ZIOPHARM Oncology, Inc Annual Report 2018

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549FORM 10-K ☒ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018OR ☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 001-33038ZIOPHARM Oncology, Inc.(Exact Name of Registrant as Specified in Its Charter) Delaware 84-1475642(State or Other Jurisdiction ofIncorporation or Organization) (IRS EmployerIdentification No.)One First Avenue, Parris Building 34, Navy Yard PlazaBoston, Massachusetts 02129(Address of Principal Executive Offices) (Zip Code)(617) 259-1970(Registrant’s Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock (par value $0.001 per share) Nasdaq Capital 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 past12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-Tduring the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 definition of“large accelerated filer,” “accelerate filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer ☐ Accelerated Filer ☒Non- Accelerated Filer ☐ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒The aggregate market value of the registrant’s common stock held by non-affiliates was $339,372,440 as of June 29, 2018 (the last business day of the registrant’s mostrecently completed second fiscal quarter), based on a total of 112,374,980 shares of common stock held by non-affiliates and a closing price of $3.02 as reported on theNasdaq Capital Market on June 29, 2018. For purposes of this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates.Such determination should not be deemed to be an admission that such officers, directors or 10% beneficial owners are, in fact, affiliates of the registrant.As of February 21, 2019, there were 162,294,494 shares of the registrant’s common stock, $0.001 par value per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCE:Portions of the definitive proxy statement for the registrant’s 2019 annual meeting of stockholders, which is to be filed within 120 days after the end of the fiscal year endedDecember 31, 2018, are incorporated by reference into Part III of this Form 10-K, to the extent described in Part III.Table of ContentsZIOPHARM Oncology, Inc.ANNUAL REPORT ON FORM 10-KFOR THE FISCAL YEAR ENDED DECEMBER 31, 2018TABLE OF CONTENTS Page PART I Item 1. Business 4 Item 1A. Risk Factors 33 Item 1B. Unresolved Staff Comments 64 Item 2. Properties 64 Item 3. Legal Proceedings 65 Item 4. Mine Safety Disclosures 65 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 66 Item 6. Selected Financial Data 67 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 68 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 81 Item 8. Financial Statements and Supplementary Data 81 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 81 Item 9A. Controls and Procedures 81 Item 9B. Other Information 82 PART III Item 10. Directors, Executive Officers and Corporate Governance 83 Item 11. Executive Compensation 83 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 83 Item 13. Certain Relationships and Related Transactions, and Director Independence 83 Item 14. Principal Accountant Fees and Services 83 PART IV Item 15. Exhibits and Financial Statement Schedules 84 Item 16. Form 10-K Summary 87 Signatures 88 Financial Statements F-1 All trademarks, trade names and service marks appearing in this Annual Report on Form 10-K are the property of their respective owners 1Table of ContentsSpecial Note Regarding Forward-Looking StatementsThis Annual Report on Form 10-K, or Annual Report, contains forward-looking statements that are based on management’s current beliefs andassumptions and on information currently available to management. All statements other than statements of historical facts contained in this AnnualReport are forward-looking statements. In some cases, you can identify forward-looking statements by words such as: “anticipate,” “believe,”“estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “target,” “will” and other words and terms of similar meaning.These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to bematerially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonablebasis for each forward-looking statement contained in this Annual Report, we caution you that these statements are based on a combination of facts andfactors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this Annual Reportinclude, but are not limited to, statements about: • our ability to raise substantial additional capital to fund our planned operations in the near term and to continue as a going concern; • our estimates regarding expenses, use of cash, timing of future cash needs and capital requirements; • the development of our product candidates, including statements regarding the timing of initiation, completion and the outcome of clinicalstudies or trials and related preparatory work and the period during which the results of the trials will become available; • our ability to advance our product candidates through various stages of development, especially through pivotal safety and efficacy trials; • the risk that final trial data may not support interim analysis of the viability of our product candidates; • our expectation regarding the safety and efficacy of our product candidates, the progress and timing of our research and developmentprograms; • the timing, scope or likelihood of regulatory filings and approvals from the U.S. Food and Drug Administration or equivalent foreignregulatory agencies for our product candidates and for which indications; • our ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existinglicense agreements; • our ability to enter into partnerships or achieve the results contemplated by our collaboration agreements and the benefits to be derivedfrom relationships with collaborators; • developments and projections relating to competition from other pharmaceutical and biotechnology companies or our industry; • our estimates regarding the potential market opportunity for our product candidates; • the anticipated rate and degree of market acceptance of our product candidates for any indication, if approved; • the anticipated amount, timing and accounting of contract liability (formerly deferred revenue), milestones and other payments underlicensing, collaboration or acquisition agreements, research and development costs and other expenses; • our intellectual property position, including the strength and enforceability of our intellectual property rights; • our ability to attract and retain qualified employees and key personnel; 2Table of Contents • the impact of government laws and regulations in the United States and foreign countries; and • other risks and uncertainties, including those listed under Part I, Item 1A, “Risk Factors”.Any forward-looking statements in this Annual Report reflect our current views with respect to future events and with respect to our future financialperformance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements tobe materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors thatmay cause actual results to differ materially from current expectations include, among other things, those described under Part I, Item 1A, “RiskFactors” and elsewhere in this Annual Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new informationbecomes available in the future.Unless the context requires otherwise, references in this Annual Report to “Ziopharm,” the “Company,” “we,” “us” and “our” refer to ZiopharmOncology, Inc. and its subsidiaries. 3Table of ContentsPART IItem 1. BusinessBUSINESS OVERVIEWWe are a biopharmaceutical company focused on discovering, acquiring, developing and commercializing next generation immunotherapy platformsthat leverage cell- and gene-based therapies to treat patients with cancer. We are developing two immuno-oncology platform technologies that utilizethe patient’s immune system by employing novel, controlled gene expression and innovative cell engineering technologies to designed deliver safe,effective, and scalable cell- and viral-based therapies for the treatment of multiple cancer types. Our first platform is referred to as Sleeping Beauty andis based on the genetic engineering of immune cells using a non-viral transposon/transposase system to stably reprogram T cells outside of the body forsubsequent infusion. Our second platform is termed Controlled IL-12, which is designed to stimulate expression of interleukin 12, or IL-12, a masterregulator of the immune system, in a controlled and safe manner to focus the patient’s immune system to attack cancer cells. We believe these twoplatforms will provide unique and powerful solutions to address the issues associated with (1) treating solid tumors with heterogeneous and unknownantigens, and (2) providing cost-effective scalable manufacturing solutions for T-cell receptor T-cell, or TCR+ T, and chimeric antigen receptor, orCAR T-cell, or CAR+ T, therapies for solid tumors and hematologic malignancies. We expect programs from our two platform technologies to be in theclinic in 2019.Immuno-oncology, which typically utilizes a patient’s own immune system to treat cancer, is one of the most actively pursued areas of research bybiotechnology and pharmaceutical companies today. Cancer cells often contain new mutated proteins and may overexpress other proteins usuallyfound in the body. The immune system typically recognizes unusual or aberrant cell protein expression and eliminates these cells in an efficientprocess known as immune surveillance. Central to immune surveillance are types of white blood cells known as T cells. In healthy individuals, T cellscan identify and kill infected or abnormal cells, including cancer cells. Malignant cells develop the ability to evade immune surveillance, which is akey factor in their growth, spread, and persistence.Our approach to immuno-oncology entails the application of engineering principles to biological systems for designing and constructing newbiological systems or redesigning and modifying existing biological systems. This approach aims to engineer gene-based programs to modify cellularfunction to achieve a desired biological outcome, such as the survival of infused T cells, production of IL-12, or the safe elimination of cancerous cells.Using our Sleeping Beauty platform, we are developing TCR+ T therapies, initially to target solid tumors. Our T cell receptor, or TCR, program designsand manufactures T cells that target antigens unique to each patient, thereby delivering truly personalized therapy that can attack an individualpatient’s cancer. The Sleeping Beauty system uses DNA plasmids to reprogram T cells to express introduced TCRs on a patient-by-patient basis(addressing inter-tumor heterogeneity) and to express more than one TCR for each patient (addressing intra-tumor heterogeneity). We believe thescalability of our approach provides a competitive advantage to alternative viral-based approaches to T-cell manufacturing. Under our CooperativeResearch and Development Agreement, or CRADA, the National Cancer Institute, or the NCI, intends to initiate a Phase 1 clinical trial in patients witha variety of solid tumors using the Sleeping Beauty platform to genetically modify T-cells to target patient-specific neoantigens in mid-2019. Theclinical trial will be under the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI.We are also developing CAR+ T therapies using our Sleeping Beauty platform. This CAR+ T program seeks to solve the complex and costlymanufacturing limitations of existing CAR+ T therapies that we believe will continue limiting their commercial potential. We believe using DNAplasmids in the Sleeping Beauty system to express CAR and our proprietary membrane-bound interleukin 15, or mbIL15, in resting T cells obtainedfrom peripheral blood will enable infused T cells to propagate within the patient to target leukemia and lymphoma, thus avoiding the need tonumerically expand T cells for weeks in bioreactors before patient administration. We 4Table of Contentsexpect the lower cost of DNA plasmids compared with the virus used by other CAR+ T programs, together with the avoidance of lengthy ex vivomanufacturing, will reduce the cost and complexity of manufacturing CAR+ T cells. These technologies should enable T cells to be infused within twodays of gene transfer in a process we refer to as rapid personalized manufacture, or RPM. We are advancing our CAR+ T therapies in the United Statesin collaboration with The University of Texas MD Anderson Cancer Center, or MD Anderson, to target CD19 on malignant B cells. In 2019, we expectto initiate a Phase 1 clinical trial in the United States of our third-generation Sleeping Beauty modified CAR+ T cells, co-expressing CAR and mbIL15,manufactured and reinfused into the patient in less than two days from gene transfer. In addition, in a joint venture with TriArm Therapeutics, Ltd., orTriArm, we are forming Eden BioCell, Ltd., or Eden BioCell, to lead clinical development and commercialization of Sleeping Beauty-generated CD19-specific CAR-T therapies in the People’s Republic of China, Taiwan and Korea. Eden BioCell will be owned equally by us and TriArm and the partieswill share decision-making authority. TriArm has committed up to $35.0 million to this joint venture and will manage all clinical development toexecute trials in the territory. We expect our joint venture with TriArm to close in the first half of 2019 and we may evaluate additional programs topursue in this joint venture.Our Controlled IL-12 platform uses virotherapy based on an engineered replication-incompetent adenovirus (Ad-RTS-hIL-12) plus veledimex as agene delivery system to conditionally produce IL-12, a potent, naturally occurring anti-cancer protein, to treat patients with solid tumors where aspecific target is unknown, including brain cancer. Our Controlled IL-12 platform allows us to deliver IL-12 in a tunable dose, which we believe iscritical for this potent cytokine. In a Phase 1 clinical trial of patients with recurrent glioblastoma multiforme, or rGBM, a subset of patients (n=6) whoreceived low-dose steroids along with 20 mg of veledimex plus Ad-RTS-hIL-12, achieved 17.8 months median overall survival, or OS, compared withfive to eight months OS established in historical controls. Thirty-six additional patients with rGBM have been recruited into a sub study designed toencourage use of low-dose steroids and 20 mg veledimex to further understand the potential of Controlled IL-12 as a monotherapy. We are alsodeveloping our Controlled IL-12 platform in combination with immune checkpoint inhibitors. In June 2018, we began enrolling patients with rGBMto receive Ad-RTS-hIL-12 plus veledimex in combination with OPDIVO® (nivolumab) in a Phase 1 dose-escalation trial. In November 2018, weannounced a clinical supply agreement with Regeneron Pharmaceuticals, Inc., or Regeneron, to evaluate Ad-RTS-hIL-12 plus veledimex incombination with Regeneron’s PD-1 antibody Libtayo® (cemiplimab-rwlc) for the treatment of patients with rGBM. We expect to initiate a Phase 2clinical trial in the first half of 2019 in approximately 30 patients with rGBM to measure preliminary safety and efficacy of Ad-RTS-hIL-12 plusveledimex in combination with Libtayo.OUR STRATEGYOur goal is to be a leading cell therapy company focused on discovering and developing TCR and CAR+ T therapies where the target of these T cells isknown. We also seek to develop our Controlled IL-12 platform as both a monotherapy and in combination with immune checkpoint inhibitors. Webelieve our ability to control IL-12 will allow us to use this platform to treat multiple types of cancers when the tumor target is unknown.Key elements of our strategy include: • Building an end-to-end TCR solution targeting solid tumors. We believe that the NCI’s study, expected to initiate in mid-2019, willrepresent the first time a non-viral, genetically engineered TCR+ T-cell therapy will be administered to patients. We intend to strengthenour position in the field of T-cell targeting solid tumors by investing significantly to optimize and expand our process development andmanufacturing capabilities, creating an end-to-end, scalable solution. • Advancing our third generation CAR+ T program. We believe our CAR+ T therapies may solve the manufacturing difficulties limiting thecommercial potential of other CAR+ T programs. In 2019, we expect to initiate a U.S. Phase 1 clinical trial of our third generation SleepingBeauty-modified CAR+ T cells, co-expressing mbIL15 with CAR+ T cells, manufactured and reinfused back into the patient in 5Table of Contents less than two days from gene transfer. Our CAR+T program targeting CD19 on malignant B cells will be developed in collaboration withMD Anderson in the United States and with Eden BioCell in greater China, assuming the closing of this joint venture. Under our exclusivelicense agreement with Precigen, Inc., we also have rights to a second, unnamed CAR target. • Executing on the clinical trials of our Controlled IL-12 platform as both a monotherapy and in combination with immune checkpointinhibitors. In 2019, we will execute on several clinical trials to treat rGBM with our Controlled IL-12 program as both a monotherapy andin combination with immune checkpoint inhibitors, such as PD-1 inhibitors, with top-line data likely in 2020. We are preparing ourControlled IL-12 platform to enter Phase 3 clinical trials following the completion of our ongoing and planned Phase 1 and 2 clinical trials.Our Controlled IL-12 platform may enable the treatment of a broad range of solid tumors and we expect to explore additional indications topursue with one or more partners. • Selectively collaborating with third parties that provide complementary technologies or capabilities. We expect to collaborate selectivelywith companies that have enabling technologies or other capabilities to accelerate the development of our programs. In any collaboration,we expect to retain development control or receive significant economic and commercial rights to our product candidates. • Creating a leading, fully integrated biotechnology company focused on advancing our oncology platforms through clinical trials.Following the execution of our exclusive license agreement with Precigen, Inc. on October 5, 2018, we maintain full development controlof our programs. We now seek to supplement our existing team with additional research and development depth, particularly focused oncell therapy, in order to accelerate the execution of our clinical programs. In addition, we expect to continue expanding our managementteam and board of directors.SLEEPING BEAUTY PLATFORM TECHNOLOGYWe are pursuing non-viral genetic engineering technologies to develop novel CAR+ T and TCR therapies. The platform we have licensed from MDAnderson uses the Sleeping Beauty non-viral genetic modification system to generate and characterize new CAR and TCR designs in T cells.Limitations of Existing Approaches to Manufacturing T-Cell TherapiesT cells are a type of white blood cell that play a central role in the immune system. T cells are involved in both detecting and killing infected orabnormal cells, such as cancer cells, as well as coordinating immune responses. In recent years, companies have begun developing therapies thatinclude T cells engineered specifically for each patient. Manufacturing such products is separated into discrete steps and typically undertaken at acentralized facility. The production time varies from approximately two to four weeks with additional time needed for quality control requirements.Manufacturing based on viral transduction, propagation and shipping has many drawbacks: • Time to manufacture. The need to propagate (numerically expand) T cells requires the product be in culture in compliance with currentmanufacturing practice, or cGMP, during which the intended recipient may be unable to receive the genetically modified T cells. • Expense of production. The need to generate virus and the production time with the associated logistical complications increase the cost ofmanufacturing the genetically modified T cells. • Required lymphodepletion. The infusion of T cells that have been propagated ex vivo, or outside the body, tends to make them dependenton cytokines to survive and thrive after infusion. This has resulted in the use of chemotherapy and other approaches of immunosuppressionto “free up” pro-survival cytokines, such as endogenous IL-15, in the recipient prior to the administration of T cells. Lymphodepletionfacilitates the sustained persistence of genetically-modified T cells in the patient, but it exposes the patient to medical complications,raises expense, and limits the ability of the technology to be scaled as the administration of chemotherapy requires specialized centers. 6Table of Contents • Toxicity. Infusing large numbers of T cells recognizing a single antigen, such as CD19, commonly places the recipient at risk from thesynchronous activation of these T cells resulting in cytokine release syndrome and other associated toxicities, which can be severe and lifethreatening.We believe these disadvantages limit the commercial potential of CAR-T therapies and will restrict companies from commercializing effective TCRtherapies.Sleeping Beauty SolutionThe Sleeping Beauty system is a gene transfer method that utilizes a transposase enzyme to cut and paste donor transposon DNA from introducedplasmid into chromosomes using a process called transposition. The system can be used to deliver genes to a variety of cell types including human Tcells. Sleeping Beauty transposons appear to integrate in a random distribution at thymine-adenine, or TA, dinucleotide sites, making them less likelyto cause off-target effects when compared to other transposons and viral gene delivery methods.We use the Sleeping Beauty system to express TCRs that target patients’ antigens as well as CARs that enable a T cell to recognize specific proteins orantigens that are present on the surface of other cells. Our third generation CAR+ T therapy uses the Sleeping Beauty system to co-express ourproprietary mbIL15 and a kill switch along with the CAR. Interleukin 15 (IL-15) has a variety of apparently beneficial effects as it is considered apro-survival cytokine that promotes survival of T cells. Our pre-clinical data suggest that incorporating mbIL15 into a CAR+ T therapy enhances invivo persistence of the CAR+ T cell.We believe our Sleeping Beauty platform has several advantages compared with the viral gene transfer technologies used by other CAR-T and TCRcompanies: • Reduced costs. By using DNA plasmid and avoiding the time-consuming and laborious manufacture of virus, our Sleeping Beautytechnology may reduce the manufacturing expense and challenges associated with viral gene transfer systems in creating T-cellsengineered to express CAR and TCR. • Shortened manufacturing. We expect the T-cell manufacturing process with Sleeping Beauty to significantly shorten virus-basedmanufacturing times. In the preclinical setting, the time to administration of third-generation Sleeping Beauty-modified T cellsco-expressing mbIL15 and a kill switch has been shortened to two days or less from gene transfer. This reduction in time is primarilyachieved through the elimination of the need for in vitro T-cell activation and propagation which avoids the need to culture T cells, whichcan take between approximately two and four weeks. • Potential to avoid lymphodepletion. The addition of our proprietary mbIL15 likely enables the administration of CAR-expressing“younger” T cells with an ability to be long-lived after infusion. The ability of CAR+ T cells to signal via mbIL15 increases CARpersistence and has the potential to eliminate lymphodepletion as the T cells rely on their own source of this pro-survival cytokine ratherthan scavenging endogenous soluble IL-15 from the recipient. • Customizable therapies. Our Sleeping Beauty platform may allow us to manufacture more customizable therapies, therefore enabling us toprovide personalized TCR+ T-cell therapy against unique, and potentially multiple, patient-specific neoantigens. • Potential improved safety profile. Given the inclusion of mbIL15, we expect the T cells in our CAR+ T therapies to engraft from lowstarting (infusion) numbers. We believe this reduced T-cell dose may reduce the side effects caused by cytokine release syndrome, which isoften experienced by patients receiving larger infusions of CAR+ T cells. • Local Manufacturing. Our Sleeping Beauty technology enables the potential for a hospital-based manufacturing model rather than thecentralized manufacturing approach currently being employed for other CAR+ T-cell products. 7Table of ContentsSLEEPING BEAUTY TCR PROGRAMBackgroundEach T cell has a unique alpha/beta TCR and an ability to rapidly increase in numbers when the TCR interrogates a target and detects a threat. A TCRcan recognize cancer cells as a threat as the receptor docks with a specialized set of molecules on the cancer cell surface called the majorhistocompatibility complex, or MHC. The MHC reveals the health of a cell based on the loading of peptides (processed protein), which then awaitexamination by unique TCRs on populations of T cells. Two types of MHC, Class I and Class II, are interrogated by TCRs on T cells. Class I moleculesactivate CD8+ T cells which have evolved an ability to be efficient killers. Class II molecules activate CD4+ T cells which help coordinate an efficientimmune response. In each person, there are both many different TCR structures and many different MHC structures. TCRs within each person areadapted to work with their own MHC structures or alleles. For a T cell to recognize and destroy a tumor cell, the TCR must recognize the foreignantigen in the context of MHC and then be activated to deepen the engagement to kill the cell. This is different than CARs, which directly recognizeantigens, such as CD19 on the surface of malignant B cells, without the need for presentation by MHC.Genes in cancer cells can lead to the production of proteins, which are then processed by the cell into protein fragments known as peptides. When thesepeptides are presented to T cells by MHC, by either tumor cells or antigen presenting cells, and they result in T-cell activation, they are known asantigens. When these presented peptides are derived from proteins which are in turn expressed from genes that are mutated only in tumor cells, they areknown as neoantigens. Tumor cells presenting neoantigens via MHC are targets for T cells. T cells can recognize and kill neoantigen-presenting cancercells and effect a positive feedback loop to heighten the immune response.The immune system avoids targeting the body’s own healthy cells principally through processes known as immune tolerance by which T cells do notrespond to MHCs containing peptides from normal proteins and therefore avoid targeting healthy cells for destruction. The recognition by the TCR ofpeptide presented by the MHC is a vital immune mechanism that allows the body both to respond against foreign threats, including cancer, as well asto avoid targeting the body’s own healthy cells.Tumors utilize a variety of strategies to evade and suppress the host immune system. This renders T cells residing within the tumor, referred to as tumor-infiltrating lymphocytes, or TIL, ineffective and, despite expressing tumor-specific TCRs, unable to recycle their effector functions to eliminate tumor.To overcome immune suppression, “fresh” T cells are needed, such as those found in the peripheral blood. However, these circulating T cells do nottypically express tumor-specific TCRs in sufficient numbers. We seek to address this problem by genetically modifying peripheral blood-derived Tcells to express TCRs with specificity to tumor-derived antigens, especially neoantigens, and propagating them to sufficient numbers prior toadministration. 8Table of ContentsThe figure below describes how T-cell recognition of genetic mutations leads to the killing of tumor cells. Targeting NeoantigensNeoantigens are encoded by tumor-specific mutated genes that are often unique to each patient. During cancer initiation and progression, tumor cellsacquire mutations in naturally-occurring genes that are either responsible for transformation, known as driver mutations, or are a byproduct of thegenomic instability that accompanies cancer formation, known as passenger mutations.Several companies are pursuing “public” antigens that are encoded within a patient’s normal germline, such as PRAME, MAGE series, and NY-ESO-1.Targeting these antigens when they occur in tumors typically enables a library of pre-assembled TCRs to be created as proteins from these germlinetargets can be shared within cancer types between patients. We believe there are several drawbacks to relying solely on this approach: • Public antigens are not present in many tumors, which limits their appeal. • Public antigens are often not homogeneously expressed throughout the tumor because they are typically not driver mutations, whichincreases the likelihood that the infused TCR-modified T cells will not deliver a complete response. • Public antigens are, by definition, also coded within the germline, leading to endogenous TCRs used for cloning and re-expression havingweak affinity and the native T cell unable to recognize the cancer due to immune tolerance. As a result, ex vivo genetic alteration of thealpha and beta chains of the TCR is likely required to improve affinity, which increases the likelihood of on-target, but off-tissue toxicityresulting in adverse events.We believe the superior approach is to genetically modify T cells to target each patient’s neoantigens. This requires a “personal” approach to T-celltherapy in which the introduced TCRs recognize the neoantigens of a patient’s tumor. These neoantigens can be driver mutations and, therefore, thecancer cell relies upon their presence rendering it less likely the tumor can escape and thus relapse from this form of targeted T-cell therapy. We believethat neoantigen-targeted therapies will improve patient outcomes, particularly for patients with solid tumors. 9Table of ContentsThere are three essential steps in creating a T-cell therapy targeting personalized neoantigens: 1.Detecting and prioritizing neoantigens. Detecting a patient’s unique set of neoantigens requires one or more samples of the patient’smalignant tissue(s) and sampling of normal cells, followed by sequencing to reveal a catalog of candidate neoantigens that are found in thetumor cells, but not in normal cells. Bioinformatics can be used to prioritize the candidate neoantigens that are driver mutations. 2.Detecting and prioritizing TCRs. Only a subset of candidate sequence changes are neoantigens as defined by their ability to stimulate aT-cell response. Validating targets requires the presentation of candidate neoantigens via MHC with T cells to be co-cultured with antigenpresenting cells to efficiently identify the reactive T cells. One or more of the TCRs from individual reactive T cells are then sequenced. 3.Manufacturing TCR+ T cells. The sequence of one or more TCRs recognizing neoantigens are placed into DNA plasmids as SleepingBeauty transposons. These DNA plasmids are inserted into T cells derived from peripheral blood using a process called electroporation. Tcells stably expressing the introduced TCR(s) are then propagated to produce the TCR+ T cells in clinically-sufficient numbers before theyare released for administration into a patient.The process for the production and infusion of Sleeping Beauty TCR-modified T cells is based on the electro-transfer of DNA plasmids containingcoding for TCR(s) recognizing one or more neoantigens into T cells derived from a patient’s peripheral blood. The TCR is sequenced from TILresponding to the targeted neoantigens. Following electroporation, the genetically modified T cells are propagated to large numbers based on the“rapid expansion protocol” which is a technology that has been shown to generate T cells that can recognize and eliminate solid tumors. We believethe use of circulating T cells, rather than TIL, will improve the T cell’s ability to kill tumor cells because these lymphocytes are generally “young” andcan proliferate and survive in vivo to provide anti-tumor effects. To be successful, genetically modified T cells targeting one or more neoantigens will need to address the fact that (1) among a population of patients,not all tumors express the targeted neoantigen, referred to as inter-tumor heterogeneity, and (2) within a single patient, not all tumor cells express thetargeted antigen, referred to as 10Table of Contentsintra-tumor heterogeneity. Inter-tumor heterogeneity limits the number of recipients that are eligible to receive a treatment and intra-tumorheterogeneity creates the risk of antigen-escape variants, increasing the likelihood of cancer relapse. As a result, we believe companies developingT-cell therapies targeting neoantigens must address both inter- and intra-tumor heterogeneity.Clinical Development of TCRWe believe that a non-viral platform represents the only commercially feasible way of manufacturing neoantigen therapies due to the obstaclespresented by inter-tumor heterogeneity and intra-tumor heterogeneity. In 2017, we entered into a CRADA with the NCI for the development ofadoptive cell transfer-based immunotherapies to treat solid tumors.The process used by the NCI under the CRADA, and the process we expect to use the future, includes three-linked parts. The first is identifying one ormore neoantigens that underlie the changes from a normal to a malignant cell. The second is the identification of one or more TCRs that recognize theneoantigens. The third is the ex vivo manufacturing of therapeutic T cells with specificity redirected to the desired neoantigens through the expressionof the isolated TCRs. This last step, the production of T cells, is based on the use of the Sleeping Beauty system to stably express TCRs. Once thepatient-derived T cells are genetically modified, they are propagated based on the NCI’s established technology referred to as “rapid expansionprotocol” which has produced clinical-grade T cells resulting in anti-tumor effects in other studies, including in patients with solid tumors. It isanticipated that patients will receive populations of T cells genetically modified to express more than one TCR so that more than one neoantigen canbe targeted in the patient. We expect infusing multiple TCRs per patient will reduce the probability of leaving some cancer cells unaddressed, loweringthe risk of cancer relapse.Under our CRADA, the NCI will perform clinical evaluations of the ability of these Sleeping Beauty-engineered T cells to express TCRs that arereactive against neoantigens to mediate cancer regression in patients with refractory (e.g., metastatic) solid tumors for several tumor types, includinggastrointestinal and genitourinary, breast, ovarian, non-small cell lung cancer and glioblastoma. This research is being conducted at the NCI under thedirection of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI. We expect the NCI will begin treating patients in this clinicaltrial in mid-2019.Solid Tumor Malignancy MarketCancer is the second most common cause of death in the United States, accounting for nearly one of every four deaths. Approximately 1,735,350 newcancer cases were expected to be diagnosed, and 609,640 cancer deaths expected to occur, in the United States in 2018 according to the AmericanCancer Society. Of these, the majority were caused by solid tumors. Invasive cancer, such as malignancies of epithelial tissue represent 80% to 90% ofall cancer cases according to the Surveillance, Epidemiology, and End Results Program of the National Cancer Institute. These diseases includecolorectal, lung, ovarian, skin, bladder, head and neck cancers, among others.SLEEPING BEAUTY CAR-T PROGRAMBackgroundWe are developing CAR+ T cell therapies targeting CD19 for hematologic malignancies using our Sleeping Beauty platform. Our CAR+ T program isfocused on (1) shortening the time the patient must wait for treatment with engineered T cells, (2) increasing the access of hospitals to deliver, andpatients to receive, this therapy, and (3) providing safe and efficacious personalized T-cell therapies to patients.CARs are engineered molecules that, when present on the surface of a T cell, enable the T cell to directly recognize specific proteins or antigens thatare present on the surface of other cells. Autologous CAR+ T-cell therapies are manufactured individually for the recipient’s use by modifying thepatient’s own T cells outside the body, causing the T cells to stably express CARs. Our CAR+ T program is focused on CD19, which is a proteinexpressed on the cell surface of B cells and a validated target for B cell driven hematological malignancies. 11Table of ContentsTwo autologous anti-CD19 CAR+ T cell therapies have been approved by the U.S. Food and Drug Administration, or FDA, for the treatment ofrelapsed/refractory (R/R) B-cell precursor acute lymphoblastic leukemia (Kymriah®) and R/R large B-cell lymphoma (Kymriah® and Yescarta®). Theseapproaches have been successful in helping patients fight cancer, in particular CD19-positive cancers, resulting in significant remission rates. However,we anticipate that the viral manufacturing approaches used to manufacture these therapies will limit their commercial success.We believe our Sleeping Beauty CAR+ T therapy will offer distinct advantages to the approach used by other CAR-T cell companies. In particular, theability of the DNA plasmids from the Sleeping Beauty system to integrate into resting T cells, coupled with expression of mbIL15 and CAR, willenable infused T cells to propagate within the patient to target leukemias and lymphoma, thereby avoiding the need to numerically expand T cells forweeks in bioreactors before administration. The reduced cost associated with using DNA plasmids, instead of virus and avoiding lengthy ex vivomanufacturing, and the flexibility to insert industry leading CAR technology in a “cassette” based approach, provides a solution to the cost andcomplexity of the current approach to manufacturing CAR+ T cells.Clinical Development of CAR+ TFirst generation. We entered the clinic in 2015 with CAR+ T therapies utilizing the non-viral genetic modification capabilities of the Sleeping Beautysystem. These trials used “first-generation” technologies, the results from which were published in the Journal of Clinical Investigation in September2016.An update on patients in the first-generation trials was presented in a poster at the 2017 Annual Meeting of ASH. The trials demonstrated that first-generation Sleeping Beauty-modified CD19-specific CAR+ T cells appear to provide long-term cancer control when infused after hematopoietic stem-cell transplantation, or HSCT, for patients with advanced CD19+ malignancies.All seven patients with advanced CD19+ non-Hodgkin’s lymphoma that received autologous T-cells were alive with a median survival of 40 monthssince T-cell infusion. We reported the proportion of patients who were alive was 100% and progression free was 86%. For 19 patients with advancedCD19+ acute lymphoblastic leukemia and non-Hodgkin’s lymphoma infused with allogeneic T-cells following HSCT, nine patients were alive with amedian survival of 31 months. The proportion of patients reported alive was 49% and the proportion of patients that were progression free was 32%. Ofthe subset of eight patients who received donor-derived T-cells after haploidentical HSCT, the proportion of patients who were alive was 63% and theproportion of patients that were progression free was 50%. These survival rates compare favorably with historical data for patients receiving HSCTwithout CAR+ T administration. Patients receiving autologous HSCT have been reported to have a 3-year progression free survival of 49%. Patientsreceiving just allogeneic HSCT have been reported to have a one-year OS of 20-34%, and haploidentical (haplo) allogeneic HSCT patients have a3-year OS of 37% and disease-free survival of 31%.Persistence of circulating Sleeping Beauty-modified CAR+ T cells was demonstrated at two years in an autologous and allogeneic patient and for fouryears in two autologous patients.Second generation. We are currently enrolling patients in an investigator-led Phase 1 trial using second-generation CD19-specific CAR+ T cells with arevised CAR structure in patients with advanced lymphoid malignancies at MD Anderson. Our second-generation CD19 trial employs a revised CARdesign and shortened manufacturing process advancement, with culturing times as short as two weeks.A summary of this ongoing trial was presented by Dr. Partow Kebriaei of MD Anderson in a presentation at the 2017 Annual Meeting of ASH inDecember 2017. Interim data from the trial demonstrated that autologous T-cells infused after lymphodepleting chemotherapy could be detected andexhibited anti-tumor effects and had an encouraging safety profile in patients with relapsed/refractory CD19+ malignancies. Complete responses at 12Table of Contentsone month were reported in four of eight patients with either ALL (n=5), chronic lymphocytic leukemia (n=1), or diffuse large B-cell lymphoma (n=2),with two morphologic complete responses at three months. Follow-up blood tests demonstrated sustained persistence of infused T-cells and targetingof malignant and normal B cells. There were no dose limiting toxicities with only grade 1 or 2 adverse events being reported. T-cell dose escalationcontinues and we have recently completed Cohort 3. We anticipate stopping enrollment in this trial when our third-generation trial moves forward inthe clinic, as further described below.Third generation. In the preclinical setting, the time to manufacture and administer third-generation Sleeping Beauty-modified CAR+ T cellsco-expressing mbIL15 has been reduced to two days or less from gene transfer. This very rapid manufacturing process likely delivers geneticallymodified T cells with superior therapeutic potential in vivo. Preclinical studies of third-generation Sleeping Beauty CAR+ T cells, presented at the2017 Annual Meeting of ASH, demonstrated that a single dose of T cells co-expressing a CD19-specific CAR, mbIL15, and kill switch resulted insustained in vivo persistence that produced potent anti-tumor effects and superior leukemia-free survival in mice.In June 2018, we announced the FDA placed our investigator-led Investigational New Drug, or IND, application on clinical hold for the proposedPhase 1 trial to evaluate CD19-specific CAR-T therapies very rapidly manufactured at MD Anderson. The FDA has requested additional informationrelating to chemistry, manufacturing and controls, specifically requesting that the product meet a minimum threshold for cell viability. By applyingimproved principles of engineering and cell processing, we have made progress to achieve this threshold in manufacturing runs. Thus, we expect torespond to the FDA and begin treating patients in the second half of 2019.Joint Venture with Eden BioCell LimitedIn December 2018, we announced that, in conjunction with TriArm Therapeutics, Ltd., or TriArm, we would launch Eden BioCell, Ltd., or EdenBioCell, to lead clinical development and commercialization of Sleeping Beauty-generated CAR-T therapies in the People’s Republic of China(including Macau and Hong Kong), Taiwan and Korea. TriArm is a privately-owned cell therapy company with operations in Germany, China and theUnited States that was formed by Panacea Venture Healthcare, a fund co-founded and managed by James Huang, Managing Partner of Kleiner PerkinsCaufield & Byers China.We expect to license the rights to Eden BioCell for third-generation Sleeping Beauty-generated CAR-T therapies targeting the CD19 antigen. EdenBioCell will be owned equally by us and TriArm and the parties will share decision-making authority. TriArm has committed up to $35.0 million tothis joint venture and will manage all clinical development to execute trials in the territory. We expect our joint venture with TriArm to close in thefirst half of 2019.Hematologic Tumor Malignancy MarketAccording to the Leukemia and Lymphoma Society, an estimated 174,250 people are expected to be diagnosed with leukemia, lymphoma, or myelomain 2018. New diagnoses for such hematologic malignancies in the United States represented approximately 10% of the new cancer cases in the UnitedStates in 2018. CONTROLLED IL-12 PLATFORM TECHNOLOGYBackgroundAd-RTS-hIL-12 plus veledimex is our gene delivery system to regulate production of IL-12, a potent, naturally occurring anti-cancer protein whichfunctions as a master regulator of the immune system. We control the generation of recombinant IL-12 using a replication-incompetent adenoviral, orAd, vector administered via a 13Table of Contentssingle injection of virus into the brain tumor and engineered to conditionally express human IL-12, or hIL-12. The conditional expression of hIL-12 ismodulated with the RheoSwitch Therapeutic System® (RTS®) by the small molecule veledimex, an activator ligand orally administered that has beenshown to cross the blood-brain barrier.In this way, Ad-RTS-hIL-12 is administered within the tumor under the control of the RTS “switch”. Activation of the switch, and therefore conditionalgene expression and subsequent IL-12 protein production, is tightly controlled by the activator ligand, veledimex, delivered to the patient as a dailyoral capsule, typically over 14 days. When veledimex is administered to a patient, the switch is turned “on” and IL-12 is produced; when veledimex iswithdrawn, the switch is turned “off” and production of recombinant IL-12 ceases. The amount of IL-12 produced is proportional to the dosing ofveledimex which further enhances control of this cytokine. The recombinant IL-12 appears to be biologically active as, for example, it can stimulate production of the body’s own interferon-gamma, or IFN-g.IL-12 is a potent pro-inflammatory cytokine capable of reversing immune escape mechanisms and improving the function of tumor fighting naturalkiller, or NK, cells and T cells.Controlled IL-12 has been shown to biologically turn “cold tumors hot.” In our clinical trials, we have seen deep and sustained infiltration of activatedT cells (i.e., “hot” tumors) where previously there had been very little T cell infiltration (i.e., “cold” tumors). Data from repeat biopsies obtained four tosix months following administration of Ad-RTS-hIL-12 plus veledimex has shown an increased and sustained infiltration of activated T-cellsproducing IFN-g within the brain-tumor lesion. Data from our Phase 1 monotherapy clinical trial provided compelling evidence from biopsies, takenmore than four months after administration of Ad-RTS-hIL-12 plus veledimex, demonstrating that Controlled IL-12 causes a sustained influx ofactivated killer (CD8+) T cells into brain tumors. These data also show upregulated expression of PD-1/PDL-1 biomarkers, suggesting that thecombination of Ad-RTS-hIL-12 plus veledimex with an immune checkpoint inhibitor, such as targeting PD-1, may improve patient outcomes.These data are consistent with our biopsy data from patients with breast cancer and melanoma that received Ad-RTS-hIL-12 plus veledimex. 14Table of ContentsClinical Development of Controlled IL-12We have tested Ad-RTS-IL-12 plus veledimex in several Phase 1 and 2 clinical trials for the treatment of patients with metastatic melanoma, breastcancer and brain cancer. We have focused much of our efforts in developing Ad-RTS-IL-12 plus veledimex, as both a monotherapy and in combinationwith immune checkpoint inhibitors, for adults and children with recurrent brain tumors. We believe Controlled IL-12 may have broad applicability andwe may explore initiating clinical trials in additional oncology indications as a monotherapy or in combination with checkpoint inhibitors, eitheralone or with partners.Monotherapy: Clinical Development Ad-RTS-IL-12 plus Veledimex for Adult rGBM. Our multi-center Phase 1 trial in patients with rGBM, which wasinitiated in June 2015, continues to show promising data with preliminary evidence of a survival benefit and a predictable and manageable safetyprofile. The primary objective of the Phase 1 trial is to determine the safety and tolerability of a single intra-tumoral Ad-RTS-hIL-12 injection activatedupon dosing with oral veledimex. Secondary objectives are to determine the maximum tolerated dose, the immune responses elicited, and assessmentof biologic response. The trial enrolled patients at doses ranging from 10 mg to 40 mg of veledimex.A subset of six subjects in this clinical trial who received low-dose steroids (less than 20 mg of dexamethasone) along with 20 mg of veledimexachieved 17.8 months median OS compared with five to eight months OS established in historical controls. In our Phase 1 trial in rGBM,Ad-RTS-hIL-12 plus veledimex continues to be safe and well tolerated, with adverse events, or AEs, that were predictable and reversible, neurologicAEs that were relatively mild and transient, and with no drug-related deaths.In 2018, we initiated an expansion sub study to enroll additional subjects taking 20 mg of veledimex, which is now fully enrolled with an additional36 subjects. Based on the promising results seen in the six patients that received low-dose steroids in the original Phase 1 clinical trial, a goal of thesub study was to increase the patient population enrolled with 20 mg of veledimex as well low doses of steroids. At least 15 of the subjects in ourexpansion study received low-dose steroids (dexamethasone), bringing the total to at least 21 subjects in this subset.Results from Phase 1 Clinical Trial of Ad-RTS-IL-12 plus Veledimex for Adult rGBM Veledimex 20mg Cohort Craniotomy Group Veledimex 20mg Cohort Stereotactic Group Cohort DexamethasoneUse (Days0-14) mOS(months) Lowerbound Upperbound Mean F/U No.Events No.Censored20 mg Veledimex Craniotomy £20 mg 17.8 14.6 23.7 18.4 6 0 >20 mg 6.4 1.8 12.7 9.6 9 020 mg Veledimex Stereotactic £20 mg Not reached 1.7 Not reached 9.5 2 2 >20 mg 1.9 1.3 8.7 3.9 3 0 15Table of ContentsCombination Therapy. We have initiated a Phase 1 clinical trial to evaluate Ad-RTS-hIL-12 plus veledimex in combination with Bristol-Myers SquibbCompany’s OPDIVO® (nivolumab), an immune checkpoint inhibitor, or PD-1 inhibitor, in adult patients with rGBM. This trial was initiated in 2018and will explore the potentially synergistic effect of this combination in up to 18 patients. We expect to complete enrollment in the second quarter of2019.In November 2018, we announced a clinical supply agreement with Regeneron to evaluate Ad-RTS-hIL-12 plus veledimex in combination withRegeneron’s PD-1 antibody Libtayo® (cemiplimab-rwlc) to treat patients with rGBM. Libtayo has been approved in the United States for the treatmentof patients with metastatic cutaneous squamous cell carcinoma, or CSCC, or locally advanced CSCC who are not candidates for curative surgery orcurative radiation. We expect to initiate a Phase 2 clinical trial in the first half of 2019 in approximately 30 patients with rGBM to measure preliminarysafety and efficacy of Ad-RTS-hIL-12 plus veledimex in combination with Libtayo. Under the terms of our agreement, we will be responsible for theconduct and costs of the clinical trial, and Regeneron will supply Libtayo for the trial. We may potentially explore the Ad-RTS-hIL-12 plus veledimexin combination with Libtayo in additional indications.Monotherapy: Pediatrics. In 2017, we dosed the first patient in a Phase 1 clinical trial of Ad-RTS-hIL-12 plus veledimex for the treatment of pediatricbrain tumors. This open label trial will assess the safety and tolerability of a single intra-tumoral injection of Ad-RTS-hIL-12, and is conducted in twogroups. The first is comprised of pediatric patients with recurrent or progressive supratentorial brain tumors, while the second comprises pediatricpatients with glioma in the pontine region of the brain, known as diffuse intrinsic pontine glioma, or DIPG. This Phase 1 trial is being conducted atleading pediatric cancer centers across the United States, including Ann & Robert H. Lurie Children’s Hospital in Chicago, Dana-Farber CancerInstitute in Boston and the University of California, San Francisco.Glioblastoma Market. We are currently developing Controlled IL-12 to treat patients with rGBM. Glioblastoma is an aggressive primary brain tumoraffecting approximately 74,000 people worldwide each year; it is a fast-growing, aggressive type of central nervous system tumor, with an estimated12,760 new adult cases predicted in the United States for 2018 according to the American Brain Tumor Association. Recurrence rates for this type ofcancer are near 90 percent, and prognosis for adult patients is poor with treatment often combining multiple approaches including surgery, radiationand chemotherapy.Recurrent glioblastoma is an aggressive cancer with one of the lowest 3-year survival rates, at 3%, among all cancers. For patients who haveexperienced multiple recurrences, the prognosis is particularly poor, with a OS of six to seven months, while overall survival in patients who havefailed temozolomide and bevacizumab, or equivalent salvage chemotherapy, is approximately three to five months. Given the poor overall prognosisand lack of effective treatments, new therapeutic approaches for malignant gliomas are needed.In children, the incidence of brain cancer is approximately 4.84 per 100,000, according to the NCI. DIPG accounts for approximately 15 percent of allcases of pediatric brain tumors, with a median survival time of less than one year. Because of where these tumors are situated, DIPG is inaccessible tosurgery and there are no known curative options.License Agreements, Intellectual Property and Other AgreementsOur goal is to obtain, maintain, and enforce patent protection for our products, formulations, processes, methods, and other proprietary technologies topreserve our trade secrets and to operate without infringing upon the proprietary rights of other parties. Our policy is to actively seek the broadestpossible intellectual property protection for our product candidates through a combination of contractual arrangements and patents, both in the UnitedStates and abroad. 16Table of ContentsExclusive License Agreement with Precigen, Inc.On October 5, 2018, we entered into an exclusive license agreement, or the License Agreement, with Precigen, Inc., or Precigen, a wholly ownedsubsidiary of Intrexon Corporation, or Intrexon. As between us and Precigen, the terms of the License Agreement replace and supersede the terms of:(a) that certain Exclusive Channel Partner Agreement by and between us and Intrexon, dated January 6, 2011, as amended by the First Amendment toExclusive Channel Partner Agreement effective September 13, 2011, the Second Amendment to the Exclusive Channel Partner Agreement effectiveMarch 27, 2015, and the Third Amendment to Exclusive Channel Partner Agreement effective June 29, 2016, which was subsequently assigned byIntrexon to Precigen; (b) certain rights and obligations pursuant to that certain License and Collaboration Agreement effective March 27, 2015between us, Intrexon and ARES TRADING Trading S.A., or Ares Trading, a subsidiary of Merck KGaA, or Merck, as assigned by Intrexon to Precigen,or the Ares Trading Agreement; (c) that certain License Agreement between us, Intrexon, and MD Anderson, with an effective date of January 13, 2015,or the MD Anderson License, which was subsequently assigned by Intrexon and assumed by Precigen effective as of January 1, 2018; and (d) thatcertain Research and Development Agreement between us, Intrexon and MD Anderson with an effective date of August 17, 2015, or the Research andDevelopment Agreement, and any amendments or statements of work thereto.Pursuant to the terms of the License Agreement, Precigen has granted us an exclusive, worldwide, royalty-bearing, sub-licensable license to research,develop and commercialize (i) products utilizing Precigen’s RheoSwitch® gene switch, or RTS, for the treatment of cancer, referred to as IL-12Products, (ii) CAR products directed to (A) CD19 for the treatment of cancer, referred to as CD19 Products, and (B) a second target, subject to the rightsof Merck to pursue such target under the Ares Trading Agreement, and (iii) TCR products designed for neoantigens for the treatment of cancer.Precigen has also granted us an exclusive, worldwide, royalty-bearing, sub-licensable license for certain patents relating to the Sleeping Beautytechnology to research, develop and commercialize TCR products for both neoantigens and shared antigens for the treatment of cancer, referred to asTCR Products.We will be solely responsible for all aspects of the research, development and commercialization of the exclusively licensed products for the treatmentof cancer. We are required to use commercially reasonable efforts to develop and commercialize IL-12 products and CD19 products and after a two-yearperiod, the TCR Products.Precigen has also granted us an exclusive, worldwide, royalty-bearing, sub-licensable license to research, develop and commercialize productsutilizing an additional construct that expresses RTS IL-12 for the treatment of cancer, referred to as Gorilla IL-12 Products.In consideration of the licenses and other rights granted by Precigen, we will pay Precigen an annual license fee of $100 thousand and we have agreedto reimburse Precigen for certain historical costs of the licensed programs up to $1.0 million, payable quarterly.We will make milestone payments totaling up to an additional $52.5 million for each exclusively licensed program upon the initiation of later stageclinical trials and upon the approval of exclusively licensed products in various jurisdictions. In addition, we will pay Precigen tiered royalties rangingfrom low-single digit to high-single digit on the net sales derived from the sales of any approved IL-12 products and CAR products. We will also payPrecigen royalties ranging from low-single digit to mid-single digit on the net sales derived from the sales of any approved TCR products, up to amaximum royalty amount of $100.0 million in the aggregate. We will also pay Precigen 20% of any sublicensing income received by us relating to thelicensed products.We are responsible for all development costs associated with each of the licensed products, other than Gorilla IL-12 products. We and Precigen willshare the development costs and operating profits for Gorilla IL-12 products, and we are responsible for 80% of the development costs and receiving80% of the operating profits, and Precigen responsible for the remaining 20% of the development costs and receiving 20% of the operating profits. 17Table of ContentsPrecigen will pay us royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of Precigen’s CAR products, upto $50.0 million.In consideration of our entry into the License Agreement, Intrexon has forfeited and returned to us all shares of our Series 1 preferred stock held by orpayable to Intrexon as of the date of the License Agreement.We determined that this transaction represented a capital transaction between related parties. We fair valued the preferred stock and the derivativeliability on the date of the transaction, noting a total fair value of $163.3 million. The relinquishment of our obligation under the Ares TradingAgreement was also considered part of the overall capital transaction. We recognized an additional credit to accumulated deficit of $49.5 million as aresult of the relief of the obligation under the Ares Trading Agreement (Note 8). The total amount of the settlement was $212.8 million.We incurred approximately $7.4 million of transaction advisory costs with third-party vendors, of which $5.4 million was considered a direct costassociated with the Series 1 preferred stock extinguishment and is also included as part of the consideration transferred. The remaining $2.0 million oftransaction costs were recognized as an expense during the year ended December 31, 2018.We recognized a net credit to accumulated deficit of $207.3 million, calculated as the difference in the carrying value of the Series 1 preferred stock,derivative liability, and contract liability, and the consideration transferred of $5.4 million, in connection with the transaction. This amount isincluded in net income available to common shareholders in the calculation of earnings per share (Note 3).License Agreement—The University of Texas MD Anderson Cancer CenterOn January 13, 2015, we, together with Intrexon, entered into the MD Anderson License with MD Anderson (which Intrexon subsequently assigned toPrecigen). Pursuant to the MD Anderson License, we, together with Precigen, hold an exclusive, worldwide license to certain technologies owned andlicensed by MD Anderson including technologies relating to novel CAR T-cell therapies, non-viral gene transfer systems, genetic modification and/orpropagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs, arising from the laboratory of LaurenceCooper, M.D., Ph.D., who became our Chief Executive Officer in May 2015 and was formerly a tenured professor of pediatrics at MD Anderson and isnow currently a visiting scientist under that institution’s policies.On August 17, 2015, we, Precigen and MD Anderson entered into the Research and Development Agreement, to formalize the scope and process for thetransfer by MD Anderson, pursuant to the terms of the MD Anderson License, of certain existing research programs and related technology rights, aswell as the terms and conditions for future collaborative research and development of new and ongoing research programs.Pursuant to the Research and Development Agreement, we, Precigen and MD Anderson formed a joint steering committee to oversee and manage andongoing research programs. Under our License Agreement with Precigen, we and Precigen agreed that Precigen would no longer participate on the jointsteering committee after the date of the License Agreement. As provided under the MD Anderson License, we provided funding for research anddevelopment activities in support of the research programs under the Research and Development Agreement for a period of three years and in anamount of no less than $15.0 million and no greater than $20.0 million per year. On November 14, 2017, we entered into an amendment to theResearch and Development Agreement extending its term until April 15, 2021. During the year ended December 31, 2018, we made payments in theaggregate amount of $2.7 million to MD Anderson compared to $13.0 million during the year ended December 31, 2017. The decrease in cash paid toMD Anderson during the year ended December 31, 2018 as compared to the same period in the prior year is a result of the final quarterly paymentbeing made to MD Anderson in January 2018 and the result of approved expenditures incurred by us being deducted from the January 2018 quarterlypayment. The net balance of cash resources on hand at MD Anderson available to offset expenses and future costs is 18Table of Contents$27.8 million, of which $18.4 million is included in other current assets and the remaining $9.4 million is included in non-current assets atDecember 31, 2018.The term of the MD Anderson License expires on the last to occur of (a) the expiration of all patents licensed thereunder, or (b) the twentiethanniversary of the date of the MD Anderson License; provided, however, that following the expiration of the term of the MD Anderson License, we,together with Precigen, shall then have a fully-paid up, royalty free, perpetual, irrevocable and sublicensable license to use the licensed intellectualproperty thereunder. After ten years from the date of the MD Anderson License and subject to a 90-day cure period, MD Anderson will have the right toconvert the MD Anderson License into a non-exclusive license if we and Precigen are not using commercially reasonable efforts to commercialize thelicensed intellectual property on a case-by-case basis. After five years from the date of the MD Anderson License and subject to a 180-day cure period,MD Anderson will have the right to terminate the MD Anderson License with respect to specific technology(ies) funded by the government or subjectto a third-party contract if we and Precigen are not meeting the diligence requirements in such funding agreement or contract, as applicable. MDAnderson may also terminate the agreement with written notice upon material breach by us and Precigen, if such breach has not been cured within 60days of receiving such notice. In addition, the MD Anderson License will terminate upon the occurrence of certain insolvency events for both us andPrecigen and may be terminated by the mutual written agreement of us, Precigen, and MD Anderson.Cooperative Research and Development Agreement (CRADA) with the National Cancer InstituteOn January 10, 2017, we announced the signing of the CRADA with the NCI for the development of adoptive cell transfer, or ACT,-basedimmunotherapies genetically modified using the Sleeping Beauty transposon/transposase system to express TCRs for the treatment of solid tumors.The principal goal of the CRADA is to develop and evaluate ACT for patients with advanced cancers using autologous peripheral blood lymphocytes,or PBL, genetically modified using the non-viral Sleeping Beauty system to express TCRs that recognize neoantigens expressed within a patient’scancer. Research conducted under the CRADA will be at the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI, incollaboration with our researchers and Precigen researchers. Our remaining obligation, as of December 31, 2018, for the CRADA is $2.5 million overthe next year, payable in $625 thousand payments on a quarterly basis. During the twelve months ended December 31, 2018 and 2017, we madepayments of $2.5 million, each year. In February 2019, we extended our CRADA with the NCI for two years, committing an additional $5.0 million tothis program.Patents and Other Intellectual Property Rights and ProtectionPatents extend for varying periods according to the date of patent filing or grant and the legal term of patents in the various countries where patentprotection is obtained. The actual protection offering by a patent, which can vary from country to country, depends of the type of patent, the scope ofits coverage and the availability of legal remedies in the country.Pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, some of our patents,under certain conditions, may be eligible for limited patent term extension for a period of up to five years as compensation for patent term lost duringdrug development and the FDA regulatory review process. However, this extension period cannot be extended beyond 14 years from the drug’sapproval date. The patent term restoration period is generally one-half the period of time elapsed between the effective date of an IND application orthe issue date of the patent, whichever is later, and the submission date of an NDA, plus the period of time between the submission date of the NDA orthe issue date of the patent, whichever is later, and FDA approval. The United States Patent and Trademark Office, in consultation with the FDA,reviews and approves applications for any patent term extension or restoration. We intend to seek the benefits of this statute, but there can be noassurance that we will be able to obtain any such benefits.We also depend upon the skills, knowledge, and experience of our scientific and technical personnel, as well as those of our advisors, consultants, andother contractors, none of which is patentable. To help protect proprietary 19Table of Contentsknow-how, which is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely, and in the future, will continueto rely, on trade secret protection and confidentiality agreements to protect our interests. To this end, we generally require employees, consultants,advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable,require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.Our patent position and proprietary rights are subject to certain risks and uncertainties. Please read the “Risk Related to Our Intellectual Property”section for further information about certain risks and uncertainties that may affect our patent position and proprietary rights.Additional information as of December 31, 2018 about material patents and other proprietary rights covering our product candidates is set forth below.Ad-RTS-IL-12 plus veledimex and DC-RTS-IL-12 plus veledimexThe patent estate licensed to us by Precigen covering Ad-RTS-IL-12 plus activator ligands, such as veledimex and DC-RTS-IL-12 plus activator ligandcompositions, methods of use, methods of manufacture, and formulations includes over one hundred patents and applications. This portfolio alsoincludes issued and pending foreign patents in Europe, Canada, Japan, Australia and other countries. The term of one or more of the issued patents maybe extended due to the regulatory approval process.CAR+ TIn January 2015, we in-licensed from MD Anderson a technology portfolio that includes intellectual property directed to certain non-viral SleepingBeauty system and CAR+ T cell and bioprocessing technology. Under the terms of the agreement, we have an exclusive license to certain of theintellectual property, a co-exclusive license to certain of the intellectual property technology and a non-exclusive license to certain of the intellectualproperty technology. Our rights to the MD Anderson intellectual property flow to us via our agreement with Precigen.Governmental Regulation and Product ApprovalAs a biopharmaceutical company, we are subject to extensive regulation. Our programmed T-cell product candidates are regulated as biologics. Withthis classification, commercial production of our products will need to occur in registered and licensed facilities in compliance with current GoodManufacturing Practices, or cGMPs, for biologics.Human immunotherapy products are a new category of therapeutics. The FDA categorizes human cell- or tissue-based products as either minimallymanipulated or more than minimally manipulated and has determined that more than minimally manipulated products require clinical trials todemonstrate product safety and efficacy and the submission of a Biologics License Application, or BLA, for marketing authorization.Government authorities in the United States (at the federal, state and local level) and in other countries and jurisdictions, extensively regulate, amongother things, the research, development, preclinical and clinical testing, manufacturing, quality control, labeling, packaging, storage, record-keeping,promotion, advertising, sale, distribution, post-approval monitoring and reporting, marketing and export and import of biopharmaceutical productssuch as those we are developing. Our product candidates must be approved by the FDA before they may be legally marketed in the United States andby the appropriate foreign regulatory agency before they may be legally marketed in foreign countries. Generally, our activities in other countries willbe subject to regulation that is similar in nature and scope as that imposed in the United States, although there can be important differences. Theprocess for obtaining regulatory marketing approvals and the subsequent compliance with applicable federal, state, local and foreign statutes andregulations require the expenditure of substantial time and financial resources. 20Table of ContentsU.S. Product Development ProcessIn the United States, the FDA regulates biological products under the Public Health Service Act, or PHSA, and the Federal Food, Drug and CosmeticAct, or FDCA, and implementing regulations. Products are also subject to other federal, state and local statutes and regulations. The process ofobtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require theexpenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the productdevelopment process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA sanctions couldinclude, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters and similar publicnotice of alleged non-compliance with laws, product recalls or withdrawals from the market, product seizures, total or partial suspension of productionor distribution, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicialenforcement action could have a material adverse effect on us. The process required by the FDA before a biological product may be approved formarketing in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies according to Good Laboratory Practices, or GLPs, and applicablerequirements for the humane use of laboratory animals or other applicable regulations; • submission to the FDA of an Investigational New Drug Application, or IND, which must become effective before human clinical trials maybegin; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as GoodClinical Practices, or GCPs, and any additional requirements for the protection of human research subjects and their health information, toestablish the safety and efficacy of the proposed biological product for its intended use; • preparation and submission to the FDA of a Biologics License Application, or BLA, for marketing approval that includes substantiveevidence of safety, purity, and potency from results of nonclinical testing and clinical trials; • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities where the biological product is producedto assess compliance with cGMP to assure that the facilities, methods and controls used in product manufacture are adequate to preserve thebiological product’s identity, strength, quality and purity and, if applicable, the FDA’s current Good Tissue Practices, or GTPs, for the useof human cellular and tissue products; • potential FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; • payment of user fees for FDA review of the BLA; and • FDA acceptance, review and approval, or licensure, of the BLA, which might include review by an advisory committee, a panel typicallyconsisting of independent clinicians and other experts who provide recommendations as to whether the application should be approvedand under what conditions.Before testing any biological product candidate, including our product candidates, in humans, the product candidate must undergo rigorous thepreclinical testing. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations as well as in vitro and animal studies toassess the potential safety and efficacy of the product candidate. The clinical trial sponsor must submit an IND to the FDA before clinical testing canbegin in the United States. An IND must contain the results of the preclinical tests, manufacturing information, analytical data, any available clinicaldata or literature, a proposed clinical protocol, an investigator’s brochure, a sample informed consent form, and other materials. Clinical trial protocolsdetail, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be usedto monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain 21Table of Contentsadverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Some preclinicaltesting, such as toxicity studies, may continue even after the IND is submitted.The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinicaltrials or places the trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or duringclinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization andthen only under terms authorized by the FDA.Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution atwhich the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items aswhether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB alsoapproves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and mustmonitor the clinical trial until completed. Clinical trials involving recombinant or synthetic nucleic acid molecules also must be reviewed by aninstitutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at thatinstitution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.Clinical trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualifiedinvestigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials must be conducted and monitored inaccordance with the FDA’s regulations comprising the GCP requirements.Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some productsfor severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthyvolunteers, the initial human testing is often conducted in patients with the target disease or condition. • Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, topreliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage anddosing schedule. • Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patientpopulation, generally at geographically dispersed clinical trial sites. These clinical trials are intended to generate enough data tostatistically evaluate the efficacy and safety of the product for approval, to establish the overall risk to benefit profile of the product andto provide an adequate basis for product labeling.Phase 1, Phase 2, and Phase 3 clinical trials may not be completed successfully within any specified period, if at all.Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials areused to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, andclinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reportsmust be promptly submitted to the FDA, the NIH and the investigators for serious and unexpected adverse events, any findings from other studies, testsin 22Table of Contentslaboratory animals or in vitro testing that suggest a significant risk for human patients, or any clinically important increase in the rate of a serioussuspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendardays after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. The FDA or the sponsor or itsdata safety monitoring board, an independent group of experts that evaluates study data for safety and makes recommendations concerningcontinuation, modification, or termination of clinical trials, may suspend or terminate a clinical trial at any time on various grounds, including afinding that the research patients are being exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials.Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with theIRB’s requirements or if the biological product has been associated with unexpected serious harm to patients.Concurrently with clinical trials, companies usually complete additional nonclinical studies and must also develop additional information about thephysical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordancewith cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes theimportance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable ofconsistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity,strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stabilitystudies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.U.S. Review and Approval ProcessesAfter the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biologicalproduct. The BLA must include results of product development, laboratory and animal studies, human trials, information on the manufacture andcomposition of the product, proposed labeling and other relevant information.Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts thePDUFA user fees on an annual basis. PDUFA also imposes an annual program fee for approved biological products. Fee waivers or reductions areavailable in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user feesare assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before theagency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and mayrequest additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subjectto review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA.The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and/or effective for its intended use, and hasan acceptable purity profile, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity,safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that present difficultquestions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and arecommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of anadvisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, theFDA also will determine whether a Risk 23Table of ContentsEvaluation and Mitigation Strategy, or REMS, is necessary to ensure that the benefits of the product outweigh its risks and to assure the safe use of thebiological product, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricteddistribution methods, patient registries and other risk minimization tools. FDA determines the requirement for a REMS, as well as the specific REMSprovisions, on a case-by-case basis. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will notapprove a BLA without a REMS, if required.Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless itdetermines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production ofthe product within required specifications. For immunotherapy products, the FDA also will not approve the product if the manufacturer is not incompliance with the GTPs, to the extent applicable. These are FDA regulations and guidance documents that govern the methods used in, and thefacilities and controls used for, the manufacture of human cells, tissues, and cellular and tissue-based products, or HCT/Ps, which are human cells ortissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the GTP requirements is to ensure thatcell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease.FDA GTP regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donorsthrough screening and testing. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that theclinical trials were conducted in compliance with IND trial requirements and GCP requirements.Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteriafor approval. If the agency decides not to approve the BLA in its present form, the FDA will issue a Complete Response Letter, which generallyoutlines the specific deficiencies in the BLA identified by the FDA and may require additional clinical or other data or impose other conditions thatmust be met in order to secure final approval of the application. The deficiencies identified may be minor, for example, requiring labeling changes, ormajor, for example, requiring additional clinical trials. Even with the submission of additional information, the FDA may ultimately decide that theapplication does not satisfy the regulatory criteria for approval. If a Complete Response Letter is issued, the applicant may either resubmit the BLA,addressing all of the deficiencies identified in the letter, or withdraw the application.The FDA may require that certain contraindications, warnings or precautions be included in the product labeling, or otherwise limit the scope of anyapproval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess abiological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have beencommercialized. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes andadditional labeling claims, are subject to further testing requirements and FDA review and approval.In addition, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and effectivenessof the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatricsubpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers.Post-Approval RequirementsAny products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keepingrequirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product samplingand distribution requirements, and complying with FDA promotion and advertising requirements.In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval to ensurethe long-term stability of the product. We rely, and expect to continue to 24Table of Contentsrely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulationsrequire among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and theobligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution ofapproved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannouncedinspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expendtime, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product afterapproval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal ofthe product from the market.The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product. Discoveryof previously unknown problems with a product, including adverse events of unanticipated severity or frequency, with manufacturing processes, or thefailure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrativeenforcement, complete withdrawal from the market, product recalls, warning letters from the FDA, mandated corrective advertising or communicationswith doctors, product seizure or detention, injunctions, and civil or criminal penalties, among others. Newly discovered or developed safety oreffectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also mayrequire the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation,may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.Moreover, the FDA strictly regulates marketing, labeling, advertising and promotion of products. Drugs may be promoted only for the approvedindications and in accordance with the provisions of the approved label, although physicians, in the practice of medicine, may prescribe approveddrugs for unapproved indications. However, companies may share truthful and not misleading information that is otherwise consistent with thelabeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that isfound to have improperly promoted off-label uses may be subject to significant liability.U.S. Marketing ExclusivityThe Biologics Price Competition and Innovation Act, or BPCIA, amended the PHSA to authorize the FDA to approve similar versions of innovativebiologics, commonly known as biosimilars. Biosimilars are approved pursuant to an abbreviated pathway whereby applicants need not submit the fullslate of preclinical and clinical data, and approval is based in part on the FDA’s findings of safety, purity, and potency for the original biologic (i.e., thereference product). Reference products are eligible to receive 12 years of exclusivity from the time of first licensure of the product, which prevents theFDA from approving any biosimilars to the reference product through the abbreviated pathway, but does not prevent approval of BLAs that areaccompanied by a full data package and that do not rely on the reference product. A biosimilar may be approved if the product is highly similar to thereference product notwithstanding minor differences in clinically inactive components and there are no clinically meaningful differences with thereference product in terms of the safety, purity, and potency.Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existingexclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may begranted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In theUnited States and markets in other countries, sales of any products for 25Table of Contentswhich we receive regulatory approval for commercial sale will depend, in significant part, on the extent to which third-party payors provide coverage,and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs,private managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coveragefor a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay forthe product. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all ofthe FDA-approved products for a particular indication. In addition, in the United States, no uniform policy of coverage and reimbursement for drugproducts exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. Third-party payors are increasingly challenging the price, examining the medical necessity of and reviewing the cost-effectiveness of medical products,therapies and services, in addition to questioning their safety and efficacy.Reimbursement may impact the demand for, and/or the price of, any product candidate which obtains marketing approval. Even if coverage andreimbursement is obtained for a given product candidate by a third-party payor, the resulting reimbursement payment rates may not be adequate or mayrequire co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and theirprescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with those medications. Patients are unlikelyto use a product, and physicians may be less likely to prescribe a product, unless coverage is provided and reimbursement is adequate to cover all or asignificant portion of the cost of the product. Therefore, coverage and adequate reimbursement is critical to new drug product acceptance.The downward pressure on health care costs in general, particularly prescription drugs and biologics, has become very intense. Governments haveshown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements forsubstitution of generic products. As a result, increasingly high barriers are being erected to the entry of new products. The marketability of any productcandidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide favorablecoverage and adequate reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will continue toincrease the pressure on healthcare pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverageand reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.Health Care Laws Governing Interactions with Healthcare ProvidersHealthcare providers, physicians and third-party payors in the United States play a primary role in the recommendation and prescription of drugproducts. Arrangements with healthcare providers, physicians, third-party payors and customers can expose pharmaceutical manufactures to broadlyapplicable fraud and abuse and other healthcare laws and. The applicable federal, state and foreign healthcare laws and regulations laws that may affecta pharmaceutical manufacture’s ability to operate include, but are not limited to: • The federal Anti-Kickback Statute, which regulates our business activities, including our marketing practices, educational programs,pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving,offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual or the purchase orrecommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • Federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act which permits a privateindividual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the False Claims Act,which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment fromMedicare, Medicaid, or other third-party payors that are false or fraudulent; 26Table of Contents • The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal civil and criminal statutesthat prohibit, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating tohealthcare matters; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and theirimplementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individuallyidentifiable health information on entities and individuals subject to the law including certain healthcare providers, health plans, andhealthcare clearinghouses, known as covered entities, as well as individuals and entities that perform services for them which involve theuse, or disclosure of, individually identifiable health information, known as business associates; • Requirements to report annually to CMS certain financial arrangements with physicians and teaching hospitals, as defined in the ACA andits implementing regulations, including reporting any “transfer of value” made or distributed to teaching hospitals, prescribers, and otherhealthcare providers and reporting any ownership and investment interests held by physicians and their immediate family members andapplicable group purchasing organizations during the preceding calendar year; and • State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to itemsor services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies tocomply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federalgovernment that otherwise restricts certain payments that may be made to healthcare providers and entities; state laws that require drugmanufacturers to report information related to payments and other transfer of value to physicians and other healthcare providers andentities; state laws that require the reporting of information related to drug pricing; state and local laws that require the registration ofpharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information in certaincircumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicatingcompliance efforts.Efforts to ensure that business arrangements comply with applicable healthcare laws involve substantial costs. It is possible that governmental andenforcement authorities will conclude that a pharmaceutical manufacturer’s business practices do not comply with current or future statutes,regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against apharmaceutical manufacturer, and it is not successful in defending itself or asserting its rights, it may be subject to the imposition of significant civil,criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare,Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment ofoperations, as well as additional reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolveallegations of non-compliance with these laws. In addition, the approval and commercialization of drug products outside the United States may alsosubject a pharmaceutical manufacturer to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.Healthcare Reform EffortsA primary trend in the United States healthcare industry and elsewhere is cost containment. Over the last several years, there have been federal and stateproposals and legislation enacted regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement fordrugs and other medical products, and making changes to healthcare financing and the delivery of care in the United States. 27Table of ContentsIn March 2010, the ACA was enacted, which includes measures that have significantly changed healthcare financing by both governmental and privateinsurers. The provisions of the ACA of importance to the pharmaceutical and biotechnology industry are, among others, the following: • created an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drug agents or biologicagents, which is apportioned among these entities according to their market share in certain government healthcare programs; • increased the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturerprice for branded and generic drugs, respectively; • created a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discountsto negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for themanufacturer’s outpatient drugs to be covered under Medicare Part D; • extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed careorganizations, unless the drug is subject to discounts under the 340B drug discount program; • created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs thatare inhaled, infused, instilled, implanted or injected; • expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additionalindividuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federalpoverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; • expanded the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; • created a new requirement to annually report drug samples that certain manufacturers and authorized distributors provide to physicians; • expanded healthcare fraud and abuse laws, including the False Claims Act and the federal Anti-Kickback Statute, new governmentinvestigative powers, and enhanced penalties for noncompliance; • created new requirements under the federal Physician Payments Sunshine Act for drug manufacturers to annually report information relatedto payments and other transfers of value made to physicians and teaching hospitals as well as ownership or investment interests held byphysicians and their immediate family members; • created a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectivenessresearch, along with funding for such research; • established a Center for Medicare & Medicaid Innovation at CMS to test innovative payment and service delivery models to lowerMedicare and Medicaid spending, potentially including prescription drug spending; and • created a licensure framework for follow on biologic products.Some of the provisions of the ACA have yet to be implemented, and there have been legal and political challenges to certain aspects of the ACA. SinceJanuary 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent or loosen certain requirementsmandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. WhileCongress has not passed repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law. The TaxCuts and Jobs Act of 2017, or Tax Act, includes a provision which repealed, effective January 1, 2019, the tax-based shared responsibility paymentimposed by the ACA on certain 28Table of Contentsindividuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. OnJanuary 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certainACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed oncertain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. The Bipartisan BudgetAct of 2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-salediscount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans,commonly referred to as the “donut hole”. In July 2018, CMS published a final rule permitting further collections and payments to and from certainACA qualified health plans and health insurance issuers under ACA risk adjustment program in response to the outcome of federal district courtlitigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that ACAis unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. While the Texas U.S. DistrictCourt Judge, as well as the Trump administration and CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, itis unclear how this decision, subsequent appeals, and other efforts to repeal and replace ACA will impact ACA.In addition, other federal health reform measures have been proposed and adopted in the United States since the ACA was enacted. For example, as aresult of the Budget Control Act of 2011, providers are subject to Medicare payment reductions of 2% per fiscal year, which went into effect on April 1,2013 and, due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2027 unless additionalCongressional action is taken. Further, the American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and increased thestatute of limitations period for the government to recover overpayments from providers from three to five years. The Medicare Access and CHIPReauthorization Act of 2015 also introduced a quality payment program under which certain individual Medicare providers will be subject to certainincentives or penalties based on new program quality standards. Payment adjustments for the Medicare quality payment program will begin in 2019.Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost ofprescription drugs and biologics. Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and statelegislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturerpatient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration’s budgetproposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other futurelegislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allowsome states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. For example, inSeptember 2018, CMS announced that it will allow Medicare Advantage Plans the option to use step therapy for Part B drugs beginning January 1,2019, and in October 2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs andbiological products, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale AcquisitionCost, or list price, of that drug or biological product. On January 31, 2019, the U.S. Department of Health and Human Services, Office of InspectorGeneral, proposed modifications to the federal Anti-Kickback Statute discount safe harbor for the purpose of reducing the cost of drug products toconsumers which, among other things, if finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaid managed careorganizations and pharmacy benefit managers working with these organizations. While some of these and other proposed measures may requireauthorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue toseek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly enacted 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, designed to encourageimportation 29Table of Contentsfrom other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using biddingprocedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or the Right toTry Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drugproducts that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligiblepatients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. Thereis no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.U.S. Foreign Corrupt Practices Act, U.K. Bribery Act and Other LawsThe Foreign Corrupt Practices Act, or the FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering ofanything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of theforeign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities arelisted in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflectall transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controlsfor international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and civil fines,imprisonment, disgorgement, oversight, and debarment from government contracts.Our operations are also subject to non-U.S. anti-corruption laws such as the U.K. Bribery Act 2010, or the Bribery Act. As with the FCPA, these lawsgenerally prohibit us and our employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper orprohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other businessadvantage. Under the Bribery Act, we may also be liable for failing to prevent a person associated with us from committing a bribery offense.We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of theUnited Kingdom and the United States and authorities in the European Union, including applicable export control regulations, economic sanctionsand embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations,collectively referred to as trade control laws.Failure to comply with the Bribery Act, the FCPA and other anti-corruption laws and trade control laws could subject us to criminal and civil penalties,disgorgement and other sanctions and remedial measures, and legal expenses.CompetitionThe development and commercialization for new products to treat cancer, including the indications we are pursuing, is highly competitive andconsiderable competition exists from major pharmaceutical, biotechnology and specialty cancer companies. Many of these companies have moreexperience in preclinical and clinical development, manufacturing, regulatory, and global commercialization. We are also competing with academicinstitutions, governmental agencies, and private organizations that are conducting research in the field of cancer.The biopharmaceutical industry, and the rapidly evolving market for developing genetically engineered T-cells, is characterized by significantcompetition and rapid innovation. Our genetically engineering T-cell programs face significant competition in the CAR and TCR technology spacefrom multiple companies and their 30Table of Contentscollaborators. Two such companies, Novartis International AG (Kymriah®) and Kite Pharma Inc./Gilead Sciences, Inc. (Yescarta®), have nowcommercialized autologous CAR+ T cells against CD19. Additional companies developing autologous CAR+ T targets include Juno TherapeuticsInc./Celgene Corporation, bluebird bio, Inc., in collaboration with Celgene Corporation, Nanjing Legend Biotech and Janssen Biotech, Inc., asubsidiary of Johnson & Johnson, Bellicum Pharmaceuticals, Inc., Autolus Therapeutics plc, Mustang Bio, Inc. and Marker Therapeutics, Inc. Severalcompanies are pursuing the development of allogeneic CAR+ T therapies, including Allogene Therapeutics, Inc. (in collaboration with Pfizer Inc.),Atara Biotherapeutics, Inc. and Cellectis SA (in collaboration with Servier) which may compete with our product candidates.Our TCR program faces competition from companies targeting shared antigens, including from Adaptimmune Therapeutics plc in collaboration withGlaxoSmithKline plc, Kite Pharma Inc./Gilead Sciences, Inc., Tmunity Therapeutics Inc, Medigene AG, Tactiva Therapeutics, LLC, Takara Bio Inc.,TC BioPharm Ltd., TCR2 Therapeutics Inc. and Zelluna Immunotherapy AS. Several companies, including Advaxis Inc./Amgen Inc., BioNTech AG,Neon Therapeutics Inc. and Gritstone Oncology, Inc., are pursuing vaccine platforms to target neoantigens for solid tumors. Other companies aredeveloping non-viral gene therapies, including Poseida Therapeutics, Inc. and several companies developing CRISPR technology. We also facecompetition from non-cell-based treatments offered by other companies such as Amgen Inc., AstraZeneca plc, Bristol-Myers Squibb Company, IncyteCorporation, Merck & Co., Inc., and Roche Holding AG.We are initially developing our Controlled IL-12 platform for the treatment of rGBM. Companies that sell marketed drugs for rGBM are Genentech,Inc. and Roche Holding AG with Avastin (bevacizumab), a vascular endothelial growth factor directed antibody indicated for the treatment of adultswith rGBM. Arbor Pharmaceuticals Inc. markets GLIADEL Wafer, which is indicated in patients with newly diagnosed high-grade malignant glioma asan adjunct to surgery and radiation and is also indicated in patients with rGBM multiforme as an adjunct to surgery.Several companies have product candidates in Phase 3 development for the treatment of glioblastoma. Tocagen Inc. is conducting a Phase 2/3randomized, open-label study of Toca 511, a retroviral replicating vector, combined with Toca FC in subjects undergoing planned resection for rGBM.Vascular Biogenics Ltd. is developing VB-111, an anti-angiogenic non-replicating adenovirus, combined with bevacizumab, in patients with rGBM.DelMar Pharmaceuticals, Inc. is developing VAL-083, a systemic alkylating agent, in patients with rGBM who have failed standardtemozolomide/radiation therapy and bevacizumab.Other competitors with product candidates currently in Phase 2 clinical trials include AbbVie Inc.’s Depatus-M (ABT-414) and DNA-2401, aconditionally replicative adenovirus being evaluated in combination with pembrolizumab (KEYTRUDA®) for rGBM by DNATrix Inc. and Merck &Co., Inc. Duke University is enrolling a randomized Phase 2 study of oncolytic polio/rhinovirus recombinant (PVSRIPO) alone or in combination withlomustine in recurrent WHO Grade IV malignant glioma patients. Also, MedImmune, LLC/AstraZeneca plc’s durvalumab was evaluated in a Phase 2trial in patients with rGBM.EmployeesAs of February 21, 2019, we had 48 full-time employees, 33 of whom were engaged in research and development activities and 15 of whom wereengaged in business development, finance, information systems, facilities, human resources or administrative support. None of our employees aresubject to a collective bargaining agreement.Corporate InformationWe originally incorporated in Colorado in September 1998 (under the name Net Escapes, Inc.) and later changed our name to “EasyWeb, Inc.” inFebruary 1999. We re-incorporated in Delaware on May 16, 2005 under the same name. On September 13, 2005, we completed a “reverse” acquisitionof privately held Ziopharm, Inc., a Delaware corporation. To affect this transaction, we caused ZIO Acquisition Corp., our wholly-owned subsidiary, tomerge with and into Ziopharm, Inc., with Ziopharm, Inc. surviving as our wholly owned subsidiary. In accordance with the terms of the merger, theoutstanding common stock of Ziopharm, Inc. automatically converted into the right to receive an aggregate of approximately 97.3% of ouroutstanding common stock (after giving effect to the transaction). Following the merger, we caused Ziopharm, Inc. to merge 31Table of Contentswith and into us and we changed our name to “Ziopharm Oncology, Inc.” Although EasyWeb, Inc. was the legal acquirer in the transaction, weaccounted for the transaction as a reverse acquisition under generally accepted accounting principles. As a result, Ziopharm, Inc. became the registrantwith the Securities and Exchange Commission, or the SEC, and the historical financial statements of Ziopharm, Inc. became our historical financialstatements.Our principal executive offices are located at One First Avenue, Parris Building 34, Navy Yard Plaza, Boston, Massachusetts 02129, and our telephonenumber is (617) 259-1970.Available InformationOur website address is www.ziopharm.com. Our website and information included in or linked to our website are not part of this Annual Report onForm 10-K. We file reports with the SEC, which we make available on our website free of charge. These reports include annual reports on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, each of which is provided on our website as soon asreasonably practicable after we electronically file such materials with or furnish them to the SEC. In addition, the SEC maintains a website(www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers, like us, that file electronically with theSEC, including us. 32Table of ContentsItem 1A. Risk FactorsAn investment in our common stock is very risky. In addition to the other information in this Annual Report on Form 10-K, you should carefullyconsider the following risk factors in evaluating us and our business. If any of the events described in the following risk factors were to occur, ourbusiness, financial condition, results of operation and future growth prospects would likely be materially and adversely affected. In that event, thetrading price of our common stock could decline, and you could lose all or a part of your investment in our common stock. Therefore, we urge you tocarefully review this entire report and consider the risk factors discussed below. Moreover, the risks described below are not the only ones that weface. Additional risks not presently known to us or that we currently deem immaterial may also affect our business, financial condition, operatingresults or prospects.RISKS RELATED TO OUR BUSINESSWe will require substantial additional financial resources to continue ongoing development of our product candidates and pursue our businessobjectives; if we are unable to obtain these additional resources when needed, we may be forced to delay or discontinue our planned operations,including clinical testing of our product candidates.We have not generated significant revenue and have incurred significant net losses in each year since our inception. For the year ended December 31,2018, we had a net loss of $53.1 million, and, as of December 31, 2018, we have incurred approximately $566.3 million of accumulated deficit sinceour inception in 2003. We expect to continue to incur significant operating expenditures and net losses. Further development of our productcandidates will likely require substantial increases in our expenses as we: • continue to undertake clinical trials for product candidates; • scale-up the formulation and manufacturing of our product candidates; • seek regulatory approvals for product candidates; • work with regulatory authorities to identify and address program-related inquiries; • implement additional internal systems and infrastructure; and • hire additional personnel.We continue to seek additional financial resources to fund the further development of our product candidates. If we are unable to obtain sufficientadditional capital, one or more of these programs could be placed on hold.As of December 31, 2018, we have approximately $61.7 million of cash and cash equivalents. Given our current development plans, we anticipate cashresources will be sufficient to fund our operations into the second quarter of 2020, and we have no committed sources of additional capital at thistime. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses couldvary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and ourexpenses could prove to be significantly higher than we currently anticipate. Management does not know whether additional financing will be onterms favorable or acceptable to us when needed, if at all. If adequate additional funds are not available when required, or if we are unsuccessful inentering into partnership agreements for further development of our product candidates, management may need to curtail its development efforts andplanned operations.We need to raise additional capital to fund our operations. The manner in which we raise any additional funds may affect the value of yourinvestment in our common stock.Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debtfinancings and license and collaboration agreements. As of December 31, 33Table of Contents2018, we have incurred approximately $566.3 million of accumulated deficit and had approximately $61.7 million of cash and cash equivalents.Given our current development plans, we anticipate that our current cash resources will be sufficient to fund our operations into the second quarter of2020. However, changes may occur that would consume our existing capital prior to then, including expansion of the scope of, and/or slower thanexpected progress of, our research and development efforts and changes in governmental regulation. Actual costs may ultimately vary from our currentexpectations, which could materially impact our use of capital and our forecast of the period of time through which our financial resources will beadequate to support our operations.In addition to above factors, our actual cash requirements may vary materially from our current expectations for a number of other factors that mayinclude, but are not limited to, changes in the focus and direction of our development programs, competitive and technical advances, costs associatedwith the development of our product candidates, our ability to secure partnering arrangements, and costs of filing, prosecuting, defending andenforcing our intellectual property rights. If we exhaust our capital reserves more quickly than anticipated, regardless of the reason, and we are unableto obtain additional financing on terms acceptable to us or at all, we will be unable to proceed with development of some or all of our productcandidates on expected timelines and will be forced to prioritize among them.The unpredictability of the capital markets may severely hinder our ability to raise capital within the time periods needed or on terms we consideracceptable, if at all. Moreover, if we fail to advance one or more of our current product candidates to later-stage clinical trials, successfullycommercialize one or more of our product candidates, or acquire new product candidates for development, we may have difficulty attracting investorsthat might otherwise be a source of additional financing.Our need for additional capital and limited capital resources may force us to accept financing terms that could be significantly dilutive to existingstockholders. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience dilution. In addition, we maygrant future investors rights superior to those of our existing stockholders. If we raise additional funds through collaborations and licensingarrangements, it may be necessary to relinquish some rights to our technologies, product candidates or products, or grant licenses on terms that are notfavorable to us. If we raise additional funds by incurring debt, we could incur significant interest expense and become subject to covenants in therelated transaction documentation that could affect the manner in which we conduct our business.Our plans to develop and commercialize non-viral and viral adoptive cellular therapies based on engineered cytokines and CAR T-cell as well asTCR therapies can be considered as new approaches to cancer treatment, the successful development of which is subject to significant challenges.We intend to employ technologies such as the technology licensed from MD Anderson pursuant to the MD Anderson License described above, andfrom Precigen, pursuant to the License Agreement, to pursue the development and commercialization of non-viral and viral adoptive cellular therapiesbased on cytokines, T-cells, CARs and TCRs, possibly under control of the RTS® and other switch technologies targeting both hematologic and solidtumor malignancies. Because this is a new approach to cancer immunotherapy and cancer treatment generally, developing and commercializingproduct candidates subjects us to a number of challenges, including: • obtaining regulatory approval from the FDA and other regulatory authorities that have very limited experience with the commercialdevelopment of genetically modified and/or unmodified T-cell therapies for cancer; • developing and deploying consistent and reliable processes for engineering a patient’s and/or donor’s T-cells ex vivo and infusing theT-cells back into the patient; • possibly conditioning patients with chemotherapy in conjunction with delivering each of the potential products, which may increase therisk of adverse side effects of the potential products; 34Table of Contents • educating medical personnel regarding the potential side effect profile of each of the potential products, such as the potential adverse sideeffects related to cytokine release; • addressing any competing technological and market developments; • developing processes for the safe administration of these potential products, including long-term follow-up for all patients who receive thepotential products; • sourcing additional clinical and, if approved, commercial supplies for the materials used to manufacture and process the potential products; • developing a manufacturing process and distribution network with a cost of goods that allows for an attractive return on investment; • establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance; • developing therapies for types of cancers beyond those addressed by the current potential products; • maintaining and defending the intellectual property rights relating to any products we develop; • and not infringing the intellectual property rights, in particular, the patent rights, of third parties, including competitors, such as thosedeveloping T-cell therapies.We cannot assure you that we will be able to successfully address these challenges, which could prevent us from achieving our research, developmentand commercialization goals.Our current product candidates are based on novel technologies and are supported by limited clinical data and we cannot assure you that ourcurrent and planned clinical trials will produce data that supports regulatory approval of one or more of these product candidates.The immuno-oncology effector platform in which we have acquired rights pursuant to our License Agreement with Precigen represents early-stagetechnology in the field of human oncology biotherapeutics, with Ad-RTS-IL-12 plus veledimex having completed trials, in melanoma, breast cancerand rGBM. Similarly, our genetically modified and/or non-modified T-cell candidates are supported by limited clinical data, all of which has beengenerated through trials conducted by MD Anderson, not by us. We plan to assume control of the overall clinical and regulatory development of ourT-cell product candidates, and any failure to obtain, or delays in obtaining, sponsorship of new INDs, or in filing INDs sponsored by us for these or anyother product candidates we determine to advance could negatively affect the timing of our potential future clinical trials. Such an impact on timingcould increase research and development costs and could delay or prevent obtaining regulatory approval for our product candidates, either of whichcould have a material adverse effect on our business.Further, we did not control the design or conduct of the previous trials. It is possible that the FDA will not accept these previous trials as providingadequate support for future clinical trials, whether controlled by us or third parties, for any of one or more reasons, including the safety, purity, andpotency of the product candidate, the degree of product characterization, elements of the design or execution of the previous trials or safety concerns,or other trial results. We may also be subject to liabilities arising from any treatment-related injuries or adverse effects in patients enrolled in theseprevious trials. As a result, we may be subject to unforeseen third-party claims and delays in our potential future clinical trials. We may also be requiredto repeat in whole or in part clinical trials previously conducted by MD Anderson or other entities, which will be expensive and delay the submissionand licensure or other regulatory approvals with respect to any of our product candidates.In addition, the results of the limited clinical trials conducted to date may not be replicated in future clinical trials. Our Ad-RTS-IL-12 plus veledimexand genetically modified and non-modified T-cell product candidates, as well as other product candidates, may fail to show the desired safety andefficacy in clinical development, and 35Table of Contentswe cannot assure you that the results of any future trials will demonstrate the value and efficacy of our product candidates. Moreover, there are anumber of regulatory requirements that we must satisfy before we can continue clinical trials of CAR+ T or other cellular therapy product candidates inthe United States. Satisfaction of these requirements will entail substantial time, effort and financial resources. Any time, effort and financial resourceswe expend on our Ad-RTS-IL-12 plus veledimex and genetically modified and non-modified T-cell product candidates and other early-stage productcandidate development programs may adversely affect our ability to continue development and commercialization of our immuno-oncology productcandidates.We report interim data on certain of our clinical trials and we cannot assure you that interim data will be predictive of either future interim resultsor final study results.As part of our business, we provide updates related to the development of our product candidates, which may include updates related to interim clinicaltrial data. To date, our clinical trials have involved small patient populations and because of the small sample size, the interim results of these clinicaltrials may be subject to substantial variability and may not be indicative of either future interim results or final results.We face substantial competition from other biopharmaceutical companies, which may result in others discovering, developing or commercializingproducts before, or more successfully than, we do.The biopharmaceutical industry, and the rapidly evolving market for developing genetically engineered T-cells in particular, is characterized byintense competition and rapid innovation. The business of genetically engineering T-cells faces significant competition in the CAR and TCRtechnology space from multiple companies and their collaborators.Two such companies, Novartis International AG (Kymriah®) and Kite Pharma Inc./Gilead Sciences, Inc. (Yescarta®), have now commercializedautologous CAR+ T cells against CD19. Additional companies developing autologous CAR+ T products include Juno Therapeutics Inc./CelgeneCorporation, bluebird bio, Inc., in collaboration with Celgene Corporation, Nanjing Legend Biotech and Janssen Biotech, Inc., a subsidiary of Johnson& Johnson, Bellicum Pharmaceuticals, Inc., Autolus Therapeutics plc, Mustang Bio, Inc. and Marker Therapeutics, Inc. Several companies are pursuingthe development of allogeneic CAR+ T therapies, including Allogene Therapeutics, Inc. (in collaboration with Pfizer Inc.), Atara Biotherapeutics, Inc.and Cellectis SA (in collaboration with Servier) which may also compete with our product candidates.Our TCR program faces competition from companies targeting shared antigens, including from Adaptimmune Therapeutics plc in collaboration withGlaxoSmithKline plc, Kite Pharma Inc./Gilead Sciences, Inc., Tmunity Therapeutics Inc, Medigene AG, Tactiva Therapeutics, LLC, Takara Bio, Inc.,TC Biopharm Ltd., TCR2 Therapeutics Inc. and Zelluna Immunotherapy AS and others. Several companies, including Advaxis Inc./Amgen Inc.,BioNTech AG, Neon Therapeutics Inc. and Gritstone Oncology, Inc., are pursuing vaccine platforms to target neoantigens for solid tumors.We are initially developing our Controlled IL-12 platform for the treatment of rGBM. Companies that sell marketed drugs for rGBM are Genentech Inc.and Roche Holding AG with Avastin (bevacizumab), a vascular endothelial growth factor directed antibody indicated for the treatment of adults withrGBM. Arbor Pharmaceuticals Inc. markets GLIADEL Wafer, which is indicated in patients with newly diagnosed high-grade malignant glioma as anadjunct to surgery and radiation and is also indicated in patients with recurrent glioblastoma multiforme as an adjunct to surgery.Several companies have product candidates in Phase 3 development for the treatment of glioblastoma, including Tocagen Inc., Vascular BiogenicsLtd., and DelMar Pharmaceuticals, Inc. Several companies and institutions have product candidates currently in Phase 2 clinical trials, includingAbbvie Inc., Duke University and MedImmune LLC/AstraZeneca plc.Even if we obtain regulatory approval of potential products, we may not be the first to market and that may affect the price or demand for our potentialproducts. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication thanour products or may offer comparable performance at a lower cost. Additionally, the availability and price of our competitors’ products 36Table of Contentscould limit the demand and the price we are able to charge for our potential products. We may not be able to implement our business plan if theacceptance of our potential products is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment toour potential products, or if physicians switch to other new drug or biologic products or choose to reserve our potential products. Additionally, acompetitor could obtain orphan product exclusivity from the FDA with respect to such competitor’s product. If such competitor product is determinedto be the same product as one of our potential products, that may prevent us from obtaining approval from the FDA for such potential products for thesame indication for seven years, except in limited circumstances. If our products fail to capture and maintain market share, we may not achievesufficient product revenues and our business will suffer.We compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies,academic institutions, government agencies and other public and private research organizations. Many of these competitors have products alreadyapproved or in development. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger researchand development programs or have substantially greater financial resources than we do, as well as significantly greater experience in: • developing drugs and biopharmaceuticals; • undertaking preclinical testing and human clinical trials; • obtaining FDA and other regulatory approvals of drugs and biopharmaceuticals; • formulating and manufacturing drugs and biopharmaceuticals; and • launching, marketing, and selling drugs and biopharmaceuticals.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have feweror less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA orother regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing astrong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or otherthird-party payors seeking to encourage the use of generic products.Any termination of our licenses with Precigen or MD Anderson could result in the loss of significant rights and could harm our ability to developand commercialize our product candidates.We are dependent on patents, know-how, and proprietary technology that are licensed from others, particularly MD Anderson and Precigen. Anytermination of these licenses could result in the loss of significant rights and could harm our ability to commercialize our product candidates. Disputesmay also arise between us and these licensors regarding intellectual property subject to a license agreement, including those relating to: • the scope of rights granted under the applicable license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes, and the technology and processes of Precigen, MD Anderson and our otherlicensors, infringe on intellectual property of the licensor that is not subject to the applicable license agreement; • our right to sublicense patent and other rights to third parties pursuant to our relationships with our licensors and partners; • whether we are complying with our diligence obligations with respect to the use of the licensed technology in relation to our developmentand commercialization of our potential products under the MD Anderson License; and 37Table of Contents • the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensorsand by us.If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements, particularlywith MD Anderson and Precigen, on acceptable terms, we may be unable to successfully develop and commercialize the affected potential products.We are generally also subject to all of the same risks with respect to protection of intellectual property that we license as we are for intellectual propertythat we own. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize potential products under ourapplicable licenses could suffer. There is a substantial amount of litigation involving patents and other intellectual property rights in thebiotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, andreexamination proceedings before the United States Patent and Trademark Office, or USPTO, or oppositions and other comparable proceedings inforeign jurisdictions. Recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and post-grantreview have been implemented, which adds uncertainty to the possibility of challenge to our or our licensors’ patents in the future.Clinical trials are very expensive, time-consuming, and difficult to design, initiate and implement.Human clinical trials are very expensive and difficult to design, initiate and implement, in part because they are subject to rigorous regulatoryrequirements. The clinical trial start-up and process itself is also time-consuming and results are inherently uncertain. We estimate that clinical trials ofour product candidates will take at least several years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounterproblems that cause us to delay the start of, abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed byseveral factors, including: • Additional nonclinical data requests by regulatory agencies; • Unforeseen safety issues; • Determination of dosing issues; • Lack of effectiveness during clinical trials; • Slower than expected rates of patient recruitment and enrollment; • Inability to monitor patients adequately during or after treatment; • Inability or unwillingness of medical investigators to follow our clinical protocols; and • Regulatory determinations to temporarily or permanently cease enrollment for other reasons not related to patient safety.Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. In addition, we or the FDA may suspendour clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our INDsubmission or in the conduct of these trials. In June 2018, we announced that the FDA placed our Phase 1 trial on clinical hold to evaluate CD19-specific CAR-T therapies manufactured using our rapid personalized manufacturing technology and requested additional information in support of theIND submission for the trial. Our business may be materially harmed if we or our partners are unable to adequately address the FDA’s requests for thistrial in a timely manner.See also “Risks Related to the Clinical Testing, Regulatory Approval and Manufacturing of our Product Candidates—Our product candidates are invarious stages of clinical trials, which are very expensive and time-consuming. We cannot be certain when we will be able to submit a BLA, to theFDA and any failure or delay in completing clinical trials for our product candidates could harm our business.” 38Table of ContentsWe may not be able to commercialize any products, generate significant revenues, or attain profitability.To date, none of our product candidates have been approved for commercial sale in any country. The process to develop, obtain regulatory approvalfor, and commercialize potential product candidates is long, complex, and costly. Unless and until we receive approval from the FDA and/or otherforeign regulatory authorities for our product candidates, we cannot sell our products and will not have product revenues. Even if we obtain regulatoryapproval for one or more of our product candidates, if we are unable to successfully commercialize our products, we may not be able to generatesufficient revenues to achieve or maintain profitability, or to continue our business without raising significant additional capital, which may not beavailable. Our failure to achieve or maintain profitability could negatively impact the trading price of our common stock.Ethical, legal and social concerns about synthetic biologically engineered products could limit or prevent the use of our product candidates.Our product candidates use an immuno-oncology platform. Public perception about the safety and environmental hazards of, and ethical concernsover, genetically engineered products could influence public acceptance of our product candidates. If we and our collaborators are not able toovercome the ethical, legal and social concerns relating to biological engineering, our product candidates may not be accepted. These concerns couldresult in increased expenses, regulatory scrutiny, delays or other impediments to the public acceptance and commercialization of our productcandidates. Our ability to develop and commercialize products could be limited by public attitudes and governmental regulation.The subject of genetically modified organisms has received negative publicity, which has aroused public debate. This adverse publicity could lead togreater regulation and trade restrictions on the development and commercialization of genetically altered products. Further, there is a risk that ourproduct candidates could cause adverse health effects or other AEs, which could also lead to negative publicity.The biological platform that we use may have significantly enhanced characteristics compared to those found in naturally occurring organisms,enzymes or microbes. While we believe we produce biological technologies only for use in a controlled laboratory and industrial environment, therelease of such biological technologies into uncontrolled environments could have unintended consequences. Any adverse effect resulting from such arelease could have a material adverse effect on our business and financial condition, and we may have exposure to liability for any resulting harm.We will incur additional expenses in connection with our License Agreement with Precigen.We expect our overall research and development expenses will continue to increase as we move forward with our research and development effortsunder the License Agreement with Precigen. Although all human clinical trials are expensive and difficult to design and implement, we believe thatdue to complexity, costs associated with clinical trials for immuno-oncology products are greater than the corresponding costs associated with clinicaltrials for small-molecule candidates. We now control many of the activities previously performed by Precigen on our behalf, including themanufacturing of our products in development. As a result, we expect to add increased headcount to support these efforts, among other expenses, whichwould add to our research and development expenses going forward.Although our forecasts for expenses and the sufficiency of our capital resources take into account our plans to develop products under the LicenseAgreement, the actual costs associated therewith may be significantly in excess of forecasted amounts. In addition to the amount and timing ofexpenses related to the clinical trials, our actual cash requirements may vary materially from our current expectations for a number of other factors thatmay include, but are not limited to, changes in the focus and direction of our development programs, competitive and technical advances, costsassociated with the development of our product candidates and costs of filing, prosecuting, defending and enforcing our intellectual property rights. Ifwe exhaust our capital reserves more 39Table of Contentsquickly than anticipated, regardless of the reason, and we are unable to obtain additional financing on terms acceptable to us or at all, we will beunable to proceed with development of some or all of our product candidates on expected timelines and will be forced to prioritize among them.We may incur additional expenses in connection with our License Agreement with MD Anderson.Pursuant to the MD Anderson License with MD Anderson, we, together with Precigen, obtained an exclusive, worldwide license to certain technologiesowned and licensed by MD Anderson including technologies relating to novel CAR+ T cell and TCR cell therapies arising from the laboratory ofLaurence Cooper, M.D., Ph.D., who was then at MD Anderson, as well as either co-exclusive or non-exclusive licenses under certain relatedtechnologies. Pursuant to the MD Anderson License, we, together with Precigen, entered into a research and development agreement with MDAnderson pursuant to which we agreed to provide funding for certain research and development activities of MD Anderson for a period of three yearsfrom the date of the MD Anderson License, in an amount between $15.0 and $20.0 million per year. We made the final payment in January 2018.Although our forecasts for expenses and the sufficiency of our capital resources takes into account the funds available at MD Anderson, our actual cashrequirements may vary materially from our current expectations for a number of other factors that may include, but are not limited to, changes in thefocus and direction of our development programs, competitive and technical advances, costs associated with the development of our productcandidates and costs of filing, prosecuting, defending and enforcing our intellectual property rights. If we exhaust the funds available at MD Andersonmore quickly than anticipated, regardless of the reason, and we are unable to obtain additional financing on terms acceptable to us or at all, we will beunable to proceed with development of some or all of our product candidates on expected timelines and will be forced to prioritize among them.We may not be able to retain the rights licensed to us and Precigen by MD Anderson to technologies relating to CAR, T-cell therapies and otherrelated technologies.Under the MD Anderson License, we, together with Precigen, received an exclusive, worldwide license to certain technologies owned and licensed byMD Anderson including technologies relating to novel CAR+ T cell and TCR cell therapies arising from the laboratory of Laurence Cooper, M.D.,Ph.D., who was then at MD Anderson, as well as either co-exclusive or non-exclusive licenses under certain related technologies. When combined withPrecigen’s technology suite and Ziopharm’s clinically tested RTS® interleukin 12 modules, the resulting proprietary methods and technologies mayhelp realize the promise of genetically modified CAR+ T cells and TCR therapies by controlling cell expansion and activation in the body, minimizingoff-target and unwanted on-target effects and toxicity while maximizing therapeutic efficacy. The term of the MD Anderson License expires on the lastto occur of (a) the expiration of all patents licensed thereunder, or (b) the twentieth anniversary of the date of the MD Anderson License; provided,however, that following the expiration of the term, we and Precigen shall then have a fully-paid up, royalty free, perpetual, irrevocable andsublicensable license to use the licensed intellectual property thereunder.After 10 years from the date of the MD Anderson License and subject to a 90-day cure period, MD Anderson will have the right to convert the MDAnderson License into a non-exclusive license if we and Precigen are not using commercially reasonable efforts to commercialize the licensedintellectual property on a case-by-case basis. After five years from the date of the MD Anderson License and subject to a 180-day cure period, MDAnderson will have the right to terminate the MD Anderson License with respect to specific technology(ies) funded by the government or subject to athird-party contract if we and Precigen are not meeting the diligence requirements in such funding agreement or contract, as applicable. MD Andersonmay also terminate the agreement with written notice upon material breach by us or Precigen, if such breach has not been cured within 60 days ofreceiving such notice. In addition, the MD Anderson License will terminate upon the occurrence of certain insolvency events for both us or Precigenand may be terminated by the mutual written agreement of us, Precigen and MD Anderson. 40Table of ContentsThere can be no assurance that we will be able to successfully perform under the MD Anderson License and if the MD Anderson License is terminatedit may prevent us from achieving our business objectives.We have a limited operating history upon which to base an investment decision.We have not demonstrated an ability to perform the functions necessary for the successful commercialization of any product candidates. The successfulcommercialization of any product candidates will require us to perform a variety of functions, including: • Continuing to undertake preclinical development and clinical trials; • Participating in regulatory approval processes; • Formulating and manufacturing products; and • Conducting sales and marketing activities.Our operations have been limited to organizing and staffing our company, acquiring, developing and securing our proprietary product candidates, andundertaking preclinical and clinical trials of our product candidates. These operations provide a limited basis for you to assess our ability tocommercialize our product candidates and the advisability of investing in our securities.We may not be successful in establishing development and commercialization collaborations, which failure could adversely affect, and potentiallyprohibit, our ability to develop our product candidates.Developing biopharmaceutical products and complementary technologies, conducting clinical trials, obtaining marketing approval, establishingmanufacturing capabilities and marketing approved products is expensive and, therefore, we anticipate exploring collaborations with third parties thathave alternative technologies, more resources and more experience than we do. In situations where we enter into a development and commercialcollaboration arrangement for a product candidate or complementary technology, we may also seek to establish additional collaborations fordevelopment and commercialization in territories outside of those addressed by the first collaboration arrangement for such product candidate ortechnology. There are a limited number of potential partners, and we expect to face competition in seeking appropriate partners. If we are unable toenter into any development and commercial collaborations and/or sales and marketing arrangements on reasonable and acceptable terms, if at all, wemay be unable to successfully develop and seek regulatory approval for our product candidates and/or effectively market and sell future approvedproducts, if any, in some or all of the territories outside of the United States where it may otherwise be valuable to do so.Because we currently do not have internal research capabilities, we are dependent upon pharmaceutical and biotechnology companies andacademic and other researchers to sell or license us their product candidates and technology.Proposing, negotiating, and implementing an economically viable product acquisition or license is a lengthy and complex process. We compete forpartnering arrangements and license agreements with pharmaceutical, biopharmaceutical, and biotechnology companies, many of which havesignificantly more experience than we do and have significantly more financial resources. Our competitors may have stronger relationships with certainthird parties including academic research institutions, with whom we are interested in collaborating and may have, therefore, a competitive advantagein entering into partnering arrangements with those third parties. We may not be able to acquire rights to additional product candidates orcomplementary technology on terms that we find acceptable, or at all.We expect that any product candidate to which we acquire rights will require significant additional development and other efforts prior to commercialsale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are subject tothe risks of failure inherent in 41Table of Contentsbiopharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe or effective forapproval by regulatory authorities. Even if our product candidates are approved, they may not be economically manufactured or produced, or besuccessfully commercialized.We actively evaluate complementary technologies to acquire or license. Such complementary technologies could significantly increase our capitalrequirements and place further strain on the time of our existing personnel, which may delay or otherwise adversely affect the development of ourexisting product candidates. We must manage our development efforts and clinical trials effectively, and hire, train and integrate additionalmanagement, administrative, and research and development personnel. We may not be able to accomplish these tasks, and our failure to accomplishany of them could prevent us from successfully growing.We may not be able to successfully manage our growth.In the future, if we are able to advance our product candidates to the point of, and thereafter through, clinical trials, we will need to expand ourdevelopment, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide for these capabilities. Any futuregrowth will place a significant strain on our management and on our administrative, operational, and financial resources. Therefore, our future financialperformance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage anyfuture growth effectively. To manage this growth, we must expand our facilities, augment our operational, financial and management systems, and hireand train additional qualified personnel. If we are unable to manage our growth effectively, our business may be harmed.Our business will subject us to the risk of liability claims associated with the use of hazardous materials and chemicals.Our contract research and development activities may involve the controlled use of hazardous materials and chemicals. Although we believe that oursafety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannotcompletely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable forany resulting damages and any liability could have a materially adverse effect on our business, financial condition, and results of operations. Inaddition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactivematerials and waste products may require our contractors to incur substantial compliance costs that could materially adversely affect our business,financial condition, and results of operations.We rely on key executive officers and scientific and medical advisors, and their knowledge of our business and technical expertise would be difficultto replace.We are highly dependent on Dr. Laurence J.N. Cooper, our Chief Executive Officer; Dr. David Mauney, our President; and our principal scientific,regulatory, and medical advisors. Each of Drs. Cooper and Mauney may terminate their employment with us at any time, subject, however, to certainnon-compete and non-solicitation covenants. The loss of the technical knowledge and management and industry expertise of each of Drs. Cooper orMauney, or any of our other key personnel, could result in delays in product development, loss of customers and sales, and diversion of managementresources, which could adversely affect our operating results. We do not carry “key person” life insurance policies on any of our officers or keyemployees.If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.We will need to hire additional qualified personnel with expertise in preclinical and clinical research and testing, government regulation, formulationand manufacturing, and eventually, sales and marketing. In particular, we expect to significantly expand our internal cell therapy capabilities in ourHouston, Texas facilities by hiring additional research and development personnel. We compete for qualified individuals with numerous 42Table of Contentsbiopharmaceutical companies, universities, and other research institutions. Competition for such individuals is intense and we cannot be certain thatour search for such personnel will be successful. Attracting and retaining qualified personnel will be critical to our success. If we are unable to hireadditional qualified personnel, our ability to grow our business may be harmed.We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits.The testing and marketing of medical products entail an inherent risk of product liability. If we cannot successfully defend ourselves against productliability claims, we may incur substantial liabilities or be required to limit commercialization of our products, if approved. Even a successful defensewould require significant financial and management resources. Regardless of the merit or eventual outcome, liability claims may result in: • Decreased demand for our product candidates; • Injury to our reputation; • Withdrawal of clinical trial participants; • Withdrawal of prior governmental approvals; • Costs of related litigation; • Substantial monetary awards to patients; • Product recalls; • Loss of revenue; and • The inability to commercialize our product candidates.We currently carry clinical trial insurance and product liability insurance. However, an inability to renew our policies or to obtain sufficient insuranceat an acceptable cost could prevent or inhibit the commercialization of pharmaceutical products that we develop, alone or with collaborators.Our business and operations would suffer in the event of system failures.Despite the implementation of security measures, our internal computer systems and those of our current and future contractors and consultants arevulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Whilewe are not aware of any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in ouroperations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial datafrom completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. Likewise, we rely on third parties to manufacture our product candidates and conduct clinical trials, and similar events relating totheir computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in aloss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and thefurther development and commercialization of our product candidates could be delayed.RISKS RELATED TO THE CLINICAL TESTING, REGULATORY APPROVAL AND MANUFACTURING OF OUR PRODUCT CANDIDATESIf we are unable to obtain the necessary U.S. or worldwide regulatory approvals to commercialize any product candidate, our business will suffer.We may not be able to obtain the approvals necessary to commercialize our product candidates, or any product candidate that we may acquire ordevelop in the future for commercial sale. We will need FDA approval to 43Table of Contentscommercialize our product candidates in the United States and approvals from regulatory authorities in foreign jurisdictions equivalent to the FDA tocommercialize our product candidates in those jurisdictions. In order to obtain FDA approval of any product candidate, we must submit to the FDA aBiologics License Application, or BLA, demonstrating that the product candidate is safe for humans and effective for its intended use. Thisdemonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to asclinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depending upon the type, complexity, and novelty of theproduct candidate, and will require substantial resources for research, development, and testing. We cannot predict whether our research, development,and clinical approaches will result in products that the FDA will consider safe for humans and effective for their intended uses. The FDA has substantialdiscretion in the approval process and may require us to conduct additional preclinical and clinical testing or to perform post-marketing studies. Theapproval process may also be delayed by changes in government regulation, future legislation, or administrative action or changes in FDA policy thatoccur prior to or during our regulatory review. Delays in obtaining regulatory approvals may: • Delay commercialization of, and our ability to derive product revenues from, our product candidates; • Impose costly procedures on us; and • Diminish any competitive advantages that we may otherwise enjoy.Even if we comply with all FDA requests, the FDA may ultimately reject one or more of our BLAs. We cannot be sure that we will ever obtainregulatory approval for any of our product candidates. Failure to obtain FDA approval for our product candidates will severely undermine our businessby leaving us without a saleable product, and therefore without any potential revenue source, until another product candidate can be developed. Thereis no guarantee that we will ever be able to develop or acquire another product candidate or that we will obtain FDA approval if we are able to do so.In foreign jurisdictions, we similarly must receive approval from applicable regulatory authorities before we can commercialize any of our productcandidates. Foreign regulatory approval processes generally include all of the risks associated with the FDA approval procedures described above.Our product candidates are in various stages of clinical trials, which are very expensive and time-consuming. We cannot be certain when we will beable to submit a BLA to the FDA and any failure or delay in completing clinical trials for our product candidates could harm our business.Our product candidates are in various stages of development and require extensive clinical testing. Notwithstanding our current clinical trial plans foreach of our existing product candidates, we may not be able to commence additional trials or see results from these trials within our anticipatedtimelines. As they enter later stages of development, our product candidates generally will become subject to more stringent regulatory requirements,including the FDA’s requirements for chemistry, manufacturing and controls for product candidates entering Phase 3 clinical trials. There is noguarantee the FDA will allow us to commence Phase 3 clinical trials for product candidates studied in early clinical trials. If the FDA does not allow ourproduct candidates to enter later stage clinical trials, or requires changes to the formulation or manufacture of our product candidates beforecommencing Phase 3 clinical trials, our ability to further develop, or seek approval for, such product candidates may be materially impacted. As such,we cannot predict with any certainty if or when we might submit a BLA for regulatory approval of our product candidates or whether such a BLA willbe accepted. Because we do not anticipate generating revenues unless and until we submit one or more BLAs and thereafter obtain requisite FDAapprovals, the timing of our BLA submissions and FDA determinations regarding approval thereof, will directly affect if and when we are able togenerate revenues. 44Table of ContentsOur product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit thecommercial profile of an approved label, or result in significant negative consequences following any potential marketing approval.As with many pharmaceutical and biological products, treatment with our product candidates may produce undesirable side effects or adverse reactionsor events, including potential adverse side effects related to cytokine release. If our product candidates or similar products or product candidates underdevelopment by third parties demonstrate unacceptable AEs, we may be required to halt or delay further clinical development of our productcandidates. The FDA or other foreign regulatory authorities could order us to cease further development of or deny approval of our product candidatesfor any or all targeted indications.The product-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential productliability claims. In addition, these side effects may not be appropriately or timely recognized or managed by the treating medical staff, particularlyoutside of the institutions that collaborate with us, as toxicities resulting from our novel technologies may not be normally encountered in the generalpatient population and by medical personnel. We expect to have to train medical personnel using our product candidates to understand their side effectprofiles, both for our planned clinical trials and upon any commercialization of any product candidates. Inadequate training in recognizing ormanaging the potential side effects of our product candidates could result in adverse effects to patients, including death.Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused bysuch products, including during any long-term follow-up observation period recommended or required for patients who receive treatment using ourproducts, a number of potentially significant negative consequences could result, including: • regulatory authorities may withdraw approvals of such product; • regulatory authorities may require additional warnings on the label; • we may be required to create a risk evaluation and mitigation strategy plan, which could include a medication guide outlining the risks ofsuch side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements to assure safe use; • we could be sued and held liable for harm caused to patients; and • our reputation may suffer.Any of the foregoing could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved. Furthermore,any of these occurrences may harm our business, financial condition and prospects significantly.Our cell-based and gene therapy immuno-oncology products rely on the availability of reagents, specialized equipment, and other specialtymaterials and infrastructure, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials,we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products.Manufacturing our product candidates will require many reagents, which are substances used in our manufacturing processes to bring about chemicalor biological reactions, and other specialty materials and equipment, some of which are manufactured or supplied by small companies with limitedresources and experience to support commercial biologics production. We currently depend on a limited number of vendors for certain materials andequipment used in the manufacture of our product candidates. Some of these suppliers may not have the capacity to support commercial productsmanufactured under current good manufacturing practices by biopharmaceutical firms or may otherwise be ill-equipped to support our needs. We alsodo not have supply contracts with many of these suppliers and may not be able to obtain supply contracts with them on acceptable 45Table of Contentsterms or at all. Accordingly, we may experience delays in receiving key materials and equipment to support clinical or commercial manufacturing.For some of these reagents, equipment, infrastructure, and materials, we rely and may in the future rely on sole source vendors or a limited number ofvendors. An inability to continue to source product from any of these suppliers, which could be due to regulatory actions or requirements affecting thesupplier, adverse financial or other strategic developments experienced by a supplier, labor disputes or shortages, unexpected demands, or qualityissues, could adversely affect our ability to satisfy demand for our product candidates, which could adversely and materially affect our product salesand operating results or our ability to conduct clinical trials, either of which could significantly harm our business.As we continue to develop and scale our manufacturing process, we expect that we will need to obtain rights to and supplies of certain materials andequipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially reasonable terms, or at all, and ifwe are unable to alter our process in a commercially viable manner to avoid the use of such materials or find a suitable substitute, it would have amaterial adverse effect on our business. Even if we are able to alter our process so as to use other materials or equipment, such a change may lead to adelay in our clinical development and/or commercialization plans. If such a change occurs for product candidate that is already in clinical testing, thechange may require us to perform both ex vivo comparability studies and to collect additional data from patients prior to undertaking more advancedclinical trials.The results of our clinical trials may not support our product candidate claims.Even if our clinical trials are completed as planned, we cannot be certain that their results will support approval of our product candidates. The FDAnormally expects two randomized, well-controlled Phase 3 pivotal trials in support of approval of a BLA. Success in preclinical testing and earlyclinical trials does not ensure that later clinical trials will be successful, and we cannot be certain that the results of later clinical trials will replicate theresults of prior clinical trials and preclinical testing. The clinical trial process may fail to demonstrate that our product candidates are safe for humansand effective for the indicated uses. This failure would cause us to abandon a product candidate and may delay development of other productcandidates. Any delay in, or termination of, our clinical trials will delay the submission of our BLAs with the FDA and, ultimately, our ability tocommercialize our product candidates and generate product revenues. In addition, our clinical trials involve small patient populations. Because of thesmall sample size, the results of these clinical trials may not be indicative of future results.Our immuno-oncology product candidates are based on a novel technology, which makes it difficult to predict the time and cost of productcandidate development and subsequently obtaining regulatory approval. Currently, few gene therapy and cell therapy products have been approvedin the United States and Europe.We are currently focused on developing products in immuno-oncology that employ novel gene expression, control and cell technologies to deliversafe, effective and scalable cell- and viral-based therapies for the treatment of cancer. Due to the novelty of this medical technology, there can be noassurance that any development problems we experience in the future related to our immuno-oncology platforms will not cause significant delays orunanticipated costs, or that such development problems can be solved. We may also experience unanticipated problems or delays in expanding ourmanufacturing capacity or transferring our manufacturing process to commercial partners, which may prevent us from completing our clinical trials orcommercializing our immuno-oncology product candidates on a timely or profitable basis, if at all.In addition, the clinical study requirements of the FDA, the EMA and other regulatory agencies and the criteria these regulators use to determine thesafety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potentialproducts. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, betterknown or extensively studied pharmaceutical or other product candidates. These factors make it difficult to 46Table of Contentsdetermine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in either the United States or Europe.Approvals by the EMA may not be indicative of what the FDA may require for approval.Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. For example,the FDA has established the Office of Tissue and Advanced Therapies within its Center for Biologics Evaluation and Research, or CBER, toconsolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on itsreview. Also, before a clinical trial can begin at an institution, that institution’s institutional review board, or IRB, and its Institutional BiosafetyCommittee will have to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of genetherapy products conducted by others may cause the FDA or other regulatory bodies to change the requirements for approval of any of our productcandidates.These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, requireus to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approvaland commercialization of these treatment candidates or lead to significant post-approval limitations or restrictions. As we advance our immuno-oncology product candidates, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines. If wefail to do so, we may be required to delay or discontinue development of our product candidates. These additional processes may result in a review andapproval process that is longer than we otherwise would have expected for oncology product candidates. Delay or failure to obtain, or unexpectedcosts in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient productrevenue to maintain our business.Because we are dependent upon clinical research institutions and other contractors for clinical testing and for research and development activities,the results of our clinical trials and such research activities are, to a certain extent, beyond our control.We materially rely upon independent investigators and collaborators, such as universities and medical institutions, to conduct our preclinical andclinical trials under agreements with us. These collaborators are not our employees and we cannot control the amount or timing of resources that theydevote to our programs. These investigators may not assign as great a priority to our programs or pursue them as diligently as we would if we wereundertaking such programs ourselves. If outside collaborators fail to devote sufficient time and resources to our product development programs, or iftheir performance is substandard, the approval of our FDA applications, if any, and our introduction of new products, if any, will be delayed. Thesecollaborators may also have relationships with other commercial entities, some of whom may compete with us. If our collaborators assist ourcompetitors to our detriment, our competitive position would be harmed.Our reliance on third parties to formulate and manufacture our product candidates exposes us to a number of risks that may delay the development,regulatory approval and commercialization of our products or result in higher product costs.We have limited experience in biopharmaceutical manufacturing. We currently lack the internal resources and expertise to formulate or manufactureour own product candidates and, therefore, contract the manufacture of our product candidates with third parties. We intend to contract with one ormore manufacturers to manufacture, supply, store, and distribute supplies for our clinical trials. If a product candidate we develop or acquire in thefuture receives FDA approval, we may rely on one or more third-party contractors to manufacture our products. Our anticipated future reliance on alimited number of third-party manufacturers exposes us to the following risks: • We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and theFDA must approve any replacement contractor. This 47Table of Contents approval would require new testing and compliance inspections. In addition, a new manufacturer would have to be educated in, or developsubstantially equivalent processes for, production of our products after receipt of FDA approval, if any. • Our third-party manufacturers might be unable to formulate and manufacture our products in the volume and of the quality required to meetour clinical needs and commercial needs, if any. • Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time requiredto supply our clinical trials or to successfully produce, store, and distribute our products. • Biopharmaceutical manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug EnforcementAdministration and corresponding state and foreign agencies to ensure strict compliance with current good manufacturing practices, orcGMP, and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’compliance with these regulations and standards. • If any third-party manufacturer makes improvements in the manufacturing process for our products, we may not own, or may have to share,the intellectual property rights to the innovation. • Our third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the UnitedStates. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions beingimposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, licenserevocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adverselyaffect supplies of our products.Each of these risks could delay our clinical trials, the approval, if any, of our product candidates by the FDA or the commercialization of our productcandidates or result in higher costs or deprive us of potential product revenues.Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or withdrawal from the market andwe may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, whenand if any of them are approved.Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling,advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatoryauthorities. These requirements include, among other things, submissions of safety and other post-marketing information and reports, registration andlisting requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records anddocuments, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate isgranted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval,including the requirement to implement a risk evaluation and mitigation strategy, or REMS, which could include requirements for a restricteddistribution system. If any of our product candidates receives marketing approval, the accompanying label may limit the approved uses, which couldlimit sales of the product.The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of ourapproved products. The FDA closely regulates the post-approval marketing and promotion of products to ensure that they are marketed only for theapproved indications and in accordance with the provisions of the approved labeling. However, companies may share truthful and not misleadinginformation that is otherwise consistent with the labeling. The FDA imposes stringent restrictions on manufacturers’ communications regardingoff-label use and if we market our products outside of their approved 48Table of Contentsindications, we may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug and Cosmetic Act relating to thepromotion of prescription drugs may lead to investigations alleging violations of federal and state health care fraud and abuse laws, as well as stateconsumer protection laws.In addition, later discovery of previously unknown AEs or other problems with our products, manufacturers or manufacturing processes, or failure tocomply with regulatory requirements, may yield various results, including: • Litigation involving patients taking our product; • Restrictions on such products, manufacturers or manufacturing processes; • Restrictions on the labeling or marketing of a product; • Restrictions on product distribution or use; • Requirements to conduct post-marketing studies or clinical trials; • Warning letters; • Withdrawal of the products from the market; • Refusal to approve pending applications or supplements to approved applications that we submit; • Recall of products; • Fines, restitution or disgorgement of profits or revenues; • Suspension or withdrawal of marketing approvals; • Damage to relationships with existing and potential collaborators; • Unfavorable press coverage and damage to our reputation; • Refusal to permit the import or export of our products; • Product seizure; or • Injunctions or the imposition of civil or criminal penalties.Noncompliance with requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties. Similarly, failureto comply with U.S. and foreign regulatory requirements regarding the development of products for pediatric populations and the protection ofpersonal health information can also lead to significant penalties and sanctions.RISKS RELATED TO OUR ABILITY TO COMMERCIALIZE OUR PRODUCT CANDIDATESIf we are unable either to create sales, marketing and distribution capabilities or enter into agreements with third parties to perform these functions,we will be unable to commercialize our product candidates successfully.We currently have no marketing, sales, or distribution capabilities. If and when we become reasonably certain that we will be able to commercialize ourcurrent or future product candidates, we anticipate allocating resources to the marketing, sales and distribution of our proposed products in NorthAmerica and in certain other countries; however, we cannot assure that we will be able to market, sell, and distribute our products successfully. Ourfuture success also may depend, in part, on our ability to enter into and maintain collaborative relationships for such capabilities and to encourage thecollaborator’s strategic interest in the products under development, and such collaborator’s ability to successfully market and sell any such products.Although we intend to pursue certain collaborative arrangements regarding the sale and marketing of certain of our product candidates, there are noassurances that we will be able to establish or maintain collaborative arrangements or, if we are able to do so, whether we would be able to conduct ourown sales efforts. There can also be no assurance that we will be 49Table of Contentsable to establish or maintain relationships with third-party collaborators or develop in-house sales and distribution capabilities. To the extent that wedepend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there can be noassurance that such efforts will be successful. In addition, there can also be no assurance that we will be able to market and sell our product candidatesin the United States or overseas.If we are not able to partner with a third party and are not successful in recruiting sales and marketing personnel or in building a sales and marketinginfrastructure, we will have difficulty commercializing our product candidates, which would harm our business. If we rely on pharmaceutical orbiotechnology companies with established distribution systems to market our products, we will need to establish and maintain partnershiparrangements, and we may not be able to enter into these arrangements on acceptable terms or at all. To the extent that we enter into co-promotion orother arrangements, any revenues we receive will depend upon the efforts of third parties that may not be successful and that will be only partially inour control.If we cannot compete successfully for market share against other biopharmaceutical companies, we may not achieve sufficient product revenues andour business will suffer.The market for our product candidates is characterized by intense competition and rapid technological advances. If a product candidate receives FDAapproval, it will compete with a number of existing and future products and therapies developed, manufactured and marketed by others. Existing orfuture competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products or mayoffer comparable performance at a lower cost. If our products fail to capture and maintain market share, we may not achieve sufficient product revenuesand our business will suffer.We will compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceuticalcompanies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have productsalready approved or in development. In addition, many of these competitors, either alone or together with their collaborative partners, operate largerresearch and development programs or have substantially greater financial resources than we do, as well as significantly greater experience in: • Developing drugs and biopharmaceuticals; • Undertaking preclinical testing and human clinical trials; • Obtaining FDA and other regulatory approvals of drugs and biopharmaceuticals; • Formulating and manufacturing drugs and biopharmaceuticals; and • Launching, marketing, and selling drugs and biopharmaceuticals.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have feweror less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA orother regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing astrong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or otherthird-party payors seeking to encourage the use of generic products.If physicians and patients do not accept and use our product candidates, our ability to generate revenue from sales of our products will be materiallyimpaired.Even if the FDA and/or foreign equivalents thereof approve our product candidates, physicians and patients may not accept and use them. Acceptanceand use of our products will depend upon a number of factors including: • Perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our products; 50Table of Contents • Pharmacological benefit and cost-effectiveness of our products relative to competing products; • Availability of coverage and adequate reimbursement for our products from government or other third-party payors; • Effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any; and • The price at which we sell our products.Because we expect sales of our current product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future,the failure of a product to find market acceptance would harm our business and could require us to seek additional financing in order to fund thedevelopment of future product candidates.Our ability to generate product revenues will be diminished if our products do not obtain coverage and adequate reimbursement from payors.Our ability to commercialize our product candidates, if approved, alone or with collaborators, will depend in part on the extent to which coverage andreimbursement will be available from third-party payors, including government and health administration authorities, private health maintenanceorganizations and health insurers and other payors.Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costsassociated with their prescription drugs. Sufficient coverage and adequate reimbursement from third-party payors are critical to new productacceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lowercost therapeutic alternatives are already available or subsequently become available. It is difficult to predict the coverage and reimbursement decisionsthat will be made by third-party payors for novel gene and cell therapy products such as ours. Even if we obtain coverage for our product candidates,the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients areunlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of ourproduct candidates.In addition, the market for our product candidates for which we may receive regulatory approval will depend significantly on access to third-partypayors’ drug formularies or lists of medications for which third-party payors provide coverage and reimbursement, which might not include all of theFDA-approved drugs for a particular indication. The industry competition to be included in such formularies often leads to downward pricing pressureson pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patientaccess to a branded drug when a less costly generic equivalent or other alternative is available.Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controllinghealthcare costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors.Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process isoften a time-consuming and costly process that requires us to provide scientific and clinical support for the use of our products to each payorseparately, with no assurance that approval will be obtained. If we are unable to obtain coverage of and adequate payment levels for our productcandidates from third-party payors, physicians may limit how much or under what circumstances they will prescribe or administer our products andpatients may decline to purchase them. This in turn could affect our ability to successfully commercialize our products and impact our profitability,results of operations, financial condition, and future success.In addition, in many foreign countries, particularly the countries of the EU, the pricing of prescription drugs is subject to government control. In somenon-U.S. jurisdictions, the proposed pricing for a drug must be approved 51Table of Contentsbefore it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU providesoptions for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and tocontrol the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt asystem of direct or indirect controls on the profitability of the company placing the medicinal product on the market. We may face competition for ourproduct candidates from lower-priced products in foreign countries that have placed price controls on pharmaceutical products. In addition, there maybe importation of foreign products that compete with our own products, which could negatively impact our profitability.The market opportunities for our product candidates may be limited to those patients who are ineligible for or have failed prior treatments and maybe small.Cancer therapies are sometimes characterized as first line, second line, or third line, and the FDA often approves new therapies initially only for thirdline use. When cancer is detected early enough, first line therapy is sometimes adequate to cure the cancer or prolong life without a cure. Whenever firstline therapy, usually chemotherapy, hormone therapy, surgery, or a combination of these, proves unsuccessful, second line therapy may beadministered. Second line therapies often consist of more chemotherapy, radiation, antibody drugs, tumor targeted small molecules, or a combinationof these. Third line therapies can include bone marrow transplantation, antibody and small molecule targeted therapies, more invasive forms of surgery,and new technologies. We expect to initially seek approval of our product candidates as a third line therapy for patients who have failed otherapproved treatments.Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval as a second line therapy andpotentially as a first line therapy, but there is no guarantee that our product candidates, even if approved, would be approved for second line or firstline therapy. In addition, we may have to conduct additional clinical trials prior to gaining approval for second line or first line therapy.Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers in a position toreceive third line therapy and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates.These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market researchand may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of patients mayturn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may notbe amenable to treatment with our product candidates. Even if we obtain significant market share for our product candidates, because the potentialtarget populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications, including use as afirst- or second-line therapy.Our market opportunities may also be limited by competitor treatments that may enter the market. See also “Risks Related to Our Ability toCommercialize Our Product Candidates—If we cannot compete successfully for market share against other biopharmaceutical companies, we may notachieve sufficient product revenues and our business will suffer.”Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory enactments in recent years thatchange the healthcare system in ways that could impact our future ability to sell our product candidates profitably.Furthermore, there have been and continue to be a number of initiatives at the federal and state level that seek to reduce healthcare costs. Mostsignificantly, in March 2010, President Obama signed into law the Patient 52Table of ContentsProtection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, which includedmeasures that have significantly changed the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACAof importance to the pharmaceutical industry are the following: • Created an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents,apportioned among these entities according to their market share in certain government healthcare programs; • Increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of theaverage manufacturer price for most branded and generic drugs, respectively; • Created a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-salediscounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for themanufacturer’s outpatient drugs to be covered under Medicare Part D; • Extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed careorganizations; • Created new methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugsthat are inhaled, infused, instilled, implanted or injected, and for drugs that are line extensions; • Expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additionalindividuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing both the volume of sales andmanufacturers’ Medicaid rebate liability; • Expanded the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; • Created a new requirement to annually report drug samples that certain manufacturers and authorized distributors provide to physicians; • Expanded healthcare fraud and abuse laws, including the False Claims Act and the federal Anti-Kickback Statute, new governmentinvestigative powers, and enhanced penalties for noncompliance; • Created a licensure framework for follow-on biologic products; • Created new requirements under the federal Physician Payments Sunshine Act for drug manufacturers to annually report information relatedto payments and other transfers of value made to physicians and teaching hospitals as well as ownership or investment interests held byphysicians and their immediate family members; • Created a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectivenessresearch, along with funding for such research; and • Established a Center for Medicare & Medicaid Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovativepayment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.Some of the provisions of the ACA have yet to be implemented, and there have been legal and political challenges to certain aspects of the ACA. SinceJanuary 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirementsmandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. WhileCongress has not passed repeal legislation, two bills affecting the implementation of certain taxes under 53Table of Contentsthe ACA have been signed into law. In December 2017, Congress repealed the tax penalty, effective January 1, 2019, for an individual’s failure tomaintain ACA-mandated health insurance as part of the Tax Cuts and Jobs Act of 2017, or Tax Act. On January 22, 2018, President Trump signed acontinuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called“Cadillac” tax on certain high cost employer-sponsored insurance plans and the annual fee imposed on certain health insurance providers based onmarket share. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to increase from50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and close thecoverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. In July 2018, CMS published a final rule permitting furthercollections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program inresponse to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, aTexas U.S. District Court Judge ruled that ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part ofthe Tax Act. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that the ruling will have noimmediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace ACA willimpact ACA and our business. The ultimate content, timing or effect of any healthcare reform legislation on the U.S. healthcare industry is unclear.In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, in August 2011, President Obamasigned into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommendproposals in spending reductions to Congress. The Joint Select Committee on Deficit Reduction did not achieve its targeted deficit reduction of atleast $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reductions to several government programs. These reductionsinclude aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and, due to subsequentlegislative amendments, including the BBA, will stay in effect through 2027 unless additional Congressional action is taken. In January 2013,President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to severalproviders and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. As a result,there have been several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bringmore transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government programreimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drugprice control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permitMedicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, andto eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a “Blueprint”, or plan, to lower drugprices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiatingpower of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs ofdrug products paid by consumers. The Department of Health and Human Services, or HHS, has already started the process of soliciting feedback onsome of these measures and, at the same, is immediately implementing others under its existing authority. For example, in September 2018, CMSannounced that it will allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2019, and in October2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs and biological products, forwhich payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, ofthat drug or biological product. On January 31, 2019, the U.S. Department of Health and Human Services, Office of Inspector General, proposedmodifications to the federal Anti-Kickback Statute discount safe harbor for the 54Table of Contentspurpose of reducing the cost of drug products to consumers which, among other things, if finalized, will affect discounts paid by manufacturers toMedicare Part D plans, Medicaid managed care organizations and pharmacy benefit managers working with these organizations. While some of these,and other proposed, measures may require additional authorization through additional legislation to become effective, Congress and the Trumpadministration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Individual statesin the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing,including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparencymeasures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or the Right toTry Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drugproducts that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligiblepatients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. Thereis no obligation for a manufacturer to make its products available to eligible patients as a result of the Right to Try Act.We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteriaand in additional downward pressure on the price that we may receive for any approved product. Any reduction in reimbursement from Medicare orother government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures orother healthcare reforms may prevent us from being able to generate revenue, attain profitability, or if we receive regulatory approval, commercializeour products.If we fail to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, we couldface substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.As 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, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will beapplicable to our business. For example, we could be subject to healthcare fraud and abuse and patient privacy regulation by both the federalgovernment and the states in which we conduct our business. The laws that may affect our ability to operate include, among others: • The federal Anti-Kickback Statute, which regulates our business activities, including our marketing practices, educational programs,pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving,offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual or the purchase orrecommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • Federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act which permits a privateindividual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the False Claims Act,which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment fromMedicare, Medicaid, or other third-party payors that are false or fraudulent; • The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal civil and criminal statutesthat prohibit, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating tohealthcare matters; 55Table of Contents • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and theirimplementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individuallyidentifiable health information on entities and individuals subject to the law including certain healthcare providers, health plans, andhealthcare clearinghouses, known as covered entities, as well as individuals and entities that perform services for them which involve theuse, or disclosure of, individually identifiable health information, known as business associates; • Requirements to report annually to CMS certain financial arrangements with physicians and teaching hospitals, as defined in the ACA andits implementing regulations, including reporting any “transfer of value” made or distributed to teaching hospitals, prescribers, and otherhealthcare providers and reporting any ownership and investment interests held by physicians and their immediate family members andapplicable group purchasing organizations during the preceding calendar year; and • State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to itemsor services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies tocomply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federalgovernment that otherwise restricts certain payments that may be made to healthcare providers and entities; state laws that require drugmanufacturers to report information related to payments and other transfer of value to physicians and other healthcare providers andentities; state laws that require the reporting of information related to drug pricing; state and local laws that require the registration ofpharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information in certaincircumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicatingcompliance efforts.Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our businessactivities, including our consulting agreements with physicians, some of whom receive stock or stock options as compensation for their services, couldbe subject to challenge under one or more of such laws. In addition, recent health care reform legislation has further strengthened these laws. Forexample, the ACA, among other things, amended the intent requirement of the federal Anti-Kickback Statute and certain criminal healthcare fraudstatutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the ACA provides thatthe government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false orfraudulent claim for purposes of the False Claims Act.To the extent that any of our product candidates is ultimately sold in a foreign country, we may be subject to similar foreign laws and regulations.Efforts to ensure that our business arrangements comply with applicable healthcare laws involve substantial costs. It is possible that governmental andenforcement authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law interpretingapplicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defendingourselves or asserting our rights, we may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines,exclusion from participation in United States federal or state health care programs, such as Medicare and Medicaid, disgorgement, imprisonment,integrity oversight and reporting obligations, and the curtailment or restructuring of our operations any of which could materially adversely affect ourability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution forviolations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defendagainst it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover,achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly. 56Table of ContentsOur immuno-oncology product candidates may face competition in the future from biosimilars.The Biologics Price Competition and Innovation Act of 2009, or BPCIA, provides an abbreviated pathway for the approval of follow-on biologicalproducts. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original branded productwas approved under a BLA. However, there is a risk that the U.S. Congress could amend the BPCIA to significantly shorten this exclusivity period,potentially creating the opportunity for generic competition sooner than anticipated. Further, this data exclusivity does not prevent another companyfrom developing a product that is highly similar to the original branded product, generating its own data and seeking approval. Data exclusivity onlyassures that another company cannot rely upon the data within the innovator’s application to support the biosimilar product’s approval.RISKS RELATED TO OUR INTELLECTUAL PROPERTYIf we or our licensors fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of ourintellectual property rights would diminish and our ability to successfully commercialize our products may be impaired.Our success, competitive position, and future revenues will depend in part on our ability and the abilities of our licensors to obtain and maintain patentprotection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on ourproprietary rights, and to operate without infringing the proprietary rights of third parties.To date, we have exclusive rights in the field of cancer treatment to certain U.S. and foreign intellectual property with respect to the Precigentechnology, including Ad-RTS-IL-12 plus veledimex, and with respect to CAR+ T, NK and TCR cell therapies arising from the laboratory of LaurenceCooper, M.D., Ph.D., who was then at MD Anderson. Under our License Agreement with Precigen, Precigen has the right, but not the obligation, toprepare, file, prosecute, and maintain the patents and patent applications licensed to us and shall bear any related costs incurred by it in regard to thoseactions. Precigen is required to consult with us and keep us reasonably informed of the status of the patents and patent applications licensed to us, andto confer with us and incorporate our comments prior to submitting any related filings and correspondence. Although under the agreement Precigen hasagreed to consider in good faith and consult with us regarding any comments we may have regarding these patents and patent applications, we cannotguarantee that our comments will be solicited or followed. Under the MD Anderson License, future filings and applications require the agreement ofeach of MD Anderson, Precigen and us, and MD Anderson has the right to control the preparation and filing of additional patent applications unlessthe parties agree that we or Precigen may prosecute the application directly. Although under the agreement MD Anderson has agreed to review andincorporate any reasonable comments that we or Precigen may have regarding these patents and patent applications, we cannot guarantee that ourcomments will be solicited or followed. Without direct control of the in-licensed patents and patent applications, we are dependent on Precigen or MDAnderson, as applicable, to keep us advised of prosecution, particularly in foreign jurisdictions where prosecution information may not be publiclyavailable. We anticipate that we, Precigen and MD Anderson will file additional patent applications both in the United States and in other countries.However, we cannot predict or guarantee: • The degree and range of protection any patents will afford us against competitors, including whether third parties will find ways toinvalidate or otherwise circumvent our patents; • If and when patents will be issued; • Whether or not others will obtain patents claiming subject matter related to or relevant to our product candidates; or • Whether we will need to initiate litigation or administrative proceedings that may be costly whether we win or lose.The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patentapplications at a reasonable cost, in a timely manner, or in all jurisdictions. It is 57Table of Contentsalso possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain thepatents, covering technology that we license from third parties. We may also require the cooperation of our licensors in order to enforce the licensedpatent rights, and such cooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a mannerconsistent with the best interests of our business.The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions andhas in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as thelaws of the United States and we may fail to seek or obtain patent protection in all major markets. For example, European patent law restricts thepatentability of methods of treatment of the human body more than United States law does. Publications of discoveries in the scientific literature oftenlag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months afterfiling, or in some cases not at all.Changes in patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual propertyor narrow the scope of our patent protection. In September 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law,resulting in a number of significant changes to United States patent law. These changes include provisions that affect the way patent applications willbe prosecuted and may also affect patent litigation. In addition, the United States Supreme Court has ruled on several patent cases in recent years,either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. Thiscombination of events has created uncertainty with respect to the value of patents, once obtained, and with regard to our ability to obtain patents in thefuture. As the USPTO continues to implement the Leahy-Smith Act, and as the federal courts have the opportunity to interpret the Leahy-Smith Act, thelaws and regulations governing patents, and the rules regarding patent procurement could change in unpredictable ways that would weaken our abilityto obtain new patents or to enforce our existing patents and patents that we might obtain in the future.Certain technologies utilized in our research and development programs are already in the public domain. Moreover, a number of our competitors havedeveloped technologies, filed patent applications or obtained patents on technologies, compositions and methods of use that are related to ourbusiness and may cover or conflict with our owned or licensed patent applications, technologies or product candidates. Such conflicts could limit thescope of the patents that we may be able to obtain or may result in the rejection of claims in our patent applications. Because patent applications in theUnited States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and becausepublications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that others havenot filed or maintained patent applications for technology used by us or covered by our pending patent applications without our being aware of theseapplications. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned patents or pendingpatent applications, or that we were the first to file for patent protection of such inventions, nor can we know whether those from whom we licensepatents were the first to make the inventions claimed or were the first to file. As a result, the issuance, scope, validity, enforceability and commercialvalue of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect ourtechnology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changesin either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow thescope of our patent protection. In addition, our own earlier filed patents and applications or those of Precigen or MD Anderson may limit the scope oflater patents we obtain or may result in the rejection of claims in our later filed patent applications. If third parties filed patent applications or obtainedpatents on technologies, compositions and methods of use that are related to our business and that cover or conflict with our owned or licensed patentapplications, technologies or product 58Table of Contentscandidates, we may be required to challenge such protection, terminate or modify our programs impacted by such protection or obtain licenses fromsuch third parties, which might not be available on acceptable terms, or at all.Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection,prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent ourowned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may bechallenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or inpatent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using orcommercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given theamount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expirebefore or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficientrights to exclude others from commercializing products similar or identical to ours.If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.Our success also depends upon the skills, knowledge, and experience of our scientific and technical personnel, our consultants and advisors, as well asour licensors and contractors. To help protect our proprietary know-how and our inventions for which patents may be unobtainable or difficult toobtain, and to maintain our competitive position, we rely on trade secret protection and confidentiality agreements. To this end, it is our general policyto require our employees, consultants, advisors, and contractors to enter into agreements that prohibit the disclosure of confidential information and,where applicable, require disclosure and assignment to us of the ideas, developments, discoveries, and inventions important to our business. Theseagreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized useor disclosure or the lawful development by others of such information. Moreover, we may not be able to obtain adequate remedies for any breaches ofthese agreements. Our trade secrets may also be obtained by third parties by other means, such as breaches of our physical or computer security systems.Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome isunpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our tradesecrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom theycommunicate it, from using that technology or information to compete with us. If any of our trade secrets, know-how or other proprietary information isdisclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitiveposition would suffer.Third-party claims of intellectual property infringement would require us to spend significant time and money and could prevent us from developingor commercializing our products.In order to protect or enforce patent rights, we may initiate patent infringement litigation against third parties. Similarly, we may be sued by others forpatent infringement. We also may become subject to proceedings conducted in the United States Patent and Trademark Office, including interferenceproceedings to determine the priority or derivation of inventions, or post-grant review, inter partes review, or reexamination proceedings reviewing thepatentability of our patented claims. In addition, any foreign patents that are granted may become subject to opposition, nullity, or revocationproceedings in foreign jurisdictions having such proceedings. The defense and prosecution, if necessary, of intellectual property actions are costly anddivert technical and management personnel away from their normal responsibilities. 59Table of ContentsOur commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidateswithout infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceuticalindustries. While no such litigation has been brought against us and we have not been held by any court to have infringed a third party’s intellectualproperty rights, we cannot guarantee that our products or use of our products do not infringe third-party patents. It is also possible that we have failedto identify relevant third-party patents or applications. For example, applications filed before November 29, 2000 and certain applications filed afterthat date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhereare published approximately 18 months after the earliest filing, which is referred to as the priority date. Therefore, patent applications covering ourproducts or technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been publishedcan, subject to certain limitations, be later amended in a manner that could cover our products or the use of our products.Our research, development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringeor be claimed to infringe patents or patent applications under which we do not hold licenses or other rights. Patents do not protect its owner from aclaim of infringement of another owner’s patent. Therefore, our patent position cannot and does not provide any assurance that we are not infringingthe patent rights of another.The patent landscape in the field of immuno-oncology is particularly complex. We are aware of numerous United States and foreign patents andpending patent applications of third parties that cover compositions, methods of use and methods of manufacture of immuno-oncology. In addition,there may be patents and patent applications in the field of which we are not aware. The technology we license from Precigen and MD Anderson isearly-stage technology and we are in the process of designing and developing products using this technology. Although we will seek to avoidpursuing the development of products that may infringe any patent claims that we believe to be valid and enforceable, we may fail to do so. Moreover,given the breadth and number of claims in patents and pending patent applications in the field of immuno-oncology and the complexities anduncertainties associated with them, third parties may allege that we are infringing upon patent claims even if we do not believe such claims to be validand enforceable.If a claim for patent infringement is asserted, there can be no assurance that the resolution of the claim would permit us to continue marketing therelevant product on commercially reasonable terms, if at all. We may not have sufficient resources to bring these actions to a successful conclusion. Ifwe do not successfully defend any infringement actions to which we become a party or are unable to have infringed patents declared invalid orunenforceable, we may have to pay substantial monetary damages, which can be tripled if the infringement is deemed willful or be required todiscontinue or significantly delay commercialization and development of the affected products.Any legal action against us or our collaborators claiming damages and seeking to enjoin developmental or marketing activities relating to affectedproducts could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain licenses to continue to develop,manufacture, or market the affected products. Such a license may not be available to us on commercially reasonable terms, if at all.An adverse determination in a proceeding involving our owned or licensed intellectual property may allow entry of generic substitutes for ourproducts.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and otherrequirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with theserequirements.Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of thepatent. The USPTO and various foreign governmental patent agencies 60Table of Contentsrequire compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. Whilean inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situationsin which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights inthe relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limitedto, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formaldocuments. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.If we breach any of the agreements under which we license rights to products or technology from others, we could lose license rights that arematerial to our business or be subject to claims by our licensors.We license rights to products and technology that are important to our business, and we expect to enter into additional licenses in the future. Forinstance, we have exclusively licensed patents and patent applications under our License Agreement with Precigen as well as under the MD AndersonLicense. Under these agreements, we are subject to a range of commercialization and development, sublicensing, royalty, patent prosecution andmaintenance, insurance and other obligations.Any failure by us to comply with any of these obligations or any other breach by us of our license agreements could give the licensor the right toterminate the license in whole, terminate the exclusive nature of the license or bring a claim against us for damages. Any such termination or claimcould have a material adverse effect on our financial condition, results of operations, liquidity or business. Even if we contest any such termination orclaim and are ultimately successful, such dispute could lead to delays in the development or commercialization of potential products and result intime-consuming and expensive litigation or arbitration. On termination we may be required to license to the licensor any related intellectual propertythat we developed.In addition, in certain cases, the rights licensed to us are rights of a third party licensed to our licensor. In such instances, if our licensors do not complywith their obligations under such licenses, our rights under our license agreements with our licensor may be adversely affected.We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property or claimingownership of what we regard as our own intellectual property.Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors orpotential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us,we may be subject to claims that these employees or we have used or disclosed intellectual property, including trade secrets or other proprietaryinformation, of any such employee’s former employer. Litigation may be necessary to defend against these claims.In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to executeagreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact developsintellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may beforced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectualproperty.If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights orpersonnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction tomanagement. 61Table of ContentsOTHER RISKS RELATED TO OUR COMPANYOur stock price has been, and may continue to be, volatile.The market price for our common stock is volatile and may fluctuate significantly in response to a number of factors, most of which we cannot control,including: • Price and volume fluctuations in the overall stock market; • Market conditions or trends in our industry or the economy as a whole; • Laboratory or clinical trial results; • Public concern as to the safety of drugs developed by us or others; • Changes in operating results and performance and stock market valuations of other biopharmaceutical companies generally, or those thatdevelop and commercialize cancer drugs in particular; • The financial or operational projections we may provide to the public, any changes in these projections or our failure to meet theseprojections; • Comments by securities analysts or changes in financial estimates or ratings by any securities analysts who follow our common stock, ourfailure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock; • The public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC, as well asannouncements of the status of development of our products, announcements of technological innovations or new therapeutic products byus or our competitors, announcements regarding collaborative agreements and other announcements relating to product development,litigation and intellectual property impacting us or our business; • Government regulation; • FDA determinations on the approval of a product candidate BLA submission; • The sustainability of an active trading market for our common stock; • Future sales of our common stock by our executive officers, directors and significant stockholders; • Announcements of mergers or acquisition transactions; • Our inclusion or deletion from certain stock indices; • Developments in patent or other proprietary rights; • Changes in reimbursement policies; • Announcements of medical innovations or new products by our competitors; • Announcements of changes in our senior management; • Other events or factors, including those resulting from war, incidents of terrorism, natural disasters or responses to these events; and • Changes in accounting principles.In addition, the stock market from time to time experiences significant price and volume fluctuations unrelated to the operating performance ofparticular companies. The stock markets, and in particular the Nasdaq Capital Market, have experienced extreme price and volume fluctuations thathave affected and continue to affect the market prices of equity securities of many biopharmaceutical companies. Stock prices of manybiopharmaceutical companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past,stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, wecould incur substantial costs and our resources, and the attention of management could be diverted from our business. 62Table of ContentsAnti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which may be beneficial to ourstockholders, more difficult.Provisions of our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for athird party to acquire us, even if doing so would benefit our stockholders. These provisions authorize the issuance of “blank check” preferred stock thatcould be issued by our board of directors to increase the number of outstanding shares and hinder a takeover attempt, and limit who may call a specialmeeting of stockholders. In addition, Section 203 of the Delaware General Corporation Law generally prohibits a publicly-held Delaware corporationfrom engaging in a business combination with a party that owns at least 15% of its common stock unless the business combination is approved by thecompany’s board of directors before the person acquires the 15% ownership stake or later by its board of directors and two-thirds of its stockholders.Section 203 could have the effect of delaying, deferring or preventing a change in control that our stockholders might consider to be in their bestinterests.Because we do not expect to pay dividends, you will not realize any income from an investment in our common stock unless and until you sell yourshares at profit.We have never paid dividends on our common stock and we do not anticipate that we will pay any dividends for the foreseeable future. Accordingly,any return on an investment in us will be realized, if at all, only when you sell shares of our common stock.Our ability to use net operating loss carryforwards and research tax credits to reduce future tax payments may be limited or restricted.We have generated significant net operating loss carryforwards, or NOLs, and research and development tax credits, or R&D credits, as a result of ourincurrence of losses and our conduct of research activities since inception. We generally are able to carry NOLs and R&D credits forward to reduce ourtax liability in future years. However, our ability to utilize the NOLs and R&D credits is subject to the rules of Sections 382 and 383 of the InternalRevenue Code of 1986, as amended, or the Code, respectively. Those sections generally restrict the use of NOLs and R&D credits after an “ownershipchange.” An ownership change occurs if, among other things, the stockholders (or specified groups of stockholders) who own or have owned, directlyor indirectly, 5% or more of a corporation’s common stock or are otherwise treated as 5% stockholders under Section 382 of the code and the UnitedStates Treasury Department regulations promulgated thereunder increase their aggregate percentage ownership of that corporation’s stock by more than50 percentage points over the lowest percentage of the stock owned by these stockholders over the applicable testing period. In the event of anownership change, Section 382 imposes an annual limitation on the amount of taxable income a corporation may offset with NOL carry forwards andSection 383 imposes an annual limitation on the amount of tax a corporation may offset with business credit (including the R&D credit) carry forwards.We may have experienced an “ownership change” within the meaning of Section 382 in the past and there can be no assurance that we will notexperience additional ownership changes in the future. As a result, our NOLs and business credits (including the R&D credit) may be subject tolimitations and we may be required to pay taxes earlier and in larger amounts than would be the case if our NOLs or R&D credits were freely usable.If securities and/or industry analysts fail to continue publishing research about our business, if they change their recommendations adversely or ifour results of operations do not meet their expectations, our stock price and trading volume could decline.The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or ourbusiness. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in thefinancial markets, which in turn 63Table of Contentscould cause our stock price or trading volume to decline. In addition, it is likely that in some future period our operating results will be below theexpectations of securities analysts or investors. If one or more of the analysts who cover us downgrade our stock, or if our results of operations do notmeet their expectations, our stock price could decline.Our principal stockholders, executive officers and directors have substantial control over the company, which may prevent you and otherstockholders from influencing significant corporate decisions and may harm the market price of our common stock.As of December 31, 2018, our executive officers, directors and holders of five percent or more of our outstanding common stock, beneficially owned, inthe aggregate, 26.2% of our outstanding common stock. These stockholders may have interests that conflict with our other stockholders and, if actingtogether, have the ability to influence the outcome of matters submitted to our stockholders for approval, including the election and removal ofdirectors and any merger, consolidation or sale of all or substantially all of our assets. Accordingly, this concentration of ownership may harm themarket price of our common stock by: • Delaying, deferring or preventing a change in control; • Impeding a merger, consolidation, takeover or other business combination involving us; or • Discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.The Tax Cuts and Jobs Act, signed into law in 2017 could adversely affect our business and financial condition.On December 22, 2017, President Trump signed into law legislation, known as the Tax Cuts and Jobs Act of 2017, or Tax Act, that significantly revisesthe Code. The federal income tax law is referred to as the Tax Act, and contains significant changes to corporate taxation, including reduction of thecorporate 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 for NOLs to 80% of current year taxable income and elimination of NOL carrybacks,one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject tocertain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, andmodifying or repealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of theTax Act is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent variousstates will conform to the Tax Act. The impact of the Tax Act on holders of our common stock is also uncertain and could be adverse. We urge ourstockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holdingour common stock.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesOur corporate office is located at One First Avenue, Parris Building #34, Navy Yard Plaza, Boston, Massachusetts 02129. The Boston office is leasedpursuant to a lease agreement that expires in August 2021. On December 21, 2015, we renewed a portion of the lease for Boston office throughAugust 31, 2021 for $427 thousand, annually. We believe that our existing facilities are adequate to meet our current needs.We also lease office space at MD Anderson in Houston, Texas pursuant to a lease agreement that expires in April 2021. Under the terms of the Houstonlease agreement, we lease approximately two hundred and ten square 64Table of Contentsfeet and are required to make rental payments at an average monthly rate of approximately $1 thousand. The monthly rent expense is deducted fromour prepayment at MD Anderson. See Note 8 to the accompanying financial statements.We are currently evaluating alternatives to expand our research and manufacturing capacities for our CAR-T and TCR programs. To support thisexpansion, we expect to lease additional facilities suitable for these efforts and we anticipate these facilities will be located in Houston, Texas.Item 3. Legal ProceedingsIn the ordinary course of business, we may periodically become subject to legal proceedings and claims arising in connection with ongoing businessactivities. The results of litigation and claims cannot be predicted with certainty, and unfavorable resolutions are possible and could materially affectour results of operations, cash flows or financial position. In addition, regardless of the outcome, litigation could have an adverse impact on us becauseof defense costs, diversion of management resources and other factors.There are no matters, as of December 31, 2018, that, in the opinion of management, might have a material adverse effect on our financial position,results of operation or cash flows.Item 4. Mine Safety DisclosuresNot applicable. 65Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity SecuritiesRecord HoldersAs of February 21, 2019, we had approximately 286 holders of record of our common stock, one of which was Cede & Co., a nominee for DepositoryTrust Company, or DTC. Shares of common stock that are held by financial institutions as nominees for beneficial owners are deposited intoparticipant accounts at DTC and are considered to be held of record by Cede & Co. as one stockholder. As of February 21, 2019, we hadapproximately 28,718 beneficial holders of our common stock.DividendsWe have never declared or paid a cash dividend on our common stock and do not anticipate paying any cash dividends in the foreseeable future.Recent Sales of Unregistered SecuritiesOn November 11, 2018, we entered into a securities purchase agreement with certain institutional and accredited investors pursuant to which we agreedto issue and sell to the investors an aggregate of 18,939,394 immediately separable units at a price per unit of $2.64, for gross proceeds ofapproximately $50 million. Each unit was comprised of (i) one share of our common stock, par value $0.001 per share and (ii) a warrant to purchaseone share of our common stock. The warrants have a five-year term expiring on November 13, 2023 and have a per share exercise price of $3.01. Theexercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including stocksplits, stock dividends, reclassifications and the like. The number of shares of our common stock that may be acquired upon any exercise of thewarrants is generally limited to the extent necessary to ensure that, following such exercise, such person exercising the warrant would not, togetherwith its affiliates and any other persons or entities whose beneficial ownership of our common stock would be aggregated with such person forpurposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, beneficially own in excess of 9.99% of the totalnumber of shares of our common stock then issued and outstanding and/or the then combined voting power of all of our voting securities, which werefer to as the Exercise Limitation. The Exercise Limitation (i) may be increased, decreased or terminated, in each stockholder’s sole discretion, upon atleast 61 days’ prior notice to us and (ii) terminates automatically on the date that is 15 days prior to the expiration of the warrants.The securities issued by us pursuant to the securities purchase agreement and to be issued upon exercise of the warrants were not registered under theSecurities Act of 1933, as amended, or the Securities Act, and may not be offered or sold in the United States absent registration or an applicableexemption from registration requirements. When issuing the units, we relied on the private placement exemption from registration provided bySection 4(a)(2) of the Securities Act and by Rule 506 of Registration D, promulgated thereunder and on similar exemptions under applicable state lawsand filed a Form D with the SEC on November 19, 2018. On February 7, 2019, we filed a registration statement on Form S-3 registering the resale ofshares issued pursuant to the securities purchase agreement and the resale of shares that may be issued upon exercise of the warrants.Issuer Purchases of Equity SecuritiesDuring the three months ended December 31, 2018, we purchased an aggregate of 202,783 shares of restricted stock from certain employees andmembers of our board of directors to cover the applicable withholding taxes due from them for the shares of restricted stock at the time that theapplicable forfeiture restrictions lapsed. The 66Table of Contentsfollowing table provides information about these purchases of restricted shares for the three months ended December 31, 2018: Period Total Number ofShares Purchased Average Price PaidPer Share October 1 to 31, 2018 — $— November 1 to 30, 2018 — — December 1 to 31, 2018 202,783 1.70 Total 202,783 Item 6. Selected Financial DataThe selected financial data presented below has been derived from our financial statements. This data may not be indicative of our future financialcondition or results of operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations” and our financial statements and accompanying notes included elsewhere herein. Year Ended December 31, (in thousands, except share data and per share amounts) 2018 2017 2016 2015 2014 Statements of Operations Data: Collaboration revenue $146 $6,389 $6,861 $4,332 $1,373 Total operating expenses 54,052 59,882 172,168 124,432 44,872 Loss from operations (53,906) (53,493) (165,307) (120,100) (43,499) Other income (expense), net 631 465 134 12 (5) Change in fair value of warrants — — — — 11,723 Change in fair value of derivative liabilities 158 (1,295) (124) — — Net loss (53,117) (54,323) (165,297) (120,088) (31,781) Preferred stock dividends (16,998) (18,938) (7,123) — — Settlement of a related party relationship 207,361 — — — — Net income (loss) applicable to common stockholders 137,246 (73,261) (172,420) (120,088) (31,781) Net income (loss) per share - basic $0.96 $(0.53) $(1.32) $(0.96) $(0.31) Net income (loss) per share - diluted $0.96 $(0.53) $(1.32) $(0.96) $(0.31) Weighted average number of common sharesoutstanding: basic 143,508,674 136,938,264 130,391,463 125,416,084 101,130,710 Weighted average number of common sharesoutstanding: diluted 143,710,160 136,938,264 130,391,463 125,416,084 101,130,710 67Table of Contents Year Ended December 31, (in thousands) 2018 2017 2016 2015 2014 Balance Sheet Data: Cash and cash equivalents $61,729 $70,946 $81,053 $140,717 $42,803 Total assets 95,051 105,606 106,348 153,724 45,237 Derivative liabilities — 2,424 862 — — Total liabilities 9,487 58,420 58,325 66,353 11,396 Series 1 Preferred Stock — 143,992 125,321 — — Stockholders’ equity (deficit) 85,564 (96,806) (77,298) 87,371 33,841 Item 7. Management Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidatedfinancial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, thefollowing discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially fromthose contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those under“Risk Factors” included in Part I, Item 1A and under “Special Note Regarding Forward-Looking Statements” or in other parts of this Annual Reporton Form 10-K.Business OverviewWe are a biopharmaceutical company focused on discovering, acquiring, developing and commercializing next generation immunotherapy platformsthat leverage cell- and gene-based therapies to treat patients with cancer. We are developing two immuno-oncology platform technologies designed toutilize the patient’s immune system by employing novel, controlled gene expression and innovative cell engineering technologies to deliver safe,effective, and scalable cell- and viral-based therapies for the treatment of multiple cancer types. Our first platform is referred to as Sleeping Beauty andis based on the genetic engineering of immune cells using a non-viral transposon/transposase system to stably reprogram T cells outside of the body forsubsequent infusion. Our second platform is termed Controlled IL-12, which is designed to stimulate expression of interleukin 12, or IL-12, a masterregulator of the immune system, in a controlled and safe manner to focus the patient’s immune system to attack cancer cells. We believe these twoplatforms will provide unique and powerful solutions to address the issues associated with (1) treating solid tumors with heterogeneous and unknownantigens, and (2) providing cost-effective scalable manufacturing solutions for T-cell receptor T-cell, or TCR+ T, and chimeric antigen receptor, orCAR T-cell, or CAR+ T therapies for solid tumors and hematologic malignancies. We expect programs from our two platform technologies to be in theclinic in 2019.Immuno-oncology, which typically utilizes a patient’s own immune system to treat cancer, is one of the most actively pursued areas of research bybiotechnology and pharmaceutical companies today. Cancer cells often contain new mutated proteins and may overexpress other proteins usuallyfound in the body. The immune system typically recognizes unusual or aberrant cell protein expression and eliminates these cells in an efficientprocess known as immune surveillance. Central to immune surveillance are types of white blood cells known as T cells. In healthy individuals, T cellscan identify and kill infected or abnormal cells, including cancer cells. Malignant cells develop the ability to evade immune surveillance, which is akey factor in their growth, spread, and persistence.Our approach to immuno-oncology entails the application of engineering principles to biological systems for designing and constructing newbiological systems or redesigning and modifying existing biological systems. This approach aims to engineer gene-based programs to modify cellularfunction to achieve a desired biological outcome, such as the survival of infused T cells, production of IL-12, or the safe elimination of cancerous cells. 68Table of ContentsUsing our Sleeping Beauty platform, we are developing our TCR+ T therapies, initially to target solid tumors. Our T cell receptor, or TCR, programdesigns and manufactures T cells that target antigens unique to each patient, thereby delivering truly personalized therapy that can attack anindividual patient’s cancer. Our Sleeping Beauty system uses DNA plasmids to reprogram T cells to express introduced TCRs on a patient-by-patientbasis (addressing inter-tumor heterogeneity) and to express more than one TCR for each patient (addressing intra-tumor heterogeneity). We believe thescalability of our approach provides a competitive advantage to alternative viral-based approaches to T-cell manufacturing. Under our CooperativeResearch and Development Agreement, or CRADA, the National Cancer Institute, or the NCI, intends to initiate a Phase 1 clinical trial in patients witha variety of solid tumors using the Sleeping Beauty platform to genetically modify T-cells to target patient-specific neoantigens in mid-2019. Theclinical trial will be under the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI.We are also developing CAR+ T therapies using our Sleeping Beauty platform. Our CAR+ T program seeks to solve the complex and costlymanufacturing limitations of existing CAR+ T therapies that we believe will continue limiting their commercial potential. We believe using DNAplasmids in the Sleeping Beauty system to express CAR and our proprietary membrane-bound interleukin 15, or mbIL15, in resting T cells obtainedfrom peripheral blood will enable infused T cells to propagate within the patient to target leukemia and lymphoma, thus avoiding the need tonumerically expand T cells for weeks in bioreactors before patient administration. We expect the lower cost of DNA plasmids compared with the virusused by other CAR+ T programs, together with the avoidance of lengthy ex vivo manufacturing, will reduce the cost and complexity of manufacturingCAR+ T cells. These technologies should enable T cells to be infused within two days of gene transfer in a process we refer to as rapid personalizedmanufacture, or RPM. We are advancing our CAR+ T therapies in the United States in collaboration with The University of Texas MD AndersonCancer Center, or MD Anderson, to target CD19 on malignant B cells. In 2019, we expect to initiate a Phase 1 clinical trial in the United States of ourthird-generation Sleeping Beauty modified CAR+ T cells, co-expressing CAR and mbIL15, manufactured and reinfused into the patient in less than twodays from gene transfer. In addition, in a joint venture with TriArm Therapeutics, Ltd., or TriArm, we are forming Eden BioCell, Ltd., or Eden BioCell,to lead clinical development and commercialization of Sleeping Beauty-generated CD19-specific CAR-T therapies in the People’s Republic of China,Taiwan and Korea. Eden BioCell is owned equally by us and TriArm and the parties will share decision-making authority, and TriArm has committedup to $35.0 million to this joint venture and will manage all clinical development to execute trials in the territory. We expect our joint venture withTriArm to close in the first half of 2019 and we may evaluate additional programs to pursue in this joint venture.Our Controlled IL-12 platform uses virotherapy based on an engineered replication-incompetent adenovirus (Ad-RTS-hIL-12) plus veledimex as agene delivery system to conditionally produce IL-12, a potent, naturally occurring anti-cancer protein, to treat patients with solid tumors where aspecific target is unknown, including brain cancer. Our Controlled IL-12 platform allows us to deliver IL-12 in a tunable dose, which we believe iscritical for this potent cytokine. In a Phase 1 clinical trial of patients with recurrent glioblastoma multiforme, or rGBM, a subset of patients (n=6) whoreceived low-dose steroids along with 20 mg of veledimex plus Ad-RTS-hIL-12, achieved 17.8 months median OS compared with five to eight monthsOS established in historical controls. Thirty-six additional patients with rGBM have been recruited into a sub study designed to encourage use oflow-dose steroids and 20 mg veledimex to further understand the potential of Controlled IL-12 as a monotherapy. We are also developing ourControlled IL-12 platform in combination with immune checkpoint inhibitors. In June 2018, we began enrolling patients with rGBM to receiveAd-RTS-hIL-12 plus veledimex in combination with OPDIVO® (nivolumab) in a Phase 1 dose-escalation trial. In November 2018, we announced aclinical supply agreement with Regeneron Pharmaceuticals, Inc., or Regeneron, to evaluate Ad-RTS-hIL-12 plus veledimex in combination withRegeneron’s PD-1 antibody Libtayo® (cemiplimab-rwlc) for the treatment of patients with rGBM. We expect to initiate a Phase 2 clinical trial in thefirst half of 2019 in approximately 30 patients with rGBM to measure preliminary safety and efficacy of Ad-RTS-hIL-12 plus veledimex incombination with Libtayo. 69Table of ContentsAs of December 31, 2018, we have approximately $61.7 million of cash and cash equivalents. Given our current development plans, we anticipate cashresources will be sufficient to fund our operations into the second quarter of 2020, and we have no committed sources of additional capital at thistime. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses couldvary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and ourexpenses could prove to be significantly higher than we currently anticipate. Management does not know whether additional financing will be onterms favorable or acceptable to us when needed, if at all. If adequate additional funds are not available when required, or if we are unsuccessful inentering into partnership agreements for further development of our product candidates, management may need to curtail its development efforts andplanned operations.We have not generated significant revenue and have incurred significant net losses in each year since our inception. For the year ended December 31,2018, we had a net loss of $53.1 million, and, as of December 31, 2018, we have incurred approximately $566.3 million of accumulated deficit sinceour inception in 2003. We expect to continue to incur significant operating expenditures and net losses. Further development of our productcandidates will likely require substantial increases in our expenses as we: • continue to undertake clinical trials for product candidates; • seek regulatory approvals for product candidates; • work with regulatory authorities to identify and address program-related inquiries; • implement additional internal systems and infrastructure; • hire additional personnel; and • scale-up the formulation and manufacturing of our product candidates.We continue to seek additional financial resources to fund the further development of our product candidates. If we are unable to obtain sufficientadditional capital, one or more of these programs could be delayed, and we may be unable to continue our operations at planned levels and be forcedto reduce our operations. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing oramount of increased expenses or when or if we will be able to achieve or maintain profitability.Financial OverviewOverview of Results of OperationsCollaboration RevenueWe recognize research and development funding revenue over the estimated period of performance. We have not generated product revenues since ourinception. Unless and until we receive approval from the FDA and/or other regulatory authorities for our product candidates, we cannot sell ourproducts and will not have product revenues.Research and Development ExpensesOur research and development expense consists primarily of salaries and related expenses for personnel, costs of contract manufacturing services, costsof facilities and equipment, fees paid to professional service providers in conjunction with our clinical trials, fees paid to contract researchorganizations in conjunction with preclinical animal studies, costs of materials used in research and development, consulting, license and milestonepayments and sponsored research fees paid to third parties.We have not accumulated and tracked our internal historical research and development costs or our personnel and personnel-related costs on aprogram-by-program basis. Our employee and infrastructure resources are allocated across several projects, and many of our costs are directed tobroadly applicable research endeavors. As a result, we cannot state the costs incurred for each of our oncology programs on a program-by-programbasis. 70Table of ContentsFor the year ended December 31, 2018, our clinical stage projects included a Phase 1 clinical trial with Ad-RTS-IL-12 plus veledimex in progressiveglioblastoma; a Phase 1b/2 trial with Ad-RTS-IL-12 plus veledimex in metastatic breast cancer; an investigator-led Phase 1 clinical trial infusing our2nd generation CD19-specific CAR+ T cells in patients with advanced lymphoid malignancies; an investigator-led Phase 1 clinical trial infusing ourCD33-specific CAR+ T therapy for relapsed or refractory acute myeloid leukemia; and a Phase 1 clinical trial of Ad-RTS-hIL-12 with veledimex for thetreatment of pediatric brain tumors. The expenses incurred by us to third parties for our Phase 1 clinical trial with Ad-RTS-IL-12 plus veledimex inprogressive glioblastoma were $2.6 million for the year ended December 31, 2018, and $6.8 million from the project’s inception in June 2015 throughDecember 31, 2018. The expenses incurred by us to third parties for our Phase 1b/2 clinical trial with Ad-RTS-IL-12 plus veledimex in metastaticbreast cancer for the year ended December 31, 2018 were $0.2 million, and expenses from the project’s inception in April 2015 through December 31,2018 were $1.0 million. The expenses incurred by us to third parties for our investigator-led Phase 1 clinical trial infusing our 2nd generation CD19-specific CAR+ T cells in patients with advanced lymphoid malignancies were $1.9 million for the year ended December 31, 2018 and $4.7 millionfrom the project’s inception in December 2015 through December 31, 2018. The expenses incurred by us to third parties for our investigator-led Phase1 clinical trial infusing our CD33-specific CAR+ T therapy for relapsed or refractory acute myeloid leukemia for the year ended December 31, 2018were $2.3 million and $3.7 million from the project’s inception in September 2017 through December 31, 2018. The expenses incurred by us tothird parties for our investigator-led Phase 1 clinical trial of Ad-RTS-hIL-12 with veledimex for the treatment of pediatric brain tumors were$0.9 million for the year ended December 31, 2018 and the $1.5 million from the project’s inception in October 2017 through December 31, 2018.Our future research and development expenses in support of our current and future programs will be subject to numerous uncertainties in timing andcost to completion. We test potential products in numerous preclinical studies for safety, toxicology and efficacy. We may conduct multiple clinicaltrials for each product. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus ourresources on more promising products or indications. Completion of clinical trials may take several years or more, and the length of time generallyvaries substantially according to the type, complexity, novelty and intended use of a product. It is not unusual for preclinical and clinical developmentof each of these types of products to require the expenditure of substantial resources.We estimate that clinical trials of the type generally needed to secure new drug approval are typically completed over the following timelines: Clinical Phase Estimated Completion PeriodPhase 1 1 - 2 yearsPhase 2 2 - 3 yearsPhase 3 2 - 4 yearsThe duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development,including, among others, the following: • The number of clinical sites included in the trials; • The length of time required to enroll suitable patients; • The number of patients that ultimately participate in the trials; • The duration of patient follow-up to ensure the absence of long-term product-related adverse events; and • The efficacy and safety profile of the product.As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our programs or when and to whatextent we will receive cash inflows from the commercialization and sale of a 71Table of Contentsproduct. Our inability to complete our programs in a timely manner or our failure to enter into appropriate collaborative agreements could significantlyincrease our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources offinancing from time-to-time in order to continue with our product development strategy. Our inability to raise additional capital, or to do so on termsreasonably acceptable to us, would jeopardize the future success of our business.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, benefits and stock-based compensation, consulting and professional fees, includingpatent related costs, general corporate costs and facility costs not otherwise included in research and development expenses or cost of product revenue.Other Income (Expense)Other income (expense) consists primarily of changes in the fair value of our Series 1 preferred stock. All of the Series 1 preferred stock was forfeited onOctober 5, 2018 in conjunction with entering the License Agreement with Precigen.Results of Operations for the Fiscal Year ended December 31, 2018 versus December 31, 2017Collaboration RevenuesRevenues for the years ended December 31, 2018 and 2017 were as follows: Year ended December 31, 2018 2017 Change ($ in thousands) Collaboration revenue $146 $6,389 $(6,243) -98% Revenue for the year ended December 31, 2018 decreased by $6.2 million in comparison to revenue for the year ended December 31, 2017 due to theadoption of ASC 606 (Note 3). During the year ended December 31, 2018, we recognized $146 thousand of revenue related to the Ares TradingAgreement under ASC 606. During the year ended December 31, 2017, we recognized $6.4 million through our Ares Trading Agreement under ASC605. (Note 3).Research and Development ExpensesResearch and development expenses during the years ended December 31, 2018 and 2017 were as follows: Yearended December 31, 2018 2017 Change ($ in thousands) Research and development $34,134 $45,084 $(10,950) -24% Research and development expenses for the year ended December 31, 2018 decreased by $11.0 million when compared to the year endedDecember 31, 2017. The decrease in expense during the year ended December 31, 2018 was due to a decrease of $10.4 million in preclinical activities,a decrease of $1.7 million related to graft versus host disease, or GvHD, expenses, and a reduction of $0.6 million in other clinical expenses. Thedecrease in preclinical, GvHD, and other clinical expenses was offset by increases in Gorilla IL-12 expenses due to Precigen under the LicenseAgreement of $1.0 million (Note 7) and of $0.7 million related to salary and employee related expense during the year ended December 31, 2018. Wepreviously determined that the pursuit of GvHD as an indication was not a material part of its corporate strategy and decided to stop pursuing thedevelopment of engineered cell therapy strategies, used either separately or in combination, for targeted treatment of GvHD (Note 8). 72Table of ContentsGeneral and Administrative ExpensesGeneral and administrative expenses during the years ended December 31, 2018 and 2017 were as follows: Year ended December 31, 2018 2017 Change ($ in thousands) General and administrative $19,918 $14,798 $5,120 35% General and administrative expenses for the year ended December 31, 2018 increased by $5.1 million as compared to the prior year. The change wasprimarily due to increased contracted outside services and advisory fees related to our License Agreement with Precigen (Note 7) of $4.1 million and anincrease of $1.3 million related to salary and employee related expense during the year ended December 31, 2018. The increased costs in 2018 wereoffset by a reduction of milestone payments of $0.3 million due to Baxter Healthcare S.A., or Baxter, as our license agreement with Baxter expired inNovember 2017 (Note 8).Other Income (Expense)Other income (expense) during the years ended December 31, 2018 and 2017 were as follows: Year ended December 31, 2018 2017 Change ($ in thousands) Other income (expense), net $631 $465 $166 36% Change in fair value of derivative liabilities 158 (1,295) 1,453 -112% Total $789 $(830) $1,619 During the year ended December 31, 2018 we recorded a gain on the change in fair value of the derivative liabilities of $158 thousand, compared to aloss of $1.3 million during the year ended December 31, 2017 (Note 12). These changes are derived from the number of previously outstanding sharesof Series 1 preferred stock and their respective valuations. Additionally, we recorded $631 thousand in other income for the year ended December 31,2018, compared to $465 thousand earned in the prior year, due to increases in our cash equivalent accounts (Note 3).Results of Operations for the Fiscal Year ended December 31, 2017 versus December 31, 2016Collaboration RevenuesRevenues for the years ended December 31, 2017 and 2016 were as follows: Year ended December 31, 2017 2016 Change ($ in thousands) Collaboration revenue $6,389 $6,861 $(472) -7% Revenue for the year ended December 31, 2017 decreased by $472 thousand in comparison to revenue for the year ended December 31, 2016. Duringeach of the years ended December 31, 2017 and 2016, we recognized revenue of $6.4 million under the Ares Trading Agreement. During the yearended December 31, 2016, we recognized $272 thousand from our agreement with Solasia and $200 thousand from our agreement with PredictiveTherapeutics. We recognized no revenue from our agreements with Solasia and Predictive Therapeutics during the year ended December 31, 2017. 73Table of ContentsResearch and Development ExpensesResearch and development expenses during the years ended December 31, 2017 and 2016 were as follows: Year ended December 31, 2017 2016 Change ($ in thousands) Research and development $45,084 $157,791 $(112,707) -71% Research and development expenses for the year ended December 31, 2017 decreased by $112.7 million when compared to the year endedDecember 31, 2016. During the year ended December 31, 2016, we incurred a noncash charge of $119.0 million related to Series 1 preferred stock andrelated dividends issued to Intrexon. Excluding the noncash charge of $119.0 in 2016, research and development expenses would have been higher by$6.3 million for the year ended December 31, 2017 compared to the year ended December 31, 2016. The increase in expenses during the year endedDecember 31, 2017 was due to an increase of $2.8 million for salary and employee related expense due to increased headcount, $1.6 million in celltherapy expenses to support our ongoing trials at MD Anderson, $1.2 million to support our ongoing gene therapy programs, and $0.7 million in otheroperating expense.General and Administrative ExpensesGeneral and administrative expenses during the years ended December 31, 2017 and 2016 were as follows: Year ended December 31, 2017 2016 Change ($ in thousands) General and administrative $14,798 $14,377 $421 3% General and administrative expenses for the year ended December 31, 2017 increased by $421 thousand as compared to the prior year. The change wasprimarily due to increased salary and employee related expenses as a result of headcount additions during the year ended December 31, 2017.Other Income (Expense)Other income (expense) during the years ended December 31, 2017 and 2016 were as follows: Year ended December 31, 2017 2016 Change ($ in thousands) Other income (expense), net $465 $134 $331 247% Change in fair value of derivative liabilities (1,295) (124) (1,171) -944% Total $(830) $10 $(840) During the year ended December 31, 2017 and 2016, we recorded a loss on the change in fair value of the derivative liabilities of $1.3 million and$124 thousand, respectively (Note 10). These changes are derived from the number of outstanding shares of Series 1 preferred stock and their respectivevaluations. Additionally, we recorded $465 thousand in other income for the year ended December 31, 2017, compared to $134 thousand earned in theprior year, due to increases in our cash equivalent accounts (Note 3).Liquidity and Capital ResourcesAs of December 31, 2018, we have approximately $61.7 million of cash and cash equivalents. Given our development plans, we anticipate our cashresources will be sufficient to fund our operations into the second 74Table of Contentsquarter of 2020. We currently have no committed sources of additional capital. The forecast of cash resources is forward-looking information thatinvolves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We havebased our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate.Management does not know whether additional financing will be on terms favorable or acceptable to us when needed, if at all. If adequate additionalfunds are not available when required, or if we are unsuccessful in entering into partnership agreements for further development of our products,management may need to curtail development efforts.In addition to these factors, our actual cash requirements may vary materially from our current expectations for a number of other factors that mayinclude, but are not limited to, changes in the focus and direction of our development programs, competitive and technical advances, costs associatedwith the development of our product candidates, our ability to secure partnering arrangements, and the costs of filing, prosecuting, defending andenforcing our intellectual property rights. If we exhaust our capital reserves more quickly than anticipated, regardless of the reason, and we are unableto obtain additional financing on terms acceptable to us or at all, we will be unable to proceed with development of some or all of our productcandidates on expected timelines and will be forced to prioritize among them.We expect that we will need additional financing to support our long-term plans for clinical trials and new product development. We expect to financeour cash needs through the sale of equity securities, strategic collaborations and/or debt financings, or through other sources that may be dilutive toexisting stockholders. There can be no assurance that we will be able to obtain funding from any of these sources or, if obtained, what the terms of suchfunding(s) may be, or that any amount that we are able to obtain will be adequate to support our working capital requirements until we achieveprofitable operations. We have no current committed sources of additional capital. Recently, capital markets have experienced a period of instabilitythat may severely hinder our ability to raise capital within the time periods needed or on terms we consider acceptable, if at all. If we are unable to raiseadditional funds when needed, we may not be able to continue development and regulatory approval of our products, or we could be required to delay,scale back or eliminate some or all our research and development programs.Recent Financing TransactionsNovember 2018 Private PlacementOn November 11, 2018, we entered into a securities purchase agreement with certain institutional and accredited investors pursuant to which we agreedto issue and sell to the investors an aggregate of 18,939,394 immediately separable units at a price per unit of $2.64, for net proceeds of approximately$47.1 million. Each unit was comprised of (i) one share of our common stock, par value $0.001 per share and (ii) a warrant to purchase one share ofcommon stock. The securities issued by us pursuant to the securities purchase agreement and to be issued upon exercise of the warrants were notregistered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registrationrequirements. When issuing the units, we relied on the private placement exemption from registration provided by Section 4(a)(2) of the Securities Actand by Rule 506 of Registration D, promulgated thereunder and on similar exemptions under applicable state laws and filed a Form D with the SEC onNovember 19, 2018. On February 7, 2019, we filed a registration statement on Form S-3 registering the resale of shares issued pursuant to the securitiespurchase agreement and the resale of shares that may be issued upon exercise of the warrants.May 2017 Public OfferingOn May 11, 2017, we sold in an underwritten public offering an aggregate of 9,708,738 shares of our common stock to a single institutional investor inan underwritten offering. The price to the investor in the offering was $5.15 per share, and the underwriters agreed to purchase the shares from uspursuant to the underwriting agreement at a purchase price of $4.893 per share. The offering was made pursuant to a registration statement on 75Table of ContentsForm S-3ASR previously filed with the SEC, and a prospectus supplement thereunder. The net proceeds from the offering were approximately$47.3 million after deducting underwriting commissions and estimated offering expenses payable by us.Cash Increases and (Decreases)The following table summarizes our net increase (decrease) in cash and cash equivalents for the years ended December 31, 2018, 2017 and 2016: Year ended December 31, 2018 2017 2016 ($ in thousands) Net cash provided by (used in): Operating activities $(49,457) $(54,669) $(58,325) Investing activities (459) (737) (551) Financing activities 40,311 45,299 (788) Net decrease in cash and cash equivalents $(9,605) $(10,107) $(59,664) Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financingactivities. Operating cash flow is derived by adjusting our net loss for: • Non-cash operating items such as depreciation and amortization, stock-based compensation and common and preferred stock issued inexchange for license agreements; • Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated withtransactions and when they are recognized in results of operations; and • Changes associated with the fair value of our derivative liabilities.Net cash used in operating activities for the year ended December 31, 2018 was $49.5 million, as compared to net cash used in operating activities of$54.7 million and $58.3 million for the years ended December 31, 2017 and 2016, respectively. The net cash used in operating activities for the yearended December 31, 2018 was primarily a result of our net loss of $53.1 million, offset by an increase in prepaid expenses and receivables of$3.1 million, a decrease in other noncurrent assets of $3.9 million, and a decrease in accounts payable and accrued expenses of $4.8 million. The netcash used in operating activities for the year ended December 31, 2017 was primarily a result of our net loss of $54.3 million, a decrease in prepaidexpenses of $4.0 million, an increase in other noncurrent assets of $13.0 million and an increase in accounts payable and accrued expenses of$5.1 million. The net cash used in operating activities for the twelve months ended December 31, 2016 was primarily a result of our net loss of$165.3 million, an increase of $12.5 million in charges related to prepayments for cell therapy programs under our license agreements, a decrease indeferred revenue of $6.9 million, a decrease in accounts payable and accrued expenses of $1.6 million and an increase in stock compensation of$0.4 million.Net cash used in investing activities was $459 thousand for the year ended December 31, 2018 compared to $737 thousand and $551 thousand for theyears ended December 31, 2017 and December 31, 2016, respectively. The change was due primarily to increases in equipment purchases under ouragreement with MD Anderson to support our ongoing clinical trials in Houston, Texas during the years ended December 31, 2017 and 2016.Net cash provided by financing activities was $40.3 million for the year ended December 31, 2018 compared to net cash provided by financingactivities of $45.3 million and $788 thousand cash used in financing activities for the years ended December 31, 2017 and 2016, respectively. The$40.3 million provided by financing activities during the year ended December 31, 2018 is a result of net proceeds of $47.1 million from ourNovember 2018 financing (Note 2) which were offset by cash paid of $5.4 million from our License Agreement (Note 8) and 76Table of Contents$1.6 million paid for the repurchase of common stock. The $45.3 million provided by financing activities during the year ended December 31, 2017 isa result of net proceeds of $47.3 million from our May 2017 offering (Note 2) which was offset by $2.1 million in cash used in the issuance of restrictedcommon stock.Operating Capital and Capital Expenditure RequirementsWe anticipate that losses will continue for the foreseeable future. At December 31, 2018, our accumulated deficit was approximately $566.3 million.Our actual cash requirements may vary materially from those planned because of a number of factors including: • changes in the focus, direction and pace of our development programs; • competitive and technical advances; • costs associated with the development of our product candidates; • our ability to secure partnering arrangements; • costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights, or other developments;and • other matters identified under Part I – Item 1A. “Risk Factors.”Working capital as of December 31, 2018 was $74.8 million, consisting of $84.3 million in current assets and $9.5 million in current liabilities.Working capital as of December 31, 2017 was $69.9 million, consisting of $90.8 million in current assets and $20.9 million in current liabilities.Contractual ObligationsThe following table summarizes our outstanding obligations as of December 31, 2018 and the effect those obligations are expected to have on ourliquidity and cash flows in future periods: ($ in thousands) Total Less than1 year 2 - 3 years 4 - 5 years More than5 years Operating leases $1,947 $723 $1,224 $— $— CRADAs $2,500 2,500 — — — Royalty and license fees $2,000 100 200 200 1,500 Total $6,447 $3,323 $1,424 $200 $1,500 Our commitments for operating leases relate to the lease for our corporate headquarters in Boston, Massachusetts, and office space in Houston, Texas.On December 21, 2015 and April 15, 2016, we renewed the sublease for our corporate headquarters in Boston, MA through August 31, 2021. OnJanuary 30, 2018, we entered into a lease agreement for office space in Houston, TX at MD Anderson through April 15, 2021.On January 10, 2017, we announced the signing of a CRADA with the NCI for the development of ACT-based immunotherapies genetically modifiedusing the Sleeping Beauty transposon/transposase system for the treatment of solid tumors. Our obligation for the CRADA is reflected above with$2.5 million in the column “Less than 1 Year”.On October 5, 2018, we entered into the License Agreement with Precigen. Under the License Agreement, we are obligated to pay Precigen annuallicensing fees of $100 thousand expected to be paid through the term of the agreement.Critical Accounting Policies and Significant EstimatesOur Management’s Discussion and Analysis of our financial condition and results of operations is based upon our financial statements, which havebeen prepared in accordance with accounting principles generally accepted 77Table of Contentsin the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts ofassets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported expenses duringthe reporting periods. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ materially from these estimates underdifferent assumptions or conditions.We believe the following are our more significant estimates and judgments used in the preparation of our financial statements: • Clinical trial expenses; • Collaboration agreements; • Fair value measurements of stock-based compensation and Series 1 Preferred Stock (including related dividends): and • Income taxes.Clinical Trial ExpensesClinical trial expenses include expenses associated with clinical research organizations, or CROs. The invoicing from CROs for services rendered canlag several months. We accrue the cost of services rendered in connection with CRO activities based on our estimate of site management, monitoringcosts, and project management costs. We maintain regular communication with our CROs to gauge the reasonableness of our estimates. Differencesbetween actual clinical trial expenses and estimated clinical trial expenses recorded have not been material and are adjusted for in the period in whichthey become known.Revenue Recognition from Collaboration AgreementsThe Company primarily generates revenue through collaboration arrangements with strategic partners for the development and commercialization ofproduct candidates. Commencing January 1, 2018, the Company recognized revenue in accordance with ASC 606 which replaced ASC 605, MultipleElement Arrangements, as used in historical years. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer ofpromised goods and/or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange forthose goods and/or services. To determine the appropriate amount of revenue to be recognized for arrangements that the Company determines arewithin the scope of ASC 606, the Company performs the following steps: (i) identify the contract(s) with the customer, (ii) identify the performanceobligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and(v) recognize revenue when (or as) each performance obligation is satisfied.The Company recognizes collaboration revenue under certain of the Company’s license or collaboration agreements that are within the scope of ASC606. The Company’s contracts with customers typically include promises related to licenses to intellectual property, research and developmentservices and options to purchase additional goods and/or services. If the license to the Company’s intellectual property is determined to be distinctfrom the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated tothe license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled withother promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combinedperformance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes ofrecognizing revenue from non-refundable, up-front fees. Contracts that include an option to acquire additional goods and/or services are evaluated todetermine if such option provides a material right to the customer that it would not have received without entering into the contract. If so, the option isaccounted for as a separate performance obligation. If not, the option is considered a marketing offer which would be accounted for as a separatecontract upon the customer’s election. 78Table of ContentsThe terms of the Company’s arrangements with customers typically include the payment of one or more of the following: (i) non-refundable, up-frontpayment, (ii) development, regulatory and commercial milestone payments, (iii) future options and (iv) royalties on net sales of licensed products.Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and variable consideration in the form of milestonepayments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products. TheCompany measures the transaction price based on the amount of consideration to which it expects to be entitled in exchange for transferring thepromised goods and/or services to the customer. The Company utilizes the most likely amount method to estimate the amount of variableconsideration, to predict the amount of consideration to which it will be entitled for its one open contract. Amounts of variable consideration areincluded in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will notoccur when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of each arrangement that includesdevelopment and regulatory milestone payments, the Company evaluates whether the associated event is considered probable of achievement andestimates the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within the controlof the Company or the licensee, such as those dependent upon receipt of regulatory approval, are not considered to be probable of achievement untilthe triggering event occurs. At the end of each reporting period, the Company reevaluates the probability of achievement of each milestone and anyrelated constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-upbasis, which would affect revenue and net loss in the period of adjustment. For arrangements that include sales-based royalties, including milestonepayments based upon the achievement of a certain level of product sales, the Company recognizes revenue upon the later of: (i) when the related salesoccur or (ii) when the performance obligation to which some or all of the payment has been allocated has been satisfied (or partially satisfied). To date,the Company has not recognized any development, regulatory or commercial milestones or royalty revenue resulting from any of its collaborationarrangements. Consideration that would be received for optional goods and/or services is excluded from the transaction price at contract inception.The Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis.However, certain components of variable consideration are allocated specifically to one or more particular performance obligations in a contact to theextent both of the following criteria are met: (i) the terms of the payment relate specifically to the efforts to satisfy the performance obligation ortransfer the distinct good or service and (ii) allocating the variable amount of consideration entirely to the performance obligation or the distinct goodor service is consistent with the allocation objective of the standard whereby the amount allocated depicts the amount of consideration to which theentity expects to be entitled in exchange for transferring the promised goods or services. The Company develops assumptions that require judgment todetermine the standalone selling price for each performance obligation identified in each contract. The key assumptions utilized in determining thestandalone selling price for each performance obligation may include forecasted revenues, development timelines, estimated research and developmentcosts, discount rates, likelihood of exercise and probabilities of technical and regulatory success.Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as theperformance obligation is satisfied by transferring a promised good and/or service to the customer. For performance obligations that are satisfied overtime, the Company recognizes revenue by measuring the progress toward complete satisfaction of the performance obligation using a single method ofmeasuring progress which depicts the performance in transferring control of the associated goods and/or services to the customer. The Company usesinput methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time. The Company evaluates themeasure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Any such adjustmentsare recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment. 79Table of ContentsFair Value Measurements of Stock Based Compensation and Series 1 Preferred Stock (including related dividends)Accounting standards define fair value, establish a framework for measuring fair value under generally accepted accounting principles and enhancedisclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on themeasurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservableinputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the lastunobservable, that may be used to measure fair value which are the following: • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data forsubstantially the full term of the assets or liabilities. • Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets orliabilities.We make certain assumptions to value and expense our share-based compensation awards, as well as our Series 1 preferred stock (including relateddividends), which as of October 2018 is no longer outstanding. In connection with valuing stock options we use the Black-Scholes, which require us toestimate certain subjective assumptions. The key assumptions we make are: the expected volatility of our stock; the expected term of the award; andthe forfeiture rate related to share based awards. In connection with our restricted stock programs, we make assumptions principally related to theforfeiture rate.We review our valuation assumptions periodically and, as a result, we may change our valuation assumptions used to value share-based awards grantedin future periods. Such changes may lead to a significant change in the expense we recognize in connection with share-based payments.Income TaxesIn preparing our financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actualcurrent tax expense together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes.These differences result in deferred tax assets and liabilities, which, prior to the consideration for the need for a valuation allowance, are included onthe balance sheet. Significant management judgment is required in assessing the realizability of our deferred tax assets. In performing this assessment,we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferredtax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Inmaking this determination, under the applicable financial accounting standards, we are allowed to consider the scheduled reversal of deferred taxliabilities, projected future taxable income, and the effects of tax planning strategies. Our estimates of future taxable income include, among otheritems, our estimates of future income tax deductions related to the exercise of stock options. In the event that actual results differ from our estimates, weadjust our estimates in future periods and we may need to establish a valuation allowance, which could materially impact our financial position andresults of operations.We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluationof uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken orexpected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances relatedto 80Table of Contentsa tax position. We evaluate uncertain tax positions on an annual basis and adjust the level of the liability to reflect any subsequent changes in therelevant facts surrounding the uncertain positions. Our liabilities for uncertain tax positions can be relieved only if the contingency becomes legallyextinguished through either payment to the taxing authority or the expiration of the statute of limitations, the recognition of the benefits associatedwith the position meet the “more-likely-than-not” threshold or the liability becomes effectively settled through the examination process. We considermatters to be effectively settled once the taxing authority has completed all of its required or expected examination procedures, including all appealsand administrative reviews; we have no plans to appeal or litigate any aspect of the tax position; and we believe that it is highly unlikely that thetaxing authority would examine or re-examine the related tax position. We also accrue for potential interest and penalties, related to unrecognized taxbenefits in income tax expense.Recent Accounting PronouncementsFor a discussion of new accounting standards, please read Note 3 to the accompanying financial statements, Summary of Significant AccountingPrinciples included in this report.Off-Balance Sheet ArrangementsWe have not entered into, nor do we currently have any special purpose entities or off-balance sheet financing arrangements as defined under SECrules.Item 7A. Quantitative and Qualitative Disclosures About Mark RiskNot applicable to smaller reporting companies. Item 8. Financial Statements and Supplementary DataThe information required by this Item 8 is contained on pages F-1 through F-40 of this Annual Report and is incorporated herein by reference.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosuresNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and Procedures.Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Accounting Officer, we haveevaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under theExchange Act, as of December 31, 2018. Based on that evaluation, our Chief Executive Officer and Chief Accounting Officer have concluded that as ofsuch date, our disclosure controls and procedures were effective.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting for us. Internal control overfinancial reporting (as defined in Rule 13a-15(f) of the Exchange Act) is a process to provide reasonable assurance regarding the reliability of ourfinancial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control overfinancial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurancethat transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures ofcompany assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use ordisposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Becauseof its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financialstatements would be prevented or detected. 81Table of ContentsManagement conducted an evaluation of the effectiveness, as of December 31, 2018, of our internal control over financial reporting based on theframework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2018.RSM US LLP, an independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting as ofDecember 31, 2018. That report is included in this Annual Report.Changes in Internal Controls over Financial ReportingThere were no changes in our internal control over financial reporting during the year ended December 31, 2018 that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other InformationNone. 82Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceInformation in response to this Item is incorporated herein by reference to the information from our definitive proxy statement to be filed pursuant toRegulation 14A within 120 days after the end of the fiscal year covered by this Annual Report under the sections titled Proposals—Election ofDirectors, Current Directors, Director Nominees and Executive Officers, Information Regarding the Board of Directors and Corporate Governanceand Stock Ownership.Item 11. Executive CompensationInformation in response to this Item is incorporated herein by reference to the information from our definitive proxy statement to be filed pursuant toRegulation 14A within 120 days after the end of the fiscal year covered by this Annual Report under the section entitled Executive Compensation.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersSecurities Authorized for Issuance under Equity Compensation PlansOur Amended and Restated 2003 Stock Option Plan, or the 2003 Plan, and our 2012 Stock Option Plan, or the 2012 Plan, are our only equitycompensation plans approved by our stockholders. The following table sets forth certain information as of December 31, 2018 with respect to the 2003and 2012 Plans: Number of Securities tobe Issued Upon Exerciseof Outstanding Options Weighted-AverageExercise Price ofOutstanding Options Number of SecuritiesRemaining Available forFuture Issuance UnderEquity CompensationPlans (ExcludingSecurities Reflected inColumn (A)) Plan Category (A) (B) (C) Equity compensation plans approved bystockholders: 2003 Stock Option Plan 674,167 $4.31 — 2012 Stock Option Plan 4,602,918 4.23 3,895,923 Total: 5,277,085 $4.24 3,895,923 Equity compensation plans not approved bystockholders: Inducement Award 500,000 6.19 — Total: 500,000 $6.19 — Additional information in response to this Item is incorporated herein by reference to the information from our definitive proxy statement to be filedpursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report under the section titled Stock Ownership.Item 13. Certain Relationships and Related Transactions, and Director IndependenceInformation in response to this Item is incorporated herein by reference to the information from our definitive proxy statement to be filed pursuant toRegulation 14A within 120 days after the end of the fiscal year covered by this Annual Report under the section titled Certain Relationships andRelated Transactions and Information Regarding the Board of Directors and Corporate Governance.Item 14. Principal Accountant Fees and ServicesInformation in response to this Item is incorporated herein by reference to the information from our definitive proxy statement to be filed pursuant toRegulation 14A within 120 days after the end of the fiscal year covered by this Annual Report under the section titled Independent Registered PublicAccounting Firm Fees and Other Matters. 83Table of ContentsPART IVItem 15. Exhibits, Financial Statement Schedules(1) Financial Statements:The Financial Statements required to be filed by Item 8 of this Annual Report, and filed in this Item 15, are as follows: Page Balance Sheets as of December 31, 2018 and 2017 F-4 Statements of Operations for the Years Ended December 31, 2018, 2017, and 2016 F-5 Statements of Changes Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018, 2017, and 2016 F-6-8 Statements of Cash Flows for the Years Ended December 31, 2018, 2017, and 2016 F-9 Notes to Financial Statements F-10 (2) Financial Statement Schedules:Schedules are omitted because they are not applicable, or are not required, or because the information is included in the financial statements andnotes thereto.(3) Exhibits: Exhibit No. Description of Document 2.1 Agreement and Plan of Merger among the Registrant (formerly “EasyWeb, Inc.”), ZIO Acquisition Corp. and ZIOPHARM, Inc.,dated August 3, 2005 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, SEC File No. 000-32353, filedAugust 9, 2005). 3.1 Amended and Restated Certificate of Incorporation, as filed with the Delaware Secretary of State on April 26, 2006(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, SEC File No. 000-32353, filedApril 26, 2006). 3.2 Certificate of Merger dated September 13, 2005, relating to the merger of ZIO Acquisition Corp. with and into ZIOPHARM, Inc.(incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, SEC File No. 000-32353, filed September 19, 2005). 3.3 Certificate of Ownership of the Registrant (formerly “EasyWeb, Inc.”) dated as of September 14, 2005, relating the merger ofZIOPHARM, Inc. with and into the Registrant, and changing the Registrant’s corporate name from EasyWeb, Inc. toZIOPHARM Oncology, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, SEC File No. 000-32353,filed September 19, 2005). 3.4 Amended and Restated Certificate of Designation, Preferences and Rights of Series 1 Preferred Stock, as filed with the DelawareSecretary of State on July 1, 2016 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K/A,SEC File No. 001-33038, filed July 1, 2016). 3.5 Bylaws, as amended to date (incorporated by reference to Exhibit 3.3 to the Registrant’s Form 8-K, SEC File No. 000-32353,filed September 19, 2005). 4.1 Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on FormSB-2, SEC File No. 333-129020, filed October 14, 2005). 4.2 Form of Option for the Purchase of Shares of common stock dated August 30, 2004 and issued to The University of Texas M. D.Anderson Cancer Center (incorporated by reference to Exhibit 4.6 to the Registrant’s Annual Report on Form 10-KSB, SEC FileNo. 000-32353, filed March 20, 2006). 84Table of ContentsExhibit No. Description of Document 4.3 Schedule identifying Material Terms of Options for the Purchase of Shares of Common Stock (incorporated by reference to Exhibit4.7 to the Registrant’s Annual Report on Form 10-KSB, SEC File No. 000-32353, filed March 20, 2006). 4.4 Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K SEC File No. 001-33038 filed November 13, 2018).10.1 ZIOPHARM Oncology, Inc. Amended and Restated 2003 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to theRegistrant’s Annual Report on Form 10-K SEC File No. 001-33038 filed March 1, 2011).10.2 Form of Incentive Stock Option Agreement granted under the Registrant’s 2003 Stock Option Plan (incorporated by reference toExhibit 10.7 to the Registrant’s Annual Report on Form 10-KSB, SEC File No. 000-32353, filed March 20, 2006).10.3 Form of Director Non-Qualified Stock Option Agreement granted under the Registrant’s 2003 Stock Option Plan (incorporated byreference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-KSB, SEC File No. 000-32353, filed March 20, 2006).10.4 Form of Restricted Stock Agreement granted under the Registrant’s 2003 Stock Option Plan (incorporated by reference to Exhibit10.1 to the Registrant’s Current Report on Form 8-K SEC File No. 001-33038 filed December 18, 2007).10.6 ZIOPHARM Oncology, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s CurrentReport on Form 8-K SEC File No. 001-33038 filed June 26, 2012).10.7 Form of Restricted Stock Agreement Granted Under the ZIOPHARM Oncology, Inc. 2012 Equity Incentive Plan (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K SEC File No. 001-33038 filed June 26, 2012).10.8 Form of Option Agreement Granted Under the ZIOPHARM Oncology, Inc. 2012 Equity Incentive Plan (incorporated by reference toExhibit 10.3 to the Registrant’s Current Report on Form 8-K SEC File No. 001-33038 filed June 26, 2012).10.9+ Patent and Technology License Agreement dated August 24, 2004, among ZIOPHARM, Inc. (predecessor to the Registrant), theBoard of Regents of the University of Texas System on behalf of the University of Texas M.D. Anderson Cancer Center and theTexas A&M University System (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form SB-2,SEC File No. 333-129020, filed October 14, 2005).10.10 Form of Indemnity Agreement for directors and executive officers (incorporated by reference to Exhibit 99.1 to the Registrant’sCurrent Report on Form 8-K, SEC File No. 001-33038, filed January 31, 2013).10.11 License Agreement by and among the Registrant, Intrexon Corporation and The University of Texas System Board of Regents onbehalf of The University of Texas M.D. Anderson Cancer Center dated as of January 13, 2015 (incorporated by reference to Exhibit10.5 to the Registrant’s Current Report on Form 8-K, SEC File No. 001-33038, filed January 28, 2015).10.12+ License and Collaboration Agreement by and among the Registrant, Intrexon Corporation and ARES TRADING S.A. dated as ofMarch 27, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, SEC File No. 001-33038,filed April 2, 2015).10. 13 Employment Agreement by and between the Registrant and Laurence James Neil Cooper, M.D., Ph.D. dated as of May 5, 2015(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, SEC File No. 001-33038, filed May 7,2015). 85Table of ContentsExhibit No. Description of Document10.14 Research and Development Agreement by and among the Registrant, Intrexon Corporation and The University of Texas M.D.Anderson Cancer Center dated as of August 17, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Reporton Form 8-K, SEC File No. 001-33038, filed August 21, 2015).10.15 Offer Letter by and between the Registrant and David Mauney, M.D., dated as of September 26, 2017 (incorporated by reference toExhibit 10.1 to the Registrant’s Current Report on Form 8-K, SEC File No. 001-33038, filed September 28, 2017).10.16 Severance Agreement by and between the Registrant and David Mauney, M.D., dated as of September 28, 2017 (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, SEC File No. 001-33038, filed September 28, 2017).10.17+ Exclusive License Agreement by and between the Registrant, Precigen, Inc. and Intrexon Corporation, dated October 5, 2018(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, SEC File No. 001-33038, filedNovember 9, 2018).10.18 Form of Securities Purchase Agreement, dated November 11, 2018, by and between the Registrant and certain investors(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K SEC File No. 001-33038 filedNovember 13, 2018).10.19 Form of Registration Rights Agreement, dated November 11, 2018, by and between the Registrant and certain investors(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K SEC File No. 001-33038 filedNovember 13, 2018).10.20 Placement Agency Agreement, dated November 11, 2018, by and among Ziopharm Oncology, Inc. and Raymond James &Associates, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K SEC File No. 001-33038filed November 13, 2018).10.21* Amendment #1 to the Research and Development Agreement by and among the Registrant, Intrexon Corporation and The Universityof Texas M.D. Anderson Cancer Center dated as of August 30, 2016.10.22* Amendment #2 to the Research and Development Agreement by and among the Registrant, Intrexon Corporation and The Universityof Texas M.D. Anderson Cancer Center dated as of January 17, 2017.10.23* Amendment #3 to the Research and Development Agreement by and among the Registrant, Intrexon Corporation and The Universityof Texas M.D. Anderson Cancer Center dated as of November 14, 2017.21.1* Subsidiaries of the Registrant.23.1* Consent of Independent Registered Public Accounting Firm24.1 Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K).31.1* Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to Section 302of the Sarbanes-Oxley Act of 2002.31.2* Certification of Chief Accounting Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002.32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2* Certification of Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS XBRL Instance Document 86Table of ContentsExhibit No. Description of Document101.SCH XBRL Taxonomy Extension Schema Document101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Taxonomy Extension Definition Linkbase Document101.LAB XBRL Taxonomy Extension Label Linkbase Document101.PRE XBRL Taxonomy Extension Presentation Linkbase Document+ Confidential treatment has been granted as to certain portions of this exhibit pursuant to Rule 406 of the Securities Act of 1933, as amended, or Rule24b-2 of the Securities Exchange Act of 1934, as amended. *Filed herewith.Item 16. Form 10-K SummaryNot applicable. 87Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. ZIOPHARM ONCOLOGY, INC.Date: March 5, 2019 By: /s/ Laurence J.N. Cooper Laurence J.N. Cooper, M.D., Ph.D. Chief Executive Officer (Principal Executive Officer)Date: March 5, 2019 By: /s/ Kevin G. Lafond Kevin G. Lafond Senior Vice President Finance, Chief Accounting Officer and Treasurer(Principal Financial and Accounting Officer)KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Laurence J.N. Cooper andKevin G. Lafond, jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, forhim or her, and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with allexhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact andagents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises herebyratifying and confirming all that said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date/s/ Laurence J.N. CooperLaurence J.N. Cooper, M.D., Ph.D. Chief Executive Officer (Principal Executive Officer), andDirector March 5, 2019/s/ Kevin G. LafondKevin G. Lafond Senior Vice President Finance, Chief Accounting Officerand Treasurer (Principal Financial and Accounting Officer) March 5, 2019 /s/ Scott BraunsteinScott Braunstein Director March 5, 2019/s/ James CannonJames Cannon Director March 5, 2019/s/ Elan EzicksonElan Ezickson. Director March 5, 2019/s/ Douglas PagánDouglas Pagán Director March 5, 2019/s/ Scott TariffScott Tariff Director March 5, 2019 88Table of ContentsZIOPHARM Oncology, Inc.INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F-2 Balance Sheets as of December 31, 2018 and 2017 F-4 Statements of Operations for the Years Ended December 31, 2018, 2017, and 2016 F-5 Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018, 2017, and 2016 F-6-8 Statements of Cash Flows for the Years Ended December 31, 2018, 2017, and 2016 F-9 Notes to Financial Statements F-10 Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors ofZIOPHARM Oncology, Inc.Opinions on the Financial Statements and Internal Control Over Financial ReportingWe have audited the accompanying balance sheets of ZIOPHARM Oncology, Inc. (the Company) as of December 31, 2018 and 2017, and the relatedstatements of operations, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2018, and therelated notes (collectively, the financial statements). We also have audited the Company’s internal control over financial reporting as of December 31,2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the TreadwayCommission in 2013.In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31,2018, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, inall material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.Change in Accounting PrincipleAs discussed in Note 3 to the financial statements, the Company has changed its method of accounting for collaboration revenue in 2018 due to theadoption of ASC 606, Revenue from Contracts with Customers, as of January 1, 2018.Basis for OpinionsThe Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on InternalControl Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the company’sinternal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effectiveinternal control over financial reporting was maintained in all material respects.Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whetherdue to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regardingthe amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimatesmade by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reportingincluded obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. F-2Table of ContentsDefinition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could havea material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate./s/ RSM US LLPWe have served as the Company’s auditor since 2010.Boston, MassachusettsMarch 5, 2019 F-3Table of ContentsZIOPHARM Oncology, Inc.BALANCE SHEETS(in thousands, except share and per share data) December 31,2018 December 31,2017 ASSETS Current assets: Cash and cash equivalents $61,729 $70,946 Receivables 1,864 19 Prepaid expenses and other current assets 20,692 19,818 Total current assets 84,285 90,783 Property and equipment, net 1,097 1,211 Deposits 128 128 Other non-current assets 9,541 13,484 Total assets $95,051 $105,606 LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $707 $4,417 Accrued expenses 8,763 9,909 Deferred revenue - current portion — 6,389 Deferred rent - current portion 13 141 Total current liabilities 9,483 20,856 Deferred revenue, net of current portion — 35,139 Deferred rent, net of current portion 4 1 Derivative liabilities — 2,424 Total liabilities 9,487 58,420 Commitments and contingencies (Note 8) Preferred stock, $0.001 par value, 30,000,000 shares authorized Series 1 preferred stock, $1,200 stated value; 250,000 designated; 0 and 119,644 shares issued andoutstanding at December 31, 2018 and 2017 respectively; liquidation value of $0 million and $143.6 atDecember 31, 2018 and 2017, respectively — 143,992 Stockholders’ deficit: Common stock, $0.001 par value; 250,000,000 shares authorized; 161,066,136 and 142,658,037 sharesissued and outstanding at December 31, 2018 and 2017, respectively 161 143 Additional paid-in capital 651,732 615,493 Accumulated deficit (566,329) (712,442) Total stockholders’ equity (deficit) 85,564 (96,806) Total liabilities and stockholders’ equity (deficit) $95,051 $105,606 The accompanying notes are an integral part of these financial statements. F-4Table of ContentsZIOPHARM Oncology, Inc.STATEMENTS OF OPERATIONS(in thousands, except share and per share data) For the Year Ended December 31, 2018 2017 2016 Collaboration revenue $146 $6,389 $6,861 Operating expenses: Research and development 34,134 45,084 157,791 General and administrative 19,918 14,798 14,377 Total operating expenses 54,052 59,882 172,168 Loss from operations (53,906) (53,493) (165,307) Other income (expense), net 631 465 134 Change in fair value of derivative liabilities 158 (1,295) (124) Net loss $(53,117) $(54,323) $(165,297) Preferred stock dividends $(16,998) $(18,938) $(7,123) Settlement of a related party relationship $207,361 $— $— Net income (loss) applicable to common stockholders $137,246 $(73,261) $(172,420) Net income (loss) per share - basic $0.96 $(0.53) $(1.32) Net income (loss) per share - diluted $0.96 $(0.53) $(1.32) Weighted average common shares outstanding used to compute basic net income(loss) per share 143,508,674 136,938,264 130,391,463 Weighted average common shares outstanding used to compute diluted netincome (loss) per share 143,710,160 136,938,264 130,391,463 The accompanying notes are an integral part of these financial statements. F-5Table of ContentsZIOPHARM Oncology, Inc.STATEMENTS OF CHANGES IN PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)(in thousands, except share and per share data) Series 1 PreferredStock-Mezzanine Common Stock AdditionalPaid InCapital AccumulatedDeficit TotalStockholders’Equity (Deficit) Shares Amount Shares Amount Balance at December 31, 2015 — — 131,718,579 132 579,939 (492,700) 87,371 Exercise of employee stock options — — 189,696 2 712 — 714 Stock-based compensation — — — — 8,452 — 8,452 Issuance of restricted common stock 711,770 712 (712) — — Issuance of common stock in a license agreement — — 87 — 87 Repurchase of common stock — — (243,207) (2) (1,498) — (1,500) Stock buy-back — — (168) — (2) — (2) Issuance of Series 1 Preferred Stock in a licenseagreement with Intrexon, net of issuance costs of$109 100,000 118,242 — — — — — Preferred stock dividends 6,184 7,079 — — (7,123) — (7,123) Net loss — — — — — (165,297) (165,297) Balance at December 31, 2016 106,184 $125,321 132,376,670 $132 $580,567 $(657,997) $(77,298) F-6Table of ContentsZIOPHARM Oncology, Inc.STATEMENTS OF CHANGES IN PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Cont.)(in thousands, except share and per share data) Series 1 PreferredStock-Mezzanine Common Stock AdditionalPaid InCapital AccumulatedDeficit TotalStockholders’Equity (Deficit) Shares Amount Shares Amount Cumulative effect adjustment ASU No. 2016-09 — — — — 122 (122) — Exercise of stock options — — 59,864 1 87 — 88 Stock-based compensation — — — — 8,454 — 8,454 Issuance of restricted common stock — — 907,032 1 (1) — — Repurchase of common stock — — (394,267) (1) (2,058) — (2,059) Issuance of common stock, net of commissions and expenses of $2.7 million — — 9,708,738 10 47,260 — 47,270 Preferred stock dividends 13,460 18,672 — — (18,938) — (18,938) Net loss — — — — — (54,323) (54,323) Balance at December 31, 2017 119,644 $143,993 142,658,037 $143 $615,493 $(712,442) $(96,806) F-7Table of ContentsZIOPHARM Oncology, Inc.STATEMENTS OF CHANGES IN PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Cont.)(in thousands, except share and per share data) Series 1 PreferredStock-Mezzanine Common Stock AdditionalPaid InCapital AccumulatedDeficit TotalStockholders’Equity (Deficit) Shares Amount Shares Amount Adjustment for implementation of ASU No.2014-09, Revenue from Contracts with Customers — — — — — (8,131) (8,131) Stock-based compensation — — — — 7,534 — 7,534 Issuance of restricted common stock — — 150,321 2 (1) — 1 Exercise of employee stock options — — 104,166 2 240 — 242 Cancelled restricted common stock — — (271,433) (2) 3 — 1 Repurchase of restricted common stock — — (514,349) (3) (1,621) — (1,624) Issuance of warrants and common stock in a privateplacement, net of commissions and expenses of$2,898 — — 18,939,394 19 47,082 — 47,101 Preferred stock dividends 11,415 16,775 — — (16,998) — (16,998) Settlement of a related party relationship (Note 7) (131,059) (160,767) — — — 207,361 207,361 Net loss — — — — — (53,117) (53,117) Balance at December 31, 2018 — $— 161,066,136 $161 $651,732 $(566,329) $85,564 F-8Table of ContentsZIOPHARM Oncology, Inc.STATEMENTS OF CASH FLOWS(in thousands) For the Year Ended December 31, 2018 2017 2016 Cash flows from operating activities: Net loss $(53,117) $(54,323) $(165,297) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 575 369 290 Stock-based compensation 7,534 8,454 8,452 Preferred stock issued in exchange for 2016 ECP amendment — — 118,936 Change in fair value of derivative liabilities (158) 1,295 124 Issuance of common stock in a license agreement — — 87 Change in operating assets and liabilities: (Increase) decrease in: Receivables (1,845) 2 425 Prepaid expenses and other current assets (1,263) 3,992 (12,452) Other noncurrent assets 3,942 (12,991) — Increase (decrease) in: Accounts payable (3,709) 4,261 (1,852) Accrued expenses (1,145) 800 203 Deferred revenue (146) (6,389) (6,861) Deferred rent (125) (139) (380) Net cash used in operating activities (49,457) (54,669) (58,325) Cash flows from investing activities: Purchases of property and equipment (459) (737) (551) Net cash used in investing activities (459) (737) (551) Cash flows from financing activities: Proceeds from exercise of stock options 240 88 714 Issuance of restricted common stock — (2,059) (1,500) Repurchase of common stock (1,622) — (2) Proceeds from issuance of common stock, net — 47,270 — Proceeds from underwritten financing 47,101 — — Cash paid for settlement of related party relationship (5,408) — — Net cash provided by (used in) financing activities 40,311 45,299 (788) Net decrease in cash and cash equivalents, and restricted cash (9,605) (10,107) (59,664) Cash and cash equivalents, and restricted cash, beginning of period 71,334 81,441 140,717 Cash and cash equivalents, and restricted cash, end of period $61,729 $71,334 $81,441 Supplementary disclosure of cash flow information: Cash paid for interest $— $— $— Cash paid for income taxes $— $— $— Supplementary disclosure of noncash investing and financing activities: Noncash portion of related party relationship settlement $212,769 $— Payment of Series 1 preferred stock dividends in preferred stock $16,998 $18,938 $7,123 Series 1 preferred stock issued as consideration for a license agreement $— $— $119,045 The accompanying notes are an integral part of these financial statements. F-9Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 1. OrganizationZIOPHARM Oncology, Inc., which is referred to herein as “ZIOPHARM,” or the “Company,” is a biopharmaceutical company seeking to develop,acquire, and commercialize, on its own or with partners, a diverse portfolio of immuno-oncology therapies.The Company’s operations to date have consisted primarily of raising capital and conducting research and development. The Company’s fiscal yearends on December 31.The Company has operated at a loss since its inception in 2003 and has no recurring revenues from operations. The Company anticipates that losseswill continue for the foreseeable future. As of December 31, 2018, the Company had approximately $61.7 million of cash and cash equivalents and theCompany’s accumulated deficit was approximately $566.3 million. Given its current development plans, the Company anticipates cash resources willbe sufficient to fund operations into the second quarter of 2020. The Company’s ability to continue operations after its current cash resources areexhausted depends on its ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given. Cashrequirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and developmentprograms, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are notavailable when required, or if we are unsuccessful in entering into partnership agreements for further development of our product candidates,management may need to curtail its development efforts and planned operations to conserve cash. 2. FinancingsOn November 11, 2018, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant towhich the Company agreed to issue and sell to the Investors an aggregate of 18,939,394 immediately separable units with each Unit being comprisedof (i) one share of the Company’s common stock, par value $0.001 per share and (ii) a warrant to purchase one share of common stock at a price per unitof $2.64, for net proceeds of approximately $47.1 million.On May 11, 2017, the Company sold in an underwritten offering an aggregate of 9,708,738 shares of its common stock to a single investor. The priceto the investor in the offering was $5.15 per share, and the underwriters agreed to purchase the shares from the Company pursuant to the underwritingagreement at a purchase price of $4.893 per share. The net proceeds from the offering were approximately $47.3 million after deducting underwritingcommissions and estimated offering expenses payable by the Company. 3. Summary of Significant Accounting PoliciesBasis of PresentationThe accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States ofAmerica or U.S. GAAP.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets andliabilities at the date of the financial statements F-10Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) and the reported amounts of revenues and expenses during the reporting period. Although the Company regularly assesses these estimates, actualresults could differ from those estimates. Changes in estimates are recorded in the period in which they become known.The Company’s most significant estimates and judgments used in the preparation of the financial statements are: • Clinical trial expenses; • Collaboration agreements; • Fair value measurements of stock-based compensation and Series 1 preferred stock (and related dividends); and • Income taxes.Subsequent EventsThe Company evaluated all events and transactions that occurred after the balance sheet date through the date of this filing. Except as disclosed below,the Company did not have any material subsequent events that impacted its financial statements or disclosures.On December 18, 2018, Ziopharm and TriArm Therapeutics, Ltd. (“TriArm”) announced that the companies plan to launch Eden BioCell, Ltd. (“EdenBioCell”) to lead clinical development and commercialization of Sleeping Beauty-generated CAR-T therapies in the People’s Republic of China(including Macau and Hong Kong), Taiwan and Korea. TriArm is a cell therapy company with operations in Germany, China and the United States.For the territory of China, Taiwan and Korea, Ziopharm will license the rights to Eden BioCell for third-generation Sleeping Beauty-generated CAR-Ttherapies targeting the CD19 antigen. Eden BioCell will be jointly-owned by Ziopharm and TriArm. TriArm has committed up to $35.0 million to thisjoint venture. Under the terms of the agreement, Eden BioCell has rights in the region to CAR-T cells very rapidly manufactured in two days or lessusing the Sleeping Beauty platform to express a CD19-specific CAR and membrane-bound interleukin 15, or mbIL15, along with a kill switch. Eachparty will share decision-making authority. TriArm will manage all clinical development to execute trials in China for Eden BioCell. On January 3,2019 Eden BioCell was incorporated in Hong Kong. The definitive agreements are expected to be executed in the first half of 2019.In February 2019, the Company extended its CRADA with the NCI for the development of adoptive cell transfer, or ACT,-based immunotherapiesgenetically modified using the Sleeping Beauty transposon/transposase system to express TCRs for the treatment of solid tumors. The Company hascommitted an additional $5.0 million to this program through January 2022.Cash and Cash EquivalentsCash equivalents consist primarily of demand deposit accounts and deposits in short-term U.S. treasury money market mutual funds. Cash equivalentsare stated at cost, which approximates fair market value.Concentrations of Credit RiskFinancial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. TheCompany maintains cash accounts in commercial banks, which may, at times, exceed federally insured limits. The Company has not experienced anylosses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. F-11Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) Property and EquipmentProperty and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense while the costs of significantimprovements are capitalized. Depreciation is provided using the straight-line method over the following estimated useful lives of the related assets,which is between three and five years. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation areeliminated from the balance sheets and related gains or losses are reflected in the statements of operations.Restricted CashRestricted cash consists of $105 thousand, which is restricted as collateral for a line of credit and is included in other assets.Long-Lived AssetsThe Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate thatthe carrying amounts of the assets may not be recoverable. Any long-lived assets held for disposal are reported at the lower of their carrying amounts orfair values less costs to sell.Operating SegmentsOperating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by thechief operating decision maker, the Company’s Chief Executive Officer, in making decisions regarding resource allocation and assessing performance.The Company views its operations and manages its business in one operating segment and does not track expenses on a program-by-program basis.WarrantsThe Company assesses whether an equity issued financial instrument is indexed to an entity’s own stock for purposes of determining whether afinancial instrument should be treated as a derivative. In applying the methodology, the Company concluded that warrants issued by the Companyhave terms that meet the criteria to be considered indexed to the Company’s own stock and therefore are classified as equity on the Company’s balancesheet.Fair Value MeasurementsThe Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair valuehierarchy as described in the accounting standards for fair value measurements. • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data forsubstantially the full term of the assets or liabilities. • Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets orliabilities. F-12Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) Assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017 are as follows: ($ in thousands) Fair Value Measurements at Reporting Date Using Description Balance as ofDecember 31,2018 Quoted Prices inActive Markets forIdenticalAssets/Liabilities(Level 1) Significant OtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Cash equivalents $24,437 $24,437 $— $— ($ in thousands) Fair Value Measurements at Reporting Date Using Description Balance as ofDecember 31,2017 Quoted Prices inActive Markets forIdenticalAssets/Liabilities(Level 1) Significant OtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Cash equivalents $66,156 $66,156 $— $— Derivative liabilities $(2,424) $— $— $(2,424) The cash equivalents represent deposits in a short-term United States treasury money market mutual fund quoted in an active market and classified as aLevel 1 asset.As discussed further in Notes 6, 8, and 11, the Company issued Intrexon Corporation, or Intrexon, 100,000 shares of the Company’s Series 1 preferredstock, a class of preferred stock authorized by the Company’s board of directors, in consideration of the parties entering into a Third Amendment toExclusive Channel Partner Agreement, or the 2016 ECP Amendment, amending the existing Exclusive Channel Partner Agreement, effectiveJanuary 6, 2011 and as amended to date, which the Company refers to as the Channel Agreement, and an Amendment to Exclusive ChannelCollaboration Agreement, or the 2016 GvHD Amendment, amending the existing Exclusive Channel Collaboration Agreement, effectiveSeptember 28, 2015, which the Company refers to as the GvHD Agreement. The Series 1 preferred stock were financial liabilities that consist of aconversion option and a redemption feature and were classified as a Level 3 asset. There were no transfers between asset classes during the year endedDecember 31, 2018.At June 30, 2016, the Company’s Series 1 preferred stock was valued using a probability-weighted approach and a Monte Carlo simulation model.Additionally, the monthly dividends issued on the outstanding Series 1 preferred stock were valued using the same probability-weighted approach anda Monte Carlo simulation model. However, there is no adjustment or further revaluation after the initial valuation on the Series 1 preferred stock otherthan required periodic dividends.The Company’s Level 3 financial liabilities consisted of a conversion option and a redemption feature associated with the Company’s Series 1preferred stock issued to Intrexon that had been bifurcated from the Series 1 preferred stock and were accounted for as derivative liabilities at fair value.The preferred stock derivative liabilities were valued using a probability-weighted approach and a Monte Carlo simulation model. The fair value of theembedded derivatives was estimated using the “with” and “without” method where the preferred stock was first valued with all of its features (“with”scenario) and then without derivatives subject to the valuation analysis (“without” scenario). The fair value of the derivatives was then estimated as thedifference between the fair value of the preferred stock in the “with” scenario and the preferred stock in the “without” F-13Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) scenario. See Note 8 for additional disclosures on the 2016 ECP Amendment and 2016 GvHD Amendments and Note 11 for additional disclosure onthe rights and preferences of the Series 1 preferred stock and valuation methodology. All shares of the Series 1 preferred stock were forfeited byIntrexon on October 5, 2018 in conjunction with the Company’s entry into an Exclusive License Agreement with Precigen, Inc., a wholly ownedsubsidiary of Intrexon (“Precigen”).Revenue Recognition from Collaboration AgreementsThe Company adopted Accounting Standards Codification, or ASC Topic 606, Revenue from Contracts with Customers, or ASC 606, using themodified retrospective approach on January 1, 2018. The Company completed its assessment and the implementation resulted in a cumulative effectadjustment to accumulated deficit as of January 1, 2018 of approximately $8.1 million and a corresponding increase to the contract liability (formerlydeferred revenue). The adjustment to the Company’s financial statements due to the adoption of ASC 606 is related to the Company’s Ares TradingAgreement (Note 6), which was the Company’s sole open revenue contract outstanding at January 1, 2018.The Company primarily generates revenue through collaboration arrangements with strategic partners for the development and commercialization ofproduct candidates. Commencing January 1, 2018, the Company recognized revenue in accordance with ASC 606 which replaced ASC 605, MultipleElement Arrangements, as used in historical years. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer ofpromised goods and/or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange forthose goods and/or services. To determine the appropriate amount of revenue to be recognized for arrangements that the Company determines arewithin the scope of ASC 606, the Company performs the following steps: (i) identify the contract(s) with the customer, (ii) identify the performanceobligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and(v) recognize revenue when (or as) each performance obligation is satisfied.The Company recognizes collaboration revenue under certain of the Company’s license or collaboration agreements that are within the scope of ASC606. The Company’s contracts with customers typically include promises related to licenses to intellectual property, research and developmentservices and options to purchase additional goods and/or services. If the license to the Company’s intellectual property is determined to be distinctfrom the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated tothe license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled withother promises, the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the combinedperformance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes ofrecognizing revenue from non-refundable, up-front fees. Contracts that include an option to acquire additional goods and/or services are evaluated todetermine if such option provides a material right to the customer that it would not have received without entering into the contract. If so, the option isaccounted for as a separate performance obligation. If not, the option is considered a marketing offer which would be accounted for as a separatecontract upon the customer’s election.The terms of the Company’s arrangements with customers typically include the payment of one or more of the following: (i) non-refundable, up-frontpayment, (ii) development, regulatory and commercial milestone payments, (iii) future options and (iv) royalties on net sales of licensed products.Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and variable consideration in the form of milestonepayments due upon the achievement of specified events and tiered royalties earned when customers F-14Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) recognize net sales of licensed products. The Company measures the transaction price based on the amount of consideration to which it expects to beentitled in exchange for transferring the promised goods and/or services to the customer. The Company utilizes the most likely amount method toestimate the amount of variable consideration, to predict the amount of consideration to which it will be entitled for its one open contract. Amounts ofvariable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulativerevenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of eacharrangement that includes development and regulatory milestone payments, the Company evaluates whether the associated event is consideredprobable of achievement and estimates the amount to be included in the transaction price using the most likely amount method. Milestone paymentsthat are not within the control of the Company or the licensee, such as those dependent upon receipt of regulatory approval, are not considered to beprobable of achievement until the triggering event occurs. At the end of each reporting period, the Company reevaluates the probability ofachievement of each milestone and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustmentsare recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, the Company recognizes revenue uponthe later of: (i) when the related sales occur or (ii) when the performance obligation to which some or all of the payment has been allocated has beensatisfied (or partially satisfied). To date, the Company has not recognized any development, regulatory or commercial milestones or royalty revenueresulting from any of its collaboration arrangements. Consideration that would be received for optional goods and/or services is excluded from thetransaction price at contract inception.The Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis.However, certain components of variable consideration are allocated specifically to one or more particular performance obligations in a contact to theextent both of the following criteria are met: (i) the terms of the payment relate specifically to the efforts to satisfy the performance obligation ortransfer the distinct good or service and (ii) allocating the variable amount of consideration entirely to the performance obligation or the distinct goodor service is consistent with the allocation objective of the standard whereby the amount allocated depicts the amount of consideration to which theentity expects to be entitled in exchange for transferring the promised goods or services. The Company develops assumptions that require judgment todetermine the standalone selling price for each performance obligation identified in each contract. The key assumptions utilized in determining thestandalone selling price for each performance obligation may include forecasted revenues, development timelines, estimated research and developmentcosts, discount rates, likelihood of exercise and probabilities of technical and regulatory success.Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as theperformance obligation is satisfied by transferring a promised good and/or service to the customer. For performance obligations that are satisfied overtime, the Company recognizes revenue by measuring the progress toward complete satisfaction of the performance obligation using a single method ofmeasuring progress which depicts the performance in transferring control of the associated goods and/or services to the customer. The Company usesinput methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time. The Company evaluates themeasure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Any such adjustmentsare recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment. F-15Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) As it relates to the Ares Trading Agreement (Note 6), the Company recognized the upfront payment associated with its one open contract as a contractliability upon receipt of payment as it requires deferral of revenue recognition to a future period until the Company performs its obligations under thearrangement. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date are classified in currentliabilities. Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as contractliabilities, net of current portion. The Company determined that there were three performance obligations; the first performance obligation consists ofthe license and research development services and the other two performance obligations are material rights as it relates to potential future targets thathave not yet been identified. As described above, the transaction price of $57.5 million was allocated to the performance obligations based on theirrelative standalone selling prices.There are multiple distinct performance obligations, including material rights; thus, the Company allocates the transaction price to each distinctperformance obligation based on its relative standalone selling price. The standalone selling price is generally determined based on the prices chargedto customers or using expected cost-plus margin. Revenue is recognized by measuring the progress toward complete satisfaction of the performanceobligations using an input measure. Furthermore, the Company has not capitalized any contract costs under the guidance in ASC 340-40, Other Assetsand Deferred Costs: Contracts with Customers.The Company does not believe that any variable consideration should be included in the transaction price at the date of adoption of ASC 606 onJanuary 1, 2018. Such assessment considered the application of the constraint to ensure that estimates of variable consideration would be included inthe transaction price only to the extent the Company had a high degree of confidence that revenue would not be reversed in a subsequent reportingperiod. The Company will re-evaluate the transaction price, including the estimated variable consideration included in the transaction price and allconstrained amounts, in each reporting period and as other changes in circumstances occur.Impact of Topic 606 AdoptionAs a result of adopting ASC 606, the Company recorded an $8.1 million adjustment to the opening balance of accumulated deficit in the first quarter of2018 as a result of the treatment of the up-front consideration received in July 2015 under ASC 605-25 versus ASC 606. Refer below for a summary ofthe amount by which each financial statement line item was affected by the impact of the cumulative adjustment: ($ in thousands) Impact of Topic 606 Adoptionon the Balance Sheetas of January 1, 2018 Description As reported underTopic 606 Adjustments Balances withoutadoption ofTopic 606 Contract liability, current portion $622 $(5,767) $6,389 Contract liability, net of current portion $49,037 $13,898 $35,139 Accumulated deficit $(720,573) $(8,131) $(712,442) F-16Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) ($ in thousands) Impact of Topic 606 Adoptionon the Statement of Operationsfor the Year Ended December 31, 2018 Description AsreportedunderTopic 606 Adjustments BalanceswithoutadoptionofTopic 606 Collaboration revenue $146 $(4,732) $4,878 Net loss $(53,117) $(4,732) $(48,385) Net income (loss) applicable to common shareholders $137,246 $(4,732) $141,978 Net income (loss) per share - basic $0.96 $(0.03) $0.99 Net income (loss) per share - diluted $0.96 $(0.03) $0.99 ($ in thousands) Impact of Topic 606 Adoptionon the Statement of Cash Flowsfor the Year Ended December 31, 2018 Description AsreportedunderTopic 606 Adjustments BalanceswithoutadoptionofTopic 606 Net loss $(53,117) $(4,732) $(48,385) Changes in contract liability $— $— $— The most significant change above relates to the Company’s collaboration revenue, which to date has been exclusively generated from itscollaboration arrangement with Ares Trading and Precigen, formerly Intrexon (Note 8). Under ASC 605, the Company accounted for the up-frontpayment over the estimated period of performance of the research and development services which was estimated to be 9 years. In connection with theadoption of ASC 606, the Company uses cost-based input method to measure progress because such method best reflects the satisfaction of theperformance obligation. In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to thebudgeted costs to complete the research programs. These costs consist primarily of internal full-time equivalent effort and third-party contract costs.Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs. As a result, although the performance obligations notedabove and identified under ASC 606 were generally consistent with the units of account identified under ASC 605, the timing of the allocation of thetransaction price to the identified performance obligations under ASC 606 differed from the allocations of consideration under ASC 605. Accordingly,the transaction price ultimately allocated to each performance obligation under ASC 606 differed from the amounts allocated under ASC 605.Additionally, at December 31, 2018, the contract liability is $0 under both methods of revenue recognition (Note 7).Research and Development CostsResearch and development expenditures are charged to the statement of operations as incurred. Such costs include proprietary research anddevelopment activities, purchased research and development, and expenses associated with research and development contracts, whether performed bythe Company or contracted with independent third parties.Income TaxesIncome taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequencesof temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities aremeasured using enacted tax rates expected to F-17Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. The Company evaluates therealizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assetswill not be realized.The Company accounts for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. Theevaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken orexpected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances relatedto a tax position. The Company evaluates this tax position on an annual basis. The Company also accrues for potential interest and penalties, related tounrecognized tax benefits in income tax expense (Note 10).Accounting for Stock-Based CompensationStock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over theemployee’s requisite service period. Stock-based compensation expense is based on the number of awards ultimately expected to vest and is thereforereduced for an estimate of the awards that are expected to be forfeited prior to vesting. Consistent with prior years, the Company uses the Black-Scholesoption pricing model which requires estimates of the expected term option holders will retain their options before exercising them and the estimatedvolatility of the Company’s common stock price over the expected term.The Company recognizes the full impact of its share-based employee payment plans in the statements of operations for each of the years endedDecember 31, 2018, 2017, and 2016 and did not capitalize any such costs on the balance sheets. The Company recognized $3.0 million, $2.5 million,and $3.0 million of compensation expense related to stock options during the years ended December 31, 2018, 2017, and 2016, respectively. In theyears ended December 31, 2018, 2017, and 2016, the Company recognized $4.5 million, $6.0 million, and $5.5 million of compensation expense,respectively, related to restricted stock (Note 13). The total compensation expense relating to vesting of stock options and restricted stock awards forthe years ended December 31, 2018, 2017, and 2016 was $7.5 million, $8.5 million, and $8.5 million, respectively. The following table presents share-based compensation expense included in the Company’s Statements of Operations: Year ended December 31, (in thousands) 2018 2017 2016 Research and development $1,683 $2,401 $2,077 General and administrative 5,851 6,053 6,375 Share based employee compensation expense before tax 7,534 8,454 8,452 Income tax benefit — — — Net share based employee compensation expense $7,534 $8,454 $8,452 The fair value of each stock option is estimated at the date of grant using the Black-Scholes option pricing model. The estimated weighted-average fairvalue of stock options granted to employees in 2018, 2017, and 2016 was approximately $1.64, $3.94, and $4.43 per share, respectively. Assumptionsregarding volatility, expected term, dividend yield and risk-free interest rate are required for the Black-Scholes model. The volatility assumption isbased on the Company’s historical experience. The risk-free interest rate is based on a U.S. treasury note with a maturity similar to the option award’sexpected life. The expected life represents the average period of time that options granted are expected to be outstanding. The Company calculatedexpected term using the simplified method described in SEC Staff Accounting Bulletin, or SAB, No. 107 and No. 110 as it continues to meet the F-18Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) requirements promulgated in SAB No. 110. The assumptions for volatility, expected life, dividend yield and risk-free interest rate are presented in thetable below: 2018 2017 2016Weighted average risk-free interest rate 2.55 - 3.06% 1.85 - 2.27% 1.27 - 2.09%Expected life in years 6 6 6Expected volatility 80.75 - 84.71% 80.31 - 81.03% 79.15 - 82.95%Expected dividend yield 0 0 0Net Loss Per ShareBasic net loss per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.Diluted earnings (loss) per share is computed using the weighted-average number of common shares outstanding during the period, plus the dilutiveeffect of outstanding options and warrants, using the treasury stock method and the average market price of the Company’s common stock during theapplicable period. For the Year Ended December 31, in thousands, except share and per share data 2018 2017 2016 Basic Net loss $(53,117) $(54,323) $(165,297) Preferred stock dividends (16,998) (18,938) (7,123) Settlement of a related party relationship 207,361 — — Net income / (loss) applicable to commonshareholders $137,246 $(73,261) $(172,420) Weighted-average common shares outstanding 143,508,674 136,938,264 130,391,463 Earnings per share, basic $0.96 $(0.53) $(1.32) Diluted Net Loss $(53,117) $(54,323) $(165,297) Preferred stock dividends (16,998) (18,938) (7,123) Precigen license transaction 207,361 — — Net income / (loss) applicable to commonshareholders $137,246 $(73,261) $(172,420) Weighted-average common shares outstanding 143,508,674 136,938,264 130,391,463 Effect of dilutive securities Stock options 201,362 — — Unvested restricted common stock 124 — — Warrants — — — Dilutive potential common shares 201,486 — — Shares used in calculating diluted earnings pershare 143,710,160 136,938,264 130,391,463 Earnings per share, diluted $0.96 $(0.53) $(1.32) F-19Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) Certain shares related to some of the Company’s outstanding common stock options, unvested restricted stock, preferred stock, and warrants have notbeen included in the computation of diluted net earnings (loss) per share for the years ended December 31, 2018, 2017 and 2016 as the result would beantidilutive. Such potential common shares at December 31, 2018, 2017, and 2016 consist of the following: December 31, 2018 2017 2016 Stock options 5,075,723 4,352,135 3,465,335 Unvested restricted stock 681,946 1,808,559 1,680,492 Preferred stock — 34,134,524 20,465,067 Warrants 18,939,394 — — 24,697,063 40,295,218 25,610,894 During the year ended December 31, 2018, the Company and Precigen, a wholly owned subsidiary Intrexon entered into a License Agreement toreplace all existing agreements between the companies that will provide Ziopharm with certain exclusive and non-exclusive rights to technologycontrolled by Precigen, Inc. The License Agreement was dated October 5, 2018. In consideration of the Company entering into the License Agreement,Intrexon agreed to forfeit and return to the Company all shares of the Company’s Series 1 Preferred Stock held by or payable to Intrexon as of the dateof the License Agreement (Note 7).New Accounting PronouncementsIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by requiringthe recognition of a right-of-use assets and lease liabilities for most lease arrangements on the balance sheet. Under the standard, disclosures arerequired to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The standard permits two transitionmethods, (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at theeffective date. Under both transition methods there is a cumulative effect adjustment. The Company intends to. It also intends to elect the package ofpractical expedients permitted under the transition guidance within the new standard, which, among other things, allows us to carry forward thehistorical lease classification. Additionally, the right-of-use asset is subject to an impairment analysis under ASC 360, Property, Plant, and Equipment,at each reporting period, to evaluate asset recoverability. The Company is currently evaluating the potential changes from this ASU to its futurefinancial reporting and disclosures and designing and implementing related processes and controls. The Company expects the standard to have animpact of approximately $1.7 million on its assets and liabilities for the addition of right-of-use assets and lease liabilities, but it does not expect it tohave a material impact on the Company’s financial statements.In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, or ASU 2016-15, to address howcertain cash receipts and cash payments are presented and classified in the statement of cash flows in an effort to reduce existing diversity in practice.The update includes eight specific cash flow issues and provides guidance on the appropriate cash flow presentation for each. ASU 2016-15 is effectivefor annual reporting periods beginning after December 15, 2017, including interim reporting periods within each annual reporting period. TheCompany adopted this standard on January 1, 2018. The adoption did not have a material impact on the Company’s financial statements. F-20Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies (Continued) In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash or ASU 2016-18. The amendments in this update requirethat amounts generally described as restricted cash and restricted cash equivalents be included within cash and cash equivalents when reconciling thebeginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 was effective January 1, 2018. As a result ofadopting ASU 2016-18, the Company includes its restricted cash balance in the cash and cash equivalents reconciliation of operating, investing andfinancing activities. The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the statement of financialposition that sum to the total of the same such amounts shown in the statement of cash flows. December 31, (in thousands) 2018 2017 2016 Cash and cash equivalents $61,729 $70,946 $81,053 Restricted cash included in prepaid expenses and other current assets — 388 — Restricted cash included in other non-current assets — — 388 Total cash, cash equivalents, and restricted cash shown in the statement of cashflows $61,729 $71,334 $81,441 In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, or ASU2017-09, to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this new guidance,modification accounting is required if the fair value, vesting conditions, or classification of the award changes as a result of the change in terms orconditions. ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within eachannual reporting period. The Company adopted this standard on January 1, 2018. The adoption did not have any impact on the Company’s financialstatements.In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-BasedPayment Accounting, or ASU 2018-07. The guidance in this ASU expand the scope of Topic 718 to include sharebased payment transactions foracquiring goods and services from nonemployees. The new standard is effective for annual reporting periods beginning after December 15, 2019,including interim reporting periods within each annual reporting period. The Company is currently evaluating the impact of the adoption of this ASUon the financial statements.In August 2018, the FASB issued ASU No. 2018-03, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the DisclosureRequirements for Fair Value Measurement, or ASU 2018-03. The guidance in this ASU modify the disclosure requirements on fair value measurementsin Topic 820, Fair Value Measurement. Under the new guidance, transfers between asset classes and the valuation related to level 3 assets is modified.The new standard is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within each annualreporting period. The Company is currently evaluating the impact of the adoption of this ASU on the financial statements. F-21Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 4. Property and Equipment, netProperty and equipment, net, consists of the following: December 31, (in thousands) 2018 2017 Office and computer equipment $1,249 $1,215 Software 1,030 913 Leasehold improvements 1,839 1,553 Research and development equipment 1,182 1,161 5,300 4,842 Less: accumulated depreciation (4,203) (3,631) Property and equipment, net $1,097 $1,211 Depreciation charged to the statement of operations for the years ended December 31, 2018, 2017, and 2016 was $573 thousand, $369 thousand and$290 thousand, respectively. 5. Accrued ExpensesAccrued expenses consist of the following: December 31, (in thousands) 2018 2017 Clinical consulting services $3,003 $3,022 Employee compensation 1,786 1,919 Preclinical services 1,247 2,210 Manufacturing services 1,164 902 Professional services 745 256 Accrued vacation 363 361 Payroll taxes and benefits 349 1,017 Other consulting services 106 222 Total $8,763 $9,909 6. Related Party TransactionsCollaborations with Intrexon/ PrecigenDuring the year ended December 31, 2018, the Company and Precigen entered into an Exclusive License Agreement (Note 7).During the year ended December 31, 2018, the Company issued an aggregate of 11,415 shares of Series 1 preferred stock to Intrexon, the holder of allof the outstanding shares of the Company’s Series 1 preferred stock, as monthly dividend payments. The Company recorded such shares of Series 1preferred stock at a fair value of $18.9 million, which is a component of temporary equity and recorded a loss on the change of the derivative liabilitiesin the amount of $1.3 million. See Notes 3 and 12 for additional discussion regarding the accounting for and valuation of these derivative financialinstruments. F-22Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 6. Related Party Transactions (Continued) During the years ended December 31, 2018, 2017, and 2016, the Company expensed $8.1 million, $21.4 million, and $22.2 million, respectively, forservices performed by Intrexon. As of December 31, 2018, and 2017, the Company recorded $1.9 million and $6.8 million, respectively, in currentliabilities on its balance sheet for amounts due to Intrexon.Collaboration with Precigen and MD AndersonOn January 13, 2015, the company, together with Intrexon, entered into the MD Anderson License with MD Anderson (which Intrexon subsequentlyassigned to Precigen). Pursuant to the MD Anderson License, the company, together with Precigen, hold an exclusive, worldwide license to certaintechnologies owned and licensed by MD Anderson including technologies relating to novel CAR T-cell therapies, non-viral gene transfer systems,genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs, arising from thelaboratory of Laurence Cooper, M.D., Ph.D., who became the Company’s Chief Executive Officer in May 2015 and was formerly a tenured professor ofpediatrics at MD Anderson and is now currently a visiting scientist under that institution’s policies. In partial consideration for entering into the MDAnderson License, the Company issued MD Anderson an aggregate of 11,722,163 shares of common stock for which the Company incurred a$67.3 million charge recorded in 2015.The Company has determined that the rights acquired in the MD Anderson License represent in-process research and development with no alternativefuture use. During the year ending December 31, 2018, the Company made one quarterly payments totaling $2.7 million, bringing the total aggregatepayments to $41.9 million under this arrangement. The net balance of cash resources on hand at MD Anderson available to offset expenses and futurecosts is $27.8 million, of which $18.4 million is included in other current assets and the remaining $9.4 million is included in non-current assets atDecember 31, 2018. The classification is based on management’s current estimate of plans to utilize the prepaid balance and is subject to revision on aquarterly basis. 7. Settlement of a Related Party RelationshipExclusive License Agreement with PrecigenOn October 5, 2018, the Company entered into the license agreement with Precigen. As between the Company and Precigen, the terms of the LicenseAgreement replace the terms of: (a) the Channel Agreement, including all amendments to the Channel Agreement; (b) certain rights and obligationspursuant to the Ares Trading Agreement; (c) the MD Anderson License; and (d) that certain Research and Development Agreement between theCompany, Intrexon and MD Anderson with an effective date of August 17, 2015 (the “Research and Development Agreement”), and any amendmentsor statements of work thereto.Pursuant to the terms of the License Agreement, Precigen has granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license toresearch, develop and commercialize (i) products utilizing Precigen’s RheoSwitch® gene switch, or RTS, for the treatment of cancer, referred to as IL-12Products, (ii) CAR products directed to (A) CD19 for the treatment of cancer, referred to as CD19 Products, and (B) a second target, subject to the rightsof Ares Trading (now Intrexon) to pursue such target under the Ares Trading Agreement, and (iii) T-cell receptor, or TCR, products designed forneoantigens for the treatment of cancer. Precigen has also granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license forcertain patents relating to the Sleeping Beauty technology to research, develop and commercialize TCR products for both neoantigens and sharedantigens for the treatment of cancer, referred to as TCR Products.The Company is solely responsible for all aspects of the research, development and commercialization of the exclusively licensed products for thetreatment of cancer. The Company is required to use commercially F-23Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 7. Settlement of a Related Party Relationship (Continued) reasonable efforts to develop and commercialize IL-12 Products and CD19 Products and after a two-year period, the TCR Products. Precigen has alsogranted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license to research, develop and commercialize products utilizing anadditional construct that expresses RTS IL-12 for the treatment of cancer, referred to as Gorilla IL-12 Products.Ziopharm agreed to reimburse Precigen for certain historical costs of the licensed programs up to $1.0 million, payable quarterly. The Companydetermined that the fair value of this program was $1.0 million and this was expensed in accordance with ASC 730, Research and Development duringthe year ended December 31, 2018 and it has been included in accrued expense on the balance sheet.The agreement also calls for an annual license fee of $100 thousand as long as the agreement is effective. The Company will also make milestonepayments totaling up to an additional $52.5 million for each exclusively licensed program upon the initiation of later stage clinical trials and upon theapproval of exclusively licensed products in various jurisdictions. In addition, the Company will pay Precigen tiered royalties ranging from low-singledigit to high-single digit on the net sales derived from the sales of any approved IL-12 Products and CAR Products. The Company will also payPrecigen royalties ranging from low-single digit to mid-single digit on the net sales derived from the sales of any approved TCR Products, up to amaximum royalty amount of $100.0 million in the aggregate. The Company will also pay Precigen 20% of any sublicensing income received by theCompany relating to the licensed products.The Company is responsible for all development costs associated with each of the licensed products, other than Gorilla IL-12 Products. The Companyand Precigen will share the development costs and operating profits for Gorilla IL-12 Products, with the Company responsible for 80% of thedevelopment costs and receiving 80% of the operating profits, and Precigen responsible for the remaining 20% of the development costs and receiving20% of the operating profits.Precigen will pay the Company royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of Precigen’s CARproducts, up to $50.0 million.In consideration of the Company entering into the License Agreement, Intrexon forfeited and returned to the Company all shares of the Company’sSeries 1 preferred stock held by or payable to Intrexon as of the date of the License Agreement. In addition, Precigen is required to transfer all ofZiopharm’s rights and obligations under the Ares Trading Agreement to Intrexon (or its’ affiliate). As a result, Ziopharm shall not be responsible for anyremaining obligations under the Merck Agreement. Additionally, Intrexon forfeited and returned to the Company all shares of the Company’s Series 1preferred stock held by or payable to Intrexon as of the date of the License Agreement.The Company determined that this transaction represented a capital transaction between related parties. The Company fair valued the preferred stockand the derivative liability on the date of the transaction, noting a total fair value of $163.3 million. The relinquishment of the Ziopharm’s obligationunder the Ares Trading Agreement was also considered part of the overall capital transaction. The Company recognized an additional credit toaccumulated deficit of $49.5 million as a result of the relief of the obligation under the Ares Trading Agreement (Note 8). The total amount of thesettlement was $212.8 million.The Company incurred approximately $7.4 million of transaction advisory costs with third-party vendors, of which $5.4 million was considered adirect cost associated with the Series 1 preferred stock extinguishment and is also included as part of the consideration transferred. The remaining$2.0 million of transaction costs were recognized as an expense during the year ended December 31, 2018. F-24Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 7. Settlement of a Related Party Relationship (Continued) The Company recognized a net credit to accumulated deficit of $207.3 million, calculated as the difference in the carrying value of the Series 1preferred stock, derivative liability, and contract liability, and the consideration transferred of $5.4 million, in connection with the transaction. Thisamount is included in net income available to common shareholders in the calculation of earnings per share (Note 3). 8. Commitments and ContingenciesOperating LeasesPrior to December 31, 2012, the Company entered into an operating lease in New York, NY for office space. In accordance with this agreement, theCompany entered into a letter of credit in the amount of $388 thousand, naming the Company’s landlord as beneficiary. In January 2012, the Companyamended the lease agreement, adding additional office space. The collateral for the letter of credit was recorded in other current assets on the balancesheet as of December 31, 2017. The lease for office space in New York, NY expired in October 2018.On October 17, 2013, the Company entered into a sublease agreement to lease all of its New York office space to a subtenant. The Company recorded aloss on the sublease in the amount of $729 thousand for the year ended December 31, 2013, representing the remaining contractual obligation of$2.3 million, less $1.6 million in payments from its subtenant. The sublease agreement for the New York office space expired in October 2018 inconjunction with the Company’s lease expiring for the New York office space.In June 2012, the Company entered into a master lease for the Company’s Boston office, which was originally set to expire in August 2016. OnDecember 21, 2015 and April 15, 2016, the Company renewed the sublease for the Company’s corporate headquarters in Boston, MA throughAugust 31, 2021. As of December 31, 2018 and 2017, a total security deposit of $128 thousand is included in deposits on the balance sheet.On January 30, 2018, the Company entered into a lease agreement for office space in Houston, TX at MD Anderson. Under the terms of the Houstonlease agreement, the Company leases approximately two hundred and ten square feet and are required to make rental payments at an average monthlyrate of approximately $1 thousand through April 2021. All future rent expense incurred in Houston, will be deducted from the Company’s prepaymentsat MD Anderson described in the license agreement section below.Future net minimum lease payments under operating leases as of December 31, 2018 are as follows (in thousands): 2019 723 2020 736 2021 488 Future minimum lease payments, net $1,947 Total rent expense was approximately $0.7 million, $0.7 million, and $0.3 million for the years ended December 31, 2018, 2017, and 2016,respectively.The Company records rent expense on a straight-line basis over the term of the lease. Accordingly, the Company has recorded a liability for deferredrent at December 31, 2018 and 2017 of $17 thousand ($13 thousand current and $4 thousand long-term) and $142 thousand ($141 thousand currentand $1 thousand long-term) respectively, which is recorded in deferred rent on the balance sheet. F-25Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 8. Commitments and Contingencies (Continued) License AgreementsExclusive License Agreement with Precigen, Inc.On October 5, 2018, the Company entered into an exclusive license agreement, or the License Agreement, with Precigen, Inc., or Precigen, a whollyowned subsidiary of Intrexon Corporation, or Intrexon. As between the Company and Precigen, the terms of the License Agreement replace andsupersede the terms of: (a) that certain Exclusive Channel Partner Agreement by and between the Company and Intrexon, dated January 6, 2011, asamended by the First Amendment to Exclusive Channel Partner Agreement effective September 13, 2011, the Second Amendment to the ExclusiveChannel Partner Agreement effective March 27, 2015, and the Third Amendment to Exclusive Channel Partner Agreement effective June 29, 2016,which was subsequently assigned by Intrexon to Precigen; (b) certain rights and obligations pursuant to that certain License and CollaborationAgreement effective March 27, 2015 between ZIOPHARM, Intrexon and ARES TRADING Trading S.A., or Ares Trading, a subsidiary of Merck KGaA,or Merck, as assigned by Intrexon to Precigen, or the Ares Trading Agreement; (c) that certain License Agreement between the Company, Intrexon, andMD Anderson, with an effective date of January 13, 2015, or the MD Anderson License, which was subsequently assigned by Intrexon and assumed byPrecigen effective as of January 1, 2018; and (d) that certain Research and Development Agreement between the Company, Intrexon and MD Andersonwith an effective date of August 17, 2015, or the Research and Development Agreement, and any amendments or statements of work thereto.Pursuant to the terms of the License Agreement, Precigen has granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license toresearch, develop and commercialize (i) products utilizing Precigen’s RheoSwitch® gene switch, or RTS, for the treatment of cancer, referred to as IL-12Products, (ii) CAR products directed to (A) CD19 for the treatment of cancer, referred to as CD19 Products, and (B) a second target, subject to the rightsof Merck to pursue such target under the Ares Trading Agreement, and (iii) TCR products designed for neoantigens for the treatment of cancer.Precigen has also granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license for certain patents relating to the SleepingBeauty technology to research, develop and commercialize TCR products for both neoantigens and shared antigens for the treatment of cancer, referredto as TCR Products.The Company will be solely responsible for all aspects of the research, development and commercialization of the exclusively licensed products for thetreatment of cancer. The Company are required to use commercially reasonable efforts to develop and commercialize IL-12 products and CD19products and after a two-year period, the TCR Products.Precigen has also granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license to research, develop and commercializeproducts utilizing an additional construct that expresses RTS IL-12 for the treatment of cancer, referred to as Gorilla IL-12 Products.In consideration of the licenses and other rights granted by Precigen, the Company will pay Precigen an annual license fee of $100 thousand and hasagreed to reimburse Precigen for certain historical costs of the licensed programs up to $1.0 million, payable quarterly.The Company will make milestone payments totaling up to an additional $52.5 million for each exclusively licensed program upon the initiation oflater stage clinical trials and upon the approval of exclusively licensed products in various jurisdictions. In addition, the Company will pay Precigentiered royalties ranging from low-single digit to high-single digit on the net sales derived from the sales of any approved IL-12 products and CARproducts. The Company will also pay Precigen royalties ranging from low-single digit to mid-single digit F-26Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 8. Commitments and Contingencies (Continued) on the net sales derived from the sales of any approved TCR products, up to a maximum royalty amount of $100.0 million in the aggregate. TheCompany will also pay Precigen 20% of any sublicensing income received by the Company relating to the licensed products.The Company is responsible for all development costs associated with each of the licensed products, other than Gorilla IL-12 products. ZIOPHARMand Precigen will share the development costs and operating profits for Gorilla IL-12 products, and ZIOPHARM is responsible for 80% of thedevelopment costs and receiving 80% of the operating profits, and Precigen responsible for the remaining 20% of the development costs and receiving20% of the operating profits.Precigen will pay the Company royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of Precigen’s CARproducts, up to $50.0 million.In consideration of entering into the License Agreement, Intrexon has forfeited and returned to the Company all shares of Series 1 preferred stock heldby or payable to Intrexon as of the date of the License Agreement (Note 7).License Agreement—The University of Texas MD Anderson Cancer CenterOn January 13, 2015, ZIOPHARM, together with Intrexon, entered into the MD Anderson License with MD Anderson (which Intrexon subsequentlyassigned to Precigen). Pursuant to the MD Anderson License, the Company, together with Precigen, holds an exclusive, worldwide license to certaintechnologies owned and licensed by MD Anderson including technologies relating to novel CAR T-cell therapies, non-viral gene transfer systems,genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs, arising from thelaboratory of Laurence Cooper, M.D., Ph.D., who became the Company’s Chief Executive Officer in May 2015 and was formerly a tenured professor ofpediatrics at MD Anderson and is now currently a visiting scientist under that institution’s policies.On August 17, 2015, ZIOPHARM, Precigen and MD Anderson entered into the Research and Development Agreement, to formalize the scope andprocess for the transfer by MD Anderson, pursuant to the terms of the MD Anderson License, of certain existing research programs and relatedtechnology rights, as well as the terms and conditions for future collaborative research and development of new and ongoing research programs.Pursuant to the Research and Development Agreement, ZIOPHARM, Precigen and MD Anderson have agreed to form a joint steering committee thatwill oversee and manage the new and ongoing research programs. Under the License Agreement with Precigen, ZIOPHARM and Precigen agreed thatPrecigen would no longer participate on the joint steering committee after the date of the License Agreement. As provided under the MD AndersonLicense, the Company provided funding for research and development activities in support of the research programs under the Research andDevelopment Agreement for a period of three years and in an amount of no less than $15.0 million and no greater than $20.0 million per year. OnNovember 14, 2017, the Company entered into an amendment to the Research and Development Agreement extending its term until April 15, 2021.During the year ended December 31, 2018, the Company made payments in the aggregate amount of $2.7 million to MD Anderson compared to$13.0 million during the year ended December 31, 2017. The decrease in cash paid to MD Anderson during the year ended December 31, 2018 ascompared to the same period in the prior year is a result of the final quarterly payment being made to MD Anderson in January 2018 and the result ofapproved expenditures incurred by us being deducted from the January 2018 quarterly payment. F-27Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 8. Commitments and Contingencies (Continued) The net balance of cash resources on hand at MD Anderson available to offset expenses and future costs is $27.8 million, of which $18.4 million isincluded in other current assets and the remaining $9.4 million is included in non-current assets at December 31, 2018.The term of the MD Anderson License expires on the last to occur of (a) the expiration of all patents licensed thereunder, or (b) the twentiethanniversary of the date of the MD Anderson License; provided, however, that following the expiration of the term of the MD Anderson License, theCompany, together with Precigen, shall then have a fully-paid up, royalty free, perpetual, irrevocable and sublicensable license to use the licensedintellectual property thereunder. After ten years from the date of the MD Anderson License and subject to a 90-day cure period, MD Anderson will havethe right to convert the MD Anderson License into a non-exclusive license if ZIOPHARM and Precigen are not using commercially reasonable effortsto commercialize the licensed intellectual property on a case-by-case basis. After five years from the date of the MD Anderson License and subject to a180-day cure period, MD Anderson will have the right to terminate the MD Anderson License with respect to specific technology(ies) funded by thegovernment or subject to a third-party contract if the Company and Precigen are not meeting the diligence requirements in such funding agreement orcontract, as applicable. MD Anderson may also terminate the agreement with written notice upon material breach by us and Precigen, if such breach hasnot been cured within 60 days of receiving such notice. In addition, the MD Anderson License will terminate upon the occurrence of certaininsolvency events for both us and Precigen and may be terminated by the mutual written agreement of us, Precigen, and MD Anderson.Cooperative Research and Development Agreement (CRADA) with the National Cancer InstituteOn January 10, 2017, the Company announced the signing of the CRADA with the NCI for the development of adoptive cell transfer, or ACT,-basedimmunotherapies genetically modified using the Sleeping Beauty transposon/transposase system to express TCRs for the treatment of solid tumors.The principal goal of the CRADA is to develop and evaluate ACT for patients with advanced cancers using autologous peripheral blood lymphocytes,or PBL, genetically modified using the non-viral Sleeping Beauty system to express TCRs that recognize neoantigens expressed within a patient’scancer. Research conducted under the CRADA will be at the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI, incollaboration with the Company’s researchers and Precigen researchers. The remaining obligation, as of December 31, 2018, for the CRADA is$2.5 million over the next year, payable in $625 thousand payments on a quarterly basis. During the twelve months ended December 31, 2018 and2017, the Company made payments of $2.5 million, each year. In February 2019, the Company extended the CRADA with the NCI for two years,committing an additional $5.0 million to this program (Note 3).Exclusive Channel Partner Agreement with Precigen for the Cancer ProgramsFrom 2011 to 2018, the Company was party to various arrangements with Intrexon (now Precigen) in which the Company used Precigen’s technologyto research and develop cancer treatments in return for various future profit sharing and royalty arrangements. These agreements were modified orterminated by the License Agreement described in Note 7.Exclusive Channel Collaboration Agreement with Precigen for GvHDOn September 28, 2015, the Company entered into the GvHD Agreement with Intrexon (now Precigen), under which the Company would usePrecigen’s technology directed towards in vivo expression of effectors to F-28Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 8. Commitments and Contingencies (Continued) research, develop and commercialize products for use in the treatment or prevention of GvHD. The GvHD Agreement granted the Company aworldwide license to use specified patents and other intellectual property of Precigen in connection with the research, development, use, importing,manufacture, sale, and offer for sale of products developed under the GvHD Agreement.In November 2017, the Company determined that the pursuit of GvHD as an indication was not a material part of its corporate strategy and thereforestopped pursuing the development of engineered cell therapy strategies, used either separately or in combination, for targeted treatment of GvHD. Atsuch time, the Company reverted the rights under the GvHD program back to Precigen.Ares Trading License and Collaboration AgreementOn March 27, 2015, the Company, together with Intrexon (now Precigen), signed the Ares Trading Agreement, with Ares Trading S.A., a subsidiary ofthe biopharmaceutical business of Merck KGaA, Darmstadt, Germany, through which the parties established a collaboration for the research anddevelopment and commercialization of certain products for the prophylactic, therapeutic, palliative or diagnostic use for cancer in humans.Precigen was entitled to receive $5.0 million, from Ares Trading, payable in equal quarterly installments over two years for each identified productcandidate, which will be used to fund discovery work. The Company was responsible for costs exceeding the quarterly installments and all other costsof the preclinical research and development. For the year ended December 31, 2018, the Company expensed $0.1 million under the Ares TradingAgreement. For the year ended December 31, 2017, the Company has expensed $1.6 million under the Ares Trading Agreement, respectively. TheCompany did not incur any costs under the agreement for the year ended December 31, 2016.Ares Trading paid a non-refundable upfront fee of $115.0 million to Intrexon as consideration for entry into the Ares Trading Agreement. Pursuant tothe ECP Amendment, the Company was entitled to receive 50% of the upfront fee, or $57.5 million, which was received from Intrexon in July 2015.Under the License Agreement, Precigen agreed to perform all future obligations of the Company under the Ares Trading Agreement other than certainpayment obligations. Accordingly, the Company recognized the remaining deferred revenue as part of the settlement of related party relationships asdescribed in Note 7.Patent and Technology License Agreement—The University of Texas MD Anderson Cancer Center and the Texas A&M University SystemOn August 24, 2004, the Company entered into a patent and technology license agreement with MD Anderson and the Texas A&M University System,which the Company refers to, collectively, as the Licensors. Under this agreement, were granted an exclusive, worldwide license to rights (includingrights to U.S. and foreign patent and patent applications and related improvements and know-how) for the manufacture and commercialization of twoclasses of organic arsenicals (water- and lipid-based) for human and animal use. The class of water-based organic arsenicals includes darinaparsin.The Company issued options to purchase 50,222 shares outside of its stock option plans following the successful completion of certain clinicalmilestones, of which 37,666 shares have vested. The remaining 12,556 shares vested upon enrollment of the first patient in a multi-center pivotalclinical trial i.e. a human clinical trial intended to provide the substantial evidence of efficacy necessary to support the filing of an approvable F-29Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 8. Commitments and Contingencies (Continued) New Drug Application, or NDA. An expense of $87 thousand was charged to research and development expense for the vesting event which occurredin March 2016. This trial was initiated by Solasia Pharma K.K., or Solasia, on March 28, 2016 and triggered a $1.0 million milestone payment to theCompany from Solasia which was received in May 2016. An equivalent of $1.0 million milestone payment was subsequently made to MD Andersonand reported net. In addition, the Licensors are entitled to receive certain milestone payments. In addition, the Company may be required to makeadditional payments to the Licensors (as defined in the MD Anderson License) upon achievement of certain other milestones in varying amountswhich, on a cumulative basis could total up to an additional $4.5 million. In addition, the Licensors are entitled to receive single digit percentageroyalty payments on sales from a licensed product and will also be entitled to receive a portion of any fees that the Company may receive from apossible sublicense under certain circumstances.Collaboration Agreement with Solasia Pharma K.K.On March 7, 2011, the Company entered into a License and Collaboration Agreement with Solasia. Pursuant to the License and CollaborationAgreement, the Company granted Solasia an exclusive license to develop and commercialize darinaparsin in both intravenous and oral forms andrelated organic arsenic molecules, in all indications for human use in a pan-Asian/Pacific territory comprising Japan, China, Hong Kong, Macau,Republic of Korea, Taiwan, Singapore, Australia, New Zealand, Malaysia, Indonesia, Philippines and Thailand.As consideration for the license, the Company received an upfront payment of $5.0 million to be used exclusively for further clinical development ofdarinaparsin outside of the pan-Asian/Pacific territory and will be entitled to receive additional payments of up to $32.5 million in development-basedmilestones and up to $53.5 million in sales-based milestones. The Company will also be entitled to receive double digit royalty payments from Solasiabased upon net sales of licensed products in the applicable territories, once commercialized, and a percentage of sublicense revenues generated bySolasia. The $5.0 million upfront payment received in March 2011 was amortized over the period of the research and development effort, which wascompleted in March 2016.On July 31, 2014, the Company entered into an amendment and restatement of the License and Collaboration Agreement granting Solasia an exclusiveworldwide license to develop and commercialize darinaparsin, and related organoarsenic molecules, in both intravenous and oral forms in allindications for human use. In exchange, the Company will be eligible to receive from Solasia development- and sales-based milestones, a royalty onnet sales of darinaparsin, once commercialized, and a percentage of any sublicense revenues generated by Solasia.Solasia will be responsible for all costs related to the development, manufacturing and commercialization of darinaparsin. The Company’s Licensors,as defined in the agreement, will receive a portion of all milestone and royalty payments made by Solasia to the Company in accordance with the termsof the license agreement with the Licensors.On March 28, 2016, Solasia initiated a multi-center pivotal clinical trial intended to provide substantial evidence of efficacy necessary to support thefiling of an application for an NDA for darinaparsin in certain of the territories assigned to Solasia. The initiation of the trial on March 28, 2016triggered a $1.0 million milestone payment from Solasia to the Company which was received in May 2016. The Company subsequently made anequivalent payment to MD Anderson as the ultimate licensor of darinaparsin (see above). F-30Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 8. Commitments and Contingencies (Continued) License Agreement with Baxter Healthcare S.A.On November 3, 2006, the Company entered into a definitive Asset Purchase Agreement for indibulin and a License Agreement to proprietarynanosuspension technology with affiliates of Baxter Healthcare S.A. The purchase included the entire indibulin intellectual property portfolio as wellas existing drug substance and capsule inventories. The terms of the Asset Purchase Agreement included an upfront cash payment and an additionalpayment for existing inventory. During the year ended December 31, 2017, the Company made the final payment of $250 thousand under the assetagreement. The Company is not actively pursuing the development of indibulin. 9. WarrantsThe Company assesses whether an equity classified financial instrument is indexed to an entity’s own stock for purposes of determining whether afinancial instrument should be treated as a derivative.In connection with the November 2018 financing (Note 2), the Company issued warrants to purchase an aggregate of 18,939,394 shares of commonstock which are exercisable six months after the closing. The warrants have an exercise price of $3.01 per share and have a five-year term. The relativefair value of the warrants was estimated at $18.4 million using a Black-Scholes model with the following assumptions: expected volatility of 71%, riskfree interest rate of 2.99%, expected life of five years and no dividends.The Company assessed whether the warrants require accounting as derivatives. The Company determined that the warrants were (1) indexed to theCompany’s own stock and (2) classified in stockholders’ equity in accordance with Financial Accounting Standards Board (FASB”) AccountingStandards Codification (“ASC”) Topic 815, Derivatives and Hedging. As such, the Company has concluded the warrants meet the scope exception fordetermining whether the instruments require accounting as derivatives and should be classified in stockholders’ equity. 10. Income TaxesThere is no provision for income taxes because the Company has incurred operating losses since inception. The reported amount of income taxexpense for the years differs from the amount that would result from applying domestic federal statutory tax rates to pretax losses primarily because ofthe changes in the valuation allowance. Significant components of the Company’s deferred tax assets at December 31, 2018 and 2017 are as follows: December 31, (in thousands) 2018 2017 Net operating loss carryforwards $106,430 $89,098 Start-up and organizational costs 33,977 37,488 Research and development credit carryforwards 33,684 32,395 Stock compensation 990 1,330 Capitalized acquisition costs 5,160 5,822 Deferred revenue — 11,126 Depreciation 132 136 Other 920 993 181,293 178,388 Less valuation allowance (181,293) (178,388) Effective tax rate $— $— F-31Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 10. Income Taxes (Continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. At December 31, 2018, the Company has aggregate net operating loss carryforwards for federaltax purposes of approximately $403.0 million and $344.0 million for Federal and state purposes, respectively, available to offset future federal andstate taxable income to the extent permitted under the Internal Revenue Code, or IRC, expiring in varying amounts through 2038. Additionally, theCompany has approximately $34.0 million of research and development credits at December 31, 2018, expiring in varying amounts through 2038,which may be available to reduce future taxes.In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” (ASU 2016-09), which is intendedto simplify several aspects of accounting for share-based payment transactions, including the income tax effects, statutory withholding requirements,forfeitures, and classification on the statement of cash flows. ASU 2016-09 is effective for annual reporting periods after December 15, 2016, includinginterim reporting periods within each annual reporting period. The Company adopted this standard on January 1, 2017. The update revisesrequirements in the following areas: minimum statutory withholding, accounting for income taxes, and forfeitures. Prior to adoption, the Companyrecognized share-based compensation, net of estimated forfeitures, over the vesting period of the grant. Upon adoption of ASU 2016-09, the Companyelected to change its accounting policy to recognize forfeitures as they occur. The new forfeiture policy election was adopted using a modifiedretrospective approach with a cumulative effect adjustment of $122 thousand recorded to retained earnings as of January 1, 2017. The update requiresthe Company to recognize the income tax effect of awards in the income statement when the awards vest or are settled without triggering a liability.The income tax related items had no effect on the current period presentation and the Company maintains a full valuation allowance against itsdeferred tax assets. As a result, an accumulated excess tax benefit of 10.2 million was recognized as a deferred tax asset with a full valuation allowanceagainst it. Additionally, the Company continued to estimate the number of awards expected to be vested. The adoption had no material impact on theCompany’s financial statements for the 2017 tax year or the interim periods within.In May 2014, the FASB issued an accounting standard update which provides for new revenue recognition guidance, superseding nearly all priorrevenue recognition guidance. The new revenue standard outlines a single comprehensive model for accounting for revenue from contracts withcustomers and requires more detailed revenue disclosures.The Company adopted the new revenue standard on January 1, 2018 and as a result of the adoption increased deferred revenue by $8.1 million anddecreased retained earnings by the same amount. Previously the Company had recorded revenue of $15.9 million and had deferred revenue of$41.5 million at December 31, 2017. The increase in the deferred revenue represented the recapture of revenue that was previously recorded and taxed.There was no impact to tax as the increase to the deferred tax asset was fully offset by the Company’s full valuation allowance.Under the IRC Section 382, certain substantial changes in the Company’s ownership may limit the amount of net operating loss carryforwards that canbe utilized in any one year to offset future taxable income.Section 382 of the IRC provides limits to which a corporation that has undergone a change in ownership (as defined) can utilize any net operating loss,or NOL, and general business tax credit carryforwards it may have. The Company commissioned an analysis to determine whether Section 382 couldlimit the use of its carryforwards in this manner. After completing the analysis, it was determined an ownership change had occurred in February 2007.As a result of this change, the Company’s NOL’s and general business tax credits F-32Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 10. Income Taxes (Continued) from February 23, 2007 and prior would be completely limited under IRC Section 382. The deferred tax assets related to NOL’s and general businesscredits have been reduced by $11.2 million and $636 thousand, respectively, as a result of the change. The Company updated the IRC Section 382analysis through December 31, 2018. There was no change in ownership at this time.The Company has provided a valuation allowance for the full amount of these net deferred tax assets, since it is more likely than not that these futurebenefits will not be realized. However, these deferred tax assets may be available to offset future income tax liabilities and expenses. The valuationallowance decreased by $2.9 million in 2018 primarily due to net operating loss carryforwards and the increase in research and development credits.Income taxes using the federal statutory income tax rate differ from the Company’s effective tax rate primarily due to non-deductible expenses relatedto the Company’s issuance of preferred stock along with the change in the valuation allowance on deferred tax assets.A reconciliation of income tax expense (benefit) at the statutory federal income tax rate and income taxes as reflected in the financial statements is asfollows: Year Ended December 31, (in thousands) 2018 2017 2016 Federal income tax at statutory rates 21% 34% 34% State income tax, net of federal tax benefit 4% 4% 1% Research and development credits 2% 3% 3% Stock compensation -1% -1% -1% Channel rights 0% 0% -25% Research and development true-up 0% -7% 0% Officers compensation -1% -2% 0% Other -2% -3% 0% Federal rate change 3% -124% 0% Change in valuation allowance -26% 96% -12% Effective tax rate 0% 0% 0% The Company adopted ASC740, “Accounting for Uncertain Tax Positions” on January 1, 2007. ASC 740 clarifies the accounting for uncertainty inincome taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” ASC 740prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. The Company did not establish anyadditional reserves for uncertain tax liabilities upon adoption of ASC 740. There were no adjustments to its uncertain tax positions in the years endedDecember 31, 2018, 2017, and 2016.The Company has not recognized any interest and penalties in the statement of operations because of the Company’s net operating losses and taxcredits that are available to be carried forward. When necessary, the Company will account for interest and penalties related to uncertain tax positionsas part of its provision for federal and state income taxes. The Company does not expect the amounts of unrecognized benefits will changesignificantly within the next twelve months.The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and state jurisdictions for the years endedDecember 31, 1999 through 2018. F-33Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 10. Income Taxes (Continued) The Tax Cuts and Jobs Act, or the “Tax Act,” was enacted in December 2017. The act significantly changes US tax law by, among other things,lowering US corporate income tax rates, implementing a territorial tax system, and imposing a one-time transition tax on deemed repatriated earningsof foreign subsidiaries. The Tax Act reduces the US corporate income tax rate from 35% to 21%, effective January 1, 2018. Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected toreverse. As a result of the reduction in the US corporate tax rate from 35% to 21% under the Tax Act, the Company revalued its ending net deferred taxassets at December 31, 2017. There was no impact as a result of the revaluation of the deferred tax assets as the calculated provisional tax benefit ofapproximately $67.0 million was offset by the Company’s subsequent change in valuation allowance. There was no impact to the Company withregards to the implementation of the territorial tax system as the Company has no foreign subsidiaries. 11. Preferred Stock and Stockholders’ Equity (Deficit)On April 26, 2006, the date of the Company’s annual stockholders meeting that year, the shareholders approved the adoption of an Amended andRestated Certificate of Incorporation pursuant to which the Company has 280,000,000 shares of authorized capital stock, of which 250,000,000 sharesare designated as common stock (par value $0.001 per share), and 30,000,000 shares are designated as preferred stock (par value $0.001 per share).Common StockOn November 11, 2018, the Company entered into a securities purchase agreement with certain institutional and accredited investors, pursuant towhich the Company agreed to issue and sell to the Investors an aggregate of 18,939,394 immediately separable units, with each unit being composedof (i) one share of the Company’s common stock, par value $0.001 per share, and (ii) a warrant to purchase one share of common stock, at a price perunit of $2.64, for net proceeds of approximately $47.1 million.On May 11, 2017, the Company sold in an underwritten offering an aggregate of 9,708,738 shares of its common stock. The price to the investor in theoffering was $5.15 per share, and the underwriters agreed to purchase the shares from the Company pursuant to the Company’s registration statementon Form S-3ASR (File No. 333-201826) previously filed with the SEC, and a prospectus supplement thereunder. The net proceeds from the offeringwere approximately $47.3 million after deducting underwriting commissions and estimated offering expenses payable by the Company.Preferred StockThe Company’s Board of Directors are authorized to designate any series of Preferred Stock, to fix and determine the variations in relative rights,preferences, privileges and restrictions as between and among such series.On June 29, 2016, the Company entered into the 2016 ECP Amendment and 2016 GvHD Amendment with Intrexon (now Precigen) (Note 8). Inconsideration for the execution and delivery of the 2016 ECP Amendment and the 2016 GvHD Amendment, the Company issued to Intrexon 100,000shares of its newly designated Series 1 preferred stock. Each share of the Company’s Series 1 preferred stock had a stated value of $1,200, subject toappropriate adjustment in the event of any stock dividend, stock split, combination or other recapitalization. The Series 1 preferred stock had certainrights, preferences, privileges and obligations, including dividend rights, conversion rights, consent rights with respect to certain Company actions,and rights to F-34Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 11. Preferred Stock and Stockholders’ Equity (Deficit) (Continued) preferential payments in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or a change of control orsale, lease, transfer or exclusive license of all or substantially all of the Company’s assets prior to the conversion of the Series 1 preferred stock.During the year ended December 31, 2018, the Company and Precigen entered into the License Agreement to replace all existing agreements betweenthe companies that will provide Ziopharm with certain exclusive and non-exclusive rights to technology controlled by Precigen. The LicenseAgreement was dated October 5, 2018. In consideration of the Company entering into the License Agreement, Intrexon forfeited and returned to theCompany all shares of the Company’s Series 1 preferred stock held by or payable to Intrexon as of the date of the License Agreement. (Notes 6 and 7) 12. Derivative Financial InstrumentsThe Company determined that certain embedded features related to the Series 1 preferred stock were derivative financial instruments. The companyvalues the embedded derivative financial instruments related to the Series 1 preferred stock as Level 3 financial liabilities (Note 3).On October 5, 2018, the Company entered into the License Agreement with Precigen. In partial consideration for the termination of the formeragreements, the companies agreed that Intrexon would forfeit all outstanding shares of the Series 1 preferred stock held by Intrexon, including anyaccrued dividends.The change in the derivative liability for the years ended December 31, 2018, 2017 and 2016 consists of the following: Fair Value Balance, June 30, 2016 $694 Dividends 44 Change in fair value 124 Balance, December 31, 2016 $862 Dividends 267 Change in fair value 1,295 Balance, December 31, 2017 $2,424 Dividends 223 Change in fair value (158) Settlement of a related party relationship (2,489) Balance, December 31, 2018 $— The fair value of the Series 1 preferred stock dividends was estimated using a probability-weighted approach and a Monte Carlo simulation model. Thefair value of the embedded derivatives was estimated using the “with” and “without” method where the preferred stock was first valued with all of itsfeatures (“with” scenario) and then without derivatives subject to the valuation analysis (“without” scenario). The fair value of the derivatives was thenestimated as the difference between the fair value of the preferred stock in the “with” scenario and the preferred stock in the “without” scenario. Themodel also takes into account, management estimates of clinical success/failure based upon market studies and probability of potential conversion andliquidation events. If these F-35Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 12. Derivative Financial Instruments (Continued) estimates were different, the valuations would change, and that change could be material. Inputs to the models included the following: December 31, 2018 2017Risk-free interest rate 2.50 - 3.13% 1.92 - 2.12%Expected dividend rate 0 0Expected volatility 77.6 - 82.4% 68.7 - 80.4%Preferred stock conversion limit—percentage of outstanding common stock 19.90% 19.90%Preferred conversion floor price $ 1.00 $ 1.00See Note 3 for additional discussion regarding the accounting for and valuation of these derivative financial instruments. 13. Stock Option PlanThe Company adopted the 2012 Equity Incentive Plan, or the “2012 Plan,” in May 2012. Including subsequent increases, the Company has reserved14.0 million shares for issuance. At December 31, 2018, there are 5,284,988 shares reserved for issuance and 3,895,923 available for future grant.As of December 31, 2018, the Company had outstanding options to its employees to purchase up to 4,146,135 shares of the Company’s common stock,to its directors to purchase up to 1,120,950 shares of the Company’s common stock, as well as options to consultants in connection with servicesrendered to purchase up to 10,000 shares of the Company’s common stock.Stock options to employees generally vest ratably in annual installments over three years, commencing on the first anniversary of the grant date andhave contractual terms of ten years. Stock options to directors generally vest ratably over one or three years and have contractual terms of tenyears. Stock options are valued using the Black-Scholes option pricing model and compensation is recognized based on such fair value over the periodof vesting on a straight-line basis. The Company has also reserved an aggregate of 526,364 additional shares for issuance under options grantedoutside of the 2003 and 2012 Plans.Proceeds from the option exercises during the years ended December 31, 2018, 2017, and 2016 amounted to $0.2 million, $0.1 million and$0.7 million respectively. The intrinsic value of these options amounted to $0.1 million, $0.2 million and $0.8 million for years ended December 31,2018, 2017 and 2016, respectively. F-36Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 13. Stock Option Plan (Continued) Transactions under the 2012 Plan for the years ending December 31, 2018, 2017, and 2016 were as follows: (in thousands, except share and per share data) Number ofShares Weighted-Average ExercisePrice Weighted-AverageContractualTerm (Years) AggregateIntrinsic Value Outstanding, December 31, 2015 3,481,468 $4.96 Granted 362,800 6.40 Exercised (234,833) 4.57 Cancelled (144,100) 6.43 Outstanding, December 31, 2016 3,465,335 5.07 Granted 688,800 5.27 Exercised (180,000) 3.67 Cancelled (122,000) 6.64 Outstanding, December 31, 2017 3,852,135 5.12 Granted 1,744,950 2.35 Exercised (104,167) 2.30 Cancelled (215,833) 5.72 Outstanding, December 31, 2018 5,277,085 $4.24 6.86 $88 Options exercisable, December 31, 2018 3,099,935 $5.15 4.93 $88 Options exercisable, December 31, 2017 2,925,502 $5.12 5.58 $1,152 Options available for future grant at December 31, 2018 3,895,923 In September 2017, the Company granted an option for 500,000 shares of its common stock, with an exercise price of $6.16 per share, which vestsratably in annual installments over three years, commencing on the first anniversary of the grant date and has a contractual term of ten years. Thisoption was granted outside of the 2012 plan and therefore, is not included in the table above. The grant date fair value was $2.2 million. As ofDecember 31, 2018, all 500,000 options are outstanding.At December 31, 2018, total unrecognized compensation costs related to non-vested stock options outstanding amounted to $5.1 million. The cost isexpected to be recognized over a weighted-average period of 1.53 years.Restricted StockIn December 2018, the Company issued 30,000 shares of restricted stock to its employees, which vest ratably in annual installments over three years,commencing on the first anniversary of the grant date. In December 2017, the Company issued 838,000 shares of restricted stock to its employees,which vest ratably in annual installments over three years, commencing on the first anniversary of the grant date. In December 2016, the Companyissued 625,750 shares of restricted stock to its employees, which vest ratably in annual installments over three years, commencing on the firstanniversary of the grant date. In December 2018, the Company issued 120,321 shares of restricted stock to its non-employee directors, which vest intheir entirety on the one-year anniversary of the grant date. In December 2017, the Company issued 69,032 shares of restricted stock to itsnon-employee directors, which vest in their entirety on the one-year anniversary of the grant date. In December 2016, the Company issued 86,020shares of restricted stock to its non-employee directors, which vest in their entirety on the one-year anniversary of the grant date. F-37Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 13. Stock Option Plan (Continued) In the year ended December 31, 2018, the Company repurchased 514,349 shares at average prices ranging from $1.70 to 4.41 to cover payroll taxes. Inthe year ended December 31, 2017, the Company repurchased 394,269 shares at average prices ranging from $4.14 to $7.12 to cover payroll taxes. Inthe year ended December 31, 2016, the Company repurchased 133,656 shares at average prices ranging from $5.35 to $7.74 to cover payroll taxes. Asummary of the status of non-vested restricted stock as of December 31, 2018, 2017 and 2016 is as follows: Number ofShares Weighted-AverageGrant Date Fair Value Non-vested, December 31, 2015 1,586,388 $9.00 Granted 711,770 5.35 Vested (617,666) 8.90 Cancelled — — Non-vested, December 31, 2016 1,680,492 7.49 Granted 907,032 4.14 Vested (778,965) 7.66 Cancelled — — Non-vested, December 31, 2017 1,808,559 5.74 Granted 150,321 1.87 Vested (1,005,377) 6.62 Cancelled (271,433) 5.00 Non-vested, December 31, 2018 682,070 $3.47 As of December 31, 2018, there was $2.6 million of total unrecognized stock-based compensation expense related to non-vested restricted stockarrangements. The expense is expected to be recognized over a weighted-average period of 1.33 years. 14. Employee Benefit PlanThe Company sponsors a qualified 401(k) retirement plan under which employees are allowed to contribute certain percentages of their pay, up to themaximum allowed under Section 401(k) of the IIRC. The Company may make contributions to this plan at its discretion. The Company contributedapproximately $329 thousand, $90 thousand, and $75 thousand to this plan during the years ended December 31, 2018, 2017, and 2016, respectively. F-38Table of ContentsZIOPHARM Oncology, Inc.NOTES TO FINANCIAL STATEMENTS 15. Selected Quarterly Information (Unaudited) (in thousands, except per share amount) Year Ended December 31, 2018 FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Revenue $146 $— $— $— Total operating expenses 16,342 12,378 12,570 12,762 Loss from operations (16,196) (12,378) (12,570) (12,762) Preferred stock dividends (5,120) (5,462) (6,074) (342) Settlement of a related party relationship — — — 207,361 Net income (loss) applicable to common shareholders (21,540) (17,493) (18,659) 194,538 Net income (loss) per share, basic $(0.15) $(0.12) $(0.13) $1.29 Net income (loss) per share, diluted $(0.15) $(0.12) $(0.13) $1.29 Year Ended December 31, 2017 FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Revenue $1,597 $1,597 $1,598 $1,597 Total operating expenses 15,562 14,611 14,676 15,033 Loss from operations (13,965) (13,014) (13,078) (13,436) Preferred stock dividends (4,171) (4,865) (4,903) (4,999) Net (loss) applicable to common shareholders (19,658) (17,727) (17,604) (18,272) Loss per share, basic and diluted $(0.15) $(0.13) $(0.13) $(0.12) F-39EXHIBIT 10.21AMENDMENT #1 TO RESEARCH AND DEVELOPMENT AGREEMENTThis AMENDMENT #1 (“AMENDMENT #1”) to the RESEARCH AND DEVELOPMENT AGREEMENT (the“AGREEMENT”) is effective upon execution of the NEW RESEARCH PROGRAM by and among THE UNIVERSITY OFTEXAS M.D. ANDERSON CANCER CENTER (“UTMDACC”), INTREXON CORPORATION (“INTREXON”) andZIOPHARM ONCOLOGY, INC. (“ZIOPHARM”). Capitalized terms used herein and not defined shall have the meaningascribed to them in the AGREEMENT.Whereas, INTREXON, ZIOPHARM, and UTMDACC have a mutual interest in amending theAGREEMENT as follows with respect to INVENTIONS arising from the performance of certain NEWRESEARCH PROGRAMS:Notwithstanding Sections 6.1 and 6.3 of the AGREEMENT, for any NEW RESEARCH PROGRAM wholly funded byINTREXON and/or ZIOPHARM, INTREXON shall solely own all INVENTIONS solely or jointly made by employees, otheragents and consultants of UTMDACC that are conceived or reduced to practice in the performance of any of the attachedResearch Work Plan(s). All such INVENTIONS are hereby assigned to INTREXON. For any NEW RESEARCH PROGRAMthat is not wholly funded by INTREXON and/or ZIOPHARM, Sections 6.1 and 6.3 shall remain in effect with respect to suchNEW RESEARCH PROGRAM. Each Research Work Plan will identify the specific ownership rights of the parties inINVENTIONS as set forth in this AMENDMENT #1All other terms and conditions of the AGREEMENT remain in full force and effect.IN WITNESS WHEREOF, the parties hereto have duly executed this AMENDMENT #1 to the AGREEMENT by dulyauthorized representatives. THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER By: /s/ Chris McKee Date: 8/30/2016 Name: Chris McKee, MHA Title: Vice President, Business Operations INTREXON CORPORATION By: /s/ Jeffrey Perez Date: 8/25/2016 Name: Jeffrey Perez Title: Senior Vice President ZIOPHARM ONCOLOGY, INC. By: /s/ Caesar Belbel Date: 8/29/2016 Name: Caesar Belbel Title: EVP, COO, Chief Legal Officer EXHIBIT 10.22AMENDMENT #2 TO THE RESEARCH AND DEVELOPMENT AGREEMENTThis AMENDMENT #2 (“AMENDMENT #2”) to the RESEARCH AND DEVELOPMENT AGREEMENT (the“AGREEMENT”) is entered into as of January 17, 2017 by and among THE UNIVERSITY OF TEXAS M.D. ANDERSONCANCER CENTER (“UTMDACC”), INTREXON CORPORATION (“INTREXON”) and ZIOPHARM ONCOLOGY,INC. (“ZIOPHARM”). Capitalized terms used herein and not defined shall have the meaning ascribed to them in theAGREEMENT.Whereas, INTREXON, ZIOPHARM, and UTMDACC have a mutual interest in amending the Agreement as followswith respect to payment for the funding of RESEARCH PROGRAMS.Now, therefore, in consideration of the mutual promises and covenants herein contained, the parties agree as follows.1. From and after the effective date of this AMENDMENT #2, ZIOPHARM may set off against theadvance quarterly payments to MDACC required under Section 5.2(B) of the AGREEMENT those expendituresincurred and actually paid by ZIOPHARM during the prior three-month period for third party costs in support of theRESEARCH PROGRAMS that were approved in advance by the JSC. In the event the total expenditures incurredand actually paid by ZIOPHARM exceed the amount approved by the JSC by greater than ten percent (10%), suchoverages may not be set off until further review and approval by the JSC is completed. ZIOPHARM shall provideMDACC with all documentation substantiating all such expenditures as reasonably requested by MDACC.All other terms and conditions of the AGREEMENT remain in full force and effect.IN WITNESS WHEREOF, the parties hereto have duly executed this AMENDMENT #2 to the AGREEMENT by dulyauthorized representatives. THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER By: /s/ Wesley Harrott Date: 1/19/2017 Name: Wesley Harrott Title: Associate VP, Research and Administration INTREXON CORPORATION By: /s/ Jeffrey Perez Date: 1/18/2017 Name: Jeffrey Perez Title: Senior Vice President ZIOPHARM ONCOLOGY, INC. By: /s/ Caesar Belbel Date: 1/18/2017 Name: Caesar Belbel Title: EVP, COO, Chief Legal Officer EXHIBIT 10.23AMENDMENT #3 TO THE RESEARCH AND DEVELOPMENT AGREEMENTThis AMENDMENT #3 (“AMENDMENT #3”) to the RESEARCH AND DEVELOPMENT AGREEMENT,AMENDMENT #1, and AMENDMENT #2 (collectively, the “AGREEMENT”) is entered into as of November 14, 2017 byand among THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER (“UTMDACC”), INTREXONCORPORATION (“INTREXON”) and ZIOPHARM ONCOLOGY, INC. (“ZIOPHARM”). Capitalized terms used herein andnot defined shall have the meaning ascribed to them in the AGREEMENT.Whereas, INTREXON, ZIOPHARM, and UTMDACC have a mutual interest in amending the AGREEMENT asfollows with respect to payment for the funding of RESEARCH PROGRAMS and extending the TERM of the AGREEMENT;andWhereas ZIOPHARM will have met ZIOPHARM’s funding commitment under Section 5.2 following ZIOPHARM’sfinal quarterly advance payment made to MDACC, occurring on or before January 13, 2018.Now, therefore, in consideration of the mutual promises and covenants herein contained, the parties agree as follows. 1.From and after the effective date of this AMENDMENT #3, UTMDACC will draw from the funds provided byZIOPHARM under Section 5 for any DEVELOPMENT COSTS incurred by UTMADCC. 2.ZIOPHARM will continue to invoice UTMDACC for any DEVELOPMENT COSTS performed by a third party insupport of the RESEARCH PROGRAMS. ZIOPHARM will submit invoices to UTMDACC on a quarterly basis andUTMDACC shall remit payment ZIOPHARM within thirty (30) days of the invoice date. ZIOPHARM shall provideUTMDACC with all documentation substantiating all such expenditures as reasonably requested by UTMDACC. 3.Section 9.1, TERM OF THE AGREEMENT is hereby deleted and replaced with the following:“9.1 TERM OF THE AGREEMENT. The term of this AGREEMENT (the “TERM”) shall commence on theEFFECTIVE DATE and expire on April 15, 2021, unless earlier terminated pursuant to this Section 9 or as otherwiseprovided in this AGREEMENT, or extended pursuant to mutual written agreement.”All other terms and conditions of the AGREEMENT remain in full force and effect.IN WITNESS WHEREOF, the parties hereto have duly executed this AMENDMENT #3 to the AGREEMENT by dulyauthorized representatives.THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER By: /s/ Wesley Harrott Date: 12/5/2017 Name: Wesley Harrott Title: Associate VP, Research and Administration INTREXON CORPORATION By: /s/ Helen Sabzevari Date: 11/14/2017 Name: Helen Sabzevari, Ph.D. Title: Sr. Vice President, Research & Development ZIOPHARM ONCOLOGY, INC. By: /s/ Caesar Belbel Date: 11/16/2017 Name: Caesar Belbel Title: EVP, Chief Legal Officer Exhibit 21.1Subsidiaries of the Registrant.ZIOPHARM Oncology, Ltd Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements (Nos. 333-129884, 333-134280, 333-142701, 333-160496, 333-167925,333-185433, 333-199304, 333-220804, and 333-228291) on Forms S-8 and Registration Statements (Nos. 333-134279, 333-141014, 333-161453,333-162160, 333-163517, 333-166444, 333-174292, 333-177793, 333-201826, and 333-229555) on Forms S-3 of our report dated March 5, 2019relating to the financial statements and the effectiveness of internal control over financial reporting of ZIOPHARM Oncology, Inc., appearing in thisAnnual Report on Form 10-K of ZIOPHARM Oncology, Inc. for the year ended December 31, 2018./s/ RSM US LLPBoston, MassachusettsMarch 5, 2019Exhibit 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERI, Laurence J.N. Cooper, certify that: 1.I have reviewed this annual report on Form 10-K of ZIOPHARM Oncology, 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 respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) 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) and15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under 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 mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 5, 2019 /s/ Laurence J.N. Cooper Laurence J.N. Cooper, M.D., Ph.D.Chief Executive Officer(Principal Executive Officer)Exhibit 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERI, Kevin G. Lafond, certify that: 1.I have reviewed this annual report on Form 10-K of ZIOPHARM Oncology, 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 respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) 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) and15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under 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 mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 5, 2019 /s/ Kevin G. Lafond Kevin G. LafondSenior Vice President Finance, Chief Accounting Officer and Treasurer(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 2002In connection with the Annual Report of ZIOPHARM Oncology, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2018, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Laurence J.N. Cooper, Principal Executive Officer of the Company,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 Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of theCompany. /s/ Laurence J.N. Cooper Laurence J.N. Cooper, M.D., Ph.D.Chief Executive Officer(Principal Executive Officer)March 5, 2019Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of ZIOPHARM Oncology, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2018, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin G. Lafond, Principal Financial and Accounting Officer of theCompany, 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 Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of theCompany. /s/ Kevin G. Lafond Kevin G. LafondSenior Vice President Finance, Chief Accounting Officer and Treasurer(Principal Financial and Accounting Officer)March 5, 2019

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