# Sana Biotechnology, Inc. (SANA) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Sana Biotechnology, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1770121/000095017025040254/sana-20241231.htm
Accession: 0000950170-25-040254
Filing date: 2025-03-17
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/SANA/
All MD&A years: /company/SANA/mda/
Previous year: /company/SANA/mda/fy2023/ (FY 2023)
Next year: /company/SANA/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Overview

We were founded on the belief that engineered cells will be one of the most important transformations in medicine over the next several decades. The burden of diseases that can be addressed at their root cause through engineered cells is significant. We view engineered cells as having the potential to be as therapeutically disruptive as biologic drugs to clinical practice, enabling us to repair cells in the body when possible and replace them when needed. We are developing ex vivo and in vivo cell engineering platforms to revolutionize treatment across a broad array of therapeutic areas with unmet treatment needs, including type 1 diabetes, B cell mediated autoimmune diseases, and oncology.

For our ex vivo platform, we have made focused investments in our hypoimmune platform technology, which we refer to as our HIP technology, with the twin goals of engineering allogeneic cells that can "hide" from the patient's immune system to overcome the fundamental challenge of immune rejection and cell persistence, and that we can manufacture at scale. A successful therapeutic requires cells that can engraft, function, and persist in the body, and we believe our approach can unlock a wave of disruptive therapeutics. For in vivo therapies that aim to repair and control genes in the body, a successful product candidate requires both gene modification and in vivo delivery of the therapeutic payload. Of these, we view effective in vivo delivery as the greatest current limitation to dramatically expanding the impact of this class of therapeutics. To this end, our initial focus is on cell-specific delivery of genetic payloads that integrate into the genome of the target cells.

We currently focus our efforts across three areas and have three ongoing clinical trials across multiple disease types and therapeutic areas, including type 1 diabetes (T1D), B cell mediated autoimmune diseases, and B cell malignancies.

•
Type 1 Diabetes: Approximately nine million people suffer from T1D worldwide, and there have been no major novel medicines for the disease since insulin. We are developing SC451, a HIP-modified, stem cell derived pancreatic islet cell therapy, for the treatment of type 1 diabetes. The goal of this therapy is euglycemia, or normal blood glucose, without the need for exogenous insulin injections or immunosuppression. We currently have an ongoing investigator-sponsored first-in-human study (IST) evaluating UP421, an allogeneic, primary islet cell therapy engineered with our HIP technology, in patients with T1D. We expect to share additional data in 2025 and file an investigational new drug application (IND) for SC451 as early as 2026.

•
Allogeneic CAR T cells: We are developing SC291, our HIP-modified allogeneic CD19-directed allogeneic CAR T cell product candidate, in patients with B cell mediated autoimmune diseases. The GLEAM study is a Phase 1 clinical trial evaluating SC291 in patients with lupus nephritis (LN), extrarenal lupus (ERL), and antineutrophil cytoplasmic antibody (ANCA)-associated vasculitis. If successful, SC291 has the potential to benefit patients in a number of additional B cell-mediated autoimmune diseases. We are also studying SC262, our HIP-modified allogeneic CD22-directed CAR T cell product candidate. The VIVID study is a Phase 1 clinical trial evaluating SC262 in patients with relapsed and/or refractory (R/R) B cell malignancies who have received prior CD19-directed CAR T therapy. We are enrolling patients in both the GLEAM and VIVID trials and expect to share data from each study in 2025.

•
In vivo CAR T cells: Using our fusogen platform, which allows for cell-specific, in vivo delivery of various payloads, we are developing our SG299 product candidate, which is a CD8-targeted fusosome that delivers to CD8+ T cells the genetic material to make CD19-directed CAR T cells while avoiding delivery to potentially troublesome tissues such as the liver and gonadal tissue. We plan to develop SG299 in a range of B cell cancers and B cell mediated autoimmune diseases and expect to file an IND for SG299 as early as 2026.

149

We believe the time is right to develop engineered cell therapies across a broad range of therapeutic areas. Substantial progress in the understanding of genetics, gene editing, protein engineering, stem cell biology, immunology, process analytics, and computational biology have converged to create an opportunity to markedly increase the breadth and depth of the potential impact of cellular medicines. We continue to make progress developing our ex vivo cell engineering platforms – our hypoimmune allogeneic CAR T cell platform and our stem-cell derived platform that also leverages our HIP technology – and our in vivo cell engineering platform. We are in the early stages of development across a broad pipeline of product candidates, which are summarized below:

1Investigator sponsored trial. Abbreviations: AAV, ANCA-associated vasculitis; NHL, non-Hodgkin's lymphoma; SLE, systemic lupus erythematosus; T1D, type 1 diabetes; WW, worldwide.

Each of our programs provides the potential for meaningful standalone value while also supporting our potential ability to further exploit our platforms in a manner that leads to the development of broadly applicable medicines. Based on our current timelines for our lead programs, we believe our cash runway will enable multiple data readouts across our programs in 2025.

In early 2025, we announced positive four-week results from the UP421 IST demonstrating that all primary and secondary endpoints were met. Results of the study at four weeks and preliminary results at 12 weeks after cell transplantation demonstrate the survival and function of pancreatic beta cells as measured by the presence of circulating C-peptide, a biomarker indicating that transplanted beta cells are producing insulin. C-peptide levels also increase with a mixed meal tolerance test (MMTT) during testing at these timepoints, consistent with insulin secretion in response to a meal. Magnetic resonance imaging (MRI) scanning also demonstrated a sustained signal at the site of transplanted cells over time, which is consistent with graft survival. The study identified no safety issues, and the HIP-modified islet cells evaded immune detection. The trial continues to evaluate safety, persistence, and function of the transplanted cells. The 12-week data remain subject to source data verification, after which we and our collaborators at Uppsala University Hospital expect to publish in scientific journals and/or present at scientific conferences more details and longer follow-up from this study in 2025 and beyond.

We continue to make progress on advancing our research- and preclinical-stage product candidates into and through preclinical development and toward potential IND submissions. As certain of our product candidates advance toward potential IND submissions, we are conducting good laboratory practices toxicity studies and establishing necessary scale-up for our manufacturing processes.

Given the depth and breadth of our portfolio, we expect to continue to assess and prioritize our programs on an ongoing basis based on various factors, including internal and external opportunities and constraints, which may result in our decision to advance certain programs ahead or instead of others. For details regarding our product candidates, see the section titled “Business—Overview” in Part I, Item 1 included elsewhere in this Annual Report.

150

In November 2024, we announced a portfolio prioritization to prioritize clinical and preclinical development in type 1 diabetes, B-cell mediated autoimmune diseases, refractory B-cell malignancies, and the fusogen platform for generating in vivo CAR T cells. We suspended development of SC291, our HIP-modified CD19 allogeneic CAR T therapy, in oncology, and SC379, our glial progenitor cell program, as we seek partnerships for these programs. As part of these efforts, we are winding down the ARDENT Phase 1 clinical trial evaluating SC291 in B-cell malignancies, including non-Hodgkin’s lymphoma and chronic lymphoblastic leukemia. In connection with the portfolio prioritization, we expect to incur approximately $5.8 million of cash-based expenses related to employee severance, benefits, and related costs. We anticipate that the portfolio update and associated workforce reduction will be substantially complete in the first quarter of 2025.

Our ex vivo and in vivo technologies represent an aggregation of years of innovation and technology from multiple academic institutions and companies, including hypoimmune technology licensed from the President and Fellows of Harvard College (Harvard) and The Regents of the University of California, fusogen technology acquired from Cobalt Biomedicine Inc. (Cobalt), and gene editing technology licensed from Beam Therapeutics Inc. (Beam), among others. For details regarding these acquisitions and license and collaboration agreements, see Note 4, Acquisitions and Note 5, License and collaboration agreements, to our consolidated financial statements included in this Annual Report, as well as the section titled “Business—Key Intellectual Property Agreements” in Part I, Item 1 included elsewhere in this Annual Report.

Our operations to date have included developing our ex vivo and in vivo cell engineering platforms, identifying and developing potential product candidates, executing preclinical studies, establishing manufacturing capabilities, conducting clinical trials of our product candidates, supporting clinical trials of product candidates developed using our technologies, acquiring technologies, staffing the company, business planning, establishing and maintaining our intellectual property portfolio, raising capital, and providing general and administrative support for these operations. All of our programs are currently in the development stage, and we do not have any products approved for sale. We have incurred net losses each year since our inception. Our net losses for the years ended December 31, 2024, 2023, and 2022 were $266.8 million, $283.3 million, and $269.5 million, respectively. As of December 31, 2024, we had an accumulated deficit of $1.6 billion. Our net losses resulted primarily from our research and development programs, and, to a lesser extent, general and administrative costs associated with our operations.

As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $152.5 million. We will need to raise additional financing in the near-term and in the future to fund our operations, including the commercialization of any approved product candidates. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations with our existing cash, cash equivalents, and marketable securities, proceeds from any future equity or debt financings, and milestone, royalty, and other payments received under any future licenses, collaborations, or other arrangements. Additional capital may not be available on terms that are reasonable or acceptable to us, if at all. If we are unable to raise capital when needed or on attractive terms, our business, results of operations, and financial condition would be adversely affected.

Management has determined that our present capital resources may not be sufficient to fund our planned operations for at least one year from the date of this Annual Report, and there is substantial doubt as to our ability to continue as a going concern. Our ability to continue as a going concern will depend on, among other things, our ability to obtain additional funding and appropriately manage the amount of cash used to fund our operations. We plan to address this condition through equity or debt offerings or capital obtained in connection with strategic collaborations or licensing or other arrangements. If we are unable to obtain such financing, we may be required to significantly modify our operational plans by delaying, reducing the scope of, or ceasing our research and development programs.

We expect our operating losses and expenses to decrease in 2025 compared to 2024 as a result of our portfolio prioritization announced in November 2024. Operating expenses may increase over the longer term if our clinical trials are successful and if we expand our research and development efforts. Cost increases would be driven in large part by commencing and advancing our current and future product candidates through clinical trials; identifying additional product candidates; continuing to establish our manufacturing capabilities, including through third-party contract development and manufacturing organizations (CDMOs) and our internal manufacturing capabilities; initiating and advancing preclinical development of our current and future product candidates; advancing and expanding the capabilities of our ex vivo and in vivo cell engineering platforms; acquiring and licensing technologies aligned with our ex vivo and in vivo cell engineering platforms, or modifying the terms of existing acquisition or license arrangements; seeking regulatory approval of our current and future product candidates; engaging in commercialization activities for any of our product candidates for which we obtain marketing approval; increasing our personnel, including those required to support our research, clinical and preclinical development, manufacturing, and potential future commercialization efforts; expanding our operational, financial, and management systems; continuing to develop, prosecute, and defend our intellectual property portfolio; and continuing to incur legal, accounting, or other expenses to operate our business, including the costs associated with being a public company.

151

We have invested in building world class capabilities in key areas of manufacturing sciences and operations, including development of our cell engineering platforms, product characterization, and process analytics. Our investments also include scaled research solutions, scaled infrastructure, and novel technologies to improve efficiency, characterization, and scalability of manufacturing.

Macroeconomic Considerations

Our business and operations may be negatively affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges such as changes in trade policies, including sanctions, treaties, tariffs, regulatory requirements, and other limitations on cross-border operations, changes in inflation and fluctuations in interest rates, instability in the banking and financial services sector, declines in consumer confidence, declines in economic growth, uncertainty in the markets, geo-political and economic instability, and tensions in U.S.-China relations. The extent, severity, and duration of the impact of these events and conditions on our business cannot be predicted and may not be fully reflected in our results of operations until future periods. If economic uncertainty continues or increases, or if the global economy worsens, our business, financial condition, and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events and conditions on our business, financial condition, and operating results, see the section of this Annual Report titled “Risk Factors.”

Acquisitions

We have completed various acquisitions since inception. For details regarding our acquisitions, see the section titled “Business—Key Intellectual Property Agreements” and Note 4, Acquisitions, to our consolidated financial statements included elsewhere in this Annual Report.

License and collaboration agreements

We have entered into license and collaboration agreements with various third parties. For details regarding these agreements, see the section titled “Business— Key Intellectual Property Agreements” and Note 5, License and collaboration agreements, to our consolidated financial statements included elsewhere in this Annual Report.

Success payments and contingent consideration

Cobalt success payment and contingent consideration

Pursuant to the terms and conditions of the Cobalt acquisition agreement, we are obligated to pay to certain former Cobalt stockholders contingent consideration (Cobalt Contingent Consideration) of up to an aggregate of $500.0 million upon our achievement of certain specified development milestones and a success payment (Cobalt Success Payment) of up to $500.0 million, each of which is payable in cash or stock. The Cobalt Success Payment is payable if, at pre-determined valuation measurement dates, our market capitalization equals or exceeds $8.1 billion, and we are advancing a program based on the fusogen technology in a clinical trial pursuant to an IND, or have filed for, or received approval for, a biologics license application or new drug application for a product based on the fusogen technology. The Cobalt Success Payment can be achieved over a maximum of 20 years from the date of the acquisition, but this period could be shorter upon the occurrence of certain events. A valuation measurement date would also be triggered upon a change of control if at least one of our programs based on the fusogen technology is the subject of an active research program at the time of such change of control. If there is a change of control and our market capitalization is below $8.1 billion as of the date of such change of control, the amount of the potential Cobalt Success Payment will decrease, and the amount of potential Cobalt Contingent Consideration will increase. As of December 31, 2024, a Cobalt Success Payment had not been triggered.

See Note 4, Acquisitions to our consolidated financial statements included elsewhere in this Annual Report for details on the amount of the potential Cobalt Success Payment and potential Cobalt Contingent Consideration if there is a change of control based on various thresholds for our market capitalization on such change of control date. See the subsections below titled “—Success payments” and “—Contingent consideration” for more information on the accounting treatment of the Cobalt Success Payment and Cobalt Contingent Consideration.

152

Harvard success payments

Pursuant to the terms of the Harvard agreement, we may be required to make up to an aggregate of $175.0 million in success payments to Harvard (Harvard Success Payments), payable in cash, based on increases in the per share fair market value of our common stock. The potential Harvard Success Payments are based on multiples of increasing value ranging from 5x to 40x based on a comparison of the per share fair market value of our common stock relative to the original issuance price of $4.00 per share at ongoing pre-determined valuation measurement dates. The Harvard Success Payments can be achieved over a maximum of 12 years from the effective date of the agreement. If a higher success payment tier is met at the same time a lower tier is met, both tiers will be owed. Any previous Harvard Success Payments made are credited against the Harvard Success Payment owed as of any valuation measurement date so that Harvard does not receive multiple success payments in connection with the same threshold. As of December 31, 2024, a Harvard Success Payment had not been triggered.

See Note 5, License and collaboration agreements to our consolidated financial statements included elsewhere in this Annual Report for more details on the various per share common stock values that trigger a Harvard Success Payment. See the subsection below titled “—Success payments” for more information on the accounting treatment of the Harvard Success Payments.

Components of operating results

Operating expenses

Research and development

To date, research and development expenses have related primarily to discovery and development of our platform technologies and product candidates. Research and development expenses are recognized as incurred, and payments made prior to the receipt of goods or services to be used in research and development are recorded as prepaid expenses until the goods or services are received.

Research and development expenses consist of personnel-related costs, including salaries, benefits, and non-cash stock-based compensation, external research and development expenses incurred under arrangements with third parties, including CDMO manufacturing costs (including pass-through costs) and clinical trial costs, costs for laboratory supplies, costs to acquire and license technologies aligned with our ex vivo and in vivo cell engineering platforms, and facility expenses, including rent and depreciation, and allocated overhead costs. The timing and amount of costs to acquire and license technologies in the future cannot be reliably estimated and may fluctuate from quarter to quarter and year to year.

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

Research and development activities account for a significant portion of our operating expenses. As a result of our portfolio prioritization and associated workforce reduction announced in November 2024, we expect our research and development expenses to decrease in 2025 compared to 2024. Research and development expenses may increase over the longer term if our clinical trials are successful and if we expand our research and development efforts. Cost increases, if they occur, would be driven in large part by advancing our current and future product candidates into and through clinical trials; identifying additional product candidates; continuing to establish our manufacturing capabilities, including through third-party CDMOs and our internal manufacturing capabilities; initiating and advancing preclinical development of our current and future product candidates; advancing and expanding the capabilities of our ex vivo and in vivo cell engineering platforms; acquiring and licensing technologies aligned with our ex vivo and in vivo cell engineering platforms, or modifying the terms of existing acquisition or license arrangements; seeking regulatory approval of our current and future product candidates; and increasing our workforce to support our expanded research, clinical, and preclinical development efforts. A change in the outcome of any of these factors could result in a significant change in the costs and timing associated with the development of our product candidates.

Research and development related success payments and contingent consideration

Research and development related success payments and contingent consideration include the change in the estimated fair value of our Cobalt and Harvard Success Payment liabilities and Cobalt Contingent Consideration liability. The expense or gain associated with our research and development related success payments and contingent consideration is unpredictable, in part, because our success payments are impacted by changes in our common stock price and market capitalization at the end of each reporting period, and continues to vary significantly from quarter to quarter and year to year due to changes in the assumptions used in the calculations.

153

General and administrative

General and administrative expenses consist of personnel-related costs, including salaries, benefits, and non-cash stock-based compensation for our employees in finance, legal, executive, human resources, and information technology functions, legal and consulting fees, insurance fees, restructuring expenses, and facility costs not otherwise included in research and development expenses. Legal fees include those related to corporate and patent matters. Included in general and administrative expenses for the year ended December 31, 2023, are costs incurred for the early termination of the lease (Fremont lease) for our previously planned manufacturing facility in Fremont, California (Fremont facility).

As a result of our portfolio prioritization and associated workforce reduction commenced in November 2024, we expect our general and administrative expenses to decrease in 2025 compared to 2024. General and administrative expenses may increase over the longer term to support potential expanded research and development activities.

Results of operations

Comparison of the years ended December 31, 2024 and 2023

The following table summarizes our results of operations for the periods presented:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Operating expenses:"],["Research and development","","$","217,564","","","$","268,823","","","$","(51,259",")"],["Research and development related success payments and contingent consideration","","","(8,881",")","","","(48,981",")","","","40,100"],["General and administrative","","","64,040","","","","73,299","","","","(9,259",")"],["Total operating expenses","","","272,723","","","","293,141","","","","(20,418",")"],["Loss from operations","","","(272,723",")","","","(293,141",")","","","20,418"],["Interest income, net","","","10,471","","","","9,938","","","","533"],["Other expense, net","","","(4,507",")","","","(52",")","","","(4,455",")"],["Net loss","","$","(266,759",")","","$","(283,255",")","","$","16,496"]]
[[/GREPCENT_TABLE]]

Research and development expenses

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

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Research and laboratory","","$","27,918","","","$","48,468","","","$","(20,550",")"],["Personnel","","","86,796","","","","106,929","","","","(20,133",")"],["Third-party manufacturing","","","11,231","","","","20,907","","","","(9,676",")"],["Facility and other allocated costs","","","60,181","","","","65,941","","","","(5,760",")"],["Impairment of lab equipment and leasehold improvements","","","1,891","","","","7,014","","","","(5,123",")"],["Clinical development","","","23,655","","","","11,862","","","","11,793"],["Other","","","5,892","","","","7,702","","","","(1,810",")"],["Total research and development expense","","$","217,564","","","$","268,823","","","$","(51,259",")"]]
[[/GREPCENT_TABLE]]

154

Research and development expense was $217.6 million and $268.8 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $51.3 million was primarily due to:

•
a decrease of $20.6 million in research expenses primarily due to lower research and development activities;

•
a net decrease of $20.1 million in personnel-related expenses due to lower research and development headcount related to the portfolio prioritizations in the fourth quarters of 2023 and 2024;

•
a decrease of $9.7 million in third-party manufacturing costs for CDMOs;

•
a decrease of $5.8 million in facility and other allocated costs; and

•
a decrease of $5.1 million for impairment of lab equipment and leasehold improvements recorded in 2024 compared to 2023.

These decreases were partially offset by an increase of $11.8 million in clinical development costs.

Research and development related success payments and contingent consideration

The following table summarizes the gains associated with research and development related success payments and contingent consideration for the periods presented:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Cobalt success payment","","$","(6,924",")","","$","(7,856",")","","$","932"],["Harvard success payments","","","(1,319",")","","","(352",")","","","(967",")"],["Contingent consideration","","","(638",")","","","(40,773",")","","","40,135"],["Total research and development related success payments and contingent consideration","","$","(8,881",")","","$","(48,981",")","","$","40,100"]]
[[/GREPCENT_TABLE]]

The gains related to the change in the estimated fair value of our Cobalt Success Payment were $6.9 million and $7.9 million for the years ended December 31, 2024 and 2023, respectively. The changes in value were primarily due to changes in our market capitalization during the relevant periods, and for 2023, the reduction of our near-term investment in our fusogen program in connection with our portfolio prioritization in the fourth quarter of 2023. The gains related to the change in the estimated fair value of our Harvard Success Payments were $1.3 million and $0.3 million for the years ended December 31, 2024 and 2023, respectively. The changes in value were primarily due to changes in our common stock price during the relevant periods. The gains related to the change in the estimated fair value of our Cobalt Contingent Consideration were $0.6 million and $40.8 million for the years ended December 31, 2024 and 2023, respectively. The changes in value were due primarily to changes in the timing and probability of the achievement of milestones during the relevant periods and the discount rates used in the calculations.

General and administrative expenses

General and administrative expenses were $64.0 million and $73.3 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $9.3 million was primarily due to a decrease in legal fees of $3.1 million, a loss on lease termination of $2.7 million associated with the Fremont facility recorded in 2023, a decrease in personnel costs of $2.6 million, a decrease in facility costs of $1.9 million, and a decrease in insurance and consulting fees of $1.1 million. These decreases were partially offset by an increase in non-cash stock-based compensation of $2.0 million.

Interest income, net

Interest income, net, was $10.5 million and $9.9 million for the years ended December 31, 2024 and 2023, respectively, and consisted primarily of interest earned on our cash and marketable securities balances.

Other expense, net

Other expense, net, was $4.5 million and immaterial for the years ended December 31, 2024 and 2023, respectively. The change in value of $4.5 million was due to other-than-temporary impairments of other assets.

155

Comparison of the years ended December 31, 2023 and 2022

The following table summarizes our results of operations for the periods presented:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","","2022","","","Change"],["","","(in thousands)"],["Operating expenses:"],["Research and development","","$","268,823","","","$","285,885","","","$","(17,062",")"],["Research and development related success payments and contingent consideration","","","(48,981",")","","","(84,882",")","","","35,901"],["General and administrative","","","73,299","","","","71,561","","","","1,738"],["Total operating expenses","","","293,141","","","","272,564","","","","20,577"],["Loss from operations","","","(293,141",")","","","(272,564",")","","","(20,577",")"],["Interest income, net","","","9,938","","","","3,762","","","","6,176"],["Other expense, net","","","(52",")","","","(674",")","","","622"],["Net loss","","$","(283,255",")","","$","(269,476",")","","$","(13,779",")"]]
[[/GREPCENT_TABLE]]

Research and development expenses

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

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","","2022","","","Change"],["","","(in thousands)"],["Research, development, and laboratory","","$","60,330","","","$","70,585","","","$","(10,255",")"],["Third-party manufacturing","","","20,907","","","","27,986","","","","(7,079",")"],["Licensing of technology","","","1,095","","","","6,873","","","","(5,778",")"],["Personnel","","","106,929","","","","111,208","","","","(4,279",")"],["Impairment of lab equipment and leasehold improvements","","","7,014","","","","-","","","","7,014"],["Facility and other allocated costs","","","65,941","","","","64,196","","","","1,745"],["Other","","","6,607","","","","5,037","","","","1,570"],["Total research and development expense","","$","268,823","","","$","285,885","","","$","(17,062",")"]]
[[/GREPCENT_TABLE]]

Research and development expenses were $268.8 million and $285.9 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $17.1 million was primarily due to:

•
a decrease of 10.3 million in research and laboratory costs, primarily due to our portfolio prioritizations in 2022 and 2023, partially offset by an increase in clinical development costs as more programs moved into the clinic;

•
a decrease of $7.1 million in third-party manufacturing costs for CDMOs, including pass-through costs for materials;

•
a decrease of $5.8 million in costs to license technology for our CD22 and BCMA programs; and

•
a decrease of $4.3 million in personnel-related costs, including $3.3 million in non-cash stock-based compensation expense.

These decreases were partially offset by $7.0 million for the impairment of certain lab equipment and leasehold improvements, primarily related to the portfolio prioritization in October 2023.

Research and development related success payments and contingent consideration

The following table summarizes the expenses (gains) associated with research and development related success payments and contingent consideration for the periods presented:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","","2022","","","Change"],["","","(in thousands)"],["Cobalt success payment","","$","(7,856",")","","$","(69,337",")","","$","61,481"],["Harvard success payments","","","(352",")","","","(12,181",")","","","11,829"],["Contingent consideration","","","(40,773",")","","","(3,364",")","","","(37,409",")"],["Total research and development related success payments and contingent consideration","","$","(48,981",")","","$","(84,882",")","","$","35,901"]]
[[/GREPCENT_TABLE]]

156

The gains related to the change in the estimated fair value of our Cobalt Success Payment were $7.9 million and $69.3 million for the years ended December 31, 2023 and 2022, respectively. The changes in value were primarily due to changes in our market capitalization during the relevant periods, and for 2023, the reduction of our near-term investment in our fusogen program in connection with our portfolio prioritization in the fourth quarter of 2023. The gains related to the change in the estimated fair value of our Harvard Success Payments were $0.3 million and $12.2 million for the years ended December 31, 2023 and 2022, respectively. The changes in value were primarily due to changes in our common stock price during the relevant periods. The gains related to the change in the estimated fair value of our Cobalt Contingent Consideration were $40.8 million and $3.4 million for the years ended December 31, 2023 and 2022, respectively. The changes in value were primarily due to the reduction of our near-term investment in our fusogen programs, including delaying the IND for SG299, which impacted the timing and probability of the achievement of milestones.

General and administrative expenses

General and administrative expenses were $73.3 million and $71.6 million for the years ended December 31, 2023 and 2022, respectively. The increase of $1.7 million was primarily due to an increase in patent and other legal fees of $4.3 million, a loss on lease termination of $2.7 million associated with the Fremont facility, and increased facility costs of $1.0 million. These increases were partially offset by the write-off of $4.5 million of construction in progress costs in 2022 for the Fremont facility and a decrease of $2.1 million in insurance costs.

Interest income, net

Interest income, net, was $9.9 million and $3.8 million for the years ended December 31, 2023 and 2022, respectively, and consisted primarily of interest earned on our cash and marketable securities balances.

Liquidity, capital resources, and capital requirements

Sources of liquidity

As of December 31, 2024, we had $152.5 million in cash, cash equivalents, and marketable securities. To date we have raised an aggregate of approximately $1.5 billion in net proceeds from sales of common stock and private placements of our convertible preferred stock.

In February 2024, we completed an underwritten public offering pursuant to which we sold 21.8 million shares of our common stock, including 4.5 million shares pursuant to the full exercise of the underwriters' option to purchase additional shares, and pre-funded warrants to purchase 12.7 million shares of our common stock for net proceeds of approximately $180.0 million, after deducting underwriting discounts and commissions and offering expenses.

In August 2022, we entered into a sales agreement with Cowen, acting as sales agent, pursuant to which we may offer and sell through Cowen, up to $150.0 million in shares of our common stock under the ATM facility. To date, we have sold an aggregate of 4.9 million shares of our common stock under the ATM facility for net proceeds of $28.6 million, after deducting commissions and expenses.

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

Future funding requirements

We expect to incur additional losses for the foreseeable future as we conduct our research and development efforts, including conducting clinical trials and preclinical studies, developing new product candidates, continuing to establish internal and external manufacturing capabilities, and funding our operations generally. We are subject to the risks typically related to the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business.

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Management has determined that our present capital resources may not be sufficient to fund our planned operations for at least one year from the date of this Annual Report, and there is substantial doubt as to our ability to continue as a going concern. Our ability to continue as a going concern will depend on, among other things, our ability to obtain additional funding and appropriately manage the amount of cash used to fund our operations. We plan to address this condition through equity or debt offerings or capital obtained in connection with strategic collaborations or licensing or other arrangements. If we are unable to obtain such financing, we may be required to significantly modify our operational plans by delaying, reducing the scope of, or ceasing our research and development programs.

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

•
the scope, timing, progress, costs, and results of discovery, preclinical development, and clinical trials for our current or future product candidates, including the development of companion diagnostics to such product candidates;

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

•
the costs, timing, and outcome of regulatory review of our current or future product candidates and any companion diagnostics to such product candidates;

•
the cost, timing, and scope of our manufacturing capabilities, as well as costs associated with the manufacturing of clinical and commercial supplies of our current and future product candidates;

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

•
the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights;

•
our ability to maintain existing, and establish new, strategic collaborations, licensing, or other arrangements, and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty, or other payments due under any such agreement;

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

•
the expenses required to attract, hire, and retain skilled personnel;

•
the impact of global supply chain issues and changing rates of inflation on the costs of laboratory consumables, supplies, and equipment required for our ongoing operations;

•
the costs of operating as a public company;

•
our ability to effectively manage the amount of cash used in our operations;

•
our ability to establish a commercially viable pricing structure and obtain approval for coverage and adequate reimbursement from third-party, including government, payors;

•
potential interruptions or delays resulting from global geo-political, economic, and other factors beyond our control;

•
the effect of competing technological and market developments; and

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

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Until such time, if ever, as we can generate significant revenue from product sales, we expect to finance our operations with our existing cash, cash equivalents, and marketable securities, proceeds from any future equity or debt financings, and milestone, royalty, and other payments received under any future licenses, collaborations, or other arrangements. In the event that additional financing is required, we may not be able to raise it on terms that are acceptable to us or at all. Our ability to raise additional financing may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from public health crises, the escalation in conflict in Ukraine and the Middle East, or other regions, changes in inflation, interest rate uncertainty, disruptions in global trade caused by political tensions and conflicts between countries, and other factors creating market risk. Bank failures have also caused increased concerns about liquidity in the broader financial services industry, and our business, business partners, or industry as a whole may be adversely impacted in ways that we cannot predict at this time. If we raise additional funds through the issuance of equity or convertible debt securities, existing stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may result in increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock, and involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, or acquiring, selling, or licensing intellectual property rights or assets, which could adversely impact our ability to conduct our business. If we raise funds through strategic collaborations or licensing or other arrangements, we may have to relinquish significant rights or grant licenses on terms that are not favorable to us. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from various factors beyond our control. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected.

Cash flows

The following table summarizes our cash flows for the periods indicated:

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[[/GREPCENT_TABLE]]

Operating activities

During the year ended December 31, 2024, net cash used in operating activities was $223.2 million, consisting primarily of net loss of $266.8 million and the change in net operating assets and liabilities of $1.2 million, offset by non-cash charges of $44.8 million. The non-cash charges of $44.8 million consisted of non-cash stock-based compensation expense of $37.7 million and depreciation expense of $17.4 million, offset by gains of $8.2 million and $0.6 million for revaluation of our success payment liabilities and contingent consideration, respectively, and other non-cash charges of $1.5 million.

During the year ended December 31, 2023, net cash used in operating activities was $253.6 million, consisting primarily of net loss of $283.3 million, the change in net operating assets and liabilities of $18.6 million, and non-cash charges of $11.1 million. The non-cash charges of $11.1 million consisted of non-cash stock-based compensation expense of $35.5 million and depreciation expense of $24.6 million, which includes $7.0 million for the impairment of certain lab equipment and leasehold improvements which were primarily related to the portfolio prioritization in the fourth quarter of 2023, partially offset by gains of $40.8 million and $8.2 million for revaluation of our success payment liabilities and contingent consideration, respectively.

During the year ended December 31, 2022, net cash used in operating activities was $290.1 million, consisting primarily of net loss of $269.5 million, the change in net operating assets and liabilities of $7.5 million, and non-cash charges of $28.1 million. The non-cash charges of $28.1 million consisted of gains of $81.5 million and $3.4 million for revaluation of our success payment liabilities and contingent consideration, respectively, non-cash stock-based compensation expense of $38.3 million, depreciation expense of $15.6 million, and other non-cash charges of $2.9 million.

159

Investing activities

Cash provided by investing activities was $17.5 million, $172.0 million, and $210.6 million during the years ended December 31, 2024, 2023, and 2022, respectively. For the years ended December 31, 2024, 2023, and 2022, this consisted of net purchases and maturities of marketable securities of $50.9 million, $192.0 million, and $231.5 million, respectively, offset by the purchase of property and equipment of $33.4 million, $20.0 million, and $20.9 million, respectively.

Financing activities

During the year ended December 31, 2024, cash provided by financing activities was $199.7 million, consisting primarily of net proceeds from issuance of common stock of $181.0 million, $11.0 million in proceeds from our employee stock purchase program and the exercise of stock options, and net proceeds of $7.7 million from a loan to fund tenant improvements for our manufacturing facility in Bothell, Washington.

During the year ended December 31, 2023, cash provided by financing activities was $31.6 million, consisting primarily of net proceeds from issuance of common stock of $27.0 million and $4.6 million in proceeds from our employee stock purchase program and the exercise of stock options.

During the year ended December 31, 2022, cash provided by financing activities was $4.9 million, consisting primarily of proceeds from our employee stock purchase program and the exercise of stock options.

Contractual obligations and commitments

The following table summarizes our significant contractual obligations and commitments as of December 31, 2024:

[[GREPCENT_TABLE]]
[["","","Payments Due by Period"],["","","Less than 1 Year","","","1 to 3 Years","","","3 to 5 Years","","","More than 5 Years","","","Total"],["","","(in thousands)"],["Operating lease obligations","","$","21,769","","","$","41,862","","","$","28,769","","","$","79,380","","","$","171,780"]]
[[/GREPCENT_TABLE]]

Other than as disclosed in the table above, the payment obligations under our license, collaboration, and acquisition agreements as of December 31, 2024 are contingent upon future events such as our achievement of specified development, regulatory, and commercial milestones or royalties on net product sales. See the section titled “Business—Key Intellectual Property Agreements” for more information about these payment obligations.

We are also obligated to make a success payment to Cobalt of up to $500.0 million, payable in cash or stock, pursuant to the terms and conditions in the Cobalt acquisition agreement, and up to an aggregate of $175.0 million in success payments to Harvard, payable in cash. See the subsection below titled “—Critical accounting policies and significant judgments and estimates—Success payments” and Note 4, Acquisitions, and Note 5, License and collaboration agreements, to our consolidated financial statements located elsewhere in this Annual Report for more information on the success payments. As of December 31, 2024, the timing and likelihood of achieving the milestones and success payments and generating future product sales are uncertain, and therefore any related payments are not included in the table above.

We also enter into agreements in the normal course of business for sponsored research, preclinical studies, clinical trials, contract manufacturing, and other services and products for operating purposes, which are generally cancelable upon written notice. These obligations and commitments are not included in the table above.

Off-balance sheet arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements as defined under the rules and regulations of the SEC.

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JOBS Act accounting election

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). We will remain an emerging growth company until the earliest to occur of (1) December 31, 2026, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the fair market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our independent registered public accounting firm provide an attestation report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use the extended transition period for any new or revised accounting standards during the period in which we remain an emerging growth company; however, we may adopt certain new or revised accounting standards early if the standard allows early adoption.

Critical accounting policies and significant judgments and estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this Annual Report. We believe the following accounting policies relate to the significant areas involving management’s judgments and estimates and are critical to understanding our historical and future performance.

Research and development expenses

We record research and development expenses in the periods in which they are incurred. We accrue for research and development expenses based on the estimated services performed, but not yet invoiced, pursuant to contracts with clinical research organizations, CDMOs, research institutions, or other service providers that conduct and manage clinical trials and preclinical studies, manufacture our product candidates, and perform other research services on our behalf and record these costs in accrued and other current liabilities. We make judgments and estimates in determining the accrued liabilities balance at each reporting period. Payments made prior to the receipt of goods or services to be used in research and development are recorded as prepaid expenses until the goods or services are received.

To date, we have not experienced any material differences between accrued expenses and actual expenses incurred. However, the status and timing of actual services performed may vary from our estimates, resulting in adjustments to expense in future periods. Changes in these estimates that result in material changes to our accruals could materially affect our results of operations.

Acquisitions

We account for business combinations using the acquisition method of accounting, which requires the assets acquired, including in-process research and development (IPR&D), and liabilities assumed, be recorded at their fair values as of the acquisition date. Any excess of the purchase price over the fair value of net assets acquired is recorded as goodwill. The determination of the estimated fair value of these items requires us to make significant estimates and assumptions.

If we determine the acquisition does not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill or contingent consideration are recognized at the acquisition date. In an asset acquisition, upfront payments allocated to IPR&D are recorded in research and development expense if it is determined that there is no alternative future use, and subsequent milestone payments are recorded in research and development expense when achieved.

161

Intangible assets and goodwill

Accounting for business combinations requires us to make significant estimates and assumptions with respect to tangible and intangible assets acquired and liabilities assumed. We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets. Intangible assets are reviewed for impairment annually and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment.

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination. We evaluate goodwill for impairment annually and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment. Our evaluation includes assessing qualitative factors or performing a quantitative analysis to determine whether it is more-likely-than-not that the fair value of net assets is below the carrying amounts.

Contingent consideration

Contingent consideration obligations are estimated at fair value at the acquisition date of a business combination and at each subsequent balance sheet date, with changes in fair value recorded in research and development related success payments and contingent consideration. The fair value of contingent consideration is determined by calculating the probability-weighted estimated value of the milestone payments based on the assessment of the likelihood and estimated timing that the milestones would be achieved and applying the relevant discount rates. We use significant estimates and assumptions in determining the estimated contingent consideration and associated expense or gain at each balance sheet date. The valuation of contingent consideration uses assumptions we believe would be made by a market participant. In evaluating the fair value of contingent consideration, significant judgment is required to estimate the likelihood and timing that the milestones would be achieved. We assess these estimates on an ongoing basis as additional data impacting the assumptions become available. Contingent consideration may change significantly as development progresses and additional data is obtained, impacting our assumptions regarding probabilities of successful achievement of the related milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates.

Success payments

The Cobalt Success Payment was recorded as a liability on the consolidated balance sheet at fair value on the acquisition date and is remeasured at each subsequent reporting period, with changes in fair value recognized in research and development related success payments and contingent consideration. For the Harvard Success Payments, both the initial value and subsequent changes in fair value are recorded in research and development related success payments and contingent consideration. To determine the estimated fair value of the success payment liabilities, we use a Monte Carlo simulation methodology which models the estimated fair value of the liability based on several key assumptions, including the estimated number and timing of valuation measurement dates on the basis of which payments may be triggered, term of the success payments, the risk-free interest rate, and expected volatility, which is estimated using peer company stocks for a period of time commensurate with the expected term assumption. Additionally, the computation of the estimated fair value of the Harvard Success Payments incorporates the per share fair market value of our common stock at the end of each reporting period, and the computation of the estimated fair value of the Cobalt Success Payment incorporates our market capitalization at the end of each reporting period. The assumptions used to calculate the fair value of the success payments are subject to a significant amount of judgment and a small change in the assumptions may have a relatively large change in the estimated liability and resulting expense or gain.

Stock-based compensation

We recognize compensation costs related to restricted stock awards, restricted stock units, and stock options granted to employees and non-employees based on the estimated fair value of the awards on the date of grant, and we recognize forfeitures as they occur. For restricted stock awards and restricted stock units, the fair value of our common stock is used to determine the resulting stock-based compensation expense. For stock options, we estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option pricing model. The fair value of stock-based awards is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period.

The Black-Scholes option pricing model requires the use of highly subjective assumptions to determine the fair value of stock-based awards. These assumptions include:

•
Fair Value of Common Stock—The fair value of our common stock is based on the closing price as reported on the Nasdaq Global Select Market on the date of grant.

162

•
Expected Term—The expected term represents the period that the stock-based awards are expected to be outstanding. We use the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the options.

•
Expected Volatility—Due to our limited operating history, the expected volatility is estimated based on the average historical volatilities of common stock of comparable publicly traded companies and our historical common stock volatility over a period of time commensurate with the expected term of the stock option grants. The comparable companies are chosen based on their size, stage in the product development cycle, or area of specialty. We will continue to apply this process until sufficient historical information regarding the volatility of our own stock price becomes available.

•
Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the awards.

•
Expected Dividend—We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.

See Note 12, Stock-based compensation to our consolidated financial statements included elsewhere in this Annual Report for information concerning certain specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2024, 2023, and 2022. Such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change or we use significantly different assumptions or estimates, our stock-based compensation could be materially different.

Recently adopted and recent accounting pronouncements

See Note 2, Summary of significant accounting policies to our consolidated financial statements included elsewhere in this Annual Report for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition or results of operations.