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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2022~~2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 001-38811

TCR2 Therapeutics Inc.

(Exact name of Registrant as specified in its charter)


Delaware		47-4152751
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)


100 Binney Street	Suite 710	Cambridge	MA	02142
(Address of Principal Executive Offices)				(Zip Code)

(617) 949-5200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 Par Value	TCRR	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~November~~May 1, ~~2022~~2023, there were 3839,~~657~~261,~~061~~745 shares of the registrant’s Common Stock, $0.0001 par value per share, outstanding.

TCR2 Therapeutics Inc.

Table of Contents

PART I
Item 1.	Financial Statements	56
	Unaudited Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	5
	Unaudited Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	6
	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	6
	Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022	7
	Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2022 and 2021	7
	Unaudited Consolidated Statements of Comprehensive Loss for the Three Ended March 31, 2023 and 2022	8
	Unaudited Consolidated Statements of Stockholders' Equity as of September 30, 2022 and 2021	8
	Unaudited Consolidated Statements of Stockholders' Equity as of March 31, 2023 and 2022	9
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	9
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	10
	Notes to the Unaudited Consolidated Financial Statements	1011
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2529
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3439
Item 4.	Controls and Procedures	3439
PART II		3641
Item 1.	Legal Proceedings	3641
Item 1A.	Risk Factors	3641
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98110
Item 3.	Defaults Upon Senior Securities	98110
Item 4.	Mine Safety Disclosures	98110
Item 5.	Other Information	98110
Item 6.	Exhibits	99111
	Signatures	~~100~~112

Summary of the Material Risks Associated with Our Business

Our business is subject to numerous material and other risks and uncertainties that you should be aware of in evaluating our business. These risks are described more fully in “Item 1A—Risk Factors,” and include, but are not limited to, the following:

•

~~Our~~Failure ~~approach~~ to ~~the discovery and development of product candidates based on our TRuC-T cell platform represents a novel approach to cancer treatment~~complete, ~~which~~or ~~creates~~delays ~~significant challenges for us. We are early~~ in ~~our development efforts. Gavo-cel~~completing, ~~our~~the ~~most~~potential ~~advanced~~merger ~~product~~with ~~candidate,~~Adaptimmune isTherapeutics inplc ~~the~~(“Adaptimmune”) ~~Phase~~announced 2on ~~portion~~March ~~of the Phase 1/2 clinical trial~~6, ~~TC-510~~2023 ~~is in~~ (the ~~Phase~~"Merger") 1could ~~portion~~materially ~~of the Phase 1/2 clinical trial,~~ and ~~our~~adversely ~~other~~affect ~~product candidates are still in preclinical development. If we are unable to advance~~ our ~~product~~results ~~candidates~~of ~~through~~operations, ~~clinical development~~business, ~~obtain~~financial ~~regulatory~~results ~~approval~~ and ~~ultimately commercialize our product candidates,~~ /or ~~experience~~stock ~~significant delays in doing so, our business will be materially harmed~~price.

•

Uncertainty with respect to if or when the Merger will be completed.

•

Because the Merger Agreement (as defined below) provides for a fixed exchange ratio for the number of shares of Adaptimmune American Depositary Shares that will be issued for each outstanding share of our common stock, the consideration received at the time of the Merger may be lower than the public trading value of shares of our common stock when we entered into the Merger Agreement.

•

The Merger Agreement contains provisions that limit our ability to pursue alternatives to the Merger, could discourage a potential competing acquiror of us from making an alternative transaction proposal and, in specified circumstances, could require us to pay a termination fee to Adaptimmune.

•

Lawsuits may be filed against us and the members of our board of directors arising out of the Merger, which may delay or prevent the Merger.

•

Our approach to the discovery and development of product candidates based on our TRuC-T cell platform represents a novel approach to cancer treatment, which creates significant challenges for us. We are early in our development efforts. Gavo-cel, our most advanced product candidate, is in the Phase 2 portion of the Phase 1/2 clinical trial, TC-510 is in the Phase 1 portion of the Phase 1/2 clinical trial and our other product candidates are still in preclinical development. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

•

Our business is highly dependent on our clinical trials for our lead product candidates, gavo-cel and TC-510, and we must complete IND-enabling studies and clinical testing before we can seek regulatory approval and begin commercialization of any of our product candidates. We cannot be certain that we will be able to complete ongoing clinical trials, initiate future planned clinical trials, or advance our product candidates into additional trials, or to successfully develop, or obtain regulatory approval for, or successfully commercialize, any of our product candidates.

•

We have limited experience as a company in conducting clinical trials. Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidate.

•

Manufacturing and administering our product candidates are complex and we may encounter difficulties in production, particularly with respect to process development or scaling up of our manufacturing capabilities. If we encounter such difficulties, our ability to provide supply of our TRuC-T cells for clinical trials or for commercial purposes could be delayed or stopped. We plan to establish our own manufacturing facility and infrastructure in addition to or in lieu of relying on third parties for the manufacture of our product candidates and the use of third-party manufacturing suites, which will be costly, time-consuming, and which may not be successful.

•

The current novel coronavirus, or COVID-19, pandemic has caused, and could continue to cause, severe disruptions in the U.S., regional and global economies. COVID-19 has affected our on-going clinical trials and could seriously harm our development efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.

The market opportunities for our product candidates may be relatively small as they will be limited to those patients who are ineligible for or have failed prior treatments and our estimates of the prevalence of our target patient populations may be inaccurate.

•

We rely on third parties to conduct our clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.

•

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability. We have incurred significant losses since inception, and we expect to incur losses over the next several years and may not be able to achieve or sustain revenues or profitability in the future. If we fail to obtain additional financing, we may be unable to continue our research and product development programs.

•

If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to commercialize any product candidates we may develop, and our technology may be adversely affected.

•

~~The~~Our ~~U.S.~~restructuring ~~Food~~ and ~~Drug~~strategic ~~Administration~~reprioritization ~~(FDA)~~activities ~~regulatory~~in ~~approval~~the ~~process~~past isyear ~~lengthy~~may ~~and~~be ~~time-consuming,~~disruptive ~~and~~to weour ~~may~~operations ~~experience~~and ~~significant~~harm ~~delays~~our inbusiness ~~the clinical development~~ and ~~regulatory~~may ~~approval~~not ofbe ~~our product candidates~~successful.

•

The U.S. Food and Drug Administration (FDA) regulatory approval process is lengthy and time-consuming and we may experience significant delays in the clinical development and regulatory approval of our product candidates.

•

Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

•

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

•

Our stock price has been and will likely continue to be volatile. Securities class action or other litigation involving our company or members of our management team could also substantially harm our business, financial condition and results of operations.

•

WeUnstable ~~are~~global ~~an emerging growth company~~markets, economic and wepolitical ~~cannot~~conditions bemay ~~certain~~have ifserious ~~the~~adverse ~~reduced~~consequences ~~reporting~~on ~~requirements applicable to emerging growth companies will make~~ our ~~common~~business, ~~stock~~financial ~~less~~condition ~~attractive to investors. We are also a “smaller reporting company,”~~ and ~~the reduced disclosure requirements applicable to smaller reporting companies may make our common~~ stock ~~less attractive to investors~~price.

•

We are an emerging growth company and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors. We are also a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of TCR2 Therapeutics Inc. ("we," "us" and "our") contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continue” or the negative of these terms or other comparable terminology. Forward-looking statements appear in a number of places in this Quarterly Report on Form 10-Q and include, but are not limited to, statements about:

•

the occurrence of any event, change, or other circumstances that could delay or prevent closing of the transactions contemplated by, or give rise to the termination of that certain Agreement and Plan of Merger, dated as of March 5, 2023 (as amended, the “Merger Agreement”), by and among us, Adaptimmune Therapeutics plc, a public limited company incorporated in England and Wales (“Adaptimmune”), and CM Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Adaptimmune (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company, with the Company surviving as a wholly-owned subsidiary of Adaptimmune;

•

the timing of preclinical studies and clinical trials of gavo-cel, TC-510 and any other product candidates;

•

our need to raise additional funding before we can expect to generate any revenues from product sales;

•

our ability to submit our planned INDs, conduct successful clinical trials and obtain regulatory approval for gavo-cel, TC-510 or any other product candidates that we may identify or develop;

•

the ability of our TRuC-T cell platform to generate and advance additional product candidates;

•

our ability to establish an adequate safety, potency and purity profile for gavo-cel, TC-510 or any other product candidates that we may identify or develop;

•

our ability to manufacture gavo-cel, TC-510 or any other product candidate in conformity with our specifications and with the FDA’s requirements and to scale up manufacturing of our product candidates to commercial scale, if approved;

•

the implementation of our strategic plans for our business, any product candidates we may develop and our technology;

•

our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

•

the rate and degree of market acceptance and clinical utility for any product candidates we may develop;

•

our estimates regarding our expenses, future revenues, capital requirements and our needs for additional financing;

•

our ability to maintain and establish collaborations;

•

our ability to effectively manage our anticipated growth;

•

developments relating to our competitors and our industry, including the impact of government regulation;

•

our estimates regarding the market opportunities for our product candidates;

•

our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

•

our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for, or ability to obtain, additional financing;

•

our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or the JOBS Act;

•

the current and future impact of the ongoing COVID-19 pandemic on our business;

•

our financial performance; and

•

other risks and uncertainties, including those listed under the section titled “Risk Factors.”

Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, and involve known and unknown risks, uncertainties and other factors including, without limitation, risks, uncertainties and assumptions regarding the continuing impact of the COVID-19 pandemic on our business, operations, strategy, goals and anticipated timelines, our ongoing and planned preclinical activities, our ability to initiate, enroll, conduct or complete ongoing and planned clinical trials, our timelines for regulatory submissions and our financial position that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results under “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and in this Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. We do not intend, and undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.

Part I

Item 1. Financial Statements

TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

	September 30,2022			December 31,2021
	March 31,2023			December 31,2022
Assets
Current assets
Cash and cash equivalents	$	5414,~~006~~446		$	~~222~~32,~~564~~746
Investments		~~121~~95,~~980~~864			43116,~~029~~433
Prepaid expenses and other current assets		8,~~093~~821			105,~~534~~155
Total current assets		184,079			276,127
Assets held for sale		21,360			23,287
Property and equipment, net		29,083			17,075
Total current assets		140,491			177,621
Right-of-use assets, operating leases		57,704			28,283
Property and equipment, net		3,342			6,166
Restricted cash		1,152			1,156
Right-of-use assets, operating leases		5,811			22,510
Other assets, non-current		909			730
Restricted cash		1,152			1,152
Total assets	$	272,927		$	323,371
Other assets, non-current		717			787
Total assets	$	151,513		$	208,236
Liabilities and stockholders’ equity
Accounts payable	$	26,~~963~~320		$	2,~~144~~793
Accrued expenses and other current liabilities		139,~~185~~217			1310,~~094~~823
Operating lease liabilities		203,~~545~~268			321,~~367~~834
Total current liabilities		36,693			18,605
Operating lease liabilities related to assets held for sale		28,668			28,611
Operating lease liabilities, non-current		37,684			22,996
Total current liabilities		47,473			64,061
Other liabilities		-			293
Operating lease liabilities, non-current		2,710			3,316
Total liabilities		7450,~~377~~183			4167,~~894~~377
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued or outstanding as of September 30, 2022 and December 31, 2021, respectively.		-			-
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2023 and December 31, 2022, respectively.		-			-
Common stock, $0.0001 par value; 150,000,000 shares authorized; 38,657,061 and 38,496,484 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.		4			4
Common stock, $0.0001 par value; 150,000,000 shares authorized; 39,244,199 and 39,203,366 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.		4			4
Additional paid-in capital		~~639~~643,~~981~~257			~~631~~642,~~008~~644
Accumulated other comprehensive income (loss)		(~~596~~188	)		(13445	)
Accumulated deficit		(~~440~~541,~~839~~743	)		(~~349~~501,~~522~~344	)
Total stockholders’ equity		~~198~~101,~~550~~330			~~281~~140,~~477~~859
Total liabilities and stockholders’ equity	$	~~272~~151,~~927~~513		$	~~323~~208,~~371~~236

See accompanying notes to unaudited consolidated financial statements

TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share and per share data)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2022			2021			2022			2021
	2023			2022
Operating expenses
Research and development	$	2429,~~791~~265		$	2022,~~277~~320		$	~~73,441~~		$	~~54,828~~
General and administrative		6,312			5,963			18,636			17,297
Impairments and restructuring charges		4,041			563
Total operating expenses		31,103			26,240			92,077			72,125
General and administrative		8,201			6,320
Loss from operations		(31,103	)		(26,240	)		(92,077	)		(72,125	)
Total operating expenses		41,507			29,203
Interest income, net		510			38			925			186
Loss from operations		(41,507	)		(29,203	)
Loss before income tax expense		(30,593	)		(26,202	)		(91,152	)		(71,939	)
Interest income, net		1,111			117
Income tax expense		1			42			165			129
Loss before income tax expense		(40,396	)		(29,086	)
Net loss	$	(30,594	)	$	(26,244	)	$	(91,317	)	$	(72,068	)
Income tax expense		3			36
Per share information
Net loss	$	(40,399	)	$	(29,122	)
Net loss per share of common stock, basic and diluted	$	(0.79	)	$	(0.69	)	$	(2.37	)	$	(1.91	)
Per share information
Weighted average shares outstanding, basic and diluted		38,620,751			38,197,929			38,567,331			37,816,345
Net loss per share of common stock, basic and diluted	$	(1.03	)	$	(0.76	)
Weighted average shares outstanding, basic and diluted		39,220,984			38,513,104

See accompanying notes to unaudited consolidated financial statements

TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (~~LOSS)

(amounts in thousands)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2022			2021			2022			2021
	2023			2022
Net loss	$	(3040,~~594~~399	)	$	(2629,~~244~~122	)	$	~~(91,317~~	)	$	~~(72,068~~	)
Unrealized gain (loss) on investments, net		75257			4(331	)		~~(583~~	)		~~(78~~	)
Comprehensive loss	$	(3040,~~519~~142	)	$	(2629,~~240~~453	)	$	~~(91,900~~	)	$	~~(72,146~~	)

See accompanying notes to unaudited consolidated financial statements

TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands, except share amounts)

					Additional					Accumulated Other			Total
	Common Stock				Paid-In		Accumulated			Comprehensive			Stockholders'
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance as of December 31, 2022		39,203,366	$	4	$	642,644	$	(501,344	)	$	(445	)	$	140,859
Vesting of restricted stock units		8,415		-		-		-			-			-
Issuance of common stock related to ESPP		32,418		-		34		-			-			34
Stock-based compensation expense		-		-		579		-			-			579
Unrealized gain on investments		-		-		-		-			257			257
Net loss		-		-		-		(40,399	)		-			(40,399	)
Balance as of March 31, 2023		39,244,199	$	4	$	643,257	$	(541,743	)	$	(188	)	$	101,330
					Additional					Accumulated Other			Total
	Common Stock				Paid-In		Accumulated			Comprehensive			Stockholders'
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance as of December 31, 2021		38,496,484	$	4	$	631,008	$	(349,522	)	$	(13	)	$	281,477
Exercise of stock options including ESPP shares issued		49,861		-		115		-			-			115
Issuance of common stock related to ESPP		49,861		-		115		-			-			115
Stock-based compensation expense		-		-		3,177		-			-			3,177
Unrealized loss on investments		-		-		-		-			(331	)		(331	)
Net loss		-		-		-		(29,122	)		-			(29,122	)
Balance as of March 31, 2022		38,546,345	$	4	$	634,300	$	(378,644	)	$	(344	)	$	255,316
Issuance of common stock, net of issuance costs		10,498		-		-		-			-			-
Exercise of stock options including ESPP shares issued		42,073		-		28		-			-			28
Stock-based compensation expense		-		-		2,847		-			-			2,847
Unrealized loss on investments		-		-		-		-			(327	)		(327	)
Net loss		-		-		-		(31,601	)		-			(31,601	)
Balance as of June 30, 2022		38,598,916	$	4	$	637,175	$	(410,245	)	$	(671	)	$	226,263
Exercise of stock options including ESPP shares and restricted stock units vested and issued		58,145		-		113		-			-			113
Stock-based compensation expense		-		-		2,693		-			-			2,693
Unrealized gain on investments		-		-		-		-			75			75
Net loss		-		-		-		(30,594	)		-			(30,594	)
Balance as of September 30, 2022		38,657,061	$	4	$	639,981	$	(440,839	)	$	(596	)	$	198,550
					Additional					Accumulated Other			Total
	Common Stock				Paid-In		Accumulated			Comprehensive			Stockholders'
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance as of December 31, 2020		33,516,795	$	3	$	486,197	$	(249,715	)	$	63		$	236,548
Issuance of common stock, net of issuance costs		4,590,164		1		131,329		-			-			131,330
Exercise of stock options including ESPP shares issued		52,243		-		376		-			-			376
Stock-based compensation expense		-		-		3,120		-			-			3,120
Unrealized loss on investments		-		-		-		-			(107	)		(107	)
Net loss		-		-		-		(21,512	)		-			(21,512	)
Balance as of March 31, 2021		38,159,202	$	4	$	621,022	$	(271,227	)	$	(44	)	$	349,755
Exercise of stock options including ESPP shares issued		22,129		-		204		-			-			204
Stock-based compensation expense		-		-		3,219		-			-			3,219
Unrealized gain on investments		-		-		-		-			25			25
Net loss		-		-		-		(24,312	)		-			(24,312	)
Balance as of June 30, 2021		38,181,331	$	4	$	624,445	$	(295,539	)	$	(19	)	$	328,891
Exercise of stock options including ESPP shares issued		39,113		-		433		-			-			433
Stock-based compensation expense		-		-		3,186		-			-			3,186
Unrealized gain on investments		-		-		-		-			4			4
Net loss		-		-		-		(26,244	)		-			(26,244	)
Balance at September 30, 2021		38,220,444	$	4	$	628,064	$	(321,783	)	$	(15	)	$	306,270

See accompanying notes to unaudited consolidated financial statements

TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2022			2021
	2023			2022
Operating activities
Net loss	$	(9140,~~317~~399	)	$	(7229,~~068~~122	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		~~2,300~~615			~~1,976~~706
Stock-based compensation expense		8,717			9,525
Impairment and restructuring charges		3,044			(831	)
(Accretion) / Amortization on investments		(403	)		626
Stock-based compensation expense		579			3,177
Deferred tax liabilities		(293	)		105
(Accretion) / Amortization on investments		(475	)		20
Deferred tax liabilities		-			21
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		2(1,~~618~~630	)		(414,400	)
Operating leases, net		(2,~~445~~415	)		~~(2,811~~375	)
Accounts payable		~~(637~~3,527	)		21,~~066~~756
Accrued expenses and other liabilities		66(2,856	)		(2,~~299~~836	)
Cash used in operating activities		(7640,~~504~~010	)		(5831,~~323~~134	)
Investing activities
Purchases of equipment		(~~12,681~~158	)		(41,~~352~~911	)
Software development costs		~~(330~~-	)		(~~308~~66	)
Purchases of investments		(215,619	)		(40,732	)
Sale of equipment		543			-
Proceeds from sale or maturity of investments		136,488			140,622
Purchases of investments		(13,699	)		(148,382	)
Cash provided by (used in) investing activities		(92,142	)		95,230
Proceeds from sale or maturity of investments		35,000			32,989
Cash provided by (used in) investing activities		21,686			(117,370	)
Financing activities
Proceeds from public offering of common stock, net of issuance costs		-			131,330
Proceeds from the exercise of stock options		34			115
Proceeds from the exercise of stock options		256			1,013
Payment of deferred offering costs		(10	)		(56	)
Payment of deferred offering costs		(172	)		(336	)
Cash provided by financing activities		24			59
Cash provided by financing activities		84			132,007
Net change in cash, cash equivalents, and restricted cash		(18,300	)		(148,445	)
Net change in cash, cash equivalents, and restricted cash		(168,562	)		168,914
Cash, cash equivalents, and restricted cash at beginning of year		33,898			223,720
Cash, cash equivalents, and restricted cash at beginning of year		223,720			94,738
Cash, cash equivalents, and restricted cash at end of period	$	15,598		$	75,275
Cash, cash equivalents, and restricted cash at end of period	$	55,158		$	263,652
Supplemental disclosure and noncash activities
Supplemental disclosure of noncash activities
Property and equipment additions in accounts payable and accrued expenses	$	-		$	1,099
Property and equipment additions in accounts payable and accrued expenses	$	1,973		$	481
Right-of-use assets obtained in exchange for operating lease liabilities	$	-		$	28,831
Right-of-use assets obtained in exchange for operating lease liabilities	$	40,628		$	21,315
Operating cash flows used in operating leases	$	16,965		$	3,287
Operating cash flows used in operating leases	$	14,704		$	9,171
Reduction of right-of-use assets and operating lease liabilities due to an operating lease modification	$	3,095		$	-

See accompanying notes to unaudited consolidated financial statements

910

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

1. Organization and Description of Business

TCR2 Therapeutics Inc. (the "Company") is a clinical-stage cell therapy company with a pipeline of novel T cell therapies for cancer patients suffering from solid tumors. The Company was incorporated under the laws of the State of Delaware on May 29, 2015 under the name TCR2, Inc. In November 2016, the Company changed its name to TCR2 Therapeutics Inc. The Company’s principal operations are located in Cambridge, Massachusetts.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Proposed Transaction with Adaptimmune

On March 5, 2023, the Company entered into a definitive agreement with Adaptimmune Therapeutics plc, a public limited company incorporated in England and Wales ("Adaptimmune"), and CM Merger Sub., Inc., a Delaware Corporation and an indirect wholly owned subsidiary of Adaptimmune ("Merger Sub"), pursuant to which, upon the terms and subject to the conditions thereof, the Company will become a wholly-owned indirect subsidary of Adaptimmune (as amended, the “Merger Agreement” and such transaction, the “Merger”). The combined company will create a preeminent cell therapy company focused on treating solid tumors. The combination provides extensive advantages for clinical development and product delivery supported by complementary technology platforms. The lead clinical franchises for the combined company utilize engineered T-cell therapies targeting MAGE A4 and mesothelin. These targets are expressed on a broad range of solid tumors and are supported by compelling early- and late-stage clinical data. The combined company also has a preclinical pipeline of additional target opportunities with development initially focused on PRAME and CD70.

The Merger Agreement was approved by the Company's board of directors (the “Board”), and the Board resolved to recommend approval of the Merger Agreement to its stockholders. The closing of the Merger is subject to approval of its stockholders and the satisfaction of other closing conditions. In connection with the execution of the Merger Agreement, certain of its stockholders and certain shareholders of Adaptimmune entered into voting and support agreements with the Company and Adaptimmune, respectively, pursuant to which they have agreed, among other things, and subject to the terms and conditions of the agreements, to vote their shares in favor of the Merger Agreement and the Merger, in accordance with the recommendation of the respective boards of directors of Adaptimmune and the Company.

Subject to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company's common stock (other than shares of the Company's common stock held as treasury stock, or shares of the Company's common stock owned by Adaptimmune, Merger Sub or any direct or indirect wholly-owned subsidiaries of Adaptimmune), including shares of the Company's common stock underlying our restricted stock units that immediatly vest upon a change of control of the Company, will be converted into the right to receive 1.5117 American Depositary Shares of Adaptimmune (each an “Adaptimmune ADS”) with each Adaptimmune ADS representing six ordinary shares of Adaptimmune. Following the closing of the Merger, Adaptimmune shareholders will own approximately 75% of the combined company and the Company's stockholders will own approximately 25% of the combined company. The Company's special meeting of stockholders to vote on the proposal to adopt the Merger Agreement is scheduled for May 30, 2023.

Shelf registration statement

On March 16, 2021, the Company filed an automatic shelf registration statement on Form S-3 (the Shelf), with the Securities and Exchange Commission (SEC), which covers the offering, issuance and sale of an indeterminate amount of the Company’s common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. The Shelf was automatically effective when filed. On March 22, 2022, the Company amended the Shelf to cover the offering, issuance and sale of up to an aggregate of $300.0 million of the Company's common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. The amendment to the Shelf was declared effective by the SEC on March 23, 2022. The Company previously entered into a sales agreement with Jefferies LLC, as sales agent, to provide for the issuance and sale by the Company of up to $100.0 million of our common stock from time to time in “at-the-market” offerings under the Shelf, which we refer to as the ATM Program.

~~Equity offerings~~11

On January 22, 2021, the Company closed a public offering of its common stock pursuant to which it issued and sold 4,590,164 shares of its common stock at a price to the public of $30.50 per share. The aggregate net proceeds received by the Company from the offering were approximately $131.3 million after deducting $8.7 million relating to underwriting discounts and commissions and offering expenses.

2. Liquidity

The Company’s operations to date have focused on organization and staffing, business planning, raising capital, acquiring technology and assets, manufacturing, and conducting preclinical studies and clinical activities. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company’s product candidates are subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidates.

The Company is subject to a number of risks including, but not limited to, the need to obtain adequate additional funding for the ongoing and planned clinical development of its product candidates. Because of the numerous risks and uncertainties associated with pharmaceutical products and development, the Company is unable to accurately predict the timing or amount of funds required to complete development of its product candidates, and costs could exceed the Company’s expectations for a number of reasons, including reasons beyond the Company’s control. The Company is also subject to a number of other risks including possible failure of preclinical studies or clinical trials, the need to obtain marketing approval for its product candidates, the development of new technological innovations by competitors, the need to successfully commercialize and gain market acceptance of any of the Company’s products that are approved and uncertainty around intellectual property matters. If the Company does not successfully commercialize any of its products, it will be unable to generate product revenue or achieve profitability.

The Company expects to continue to generate losses for the foreseeable future. The Company expects that its cash, cash equivalents and investments as of September 30, 2022 of $176.0 million will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these unaudited consolidated financial statements.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

million of the Company's common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. The amendment to the Shelf was declared effective by the SEC on March 23, 2022. The Company previously entered into a sales agreement with Jefferies LLC, as sales agent, to provide for the issuance and sale by the Company of up to $100.0 million of our common stock from time to time in “at-the-market” offerings under the Shelf, which we refer to as the ATM Program.

2. Liquidity

The Company’s operations to date have focused on organization and staffing, business planning, raising capital, acquiring technology and assets, manufacturing and conducting clinical and preclinical studies. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company’s product candidates are subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidates.

During January 2023, the Company announced a reprioritization of the Company’s clinical and research priorities and a corresponding reduction in workforce and adjustment to the Company’s manufacturing network, designed to reduce costs and reallocate resources while maintaining the personnel needed to support the Company’s key programs and refocused pipeline. The reduction in personnel was substantially completed during January 2023. In addition, the Company took steps to reduce its manufacturing costs by providing ElevateBio with a notice of termination for its manufacturing agreement in January 2023, with the agreement effectively terminating in April 2023, and is seeking to exit its lease related to the Rockville, Maryland manufacturing facility.

The Company has incurred net losses from operations since inception. The Company expects to continue to generate losses for the foreseeable future. The Company expects that its cash, cash equivalents and investments as of March 31, 2023 of $110.3 million will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these unaudited consolidated financial statements.

3. Summary of Significant Accounting Policies

Principles of consolidation and basis of presentation

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and in accordance with Article 10 of Regulation S-X of the SEC, and reflect the financial position, results of operations and cash flows of the Company's business. Accordingly, they do not include all of the disclosures required by U.S. GAAP for a complete set of annual audited financial statements. All significant intercompany accounts and transactions are eliminated in consolidation.

The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K filed with the SEC on March 22, 2022 for the year ended December 31, 2021 (the 2021 Form 10-K). In the opinion of the Company's management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K filed with the SEC on March 23, 2023 for the year ended December 31, 2022 (the "2022 Form 10-K"). In the opinion of the Company's management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included.

Financial statement presentation

Certain reclassifications have been made to prior periods to conform with the current period presentation. On the consolidated statement of operations, the Company reclassified amounts for impairments and restructuring charges for the three months ended March 31, 2022 from research and development expenses to a separate financial statement line item within operating expenses to conform to current period presentation of impairments and restructuring charges.

Use of estimates

The preparation of the accompanying unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these unaudited consolidated financial statements include, but are not limited to, the measurement of right-of-use assets and lease liabilities and held for sale assets and liabilities, accrued expenses related to research and development activities, the fair value of the royalty transfer agreement obligations, and the fair value of stock-based compensation awards granted under the Company’s equity-based compensation plans. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the unaudited consolidated financial statements, actual results may materially vary from these estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Concentrations of credit risk and of manufacturing risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and investments. The Company’s cash, cash equivalents and investments are held by financial institutions in the United States. Amounts on deposit may at times exceed federally insured limits. Management believes that the financial institutions are financially sound, and accordingly, minimal credit risk exists with respect to the financial institutions.

As of ~~September~~March 3031, ~~2022~~2023, the Company has manufacturing arrangements with vendors for the supply of materials for use in preclinical and clinical studies. If the Company were to experience any disruptions in the vendors' ability or willingness to continue to provide manufacturing services, the Company may experience significant delays in its product development timelines and may incur substantial costs to secure alternative sources of manufacturing.

Fair value of financial instruments

As of ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022, the Company’s financial instruments consist of money market funds, ~~U.S.~~commercial ~~Treasury securities~~paper, agency and corporate bonds and asset-backed securities are included in investments. The carrying value of investments is the estimated fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

1113

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

Cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022, cash equivalents consisted of U.S treasuries, corporate bonds, and government-backed money market funds.

Investments

As of ~~September~~March 3031, ~~2022~~2023, all investments were classified as available-for-sale and were carried at their estimated fair value. WeUnrealized ~~report~~gains ~~available-for-sale~~and losses are recorded as a component of accumulated other comprehensive income (loss) until realized. The Company determines the appropriate classification of its investments in debt securities at ~~fair~~the ~~value~~time of purchase and re-evaluates such determination at each balance sheet date,. ~~and~~The ~~include~~Company ~~any~~periodically ~~unrealized~~reviews ~~holding~~its ~~gains~~investments in debt securities for impairment and ~~losses~~adjusts ~~(the~~these ~~adjustment~~investments to their fair value) inwhen ~~accumulated~~a ~~other~~decline ~~comprehensive~~in ~~income~~market ~~(loss),~~value ais ~~component~~deemed ofto ~~stockholders'~~be ~~equity.~~other ~~Realized~~than ~~gains~~temporary. ~~and~~If losses ~~are~~on ~~determined~~these ~~using~~securities ~~the~~are ~~specific-identification~~considered ~~method,~~to ~~and~~be ~~are~~other ~~included~~than intemporary, ~~interest~~the ~~income,~~loss ~~net~~is recognized in ~~our~~the ~~consolidated~~ statement of operations. The Company classifies its available-for-sale marketable securities as current or non-current based on each instrument’s underlying effective maturity date and for which the Company has the intent and ability to hold the investment for a period of greater than 12 months. Marketable securities with maturities of less than 12 months are classified as current and are included in investments in the consolidated balance sheets. Marketable securities with maturities greater than 12 months for which the Company has the intent and ability to hold the investment for greater than 12 months are classified as non-current and are included in investments, non-current in the consolidated balance sheets.

Assets not placed in service

Assets not placed in service ~~includes~~include ~~direct costs related to~~ the acquisition of ~~property~~laboratory ~~and~~ equipment ~~including leasehold improvements~~. Such costs are not depreciated until the asset is completed and placed into service. As of March 31, 2023 laboratory equipment with a carrying amount of $0.8 million met the criteria to be presented as assets held for sale. As a result, these assets have been removed from their respective categories on the balance sheet as of March 31, 2023 and have been presented separately within assets held for sale in the current asset section of the balance sheet. See Note 11 for further information.

Impairment of long-lived assets

Long-lived assets classified as held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated. Impairment charges are recognized at the amount by which the carrying amount of an asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. During the year ended December 31, 2021, the Company recognized impairment of long-lived assets in association with the wind down of its manufacturing operations in the United Kingdom. See Note 11, Restructuring.

NoA ~~impairments of~~ long-lived ~~assets~~asset or disposal group classified as held for sale is measured at the ~~three-month~~lower ~~and~~of ~~nine~~its carrying amount or fair value less cost to sell. An impairment loss is recognized for any initial or subsequent write-~~month~~down ~~periods~~to ~~ended~~fair ~~September~~value 30less cost to sell. A gain is recognized for any subsequent increase in fair value less cost to sell, ~~2022~~but ~~were~~not in excess of the cumulative loss previously recognized for the long-lived asset or disposal group.

~~Restricted~~Impairment ~~cash~~charges are presented in the statements of operations in a separate line item within operating expenses with other restructuring charges recognized during the respective periods. During the three months ended March 31, 2023, the Company recognized an impairment charge for the write-down of long-lived assets classified as held for sale related to personal property assets of $1.9 million. During the three months ended March 31, 2022, the Company recognized a charge for the impairment of long-lived assets and restructuring expenses related to the wind down of the UK manufacturing operations. See Note 11 for further information.

Cash accounts that are restricted as to withdrawal or usage are presented as restricted cash in the Company's balance sheets. Restricted cash includes amounts held as a security deposit in the form of a letter of credit for the Company’s leased facilities.14

Deferred offering costs

The Company capitalizes costs that are directly associated with in-process equity financings until such financings are consummated at which time such costs are recorded against the gross proceeds of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

Restricted cash

On March 13, 2023, the Federal Deposit Insurance Corporation ("FDIC") stated it had transferred all of the deposits, both insured and uninsured, and substantially all of the assets of Silicon Valley Bank to the Silicon Valley Bridge Bank, N.A., a bridge bank that will be operated by the FDIC. The Company’s restricted cash balances had historically been held as certificates of deposit at Silicon Valley Bank, and those assets were transferred to Silicon Valley Bridge Bank, N.A. as of March 31, 2023.

Deferred offering costs

Assets held for sale

The Company records assets and corresponding liabilities as held for sale that meet the criteria outlined for this designation in ASC 360, Property, Plant, and Equipment. A long-lived asset or disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. Assets and liabilities held for sale are included in a separate financial statement line item in the balance sheets for the periods they meet this designation.

Stock-based compensation

The Company measures stock-based awards at grant-date fair value and records compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. The Company accounts for forfeitures as they occur.

The Company issues share-based compensation awards with service-only and performance- and service- based criteria. For performance-based awards, share-based compensation is based on estimated performance until the performance measurement date. At the performance measurement date, share-based compensation is adjusted to actual performance.

Estimating the fair value of stock options and warrants requires the input of subjective assumptions, including the expected life of the instrument and stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards and warrants. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

The Company classifies stock-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases are classified at their commencement date, which is defined as the date on which the lessor makes the underlying asset available for use by the lessee, as either operating or finance leases based on the economic substance of the agreement. The Company recognizes lease right-of-use assets and related liabilities in its consolidated balance sheets for both operating and finance leases. Lease liabilities are measured at the lease commencement date as the present value of the future lease payments using the interest rate implicit in the lease, or the incremental borrowing rate if the rate implicit in the lease is not readily determinable. Lease right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments less expected lease incentives. The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. The Company recognizes operating lease costs in operating expenses in its consolidated statements of operations, inclusive of rent escalation provisions and rent holidays, on a straight-line basis over the respective lease term.

~~Research and development expenses~~15

Research and development costs are expensed as incurred and consist primarily of funds paid for employee wages and funds paid to third parties for the provision of services for product candidate development, clinical and preclinical development and related supply and manufacturing costs, and regulatory compliance costs. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these costs.

Upfront milestone payments made to third parties who perform research and development services on the Company’s behalf are expensed as services are rendered.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

lease commencement date as the present value of the future lease payments using the interest rate implicit in the lease, or the incremental borrowing rate if the rate implicit in the lease is not readily determinable. Lease right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments less expected lease incentives. The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. The Company recognizes operating lease costs in operating expenses in its consolidated statements of operations, inclusive of rent escalation provisions and rent holidays, on a straight-line basis over the respective lease term.

Research and development expenses

Upfront milestone payments made to third parties who perform research and development services on the Company’s behalf are expensed as services are rendered.

Transaction costs

All expenses related to the proposed transaction with Adaptimmune are expensed as incurred.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A reduction in the carrying value of the deferred tax assets is required when it is not more likely than not that such deferred tax assets are realizable.

Net loss per share

Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-average shares of common stock outstanding during the period. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive. Therefore, the weighted-average shares used to calculate both basic and diluted loss per share are the same.

The following potentially dilutive securities, on an as converted basis, have been excluded from the computation of diluted weighted-average shares outstanding as of September 30, 2022 and 2021, as they would be antidilutive:16

	As of September 30,
	2022		2021
Stock options outstanding		5,588,987		5,495,365
Common stock warrants		203,676		203,676
Restricted stock units		1,066,992		-
Employee stock purchase plan		15,971		4,011
Total		6,875,626		5,703,052

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

The following potentially dilutive securities, on an as converted basis, have been excluded from the computation of diluted weighted-average shares outstanding as of March 31, 2023 and 2022, as they would be antidilutive:


	As of March 31,
	2023		2022
Stock options outstanding		3,588,655		5,905,550
Common stock warrants		203,676		203,676
Unvested restricted stock units		1,110,660		66,000
Employee stock purchase plan		4,637		10,169
Total		4,907,628		6,185,395

Comprehensive loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources (which excludes investments from owners). The Company’s only element of other comprehensive loss is unrealized gains and losses on investments.

Common stock

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.

Preferred stock

The Board of Directors or any authorized committee thereof is expressly authorized, to the fullest extent permitted by law, to provide by resolution or resolutions for, out of the unissued shares of Undesignated Preferred Stock, the issuance of the shares of Undesignated Preferred Stock in one or more series of such stock, and by filing a certificate of designations pursuant to applicable law of the State of Delaware, to establish or change from time to time the number of shares of each such series, and to fix the designations, powers, including voting powers, full or limited, or no voting powers, preferences and the relative, participating, optional or other special rights of the shares of each series and any qualifications, limitations and restrictions thereof. As of ~~September~~March 3031, ~~2022~~2023, there are no preferred shares issued.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

Reconciliation of cash, cash equivalents and restricted cash as presented in the statements of cash flows

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited consolidated balance sheets to the total of the same such amounts shown in the unaudited consolidated statements of cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022.

	As of September 30,
	As of March 31,
	2022		2021
	2023		2022
Cash and cash equivalents	$	5414,~~006~~446	$	~~262~~74,~~497~~117
Restricted cash		1,152		1,~~155~~158
Cash, cash equivalents and restricted cash shown in the statements of cash flows	$	5515,~~158~~598	$	~~263~~75,~~652~~275

Segment information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one consolidated operating segment.

~~JOBS Act accounting election~~17

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

4. Investments and Fair Value Measurements

As of September 30, 2022, investments were comprised of the following:

		AmortizedCost				UnrealizedGains				UnrealizedLosses				FairValue
U.S. Treasury securities		$	122,576			$	-			$	(596	)		$	121,980

As of December 31, 2021, investments were comprised of the following:

	AmortizedCost		UnrealizedGains		UnrealizedLosses			FairValue
Corporate bonds	$	33,048	$	-	$	(11	)	$	33,037
U.S. Treasury securities		9,994		-		(2	)		9,992
Total	$	43,042	$	-	$	(13	)	$	43,029

Investments in corporate bonds are in accordance with our corporate investment policy which requires investment in Investment Grade Bonds as defined by the three major bond-ratings agency.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

JOBS Act accounting election

4. Investments and Fair Value Measurements

As of March 31, 2023, investments were comprised of the following:


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. Treasury securities	$	96,052	$	-	$	(188	)	$	95,864

As of December 31, 2022, investments were comprised of the following:


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. Treasury securities	$	116,878	$	-	$	(445	)	$	116,433

The amortized cost and estimated fair value of marketable securities, by contractual maturity:

September 30, 2022

March 31, 2023

AmortizedCost

Fair Value

Due within one year or less

~~122~~96,~~576~~052

~~121~~95,~~980~~864

December 31, 2021

December 31, 2022

AmortizedCost

Fair Value

Due within one year or less

43116,~~042~~878

43116,~~029~~433

The Company follows FASB’s accounting guidance on fair value measurements for financial assets and liabilities measured on a recurring basis. Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. Where available, fair value is based on observable market prices, or parameters derived from such prices. Where observable prices or inputs are not available, valuation models are applied. This hierarchy requires the use of observable market data when available and to minimize the use of unobservable inputs when determining fair value. These valuation techniques involve some level of management estimation and judgment. The degree of management estimation and judgment is dependent on the price transparency for the instruments, or market, and the instruments’ complexity.

The guidance requires fair value measurements to be classified and disclosed in one of the following three categories:

Level 1—Quoted prices (unadjusted in active markets for identical assets or liabilities)

Level 2—Inputs other than quoted prices in active markets that are observable either directly or indirectly

Level 3—Unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions

~~As of September 30, 2022, the Company has classified assets measured at fair value on a recurring basis as follows:~~18

					Fair Value Measurement Based on
	Amortized				QuotedPrices inActiveMarket		SignificantOtherObservableInputs		SignificantUnobservableInputs
	Cost		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash equivalents (1)	$	51,693	$	51,693	$	51,693	$	-	$	-
U.S. Treasury securities		122,576		121,980		-		121,980		-
Total	$	174,269	$	173,673	$	51,693	$	121,980	$	-

As of December 31, 2021, the Company has classified assets measured at fair value on a recurring basis as follows:

					Fair Value Measurement Based on
	Amortized				QuotedPrices inActiveMarket		SignificantOtherObservableInputs		SignificantUnobservableInputs
	Cost		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash equivalents (1)	$	219,162	$	219,162	$	219,162	$	-	$	-
Corporate bonds		33,048		33,037		-		33,037		-
U.S. Treasury securities		9,994		9,992		-		9,992		-
Total	$	262,204	$	262,191	$	219,162	$	43,029	$	-

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

As of March 31, 2023, the Company has classified assets measured at fair value on a recurring basis as follows:


					Fair Value Measurement Based on
	Amortized				Quoted Prices in Active Market		Significant Other Observable Inputs		Significant Unobservable Inputs
	Cost		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash equivalents (1)	$	12,755	$	12,755	$	12,755	$	-	$	-
U.S. Treasury securities		96,052		95,864		-		95,864		-
Total	$	108,807	$	108,619	$	12,755	$	95,864	$	-

As of December 31, 2022, the Company has classified assets measured at fair value on a recurring basis as follows:


					Fair Value Measurement Based on
	Amortized				Quoted Prices in Active Market		Significant Other Observable Inputs		Significant Unobservable Inputs
	Cost		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash equivalents (1)	$	30,820	$	30,820	$	30,820	$	-	$	-
U.S. Treasury securities		116,878		116,433		-		116,433		-
Total	$	147,698	$	147,253	$	30,820	$	116,433	$	-

(1) Includes cash sweep accounts, U.S. Treasury money market mutual fund, bank certificates of deposit, U.S. Treasury bills and corporate bonds that have a maturity of three months or less from the original acquisition date.

5. Property and Equipment

Property and equipment, net, consisted of:

	As of
	September 30, 2022			December 31, 2021
	March 31, 2023			December 31, 2022
Laboratory equipment	$	127,~~013~~229		$	1310,~~115~~580
Computer hardware and equipment		-			54
Furniture and fixtures		326			326
Furniture and fixtures		326			376
Leasehold improvements		476			476
Leasehold improvements		477			551
Assets not placed in service		145			887
Assets not placed in service		22,360			7,592
		8,176			12,269
		35,176			21,688
Less: accumulated depreciation		(4,834	)		(6,103	)
Less: accumulated depreciation		(6,093	)		(4,613	)
	$	3,342		$	6,166
	$	29,083		$	17,075

~~Depreciation~~The ~~expense~~decrease ~~was~~in ~~$2.0~~property ~~million~~ and ~~$1.1~~equipment, ~~million~~net ~~for~~is primarily driven by the ~~nine~~reclassification ~~months~~of ~~ended~~certain ~~September~~personal ~~30,~~property ~~2022~~assets not placed in service and ~~2021~~laboratory equipment to assets held for sale as of March 31, ~~respectively~~2023. See Note 11 for details.

Depreciation expense was $0.5 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of:

	As of
	September 30, 2022		December 31, 2021
	March 31, 2023		December 31, 2022
Employee compensation and related benefits	$	42,~~511~~303	$	4,~~631~~858
Professional fees		~~660~~3,042		~~413~~533
Contract manufacturing organization fees		~~1,055~~804		~~1,261~~873
Contract research organization fees		52,~~218~~425		23,~~810~~725
Property received not yet invoiced		1,097		748
Other		643		834
Accrued restructuring charges		-		2,401
	$	9,217	$	10,823
Other		644		830
	$	13,185	$	13,094

7. Commitments and Contingencies

Litigation

The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings.

Royalty transfer agreement

In connection with the sale of Series A redeemable convertible preferred stock, certain investors are entitled to receive, in the aggregate, a royalty from the Company equal to one percent of (i) all global net sales of any Company products and (ii) any license income on intellectual property that was in existence at the time of the Series A preferred stock financing. The Company has elected to account for this liability at fair value with changes recognized in the statements of operations. Given the early-stage nature of the underlying technology and inherent risks associated with obtaining regulatory approval and achieving commercialization, the Company ascribed no value to the royalty agreement at inception and as of ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022. The Company currently does not have any net sales or license income and as a result has paid no royalties under this obligation for the three months ended March 31, 2023 and ~~nine~~2022 ~~months~~nor has the Company accrued any liability as of March 31, 2023 or December 31, 2022.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

ended September 30, 2022 and 2021 nor has the Company accrued any liability as of September 30, 2022 or December 31, 2021.

8. Leases

The Company leases all of its offices and facilities under operating leases. The Company has entered into various non-cancellable lease arrangements for facilities expiring at various times through 2036. Certain of these arrangements have free rent periods or escalating rent payment provisions. None of our leases include residual value guarantees.

Fixed fees for use of property or equipment and other services are included in the right-of-use assets and lease liabilities. Rent expense is recognized on a straight-line basis for total rent over the lease period. Variable service costs are included in the lease expense as incurred. The Company is generally obligated for the cost of property taxes, insurance, common area maintenance, and other administrative fees relating to its leases, which are considered variable lease costs and are expensed as incurred. In addition, the Company enters into contracts that have different service obligations. These contracts are considered multiple-element service contracts. When leases are embedded in multiple-element service contracts, all contract services are accounted for as a single lease component since the Company elected the practical expedient to not separate lease components and non-lease components.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

Operating leases

Office space and lab facility, Cambridge, Massachusetts

In March 2018, the Company entered into a lease for office and laboratory facilities that expires in July 2025. Under the terms of the lease, the Company placed a $0.3 million letter of credit into a restricted cash account as security for the facility.

Office space, Cambridge, Massachusetts

In September 2019, the Company entered into a lease for office facilities that expires in August 2024. Under the terms of the lease, the Company placed a $0.1 million letter of credit into a restricted cash account as security for the facility.

Lab facility, Cambridge Massachusetts

In November 2020, the Company entered into a lease for office and laboratory facilities that expires in January 2024. Under the terms of the lease, the Company placed a $0.2 million letter of credit into a restricted cash account as security for the facility.

Manufacturing facility, Waltham, Massachusetts

In November 2020, the Company entered into a manufacturing agreement with ElevateBio LLC (ElevateBio) which includes identified space dedicated to the Company. The Company determined that the agreement contained an embedded lease. The lease began in February 2021 when the Company obtained control of the dedicated manufacturing space and was for a contractual period ended July 2022.

In February 2022, the Company executed an agreement that expanded its partnership with ElevateBio by obtaining a second GMP manufacturing suite at ElevateBio BaseCamp in Waltham, Massachusetts through December 2023, and also updated terms in the original agreement including extending the contractual period through December 2023. As a result of this agreement, the Company recorded additional right-of-use assets and operating lease liabilities of approximately $28.8 million to reflect this new agreement during the ~~period~~three ~~ending~~months ended March 31, 2022.

18During January 2023, the Company notified ElevateBio that it was terminating the agreement. As a result, the Company recognized the impact of this lease modification during the three months ended March 31, 2023, based on the remaining term of the lease agreement. The agreement provides for a three-month notice period and a $10.0 million payment upon termination. The termination payment amount associated with the ElevateBio agreement is included in research and development expenses in the Company's statement of operations for the three months ended March 31, 2023. The termination payment was paid during the three months ended March 31, 2023 and the agreement formally terminated in April 2023.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

Manufacturing facility, Rockville, Maryland

In March 2021, the Company entered into a lease for a new manufacturing facility for an initial term of 15 years through June 2036. The Company also has an option to extend the term of the lease for two consecutive terms of five years each. The Company placed a $0.6 million letter of credit into a restricted cash account as security for the facility.

During the second quarter of 2022, our right-of-use asset and associated lease liabilities related to the Rockville, Maryland facility increased by $11.8 million due to a change in expected reimbursements.

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

the Company also began to seek selling alternatives for construction-in-progress assets and personal property assets at the Rockville, Maryland manufacturing facility through either the prospective third party assuming the lease arrangement or after-market selling channels. As such, the Rockville, Maryland manufacturing facility long-lived assets, which consist of operating lease right-of-use assets, construction-in-progress assets and personal property assets, have been reclassified as held for sale beginning as of December 31, 2022. In addition, operating lease liabilities which directly related to Rockville, Maryland right-of-use assets have also been reclassified as held for sale beginning as of December 31, 2022. The Rockville, Maryland disposal group has thus been removed from those respective balance sheet categories and has been presented separately as assets and liabilities held for sale in the balance sheets, measured at the lower of their carrying amount or fair value less cost to sell as of March 31, 2023 and December 31, 2022. See Note 11 for further information.

Right-of-use assets and lease liabilities:

	September 30,2022		December 31, 2021
	March 31,2023		December 31, 2022
Assets:
Right-of-use assets, operating leases	$	575,~~704~~811	$	2822,~~283~~510
Right-of-use assets, operating leases included in assets held for sale		17,463		17,463
	$	23,274	$	39,973
Liabilities
Operating lease liabilities	$	203,~~545~~268	$	321,~~367~~834
Operating lease liabilities, non-current		372,~~684~~710		223,~~996~~316
Total lease liabilities	$	58,229	$	26,363
Operating lease liabilities related to assets held for sale		28,668		28,611
Total lease liabilities	$	34,646	$	53,761

The components of the lease costs for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, were as follows:

	September 30,2022		September 30,2021
	March 31,2023		March 31,2022
Operating lease costs	$	1614,~~545~~300	$	53,~~579~~432
Short-term lease costs		~~549~~128		~~395~~209
Variable lease costs		41,~~846~~217		31,~~130~~060
Total lease costs	$	2115,~~940~~645	$	94,~~104~~701

Weighted average remaining lease term and discount rate as of ~~September~~March 3031, ~~2022~~2023 were as follows:

	September 30,2022
	March 31,2023
Weighted-average remaining lease term (in years)
Operating leases		71.59
Weighted-average discount rate:
Operating leases		1412.18	%

The following table presents future minimum lease payments under operating leases as of ~~September~~March 3031, ~~2022~~2023:

	September 30, 2022
	March 31, 2023
2022	$	6,816
2023	$	3,066
2023		26,864
2024		2,538
2024		6,351
2025		1,054
2025		5,255
Total minimum payments required		6,658
2026		4,327
Less amounts representing imputed interest		(680	)
Thereafter		48,144
Present value of lease liabilities	$	5,978
Total minimum payments required		97,757
Less amounts representing imputed interest		(39,528	)
Present value of lease liabilities	$	58,229

19The table above does not include future minimum lease payments for the Rockville, Maryland facility due to its reclassification as held for sale as of March 31, 2023 and December 31, 2022. The operating lease liabilities for the Rockville, Maryland facility have been presented separately on the balance sheet as

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

operating lease liabilities related to assets held for sale, and the liabilities are expected to be transferred to a third party assuming the lease arrangement within a year.

9. Stock-based Compensation

2018 Stock Option and Incentive Plan

In February 2019, the Company’s Board of Directors and stockholders approved the 2018 Stock Option and Incentive Plan (the 2018 Plan), which replaced the 2015 Stock Option and Grant Plan (the 2015 Plan). The shares under the 2015 Plan which were not issued were rolled into the 2018 Plan. The 2018 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units (RSUs), stock appreciation rights and other stock-based awards. The Company’s officers, employees, directors, and other key persons (including consultants) are eligible to receive awards under the 2018 Plan. The maximum number of authorized shares to be issued under the 2018 Plan is 89,~~934~~208,~~465~~022 shares of common stock. The number of shares of common stock reserved for issuance under the 2018 Plan shall be cumulatively increased on January 1, 2019 and each January 1 thereafter by 4% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year or a lesser number of shares determined by the Company's Board of Directors. The amount, terms of grants, and exercisability provisions are determined and set by the Compensation Committee of the Company’s Board of Directors. The term of the options may be up to 10 years, and options are exercisable in cash or as otherwise determined by the Board of Directors.

As of ~~September~~March 3031, ~~2022~~2023, there were 24,~~045~~985,~~061~~107 shares of common stock available for future issuance under the 2018 Plan. Generally, options vest over a four-year period and RSUs vest over a two- or three-year period.

2022 Inducement Plan

On February 11, 2022, our Board of Directors approved the TCR2 Therapeutics Inc. 2022 Inducement Plan (Inducement Plan) pursuant to Listing Rule 5635(c)(4) of the corporate governance rules of the NASDAQ Stock Market, and reserved 1,400,000 shares of our Common Stock for issuance employees of the Company under the Inducement Plan. The Inducement Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, and dividend equivalent rights. The purpose of the Inducement Plan is to encourage and enable the Company to grant equity awards to induce highly qualified prospective officers and employees to accept employment and provide them a proprietary interest in the Company. The maximum number of authorized shares to be issued under the Inducement Plan is 1,400,000 shares of common stock. The amount, terms of grants, and exercisability provisions are determined and set by the Compensation Committee of the Company’s Board of Directors. The term of the options may be up to 10 years, and options are exercisable in cash or as otherwise determined by the Board of Directors.

As of ~~September~~March 3031, ~~2022~~2023, there were ~~876~~923,~~026~~600 shares of common stock available for future issuance under the Inducement Plan. Generally, options vest over a four-year period. No RSUs have been issued from the Inducement Plan.

The Company recorded stock-based compensation expense in the following expense categories of its accompanying unaudited consolidated statements of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022:

	Three Months Ended September 30,						Nine Months Ended September 30,
		For the Three Months Ended March 31,
	2022			2021			2022		2021
		2023			2022
Research and development	$	~~1,105~~$	194	$	~~1,336~~$	1,455	$	~~3,687~~	$	~~4,147~~
General and administrative		~~1,588~~	385		~~1,850~~	1,722		~~5,030~~		~~5,378~~
	$	~~2,693~~$	579	$	~~3,186~~$	3,177	$	~~8,717~~	$	~~9,525~~

2023

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

Stock options

During the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, there were ~~803~~313,~~103~~302 grants of stock options, ~~223~~597,~~491~~104 options forfeited, and ~~95,596~~0 options exercised.

The following table summarizes the activity related to stock option grants to employees and non-employees for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023:

	Shares			WeightedAverage ExercisePrice Per Share		Weighted Average Remaining ContractualLife (in Years)
Balance as of December 31, 2021		6,181,335		$	13.32		6.1
Balance as of December 31, 2022		3,895,296		$	4.43		8.3
Granted		~~778~~6,~~502~~000		$	31.1350
Exercised		~~(49,581~~-	)	$	~~0.74~~-
Forfeited		(1320,~~329,286~~658	)	$	133.0838
Balance as of September 30, 2022		5,580,970		$	12.08		7.7
Balance as of March 31, 2023		3,580,638		$	4.52		7.8
Exercisable as of September 30, 2022		2,738,500			13.48		6.4
Exercisable as of March 31, 2023		1,442,220		$	6.21		5.8
Vested and expected to vest as of September 30, 2022		5,580,970		$	12.08
Vested and expected to vest as of March 31, 2023		3,580,638		$	4.52

As of ~~September~~March 3031, ~~2022~~2023, there was $184.13 million in unrecognized compensation cost that is expected to be recognized over an estimated weighted-average amortization period of 2.24 years.

The fair value of options is estimated using the Black-Scholes option pricing model, which takes into account inputs such as the exercise price, the value of the underlying common stock at the grant date, expected term, expected volatility, risk-free interest rate and dividend yield. The fair value of each grant of options for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022 was determined using the methods and assumptions discussed below:

▪

The expected term of employee options is determined using the “simplified” method, as prescribed in the SEC Staff Accounting Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. The expected term of non-employee options is equal to the contractual term.

▪

The expected volatility was based on the historical stock volatility of several comparable publicly traded companies over a period of time equal to the expected term of the options, as we do not have sufficient trading history to use the volatility of our own common stock.

▪

The estimated annual dividend yield is 0% because the Company has not historically paid and does not expect for the foreseeable future to pay, a dividend on its common stock.

▪

The Company is traded on the Nasdaq Global Select Market. Fair value of the underlying common stock is determined by the stock price quoted on Nasdaq.

The grant date fair value of all option grants was estimated at the time of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions:

	Nine Months Ended September 30,
	For the Three Months Ended March 31,
	2022			2021
	2023			2022
Risk-free interest rate		23.6	%		01.98	%
Expected term (in years)		6.1			6.1
Expected volatility		7274.05	%		7269.6	%
Annual dividend yield		0	%		0	%
Fair value of common stock	$	1.9602		$	112.6132

2124

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

Restricted stock units

During the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, the Company granted no RSUs to employees.

	Restricted Stock Units			Weighted Average Price Per Share
Balance as of December 31, 2021		66,000		$	4.80
Balance as of December 31, 2022		1,470,889		$	2.22
Granted		~~1,023,992~~-		$	~~3.24~~-
Vested		(18,~~907~~415	)	$	43.8015
Forfeited		(21351,~~093~~814	)	$	42.1277
Balance as of September 30, 2022		1,066,992		$	3.32
Balance as of March 31, 2023		1,110,660		$	2.04

During the quarter ended September 30, 2022, the Company granted 373,255 performance-based RSUs (PRSUs). Performance iswas based upon attaining specified operational metrics. The performance criteria ~~will~~was be measured at December 31, 2022 and March 31, 2023. The PRSUs also have service-based vesting criteria for two years after the measurement date. The performance criteria was not met, no share-based compensation has been recognized and no shares have been issued.

As of ~~September~~March 3031, ~~2022~~2023, there was $31.4 million of unrecognized compensation cost related to unvested employee RSUs. This amount is expected to be recognized over a weighted-average period of 12.94 years.

Warrants

As of ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022, there were 203,676 warrants outstanding. During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, the Company granted no warrants, there were no forfeitures, or exercises.

Employee stock purchase plan (ESPP)

In February 2019, the Company’s Board of Directors adopted and the Company’s stockholders approved the 2018 Employee Stock Purchase Plan (2018 ESPP). The 2018 ESPP enables eligible employees to purchase shares of the Company's common stock at the end of each six-month offering period at a price equal to 85% of the fair market value of the shares on the first business day or the last business day of the offering period, whichever is lower. Eligible employees generally included all employees. Offering periods begin on the first trading day of September and March of each year and end on the last trading day in February and August of each year. Share purchases are funded through payroll deductions of up to 15% of an employee’s eligible compensation for each payroll period, or $25 each calendar year.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, there were 9832,~~591~~418 shares and 1749,~~889~~861 shares issued under the 2018 ESPP, respectively.

10. Related-party transactions

Manufacturing agreement

During November 2020, the Company entered into a manufacturing partnership with ElevateBio, which was amended in February 2022. Dr. Ansbert Gadicke is a member of the board of directors at the Company and ElevateBio. The agreement is to establish a manufacturing partnership with ElevateBio for production of the Company’s clinical trial products. During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, the Company has incurred $1413.65 million in expenses ~~and~~related ~~has~~to ~~incurred~~its ~~additional~~agreement ~~costs~~with ~~of $0.1 million for equipment owned by the Company for use by~~ ElevateBio. During the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, the Company incurred $01.97 million in expenses and incurred additional costs of $0.31 million for equipment owned by the Company for use by ElevateBio.

22During January 2023, the Company notified ElevateBio that it was terminating the agreement. The agreement provides for a three-month notice period and a $10.0 million payment upon termination. As a

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)

11result, the Company recognized the impact of this lease modification during the three months ended March 31, 2023, based on the remaining term of the lease agreement. ~~Restructuring~~The termination payment amount associated with the ElevateBio agreement is included in research and development expenses in the Company's statement of operations for the three months ended March 31, 2023. The termination payment was paid during the three months ended March 31, 2023 and the agreement formally terminated in April 2023.

~~During~~11. ~~December~~Impairments ~~2021, the Company decided to wind down its operations in the United Kingdom~~ and ~~consolidated~~Restructuring ~~manufacturing operations in the United States. The Company completed the restructuring during the second quarter of 2022.~~Charges

In December 2022, the Company began to actively market the Rockville, Maryland manufacturing facility in an effort to find a third party to assume the lease arrangement with the landlord. As part of this action, the Company also began to seek selling alternatives for construction-in-progress assets and personal property assets at the Rockville, Maryland manufacturing facility through either the prospective third party assuming the lease arrangement or after-market selling channels. These actions were commenced in order to gain capital efficiencies in the manufacturing activities currently supporting the Company’s clinical timelines. As such, Rockville, Maryland manufacturing facility long-lived assets, which consist of operating lease right-of-use assets, construction-in-progress assets and personal property assets, have been reclassified as held for sale as of March 31, 2023 and December 31, 2022. The Company expects all sales related to the Rockville, Maryland assets held for sale to be completed within a year. In addition, operating lease liabilities which directly relate to Rockville, Maryland right-of-use assets have also been reclassified as held for sale as of March 31, 2023 and December 31, 2022.

During the three months ended March 31, 2023, the Company recognized an impairment charge for the write-down of long-lived assets classified as held for sale related to personal property assets of $1.9 million, as outlined below.

During December 2021, the Company decided to wind down its operations in the United Kingdom and consolidated manufacturing operations in the United States. The Company completed the restructuring during the second quarter of 2022. Restructuring charges related to this action were recognized in the three months ended March 31, 2022 of $0.5 million.

Restructuring expenses

~~During~~In ~~the~~January ~~nine months ended September 30~~2023, ~~2021,~~ the Company ~~did~~announced ~~not~~a ~~incur~~reprioritization ~~any~~of ~~restructuring costs. In December 2021,~~ the Company’s ~~elected~~clinical toand ~~cease~~research ~~manufacturing~~priorities ~~operations~~and ata ~~its~~corresponding ~~Catapult~~reduction ~~facility.~~in Asworkforce aand ~~result,~~adjustment to the Company’s ~~recognized~~manufacturing anetwork, ~~$1.5~~designed ~~million~~to ~~variable~~reduce ~~lease~~costs ~~cost~~and asreallocate ofresources ~~December~~while ~~31,~~maintaining ~~2021 reflecting its estimated obligation for~~ the ~~12-month~~personnel ~~termination~~needed ~~period~~to ~~associated~~support ~~with~~ the ~~Catapult~~Company’s ~~lease~~key ~~agreement,~~programs asand ~~well~~refocused aspipeline ~~other restructuring related expenses incurred as a result of~~ (the ~~decision to cease manufacturing operations at Catapult~~“Restructuring”). ~~During~~The ~~the~~Restructuring ~~nine~~reduced ~~months ended September 30, 2022,~~ the Company’s ~~incurred~~workforce ~~the~~by ~~following~~approximately ~~expenses~~40%, ~~associated~~ with the ~~restructuring~~reductions ~~which are included~~ in ~~research~~personnel ~~and~~substantially ~~development~~completed ~~expenses~~at on the ~~statements~~end of ~~operations~~January 2023.

	Nine Months Ended September 30, 2022
	Severance and Related Costs		Lease and Other costs		Asset Impairment Costs		Total
Expenses	$	306	$	228	$	-	$	534

In December 2021, the Company elected to cease manufacturing operations at its Catapult facility. During the three months ended March 31, 2022, the Company incurred the following expenses associated with the restructuring which are included in impairment and restructuring charges financial statement line item in the Statement of Operations.

Accrued restructuring expenses


	Restructuring Expenses
	Severance and Related Costs		Lease and Other costs		Total
For the three months ended March 31, 2023	$	2,155	$	-	$	2,155
For the three months ended March 31, 2022	$	306	$	257	$	563

~~Balances related to this restructuring included in accrued expenses on the balance sheet are as follows:~~26

	Accrued Expenses
	Severance and Related Costs			Lease and Other costs			Total
Balance as of January 1, 2021	$	-		$	-		$	-
Expenses		885			2,217			3,102
Cash payments		(701	)		-			(701	)
Balance as of December 31, 2021		184			2,217			2,401
Expenses		306			285			591
Adjustment of expenses		-			(57	)		(57	)
Cash payments		(490	)		(2,445	)		(2,935	)
Balance as of September 30, 2022	$	-		$	-		$	-

TCR2 Therapeutics Inc.

23Notes to Unaudited Consolidated Financial Statements

~~12.~~(Amounts ~~Subsequent~~in ~~Event~~thousands, excluding share and per share items or noted otherwise)

On October 19, 2022, the Company filed a Schedule TO with the SEC in connection with a tender offer to eligible employees of the Company to exchange stock options granted under the 2018 Plan with an exercise price over $10.00 per share for a reduced number of restricted stock units with time-based vesting requirements as determined on an approximate value-for-value basis. There were 2,574,615 eligible stock options at the time of the offering. Employees may, but are not required to participate. If all eligible stock options are offered for exchange, the Company expects it could issue 756,679 restricted stock units. Any new restricted stock units granted in connection with the tender offer shall be governed by the 2018 Plan. The offer is expected to close during the fourth quarter of 2022.


	Accrued Expenses
	Severance and Related Costs			Lease and Other costs			Total
Balance as of December 31, 2022	$	-		$	-		$	-
Expenses		2,155			-			2,155
Cash payments		(1,254	)		-			(1,254	)
Balance as of March 31, 2023	$	901		$	-		$	901

	Severance and Related Costs			Lease and Other costs			Total
Balance as of December 31, 2021	$	184		$	2,217		$	2,401
Expenses		306			315			621
Adjustment of expenses		-			(58	)		(58	)
Cash payments		(490	)		(904	)		(1,394	)
Balance as of March 31, 2022	$	-		$	1,570		$	1,570

24Impairment charges on assets held for sale

A long-lived asset or disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. The Company recognizes an impairment loss for any initial or subsequent write-down of the assets held for sale to fair value less cost to sell.

In December 2022, the Company reclassified long-lived assets at the Rockville, Maryland manufacturing facility, which consist of operating lease right-of-use assets, construction-in-progress assets, and personal property assets, as held for sale as of December 31, 2022. The Company will continue to evaluate the assets classified as held for sale, and will remeasure them at the lower of their carrying value or fair value less cost to sell each reporting period until the sales occur.

Rockville, Maryland assets not placed in service

The Company has various long-lived assets not placed in service at the Rockville, Maryland manufacturing facility. These assets are comprised of leasehold improvements and other assets associated with the in-process build-out of the Rockville, Maryland facility, as well as certain other personal property assets such as equipment that has not yet been placed into service. At the time of the Company’s determination that the Rockville, Maryland manufacturing facility long-lived assets would be actively marketed and held for sale, the total carrying value of these assets not placed in service was $21.8 million. The Company has pursued different selling alternatives for assets not placed in service through either a prospective third party to assume the lease arrangement or after-market selling channels.

Laboratory equipment and assets not placed in service

During the three months ended March 31, 2023, the Company determined that certain laboratory equipment in the assets not placed in service category would be actively marketed and was therefore moved to the assets held for sale financial statement line item. In addition, the Company began to actively market other laboratory equipment which had been part of the ElevateBio manufacturing operation, and therefore these assets were also reclassified to the assets held for sale financial statement line item. The Company recognized $0.3 million in equipment sales during the three months ended March 31, 2023 related to this laboratory equipment. The Company determined that the laboratory equipment remaining as of March 31, 2023 had an estimated fair value of $0.1 million, with the remaining $1.1 million recognized as impairment expense during the quarter.

An impairment charge was recognized as of March 31, 2023 in order to write-down these assets not placed in service and laboratory equipment long-lived assets and personal property assets to fair value less costs to sell, as follows:

TCR2 Therapeutics Inc.

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, excluding share and per share items or noted otherwise)


	As of March 31, 2023
Asset	Carrying Value		Fair Value Less Costs to Sell		Amounts Realized on Sale		Impairment Amount
Assets not placed in service	$	799	$	-	$	-	$	799
Laboratory equipment		1,490		145		258		1,087
Total impairment charge							$	1,886

Assets held for sale

As of March 31, 2023 and December 31, 2022, the following assets and liabilities related to the Rockville, Maryland manufacturing facility were classified as held for sale at their fair value less cost to sell and are presented as held for sale in the Company’s consolidated balance sheet as of March 31, 2023 and December 31, 2022:


Assets	Balance as of December 31, 2022		Additions to Assets Held for Sale		Assets Sold		Balance as of March 31, 2023
Right-of-use assets, operating leases included in assets held for sale	$	17,463	$	-	$	-	$	17,463
Personal property		5,824		561		2,488		3,897
Total	$	23,287					$	21,360

Liabilities
Operating lease liabilities related to assets held for sale	$	28,611					$	28,668

No additional impairment expense was recognized during the three months ended March 31, 2023 related to previously identified Rockville, Maryland facility assets held for sale. During the three months ended March 31, 2023, the Company recognized sales of approximately $2.2 million related to personal property assets previously identified and held for sale at the Rockville, Maryland facility, of which approximately $0.6 million was collected in cash during the period.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the “Annual Report’) filed with the Securities and Exchange Commission (the “SEC”) on March 2223, ~~2022~~2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward looking statements that involve risks and uncertainties. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those set forth in Item 1A, “Risk Factors” and elsewhere in our Annual Report and this Quarterly Report.

Overview

We are a clinical-stage cell therapy company developing a pipeline of novel T cell therapies for cancer patients suffering from solid tumors by powering the T cell receptor (TCR) with our proprietary, first-in-class TCR Fusion Construct T cells (TRuC-T cells). Designed to overcome the limitations of current cell therapy modalities, our TRuC-T cells, ~~specifically~~an HLA-independent T cell therapy platform, recognize and kill cancer cells by harnessing the entire TCR signaling complex, ~~independent of human leukocyte antigens (HLA),~~ which we believe is essential for T cell therapies to be effective ~~while maintaining broad applicability~~ in patients with solid tumors.

In September 2022, we announced a refocused pipeline designed to maximize the delivery of near-term clinical data in a capital efficient manner. The refocused pipeline funds the following programs:

•

gavo-cel: our lead, first-in-class TRuC-T cell targeting mesothelin-expressing solid tumors (gavocabtagene autoleucel, formerly TC-210)

•

TC-510: our first enhanced TRuC-T cell targeting mesothelin-expressing solid tumors which incorporates a PD-1:CD28 chimeric switch receptor

•

TC-520: our first TRuC-T cell targeting CD-70-expressing solid and liquid tumors which incorporates IL-15 pathway enhancements designed to improve T cell persistence

In January 2023, we announced that we had narrowed the focus of our development of gavo-cel to ovarian cancer in combination with Opdivo® (nivolumab) and redosing strategies which we believe may increase the duration of benefit in patients. We expect preliminary durability data from the ovarian cancer cohort in the second half of 2023.

Proposed Transaction with Adaptimmune

On March 5, 2023, we entered into a definitive agreement with Adaptimmune Therapeutics plc, a public limited company incorporated in England and Wales (“Adaptimmune”), and CM Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Adaptimmune (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions thereof, we will become a wholly-owned indirect subsidiary of Adaptimmune (as amended, the "Merger Agreement" and such transaction, the "Merger"). The combined company will create a preeminent cell therapy company focused on treating solid tumors. The combination provides extensive advantages for clinical development and product delivery supported by complementary technology platforms. The lead clinical franchises for the combined company utilize engineered T-cell therapies targeting MAGE A4 and mesothelin. These targets are expressed on a broad range of solid tumors and are supported by compelling early- and late-stage clinical data. The combined company also has a preclinical pipeline of additional target opportunities with development initially focused on PRAME and CD70.

The Merger Agreement was approved by our board of directors (the “Board”), and the Board resolved to recommend approval of the Merger Agreement to our stockholders. In connection with the execution of

the Merger Agreement, certain of our stockholders and certain shareholders of Adaptimmune entered into voting and support agreements with us and Adaptimmune, respectively, pursuant to which they have agreed, among other things, and subject to the terms and conditions of the agreements, to vote their

shares in favor of the Merger Agreement and the Merger, in accordance with the recommendation of the respective boards of directors of Adaptimmune and the Company.

Subject to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of our common stock (other than shares of our common stock held as treasury stock, or shares of our common stock owned by Adaptimmune, Merger Sub, or any direct or indirect wholly-owned subsidiaries of Adaptimmune), including shares of our common stock underlying our restricted stock units that immediately vest upon a change of control of us, will be converted into the right to receive 1.5117 American Depositary Shares of Adaptimmune (each an “Adaptimmune ADS”) with each Adaptimmune ADS representing six ordinary shares of Adaptimmune. Following the closing of the Merger, Adaptimmune shareholders will own approximately 75% of the combined company and our stockholders will own approximately 25% of the combined company.

Subject to approval by our stockholders and the shareholders of Adaptimmune and satisfaction or waiver of other closing conditions, the transaction is expected to close in the second quarter of 2023. Our special meeting of stockholders to vote on teh proposal to adopt the Merger Agreement is scheduled for 8 a.m. Eastern Time on May 30, 2023. You can find more information about our stockholder meeting in our Definitive Proxy Statement filed with the SEC on April 20, 2023.

gavo-cel

We ~~are~~have ~~conducting~~completed the Phase 1 portion of our Phase 1/2 clinical trial for gavo-cel to treat patients with ovarian cancer, non-small cell lung cancer (NSCLC), ~~ovarian cancer,~~ malignant pleural/peritoneal mesothelioma ~~(MPM)~~ or cholangiocarcinoma. ~~We estimate the patient population for gavo-cel in the four indications which we are exploring in our clinical trial is up to 81,000 patients in the United States alone.~~

•

InBased on the ~~first~~topline ~~half~~data ofreadout ~~2022~~presented on September 28, we2022 ~~initiated~~from patients in dose escalation in the Phase 21 ~~expansion~~ portion of our ~~ongoing~~ Phase 1/2 clinical trial as of the September 9, 2022 data cutoff, gavo-cel has demonstrated consistent clinical benefit, with 28 of 30 patients evaluable for efficacy experiencing tumor regression, clinical activity observed in all three mesothelin-expressing tumor types treated (i.e. ~~Enrollment~~ovarian iscancer, ~~ongoing~~mesothelioma and cholangiocarcinoma) and an 77% disease control rate (DCR).

•

InWe ~~September~~have ~~2022,~~observed wea ~~presented~~22% ~~the~~Overall ~~topline~~Response ~~Phase~~Rate 1(ORR) ~~dataset~~in ~~for~~patients infused with gavo-cel ~~from~~following ~~the~~lymphodepletion ~~dose~~with ~~escalation~~six ~~portion~~(four ofmesothelioma, ~~the~~two ~~Phase~~ovarian ~~1/2~~cancer) ~~clinical~~RECIST ~~trial~~partial ofresponses ~~gavo-cel~~(PRs) inby ~~patients~~independent ~~with~~assessment. ~~treatment~~The ~~refractory~~ORR ~~mesothelin-expressing~~was ~~solid~~29% ~~tumors,~~in ~~with~~ovarian ~~some~~cancer ~~patients~~and ~~still~~21% ~~being~~in ~~monitored for clinical response or stable disease~~mesothelioma.

•

The median overall survival (OS) for patients with ovarian cancer was 8.1 months, whereas the median progression-free survival (PFS) for patients with ovarian cancer was 5.8 months. The median OS for patients with MPM was 11.2 months, whereas the median PFS for patients with MPM was 5.6 months.

We designed the Phase 2 portion of our Phase 1/2 clinical trial to assess gavo-cel in patients with ovarian cancer, NSCLC, malignant pleural/peritoneal mesothelioma or cholangiocarcinoma. In January 2023, we announced that we had narrowed the focus of our development of gavo-cel to ovarian cancer in combination with Opdivo® (nivolumab) and redosing strategies which we believe may increase the duration of benefit in patients. We expect preliminary durability data from the ovarian cancer cohort in the second half of 2023.

TC-510

We are conducting our Phase 1/2 clinical trial for TC-510 to treat patients with mesothelin-expressing MPM, ovarian cancer, pancreatic cancer, colorectal cancer or triple negative breast cancer. We estimate ~~the patient population for TC-510 in the five indications which we are exploring in our clinical trial is up to 148,000 patients in the United States alone.~~

2530

In the ~~first~~patient ~~half~~population offor ~~2022,~~TC-510 wein ~~announced that~~ the ~~U.S.~~five ~~Food~~indications ~~and~~which ~~Drug Administration (FDA) cleared the investigational new drug (IND) application and~~ we ~~initiated~~are ~~the~~exploring ~~Phase~~in 1our ~~dose escalation portion of the Phase 1/2~~ clinical trial ~~of TC-510. The Phase 1/2 clinical trial~~ is ~~evaluating~~up ~~the~~to ~~safety~~148,000 ~~and~~patients ~~efficacy of TC-510~~ in ~~patients~~the ~~with~~United ~~mesothelin-expressing~~States ~~solid tumors~~alone. ~~Enrollment is ongoing.~~

In the first half of 2022, we announced that the U.S. Food and Drug Administration (FDA) cleared the investigational new drug (IND) application, and we initiated the Phase 1 dose escalation portion of the Phase 1/2 clinical trial of TC-510. The Phase 1/2 clinical trial is evaluating the safety and efficacy of TC-510 in patients with mesothelin-expressing solid tumors. Enrollment is ongoing.

In preclinical studies of TC-510, we observed enhanced signaling, increased proliferation, reduced exhaustion and improved in vivo efficacy against tumors with high PD-L1 expression. Based on these preclinical studies, we believe TC-510 can improve on the efficacy of gavo-cel in specific hostile solid tumor microenvironment settings and potentially expand into new solid tumor indications.

We expect to share initial data from the Phase 1 portion of the Phase 1/2 clinical trial for TC-510 in the second half of 2023.

TC-520

We are ~~preparing~~conducting ~~for~~ IND-enabling ~~studies~~activities for TC-520 to treat patients with hematological malignancies and solid tumors, specifically renal cell carcinoma and acute myeloid leukemia. Due to the high expression of CD70 across many cancer types, we estimate that up to 141,000 patients express CD70 in the United States alone.

In our preclinical studies, we observed TRuC-T cells targeting CD70 enhanced with IL-15 resulted in a significant increase in TC-520 cells with a naïve/TSCM (memory stem T cells) phenotype, improved autonomous persistence as well as increased expansion following repeated rounds of tumor challenge with no evidence of fratricide.

We continue to invest in our clinical and commercial manufacturing network in a capital efficient manner which will provide capacity in a regulated timeline that aligns with preparation for a commercial launch for gavo-cel. We are devoting ~~extensive~~ resources in process development and manufacturing to optimize the reliability of our product candidates and reduce manufacturing costs and time.

Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. As of ~~September~~March 3031, ~~2022~~2023, we had an accumulated deficit of $~~440~~541.87 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

•

initiate and conduct clinical trials for our product candidates;

•

continue to discover and develop additional product candidates;

•

acquire or in-license other product candidates and technologies;

•

maintain, expand, and protect our intellectual property portfolio;

•

hire additional clinical and scientific personnel;

•

expand our manufacturing capabilities with third parties;

•

seek regulatory approvals for any product candidates that successfully complete clinical trials; and

•

add operational, financial, and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts and our operations as a public reporting company.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Additionally, we expect to incur significant expenses if we acquire and establish our own commercial manufacturing facility, which will be a costly and time-consuming process, and in our operations as a public company.31

26We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.

Impact of the COVID-19 Pandemic

Since the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome 2), or coronavirus (COVID-19) in December 2019, we have been carefully monitoring the COVID-19 pandemic and its actual and potential impact on our business and have taken important steps to help ensure the safety of employees and their families and to reduce the spread of COVID-19 in our communities while balancing our commitment to conduct our clinical trials. We have implemented safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the ongoing COVID-19 pandemic. We have also maintained efficient communication with our partners and clinical sites as the COVID-19 situation has progressed. We have taken these precautionary steps while maintaining business continuity so that we can continue to progress our programs. COVID-19 has significantly impacted the global healthcare system, including the conduct of clinical trials as medical institutions prioritize the treatment of those afflicted with COVID-19. We continue to closely monitor the adverse impact of the ongoing COVID-19 pandemic on our operations and ongoing clinical and preclinical development.

The COVID-19 pandemic has impacted our development timelines for gavo-cel and TC-510; however, we believe that we have been able, as of the date of this Quarterly Report, to mitigate some of the impact from the COVID-19 pandemic on our ongoing clinical programs. The future impact of the ongoing COVID-19 pandemic on our industry, the healthcare system, clinical trials and our current and future operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, as well as the effect of any relaxation of current restrictions within our local community or regions in which our partners and clinical sites are located, and the direct and indirect economic effects of the pandemic and containment measures, among others. See “Item 1A. Risk Factors” for a discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.

Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our product candidates, which include:

•

employee-related expenses, including salaries, benefits and stock-based compensation;

•

expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with third parties, such as consultants, contractors and contract research organizations (CROs);

•

the cost of acquiring and manufacturing preclinical and clinical trial materials, including under agreements with third parties, such as consultants, contractors and contract manufacturing organizations (CMOs);

•

consultant fees and expenses associated with outsourced professional scientific development services;

•

facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance; and

•

payments made under third-party licensing agreements.

We expense research and development costs as incurred. Any non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development and manufacturing activities in the near term and in the future. At this time, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

•

the timing and progress of our preclinical studies and clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors;

•

the number and scope of preclinical and clinical programs we decide to pursue;

•

the progress of the development efforts of parties with whom we may enter into collaboration arrangements;

•

our ability to maintain our current research and development programs and to establish new ones;

•

our ability to establish licensing or collaboration arrangements;

•

our ability to complete IND enabling studies and successfully submit IND or comparable applications;

•

whether we are required by the FDA or similar foreign regulatory authorities to conduct additional clinical trials or other studies beyond those planned to support the approval and commercialization of our product candidates or any future product candidates;

•

the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities;

•

our ability and the ability of third parties with whom we contract to manufacture adequate clinical and commercial supplies of our product candidates or any future product candidates, remain in good standing with regulatory agencies and develop, validate and maintain commercially viable manufacturing processes that are compliant with cGMP;

•

our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, potency, purity and acceptable risk to benefit profile of our product candidates or any future product candidates;

•

the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or future product candidates, if any;

•

our ability to establish and enforce intellectual property rights in and to our product candidates or any future product candidates;

•

our ability to successfully develop a commercial strategy and thereafter commercialize our product candidates or any future product candidates in the United States and internationally, if licensed for marketing, reimbursement, sale and distribution in such countries and territories, whether alone or in collaboration with others;

•

the willingness of physicians, operators of clinics and patients to utilize or adopt any of our product candidates or future product candidates to treat solid and hematologic cancers;

•

patient demand for our product candidates and any future product candidates, if licensed;

•

competition with other products; and

•

continued acceptable safety profile of our therapies following approval.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.

Impairment and Restructuring Expenses

Impairment and restructuring expenses consist of the write down of certain personal property assets classified as held for sale as well as certain restructuring charges recognized during the periods.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, legal, and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

Interest Income, net

Interest income, net, consists of interest earned on our cash equivalents and investment balances, net of investment charges.

Three Month Consolidated Statements of Operations

The following table summarizes our results of operations for the three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022 (in thousands):

	Three Months Ended September 30,
	Three Months Ended March 31,
	2022			2021			Change
	2023			2022			Change
Operating expenses
Research and development	$	2429,~~791~~265		$	2022,~~277~~320		$	46,~~514~~945
General and administrative		6,312			5,963			349
Impairments and restructuring charges		4,041			563			3,478
Total operating expenses		31,103			26,240			4,863
General and administrative		8,201			6,320			1,881
Loss from operations		(31,103	)		(26,240	)		(4,863	)
Total operating expenses		41,507			29,203			12,304
Interest income, net		510			38			472
Loss from operations		(41,507	)		(29,203	)		(12,304	)
Loss before income taxes	$	(30,593	)	$	(26,202	)	$	(4,391	)
Interest income, net		1,111			117			994
Loss before income taxes	$	(40,396	)	$	(29,086	)	$	(11,310	)

Research and Development Expenses

Research and development expenses were $2429.83 million for the three months ended ~~September~~March 3031, ~~2022~~2023 compared to $2022.3 million for the three months ended ~~September~~March 3031, ~~2021~~2022, an increase of $47.50 million. The following table summarizes our research and development expenses for the three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022 (in thousands).

	Three Months Ended September 30,
	Three Months Ended March 31,
	2022		2021		Change
	2023		2022		Change
Clinical program expenses	$	1018,~~627~~685	$	36,~~404~~841	$	711,~~223~~844
Platform development expenses		~~841~~424		21,~~348~~212		(~~1,507~~788	)
Personnel expenses		85,~~753~~307		9,~~212~~728		(~~459~~4,421	)
Allocated facility expenses		34,~~617~~084		43,~~137~~516		~~(520~~568	)
Other expenses		~~953~~765		1,~~176~~023		(~~223~~258	)
	$	2429,~~791~~265	$	2022,~~277~~320	$	46,~~514~~945

~~Clinical~~During the three months ended March 31, 2023, we incurred a $10.0 million termination fee for the ElevateBio agreement. The termination fee is included in the clinical program expenses category of research and development expenses, based on the nature of the ElevateBio agreement. Excluding the ElevateBio termination fee, clinical program expenses for the three months ended March 31, 2023 increased by $71.28 million and platform development expenses decreased by $10.58 million as our programs ~~advanced~~are toadvancing in clinical development as compared to the three months ended March 31, 2022. Personnel costs decreased by $04.54 million due to a reduction in ~~total~~ personnel for the three months ended ~~September~~March 3031, ~~2022~~2023 as compared to the three months ended ~~September~~March 3031, ~~2021~~2022 as we refocused our development efforts on our clinical and near-clinical stage assets.

29Impairment and Restructuring Expenses

~~and~~During ~~near-clinical~~the ~~stage~~three ~~assets~~months ended March 31, 2023, we recognized an impairment charge of $1.9 ~~Facilities~~million for expenses related to laboratory equipment and other ~~expenses~~long-lived ~~decreased~~assets bythat have been classified as held for sale and were written down to their fair value less cost to sell. In addition, we recognized $02.71 million ~~primarily~~for ~~due~~severance ~~discontinued~~and ~~operations~~related incosts during the ~~United~~three ~~Kingdom~~months ~~which~~ended ~~were~~March ~~included~~31, 2023 as a result of a reduction in ~~2021~~workforce ~~expenses~~that was executed in January 2023 to support the Company’s reprioritization of clinical and research priorities.

During the three months ended March 31, 2022, we incurred other restructuring charges of $0.5 million related to the wind down of UK operations.

General and Administrative Expenses

General and administrative expenses were $68.32 million for the three months ended ~~September~~March 3031, ~~2022~~2023, compared to $6.03 million for the three months ended ~~September~~March 3031, ~~2021~~2022. ~~The~~During ~~slight~~the ~~increase~~three months ended March 31, 2023, we incurred transaction costs of $3.6 million in ~~general~~professional ~~and~~fees ~~administrative~~related ~~expenses~~to ~~was~~the ~~primarily~~proposed ~~due~~Adaptimmune transaction. Transactions costs are expensed as incurred. Personnel costs decreased by $1.4 million for the three months ended March 31, 2023 compared to ~~supporting~~the ~~corporate~~three ~~activities~~months ended March 31, 2022 as a result of the reduction in personnel experienced in January 2023. Other costs decreased by $0.3 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Interest Income, net

Interest income, net, increased by $01.50 million due to increased interest rates on our investments for the three months ending ~~September~~March 3031, ~~2022~~2023 over the three months ended ending ~~September~~March 3031, ~~2021~~2022.

~~Nine Month Consolidated Statements of Operations~~35

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021 (in thousands):

	Nine Months Ended September 30,
	2022			2021			Change
Operating expenses
Research and development	$	73,441		$	54,828		$	18,613
General and administrative		18,636			17,297			1,339
Total operating expenses		92,077			72,125			19,952
Loss from operations		(92,077	)		(72,125	)		(19,952	)
Interest income, net		925			186			739
Loss before income taxes	$	(91,152	)	$	(71,939	)	$	(19,213	)

Research and Development Expenses

Research and development expenses were $73.4 million for the nine months ended September 30, 2022 compared to $54.8 million for the nine months ended September 30, 2021, an increase of $18.6 million. The following table summarizes our research and development expenses for the nine months ended September 30, 2022 and 2021 (in thousands).

	Nine Months Ended September 30,
	2022		2021		Change
Clinical program expenses	$	28,729	$	9,475	$	19,254
Platform development expenses		3,324		5,671		(2,347	)
Personnel expenses		27,684		25,127		2,557
Allocated facility expenses		10,634		10,483		151
Other expenses		3,070		4,072		(1,002	)
	$	73,441	$	54,828	$	18,613

Clinical program expenses increased by $19.3 million and platform expenses decreased by $2.3 million as our programs advanced to clinical development. Personnel costs increased by $2.6 million due to higher average total personnel and personnel-related expenses during the first and second quarters of 2022. Other expenses decreased by $1.0 million primarily due discontinuing operations in the United Kingdom which were included in 2021 expenses.

General and Administrative Expenses

General and administrative expenses were $18.6 million for the nine months ended September 30, 2022, compared to $17.3 million for the nine months ended September 30, 2021. The slight increase in general and administrative expenses was primarily due to supporting corporate activities.

Interest Income, net

Interest income, net, increased by $0.7 million due to increased interest rates on our investments for the nine months ending September 30, 2022 over the nine months ended ending September 30, 2021.

Liquidity and Capital Resources

Since our inception, we have incurred net losses and generated negative cash flows from operations and have funded our operations with proceeds from the sale of our stock. During 2021, we raised $131.3 million from the sale of stock. Since our inception, we have received gross proceeds of $541.7 million from the sale of our stock. As of ~~September~~March 3031, ~~2022~~2023, we had cash, cash equivalents, and investments of $~~176~~110.03 million.

Funding Requirements

WeDuring ~~expect~~January ~~our~~2023, ~~expenses~~the toCompany ~~increase~~announced ~~substantially~~a inreprioritization ~~connection~~of ~~with~~the ~~our~~Company’s ~~ongoing~~clinical ~~activities,~~and ~~particularly~~research aspriorities weand ~~advance~~a ~~the~~corresponding ~~preclinical~~reduction ~~studies~~in workforce and ~~clinical~~adjustment ~~trials~~to ofthe ~~our~~Company’s ~~product~~manufacturing ~~candidates~~network, indesigned ~~development~~to reduce costs and wereallocate ~~will~~resources ~~incur~~while ~~additional~~maintaining ~~costs~~the ~~associated~~personnel ~~with~~needed ~~operating~~to assupport athe ~~public~~Company’s ~~reporting~~key ~~company~~programs and refocused pipeline. The reduction in personnel was substantially completed during January 2023. In addition, ifthe weCompany ~~obtain~~took ~~marketing~~steps ~~approval~~to ~~for~~reduce ~~any~~its ofmanufacturing ~~our~~costs ~~product~~by ~~candidates,~~providing weElevateBio ~~expect~~with toa ~~incur~~notice ~~significant~~of ~~commercialization~~termination ~~expenses~~for ~~related~~its tomanufacturing ~~establishing~~agreement ~~sales,~~in ~~marketing~~January 2023, ~~distribution~~with the agreement effectively terminating in April 2023, and ~~other~~is ~~commercial~~seeking ~~infrastructure~~to exit its lease related to ~~commercialize~~the ~~such~~Rockville, ~~products~~Maryland manufacturing facility.

In addition, our expenses ~~will~~may increase over time as we:

•

continue enrollment of existing clinical trials and commence enrollment for additional clinical trials for our product candidates;

•

seek regulatory approval for any product candidates that successfully complete preclinical and clinical trials;

•

establish manufacturing capabilities for the production of preclinical and clinical supply;

•

hire additional clinical, medical, research and operational personnel; and

•

maintain, expand, and protect our intellectual property portfolio.

As of ~~September~~March 3031, ~~2022~~2023, we had cash, cash equivalents and investments of $~~176~~110.03 million. We believe that our existing cash, cash equivalents and investments, will enable us to fund our operating expenses and capital expenditure requirements at least into ~~2024~~early 2025. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Additionally, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. If we raise additional funds through collaborations, strategic alliances, or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce, or terminate our research, product development, or future commercialization efforts, or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.

3136

Cash Flows

The following table summarizes our sources and uses of cash for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022 (in thousands):

	Nine Months Ended September 30,
	For the Three Months Ended March 31,
	2022			2021
	2023			2022
Operating activities	$	(7640,~~504~~010	)	$	(5831,~~323~~134	)
Investing activities		~~(92~~21,~~142~~686	)		95(117,~~230~~370	)
Financing activities		8424			~~132,007~~59

Operating Activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, we used $7640.50 million of cash in operating activities, resulting primarily from our net loss of $9140.34 million partially offset by non-cash charges of $~~10.~~3.8 million, which primarily related to depreciation and amortization, impairment and restructuring charges and stock-based compensation. Cash ~~provided~~used by operating assets and liabilities was $43.54 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 due to $2.4 million ~~provided~~used by operating lease accounts, ~~and~~$1.6 million used by prepaid expenses and other current assets, $2.19 million ~~change~~used inby ~~other~~accrued ~~operating~~expenses ~~assets~~ and other liabilities offset by $3.5 million provided by accounts payable.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, we used $5831.31 million of cash in operating activities, resulting primarily from our net loss of $7229.1 million and net outflows of $5.1 million from the change in operating assets and liabilities, partially offset by non-cash charges of $123.29 million, which primarily related to depreciation and amortization and stock-based compensation,. ~~and~~The anet ~~change~~outflow inresulting ~~operating~~from ~~assets~~the ~~and~~change ~~liabilities of $1.5 million. The net increase~~ in operating assets and liabilities ~~cash~~was ~~flows were~~ primarily attributable to the timing of payments of prepaid assets as well ~~increased~~decreased compensation accruals, which are generally paid in the fourth quarter of the current year and first quarter of the subsequent year~~, offset by operating lease payments~~.

Investing Activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, cash ~~used~~provided inby investing activities was $9221.17 million, consisting primarily of ~~purchases~~proceeds offrom investments offset by ~~proceeds~~purchases ~~from~~of investments of $7921.14 million, ~~and~~$0.5 ~~purchases~~million proceeds from the sale of ~~property~~assets and ~~equipment~~offset ~~and~~by ~~capitalized~~purchases ~~software~~of ~~development~~property ~~costs~~and equipment of $~~13.~~0.2 million.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, cash ~~provided~~used byin investing activities was $95117.24 million, consisting primarily of ~~proceeds~~purchases ~~from~~of investments net of ~~purchases~~proceeds of $99115.93 million, ~~partially~~and ~~offset by~~ purchases of property and equipment and capitalized software development costs of $42.70 million.

Financing Activities

During the nine months ended September 30, 2021, net cash provided by financing activities was $132.0 million primarily from our secondary equity offering of $131.3 million, $1.0 million from the exercise of stock options less deferred offering costs of $0.3 million.

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 (GAAP). The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 3 to our unaudited consolidated financial statements appearing elsewhere in this Quarterly Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred.

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include fees paid to:

•

vendors in connection with preclinical development activities;

•

CMOs in connection with the production of preclinical and clinical trial materials; and

•

CROs in connection with preclinical studies and clinical trials.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CMOs and CROs that supply, conduct, and manage preclinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

Stock-Based Compensation

We measure stock options and other stock-based awards granted to employees based on their fair value on the date of the grant and recognize compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. We apply the straight-line method of expense recognition to all awards with service-based vesting conditions. For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed.

We estimate the fair value of restricted stock at the then-current fair value of our common stock and for other stock-based awards we use the Black-Scholes option-pricing model, which requires subjective assumptions, including the fair value of our common stock, volatility, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield. The assumptions used in our Black-Scholes option-pricing model represent management’s best estimates and involve a number of variables, uncertainties and assumptions and the application of management’s judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.

We do not estimate and apply a forfeiture rate as we have elected to account for forfeitures as they occur.

These assumptions are estimated as follows:

•

Fair Market Value of Common Stock. The Company's stock is traded on The Nasdaq Global Select Market. Fair market value of our stock is considered the quoted market price on NASDAQ.

•

Volatility. The expected volatility is based on the historical stock volatility of ours and several comparable publicly traded companies over a sufficient period of time equal to the expected term of the options, as we do not have sufficient trading history to use the volatility of our own common stock.

•

Expected Term. The expected term represents the period that our stock options are expected to be outstanding. We calculated the expected term using the simplified method based on the average of each option’s vesting term and the contractual period during which the option can be exercised, which is typically 10 years following the date of grant.

•

Risk-Free Interest Rate. The risk-free interest rate was based on the yields of U.S. Treasury securities with maturities commensurate with the expected term of the award.

•

Expected Dividend Yield. We have not paid dividends on our common stock nor do we expect to pay dividends in the foreseeable future.

Royalty Transfer Agreement

In connection with the sale of Series A redeemable convertible preferred stock, certain investors are entitled to receive, in the aggregate, a royalty from us equal to one percent of (i) all global net sales of any of our products, if approved, and (ii) any license income on intellectual property that was in existence at the time of the Series A preferred stock financing. We have elected to account for this liability at fair value with changes recognized in the statement of operations. Given the early-stage nature of the underlying technology and inherent risks associated with obtaining regulatory approval and achieving commercialization, we ascribed no value to the royalty agreement at inception and as of ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022. We continue to evaluate our scientific progress to assess our obligations under this agreement. There is substantial judgment involved in our assessment.

Recently Issued and Adopted Accounting Pronouncements

A description of recently adopted accounting pronouncements that materially impacted our financial position is disclosed in Note 3 to our unaudited consolidated financial statements appearing elsewhere in this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, or Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including ~~the principal executive officer (~~our Chief Executive Officer, who serves as our principal executive officer, and our Chief Financial Officer, who serves as principal financial officer and principal accounting officer, to allow timely decisions regarding required disclosure.

34Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022.39

management necessarily applies judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter which ended ~~September~~March 3031, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

3540

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

Merger Action

In connection with the Agreement and Plan of Merger (the “Merger Agreement”) with Adaptimmune, and CM Merger Sub, Inc., a Delaware corporation (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the merger as a wholly-owned direct subsidiary of CM Intermediate Sub II, Inc., a Delaware corporation and wholly-owned subsidiary of Adaptimmune (“CM Intermediate”), one complaint has been filed by a purported Company stockholder as an individual action in the United States District Court for the Southern District of New York, captioned Scott v. TCR2 Therapeutics, Inc. et al., 23-cv-3763 (filed May 4, 2023). A second individual action was filed by a different purported TCR2 stockholder on May 8, 2023, in the United States District Court for the District of Delaware, captioned Thompson v. TCR2 Therapeutics Inc., et. al., 1:23-cv-00503. The foregoing complaints are referred to as the “Merger Actions.”

The Merger Action alleges that the Schedule 14A Definitive Proxy Statement filed the SEC on April 20, 2023, misrepresents and/or omits certain purportedly material information relating to the Company and Adaptimmune’s financial projections and the analyses performed by the financial advisor to the Company's Board of Directors in connection with the Merger. The Merger Actions assert violations of Section 14(a) of the Securities Exchange Act of 1934, as amended, and Rule 14a-9 promulgated thereunder against all defendants (the Company and its Board of Directors) and violations of Section 20(a) of the Exchange Act against the Company’s Board of Directors. The Merger Action seek, among other things, an injunction enjoining the consummation of the Merger, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees, and other relief the court may deem just and proper.

The Company believes that the Merger Action is without merit, and the Company and the individual defendants intend to vigorously defend against the Merger Action and any subsequently filed similar actions. If additional similar complaints are filed, absent new or significantly different allegations, the Company will not necessarily disclose such additional filings.

Item 1A. Risk Factors

Careful consideration should be given to the following risk factors, in addition to the other information set forth in this Quarterly Report on Form 10-Q and in other documents that we file with the Securities and Exchange Commission, or SEC, in evaluating the Company and our business. Investing in our common stock involves a high degree of risk. If any of the following risks and uncertainties actually occurs, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks described below are not intended to be exhaustive and are not the only risks facing the Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impact our business, prospects, financial condition and results of operations.

Those risk factors below denoted with a “*” are newly added or have been materially updated from our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, filed with the SEC on March 2223, ~~2022~~2023.

Risks Related to the Development of Our Product Candidates

Risks Related to Clinical Development

Our approach to the discovery and development of product candidates based on our TRuC-T cell platform represents a novel approach to cancer treatment, which creates significant challenges for us.

Our future success depends on the successful development of our product candidates, which target solid tumors and hematologic malignancies using the complete T cell receptor (TCR) complex without the need for human leukocyte antigen (HLA) matching. Advancing our product candidates based on our innovative TRuC-T cell platform creates significant challenges for us, including:

•

educating medical personnel about the administration of TRuC-T cell therapies on a stand-alone basis or in combination with built-in immune and tumor modulators;

•

educating medical personnel regarding the potential side effect profile of our product candidates, such as the potential adverse side effects related to cytokine release syndrome (CRS), neurotoxicity or autoimmune or rheumatologic disorders;

•

administering chemotherapy to patients in advance of administering our product candidates, which may increase the risk of adverse side effects;

•

sourcing clinical and, if licensed, commercial, supplies for the materials used to manufacture and process our product candidates;

•

manufacturing viral vectors to deliver TRuC constructs to T cells;

•

developing a robust and reliable TRuC-T cell manufacturing process and manufacturing capacity as well as a complete shipment lifecycle and supply chain, including efficiently managing shipment of patient cells from and to clinical sites;

•

minimizing potential contamination to the cell product during production and effectively scaling manufacturing capacity to meet demand;

•

managing costs of inputs and other supplies while scaling production;

•

using medicines to manage adverse side effects of our product candidates, which may not adequately control the side effects and/or may have a detrimental impact on the potency of the treatment;

•

obtaining and maintaining regulatory approval from the ~~US Food and Drug Administration (~~FDA) for our product candidates; and

•

establishing sales and marketing capabilities upon obtaining any regulatory approval to gain market acceptance of a novel therapy.

In developing our product candidates, we have not exhaustively explored different options in the design of the TRuC construct and in the method for manufacturing TRuC-T cells. We may find our existing TRuC-T cells and manufacturing process may be substantially improved with future design or process changes, necessitating development of new or additional TRuC constructs and further clinical testing and delaying commercial launch of our first products. For example:

•

We have made several TRuC constructs and used preclinical studies to select product candidates to advance into clinical trials. The preclinical studies are limited in their ability to predict behavior of our product candidates in patients. As we gain experience working with TRuC constructs, we may decide to select other TRuC constructs for clinical development.

•

We have used a lentiviral vector to deliver the TRuC construct to T cells. In the future, we may find that another viral vector or non-viral transfer process offers advantages. Switching from ~~lentiviral to another delivery system would necessitate additional process development and clinical testing and delay the development of existing product candidates.~~

lentiviral to another delivery system would necessitate additional process development and clinical testing and delay the development of existing product candidates.

•

The process by which patient cells are converted into a TRuC-T cell has many steps that can influence quality and activity. We have explored a subset of variables and expect to continue to improve and optimize the manufacturing process. Depending upon the nature of the process changes, we may be compelled to perform bridging studies and/or to re-start clinical development, causing delays in time to market and potentially introducing a risk of failure if new processes do not perform as expected.

We are early in our development efforts. Gavo-cel, our most advanced product candidate, is in the Phase 2 portion of the Phase 1/2 clinical trial, TC-510 is in the Phase 1 portion of the Phase 1/2 clinical trial, and our other product candidates are still in preclinical development. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed. In January 2023, we announced that we have narrowed the focus of the ongoing Phase 2 clinical trial of gavo-cel to evaluate gavo-cel in ovarian cancer in combination with checkpoint inhibitors and redosing strategies, and prioritizing our second generation enhanced TC-510 and TC-520 programs.

We are early in our development efforts. Gavo-cel, our most advanced product candidate, is in the Phase 2 portion of the Phase 1/2 clinical trial, TC-510 is in the Phase 1 portion of the Phase 1/2 clinical trial, and our other product candidates are still in preclinical development. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. The success of our product candidates will depend on several factors, including the following:

•

successful completion of preclinical studies;

•

successful initiation and completion of clinical trials;

•

successful patient enrollment in and completion of clinical trials;

•

receipt and related terms of marketing approvals and licensures from applicable regulatory authorities;

•

obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

•

making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supply of our product candidates;

•

establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;

•

acceptance of our products, if and when approved, by patients, the medical community and third-party payors;

•

obtaining and maintaining third-party coverage and adequate reimbursement;

•

maintaining a continued acceptable safety profile of our products following licensure; and

•

effectively competing with other therapies.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or be unable to successfully commercialize our product candidates, which would materially harm our business.

We have limited experience as a company in conducting clinical trials.

We have limited experience as a company in conducting clinical trials. Our Phase 1/2 clinical trial for gavo-cel began in 2019, and ~~TC-510~~our ~~received IND clearance from FDA to initiate a~~ Phase 1/2 clinical trial infor ~~the~~TC-510 ~~first~~began ~~half~~in of 2022. Because of this limited experience, and other factors, we cannot be certain that our planned and ongoing preclinical studies will be completed on time, or that our planned and ongoing clinical trials will begin, enroll sufficient patients, produce data on expected timelines or be completed on expected timelines, if at all. Large-scale clinical trials require significant additional financial and management resources and reliance on third-party clinical investigators, CROs and consultants. Relying on third-party clinical investigators, CROs and consultants may force us to encounter delays that are outside of our control.

Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidate.

We cannot be certain that our preclinical studies and clinical trial results will be sufficient to support regulatory approval of our product candidates. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Failure or delay can occur at any time during the clinical trial process.

We may experience delays in obtaining the FDA’s authorization to initiate clinical trials under future INDs, completing ongoing clinical studies of our product candidates due to a variety of factors, including the impact of COVID-19 at our clinical sites, and initiating our planned preclinical studies and clinical trials. Additionally, we cannot be certain that preclinical studies or clinical trials for our product candidates will begin on time, not require redesign, enroll an adequate number of subjects on time, or be completed on schedule, if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:

•

the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials;

•

delays in obtaining regulatory approval to commence a clinical trial;

•

reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;

•

obtaining institutional review board (IRB) approval at each clinical trial site;

•

recruiting an adequate number of suitable patients to participate in a clinical trial;

•

having subjects complete a clinical trial or return for post-treatment follow-up;

•

clinical trial sites deviating from clinical trial protocol or dropping out of a clinical trial;

•

addressing subject safety concerns that arise during the course of a clinical trial;

•

adding a sufficient number of clinical trial sites; or

•

obtaining sufficient product supply of product candidate for use in preclinical studies or clinical trials from third-party suppliers.

For example, in February 2019, we received a request from the FDA’s Center for Devices and Radiological Health (CDRH) for the submission of an investigational device exemption (IDE) application regarding our use of a commercially available in vitro diagnostic assay for screening mesothelin expression in tumors. The CDRH subsequently determined that we did not need to submit an IDE application, but such a requirement, or other unexpected FDA requests, could lead to future delays of our clinical trials. We may experience numerous adverse or unforeseen events during, or as a result of, preclinical studies and clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:

application, but such a requirement, or other unexpected FDA requests, could lead to future delays of our clinical trials. We may experience numerous adverse or unforeseen events during, or as a result of, preclinical studies and clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:

•

we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;

•

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon our research efforts for our other product candidates;

•

the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of our clinical trials at a higher rate than we anticipate;

•

our third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls or be unable to provide us with sufficient product supply to conduct and complete preclinical studies or clinical trials of our product candidates in a timely manner, or at all;

•

we or our investigators might have to suspend or terminate clinical trials of our product candidates for various reasons, including non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other unexpected characteristics or a finding that the participants are being exposed to unacceptable health risks;

•

the cost of clinical trials of our product candidates may be greater than we anticipate;

•

the quality of our product candidates or other materials necessary to conduct preclinical studies or clinical trials of our product candidates may be insufficient or inadequate;

•

regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and

•

future collaborators may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only moderately positive or if there are safety concerns, our business and results of operations may be adversely affected and we may incur significant additional costs. In addition, costs to treat patients with relapsed or refractory cancer and to treat potential side effects that may result from our product candidates can be significant. Accordingly, our clinical trial costs are likely to be significantly higher than those for more conventional therapeutic technologies or drug product candidates.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such clinical trials are being conducted, by the Data Safety Monitoring Board (DSMB) for such clinical trial or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical trial protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from the product candidates, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

39If we experience delays in the completion, or termination, of any preclinical study or clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed and our ability

If we experience delays in the completion, or termination, of any preclinical study or clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate revenues from any of these product candidates will be delayed or not realized at all. In addition, any delays in completing our preclinical studies or clinical trials may increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. If one or more of our product candidates generally prove to be ineffective, unsafe or commercially unviable, our entire pipeline and TRuC-T cell platform would have little, if any, value, which would have a material and adverse effect on our business, financial condition, results of operations and prospects.45

~~Our~~to ~~business~~generate isrevenues ~~highly~~from ~~dependent~~any onof these product candidates will be delayed or not realized at all. In addition, any delays in completing our preclinical studies or clinical trials ~~for~~may increase our ~~lead~~costs, slow down our product ~~candidates,~~candidate ~~gavo-cel~~development and ~~TC-510,~~approval process and wejeopardize ~~must~~our ~~complete~~ability ~~IND-enabling~~to ~~studies~~commence product sales and ~~clinical~~generate ~~testing~~revenues. ~~before~~Any weof ~~can~~these ~~seek~~occurrences ~~regulatory~~may ~~approval~~significantly harm our business, financial condition and ~~begin~~prospects. ~~commercialization~~In ofaddition, ~~any~~many of ~~our~~the ~~product~~factors ~~candidates.~~that Wecause, ~~cannot~~or belead ~~certain~~to, ~~that~~a wedelay ~~will~~in bethe ~~able~~commencement toor ~~complete~~completion ~~ongoing~~of clinical trials, ~~initiate~~may ~~future~~also ~~planned~~ultimately ~~clinical~~lead ~~trials,~~to orthe ~~advance~~denial of regulatory approval of our product candidates. ~~into~~If ~~additional~~one ~~trials,~~ or more of our product candidates generally prove to ~~successfully~~be ~~develop~~ineffective, unsafe or ~~obtain~~commercially ~~regulatory~~unviable, ~~approval~~our ~~for,~~entire orpipeline ~~successfully~~and ~~commercialize~~TRuC-T cell platform would have little, if any, ofvalue, which would have a material and adverse effect on our ~~product~~business, ~~candidates~~financial condition, results of operations and prospects.

Our business ~~depends~~is ~~heavily~~highly dependent on our ~~ability to complete~~ clinical ~~development~~trials ~~and~~for ~~non-clinical studies of~~ our lead product candidates, gavo-cel and TC-510, and ~~our~~we ~~other~~must ~~product~~complete ~~candidates,~~IND-enabling studies and toclinical ~~obtain~~testing ~~regulatory~~before ~~approval~~we ofcan ~~and~~seek ~~successfully~~regulatory ~~commercialize~~approval ~~these~~ and ~~any~~begin ~~future~~commercialization ~~product~~of ~~candidates. There is no guarantee that~~ any of our product candidates. ~~will~~We ~~proceed~~cannot inbe ~~preclinical~~certain orthat ~~clinical~~we ~~development~~will orbe ~~achieve~~able ~~regulatory~~to ~~approval.~~complete ~~The~~ongoing ~~process~~clinical ~~for~~trials, ~~obtaining~~initiate ~~marketing~~future ~~approval~~planned ~~for~~clinical ~~any~~trials, ~~product~~or ~~candidate~~advance isour ~~very~~product ~~long~~candidates ~~and~~into ~~risky~~additional ~~and~~trials, ~~there~~or ~~will be significant challenges for us~~ to ~~address~~successfully indevelop, ~~order~~or to obtain ~~marketing~~regulatory approval asfor, ~~planned~~ or successfully commercialize, ifany atof ~~all~~our product candidates.

~~There~~Our isbusiness nodepends ~~guarantee~~heavily ~~that~~on ~~the~~our ~~results~~ability ~~obtained~~to incomplete ~~current~~clinical ~~preclinical~~development ~~studies,~~and ~~the Phase 2 portion of our Phase 1/2~~ non-clinical ~~trial~~studies of ~~gavo-cel, or~~ our ~~planned~~lead ~~clinical trials will be sufficient to obtain regulatory approval or marketing authorization for such~~ product candidates~~. The FDA may ultimately decide that the design~~, ~~number and type of clinical trials, number of patients studied or results of our clinical trial for~~ gavo-cel, ~~even~~and ~~if positive, are not sufficient for regulatory approval in their respective target indications. Changes in the manufacturing process as we scale~~TC-up510 and ~~optimize~~ our ~~process~~other ~~for manufacturing our~~ product candidates ~~could~~and ~~also delay development or require us~~ to ~~conduct~~obtain ~~additional~~regulatory ~~clinical~~approval ~~trials~~of orand ~~non-clinical~~successfully ~~studies~~commercialize orthese could lead to different results than achieved with the earlier processes. We may not be able to initiate or complete our clinical trials or announce results from our clinical trials on the timelines we expect. We may experience slower than expected enrollment and ~~randomization~~any offuture ~~patients~~product ~~in our clinical trials~~candidates. ~~These types of delays can lead to delays in completion of a trial and announcement of results.~~ There is ~~also~~no ~~the~~guarantee ~~potential~~that ~~for slower than expected clinical site initiation, delays or problems in analyzing data, and the potential need for additional analysis or data or the need to enroll additional patients in~~ any of our ~~clinical~~product ~~trials.~~candidates Wewill ~~may~~proceed ~~also encounter delays arising from unexpected adverse events~~ in apreclinical ~~trial~~ or ~~other~~clinical ~~unexpected~~development ~~hurdles~~ or ~~issues~~achieve inregulatory ~~the conduct of any trial~~approval. ~~Negative~~The ~~results~~process infor ~~the~~obtaining ~~development~~marketing ~~of our lead product candidates may also impact our ability to obtain regulatory~~ approval for ~~our~~any ~~other~~ product ~~candidates,~~candidate ~~either~~is atvery ~~all~~long orand ~~within~~risky ~~anticipated timeframes because, although other product candidates may target different indications, the underlying technology platform, manufacturing process~~ and ~~development~~there ~~process~~will isbe ~~the~~significant ~~same~~challenges for ~~all~~us ofto ~~our~~address ~~product candidates. Accordingly, a failure~~ in ~~any~~order ~~one program may affect the ability~~ to obtain ~~regulatory~~marketing approval toas ~~continue~~planned or, ~~conduct~~if ~~clinical~~at ~~programs for other product candidates~~all.

InThere ~~addition~~is no guarantee that the results obtained in current preclinical studies, ~~because~~the wePhase ~~have~~2 ~~limited~~portion ~~financial~~of ~~and~~our ~~personnel~~Phase ~~resources~~1/2 clinical trial of gavo-cel, the Phase 1 and/or ~~are~~Phase ~~placing~~2 ~~significant~~portions ~~focus~~of onour ~~the~~Phase ~~development~~1/2 clinical trial of TC-510, or our ~~lead~~other planned clinical trials will be sufficient to obtain regulatory approval or marketing authorization for such product candidates. The FDA may ultimately decide that the design, number and type of clinical trials, number of patients studied or results of our clinical trial for gavo-cel and/or TC-510, even if positive, are not sufficient for regulatory approval in their respective target indications. Changes in the manufacturing process as we scale-up and optimize our process for manufacturing our product candidates could also delay development or require us to conduct additional clinical trials or non-clinical studies or could lead to different results than achieved with the earlier processes. We may ~~forgo~~not be able to initiate or ~~delay~~complete ~~pursuit~~our clinical trials or announce results from our clinical trials on the timelines we expect. We may experience slower than expected enrollment and randomization of ~~opportunities~~patients ~~with~~in ~~other~~our ~~future~~clinical ~~product~~trials. ~~candidates~~These ~~that~~types ~~later~~of ~~prove~~delays can lead to ~~have~~delays ~~greater~~in ~~commercial~~completion of a trial and announcement of results. There is also the potential for slower than expected clinical site initiation, delays or ~~may~~problems in analyzing data and the potential need tofor ~~divert~~additional ~~resources~~analysis or data or the need to enroll additional patients in any of our clinical trials. We may also encounter delays arising from unexpected adverse events in a trial or other ~~programs~~unexpected hurdles or issues in the conduct of any trial. We may not be able to collect sufficient data in our clinical trials to obtain regulatory approval or marketing authorization or to continue with clinical development of one or more of our product candidates. For example, inwe ~~October~~may ~~2021,~~not be able to obtain sufficient patient samples because the patients we enroll in ~~alignment~~our clinical trials are unable or unwilling to complete follow-up visits and/or proceed with ~~our~~sample ~~pipeline~~collection ~~prioritization~~such onas ~~solid~~biopsy ~~tumors~~procedures. Consequently, we ~~deprioritized~~may not be able to produce translational or other data on expected timelines, or at all. Negative results in the development of ~~TC-110~~our lead product candidates may also impact our ability to obtain regulatory approval for our other product candidates, aeither at all or within anticipated timeframes because, although other product ~~candidate~~candidates inmay atarget ~~Phase~~different 1indications, ~~clinical~~the ~~trial~~underlying technology platform, manufacturing process and development process is the same for all of our product candidates. ~~Our~~Accordingly, ~~resource~~a ~~allocation~~failure ~~decisions~~in any one program may ~~cause~~affect usthe ability to ~~fail~~obtain regulatory approval to ~~capitalize~~continue onor ~~viable~~conduct ~~commercial~~clinical programs for other product candidates.

40In addition, because we have limited financial and personnel resources and are placing significant focus on the development of our lead product candidates, we may forgo or delay pursuit of opportunities with

products or profitable market opportunities or limit the opportunities we are able to pursue. Our spending on current and future research and development programs and other future product candidates for specific indications may not yield any commercially viable future product candidates. If we do not accurately evaluate the commercial potential or target market for a particular future product candidate, we may relinquish valuable rights to those future product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such future product candidates.46

other future product candidates that later prove to have greater commercial potential, or may need to divert resources to other programs. For example, in October 2021, in alignment with our pipeline prioritization on solid tumors, we deprioritized the development of TC-110, a product candidate in a Phase 1 clinical trial. Further, we may forgo, delay, alter, or reduce focus and/or expenditure on development of certain lead product candidates in favor of, or to allow prioritization of, development of other product candidates. For example, in January 2023, we announced that we have narrowed the focus of the ongoing Phase 2 clinical trial of gavo-cel to evaluate gavo-cel in ovarian cancer in combination with checkpoint inhibitors and redosing strategies, and prioritizing our second generation enhanced TC-510 and TC-520 programs. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities or limit the opportunities we are able to pursue. Our spending on current and future research and development programs and other future product candidates for specific indications may not yield any commercially viable future product candidates. If we do not accurately evaluate the commercial potential or target market for a particular future product candidate, we may relinquish valuable rights to those future product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such future product candidates.

Our preclinical studies and clinical trials may fail to demonstrate adequately the safety and efficacy of any of our product candidates, which would prevent or delay development, regulatory approval and commercialization.

Before obtaining regulatory approvals for the commercial sale of our product candidates, including gavo-cel and TC-510, we must demonstrate through lengthy, complex and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use in each target indication. We may not be able to demonstrate the efficacy and safety of gavo-cel, TC-510, or any of our other product candidates or any future product candidate at each stage of clinical development or we may encounter issues with any non-clinical studies required for regulatory submissions. Success in preclinical studies or in earlier stage clinical trials may not be repeated or observed in ongoing or future clinical trials involving TRuCs or other product candidates. The results of clinical trials or non-clinical studies of our product candidates at any stage may not support further development or may not be sufficient to obtain regulatory approval.

InBased on the ~~Phase~~topline 1data readout presented on September 28, 2022 from patients in dose escalation in the Phase 1 portion of our Phase 1/2 clinical trial as of the September 9, 2022 data cutoff, gavo-cel was generally well tolerated with a manageable adverse event profile up until dose level (DL) 5, with no patients experiencing on-target, off-tumor toxicities. Two dose limiting toxicities (DLTs) were observed: one case of Grade 3 pneumonitis at DL1 that resolved with anti-cytokine therapy, and one case of Grade 5 bronchoalveolar hemorrhage at DL5. Furthermore, all three patients treated at DL5 experienced Grade ≥3 CRS which resulted in 5x108 cells/m2 following lymphodepletion being declared the maximum tolerated dose (MTD) by the safety review team (SRT). After declaring the MTD, the study proceeded to a dose de-escalation portion, first at DL3.5 (3x108 cells/m2 following lymphodepletion) using a split-dosing approach, and subsequently at DL3 (~~1x108 cells~~1x108cells/m2 following lymphodepletion) which was declared the ~~recommended Phase 2 dose (~~RP2D). No new DLTs were observed during the dose de-escalation. While our data in the Phase 1/2 clinical trial has been positive with a manageable ~~safety~~adverse event profile, these results may not be repeated or observed in future cohorts of patients treated in the currently ongoing clinical trial or in future clinical trials and may not be predictive of the results of later-stage clinical trials.

The drug-development process, including preclinical and clinical testing is expensive, can take many years to complete, and may include post-marketing studies and surveillance, which will require the expenditure of substantial resources. The outcome of the drug development process is inherently uncertain. Of the large number of drugs in development in the U.S., only a small percentage will successfully complete the FDA regulatory approval process and will be commercialized. Failure can occur at any time during the preclinical study and clinical trial processes, and, because our product candidates are in an early stage of development, there is a high risk of failure and we may never succeed in developing marketable products. Clinical trials of our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the U.S. and in other countries where we intend to test and, if approved, market any product candidate. Accordingly, even if we have the requisite financial resources, when needed, to continue to fund our development efforts, we cannot assure you that any of our product candidates will be successfully developed or commercialized either in the U.S. or in any country outside the U.S. Even if we gain approval of any of our other product candidates, we may never be able to successfully commercialize the product or to meet our expectations with respect to revenues or profits.

41numerous government authorities in the U.S. and in other countries where we intend to test and, if approved, market any product candidate. Accordingly, even if we have the requisite financial resources, when needed, to continue to fund our development efforts, we cannot assure you that any of our product candidates will be successfully developed or commercialized either in the U.S. or in any country outside the U.S. Even if we gain approval of any of our other product candidates, we may never be able to successfully commercialize the product or to meet our expectations with respect to revenues or profits.

The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through preclinical studies and clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of potency or efficacy, insufficient durability of potency or efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that commence preclinical studies and clinical trials are never approved as products.

Any preclinical studies or clinical trials that we may conduct may not demonstrate the safety and efficacy necessary to obtain regulatory approval to market our product candidates. If the results of our ongoing or future preclinical studies and clinical trials are inconclusive with respect to the safety and efficacy of our product candidates, if we do not meet the clinical endpoints with statistical and clinically meaningful significance, or if there are safety concerns associated with our product candidates, we may be prevented or delayed in obtaining marketing approval for such product candidates. There can be significant variability in safety and efficacy results between different preclinical studies and clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. Additionally, our preclinical studies comparing our product candidates to chimeric antigen receptor T (CAR-T) cells utilized CAR-T cells that we engineered, rather than the CAR-T cell therapies that are currently approved by the FDA. Although we believe, based on the results we observed in these preclinical studies, that our product candidates have the potential to improve upon the safety and efficacy of currently approved CAR-T cell therapies, these results may not be predictive of the outcome of our future preclinical studies and clinical trials, including any potential preclinical studies and clinical trials that may compare our product candidates to FDA-approved CAR-T cells.

Since the number of patients that we plan to dose in each of our Phase 1/2 clinical ~~trial~~trials for gavo-cel is small, the results from ~~this~~these clinical ~~trial~~trials, once completed, may be less reliable than results achieved in a larger clinical trial, which may hinder our efforts to obtain regulatory approval.

The number of patients we plan to treat in our clinical trial for gavo-cel is small and the results from this clinical trial, once completed, may be less reliable that results achieved in larger clinical trials. For example, in the Phase 1 portion of our Phase 1/2 clinical trial of gavo-cel, we evaluated the safety profile of gavo-cel and established the ~~recommended Phase 2 dose~~RP2D. In Phase 2, we intend to treat ~~up to 75 patients with malignant pleural/peritoneal mesothelioma,~~ approximately 20 patients with ~~non-small cell lung cancer (NSCLC), approximately 20 patients with~~ ovarian cancer ~~and approximately 20 patients with cholangiocarcinoma~~. The preliminary results of clinical trials with smaller sample sizes, such as our Phase 1/2 clinical ~~trial~~trials of gavo-cel, can be disproportionately influenced by various biases associated with the conduct of small clinical trials, such as the potential failure of the smaller sample size to accurately depict the features of the broader patient population, which limits the ability to generalize the results across a broader community, thus making the clinical trial results less reliable than clinical trials with a larger number of patients. As a result, there may be less certainty that such product candidates would achieve a statistically significant effect in any future clinical trials. If we conduct any future clinical trials of gavo-cel, we may not achieve a statistically significant result or the same level of statistical significance, if any, that we might have anticipated based on the results observed in our initial Phase 1/2 clinical ~~trial~~trials.

We may not be able to file INDs or IND amendments to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed.

We may not be able to file INDs on the timelines we expect. For example, we may experience manufacturing delays or other delays with IND-enabling studies. Moreover, we cannot be sure that submission of an IND will result in the FDA allowing further clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND, we cannot guarantee that such regulatory authorities will not change their requirements in the future. These considerations also apply to new clinical trials we may submit as amendments to existing INDs.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including impacts that have resulted or may result from the ongoing COVID-19 pandemic. The timely completion of clinical trials in accordance with their protocols depends on, among other things, our ability to enroll a sufficient number of patients who remain in the clinical trial until its conclusion. The enrollment of patients depends on many factors, including:

•

the patient eligibility criteria defined in the clinical trial protocol;

•

the size of the patient population required for analysis of the clinical trial’s primary endpoints;

•

the proximity of patients to clinical trial sites;

•

the design of the clinical trial;

•

our ability to recruit clinical trial investigators with the appropriate competencies and experience;

•

our ability to obtain and maintain patient consents;

•

reporting of the preliminary results of any of our clinical trials; and

•

the risk that patients enrolled in clinical trials will drop out of the clinical trials before the manufacturing and infusion of our product candidates or clinical trial completion.

Our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us because some patients who might have opted to enroll in our clinical trials may instead opt to enroll in a clinical trial being conducted by one of our competitors. In addition, patients may be unwilling to participate in our studies because of negative publicity from adverse events in the biotechnology industry or for other reasons. Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Moreover, because our product candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and hematopoietic stem cell transplantation, rather than enroll patients in any future clinical trial. Additionally, because some of our clinical trials are in patients with relapsed/refractory cancer, the patients are typically in the late stages of their disease and may experience disease progression independent from our product candidates, making them unevaluable for purposes of the clinical trial and requiring additional patient enrollment.

Delays in completing patient enrollment may result in increased costs or may affect the timing or outcome of our ongoing and planned clinical trials, which could prevent completion or commencement of these clinical trials and adversely affect our ability to advance the development of our product candidates.

Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, require expansion of the trial size, limit their commercial potential, or result in significant negative consequences.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities, including IRBs, to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. Further, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of subjects and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered with a significantly larger number of patients exposed to the drug. Because of our planned dose escalation design for our clinical trials, undesirable side effects could also result in an expansion in the size of our clinical trials, increasing the expected costs and timeline of our clinical trials. Additionally, results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics, which may stem from our product candidates specifically or may be due to an illness from which the clinical trial subject is suffering. In the Phase 1 dose escalation portion of our Phase 1/2 clinical trial, as of the September 9, 2022 data cutoff, gavo-cel was generally well tolerated with a manageable adverse event profile up until DL5, with no patients experiencing on-target, off-tumor toxicities. Two DLTs were observed: one case of Grade 3 pneumonitis at DL1 that resolved with anti-cytokine therapy and one case of Grade 5 bronchoalveolar hemorrhage at DL5. Furthermore, all three patients treated at DL5 experienced Grade ≥3 CRS which resulted in 5x108cells/m2 following lymphodepletion being declared the MTD by the SRT. After declaring the MTD, the study proceeded to a dose de-escalation portion, first at DL3.5 (3x108 cells/m2 following lymphodepletion) using a split-dosing approach and subsequently at DL3 (1x108cells/m2 following lymphodepletion) which was declared the RP2D. No new DLTs were observed during the dose de-escalation. While our data in the Phase 1/2 clinical trial has been positive with a manageable safety profile, these results may not be repeated or observed in future cohorts of patients treated in the currently ongoing clinical trial or in future clinical trials and may not be predictive of the results of later-stage clinical trials.

43Autoimmunity may occur after TRuC-T cell treatment. TRuC-T cells are generated from a patient’s own T cells isolated from their peripheral blood. There is a theoretical risk that this process will expand a patient’s own T cell that has autoreactivity, or that may recognize healthy cells and upon re-infusion may trigger an autoimmune reaction resulting in damage to normal tissues and potentially even death. Autoimmune reaction triggered by an interaction between a patient’s naturally occurring antibodies and engineered T cells is a theoretical safety risk of product candidates we develop using our TRuC-T cell platform. If a patient’s self-generated antibodies were directed to a target expressed on the surface of cells in normal tissue (autoantibodies), engineered T cells would be directed to attack these same tissues, potentially resulting in off-tumor effects. These autoantibodies may be present whether or not the patient has an active autoimmune disease. In our clinical testing, we plan to take steps to minimize the likelihood that this occurs, for example by excluding patients with a history of severe autoimmune disease from our trials. There is no guarantee, however, that we will not observe autoimmune reactions in the future and no guarantee that if we do, that we will be able to implement interventions to address the risk.

manageable adverse event profile up until DL5, with no patients experiencing on-target, off-tumor toxicities. Two DLTs were observed: one case of Grade 3 pneumonitis at DL1 that resolved with anti-cytokine therapy, and one case of Grade 5 bronchoalveolar hemorrhage at DL5. Furthermore, all three patients treated at DL5 experienced Grade ≥3 CRS which resulted in 5x108 cells/m2 following lymphodepletion being declared the MTD by the SRT. After declaring the MTD, the study proceeded to a dose de-escalation portion, first at DL3.5 (3x108 cells/m2 following lymphodepletion) using a split-dosing approach, and subsequently at DL3 (1x108 cells/m2 following lymphodepletion) which was declared the RP2D. No new DLTs were observed during the dose de-escalation. While our data in the Phase 1/2 clinical trial has been positive with a manageable safety profile, these results may not be repeated or observed in future cohorts of patients treated in the currently ongoing clinical trial or in future clinical trials and may not be predictive of the results of later-stage clinical trials.

Autoimmunity may occur after TRuC-T cell treatment. TRuC-T cells are generated from a patient’s own T cells isolated from their peripheral blood. There is a theoretical risk that this process will expand a patient’s own T cell that has autoreactivity, or that may recognize healthy cells, and upon re-infusion may trigger an autoimmune reaction resulting in damage to normal tissues and potentially even death. Autoimmune reaction triggered by an interaction between a patient’s naturally occurring antibodies and engineered T cells is a theoretical safety risk of product candidates we develop using our TRuC-T cell platform. If a patient’s self-generated antibodies were directed to a target expressed on the surface of cells in normal tissue (autoantibodies), engineered T cells would be directed to attack these same tissues, potentially resulting in off-tumor effects. These autoantibodies may be present whether or not the patient has an active autoimmune disease. In our clinical testing, we plan to take steps to minimize the likelihood that this occurs, for example by excluding patients with a history of severe autoimmune disease from our trials. There is no guarantee, however, that we will not observe autoimmune reactions in the future and no guarantee that if we do, that we will be able to implement interventions to address the risk.

Immunogenicity, which is the reaction between a patient’s immune system and a foreign protein outside of the autoimmune context, is an additional theoretical safety risk of product candidates we develop using our TRuC-T cell platform. Patients’ immune systems may recognize the TRuC construct on the TRuC-T cell as a foreign protein and fight against it, potentially rendering it ineffective, or even provoking an allergic/anaphylactoid response or other adverse side effects. The immunogenic potential of novel therapeutics like TRuC-T cells is difficult to predict. There is no guarantee that we will not observe immunogenic reactions in the future and no guarantee that if we do, that we will be able to implement interventions to address the risk.

If unacceptable toxicities arise in the development of our product candidates, we could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities, or local regulatory authorities such as IRBs, could order us to cease clinical trials. Competent national health authorities, such as the FDA, could also deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the clinical trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from T cell therapy are not normally encountered in the general patient population and by medical personnel. We expect to have to train medical personnel using our product candidates to understand the side effect profile of our product candidates for both our planned clinical trials and upon any commercialization of any product candidates, if licensed. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient deaths. Any of these occurrences may significantly harm our business, financial condition and prospects.

Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the clinical trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from T cell therapy are not normally encountered in the general patient population and by medical personnel. We expect to have to train medical personnel using our product candidates to understand the side effect profile of our product candidates for both our planned clinical trials and upon any commercialization of any product candidates, if licensed. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient deaths. Any of these occurrences may significantly harm our business, financial condition and prospects.

Our product candidates may target healthy cells expressing target antigens leading to potentially fatal adverse effects.

Our product candidates target specific antigens that are also expressed on healthy cells. For example, each of gavo-cel, ~~one~~and ofTC-510 ~~our lead product candidates,~~ targets mesothelin, an antigen commonly found on mesotheliomas, ovarian cancers, and NSCLC, as well in healthy cells that line the pleura, pericardium and peritoneum. Our product candidates may target healthy cells, leading to serious and potentially fatal adverse effects. In the Phase 1 portion of our Phase 1/2 clinical trial of gavo-cel we used, and in the Phase 1 portion of our Phase 1/2 clinical trial of TC-510 we are using, a dose escalation model to closely monitor the effect of gavo-cel and TC-510 on vital organs and other potential side effects. Even though we intend to closely monitor the side effects of our product candidates in both preclinical studies and clinical trials, we cannot guarantee that products will not target and kill healthy cells.

adverse effects. In our Phase 1/2 clinical trial of gavo-cel, we are using a dose escalation model to closely monitor the effect of gavo-cel on vital organs and other potential side effects. Even though we intend to closely monitor the side effects of our product candidates in both preclinical studies and clinical trials, we cannot guarantee that products will not target and kill healthy cells.

Our product candidates may have serious and potentially fatal cross-reactivity to other peptides or protein sequences within the body.

Our product candidates may recognize and bind to a peptide unrelated to the target antigen to which it is designed to bind. If this peptide is expressed within normal tissues, our product candidates may target and kill the normal tissue in a patient, leading to serious and potentially fatal adverse effects. Detection of any cross-reactivity may halt or delay any ongoing clinical trials for any TRuC-T cell based product candidate and prevent or delay regulatory approval. Unknown cross-reactivity of the TRuC-T cell binding domain to related proteins could also occur. We have also developed a preclinical screening process to identify cross-reactivity of the TRuC-T cell binders. Any cross-reactivity that impacts patient safety could materially impact our ability to advance our product candidates into clinical trials or to proceed to marketing approval and commercialization.

Our product candidates rely on the use of protein binding domains, or binders, to target specific cancers, which we may develop or which may be developed by third parties. We are limited in our ability to apply our product candidates to a wider range of potential target cancers by our ability to develop, partner for or acquire these binders on commercially reasonable terms.

TRuC-T cell therapies require the use of antigen-specific protein binding domains, or binders, which guide the TRuC-T cells and bind to the antigens on the surface of a tumor to target specific types of cancers. Our ability to develop and commercialize our product candidates will depend on our ability to develop these binders or partner for such binders on commercially reasonable terms for use in clinical trials as well as the availability of such binders for use in commercialized products, if licensed. For example, we have a non-exclusive license for the mesothelin binder incorporated into the TRuC construct for gavo-cel and for TC-510 from Harpoon Therapeutics, Inc. (Harpoon). However, we cannot be certain that our Harpoon license or potential future collaborations will provide us with a steady supply of binders that we can utilize in combination with the TRuC construct to develop future product candidates. If we are unable to enter into such collaborations on commercially reasonable terms or fail to realize the benefits of any such collaboration, we may be limited to using antibody fragments that we are able to independently develop which may limit the ability of our product candidates to target and kill cancer cells.

The failure to enter into a successful collaboration or to develop our own binders may delay our development timelines, increase our costs and jeopardize our ability to develop future product candidates ~~as a commercially viable drug, which could result in delays in product development and harm our business.~~

as a commercially viable drug, which could result in delays in product development and harm our business.

Co-administering our TRuC-T cell product candidates with other approved therapies or enhancing our TRuC-T cells with new constructs may increase the risk of severe adverse events, including cytokine release syndrome and other toxicities, which could interrupt, delay, or halt our clinical trials.

We believe that co-administration and/or enhancing our TRuC-T cell product candidates may lead to better efficacy, durability and patient outcomes. However, enhancements and co-administration may increase the occurrence of severe adverse side effects, such as cytokine release syndrome (CRS). Undesirable side effects caused by our product candidates could cause us or regulatory authorities, including IRBs, to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities.

We are evaluating gavo-cel in combination with the checkpoint ~~inhibitors~~inhibitor Opdivo® (nivolumab), an anti-PD-1 checkpoint inhibitor, and Yervoy® (ipilimumab), an anti-CTLA-4 checkpoint inhibitor, in the planned Phase 2 portion of our Phase 1/2 clinical trial. Nivolumab and ipilimumab are FDA approved therapies, but each has its own risks and side effects. Providing these therapies in combination with gavo-cel may increase gavo-cel’s efficacy, but it may also increase undesirable side effects from gavo-cel, nivolumab or ipilimumab.

45Our first enhanced TRuC-T cell is TC-510, which is a TRuC-T cell targeting mesothelin-expressing solid tumors which incorporates a PD-1:CD28 chimeric switch receptor (PD-1 Switch). The PD-1 Switch is designed to translate the inhibition of a cancer cell’s PD-1 signal into a costimulatory CD28 signal, causing cell activity to increase rather than be suppressed by the hostile tumor microenvironment. Based on our preclinical studies, we believe that TC-510’s unique way of engaging and powering T cells could lead to improved T cell function and persistence and result in better clinical outcomes for patients. However, increased T cell function may also lead to greater risk of severe adverse side effects. We have observed adverse side effects with gavo-cel in the Phase 1 portion of our Phase 1/2 clinical trial, including several patients that developed grade 3 or higher CRS, one patient with Grade 3 pneumonitis that resolved with anti-cytokine therapy, and one patient with Grade 5 bronchoalveolar hemorrhage. It is possible that TC-510, which is similar to gavo-cel plus the PD-1 Switch, will have a greater risk of triggering CRS and other undesirable side effects.

Phase 2 portion of our Phase 1/2 clinical trial. Nivolumab and ipilimumab are FDA approved therapies, but each has its own risks and side effects. Providing these therapies in combination with gavo-cel may increase gavo-cel’s efficacy, but it may also increase undesirable side effects from gavo-cel, nivolumab or ipilimumab.

Our first enhanced TRuC-T cell is TC-510, which is a TRuC-T cell targeting mesothelin-expressing solid tumors which incorporates a PD-1:CD28 chimeric switch receptor (PD-1 Switch). The PD-1 Switch is designed to translate the inhibition of a cancer cell’s PD-1 signal into a costimulatory CD28 signal, causing cell activity to increase rather than be suppressed by the hostile tumor microenvironment. Based on our preclinical studies, we believe that TC-510’s unique way of engaging and powering T cells could lead to improved T cell function and persistence, and result in better clinical outcomes for patients. However, increased T cell function may also lead to greater risk of severe adverse side effects. We have observed adverse side effects with gavo-cel in the Phase 1 portion of our Phase 1/2 clinical trial, including several patients that developed grade 3 or higher CRS and one patient with Grade 5 bronchoalveolar hemorrhage. It is possible that TC-510, which is similar to gavo-cel plus the PD-1 Switch, will have a greater risk of triggering CRS and other undesirable side effects.

We may not be successful in our efforts to identify or discover additional product candidates.

The success of our business depends primarily upon our ability to identify, develop and commercialize products based on our TRuC-T cell platform. Our research programs may fail to identify other potential product candidates for clinical development for a number of reasons. We may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful. If any of these events occur, we may be forced to abandon our research, development or commercialization efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.

Risks Related to Manufacturing

The process of manufacturing and administering our product candidates is complex and highly regulated. The manufacture of our product candidates involves complex processes, including the manufacture of a lentiviral delivery vector containing the genetic information for our TRuC construct and manufacturing T cells containing the TRuC construct for the final product candidates. More specifically, the manufacture of our product candidates includes harvesting white blood cells from the patient, isolating certain T cells from the white blood cells, combining patient T cells with our lentiviral delivery vector through a process known as transduction, expanding the transduced T cells to obtain the desired dose, and ultimately infusing the modified T cells back into the patient’s body. As a result of the complexities entailed in this process, our manufacturing and supply costs are likely to be higher than those at more traditional manufacturing processes and the manufacturing process is less reliable and more difficult to reproduce. Additionally, the number of facilities that are capable of harvesting patients’ cells for the manufacture of our product candidates and other autologous cell therapy products and product candidates is limited. As the number of autologous cell therapy products and product candidates increases, the limited number of facilities capable of harvesting patients’ cells could result in delays in the manufacture and administration of our product candidates and/or require us to prioritize among our clinical programs, potentially resulting in clinical trial delays.52

46manufacturing capabilities. If we encounter such difficulties, our ability to provide supply of our TRuC-T cells for clinical trials or for commercial purposes could be delayed or stopped.

WeThe ~~rely~~process onof ~~third~~manufacturing ~~parties~~and ~~for~~administering ~~the~~our ~~manufacture~~product ofcandidates ~~our~~is ~~lentiviral~~complex ~~vectors~~ and ~~our~~highly ~~product candidates~~regulated. ~~These~~The ~~third-party~~manufacture ~~manufacturers~~of ~~may~~our ~~incorporate~~product ~~their~~candidates ~~own~~involves ~~proprietary~~complex processes, ~~into~~including ~~our~~the manufacture of a lentiviral delivery vector ~~and~~containing ~~product~~the ~~candidate~~genetic information for our TRuC construct and manufacturing ~~processes.~~T Wecells ~~have~~containing ~~limited~~the ~~control~~TRuC ~~and~~construct ~~oversight~~for ofthe afinal ~~third~~product ~~party’s~~candidates. ~~proprietary~~More ~~process~~specifically, ~~and~~the amanufacture ~~third~~of ~~party~~our ~~may~~product ~~elect~~candidates toincludes ~~modify~~harvesting ~~its~~white ~~process~~blood ~~without~~cells ~~our~~from ~~consent~~the orpatient, ~~knowledge.~~isolating ~~These~~certain ~~modifications~~T ~~could~~cells ~~negatively~~from ~~impact~~the ~~our~~white ~~manufacturing~~blood cells, ~~including~~combining ~~product~~patient ~~loss~~T orcells ~~failure~~with ~~that~~our ~~requires~~lentiviral ~~additional~~delivery ~~manufacturing~~vector ~~runs~~through or a ~~change~~process inknown ~~manufacturer~~as transduction, ~~both~~expanding ofthe ~~which~~transduced ~~could~~T ~~significantly~~cells ~~increase~~to obtain the ~~cost~~desired ofdose and ~~significantly~~ultimately ~~delay~~infusing the ~~manufacture~~modified T cells back into the patient’s body. As a result of the complexities entailed in this process, our ~~product~~manufacturing ~~candidates.~~and Insupply ~~addition~~costs ~~these~~are ~~third~~likely ~~parties~~to ~~may~~be ~~have~~higher ~~limited~~than those at more traditional manufacturing ~~capacity~~processes and wethe ~~have~~manufacturing process is less ~~control~~reliable ~~over~~and ~~production~~more ~~methods~~difficult to reproduce. Additionally, ~~staffing~~the ~~and~~number of facilities that are capable of harvesting patients’ cells for the manufacture of our product ~~quality~~candidates ~~when~~and ~~produced~~other ~~with~~autologous ~~third~~cell ~~party~~therapy ~~manufacturers~~products and product candidates is limited. InAs ~~both~~the ~~cases,~~number ~~this~~of ~~can~~autologous ~~cause~~cell ~~delays~~therapy inproducts ~~planned~~and ~~manufacturing~~product ~~runs~~candidates increases, ~~require~~the ~~remanufacture~~limited ~~due~~number toof ~~failed~~facilities ~~runs~~capable ~~and~~of ~~limit~~harvesting ~~our~~patients’ ~~ability~~cells tocould ~~manufacture~~result ~~lentiviral~~in ~~vector~~delays in the manufacture and administration of our product candidates asand/or ~~needed,~~require ~~resulting~~us into ~~delays~~prioritize ~~for~~among ~~IND~~our ~~filings~~clinical programs, ~~clinical~~potentially ~~trials~~resulting ~~and~~in ~~non-~~clinical ~~studies~~trial delays.

~~Our~~We ~~manufacturing~~rely ~~process~~on isthird ~~and~~parties ~~will~~for bethe ~~susceptible~~manufacture toof ~~product~~our ~~loss~~lentiviral orvectors ~~failure~~and ~~due~~our toproduct ~~logistical~~candidates. ~~issues,~~These ~~including~~third-party ~~manufacturing~~manufacturers ~~issues~~may ~~associated~~incorporate ~~with~~their ~~the~~own ~~differences~~proprietary inprocesses ~~patients’~~into ~~white~~our ~~blood~~lentiviral ~~cells,~~vector ~~interruptions~~and inproduct ~~the~~candidate manufacturing ~~process,~~processes. ~~contamination,~~We ~~equipment~~have orlimited ~~reagent~~control ~~failure,~~and ~~power~~oversight ~~failures,~~of ~~supplier~~a ~~error~~third ~~and~~party’s ~~variability~~proprietary inprocess ~~patient~~and ~~characteristics.~~a ~~For~~third ~~example,~~party inmay ~~July~~elect ~~2018,~~to amodify ~~power~~its ~~failure~~process ~~that~~without ~~occurred~~our ~~during~~consent aor ~~manufacturing~~knowledge. ~~run~~These tomodifications ~~produce~~could ~~virus~~negatively ~~for~~impact our ~~Phase~~manufacturing, ~~1/2~~including ~~clinical~~product ~~trial~~loss ofor ~~gavo-cel~~failure ~~caused us to abandon~~ that ~~run,~~requires ~~and~~additional ~~resulted~~manufacturing inruns or a ~~month-long~~change ~~delay~~ in ~~the~~manufacturer, ~~process~~both of ~~manufacturing~~which ~~the~~could ~~requisite~~significantly ~~virus~~increase tothe ~~support~~cost ~~our~~of ~~IND filing for gavo-cel~~ and ~~consequently~~significantly a delay in the ~~IND~~manufacture ~~filing~~of ~~itself.~~our ~~Even~~product ~~minor~~candidates. ~~deviations~~In ~~from~~addition, ~~normal~~these ~~manufacturing~~third ~~processes~~parties ~~could~~may ~~result~~have inlimited ~~reduced~~manufacturing ~~production~~capacity ~~yields, product defects~~ and ~~other supply disruptions. If for any reason~~ we ~~lose~~have aless ~~patient’s~~control ~~white~~over ~~blood~~production ~~cells~~methods, orstaffing ~~such~~and ~~material~~product ~~gets~~quality ~~contaminated~~when orproduced ~~processing~~with ~~steps~~third ~~fail~~party atmanufacturers. ~~any~~In ~~point~~both cases, ~~the~~this ~~manufacturing~~can ~~process~~cause ofdelays ~~the~~in ~~TRuC-T~~planned ~~cells~~manufacturing ~~for~~runs, ~~that~~require ~~patient~~remanufacture ~~will~~due ~~need~~ to befailed ~~restarted~~runs and ~~the~~limit ~~resulting delay may adversely affect that patient’s outcome. If microbial, viral or other contaminations are discovered in~~ our ~~product~~ability ~~candidates~~to ormanufacture inlentiviral ~~the~~vector ~~manufacturing~~and ~~facilities in which~~ our product candidates ~~are~~as ~~made or administered~~needed, ~~such~~resulting ~~manufacturing~~in ~~facilities~~delays ~~may need to be closed~~ for anIND ~~extended~~filings, ~~period~~clinical oftrials ~~time to investigate~~ and ~~remedy~~non-clinical ~~the contamination~~studies.

AsOur ~~our~~manufacturing ~~product~~process ~~candidates~~is ~~progress~~and ~~through~~will ~~preclinical~~be ~~studies~~susceptible ~~and~~to ~~clinical~~product ~~trials~~loss ~~towards~~or ~~potential~~failure ~~licensure~~due ~~and~~to ~~commercialization~~logistical issues, itincluding ismanufacturing ~~expected~~issues ~~that~~associated ~~various~~with ~~aspects~~the ofdifferences in patients’ white blood cells, interruptions in the manufacturing process, contamination, equipment or reagent failure, power failures, supplier error and ~~administration~~variability ~~process~~in ~~will~~patient becharacteristics. ~~altered~~For example, in anJuly ~~effort~~2018, a power failure that occurred during a manufacturing run to ~~optimize~~produce ~~processes~~virus ~~and~~for ~~results.~~our WePhase ~~have~~1/2 ~~already~~clinical ~~identified~~trial ~~some~~of ~~improvements~~gavo-cel caused us to ~~our~~abandon ~~manufacturing~~that run and ~~administration~~resulted ~~processes,~~in ~~but~~a ~~these~~month-long ~~changes~~delay ~~may~~in ~~not~~the ~~achieve~~process of manufacturing the ~~intended~~requisite ~~objectives,~~virus to support our IND filing for gavo-cel and consequently a delay in the IND filing itself. Even minor deviations from normal manufacturing processes could ~~cause~~result ~~our~~in ~~product~~reduced ~~candidates~~production toyields, ~~perform~~product ~~differently~~defects and ~~affect~~other ~~the~~supply ~~results~~disruptions. ofIf ~~planned~~for ~~clinical~~any ~~trials~~reason orwe ~~other~~lose ~~future~~a ~~clinical~~patient’s ~~trials.~~white Inblood ~~addition~~cells, or such ~~changes~~material ~~may~~gets ~~require~~contaminated ~~amendments~~or processing steps fail at any point, the manufacturing process of the TRuC-T cells for that patient will need to be ~~made~~restarted toand ~~regulatory~~the ~~applications~~resulting ~~which~~delay may ~~further~~adversely ~~delay~~affect that patient’s outcome. If microbial, viral or other contaminations are discovered in our product candidates or in the ~~timeframes~~manufacturing ~~under~~facilities in which ~~modified~~our product candidates are made or administered, such manufacturing ~~processes~~facilities ~~can~~may need to be ~~used~~closed for ~~any~~an extended period of ~~our~~time ~~product~~to ~~candidates~~investigate and remedy the contamination.

~~Developing~~As aour ~~commercially~~product ~~viable~~candidates ~~process~~progress isthrough apreclinical ~~difficult~~studies and ~~uncertain task, and there are risks associated with scaling to the level required for advanced~~ clinical trials ortowards ~~commercialization,~~potential ~~including,~~licensure ~~among~~and ~~others~~commercialization, ~~increased~~it ~~costs,~~is ~~potential~~expected ~~problems~~that ~~with~~various ~~process~~aspects ~~scale-out,~~of ~~process~~the ~~reproducibility,~~manufacturing ~~stability issues, lot consistency,~~ and ~~timely~~administration ~~availability~~process ofwill ~~reagents~~be oraltered ~~raw~~in ~~materials.~~an Ineffort ~~addition, changes~~ to ~~our~~optimize ~~manufacturing~~processes ~~process~~and ~~may~~results. ~~also~~We ~~require~~have ~~further~~already ~~review~~identified ~~and~~some ~~approval~~improvements ~~by the FDA, leading~~ to ~~delays in~~ our ~~clinical~~manufacturing ~~trials.~~and ~~Competitors~~administration ~~have~~processes, ~~had~~but ~~difficulty~~these ~~reliably~~changes ~~producing~~may ~~T-cell~~not ~~therapies~~achieve in the ~~commercial~~intended ~~setting.~~objectives Ifand wecould ~~experience~~cause ~~similar~~our ~~challenges manufacturing~~ product candidates to ~~approved~~perform ~~specifications,~~differently ~~this~~and ~~may~~affect ~~limit~~the ~~our~~results ~~product~~of ~~candidates’~~planned ~~utilization~~clinical ~~and~~trials ~~our~~or ~~ability~~other tofuture ~~receive~~clinical ~~payment~~trials. ~~for~~In ~~these~~addition, ~~product~~such ~~candidates~~changes ~~once~~may ~~approved.~~require Weamendments ~~may~~to ~~ultimately~~ be ~~unable~~made to ~~reduce~~regulatory ~~the~~applications ~~expenses~~which ~~associated~~may ~~with~~further ~~our~~delay ~~product~~the ~~candidates~~timeframes tounder ~~levels~~which ~~that~~modified ~~will~~manufacturing ~~allow~~processes uscan tobe ~~achieve~~used afor ~~profitable~~any ~~return~~of onour ~~investment~~product candidates.

Developing a commercially viable process is a difficult and uncertain task and there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including, among others, increased costs, potential problems with process scale-out, process reproducibility, stability issues, lot consistency and timely availability of reagents or raw materials. In addition, changes to our manufacturing process may also require further review and approval by the FDA, leading to delays in our clinical trials. Competitors have had difficulty reliably producing T-cell therapies in the commercial setting. If we experience similar challenges manufacturing product candidates to approved specifications, this may limit our product candidates’ utilization and our ability to receive payment for these product candidates once approved. We may ultimately be unable to reduce the expenses associated with our product candidates to levels that will allow us to achieve a profitable return on investment.

We do not have our own clinical-scale manufacturing facility and are currently reliant on a limited number of manufacturers for our lentiviral vector and TRuC-T cell product candidates. We will pursue additional manufacturing capacity to meet the patient demand for our product candidates as needed, however third-party manufacturing providers may not be able to provide adequate resources or consistent capacity to meet our clinical trial or commercial needs.

We rely on third parties to manufacture our product candidates for our clinical trials.

We rely on third parties for the manufacture of our lentiviral vectors and our product candidates. We do not currently have a facility that can be used as our clinical scale manufacturing facility for our product candidates or lentiviral vector and we expect to rely on outside vendors to meet these manufacturing needs. WeThe ~~have added to our third-party manufacturing~~ capacity ~~for our product candidates through our partnership with ElevateBio. This partnership reserves us two~~ of ~~our~~third ~~own~~party ~~cGMP~~manufacturers manufacturing suites with our own equipment and staffed with ElevateBio’s employees at ElevateBio BaseCamp, a 140,000 square foot, world-class cell and gene therapy manufacturing facility based in Waltham, Massachusetts. However, this additional capacity may not be enough to support our clinical trials,. ~~and~~In ~~our~~addition, ~~own~~since ~~employees~~we ~~will~~do not betrain ~~controlling~~or ~~and~~control ~~operating~~ the ~~facility.~~workforce Toof ~~mitigate~~ the ~~risk of~~ third- party manufacturers that we ~~plan to develop our own controlled and operated manufacturing facilities for our product candidates at our 85~~utilize,~~000~~ ~~square~~we ~~foot~~have ~~manufacturing~~less ~~facility~~control inover ~~Rockville,~~the ~~Maryland.~~production ~~The~~methods ~~BaseCamp partnership enables us to establish additional near-term manufacturing capacity~~ and ~~technical~~procedures ~~capabilities in the United States,~~ and the ~~Rockville, Maryland facility, once operational, will be able to support clinical and commercial production of our~~ product ~~candidates~~quality. ~~However, we still continue to rely on third-party manufacturers to meet our clinical trial demands.~~ We have not yet caused any product candidates to be manufactured or processed on a commercial scale and may not be able to do so for any of our product candidates. We plan to make changes as we work to optimize the manufacturing process. For example, we may switch or be required to switch from research-grade materials to commercial-grade materials in order to get regulatory approval of our product candidates. We cannot be sure that even minor changes in the process will result in therapies that are safe and effective and licensed for commercial sale.

The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA, as part of our BLA, or other foreign regulatory authorities following inspections by the FDA or other foreign regulatory authorities. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with cGMPs and any other regulatory requirements of the FDA or other regulatory authorities for the manufacture of our product candidates. We have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority finds deficiencies with or does not approve these facilities for the manufacture of our product candidates or if it finds deficiencies or withdraws any approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates. In addition, these third parties may have limited manufacturing capacity and we have less control over production methods, staffing and product quality when produced with third-party manufacturers. In both cases, this can cause delays in planned manufacturing runs, require remanufacture due to failed runs and limit our ability to manufacture lentiviral vector and our product candidates as needed, resulting in delays for IND filings, clinical trials and non-clinical studies.

We ~~plan~~may toin the future establish our own manufacturing facility and infrastructure in addition to or in lieu of relying on third parties for the manufacture of our product candidates ~~and the use of third-party manufacturing suites~~, which ~~will~~would be costly, time-consuming, and which may not be successful.

WeAs ~~are~~part ~~adding~~of to our ~~capacity for our larger clinical trials with third-party~~ manufacturing ~~capacity~~strategy ~~with~~and ~~ElevateBio. We are also planning~~ to establish our own commercial manufacturing facility for the manufacture of our product candidates at our 85,000 square foot facility in Rockville, Maryland. Adding capacity with our own company-operated manufacturing facility should mitigate our reliance on third-party vendors for the manufacture of TRuC-T cells, ~~and ensure~~ we ~~can~~may ~~effectively~~determine ~~manage~~in ~~our~~the ~~supply~~future ~~chain, quality, manufacturing costs and other associated production areas. We anticipate~~ that ~~the~~we ~~partnership~~will ~~with~~internalize ~~ElevateBio~~some ~~will~~or ~~significantly~~all ~~increase~~of our ~~total manufacturing capacity.~~

The establishment of our own commercial manufacturing facility in Rockville, Maryland will be a costly and time-consuming process that will require significant additional capital to fund and we do not expect it to be operational in the near term. We have no experience as a company in setting up, building or managing a manufacturing facility or manufacturing suite, and may never be successful in developing our 54

48manufacturing capacity by utilizing our own company-operated manufacturing facility. The establishment of our own commercial manufacturing facility would be a costly and time-consuming process that would require significant additional capital to fund, and it may be unsuccessful. We have no experience as a company in the set up and building or management of a manufacturing facility or manufacturing suite and may never be successful in developing our own manufacturing suite, manufacturing facility or manufacturing capability. We would need to hire additional personnel to manage our operations and facilities and develop the necessary infrastructure to continue the research and development, and eventual commercialization, if approved, of our product candidates. If we fail to recruit the required personnel and generally manage our growth effectively or fail to select the correct location or otherwise determine that building or establishing our own manufacturing facility is no longer in line with our manufacturing strategy, the development and production of our product candidates could be curtailed or delayed or we could incur costs associated with closing down a manufacturing facility or with stopping development of our own manufacturing facility. For example, during the fourth quarter of 2022, we determined that we would cease the build-out of our own commercial manufacturing facility in Rockville, Maryland.

own manufacturing suite, manufacturing facility or manufacturing capability. We will need to hire additional personnel to manage our operations and facilities and develop the necessary infrastructure to continue the research and development, and eventual commercialization, if approved, of our product candidates. If we fail to recruit the required personnel and generally manage our growth effectively or fail to select the correct location, the development and production of our product candidates could be curtailed or delayed. Even if we are successful in establishing a manufacturing suite or manufacturing facility in the future, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, natural disasters, power failures and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

In addition, the FDA, the European Medicines Agency (EMA) and other foreign regulatory authorities may require us to submit samples of any lot of any licensed product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA, the EMA or other foreign regulatory authorities may require that we not distribute a lot until the relevant agency authorizes its release. Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. Lot failures or product recalls could cause us to delay product launches or clinical trials, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects. Problems in our manufacturing process could restrict our ability to meet market demand for our products. The establishment of our own commercial manufacturing facility in the United States ~~will~~would result in our operations being subject to review and oversight by the FDA and the FDA could object to our use of our manufacturing facility. We must first receive approval from the FDA prior to licensure to manufacture our product candidates, which we may never obtain. Even if licensed, we would be subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMPs and other government regulations. Our license to manufacture product candidates will be subject to continued regulatory review.

We also may encounter problems hiring and retaining the experienced scientific, quality-control and manufacturing personnel needed to operate our manufacturing processes, which could result in delays in production or difficulties in maintaining compliance with applicable regulatory requirements.

Any problems in our manufacturing process or facilities could make us a less attractive collaborator for potential partners, including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs.

We may have difficulty validating our manufacturing process as we manufacture TRuC-T cells from an increasingly diverse patient population for our clinical trials.

During our development of the manufacturing process, our TRuC-T cells have demonstrated consistency from lot to lot and from donor to donor. However, our sample size is small and the starting material is from healthy donors. Once we have experience with working with white blood cells taken from our patient population, we may encounter unforeseen difficulties due to starting with material from donors who are not healthy, including challenges inherent in harvesting white blood cells from unhealthy patients.

Although we believe our current manufacturing process is scalable for commercialization, we may encounter challenges in validating our process due to the heterogeneity of the product starting material. However, we anticipate that during the early phases of our clinical trials we will be able to adapt our process to account for these differences resulting in a more robust process. We cannot guarantee that any other issues relating to the heterogeneity of the starting material will not impact our ability to commercially manufacturing our product candidates.

The viral vectors used to manufacture our TRuC-T cells may incorrectly modify the genetic material of a patient’s T cells, potentially triggering the development of a new cancer or other adverse events.

Our TRuC-T cells are manufactured by using a viral vector to insert genetic information encoding the TRuC construct into the patient’s T cells. The TRuC construct is then integrated into the natural TCR complex and transported to the surface of the patient’s T cells. Because the viral vector modifies the genetic information of the T cell, there is a theoretical risk that modification will occur in the wrong place in the T cell’s genetic code, leading to vector-related insertional oncogenesis, and causing the T cell to become cancerous. If the cancerous T cell is then administered to the patient with the TRuC-T cells, the cancerous T cell could trigger the development of a new cancer in the patient. We use lentiviral vectors to insert genetic information into T cells, which we believe have a lower risk of insertional oncogenesis as opposed to other types of viral vectors. However, the risk of insertional oncogenesis remains a concern for gene therapy and we cannot assure that it will not occur in any of our ongoing or planned preclinical studies or clinical trials. There is also the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of vectors used to carry the genetic material. The FDA has stated that lentiviral vectors possess characteristics that may pose high risks of delayed adverse events. If any such adverse events occur, further advancement of our preclinical studies or clinical trials could be halted or delayed, which would have a material adverse effect on our business and operations.

Risks Related to Commercialization

The market opportunities for our product candidates may be relatively small as it will be limited to those patients who are ineligible for or have failed prior treatments and our estimates of the prevalence of our target patient populations may be inaccurate.

Cancer therapies are sometimes characterized as first line, second line, or third line, and the FDA often approves new therapies initially only for a particular line of use. When cancer is detected early enough, first line therapy is sometimes adequate to cure the cancer or prolong life without a cure. Whenever first line therapy, usually chemotherapy, antibody drugs, tumor-targeted small molecules, hormone therapy, radiation therapy, surgery, or a combination of these, proves unsuccessful, second line therapy may be administered. Second line therapies often consist of more chemotherapy, radiation, antibody drugs, tumor-targeted small molecules, or a combination of these. Third line therapies can include hematopoietic stem cell transplantation in certain cancers, chemotherapy, antibody drugs and small molecule tumor-targeted therapies, more invasive forms of surgery and new technologies. We expect to initially seek approval of our product candidates in most instances at least as a second or third line therapy, for use in patients with relapsed or refractory metastatic cancer. Subsequently, for those product candidates that we believe prove to be sufficiently safe and beneficial, if any, we would expect to seek approval as a second line therapy and potentially as a first line therapy, but there is no guarantee that our product candidates, even if licensed as a second or third or subsequent line of therapy, would be licensed for an earlier line of therapy, and, prior to any such approvals, we may have to conduct additional clinical trials. Consequently, the potentially addressable patient population for our product candidates may be extremely limited or may not be amenable to treatment with our product candidates.

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 to receive a particular line of 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 research, and may prove to be incorrect. Further, new therapies may change the estimated incidence or prevalence of the cancers that we are targeting. Consequently, even if our product candidates are approved for a second or third line of therapy, the number of patients that may be eligible for treatment with our product candidates may turn out to be much lower than expected.

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Weclinics, ~~face~~patient ~~significant~~foundations ~~competition,~~or market research and ~~our~~may ~~operating~~prove ~~results~~to ~~will~~be ~~suffer~~incorrect. ifFurther, new therapies may change the estimated incidence or prevalence of the cancers that we ~~fail~~are targeting. Consequently, even if our product candidates are approved for a second or third line of therapy, the number of patients that may be eligible for treatment with our product candidates may turn out to ~~compete~~be ~~effectively~~much lower than expected.

We face significant competition and our operating results will suffer if we fail to compete effectively.

The biopharmaceutical industry is characterized by intense competition and rapid innovation. Our competitors may be able to develop other products or drugs that are able to achieve similar or better results. Our potential competitors include larger biotechnology and pharmaceutical companies with greater resources than us, academic institutions, governmental agencies, public and private research institutions and early stage or smaller companies. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff, experienced marketing and manufacturing organizations and well-established sales forces. In addition, many of these competitors are active in seeking patent protection and licensing arrangements in anticipation of collecting royalties for use of technology that they have developed. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products. We believe the key competitive factors that will affect the development and commercial success of our product candidates are safety, potency, purity, tolerability, reliability, convenience of use, price and reimbursement.

The market opportunity in oncology has led to a number of collaborations ~~GlaxoSmithKline~~including ~~plc (GlaxoSmithKline)/Adaptimmune Therapeutics PLC (Adaptimmune),~~ Janssen Biotech, Inc. (Janssen)/ Nanjing Legend Pharmaceutical & Chemical Co., Ltd (Legend), bluebird bio, Inc. (bluebird)/ Regeneron Pharmaceuticals Inc. (Regeneron) and bluebird/Gritstone Oncology, Inc.) and major acquisitions (Gilead Sciences, Inc. (Gilead)/Kite Pharma Inc. (Kite), Bristol Myers Squibb Co (BMS)/Celgene Corporation (Celgene)/Juno Therapeutics, Inc. (Juno), Takeda Pharmaceutical Company Limited (Takeda)/GammaDelta Therapeutics Limited (GammaDelta)), Astra Zeneca/Neogene Therapeutics Inc. (Neogene), Kite/Tmunity Therapeutics (Tmunity)) among companies focused on cellular cancer therapies. If this trend continues, which we expect, we could see further consolidation of technical expertise and human capital. This potentially provides a partnership opportunity for us but could also make it more challenging for us to acquire complementary technology or products and recruit and retain qualified scientific and management personnel. In addition, this competition could impact our ability to recruit clinical trial sites and patients in a timely manner for our clinical trials. Larger companies with greater financial flexibility and global reach may be able to obtain regulatory approvals and gain widespread market acceptance before us, which could impact our commercial launch and could make our products obsolete or non-competitive. Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances. For additional information regarding our competition, see “Business—Competition.”

Even if we obtain regulatory approval of our product candidates, the products may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers and others in the medical community.

The use of engineered T cells as a potential cancer treatment is a recent development and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers and others in the ~~medical community. Various factors will influence whether our product candidates are accepted in the market, including:~~

medical community. Various factors will influence whether our product candidates are accepted in the market, including:

•

the clinical indications for which our product candidates are licensed;

•

physicians, hospitals, cancer treatment centers and patients considering our product candidates as a safe and effective treatment;

•

the potential and perceived advantages of our product candidates over alternative treatments;

•

our ability to demonstrate the advantages of our product candidates over other engineered TCR-T cell and CAR-T cell therapies;

•

the prevalence and severity of any side effects;

•

the prevalence and severity of any side effects for other adoptive cell therapies, engineered TCR-T cell and CAR-T cell products and public perception of other adoptive cell therapies, engineered TCR-T cell and CAR-T cell products;

•

product labeling or product insert requirements of the FDA or other regulatory authorities;

•

limitations or warnings contained in the labeling approved by the FDA;

•

the timing of market introduction of our product candidates as well as competitive products;

•

the cost of treatment in relation to alternative treatments;

•

the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities;

•

the willingness of patients to pay out-of-pocket in the absence of coverage by third-party payors and government authorities;

•

relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and

•

the effectiveness of our sales and marketing efforts.

In addition, although we are not utilizing embryonic stem cells or replication competent vectors, adverse publicity due to the ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects from any clinical trials using these technologies or the failure of such clinical trials to demonstrate that these therapies are safe and effective may limit market acceptance of our product candidates. If our product candidates are licensed but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical community, we will not be able to generate significant revenue.

In addition, although our product candidates differ in certain ways from other engineered TCR-T cell and CAR-T cell approaches, serious adverse events or deaths in other clinical trials involving engineered TCR, CAR-T or other T cell products or with our use of licensed engineered TCR-T cell or CAR-T cell products, even if not ultimately attributable to our product or product candidates, could result in increased government regulation, unfavorable public perception and publicity, potential regulatory delays in the testing or licensing of our product candidates, stricter labeling requirements for those product candidates that are licensed, and a decrease in demand for any such product candidates.

Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.

Risks Related to Our Proposed Transaction with Adaptimmune

Failure to complete, or delays in completing, the Merger with Adaptimmune announced on March 6, 2023 could materially and adversely affect our results of operations, business, financial results and/or stock price.

On March 5, 2023, we entered into a definitive agreement with Adaptimmune and Merger Sub, pursuant to which, upon the terms and subject to the conditions thereof, we will become a wholly-owned indirect subsidiary of Adaptimmune. Consummation of the Merger is subject to certain closing conditions, a number of which are not within our control. Any failure to satisfy these required conditions to closing may prevent, delay or otherwise materially adversely affect the closing of the transaction. We cannot predict with certainty whether or when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that we will be able to successfully consummate the proposed Merger as currently contemplated under the Merger Agreement or at all.

Our efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, our current and any planned future business plans, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the Merger will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following the transaction. Uncertainty as to our future could adversely affect our business and our relationship with customers, collaborators, suppliers, vendors, regulators and other business partners. For example, vendors and other counterparties may defer decisions about working with us or seek to change existing business relationships with us. Changes to, or termination of, existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in closing of the transaction or termination of the Merger Agreement.

Risks related to the failure of the proposed Merger to be consummated include, but are not limited to, the following:

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we would not realize any or all of the potential benefits of the Merger, including any synergies that could result from combining our financial and proprietary resources with those of Adaptimmune, which could have a negative effect on our stock price;

•

under certain specified circumstances, we may be required to pay a termination fee to Adaptimmune equal to $2.4 million;

•

we will remain liable for significant transaction costs, including legal, accounting, financial advisory and other costs relating to the Merger regardless of whether the Merger is consummated;

•

the trading price of our common stock may decline to the extent that the current market price for our stock reflects a market assumption that the Merger will be completed;

•

the attention of our management and employees may have been diverted to the Merger rather than to our own operations and the pursuit of other opportunities that could have been beneficial to us;

•

we could be subject to litigation related to any failure to complete the Merger;

•

the potential loss of key personnel during the pendency of the Merger as employees and other service providers may experience uncertainty about their future roles with us following closing of the Merger; and

•

under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger, which restrictions could adversely affect our ability to conduct our business as we otherwise would have done if we were not subject to these restrictions.

The occurrence of any of these events individually or in combination could materially and adversely affect our results of operations, business, and our stock price.

We cannot be certain if or when the Merger will be completed.

The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the approval of the Merger by our stockholders. We cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If we are unable to satisfy the closing conditions or if other mutual closing conditions are not satisfied, Adaptimmune will not be obligated to complete the Merger. Under certain circumstances, we would be required to pay Adaptimmune a termination fee equal to $2.4 million.

If the Merger is not completed, our board of directors, in discharging its fiduciary obligations to our stockholders, will evaluate our options which include pursuing other strategic alternatives or financing options that may be available, continuing our operations as they are currently being conducted, or continuing our operations with a further narrowing of focus or other strategic adjustments, which options and alternatives may not be as favorable to our stockholders as the Merger. Any future sale or merger, financing or other transaction may be subject to further stockholder approval. We may also be unable to find, evaluate or complete other strategic alternatives, which may materially and adversely affect our business.

Our efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, our current and any planned future business plans, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the Merger will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following the transaction. A substantial amount of our management’s and employees’ attention is being directed toward the closing of the transaction and thus is being diverted from our day-to-day operations. Uncertainty as to our future could adversely affect our business and our relationship with collaborators, suppliers, vendors, regulators and other collaboration partners. For example, suppliers and other counterparties may defer decisions concerning working with us, or seek to change existing business relationships with us. Changes to, or termination of, existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in the closing of the transaction or termination of the Merger Agreement.

Until the Merger closes, the Merger Agreement restricts Adaptimmune and us from taking specified actions without the consent of the other party, and, in regards to us, requires us to operate in the ordinary course of business consistent with past practice in all material respects. These restrictions may prevent Adaptimmune and us from making appropriate changes to our respective businesses or pursuing attractive business opportunities that may arise prior to the closing of the Merger.

Because the Merger Agreement provides for a fixed exchange ratio for the number of shares of Adaptimmune ADSs that will be issued for each issued and outstanding share of our common stock, the consideration received at the time of the Merger may be lower than the public trading value of shares of our common stock when we entered into the Merger Agreement.

The Merger Agreement provides for a fixed exchange ratio for the number of shares of Adaptimmune ADSs that will be issued for each issued and outstanding share of our common stock in the Merger (other than shares of our common stock held by us as treasury stock, or shares of our common stock owned by Adaptimmune, Merger Sub or any direct or indirect wholly-owned subsidiaries of Adaptimmune), including shares of our common stock underlying our restricted stock units that immediately vest upon a change of control of the Company. If the public trading value of shares of Adaptimmune ADSs declines over the period of time required to satisfy the Merger’s closing conditions, the consideration received at the time of the Merger may be lower than the public trading value of shares of our common stock when we entered into the Merger Agreement.

The Merger Agreement provides that we shall not, and requires us to refrain from permitting our representatives to, among other things, solicit, participate in negotiations with respect to or approve or recommend any third party proposal for an alternative transaction, subject to exceptions set forth in the Merger Agreement relating to the receipt of certain unsolicited proposals. If the Merger Agreement is terminated, in certain circumstances, we may be required to pay Adaptimmune a termination fee equal to $2.4 million.

These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of us or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the consideration in the Merger, or might result in a potential third-party acquiror or merger partner proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.

If the Merger Agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.

Lawsuits may be filed against us and the members of our board of directors arising out of the Merger, which may delay or prevent the Merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints may be filed against us, our board of directors, Adaptimmune, Adaptimmune’s board of directors and others in connection with the transactions contemplated by the Merger Agreement. The outcome of litigation is inherently uncertain, and we may not be successful in defending against any such future claims. Lawsuits that may be filed against us, our board of directors, Adaptimmune, or Adaptimmune’s board of directors could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business and otherwise adversely affect us financially.

Risks Related to Our Reliance On Third Parties

Third Party Risks Related to Our Product Development

We ~~plan to~~ utilize and depend upon independent investigators and collaborators, such as medical institutions, CROs, CMOs and strategic partners to conduct our preclinical studies and clinical trials under agreements with us, and we plan to continue to do so. We expect to have to negotiate budgets and contracts with CROs, trial sites and CMOs which may result in delays to our development timelines and increased costs. We will rely heavily on these third parties over the course of our clinical trials, and we control only certain aspects of their activities. As a result, we ~~will~~ have less direct control over the conduct, timing and completion of these clinical trials and the management of data developed through clinical trials than would be the case if we were relying entirely upon our own staff. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with applicable protocol, legal and regulatory requirements and scientific standards and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with good clinical practices (GCPs), which are regulations and guidelines enforced by the FDA and comparable foreign

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~~studies is conducted in accordance with applicable protocol, legal and~~ regulatory requirements and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with good clinical practices (GCPs), which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the GCP regulations. In addition, our clinical trials must be conducted with biologic product produced under cGMP regulations, including current good tissue practice (cGTP) regulations, and will require a large number of test patients. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.

Any third parties conducting our clinical trials are not and will not be our employees and, except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our ongoing, clinical and non-clinical product candidates. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory approval of or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

Switching or adding third parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. In addition, changes in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies between our prior clinical supply used in our clinical trials and that of any new manufacturer. We may be unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of additional clinical trials. Additionally, there is a natural transition period when a new third party commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.

If or until we develop our own manufacturing facility, we expect to rely on the use of manufacturing suites in third-party cGMP facilities or third parties to manufacture our product candidates. Our business could be harmed if we are unable to use third-party manufacturing suites or if the third-party manufacturers fail to provide us with sufficient quantities of our product candidates or fail to do so at acceptable quality levels or prices.

We do not currently own any facility that may be used as our clinical-scale manufacturing and processing facility and must currently rely on outside vendors to manufacture and process our product candidates, which is and will need to be done on a patient-by-patient basis. Although we plan to establish our own manufacturing facility in Rockville, Maryland, we will also continue to rely on third parties like Miltenyi and ElevateBio in part for our manufacturing capacity and may, in any event, never be successful in developing our own manufacturing facilities. Our ~~anticipated~~ reliance on a limited 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 the FDA must inspect any manufacturers for cGMP and cGTP compliance as part of our marketing application;

•

a new manufacturer would have to be educated in, or develop substantially equivalent processes for, the production of our product candidates, which can take several months or more, and we will need to demonstrate to regulatory authorities that clinical trial product manufactured at a new supplier is comparable to clinical trial product being produced by current manufacturers;

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•

~~will~~our ~~need~~manufacturers tomay ~~demonstrate~~have tolittle ~~regulatory~~or ~~authorities~~no ~~that~~experience ~~clinical~~with ~~trial~~autologous ~~product~~cell ~~manufactured~~products, atwhich are products made from a ~~new~~patient’s ~~supplier~~own iscells ~~comparable~~and therefore may require a significant amount of support from us in order to ~~clinical~~implement ~~trial~~and ~~product~~maintain ~~being~~the ~~produced~~infrastructure byand ~~current~~processes ~~manufacturers~~required to manufacture our product candidates;

•

our manufacturers may have little or no experience with autologous cell products, which are products made from a patient’s own cells, and therefore may require a significant amount of support from us in order to implement and maintain the infrastructure and processes required to manufacture our product candidates;

our third-party manufacturers might be unable to timely manufacture our product candidates or produce the quantity and quality required to meet our clinical and commercial needs, if any;

•

contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately, affecting quality of our product and requiring additional runs to remanufacture product that is suitable for use in clinical trials;

•

our future contract manufacturers may not perform as agreed, may not devote sufficient resources to our product candidates or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store, and distribute our products, if any;

•

manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP, cGTP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards;

•

we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our product candidates;

•

our third-party manufacturers could breach or terminate their agreements with us;

•

raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects;

•

our contract manufacturers and critical reagent suppliers may be subject to inclement weather, pandemics and natural or man-made disasters; and

•

our contract manufacturers may have unacceptable or inconsistent product quality success rates and yields, and we have no direct control over our contract manufacturers’ ability to maintain adequate quality control, quality assurance and qualified personnel.

Each of these risks could delay or prevent the completion of our clinical trials or the approval of any of our product candidates by the FDA, result in higher costs or adversely impact commercialization of our product candidates. In addition, we will rely on third parties to perform certain specification tests on our product candidates prior to delivery to patients. If these tests are not appropriately done and test data are not reliable, patients could be put at risk of serious harm and the FDA could place significant restrictions on our company until deficiencies are remedied.

The manufacture of biological drug products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of biologic products often encounter difficulties in production, particularly in scaling up or out, validating the production process and assuring high reliability of the manufacturing process (including the absence of contamination). These problems include logistics and shipping, difficulties with production costs and yields, quality control, including stability of the product, product testing, operator error and availability of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if contaminants are discovered in our supply of our product candidates or in the manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our product candidates will not occur in the future.

We may fail to manage the logistics of collecting and shipping patient material to the manufacturing site and shipping the product candidate back to the patient. Logistical and shipment delays and problems caused by us, our vendors or other factors not in our control, such as weather, could prevent or delay the delivery of product candidates to patients. Additionally, we have to maintain a complex chain of identity and chain of custody with respect to patient material as it moves to the manufacturing facility, through the

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caused by us, our vendors or other factors not in our control, such as weather, could prevent or delay the delivery of product candidates to patients. Additionally, we have to maintain a complex chain of identity and chain of custody with respect to patient material as it moves to the manufacturing facility, through the manufacturing process and back to the patient. Failure to maintain chain of identity and chain of custody could result in patient death, loss of product or regulatory action.

Our manufacturing process needs to comply with FDA regulations relating to the quality and reliability of such processes. Any failure to comply with relevant regulations could result in delays in or termination of our clinical programs and suspension or withdrawal of any regulatory approvals.

In order to commercially produce our products ~~either~~ at ~~our own facility or at~~ a third party’s facility, we will need to comply with the FDA’s cGMP regulations and guidelines, including cGTPs. We may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. We are subject to inspections by the FDA and comparable foreign regulatory authorities to confirm compliance with applicable regulatory requirements. Any failure to follow cGMP, cGTP or other regulatory requirements or delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our TRuC-T cells as a result of a failure of ~~our facilities or~~ the facilities or operations of third parties to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and commercialize our TRuC-T cell programs, including leading to significant delays in the availability of our TRuC-T cells for our clinical trials or the termination of or suspension of a clinical trial, or the delay or prevention of a filing or approval of marketing applications for our TRuC-T cell product candidates. Significant non-compliance could also result in the imposition of sanctions, including warning or untitled letters, fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our TRuC-T cell product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could damage our reputation and our business.

If our third-party manufacturers use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.

Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological materials, by our third-party manufacturers. Our manufacturers are subject to federal, state and local laws and regulations in the United States governing the use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our manufacturers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance for liabilities arising from medical or hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition or results of operations.

Risks Related to Third Party Agreements

We have and may in the future form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such collaborations, alliances or licensing arrangements.

We have and may in the future form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. Any of these relationships may require us to incur non-recurring ~~and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business.~~

5564

and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business.

In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy and obtain marketing approval.

Further, collaborations involving our product candidates are subject to numerous risks, which may include the following:

•

collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;

•

collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization of our product candidates based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

•

collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

•

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates;

•

a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution;

•

collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

•

disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;

•

collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; and

•

collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property.

As a result, if we enter into additional collaboration agreements and strategic partnerships or license our product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results of operations.

Our product candidates rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or at all.

Our product candidates require many specialty raw materials, some of which are manufactured by small companies with limited resources and experience to support a commercial product. In addition, those suppliers normally support blood-based hospital businesses and generally do not have the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms. The suppliers may be ill-equipped to support our needs, especially in non-routine circumstances like an FDA inspection or medical crisis, such as widespread contamination. We also do not have contracts with many of these suppliers and may not be able to contract with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key raw materials to support clinical or commercial manufacturing.

56In addition, some of our raw materials are currently available from a single supplier, or a small number of suppliers. For example, the type of cell culture media and cryopreservation buffer that we currently use in our manufacturing process for the TRuC-T cells for gavo-cel are each only available from a single supplier. In addition, the cell processing equipment and tubing that we use in our current manufacturing process is only available from a single supplier. We also use certain biologic materials, including certain activating antibodies, that are available from multiple suppliers, but each version may perform differently, requiring us to characterize them and potentially modify some of our protocols if we change suppliers. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose. If we have to change suppliers, the materials may only be available from another supplier on terms that are less favorable to us than the terms under which we currently obtain the materials. Accordingly, if we no longer have access to these suppliers, we may experience delays in our clinical or commercial manufacturing which could harm our business or results of operations.

medical crisis, such as widespread contamination. We also do not have contracts with many of these suppliers and may not be able to contract with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key raw materials to support clinical or commercial manufacturing.

In addition, some of our raw materials are currently available from a single supplier, or a small number of suppliers. The type of cell culture media and cryopreservation buffer that we currently use in our manufacturing process for the TRuC-T cells for gavo-cel are each only available from a single supplier. In addition, the cell processing equipment and tubing that we use in our current manufacturing process is only available from a single supplier. We also use certain biologic materials, including certain activating antibodies, that are available from multiple suppliers, but each version may perform differently, requiring us to characterize them and potentially modify some of our protocols if we change suppliers. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose. Accordingly, if we no longer have access to these suppliers, we may experience delays in our clinical or commercial manufacturing which could harm our business or results of operations.

Risks Related to Our Financial Condition and Capital Requirements

Risks Related to Operating History

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We are a clinical-stage cell therapy company with a limited operating history. We commenced operations in May 2015, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, conducting discovery and research activities, filing patent applications, identifying potential product candidates, undertaking preclinical studies, establishing arrangements with third parties for the manufacture of initial quantities of our product candidates and component materials and initiating and conducting our first clinical trials. We have advanced three product candidates to Phase 1/2 clinical trials, with two product candidates currently in a Phase 1/2 clinical trials, and our other product candidates are still in preclinical development. We have not yet demonstrated our ability to successfully ~~conduct or~~ complete any clinical trials, obtain marketing approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

We have incurred significant losses since inception, and we expect to incur losses over the next several years and may not be able to achieve or sustain revenues or profitability in the future.

Investment in biopharmaceutical product development is a highly speculative undertaking and entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We are still in the early stages of development of our product candidates. We have no products licensed for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. We have financed our operations primarily through private placements of our preferred stock, our initial public offering and subsequent public offerings.

57We have incurred significant net losses in each period since our inception in May 2015. For the year-to-date period ended March 31, 2023, we incurred a net loss of $40.4 million. As of March 31 2023, we had an accumulated deficit of $541.7 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we:

•

ongoing operations. We have financed our operations primarily through private placements of our preferred stock, our initial public offering and subsequent public offerings.

We have incurred significant net losses in each period since our inception in May 2015. For the year to date period ended September 30, 2022, we incurred a net loss of $91.3 million. As of September 30, 2022, we had an accumulated deficit of $440.8 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we:

conduct clinical trials and preclinical studies and clinical trials for our current and future product candidates based on our TRuC-T cell platform;

•

continue our research and development efforts and submit IND applications for our lead product candidates;

•

establish and expand our manufacturing capabilities for both clinical and commercial supplies of our product candidates;

•

seek marketing approvals for any product candidates that successfully complete clinical trials;

•

build commercial infrastructure to support sales and marketing for our product candidates;

•

expand, maintain and protect our intellectual property portfolio;

•

hire additional clinical, regulatory and scientific personnel; and

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continue to operate as a public company.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses we will incur or when, if ever, we will be able to achieve profitability. Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop, seek regulatory approval for, and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We have not generated any revenue from our product candidates and may never be profitable.

Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from any of our product candidates. We do not expect to generate significant revenue unless or until we successfully complete clinical development and obtain regulatory approval of, and then successfully commercialize, at least one of our product candidates. Other than gavo-cel and TC-510, all of our product candidates are in the preclinical stages of development and will require additional preclinical studies, clinical development, regulatory review and approval, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. Gavo-cel, our most advanced mono TRuC-T cell product candidate targeting mesothelin-positive solid tumors, is in the Phase 2 portion of a Phase 1/2 clinical trial and will require additional regulatory review and approval, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. Many of our other TRuC-T cell product candidates are in early preclinical stages. We are in the early stages of our clinical trial for gavo-cel and we have not yet administered any of our other product candidates in humans and, as such, we face significant translational risk as our product candidates advance to the clinical stage. Our ability to generate revenue depends on a number of factors, including, but not limited to:

product sales. TC-510 is in the Phase 1 portion of a Phase 1/2 clinical trial and will require additional clinical study, regulatory review and approval, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. We are conducting IND-enabling activities for our preclinical product candidate TC-520. Many of our other TRuC-T cell product candidates are in early preclinical stages. We face significant translational risk as our product candidates advance to the clinical stage. Our ability to generate revenue depends on a number of factors, including, but not limited to:

•

timely completion of our preclinical studies and clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors;

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our ability to complete IND-enabling studies and successfully submit INDs or comparable applications;

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our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, potency, purity, of which potency and purity the FDA interprets to mean effectiveness, and acceptable risk to benefit profile of our product candidates or any future product candidates;

•

the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or future product candidates, if any;

•

the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities;

•

the willingness of physicians, operators of clinics and patients to utilize or adopt any of product candidates or future product candidates to treat solid tumors and hematological malignancies;

•

our ability and the ability of third parties with whom we contract to manufacture adequate clinical and commercial supplies of our product candidates or any future product candidates, remain in good standing with regulatory authorities and develop, validate and maintain commercially viable manufacturing processes that are compliant with current good manufacturing practices (cGMP);

•

patient demand for our product candidates and any future product candidates, if licensed; and

•

our ability to establish and enforce intellectual property rights in and to our product candidates or any future product candidates.

Many of the factors listed above are beyond our control and could cause us to experience significant delays or prevent us from obtaining regulatory approvals or commercialize our product candidates. Even if we are able to commercialize our product candidates, we may not achieve profitability soon after generating product sales, if ever. If we are unable to generate sufficient revenue through the sale of our product candidates or any future product candidates, we may be unable to continue operations without continued funding.

Risks Related to Raising Additional Capital

* If we fail to obtain additional financing, we may be unable to continue our research and product development programs.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts (including net proceeds from public offerings of our common stock) to continue the clinical development of our product candidates, including our Phase 2 portion of the Phase 1/2 clinical trial of gavo-cel, our Phase 1/2 clinical trial of TC-510 and ongoing and planned IND-enabling studies for our other product candidates. If licensed, we will require significant additional amounts in order to launch and commercialize our product candidates.

In February 2019, we completed our initial public offering (IPO) raising gross proceeds of approximately $86.3 million, inclusive of the exercise of the underwriters' overallotment option. On July 31, 2020, we completed a stock offering raising gross proceeds of approximately $142.6 million. On January 22, 2021, we completed a stock offering raising gross proceeds of $140.0 million. As of ~~September~~March 3031, ~~2022~~2023, we had cash, cash equivalents and short-term investments of approximately $~~176~~110.03 million. Our existing cash, cash equivalents and short-term investments may not be sufficient to fund all of our efforts that we plan to undertake.

We believe that our existing cash, cash equivalents and investments, including our net proceeds from the IPO and secondary offerings, will be sufficient to fund our operations into ~~2024~~early 2025. However, we have based this estimate on assumptions that may prove to be wrong. Additionally, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. Recent volatility in capital markets and lower market prices for our securities may affect our ability to access new capital through sales of shares of our common stock or issuance of indebtedness, which may harm our liquidity or limit our ability to pursue our clinical development plans. In addition, recent increases in interest rates may increase our borrowing costs, and may also affect our ability to obtain working capital through borrowings such as bank credit lines and public or private sales of debt securities, which may result in lower liquidity, reduced working capital and other adverse impacts on our business. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue our research and development initiatives. We could be required to seek collaborators for our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.

more money than currently expected because of circumstances beyond our control. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. Recent volatility in capital markets and lower market prices for our securities may affect our ability to access new capital through sales of shares of our common stock or issuance of indebtedness, which may harm our liquidity or limit our ability to pursue our clinical development plans. In addition, recent increases in interest rates may increase our borrowing costs, and may also affect our ability to obtain working capital through borrowings such as bank credit lines and public or private sales of debt securities, which may result in lower liquidity, reduced working capital and other adverse impacts on our business. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue our research and development initiatives. We could be required to seek collaborators for our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.

Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.

* Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to ~~relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.~~

We have in the past relied in part on sales of our common stock through our at-the-market (ATM) offering program. Increased volatility and decreases in market prices of equity securities generally and of our common stock in particular may have an adverse impact on our willingness and/or ability to continue to sell our common shares through our ATM offering. Decreases in these sales could affect the cost or availability of equity capital, which could in turn have an adverse effect on our business, clinical development and research plans, and the market price of our common stock.69

Inrelinquish ~~March,~~valuable ~~2020,~~rights ~~we commenced an at-the-market, or ATM, program~~ to ~~raise capital. Under~~ our ~~ATM~~technologies ~~Program, we have entered into a sales agreement to sell common shares, up to a maximum aggregate market value of $100.0 million, through one~~ or ~~more~~product ~~at-the-market offerings. Given the decrease in the market prices of our common stock and volatility in the capital markets~~candidates, ~~we may not be willing~~ or ~~able~~grant tolicenses ~~continue~~on ~~to raise equity capital through our ATM Program. We may, therefore, need to turn to other sources of funding that may have~~ terms ~~that~~unfavorable ~~are not favorable~~ to us~~, or reduce our business operations given capital constraints~~.

~~Alternative~~We ~~financing~~have ~~arrangements,~~in ifthe wepast ~~pursue~~relied ~~any,~~in ~~could~~part ~~involve~~on ~~issuances~~sales of ~~one~~our ~~or more types of securities, including~~ common stock, ~~preferred~~through ~~stock,~~our ~~convertible~~at-the-market ~~debt,~~(ATM) ~~warrants~~offering ~~to acquire common stock or other securities~~program. ~~These~~Increased ~~securities~~volatility ~~could~~and bedecreases ~~issued~~in atmarket orprices ~~below~~of ~~the~~equity ~~then~~securities ~~prevailing~~generally ~~market~~and ~~price~~of ~~for~~ our common stock. Inin ~~addition,~~particular ifmay wehave ~~issue~~an ~~debt~~adverse ~~securities,~~impact ~~the~~on ~~holders~~our ofwillingness ~~the~~and/or ~~debt~~ability ~~would~~to ~~have~~continue ~~a claim~~ to sell our ~~assets~~common ~~that~~shares ~~would~~through beour ~~superior~~ATM tooffering. ~~the~~Decreases ~~rights~~in ofthese ~~stockholders~~sales ~~until~~could affect the ~~principal,~~cost ~~accrued and unpaid interest and any premium~~ or ~~make-whole~~availability ~~has~~of ~~been~~equity ~~paid. In addition~~capital, ifwhich wecould ~~borrow~~in ~~funds~~turn ~~and/or~~have ~~issue~~an ~~debt~~adverse ~~securities~~effect ~~through~~on aour ~~subsidiary~~business, ~~the~~clinical ~~lenders~~development and~~/or~~ ~~holders~~research ofplans ~~those~~and ~~debt~~the ~~securities~~market ~~would~~price ~~have~~of aour ~~right~~common to stock.

60In March 2020, we commenced an at-the-market, or ATM, program to raise capital. Under our ATM Program, we have entered into a sales agreement to sell common shares, up to a maximum aggregate market value of $100.0 million, through one or more at-the-market offerings. Given the decrease in the market prices of our common stock and volatility in the capital markets, we may not be willing or able to continue to raise equity capital through our ATM Program. We may, therefore, need to turn to other sources of funding that may have terms that are not favorable to us, or reduce our business operations given capital constraints.

Alternative financing arrangements, if we pursue any, could involve issuances of one or more types of securities, including common stock, preferred stock, convertible debt, warrants to acquire common stock or other securities. These securities could be issued at or below the then prevailing market price for our common stock. In addition, if we issue debt securities, the holders of the debt would have a claim to our assets that would be superior to the rights of stockholders until the principal, accrued and unpaid interest and any premium or make-whole has been paid. In addition, if we borrow funds and/or issue debt securities through a subsidiary, the lenders and/or holders of those debt securities would have a right to payment that would be effectively senior to the company’s equity ownership in the subsidiary, which would adversely affect the rights of holders of both the company’s equity securities and its debt and debt securities.

Interest on any newly-issued debt securities and/or newly-incurred borrowings would increase our operating costs and increase our net loss. If the issuance of new securities results in diminished rights to holders of our common stock, the market price of our common stock could be materially and adversely affected. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could/would result in a material adverse effect on our business, operating results, financial condition and prospects.

Risks Related To Developments in the Financial Services Industry

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank was swept into receivership. Although a statement by the Department of the Treasury, the Federal Reserve and the FDIC stated all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts, borrowers under credit agreements, letters of credit and certain other financial instruments with SVB, Signature Bank or any other financial institution that is placed into receivership by the FDIC may be unable to access undrawn amounts thereunder. As of the date of this Quarterly Report, we have less than $0.1 million of unrestricted cash, cash equivalents and investments

and we have approximately $1.2 million of restricted cash as certificates of deposits for facility leases held at SVB, and we may not be able to access these funds due to the receivership of SVB. We are not a borrower or party to any such instruments with Signature Bank or any other financial institution currently in receivership, however, if any of our lenders or other counterparties to any such instruments were to be placed into receivership, we may be unable to access such funds. In addition, counterparties to SVB credit agreements and arrangements, and third parties such as beneficiaries of letters of credit (among others), may experience direct impacts from the closure of SVB and uncertainty remains over liquidity concerns in the broader financial services industry. Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program. There is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by certain factors that affect us, the financial institutions with which we have credit agreements or arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.

The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These could include, but may not be limited to, the following:

•

Delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;

•

Loss of access to revolving existing credit facilities or other working capital sources and/or the inability to refund, roll over or extend the maturity of, or enter into new credit facilities or other working capital resources;

•

Potential or actual breach of contractual obligations that require us to maintain letters or credit or other credit support arrangements;

•

Potential or actual breach of financial covenants in our credit agreements or credit arrangements;

•

Potential or actual cross-defaults in other credit agreements, credit arrangements or operating or financing agreements; or

•

Termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it

more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our customers or suppliers, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. For example, a customer may fail to make payments when due, default under their agreements with us, become insolvent or declare bankruptcy, or a supplier may determine that it will no longer deal with us as a customer. In addition, a customer or supplier could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on the Company, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution. Any customer or supplier bankruptcy or insolvency, or the failure of any customer to make payments when due, or any breach or default by a customer or supplier, or the loss of any significant supplier relationships, could result in material losses to the Company and may material adverse impacts on our business.

Risks Related to the Current Novel Coronavirus (COVID-19) Pandemic on the Company

The current COVID-19 pandemic has caused, and could continue to cause, severe disruptions in the U.S., regional and global economies and could seriously harm our development efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.

Public health pandemics or outbreaks could adversely impact our business. In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China and has since spread to several other countries, including the United States and European countries, with infections and deaths reported globally. To date, the ongoing COVID-19 pandemic has caused widespread disruptions to the U.S. and global economy and has contributed to significant volatility and negative pressure in financial markets. The global impact of the pandemic is continually evolving, particularly in light of new variants of COVID-19, and, as additional cases of the virus are identified, many countries, including the U.S., have reacted by instituting quarantines, restrictions on travel and mandatory closures of businesses. Certain states and cities, including where we or the third parties with whom we engage operate, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate and/or restrictions on the types of construction projects that may continue.

The extent to which the ongoing COVID-19 pandemic impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, as well as the effect of any relaxation of current restrictions within the Cambridge community or regions in which our partners and clinical sites are located, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the ongoing COVID-19 pandemic may adversely affect our business, financial condition and results of operations, and it has had, and may continue to have, the effect of heightening many of the risks described in this Annual Report, including but not limited to the below.

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The ongoing COVID-19 pandemic has had, and will likely continue to have, an impact on various aspects of our ongoing clinical trials. We remain in active dialog with our CROs, and clinical sites to minimize the impact of this pandemic to our gavo-cel Phase 1/2 clinical trial and our TC-510 Phase 1/2 clinical trial without adversely impacting the safety of patients. Despite our best efforts, it may prove difficult to continue to treat patients in a timely manner and activation of new sites could be delayed, particularly for our clinical trial sites in areas with high rates of community spread.

Other potential impacts of the ongoing COVID-19 pandemic on our Phase 1/2 clinical trial include patient dosing and study monitoring, which may be paused or delayed due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and regulations, including quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts, including diminished attention of physicians serving as our clinical trial investigators and 72

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61As the COVID-19 pandemic evolves, patient dosing and study monitoring, which may be paused or delayed due to changes in policies at various clinical sites and other aspects of our current and future clinical trials may be adversely affected, delayed or interrupted, including, for example, site initiation, patient recruitment and enrollment, availability of clinical trial materials and data analysis. Some patients and clinical investigators may not be able to comply with clinical trial protocols and patients may choose to withdraw from our studies or we may have to pause enrollment or we may choose to or be required to pause enrollment and or patient dosing in our ongoing clinical trials in order to preserve health resources and protect trial participants. It is unknown how long these pauses or disruptions could continue.

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~~reduced~~We ~~availability~~currently ofrely ~~site~~on ~~staff~~third ~~supporting~~parties, ~~the~~including ~~conduct of~~ our ~~clinical trials~~CROs, ~~interruption~~and orour ~~delays~~contract inmanufacturing ~~the~~organizations, ~~operations~~or ofCMOs, ~~the~~and ~~FDA or~~ other ~~reasons~~contractors ~~related~~and consultants to, ~~the~~among ~~COVID-19~~other ~~pandemic. As the COVID-19 pandemic evolves~~things, ~~other~~conduct ~~aspects of~~ our ~~current~~preclinical studies and ~~future~~ clinical trials, ~~may~~manufacture beraw ~~adversely affected~~materials, ~~delayed~~manufacture orand ~~interrupted,~~supply ~~including,~~our ~~for~~product ~~example~~candidates, ~~site~~ship ~~initiation,~~clinical ~~patient~~trial ~~recruitment~~samples, ~~and~~perform ~~enrollment,~~quality ~~availability~~testing ofand ~~clinical~~supply ~~trial~~other ~~materials~~goods and ~~data~~services ~~analysis.~~to ~~Some~~run ~~patients~~our ~~and~~business. ~~clinical~~If ~~investigators~~any ~~may~~such ~~not~~third beparty ~~able~~is toadversely ~~comply~~impacted ~~with~~by ~~clinical~~restrictions ~~trial~~resulting ~~protocols~~from ~~and~~the ~~patients~~ongoing ~~may~~COVID-19 ~~choose~~pandemic, toincluding ~~withdraw~~staffing ~~from~~shortages, ~~our~~production ~~studies~~slowdowns orand wedisruptions ~~may~~in ~~have~~delivery tosystems, ~~pause~~our ~~enrollment~~supply orchain we may ~~choose~~be todisrupted, orwhich becould ~~required~~limit toour ~~pause~~ability ~~enrollment~~to ~~and~~manufacture orour ~~patient~~product ~~dosing~~candidates infor our ~~ongoing~~ clinical trials inand ~~order~~conduct toour ~~preserve~~research ~~health resources~~ and ~~protect~~development ~~trial participants~~operations. ~~It is unknown how long these pauses or disruptions could continue.~~

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WeOur ~~currently~~employees ~~rely~~may onhave ~~third~~limited ~~parties, including our CROs, and our contract manufacturing organizations,~~ or ~~CMOs,~~no ~~and~~access ~~other contractors and consultants~~ to, ~~among other things, conduct~~ our ~~preclinical~~laboratory ~~studies~~for ~~and~~an ~~clinical~~extended ~~trials,~~period ~~manufacture~~of ~~raw~~time ~~materials, manufacture~~ and ~~supply our product candidates~~, ~~ship~~as ~~clinical~~a ~~trial samples~~result, ~~perform~~this ~~quality~~could ~~testing~~delay ~~and~~timely ~~supply~~completion ~~other~~of ~~goods~~preclinical ~~and services to run our business. If any such third party is adversely impacted by restrictions resulting from the ongoing COVID-19 pandemic~~activities, including ~~staffing~~conducting ~~shortages,~~IND-enabling ~~production~~studies ~~slowdowns~~or ~~and disruptions in delivery systems,~~ our ~~supply chain may be disrupted, which could limit our~~ ability to ~~manufacture~~select ~~our~~future ~~product~~development candidates ~~for our clinical trials~~ and ~~conduct~~initiation ~~our research and development operations. For example, since the beginning~~ of ~~the~~additional ~~COVID-19~~clinical ~~pandemic~~trials ~~several vaccines~~ for COVID-19 were granted Emergency Use Authorization by the FDA and a number of those later received marketing approval. Additional vaccines may be authorized or approved in the future. The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials for the manufacture of our other product candidates~~, which could lead to delays in these trials~~.

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~~Material~~The ~~shortages~~trading ~~may~~prices ~~affect~~for our ~~research~~common stock and ~~development~~those ~~and~~of ~~manufacturing~~other ~~activities~~biopharmaceutical ~~and~~companies ~~timelines.~~have ~~Increased~~been ~~demand~~highly ~~for~~volatile ~~personal~~as ~~protective~~a ~~equipment,~~result ~~plastics~~of ~~used~~the ~~for~~ongoing ~~pipettes~~COVID-19 ~~and~~pandemic. ~~other~~As ~~laboratory~~a ~~consumables~~result, ~~and~~we ~~other~~may ~~laboratory~~face ~~supplies~~difficulties ~~has~~raising ~~led~~capital tothrough ~~shortages~~sales of ~~some of these materials that we need for~~ our ~~research~~common ~~and~~stock ~~development~~or ~~activities,~~such ~~and~~sales ~~that~~may ~~our~~be ~~third-party~~on ~~manufacturers~~unfavorable ~~need to produce our product candidates~~terms. In addition, ~~COVID-19 restrictions on manufacturers and their employees has led to~~ a ~~shortage of personnel to manufacture~~recession, ~~package~~depression ~~and~~or ~~ship~~other ~~laboratories~~sustained ~~supplies~~adverse ~~and~~market ~~consumables,~~event ~~further~~resulting ~~limiting~~from the ~~available~~COVID-19 ~~supply.~~pandemic Ifcould ~~we,~~materially ~~our CROs, our vendors~~ and ~~our~~adversely ~~third-party~~affect ~~manufacturers are not able to obtain materials needed for~~ our ~~laboratory~~business ~~operations, our research~~ and ~~development and~~ the ~~manufacture~~value of our ~~product~~common ~~candidates could be delayed~~stock.

Certain government agencies, such as health regulatory agencies and patent offices, within the U.S. or internationally may experience disruptions in their operations as a result of the ongoing COVID-19 pandemic. The FDA, and comparable foreign regulatory agencies may have slower response times or be under-resourced to continue to monitor our clinical trials and, as a result, review, inspection and other timelines may be materially delayed. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates.

The trading prices for our common stock and those of other biopharmaceutical companies have been highly volatile as a result of the ongoing COVID-19 pandemic. As a result, we may face

difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the COVID-19 pandemic could materially and adversely affect our business and the value of our common stock.

Risks Related to Our Intellectual Property

Risks Related to Protecting Our Intellectual Property

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our product candidates, their respective components, formulations, combination therapies, methods used to manufacture them and methods of treatment and development that are important to our business. If we do not adequately protect our intellectual property rights, competitors may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. To protect our proprietary position, we file patent applications in the United States and abroad related to our novel product candidates that are important to our business; we may in the future also license or purchase patent applications filed by others. If we are unable to secure or maintain patent protection with respect to our technology and any proprietary products and technology we develop, our business, financial condition, results of operations, and prospects could be materially harmed.

We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our current and future product candidates or otherwise provide any competitive advantage. In addition, to the extent that we license intellectual property in the future, we cannot assure you that those licenses will remain in force. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.73

applications in the United States and abroad related to our novel product candidates that are important to our business; we may in the future also license or purchase patent applications filed by others. If we are unable to secure or maintain patent protection with respect to our technology and any proprietary products and technology we develop, our business, financial condition, results of operations and prospects could be materially harmed.

We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our current and future product candidates or otherwise provide any competitive advantage. In addition, we license certain intellectual property and, to the extent that we license any additional intellectual property in the future, we cannot assure you that those licenses will remain in force. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

Patent positions of life sciences companies can be uncertain and involve complex factual and legal questions. No consistent policy governing the scope of claims allowable in the field of cellular therapy has emerged in the United States. The scope of patent protection in jurisdictions outside of the United States is also uncertain. Changes in either the patent laws or their interpretation in any jurisdiction that we seek patent protection may diminish our ability to protect our inventions, maintain and enforce our intellectual property rights; and, more generally, may affect the value of our intellectual property, including the narrowing of the scope of our patents and any that we may license.

The patent prosecution process is complex, expensive, time-consuming and inconsistent across jurisdictions. We may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent rights at a commercially reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent protection in all relevant markets. It is possible that we will fail to identify important patentable aspects of our research and development efforts in time to obtain appropriate or any patent protection. While we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development efforts, including for example, our employees, corporate collaborators, external academic scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby endangering our ability to seek patent protection. In addition, publications of discoveries in the scientific and scholarly literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Consequently, we cannot be certain that we were the first to file for patent protection on the inventions claimed in our patents or pending patent applications.

to seek patent protection. In addition, publications of discoveries in the scientific and scholarly literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Consequently, we cannot be certain that we were the first to file for patent protection on the inventions claimed in our patents or pending patent applications.

The issuance or grant of a patent is not irrefutable as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. We may in the future, become subject to a third-party pre-issuance submission of prior art or opposition, derivation, revocation, re-examination, post-grant and inter partes review, or interference proceeding and other similar proceedings challenging our patent rights or the patent rights of others in the U.S. Patent and Trademark Office (USPTO) or other foreign patent office. An unfavorable determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or extinguish our ability to manufacture or commercialize products without infringing third-party patent rights.

In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some of our owned and in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.74

In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some of our owned and in-licensed patents and patent applications are, and may in the future be, owned by or co-owned with third parties. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our market.

Biotechnology and pharmaceutical companies generally, and we in particular, compete in a crowded competitive space characterized by rapidly evolving technologies and aggressive defense of intellectual property. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

We rely upon a combination of patents, confidentiality agreements, trade secret protection and license agreements to protect the intellectual property related to our technologies. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market. We, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to strengthen our patent position.

It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we or our partners, collaborators, licensees or licensors fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our partners, collaborators, licensees or licensors are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form, preparation, prosecution, or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

64Currently, our patents and patent applications are directed to our TRuC-T cells and accompanying technologies. We seek or plan to seek patent protection for our TRuC-T cell platform and product candidates by filing and prosecuting patent applications in the United States and other countries as appropriate. The claims of our patent applications are directed toward various aspects of our product candidates and research programs including compositions of matter, methods of use, and processes. These patent applications, if issued, are expected to expire on various dates from 2036 through 2042, in each case without taking into account any possible patent term adjustments or extensions.

such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

Currently, our patents and patent applications are directed to our TRuC-T cells and accompanying technologies. We seek or plan to seek patent protection for our TRuC-T cell platform and product candidates by filing and prosecuting patent applications in the United States and other countries as appropriate. The claims of our patent applications are directed toward various aspects of our product candidates and research programs including compositions of matter, methods of use, and processes. These patent applications, if issued, are expected to expire on various dates from 2036 through 2041, in each case without taking into account any possible patent term adjustments or extensions.

We anticipate additional patent applications will be filed both in the United States and in other countries, as appropriate. However, we cannot predict:

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if and when patents will be issued;

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the degree and range of protection any issued patents will afford us against competitors including whether third parties will find ways to invalidate or otherwise circumvent our patents;

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whether any of our intellectual property will provide any competitive advantage;

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whether any of our patents that may be issued may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage;

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whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or

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whether we will need to initiate or defend litigation or administrative proceedings which may be costly regardless of whether we win or lose.

Additionally, we cannot be certain that the claims in our pending patent applications covering composition of matter of our product candidates will be considered patentable by the USPTO, or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered patentable by courts in the United States or foreign countries.

The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries. Even if the patents do successfully issue, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the breadth or strength of protection provided by the patent applications we hold with respect to our product candidates is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates.

Recent or future patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. In March 2013, under the recently enacted Leahy-Smith America Invents Act, or America Invents Act, the United States moved from a “first to invent” to a “first-to-file” system. Under a “first-to-file” system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the invention earlier. The America Invents Act includes a number of other significant changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted, redefine prior art and establish a new post-grant review system. The effects of these changes are currently unclear as the USPTO only recently developed new regulations and procedures in connection with the America Invents Act and many of the substantive changes to patent law, including the “first-to-file” provisions, only became effective in March 2013. In addition, the courts have yet to address many of these provisions and the applicability of the act and new regulations on specific patents discussed herein have not been determined and would need to be reviewed. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

of the substantive changes to patent law, including the “first-to-file” provisions, only became effective in March 2013. In addition, the courts have yet to address many of these provisions and the applicability of the act and new regulations on specific patents discussed herein have not been determined and would need to be reviewed. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

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others may be able to make or use compounds or cells that are similar to the biological compositions of our product candidates but that are not covered by the claims of our patents;

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the active biological ingredients in our current product candidates will eventually become commercially available in biosimilar drug products, and no patent protection may be available with regard to formulation or method of use;

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we or our licensors, as the case may be, may fail to meet our obligations to the U.S. government in regards to any in-licensed patents and patent applications funded by U.S. government grants, leading to the loss of patent rights;

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we or our licensors, as the case may be, might not have been the first to file patent applications for these inventions;

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others may independently develop similar or alternative technologies or duplicate any of our technologies;

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it is possible that our pending patent applications will not result in issued patents;

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it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents, as the case may be, or parts of our or their patents;

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it is possible that others may circumvent our owned or in-licensed patents;

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it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to ours;

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the laws of foreign countries may not protect our or our licensors’, as the case may be, proprietary rights to the same extent as the laws of the United States;

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the claims of our owned or in-licensed issued patents or patent applications, if and when issued, may not cover our product candidates;

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our owned or in-licensed issued patents may not provide us with any competitive advantages, may be narrowed in scope, or be held invalid or unenforceable as a result of legal challenges by third parties;

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the inventors of our owned or in-licensed patents or patent applications may become involved with competitors, develop products or processes which design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors;

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it is possible that our owned or in-licensed patents or patent applications omit individual(s) that should be listed as inventor(s) or include individual(s) that should not be listed as inventor(s), which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable;

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we have engaged in scientific collaborations in the past and will continue to do so in the future, and such collaborators may develop adjacent or competing products to ours that are outside the scope of our patents;

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we may not develop additional proprietary technologies for which we can obtain patent protection;

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it is possible that product candidates or diagnostic tests we develop may be covered by third parties’ patents or other exclusive rights; or

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the patents of others may have an adverse effect on our business.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to the protection afforded by patents, we seek to rely on trade secret protection, confidentiality agreements, and license agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. For example, significant elements of our products, including aspects of sample preparation, methods of manufacturing, cell culturing conditions, computational-biological algorithms, and related processes and software, are based on unpatented trade secrets that are not publicly disclosed. Although we require all of our employees to assign their inventions to us, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

methods of manufacturing, cell culturing conditions, computational-biological algorithms, and related processes and software, are based on unpatented trade secrets that are not publicly disclosed. Although we require all of our employees to assign their inventions to us, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

Courts outside the United States are sometimes less willing to protect trade secrets. If we choose to go to court to stop a third party from using any of our trade secrets, we may incur substantial costs. These lawsuits may consume our time and other resources even if we are successful. For example, significant elements of our products, including aspects of sample preparation, methods of manufacturing, cell culturing conditions, computational-biological algorithms, and related processes and software, are based on unpatented trade secrets that are not publicly disclosed. Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology.

Thus, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual or entity during the course of the party’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary technology by third parties. We have also adopted policies and conduct training that provides guidance on our expectations, and our advice for best practices, in protecting our trade secrets.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our marks of interest and our business may be adversely affected.

Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During the trademark registration process, we may receive Office Actions from the USPTO objecting to the registration of our trademark. Although we would be given an opportunity to respond to those objections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and/or to seek the cancellation of registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

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pending trademark applications and/or to seek the cancellation of registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

Risks Related to Third Party Intellectual Property

We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

We are dependent on patents, know-how and proprietary technology, both our own and licensed from others. For example, we have a non-exclusive license for the mesothelin binder incorporated into the TRuC construct for gavo-cel and TC-510 from Harpoon. Harpoon has the ability to terminate our license in the event we materially breach our agreement with Harpoon and fail to cure this breach within sixty days. If the license with Harpoon is terminated, we would need to partner for another mesothelin binder or independently develop our own mesothelin binder. In addition, we cannot prevent Harpoon from also licensing the mesothelin binder we use in gavo-cel and TC-510 to a third-party. If Harpoon licenses the mesothelin binder to another immuno-oncology company, that company could develop a competitive product to gavo-cel and/or TC-510.

We are currently, and expect in the future to be, party to material license or collaboration agreements. These agreements typically impose numerous obligations, such as diligence and payment obligations. Any termination of these licenses could result in the loss of significant rights and could harm our ability to commercialize our product candidates. These licenses do and future licenses may include provisions that impose obligations and restrictions on us. This could delay or otherwise negatively impact a transaction that we may wish to enter into.

Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including:

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the scope of rights granted under the license agreement and other interpretation-related issues;

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whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

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our right to sublicense patent and other rights to third parties under collaborative development relationships;

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our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; and

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the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

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 property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize products could suffer.

If we fail to comply with our obligations under our patent licenses with third parties, we could lose license rights that are important to our business.

We are a party to a license agreement with Harpoon, pursuant to which we in-license key patent and patent applications for use in one or more of our product candidates. This existing license imposes various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply

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with these obligations, Harpoon may have the right to terminate the license, in which event we would not be able to develop or market the products covered by such licensed intellectual property.

We rely on certain of our licensors to file and prosecute patent applications and maintain patents and otherwise protect the intellectual property we license from them and may continue to do so in the future. We have limited control over these activities or any other intellectual property that may be related to our in-licensed intellectual property. For example, we cannot be certain that such activities by these licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. We have limited control over the manner in which our licensors initiate an infringement proceeding against a third-party infringer of the intellectual property rights, or defend certain of the intellectual property that is licensed to us. It is possible that any licensors’ infringement proceeding or defense activities may be less vigorous than had we conducted them ourselves.

Third-party claims of intellectual property infringement may prevent or delay our product discovery and development efforts.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, reexamination, and post grant review proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our product candidates and/or proprietary technologies infringe their intellectual property rights. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others. Moreover, it is not always clear to industry participants, including us, which patents cover various types of drugs, products or their methods of use or manufacture. Thus, because of the large number of patents issued and patent applications filed in our fields, there may be a risk that third parties may allege they have patent rights encompassing our product candidates, technologies or methods.

Third parties may assert that we are employing their proprietary technology without authorization. Generally, conducting preclinical and clinical trials and other development activities in the United States is not considered an act of infringement. If gavo-cel, TC-510 or another product candidate is licensed by the FDA, a third party may then seek to enforce its patent by filing a patent infringement lawsuit against us. While we do not believe that any claims that could otherwise have a materially adverse effect on the commercialization of our product candidates, if licensed, are valid and enforceable, we may be incorrect in this belief, or we may not be able to prove it in litigation. In this regard, patents issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is “clear and convincing,” a heightened standard of proof. There may be issued third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Patent applications can take many years to issue. There may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Moreover, we may fail to identify relevant patents or incorrectly conclude that a patent is invalid, not enforceable, exhausted, or not infringed by our activities. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing process, or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop

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and commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business. Even if we obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Defense of these claims, regardless of their merit, could involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need or may choose to obtain licenses from third parties to advance our research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly.

We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through acquisitions and in-licenses.

Presently we have rights to certain intellectual property, through licenses from third parties and under patent applications that we own or will own, related to gavo-cel, TC-510 and certain other product candidates. Because additional product candidates may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, while we have patent rights directed to certain TRuC constructs we may not be able to obtain intellectual property to broad TRuC-T cell or engineered TCR-T cell constructs.

Our product candidates may also require specific formulations to work effectively and efficiently and these rights may be held by others. Similarly, efficient production or delivery of our product candidates may also require specific compositions or methods, and the rights to these may be owned by third parties. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify as necessary or important to our business operations. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, which would harm our business. We may need to cease use of the compositions or methods covered by such third-party intellectual property rights, and may need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology. Moreover, the specific antibodies that will be used with our product candidates may be covered by the intellectual property rights of others.

Additionally, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. In certain cases, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to others, potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the existing

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intellectual property rights we have, we may have to abandon development of such program and our business and financial condition could suffer.

The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

Risks Related to Intellectual Property Litigation

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.

Post-grant proceedings provoked by third parties or brought by the USPTO may be necessary to determine the validity or priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or post-grant proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of

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