(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ☐ Yes ☒ No

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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.

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

As of June ~~28, 2019,~~30, 2020, the aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates was approximately ~~$277.5~~$40.0 million based on a closing price of ~~$10.20~~$15.05 per share as quoted by The Nasdaq Global ~~Select~~ Market as of such date. In determining the market value of non-affiliate common stock, shares of the registrant’s common stock beneficially owned by officers, directors and affiliates have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March ~~11, 2020~~10, 2021, there were ~~36,445,751~~31,780,347 shares of common stock, $0.0001 par value per share, outstanding.

Part III of this Annual Report on Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for its ~~2020~~2021 annual meeting of shareholders, scheduled to be held on ~~May 6, 2020~~April 27, 2021 which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year end of December 31, ~~2019.~~2020. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.

Prior to September 15, 2020, we were a clinical-stage biopharmaceutical company known as resTORbio, Inc. (resTORbio) that had historically focused on developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy lifespans. resTORbio was originally incorporated under the laws of the State of Delaware in July 2016 and commenced research and development operations in March 2017.

On September 15, 2020, we completed our business combination whereby a wholly-owned subsidiary of resTORbio merged with and into Adicet Bio, Inc. (Former Adicet), with Former Adicet surviving as a wholly-owned subsidiary of resTORbio and changing our name to Adicet Therapeutics, Inc. (such transactions, the Merger). In connection with the completion of the Merger, resTORbio was renamed Adicet Bio, Inc. (Adicet Bio).

Immediately prior to the Effective Time of the Merger, resTORbio effected a reverse stock split of our common stock at a ratio of 1-for-7 (the Reverse Stock Split). At the Effective Time of the Merger, each outstanding share of Former Adicet’s capital stock was converted into the right to receive 0.1240 (the Exchange Ratio) shares of Adicet Bio’s common stock.

Unless otherwise noted, all references to common stock share and per share amounts in this Annual Report on Form 10-K have been retroactively adjusted to reflect the conversion of shares in the Merger based on the Exchange Ratio and Reverse Stock Split. As used herein, the words “the Company,” “we,” “us,” and “our” refer to, for periods following the Merger, Adicet Bio (formerly resTORbio, Inc.), together with its direct and indirect subsidiaries, and for periods prior to the Merger, Adicet Therapeutics, Inc. (formerly Adicet Bio, Inc.), and our direct and indirect subsidiaries, as applicable. In addition, the word “resTORbio” refers to the Company prior to the completion of the Merger, and we sometimes refer to Adicet Therapeutics, Inc. as “Adicet” or “Former Adicet.”

This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Annual Report on Form 10-K and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this Annual Report on Form 10-K, and we believe these industry publications and third-party research, surveys and studies are reliable.

Unless the context requires otherwise, references in this Annual Report on Form 10-K to the “Company,” “resTORbio,” “we,” “us,” and “our” refer to resTORbio, Inc. and its subsidiary. Our “board of directors” refers to the board of directors of resTORbio, Inc. All brand names or trademarks appearing in this report are the property of their respective owners. Unless the context requires otherwise, references in this report to “Adicet Bio,” “Adicet,” “ the “Company,” “we,” “us” and “our” refer to Adicet Bio, Inc. and its subsidiaries, as applicable.

We are a ~~clinical-stage biopharmaceutical~~biotechnology company discovering and developing ~~innovative medicines~~allogeneic gamma delta T cell therapies for cancer and other diseases. We are advancing a pipeline of “off-the-shelf” gamma delta T cells, engineered with chimeric antigen receptors (CARs) and T cell receptor-like antibodies to enhance selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and improve persistence for durable activity in patients. Gamma delta cells are unique because they may have an inherent capacity to persist following treatment, and can recognize and kill circulating tumor cells and to infiltrate and kill solid tumors. We believe that ~~target~~by applying our proprietary engineering and manufacturing approach to gamma delta T cells we may have significant advantages over alpha beta T cell-based therapies, which are the ~~biology~~basis of ~~aging to prevent or treat age-related diseases~~standard CAR-T cell therapies and also natural killer (NK) cell-based therapies, which are currently in development.

Our proprietary engineering and manufacturing process begins with extracting gamma delta T cells from the blood of healthy donors, and results in the potential to ~~extend healthy lifespan. Our lead program selectively inhibits~~treat up to 1,000 patients per batch with an “off-the-shelf” product that is available on demand. The potential to administer product candidates based on gamma delta T cells to patients without inducing a graft versus host immune response could mean that our products can potentially be used as “off-the-shelf” therapies. This is in contrast to products based on alpha beta T cells, which either must be manufactured for each patient from his or her own T cells, or require significant gene editing to manufacture if the ~~target of rapamycin complex 1, or TORC1, an evolutionarily conserved pathway~~T cells are derived from donors that ~~contributes~~are unrelated to the ~~age-related decline~~patient. Based on what we believe is the unique potential of gamma delta T cells and associated modifications, we are initially developing product candidates in ~~function of multiple organ systems. Our~~oncology, both for hematological malignancies and for solid tumors. In October 2020, the United States (U.S.), Food and Drug Administration (FDA), cleared our Investigational New Drug (IND) application for ADI-001, our lead product candidate, ~~RTB101, is an oral, selective, and potent inhibitor~~for the treatment of ~~TORC1. RTB101 inhibits~~Non-Hodgkin’s Lymphoma (NHL). The active IND enables us to initiate the phosphorylation of multiple targets downstream of TORC1. Inhibition of TORC1 has been observed to extend lifespan and healthspan in aging preclinical species and to enhance immune, neurologic and cardiac functions, suggesting potential benefits in several aging-related diseases. In April of 2019, we initiated a Phase 1b/2afirst-in-human clinical trial of RTB101 alone or in combination with sirolimus in Parkinson’s disease, or PD. The ongoing multicenter, 2:1 randomized, double-blind, placebo-controlled Phase 1b/2a trial is evaluating the safety and tolerability of RTB101 alone or in combination with escalating doses of sirolimus (2 mg, 4 mg and 6 mg) once weekly for 4 weeks in patients with PD. To date, patients have completed enrollment in four cohorts and completed dosing in three cohorts: once weekly with 300 mg of RTB101 alone; 2 mg of sirolimus alone; and a combination of 300 mg RTB101 and 2 mg of sirolimus. Results of an interim study analysis demonstrated that all 3 dosing regimens were well tolerated and RTB101 300 mg once weekly was observed to cross the blood brain barrier. Sirolimus at the dose of 2 mg, alone or in combination with RTB101, was not detected in the CSF. Data from the first three cohorts in the study suggest that the concentrations of RTB101 observed in the CSF four hours after dosing were highest when RTB101 was given as a monotherapy. We expect the full data from this trial by mid-2020.

RTB101 was previously in development for preventing clinically symptomatic respiratory illness in adults age 65 and older. On November 15, 2019, we announced that top line data from the PROTECTOR 1 Phase 3 study, evaluating theassess safety and efficacy of ~~RTB101~~ADI-001 in ~~preventing clinically symptomatic respiratory illness~~NHL patients in ~~adults age 65~~the first quarter of 2021. The Phase 1 study for ADI-001 will enroll up to 80 late-stage NHL patients at a number of cancer centers across the U.S. The study includes a dose finding portion followed by dose expansion cohorts to explore the activity of ADI-001 in multiple subtypes of NHL. Site initiation activities are underway and ~~older, did not meet its primary endpoint and~~interim clinical data from this study are expected in 2021. We intend to file an IND with the FDA in late 2021 for ADI-002, our first solid tumor product candidate.

Gamma delta T cells have unique attributes that we ~~have stopped the development of RTB101 for clinically symptomatic respiratory illness.~~

We licensed the worldwide rights to our TORC1 program, including RTB101 alone or in combination with everolimus, from Novartis International Pharmaceutical Ltd., or Novartis, in March 2017. Our management team includes our co-founders, Chen Schor, who serves as our President and Chief Executive Officer, Joan Mannick, M.D., who serves as our Chief Medical Officer, Lloyd Klickstein, M.D., Ph.D., who serves as our Chief Scientific Officer, and additional veterans in drug development and discovery, with executive experience in leading global pharmaceutical companies. Dr. Mannick led the TORC1 clinical program at Novartis Institutes for Biomedical Research, Inc., or NIBR, prior to our in-licensing of the program.

In addition, we have retained JMP Securities LLC as a financial advisor to assist us in our evaluation of a broad range of strategic alternatives to enhance stockholder value, including additional capital raising transactions, an acquisition, merger, business combination, licensing and/or other strategic transaction involving us. There is no assurance that the review of strategic alternatives will result in us changing our business plan, pursuing any particular transaction, or, if we pursue any such transaction, that it will be completed.

~~Our goal is~~believe make them especially well-suited to be used for cancer therapy. Approximately 95% of T cells in circulation are so-called alpha beta T cells, named after the proteins that make up the cells’ T cell receptor (TCR). The remaining T cells include a ~~leading biopharmaceutical company focused on treating aging-related diseases. We strive to maintain~~population that makes up between 1% and 5% of all T cells, the gamma delta T cells, along with a ~~leadership position in~~few other cell types. Distinct among immune cell populations, we believe gamma delta T cells may have the ~~TORC1 inhibitor class~~following combination of ~~pharmaceutical products for aging-related diseases. The key elements of our strategy to achieve this goal include:~~attributes:

~~Develop~~By contrast, approved CAR-T cell therapies, as well as the majority of CAR-T cell therapies in clinical development, are based on a different population of T cells, known as alpha beta T cells, which have the ability to attack healthy tissues if they are not immunologically matched to the patient. For this reason, the majority of alpha-beta-T-cell-derived CAR-T cell products are custom-generated from cells isolated from each patient. Gamma delta T cells, by contrast, do not in principle require

immunological matching and therefore cells isolated from healthy donors can potentially be administered to any patient. This may enable cell therapy products based on gamma delta T cells to be manufactured in bulk and be distributed as readily available off-the-shelf products. In animal models and early third-party clinical trials, gamma delta T cells do not expand in healthy tissues, indicating that they may be associated with a lower risk of life-threatening immune responses. In addition to their ability to circulate, gamma delta T cells have an inherent capacity to locate in tissues and recognize and attack cancerous cells.

In comparison to a number of NK cell therapies currently in development, CAR-modified gamma delta T cells functionally persist in non-clinical models for protracted periods of time and are designed to persist after single or repeat dosing of patients for clinically meaningful periods. Our manufacturing process results in highly homogeneous cell populations that we have observed to display potent anti-tumor activity in non-clinical models. Unlike most NK cells, that only exhibit characteristics on innate lymphocytes, gamma delta T cells display features of both innate and adaptive anti-tumor immunity and readily recognize and kill tumor cells with and without expression of CARs. Additionally, we believe that our ~~TORC1 program~~short proprietary process to manufacturing CAR-modified gamma delta T cells is not as complex, without any “feeder” cell lines, and compares favorably to alternatives used in the manufacture of expanded allogeneic NK cell-based therapies.

ADI-001 is a gamma delta T-cell product candidate into which we introduced a CAR that specifically recognizes CD20, a highly expressed surface protein found on the majority of NHLs. We are developing a highly efficient and robust process to activate, engineer and manufacture product candidates derived from peripheral blood cells of healthy donors. We are developing processes to produce these cells in bulk under conditions that meet current Good Manufacturing Practices, that is, are cGMP-compliant, to generate an inventory of cell product that is readily available to patients on demand “off-the-shelf” at clinical sites. Gamma delta T cells engineered with anti-CD20 CAR have demonstrated potent antitumor activity in preclinical models, leading to long-term control of tumor growth. In October 2020, FDA cleared our IND application for ~~additional indications.~~ ~~We also may develop RTB101~~ADI-001 for the treatment of ~~additional aging-related diseases based~~NHL. The active IND enables us to initiate the first-in-human clinical trial to assess safety and efficacy of ADI-001 in NHL patients in the first quarter of 2021. We believe that ADI-001 has the potential to benefit patients that have NHL while also providing clinical validation of our gamma delta T-cell platform technology.

In addition to potentially providing access to immunocellular therapies to a broader set of patients with hematological malignancies, we believe that our gamma-delta platform technology is well-positioned to bring these therapies to patients with solid tumors. ADI-002 is a product candidate containing a CAR directed against Glypican-3, or GPC3, a tumor antigen that is highly expressed in hepatocellular carcinoma, or HCC, and other tumors such as gastric cancer and squamous cell carcinoma of the lung. ADI-002 has demonstrated dose-dependent antitumor activity in animal models and we intend to file an IND application with the FDA in late 2021 for ADI-002. Subject to the FDA regulatory process for review of INDs, we intend to initiate a clinical trial and treat the first patient with ADI-002 in 2022.

Our solid tumor efforts are further complemented by our proprietary T cell receptor-like antibody (TCRL), platform technology, a monoclonal antibody technology which enables the generation of CARs that recognize tumor antigens inside tumor cells, also known as intracellular proteins. These intracellular proteins are processed by the cell and presented by antigen-presenting molecules encoded by the major histocompatibility complex, (MHC). We believe that the ability to selectively bind to tumor antigens derived specifically from intracellular proteins is a critical advantage to immunocellular therapy due to the scarcity of tumor-specific surface antigens on ~~preclinical and clinical evidence on the effects of TORC1 inhibition.~~

~~The following table summarizes key information about our product candidates.~~

* For PD, we may be required to file an investigational new drug application, or IND, with the U.S. Food and Drug Administration, or FDA, prior to initiating Phase 2 clinical trials in the United States.

** For neurodegenerative diseases and diseases associated with TORC1 hyperactivation, subject to review by the FDA, we believe we may have the ability to initiate Phase 2 clinical trials without the need to conduct additional Phase 1 trials.

~~Advances in the scientific understanding of aging have until recently been limited, despite high growth in the elderly population~~

The elderly are the fastest growing population around the globe. According to the U.S. Census Bureau, the population age 65 and older in the United States is expected to double by 2050 compared to 2012 estimates. According to global census data, there are nearly 150 million people age 65 and older, and approximately 20 million people age 85 years and older in the United States, the major European countries and Japan. Despite age being the major risk factor for multiple chronic diseases, we believe few therapies are being developed to target aging biology, and none have been approved.

~~mTOR is a serine/threonine protein kinase that regulates the process of aging and aging-related diseases and conditions. Inhibition~~eliminate cancer. One of the ~~mTOR pathway has been observed~~key breakthroughs in immuno-oncology involved using T cells, a key element of the immune system, and turning them into even more potent, tumor-cell-specific killers. Researchers have achieved this improvement and targeting by loading the T cells with a gene encoding a CAR. These engineered receptors represent a powerful combination of, first, a region that binds to ~~prolong lifespan in multiple animals. These data support~~a target on a cancer cell and tethers the ~~potential for drugs~~T cell to it; and second, a signal that ~~target~~activates the ~~mTOR pathway~~T cell to ~~have therapeutic benefits for aging and aging-related conditions in humans.~~

~~In preclinical studies,~~eliminate the ~~mTOR pathway has been observed to be hyperactivated in some cell types, including hematopoietic stem~~tethered cancer cell. To our knowledge, all marketed CAR-T cells or HSCs, at an advanced age. It was observed that suppressing mTOR activity in these cell types to levels found at younger ages may enhance cell function, including their ability to generate white bloodcontain predominantly alpha beta T cells. Furthermore, preclinical studies found that mTOR activity stimulates protein synthesis and cell growth but inhibits protective processes such as autophagy in which damaged proteins and organelles are broken down and recycled. Therefore, these studies suggest that increased mTOR activity is beneficial during years of growth and reproduction but may be harmful during post-reproductive years when cells accumulate damage and require protective mechanisms such as autophagy to prevent and repair damage.

mTOR signals via two multiprotein complexes, known as TORC1 and TORC2. TORC1 inhibition has been observed to prolong lifespan, enhance immune responses, ameliorate neurodegenerative diseases, ameliorate heart failure, enhance memory and mobility, decrease adiposity and delay onset of aging-related diseases in multiple animal studies. On the other hand, TORC2 inhibition has been observed to decrease lifespan and cause hyperlipidemia and hyperglycemia in certain animals and humans. Therefore,While we believe the ~~optimal approach for~~use of CAR-T cell therapies is extremely promising, conventional CAR-T cell therapies also have some key flaws that, we believe, can potentially be addressed by using a cell population, specifically, gamma delta T cells rather than alpha beta T cells.

As of March 10, 2021, four CD19-targeting CAR-T cell therapies have been approved by the FDA: axicabtagene ciloleucel (Yescarta®) and brexucabtagene autoleucel (Tecartus™) developed by Kite Pharma (now Gilead); tisagenlecleucel (Kymriah®), developed by Novartis; and lisocabtagene maraleucel (Breyanzi®) developed by Juno Therapeutics, Inc. (now Bristol Myers Squibb Company). These therapies are highly effective in many patients. Among the 101 patients with diffuse large B cell lymphoma, or DLBCL, treated with Yescarta® in a clinical trial, an objective response rate of 82% was observed with 54% of patients achieving a complete response. This high efficacy, however, is associated with significant adverse events, with 13% of patients experiencing grade 3 or higher cytokine release syndrome and 28% of patients experiencing grade 3 or higher neurologic events. In the Yescarta® DLBCL clinical trial, three patients died due to adverse events during treatment of aging-related conditions through mTOR inhibition is a regimen that inhibits TORC1 without inhibiting TORC2. mTOR within the TORC1 complex introduces phosphates to, or phosphorylates, multiple proteins including S6K, 4EBP1 and ~~Ulk1, as shown~~ten patients who were enrolled in the ~~figure below. Different dosing regimens~~trial were not able to be treated due to disease progression or complications that ~~inhibit different spectrum~~arose during the period of ~~TORC1, as measured~~time required to generate the patient-specific therapy or because of the inability to generate the desired CAR-T cells from the patient’s cells. Despite these known adverse events, in 2017 and 2018, leading CAR-T cell companies Kite Pharma and Juno Therapeutics, Inc., or Juno, were acquired for a total of $20.9 billion by ~~decreased phosphorylation of multiple proteins downstream of TORC1, may be more beneficial for the prevention or treatment of certain aging-related diseases.~~

Gilead and Celgene, now Bristol Myers-Squibb, respectively. We believe ~~TORC1 inhibition may~~these acquisitions were a result of a combination of the ability of Kite Pharma and Juno to treat cancer immediately through the initial product candidates and projected to generate numerous additional candidates. We believe that, despite their progress to date, currently available CAR-T cell therapies have ~~therapeutic benefit in multiple aging-related diseases. Preclinical studies suggest that key mechanisms involved in the anti-aging effects of TORC1 inhibition include improved stem~~not reached their full promise, and our gamma delta CAR-T cell function, increased autophagy, increased expression of mitochondrial proteins that are important for energy production, decreased adiposity and increased expression of proteins that are responsible for cellular maintenance and repair. Based on preclinical data, these biological effects have the potential to improve multiple aging-related pathologies including decreased autophagy and accumulation of damaged proteins. Autophagy is the process in which a cell breaks down and recycles damaged cellular components, including damaged and aggregated proteins. Preclinical data suggests that an aging-associated decrease in autophagy leads to the accumulation of toxic proteins and may result in aging-associated pathologies such as neurodegeneration.

~~Potential for TORC1 inhibition to ameliorate levodopa-induced dyskinesia and to be neuroprotective in Parkinson’s disease patients~~

Preclinical studies of RTB101 in rodent models of PD conducted by third parties have shown that mTOR inhibition can induce autophagy, reduce α-synuclein accumulation and decrease neuronal cell death. Therefore, we believe induction of autophagy with RTB101 alone or in combination with a rapalogapproach has the potential to be a significant improvement.

The current generation of CAR-T cell therapies represented by Yescarta®, Tecartus™, and Kymriah® are autologous cell therapies, that is, they are based on immune cells isolated from a patient, modified and expanded in a laboratory and then reintroduced into the same patient. One key reason for taking this autologous approach is that the cytotoxic (cell-killing) predominantly alpha beta T cells that are used to generate these therapies are cells that the immune system uses to recognize and attack foreign cells. If these types of T cells were to be introduced into a patient from an unrelated donor, the donor T cells would attack healthy tissues throughout the patient in a process known as graft versus host disease ~~modifying~~(GvHD) potentially causing multiple organ failure and death.

The T cells used for first-generation CAR-T cell therapies were derived from a highly abundant subclass of T cells known as alpha beta T cells. Alpha beta T cells, which comprise approximately 95% of the T cells in circulation in the body, are able to distinguish whether cells that they encounter are normal cells that belong in the body or foreign or damaged cells that need to be destroyed. Alpha beta T cells have a receptor on their surface called a TCR which is made up of alpha and beta protein chains. These TCRs recognize targets, also known as antigens, on cells that are presented by antigen-presenting molecules encoded by the major histocompatibility complex (MHC). The MHC contains genes that encode a number of proteins with multiple variants (alleles), such that most individuals have a distinct MHC profile. During normal T cell development, those T cells that recognize the combination of the specific MHC profile and antigens that are presented by healthy cells of the specific individual are eliminated, resulting in a population of T cells that circulate throughout the body, vigilantly checking for abnormal antigens or foreign cells, including from another individual.

In one type of cellular immunotherapy known as adoptive cell therapy, naturally occurring immune cells from a patient are isolated and are activated using cytokines and tumor-specific antigens to stimulate the growth and expansion of antitumor T cells that already exist at low abundance in the patient. After activation and expansion in the laboratory, large numbers of T cells that are primed to recognize the tumor are reintroduced into the same patient.

CAR-T cell therapies are a variant of this adoptive cell therapy in ~~PD. Moreover, inhibition~~which, instead of ~~TORC1~~trying to activate T cells based on the ability of naturally occurring TCRs to recognize tumor antigens, a chimeric antigen receptor, or CAR, that is designed to recognize a specific tumor antigen is genetically introduced into T cells. These CAR-T cells are then able to destroy any cells expressing the appropriate antigen completely independent of MHC. However, without further genetic engineering, CAR-T cells derived from alpha beta T cells still have endogenous TCRs which restrict their use to the original patient.

Autologous cell therapies, such as those developed by Kite Pharma and Novartis, have a number of limitations, including but not limited to the following:

Autologous cell therapies, such as CAR-T cells derived from alpha beta T cells, have been successful in their initial use in hematological malignancies. Furthermore, they have provided critical data that demonstrates the potential of immunocellular cancer therapies. However, manufacturing of these cells imposes some critical limitations that could be minimized if similar allogeneic cell therapies that can be given to any patient, regardless of the donor of cells, are developed. We believe that allogeneic cell therapies offer great promise for optimizing the access to therapy, overcoming manufacturing-related and cost-related limitations of autologous cell therapies.

Gamma delta T cells are a subset of T cells that have TCRs comprising gamma and delta receptor chains. In contrast to alpha beta T cells, gamma delta T cells are not selective for patient-specific MHC molecules. Therefore, gamma delta T cells from an unrelated donor can be administered to a patient without inducing GvHD and may recognize tumor-associated antigens in an MHC-independent manner. Gamma delta T cells primarily reside in tissues and comprise between 1% and 5% of circulating T cells.

An analysis of the transcriptional profiles of 5,872 patient tumor samples across 25 malignancies published in Nature Medicine in 2015 found that gene signatures consistent with gamma delta T cells were the strongest predictors of overall survival. The association of gamma delta T cells with overall survival in solid tumors had a z-score over three, meaning it was over three standard deviations above the mean, corresponding to a p value less than 0.001.

Figure 1. Analysis of the immune cell composition of tumor samples that gamma delta T cells were highly predictive of overall survival. Adapted from Gentles et al., Nat Med. 2015; 21(8).

Additionally, high levels of gamma delta T cells have been associated with improved overall survival in acute leukemia patients who received hematopoietic stem cell transplants (HSCT). In a study published by KT Godder et al. in 2007 in the journal Bone Marrow Transplantation, those patients with high levels of gamma delta T cells after the transplant had a leukemia free survival at five-years of 54.4% and overall survival of 70.8%. Those with low levels of gamma delta T cells had a significantly lower five-year leukemia free survival of 19.1% and a five-year overall survival of 19.6%.

Figure 2. HSCT patients who develop high levels of gamma delta T cells have improved survival. Adapted from Godder et al., Bone Marrow Transplantation 2007; 39.

The correlation between high levels of gamma delta T cells and disease-free survival extends to patients with solid tumors. In a study published by Meraviglia et al in 2017 in the journal OncoImmunology, across a cohort of 557 patients with colorectal cancer, those with high gamma delta T cell levels had a five-year disease-free survival rate of over 80%, and revealed that DFS probability was significantly higher in CRC patients with high number of tumor infiltrating gamma delta T cells.

Figure 3. High levels of gamma delta T cells are correlated with increased disease-free survival in colorectal cancer patients. Adapted from Meraviglia et al., Oncoimmunology 2017; 6 (10).

We believe that these studies and others point to an important role of gamma delta T cells in disease control and overall survival and indicate that gamma delta T cell-based therapies have the potential to deliver clinically meaningful results.

Immunotherapies developed using gamma delta T cells have a number of advantages over other therapies developed using other cell types, including the following:

Human gamma delta T cells can be divided into three main subsets based on their TCR delta chain usage: Vδ1, Vδ2 and Vδ3. The most abundant subset of gamma delta T cells in the circulatory system, the Vδ2 cells, is the most well-studied. However, it is the Vδ1 subset which primarily resides in tissues and presents a favorable cytotoxic anti-tumor profile that we are activating and manufacturing using our proprietary platform technology.

Vδ1 cells have properties of both the innate and adaptive immune system, meaning that they can be activated by tumor-specific antigens as well as by general activators common to damaged or otherwise abnormal cells. Similar to other T cells, they express TCRs, but also express cytotoxicity receptors that are found on innate immune cells such as natural killer (NK), cells. These gamma delta T cells can induce tumor cell death through multiple mechanisms including the secretion of cytotoxic proteins such as granzymes and perforin as well as through the secretion of cytokines such as interferon gamma (IFNγ), and tumor necrosis factor alpha (TNFα).

In in vitro and in vivo preclinical cancer models, Vδ1 cells are more cytotoxic and may have ~~additional benefit~~a longer durability than Vδ2 cells. Vδ1 cells are also more resistant to activation induced cell death (AICD), which has posed significant problems in ~~PD patients by alleviating levodopa-induced dyskinesia, or LID. LID is a distressing side-effect~~clinical trials following chronic stimulation of ~~levodopa treatment that causes patients~~Vδ2 cells. Vδ1 cells normally reside within tissues and they are able to ~~experience involuntary movements. Polymorphisms~~adapt to lower nutrient availability and decreased oxygen levels, conditions which are similar to those in the ~~mTOR gene~~microenvironments or localized areas associated with certain solid tumors. Incubation of these gamma delta T cells in ~~patients with PD have been linked to increased susceptibility to developing LID. In preclinical PD models, inhibition~~conditions of ~~TORC1 activity~~low oxygen (hypoxia) that are typical of tumors has been shown to ~~alleviate LID symptoms. Together,~~enhance their cytotoxicity.

An alternate approach to the development of allogeneic CAR T cells consists of engineered natural killer (NK), cell-based therapy. While both gamma delta T cell and NK cell therapy generally are not expected to cause graft versus host disease, NK cells express a broad repertoire of both inhibitory and activating receptors and have more limited tumor induced secretion of multiple cytokines. We believe that the gamma delta T cell technology it uses has several advantages over this approach. Unlike engineered NK cells, Vδ1 gamma delta T-cells have the following advantages:

We believe these ~~data suggest~~advantages position gamma delta T cell-based therapies to become an attractive alternative to NK based therapies for many oncology indications and lines of therapy.

Anticipated advantages of Vδ1 gamma delta T cells over other approaches to generate allogeneic CAR-T cells

An alternative approach to the development of allogeneic gamma delta CAR T cells consists of introducing genetic modifications that ~~TORC1 inhibition may~~disable the TCR in alpha beta T cells derived from donors that are not related to the patient. This process prevents these cells from attacking the patient’s healthy cells. We believe that the healthy donor-derived gamma delta T cell technology, which lacks the ability to attack healthy cells from unrelated individuals, has a number of advantages over this approach. In an allogeneic paradigm, unlike alpha beta T cells, Vδ1 gamma delta T-cells have the following advantages:

We believe these advantages position gamma delta T cell based therapies to become an attractive alternative to alpha beta T cell based therapies.

Anticipated advantages of Vδ1 gamma delta T cells over bispecific antibody T cell recruitment for tumor immunotherapy

An alternative approach to the development of allogeneic CAR T cells consists of bispecific antibodies that are designed to crosslink T cells to specific targets on the tumor. This approach generally requires healthy and functional T cells able to attack the tumor when guided to the tumor expressing the target antigen. We believe that the healthy donor-derived gamma delta T cell technology has a number of potential advantages over this approach. Unlike bispecific antibodies, Vδ1 gamma delta T cells have the following advantages:

We believe these advantages position gamma delta T cell-based therapies to become an attractive to bispecific-based therapies for many oncology indications and lines of therapy.

We believe that the gamma delta T cell technology that it is developing has a number of potential advantages over the technology of gamma delta T cell competitor companies, including the following:

We believe these advantages position our gamma delta T-cell based therapies to become an attractive approach to the technologies used by other gamma delta T cell competitor companies.

To produce gamma delta T cell-based product candidates, we isolate peripheral blood mononuclear cells (PBMCs), from healthy donors that meet all the safety criteria for human cells, tissues, and cellular and tissue-based products (HCT/P), criteria for donors as outlined by the FDA in 21 CFR Part 1271. We then activate Vδ1 gamma delta T cells using a proprietary agonistic antibody and cytokines and expands these cells before introduction of replication-incompetent retroviral vectors containing the coding sequence for CAR constructs. These CAR-modified cells are further expanded, routinely greater than 6,000-fold at clinical scale, resulting in cell cultures that primarily consist of the desired gamma delta T cells. To reduce the chance of a patient developing GvHD, the remaining alpha beta T cells are then depleted using alpha-beta-specific, antibody-based techniques. The resulting gamma delta T cells are then formulated in an infusible solution to form the final drug product, which is filled into vials and then frozen to enable delivery of a post-thaw cell dose from each vial of CAR-T cells.

We believe that our manufacturing process, including the generation of the antibodies and retroviral vectors, meets current GMPs, i.e. is a cGMP-compliant process. We expect to be ~~beneficial~~able to ~~PD patients both for prevention~~produce tens to hundreds of ~~disease progression, by virtue~~doses from a single donor, greatly increasing the efficiency of ~~direct effects on autophagy~~manufacturing compared to autologous alpha beta T cell therapies. We have chosen to partner with a number of contract manufacturing organizations in the ~~brain,~~U.S. and ~~for amelioration of secondary symptoms created by treatment with levodopa,~~Europe to access specific capabilities to ensure that the ~~mainstay of current therapy.~~

PDmanufacturing process is ~~a progressive neurodegenerative disease that affects approximately 7.5 million people worldwide. The incidence of PD increases rapidly in people 60 years of age~~highly scalable, and ~~older, with a mean age at diagnosis of 70.5 years. Patients with PD develop shaking, rigidity, slowness of movement~~fully cGMP-compliant, and difficulty walking. PD may be attributed in part to neuronal damage caused by the accumulation in brain cells of abnormal aggregates, in the case of PD, containing the protein α-synuclein. Preclinical studies in mouse models of PD have shown that mTOR inhibition can induce autophagy, reduce α-synuclein accumulation and decrease neuronal cell death. Therefore, induction of autophagy with RTB101 alone or in combination with a rapalog may have therapeutic benefit for patients with PD.

In March 2017, we obtained a license from Novartis to the worldwide rights to RTB101 for all indications, and the rights to use everolimus in combination with RTB101 for all aging-related indications. RTB101 is an orally administered, small molecule, potent TORC1 inhibitor that binds to the active site of mTOR on the TORC1 complex, a mechanism known as catalytic inhibition. In contrast, rapalogs, such as everolimus or sirolimus, also orally administered small molecules, inhibit mTOR activity by changing the shape of TORC1, a mechanism known as allosteric inhibition, that is distinct from and synergistic with catalytic inhibition.

~~The downstream signaling cascade of TORC1 that~~ we believe ~~occurs in scenarios of baseline, RTB101 alone and RTB101 in combination with a rapalog, such as everolimus or sirolimus are pictured in the following figure.~~

Our TORC1 program includes evaluation of RTB101 alone because we believe RTB101 monotherapy can effectively inhibit phosphorylation of multiple downstream signaling nodes of TORC1, including S6K, 4EBP1 and Ulk1, that are key drivers of TORC1 downstream activity. Decreased phosphorylation of S6K leads to decreased activity, while decreased phosphorylation of 4EBP1 and Ulk1 leads to increased activity. We believe RTB101 alone consistently inhibits more downstream signaling nodes of TORC1 than a rapalog, such as everolimus or sirolimus, alone. Therefore, we believe RTB101 alonethis process has the potential to ~~inhibit~~treat up to 1,000 patients per batch.

ADI-001 is an allogeneic Vδ1 gamma delta T cell product candidate containing an anti-CD20 CAR. We are developing ADI-001 for the ~~targets downstream~~treatment of ~~TORC1 needed~~NHL. In October 2020, the FDA cleared our IND application for ADI-001. We expect initial clinical results from this trial in 2021.

NHL is the most common cancer of the lymphatic system. An estimated 77,240 new cases are expected to ~~induce autophagy~~be diagnosed in the U.S. in 2020, according to the web site of the U.S. National Institutes of Health. According to the cancer.net web site maintained by the American Society for Clinical Oncology, approximately 90% of NHL patients in western countries have B

cell lymphomas of various types and ~~have disease modifying effects~~diffuse large B cell lymphoma (DLBCL), is the most common and aggressive type of NHL, accounting for 30% of NHL. The second most common type is follicular lymphoma (FL), which occurs in PD20% of NHL patients. Mantle cell lymphoma (MCL), is diagnosed in 5% to 7% of NHL cases.

Although B cell NHLs represent a heterogeneous set of lymphomas, many cell surface antigens are shared among them, including CD19 and CD20. First line therapy for patients with aggressive B cell NHLs, such as ~~well as to alleviate levodopa-induced dyskinesia.~~

~~Our TORC1 program also includes evaluation of RTB101~~DLBCL, is chemotherapy in combination with radiation or rituximab, an antibody that targets CD20. According to the rituximab label as published on the FDA web site, the addition of rituximab to chemotherapy results in an approximately 10% to 15% overall increase in survival at one year compared to chemotherapy alone with almost no increase in toxicity. According to an article published by K.T. Godder et al. in the journal Bone Marrow Transplantation in 2007, up to 50% of patients become refractory or relapse after treatment. Of those, according to an article published by Andrew R. Rezvani and David G. Maloney in the journal Best Practice & Research Clinical Haematology in 2011, approximately 60% percent are resistant to rituximab upon relapse. Subsequent chemotherapy-based therapies typically have limited efficacy in these patients and, at that point, they become candidates for treatment with allogeneic HSCT or anti-CD19 CAR-T cell therapy. Approximately 35% of patients treated with anti-CD19 CAR-T cell therapies relapse within one year, according to the label for Kymriah® published on the Novartis web site.

ADI-001 is a ~~rapalog, such~~gamma delta T cell product candidate that targets malignant B-cells via an anti-CD20 CAR and via the gamma delta T cell endogenous receptors, which we are developing as ~~everolimus~~an allogeneic immunocellular therapy for the treatment of B-cell NHL. ADI-001 is created from Vδ1 gamma delta T cells isolated from healthy donors. It is manufactured in bulk under cGMP-compliant conditions and is intended to be supplied as an immediately available off-the-shelf anti-CD20 CAR-T cell therapy. In October 2020, the FDA cleared our IND application for ADI-001. We intend to initiate a clinical trial and treat the first patient with ADI-001 in March 2021.

ADI-001 contains an anti-CD20 CAR that has a proprietary antigen-binding domain that recognizes a region of CD20 distinct from that recognized by rituximab. Similar to other CAR-Ts cells including the one used to create Kymriah®, our CAR-T cells contain the clinically validated costimulatory domain from 4-1BB and the CD3ζ.

All preclinical experiments were conducted using anti-CD20 CAR-modified gamma delta T cells, a research version of ADI-001. We evaluated the in vitro potency of our anti-CD20 CAR gamma delta T cells using human-derived laboratory cell lines, known as Raji and Daudi human Burkitt’s lymphoma cell lines, which are known to express high levels of CD20. Mixing the tumor cells with the anti-CD20 CAR gamma delta T cells resulted in apoptosis, or ~~sirolimus, as~~cell death, of the ~~combination~~tumor cells after four hours. Increasing the ratio of ~~catalytic and allosteric inhibitors synergistically inhibit TORC1. We believe rapalogs, such as everolimus and sirolimus, may induce~~the number of anti-CD20 CAR gamma delta T cells to tumor cells resulted in a ~~conformation change~~higher percentage of dying tumor cells. Similar potency in ~~TORC1 that allows lower concentrations~~the killing of ~~RTB101 to inhibit TORC1. It~~target cells by anti CD20 CAR gamma delta T cells was observed in both Mino cells, a human mantle cell lymphoma line that expresses high levels of CD20; and WILL-2 cells, cells derived from a rituximab-resistant patient with B cell lymphoma that expresses low levels of CD20. These results suggest that anti-CD20 CAR gamma delta cells can be highly efficient at recognizing and eliminating tumor cells that express any level of CD20. In all the cases, our gamma delta T cells that did not have anti-CD20 CAR expression also caused tumor cell death due to innate cytotoxic receptors.

Figure 6. Anti-CD20 CAR gamma delta T cells demonstrated potent cell killing activity across multiple human tumor cell lines.

We have tested the antitumor activity of our anti-CD20 CAR gamma delta T cells in multiple tumor models in immunocompromised mice including Raji tumor models, a Mino tumor model and a Granta tumor model derived from a mantle cell tumor. Five to seven days after tumors were implanted into these mice, anti-CD20 CAR gamma delta T cells were administered as a single intravenous dose. Human recombinant IL-2 was administered three times a week for the duration of the study to stimulate the gamma delta T cells. In all cases, treatment using our anti-CD20 CAR gamma delta T cells was able to arrest tumor growth. The absolute duration of these studies was not pre-specified, however each of the studies were terminated when the growth of tumors in any of the animals in the no-treatment control group (tumor-only) exceeded a pre-specified limit; in subcutaneous tumor models this limit was generally tumor growth exceeding 4000mm3. This resulted in the individual studies being run for slightly different durations.

Figure 7. Anti-CD20 CAR gamma delta T cells inhibited tumor growth in multiple animal models.

Treatment of Raji tumors in mice with anti-CD20 CAR gamma delta T cells resulted in the complete elimination of tumors in four out of six mice. Sixty days after the original — and only – dose of anti-CD20 CAR gamma delta T cells, the four mice with complete responses were re-challenged with Raji tumor cells. Growth of these newly introduced tumors continued to be suppressed at least until the end of the experiment at day 100. We believe that these results suggest that our gamma delta cells had a long persistence in vivo and remain active. Other preclinical ~~in vitro studies~~experiments have shown that RTB101 and everolimus at the comparable doses that we are evaluating in our clinical trials synergistically inhibit S6K and 4EBP1 phosphorylation and induce autophagy. The synergy of RTB101 with everolimus or sirolimus, as measured by Bliss synergy scoring, wasthey can undergo up to ~~150%~~twenty cell doublings and can have antitumor activity that can extend to six months in ~~those studies. Bliss scores~~animal models.

Figure 8. Gamma delta T cells retained their antitumor activity for at least 90 days in ~~excess~~a Raji tumor model. Four of ~~30% are considered to be high. Preclinical and clinical data suggest that RTB101 monotherapy alone or in combination with sirolimus may achieve concentrations~~the six mice in the ~~CNS sufficient~~primary tumor challenge exhibited complete responses, and these four mice were given a second tumor challenge without additional gamma delta CAR T cells.

We performed a direct analysis of the ability of our gamma delta CAR-T cells to ~~inhibit TORC1~~migrate and ~~have potential therapeutic benefit~~proliferate in ~~patients~~tumors using a fluorescent dye technology to examine cell division. Gamma delta CAR-T cells were treated with ~~neurodegenerative diseases~~a fluorescent dye that attaches to cellular proteins. As these fluorescent cells divided, the molecules modified with the fluorescent dye were split among the mother and daughter cells. This resulted in a reduction in the average fluorescence signal per cell. Quantification of the amount of fluorescence per cell was then used as a surrogate for the number of divisions that a cell has undergone.

Using this assay, we observed that, within six days, our CAR gamma delta T cells had undergone significant cell divisions in tumors with little replication in blood, spleen, bone marrow or liver. By contrast, in a similar experiment using CAR alpha beta T cells, it was observed that replication occurred in all tissues examined. We believe that this selective replication in tumors by CAR gamma delta T cells, compared to CAR alpha beta T cells, may contribute to increased antitumor activity and a lower risk of developing life-threatening systemic immune responses such as ~~PD. Accordingly,~~cytokine release syndrome.

Figure 9. Proliferation of CAR gamma delta T cells was primarily localized in tumors, while the proliferation of CAR alpha beta T cells was observed in all tissues examined.

Interleukin 15 (IL-15) is a cytokine that preferentially stimulates T cell and NK cell activation, proliferation and cytolytic activity. These functional activities of IL-15 translate to enhanced antitumor responses in multiple tumor models. IL-15 is closely related to a cytokine that is a known activator of immune responses, IL-2. Both cytokines have the potential to

stimulate gamma delta T cells. IL-15 plays a more important role in maintaining T cell responses that are long-lasting and show high affinity for cancer cell targets, while IL-2 has a more significant role in activating cytotoxic responses.

The antitumor activity of our ~~TORC1 program includes evaluation~~anti-CD20 CAR gamma delta T cells was tested in SRG-15 mice. These are mice that lack much of ~~both RTB101 alone and~~their mouse immune system but that do express human IL-15. In these studies, potent antitumor activity against Raji tumors in ~~combination~~was observed. Furthermore, this activity was not accompanied by the development of GvHD. In contrast, mice treated with ~~a rapalog, such as everolimus or sirolimus.~~anti-CD20 CAR alpha beta T cells had antitumor responses, but subsequently experienced increased mortality due to the development of GvHD.

Figure 10. Anti-CD20 CAR gamma delta T cells do not induce GvHD, whereas treatment with anti-CD20 CAR alpha beta cells caused GvHD that led to increased mortality.

In October 2020, the FDA cleared our IND application for ADI-001 for the treatment of ~~RTB101~~

~~RTB101 was previously in development for preventing clinically symptomatic respiratory illness in adults age 65 and older. On November 15, 2019, we announced that top line data from~~NHL. The active IND enables us to initiate the ~~PROTECTOR 1 Phase 3 study, evaluating the~~first-in-human clinical trial to assess safety and efficacy of ~~RTB101~~ADI-001 in ~~preventing clinically symptomatic respiratory illness~~NHL patients in ~~adults age 65~~the first quarter of 2021. The Phase 1 study for ADI-001 will enroll up to 80 late-stage NHL patients at a number of cancer centers across the U.S. The study includes a dose finding portion followed by dose expansion cohorts to explore the activity of ADI-001 in multiple subtypes of NHL. Included in this trial will be previously treated patients that were not able to receive approved autologous CAR-T cell therapies due to medical, technical, logistical, or financial reasons, as well as patients who relapsed after receiving autologous CAR-T cell therapies. Site initiation activities are underway and ~~older, did not meet its primary endpoint~~interim clinical data from this study are expected in 2021.

Patients enrolled in the trial will undergo chemotherapy-based lymphodepletion for three days followed by ADI-001 dosing by infusion on day five. Patients will be evaluated at four weeks, twelve weeks and then every three months for the first year and at months 18 and 24 after treatment. Once a recommended dose has been selected, up to 36 patients will be enrolled in indication-specific dose expansion cohorts: DLBCL, MCL, and one for all other B cell malignancies. Select patients experiencing clinical benefit with ADI-001 may be eligible for retreatment.

An additional cohort in this trial will investigate the potential of IL-2 therapy to boost the activity and durability of ADI-001. Treatment with IL-2 is supported by preclinical data that we have ~~stopped~~generated demonstrating that IL-2 improves the antitumor activity of our gamma delta T cells both in vitro and in vivo. Treatment of HSCT patients with IL-2 has also been shown to stimulate the proliferation of gamma delta T cells in the clinic.

ADI-002 is a gamma delta T cell containing a CAR that is specific for glypican 3 protein (GPC3), a protein that is highly expressed on the surface of multiple solid tumors including hepatocellular carcinoma (HCC), gastric cancer, and squamous cell carcinoma of the lung (SCCL). We intend to file an IND application with the FDA in late 2021 for ADI-002. Subject to the FDA regulatory process for review of INDs, we intend to initiate a clinical trial and treat the first patient with ADI-002 in 2022.

Hepatocellular carcinoma (HCC) is the most prevalent form of liver cancer. The risk of HCC development is increased by a number of ~~RTB101~~environmental and lifestyle factors such as hepatitis B and hepatitis C virus, alcohol drinking, tobacco smoking, aflatoxin exposure, obesity and diabetes. These factors lead to wide disparities in disease incidence across geographies. According to a 2013 publication by Sahil Mittal and Hashem B. El-Serag in the Journal of Clinical Gastroenterology, in the U.S., the incidence is approximately six per 100,000 per year, while in sub-Saharan Africa and Eastern Asia the incidence is over 20 per 100,000 per year.

Patients diagnosed with HCC generally have a poor prognosis. The majority of patients are diagnosed with advanced disease and they have a five-year survival rate of approximately 11%, according to cancer.net, the web site of the American Society of Clinical Oncology. Patients are initially treated with combinations of cytotoxic drugs or radiation. In some cases, they may also receive targeted therapies including kinase inhibitors such as lenvatinib, marketed as Lenvima® by Eisai; and sorafenib, marketed as Nexavar® by Bayer and subsequently cabozantinib, marketed as Cabometyx® by Exelixis. These therapies, however, have significant toxicities and limited clinical benefit with progression free survival of less than eight months. Checkpoint immunotherapies such as pembrolizumab and nivolumab have demonstrated some efficacy in HCC, although response rates are less than 20% according to the label for ~~clinically symptomatic respiratory illness.~~pembrolizumab, marketed by Merck as Keytruda®. The combination of both nivolumab and ipilimumab, despite increased toxicities, increased this response rate to 33%. We believe these results demonstrate that there is significant unmet need in HCC and that there is potential to treat HCC with immunotherapy.

GPC3, is a tumor-associated antigen that is expressed in many tumors but in almost no normal tissues other than embryonic liver and kidney or placenta.

Figure 12. Screening of a panel of over 4,000 tumor samples found that GPC3 is expressed in numerous cancers. Baumhoer et al., Am. J. Clin. Pathol. 2008;129.

In ~~April~~a trial conducted by David Ho at the University of ~~2019, we initiated a Phase 1b/2a clinical trial of RTB101 alone or~~Hong Kong and colleagues and published in ~~combination with sirolimus~~the journal PLOS One in PD. The four-week, multicenter, 2:1 randomized, double-blind, placebo-controlled Phase 1b/2a trial is evaluating the safety and tolerability of RTB101 alone or in combination with sirolimus in PD. We plan to enroll 45 patients with mild to moderate PD who are already on standard-of-care therapy. Patients are expected to be enrolled into five cohorts and dosed once weekly with RTB101 300 mg alone or in combination with three dose2012, high levels of ~~sirolimus (2 mg, 4 mg and 6 mg). The primary endpoint~~GPC3 are detected by immunohistochemistry in a large proportion of ~~the trial is safety and tolerability, and secondary endpoints include exposure~~HCC tumor tissue samples, but no GPC3 can be detected in ~~blood, plasma and cerebrospinal fluid, or CSF. The exploratory endpoints include biomarkers~~adjacent normal cells.

Figure 13. Immunohistochemistry detected strong signals of GPC3 in plasma and CSF, and various clinical assessments. To date, patients have completed enrollment in four cohorts and completed dosing in three cohorts: once weekly with 300 mg of RTB101 alone; 2 mg of sirolimus alone; and a combination of 300 mg RTB101 and 2 mg of sirolimus. Results of an interim study analysis demonstrated that all 3 dosing regimens were well tolerated and RTB101 300 mg once weeklyliver tumor tissue, but negative staining for GPC3 was ~~observed to cross the blood brain barrier. Sirolimus at the dose of 2 mg, alone or in combination with RTB101, was not~~ detected in the ~~CSF. Data~~adjacent non-tumorous tissue. Adapted from ~~the first three cohorts in the study suggest~~Ho et al., PLoS One. 2012;7(5).

ADI-002 is an anti-GPC3 CAR gamma delta T cell product candidate that ~~the concentrations of RTB101 observed in the CSF four hours after dosing were highest when RTB101 was given as a monotherapy. We expect the full data from this trial by mid-2020.~~

~~We may evaluate RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, or other drugs~~we are developing for the treatment of ~~additional neurologic indications,~~solid tumors. We believe that modification of Vγ1 gamma delta T cells, which have an inherent tumor homing ability, with a CAR that is specific for GPC3, may result in a therapeutic product able to have potent antitumor activity in patients suffering from multiple solid tumors. We intend to file an IND application with the FDA in late 2021 for ADI-002. Subject to the FDA regulatory process for review of INDs, we intend to initiate a clinical trial and treat the first patient with ADI-002 in 2022.

To enhance the proliferative ability and durability of our anti-GPC3 CAR gamma delta T cells, we engineered these cells to express soluble IL-15. We anticipate that the tumor homing ability of gamma delta T cells will potentially result in expression of IL-15 predominantly in tumors. In combination with the inherent secretion of factors such as ~~Huntington’s disease~~interferon gamma

from activated gamma delta T cells, the secretion of IL-15 is anticipated to lead to reversal of immunosuppressive effects in the tumor microenvironment and ~~Alzheimer’s disease.~~direct stimulation of the gamma delta T cells.

~~Huntington’s disease, or HD,~~We demonstrated in in vitro assays that our anti-GPC3 CAR gamma delta T cells have potent and GPC3-antigen-dependent cell killing activity. When our anti-GPC3 CAR-T cells were added to HepG2 cells, a cell line expressing GPC3 that was derived from a patient with HCC, an increase in tumor cell killing was observed. Gamma delta T cells prepared without the addition of our anti-GPC3 CAR were still able to kill the HepG2 cells, only with less potency at 18 hours. We believe that this CAR-independent killing activity was driven by innate receptors on our gamma delta T cells and that this innate antitumor activity may provide meaningful antitumor clinical activity in cases in which tumors may lose the expression of the targeted GPC3 antigen. Loss of tumor-expressed antigens represents a significant mechanism of escape from antitumor activities from other immunotherapies such as anti-CD19 CAR-T cell therapies. The ability to continue to have antitumor activity driven by the innate immune cell properties of our gamma delta T cells is a ~~disease~~distinct advantage compared to alpha beta T cells, which lack this capability. Our gamma delta T cells had no cell killing activity when added to RAT2 normal fibroblasts that ~~affects neurons~~do not express GPC3.

Figure 14. Expression of an anti-GPC3 CAR in gamma delta T cells led to potentiation of killing of HepG2 hepatocellular carcinoma cell line.

Anti-GPC3 CAR gamma delta T cells had dose-dependent antitumor activity in HepG2 tumors in immunodeficient mice. HepG2 tumor cells were inoculated into immunocompromised mice and allowed to grow to a volume of 200 mm3 over a period of approximately eight days. A single dose of anti-GPC3 CAR gamma delta T cells was then administered and tumor growth at day 37 was assessed. High doses of anti-GPC3 gamma delta T cells led to complete suppression of tumor growth.

Figure 15. Dose-dependent inhibition of HepG2 tumor growth by anti-GPC3 gamma delta T cells

In addition to the product candidates described above, we anticipate many further opportunities for developing product candidates based on our gamma delta T cell technology. We believe that thespectrum of indications that products such as CAR-T cell therapies have been able to address has been limited by two factors: the weak ability of alpha beta T cell-based therapies to penetrate solid tumors, and the scarcity of tumor-specific antigens on the cell surface that can be targeted by antibody-derived binding domains that are an essential component of the CAR constructs. We believe that the tumor homing ability of our gamma delta T cell technology represents a potential solution to the solid tumor localization problem and our TCRL antibody technology can be used to identify and target tumor-specific antigens.

Therapeutics such as antibodies and CARs recognize cell surface molecules. In HCC and select other tumors, there are proteins such as GPC3 which are selectively expressed on the surface of tumors cells that can be used as antigens for immune-targeted therapy. The lack of their expression on normal cells limits the potential of on-target, off-tumor systemic toxicities. Surface-expressed proteins that are strictly expressed only on tumor cells are, however, rare. In most cases surface expressed antigens such as CD19 and CD20 are expressed both on hematopoietic tumor and normal cells. Therapies that target CD19 or CD20 therefore result in killing of both tumor and normal cells. In hematological malignancies these therapies result in systemic depletion of normal B cells. However, this is mechanism-based toxicity can be managed in clinical practice. Challenges arise with antigens such as epidermal growth factor receptor (EGFR) that is overexpressed on some types of tumor cells, but also expressed on normal epithelial cells elsewhere in the ~~brain~~body. Dosing with anti-EGFR antibodies has led to significant dermatological and ~~causes movement, psychiatric~~cardiac toxicities.

Intracellular proteins represent nearly half of the proteins found in human cells. These proteins provide an untapped reservoir of potential tumor-specific antigens that are inaccessible to traditional antibody-binding domains. Immune surveillance for these intracellular proteins is normally done by alpha beta T cells. These intracellular proteins are chopped up by a cell component known as the proteasome into short peptides between eight and ~~cognitive impairment. HD is caused~~ten amino acids long. These short peptides are then presented to the T cells by ~~mutations~~the MHC. TCRs on the T cells are then able to recognize the complex of the peptide and the MHC, triggering creation of T-cell populations prepared to attack these specific sequences.

Gamma delta T cells have advantages compared to alpha beta T cells with regard to their potential as allogeneic therapies, their ability to localize to tumors and their retention of innate immune signaling pathways. However, to be most effective they need to be able to be engineered to attack specific tumors.

We have developed an antibody platform that enables the discovery of TCRL antibodies that recognize peptides that are presented on the cell surface by specific MHC molecules. In effect, our TCRL antibodies have the same antigen recognition properties as TCRs but are highly specific for a single tumor antigen and MHC molecule. They do not recognize other MHC molecules or antigens that may be expressed by healthy cells.

Figure 16. Schematic diagram of the interaction between our TCRL antibodies and tumor-specific peptides presented by the MHC.

TCRLs are conventional antibodies with antigen binding domains that specifically recognize peptide-MHC complexes that can be used to create CARs. Introduction of these CARs into our gamma delta T cells enables them to target tumors expressing intracellular tumor antigens when these antigens are selectively presented by MHC on the surface of tumor cells. Gamma delta CAR-T cells generated using TCRLs open up the potential to bring immune cell therapy to tumors that lack tumor-specific surface antigens, a group that includes most solid tumors.

The TCRL discovery process starts by carrying out an analysis of the peptides expressed by MHC receptors in a ~~gene encoding protein called huntingtin. Mutant huntingtin forms aggregate~~panel of hundreds of tumor and normal tissues. In searching for candidate peptides, we focus on differentially expressed peptides that are broadly expressed in ~~neurons~~tumors but that are not found in normal tissues. Candidate peptides are then validated by expression analysis both in other tissues as well as in databases. Those peptides that, based on bioinformatic analysis, are predicted to have minimal cross-reactivity with peptides from normal cells are then further prioritized. This peptide discovery process leads, step-by-step, to the narrowing of the list of potential candidates by approximately one thousand-fold. Once a tractable number of remaining candidates has been identified, a population that includes the most promising ones, antibodies are then created that are specific to the complex of an MHC receptor and ~~cause~~ the ~~neurons~~bound peptides. These antibodies mimic key aspects of tumor as recognized by the immune system. By creating CARs that incorporate these antigen-recognition templates in gamma delta T cell-based product candidates, we create a set of candidates designed to ~~degenerate.~~specifically attack tumors by virtue of their intracellular proteins.

Tyrosinase is a well-validated tumor-expressed antigen for which we have developed TCRLs. The ~~mutant huntingtin aggregates can be cleared from neurons~~specificity for a mouse and a humanized version of one of these TCRLs was determined by comparing their binding affinityto that of a ~~process called autophagy~~series of peptides that contained single amino acid changes. It was learned that changes to any of the internal eight amino acid positions to the amino acid alanine led to reductions in ~~which cells remove and recycle intracellular debris including protein aggregates. Preclinical data from brain slices~~binding of 70% or greater. Substituting any amino acid in a ~~HD mouse model~~non-anchor position resulted in substantial loss of binding and indicates the high degree of specificity that the TCRL antibody has ~~shown that RTB101 in combination with~~for the targeted MHC peptide complex.

Figure 17. Single amino acid changes to the targeted peptide reduced binding by at least 70 percent.

The antigen-binding domain from a ~~rapalog,~~tyrosinase TCRL was incorporated into a CAR and introduced into our gamma delta T cells to assess cell killing activity against tumor cell lines. These anti-Tyr CAR gamma delta T cells led to cell killing of WM266.4 human metastatic melanoma tumor cells, which are known to express tyrosinase. Anti-Tyr CAR gamma delta T cells, however, had no cell killing activity when tested against ten other cell lines from tumors such as ~~everolimus or sirolimus, synergize~~colon, bladder and pancreatic cancers, B cell leukemia and retinoblastoma – all of which do not express tyrosinase. That observation points to ~~prevent neurodegeneration, likely by inducing autophagy~~a desirable level of specificity for our anti-Tyr CAR gamma delta T cells and ~~clearing mutant huntingtin aggregates.~~to an important in vitro proof of concept.

Furthermore, these anti-Tyr CAR gamma delta T cells had potent antitumor activity in a WM266.4 tumor model leading to tumor shrinkage within five days of administration and a durable antitumor response through 27 days. Although the TCRL-based CAR that is generated binds to an MHC-peptide complex, it does not induce the GvHD that is seen with alpha beta T cells because it recognizes a single peptide that has been selected to be highly specific for tumor cells.

Figure 18. Anti-Tyr CAR gamma delta T cells showed potent antitumor activity in a WM266.4 melanoma model.

We have generated TCRLs against a number of solid tumor antigens which are being evaluating in animal models. We intend to advance at least one candidate from these early-stage programs into IND-enabling studies in 2021. We believe ~~these findings support~~that the combination of our gamma delta and TCRL technology provides the basis for a new generation of CAR-T cell therapies that have the potential ~~that RTB101 in combination with a rapalog, such as everolimus or sirolimus, could have therapeutic benefit for~~to transform the treatment of ~~HD. We currently have no plans to develop RTB101 for HD without a partner.~~solid tumors.

Alzheimer’s disease, or AD, is an irreversible, progressive brain disorder that affects neurons in the brain and results in loss of memory and thinking skills. AD is currently ranked the sixth leading cause of death in the US, and a major risk factor is aging. There is no cure for AD. Amyloid plaques, neurofibrillary tangles and inflammation are characteristic of the disease. In preclinical models of AD, RTB101 has been shown to reverse changes in inflammatory cytokines, decrease microglial activation or proliferation, and improve memory deficits. We believe these findings support the potential that RTB101 could have therapeutic benefit for the treatment of AD. We currently have no plans to develop RTB101 for AD without a partner.

Our gamma delta T cell-based product candidates and substantially all of our intellectual property have been developed by us, with certain antigen binding domains derived from our collaboration with Regeneron. Additional intellectual portfolio assets were acquired via acquisition of Applied Immune Technologies Ltd. in 2016. We strive to protect and enhance the proprietary ~~technologies~~technology, inventions and improvements that ~~we believe~~ are ~~important~~commercially material to our business, including seeking, maintaining and ~~maintaining~~defending our patent ~~protection intended~~rights.

Our policy is to ~~cover the composition of matter~~develop and maintain protection of our ~~product candidates, including RTB101, their~~proprietary position by, among other methods, ~~of use,~~filing or in-licensing U.S. and foreign patents and applications related to our technology, inventions, and ~~other inventions~~improvements that are ~~important~~material to the development and implementation of our business. We ~~licensed a~~also rely on trademarks, trade secrets, know-how, continuing technological innovation, confidentiality agreements, and invention assignment agreements to develop and maintain our proprietary position.

Our patent portfolio ~~of ten patent families from Novartis. See “—License Agreement with Novartis.”~~includes protection for our lead product candidates, ADI-001 and ADI-002, as well as our other research-stage candidates. As of March ~~11, 2020, one family within this~~10, 2021, there are multiple patent ~~portfolio covering~~families comprising three pending U.S. non-provisional applications and over 20 foreign patent applications pending in such jurisdictions as Australia, Canada, China, Europe, Japan, Russia, and South Africa with claims directed to reagents and related protocols for gamma delta T cell expansion and resulting compositions of matter ~~has 45 issuances in 34 countries;~~encompassing both ADI-001 and ~~has six pending applications in five counties. Our~~ADI-002, which, if issued, patents and pending applications with respect to RTB101 are expected to expire in 2031 or 2032, (depending on eligibility for patent term extension or supplementary protection). Additional pending applications are expected to expire between ~~2034~~2035 and ~~2039,exclusive~~2037. As of ~~possible~~March 10, 2021, there are also two international patent ~~term adjustments~~applications (PCT) applications, with claims directed to CAR constructs and antigen binding domains relating to ADI-001 and ADI-002, as well as their methods of use for certain indications, preconditioning methods, and dosing regimens, where applications claiming the benefit of these PCT applications, if issued, would expire between 2038 and 2039. With respect to ADI-001, we have a collaboration with Regeneron which grants us access to certain proprietary antigen binding domains covered by Regeneron’s patent rights, including in particular the antigen binding domain incorporated into ADI-001. Additionally, there are multiple granted patents and pending patent applications in the U.S. and internationally directed to our TCRL platform technology, with actual and, in the case of pending applications, anticipated expiration dates between 2021 and 2037. Although certain earlier patents relating to our TCRL platform technology will expire in 2021, other patents covering this technology remain in force, or ~~extensions.~~

~~In addition~~are expected to issue from pending applications, including three pending patent ~~protection, we rely on trade secrets~~families directed to certain carcinoma, melanoma and ~~confidentiality agreements~~glioblastoma targets, are expected to ~~protect our technology, know-how~~expire between 2036 and ~~other aspects of our business that are not amenable to, or that~~2037. As a result, we do not ~~consider appropriate~~ expect that the expiration of the earlier patents in our TCRL portfolio, individually or in the aggregate, will have a material adverse effect on our future operations or financial position.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the date of filing of the first non-provisional application to which priority is claimed. In the U.S., patent term may be lengthened by patent term adjustment, which compensates a patentee

for administrative delays by the U.S. Patent and Trademark Office in granting a patent ~~protection.~~or may be shortened if a patent is terminally disclaimed over an earlier-filed patent. In the U.S., the term of a patent that covers an FDA-approved drug may also be eligible for a patent term extension of up to five years under the Hatch-Waxman Act, which is designed to compensate for the patent term lost during the FDA regulatory review process. The length of the patent term extension involves a complex calculation based on the length of time it takes for regulatory review. A patent term extension under the Hatch-Waxman Act cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Moreover, a patent can only be extended once, and thus, if a single patent is applicable to multiple products, it can only be extended based on one product. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug.

Our commercial success ~~will depend significantly~~depends in part on our ability to obtain and maintain ~~patent and other~~ proprietary protection for ~~commercially important technology, inventions,~~our product candidates, as well as novel discoveries, core technologies, and know-how, ~~related~~as well as our ability to ~~our business, defend and enforce the patents we own or control, maintain our licenses to use intellectual property owned by third parties, preserve the confidentiality of our trade secrets, and~~ operate without infringing on the ~~valid and enforceable patents and other~~ proprietary rights of ~~third parties.~~others and to prevent others from infringing our proprietary rights.

The patent positions of ~~biopharmaceutical~~ companies like us are generally uncertain and involve complex legal, scientific, and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Consequently, we do not know whether any of our product candidates will be protectable or remain protected by enforceable ~~patents.~~patents or will be commercially useful in protecting our commercial products and methods of using and manufacturing the same. We also cannot predict whether the patent applications ~~we are~~it is currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold or control may be challenged, circumvented or invalidated by third parties. In addition, while we have confidence in our agreements and security measures, either may be breached, and we may not have adequate remedies. Further, our trade secrets may otherwise become known or independently discovered by competitors.

We have licensed various intellectual property and trade secrets to third parties for purposes of collaboration, product development and research and development.

~~In March 2017,~~On July 29, 2016, we entered into a license and collaboration agreement with ~~Novartis, pursuant~~Regeneron, which was amended in April 2019, with such amendment becoming effective in connection with Regeneron’s investment in our Series B preferred stock private placement transaction in July 2019 (as amended, referred to as the Regeneron Agreement).

Agreement Structure. The Regeneron Agreement has two principal components: (a) a research collaboration component under which we were granted an exclusive, field-restricted, worldwide license to certain intellectual property rights owned or controlled by Novartis, including patents, patent applications, proprietary information, know-howthe parties will research, develop, and ~~other intellectual property, to develop,~~ commercialize next-generation engineered gamma delta immune cell therapeutics (ICPs) namely engineered gamma delta immune cells with CARs and sell one or more therapeutic products comprising RTB101 alone or RTB101 and everolimus in a fixed dose combination. Under the license agreement, we have been licensed a patent portfolio of ten patent familiesTCRs directed to ~~composition of matter of RTB101 and its salts, formulations of everolimus and methods of using RTB101 and everolimus to enhance~~disease-specific cell surface antigens, which includes the immune response among others. These families include certain granted patents and pending patent applications in the United States and foreign jurisdictions, including Canada, the United Kingdom, Germany, France, Italy, Spain, Russia, Japan, Korea and China. Patents in these families will begin expiring in 2026, subject to possible patent term extensions. We believe that patent term extension and the potential grant of certain ~~pending patent applications may provide exclusivity~~licenses to intellectual property between the two parties, and (b) for ~~RTB101 and RTB101 in combination with everolimus until 2039 in the United States and the major European markets.~~

The exclusive field for RTB101 is for the treatment, prevention and diagnosis of diseases and other conditions in all indications in humans and animals. With respect to the fixed dose combination of RTB101 and everolimus, the exclusive field of use is for any indication in humans related to the improvement in immune function or immunosenescence in the elderly, the reduction of infection frequency, severity, duration, health care resource utilization, hospitalization, morbidity or mortality, or the treatment of infections, the reduction of pulmonary disease exacerbation frequency, severity, or related hospitalization, the enhancement of therapeutic or prophylactic benefits of vaccines, or any aging-related disease, excluding in each case the application of everolimus in connection with organ transplantation, oncology, immune-oncology or in the cardiac stent field. Novartis has agreed not to enforce any rights to improvements related to RTB101 developed aftera certain period following the effective date, a license to us to use certain of Regeneron’s proprietary mice to develop and commercialize ICPs generated by us, with certain limitations relating to targets under the Regeneron Agreement.

Research Collaboration. Research activities under the collaboration are governed by research plans, which include the strategy, goals, activities, and responsibilities of the parties with respect to a target. We are primarily responsible for generating, validating, and optimizing ICPs, developing processes for manufacture of ICPs, and certain preclinical and clinical manufacturing activities for ICP’s; Regeneron’s key responsibility is generating, validating, and optimizing CARs and TCRs that bind to the applicable target. The parties have formed a joint research committee to monitor and govern the research and development efforts during the research program term.

Rights to Research Targets. Under the terms of the five-year research collaboration, the parties will conduct research on mutually agreed upon targets. Regeneron may obtain exclusive rights for the targets that it chooses in accordance with the target selection mechanism set forth in the Regeneron Agreement, and we similarly may obtain exclusive rights for targets it chooses in accordance with such target selection mechanism. We have the right to develop and commercialize ICPs to the first collaboration target to come out of the research program. In connection with an IND submission, Regeneron has an option to exercise exclusive rights for ADI-002 and potentially for additional targets to be mutually agreed upon. For those targets it does not have an option to license, Regeneron has a right of first negotiation for up to two targets. Regeneron has the right to terminate the research program in its entirety (a) for convenience on six months prior written notice given at any time after December 31, 2019, or (b) following a change of control (as defined in the Regeneron Agreement) of us. The parties mutually agreed to their first product declaration criteria for collaboration ICP, CD20, in 2018.

Rights to Adicet-Developed Targets. Regeneron has an exclusive license to use targeting moieties generated by us by its use of Regeneron’s proprietary mice to develop and commercialize non-ICPs.

Exclusivity. During the five-year target selection period, we may not directly or indirectly research, develop, manufacture or commercialize an ICP, or grant a license to do the foregoing, except pursuant to the Regeneron Agreement. For so long as either party is researching or developing an ICP to a target under the research program, neither party may research, develop, manufacture or commercialize any other ICP to such target, or grant a license to do the foregoing. And for so long as a party is researching, developing or commercializing an ICP to target that is licensed to it (and royalty bearing) under the agreement, neither party may research, develop, manufacture or commercialize any other ICP to such target, or grant a license to permit another party to do the foregoing. These exclusivity obligations are limited to engineered gamma delta immune cells to targets reasonably considered to have therapeutic relevance in oncology. The Regeneron Agreement includes certain exceptions to the exclusivity obligations of the parties, including with respect to targets that are rejected by one party in the target selection process, as well as protections in the event of a change of control of a party where the acquirer has a competing program.

Co-Funding and Profit Sharing. We have an option to co-fund specified portions of the future development costs for, and to co-promote, ICPs to a target for which Regeneron has exercised an option, and to participate in the profits for such target. We have the right to exercise this right in various geographic regions, including on a worldwide basis. In the event we exercise such right, the parties will share further development costs and revenues proportionally to their co-funding percentages.

Financial Terms. We received a non-refundable upfront payment of ~~our rights under this agreement.~~$25.0 million from Regeneron upon execution of the Regeneron Agreement, received an aggregate of $20.0 million of additional payments for research funding from Regeneron as of December 31, 2020. In addition, Regeneron may have to pay us additional amounts in the future consisting of up to an aggregate of $100.0 million of option exercise fees, as specified in the Regeneron Agreement. Regeneron must also pay us high single digit royalties as a percentage of net sales for ICPs to targets for which it has exclusive rights, and low single digit royalties as a percentage of net sales on any non-ICP product comprising a targeting moiety generated by us through the use of Regeneron’s proprietary mice. We must pay Regeneron mid-single to low double digit, but less than teens, of royalties as a percentage of net sales of ICPs to targets for which we have ~~agreed~~exercised exclusive rights, and low to ~~grant back~~mid-single digit of royalties as a percentage of net sales of targeting moieties generated from our license to ~~Novartis for~~ use ~~outside~~Regeneron’s proprietary mice. Royalties are payable until the longer of the ~~exclusive fields any improvements related to everolimus that we develop after~~expiration or invalidity of the ~~effective date.~~licensed patent rights or twelve (12) years from first commercial sale.

~~We are required~~Other Terms. The Regeneron Agreement contains customary representations, warranties and covenants by us and Regeneron and includes (i) an obligation of ours to use commercially reasonable efforts to develop and commercialize at least one product ~~in the field in~~based on a collaboration ICP that is not an optioned collaboration ICP for each collaboration target and (ii) an obligation of Regeneron to use commercially reasonable efforts to develop and commercialize at least one ~~major market,~~product based on an optioned collaboration ICP for each collaboration target. We and Regeneron are required to indemnify the other party against all losses and expenses related to breaches of the representations, warranties and covenants under the Regeneron Agreement.

Term and Termination. The term of the Regeneron Agreement expires, on a product-by-product basis, on the expiration of the obligation to pay royalties for such product. The Regeneron Agreement is subject to early termination by either party upon uncured material breach by the other party. The licenses to develop and commercialize an ICP to a target that one party has exclusively licensed may be terminated by such party for convenience.

Equity Investments. In connection with the collaboration, Regeneron and we entered into a side letter pursuant to which, ~~includes~~among other matters, Regeneron was granted certain stockholder rights and investment rights in connection with our next equity financing that met certain criteria and in connection with an initial public offering by us. Regeneron exercised its investment right and purchased approximately $10.0 million of our Series B preferred stock in a private placement transaction in July 2019.

We and our wholly owned subsidiary, Adicet Bio Israel, Ltd. (formerly Applied Immune Technology Ltd.), are parties to an Amended and Restated License Agreement dated May 21, 2014, as was amended in June 2015 and January 2016, with Technion Research and Development Foundation Ltd. (TRDF) the ~~United States, Japan~~technology transfer subsidiary of Technion – Israel Institute of Technology (Technion). The license agreement provides us with an exclusive, royalty-bearing, worldwide license, with a right to grant sublicenses, to make use of certain TRDF patents and know-how relating to moieties that recognize and bind to TCRLs, along with certain ~~identified countries~~improvements and research results developed at TRDF and relating to either the licensed patents and know-how of TCRL, in ~~Europe.~~each case for the purposes of research, development, and commercialization of specified products. We further obtained joint ownership rights in improvements, developments, and inventions developed in the laboratory of a specified professor under certain conditions, including where we provided specified amounts of funding for research specific to TCRL compounds. TRDF also grants us an exclusive, worldwide, assignable, sublicensable license to TRDF’s rights in such jointly owned improvements, developments, and inventions. Technion further agrees not to enforce against us any TCRL-related technology owned by Technion but not licensed to us under the agreement, and to require its licensees to agree to the same. We are required to meet certain diligence obligations to preserve our exclusive licenses. Either Adicet or Technion may terminate the agreement or a specific license if the other party materially breaches its obligations under the agreement or with respect to a specific license granted under it and fails to cure that breach. We have the right to terminate the agreement at any time by providing notice to TRDF.

~~As initial consideration~~In return for the license, ~~we issued NIBR 2,587,992 shares of our Series A preferred stock.~~

~~As additional consideration for the license, we~~We are required to pay ~~up to an aggregate of $4.3 million upon the satisfaction of clinical milestones, up to an aggregate of $24 million upon the satisfaction of regulatory milestones~~TRDF, for ten (10) years after the first ~~indication approved,~~commercial sale of a product for which it owes royalties under the agreement, on a licensed-product-by-licensed-product basis, (i) certain royalties in the low single-digit percentages of all net sales by us and ~~up to an aggregate~~any of ~~$18 million upon~~our controlled affiliates, and (ii) the ~~satisfaction~~lesser of ~~regulatory milestones for the second indication approved. In addition, we are required to pay up to an aggregate~~(a) a low single-digit percentage of $125 million upon the satisfaction of commercial milestones, based on the amount of annual net sales. We are also required to pay tiered royalties ranging from a mid-single digit percentage to a low-teen digit percentage on annual net sales of ~~products. These royalty obligations last~~our sublicensees, or (b) low double-digit percentage of amounts received by us or our controlled affiliates in the form of royalties on net sales from our sublicensees, subject to certain reductions. Furthermore, we agreed to pay for all patent filing and maintenance expenses for the patents included in the licenses granted to us by TRDF, with limited exceptions.

Under the agreement, TRDF reserves the right, for itself, alone or with other certain academic institutions, to utilize the licensed technology solely for educational and non-commercial research purposes.

The license agreement continues in full force and effect on a product-by-product and country-by-country basis until the ~~latest~~expiration of ~~(i)~~all payment obligations for any licensed product as described above. Upon the expiration, ofwe will have a fully paid-up, worldwide, non-exclusive license (with the ~~last valid claim of a Novartis patent covering a subject product, (ii) the expiration of any regulatory exclusivity~~right to grant sublicenses) to develop, have developed, manufacture, have manufactured, use, market, offer for ~~the subject product in a country,~~sale, sell, have sold, import, export, and otherwise transfer physical possession or ~~(iii) the 10th anniversary of the first commercial sale of the product in the country, and are subject~~title to ~~a reduction after the expiration of the last valid claim of a Novartis patent or the introduction of a generic equivalent of a product in a country. In addition, if we sublicense the rights~~products for which royalties would have otherwise been due under the ~~license agreement, we are required to pay a certain percentage of the sublicense revenue to Novartis.~~

Either we or Novartis may terminate the license agreement if the other party commits a material breach and fails to cure such breach within 60 days after written notice. Novartis may terminate the license agreement upon our bankruptcy, insolvency, dissolution or winding up. In addition, Novartis may partially terminate the license agreement with respect to everolimus if we fail or cease to use commercially reasonable efforts to research, develop and commercialize a product utilizing everolimus for a period of three years, provided that our license related to RTB101 and Novartis’s license to our improvements related to everolimus will continue. In addition, we may terminate the license agreement, with or without cause, in its entirety or on a product-by-product or country-by-country basis, upon 60 days’ prior written notice.

We hold worldwide commercialization rights to our product candidates. We do not have our own marketing, sales or distribution capabilities. In order to commercialize our product candidate if approved for commercial sale, we must either develop a sales and marketing infrastructure or collaborate with third parties that have sales and marketing experience. We plan to directly commercialize our product candidates in the United States with a focused sales force. For some indications, we may also directly commercialize our product candidates in the European Union, or the EU. In other markets or for certain indications outside the United States for which commercialization may be less capital efficient for us, we may selectively pursue strategic collaborations with third parties in order to maximize the commercial potential of our product candidates.agreement.

~~RTB101~~We are developing and ~~rapalogs, such as everolimus or sirolimus,~~enabling scalable and propriety cGMP-compliant manufacturing processes. We have invested resources to optimize our manufacturing process and plans to continue to invest to continuously improve our production and supply chain capabilities over time.

We manufacture cell-based immunotherapy products based on gamma delta T cells that are ~~small molecules that can be manufactured using commercially available technologies. We acquired data~~obtained from ~~Novartis related~~the blood of healthy donors who are unrelated to the ~~chemical synthesis~~patients that will be treated. These products are classed as allogeneic cell therapy products. Donor-derived blood is fractionated and the fractions containing gamma delta T cells are frozen prior to use in future manufacturing campaigns. We believe that our freezing and storing of ~~RTB101, which is currently being manufactured by a single contract~~the donor blood products allows us to efficiently schedule subsequent manufacturing ~~organization, and are outsourcing~~steps. After obtaining blood products from healthy donors the manufacturing process begins with the activation of ~~rapalogs, such~~a subpopulation of gamma delta T cells using an antibody that is proprietary to us. This antibody, in combination with other factors including the cytokine, IL-2, induces gamma delta T cells to proliferate, whereupon we expose the cells to a viral vector that transfers a gene sequence encoding a CAR, or other gene sequences, to the proliferating cells. This step is referred to as ~~everolimus or sirolimus.~~

the transduction step. Following the transduction step gamma delta T cells are induced to proliferate further with IL-2 before an enrichment step that increases the proportion of gamma delta T cells, removes unwanted residual alpha beta T cells and results in the CAR-modified gamma delta T cells drug product. CAR-modified gamma delta T cell products are then frozen in single-use vials for long-term storage at cryogenic temperatures. These storage conditions are designed to ensure stability of the cell-based drug products for protracted periods of time. The storage in singe use vials is designed to simplify the handling and treatment administration. Just prior to administration of treatment, the vials will be thawed and then the contents infused into the patient. We believe ~~there~~that the single manufacturing process we are ~~multiple sources for all~~developing will be able to be completed in approximately two weeks and will result in sufficient quantities of ~~the materials required~~drug product to treat numerous patients.

To date, we currently rely, and expects to continue to rely, on third parties for the manufacture of our product ~~candidates. Our~~candidates and any products that we may develop. We have chosen to partner with a number of contract manufacturing organizations in the U.S. and Europe to access specific capabilities to ensure that the manufacturing process is highly scalable, closed and fully cGMP compliant. This strategy ~~enables~~allows us to maintain a more ~~efficiently direct financial resources~~flexible infrastructure while focusing our expertise on developing our products. In addition to the ~~research, development,~~quality management systems utilized by strategic manufacturing partners, we have established a quality control and ~~commercialization~~quality assurance program, which includes a set of ~~product candidates rather than diverting resources~~standard operating procedures and specifications designed to ~~internally develop manufacturing facilities. As~~ensure that our ~~product candidates advance through development,~~products are manufactured in accordance with cGMPs, and other applicable domestic and foreign regulations.

For example, we ~~expect~~currently engage a single US-based third-party manufacturer to ~~enter into longer-term commercial supply agreements with key suppliers~~provide the active pharmaceutical ingredient for ADI-001. We also utilize separate third party contractors to manufacture cGMP-compliant starting and ~~manufacturers to fulfill and secure the ongoing and planned preclinical, clinical, and, if our product candidates~~critical materials that are ~~approved for marketing, our commercial supply needs for ourselves and our collaborators. Our long-term strategy is to secure at least two sources~~used for the manufacturing of our ~~products.~~product candidates, such as donor blood products, gamma delta T cell activating antibody and viral vectors that are used to deliver the applicable CAR gene into the T cells. We believe all materials and components utilized in the production of the cell line, viral vector and final gamma delta T cell product are available from qualified suppliers and suitable for pivotal process development in readiness for registration and commercialization. Going forward, we intend to continue to expand our manufacturing capability through agreements with leading cell therapy contract manufacturing organizations.

~~Manufacturing~~If any of our current manufacturers becomes unavailable to us for any reason, we believe that there are a number of potential replacements, although we would likely incur some delay in identifying and qualifying such replacements. We plan to continue to create a robust supply chain with redundant sources of supply comprised of both internal and external infrastructure.

The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face potential competition from many different sources, including existing and novel therapies developed by biopharmaceutical companies, academic research institutions, governmental agencies and public and private research institutions, in addition to standard of care treatments.

Novartis and Kite Pharma (now Gilead) were the first to achieve FDA approval for autologous T cell therapies. In August 2017, Novartis obtained FDA approval to commercialize Kymriah®, for the treatment of children and young adults with B-cell ALL that is refractory or has relapsed at least twice. In May 2018, Kymriah® received FDA approval for adults with R/R large B-cell lymphoma. In October 2017, Kite Pharma obtained FDA approval to commercialize Yescarta®, the first CAR T cell product candidate for the treatment of adult patients with R/R large B-cell lymphoma. In July 2020, Gilead obtained FDA approval to commercialize Tecartus™, the first CAR T cell product candidate for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL). In February 2021, Bristol Myers Squibb obtained FDA approval to commercialize Breyanzi® for the treatment of adults with R/R large B-cell lymphoma.

Due to the promising therapeutic effect of T cell therapies in clinical trials, we anticipate increasing competition from existing and new companies developing these therapies, as well as in the development of allogeneic T cell therapies generally. Potential T cell therapy competitors include, but are not limited to:

Although we believe our development of proprietary processes for engineering and manufacturing gamma delta T cells expressing CARs is ~~subject~~unique due to ~~extensive regulations~~what we believe is the enormous potential of these cells, it is likely that ~~impose various procedural~~additional competition may arise from existing companies currently focusing on development of alpha beta or gamma delta T-cell therapies, or from new entrants in the field.

Competition may also arise from non-cell based immune oncology platforms. For instance, we may experience competition from companies, such as Amgen Inc., Bristol-Myers Squibb Company, F. Hoffmann-La Roche AG, Genmab A/S, GlaxoSmithKline plc, MacroGenics, Inc., Merus N.V., Regeneron Pharmaceuticals, Inc., and ~~documentation requirements,~~Xencor Inc., that are pursuing bispecific antibodies, which ~~govern recordkeeping,~~target both the cancer antigen and T-cell receptor, thus bringing both cancer cells and T cells in close proximity to maximize the likelihood of an immune response to the cancer cells. Additionally, companies, such as Amgen Inc., AbbVie, Daiichi Sankyo Company, Limited, GlaxoSmithKline plc, ImmunoGen, Inc., Immunomedics, Inc., and Seattle Genetics, Inc., are pursuing antibody drug conjugates, which utilize the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells.

Many of our competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, preclinical testing, clinical trials, manufacturing, ~~processes~~ and ~~controls, personnel, quality control~~marketing than we do. Future collaborations and ~~quality assurance,~~mergers and acquisitions may result in further resource concentration among ~~others.~~a smaller number of competitors.

Our commercial potential could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our own products, which could result in our competitors establishing a strong market position before We ~~expect that~~are able to enter the market or make our development more complicated. The key competitive factors affecting the success of all of our ~~contract manufacturing organizations will manufacture RTB101 under current Good Manufacturing Practice, or cGMP, conditions. cGMP is a regulatory standard for the production of pharmaceuticals~~programs are likely to be ~~used in humans.~~

We consider Navitor Pharmaceuticals, Inc., or Navitor, to be our most direct competitor in developing novel therapeutics targeting TORC1 for aging-related diseases. However, Navitor’s clinical TORC1 candidate is a TORC1 activator that is in Phase 1 clinical trials for treatment-resistant depression. We are aware of multiple other allosteric and catalytic mTOR inhibitors in development by other companies. We are not aware of any TORC1 inhibitors with TORC1 selectivity comparable to our product candidate, RTB101, being commercially developed.

We are also aware of other companies seeking to develop treatments to prevent or treat aging-related diseases through biological pathways unrelated to mTOR inhibition, including Calico Life Sciences LLC, or Calico, and UNITY Biotechnology, Inc., or Unity. Calico has not yet disclosed any pipeline candidates, and Unity’s most advanced candidate, based on publicly disclosed information, is in Phase 1 clinical trials for osteoarthritis. Hence, we believe that we currently have the most clinically advanced program based on the stage of development of our competitors’ programs.

We are aware of other companies that are potential competitors for prevention or treatment of aging-associated pathologies such as neurodegeneration. Companies pursuing prevention or treatment of aging-associated pathologies such as neurodegeneration in PD include: Denali Therapeutics, Inc., Acorda Therapeutics, Inc., Prothena Biosciences, Inc., Takeda Pharmaceutical Company (formerly Shire plc), Affiris AG, Biogen Inc., Inflazome Ltd., Casma Therapeutics, Inc., Neuropore Therapies, Inc., Caraway Therapeutics, Inc. (previously called Rheostat Therapeutics), Selphagy Therapeutics Inc., and others. Companies pursuing treatments for levodopa-induced dyskinesia in PD include: VistaGen Therapeutics, Inc., Prilienia Therapeutics, Inc., IRLAB Therapeutics AB, Neurolixis Inc, and others.

Drug development is highly competitive and subject to rapid and significant technological advancements. Our ability to compete will significantly depend upon our ability to complete necessary clinical trials and regulatory approval processes, and effectively market any drug that we may successfully develop. Our current and potential future competitors may include pharmaceutical and biotechnology companies, academic institutions and government agencies. The primary competitive factors that will affect the commercial success of any product candidate for which we may receive regulatory approval include efficacy, safety and tolerability profile, ~~dosing~~ convenience, price, ~~formulary coverage~~reimbursement and ~~reimbursement. Our existing or potential future~~cost of manufacturing.

These competitors may ~~have substantially greater financial, technical~~also vie for a similar pool of qualified scientific and ~~human resources than we do~~management talent, sites and ~~significantly greater experience in the discovery~~patient populations for clinical trials, and ~~development of product candidates,~~investor capital, as well as ~~in obtaining regulatory approvals of those product candidates~~for technologies complementary to, or necessary for, our programs.

As a biopharmaceutical company that operates in the ~~United States and in foreign countries.~~U.S., we are subject to extensive regulation. Our current and potential future competitors may also have significantly more experience commercializing drugs that have been approved for marketing. Mergers and acquisitions in the pharmaceutical and biotechnology industries could result in even more resources being concentrated among a small numbercell products will be regulated as biologics. With this classification, commercial production of our ~~competitors.~~

~~Accordingly, our competitors may be~~products will need to occur in registered facilities in compliance with cGMP for biologics. The FDA categorizes human cell- or tissue-based products as either minimally manipulated or more ~~successful~~ than ~~us in obtaining regulatory for therapies~~minimally manipulated and ~~in achieving widespread market acceptance of their drugs. It is also possible~~has determined that more than minimally manipulated products require clinical trials to demonstrate product safety and efficacy and the ~~development~~submission of a Biologics License Application (BLA) to the FDA for marketing authorization. Our products are considered more ~~effective treatments by~~than minimally manipulated and will require evaluation in clinical trials and the submission and approval of a ~~competitor could render our product candidate non-competitive or obsolete or reduce the demand for our product candidate~~BLA before we can ~~recover~~market them. Generally, before a new drug or biologic can be marketed, considerable data demonstrating our ~~development~~quality, safety and ~~commercialization expenses.~~

~~Government Regulation~~efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

Government authorities in the ~~United States, at~~U.S. (at the federal, state, and local ~~level,~~level) and in other countries ~~and jurisdictions, including the European Union,~~ extensively regulate, among other things, the research, development, testing, ~~manufacture,~~manufacturing, quality control, approval, labeling, packaging, storage, ~~recordkeeping, labeling,~~record-keeping, promotion, advertising, ~~promotion,~~ distribution, ~~marketing,~~ post-approval monitoring and reporting, marketing and export and import of biopharmaceutical products such as those We are developing. Our product candidates must be approved by the FDA before they may be legally marketed in the U.S. and ~~export~~by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the U.S., although there can be important differences. Additionally, some significant aspects of ~~pharmaceutical products.~~regulation in Europe are addressed in a centralized way but country-specific regulation remains essential in many respects. The ~~processes~~process for obtaining regulatory marketing approvals inand the ~~United States and in foreign countries and jurisdictions, along with~~ subsequent compliance with ~~applicable~~appropriate federal, state, local and foreign statutes and regulations ~~and other regulatory authorities,~~ require the expenditure of substantial time and financial resources.

~~Review and Approval of Drugs in the United States~~U.S. Product Development Process

In the ~~United States,~~U.S., the FDA regulates ~~drugs primarily~~pharmaceutical and biological products under the Federal Food, Drug and Cosmetic Act ~~or FDCA,~~(the FDCA), the Public Health Service Act (the PHSA), and ~~its implementing~~their implemented regulations. The ~~failure~~process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant ~~and/or sponsor~~ to ~~a variety of~~ administrative or judicial sanctions. FDA sanctions ~~including~~could include, among other actions, refusal ~~by the FDA~~ to approve pending applications, withdrawal of an approval, ~~imposition of~~ a clinical hold, ~~issuance of~~ warning letters, ~~and other types of letters,~~product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement ~~of profits,~~ or civil or criminal ~~investigations and penalties brought~~penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA ~~and the Department of Justice or other governmental entities. In addition, an applicant~~before a biological product may ~~need to recall a product.~~

~~An applicant seeking approval to market and distribute a new drug product~~be marketed in the ~~United States must typically undertake~~U.S. generally involves the following:

Before ~~an applicant begins~~ testing ~~a compound~~any biological product candidate, including our product candidates, in humans, the ~~drug~~product candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory ~~evaluation~~evaluations of ~~the purity~~product chemistry, toxicity and ~~stability of the manufactured drug substance or active pharmaceutical ingredient and the formulated drug or drug product,~~formulation, as well as ~~in vitro and~~ animal studies to assess the potential safety and activity of the ~~drug for initial testing in humans and to establish a rationale for therapeutic use.~~product candidate. The conduct of the key preclinical ~~studies is subject to~~tests must comply with federal regulations and requirements including ~~GLP regulations.~~GLPs. An IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials may begin. The clinical trial sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and ~~plans for~~a proposed clinical ~~trials, among other things, are submitted~~protocol, to the FDA as part of anthe IND. Some ~~long-term~~ preclinical testing ~~such as animal tests of reproductive adverse events and carcinogenicity,~~ may continue even after the IND is submitted.

An IND is an exemption from the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigational drug to humans. Such authorization must be secured prior to interstate shipment and administration of the investigational drug. In an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments. In addition, the results of the preclinical tests, manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted toautomatically becomes effective thirty (30) days after receipt by the FDA, ~~as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. At any time during this 30-day period,~~unless the FDA ~~may raise~~raises concerns or questions ~~about~~regarding the ~~conduct of~~proposed clinical trials and requests additional information and or places the ~~trials as outlined in the IND and impose~~trial on a clinical ~~hold.~~hold within that 30-day time period. In ~~this~~such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical trials ~~can begin.~~due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such trials.

~~Following commencement~~Clinical trials involve the administration of the biological product candidate to patients under the supervision of qualified investigators at independent clinical sites/hospitals, physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial ~~under an IND,~~will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of onlyas part of the ~~clinical work requested under the~~ IND. ~~No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold.~~

Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed. The FDA will base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.

~~A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an IND, all FDA IND requirements~~Clinical trials must be ~~met unless waived. When the foreign clinical study is not~~ conducted ~~under an IND, the sponsor who wishes to rely upon it in support of its NDA must ensure that the study is conducted~~and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including ~~review~~the requirement that all research patients provide informed consent. Further, each clinical trial must be reviewed and ~~approval~~approved by an independent ~~ethics committee,~~IRB at or ~~IEC,~~servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and ~~informed consent from subjects. The GCP requirements are intended~~rights of trial participants and considers such items as whether the risks to help ensure the protection of human subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of the resulting data. FDA must also be able to validate the data from the study through an on-site inspection if necessary.

~~In addition to the foregoing IND requirements, an IRB representing each institution~~individuals participating in the clinical ~~trial~~trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must ~~review and approve the plan for any~~be signed by each clinical trial ~~before it commences at that institution,~~subject or his or her legal representative and ~~the IRB~~ must conduct continuing review of the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, ifmonitor the clinical trial ~~is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients.~~

~~Additionally, some trials are overseen~~until completed. Some studies also include oversight by an independent group of qualified experts organized by the ~~trial~~clinical study sponsor, known as a data safety monitoring board, ~~or committee. This group~~which provides authorization for whether or not a ~~trial~~study may move forward at designated check points based on access ~~that only the group maintains~~ to ~~available~~certain data from the ~~study. Suspension or termination of development during any phase of~~study and may halt the clinical ~~trials can occur~~trial if it determines that there is ~~determined that the~~an unacceptable safety risk for subjects or ~~patients~~other grounds, such as no demonstration of efficacy. There are ~~being exposed~~also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

A sponsor who wishes to conduct a clinical trial outside of the U.S. may, but need not, obtain FDA authorization to conduct the clinical trial under an ~~unacceptable health risk. Other reasons for suspension or termination~~IND. If a foreign clinical trial is not conducted under an IND, the sponsor may ~~be made by us based on evolving business objectives and/or competitive climate.~~

~~Information about certain~~submit data from the clinical ~~trials must be submitted within specific timeframes~~trial to the ~~National Institutes~~FDA in support of ~~Health, or NIH, for public dissemination on its ClinicalTrials.gov website.~~

~~Human Clinical Trials in Support~~a BLA. A clinical trial outside the U.S. may also be conducted under the authorization of ~~an NDA~~

~~Clinical trials involve the administration~~similar regulatory authorities of the ~~investigational product to human subjects~~country/region. The FDA will accept a well-designed and well-conducted foreign clinical study not conducted under an IND if the ~~supervision of qualified investigators~~study was conducted in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the ~~effectiveness criteria~~FDA is able to ~~be evaluated.~~validate the data through an onsite inspection if deemed necessary.

Human clinical trials are typically conducted in three sequential phases ~~which~~that may overlap or be combined:

as Phase 4. ~~Post-approval studies~~4 clinical trials, may be conducted after initial ~~regulatory~~marketing approval. These ~~studies~~clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic ~~indication.~~indication, particularly for long-term safety follow-up. In case of an accelerated BLA approval based on limited clinical data, FDA may mandate a Phase 4 clinical trial prior to full approval. During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress

~~Progress~~ reports detailing the results of the clinical trials must be submitted ~~at least annually~~ to the FDA. ~~In addition,~~Written IND safety reports must be promptly submitted to the FDA, ~~for any of~~and the ~~following:~~investigators for serious and unexpected ~~suspected~~ adverse ~~reactions;~~events, any findings from other studies, tests in laboratory animals or ~~animal or~~ in vitro testing that suggest a significant risk ~~in humans exposed to the drug; and~~for human patients, or any clinically important increase in the ~~case~~rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15fifteen (15) calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven (7) calendar days after the sponsor’s initial receipt of the information.

Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, orif at all. ~~Furthermore, the~~The FDA or the sponsor or its data safety monitoring board may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research ~~subjects~~patients are being exposed to an unacceptable health ~~risk.~~risk, including risks inferred from other unrelated immunotherapy trials. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution ~~or an institution it represents,~~ if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the ~~drug~~biological product has been associated with unexpected serious harm to patients. ~~The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.~~

A manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 trial of the investigational drug or, as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative advanced therapy.

~~Concurrent~~Concurrently with clinical trials, companies ~~often~~usually complete additional ~~animal~~ studies and must also develop additional information about the ~~chemistry and~~ physical characteristics of the ~~drug~~biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the ~~drug~~product candidate and, among other things, the ~~applicant~~sponsor must develop methods for testing the identity, strength, quality, ~~purity,~~potency and ~~potency~~purity of the final ~~drug.~~biological product according to the requirements of the phase of clinical development. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the ~~drug~~biological product candidate does not undergo unacceptable deterioration over its shelf life.

~~Review~~Further, as a result of ~~an NDA~~the COVID-19 pandemic, the extent and length of which is uncertain, we will be required to develop and implement additional clinical study policies and procedures designed to help protect study participants from the COVID-19 virus, which may include using telemedicine visits and remote monitoring of patients and clinical sites. We will also need to ensure data from our clinical studies that may be disrupted as a result of the pandemic is collected pursuant to the study protocol and is consistent with GCPs, with any material protocol deviation reviewed and approved by the site IRB. Patients who may miss scheduled appointments, any interruption in study drug supply, or other consequence that may result in incomplete data being generated during a study as a result of the pandemic must be adequately documented and justified. For example, on March 18, 2020, the FDA issued a guidance on conducting clinical trials during the pandemic, which describe a number of considerations for sponsors of clinical trials impacted by the pandemic, including the requirement to include in the clinical study report (or as a separate document) contingency measures implemented to manage the study, and any disruption of the study as a result of COVID-19; a list of all study participants affected by COVID-19-related study disruption by unique subject identifier and by investigational site, and a description of how the individual’s participation was altered; and analyses and corresponding discussions that address the impact of implemented contingency measures (e.g., participant discontinuation from investigational product and/or study, alternative procedures used to collect critical safety and/or efficacy data) on the safety and efficacy results reported for the study. As of August 4, 2020, the FDA continues to update and revise its guidance for ongoing clinical trials.

~~Assuming successful~~U.S. Review and Approval Processes

After the completion of ~~required~~ clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA submission must include results of product safety, efficacy, development, laboratory and animal studies, human trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. The testing and ~~other requirements, the results of the preclinical studies~~approval processes require substantial time and ~~clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls~~effort and ~~proposed labeling, among other things, are submitted to~~there can be no assurance or guarantee that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.

Under the Prescription Drug User Fee Act (PDUFA), as ~~part of an NDA requesting approval to market~~amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the ~~drug product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to an application~~PDUFA user ~~fee, currently exceeding $2.9 million in fiscal year 2020 for applications requiring clinical data, and~~fees on an annual ~~prescription drug~~basis. PDUFA also imposes an annual program fee ~~exceeding $325,000 in fiscal year 2020. These fees are typically increased annually. Certain exceptions and~~for biological products. Fee waivers or reductions are available ~~for some~~in certain circumstances, including a waiver of ~~these fees, such as an exception from~~ the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, ~~with orphan designation.~~unless the product also includes a non-orphan indication.

~~The~~Within 60 or 74 days following submission of the application, the FDA ~~conducts~~reviews a ~~preliminary review of an NDA within 60 days of its receipt, before accepting the NDA for filing,~~BLA submitted to determine ~~whether~~if it is substantially complete before the ~~application is sufficiently complete to permit substantive review.~~agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional ~~information rather than accept an NDA for filing.~~information. In this event, the ~~application~~BLA must be resubmitted with the additional information. The resubmitted application also is ~~also~~ subject to review before the FDA accepts it for filing. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months from the filing date to complete its initial review of an original BLA and respond to the applicant, and six months from the filing date of an original

BLA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs, and the review process is often extended by FDA requests for additional information or clarification.

Once the submission is accepted for filing, the FDA begins an in-depth substantive ~~review.~~review of the BLA. The FDA ~~has agreed~~reviews the BLA to ~~specified performance goals in~~determine, among other things, whether the review process of NDAs. Applications for drugs containing novel active moieties are meant to be reviewed within ten months from the date of filing, and applications for “priority review” products containing novel active moieties are meant to be reviewed within six months of filing. The review process may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.

~~Before approving an NDA, the FDA typically will inspect the facility or facilities where the~~proposed product is safe, potent, and/or ~~will be manufactured. These pre-approval inspections may cover all facilities associated with~~effective for its intended use, and has an NDA submission, including drug component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.

In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events,acceptable purity profile, and whether the product is ~~a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements~~being manufactured in accordance with cGMP to assure ~~safe use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring,~~ and preserve the ~~use of patient registries.~~product’s identity, safety, strength, quality, potency and purity. The FDA may ~~require a REMS before approval~~refer applications for novel biological products or ~~post-approval if it becomes aware~~biological products that present difficult questions of ~~a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.~~

~~The FDA is required to refer an application for a novel drug~~safety or efficacy to an advisory committee, ~~or explain why such referral was not made. Typically, an advisory committee is~~typically a panel ~~of independent experts, including~~that includes clinicians and other ~~scientific~~ experts, ~~that reviews, evaluates~~for review, evaluation and ~~provides~~ a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

~~Fast Track, Breakthrough Therapy,~~During the biological product approval process, the FDA also will determine whether a Risk Evaluation and ~~Priority~~Mitigation Strategy (REMS) is necessary to assure the safe use of the biological product. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required. Both Kymriah® and Yescarta® were approved with a REMS.

Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. For cellular immunotherapy products, the FDA also will not approve the product if the manufacturer is not in compliance with the cGTP, to the extent applicable. These are FDA regulations and guidance documents that in part govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissue, and cellular and tissue-based products (HCT/Ps) which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements. To assure cGMP, GTP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.

Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product receives regulatory approval, the approval may be limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.

Pediatric Information

In addition, under the Pediatric Research Equity Act (PREA), a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. A sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration must submit an initial Pediatric Study Plan (PSP), within sixty (60) days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 study. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric

studies along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical trials and/or other clinical development programs.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available in the U.S. a drug or biologic for this type of disease or condition will be recovered from sales in the U.S. for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.

A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Expedited Development and Review Programs

The FDA has a ~~number of programs~~fast track program that is intended to expedite or facilitate ~~and expedite development and review of~~the process for reviewing new ~~drugs~~products that meet certain criteria. Specifically, new products are eligible for fast track designation if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. Three of these programs are referred to as fast track designation, breakthrough therapy designation, and priority review designation.

Specifically, the FDA may designate a product for Fast Track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a Fast Track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a Fast Track application does not begin until the last section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

~~Second, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination with one or more other products,~~ to treat a serious or life-threatening disease or condition and ~~preliminary clinical evidence indicates that~~demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respectand the specific indication for which it is being studied. Unique to ~~Breakthrough Therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the~~a fast track product, sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.

~~Third,~~ the FDA may ~~designate~~consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.

Any product submitted to the FDA for approval, including a product with a fast track designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product is eligible for priority review if it ~~is a product that treats a serious~~has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or ~~life-threatening disease or condition and, if approved, would provide~~ a significant improvement in ~~safety~~the treatment, diagnosis or ~~effectiveness.~~prevention of a disease compared to marketed products. The FDA determines, on a case-by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intendedwill attempt to direct ~~overall attention and~~additional resources to the evaluation of ~~such applications, and~~an application for a new product designated for priority review in an effort to ~~shorten~~facilitate the ~~FDA’s goal for taking action on a marketing application from ten months to six months.~~

~~Accelerated Approval Pathway~~

~~The FDA may grant accelerated approval to~~review. Additionally, a product may be eligible for aaccelerated approval. Products studied for their safety and effectiveness in treating serious or life-threatening ~~condition that provides meaningful therapeutic advantage to patients over existing treatments based~~diseases or conditions may receive accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on ~~an intermediate~~a clinical endpoint that can be measured earlier than ~~an effect on~~ irreversible morbidity or mortality, ~~or IMM, and~~ that is reasonably likely to predict an effect on ~~IMM~~irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug or biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical studies. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

Regenerative Medicine Advanced Therapy (RMAT), designation was established by the FDA in 2017 to facilitate an efficient development program for, and expedite review of, any drug that meets the following criteria: (1) it qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (2) it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (3) preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such a disease or condition. RMAT designation provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate and eligibility for rolling review and priority review. Products granted RMAT designation may also be eligible for accelerated approval ~~must meet~~on the ~~same statutory standards for safety and effectiveness as those granted traditional approval.~~

~~For the purposes~~basis of ~~accelerated approval,~~ a surrogate ~~endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign,~~ or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate ~~clinical~~ endpoint ~~is a measurement of a therapeutic effect that is considered~~ reasonably likely to predict ~~the~~long-term clinical benefit, or reliance upon data obtained from a

meaningful number of ~~a product,~~sites, including through expansion to additional sites. Once approved, when appropriate, the FDA can permit fulfillment of post-approval requirements under accelerated approval through the submission of clinical evidence, clinical studies, patient registries, or other sources of real world evidence such as ~~an effect on IMM.~~electronic health records; through the collection of larger confirmatory datasets; or through post-approval monitoring of all patients treated with the therapy prior to approval.

Breakthrough therapy designation is also intended to expedite the development and review of products that treat serious or life-threatening conditions. The designation by FDA ~~has limited experience with accelerated approvals based on intermediate~~requires preliminary clinical ~~endpoints, but has indicated~~evidence that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product.

The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly.

The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the product’s clinical benefit. As a result, a product candidate, ~~approved~~alone or in combination with other drugs and biologics, demonstrates substantial improvement over currently available therapy on ~~this~~one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Breakthrough therapy designation comes with all of the benefits of fast track designation, which means that the sponsor may file sections of the BLA for review on a rolling basis ~~is subject to rigorous post-marketing compliance requirements,~~if certain conditions are satisfied, including ~~the completion of Phase 4 or post-approval clinical trials to confirm the effect~~an agreement with FDA on the ~~clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, could result in the FDA’s withdrawal~~proposed schedule for submission of portions of the ~~approval~~application and ~~require~~ the ~~withdrawal~~payment of ~~the product from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.~~

~~The FDA’s Decision on an NDA~~

~~On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities and select clinical trial sites,~~applicable user fees before the FDA may ~~issue an~~initiate a review.

Fast Track designation, priority review, RMAT and breakthrough therapy designation do not change the standards for approval ~~letter~~but may expedite the development or ~~a complete response letter. An~~regulatory approval ~~letter authorizes commercial marketing of the product with specific prescribing information~~process for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety or effectiveness after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs.our products.

Post-Approval Requirements

~~Drugs manufactured or distributed pursuant to~~Any products for which we receive FDA approvals are subject to ~~pervasive and~~ continuing regulation by the FDA, including, among other things, record-keeping requirements, ~~relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and~~ reporting of adverse experiences with the ~~product. After~~product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved uses (known as off-label use), limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although a physician may prescribe a legally available product for an off-label use, if the physician deems such product to be appropriate in his/her professional medical judgment, a manufacturer may not market or promote off-label uses. However, it is permissible to share in certain circumstances truthful and not misleading information that is consistent with the product’s approved labeling.

Further, additional FDA limitations on approval ~~many~~or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the ~~approved product, such as adding~~addition of new ~~indications~~warnings and contraindications, and may also require the implementation of other risk management measures, including a REMS, or ~~other labeling claims, are subject~~the conduct of post-marketing studies to ~~prior FDA review and approval. There also are annual program fee requirements for certain marketed products.~~

~~The FDA may impose~~assess a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’snewly discovered safety ~~and effectiveness after commercialization.~~issue.

In addition, ~~drug manufacturers~~quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval to ensure the adequate stability of the product. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved ~~drugs~~products are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and ~~these~~certain state agencies for compliance with cGMP ~~requirements. Changes to the manufacturing process are strictly regulated~~ and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the NDA holder and any third-party manufacturers that the NDA holder may decide to use.other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly regulated, and depending on the significance of the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and claims, are also subject to further FDA review and approval.

~~Once an approval is granted,~~We rely, and expect to continue to rely, on third parties to produce clinical and commercial quantities of our products in accordance with cGMP regulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved biologics are required to register their establishments with the FDA ~~may withdraw~~and certain state agencies and are subject to periodic unannounced inspections by the ~~approval if~~FDA and certain state agencies for compliance with ~~regulatory~~cGMP requirements and ~~standards is not maintained or if problems occur after~~other laws.

The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the ~~product reaches the market. Later discovery~~effects of an approved product. Discovery of previously unknown problems with a product ~~including adverse events of unanticipated severity~~ or ~~frequency, or with manufacturing processes, or~~the failure to comply with ~~regulatory~~applicable FDA requirements ~~may result in revisions to the approved labeling to add new safety information; imposition of post-market studies~~can have negative consequences, including adverse publicity, judicial or ~~clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:~~

~~restrictions on the marketing or manufacturing of the product, complete withdrawal of the product~~administrative enforcement, warning letters from the ~~market~~FDA, mandated corrective advertising or ~~voluntary product recalls;~~

~~fines, warning or untitled letters or holds on post-approval clinical trials;~~

•

~~refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or withdrawal of product approvals;~~

~~product seizure or detention, or refusal to permit the import or export of products; or~~

~~injunctions or the imposition of~~communications with doctors, and civil or criminal ~~penalties.~~penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling,

~~The FDA strictly regulates marketing, labeling, advertising~~including the addition of new warnings and ~~promotion~~contraindications, and also may require the implementation of ~~products that are placed on the market. Drugs generally~~other risk management measures. Also, new government requirements, including those resulting from new legislation, may be ~~promoted only for~~established, or the ~~approved indications~~FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.

U.S. Marketing Exclusivity

The Biologics Price Competition and ~~in accordance with~~Innovation Act of 2009 (BPCIA), amended the ~~provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found~~PHSA to ~~have improperly promoted off-label uses may be subject to significant liability.~~

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

~~Hatch-Waxman Amendments~~

~~Section 505 of the FDCA describes three types of marketing applications that may be submitted to~~authorize the FDA to request marketing authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A 505(b)(2) NDA is an application that contains full reports of investigations of safety and efficacy but where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy for an existing product, or published literature, in support of its application. Section 505(j) establishes an abbreviated approval process for a generic version of approved drug products through the submission of an Abbreviated New Drug Application, or ANDA. An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product, known as a reference listed drug, or RLD. ANDAs are termed “abbreviated” because they are generally not required to include preclinical (animal) and clinical (human) data to establish safety and efficacy. Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo, or other testing. The generic version must deliver the same amount of active ingredients to the site of drug action in the same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.

~~Non-Patent Exclusivity~~

~~Under the Hatch-Waxman Amendments, the FDA may not~~ approve (or in some cases accept) an ANDA or 505(b)(2) application until any applicable period of non-patent data exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity, or an NCE. For the purposes of this provision, an NCE is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, which states the proposed generic drug will not infringe one or more of the already approved product’s listed patents or that such patents are invalid or unenforceable, in which case the applicant may submit its application four years following the original product approval.

The FDCA also provides for a period of three years of exclusivity for non-NCE drugs if the NDA or a supplement to the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application or supplement. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication, but it generally would not protect the original, unmodified product from generic competition. Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA from accepting ANDAs seeking approval for generic orsimilar versions of ~~the drug as of the date of approval of the original drug product; it only prevents FDA from approving such ANDAs.~~

~~Hatch-Waxman Patent Certification and the 30-Month Stay~~

In seeking approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’s product or an approved method of using the product. Upon approval, each of the patents listed by the NDA sponsor is published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations,innovative biologics, commonly known as ~~the Orange Book. Upon submission of an ANDA or 505(b)(2) NDA, an applicant is required to certify to the FDA concerning any patents for the RLD required to be listed in the Orange Book that:~~

~~no patent information on the drug product that is the subject of the application has been submitted to the FDA;~~

~~such patent has expired;~~

~~the date on which such patent expires; or~~

~~such patent is invalid, unenforceable or will not be infringed upon by the manufacture, use, or sale of the drug product for which the application is submitted.~~

~~Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant is not~~biosimilars. A competitor seeking approval of a ~~use covered~~biosimilar must file an application to establish its molecule as highly similar to an approved innovator biologic, among other requirements. The BPCIA, however, bars the FDA from approving biosimilar applications for 12 years after an innovator biological product receives initial marketing approval. This 12-year period of data exclusivity may be extended by six months, for a total of 12.5 years, if the ~~patent or~~FDA requests that the ~~ANDA or 505(b)(2) applicant challenges a listed patent through~~innovator company conduct pediatric clinical investigations of the ~~last type~~product.

Depending upon the timing, duration and specifics of ~~certification, also known as a paragraph IV certification. If an applicant indicates that it is not seeking approval of a method of use covered by a patent, that method of use will not delay~~the FDA approval of the ~~ANDA or 505(b)(2). If the applicant otherwise does not challenge the listed~~use of our product candidates, some of our U.S. patents, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired. If the ANDA or 505(b)(2) NDA applicant has provided a paragraph IV certification the applicant must send notice of the paragraph IV certification to the NDA and patent holders once the application has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the paragraph IV certification. If the paragraph IV certification is challenged by an NDA holder or the patent owner(s) asserts a patent challenge to the paragraph IV certification within 45 days of receiving the notice, the FDA may not approve that application until the earlier of 30 months from the receipt of the notice of the paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent was favorably decided in the applicant’s favor or settled, or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In instances where an ANDA or 505(b)(2) NDA applicant files a paragraph IV certification, the NDA holder or patent owner(s) regularly take action to trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve. Thus, approval of an ANDA or 505(b)(2) application could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor’s decision to initiate patent litigation. If the drug has NCE exclusivity and the ANDA or 505(b)(2) application is submitted four years after approval, the 30-month stay is extended so that it expires 7 ¹⁄₂ ~~years after approval of the innovator drug, unless the patent expires or there is a decision in the infringement case that is favorable to the ANDA applicant before then.~~

~~Pediatric Studies and Exclusivity~~

~~Under the Pediatric Research Equity Act of 2003, as amended, an NDA or supplement thereto for a drug with certain innovative features (e.g.~~, new active ingredient, new indication, new dosage form) must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.

The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Generally, the pediatric data requirements do not apply to products with orphan designation.

~~Pediatric exclusivity is another type of non-patent exclusivity in the United States and,~~ if granted, provides for the attachment of an additional six months of marketing protection to the term of certain existing non-patent exclusivity periods, including orphan exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data within certain time periods. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application after expiration of a patent.

~~Orphan Drug Designation and Exclusivity~~

Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the United States for treatment of the disease or condition will be recovered from sales of the product). A company must request orphan product designation before submitting an NDA. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product with orphan status receives the first FDA approval for the drug for the disease or condition for which it has such designation or for a select indication or use within the rare disease or condition for which it was designated, the product generally will receive orphan product exclusivity. Orphan product exclusivity means that the FDA may not approve any other applications for the same product for the same indication for seven years, except in certain limited circumstances. Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and may obtain approval for the same product but for a different indication. If a drug or drug product designated as an orphan product ultimately receives regulatory approval for an indication broader than what was designated in its orphan product application, it may not be entitled to exclusivity.

~~Patent Term Restoration and Extension~~

~~A patent claiming a new drug product~~ may be eligible for a limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman ~~Amendments, which~~Act. The Hatch-Waxman Act permits a patent restoration term ~~restoration~~ of up to five years, as compensation for patent term lost during product development and the FDA regulatory ~~review.~~review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period ~~granted~~ is ~~typically~~generally one-half the time between the effective date of an IND and the submission date of ~~an NDA,~~a BLA plus the time between the submission date of ~~an NDA~~a BLA and the ~~ultimate~~ approval ~~date. Patent term restoration cannot be used to extend the remaining term~~ of ~~a patent past a total of 14 years from the product’s approval date.~~that application. Only one patent applicable to an approved ~~drug~~ product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the ~~patent in question and within 60 days of drug approval. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals.~~patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may intend to apply for restoration ~~in consultation with~~of patent term for one of our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the ~~FDA.~~

~~Review~~expected length of the clinical trials and ~~Approval of Medicinal Products~~other factors involved in the ~~European Union~~filing of the relevant BLA.

Pediatric exclusivity is another type of regulatory market exclusivity in the U.S. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.

Other U.S. Healthcare Laws and Compliance Requirements

In ~~order to market any product outside of~~ the United States, ~~a company must also comply with numerous~~our activities are potentially subject to regulation by various federal, state and ~~varying regulatory requirements of~~local authorities in addition to the FDA, including but not limited to, the Centers for Medicare & Medicaid Services (CMS), other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA approval for a product, an applicant will need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical trials or marketingdivisions of the ~~product in those countries or jurisdictions. Specifically,~~U.S. Department of Health and Human Services (HHS) (e.g., the ~~process governing approval~~Office of ~~medicinal products in~~Inspector General, the ~~European Union generally follows the same lines as in the United States, although the approval~~U.S. Department of ~~a medicinal product in the United States is no guarantee of approval of the same product in the European Union, either at all or~~Justice (DOJ), and individual U.S. Attorney offices within the ~~same timescale as approval~~DOJ, and state and local governments). For example, our business practices, including any of our research and future sales, marketing and scientific/educational grant programs may be granted in the United States. It entails satisfactory completion of preclinical studies and adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication. It also requires the submission to the relevant competent authorities of a marketing authorization application, or MAA, and granting of a marketing authorization by these authorities before the product can be marketed and sold in the European Union.

~~Clinical Trial Approval~~

The Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on GCP, and the related national implementing provisions of the individual EU Member States govern the system for the approval of clinical trials in the European Union. Under this system, an applicant must obtain prior approval from the competent national authority of the EU Member States in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committee has issued a favorable opinion in relation to the trial. The clinical trial application must be accompanied by, among other documents, an investigational medicinal product dossier (the Common Technical Document) with supporting information prescribed by Directive 2001/20/EC, Directive 2005/28/EC, where relevant the implementing national provisions of the individual EU Member States and further detailed in applicable guidance documents.

In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014 (Clinical Trials Regulation) was adopted. The Regulation is anticipated to come into effect in 2020. The Clinical Trials Regulation will be directly applicable in all the EU Member States (meaning that no national implementing legislation will be required in each Member State, as is the case for Directives), repealing the current Clinical Trials Directive 2001/20/EC. Conduct of all clinical trials performed in the European Union will continue to be bound by currently applicable provisions until the new Clinical Trials Regulation becomes applicable. The extent to which ongoing clinical trials will be governed by the Clinical Trials Regulation will depend on when the Clinical Trials Regulation becomes applicable and on the duration of the individual clinical trial. If a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials Regulation will at that time begin to apply to the clinical trial.

The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the European Union. The main characteristics of the regulation include: a streamlined application procedure via a single entry point, the “EU portal”; a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is assessed by the competent authorities of all EU Member States in which an application for authorization of a clinical trial has been submitted (Member States concerned), although the Part 1 review process will be led by the “reporting Member State”, which shall be proposed by the sponsor of the proposed clinical trial. Part II is assessed separately by each Member State concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the concerned EU Member State. However, overall related timelines will be defined by the Clinical Trials Regulation.

~~Marketing Authorization~~

To obtain a marketing authorization for a product under European Union regulatory systems, an applicant must submit an MAA either under a centralized procedure administered by the European Medicines Agency, or EMA, or one of the procedures administered by competent authorities in the EU Member States (the decentralized procedure, the national procedure or the mutual recognition procedure). A marketing authorization may be granted only to an applicant established in the European Union. Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, applicants have to demonstrate compliance with all measures included in an EMA-approved Pediatric Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or more of the measures included in the PIP.

The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all EU Member States and three of the four European Free Trade Association, or EFTA, States, Iceland, Liechtenstein and Norway. Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases, including products for the treatment of HIV or AIDS, cancer, diabetes, neurodegenerative diseases, auto-immune and other immune dysfunctions and viral diseases. For those products for which the use of the centralized procedure is not mandatory, applicants may elect to use the centralized procedure where either the product contains a new active substance indicated for the treatment of other diseases or where the applicant can show that the product constitutes a significant therapeutic, scientific or technical innovation, and or for which a centralized process is in the interest of patients at EU level.

~~Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established at the EMA is responsible for conducting the initial assessment of a product, specifically~~whether a medicine meets the required quality, safety and efficacy requirements, and whether the product has a positive benefit/risk profile. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days from the receipt of a valid MAA, excluding clock stops, when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Clock stops may extend the timeframe of evaluation of an MAA considerably beyond 210 days. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. If the CHMP accepts such request, the timeframe of 210 days will be reduced to 150 days (excluding clock stops), but it is possible that the CHMP can revert to the standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment. At the end of this period, the CHMP provides a scientific opinion on whether or not a marketing authorization should be granted in relation to a medicinal product. Within 67 days from the date of the CHMP Opinion, the European Commission will adopt its final decision on the marketing authorization application.

Unlike the centralized authorization procedure, the decentralized marketing authorization procedure requires a separate application to, and leads to separate approval by, the competent authorities of each EU Member State in which the product is to be marketed. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU Member States who, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the European Commission, whose decision is binding on all EU Member States.

The mutual recognition procedure similarly is based on the acceptance by the competent authorities of the EU Member States of the marketing authorization of a medicinal product by the competent authorities of other EU Member States. The holder of a national marketing authorization may submit an application to the competent authority of an EU Member State requesting that this authority recognize the marketing authorization delivered by the competent authority of another EU Member State.

~~Regulatory Data Protection in the European Union~~

In the European Union, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years of data exclusivity upon grant of a marketing authorization and an additional two years of market exclusivity pursuant to Directive 2001/83/EC. Regulation (EC) No 726/2004 repeats this entitlement for medicinal products authorized in accordance the centralized authorization procedure. Data exclusivity prevents applicants for authorization of generics of these innovative products from referencing the innovator’s data to assess a generic (abbreviated) application for a period of eight years. During an additional two-year period of market exclusivity, a generic marketing authorization application can be submitted and authorized, and the innovator’s data may be referenced, but no generic medicinal product can be placed on the European Union market until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.

~~Periods of Authorization and Renewals~~

A marketing authorization has an initial validity for five years in principle. The marketing authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the EU Member State. To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted, at least nine months before the marketing authorization ceases to be valid. The European Commission or the competent authorities of the EU Member States may decide, on justified grounds relating to pharmacovigilance, to proceed with one further five-year period of marketing authorization. Once subsequently definitively renewed, the marketing authorization shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the medicinal product on the European Union market (in case of centralized procedure) or on the market of the authorizing EU Member State within three years after authorization ceases to be valid (the so-called sunset clause).

~~Regulatory Requirements after a Marketing Authorization has been Obtained~~

~~In case an authorization for a medicinal product in the European Union is obtained, the holder of the marketing authorization is~~ required to comply with ~~a range of requirements applicable to~~ the ~~manufacturing, marketing, promotion~~anti-fraud and ~~sale of medicinal products. These include:~~

~~Compliance with the European Union’s stringent pharmacovigilance or safety reporting rules must be ensured. These rules can impose post-authorization studies and additional monitoring obligations.~~

The manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory, must also be conducted in strict compliance with the applicable European Union laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice. These requirements include compliance with European Union cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outsideabuse provisions of the ~~European Union with~~Social Security Act, the ~~intention to import the active pharmaceutical ingredients into the European Union.~~

The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs, are strictly regulated in the European Union notably under Directive 2001/83/EC, as amended, and EU Member State laws. The advertising of prescription-only medicines to the general public is not permitted in the European Union.

~~Brexit and the Regulatory Framework in the United Kingdom~~

On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union (commonly referred to as “Brexit”). Thereafter, on March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The United Kingdom formally left the European Union on January 31, 2020. ~~A transition period began on February 1, 2020, during which European Union pharmaceutical law remains applicable to the United Kingdom. This transition period is due to end on December 31, 2020.~~ Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime which applies to products and the approval of product candidates in the United Kingdom. It remains to be seen how Brexit will impact regulatory requirements for product candidates and products in the United Kingdom.

~~Healthcare Law and Regulation~~

Healthcare providers and third-party payors play a primary role in the recommendation and prescription of drug products that are granted regulatory approval. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, ~~reporting~~the patient data privacy and security provisions of ~~payments to physicians~~the Health Insurance Portability and ~~teaching hospitals~~Accountability Act of 1996 (HIPAA), transparency requirements, and ~~patient privacy~~similar state, local and foreign laws, and regulations and other healthcare laws and regulations that may constrain our business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations, include the following:each as amended.

~~the~~The federal Anti-Kickback Statute ~~which~~ prohibits, among other things, ~~persons and entities~~any person or entity, from knowingly and willfully ~~soliciting,~~ offering, paying, soliciting or receiving ~~or providing~~any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or ~~reward either the referral of an individual~~in return for purchasing, leasing, ordering or arranging for the purchase, ~~order~~lease or ~~recommendation~~order of any item, good, facility or service ~~for which payment~~reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary managers, and other individuals and entities on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection. Practices that involve remuneration that may be ~~made,~~alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of the facts and circumstances. Our practices may not in ~~whole or in part,~~all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor.

Additionally, the intent standard under the federal ~~healthcare program~~Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the Affordable Care Act, to a stricter standard such ~~as Medicare and Medicaid;~~that a person or entity ~~need not~~no longer needs to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a ~~violation; in~~violation. Rather, if “one purpose” of the

remuneration is to induce referrals, the federal Anti-Kickback Statute is violated. In addition, the ~~government may assert~~Affordable Care Act codified case law that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the ~~False Claims Act;~~

~~the~~ federal ~~civil and criminal false claims laws, including the~~ civil False Claims Act ~~and~~(discussed below).

The civil monetary penalties ~~laws, which prohibit individuals~~statute imposes penalties against any person or ~~entities from,~~entity who, among other things, is determined to have presented or caused to be presented a claim to, among others, a federal healthcare program that the person knows or should know is for a medical or other item or service that was not provided as claimed or is false or fraudulent.

The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government ~~claims for payment that are false, fictitious~~ or ~~fraudulent;~~ knowingly making, using, or causing to be made or used a false ~~statement~~record or ~~record~~statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or ~~obligation to pay or transmit~~demand” for money or property presented to the U.S. government. For example, pharmaceutical and other healthcare companies have been, and continue to be, investigated or prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal ~~government;~~programs for the product and for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus non-reimbursable, uses.

HIPAA created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or ~~knowingly~~covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

Also, many states have similar fraud and ~~improperly avoiding~~abuse statutes or ~~decreasing an obligation to pay money to the federal government;~~

•

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implemented regulations, which created additional federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the United States Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners;

~~analogous state and foreign laws and~~ regulations, such as state anti-kickback and false claims laws, which may be broader in scope and apply ~~to healthcare items or services that~~regardless of payor. These laws are ~~reimbursed~~enforced by ~~non-governmental third-party payors, including~~various state agencies and through private ~~insurers; and~~

~~European Privacy Laws including the General Data Protection Regulation and the E-Privacy Directive (2002/58/EC), and the national laws implementing or supplementing each of them.~~

actions. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant federal government compliance guidance, ~~promulgated by the federal government in addition to requiring~~require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, and restrict marketing practices or require disclosure of marketing ~~expenditures~~expenditures. In addition, certain state and ~~pricing~~local laws require the registration of pharmaceutical sales representatives.

We may be subject to data privacy and security regulations by both the federal government and the states in which we conduct business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and their implementing regulations, impose requirements on certain types of individuals and entities relating to the privacy, security and transmission of individually identifiable health information. ~~State~~Among other things, HITECH makes HIPAA’s privacy and ~~foreign~~security standards directly applicable to business associates that are independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws ~~also~~and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in ~~some~~specified circumstances, many of which differ from each other in significant ways and ~~often are~~may not ~~preempted by HIPAA,~~have the same effect, thus complicating compliance efforts.

Additionally, the federal Physician Payments Sunshine Act within the Affordable Care Act, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) annually report information to CMS related to certain payments or other transfers of value made or distributed to physicians, as defined by such law, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, physicians and teaching hospitals and certain ownership and investment interests held by physicians and their immediate family members.

In order to distribute products commercially, we must comply with state laws that require the ~~event one~~registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our product candidates becomes commercial, it is possible that governmental authorities could conclude that our business practices may not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraudactivities are potentially subject to federal and ~~abuse or other healthcare laws~~state consumer protection and ~~regulations.~~ unfair competition laws.

If our operations are found to be in violation of any of ~~these~~the federal and state healthcare laws described above or any other governmental regulations that ~~may~~ apply to us, we may be subject to ~~significant~~penalties, including without limitation, civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, ~~disgorgement,~~ exclusion from participation in government ~~funded healthcare~~ programs, such as Medicare and Medicaid, refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity ~~and oversight agreements~~agreement or similar agreement to resolve allegations of non-compliance ~~contractual damages, reputational harm, diminished profits and future earnings,~~with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Coverage, Pricing and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the U.S. and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the U.S., third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, or also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

Different pricing and reimbursement schemes exist in other countries. In the European Union (EU), governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.

The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the U.S. has increased and we expect will continue to increase the pressure on healthcare pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Healthcare Reform

In the U.S. and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect the ability to profitably sell product candidates for which marketing approval is obtained. Among policy makers and payors in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

For example, the Affordable Care Act has substantially changed healthcare financing and delivery by both governmental and private insurers. Among the Affordable Care Act provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the following:

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created an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs that began in 2011;

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increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price (AMP);

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created a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 50% (increase to 70% pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) point-of-sale discounts, off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

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extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

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expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and added new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;

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expanded the entities eligible for discounts under the 340B Drug Discount Program;

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created a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

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expanded healthcare fraud and abuse laws, including the Anti-Kickback Statute and the Foreign Corrupt Practices Act (FCPA), created new government investigative powers, and enhanced penalties for noncompliance;

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created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected;

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required reporting of certain financial arrangements with physicians and teaching hospitals;

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required annual reporting of certain information regarding drug samples that manufacturers and distributors provide to physicians;

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established a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending; and

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created a licensure framework for follow on biologic products.

There remain legal and political challenges to certain aspects of the Affordable Care Act. Since January 2017, the former U.S. President signed several executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the Affordable Care Act. In December 2017, Congress repealed the tax penalty for an individual’s failure to maintain Affordable Care Act-mandated health insurance, commonly known as the “individual mandate”, as part of the Tax Cuts and Jobs Act of 2017 (Tax Act). On December 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit held that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and held oral arguments on November 10, 2020. It is unclear how these developments, subsequent appeals, and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act.

In addition, the Further Consolidated Appropriations Act (H.R. 1865) permanently eliminated, effective January 1, 2020, the Affordable Care Act’s mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018 (BBA), among other things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. In December 2018, CMS published a final rule permitting further collections and payments to and from certain Affordable Care Act qualified health plans and health insurance issuers under the Affordable Care Act risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. Since then, the Affordable Care Act risk adjustment program payment parameters have been updated annually.

Further legislation or regulation could be passed that could harm our business, financial condition and results of operations. ~~Defending against~~Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For

example, in August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect beginning on April 1, 2013 and will stay in effect through 2030 unless additional Congressional action is taken. Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, as well as subsequent legislation, these reductions have been suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the pandemic. The Middle Class Tax Relief and Job Creation Act of 2012 required that CMS reduce the Medicare clinical laboratory fee schedule by 2% in 2013, which served as a base for 2014 and subsequent years. In addition, effective January 1, 2014, CMS also began bundling the Medicare payments for certain laboratory tests ordered while a patient received services in a hospital outpatient setting. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Additionally, there has been increasing legislative and enforcement interest in the U.S. with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and federal and state legislative activity designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

At the federal level, the former U.S. Presidential administration’s budget proposal for the fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. HHS has solicited feedback on some of the measures supported by the prior administration and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. It is unclear whether the Biden administration will challenge, reverse, revoke or otherwise modify these executive and administrative actions after January 20, 2021.

Additionally, the FDA released a final rule on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and would have applied to all U.S. states and territories for a seven-year period beginning January 1, 2021 and ending December 31, 2027. However, in response to a lawsuit filed by several industry groups, on December 28, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction enjoining government defendants from implementing the MFN Rule pending completion of notice-and-comment procedures under the Administrative Procedure Act. On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District of California and that performance for any ~~such actions can be costly, time-consuming~~final regulation stemming from the MFN Interim Final Rule shall not commence earlier than 60 days after publication of that regulation in the Federal Register. Further, authorities in Canada have passed rules designed to safeguard the Canadian drug supply from shortages. If implemented, importation of drugs from Canada and the MFN Model may materially and adversely affect the price we receive for any of our product candidates. Additionally, on December 2, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may ~~require significant financial~~be amended or repealed.

Individual states in the U.S. have also increasingly passed legislation and ~~personnel resources. If~~implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Individual states in the U.S. have also been increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We anticipate that these and other healthcare reform efforts will continue to result in additional downward pressure on coverage and the price that we receive for any approved product, and could materially harm our business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of ~~the physicians~~cost containment measures or other healthcare ~~providers~~reforms may prevent us from being able to generate revenue, attain profitability, or ~~entities with whom~~commercialize our products. Such reforms could have an adverse effect on anticipated revenue from product candidates that we ~~expect~~may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.

The Foreign Corrupt Practices Act

The FCPA prohibits any U.S. individual or business from offering, paying, promising to pay, or authorizing payment of money or anything of value, to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to any foreign official, political party or candidate to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist the individual or business in obtaining or retaining business.

The FCPA also obligates companies whose securities are listed in the U.S. to comply with certain accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls. Compliance with the FCPA is ~~found~~expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are owned and operated by the government, and doctors and other hospital employees are considered foreign officials for the purposes of the statute. Certain payments made in connection with clinical trials and other work have been deemed to be ~~not~~improper payments to government officials and have led to FCPA enforcement actions. Various laws, regulations and executive orders also restrict the use and dissemination outside of the U.S., or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products.

Accordingly, if we expand our presence outside of the U.S., we will need to dedicate additional resources to complying with the laws and regulations in ~~compliance with~~each jurisdiction in which it plans to operate. Therefore, this may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the U.S., which could limit our growth potential and increase our development costs.

Packaging and Distribution in the U.S.

If our products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. Products must meet applicable ~~laws, they may be~~child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws.

The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products. The failure to comply with any of these laws or regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, exclusion from federal healthcare programs, requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals, or refusal to allow a firm to enter into supply contracts, including government contracts. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant ~~criminal, civil~~legal expenses and divert our management’s attention from the operation of our business. Prohibitions or ~~administrative sanctions, including exclusions from government funded healthcare programs.~~restrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

Additional Regulation

In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, ~~all~~ affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations.

Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental ~~fines.~~ fines, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations. We maintain workers’ compensation insurance to cover costs and expenses it may incur due to injuries to our employees, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against it. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.

We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.

22Europe / Rest of World Government Regulation

~~GDPR~~In addition to regulations in the U.S., we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and ~~EU Privacy Law Reform~~

any commercial sales and distribution of our products. Whether or not we obtain FDA approval of a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the U.S. have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In the EU, ~~Regulation 2016/679, known~~for example, a clinical trial application must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB, respectively. Once the clinical trial application is approved in accordance with a country’s requirements, clinical trial development may proceed. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries.

The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, the clinical trials must be conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

To obtain regulatory approval of an investigational drug or biological product under EU regulatory systems, we must submit an MAA. The application used to file the BLA in the U.S. is similar to that required in the EU, with the exception of, among other things, country-specific document requirements.

For other countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials must be conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

If we or our potential collaborators fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

European Union General Data Protection Regulation or

In addition to EU regulations related to the approval and commercialization of our products, we may be subject to the EU’s General Data Protection Regulation (GDPR). The GDPR ~~replaced~~imposes stringent requirements for controllers and processors of personal data of persons in the EU, ~~Data Protection Directive~~including, for example, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on ~~May 25, 2018.~~retention of information, increased requirements pertaining to special categories of data, such as health data, and additional obligations when we contracts with third-party processors in connection with the processing of the personal data. The GDPR ~~introduced new~~also imposes strict rules on the transfer of personal data ~~protection requirements~~out of the European Union to the U.S. and other third countries. In addition, the GDPR provides that EU member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.

The GDPR applies extraterritorially, and we may be subject to the GDPR because of our data processing activities that involve the personal data of individuals located in the European Union, such as ~~well as potential~~in connection with our EU clinical trials. Failure to comply with the requirements of the GDPR and the applicable national data protection laws of the EU member states may result in fines ~~for noncompliance~~ of up to ~~the greater of €20 million~~€20,000,000 or up to 4% of the total worldwide annual ~~global revenue. The regulation imposes numerous requirements regarding~~turnover of the ~~collection, use~~preceding financial year, whichever is higher, and disclosure of personal information, including: stringent requirements relating to data subject consent; what information must be shared with data subjects regarding how their personal information is used; the obligation to notify regulatorsother administrative penalties. GDPR regulations may impose additional responsibility and ~~affected individuals of personal data breaches; extensive new internal privacy governance obligations; and obligations to honor expanded rights of individuals~~liability in relation to ~~their personal information (e.g.,~~ the right to access, correct and delete their data). In addition, the GDPR includes restrictions on cross border data transfer. The GDPR increases the responsibility and liability of pharmaceutical companies in relation to processing personal data that we process and ~~companies~~we may be required to put in place additional mechanisms to ensure compliance with the new EU data protection rules. ~~Further, Brexit~~

California Consumer Privacy Act

California recently enacted legislation, effective January 1, 2020, that has ~~created uncertainty with regard~~been dubbed the first “GDPR-like” law in the U.S. Known as the California Consumer Privacy Act (CCPA), it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA requires covered companies to ~~the status~~provide new disclosures to California consumers, provides such consumers new ways to opt-out of the United Kingdom as an ‘adequate country’ for the purposes of data transfers outside the European Economic Area. In particular, it is unclear how data transfers to and from the United Kingdom will be regulated. These changes may require us to find alternative bases for the compliant transfercertain sales of personal ~~data from the United Kingdom to the United States~~information, and ~~we are monitoring developments in this area.~~

~~Pharmaceutical Insurance Coverage and Healthcare Reform~~

In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, the product. The process for determining whether a payor will provide coverageallows for a ~~product~~new cause of action for data breaches. As our business progresses, the CCPA may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.

In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. Additionally, companies may also need to provide discounts to purchasers, private health plans or government healthcare programs. Nonetheless, product candidates may not be considered medically necessary or cost effective. A decision by a third-party payor not to cover a product could reduce physician utilization once the product is approved and have a material adverse effect on sales, results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor.

The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of products have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any approved products. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical products, limiting coverage and the amount of reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. For example, in March 2010, the United States Congress enacted the Affordable Care Act, which, among other things, includes changes to the coverage and payment for products under government health care programs. Among the provisions of the Affordable Care Act of importance toimpact (possibly significantly) our ~~potential product candidates are:~~

an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic products, apportioned among these entities according to their market share in certain government healthcare programs;

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices;

~~addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;~~

~~expanded the types of entities eligible for the 340B drug discount program;~~

established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a point-of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; and

~~a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.~~

Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future. Various portions of the Affordable Care Act are currently undergoing legal and constitutional challenges in the Fifth Circuit Court and the United States Supreme Court; the Trump Administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices; and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the Affordable Care Act. It is unclear whether the Affordable Care Act will be overturned, repealed, replaced, or further amended. We cannot predict what affect further changes to the Affordable Care Act would have on our business.

Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2029 unless additional Congressional action is taken. In January 2013, then-President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their commercial products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Outside the United States, ensuring coverage and adequate payment for a product also involves challenges. Pricing of prescription pharmaceuticals is subject to government control in many countries. Pricing negotiations with government authorities can extend well beyond the receipt of regulatory approval for a product and may require a clinical trial that compares the cost-effectiveness of a product to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in commercialization.

In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies or so-called health technology assessments, in order to obtain reimbursement or pricing approval. For example, the European Union provides options for its member states to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other member states allow companies to fix their own prices for products but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the European Union have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union. The downward pressure on healthcare costs in general, particularly prescription products, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states, and parallel trade, i.e., arbitrage between low-priced and high-priced member states, can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any products, if approved in those countries.

~~Employees~~

As of March 11, 2020, we had eighteen full-time employees, including a total of ten employees with M.D. or Ph.D. degrees, and no part-time employees. Of our workforce, twelve employees are directly engaged in research and developmentbusiness activities and ~~six employees provide administrative, business and operations support. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider~~exemplifies the ~~relationship with our employees to be good. We also use outside consultants and contractors for limited engagements.~~

~~Facilities~~

In January 2018, we entered into a multi-year agreement to lease office space in Boston, Massachusetts under an operating lease agreement. In April 2019, the Company amended its multi-year lease agreement to relocate its office space in Boston, Massachusetts under an operating lease agreement. The amended lease term is for a period of seven years from the date of relocation on August 1, 2019. Under the lease agreement, we are permitted to assign, sublease or transfer this lease, with the consent of the landlord, which consent shall not be unreasonably withheld. We believe that this office is sufficient to meet our current needs and that suitable additional space will be available as and when needed.

~~Legal Proceedings~~

~~In the ordinary course~~vulnerability of our business ~~we may, from time~~ to ~~time, be involved in lawsuits, claims, and other legal proceedings~~the evolving regulatory environment related to contracts, employment arrangements, operating activities, intellectual property or other matters. While the outcome of any such proceedings cannot be predicted with certainty, as of the date of this Annual Report on Form 10-K, we were not party to any legal proceedings or claims that we would expect to have a material adverse impact on our financial position, results of operations or cash flow.personal data and protected health information.

Corporate Information

WePrior to September 15, 2020, we were a clinical-stage biopharmaceutical company known as resTORbio, Inc. that had historically focused on developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy lifespan. resTORbio was originally incorporated under the laws of the State of Delaware in July ~~2016.~~ 2016 and commenced research and development operations in March 2017.

On September 15, 2020, we completed our business combination whereby a wholly owned subsidiary of resTORbio, Inc. merged with and into Adicet Bio, Inc., with Adicet Bio, Inc. surviving as a wholly-owned subsidiary of resTORbio and changing our name to Adicet Therapeutics, Inc. In connection with the completion of the Merger, resTORbio was renamed Adicet Bio, Inc. (Adicet Bio).

Immediately prior to the Effective Time of the Merger, resTORbio effected a reverse stock split of our common stock at a ratio of 1-for-7. At the Effective Time of the Merger, each outstanding share of former our capital stock was converted into the right to receive 0.1240 shares of resTORbio common stock.

Our ~~principal offices are~~website is located at ~~500 Boylston Street, 13~~^th ~~floor, Boston, MA 02116,~~www.adicetbio.com. Our common stock trades on the Nasdaq Global Market under the symbol “ACET.”

Employees

As of March 10, 2021, we had 81 full-time employees, one part-time employee, and 20 consultants. 51% of our ~~telephone number~~employees are female; 23 of our employees hold a Ph.D; 4 of our employees hold a M.D. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.

In addition to providing attractive and competitive total rewards packages to employees, Adicet believes in fostering individual and organizational effectiveness by offering our employees professional development opportunities that are designed to provide individuals and the organization with the knowledge and skills to respond effectively to current and future business demands and to provide ongoing support to the organization’s development efforts. Our culture is ~~(857) 315-5528~~. one that actively supports the application of new knowledge and skills on the job. We plan to continue to evolve and add to our suite of human capital resources as we grow.

Available Information

Our ~~website~~Internet address is ~~www.restorbio.com.~~www.adicetbio.com. Our ~~website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this~~ Annual ~~Report~~Reports on Form ~~10-K. You should not rely~~10-K, Quarterly Reports on ~~any such~~Form 10-Q, Current Reports on Form 8-K, including exhibits, proxy and information ~~in making your decision whether to purchase our common stock.~~

~~Available Information~~

~~We file annual, quarterly, and current reports, proxy~~ statements and ~~other documents with the Securities~~amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and ~~Exchange Commission (SEC) under~~15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act)~~. The SEC maintains an Internet~~, are available through the “Investors” portion of our website ~~that contains reports, proxy and information statements, and other information regarding issuers, including us, that~~free of charge as soon as reasonably practicable after we electronically file ~~electronically~~such material with, or furnish it to, the SEC. ~~The public can obtain~~Information on our website is not part of this Annual Report on Form 10-K or any ~~documents that we file with the SEC at~~ ~~www.sec.gov~~.

~~Copies~~ of ~~each of~~our other securities filings unless specifically incorporated herein by reference. In addition, our filings with the SEC ~~on Form 10-K, Form 10-Q, and Form 8-K and all amendments to those reports, can~~may be ~~viewed and downloaded free of charge~~accessed through the SEC’s Interactive Data Electronic Applications system at ~~our website, www.restorbio.com after the reports and amendments are electronically filed with, or otherwise furnished to, the SEC.~~

~~Our code of conduct, corporate governance guidelines and the charters~~http://www.sec.gov. All statements made in any of our ~~Audit Committee, Compensation Committee,~~securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and ~~Nominating and Corporate Governance Committee~~we do not assume or undertake any obligation to update any of those statements or documents unless we are ~~available through our website at www.restorbio.com.~~required to do so by law.

Item 1A. ~~Ris~~kRisk Factors.

Investing in our common stock involves a high degree of risk. In evaluating the Company and our business, you should carefully consider the following risks and uncertainties, together with all other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Results of Operations and Financial Condition,” as well as our other filings with the Securities and Exchange Commission, before investing in our common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties actually occur, causing you to lose all or part of your investment in our common stock. The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties that we currently do not know about or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See “Special Note Regarding Forward-Looking Statements and Industry Data” in this Annual Report on Form 10-K.

Risks Related to Our ~~Financial Position~~Business and ~~Need for Capital~~Industry

Risks Related to Operating History

We have a limited operating history and face significant challenges and expense as we build our capabilities.

Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We began operation in November 2014. We have a limited operating history upon which you can evaluate our business and prospects and is subject to the risks inherent in any early stage company, including, among other things, risks that we may not be able to hire sufficient qualified personnel and establish operating controls and procedures. We currently do not have complete in-house resources to enable our gamma delta T cell platform. As we build our own capabilities, we expect to encounter risks and uncertainties frequently experienced by growing companies in new and rapidly evolving fields, including the risks and uncertainties described herein. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biopharmaceutical products.

We have incurred ~~significant~~net losses in every period since our ~~inception. We~~inception and anticipate that we will ~~continue to~~ incur ~~significant~~substantial net losses ~~for~~in the ~~foreseeable future, and we may never achieve or maintain profitability.~~future.

We are ~~a clinical-stage~~an early clinical stage biopharmaceutical ~~company with a limited operating history.~~company. Investment in biopharmaceutical product development is highly speculative because it 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. Our product candidates including ADI-001 and ADI-002, have not yet been evaluated in clinical trials. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we will continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred net losses in each period since our ~~inception in July 2016.~~ inception. For the years ended December 31, 2020, 2019 and 2018, we reported net losses of $36.8 million, 28.1 million and $9.3 million, respectively. As of December 31, 2020, we had an accumulated deficit of $106.5 million.

We ~~have devoted a majority of~~expect to incur significant expenditures for the foreseeable future, and we expect these expenditures to increase as we continue our ~~financial resources and efforts to~~ research and development of, and seek regulatory approvals for, product candidates based on our gamma delta T cell platform, including ~~preclinical studies~~ADI-001 and ADI-002. 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 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 ~~clinical trials.~~ability to generate revenue. Our financial condition and operating results, including net losses, may fluctuate significantly from quarter to quarter and year to year. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance. Additionally, netprior losses and ~~negative cash flows~~expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. For the years ended December 31, 2019 and 2018, we reported a net loss of $82.7 million and $37.6 million, respectively. As of December 31, 2019, we had an accumulated deficit of $154.1 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, and other product candidates.

~~We anticipate that our expenses will increase substantially if and as we:~~

~~continue to develop and conduct clinical trials for our lead product candidate, RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus;~~

~~initiate and continue research, preclinical and clinical development efforts for any current or future product candidates;~~

~~seek to identify additional product candidates;~~

~~seek regulatory approvals for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidates that successfully complete clinical development, if any;~~

establish sales, marketing, distribution, manufacturing, supply chain and other commercial infrastructure in the future to commercialize various products for which we may obtain regulatory approval, if any;

~~require the manufacture of larger quantities of RTB101 alone or in fixed dose combination with a rapalog, such as everolimus or sirolimus, for clinical development and, potentially, commercialization;~~

~~maintain, expand and protect our intellectual property portfolio;~~

•

~~hire and retain additional personnel, such as clinical, quality control, scientific and commercial personnel;~~

~~add operational, financial and management information systems and personnel, including personnel to support our product development and help us comply with our obligations as a public company;~~

~~add equipment and physical infrastructure to support our research and development; and~~

~~acquire or in-license other product candidates and technologies.~~

Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until we are, or any future collaborator is, able to obtain regulatory approval for, and successfully commercialize, RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidates. Successful commercialization will require achievement of key milestones, including demonstrating safety and efficacy in clinical trials, obtaining regulatory, including marketing, approval for these product candidates, manufacturing, marketing and selling those products for which we, or any of our future collaborators, may obtain regulatory approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors. Because of the uncertainties and risks associated with these activities, we are unable to accurately and precisely predict the timing and amount of revenues, the extent of any further losses or if or when we might achieve profitability. We and any future collaborators may never succeed in these activities and,Further, even ~~if we do, or any future collaborators do, we may never generate revenues that are large enough for us to achieve profitability. Even~~ if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Additionally, our expenses could increase if we are required by the FDA or any comparable foreign regulatory authority to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates.

Our failure to become and remain profitable would depress the ~~market price~~value of our ~~common stock~~company and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. If we continue to suffer losses as we have in the past, investors may not receive any return on their investment and may lose their entire investment.

~~Our company has a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability.~~

We were formed in July 2016 and commenced research and development operations in March 2017. Our operations to date have been limited to organizing, staffing and financing our company, raising capital, in-licensing our technology and conducting research and development activities for our product candidates. We have not yet demonstrated an ability to obtain regulatory approvals, manufacture a commercial-scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in clinical development, especially clinical-stage biopharmaceutical companies such as ours. 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 or a history of successfully developing and commercializing pharmaceutical products.

We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives. We will eventually need to transition from a company with a development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product discovery and development programs or commercialization efforts.

Our operations have required substantial amounts of cash since inception. Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. For the foreseeable future, we expect to continue to rely on additional financing to achieve our business objectives.

For the years ended December 31, 2019 and 2018, we used $73.7 million and $35.5 million, respectively, in net cash for our operating activities, of which a majority related to research and development activities. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we initiate new clinical trials of, initiate new research and preclinical development efforts for and seek regulatory approval for, RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any product candidates that we develop or acquire, if any. In addition, if we obtain regulatory approval for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Some of these expenses may be incurred in advance of regulatory approval and could be substantial. Furthermore, we expect to incur significant additional costs associated with our continued operation as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminatemaintain our research and development ~~programs or any future commercialization efforts.~~

We intend to use our existing cash, cash equivalents and marketable securities, to fund the development of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, for PD and other indications, and the remainder, if any, for working capital and general corporate purposes. We will be required to expend significant funds in order to advance the development of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, as well as other product candidates we may seek to develop or acquire. In addition, while we may seek one or more collaborators for future development of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, for one or more additional indications beyond PD or in geographies outside of the United States, Europe and key territories, we may not be able to enter into a collaboration for RTB101 or any other product candidates for such indications or in such geographies on suitable terms, on a timely basis, or at all. In any event, our existing cash, cash equivalents, and marketable securities will not be sufficient to fund all of the efforts, that we plan to undertake or to activities related to the development of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, for PD and other indications, and the development of other pipeline candidates. Accordingly, we will be required to obtain substantial additional funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources.

We cannot be certain that additional funding will be available on acceptable terms, or at all. We have no committed source of additional capital and if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization ofdiversify our product candidates or other research and development initiatives. Any of our current or future license agreements may also be terminated if we are unable to meet the payment or other obligations under the agreements. We could be required to seek collaborators for 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 product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.

~~We believe our existing cash, cash equivalents and marketable securities, will enable us to fund our operating expenses and capital expenditure requirements at least into 2022.~~Our estimate may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future funding requirements, both short- and long-term, will depend on many factors, including:

the scope, progress, timing, costs and results of clinical trials of, and research and preclinical development efforts for, RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, and any future product candidates;

~~our ability to enter into, and the terms and timing of, any collaborations, licensing or other arrangements on favorable terms, if at all;~~

~~the number of future product candidates that we pursue and their development requirements;~~

~~the outcome, timing and costs of seeking regulatory approvals;~~

if approved, the costs of commercialization activities for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate that receives regulatory approval to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

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subject to receipt of regulatory approval, revenue, if any, received from commercial sales of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any future product candidates;

~~the extent to which we in-license or acquire rights to other products, product candidates or technologies;~~

~~our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure;~~

the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreement;

the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights including enforcing and defending intellectual property related claims; and

~~the costs of operating as a public company.~~

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

~~We expect our expenses to increase in connection with our planned operations. Unless and until we can generate a substantial amount~~any of revenue from our product candidates, we expect to finance our future cash needs through public or private equity offerings, debt financings, collaborations, licensing arrangements or other sources, or any combination of the foregoing. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, your ownership interest may be diluted, and the terms of these securities could include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. In addition, debt financing, if available, may result in fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming stock or declaring dividends, that could adversely impact our ability to conduct our business. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which ~~may adversely affect our management’s ability to oversee the development of our product candidates.~~

If we raise additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

~~Our exploration and pursuit of strategic alternatives may not be successful.~~

In February 2020, we announced that we were evaluating of a broad range of strategic alternatives. Potential strategic alternatives that may be explored or evaluated as part of this process include the potential for capital raising transactions, an acquisition, merger, business combination, licensing and/or other strategic transaction involving us. Despite devoting efforts to identify and evaluate potential strategic transactions, the process may not result in any definitive offer to consummate a strategic transaction, or, if we receive such a definitive offer, the terms may not be as favorable as anticipated or may not result in the execution or approval of a definitive agreement. Even if we enter into a definitive agreement, we may not be successful in completing a transaction or, if we complete such a transaction, it may not enhance stockholder value or deliver expected benefits.

~~Changes in tax law~~ ~~could adversely affect our business and financial condition.~~

The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. For example, the ~~Tax Cuts and Jobs Act, or the TCJA, was enacted in 2017 and~~ ~~significantly reformed the Internal Revenue Code of 1986, as amended, or the Code. The TCJA, among other things,~~ contained significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, a limitation of the tax deduction for net interest expense to 30% of adjusted earnings (except for certain small businesses), a limitation of the deduction for net operating losses to 80% of current year taxable income for losses generated in taxable years beginning after December 31, 2017 and an elimination of net operating loss carrybacks for losses generated in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), and the modification or repeal of many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”). Future changes in tax laws could have a material adverse effect on our business, ~~cash flow,~~ financial condition, or results of ~~operations. Prospective~~operations, and prospects and cause investors into lose all or part of their investments.

Our history of recurring losses and anticipated expenditures raise substantial doubts about our ~~common stock should consult with their legal and tax advisors with respect~~ability to ~~potential changes in tax laws and the tax consequences of investing in or holding our common stock.~~

continue as a going concern. Our ability to ~~use net~~continue as a going concern requires that we obtain sufficient funding to finance our operations.

We have incurred operating losses to date and ~~research~~it is possible we will never generate a profit. Our financial statements included elsewhere in this Annual Report on Form 10-K have been prepared on a going concern basis, which contemplates the realization of assets and ~~development credits~~satisfaction of liabilities in the ordinary course of business. These financial statements do not include any adjustments relating to ~~offset future taxable income may be subject~~the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties related to ~~certain limitations.~~

As of December 31, 2019, we had federal net operating loss carryforwards of $127.0 million, of which $14.0 million will begin to expire in 2036 and $113.0 million can be carried forward indefinitely. As of December 31, 2019, we had state net operating loss carryforwards of $130.8 million, which begin to expire in various amounts in 2036. As of December 31, 2019, we also had federal research and development tax credit carryforwards of $3.8 million, which begin to expire in 2037. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In addition, in general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses or tax credits, or NOLs or credits, to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. Our existing NOLs or credits may be subject to limitations arising from previous ownership changes. In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs or credits. We have not completed a study to determine whether our public offerings, private placements and other transactions that have occurred over the past three years may have triggered an ownership change limitation. If we determine that an ownership change has occurred and our ability to ~~use our historical NOLs or credits is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.~~

Furthermore, our ability to utilize our NOLs or credits is conditioned upon our attaining profitability and generating U. S. federal and state taxable income. As described above under “Risk Factors—Risks Related to our Financial Position and Need for Additional Capital,” we have incurred significant net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future; and therefore, we do not know whether or when we will generate the U.S. federal or state taxable income necessary to utilize our NOL or credit carryforwards that are subject to limitation by Sections 382 and 383 of the Code.

~~Risks Related to the Discovery, Development and Commercialization of Our Product Candidates~~

~~Our business depends virtually entirely upon the success of RTB101 alone or in combination with~~operate on a ~~rapalog, such as everolimus or sirolimus.~~going concern basis. If we are unable to ~~successfully develop,~~raise sufficient capital when needed, our business, financial condition and results of operations will be harmed, and we will need to significantly modify our operational plans to continue as a going concern. If we are unable to continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. The potential inclusion of a going concern explanatory paragraph by our auditors, our lack of cash resources and our potential inability to continue as a going concern may negatively impact our share price and our ability to raise new capital or to enter into critical contractual relations with third parties due to concerns about our ability to meet our contractual obligations.

Risks Related to Our Product Candidates

Our business is highly dependent on the success of ADI-001 and ADI-002. If we are unable to obtain ~~regulatory~~ approval for ADI-001 or ~~successfully~~ADI-002 and effectively commercialize ~~RTB101, alone~~ADI-001 or ~~in combination with a rapalog, such as everolimus or sirolimus, our business may be materially harmed.~~

We currently have no products approved for sale and are investing the majority of our efforts and financial resources in the development of our lead product candidate, RTB101, either alone or in combination with a rapalog, such as everolimus or sirolimus. Successful continued development and ultimate regulatory approval of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus,ADI-002 for the treatment of ~~aging-related diseases is critical to the~~patients in our approved indications, our business would be significantly harmed.

Our business and future success ofdepends on our business. We will need to raise sufficient funds for, and successfully enroll and complete, our clinical development program for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, to treat PD and possibly other aging-related diseases. The future regulatory and commercial success of this product candidate is subject to a number of risks, including the following:

~~we may not have sufficient financial and other resources to initiate or complete the necessary clinical trials for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus;~~

~~we may not be able to obtain adequate evidence of clinical efficacy and safety for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or~~ability to obtain regulatory approval of, ~~RTB101~~and then successfully commercialize, our most advanced product candidates, ADI-001 and ADI-002. ADI-001 is in the early stages of development and we intend to initiate the first-in-human clinical trial to assess safety and efficacy of ADI-001 in NHL patients in the first quarter of 2021. ADI-002 is also in the early stage of development and we intend to file an IND in late 2021.

Our preclinical results to date may not predict results for PDour planned trials or any future studies of ADI-001 and ADI-002 or any other allogeneic gamma delta T cell product candidate. Because of the lack of evaluation of allogeneic products and gamma delta T cell therapy products in the clinic to date, any such product’s failure, or the failure of other allogeneic T cell therapies or gamma delta T cell therapies, may significantly influence physicians’ and regulators’ opinions in regards to the viability of our entire pipeline of allogeneic T cell therapies, which could have a material adverse effect on our reputation. If our gamma delta T cell therapy is viewed as less safe or effective than autologous therapies or other ~~indications;~~allogeneic T cell therapies, our ability to develop other allogeneic gamma delta T cell therapies may be significantly harmed.

~~even~~All of our product candidates, including ADI-001 and ADI-002, will require additional clinical and non-clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. In addition, because ADI-001 is our most advanced product candidate, and because our other product candidates are based on similar technology, if ~~RTB101 monotherapy succeeds in its clinical~~ADI-001 encounters safety or efficacy problems, manufacturing problems, developmental delays, regulatory issues or other problems, our development plans and ~~is approved for one or more targeted indications, there can be no assurance that RTB101 in combination with a rapalog, such as everolimus or sirolimus,~~business would be ~~developed successfully and approved, and vice versa;~~

~~we may not be able to maintain an acceptable safety profile for RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, even if approved;~~

we do not know the degree to which RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, will have market uptake as a therapy by patients, the medical community or third-party payors, among others, if approved;

~~in our clinical programs, we may experience variability in the response of subjects to treatment, the need to adjust clinical trial procedures and the need for additional clinical trial sites,~~significantly harmed, which could ~~delay~~have a material adverse effect on our ~~clinical trial progress;~~business, reputation and prospects.

~~the results~~Our gamma delta T cell candidates represent a novel approach to cancer treatment that creates significant challenges for us.

We are developing a pipeline of ~~our clinical trials may not meet the level of statistical significance required by the FDA, the European Medicines Agency, or EMA, or comparable foreign regulatory bodies~~gamma delta T cell product candidates and a novel antibody platform that are intended for ~~regulatory approval~~use in patient with certain cancers. Advancing these novel product candidates creates significant challenges for ~~the treatment of PD or for other indications;~~

we may have difficulty enrolling subjects in trials if, for instance, a current or future effective standard of care limits the desire of patients, physicians, or regulatory agencies to participate in or support clinical trials, or if patients choose to participate in the trials of other sponsors’ product candidates;

~~patients in our clinical trials may die or suffer other adverse effects for reasons that may or may not be related to RTB101, which could delay or prevent further clinical development;~~

~~the requirements implemented by regulatory agencies may change at any time;~~

~~the FDA, EMA or foreign regulatory agencies may require efficacy endpoints for a future clinical trial that differ from the endpoints of our current or future trials, which may require~~ us, ~~to conduct additional clinical trials;~~including:

the mechanism of action of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, is complex and we cannot guarantee the degree to which it will translate into a medical benefit in any indications;

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~~competitor products including generic products may be developed that may have similar or better safety~~manufacturing our product candidates to our specifications and ~~efficacy or lower costs than RTB101 alone or~~ in ~~combination with~~ a ~~rapalog, such as everolimus or sirolimus;~~timely manner to support our future clinical trials, and, if approved, commercialization;

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sourcing future clinical and, if approved, commercial supplies for the raw materials used to manufacture our product candidates;

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understanding and addressing variability in the quality of a donor’s T cells, which could ultimately affect our ability to produce product in a reliable and consistent manner;

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inability to achieve efficacy in cancer patients following treatment with our product candidates;

~~we may not be able~~

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achieving a side effect profile, including GvHD, from our product candidates that makes them commercially attractive for further development;

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educating medical personnel regarding the potential side effect profile of our product candidates, if approved;

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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 efficacy of the treatment;

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conditioning patients with chemotherapy or other lymphodepletion agents in advance of administering our product candidates, which may increase the risk of adverse side effects;

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obtaining regulatory approval, as the FDA and other regulatory authorities have limited experience with development of allogeneic T cell therapies for cancer; and

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

The success of our business, including our ability to ~~establish sales, marketing, distribution~~obtain financing and ~~other commercial infrastructure~~generate any revenue in the future, ~~to commercialize various products for~~will primarily depend on the successful development, manufacturing, positive efficacy and safety profile in our clinical trials, regulatory approval and commercialization of our novel product candidates, which we may ~~obtain regulatory approval;~~

Many of these risks are beyond our control, including the risks related to clinical development, the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of any future collaborator. If we are unable to develop, receive regulatory approval for, or successfully commercialize RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, or if we experience delays as a result of any of these risks or otherwise, our business could be materially harmed.

In addition, of the large number of drugs in development in the pharmaceutical industry, only a small percentage result in the submission of an NDA to the FDA and even fewer are approved for commercialization. Furthermore, even if we do receive regulatory approval for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, any such approval may be subject to limitations on the indicated uses or patient populations for which we may market the product. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, we cannot assure you that we will successfully develop or commercialize RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, for PD or any other indications. If we or any of our ~~future collaborators~~product candidates in clinical trials or in obtaining marketing approval thereafter. Given our early stage of development, it may be several years, if at all, before we have demonstrated the safety and efficacy of a product candidate sufficient to warrant approval for commercialization. If we are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize ~~RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, for PD or any other indications,~~our product candidates, we may not be able to generate sufficient revenue to continue our ~~business.~~business, which could have a material adverse effect on our results of operations and prospects.

Our product candidates are based on novel technologies, which makes it difficult to predict the likely success of such product candidates and the time and cost of product candidate development and obtaining regulatory approval.

We ~~depend~~have concentrated our research and development efforts on our allogeneic gamma delta T cell therapy and our future success depends on the successful ~~initiation~~development of this therapeutic approach. We are in the early stages of developing our platform and ~~completion~~product candidates and there can be no assurance that any development problems we have experienced or may experience in the future will not cause significant delays or result in unforeseen issues or unanticipated costs, or that any such development problems or issues can be overcome. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our future clinical studies or commercializing our products on a timely or profitable basis, if at all. In addition, our expectations with regard to the advantages of ~~clinical trials for RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus. The positive clinical results, if any, obtained in prior or ongoing clinical trials~~an allogenic gamma delta T cell therapy platform relative to other therapies may not ~~be predictive~~materialize or materialize to the degree we anticipate. Further, our scalability and costs of ~~future results or repeated in later-stage~~manufacturing may vary significantly as we develop our product candidates and understands these critical factors.

~~Before obtaining~~study requirements of the FDA, European Medicines Agency (EMA) and other regulatory ~~approval for~~agencies and the ~~sale of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other potential product candidate, we must conduct additional clinical trials~~criteria these regulators use to demonstrate safety and efficacy in humans. The regulatory requirements for demonstrating efficacy and safety for obtaining approval for RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, may differ. A failure of one or more clinical trials can occur at any stage of testing. For example, in November 2019, we announced that top line data from the PROTECTOR 1 Phase 3 study, evaluatingdetermine the safety and efficacy of ~~RTB101 in preventing clinically symptomatic respiratory illness in adults age 65~~a product candidate are determined according to the type, complexity, novelty and ~~older, did not meet its primary endpoint~~intended use and ~~that we have stopped~~market of the ~~development of RTB101~~potential products. The regulatory approval process for clinically symptomatic respiratory illness. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in late stage clinical development, even after seeing promising results in earlier clinical trials.

~~We may experience a number of unforeseen events during, or as a result of, clinical trials for RTB101, alone or in combination with a rapalog,~~novel product candidates such as ~~everolimus~~ours can be more complex and consequently more expensive and take longer than for other, better known or ~~sirolimus, or any other potential product candidate that could adversely affect the costs, timing, or successful completion of our clinical trials, including:~~

Regulators, IRBs of the institutions in which clinical trials are being conducted or data monitoring committees 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 protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resultingapproved in the ~~imposition of a~~future. Unexpected clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, or changes in governmental regulations or administrative actions or we may have a lack of adequate funding to continue the clinical trial.

Negative or inconclusive results from our clinical trials of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, or any other clinical trial or preclinical studies in animals that we conduct,outcomes could ~~mandate repeated or additional clinical trials. We do not know whether any clinical trials that we may conduct will demonstrate adequate efficacy~~materially and safety to result in regulatory approval to market RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other potential product candidate. If later stage clinical trials do not produce favorable results, our ability to obtain regulatory approval for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other potential product candidate may be adversely impacted.

Clinical trials must be conducted in accordance with the laws and regulations of the FDA, EMA and other applicable regulatory authorities’ laws, and are subject to oversight by these governmental agencies and IRBs at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of our product candidates produced under cGMP, requirements and other regulations. Furthermore, we rely on CROs, and clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance. We depend on our collaborators and on medical institutions and CROs to conduct our clinical trials in compliance with GCP, requirements. To the extent our collaborators or the CROs fail to enroll participants for our clinical trials, fail to conduct the study to GCP standards or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both. In addition, clinical trials that are conducted in countries outside the United States and EU may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement of non-U.S. and non-EU CROs, as well as expose us to risks associated with clinical investigators who are unknown to the FDA or the EMA, and different standards of diagnosis, screening and medical care.

~~We may be subject to additional risks because we are administering RTB101 in combination with other mTOR inhibitors, including rapalogs, such as everolimus or sirolimus.~~

We are evaluating RTB101 in combination with other mTOR inhibitors. The use of RTB101 in combination with other compounds may subject us to risks that we would not face if RTB101 were being administered as a monotherapy. For example, other mTOR inhibitors, including rapalogs, such as everolimus or sirolimus, may have safety issues that are improperly attributed to RTB101 or the administration of RTB101 with such other therapies may result in safety issues that such other therapies or RTB101 would not have when used alone. In addition, other mTOR inhibitors with which we may administer RTB101, including a rapalog, such as everolimus or sirolimus, could be removed from the market and thus be unavailable for testing or commercial use concomitantly with RTB101. The outcome and cost of developing a product candidate to be used with other compounds is difficult to predict and dependent on a number of factors that are outside our reasonable control. If we experience efficacy or safety issues in our clinical trials in which RTB101 is being administered with a rapalog, such as everolimus or sirolimus, we may not receive regulatory approval for RTB101, which could prevent us from ever generating revenue or achieving profitability.

Competitive products may reduce or eliminate the commercial opportunity for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus. If our competitors develop technologies or product candidates more rapidly than we do, or their technologies are more effective or safer than ours, our ability to develop and successfully commercialize RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, may be adversely affected.

The clinical and commercial landscape for aging-related diseases is highly competitive and subject to rapid and significant technological change. New data from competitors’ product candidates continue to emerge. It is possible that these data may alter the current standard of care, completely precluding us from further developing RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, for PD or other aging-related diseases. Further, it is possible that we may initiate a clinical trial or trials for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other potential product candidate only to find that data from competing products make it impossible for us to complete enrollment in clinical trials, resulting in our inability to submit applications for regulatory approval with regulatory agencies. Even if RTB101 were approved, alone or in combination with a rapalog, such as everolimus or sirolimus, it may have limited sales due to competition in the specific indications approved.

Competitive therapeutic treatments for aging-related diseases, including PD, include those that are currently in development and any new treatments that enter the market. We believe that a significant number of product candidates are currently under development, and may become commercially available in the future, for the treatment of conditions for which we may try to develop product candidates. Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. We consider Navitor Pharmaceuticals, Inc. to be our most direct competitor in developing novel therapeutics targeting the TORC1 for aging-related diseases. Additionally, we are also aware of other companies seeking to develop treatments to prevent or treat aging-related diseases through biological pathways unrelated to mTOR inhibition, including Calico Life Sciences LLC, or Calico, and UNITY Biotechnology, Inc., or Unity. Calico has not yet disclosed any pipeline candidates, and Unity’s most advanced candidate, based on publicly disclosed information, is in Phase 1 clinical trials for osteoarthritis.

We are also aware of other companies that are potential competitors for prevention or treatment of aging-associated pathologies such as neurodegeneration. Companies pursuing prevention or treatment of aging-associated pathologies such as neurodegeneration in PD include: Denali Therapeutics, Inc., Acorda Therapeutics, Inc., Prothena Biosciences, Inc., Takeda Pharmaceutical Company (formerly Shire plc), Affiris AG, Biogen Inc., Inflazome Ltd., Casma Therapeutics, Inc., Neuropore Therapies, Inc., Caraway Therapeutics, Inc. (previously called Rheostat Therapeutics), Selphagy Therapeutics Inc., and others. Companies pursuing treatments for levodopa-induced dyskinesia in PD include: VistaGen Therapeutics, Inc., Prilienia Therapeutics, Inc., IRLAB Therapeutics AB, Neurolixis Inc, and others.

Many of our competitors have greater financial, technical, manufacturing, marketing, sales and supply resources, and human resources or experience than us and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining regulatory approval for therapies and achieving widespread market acceptance. Our competitors’ products may be more effective, or more effectively marketed and sold, than any product candidate we may commercialize and may render our therapies obsolete or non-competitive before we can recover development and commercialization expenses. If RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, is approved for the indications we are currently pursuing, it could compete with a range of therapeutic treatments that are in development. In addition, our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective or less costly than RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidates that we are currently developing or that we may develop, which could render our product candidates obsolete and noncompetitive.

If we obtain approval for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other future product candidate, we may face competition based on many different factors, including the efficacy, safety and tolerability of our products, the ease with which our products can be administered, the timing and scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Existing and future competing products could present superior treatment alternatives, including being more effective, safer, less expensive or marketed and sold more effectively than any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our product candidates. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a small number of competitors.

We also compete with other clinical stage companies and institutions for clinical trial participants, which could reduce our ability to recruit participants for our clinical trials. Delay in recruiting clinical trial participants could adversely affect our ability to bring a product to market prior to our competitors. Further, research and discoveries by others may result in breakthroughs that render our product candidates obsolete even before they begin to generate any revenue.

In addition, our competitors may obtain patent protection, regulatory exclusivities, or FDA approval and commercialize products more rapidly than we do, which may impact future approvals or sales of any of our product candidates that receive regulatory approval. If the FDA approves the commercial sale of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate, we will also be competing with respect to marketing capabilities and manufacturing efficiency. We expect competition among products will be based on product efficacy and safety, the timing and scope of regulatory approvals, availability of supply, marketing and sales capabilities, product price, reimbursement coverage by government and private third-party payors, regulatory exclusivities and patent position. Our profitability and financial position will suffer if our product candidates receive regulatory approval, but cannot compete effectively in the marketplace.

Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites, as well as in acquiring technologies complementary to, or necessary for, our programs.

Furthermore, regulatory authorities’ assessment of the data and results required to demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information, including on other products, changing policies and agency funding, staffing and leadership. We cannot be sure whether future changes to the regulatory environment will be favorable or unfavorable to our business, prospects. For example, average review times at the FDA for regulatory approval applications can be affected by a variety of factors, including budget and funding levels and statutory, regulatory and policy changes.

The regulatory approval processes of the FDA, EMA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If clinical trials of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, fail to satisfactorily demonstrate safety and efficacy to the FDA or other regulators, or do not otherwise produce favorable results, we, or any future collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus.

We, and any future collaborators, are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining regulatory approval from the FDA. Foreign regulatory authorities, such as the EMA, impose similar requirements. The time required to obtain approval by the FDA, EMA and comparable foreign authorities is unpredictable, but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. To date, we have not submitted an NDA to the FDA or similar drug approval submissions to comparable foreign regulatory authorities for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate. We, and any future collaborators, must complete additional preclinical or nonclinical studies and clinical trials to demonstrate the safety and efficacy of our product candidates in humans before we will be able to obtain these approvals.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, or other drugs is susceptible to the risk of failure inherent at any stage of development, including failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable regulatory requirements, and determination by the FDA or any comparable foreign regulatory authority that a product candidate may not continue development or is not approvable. It is possible that even if RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate that is greater than the actual positive effect, if any. For example, in a topline analysis of our Phase 2b clinical trial, we observed that certain cohorts responded better to study drug treatment than others, and that certain cohorts did not respond at all. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by RTB101, everolimus or any other product candidate, or mistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact the case.

Any inability to successfully complete preclinical and clinical development could result in additional costs to us, or any future collaborators. Moreover, if we, or any future collaborators, are required to conduct additional clinical trials or other testing of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate beyond the trials and testing that we or they contemplate, if we or they are unable to successfully complete clinical trials of our product candidates or other testing or the results of ~~these trials or tests are unfavorable, uncertain or are only modestly favorable, or there are unacceptable safety concerns associated with our product candidates, we, or any future collaborators may:~~operations and prospects.

Our failure to successfully initiate and complete clinical trials of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate would significantly harm our business. Our product candidate development costs will also increase if we experience delays in testing or regulatory approvals and we may be required to obtain additional funds to complete clinical trials. We cannot assure you that our clinical trials will begin as planned or be completed on schedule, if at all, or that we will not need to restructure our trials after they have begun. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates, which may harm our business and results of operations. In addition, many of the factors that cause, or lead to, delays of clinical trials may ultimately lead to the denial of regulatory approval of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate.

Our product candidates may cause undesirable side effects or have other properties that could ~~delay or~~halt our clinical development, prevent ~~their~~our regulatory approval, limit ~~the~~our commercial ~~profile of an approved label,~~potential or result in significant negative ~~consequences following regulatory approval, if obtained.~~consequences.

Undesirable or unacceptable side effects caused by ~~RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other~~our product ~~candidate~~candidates could cause us or regulatory authorities 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. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. ~~In clinical trials~~Approved autologous CAR-T therapies and those under development have shown frequent rates of ~~RTB101, alone~~cytokine release syndrome and ~~in combination with everolimus, to date, there were no observed study drug-related serious~~neurotoxicity, and adverse events have resulted in the ~~Phase 2a clinical trial. In the Phase 2b clinical trial, 4.5%~~death of subjects in the RTB101 10 mg once daily cohort had a serious adverse event, none of which were related to the study drug, though 4.5% of subjects in that arm discontinued the study drug due to an adverse event. The majority of observed study-drug relatedpatients. While we believe our gamma delta T cell therapy may lessen such results, similar or other adverse events ~~were mild~~for our allogeneic gamma delta T cell product candidates may occur. In addition, while we anticipate our focus on gamma delta T cells may lessen the likelihood of GvHD relative to therapies relying on unrelated alpha beta T cells, similar or moderate in severity, transient and resolved without stopping the study drug. However, there can be no guarantee that we would observe a similar tolerability profile of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, in future clinical trials. Many compounds that initially showed promise in clinical or earlier stage testing are later found to cause undesirable or unexpected side effects that prevented further development of the compound.other adverse events for our allogeneic gamma delta T cell product candidates may occur.

If unacceptable ~~side effects~~toxicities arise in the development of our product candidates, we ~~the FDA or comparable foreign regulatory authorities, the IRBs, or independent ethics committees at the institutions in which our trials are conducted, or the Data Safety Monitoring Board, or DSMB,~~ could suspend or terminate our ~~clinical~~ trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. ~~Treatment-emergent~~The data safety monitoring board may also suspend or terminate a clinical trial at any time on various grounds, including a finding that the research patients are being exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials. Treatment-related side effects ~~that are deemed to be treatment-related~~ could also affect ~~subject~~patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. ~~In addition, these~~Novel therapeutic candidates, such as those developed by us, may result in novel side ~~effects~~effect profiles that may not be appropriately recognized or managed by the treating medical staff. We ~~expect to have~~anticipate having to train medical personnel using our product candidates to understand the side effect ~~profiles~~profile of our product candidates for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in serious adverse events including patient ~~injury or death.~~deaths. Based on available preclinical data and on management’s clinical experience with other cell therapy agents, the safety profile of our pipeline product candidates is expected to include cytokine release syndrome, neurotoxicity, and possibly additional adverse events. Any of these occurrences may ~~harm~~have a material adverse effect our business, financial condition and ~~prospects significantly.~~prospects.

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

Before obtaining regulatory approvals for the commercial sale of our product candidates, including ADI-001 and ADI-002, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates are conducted in carefully defined sets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials, or those of any future collaborator, may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a product candidate, we, or others, discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse consequences could occur:

~~Any of these events could harm our business and operations and could negatively impact our stock price.~~

If we fail to develop RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, for additional indications or fail to discover, develop and commercialize other product candidates, we may be unable to grow our business and our ability to achieve our strategic objectives would be impaired.

Although the development of RTB101 for PD is our primary focus, as part of our longer-term growth strategy, we may evaluate RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, in other indications and develop other product candidates. We intend to evaluate strategic alternatives and internal opportunities from RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or other product candidates from our TORC1 program, and also may choose to in-license or acquire other product candidates as well as commercial products to treat patients suffering from other disorders with significant unmet medical needs and limited treatment options. These other product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot assure you that any such products that are approved will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace or be more effective than other commercially available alternatives.

Research programs to identify product candidates require substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including the following:

~~If we are unsuccessful in identifying and developing additional product candidates, our potential for growth and achieving our strategic objectives may be impaired.~~

~~Our preclinical programs may not produce new product candidates that are suitable for clinical trials or that can be successfully commercialized or generate revenue through collaborations.~~

We must successfully complete preclinical testing for our preclinical programs, which may include demonstrating activity and comprehensive studies to show the lack of toxicity and other adverse effects in established animal models, before commencing clinical trials for any product candidate. Many pharmaceutical products do not successfully complete preclinical testing and, even if preclinical testing is successfully completed, may fail in clinical trials. In addition, there can be no assurance that positive results from preclinical studies will be predictive of results obtained from subsequent preclinical studies or clinical trials. Many pharmaceutical candidates are not suitable for manufacture on the scale or of the quality required for clinical trials or commercialization. Some pharmaceutical candidates that initially seem suitable may later be found to be insufficiently stable or may generate toxic impurities over time. We also cannot be certain that any product candidates that do advance into clinical trials will successfully demonstrate safety and efficacy in clinical trials. Even if we achieve positive results in early preclinical studies or clinical trials, they 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 clinical trials. Product candidates in later ~~trials.~~

~~Results~~stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and ~~early clinical trials may not be predictive of results of future clinical trials, and such results do not guarantee approval of a product candidate by regulatory authorities.~~

The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict success in the results of completedinitial clinical trials. ~~Many~~A number of companies in the ~~pharmaceutical and biotechnology industries~~biopharmaceutical industry have suffered significant setbacks in ~~late-stage~~advanced clinical trials ~~after achieving positive~~due to lack of efficacy, insufficient durability of efficacy or unacceptable safety issues, notwithstanding promising results in earlier ~~development,~~trials. Most product candidates that commence clinical trials are never approved as products.

In addition, for ADI-001 and ADI-002 and any future trials that may be completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could ~~face similar setbacks.~~be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, approval of our product candidates may be significantly delayed, or we may be required to expend significant additional resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates. Any of the foregoing could have a material adverse effect on our business, prospects and financial condition.

Interim “top line” and preliminary data from our clinical trials that we may announce or publish from time to time may change as more patient data becomes available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim “top line” or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.

Preliminary or “top line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

We may not be able to file INDs 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.

In October 2020, the IND for our lead product candidate, ADI-001, to treat patients with NHL was cleared by the FDA. Additionally, we plan to submit an IND and, subject to the FDA’s regulatory process for review of INDs, initiate Phase 1 clinical trials of ADI-002 in late 2021. However, our timing of filing on ADI-002 is dependent on further preclinical and manufacturing success, which we work on with various third parties. We cannot be sure that we will be able to submit our IND in a timely manner, if at all, or that submission of an IND or IND amendment will result in the FDA allowing testing and clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND or clinical trial application, we cannot guarantee that such regulatory authorities will not change their requirements in the future. The ~~design of~~inability to initiate a clinical trial on ADI-001 or ADI-002 on the timeline currently anticipated or at all could have a material adverse effect on our business, results of operations and prospects.

We may encounter substantial delays in our clinical trials, or may not be able to conduct our trials on the timelines we expect.

Clinical testing is expensive, time consuming and subject to uncertainty. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. Even if these trials begin as planned, issues may arise that could suspend or terminate such clinical trials. A failure of one or more clinical studies can ~~determine whether~~occur at any stage of testing, and our future clinical studies may not be successful. Events that may prevent successful or timely completion of clinical development include:

Our timing of filing on these product candidates is dependent on further preclinical and manufacturing success, which we work on with various third parties. We cannot be sure that we will ~~support approval~~be able to submit our IND in a timely manner, if at all, or that submission of ~~a product and flaws~~an IND or IND amendment will result in the FDA allowing testing and clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation of athe clinical trials set forth in an IND or clinical trial ~~may~~application, we cannot guarantee that such regulatory authorities will not ~~become apparent until~~change their requirements in the ~~clinical trial is well advanced. In addition,~~future.

Any inability to successfully complete preclinical and clinical ~~data are often susceptible~~development could result in additional costs to ~~varying interpretations and analyses. Many companies that believed their~~us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, ~~performed satisfactorily in preclinical~~we may be required to or we may elect to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical study delays could also shorten any periods during which our products have patent protection and ~~clinical trials have nonetheless failed~~may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

Monitoring safety of patients receiving our product candidates is challenging, which could adversely affect our ability to obtain ~~the same positive results in later studies or~~ regulatory approval ~~for their product candidates.~~and commercialize.

For example, in November 2019, we announced that top line data from the PROTECTOR 1 Phase 3 study, evaluating the safety and efficacy of RTB101 in preventing clinically symptomatic respiratory illness in adults age 65 and older, did not meet its primary endpoint and that we have stopped the development of RTB101 for clinically symptomatic respiratory illness.

In some instances, there can be significant variability in safety or efficacy results between different 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 dosing regimen and other clinical trial procedures and the rate of dropout among clinical trial participants. If we fail to receive positive results inour planned clinical trials of our product candidates, we have contracted with and expect to continue to contract with academic medical centers and hospitals experienced in the ~~development timeline~~assessment and ~~regulatory approval~~management of toxicities arising during clinical trials. Nonetheless, these centers and ~~commercialization prospects for our most advanced product candidate,~~hospitals may have difficulty observing patients and ~~correspondingly, our business and financial prospects would be negatively impacted.~~

Wetreating toxicities, which may ~~expend our resources to pursue a particular product candidate or indication and forgo the opportunity to capitalize on product candidates or indications that may ultimately~~ be more ~~profitable~~challenging due to personnel changes, inexperience, shift changes, house staff coverage or ~~for~~related issues. This could lead to more severe or prolonged toxicities or even patient deaths, which ~~there is a greater likelihood~~could result in us or the FDA delaying, suspending or terminating one or more of ~~success.~~

~~Because we have limited financial~~our clinical trials, and ~~managerial resources, we intend~~which could jeopardize regulatory approval. Medicines used at centers to ~~focus on developing product candidates for specific indications that we identify as most likely to succeed, in terms~~help manage adverse side effects of ~~both their potential for regulatory approval~~ADI-001 and ~~commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may prove to have greater commercial potential.~~

Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indicationsADI- 002 may not ~~yield any commercially viable product candidates. If we do not accurately evaluate~~adequately control the ~~commercial potential~~ side effects and/or ~~target market for~~may have a particular product candidate, we may relinquish valuable rights to that product candidate 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 todetrimental impact on the ~~product candidate.~~

If the FDA or comparable foreign regulatory authorities approve generic versions of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate of ours that receives regulatory approval, or such authorities do not grant our products appropriate periods of non-patent exclusivity before approving generic versions of such products, the sales of such products could be adversely affected.

Once an NDA is approved, the product covered thereby becomes a “listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” or the Orange Book. Manufacturers may seek approval of generic versions of reference listed drugs through submission of abbreviated new drug applications, or ANDAs, in the United States. In support of an ANDA, a generic manufacturer generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration, conditions of use and labeling as the reference listed drug and that the generic version is bioequivalent to the reference listed drug, meaning, in part, that it is absorbed in the body at the same rate and to the same extent. Generic products may be significantly less costly to bring to market than the reference listed drug and companies that produce generic products are generally able to offer them at lower prices. Moreover, many states allow or require substitution of therapeutically equivalent generic drugs at the pharmacy level even if the branded drug is prescribed. Thus, following the introduction of a generic drug, a significant percentageefficacy of the ~~sales~~treatment. Use of ~~any branded product or reference listed drug~~these medicines may ~~be lost to the generic product.~~

The FDA may not approve (or in some cases, accept) an ANDA for a generic product until any applicable period of non-patent exclusivity for the reference listed drug has expired. The Federal Food, Drug,increase with new physicians and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug containing NCE. Specifically, in cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the listed drug is invalid, unenforceable or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the listed drug. It is unclear whether the FDA will treat the active ingredients incenters administering our product candidates, ~~as NCEs and, therefore, afford them five years~~any of NCE data exclusivity if they are approved. If any product we develop does not receive five years of NCE exclusivity, it may nevertheless receive three years of exclusivity if it meets applicable requirements. If so, the FDA may not approve generic versions of such product until three years after its date of approval. Three-year exclusivity is given towhich could have a drug if it contains an active moiety that has previously been approved, and the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the NDA. If approved, manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for our product.

~~Competition that our products, if approved, may face from generic versions of our products could negatively impact our future revenue, profitability and cash flows and substantially limit~~material adverse effect on our ability to obtain regulatory approval and commercialize on the timelines anticipated or at all, which could have a ~~return~~material adverse effect on our ~~investments in those product candidates.~~business and results of operations.

If we encounter difficulties enrolling patients in our ~~future~~ 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.~~reasons, including, without limitation, the impact of the COVID-19 pandemic. The timely completion of clinical trials in accordance with ~~their~~the protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until ~~its~~the conclusion.

~~Patient~~ The enrollment ~~is affected by~~of patients depends on many factors, including:

In addition, 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 trials may instead opt to enroll in a trial being conducted by one of our competitors. 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~~are also being used by some of our competitors, ~~use,~~ which ~~will~~may reduce the number of patients who are available for our clinical trials in ~~such~~that clinical trial site.

~~Our~~Moreover, because our product candidates represent unproven methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and hematopoietic cell transplantation or autologous CAR-T cell therapies, rather than enroll patients in our clinical trial. Patients eligible for allogeneic CAR-T cell therapies but ineligible for autologous CAR T cell therapies due to aggressive cancer and inability to ~~enroll a sufficient number of patients~~wait for ~~our clinical trials would result in significant delays or might require us to abandon one or more clinical trials altogether.~~ autologous CAR-T cell therapies may be at greater risk for complications and death from therapy.

Delays in patient enrollment may result in increased costs or may affect the timing or outcome of ~~the~~our ongoing clinical trial and planned clinical trials, ~~product candidate development and approval process and jeopardize our ability to seek and obtain the regulatory approval required to commence product sales and generate revenue,~~ which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.

Clinical trials are expensive, time-consuming and difficult to design and implement.

Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Because our gamma delta T cell product candidates ~~cause~~are based on new technologies and will require the ~~value~~creation of inventory of mass-produced, off-the-shelf products, we expect that we will require extensive research and development and have substantial manufacturing and processing costs. In addition, costs to treat patients with NHL cancer and to treat potential side effects that may result from our ~~company~~product candidates can be significant. Accordingly, our clinical trial costs are likely to ~~decline~~be significantly higher than for more conventional therapeutic technologies or drug products, which is expected to have a material adverse effect on our financial position and ~~limit~~ability to achieve profitability.

A variety of risks associated with conducting research and clinical trials abroad and marketing our product candidates internationally could materially adversely affect our business.

We plan to globally develop our product candidates. Accordingly, we expect that it will be subject to additional risks related to operating in foreign countries, including:

These and other risks associated with our potential international operations may materially adversely affect our ability to ~~obtain additional financing if needed.~~attain or maintain profitable operations, which could have a material adverse effect on our business and results of operations.

The market opportunities for our product candidates may be limited to those patients who are ineligible for or have failed prior treatments and ~~other materials necessary~~may be small.

The FDA often approves new therapies initially only for use in patients who are currently not adequately treated with currently approved therapies. We expect to ~~manufacture RTB101 or rapalogs, such as everolimus or sirolimus, may not be available on commercially reasonable terms, or at all, which may adversely affect the development~~initially seek approval of ADI-001 and ~~commercialization of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus.~~

WeADI-002 and our ~~third-party manufacturers must obtain from~~ other ~~third-party suppliers the active pharmaceutical ingredients, excipients~~product candidates in this setting. Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval in earlier lines of treatment and ~~primary and secondary packaging materials necessary for our contract manufacturers to produce RTB101 or rapalogs, such~~potentially as ~~everolimus or sirolimus, for our clinical trials and, to the extent approved or commercialized, for commercial distribution.~~a first line therapy. There is no guarantee that our product candidates, even if approved, would be approved for earlier lines of therapy, and, prior to any such approvals, we ~~would~~will have to conduct additional clinical trials, including potentially comparative trials against approved therapies. We are also targeting a similar patient population as autologous CAR-T product candidates, including approved autologous CAR-T products. Our therapies may not be as safe and effective as autologous CAR-T therapies and may only be approved for patients who are ineligible for autologous CAR-T therapy.

Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers in a position to receive second or later lines 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, patient foundations, or market research and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates. Even if we obtain significant market share for our product candidates, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications.

If we fail to develop additional product candidates, our commercial opportunity will be limited.

One of our core strategies is to pursue clinical development of additional product candidates beyond ADI-001 and ADI-002. Developing, obtaining regulatory approval and commercializing additional gamma delta T cell product candidates will require substantial additional funding and is prone to the risks of failure inherent in medical product development. We cannot provide you any assurance that it will be able to ~~enter into all~~successfully advance any of these additional product candidates through the ~~necessary agreements with third-party suppliers that we require for the supply of such materials on commercially reasonable terms, or at all.~~ development process.

Even if we ~~were able~~receive FDA approval to ~~secure~~market additional product candidates for the treatment of cancer, we cannot assure you that any such ~~agreements or guarantees, our suppliers may~~product candidates will be ~~unable or choose not to provide us the ingredients, excipients or materials in a timely manner or~~successfully commercialized, widely accepted in the ~~quantities required.~~marketplace or more effective than other commercially available alternatives. If we ~~or our third-party manufacturers~~ are unable to ~~obtain~~successfully develop and commercialize additional product candidates, our commercial opportunity will be limited. Moreover, a failure in obtaining regulatory approval of additional product candidates may have a negative effect on the ~~quantities~~approval process of ~~these ingredients, excipients~~any other, or ~~materials that are necessary for the manufacture~~result in losing approval of ~~commercial supplies of RTB101 or rapalogs, such~~any approved, product candidate which could have a material adverse effect on our business and prospects.

We currently have no marketing and sales organization and as ~~everolimus or sirolimus, our ability to generate revenue from the sale of RTB101 alone or~~a company have no experience in ~~combination with a rapalog, such as everolimus or sirolimus, would be materially and adversely affected.~~

~~Further, if~~marketing products. If we ~~or our third-party manufacturers~~ are unable to ~~obtain active pharmaceutical ingredients, excipients~~establish marketing and ~~materials as necessary for our clinical trials~~sales capabilities or ~~for the manufacture of commercial supplies of~~enter into agreements with third parties to market and sell our product candidates, if approved, potential regulatory approval or commercialization would be delayed, which would materially and adversely affect our ability to generate revenue from the sale of our product candidates. As a result of these and other factors, the cost of manufacturing drug material may not support continued development or commercialization or may materially reduce revenue. We are also unable to predict how changing global economic conditions or potential global health concerns such as the coronavirus will affect our third-party suppliers and manufacturers. Any negative impact of such matters on our third-party suppliers and manufacturers may also have an adverse impact on our results of operations or financial condition.

Even if RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate of ours receives regulatory approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, in which case we may not be able to generate ~~significant revenues or become profitable.~~product revenue.

We currently have ~~never commercialized~~no sales, marketing or distribution capabilities and as a ~~product,~~company have no experience in marketing products. We may develop a marketing organization and ~~even if RTB101, alone or in combination~~sales force, which will require significant capital expenditures, management resources and time. We will have to compete with ~~a rapalog, such as everolimus or sirolimus, or any~~ other ~~product candidate of ours is approved by the appropriate regulatory authorities for~~pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and ~~sale, it may nonetheless fail~~sales personnel.

If we are unable or decide not to ~~gain sufficient market acceptance by physicians, patients, third-party payors~~establish internal sales, marketing and ~~others in~~distribution capabilities, we will pursue collaborative arrangements regarding the ~~medical community. The market for therapies targeting Parkinson’s disease with a TORC1 inhibitor is novel,~~sales and ~~physicians may~~marketing of our products; however, there can be ~~reluctant~~no assurance that we will be able to ~~adopt novel therapies. In addition, patients and their physicians may not desire to add RTB101, alone~~establish or ~~in combination with a rapalog,~~maintain such ~~as everolimus~~collaborative arrangements, or sirolimus, even if approved, to their existing treatment regime. Further, patients often acclimate to the treatment regime that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch due to lack of coverage and reimbursement. In addition, even if we are able to ~~demonstrate~~do so, that it will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product ~~candidates’ safety~~candidates ourselves. We also face competition in our search for third parties to assist us with the sales and ~~efficacy~~marketing efforts of our product candidates.

There can be no assurance that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product that receives regulatory approval in the ~~FDA~~U.S. or overseas. If we are unable to successfully market and distribute our products, our business, results of operations and prospects could be materially adversely affected.

We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

The biopharmaceutical industry, and the immuno-oncology industry specifically, is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other ~~regulators, safety~~research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations and well-established sales forces. Smaller or ~~efficacy concerns~~early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the ~~medical community~~biotechnology and pharmaceutical industries may ~~hinder market acceptance.~~

~~Efforts to educate~~result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the ~~medical community~~commercial applicability of technologies and ~~third-party payors~~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 ~~benefits~~development of our technologies and products.

Specifically, engineered T cells face significant competition in both the CAR and TCR technology space from multiple companies. Even if we obtain regulatory approval of our product candidates, ~~may require significant resources, including management time~~the availability and ~~financial resources,~~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 successful. If RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate is approved but does not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become profitable. The degree of marketable to implement our business plan if the acceptance of our product candidates is affected 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.

We do not currently operate our own manufacturing facility, which would require significant resources and any failure to successfully manufacture our products could adversely affect our clinical trials and the commercial viability of our product candidates.

We may not be able to achieve clinical or commercial manufacturing and cell processing on our own or through our CMOs, including mass-producing off-the-shelf product to satisfy demands for any of our product candidates. Very few companies have experience in manufacturing gamma delta T cell therapy derived from blood of healthy donors and gamma delta T cells require several complex manufacturing steps before being available as a mass-produced, off-the-shelf product. While we believe our manufacturing and processing approaches are appropriate to support our clinical product development, we have limited experience in managing the allogeneic gamma delta T cell engineering process, and our allogeneic processes may be more difficult or more expensive than the approaches taken by our competitors. We cannot be sure that the manufacturing processes employed by or on our behalf will result in T cells that will be safe and effective.

Our operations remain subject to review and oversight by the FDA and the FDA could object to our use of any manufacturing facilities. We must first receive approval from the FDA prior to licensure to manufacture our product candidates, which we may never obtain. Even if approved, ~~for~~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.

Our cost of goods development is at an early stage. The actual cost to manufacture and process our product candidates could be greater than we expect and could materially and adversely affect the commercial ~~sale, will depend on a number~~viability of ~~factors, including:~~our product candidates.

~~Any failure by RTB101 alone or~~scientific and medical advisors, and our inability to find suitable replacements could result in ~~combination with a rapalog, such as everolimus or sirolimus, or any other~~delays in product ~~candidate of ours that obtains regulatory approval to achieve market acceptance or commercial success would adversely affect our business prospects.~~

Even if we, or any future collaborators, are able to commercialize any product candidate that we, or they, develop, the product may become subject to unfavorable pricing regulations or third-party payor coveragedevelopment and ~~reimbursement policies, any of which could~~ harm our business.

~~Patients who are provided medical treatment~~We conduct substantially all of our operations at our facilities in the San Francisco Bay Area. This region is headquarters to many other biopharmaceutical companies and many academic and research institutions. Competition for ~~their conditions generally rely on third party payors to reimburse all or part of the costs associated with their treatment. Therefore,~~skilled personnel in this market is intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.

To induce valuable employees to remain at the ~~ability~~company, in addition to salary and cash incentives, we have provided stock options that vest over time. The value to employees of stock options that vest over time may be significantly affected by fluctuations in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain “key person” insurance policies on the lives of these individuals or the lives of any of our other employees. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical personnel.

We have grown rapidly and will need to continue to grow the size of our organization, and it may experience difficulties in managing this growth.

As our development and commercialization plans and strategies develop, and as we transition into operating as a public company, we have rapidly expanded our employee base and expect to continue to add managerial, operational, sales, research and development, marketing, financial and other personnel. Current and future ~~collaborators~~growth imposes significant added responsibilities on members of management, including:

Our future financial performance and our ability to commercialize ~~any of~~ our product candidates will depend, in part, on our ability to effectively manage our growth, and our management may also have to divert a disproportionate amount of our attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.

We currently rely, and for the ~~extent~~foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants, pursuant to arrangements which ~~coverage~~expire after a certain period of time, to provide certain services, including certain research and ~~reimbursement~~development as well as general and administrative support. There can be no assurance that the services of independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for ~~these products~~any reason, our clinical trials may be extended, delayed or terminated, and ~~related treatments~~we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be ~~available from third-party payors including government health administration authorities~~able to manage our existing consultants or find other competent outside contractors and ~~private health coverage insurers. Third-party payors decide~~consultants on economically reasonable terms, or at all.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals, which ~~medications~~could have a material adverse effect on our business, results of operations and prospects.

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

We may 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. 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 ~~will cover~~may be deemed to be at too early of a stage of development for collaborative effort and ~~establish reimbursement levels.~~third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. Any delays in entering into new 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.

If we license products or businesses, 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. For instance, our Exclusive License and Collaboration Agreement with Regeneron requires significant research and development commitments that may not result in the development and commercialization of product candidates. We cannot be certain that, ~~coverage~~following a strategic transaction or license, we will achieve the results, revenue or specific net income that justifies such transaction, which could have a material adverse effect on our business and results of operations.

We will need substantial additional financing to develop our products and implement our operating plans. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our product candidates.

We expect to spend a substantial amount of capital in the clinical development of our product candidates, including the planned clinical trials for ADI-001 and ADI-002. We will need substantial additional financing to develop our products and implement our operating plans. In particular, we will require substantial additional financing to enable commercial production of our products and initiate and complete registration trials for multiple products. Further, if approved, we will require significant additional amounts in order to launch and commercialize our product candidates.

We believe that our cash, cash equivalents and marketable debt securities will be sufficient for us to continue as a going concern for at least one year from the issuance date of the accompanying consolidated financial statements. However, 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. We may require additional capital for the further development and commercialization of our product candidates, including funding our internal manufacturing capabilities and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate.

We cannot be certain that additional funding will be available on acceptable terms, or at all. Other than the funding agreement and our loan agreement with Pacific Western Bank, we have no committed source of additional capital and if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidates or other research and development initiatives. Our license agreements may also be terminated if we are unable to meet the payment obligations under the agreements. We could be required to seek collaborators for our product candidates at an earlier stage than otherwise would be desirable or on terms that ~~reimbursement will~~are less favorable than might otherwise be ~~adequate~~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 themselves. Additionally, we may not be able to incur indebtedness if the ongoing macroeconomic effects of the COVID-19 pandemic, including certain actions taken by U.S. or other governmental authorities, such as decreases in short-term interest rates as announced by the Federal Reserve, cause the closure of banks for ~~RTB101, alone~~an extended period of time or a sudden increase in requests for indebtedness at one time by many potential borrowers, either or both of which could overwhelm the banking industry.

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.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations, and those of our CMO, CROs and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, such as the COVID-19 pandemic, and other natural or man-made disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.

Our ability to manufacture our product candidates could be disrupted if our operations or those of our suppliers are affected by a man-made or natural disaster or other business interruption. We have facilities located in California near major earthquake faults and fire zones. The ultimate impact on us, our significant suppliers and our general infrastructure of being located near major earthquake faults and fire zones and being consolidated in certain geographical areas is unknown, but our operations and financial condition could suffer in the event of a major earthquake, fire or other natural disaster.

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.

Our business, financial position, results of operations or cash flows may be affected by the ongoing global COVID-19 pandemic and the resulting volatility and uncertainty it has caused, and is likely to continue to cause, in the U.S. and international markets, including as a result of prolonged economic downturn or recession. On March 11, 2020, the World

Health Organization declared the recent outbreak of COVID-19 a pandemic. As a result, national, state, and local authorities have recommended social distancing and imposed or are considering quarantine, shelter-in-place, curfew, and similar isolation measures, including government orders and other restrictions on the conduct of business operations, which has resulted in significant unemployment levels, decreased productivity, decreases in certain non-COVID-19 healthcare activities and healthcare utilization. Such measures have had, and are likely to continue to have, adverse impacts on the U.S. economy of uncertain severity and duration and may negatively impact our operations and those of third parties on which we rely, including by causing disruptions in the supply of our product candidates and the conduct of current and future clinical trials. In addition, the COVID-19 pandemic may affect the operations of the FDA and other health authorities, which could result in delays of reviews and approvals, including with respect to our product candidates. The evolving COVID-19 pandemic is also likely to directly or indirectly impact the pace of enrollment in our future clinical trials as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices unless due to a health emergency, and clinical trial sites may be less willing to enroll patients in clinical trials that may compromise a person’s immune system. Such facilities and offices may also be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients, and may not be available, in whole or in ~~combination with a rapalog, such as everolimus~~part, for clinical trial services related to ADI-001 or ~~sirolimus,~~ADI-002 or ~~any of~~ our other product candidates. ~~Also, we cannot be certain that reimbursement policies will not~~Additionally, while the potential economic impact brought by, and the duration of the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce ~~the demand for, or the price paid for, our products.~~

~~If coverage and reimbursement are not available, or reimbursement is available only to limited levels, we, or any future collaborators, may be limited in~~ our ability to ~~successfully commercialize~~access capital, which could negatively impact our short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. Due to the uncertain and rapidly evolving nature of current conditions in the U.S. and around the world, we cannot reasonably estimate the length or severity of the COVID-19 pandemic or the related response, including the length of time it may take for normal economic and operating conditions to resume. We do not yet know the full extent of potential delays or impacts on our business, financing, or clinical trial activities or on healthcare systems or the global economy as a whole. However, any of the foregoing risks, or other unforeseen risks related to the COVID-19 pandemic, could have a material impact on our liquidity, capital resources, operations, and business and those of the third parties on which it relies.

Inadequate funding for the FDA and other government agencies, or disruptions in their staffing levels related to the COVID-19 global pandemic, could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the approval of our product ~~candidates. Even~~candidates rely, which would negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, adequate staffing, furloughs, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities. Since March 2020, foreign and domestic inspections by FDA have largely been on hold with FDA announcing plans in July 2020 to resume prioritized domestic inspections. Should FDA determine that an inspection is necessary for approval of a marketing application and an inspection cannot be completed during the review cycle due to restrictions on travel, FDA has stated that it generally intends to issue a complete response letter. Further, if ~~coverage~~there is ~~provided,~~inadequate information to make a determination on the ~~approved reimbursement amount~~acceptability of a facility, FDA may ~~not~~defer action on the application until an inspection can be ~~high enough~~completed. In 2020, several companies announced receipt of complete response letters due to ~~allow us,~~the FDA's inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or ~~any future collaborators,~~other policy measures in response to ~~establish or maintain pricing~~the COVID-19 pandemic and may experience delays in their regulatory activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to ~~realize~~timely review and process our regulatory submissions, which could have a ~~sufficient return~~material adverse effect on our ~~or their investment. In~~business, including our ability to access the ~~United States, no uniform policy of coverage~~public markets and ~~reimbursement for products exists among~~obtain necessary capital in order to properly capitalize and continue our operations.

Our relationships with customers, physicians including clinical investigators, clinical research organizations and third-party payors are subject, directly or indirectly, to federal and ~~coverage~~state healthcare fraud and ~~reimbursement for products can differ significantly from payor to payor. As a result,~~abuse laws, false claims laws, health information privacy and security laws, transparency laws, government price reporting and other healthcare laws and regulations. If we or our employees, independent contractors, consultants, commercial partners, vendors, or other agents violate these laws, we could face substantial penalties.

These laws may impact, among other things, our clinical research program, as well as our proposed and future sales, marketing, and education programs. In particular, the ~~coverage determination process~~promotion, sales and marketing of healthcare items and services is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Regulatory approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to ~~continuing governmental control even after initial approval is granted. As~~extensive laws and regulations designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a ~~result, we, or any future collaborators, might obtain regulatory approval for a product in a particular country, but then~~wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive and other business arrangements. We may also be subject to ~~price~~federal, state and foreign laws governing the privacy and security of identifiable patient information. The U.S. healthcare laws and regulations that ~~delay commercial launch of the product, which~~ may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability or the ability of any future collaborators to recoup our or their investment in one or more product candidates, even if our product candidates obtain regulatory approval.

The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for certain medications, which could affect our ability ~~or that of any future collaborators~~ to ~~sell our product candidates profitably. These payors may~~operate include, but are not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or those of any future collaborators, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us, or any future collaborators, to decrease limited to:

Additionally, we or they, might establish for products, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.

There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the product and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging prices. We cannot be sure that coverage will be available for any product candidate that we, or any future collaborator, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to ~~additional reductions if there are changes~~analogous state and foreign healthcare laws described above, among others, some of which may be broader in scope. For example, we may be subject to the following: state Anti-Kickback and false claims laws that ~~presently restrict imports~~may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers, or that apply regardless of ~~drugs~~payor; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state and local laws requiring the registration of pharmaceutical sales and medical representatives; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Furthermore, we are subject to General Data Protection Regulation, or the GDPR, and other ex-US protections, as discussed further below.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities, or our arrangements with physicians, could be subject to challenge under one ~~country~~or more of such laws. If we or our employees, independent contractors, consultants, commercial partners and vendors violate these laws, we may be subject to ~~another. An inability~~investigations, enforcement actions and/or significant penalties.

We have adopted a code of business conduct and ethics, but it is not always possible to ~~promptly obtain coverage~~identify and ~~adequate payment rates~~deter employee misconduct or business noncompliance, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from ~~both government-funded~~governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and ~~private payors for~~enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending themselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product candidates ~~for which we,~~outside the U.S. will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Data protection, privacy and similar laws restrict access, use, and disclosure of information, and failure to comply with or ~~any future collaborator, obtain regulatory approval~~adapt to changes in these laws could ~~significantly~~materially and adversely harm our ~~operating results,~~business.

We are subject to federal and state data privacy and security laws and regulations and Laws and expectations relating to privacy continue to evolve. Changes in these laws may limit our data access, use, and disclosure, and may require increased expenditures. In addition, data protection, privacy and similar laws protect more than patient information and, although they vary by jurisdiction, these laws can extend to employee information, business contact information, provider information, and other information relating to identifiable individuals. For example, the California Consumer Privacy Act requires covered businesses to, among other things, provide disclosures to California consumers regarding the collection, use and disclosure of such consumers’ personal information and afford such consumers new rights with respect to their personal information, including the right to opt out of certain sales of personal information. We believe that further increased regulation in additional jurisdictions is likely in the area of data privacy. Any of the foregoing may have a material adverse effect on our ability to ~~raise capital needed~~provide services to ~~commercialize products~~patients and, in turn, our ~~overall~~results of operations

The collection and use of personal data in the European Union, or EU, are governed by the GDPR. The GDPR imposes stringent requirements for controllers and processors of personal data, including, for example, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to special categories of data, such as health data, and additional obligations when we contract with third-party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the U.S. and other third countries. In addition, the GDPR provides that EU member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.

~~Product~~Data protection, privacy and similar laws protect more than patient information and, although they vary by jurisdiction, these laws can extend to employee information, business contact information, provider information, and other information relating to identifiable individuals. Failure to comply with these laws may result in, among other things, civil and criminal liability, negative publicity, damage to our reputation, and liability under contractual provisions. In addition, compliance with such laws may require increased costs to us or may dictate that wet not offer certain types of services in the future.

If product liability lawsuits are brought against us, ~~or any of our future collaborators could divert our resources and attention, cause us to~~we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products. Currently, we have no products that have been approved for commercial sale; however, the current and future use of our product candidates by us and any collaborators in clinical trials, and the sale of these product candidates, if approved, in the future, may expose us to liability claims. We face an inherent risk of product liability ~~lawsuits related to~~as a result of the ~~use~~future clinical testing of our product candidates ~~in elderly patients~~ and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are ~~approved by regulatory authorities and introduced commercially. Product~~perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be brought against us or our partners by participants enrolled in our clinical trials, patients, health care providers, pharmaceutical companies, our collaborators or others using, administering or selling any of our future approved products.asserted under state consumer protection acts. If we cannot successfully defend ~~ourselves~~themselves against ~~any such~~product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

Risks Related to Our Financial Position

Our ability to use net operating losses and research and development credits to offset future taxable income may be subject to certain limitations as a result of the Merger.

To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a rolling three-year period), such corporation’s ability to use its pre-change net operating loss carryforwards (NOLs) and other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. We have not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant ~~litigation costs;~~complexity and cost associated with such a study. As a result, if we earn net taxable income, our ability to use our pre-change NOLs to offset such taxable income may be subject to limitations, if we experienced an ownership change. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, even as we attained profitability, we may be unable to use a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows.

Raising funds through lending arrangements may restrict our operations or produce other adverse results.

Our current Loan and Security Agreement with Pacific Western Bank, which we entered into on April 28, 2020 (the Loan Agreement) at an interest rate equal to the greater of 0.25% above the Prime Rate or 5.00%. The Loan Agreement contains a variety of affirmative and negative covenants, including required financial reporting, limitations on certain dispositions of assets, limitations on the incurrence of additional debt and other requirements. To secure our performance of our obligations under this Loan Agreement, we granted a security interest in substantially all of our assets, other than certain intellectual property assets, to Pacific Western Bank and issued a warrant to purchase our capital stock. Our failure to comply with the covenants in the Loan Agreement, the occurrence of a material impairment in our prospect of repayment operations, business or financial condition, our ability to repay the loan, or in the value, perfection or priority of Pacific Western Bank’s lien on our assets, as determined by Pacific Western Bank, or the occurrence of certain other specified events could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial ~~monetary awards~~portion of our debt, potential foreclosure on our assets and other adverse results. Additionally, we are bound by certain negative covenants setting forth actions that are not permitted to ~~or costly settlements with, patients~~be taken during the term of the Loan Agreement without consent of Pacific Western Bank, including, without limitation, incurring certain additional indebtedness, making certain asset dispositions, entering into certain mergers, acquisitions or other ~~claimants;~~business combination transactions or incurring any non-permitted lien or other encumbrance on our assets. The foregoing prohibitions and constraints on our operations could result in our inability to: (a) acquire promising intellectual property or other assets on desired timelines or terms; (b) reduce costs by disposing of assets or business segments no longer deemed advantageous to retain; (c) stimulate further corporate growth or development through the assumption of additional debt; or (d) enter into other arrangements that necessitate the imposition of a lien on corporate assets. Moreover, if the conditions set forth in the consent provided by Pacific Western Bank are not satisfied, we would effectively need to terminate the Loan Agreement and repay any outstanding loan funds or refinance the facility with another lender. As of the date of this Annual Report on Form 10-K, no amounts have been drawn under the Loan Agreement.

~~product recalls~~We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could harm our business and negatively impact the value of our common stock.

We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a ~~change~~combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the ~~indications~~audit of our financial statements as of and for ~~which they~~the years ended December 31, 2020, 2019 and 2018, we identified material weaknesses in our internal control over financial reporting. The material weaknesses we identified were as follows: (i) we did not design or maintain an effective control environment commensurate with our financial reporting requirements due to lack of a sufficient number of accounting professionals with the appropriate level of experience and training; (ii) we did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, and monitoring controls maintained at the corporate level were not at a sufficient level of precision to provide for the appropriate level of oversight of activities related to our internal control over financial reporting; (iii) we did not design and maintain effective controls over segregation of duties with respect to the preparation and review of account reconciliations as well as creating and posting manual journal entries; and (iv) we did not design and maintain formal accounting policies, processes and controls to analyze, account for and disclose complex transactions.

Additionally, each of the control deficiencies could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our annual or interim financial statements that would not be prevented or detected, and accordingly, we determined that these control deficiencies constitute material weaknesses.

Risks Related to Reliance on Third Parties

Risks Related to Third Parties

If our collaboration with Regeneron is terminated, or if Regeneron materially breaches our obligations thereunder, our business, prospects, operating results, and financial condition would be materially harmed.

Our financial performance may be ~~used;~~

~~loss~~significantly affected by our Regeneron collaboration that we have entered into to develop next-generation engineered immune-cell therapeutics with fully human CARs and TCRs directed to disease-specific cell surface antigens in order to enable the precise engagement and killing of ~~revenue;~~

~~diversion~~tumor cells. Under our agreement with Regeneron, Regeneron provided us with an upfront payment of ~~management~~$25 million and ~~scientific resources from our business operations;~~additional payments for research funding and

~~the inability to commercialize our product candidates.~~

~~Although the clinical trial process is designed~~ we will collaborate with Regeneron to identify and ~~assess potential side effects, clinical~~validate targets and develop a pipeline of engineered immune-cell therapeutics for selected targets. Regeneron has the option to obtain development ~~does not always fully characterize~~and commercial rights for a certain number of the ~~safety and efficacy profile of a new medicine, and it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If our~~ product candidates ~~were~~developed by the parties, subject to ~~cause adverse side effects during clinical trials or after approval,~~an option payment for each product candidate. If Regeneron exercises our option on a given product candidate, we ~~may be exposed~~then have an option to ~~substantial liabilities. Physicians~~participate in the development and ~~patients may~~commercialization for such product. If we do not ~~comply with any warnings that identify known potential adverse effects and patients who should not use~~exercise our ~~product candidates. If any of our product candidates are approved for commercial sale,~~option, we will be ~~highly dependent upon consumer perceptions~~entitled to royalties on any future sales of such products by Regeneron. In addition to developing CARs and TCRs for use in novel immune-cell therapies as part of the

collaboration, Regeneron will have the right to use these CARs and TCRs in our other antibody programs outside of the collaboration. Regeneron will also be entitled to royalties on any future sales of products developed and commercialized by us ~~and~~under the ~~safety and quality~~agreement. If Regeneron were to terminate our collaboration agreement with us, we may not have the resources or skills to replace those of our ~~products. We~~collaborator, which could require us to seek additional funding or another collaboration that might not be ~~adversely affected if we are subject~~available on favorable terms or at all, and could cause significant delays in development and/or commercialization efforts and result in substantial additional costs to ~~negative publicity associated with illness~~us. Termination of such collaboration agreement or ~~other adverse effects resulting from patients’ use or misuse~~the loss of rights provided to us under such agreement may create substantial new and additional risks to the successful development and commercialization of our products and could materially harm our financial condition and operating results.

Regeneron may change its strategic focus or ~~any similar~~pursue alternative technologies in a manner that results in reduced, delayed or no revenue to us under the agreement. Regeneron has a variety of marketed products ~~distributed~~and product candidates either by itself or under collaboration with other ~~companies.~~

~~Although we maintain product liability insurance coverage in~~companies, including some of our competitors, and the ~~amount~~corporate objectives of ~~up to $10.0 million in the aggregate, including clinical trial liability, this insurance~~Regeneron may not ~~fully cover potential liabilities that we~~be consistent with our best interests. Regeneron may ~~incur. The cost~~change its position regarding its participation and funding of ~~any product liability litigation or other proceeding, even if resolved in~~ our ~~favor, could~~and Regeneron joint activities, which may impact our ability to successfully pursue the program.

Our existing and future collaborations will be ~~substantial. We will need~~important to ~~increase~~ our ~~insurance coverage if we commercialize any product that receives regulatory approval. In addition, insurance coverage is becoming increasingly expensive.~~business. If we are unable to maintain ~~sufficient insurance coverage at an acceptable cost~~any of these collaborations, or if these collaborations are not successful, our business could be adversely affected.

We have entered, and plan to ~~otherwise protect against potential product liability claims, it could prevent or inhibit~~enter, into collaborations with other companies, including our collaboration agreement with Regeneron, that we believe can provide us with additional capabilities beneficial to our business. The collaboration with Regeneron provides us with important technologies, expertise and funding for our programs and technology, and we expect to receive additional technologies, expertise and funding under this and other collaborations in the ~~development~~future. Our existing therapeutic collaborations, and ~~commercial production~~any future collaborations we enter into, may pose a number of risks, including the following:

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

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collaborators may not perform their obligations as expected;

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collaborators may dispute the amounts of payments owed;

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collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs or license arrangements based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as a strategic transaction that may divert resources or create competing priorities;

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

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collaborators could develop independently, or with third parties, products that compete directly or indirectly with our products and product candidates if the collaborators believe that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

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product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with our own product candidates or products, which may cause collaborators to cease to devote resources to the development or commercialization of our product candidates;

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collaborators may dispute ownership or rights in jointly developed technologies or intellectual property;

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collaborators may fail to comply with applicable legal and regulatory requirements regarding the development, manufacture, sale, distribution or marketing of a product candidate or product;

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collaborators with sales, marketing, manufacturing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the sale, marketing, manufacturing and distribution of such product or products;

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disagreements with collaborators, including disagreements over proprietary rights, contract interpretation, payment obligations or the preferred course of discovery, development, sales or marketing, might cause delays or terminations of the research, development or commercialization of product candidates, might lead to additional and burdensome responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive;

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collaborators may not properly maintain or defend their or our relevant intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation and liability;

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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;

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if a collaborator of ours is involved in a business combination or cessation, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us; and

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collaborations may be terminated by the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates, or potentially lose access to the collaborator’s intellectualproperty.

If our therapeutic collaborations do not result in the successful discovery, development and commercialization of products or if one of our collaborators terminates our agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements, our development and commercialization of our technology and product candidates could be delayed and we may need additional resources to develop product candidates and our technology. All of the risks relating to product discovery, development, regulatory approval and commercialization described in these risk factors also apply to the activities of our therapeutic collaborators.

In addition to the Regeneron collaboration described above, for some of our programs, we may in the future determine to collaborate with pharmaceutical and biotechnology companies for discovery, development and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators because, for example, third parties also have rights to allogeneic T-cell technologies. For example, in April 2020, Johnson & Johnson entered into a collaboration agreement with Fate Therapeutics, a company that is also using allogeneic T-cell technologies, for up to four CAR NK and CAR-T cell therapies. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail discovery efforts or the development of a product candidate, reduce or delay our development program or one or more of our other development programs, delay our potential manufacture or commercialization, or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our expense. If we elect to fund and undertake discovery, development, manufacturing or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary discovery, development, manufacturing and commercialization activities, we may not be able to further develop our product candidates, manufacture the product candidates, bring them to market or continue to develop our technology and our business may be materially and adversely affected.

We are subject to certain exclusivity obligations under our agreement with Regeneron.

During the five-year period following the effective date of the Regeneron agreement, with certain limited exceptions, we may not directly or indirectly research, develop, manufacture or commercialize a gamma delta ICP or grant a license to do the foregoing, except pursuant to the terms of the Regeneron agreement. Both parties also have obligations not to research, develop, manufacture or commercialize an ICP with the same target as one being developed under a research program or commercialized by a party (and royalty bearing under the agreement), for so long as such activities are occurring. These exclusivity obligations are limited to engineered gamma delta immune cells to targets reasonably considered to have therapeutic relevance in oncology. If our collaboration with Regeneron is not successful, including any failure caused by the risks listed in the preceding paragraphs, and the agreement and research programs are not terminated, we may not be able to enter into collaborations with other companies with respect to ICP’s and our business could be adversely affected.

As a result, our ability to advance any gamma delta immune cell therapeutics outside of the scope of the research plan agreed on with Regeneron is limited through July 29, 2021. We may have to forego business opportunities and will also be limited in the gamma delta immune cell therapeutics we can advance on our own. The restrictions on internal development may also prevent us from, outside of the scope of research conducted with Regeneron, improving our own technologies relating to gamma delta immune cells. These limitations could lead to delays in our ability to discover and develop gamma delta immune cell therapeutics for targets not covered by the collaboration with Regeneron and loss of opportunities to obtain additional research funding and advance our own technologies separately from the Regeneron collaboration. If we are delayed in our ability to advance our technologies, our business could be harmed.

We rely and will continue to rely on third parties to conduct our clinical trials. If these third parties do not 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.

We depend and will continue to depend upon independent investigators and collaborators, such as universities, medical institutions, CROs and strategic partners to conduct our preclinical and clinical trials under agreements with us.

We negotiate budgets and contracts with CROs and study sites, 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. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with 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 cGMPs 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 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 preclinical, clinical and nonclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies 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.

If any of our relationships with trial sites, or any CRO that we may use in the future, terminates, we may not be able to enter into arrangements with alternative trial sites or CROs or do so on commercially reasonable terms. Switching or adding third parties to conduct our clinical trials will involve substantial cost and require extensive management time and focus. In addition, 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.

We may rely on third parties to manufacture our clinical product supplies, and we may have to rely on third parties to produce and process our product candidates, if approved.

We must currently rely on outside vendors to manufacture supplies and process our product candidates. We have not yet caused our product candidates to be manufactured or processed on a commercial scale and may not be able to achieve manufacturing and processing and may be unable to create an inventory of mass-produced, off-the-shelf product to satisfy demands for any of our product candidates.

We do not yet have sufficient information to reliably estimate the cost of the commercial manufacturing and processing of our product candidates, and the actual cost to manufacture and process our product candidates could materially and adversely affect the commercial viability of our product candidates. As a result, we may never be able to develop a commercially viable product.

In addition, we anticipate reliance on a limited number of third-party manufacturers exposes us to the following risks:

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We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA may have questions regarding any replacement contractor. This may require new testing and regulatory interactions. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA questions, if any.

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

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Contract manufacturers may not be able to execute our manufacturing procedures appropriately.

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Our future contract manufacturers may not perform as agreed 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.

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

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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 products.

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Our third-party manufacturers could breach or terminate their agreement(s) with us.

If any CMO with whom we contract fails to perform its obligations, we may be forced to manufacture the materials ourselves, for which we may not have the capabilities or resources, or enter into an agreement with a different CMO, which we may not be able to do on reasonable terms, if at all. In either scenario, our clinical trials supply could be delayed significantly as we establish alternative supply sources. In some cases, the technical skills required to manufacture our product candidates may be unique or proprietary to the original CMO and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are required to change CMOs for any reason, we will be required to verify that the new CMO maintains facilities and procedures that comply with quality standards and with all applicable regulations. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product candidates according to the specifications previously submitted to the FDA or another regulatory authority. The delays associated with the verification of a new CMO could negatively affect our ability to develop product candidates or commercialize our products in a timely manner or within budget. Furthermore, a CMO may possess technology related to the manufacture of our product candidates that such CMO owns independently. This would increase our reliance on such CMO or require us to obtain a license from such CMO in order to have another CMO manufacture our product candidates. 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.

Our contract manufacturers would also be subject to the same risks we face in developing our own manufacturing capabilities, as described above. Each of these risks could delay our clinical trials, the approval, if any, of our product candidates by the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenue. In addition, we will rely on third parties to perform release 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.

Cell-based therapies 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, including viral vectors that deliver the targeting moiety and other genes to the product candidate. We currently manufacture through contract manufacturers, some of which have limited resources and experience supporting a commercial product, and such suppliers may not be able to deliver raw materials to our specifications. 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 we 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. Additionally, three vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020 and early 2021, and more are likely to be authorized in the coming months. 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 or manufacturing slots for the materials needed for our clinical trials, which could lead to delays in these trials.

In addition, some raw materials utilized in the manufacture of our candidates are currently available from a single supplier, or a small number of 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. In addition, the lead time needed to establish a relationship with a new supplier can be lengthy, and we may experience delays in meeting demand in the event we must switch to a new supplier. The time and effort to qualify a new supplier could result in additional costs, diversion of resources or reduced manufacturing yields, any of which would

negatively impact our operating results. Further, we may be unable to enter into agreements with a new supplier on commercially reasonable terms, which could have a material adverse impact on our business.

If we or our third-party suppliers use hazardous, non-hazardous, biological or other 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. We and our suppliers are subject to federal, state and local laws and regulations in the U.S. governing the use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our and our suppliers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we and our suppliers 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. 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~~operations.

Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.

Our internal computer systems and ~~prospects.~~

~~We currently~~the systems of our CROs, contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. Additionally, as a result of the ongoing COVID-19 pandemic, we have ~~limited marketing, sales or distribution infrastructure. If~~transitioned certain of our workforce to a remote working model. As our employees and our business partners’ employees work from home and access our systems remotely, we are unable to develop our sales, marketing and distribution capability on our own or through collaborations with marketing partners, we will not be successful in commercializing our product candidates.

We currently have limited marketing, sales or distribution infrastructure. If RTB101 is approved for PD, we intend to establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize the approved product in key territories, which will require substantial additional resources. Some or all of these costs may be ~~incurred in advance~~subject to heightened security and privacy risks, including the risks of cyberattacks and privacy incidents. While we have not experienced any ~~approval of RTB101, alone or in combination with a rapalog,~~ such ~~as everolimus or sirolimus. Any~~material system failure or ~~delay~~security breach to date, if such an event were to occur and cause interruptions in ~~the development~~our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or ~~third parties’ internal sales, marketing and distribution capabilities would adversely impact~~reproduce the ~~commercialization~~data. To the extent that any disruption or security breach were to result in a loss of, ~~RTB101, alone~~ or ~~in combination with a rapalog, such as everolimus or sirolimus, and other future product candidates.~~

~~Factors that may inhibit our efforts to commercialize our products on our own include:~~

~~our inability to recruit and retain adequate numbers of effective sales and marketing personnel;~~

~~the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe any future products;~~

~~the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and~~

~~unforeseen costs and expenses associated with creating an independent sales and marketing organization.~~

~~With respect~~damage to, our ~~existing~~data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and ~~future product candidates, we may choose to collaborate with third parties that have direct sales forces~~the further development and established distribution systems to serve as an alternative to our own sales force and distribution systems. Our product revenue may be lower than if we directly marketed or sold our products, if approved. In addition, any revenue we receive will depend in whole or in part upon the efforts of these third parties, which may not be successful and are generally not within our control. If we are not successful in commercializing any approved products, our future product revenue will suffer, and we may incur significant additional losses.

~~If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.~~

If we, or any future collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate, potential clinical development, regulatory approval or commercialization of our product candidates could be ~~delayed or prevented.~~delayed.

We may not realize the benefits of acquired assets or other strategic transactions.

We actively evaluate various strategic transactions on an ongoing basis. We may acquire other businesses, products or technologies as well as pursue joint ventures or investments in complementary businesses. The success of our strategic transactions, and any future collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent clinical development, regulatory approval or commercialization of our product candidates,strategic transactions depends on the risks and uncertainties involved including:

~~our product candidates may produce unfavorable or inconclusive results;~~

~~regulators may require us or any future collaborators, to conduct additional clinical trials or abandon product development programs;~~

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~~the number~~unanticipated liabilities related to acquired companies or joint ventures;

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difficulties integrating acquired personnel, technologies, and operations into our existing business;

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retention of ~~patients required~~key employees;

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diversion of management time and focus from operating our business to management of strategic alliances or joint ventures or acquisition integration challenges;

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increases in our expenses and reductions in our cash available for operations and other uses;

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disruption in our relationships with collaborators or suppliers as a result of such a transaction; and possible write-offs or impairment charges relating to acquired businesses or joint ventures.

If any of these risks or uncertainties occur, we may not realize the anticipated benefit of any acquisition or strategic transaction. Additionally, foreign acquisitions and joint ventures are subject to additional risks, including those related to integration of operations across different cultures and languages, currency risks, potentially adverse tax consequences of overseas operations and the particular economic, political and regulatory risks associated with specific countries.

Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could have a material adverse effect on our financial condition.

Risks Related to Government Regulation

Risks Related to Regulatory Approval

The 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.

The research, testing, manufacturing, labeling, approval, selling, import, export, marketing, and distribution of drug products, including biologics, are subject to extensive regulation by the FDA and other regulatory authorities in the U.S. We are not permitted to market any biological drug product in the U.S. until we receive approval of a biologics license application (BLA) from the FDA. We have not previously submitted a BLA to the FDA, or similar approval filings to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and sufficient supporting information to establish the product candidate’s safety and effectiveness for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing and controls for the product.

We expect the novel nature of our product candidates to create further challenges in obtaining regulatory approval. For example, the FDA has limited experience with commercial development of allogeneic T cell therapies for cancer. We may also request regulatory approval of future product candidates by target, regardless of cancer type or origin, which the FDA may have difficulty accepting if our clinical trials only involved cancers of certain origins. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support licensure. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain licensure of the product candidates based on the completed clinical trials, as the FDA often adheres to the Advisory Committee’s recommendations. Accordingly, the regulatory approval pathway for our product candidates may be uncertain, complex, expensive and lengthy, and approval may not be obtained.

We may also experience delays in obtaining regulatory approvals, including but not limited to:

•

obtaining regulatory authorization to begin a trial, if applicable;

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redesigning our study protocols and need to conduct additional studies as may be required by a regulator;

•

governmental or regulatory delays and changes in regulation or policy relating to the development and commercialization of our product ~~candidates may be larger than we,~~candidate by the FDA or any future collaborators anticipate, patient enrollment in these clinical trials may be slower than we, or any future collaborators, may anticipate or participants may drop out of these clinical trials at a higher rate than we, or any future collaborators, anticipate;other comparable foreign regulatory authorities;

•

the outcome, timing and cost of meeting regulatory requirements established by the FDA, and other comparable foreign regulatory authorities;

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the availability of financial resources to commence and complete the planned trials;

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negotiating the terms of any collaboration agreements we may choose to initiate or conclude;

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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 trial sites;

•

failure of third-party contractors, such as CROs, or investigators to comply with regulatory requirements, including GCP standards;

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

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delay or failure in obtaining the necessary approvals from regulators or institutional review boards, or IRBs, in order to commence a clinical trial at a prospective trial site, or their suspension or termination of a clinical trial once commenced;

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Inability to recruit and enroll suitable patients to participate in a trial;

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having patients complete a trial, including having patients enrolled in clinical trials dropping out of the trial before the product candidate is manufactured and returned to the site, or return for post-treatment follow-up;

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difficulty in having patients complete a trial or return for post-treatment follow-up;

~~the cost of planned~~

•

addressing any patient safety concerns that arise during the course of a trial;

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inability to add new clinical trial sites;

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varying interpretations of the data generated from our preclinical or clinical trials;

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the cost of defending intellectual property disputes, including patent infringement actions brought by third parties;

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the effect of competing technological and market developments;

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the cost and timing of establishing, expanding and scaling manufacturing capabilities;

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inability to manufacture, or obtain from third parties, sufficient quantities of qualified materials under Current cGMPs, for the completion in preclinical and clinical studies;

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problems with biopharmaceutical product candidate storage, stability and distribution resulting in global supply chain disruptions;

•

the cost of establishing sales, marketing and distribution capabilities for any product candidate for which we may receive regulatory approval in regions where we choose to commercialize our products on our own; or

•

potential unforeseen business disruptions or market fluctuations that delay our product development or clinical trials and increase our costs or expenses, such as business or operational disruptions, delays, or system failures due to malware, unauthorized access, terrorism, war, natural disasters, strikes, geopolitical conflicts, restrictions on trade, import or export restrictions, or public health crises, such as the current COVID-19 pandemic.

We could also encounter delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial may be ~~greater than we anticipate;~~

~~Further, conducting clinical trials in foreign countries, as we have done and plan to do~~commercial prospects for our product candidates ~~presents additional risks that may delay completion of~~will be harmed, and our ~~clinical trials. These risks include the failure of enrolled patients in foreign countries~~ability to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

~~Product development costs for us, or~~generate product revenue will be delayed. In addition, any ~~future collaborators, will increase if we, or they, experience~~ delays in ~~testing or pursuing regulatory approvals and we, or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of~~completing our ~~product candidates. We do not know whether any preclinical studies or~~ clinical trials will begin as planned, will need to be restructured, or will be completed on schedule, or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which we, or any future collaborators, may have the exclusive right to commercializeincrease our costs, slow down our product ~~candidates or allow our competitors, or the competitors of any future collaborators, to bring products to market before we, or any future collaborators, do~~development and ~~impair~~approval process and jeopardize our ability ~~or the ability of any future collaborators,~~ to ~~successfully commercialize our~~commence product ~~candidates~~sales and ~~may harm our business and results of operations. In addition, many~~generate revenue.

Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical ~~trial delays~~trials may ultimately lead to the denial of regulatory approval of our product candidates.

We expect the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be subject to competition sooner than anticipated.

The BPCIA was enacted as part of the Affordable Care Act to establish an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the reference product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement the BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any of the product candidates we develop that are approved in the U.S. as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

The regulatory landscape that will govern our product candidates is uncertain; regulations relating to more established cell therapy products are still developing, and changes in regulatory requirements could result in delays or discontinuation of development of our product candidates or unexpected costs in obtaining regulatory approval.

Government authorities in the U.S. at the federal, state and local level and in other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

Because we are developing novel allogeneic cell immunotherapy product candidates, the regulatory requirements that we will be subject to are not entirely clear. Even with respect to more established products that fit into the category of cell therapies, the regulatory landscape is still developing. For example, regulatory requirements governing cell therapy products have changed frequently and may continue to change in the future. Moreover, there is substantial, and sometimes uncoordinated, overlap in those responsible for regulation of existing cell therapy products.

Complex regulatory environments exist in other jurisdictions in which we might consider seeking regulatory approvals for our product candidates, further complicating the regulatory landscape. For example, in the EU a special committee called the Committee for Advanced Therapies (CAT) was established within the EMA in accordance with Regulation (EC) No 1394/2007 on advanced-therapy medicinal products (ATMPs) to assess the quality, safety and efficacy of ATMPs, and to follow scientific developments in the field. ATMPs include somatic cell therapy products and tissue engineered products. These various regulatory review committees and advisory groups and new or revised guidelines that they promulgate from time to time may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. Because the regulatory landscape for our gamma delta CAR-T cell product candidates is new, we may face even more cumbersome and complex regulations than those emerging for cell therapy products. Furthermore, even if our product candidates obtain required regulatory approvals, such approvals may later be withdrawn as a result of changes in regulations or the interpretation of regulations by applicable regulatory agencies.

Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue to maintain our business.

The FDA may disagree with our regulatory plan and we may fail to obtain regulatory approval of our product candidates.

~~Risks Related~~The general approach for FDA approval of a new biologic or drug is for the sponsor to ~~Regulatory Approval~~provide dispositive data from two well-controlled, Phase 3 clinical studies of the relevant biologic or drug in the relevant patient population. Phase 3 clinical studies typically involve hundreds of patients, have significant costs and ~~Marketing~~take years to complete. We expect registrational trials for ADI-001 and ADI-002 to be designed to evaluate the efficacy of ~~Our Product Candidates~~the product candidate in an open-label, non-comparative, two-stage, pivotal, multicenter, single-arm clinical trial in patients who have exhausted available treatment options. If the results are sufficiently compelling, we intend to discuss with the FDA submission of a BLA for the relevant product candidate. However, we do not have any agreement or guidance from the FDA that its regulatory development plans will be sufficient for submission of a BLA. In addition, the FDA may only allow us to evaluate patients that have failed or who are ineligible for autologous therapy, which are extremely difficult patients to treat and ~~Other Legal Compliance Matters~~patients with advanced and aggressive cancer, and our product candidates may fail to improve outcomes for such patients.

~~Even~~Given the molecular similarities between ADI-001 and ADI-002, we may have additional difficulties progressing any clinical trial of ADI-002, if ~~we complete the necessary preclinical studies and~~emerging data from future clinical trials ~~the regulatory~~of ADI-001 have safety or other issues.

The FDA may grant accelerated approval ~~process~~ for our product candidates ~~is expensive, time consuming~~ and, ~~uncertain and~~as a condition for accelerated approval, the FDA may ~~prevent us~~require a sponsor of a drug or any future collaborators from obtaining approvals for the commercialization of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate. As a result, we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain regulatorybiologic receiving accelerated approval to ~~commercialize a product candidate.~~

~~The research, testing, manufacturing, labeling, approval, selling,~~perform post marketing ~~promotion~~studies to verify and ~~distribution of products are~~describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint, and the drug or biologic may be subject to ~~extensive regulation~~withdrawal procedures by the FDA ~~and comparable foreign regulatory authorities. We, and any future collaborators,~~that are ~~not permitted to market RTB101, alone or in combination~~more accelerated than those available for regular approvals. In addition, the standard of care may change with ~~a rapalog, such as everolimus or sirolimus, or any other product candidate~~the approval of new products in the ~~United States or~~same indications that we are studying. This may result in other countries until we, or they, receive approval of an NDA from the FDA or regulatory approval from applicable regulatory authorities outside the United States. RTB101 is in clinical development and is subject to the risks of failure inherent in drug development. We have not submitted an application for or received regulatory approval for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidate in the United States or in any other jurisdiction. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including obtaining FDA approval of an NDA.

The process of obtaining regulatory approvals, both in the United States and abroad, is lengthy, expensive and uncertain. It may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA or other regulatory authorities may determine that RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining regulatory approval or prevent or limit commercial use. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

In addition, changes in regulatory approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate. Any regulatory approval we, or any future collaborators, ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory ~~authority. The~~agencies requesting additional studies to show that our product candidate is superior to the new products.

Our clinical trial results may also not support approval. In addition, our product candidates could fail to receive regulatory approval for many reasons, including the following:

We may seek orphan drug designation for some or all of our product candidates across various indications, but we may be unable to obtain such designations or to maintain the benefits associated with orphan drug designation, including market exclusivity, which may cause our revenue, if any, to be reduced.

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or ~~other regulatory authority may conclude~~biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 in the U.S., or a patient population greater than 200,000 in the U.S. when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the U.S. will be recovered from sales in the U.S. for that drug or biologic. In order to obtain orphan drug designation, the request must be made before submitting a BLA. In the U.S., orphan drug designation entitles a party to financial ~~relationship between us~~incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and ~~a principal investigator has created a conflict of interest or otherwise affected interpretation~~user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the ~~study. The FDA~~drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or ~~other regulatory authority may therefore question~~shorten the ~~integrity~~duration of, the ~~data generated at~~regulatory review and approval process.

If a product that has orphan drug designation subsequently receives the ~~applicable~~first FDA approval of that particular product for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a BLA, to market the same biologic (meaning, a product with the same principal molecular structural features) for the same indication for seven years, except in limited circumstances such as a showing of clinical ~~trial site and~~superiority to the ~~utility~~product with orphan drug exclusivity or if FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. As a result, even if one of our product candidates receives orphan exclusivity, the FDA can still approve other biologics that do not have the same principal molecular structural features for use in treating the same indication or disease or the same biologic for a different indication or disease during the exclusivity period. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient supply of our product or if a subsequent applicant demonstrates clinical ~~trial itself~~superiority over our products.

We may seek orphan drug designation for some or all of our product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products. Even if we obtain orphan drug designation, exclusive marketing rights in the U.S. may be ~~jeopardized. This could result in~~limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition, or if a ~~delay in approval, or rejection,~~subsequent applicant demonstrates clinical superiority over our products, if approved. In addition, although we may seek orphan drug designation for other product candidates, we may never receive such designations.

Regenerative Medicine Advanced Therapy designation, even if granted for any of our ~~marketing applications by the FDA or other regulatory authority, as the case~~product candidates, may ~~be, and may ultimately~~not lead to a faster development or regulatory review or approval process and it does not increase the ~~denial of regulatory approval of~~likelihood that our product candidates will receive marketing approval.

We may seek RMAT designation for one or more of our product candidates. In 2017, the FDA established the RMAT designation to expedite review of a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition and for which preliminary clinical evidence indicates that the potential to address unmet medical needs for such a disease or condition. RMAT designation provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate, and eligibility for rolling review and priority review. Products granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. There is no assurance that we will be able to obtain RMAT designation for any of our product candidates. RMAT designation does not change the FDA’s standards for product approval, and there is no assurance that such designation will result in expedited review or approval or that the approved indication will not be narrower than the indication covered by the designation. Additionally, RMAT designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges.

Positive results from early preclinical studies and clinical trials are not necessarily predictive of the results of any future clinical trials of our product candidate. If we cannot replicate the positive results from our earlier preclinical studies and clinical trials of our product candidate in our future clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidate.

Any positive results from our preclinical studies and future clinical trials of our product candidate may not necessarily be predictive of the results from required later clinical trials. Similarly, even if we are able to complete our planned preclinical studies or any future clinical trials according to our current development timeline, the positive results from such preclinical studies and clinical trials may not be replicated in subsequent preclinical studies or clinical trial results.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway, or safety or efficacy observations made in preclinical studies and clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidate performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA or similar regulatory approval.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining or failure to obtain required approvals could negatively impact our ability or that of any future collaborators to generate revenue from the particular product candidate, which likely would result in significant harm to our business and adversely impact our stock price.

~~Our failure to obtain~~ regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions ~~would prevent our~~must also approve the manufacturing, marketing and promotion of the product ~~candidates~~candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, ~~being marketed abroad,~~ and ~~any approval we are granted for RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any of our other product candidates~~greater than, those in the ~~United States would not assure approval of product candidates in foreign jurisdictions.~~

~~In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding~~U.S., including additional preclinical studies or clinical ~~trial design, safety and efficacy. Clinical~~ trials as clinical studies conducted in one ~~country~~jurisdiction may not be accepted by regulatory authorities in other ~~countries, and regulatory~~jurisdictions. In many jurisdictions outside the U.S., a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the U.S. have requirements for approval of product candidates with which we must comply prior to marketing in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seekingthose jurisdictions. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and ~~may require additional preclinical studies or clinical trials which would be costly and time consuming and~~ could delay or prevent the introduction of ~~RTB101, alone or~~our products in ~~combination with a rapalog, such as everolimus or sirolimus, or any of our other product candidates in those~~certain countries. ~~We do not have experience in obtaining regulatory approval in international markets.~~ If we ~~or our partners~~ fail to comply with the regulatory requirements in international markets and/or ~~to obtain and maintain required~~receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

The exit of the United Kingdom, or the UK, from the European Union may materially affect the regulatory regime that governs our handling of EU personal data and expose us to legal and business risks under European data privacy and protection law.

On June 23, 2016, the UK held a referendum in which a majority of the eligible members of the electorate voted to leave the EU. The UK’s withdrawal from the EU is commonly referred to as Brexit. Pursuant to Article 50 of the Treaty on European Union, the UK ceased being a Member State of the EU on January 31, 2020. However, the terms of the withdrawal have yet to be fully negotiated. The implementation period began February 1, 2020 and will continue until December 31, 2020. During this 11-month period, the UK will continue to follow all of the EU’s rules and its trading relationship will remain the same. However, regulations (including data protection laws, health and safety laws and regulations and medicine licensing and regulations), have yet to be addressed. This lack of clarity on future UK laws and regulations and their interaction with EU laws and regulations could add legal risk, uncertainty, complexity and cost to our handling of EU personal information and our privacy and data security compliance programs. It is possible that over time the UK Data Protection Act could become less aligned with the EU General Data Protection Regulation, or GDPR, which could require us to implement different compliance measures for the UK and the European Union and result in potentially enhanced compliance obligations for EU personal data. This risk would apply more immediately in the event of a “no-deal” Brexit (including no transition period).

It is unclear whether the European Commission, or EC, will grant an adequacy finding to the UK (a finding that the UK privacy legal framework provides an adequate level of privacy protection to EU individuals). Absent an adequacy finding, transfers of personal data from the EU to the UK would be impermissible without adequate safeguards provided for under EC-approved mechanisms, such as current standard contractual clauses or, if approved in the future, an EU – UK privacy shield similar to the current framework in place between the EU and the U.S. The extensive authority of UK intelligence and law enforcement agencies, including to conduct surveillance on personal data flows, could reduce the likelihood that the EC would give the UK an adequacy finding, and reduce the likelihood that the EC would approve an EU – UK privacy shield. Accordingly, we would be exposed to legal risk for any of our EU-UK personal data transfers, including those that involve sensitive data such as patient and genetic data.

Even if we or any future collaborators, obtain regulatory approvals for our product candidates, the terms of approvals and ongoing regulation of our products may limit how we manufacture and market our products, which could impair our ability to generate revenue.

Once regulatory approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation. We, and any future collaborators, must therefore comply with requirements concerning advertising and promotion for any of our product candidates for which we or they obtain regulatory approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we and any future collaborators will not be able to promote any products we develop for indications or uses for which they are not approved.

In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, our contract manufacturers, any future collaborators and their contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs. Despite our efforts to inspect and verify regulatory compliance, one or more of our third-party manufacturing vendors may be found on regulatory inspection by FDA or other authorities to be not in compliance with cGMP regulations, which may result in shutdown of the third-party vendor or invalidation of drug product lots or processes. In some cases, a product recall may be warranted or required, which would materially affect our ability to supply and market our drug products.

~~Accordingly, assuming we, or any future collaborators,~~ receive regulatory approval ~~for one or more~~ 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.

Any regulatory approvals that we receive for our product candidates will require post-market surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a risk evaluation and mitigation strategy (REMS), in order to approve our product candidates, which could entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and cGCPs for any ~~future collaborators,~~clinical trials that we conduct post-approval. As such, we and our ~~and their~~ contract manufacturers will be subject to continual review and inspections to assess compliance with cGMPs and adherence to commitments made in any BLA, other marketing application and previous responses to inspectional observations. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production ~~product surveillance~~ and quality control.

~~If we, and any future collaborators, are not able to comply with post-approval regulatory requirements, we, and any future collaborators,~~ In addition, the FDA could have the regulatory approvals for our products withdrawn by regulatory authorities and our, or any future collaborators’, ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

~~We are subject to extensive government regulation and the failure to comply with these regulations may have a material adverse effect on our operations and business.~~

Both before and after approval of any product, we and our suppliers, contract manufacturers and clinical investigators are subject to extensive regulation by governmental authorities in the United States and other countries, covering, among other things, testing, manufacturing, quality control, clinical trials, post-marketing studies, labeling, advertising, promotion, distribution, import and export, governmental pricing, price reporting and rebate requirements. Failure to comply with applicable requirements could result in one or more of the following actions: warning or untitled letters; unanticipated expenditures; delays in approval or refusal to approve a product candidate; voluntary product recall; product seizure; interruption of manufacturing or clinical trials; operating or marketing restrictions; injunctions; criminal prosecution and civil or criminal penalties including fines and other monetary penalties; exclusion from federal health care programs such as Medicare and Medicaid; adverse publicity; and disruptions to our business. Further, government investigations into potential violations of these laws would require us to ~~expend considerable resources and face adverse publicity and the potential disruption of our business even if~~conduct another study to obtain additional safety or biomarker information.

Obtaining FDA approval of our product candidates requires substantial time, effort and financial resources and may be subject to both expected and unforeseen delays, and there can be no assurance that any approval will be granted for any of our product candidates on a timely basis, if at all. The FDA may decide that our data are insufficient for approval of our product candidates and require additional preclinical, clinical or other studies or additional work related to chemistry, manufacturing and controls. In addition, we, the FDA, IRBs or independent ethics committees may suspend or terminate human clinical trials at any time on various grounds, including a finding that the patients are or would be exposed to an unacceptable health risk or because of the way in which the investigators on which we rely carry out the trials. If we are required to conduct additional trials or to conduct other testing of our product candidates beyond that which we currently contemplate for regulatory approval, if we are unable to complete successfully our clinical trials or other testing, or if the results of these and other trials or tests fail to demonstrate efficacy or raise safety concerns, we may face substantial additional expenses, be delayed in obtaining regulatory approval for our product candidates or may never obtain regulatory approval.

~~We are also~~ required to comply with ~~extensive governmental regulatory requirements after a product has received marketing authorization. Governing regulatory authorities may require post-marketing studies~~FDA promotion and advertising rules, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that may negatively impact the commercial viability of a product. Once on the market, a product may become associated with previously undetected adverse effects and/or may experience manufacturing or other commercial difficulties. As a result of any of these or other problems, a product’s regulatory approval could be withdrawn, suspended or modified which could harm our business and operating results.

~~Any of our product candidates for which we, or any future collaborators, obtain regulatory approval~~are not described in the ~~future will be subject to ongoing obligations~~product’s approved uses (known as “off-label use”), limitations on industry-sponsored scientific and ~~continued regulatory review, which may result in significant additional expense. If approved, our product candidates could be subject to post-marketing restrictions or withdrawal from the market~~educational activities and ~~we, or any future collaborators, may be subject to substantial penalties if we, or they, fail to comply with regulatory~~ requirements ~~or if we, or they, experience unanticipated problems with our products following approval.~~

~~Any of our product candidates~~ for ~~which we, or any future collaborators, obtain regulatory approval, as well as the manufacturing processes, post-approval studies, labeling, advertising and~~ promotional activities ~~for such product, among other things, will be subject to ongoing requirements of~~involving the internet and review by the FDA, EMA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. We and our contract manufacturers will also be subject to user fees and periodic inspection by the FDA, EMA and other regulatory authorities to monitor compliance with these requirements and the terms of any product approval we may obtain. Even if regulatory approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the requirement to implement a REMS.

~~The FDA, EMA and other regulatory authorities may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product.~~social media. The FDA and other agencies ~~including~~actively enforce the ~~Department of Justice, closely regulate~~laws and ~~monitor~~regulations prohibiting the ~~post-approval marketing and~~ promotion of ~~products~~off-label uses, and a company that is found to ensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regardinghave improperly promoted off-label ~~use and if we, or any future collaborators, do not market any of our product candidates for which we, or they, receive regulatory approval for only their approved indications, we, or they,~~ may be subject to ~~warnings or enforcement action~~significant liability. However, physicians may, in their independent medical judgment, prescribe legally available products for off-label ~~marketing if it is alleged that we are doing so. Violation~~uses. The FDA does not regulate the behavior of physicians in their choice of treatments, but the ~~FDCA and other statutes relating to~~FDA does restrict manufacturer’s communications on the ~~promotion and advertising~~subject of ~~prescription drugs may lead to investigations or allegations~~off-label use of ~~violations of federal and state health care fraud and abuse laws and state consumer protection laws, including the False Claims Act.~~

~~In addition, later~~their products. Later discovery of previously unknown ~~adverse events or other~~ problems with our ~~products~~product candidates, including adverse events of unanticipated severity or ~~their manufacturers~~frequency, or with our third-party suppliers or manufacturing processes, or failure to comply with regulatory requirements, may ~~yield various results, including:~~

The ~~efforts of the current administration to pursue regulatory reform may limit~~ FDA’s ~~ability to engage in oversight~~ and ~~implementation activities in the normal course, and that could negatively impact our business.~~

~~The policies of the FDA and of~~ other regulatory ~~authorities~~authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the ~~United States~~U.S. or abroad. For example, certain policies of the ~~current~~former U.S. President’s administration may impact our business and industry. Namely, the ~~current~~former U.S. President’s administration ~~has taken~~took several executive actions, including the issuance of a number of ~~executive orders,~~Executive Orders, that could impose significant burdens on, or otherwise materially delay, ~~the~~ FDA’s ability to engage in routine ~~regulatory and~~ oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. On January 30, 2017, President Trump issued an executive order, applicable to all executive agencies, including the FDA, that requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This executive order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the executive order requires agencies to identify regulations to offset any incremental cost of a new regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents, and on September 8, 2017, the FDA published notices in the Federal Register soliciting broad public comment to identify regulations that could be modified in compliance with these Executive Orders. It is difficult to predict how these ~~requirements~~orders will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose ~~constraints~~restrictions on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

~~Our relationships with healthcare providers, physicians~~ If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and third-party payors will be subject to applicable anti-kickback, fraud and abuse, privacy and transparency and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.we may not achieve or sustain profitability.

~~Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any products for which~~Even if we obtain regulatory ~~approval. Our future arrangements with third party payors, healthcare providers~~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, adversely affecting our ability to achieve our commercial and financial projections.

The use of engineered gamma delta T cells as a potential cancer treatment is a recent development and may not become broadly accepted by physicians, ~~may expose us to broadly applicable fraud~~patients, hospitals, cancer treatment centers and ~~abuse and other healthcare laws and regulations,~~others in ~~addition to legal obligations related to privacy, data protection and information security, that may constrain~~ the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute any products for which we obtain regulatory approval. These includemedical community. We expect physicians in the ~~following:~~

~~Transparency Requirements—Federal laws require applicable manufacturers of covered drugs~~If our product candidates are approved but fail to ~~report payments and other transfers of value to~~achieve market acceptance among physicians, ~~including doctors, dentists, optometrists, podiatrists and chiropractors, and teaching~~patients, hospitals, as well as information regarding ownership and investment interests held by the physicians described above and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners;

Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differadequate reimbursement from ~~each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.~~

Efforts to ensure that our business arrangements with third parties, and our business generally, will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible thatthird-party payors including governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, managed care organizations and commercial payors, among others. Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In addition, because our product candidates represent new approaches to the treatment of cancer, we cannot accurately estimate the potential revenue from our product candidates.

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Obtaining coverage and adequate reimbursement from third-party payors is critical to new product acceptance.

Third-party payors decide which drugs and treatments they will cover and the ~~curtailment~~amount of reimbursement. Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s determination that use of a product is:

Obtaining coverage and reimbursement of a product from a government or ~~restructuring~~other third-party payor is a time consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our ~~operations. Defending against any such actions~~products. Even if we obtain coverage for a given product, if the resulting reimbursement rates are insufficient, hospitals may not approve our product for use in their facility or third-party payors may require co-payments that patients find unacceptably high. Patients are unlikely to use our product candidates unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our product candidates. Separate reimbursement for the product itself may or may not be available. Instead, the hospital or administering physician may be reimbursed only for providing the treatment or procedure in which our product is used. Further, from time to time, CMS revises the reimbursement systems used to reimburse health care providers, including the Medicare Physician Fee Schedule and Outpatient Prospective Payment System, which may result in reduced Medicare payments. In some cases, private third-party payers rely on all or portions of Medicare payment systems to determine payment rates. Changes to government healthcare programs that reduce payments under these programs may negatively impact payments from private third-party payers and reduce the willingness of physicians to use our product candidates.

In the U.S., no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be ~~costly, time-consuming~~available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Because our product candidate may have a higher cost of goods than conventional therapies, and may require ~~significant financial~~long-term follow-up evaluations, the risk that coverage and ~~personnel resources. Therefore, even if we are successful in defending against any such actions that~~reimbursement rates may be ~~brought against~~inadequate for us ~~our business~~to achieve profitability may be ~~impaired. If any~~greater. There is significant uncertainty related to insurance coverage and reimbursement of newly approved products. It is difficult to predict at this time what third-party payors will decide with respect to the ~~physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they~~coverage and reimbursement for our product candidate. Moreover, payment methodologies may be subject to ~~criminal, civil or administrative sanctions, including exclusions from government funded~~changes in healthcare ~~programs.~~

~~The provision of benefits or advantages~~legislation and regulatory initiatives. Additional state and federal healthcare reform measures are expected to ~~physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is generally not permitted~~be adopted in the ~~countries~~future, any of which could limit the amounts that ~~form part of the EU. Some EU Member States, like the United Kingdom, through the United Kingdom Bribery Act 2010, have enacted laws explicitly prohibiting the provision of these type of benefits~~federal and ~~advantages. Infringements of these laws can result in substantial fines~~state governments will pay for healthcare products and ~~imprisonment.~~

Payments made to physicians in certain EU Member States (e.g., France or Belgium) must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of the individual EU Member States. These requirements are provided in the EU Member State national laws, industry codes (e.g. the European Federation of Pharmaceutical Industries and Associations Disclosure and Healthcare Professionals Codes) or professional codes of conduct. Failure to comply with these requirementsservices, which could result in ~~reputational risk, public reprimands, administrative penalties, fines~~reduced demand for certain pharmaceutical products or ~~imprisonment.~~additional pricing pressures. Specifically, there have been several U.S. Congressional inquiries and federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, cost containment initiatives and additional legislative changes.

We ~~are~~intend to seek approval to market our product candidates in both the U.S. and in selected foreign jurisdictions. Increased efforts by governmental and third-party payors in the U.S. and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidate. If we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in Europe, the pricing of biologics is subject to governmental ~~regulation~~control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. Some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.

The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if government and other ~~legal obligations, particularly related~~third-party payors fail to ~~privacy, data protection~~provide coverage and ~~information security,~~adequate reimbursement. We expect downward pressure on pharmaceutical pricing to continue. Further, coverage policies and third-party reimbursement rates may change at any time.

Even if favorable coverage and reimbursement status is attained for one or more products for which we ~~are subject to consumer protection laws that regulate our marketing practices~~receive regulatory approval, less favorable coverage policies and ~~prohibit unfair or deceptive acts or practices. Our actual or perceived failure to comply with such obligations could harm our business.~~reimbursement rates may be implemented in the future.

The ~~GDPR imposes strict requirements on controllers and processors~~advancement of personal data, including special protections for “special category data,” which includes health, biometric and genetic information of data subjects located in the EU. Further, GDPR provides a broad right for EU Member States to create supplemental national laws, such as laws relating to the processing of health, genetic and biometric data, which could further limithealthcare reform may negatively impact our ability to use and share such data or could cause our costs to increase, and harm our business and financial condition. GDPR grants individuals the opportunity to object to the processing of their personal information, allows them to request deletion of personal information in certain circumstances, and provides the individual with an express right to seek legal remedies in the event the individual believes his or her rights have been violated. Further, the GDPR imposes strict rules on the transfer of personal data out of the EU to the United States or other regions that have not been deemed to offer “adequate” privacy protections.

Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States, which may deviate slightly from the GDPR, may result in fines of up to 4% of global revenues, or €20,000,000, whichever is greater, and in addition to such fines, we may be the subject of litigation and/or adverse publicity, which could have material adverse effect on our reputation and business. As a result of the implementation of the GDPR, we are required to put in place additional mechanisms to ensure compliance with the new data protection rules. For example, the GDPR requires us to make more detailed disclosures to data subjects, requires disclosure of the legal basis on which we can process personal data, may make it harder for us to obtain valid consent for processing, will require the appointment of a data protection officer where sensitive personal data (i.e., health data) is processed on a large scale, introduces mandatory data breach notification requirements throughout the EU, imposes additional obligations on us when we are contracting with service providers and requires us to adopt appropriate privacy governance including policies, procedures, training and data audit.

~~We are subject to the supervision of local data protection authorities in those jurisdictions where we monitor the behavior of individuals in the EU (i.e., undertaking clinical trials).~~

We are also subject to evolving European privacy laws on electronic marketing and cookies. The EU is in the process of replacing the e-Privacy Directive (2002/58/EC) with a new set of rules taking the form of a regulation, which will be directly implemented in the laws of each EU state, without the need for further enactment. While the e-Privacy Regulation was originally intended to be adopted on May 25, 2018 (alongside the GDPR), it is still going through the European legislative process. Draft regulations were rejected by the Permanent Representatives Committee of the Council of EU on November 22, 2019; it is not clear when new regulations will be adopted.

~~Current and future legislation may increase the difficulty and cost for us and any collaborators to obtain regulatory approval of and commercialize~~sell our product candidates, if approved, profitably.

Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the U.S. and ~~affect the prices we, or they, may obtain.~~

~~In the United States and~~certain foreign jurisdictions, there have been a number of legislative and regulatory changes ~~and proposed changes regarding~~to the ~~healthcare~~health care system that could ~~prevent or delay regulatory approval of~~impact our ability to sell our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain regulatory approval. We expect that current laws, as well as other healthcare reform measures that may be adoptedif approved, profitably. In particular, in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we, or any collaborators, may receive for any approved products.

~~In March~~ 2010 President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the Affordable Care Act. Among the provisions of the Affordable Care Act ~~of potential importance to our business~~was enacted. The Affordable Care Act and ~~our product candidates are~~its implementing regulations, among other things, revised the ~~following:~~

~~Since its enactment, there have been numerous judicial, administrative, executive, and legislative~~political challenges to certain aspects of the Affordable Care Act. Since January 2017, the former U.S. President signed several Executive Orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the Affordable Care Act. In December 2017, Congress repealed the tax penalty for an individual’s failure to maintain Affordable Care Act-mandated health insurance, commonly known as the “individual mandate”, as part of the Tax Cuts and Jobs Act ~~and we expect there will be additional challenges and amendments to~~of 2017 (Tax Act). On December 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the ~~future. Various portions~~“individual mandate” was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit held the that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are ~~currently undergoing legal and constitutional challenges in the Fifth Circuit Court and~~invalid as well. On March 2, 2020, the United States Supreme ~~Court;~~Court granted the ~~Trump Administration has issued various Executive Orders which eliminated cost sharing subsidies~~petitions for writs of certiorari to review this case, and ~~various provisions that would impose a fiscal burden~~held oral arguments on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices; and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the Affordable Care Act.November 10, 2020. It is unclear ~~whether~~how these developments, future decisions, subsequent appeals, and other efforts to repeal and replace the Affordable Care Act will ~~be overturned, repealed, replaced, or further amended. We cannot predict what affect further changes to~~impact the Affordable Care Act ~~would have on~~and our business.

In addition, the Further Consolidated Appropriations Act (H.R. 1865) permanently eliminated, effective January 1, 2020, the Affordable Care Act’s mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018, the BBA, among other things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. In December 2018, CMS published a final rule permitting further collections and payments to and from certain Affordable Care Act qualified health plans and health insurance issuers under the Affordable Care Act risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. Since then, the Affordable Care Act risk adjustment program payment parameters have been updated annually.

Further legislation or regulation could be passed that could harm our business, financial condition and results of operations. Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. InFor example, in August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, ~~included~~created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect inbeginning on April 1, 2013 and will ~~remain~~stay in effect through ~~2029~~2030, unless additional Congressional action is taken. ~~The~~Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, as well as subsequent legislation, these reductions have been suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the pandemic. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. ~~These laws may result in additional reductions in Medicare~~

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The implementation of cost containment measures or other healthcare ~~funding and otherwise affect the prices~~reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products. Such reforms could have an adverse effect on anticipated revenue from product candidates that we may ~~obtain for any of our product candidates~~successfully develop and for which we may obtain regulatory approval ~~or the frequency with which any such~~and may affect our overall financial condition and ability to develop product ~~candidate is prescribed or used.~~candidates.

~~The costs of prescription pharmaceuticals~~In addition, there has been increasing legislative and enforcement interest in the United States has also been the subject of considerable discussion in the United States, and members of Congress and the Trump Administration have stated that they will address such costs through new legislative and administrative measures. ThereU.S. with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and ~~proposed~~federal and ~~enacted~~ state ~~legislation~~legislative activity designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient assistance programs, ~~reduce the costs of drugs under Medicare~~ and reform government program reimbursement methodologies for ~~drug products.~~drugs. At the federal level, ~~Congress and~~ the ~~Trump administration have each indicated that it will continue~~former U.S. Presidential administration’s budget proposal for the fiscal year 2021 includes a $135 billion allowance to ~~pursue new~~support legislative ~~and/or administrative measures to control drug costs. The Trump administration recently released a plan, or Blueprint,~~proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. HHS has solicited feedback on some of the ~~cost of drugs. The Trump administrations’ Blueprint contains certain~~ measures supported by the prior administration and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. It is unclear whether the ~~U.S. Department of Health~~Biden administration will challenge, reverse, revoke or otherwise modify these executive and ~~Human Services is already working to implement.~~

administrative actions after January 20, 2021. Individual state legislatures have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing. Some of these measures include price or patient reimbursement constraints, discounts, restrictions on certain product access, marketing cost disclosure and transparency measures, and, in some cases, measures designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

~~In addition, individual~~ states in the ~~United States~~U.S. have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Additionally, the FDA released a final rule on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The ~~pricing of prescription pharmaceuticals is also subject~~MFN Model regulations mandate participation by identified Part B providers and would have applied to ~~governmental control outside the United States. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of regulatory approval~~all U.S. states and territories for a ~~product. To obtain reimbursement or pricing approval~~seven-year period beginning January 1, 2021, and ending December 31, 2027. However, in ~~some countries,~~response to a lawsuit filed by several industry groups, on December 28, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction enjoining government defendants from implementing the MFN Rule pending completion of notice-and-comment procedures under the Administrative Procedure Act. On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Interim Final Rule shall not commence earlier than 60 days after publication of that regulation in the Federal Register. Further, authorities in Canada have passed rules designed to safeguard the Canadian drug supply from shortages. If implemented, importation of drugs from Canada and the MFN Model may materially and adversely affect the price we ~~may be required to conduct a clinical trial that compares the cost-effectiveness~~receive for any of our product ~~candidates~~candidates. Additionally, on December 2, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed.

We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other ~~available therapies. If reimbursement~~payors of ~~our products is unavailable~~healthcare services to contain or ~~limited in scope~~ reduce costs of healthcare and/or ~~amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.~~

~~Governments outside the United States may~~ impose ~~strict~~ price controls may adversely affect:

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our ~~revenues, if any.~~future profitability.

In some countries, including Member States of the EU, the pricing of prescription drugs is subject to governmental control. Additional countries may adopt similar approaches to the pricing of prescription drugs. In such countries, pricing negotiations with governmental authorities can take considerable time after receipt of regulatory approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after coverage and reimbursement have been obtained. Reference pricing used by various countries and parallel distribution, or arbitrage between low-priced and high-priced countries, can further reduce prices. In some countries, we may be required to conduct a clinical study or other studies that compare the cost-effectiveness of any of our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval, which is time-consuming and costly. We cannot be sure that such prices and reimbursement will be acceptable to us or our strategic partners. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if reimbursement of our products is unavailable or limited in scope or amount, our revenues from sales by us or our strategic partners and the potential profitability of any of our product candidates in those countries would be negatively affected.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain products outside of the United States and require us to develop and implement costly compliance programs.

If we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

~~If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.~~

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.

~~The anticipated phasing out of~~ ~~LIBOR in the future may adversely affect the value of any outstanding debt instruments.~~

~~National~~ and international regulators and law enforcement agencies have conducted investigations into a number of rates or indices known as “reference rates.” Actions by such regulators and law enforcement agencies may result in changes to the manner in which certain reference rates are determined, their discontinuance, or the establishment of alternative reference rates. In particular, in July 2017, the Chief Executive of the U.K. Financial Conduct Authority, or FCA, which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. Such announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. As a result, it appears highly likely that LIBOR will be discontinued or modified by 2021.

At this time, it is not possible to predict the effect that these developments, any discontinuance, modification or other reforms to LIBOR or any other reference rate, or the establishment of alternative reference rates may have on LIBOR, other benchmarks, or LIBOR-based debt instruments. Uncertainty as to the nature of such potential discontinuance, modification, alternative reference rates or other reforms may materially adversely affect the trading market for securities linked to such benchmarks. Furthermore, the use of alternative reference rates or other reforms could cause the interest rate calculated for the LIBOR-based debt instruments to be materially different than expected.

~~Our commercial success depends on our ability~~Risks Related to ~~protect our intellectual property and proprietary technology.~~

Our commercial success depends in large part on our ability to obtain and maintain intellectual property rights protection through patents, trademarks, and trade secrets in the United States and other countries with respect to our proprietary product candidates. If we do not adequately protect our intellectual property rights, competitors may be able to erode, negate or preempt any competitive advantage we may have, which could harm our business and ability to achieve profitability. To protect our proprietary position, we have patent applications and may file other patent applications in the United States or abroad related to our product candidates that are important to our business; we may also license or purchase patent applications filed by others. The patent application and approval process is expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

Agreements through which we license patent rights may not give us control over patent prosecution or maintenance, so that we may not be able to control which claims or arguments are presented, how claims are amended, and may not be able to secure, maintain, or successfully enforce necessary or desirable patent protection from those patent rights. We have not had and do not have primary control over patent prosecution and maintenance for certain of the patents and patent applications we license, and therefore cannot guarantee that these patents and applications will be prosecuted or maintained in a manner consistent with the best interests of our business. We cannot be certain that patent prosecution and maintenance activities by our licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents.

If the scope of the patent protection we or our licensors obtain is not sufficiently broad, we may not be able to prevent others from developing and commercializing technology and products similar or identical to ours. The degree of patent protection we require to successfully compete in the marketplace may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any competitive advantage. We cannot provide any assurances that any of our licensed patents have, or that any of our pending owned or licensed patent applications that mature into issued patents will include, claims with a scope sufficient to protect our proprietary platform or otherwise provide any competitive advantage, nor can we assure you that our licenses are or will remain in force. Other parties have developed or may develop technologies that may be related or competitive with our approach, and may have filed or may file patent applications and may have been issued or may be issued patents with claims that overlap or conflict with our patent applications, either by claiming the same compounds, formulations or methods or by claiming subject matter that could dominate our patent position. 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 twenty 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. As a result, our patent portfolio may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to our product candidates. In addition, the patent portfolio licensed to us is, or may be, licensed to third parties, such as outside our field, and such third parties may have certain enforcement rights. Thus, patents licensed to us could be put at risk of being invalidated or interpreted narrowly in litigation

~~filed by or against another licensee or in administrative proceedings brought by or against another licensee in response to such litigation or for other reasons.~~

Even if they are unchallenged, our owned and licensed patents and pending patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims to circumvent our patents by developing similar or alternative technologies or therapeutics in a non-infringing manner. For example, a third party may develop a competitive therapy that provides benefits similar to one or more of our product candidates but falls outside the scope of our patent protection or license rights. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected, which would harm our business. Currently, a significant portion of our patents and patent applications are in-licensed, though similar risks would apply to any patents or patent applications that we now own or may own or in-license in the future.

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, whether current or future, 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.

The patent position of biotechnology and pharmaceutical companies carries uncertainty. In addition, the determination of patent rights with respect to pharmaceutical compounds commonly involves complex legal and factual questions, which are dependent upon the current legal and intellectual property context, extant legal precedent and interpretations of the law by individuals. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are characterized by uncertainty.

Pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. Similarly, we cannot be certain that parties from whom we do or may license or purchase patent rights were the first to make relevant claimed inventions, or were the first to file for patent protection for them. If third parties have filed prior patent applications on inventions claimed in our patents or applications that were filed on or before March 15, 2013, an interference proceeding in the United States can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. If third parties have filed such prior applications after March 15, 2013, a derivation proceeding in the United States can be initiated by such third parties to determine whether our invention was derived from theirs.

Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, our patents or pending patent applications may be challenged in the courts or patent offices in the United States and abroad. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found. If such prior art exists, it may be used to invalidate a patent, or may prevent a patent from issuing from a pending patent application. For example, such patent filings may be subject to a third-party submission of prior art to the U.S. Patent and Trademark Office, or USPTO, or to other patent offices around the world. Alternately or additionally, we may become involved in post-grant review procedures, oppositions, derivation proceedings, ~~ex parte~~ ~~reexaminations,~~ ~~inter partes~~ review, supplemental examinations, or interference proceedings or challenges in district court, in the United States or in various foreign patent offices, including both national and regional, challenging patents or patent applications in which we have rights, including patents on which we rely to protect our business. An adverse determination in

any such challenges may result in loss of the patent or in patent or patent application claims being narrowed, invalidated or held unenforceable, in whole or in part, or in denial of the patent application or loss or reduction in the scope of one or more claims of the patent or patent application, any of which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. 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.

Pending and future patent applications may not result in patents being issued that protect our business, in whole or in part, or which effectively prevent others from commercializing competitive products. Competitors may also be able to design around our patents. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent or in the same manner as the laws of the United States. For example, patent laws in various jurisdictions, including significant commercial markets such as Europe, restrict the patentability of methods of treatment of the human body more than United States law does. If these developments were to occur, they could have a material adverse effect on our ability to generate revenue.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:

Issued patents that we have or may obtain or license may not provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by submitting ANDAs to the FDA in which they claim that patents owned or licensed by us are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.

In addition, we rely on the protection of our trade secrets and proprietary, unpatented know-how. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and invention assignment agreements with employees, consultants, collaborators, vendors, and advisors, we cannot provide any assurances that all such agreements have been duly executed, and third parties may still obtain this information or may come upon this or similar information independently. It is possible that technology relevant to our business will be independently developed by a person who is not a party to such a confidentiality or invention assignment agreement. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, collaborators, vendors, advisors, former employees and current employees. Furthermore, if the parties to our confidentiality agreements breach or violate the terms of these agreement, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets as a consequence of such breaches or violations. Our trade secrets could otherwise become known or be independently discovered by our competitors. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets. If any of these events occurs or if we otherwise lose protection for our trade secrets or proprietary know-how, our business may be harmed.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.

In March 2017, we entered into a license agreement with Novartis, or the Novartis License, pursuant to which we were granted an exclusive, field-restricted, worldwide license to certain intellectual property rights owned or controlled by Novartis, including patents, patent applications, proprietary information, know-how and other intellectual property, to develop, commercialize and sell one or more therapeutic products comprising RTB101 or RTB101 and everolimus in a fixed dose combination.

We are dependent on ~~these~~ patents, know-how and proprietary technology, both our own and licensed from ~~Novartis.~~others. We depend substantially on our license agreements with Regeneron. These licenses may be terminated upon certain conditions. Any termination of ~~this license, or a finding that such intellectual property lacks legal effect,~~these licenses could result in the loss of significant rights and could harm our ability to commercialize ~~any~~our product candidates. ~~See~~To the ~~section entitled “Business—Intellectual Property” for additional information regarding~~extent these licensors fail to meet their obligations under their license agreements, which we are not in control of, we may lose the benefits of our license ~~agreements.~~agreements with these licensors. In the future, we may also enter into additional license agreements that are material to the development of our product candidates.

Disputes may also arise between us and our ~~licensor, our licensor and its licensors, or us and third parties that co-own intellectual property with our licensor or its~~ licensors regarding intellectual property subject to a license agreement, including those ~~relating~~related to:

If disputes over intellectual property that we have licensed or license in the future, prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, ~~or are insufficient to provide us the necessary rights to use the intellectual property,~~ 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 ~~any such~~our licensors fail to adequately protect this intellectual property, our ability to commercialize ~~our~~ products could suffer.

~~Novartis~~Confidentiality agreements with employees and third parties may ~~partially terminate~~not prevent unauthorized disclosure of trade secrets and other proprietary information.

In addition to the ~~license agreement~~protection afforded by patents, we seek to rely on trade secret protection and confidentiality 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. Trade secrets, however, may be difficult to protect. Although we require all of our employees to assign their inventions to us, and requires all of our employees and key consultants 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 U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the U.S. and abroad. 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.

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

Our commercial success depends in part on us 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. 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.

We are aware of U.S. and foreign patents held by a third parties relating to gamma delta T cell expansion protocols and related compositions which, on information and belief, are invalid and/or not infringed. In the event that these patents are successfully asserted against our product candidates, such as ADI-001 and ADI-002, or the use of our precursor cells in manufacture of these product candidates, such litigation may negatively impact our ability to commercialize these product candidates in such jurisdictions. We are also aware of several U.S. and foreign patents held by third parties relating to certain CAR compositions of matter, methods of making and methods of use which, on information and belief, are invalid and/or not infringed. Nevertheless, third parties may assert that we infringe their patents or are otherwise employing their proprietary technology without authorization and may sue us. Generally, conducting clinical trials and other development activities in the U.S. is not considered an act of infringement. If and when ADI-001 or ADI-002 or another CAR-based product candidate is approved by the FDA, third parties may then seek to enforce their patents by filing a patent infringement lawsuit against us. Patents issued in the U.S. by law enjoy a presumption of validity that can be rebutted only with ~~respect~~evidence that is “clear and convincing,” a heightened standard of proof. We may not be able to ~~everolimus if~~prove in litigation that any patent enforced against us is invalid and/or not infringed.

Additionally, there may be third-party patents of which we ~~fail~~are currently unaware with claims to materials, formulations, methods of manufacture or ~~cease~~methods for ~~three~~treatment related to the use or manufacture of our product candidates. Because 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 ~~commercially reasonable efforts~~of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to ~~research,~~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 not infringed, unpatentable, 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 and commercialize the product candidate unless we obtained a ~~product using everolimus, provided that our~~ license ~~related~~or until such patent expires or is finally determined to ~~RTB101 and Novartis’s~~be held not infringed, unpatentable, 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 ~~improvements related~~ability to ~~everolimus will continue. Additionally, either party~~commercialize our product candidates may ~~terminate the Novartis License if the~~be impaired or delayed, which could in turn significantly harm our business.

Parties making claims against us may seek and obtain injunctive or other ~~party commits a material breach~~equitable relief, which could effectively block our ability to further develop and ~~fails to cure such breach within 60 days after written notice. If Novartis unilaterally terminates the Novartis License, the research~~commercialize our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and ~~development of RTB101 or RTB101 and everolimus in a fixed dose combination~~ would be ~~suspended,~~a substantial diversion of employee resources from our business and may impact our reputation. In the event of a successful claim of infringement against us, we may ~~be unable~~have to ~~research, develop~~pay substantial damages, including treble damages and ~~license future product candidates.~~

Weattorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties, or redesign our infringing products, which may be ~~required to pay certain milestones~~impossible or require substantial time and ~~royalties under our~~monetary expenditure. We cannot predict whether any such license ~~agreements with third-party licensors.~~

~~Under our current and future license agreements, we may~~would be ~~required to pay milestones and royalties based~~available at all or whether it would be available on ~~our revenues from sales~~commercially reasonable terms. Furthermore, even in the absence of our products utilizing the technologies licensed or sublicensed from Novartis or other licensors and these royalty payments could adversely affect the overall profitability for us of any products that we may seek to commercialize. In order to maintain our license rights under current and future license agreements,litigation, we may need to ~~meet certain specified milestones, subject~~obtain licenses from third parties to ~~certain cure provisions, in the development~~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, ~~and in~~which could harm our business significantly.

If our efforts to protect the ~~raising of funding. In addition, these agreements may contain diligence milestones and we may not be successful in meeting all~~proprietary nature of the milestones in the future on a timely basis, or at all, which could result in termination of our rights under such agreements. We may need to outsource and rely on third parties for many aspects of the clinical development, sales and marketing of our products covered under our current and future license agreements. Delay or failure by these third parties could adversely affect the continuation of our license agreements with their third-party licensors.

~~It is difficult and costly to protect our~~ intellectual property ~~and~~related to our ~~proprietary~~ technologies ~~and~~are not adequate, we may not be able to ~~ensure their protection.~~compete effectively in our market.

~~Our commercial success will depend in part on obtaining and maintaining patent protection and~~We rely upon a combination of patents, trade secret protection ~~for the use, formulation~~ and structure of our products and product candidates, the methods used to manufacture them, the related therapeutic targets and associated methods of treatment as well as on successfully defending these patents against potential third-party challenges. Our abilitylicense agreements to protect the intellectual property related to our ~~products and product candidates from unauthorized making, using, selling, offering~~technologies. Any disclosure to ~~sell~~ or ~~importing~~misappropriation by third parties ~~is dependent on~~of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market.

Additional patent applications have been filed, and we anticipate additional patent applications will be filed, both in the ~~extent~~U.S. and in other countries, as appropriate. However, we cannot predict:

Composition of matter patents for biological and pharmaceutical products such as CAR-based product candidates often provide a strong form of intellectual property protection for those types of products, as such patents provide protection without regard to ~~which we have rights under~~any method of use. 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 U.S. Patent and Trademark Office (USPTO), or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid and enforceable by courts in the U.S. or foreign countries. Method of use patents protect the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing a product that ~~cover~~is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these ~~activities.~~products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute.

The ~~patent positions~~strength of ~~pharmaceutical,~~patents in the biotechnology and ~~other life sciences companies can be highly uncertain and involve~~pharmaceutical field involves complex legal and ~~factual~~scientific questions ~~for which important legal principles remain unresolved. Changes~~and can be uncertain. The patent applications that we own or in-license may fail to result in ~~either~~issued patents with claims that cover our product candidates or uses thereof in the ~~patent laws~~U.S. or in ~~interpretations of patent laws in~~other foreign countries. Even if the ~~United States and other countries~~patents do successfully issue, third parties may ~~diminish~~challenge the ~~value of our intellectual property. Further, the determination that a patent application~~patentability, validity, enforceability or ~~patent claim meets all of the requirements~~scope thereof, for ~~patentability is a subjective determination based on the application of law and jurisprudence. The ultimate determination by~~example through inter partes review, or IPR, post-grant review or ex parte reexamination before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions, which may result in such patents being cancelled, 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 their products to avoid being covered by our claims. If the breadth or strength of protection provided by the patents and 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. U.S. patent applications containing or that at any time contained a ~~court or other trier~~claim not entitled to a priority date before March 16, 2013 are subject to the “first to file” system implemented by the America Invents Act (2011).

This first to file system will require us to be cognizant going forward of ~~fact~~the time from invention to filing of a patent application. Since patent applications in the ~~United States, or corresponding foreign national patent offices or courts, on whether~~U.S. and most other countries are confidential for a ~~claim meets all requirements~~period of patentability cannot be assured. Although we have conducted searches for third-party publications, patents and other information that may affect the patentability of claims in our various patent applications and patents,time after filing, we cannot be certain that it was the first to file any patent application related to our product candidates. Furthermore, for U.S. applications in which all ~~relevant information has been identified.~~claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third-party or instituted by the USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For U.S. applications containing a claim not entitled to priority before March 16, 2013, there is a greater level of uncertainty in the patent law in view of the passage of the America Invents Act, which brought into effect significant changes to the U.S. patent laws, including new procedures for challenging patent applications and issued patents.

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.

We may require access to additional intellectual property to develop our current or future product candidates. Accordingly, ~~we cannot predict~~ the ~~breadth~~growth of ~~claims that~~our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights.

Our product candidates may also require specific formulations to work effectively and efficiently and these rights may be ~~allowed~~held by others. We may be unable to acquire or ~~enforced in our owned patents~~in-license any compositions, methods of use, processes or ~~patent applications, in our licensed patents or patent applications or in~~other third-party ~~patents.~~

We cannot provide assurances that any of our patent applications will be found to be patentable, including over our own or our licensors’ prior art publications or patent literature, or will issue as patents. Neither can we make assurances as to the scope of any claims that may issueintellectual property rights from ~~our pending and future patent applications nor to the outcome of any proceedings by any potential~~ third parties that ~~could challenge~~we identify. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, which would harm our business. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the ~~patentability, validity~~same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or ~~enforceability~~license replacement technology. We may need to cease use of the compositions or methods covered by such third-party intellectual property rights.

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.

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 ~~and patent applications in~~or the ~~United States~~patents of our licensors. To counter infringement or ~~foreign jurisdictions. Any such challenge, if successful, could limit patent protection for our products and product candidates and/or materially harm our business.~~

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:

In addition, to the extent that we are unable to obtain and maintain patent protection for one of our products or product candidates or in the event that such patent protection expires, it may no longer be cost-effective to extend our portfolio by pursuing additional development of a product or product candidate for follow-on indications.

We also may rely on trade secrets to protect our technologies or products, especially where we do not believe patent protection is appropriate or obtainable. Also, we cannot provide any assurances that any of our licensed patents have claims with a scope sufficient to protect our technology or otherwise provide any competitive advantage, nor can we assure you that our licenses are or will remain in full force or effect, in which case we would similarly rely on trade secrets. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisers may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third-party entity illegally obtained and is using anylicensors, misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the U.S.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is ~~expensive and time-consuming, and the outcome is unpredictable.~~a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, ~~courts outside~~there could be public announcements of the ~~United States are sometimes less willing~~results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to ~~protect trade secrets. Moreover,~~be negative, it could have a substantial adverse effect on the price of our competitors may independently develop equivalent knowledge, methods and know-how. Notably, proprietary technology protected by a trade secret does not preempt the patenting of independently developed equivalent technology, even if such equivalent technology is invented subsequent to the technology protected by a trade secret.common stock.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees ~~renewal fees, annuity fees and various other governmental fees~~ on ~~patents and applications~~any issued patent are ~~required~~due to be paid to the USPTO and ~~various governmental~~foreign patent agencies ~~outside of the United States~~ in several stages over the lifetime of the ~~patents and applications.~~patent. The USPTO and various ~~non-U.S.~~foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application ~~process and after~~process. While an inadvertent lapse can in many cases be cured by payment of a ~~patent has issued. There~~late fee or by other means in accordance with the applicable rules, there are situations in which ~~non-compliance~~noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such ~~a circumstance,~~an event, our competitors ~~may~~might be able to enter the market, ~~earlier than otherwise~~which would ~~be the case. Under the terms of some~~have a material adverse effect on our business.

The lives of our ~~current~~patents may not be sufficient to effectively protect our products and ~~future licenses,~~business.

Patents have a limited lifespan. In the U.S., the natural expiration of a patent is generally 20 years after its first effective filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from biosimilar or generic medications. In addition, although upon issuance in the U.S. a patient’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. If we do not have ~~the ability to maintain patents or prosecute~~sufficient patent ~~applications in the portfolio and may therefore have to rely on third parties to comply with these requirements.~~

~~Patent terms may be inadequate~~life to protect our ~~competitive position on~~products, our ~~products for an adequate amount~~business and results of ~~time.~~operations will be adversely affected.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

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. We ~~expect to seek extensions of patent terms~~may in the ~~United States and, if available,~~future be subject to claims that former employees, collaborators, or other third parties have an interest in other countries where we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). We might not be granted an extension because of, for example, failure to apply within applicable periods, failure to apply prior to the expiration of relevant patents or otherwise failure to satisfy any of the numerous applicable requirements. Moreover, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents or other intellectual property as an inventor or co-inventor. For example, we may ~~grant more limited extensions than we request. If this occurs,~~have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our ~~competitors~~product candidates. Litigation may be ~~able~~necessary to ~~obtain approval~~defend against these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, ~~competing products following our patent expiration by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. If this were~~or right to ~~occur, it~~use, valuable intellectual property. Such an outcome could have a material adverse effect on our ~~ability~~business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to ~~generate revenue.~~management and other employees.

Issued patents covering our product candidates could be found unpatentable, invalid or unenforceable if challenged in court or the USPTO.

If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate, as applicable, is invalid and/or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the U.S. or abroad, even outside the context of litigation. Such mechanisms include IPR, ex parte re-examination and post grant review in the U.S., and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our product candidates. The outcome following legal assertions of unpatentability, invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of unpatentability, invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our business.

Changes toin U.S. patent law ~~in the United States and other jurisdictions~~ could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other biopharmaceutical companies, our ~~commercial~~ success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry ~~involves~~involve both technological and legal complexity, and is therefore costly, ~~time consuming~~time-consuming and inherently uncertain. Recent wide-ranging patent reform legislation in the United States, including the Leahy-Smith America Invents Act, or the America Invents Act, could increase those uncertainties and costs. The America Invents Act was signed into law on September 16, 2011, and many of the substantive changes became effective on March 16, 2013. The America Invents Act reforms United States patent law in part by changing the U.S. patent system from a “first to invent” system to a “first inventor to file” system, expanding the definition of prior art, and developing a post-grant review system. This legislation changes United States patent law in a way that may weaken our ability to obtain patent protection in the United States for those applications filed after March 16, 2013.

~~Further, the America Invents Act created new procedures to challenge the validity of issued patents in the United States, including post-grant review and~~ ~~inter partes~~ review proceedings, which some third parties have been using to cause the cancellation of selected or all claims of issued patents of competitors. For a patent with an effective filing date of March 16, 2013 or later, a petition for post-grant review can be filed by a third party in a nine-month window from issuance of the patent. A petition for ~~inter partes~~ ~~review can be filed immediately following the issuance of a patent if the patent has an effective filing date prior to March 16, 2013. A petition for~~ ~~inter partes~~ review can be filed after the nine-month period for filing a post-grant review petition has expired for a patent with an effective filing date of March 16, 2013 or later. Post-grant review proceedings can be brought on any ground of invalidity, whereas ~~inter partes~~ review proceedings can only raise an invalidity challenge based on published prior art and patents. These adversarial actions at the USPTO review patent claims without the presumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts and use a lower burden of proof than used in litigation in U.S. federal courts. Therefore, it is generally considered easier for a competitor or third party to have a U.S. patent invalidated in a USPTO post-grant review or ~~inter partes~~ review proceeding than invalidated in a litigation in a U.S. federal court. If any of our patents are challenged by a third party in such a USPTO proceeding, there is no guarantee that we or our licensors or collaborators will be successful in defending the patent, which may result in a loss of the challenged patent right to us.

~~In addition, recent court~~Supreme Court rulings ~~in cases such as~~ ~~Association for Molecular Pathology v. Myriad Genetics, Inc., BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation, and Promega Corp. v. Life Technologies Corp.~~ have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on ~~future actions~~decisions by the U.S. Congress, the ~~U.S.~~federal courts, ~~the USPTO~~ and the ~~relevant law-making bodies in other countries,~~USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

We may not be able to ~~enforce~~protect our intellectual property rights throughout the world.

We may not be able to protect our intellectual property rights outside the U.S. Filing, prosecuting, ~~enforcing~~ and defending patents on ~~our~~ product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the ~~United States~~U.S. can be less extensive than those in the ~~United States. The requirements for patentability may differ in certain~~U.S. In addition, the laws of some foreign countries ~~particularly in developing countries; thus, even in countries where we~~ do ~~pursue patent protection, there can be no assurance that any patents will issue with claims that cover our products.~~

~~Moreover, our ability to~~not protect ~~and enforce our~~ intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, laws of some countries outside of the United States and Europe do not afford intellectual property protection to the same extent as federal and state laws in the laws of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, including India, China and other developing countries, do not favor the enforcement of patents and other intellectual property rights. This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties.U.S. Consequently, we may not be able to prevent third parties from practicing our inventions in ~~certain~~all countries outside the ~~United States and Europe~~U.S., or from selling or importing products made ~~from~~using our inventions in and into the ~~United States~~U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop ~~and market~~ their own products and further, may export otherwise infringing products to territories where we have patent protection, ~~if our ability to enforce our patents to stop infringing activities~~but enforcement is ~~inadequate.~~not as strong as that in the U.S. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

~~Agreements through~~Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biopharmaceutical products, which ~~we license patent rights may not give us sufficient rights to permit~~could make it difficult for us to ~~pursue enforcement~~stop the infringement of our ~~licensed~~ patents or ~~defense~~marketing of ~~any claims asserting the invalidity~~competing products in violation of ~~these patents (or control of such enforcement or defense) of such patent~~our proprietary rights ~~in all relevant jurisdictions as requirements may vary.~~

generally. Proceedings to enforce our patent rights ~~whether or not successful,~~in foreign jurisdictions could result in substantial costs and divert our efforts and ~~resources~~attention from other aspects of our ~~business. Moreover, such proceedings~~business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against

us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. ~~Furthermore, while we intend~~Accordingly, our efforts to ~~protect~~enforce our intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products, if approved. Accordingly, our efforts to protect our intellectual property rights in such countriesaround the world may be ~~inadequate.~~

~~Others may challenge inventorship or claim an ownership interest in our intellectual property which could expose it~~inadequate to ~~litigation and have~~obtain a significant ~~adverse effect on its prospects.~~

A third party or former employee or collaborator may claim an ownership interest in one or more of our or our licensors’ patents or other proprietary or intellectual property rights. A third party could bring legal actions against us and seek monetary damages and/or enjoin clinical testing, manufacturing and marketing of the affected product or products. While we are presently unaware of any claims or assertions by third-parties with respect to our patents or other intellectual property, we cannot guarantee that a third party will not assert a claim or an interest in any of such patents or intellectual property. If we become involved in any litigation, it could consume a substantial portion of our resources, and cause a significant diversion of effort by our technical and management personnel.

~~If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us~~commercial advantage from ~~developing or commercializing our product candidates.~~

~~Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product candidates without infringing~~ the intellectual property ~~and other proprietary rights of third parties. Third parties may have U.S. and non-U.S. issued patents and pending patent applications relating to compounds, methods of manufacturing compounds and/~~that it develops or methods of use for the treatment of the disease indications for which we are developing our product candidates. If any third-party patents or patent applications are found to cover our product candidates or their methods of use or manufacture, we may not be free to manufacture or market our product candidates as planned without obtaining a license, which may not be available on commercially reasonable terms, or at all.

There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our products candidates, including interference and post-grant proceedings before the USPTO. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the composition, use or manufacture of our product candidates. We cannot guarantee that any of our patent searches or analyses including, but not limited to, the identification of relevant patents, the scope of patent claims or the expiration of relevant patents are complete or thorough, nor can we be certain that we have identified each and every patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction. Because 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 be accused of infringing. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Accordingly, third parties may assert infringement claims against us based on intellectual property rights that exist now or arise in the future. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use or manufacture. The scope of protection afforded by a patent is subject to interpretation by the courts, and the interpretation is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could significantly harm our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

If we are found to infringe a third party’s intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate or product. If we were required to obtain a license to continue to manufacture or market the affected product, we may be required to pay substantial royalties or grant cross-licenses to our patents. We cannot, however, assure you that any such license will be available on acceptable terms, if at all. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations as a result of claims of patent infringement or violation of other intellectual property rights, Further, the outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance, including the demeanor and credibility of witnesses and the identity of any adverse party. This is especially true in intellectual property cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree. Furthermore, we may not be able to obtain any required license on commercially reasonable terms, or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us; alternatively or additionally it could include terms that impede or destroy our ability to compete successfully in the commercial marketplace. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.licenses.

We may be subject to claims ~~by third parties asserting~~ that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.

We have received confidential and proprietary information from third parties. In addition, we ~~have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.~~

~~Many of our current and former employees and our licensors’ current and former employees, including our senior management,~~employ individuals who were previously employed ~~at universities or~~ at other biotechnology or pharmaceutical companies, including some which may be competitors or potential competitors. Some of these employees, including members of our senior management, may have executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, wecompanies. We may be subject to claims that we or ~~these~~our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed ~~intellectual property, including trade secrets or other proprietary~~confidential information of ~~any such~~these third ~~party.~~parties or our employees’ former employers. Litigation may be necessary to defend against ~~such~~these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may sustain damages or lose key personnel, valuable intellectual property rights or the personnel’s work product, which could hamper or prevent commercialization of our technology, which could materially affect our commercial development efforts. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms, or at all. Even if we are successful in defending against ~~such~~these claims, litigation could result in substantial ~~costs and be a distraction to management.~~

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costscost and be a distraction to our ~~senior~~ management and ~~scientific personnel.~~employees.

~~We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.~~

Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving one or more of our patents could limit our ability to assert those patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the trademarks in question. In this case, we could ultimately be forced to cease use of such trademarks.

Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. 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 litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could adversely affect the price of shares of our common stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

Additionally, for certain of our existing and future in-licensed patent rights, we may not have the right to bring suit for infringement and may have to rely on third parties to enforce these rights for us. If we cannot or choose not to take action against those we believe infringe our intellectual property rights, we may have difficulty competing in certain markets where such potential infringers conduct their business, and our commercialization efforts may suffer as a result.

~~If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our trademarks 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 trademark registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those rejections, 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 to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. Moreover, any name we propose to use for our products in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed product names, we may be required to expend significant additional resources in an effort to identify a usable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. 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.

We rely on third parties to assist in conducting our clinical trials. If they do not perform satisfactorily, we may not be able to obtain regulatory approval or commercialize our product candidates, or such approval or commercialization may be delayed, and our business could be substantially harmed.

We do not independently conduct clinical trials of any of our product candidates. We have relied upon and plan to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct these clinical trials and expect to rely on these third parties to conduct clinical trials of any other product candidate that we develop. Any of these third parties may terminate their engagements with us under certain circumstances. We may not be able to enter into alternative arrangements or do so on commercially reasonable terms. In addition, there is a natural transition period when a new CRO begins work. As a result, delays may occur, which could negatively impact our ability to meet our expected clinical development timelines and harm our business, financial condition and prospects.

Further, although our reliance on these third parties for clinical development activities limits our control over these activities, we remain responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards. For example, notwithstanding the obligations of a CRO for a trial of one of our product candidates, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with requirements, commonly referred to as GCPs, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. The FDA enforces these GCPs through periodic inspections of trial sponsors, principal investigators, clinical trial sites and IRBs. If we or our third-party contractors fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our product candidates, which would delay the regulatory approval process. We cannot be certain that, upon inspection, the FDA will determine that any of our clinical trials comply with GCPs. We are also required to register certain clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Furthermore, the third parties conducting clinical trials on our behalf are not our employees, and except for remedies available to us under our agreements with such contractors, we cannot control whether or not they devote sufficient time, skill and resources to our ongoing development programs. These contractors 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 impede their ability to devote appropriate time to our clinical programs. If these third parties, including clinical investigators, do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we may not be able to obtain, or may be delayed in obtaining, regulatory approvals for our product candidates. If that occurs, we will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. In such an event, our financial results and the commercial prospects for any product candidates that we seek to develop could be harmed, our costs could increase and our ability to generate revenues could be delayed, impaired or foreclosed.

We also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or regulatory approval of our product candidates or commercialization of any resulting products, producing additional losses and depriving us of potential product revenue.

Our use of third parties to manufacture our product candidates and products which we are studying in combination with our product candidates may increase the risk that we will not have sufficient quantities of our product candidates, products, or necessary quantities of such materials on time or at an acceptable cost.

We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates, and we lack the resources and the capabilities to do so. As a result, we currently rely on third parties for the manufacture and supply of the active pharmaceutical ingredients, or API, in our product candidates. Our current strategy is to outsource all manufacturing of our product candidates to third parties.

We currently engage one third-party manufacturer to provide the active pharmaceutical ingredient, or API, and two other third-party manufacturers to provide services for the final drug product formulation of RTB101 that is being used in our clinical trials. Although we believe that there are several potential alternative manufacturers who could manufacture RTB101 and rapalogs, such as everolimus or sirolimus, we may incur added costs and delays in identifying and qualifying any such replacement. In addition, we typically order raw materials and services on a purchase order basis and do not enter into long-term dedicated capacity or minimum supply arrangements with any commercial manufacturer. There is no assurance that we will be able to timely secure needed supply arrangements on satisfactory terms, or at all. Our failure to secure these arrangements as needed could have a material adverse effect on our ability to complete the development of our product candidates or, to commercialize them, if approved. We may be unable to conclude agreements for commercial supply with third-party manufacturers, or may be unable to do so on acceptable terms. There may be difficulties in scaling up to commercial quantities and formulation of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, and the costs of manufacturing could be prohibitive.

~~Even if we are able to establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:~~

If we do not maintain our key manufacturing relationships, we may fail to find replacement manufacturers or develop our own manufacturing capabilities, which could delay or impair our ability to obtain regulatory approval for our products. If we do find replacement manufacturers, we may not be able to enter into agreements with them on terms and conditions favorable to us and there could be a substantial delay before new facilities could be qualified and registered with the FDA and other foreign regulatory authorities.

If any of our product candidates are approved by any regulatory agency, we intend to utilize arrangements with third-party contract manufacturers for the commercial production of those products. This process is difficult and time consuming and we may face competition for access to manufacturing facilities as there are a limited number of contract manufacturers operating under cGMPs that are capable of manufacturing our product candidates. Consequently, we may not be able to reach agreement with third-party manufacturers on satisfactory terms, which could delay our commercialization.

Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or voluntary recalls of product candidates, operating restrictions and criminal prosecutions, any of which could significantly affect supplies of our product candidates. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with cGMPs. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, we may not be able to secure and/or maintain regulatory approval for our product manufactured at these facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA finds deficiencies or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such 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, if approved. Contract manufacturers may face manufacturing or quality control problems causing drug substance production and shipment delays or a situation where the contractor may not be able to maintain compliance with the applicable cGMP requirements. Any failure to comply with cGMP requirements or

other FDA, EMA and comparable foreign regulatory requirements could adversely affect our clinical research activities and our ability to develop our product candidates and market our products, if approved.

The FDA and other foreign regulatory authorities require manufacturers to register manufacturing facilities. The FDA and corresponding foreign regulators also inspect these facilities to confirm compliance with cGMPs. Contract manufacturers may face manufacturing or quality control problems causing drug substance production and shipment delays or a situation where the contractor may not be able to maintain compliance with the applicable cGMP requirements. Any failure to comply with cGMP requirements or other FDA, EMA and comparable foreign regulatory requirements could adversely affect our clinical research activities and our ability to develop our product candidates and market our products following approval.

If any third-party manufacturer of our product candidates is unable to increase the scale of its production of our product candidates, and/or increase the product yield of its manufacturing, then our costs to manufacture the product may increase and commercialization may be delayed.

In order to produce sufficient quantities to meet the demand for clinical trials and, if approved, subsequent commercialization of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, or any other product candidates that we may develop, our third-party manufacturer will be required to increase its production and optimize its manufacturing processes while maintaining the quality of the product. The transition to larger scale production could prove difficult. In addition, if our third-party manufacturer is not able to optimize its manufacturing process to increase the product yield for our product candidates, or if it is unable to produce increased amounts of our product candidates while maintaining the quality of the product, then we may not be able to meet the demands of clinical trials or market demands, which could decrease our ability to generate profits and have a material adverse impact on our business and results of operation.

We may need to maintain licenses for active ingredients from third parties to develop and commercialize some of our product candidates, which could increase our development costs and delay our ability to commercialize those product candidates.

Should we decide to use active pharmaceutical ingredients in any of our product candidates that are proprietary to one or more third parties, we would need to maintain licenses to those active ingredients from those third parties. If we are unable to gain or continue to access rights to these active ingredients prior to conducting preclinical toxicology studies intended to support clinical trials, we may need to develop alternate product candidates for these programs by either accessing or developing alternate active ingredients, resulting in increased development costs and delays in commercialization of these product candidates. If we are unable to gain or maintain continued access rights to the desired active ingredients on commercially reasonable terms or develop suitable alternate active ingredients, we may not be able to commercialize product candidates from these programs.

~~Use of third parties to conduct testing of our product candidates in tissues or animals may increase the risk that we will have unsuitable or invalidated data for regulatory submissions and approval.~~

We currently do not own or operate laboratory facilities in which to conduct preclinical testing of our product candidates in tissues or animals. Preclinical studies regulated by FDA, EMA and most other health authorities are governed by GLP. Additionally, studies involving animals may be subject to further regulation by institutional, private or government animal welfare authorities that may vary by territory. Studies involving human tissues may also be subject to institutional and government human subject privacy policies that may vary by territory. Third-party vendors conducting tissue and/or animal studies on our behalf may be found to be in violation of one or more of these regulations or policies and may be subject to closure, censure or other penalties. In some cases, these penalties could materially impact the performance, availability, or validity of studies conducted on our behalf. Even in the absence of violations resulting in penalties, regulatory and other authorities may refuse to authorize the conduct or to accept the results of studies for regulatory or ethical reasons.

We enter into various contracts in the normal course of our business in which we indemnify the other party to the contract. In the event we have to perform under these indemnification provisions, it could have a material adverse effect on our business, financial condition and results of operations.

In the normal course of business, we periodically enter into academic, commercial, service, collaboration, licensing, consulting and other agreements that contain indemnification provisions. With respect to our academic and other research agreements, we typically indemnify the institution and related parties from losses arising from claims relating to the products, processes or services made, used, sold or performed pursuant to the agreements for which we have secured licenses, and from claims arising from our exercise of rights under the agreement. With respect to our commercial agreements, we indemnify our vendors from any third-party product liability claims that could result from the production, use or consumption of the product, as well as for alleged infringements of any patent or other intellectual property right by a third party.

Should our obligation under an indemnification provision exceed applicable insurance coverage or if we were denied insurance coverage, our business, financial condition and results of operations could be adversely affected. Similarly, if we are relying on a collaborator to indemnify us and the collaborator is denied insurance coverage or the indemnification obligation exceeds the applicable insurance coverage and does not have other assets available to indemnify us, our business, financial condition and results of operations could be adversely affected.

~~We may seek to establish collaborations and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.~~

We may seek one or more collaborators for the development and commercialization of one or more of our product candidates. Likely collaborators may include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. In addition, if we are able to obtain regulatory approval for product candidates from foreign regulatory authorities, we may enter into collaborations with international biotechnology or pharmaceutical companies for the commercialization of such product candidates.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the potential differentiation of our product candidate from competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA, the EMA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration could be more attractive than the one with us for our product candidate. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

Collaborations are complex and time-consuming to negotiate and document. Further, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. Any collaboration agreements that we enter into in the future may contain restrictions on our ability to enter into potential collaborations or to otherwise develop specified product candidates. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we enter into collaborations with third parties for the development and commercialization of our product candidates, our prospects with respect to those product candidates will depend in significant part on the success of those collaborations.

We may enter into collaborations for the development and commercialization of certain of our product candidates. If we enter into such collaborations, we will have limited control over the amount and timing of resources that our collaborators will dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on any future collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. In addition, any future collaborators may have the right to abandon research or development projects and terminate applicable agreements, including funding obligations, prior to or upon the expiration of the agreed upon terms.

~~Collaborations involving our product candidates pose a number of risks, including the following:~~

Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all. If any future collaborator of ours is involved in a business combination, it could decide to delay, diminish or terminate the development or commercialization of any product candidate licensed to it by us.

~~We may have to alter our development and commercialization plans if we are not able to establish collaborations.~~

We will require additional funds to complete the development and potential commercialization of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, and other product candidates. For some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.

We face significant competition in seeking and obtaining appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include:

The collaborator may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration could be more attractive than the one with us for our product candidate. We may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms, or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market and our business may be materially and adversely affected.

~~Business or economic disruptions or global health concerns could seriously harm our development efforts and increase our costs and expenses.~~

Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities. For example, in December 2019 an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread to a number of other countries, including the United States and several countries in the EU. To date, this outbreak has already resulted in extended shutdowns of certain businesses in the Wuhan region and has had ripple effects to businesses around the world. Global health concerns, such as coronavirus, could also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business, were to

experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted. It is also possible that global health concerns such as this one could disproportionately impact the hospitals and clinical sites in which we conduct any of our clinical trials, which could have a material adverse effect on our business and our results of operation and financial condition.

~~We only have a limited number of employees to manage and operate our business.~~

~~As of March 11, 2020, we had eighteen~~ full-time employees and no part-time employees. Our focus on the development of RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, requires us to optimize cash utilization and to manage and operate our business in a highly efficient manner. We cannot assure you that we will be able to hire and/or retain adequate staffing levels to develop RTB101, alone or in combination with a rapalog, such as everolimus or sirolimus, meet our obligations as a public company, run our operations and/or accomplish all of the objectives that we otherwise would seek to accomplish.

~~Our internal computer systems, or those used by our CROs or other independent organizations, advisors, contractors or consultants, may be subject to cyber-attacks, fail or suffer security breaches.~~

Despite the implementation of security measures, our internal computer systems and those of our CROs and other independent organizations, advisors, contractors and consultants are vulnerable to damage from computer viruses and unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Because information systems, networks and other technologies are critical to many of our operating activities, shutdowns or service disruptions at our company or vendors that provide information systems, networks or other services to us pose increasing risks. Disruptions of this nature may be caused by events such as computer hacking, phishing attacks, ransomware, dissemination of computer viruses, worms and other destructive or disruptive software, denial of service attacks and other malicious activity, as well as power outages, natural disasters (including extreme weather), terrorist attacks or other similar events. In addition, outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce our personnel or the personnel of our vendors to disclose sensitive information in order to gain access to our data and/or systems. Like other companies, we have on occasion experienced, and will continue to experience, threats and incursions to our data and systems, including malicious codes and viruses, phishing, business email compromise attacks or other cyber-attacks. The number and complexity of these threats continue to increase over time. While we have not experienced any material system failure or security breach to date, if an event of that nature were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. We currently, and may in the future continue to, rely on third parties for the manufacture of our product candidates and to conduct clinical trials and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our internal computer systems or those used by our CROs or other independent organizations, advisors, contractors or consultants, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, suffer reputational harm and experience delays in the further development and commercialization of our product candidates.

We could be required to expend significant amounts of money and other resources to respond to these threats or breaches and to repair or replace information systems or networks. We also could suffer financial loss or the loss of valuable confidential information. In addition, we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although we develop and maintain systems and controls designed to prevent these events from occurring and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely and there can be no assurance that any measures we take will prevent cyber-attacks or security breaches that could adversely affect our business.

~~We depend heavily on our executive officers, principal consultants and others and the loss of their services would materially harm our business.~~

Our success depends, and will likely continue to depend, upon our ability to hire, retain the services of our current executive officers, principal consultants and others, including Chen Schor, our president and chief executive officer, Joan Mannick, our chief medical officer, and Lloyd Klickstein, our chief scientific officer. We have entered into employment agreements with Mr. Schor, Dr. Mannick, and Dr. Klickstein, but they may terminate their employment with us at any time. Although we do not have any reason to believe that we will lose the services of Mr. Schor, Dr. Mannick, and Dr. Klickstein in the foreseeable future, the loss of their services might impede the achievement of our research, development and commercialization objectives.

Our ability to compete in the biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. Our industry has experienced a high rate of turnover of management personnel in recent years. Replacing executive officers or other key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products successfully.

Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key employees on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.

We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by other entities and may have commitments under consulting or advisory contracts with those entities that may limit their availability to us. If we are unable to continue to attract and retain highly qualified personnel, our ability to develop and commercialize our product candidates will be limited.

Our employees, independent contractors, consultants, collaborators and contract research organizations may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

We are exposed to the risk that our employees, independent contractors, consultants, collaborators and CROs may engage in fraudulent conduct or other illegal activity. Misconduct by those parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates:

Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of product materials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could have a material adverse effect on our ability to operate our business and our results of operations.

~~We expect to expand our organization, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.~~

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of regulatory affairs and sales, marketing and distribution, as well as to support our public company operations. To manage these growth activities, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Our management may need to devote a significant amount of its attention to managing these growth activities. Moreover, our expected growth could require us to relocate to a different geographic area of the country. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion or relocation of our operations, retain key employees, or identify, recruit and train additional qualified personnel. Our inability to manage the expansion or relocation of our operations effectively may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could also require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If we are unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate revenues could be reduced and we may not be able to implement our business strategy, including the successful commercialization of our product candidates.

~~Our current operations are concentrated primarily in a single location and any events affecting our headquarters may have material adverse consequences.~~

Our current operations are primarily located in our principal office in Boston, Massachusetts. Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication failure or other natural or manmade accidents or incidents that result in us being unable to fully utilize the office may have a material adverse effect on our ability to operate our business, and have significant negative consequences on our financial and operating conditions. Loss of access to this office may result in increased costs, delays in the development of our product candidates or interruption of our business operations. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at our office, our insurance coverage may not be sufficient to satisfy all of our damages and losses. If our office is unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and development programs may be harmed.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. We currently have a limited number of employees performing our accounting functions, including monitoring and maintaining effective internal control over financial reporting. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” for up to five years. An independent assessment of the effectiveness of our internal controls over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.

~~Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.~~

Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

~~We have conducted and expect to continue to conduct our operations in jurisdictions outside of the United States, and such foreign operations subject us to additional risks.~~

A portion of our operations, including our clinical research and development efforts, have been undertaken outside of the United States, and we expect to continue to conduct a portion of our business in foreign countries. For example, we conducted our Phase 2b clinical trial across two hemispheres. In addition, we may utilize third party contract organizations, some of which may be located in foreign jurisdictions, for the conduct of our clinical trials, the manufacturing of our product candidates and the commercialization of our product candidates, if approved. Such operations subject us to additional risks related to international business operations, including:

~~These and other risks may materially adversely affect our ability to conduct our business in international markets.~~

~~We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.~~

In the future, we may enter into transactions to acquire other businesses, products or technologies. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions we make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and nondisruptive manner. Acquisitions may also divert

management attention from day-to-day responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.

~~An active trading market for our common stock may not be sustained. If an active trading market is not sustained, our ability to raise capital in the future may be impaired.~~

Our shares began trading on The Nasdaq Global Select Market on January 26, 2018. Given the limited trading history of our common stock, there is a risk that an active trading market for our shares may not be sustained, which could put downward pressure on the market price of our common stock and thereby affect your ability to sell shares you purchased. An inactive trading market for our common stock may also impair our ability to raise capital to continue to fund our operations by selling shares and impair our ability to acquire other companies or technologies by using our shares as consideration.

The trading price of our common stock is highly volatile, which could result in substantial losses for purchasers of our common stock. 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.

Our stock price is highly volatile. The stock market in general and the market for smaller pharmaceutical and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the purchase price and you may lose some or all of your investment. The market price for our common stock may be influenced by many factors, including:

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for biopharmaceutical companies, which have experienced significant stock price volatility in recent years.

~~We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.~~

We are an emerging growth company, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies.” We could remain an “emerging growth company” for up to five years following our IPO, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenue exceeds $1.07 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter or (3) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period. So long as we remain an “emerging growth company,” we expect to avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404. When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

~~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.~~

We are considered a “smaller reporting company” under Rule 12b-2 of the Exchange Act. We are therefore entitled to rely on certain reduced disclosure requirements, such as an exemption from providing selected financial data and executive compensation information. These exemptions and reduced disclosures in our SEC filings due to our status as a smaller reporting company also mean our auditors are not required to review our internal control over financial reporting and may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our common stock prices may be more volatile. We will remain a smaller reporting company until our public float exceeds $250 million or our annual revenues exceed $100 million with a public float greater than $700 million.

We have and will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an “emerging growth company,” we have and will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We have and will incur costs associated with relatively recently adopted corporate governance requirements, including requirements of the Securities and Exchange Commission, or SEC, and The Nasdaq Global Select Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.

We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404, we are required to furnish a report by our management on our internal control over financial reporting in this Annual Report on Form 10-K with the Securities and Exchange Commission, or the SEC. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we have engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting. We will continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe, or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements.

~~We have broad discretion over the use of our cash, cash equivalents, and marketable securities and may not use them effectively.~~

Our management has broad discretion to use our cash, cash equivalents, and marketable securities to fund our operations and could spend these funds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending our use to fund operations, we may invest our cash, cash equivalents, and marketable securities in a manner that does not produce income or that loses value.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of stockholders and could cause our stock price to fall.

The Company will need additional capital in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to the Company’s existing stockholders, and new investors could gain rights superior to our existing stockholders.

On February 1, 2019, we filed a registration statement on Form S-3 (File No. 333-229499) with the SEC, which was declared effective on February 12, 2019 (the “Shelf Registration Statement”), in relation to the registration of common stock, preferred stock, warrants and/or units of any combination thereof for the purposes of selling, from time to time, our ~~common stock, convertible securities or other equity securities~~ in one or more offerings. The Shelf Registration Statement also registered for resale from time to time up to 12,445,646 shares of common stock held by the selling stockholders named therein. We also simultaneously entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with SVB Leerink LLC and Cantor Fitzgerald & Co., (the “Sales Agents”), to provide for the offering, issuance and sale of up to an aggregate amount of $50.0 million of our common stock from time to time in “at-the-market” offerings under the Shelf Registration Statement and subject to the limitations thereof. As of December 31, 2019, approximately $43.0 million in shares of common stock remain eligible for sale under the Sales Agreement. The Company will pay to the Sales Agent cash commissions of 3.0 percent of the aggregate gross proceeds of sales of common stock under the Sales Agreement. Sales of ~~common stock, convertible securities or other equity securities~~ by us or our stockholders under the Shelf Registration Statement may represent a significant percentage of our common stock currently outstanding. If we or our stockholders sell, or the market perceives that we or our stockholders intend to sell, substantial amounts of our common stock under the Shelf Registration Statement or otherwise, the market price of our common stock could decline significantly.

In addition, sales of a substantial number of shares of our outstanding common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock. Persons who were our stockholders prior to our IPO continue to hold a substantial number of shares of our common stock that many of them are now able to sell in the public market. Significant portions of these shares are held by a relatively small number of stockholders. Sales by our stockholders of a substantial number of shares, or the expectation that such sales may occur, could significantly reduce the market ~~price of our common stock.~~

~~We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. Accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment.~~

We have never declared nor paid cash dividends on our capital stock. We currently plan to retain all of our future earnings, if any, to finance the operation, development and growth of our business. In addition, the terms of any future debt or credit agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Our principal stockholders and management own a significant percentage of our stock and, if they choose to act together, will be able to control or exercise significant influence over matters subject to stockholder approval.

As of March 11, 2020], our executive officers, directors, five percent or greater stockholders and their affiliates beneficially own approximately 36.2 percent of our outstanding voting stock. These stockholders may have the ability to influence us through their ownership positions. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.

Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us.

Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. This could discourage, delay or prevent someone from acquiring us or merging with us, whether or not it is desired by, or beneficial to, our stockholders. This could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

Our amended and restated bylaws provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

Our amended and restated bylaws specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the restated certificate of incorporation or amended and restated bylaws, or (iv) any action asserting a claim against the Company governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated bylaws described above.

We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may limit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers, employees or agents. The enforceability of similar choice of forum provisions in other companies’ bylaws or certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated bylaws to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

~~If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.~~

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us issues an adverse opinion about our company, our stock price would likely decline. If one or more of these analysts ceases research coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We have offices in Boston, Massachusetts, and Menlo Park, California. Our ~~headquarters~~principal executive offices are located at 500 Boylston Street, 13^th13th Floor, Boston, ~~Massachusetts, where we occupy approximately 9,501 square feet of office space.~~MA 02116. This lease expires on July 31, 2026. We are permitted to assign, sublease or transfer this lease, with the consent of the landlord, which consent shall not be unreasonably withheld. We believe that this office is sufficient to meet our current needs and that suitable additional space will be available as and when needed. We also leased office and laboratory space located in Menlo Park, California. The lease expires on March 31, 2022. In addition, in October 2018, we entered a new lease for office and laboratory space in Redwood City, California. We expect to complete occupancy in the new facility in second quarter of 2022.

We are not currently subject to any material legal proceedings. From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this report, we do not believe we are party to any claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades on The Nasdaq Global ~~Select~~ Market under the symbol ~~“TORC”~~“ACET”. Trading of our common stock commenced on January 26, 2018, in connection with our initial public offering ~~or IPO.~~of resTORbio. Prior to that time, there was no established public trading market for our common stock.

As of March ~~11, 2020,~~10, 2021, we had approximately 445 holders of record of our common stock. The actual number of holders of our common stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings, if any, to fund the development and growth of our business. We do not expect to pay any cash dividends in the foreseeable future. Any future determination to pay dividends will be made at the discretion of our board of directors and will depend on various factors, including applicable laws, our results of operations, financial condition, future prospects, then applicable contractual restrictions and any other factors deemed relevant by our board of directors. Investors should not purchase our common stock with the expectation of receiving cash dividends.

The information required by Item 5 of Form 10‑K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10‑K.

On February 12, 2021, we entered into a stock purchase agreement with certain existing investors for $15.0 million of shares of our common stock, with an initial closing for certain investors held simultaneously with the closing of our February 2021 public offering and a subsequent closing for certain additional investors. Pursuant to the terms of the private placement, we issued 1,153,840 shares of common stock at a price of $13.00 per share, which was the price per share of our February 2021 public offering. We received the full proceeds from the sale and did not pay any underwriting discounts or commissions with respect to the shares of common stock that sold in the concurrent private placement. Proceeds from the private placement will be used primarily to fund activities related to our internal discovery research, other pipeline candidates and to fund the continued development of our gamma delta T cell platform; the external costs for the development of ADI-001 through the completion of a Phase 1 dose expansion study for ADI-001 in NHL; the external costs for the development of ADI-002 through the completion of a Phase 1 dose finding study for ADI-002 in solid tumors; and the remainder, if any, to fund working capital and other general corporate purposes. The private placement was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering.

We did not purchase any of our equity securities during the period covered by this Annual Report on Form 10-K.

~~Information~~ ~~requested by this Item 6. Selected Financial Data is not applicable as we are electing scaled disclosure requirements available to Smaller Reporting Companies with respect to this Item 6.~~Reserved.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

We are a ~~clinical-stage biopharmaceutical~~biotechnology company discovering and developing ~~innovative medicines that target~~allogeneic gamma delta T cell therapies for cancer and other diseases. We are advancing a pipeline of “off-the-shelf” gamma delta T cells, engineered with CARs and T cell receptor-like antibodies to enhance selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and improve persistence for durable activity in patients. We believe our approach has potentially significant advantages over alpha beta T cells, which are the ~~biology~~basis of ~~aging to prevent or treat age-related diseases~~standard CAR-T cell therapies. We are developing proprietary processes for engineering and manufacturing product candidates based on gamma delta T cells from the blood of healthy donors, resulting in high yields of cells with ~~the~~efficacious tumor-killing activity in preclinical studies. The potential to ~~extend healthy lifespan. Our lead program selectively inhibits~~administer product candidates based on gamma delta T cells to patients without inducing a graft versus host immune response could mean that our products can potentially be produced as “off-the-shelf” therapies. This is in contrast to products based on alpha beta T cells, which either must be manufactured for each patient from his or her own T cells, or require significant gene editing to manufacture if the ~~target of rapamycin complex 1, or TORC1, an evolutionarily conserved pathway~~T cells are derived from donors that ~~contributes~~are unrelated to the ~~age-related decline~~patient. Based on what we believe is the unique potential of these cells and associated modifications, we are initially developing product candidates in ~~function~~oncology, both for hematological malignancies and for solid tumors. Due to certain unique properties of ~~multiple organ systems. Our~~gamma delta T cells, we believe that our product candidates can be developed to have an inherent capacity to recognize and kill circulating tumor cells and to infiltrate and kill solid tumors. In October 2020, the FDA cleared our Investigational New Drug (IND) application for ADI-001, our lead product candidate, ~~RTB101, is an oral, selective, and potent inhibitor~~for the treatment of ~~TORC1. RTB101 inhibits~~Non-Hodgkin’s Lymphoma (NHL). The active IND enables us to initiate the phosphorylation of multiple targets downstream of TORC1. Inhibition of TORC1 has been observed to extend lifespan and healthspan in aging preclinical species and to enhance immune, neurologic and cardiac functions, suggesting potential benefits in several aging-related diseases. In April of 2019, we initiated a Phase 1b/2afirst-in-human clinical trial of RTB101 alone or in combination with sirolimus in PD. PD is a progressive neurodegenerative disease that affects approximately 7.5 million people worldwide. The multicenter, 2:1 randomized, double-blind, placebo-controlled Phase 1b/2a trial is evaluating the safety and tolerability of RTB101 alone or in combination with escalating doses of sirolimus (2 mg, 4 mg and 6 mg) once weekly for 4 weeks in patients with PD. To date, patients have completed enrollment in four cohorts and completed dosing in three cohorts: once weekly with 300 mg of RTB101 alone; 2 mg of sirolimus alone; and a combination of 300 mg RTB101 and 2 mg of sirolimus. Results of an interim study analysis indicated that all 3 dosing regimens were well tolerated and RTB101 300 mg once weekly was observed to cross the blood brain barrier. Sirolimus at the dose of 2 mg, alone or in combination with RTB101, was not detected in the CSF. Data from the first three cohorts in the study suggest that the concentrations of RTB101 observed in the CSF four hours after dosing were highest when RTB101 was given as a monotherapy. We expect the full data from this trial by mid-2020.

RTB101 was previously in development for preventing clinically symptomatic respiratory illness in adults age 65 and older. In November 2019, we announced that top line data from the PROTECTOR 1 Phase 3 study, evaluating theassess safety and efficacy of ~~RTB101~~ADI-001 in ~~preventing clinically symptomatic respiratory illness~~NHL patients in ~~adults age 65~~March 2021. The Phase 1 study for ADI-001 will enroll up to 80 late-stage non-Hodgkin’s lymphoma patients at a number of cancer centers across the U.S. The study includes a dose finding portion followed by dose expansion cohorts to explore the activity of ADI-001 in multiple subtypes of NHL. Site initiation activities are underway and ~~older, did not meet~~interim clinical data from this study are expected in 2021. We intend to file an IND with the FDA in late 2021 for ADI-002, our first solid tumor product candidate.

On April 28, 2020, Adicet Bio, Inc. (Former Adicet) entered into an agreement and plan of merger with resTORbio, Inc., a Delaware corporation (resTORbio), and Project Oasis Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of resTORbio (Merger Sub), pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub agreed to merge with and into Former Adicet, with Former Adicet surviving as a wholly owned subsidiary of resTORbio and changing the name to Adicet Therapeutics, Inc., (such transactions, the Merger). The Merger was subject to certain conditions, including the approval of resTORbio stockholders.

On September 15, 2020, we completed the Merger. In connection with the completion of the Merger, resTORbio was renamed Adicet Bio, Inc. (Adicet Bio). Immediately prior to the Effective Time of the Merger, resTORbio effected a reverse stock split of its ~~primary endpoint~~common stock at a ratio of 1-for-7 or the Reverse Stock Split). At the Effective Time of the Merger, each outstanding share of Former Adicet’s capital stock was converted into the right to receive 0.1240 (the Exchange Ratio) shares of resTORbio common stock.

The business combination has been accounted for as a reverse merger in accordance with the Generally Accepted Accounting Principles in the United States of America (U.S. GAAP or GAAP). Under this method of accounting, Former Adicet is deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (i) Former Adicet’s securityholders own approximately 75% of the voting rights of the combined company (on a fully-diluted basis excluding equity incentives available for grant); (ii) Former Adicet designated a majority (five of seven) of the initial members of the Board of Directors of the combined company; and ~~that we have stopped~~(iii) the ~~development~~terms of ~~RTB101~~the exchange of equity interests based on the exchange ratio at the announcement of the Merger factored in an implied premium to resTORbio’s stockholders. The composition of senior management of the combined company was determined to be a neutral factor in the accounting acquirer determination, as the combined company will leverage the expertise of the senior management of both companies. Accordingly, for ~~clinically symptomatic respiratory illness.~~accounting purposes, the business combination has been treated as the equivalent of Former Adicet issuing stock to acquire the net assets of resTORbio. As a result, as of the closing date of the Merger, the net assets of resTORbio have been recorded at their acquisition-date fair values in the financial statements of the combined entity and the reported operating results prior to the business combination are those of Former Adicet. Subsequent to

the closing of the Merger, the reported operating results will reflect those of the combined organization. In addition, transaction costs incurred by Former Adicet in connection with the business combination have been expensed as incurred. Our common stock remained listed on the Nasdaq Stock Market, with trading having commenced on a post-Merger and post-Reverse Stock Split basis and under the new name as of September 16, 2020. The trading symbol also changed on that date from “TORC” to “ACET.”

In February 2021, we ~~implemented~~completed an underwritten public offering of 10,575,513 shares of our common stock, including the exercise in full by the underwriters of their option to purchase up to an additional 1,344,743 shares of common stock at a ~~restructuring plan~~public offering price of $13.00 per share. The aggregate gross proceeds from the offering, before deducting underwriting discounts and commissions and offering expenses were approximately $137.5 million.

In connection with the offering, we also entered into a stock purchase agreement with certain existing investors for $15.0 million of shares of our common stock at a price per share equal to ~~reduce operating costs~~the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and ~~better align~~a subsequent closing for certain additional investors. We received the ~~workforce~~full proceeds from the sale and did not pay any underwriting discounts or commissions with respect to the shares of common stock that sold in the concurrent private placement. The shares sold in the private placement were not registered under the Securities Act.

In December 2019, a novel strain of coronavirus, COVID-19, was reported in China. Since then, COVID-19 has spread globally. The spread of COVID-19 from China to other countries has resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020. Many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.

As local jurisdictions continue to put restrictions in place, our ability to continue to operate our business ~~needs following~~may also be limited. Such events may result in a period of business, supply and drug product manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations. In response to the ~~data release.~~COVID-19 pandemic, we tasked members of our Executive Leadership team, Human Resources, Facilities and Operations and Employee Communications to develop guidelines and processes intended to raise awareness of new health and well-being protocols and potentially helpful practices for cross-functional teamwork for our employees.

~~Since~~These efforts have included implementation of remote working and shift scheduling, providing our ~~inception in July 2016,~~team members practical recommendations based on guidelines from the Centers for Disease Control and Prevention, State of California Department of Health Care Services, State of Massachusetts Department of Public Health, OSHA and other regional government entities. In addition, we are committed to updating these recommendations and communicating new pertinent information when available. While doing so we are sensitive to ensuring any guidance provided may vary by locality based on government orders and regulations.

Thus far we have ~~devoted substantially all~~not experienced a significant disruption or delay in our operations as it relates to the clinical development of our ~~resources to: identifying, acquiring,~~drug candidates. However, we anticipate that the impact of the COVID-19 pandemic may create difficulties in our clinical trials for a variety of reasons, including future regulations regarding, or the inability or unwillingness of patients to, travel to participate in clinical trials, or to participate in clinical trials that are administered in medical facilities that also treat COVID-19, potential delays in the FDA’s review and ~~developing~~approval processes and/or shortages of medical supplies that may force medical professionals to focus on non-clinical procedures, including treatment of COVID-19. The duration and ultimate impact of the COVID-19 pandemic on clinical trials generally, and on our ~~product candidate portfolio; organizing~~trials particularly, is currently unknown.

In addition, the spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and ~~staffing~~the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ~~company; raising capital; developing manufacturing capabilities; conducting clinical trials;~~ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business. Possible effects may also include absenteeism in our labor workforce, unavailability of products and ~~providing general~~supplies used in operations, and ~~administrative support~~a decline in value of assets held by us, including property and equipment, and marketable debt securities.

On April 28, 2020, we entered into a Loan and Security Agreement with Pacific Western Bank for ~~these operations. To date,~~a term loan not exceeding $12.0 million (the Loan Agreement) to finance leasehold improvements for our facilities in Redwood City, CA and other purposes permitted under the Loan Agreement, with an interest rate equal to the greater of 0.25% above the Prime Rate

(as defined in the Loan Agreement) or 5.00%. In connection with the entrance into the Loan Agreement, we ~~have primarily financed~~issued Pacific Western Bank a warrant to purchase shares of our ~~operations through the issuance and sale of our~~Series B redeemable convertible preferred stock ~~and~~(described below) at an exercise price of $1.4034 per share. Such warrant was initially exercisable for 42,753 shares of our ~~common~~Series B redeemable convertible preferred stock. ~~On February 1, 2019, we filed~~Upon the closing of the Merger, it was exchanged for a ~~Registration Statement on Form S-3 (the “Shelf”) with the Securities and Exchange Commission (the “SEC”) in relation~~warrant to ~~the registration~~purchase 5,301 shares of common stock ~~preferred~~at an exercise price of $11.32 per share and shall be exercisable for an additional number of shares of common stock ~~warrants and/or units~~equal to 1.00% of ~~any combination thereof (collectively,~~ the ~~“Securities”)~~aggregate original principal amount of all term loans made pursuant to the Loan Agreement (up to an aggregate maximum of 15,903 shares of common stock). ~~We also simultaneously~~The Loan Agreement contains a variety of affirmative and negative covenants, including required financial reporting, limitations on certain dispositions of assets, limitations on the incurrence of additional debt and other requirements. As of the date of this Annual Report on Form 10-K, we were in compliance with such covenants and had no indebtedness outstanding under the Loan Agreement.

On December 1, 2020, we entered into a ~~Controlled Equity Offering~~ Sales Agreement (the ~~“Sales Agreement”)~~2020 Sales Agreement) with ~~SVB Leerink LLC~~Evercore Group L.L.C. and ~~Cantor Fitzgerald~~H.C. Wainwright & Co., LLC (collectively, the ~~“Sales Agents”)~~Agents), pursuant to ~~provide for the offering, issuance, and sale~~which we could sell, from time to time, at our option, up to an aggregate of $50.0 million of shares of our common stock, ~~from time to time in “at-the-market” offerings~~through the Agents, as our sales agents. No shares were sold under the Shelf and subject to the limitations thereof. In 2019, we completed an underwritten public offering. We received aggregate net proceeds from the offering of approximately $49.7 million, after deducting underwriting discounts and commissions and other offering expenses payable by us. In 2019, we sold approximately 688,000 shares of common stock at a weighted-average selling price of $10.18 per share in accordance with the2020 Sales Agreement for aggregate net proceeds of $6.7 million, after payment of cash commissions of 3.0 percent of the gross proceeds to the Sales Agent and incurred issuance costs of approximately $75,000 related to legal, accounting, and other feesbefore it was terminated in ~~connection with the sale. As of December 31, 2019, $43.0 million remained available for sale under the Sales Agreement.~~February 2021.

We have never generated revenue and have incurred significant net losses since inception. Our net losses were $82.7 million and $37.6 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, we had an accumulated deficit of $154.1 million. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially as we:

We believe that our available funds will be sufficient to fund our operations at least into 2022. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate or enter into collaborative agreements with third parties, which we expect will take a number of years and the outcome of which is subject to significant uncertainty. Additionally, we currently use third parties such as contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, to carry out our preclinical and clinical development activities and we do not yet have a sales organization. If we obtain regulatory approval for our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. To fund our current and future operating plans, we will need additional capital, which we may obtain through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

On March 23, 2017, we entered into a license agreement with Novartis, pursuant to which we were granted an exclusive, field-restricted, worldwide license to certain intellectual property rights owned or controlled by Novartis, including patents, patent applications, proprietary information, know-how and other intellectual property, to develop, commercialize and sell one or more therapeutic products comprising RTB101 or RTB101 and everolimus in a fixed dose combination. Under the license agreement, we have been licensed a patent portfolio of ten patent families directed to composition of matter of RTB101 and its salts, formulations of everolimus and methods of using RTB101 and everolimus to enhance the immune response among others. The exclusive field for RTB101 under the license agreement is for the treatment, prevention and diagnosis of diseases and other conditions in all indications in humans and animals.

~~As consideration for the license, we issued Novartis Institutes for Biomedical Research, Inc., or NIBR, 2,587,992 shares of our Series A Preferred Stock.~~

The agreement may be terminated by either party upon a material breach of obligation by the other party that is not cured with 60 days after written notice. We may terminate the agreement in its entirety or on a product-by-product or country-by-country basis with or without cause with 60 days’ prior written notice.

Novartis may terminate the portion of the agreement related to everolimus if we fail to use commercially reasonable efforts to research, develop and commercialize a product utilizing everolimus for a period of three years. Novartis may terminate the license agreement upon our bankruptcy, insolvency, dissolution or winding up.

As additional consideration for the license, we are required to pay up to an aggregate of $4.3 million upon the satisfaction of clinical milestones, up to an aggregate of $24 million upon the satisfaction of regulatory milestones for the first indication approved, and up to an aggregate of $18 million upon the satisfaction of regulatory milestones for the second indication approved. In addition, we are required to pay up to an aggregate of $125 million upon the satisfaction of commercial milestones, based on the amount of annual net sales. We are also required to pay tiered royalties ranging from a mid-single digit percentage to a low-teen digit percentage on annual net sales of products. These royalty obligations last on a product-by-product and country-by-country basis until the latest of (i) the expiration of the last valid claim of a Novartis patent covering a subject product, (ii) the expiration of any regulatory exclusivity for the subject product in a country, or (iii) the 10^th anniversary of the first commercial sale in the country, and are subject to a reduction after the expiration of the last valid claim of a Novartis patent or the introduction of a generic equivalent of a product in a country.

Milestone payments to Novartis are recorded as research and development expenses in our consolidated statements of operations and comprehensive loss once achievement of each associated milestone has occurred or the achievement is considered probable. In May 2017, we initiated a Phase 2b clinical trial for a first indication, triggering the first milestone payment under the agreement. Accordingly, we paid the related $0.3 million payment in May 2017. In May 2019, we initiated a Phase 3 clinical trial for the first indication, triggering a milestone payment of $2.5 million under the agreement. As of December 31, 2019, none of the remaining clinical milestones, regulatory milestones, sales milestones, or royalties had been reached or were probable of achievement. The remaining clinical milestones are the initiation of the Phase 2 and Phase 3 clinical trials for the second indication. We also enter into contracts in the normal course of business with various third parties for preclinical research studies, clinical trials, testing and other services. These contracts generally provide for termination upon notice, and therefore we believe that our noncancelable obligations under these agreements are not material.

We have ~~not generated any revenue from the~~no products approved for commercial sale ~~of our products,~~ and we do not expect to generate ~~any~~ revenue from product sales unless and until we successfully complete development and obtain regulatory approval for our product candidates, which we expect will not be for at least several years, if ever. Our revenues to date are generated from our License and Collaboration Agreement with Regeneron Pharmaceuticals, Inc. (Regeneron) and the agreement referred to as the “Regeneron Agreement”. The primary purpose of the Regeneron Agreement is to establish a strategic relationship to identify and validate appropriate targets and work together to develop a pipeline of engineered immune cell products (Collaboration ICPs) for the selected targets. The Regeneron Agreement provides for the following: (i) licenses to our technology, (ii) research and development services, (iii) services or obligations in connection with participation in the research committee, (iv) information sharing, and (v) manufacturing services to manufacture of Collaboration ICPs for the research programs. The Regeneron Agreement provides Regeneron an option to obtain an exclusive, royalty-bearing development and commercial license under our intellectual property to develop and commercialize ~~RTB101, alone~~the optioned Collaboration ICPs ready for an IND submission.

We received a non-refundable upfront payment of $25.0 million from Regeneron upon execution of the Regeneron Agreement on July 29, 2016 and have received an aggregate of $20.0 million of additional payments for research funding from Regeneron as of December 31, 2020. In addition, Regeneron may have to pay us additional amounts in the future consisting of up to an aggregate of $100.0 million of option exercise fees, in each case as specified in the Regeneron Agreement. Regeneron must also pay us high single digit royalties as a percentage of net sales for ICPs to targets for which it has exclusive rights and low single digit royalties as a percentage of net sales on any non-ICP product comprising a target generated by us through the use of Regeneron’s proprietary mice. We must pay Regeneron mid-single to low double digit royalties as a percentage of net sales of ICPs to targets for which we have exercised exclusive rights, and low to mid-single digit royalties as a percentage of net sales of targeting moieties generated from our license to use Regeneron’s proprietary mice. Royalties are payable until the longer of the expiration or invalidity of the licensed patent rights or 12 years from first commercial sale.

We use a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize under the Regeneron Agreement. In applying the cost-based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as we complete our performance obligations over the research term of five years. A cost-based input method of revenue recognition requires us to estimate costs to complete our performance obligations, which requires significant judgment to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligations is recorded in ~~combination with a rapalog, such as everolimus or sirolimus.~~the period in which changes are identified and amounts can be reasonably estimated.

Research and development expenses, which consist primarily of costs incurred ~~for~~in connection with the development of our product candidates, ~~which include:~~

We ~~have~~do not ~~provided program~~allocate our costs ~~since inception because historically we have not tracked or recorded our~~by product candidate, as a significant amount of research and development expenses onare not tracked by product candidate, and we believe the allocation of such costs would be arbitrary and would not provide a ~~program-by-program basis. We use~~meaningful assessment as we have used our ~~personnel~~employee and infrastructure resources across multiple product candidate research and development programs directed toward developing our TORC1 program and for identifying and developing product candidates. We manage certain activities such as contract research and manufacturing of RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, and our discovery programs through our third-party vendors, and do not track the costs of these activities on a program-by-program basis.programs.

We ~~expense~~are focusing substantially all ~~research and development costs in~~of our resources on the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.

We expect our research and development expenses to decrease substantially for the foreseeable future as we are no longer developing RTB101 for the prevention of clinically symptomatic respiratory illness in adults age 65 and older. We will continue to invest in research and development activities related to developing our product candidates, however at a much lower expense rate. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

~~Because of the numerous risks and uncertainties associated with product development,~~ At this time, we cannot ~~determine with certainty~~reasonably estimate or know the ~~duration~~nature, timing and ~~completion~~estimated costs of the ~~current or future preclinical studies and clinical trials or if, when, or~~efforts that will be necessary to ~~what extent we will generate revenues from~~complete the ~~commercialization and sale~~development of our product candidates. We ~~may never succeed in achieving regulatory approval for~~are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of ~~preclinical studies and~~ clinical trials and development of our product candidates will depend on a variety of factors, including:

A change in the outcome of any of these ~~factors~~variables with respect to the development of a product candidate could ~~mean a significant~~significantly change in the costs, timing and ~~timing~~viability associated with the development of ~~our current and future preclinical and clinical~~that product ~~candidates.~~candidate. For example, if the FDA, or another regulatory authority, were to require us to conduct clinical trials beyond those that weit currently ~~anticipate~~anticipates will be required for the completion of clinical development of a product candidate, or if we experience significant delays in ~~execution of or~~ enrollment in any of our ~~preclinical studies or~~ clinical trials, we could be required to expend significant additional financial resources and time on the completion of ~~preclinical~~clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.

We are focusing substantially all of our resources on the development of our product candidates. We expect our research and development expenses to increase substantially during the next few years, as we seek to initiate clinical trials for our product candidates, complete our clinical program, pursue regulatory approval of our product candidates and prepare for a possible commercial launch. Predicting the timing or the cost to complete our clinical program or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.

General and administrative expenses consist ~~primarily~~principally of payroll and personnel ~~costs, costs related to maintenance~~expenses, including salaries and filing of intellectual property, depreciation expense and other expenses for outside professional services, including legal, human resources, audit and accounting services. Personnel costs consist of salaries,bonuses, benefits and stock-based compensation ~~expense.~~ expenses, professional fees for legal, consulting, accounting and tax services, allocated overhead expenses, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We ~~expect~~anticipate that our general and administrative expenses ~~to decrease~~will increase for the foreseeable future due to anticipated expenses related to the ~~reductions in headcount as a result of no longer developing RTB101 for the prevention of clinically symptomatic respiratory illness. We will continue~~Merger and future expenses related to ~~incur costs as a result of~~ operating as a public company, including expenses related to ~~compliance~~personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with the ~~rules~~applicable Nasdaq and ~~regulations of the Securities and Exchange Commission, The Nasdaq Global Select Market, additional insurance expenses,~~SEC requirements, investor relations ~~activities~~costs and ~~other administration~~director and ~~professional services.~~officer insurance premiums.

~~Other~~Interest income ~~net,~~ consists primarily of interest income earned on our cash and cash equivalents and marketable debt securities.

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dateInterest expense consists primarily of the consolidated financial statements, as well as the expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the resultsnon-cash amortization of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

~~We accrue for estimated~~ costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies, clinical trials, and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated amount of services provided, and include these costs in accrued liabilities in our consolidated balance sheets and within research and development expenses in our consolidated statements of operations and comprehensive loss. These costs are a significant component of our research and development expenses. We estimate the amount of work completed by third-party service providers through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. The majority of our service providers invoice in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make significant judgments and estimates in determining the accrued balance in each reporting period based on the facts and circumstances known at that time. As actual costs become known, we adjust our accrued estimates. 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, the number of patients enrolled and the rate of patient enrollment may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from CROs, CMOs and other third-party service providers. To date, there have been no material differences between estimated costs of research and development activities accrued by us each reporting period and amounts actually incurred.

Research and development costs are expensed as incurred and consist of personnel costs, lab supplies and other costs, as well as fees paid to third parties to conduct research and development activities on our behalf.

~~Amounts~~ incurred in connection with ~~license agreements are also included~~the term loan agreement entered into in ~~research and development expenses. We record payments made to outside vendors for services performed or goods being delivered for use~~April 2020.

Other income (expense), net primarily consists of changes in ~~research and development activities as either prepaid expenses or accrued expenses, depending on the timing of when services are performed or goods are delivered.~~

We recognize equity-based compensation expense for awards of equity instruments to employees and non-employees based on the grant date fair value of those awards in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718, ~~Stock Compensation~~, or ASC 718. ASC 718 requires all equity-based compensation awards to employees and non-employee directors, including grants of restricted stock, restricted stock units, and stock options, to be recognized as expense in the consolidated statements of operations and comprehensive loss based on their grant date fair values. We estimate the fair value of our redeemable convertible preferred stock ~~options using the Black-Scholes option pricing model. We use the value of our~~tranche liability and redeemable convertible preferred stock warrant liability prior to their conversion to warrants to purchase common stock ~~to determine the fair value of restricted stock and restricted stock units.~~

~~We account for restricted stock and common stock options issued to non-employees under FASB ASC Topic 505-50,~~ ~~Equity-Based Payments to Non-Employees,~~ or ASC 505-50. As such, the value of such awards is periodically remeasured and income or expense is recognized over their vesting terms. Compensation cost related to awards with service-based vesting schedules is recognized using the straight-line method. We determine the fair valueupon closing of the ~~restricted stock and common stock granted to non-employees as either the fair value of the consideration received or the fair value of the equity instruments issued.~~

The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (i) the expected volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) the expected dividend yield. Due to the lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies has characteristics similar to us, including stage of product development and focus on the life science industry. We use the simplified method, which is the average of the final vesting tranche date and the contractual term, to calculate the expected term for options granted to employees as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. For options granted to non-employees, we utilize the contractual term of the arrangement as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. We use an assumed dividend yield of zero as we have never paid dividends and have no current plans to pay any dividends on our common stock.

~~The following table presents the assumptions used to estimate the fair value of options granted:~~

For the years ended December 31, 2019 and 2018, stock-based compensation expense was $3.7 million and $2.8 million, respectively. As of December 31, 2019, we had $10.5 million of total unrecognized stock-based compensation expense, which we expect to recognize over a weighted-average period of 2.91 years.Merger.

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

Revenue increased by $16.9 million, or 1699%, for the year ended December 31, 2020 compared to the year ended December 31, 2019 resulting from the increase in revenue recognized under the Regeneron Agreement. The increase in revenue recognized under the Regeneron Agreement for the year ended December 31, 2020 was primarily due to the following:

Research and development expenses increased by $10.6 million, or 46%, during the year ended December 31, 2020 compared to ~~$73.6~~the year ended December 31, 2019. The increase in research and development expenses was primarily due to an increase of $5.3 million in personnel expenses, including salaries, benefits, and bonuses due to increases in headcount of employees involved in research and development activities, as well as an increase in stock-based compensation expense of $0.9 million, a portion which was attributable to the modification of the outstanding in-the-money stock options and restricted stock units held by resTORbio employees, in connection with the Merger. In addition, there was an increase of $5.4 million in fees incurred for CRO and CMO costs due to initiating and ramping up manufacturing and preclinical development activities related to our first product candidate, and an increase of $0.6 million in allocated facility-related costs and other general support services. There was also a change in the fair value of our in-process research & development (IPR&D) asset and contingent consideration liability (CVR) of $2.3 million and $1.9 million respectively, which represented a net charge of $0.4 million to research and development expenses. These increases were offset by a decrease in $0.6 million in lab materials, supplies, and maintenance of equipment used for research and development activities and a decrease in consulting fees of $0.2 million.

General and administrative expenses increased by $14.1 million, or 162%, during the year ended December 31, 2020 as compared to the year ended December 31, 2019. The increase in general and administrative expenses was primarily due to an increase of $7.1 million of professional fees for legal, consulting, accounting, tax and other services incurred in connection with the Merger, an increase of $5.1 million of payroll and personnel expenses, which includes salaries, benefits, bonuses, and stock-based compensation expenses, and temporary contractor fees, and an increase of $1.3 million in facilities and other expenses. The increase in payroll and personnel expenses includes payments of $0.7 million to Dr. Singhal, the former Chief Executive Officer in accordance with the Transition Agreement executed with him, incremental stock compensation expense of $0.7 million recognized resulting from the modification of Dr. Singhal’s stock options in connection with the Merger, and stock compensation expense of $1.0 million attributable to post combination services recognized resulting from the modification of the outstanding in-the-money stock options and restricted stock units held by resTORbio employees, in connection with the Merger.

Interest income decreased by $0.2 million, or 16%, during the year ended December 31, 2020 compared to the year ended December 31, 2019, which was primarily attributable to the decrease in average balance of cash and cash equivalents and marketable debt securities.

Interest expense increased by $0.1 million during the year ended December 31, 2020 as compared to the year ended December 31, 2019 due to the non-cash amortization of costs incurred in connection with the Loan Agreement entered into in April 2020.

Other income (expense), net decreased by $3.3 million, or 141%, during the year ended December 31, 2020 compared to the year ended December 31, 2019. The decrease was primarily due to a decrease in the fair value of redeemable convertible preferred stock warrant liability of $0.9 million in 2020 compared to an increase in the fair value of the redeemable convertible preferred stock tranche liability and the Technion Research and Development Foundation (TRDF) liability of $2.0 million in 2019.

We recognized an income tax benefit of $2.8 million during the year ended December 31, 2020 compared to the income tax expense of $19,000 for the year ended December 31, 2019. The income tax benefit during the year ended December 31, 2020 was a result of the recognition of a net operating loss carryback under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which was enacted on March 27, 2020 in response to the COVID-19 pandemic. This generated a refund of income taxes paid by us during the year ended December 31, 2017. In accordance with Accounting Standards Codification (ASC) 740, Income Taxes, we recorded the effect of an enacted change in a tax law in the period that includes the enactment date.

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

Revenue decreased by $7.2 million, or 88%, for the year ended December 31, 2019 ~~and were primarily attributable~~compared to $51.2 million of costs from third-party contract organizations and investigative clinical trial sites related to clinical trials, including $49.4 million for the clinically symptomatic respiratory infection indication and $1.8 million for the ongoing Phase 1b/2a for PD, $9.4 million of costs related to preclinical studies and the production of preclinical and clinical materials, $2.0 million of costs related to external consulting incurred to supplement our research and development personnel costs, and $8.5 million of personnel costs, including stock-based compensation. In addition, in May 2019, we initiated a Phase 3 clinical trial for the first indication, triggering a milestone payment of $2.5 million under our license agreement with NIBR. Research and development expenses were $31.1 million for the year ended December 31, 2018 resulting from the decrease in revenue recognized under the Regeneron Agreement.

The decrease in revenue recognized under the Regeneron Agreement during the year ended December 31, 2019 was primarily due to an amendment to the Regeneron Agreement. In April 2019, we executed an amendment to the Regeneron Agreement according to which future research program fees that were due on the third and fourth anniversaries of the Regeneron Agreement were ~~primarily attributable~~replaced with the payments based on achievement of certain development and regulatory milestones. After the amendment became effective in July 2019, these payments were accounted for as variable consideration and excluded from the transaction price due to ~~$18.0 million of costs from third-party contract organizations and investigative clinical trial sites~~substantial uncertainties related to ~~clinical trials, including~~achieving the ~~Phase 2b clinical trial for respiratory tract infections, $7.4 million of costs related to preclinical studies~~milestones and, as a result, earning with such payments. This resulted in a decrease in the ~~production of preclinical~~cumulative revenue recognized under the Regeneron Agreement (see critical accounting policy on revenue recognition below).

Research and ~~clinical materials, $1.2 million of costs related to external consulting incurred to supplement our~~development

Research and development ~~personnel costs, and $4.5 million of personnel costs, including stock-based compensation.~~

~~General and administrative~~ expenses increased ~~to $11.8~~by $9.0 million, or 61%, for the year ended December 31, 2019 ~~and were primarily attributable~~compared to $6.3 million of personnel costs, including stock-based compensation, and $5.5 million of professional services fees, including costs related to intellectual property, legal and filing costs, accounting costs, insurance, and external consulting costs incurred to supplement our personnel. General and administrative expenses were $8.6 million for the year ended December 31, ~~2018,~~2018. The increase in research and ~~were~~development expenses was primarily ~~attributable~~due to ~~$5.2~~an increase of $4.9 million in fees paid to CMOs due to initiating and ramping up manufacturing and preclinical development activities related to our first product candidate, an increase of $2.7 million in payroll and personnel ~~costs,~~expenses, including salaries, bonuses, benefits and stock-based compensation expenses due to increases in headcount of employees involved in research and ~~$3.4~~development activities, an increase of $1.1 million in laboratory materials, supplies, and maintenance of ~~professional services fees, including~~equipment used for research and development activities, and an increase of $0.3 million in facility-related costs ~~related to intellectual property, legal~~ and ~~filing costs, accounting costs, insurance,~~other general support services.

General and ~~external consulting costs incurred to supplement our personnel.~~administrative

~~Other income, net was $2.8~~General and administrative expenses increased by $0.3 million, or 3%, for the year ended December 31, 2019 compared to the year ended December 31, 2018. The increase in general and administrative expenses was primarily ~~consisted~~due to an increase of ~~interest~~$0.7 million of professional fees for legal, consulting, accounting, tax and other services and an increase of $0.4 million in depreciation, rent, travel and other expenses, offset by a decrease of $0.8 million of payroll and personnel expenses, including salaries, bonuses, benefits and stock-based compensation expenses largely due to a decrease in stock-based compensation expenses resulting from accounting for forfeitures of unvested stock options of terminated employees during the year that was partly offset by increases in headcount at the senior management level.

Interest income ~~net was $2.1~~increased by $0.4 million, or 73%, for the year ended December 31, 2019 compared to the year ended December 31, 2018, ~~and~~which was primarily ~~consisted of~~attributable to interest income from an increase in cash and cash equivalents and marketable debt securities as a result of ~~$2.1~~the proceeds received from the sale of shares of Series B redeemable convertible preferred stock in the third quarter of 2019.

Other income (expense), net decreased by $2.2 million, or 49%, for the year ended December 31, 2019 compared to the year ended December 31, 2018, which was primarily due to a decrease in fair value of redeemable convertible preferred stock tranche liability by $2.5 million, partially offset by an increase in fair value of redeemable convertible preferred stock warrant liability of $0.3 million.

During the year ended December 31, 2019, we recorded income tax expense of less than $0.1 million. For the year ended December 31, 2018, we recorded an income tax benefit of $0.6 million which was primarily due to the New York state net operating loss carryback, which generated a refund of income taxes paid for the year ended December 31, 2017.

Since our formation in 2014, we have funded our operations with an aggregate of $116.3 million in gross cash proceeds from the sale of redeemable convertible preferred stock and ~~Plan~~an aggregate of ~~Operations~~$45.0 million received to date from Regeneron under the Regeneron Agreement. In September 2020, following the closing of the Merger, all outstanding shares of the redeemable convertible preferred stock converted into 12,048,671 shares of common stock. We also acquired $64.1 million of cash, cash equivalents and restricted cash owned by resTORbio, as part of the Merger. As of December 31, 2020, we had cash,

cash equivalents and marketable debt securities of $94.6 million. In February 2021, we completed an underwritten public offering of 10,575,513 shares of our common stock, including the exercise in full by the underwriters of their option to purchase up to an additional 1,344,743 shares of common stock at a public offering price of $13.00 per share. The aggregate gross proceeds from the offering, before deducting underwriting discounts and commissions and offering expenses were approximately $137.5 million. In connection with the offering, we also entered into a stock purchase agreement with certain existing investors for $15.0 million of shares of our common stock at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.

We expect that the cash, cash equivalents, and marketable debt securities will be sufficient to fund our forecasted operating expenses, capital expenditure requirements and debt service payments for at least the next twelve months from the issuance of these annual consolidated financial statements.

From 2015 to 2018, we issued 30,233,758 shares of our Series A redeemable convertible preferred stock at $1.20 per share for total gross proceeds of $36.3 million.

We also issued 411,892 and 67,656 shares of our Series A redeemable convertible preferred stock in connection with an amendment of the license agreement with the TRDF in February 2016 and February 2019, respectively.

In January 2016 and February 2016, we issued 629,633 shares of our Series A-1 redeemable convertible preferred stock and 2,428,688 shares of Series A-2 redeemable convertible preferred stock as part of the purchase consideration for Applied Immune Technologies, Ltd. (AIT), respectively.

Following the closing of the Merger, all Series A, Series A-1, and Series A-2 redeemable convertible preferred stock were converted in 4,980,151 shares of our common stock.

In 2019, we issued 57,004,415 share of Series B redeemable convertible preferred stock at $1.4034 per share for gross proceeds of $80.0 million.

In connection with Series B redeemable convertible preferred stock financing transactions, we issued to our financial advisor warrants to purchase 1,781,387 shares of our Series B redeemable convertible preferred stock at an exercise price of at $1.4034 per share.

Following the closing of the Merger, all Series B redeemable convertible preferred stock were converted in 7,068,520 shares of our common stock.

On ~~February 1, 2019,~~April 28, 2020, we entered into the Loan Agreement with Pacific Western Bank (the Bank) for a term loan not exceeding $12.0 million to finance leasehold improvements for our facilities in Redwood City, CA, with an interest rate equal to the greater of 0.25% above the Prime Rate (as defined in the Loan Agreement) or 5.00%. In connection with the entrance into the Loan Agreement, we issued the Bank a warrant to purchase shares of our Series B redeemable convertible preferred stock at an exercise price of $1.4034 per share. Such warrant was initially exercisable for 42,753 shares of our Series B redeemable convertible preferred stock. Upon the closing of the Merger, it was exchanged for a warrant to purchase 5,301 shares of common stock at an exercise price of $11.32 per share and shall be exercisable for an additional number of shares of common stock equal to 1.00% of the aggregate original principal amount of all term loans made pursuant to the Loan Agreement (up to an aggregate maximum of 15,903 shares of common stock). The Loan Agreement contains a variety of affirmative and negative covenants, including required financial reporting, limitations on certain dispositions of assets, limitations on the incurrence of additional debt and other requirements. As of December 31, 2020, we were in compliance with such covenants and had no indebtedness outstanding under the Loan Agreement.To date, we have not drawn any funds from the Loan Agreement.

On December 1, 2020, we entered into a Sales Agreement (the 2020 Sales Agreement) with Evercore Group L.L.C. and H.C. Wainwright & Co., LLC (collectively, the ~~Sales Agents,~~Agents), pursuant to ~~provide for the offering, issuance and sale by the Company of~~which we could sell, from time to time, at our option, up

to an aggregate of $50.0 million of ~~its~~shares of our common stock, ~~from time to time in “at-the-market” offerings~~through the Agents, as our sales agents. No shares were sold under the ~~Shelf and subject~~2020 Sales Agreement before it was terminated in February 2021.

In February 2021, we completed an underwritten public offering of 10,575,513 shares of our common stock, including the exercise in full by the underwriters of their option to ~~the limitations thereof. We sold approximately 688,000~~purchase up to an additional 1,344,743 shares of common stock at a ~~weighted-average selling~~public offering price of ~~$10.18~~$13.00 per ~~share in accordance with the Sales Agreement for~~share. The aggregate ~~net proceeds of $6.7 million, after payment of cash commissions of 3.0 percent of the~~ gross proceeds tofrom the Sales Agent and incurred issuance costs of approximately $75,000 related to legal, accounting, and other fees in connection with the sale. As of December 31, 2019, $43.0 million remained available for sale under the Sales Agreement.

~~In 2019, we completed an underwritten public~~ offering, ~~and received aggregate net proceeds of approximately $49.7 million, after~~before deducting underwriting discounts and commissions and ~~other~~ offering expenses ~~payable by us.~~were approximately $137.5 million.

~~Since inception,~~In connection with the offering, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations to date primarilyalso entered into a stock purchase agreement with ~~proceeds from the sale~~certain existing investors for $15.0 million of shares of our common stock at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.

We have incurred losses since inception and have incurred losses of $36.8 million, $28.1 million and $9.3 million for the ~~sale of shares of our redeemable convertible preferred stock.~~years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, ~~2019,~~2020, we had ~~$91.5 million in~~an accumulated deficit of $106.5 million.

As of December 31, 2020, we had cash, cash equivalents and marketable debt securities ~~and an accumulated deficit~~ of ~~$154.1~~$94.6 million.

Our primary use of cash has been to fund operating expenses, which consist of research and development and general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

~~Based upon our current operating plan, we~~ We believe that our ~~existing~~ cash, cash equivalents and marketable debt securities will ~~enable~~be sufficient for us to ~~fund our operating expenses and capital expenditure requirements~~continue as a going concern for at least ~~into 2022.~~12 months from the issuance date of our consolidated financial statements as of and for the year ended December 31, 2020 included elsewhere in this Annual Report on Form 10-K. We have based ~~this estimate~~these estimates on assumptions that may prove to be wrong, and we could ~~utilize~~deplete our available capital resources sooner than we ~~currently~~ expect. Because of the risks and uncertainties associated with research, development, and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements.

All of our revenue to date is generated from the Regeneron Agreement, which is a collaboration and license agreement. We do not expect to generate any significant product revenue until we obtain regulatory approval of and commercialize any of our product candidates or enter into additional collaborative agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business.

We will continue to require additional ~~financing to advance our current product candidate through clinical development,~~capital to develop ~~acquire or in-license other potential~~our product candidates and to fund operations for the foreseeable future. ~~Accordingly, we will continue~~We may seek to ~~seek funds~~raise capital through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. We anticipate that we will need to raise substantial additional capital, the requirements for which will depend on many factors, including:

A change in the outcome of any of these or other 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. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans.

Adequate ~~additional~~ funding may not be available to us on acceptable terms or at all. ~~Any~~Our failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business ~~plans and~~ strategies.

Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.

If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our clinical trials, research and development programs or commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, and collaborations or licensing arrangements. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If additional funding is required, there can be no assurance that additional funds will be available to us on acceptable terms on a timely basis, if at all. If we are unable to raise ~~capital,~~additional funds when needed, we ~~will need~~may be required to ~~curtail planned activities~~delay, reduce, or terminate some or all of our development programs and clinical trials or we may also be required to ~~reduce costs. Doing so will likely~~sell or license to other rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have ~~an unfavorable effect on~~to give up certain rights that limit our ability to ~~execute~~develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business ~~plans.~~and financial condition.

See the section of this Annual Report on Form 10-K titled “Risk Factors” for additional risks associated with our substantial capital requirements.

The following table ~~summarizes~~sets forth the primary sources and uses of our cash, ~~flows~~cash equivalents, and restricted cash for each of the periods ~~indicated:~~presented below (in thousands):

~~Cash~~Net cash used in operating activities was $41.6 million for the year ended December 31, ~~2019~~2020. Cash used in operating activities was ~~$73.7 million, consisting~~primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of ~~$82.7~~$36.7 million, adjusted for ~~noncash items including~~non-cash activities of $8.6 million. The non-cash activities are composed of depreciation expense of $1.2 million, a non-cash lease expense of $0.7 million, stock-based compensation expense of ~~$3.7~~$5.3 million, a non-cash change in fair value of the redeemable convertible preferred stock warrant liability of $0.9 million, a non-cash expense for impairment of IPR&D of $2.3 million, a gain on the remeasurement of contingent consideration liability of $1.9 million, and ~~accretion on marketable securities~~amortization of ~~$1.0~~the deferred debt issuance cost of $0.1 million. ~~The change~~Changes in ~~our net~~ operating assets and liabilities ~~for the year ended December 31, 2019~~ were ~~due primarily to an increase in accounts payable and accrued liabilities~~composed of ~~$6.5 million primarily due to increased clinical activities, which were partially offset by~~ an increase in prepaid expenses and other current assets of ~~$0.3~~$3.2 million, an increase in other non-current assets of $1.3 million, a decrease in contract liabilities of $7.9 million, a decrease in deferred tax liability of $0.2 million, a decrease in lease liabilities of $0.9 million, and a decrease in accounts payable of $0.8 million, partially offset by an increase in accrued and other current liabilities of $0.8 million. The increase in prepaid expenses and other current assets resulted from the prepayment for director and officer insurance after the close of the Merger, timing of payments to our CROs and CMOs and an increase in federal tax receivable. The decrease in contract liabilities is due to ~~prepayments for~~the recognition of revenue under the Regeneron Agreement. Decreases in accounts payable and increase in accrued and other liabilities resulted from the timing of payments to our ~~research and development activities. Cash~~service providers.

Net cash used in operating activities was $27.9 million for the year ended December 31, ~~2018~~2019. Cash used in operating activities was ~~$35.5 million, consisting~~primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of ~~$37.6~~$28.1 million, adjusted for ~~noncash items including~~a non-cash change in fair value of the redeemable convertible preferred stock tranche liability and

TRDF liability of $2.0 million, a non-cash change in fair value of redeemable convertible preferred stock warrant liability of $0.3 million, a decrease in contract liabilities of $1.0 million, and a decrease in accrued and other current liabilities of $0.4 million, partially offset by depreciation expense of $1.2 million, stock-based compensation expense of ~~$2.8~~$1.2 million, a decrease in prepaid expenses and other current assets of $1.4 million, and ~~accretion on marketable securities~~an increase in accounts payable of ~~$0.7~~$0.5 million. The ~~change~~decrease in prepaid expenses and other current assets, decrease in accrued and other current liabilities, and increase in accounts payable resulted from the timing of payments to our ~~net~~service providers.

Net cash used in operating ~~assets and liabilities~~activities was $18.2 million for the year ended December 31, ~~2018 were due primarily to an increase~~2018. Cash used in ~~accounts payable and accrued liabilities of $0.6 million~~operating activities was primarily due to ~~increased clinical activities, which were partially offset by~~the use of funds in our operations to develop our product candidates resulting in a net loss of $9.3 million, adjusted for a non-cash change in fair value of redeemable convertible preferred stock tranche liability and TRDF liability of $4.5 million, a decrease in contract liabilities of $3.2 million, an increase in prepaid expenses and other current assets of ~~$0.6~~$2.8 million, ~~due~~a decrease in accrued and other current liabilities of $1.3 million, a decrease in accounts payable of $0.3 million, and an increase in other non-current assets of $0.3 million, partially offset by non-cash depreciation expense of $1.2 million and stock-based compensation expense of $2.5 million. The increase in prepaid expenses and other current assets and decreases in accounts payable and accrued and other current liabilities resulted from the timing of payments to ~~prepayments for~~ our ~~research and development activities.~~service providers.

~~Cash~~Net cash provided by investing activities was $115.2 million for the year ended December 31, ~~2019 was $44.1~~2020, which consisted of cash and restricted cash acquired in connection with the Merger of $64.1 million, ~~and consisted of~~proceeds from maturities of marketable debt securities of ~~$141.5~~$57.8 million, partially offset by purchases of marketable debt securities of ~~$97.1~~$5.7 million and purchases of property and equipment of ~~$0.3~~$1.0 million. ~~Cash~~

Net cash used in investing activities was $47.9 million for the year ended December 31, 2019, which related to purchases of marketable debt securities of $76.1 million and purchases of property and equipment of $1.1 million, partially offset by proceeds from maturities of marketable debt securities of $29.1 million.

Net cash used in investing activities was $16.1 million for the year ended December 31, 2018, ~~was $100.7 million and consisted of $107.9 million for the~~which related to purchases of marketable debt securities ~~and $0.3~~of $15.2 million ~~for the~~and purchases of property and equipment ~~partially offset by $7.5 million from the maturities~~ of ~~marketable securities.~~$0.9 million.

~~Cash~~Net cash provided by financing activities was $0.3 million for the year ended December 31, 2020, due to cash proceeds of $0.5 million from exercise of stock options partly offset by payment of debt issuance costs of $0.2 million.

Net cash provided by financing activities was $76.9 million for the year ended December 31, 2019, ~~was $56.4 million and consisted of $49.7 million,~~primarily due to net ~~of issuance costs, from the~~ proceeds from the ~~public offering completed in March and April 2019 and $6.7 million, net~~sale of ~~issuance costs, from the proceeds from the at-the-market offering. Cash~~shares of Series B redeemable convertible preferred stock.

Net cash provided by financing activities was $11.0 million for the year ended December 31, 2018, ~~was $89.9 million from the~~due to net proceeds from the ~~IPO, net~~sale of ~~issuance costs paid in 2018.~~

In March 2017, we entered into a license Agreement with Novartis. See “—Overview—Novartis License Agreement.” In May 2017, the Company initiated a Phase 2b clinical trial for a first indication, triggering the first milestone payment under the agreement. Accordingly, the Company paid the related $0.3shares of Series A redeemable convertible preferred stock of $10.8 million ~~payment in May 2017. In May 2019, the Company initiated a Phase 3 clinical trial for the first indication, triggering another milestone payment~~and cash proceeds of ~~$2.5~~$0.2 million ~~under the agreement. As~~from exercise of ~~December 31, 2019, none of the remaining clinical milestones, regulatory milestones, sales milestones, or royalties is probable.~~

We enter into contracts in the normal course of business with CROs and CMOs to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination upon notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.stock options.

~~Tabular disclosure~~We currently lease an office space in Boston, MA under a non-cancellable operating lease (the Boston Lease), with an expiration date of ~~contractual~~July 31, 2026. The Boston lease was amended on April 1, 2019, to relocate into a premise in the same building with additional space. The initial annual base rent for this lease was $0.6 million and increases 2% annually. We also have an office facility in Menlo Park, CA under a non-cancellable operating lease (the Menlo Park Lease), with an expiration date of March 31, 2022 (subject to any optional extension). This lease was amended on September 30, 2019 to include additional office space, with an expiration date of March 31, 2022 (subject to any optional extension). The initial annual base rent for the Menlo Park Lease is an aggregate of $1.0 million, and such amount will increase 3% annually. On October 28, 2018, we executed an additional non-cancelable lease agreement for a new office and laboratory facility in Redwood City, CA (the Redwood City Lease), with an expiration date of February 28, 2030. The initial annual base rent for the Redwood City Lease is an aggregate of $1.3 million, and such amount will increase 3% annually.

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with GAAP. The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reported periods and related disclosures. These estimates and assumptions, including those related to revenue recognition, accruals related to CMO, CRO and research and development expenses, equity-based compensation,

valuation of the IPR&D and CVR, determination of the fair value of common shares prior to our Merger are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. These critical estimates and assumptions are based on our historical experience, our observance of trends in the industry, and various other factors that are believed to be reasonable under the circumstances and form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from our estimates under different assumptions or conditions.

Under ASC 606, Revenue from Contracts with Customers (ASC 606), we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps as prescribed by ASC 606:

A contract with a customer exists when (i) we enter into a legally enforceable contract with a customer that defines each party’s rights regarding the products or services to be transferred and identifies the payment terms related to these products or services, (ii) the contract has commercial substance and (iii) we determine that collection of substantially all consideration for products or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

At contract inception, once the contract is determined to be within the scope of ASC 606, we identify the goods or services promised and determine the performance obligations by assessing whether each promised good or service is distinct. Goods or services that are not ~~applicable~~distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Our revenues are derived through the Regeneron Agreement. The terms of the Regeneron Agreement include (1) a research license, (2) a collaboration invention license, (3) a trademark license, (4) research and development services during the research term, (5) manufacturing services to manufacture collaboration ICPs for the research programs, (6) participation in the joint research committee, and (7) information sharing during the research term. We considered that the licenses granted under the Regeneron Agreement are not capable of being distinct and are not distinct from the research and development and manufacturing services within the context of the Regeneron Agreement, because (1) such licenses are for the research and development effort during the research term, unless Regeneron exercises its option under the Regeneron Agreement, (2) the research and development services significantly increase the utility of such licenses, and (3) research and development services require collaboration ICPs being manufactured. Specifically, the licenses granted by us can only provide benefit to Regeneron in combination with the research and development and manufacturing services provided by us, to discover the collaboration ICPs. Similarly, the participation in the joint research committee and information sharing are not capable of being distinct and are not distinct from the research and development and manufacturing services within the context of the agreement, because the participation in the joint research committee is for monitoring and governing of the research and development efforts and the information sharing is for sharing results of such research and development efforts. Therefore, we concluded all of the above promises are ~~electing scaled disclosure~~combined into a single performance obligation.

For revenue recognition purposes, we determine the term of our license or collaboration agreements by evaluating the period during which present and enforceable rights and obligations exist. This determination is impacted by the existence of substantive termination penalties, among other factors.

We recognize revenue under our license or collaboration agreements that are within the scope of ASC 606. These agreements include promises related to licenses to intellectual property and research and development services. If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of

recognizing revenue from non-refundable, up-front fees. Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and at specified future dates, variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products. We measure the transaction price based on the amount of consideration to which we expect to be entitled in exchange for transferring the promised goods and/or services to the customer. We utilize the “most likely amount” method to estimate the amount of variable consideration to which we will be entitled for the contract. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of each arrangement that includes development and regulatory milestone payments, we evaluate whether the associated event is considered most likely to be achieved and estimates the amount to be included in the transaction price.

Payments or reimbursements for our research and development efforts where such efforts are considered part of or a single performance obligation are recognized over time using a measure of progress that best reflects our performance in satisfying the obligation and are presented on a gross basis.

Upfront payments are recorded as contract liabilities upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligation under these arrangements. Amounts payable to us are recorded as accounts receivable when our right to consideration is unconditional. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from the Regeneron Agreement.

We lease our facilities and, prior to December 31, 2019, we met the requirements ~~available~~to ~~Smaller Reporting Companies with respect to this Item 303(a)(5) under Item 303(d).~~

~~Net Operating Loss Carryforwards~~account for these leases as operating leases. We recognized rent expense on a straight-line basis over the non-cancelable lease term. Where leases contain escalation clauses, rent abatements or concessions, such as rent holidays and landlord or tenant incentives or allowances, we applied them in the determination of straight-line rent expense over the lease term.

As of December 31, 2019, we ~~had federal net operating loss carryforwards of $127.0 million, of which $14.0 million will begin to expire in 2036~~recorded the difference between the rent paid and ~~$113.0 million can be carried forward indefinitely.~~the straight-line rent as a deferred rent liability. As of December 31, 2019, leasehold improvements funded by landlord incentives or allowances are recorded as leasehold improvement assets and a corresponding deferred rent liability. The leasehold improvement asset is amortized over the lesser of the term of the lease or life of the asset. The deferred rent liability is amortized on a straight-line basis as a reduction to rent expense over the term of the lease agreement.

Upon adoption of ASC 842, Leases, as described below under Recently Adopted Accounting Pronouncements, on January 1, 2020, we ~~had state net~~determined if an arrangement is a lease, or contains a lease, at inception. The asset component of our operating ~~loss carryforwards~~leases is recorded as right-of-use (ROU) assets, and the liability component is recorded as current lease liabilities and long-term lease liabilities in our consolidated balance sheets. ROU assets and lease liabilities are recognized based on the present value of ~~$130.8~~the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use an incremental borrowing rate, which is the estimated rate we would be required to pay for a fully collateralized borrowing equal to the total lease payments over the term of the lease, to determine the present value of future minimum lease payments. The ROU asset also includes any lease payments made to the lessor at or before the commencement date, minus lease incentives received, and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of ASC 842, we do not combine lease and non-lease components. Variable lease payments are expenses as incurred.

Assumptions made by us at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

As a result of adopting ASC 842 in 2020, we recorded lease right-of-use, (ROU) asset of $1.4 million ~~which will begin~~and lease liabilities of $1.8 million as of January 1, 2020, primarily related to ~~expire in various amounts in 2036.~~office leases based on the present value of future lease payments. There was no impact to retained earnings upon the adoption of ASC 842. As of December 31, ~~2019,~~2020, we ~~also had federal~~did not record any finance leases.

We have entered into various agreements with CMOs and CROs. Our research and development ~~tax credit carryforwards~~accruals are estimated based on the level of $3.8 million, which begin to expire in 2037. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In addition, in general, under Sections 382 and 383services performed, progress of the ~~Internal Revenue Code~~studies, including the phase or completion of ~~1986, as amended,~~events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued and other current liabilities on the consolidated balance sheet. If the actual timing of the performance of services or the ~~Code,~~level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the consolidated balance sheets until the services are rendered. To date, our estimated accruals have not differed materially from the actual costs.

We use a ~~corporation that undergoes~~fair value-based method to account for all stock-based compensation arrangements with employees and non-employees, including stock options and restricted stock awards. Our determination of the fair value of stock options on the date of grant utilizes the Black-Scholes option pricing model. The fair value of the option granted is recognized on a straight-line basis over the period during which an ~~“ownership change”~~optionee is ~~subject~~required to limitations on its ability to utilize its pre-change net operating losses or tax credits, or NOLs or credits, to offset future taxable income or taxes. For these purposes, an ownership change generally occurs whereprovide services in exchange for the ~~aggregate~~option award, known as the requisite service period, which usually is the vesting period. We account for forfeitures as they occur. In determining fair value of the stock ~~ownership~~options granted, we use the Black–Scholes option-pricing model, which requires the input of ~~one or more stockholders or groups~~subjective assumptions. These assumptions include estimating the length of ~~stockholders who owns at least 5%~~time employees will retain their vested stock options before exercising them (expected term), the estimated volatility of ~~a corporation’s~~our common stock ~~increases its ownership by more than 50 percentage points~~price over ~~its lowest ownership percentage within a specified testing period. Our existing NOLs or credits may be subject to limitations arising from previous ownership changes,~~the expected term (expected volatility), risk-free interest rate and ~~if we undergo an ownership~~expected dividends. Changes in the following assumptions can materially affect the estimate of fair value and ultimately how much stock-based compensation expense is recognized; and the resulting change in ~~connection with or after~~fair value, if any, is recognized in our ~~IPO, our ability~~consolidated statement of operations and comprehensive loss during the period the related services are rendered. These inputs are subjective and generally require significant analysis and judgment to ~~utilize NOLs or credits could be further limited by Sections 382 and 383~~develop. Changes in the following assumptions can materially affect the estimate of the ~~Code. In addition, future changes~~fair value of stock-based compensation:

Prior to our Merger, the estimated fair value of the common stock underlying our stock ~~ownership, many~~options and stock awards was determined at each grant date by our board of ~~which are outside~~directors, with assistance from management and external appraisers. All options to purchase shares of our ~~control, could result in an ownership change under Sections 382 and 383 of~~common stock were intended to be exercisable at a price per share not less than the ~~Code. Our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion~~per-share fair value of our ~~NOLs or credits. We have not completed a study~~common stock underlying those options on the date of grant. The approach to ~~determine whether~~estimate the fair value of our ~~public offerings, private placements and other transactions that have occurred over~~common stock was consistent with the ~~past three years may have triggered an ownership change limitation. If we determine that an ownership change has occurred and~~methods outlined in the American Institute of Certified Public Accountants’ Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (Practice Aid). Subsequent to the Merger, the fair value of our ~~ability to use our historical NOLs or credits~~common stock is ~~materially limited, it would harm our future operating results by effectively increasing our future tax obligations. We have not performed an ownership change analysis.~~

Furthermore, our ability to utilize our NOLs or credits is conditioned upon our attaining profitability and generating U. S. federal and state taxable income. As described above under “Risk Factors—Risks Related to our Financial Position and Need for Additional Capital,” we have incurred significant net losses since our inception and anticipate that we will continue to incur significant losses fordetermined based on the foreseeable future; and therefore, we do not know whether or when we will generate the U.S. federal or state taxable income necessary to utilize our NOL or credit carryforwards that are subject to limitation by Sections 382 and 383 of the Code.closing market price.

WeSince our inception, we have not ~~entered into~~engaged in any off-balance sheet ~~arrangements~~arrangements.

Emerging Growth Company and ~~do not have any holdings in variable interest entities.~~

In ~~addition to being a smaller reporting company, we are an “emerging growth company,” as defined in~~April 2012, the Jumpstart Our Business Startups Act of 2012 or(the JOBS Act) was enacted. Section 107 of the JOBS ~~Act. As~~Act provides that an emerging growth company ~~we may~~(EGC), can take advantage of ~~specified reduced disclosure and other requirements that are~~the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise ~~applicable generally~~apply to ~~public~~private companies.

We ~~would cease~~have elected to beuse the extended transition period for new or revised accounting standards during the period in which we remain an emerging growth company; however, we may adopt certain new or revised accounting standards early. We will remain an emerging growth company ~~on the date that is~~until the earliest to occur of: ~~(i)~~(1) the last day of the fiscal year in which we have ~~total annual gross revenues of~~more than $1.07 billion ~~or more; (ii) December 31, 2023; (iii)~~in annual revenue; (2) the date we qualify as a large accelerated filer, with at least $700.0 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in ~~nonconvertible~~non-convertible debt securities during the ~~previous three years; or (iv)~~prior three-year period; and (4) the ~~date on which we~~last day of the fiscal year ending after the fifth anniversary of our initial public offering.

We are ~~deemed~~also a smaller reporting company meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a ~~large accelerated filer under~~smaller reporting company if either (i) the ~~rules~~market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the ~~SEC.~~most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

See ~~Note 2,~~ ~~Summary~~the section titled “Summary of Significant Accounting ~~Policies~~,Policies” in ~~the Notes~~Note 2 to our ~~Consolidated Financial Statements~~financial statements included elsewhere in ~~Item 8 of Part II of~~ this Annual Report on Form 10-K for ~~a description of recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial conditions.~~additional information.

Item 7A. Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk.

~~We are exposed to~~The market risk ~~related to~~inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of December 31, ~~2019,~~2020, we had cash and cash equivalents and marketable debt securities of ~~$91.5~~$94.6 million, ~~primarily comprised~~consisting of interest-bearing money market ~~mutual~~ funds, ~~consisting of U.S. government-backed securities. Our primary exposure to market risk is interest rate sensitivity,~~asset-backed securities, corporate debt securities and commercial paper, for which isthe fair value would be affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our available for sale securities are subject to interest rate risk and will fall in value if market interest rates increase. Duerates. However, due to the short-term ~~duration of our investment portfolio~~maturities and the ~~low risk~~low-risk profile of our ~~investments,~~cash equivalents, an immediate ~~100 basis point~~10% relative change in interest rates would not have a material effect on the fair ~~market~~ value of our ~~portfolio.~~cash equivalents or on our future interest income.

We contract with CROs and contract manufacturers globally. We may be subject to fluctuations in foreign currency rates in connection with certain of these agreements. Transactions denominated in currencies other than the United States dollar are recorded based on exchange rates at the time such transactions arise. We have not engaged in the hedging of our foreign currency transactions to date, we are evaluating the costs and benefits of initiating such a program and may in the future hedge selected significant transactions denominated in currencies other than the U.S. dollar as we expand our international operation and our risk grows. ~~As of December 31, 2019, substantially all of our total liabilities were denominated in the United States dollar.~~

~~Inflation generally affects us by increasing our cost of labor.~~ We do not believe that inflation, interest rate changes or foreign currency exchange rate fluctuations have had a ~~material effect~~significant impact on our ~~business, financial condition or~~ results of operations ~~during the year ended December 31, 2019.~~for any periods presented herein.

Our consolidated financial statements, together with the report of our independent registered public accounting firm, appear on pages F-1 through ~~F-24~~F-43 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

~~There has been no change of accountants nor any disagreements with accountants on any matter of accounting principles or practices or financial disclosure required to be reported under this Item.~~None.

~~Evaluation~~Definition and limitations of ~~Disclosure Controls and Procedures~~disclosure controls

~~The Company has established~~Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange ~~Act)~~Act are designed to ensure that information required to be disclosed in ~~the~~our reports ~~that the Company files or submits~~filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and ~~forms~~forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including the ~~principal executive officer (our~~ Chief Executive ~~Officer)~~Officer (CEO) and ~~principal financial officer (our Vice President, Finance)~~Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding required disclosure.

~~The Company’s~~ Our management ~~with the participation of the Company’s Chief Executive Officer~~evaluates these controls and ~~Vice President, Finance, evaluated~~procedures on an ongoing basis.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. These limitations include the ~~Company’s~~possibility of human error, the circumvention or overriding of the controls and procedures and reasonable resource constraints. In addition, because we have designed our system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, our system of controls may not achieve its desired purpose under all possible future conditions. Accordingly, our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2019. Management recognizes that any controls and procedures, no matter how well designed and operated, can~~ provide ~~only~~ reasonable assurance, but not absolute assurance, of achieving their ~~objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship~~objectives.

Evaluation of ~~possible controls and procedures. Our~~ disclosure controls and procedures ~~have been designed to provide reasonable assurance~~

During the preparation of ~~achieving their objectives. Based on the evaluation of the Company’s disclosure controls and procedures~~our consolidated financial statements as of and for the years ended December 31, 2020, 2019, ~~the Company’s Chief Executive Officer~~ and ~~Vice President, Finance concluded that, as of such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.~~

~~Our management is responsible for establishing and maintaining adequate~~2018, we identified material weaknesses in our internal control over financial reporting. ~~Internal~~A company’s internal control over financial reporting is ~~defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as~~ a process designed by, or under the supervision of, ~~the~~a company’s principal executive and principal financial officers, or persons performing similar functions, and effected by ~~the~~a company’s ~~board~~Board of ~~directors,~~Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements ~~for external purposes~~ in accordance with generally accepted accounting ~~principles and includes those policies and procedures that:~~

~~Because~~weakness is a deficiency or combination of ~~its inherent limitations,~~deficiencies in internal control over financial reporting, ~~may~~such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not ~~prevent~~be prevented or ~~detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation~~detected and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancecorrected on a timely basis.

~~Our management assessed~~audit of our financial statements as of and for the ~~effectiveness of~~years ended December 31, 2020, 2019 and 2018, we identified material weaknesses in our internal control over financial ~~reporting~~reporting. The material weaknesses we identified were as follows:

Our management, including our CEO and our CFO, has evaluated the effectiveness of ~~December 31, 2019. In making this assessment, management used~~our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in~~ ~~Internal Control—Integrated Framework~~ ~~(2013 framework) (COSO). Based on its assessment, management believes that,~~Exchange Act) as of December 31, ~~2019,~~2020. This evaluation is performed to determine if our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Due to the material weaknesses described above and the Company’s evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were not effective as of December 31, 2020.

The material weaknesses that we identified resulted from an insufficient complement of resources with an appropriate level of accounting knowledge, experience, and training to address accounting for complex, non-routine transactions. We are currently in the process of remediating the material weakness and have taken and continue to take steps that we believe will address the underlying causes of the material weakness, primarily by hiring additional accounting and finance personnel with technical accounting and financial reporting experience, enhancing our training programs within our accounting and finance department, and enhancing our internal ~~control over~~review procedures during the financial ~~reporting~~statement close process. During the preparation of this Annual Report on Form 10-K, our management has implemented certain additional substantive and analytical review procedures to ensure that information required to be disclosed by us in this report is ~~effective based on those criteria.~~recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms.

Our management, under the supervision of our CEO and CFO has undertaken a plan to remediate the material weaknesses identified above. The remediation efforts summarized below, which are either implemented or in the process of being implemented, are intended to address the identified material weaknesses.

~~There was no other~~No change in our internal control over financial reporting ~~that~~(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the ~~fiscal quarter~~year ended December 31, ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As a result of the COVID-19 pandemic, since March 2020, we have requested that our employees work remotely, as appropriate. We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment. We are continually monitoring and assessing the COVID-19 situation to determine any potential impacts on the design and operating effectiveness of our internal controls over financial reporting.

Exemption from Management’s Report on Internal Control Over Financial Reporting for 2020

This annual report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly-public companies.

The information required by this item regarding directors, executive officers and corporate governance will be included in our ~~2020~~2021 Proxy Statement, which we intend to file with the ~~Securities and Exchange Commission~~SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by reference.

We have adopted a code of business conduct and ethics for directors, officers, and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on our website at http://www.adicetbio.com under the Corporate Governance section of our Investors page. We will promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal financial officer, or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver. Shareholders may request a free copy of the Code of Business Conduct and Ethics from our Compliance Officer, c/o Adicet Bio, Inc., 500 Boylston Street, 13^th Floor, Boston, MA 02116.

The information required by this item regarding executive compensation will be included in our ~~2020~~2021 Proxy Statement, which we intend to file with the ~~Securities and Exchange Commission~~SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item regarding security ownership of certain beneficial owners and management and securities authorized for issuance under equity compensation plans will be included in our ~~2020~~2021 Proxy Statement, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item regarding certain relationships and related transactions and director independence will be included in our 2021 Proxy Statement, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by reference.

~~Item 13. Certain Relationships and Related Transactions, and Director Independence.~~

The information required by this item regarding certain relationships and related transactions and director independence will be included in our 2020 Proxy Statement, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by reference.

The information required by this item regarding principal accounting fees and services will be included in our ~~2020~~2021 Proxy Statement, which we intend to file with the ~~Securities and Exchange Commission~~SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by reference.

~~(a)~~ The following documents are included in this Annual Report on Form 10-K:

~~(1)~~ ~~The following Report and Consolidated Financial Statements of the Company are included in this Annual Report:~~

~~Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)~~

~~All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.~~

(3) Exhibits. The exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K. The Exhibit Index is incorporated herein by reference.

We have audited the accompanying consolidated balance ~~sheets~~sheet of ~~resTORbio,~~Adicet Bio, Inc. and ~~subsidiary~~subsidiaries (the Company) as of December 31, ~~2019 and 2018,~~2020, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for ~~each of~~ the ~~years in the three‑~~year ~~period~~then ended, ~~December 31, 2019,~~ and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2019 and 2018,~~2020, and the results of its operations and its cash flows for ~~each of~~ the ~~years in the three‑~~year ~~period~~then ended, ~~December 31, 2019,~~ in conformity with U.S. generally accepted accounting principles.

We also have audited the adjustments described in Note 2 to retrospectively apply the exchange ratio to the 2019 and 2018 consolidated financial statements. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2019 or 2018 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2019 or 2018 consolidated financial statements taken as a whole.

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2020 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842).

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

We have audited the consolidated balance sheet of Adicet Bio, Inc. and its subsidiary (the “Company”) as of December 31, 2019, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit), and of cash flows for each of the two years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”), before the effects of the adjustments to retrospectively reflect the exchange ratio described in Note 2. In our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively reflect the exchange ratio described in Note 2, present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America (the 2019 financial statements before the effects of the adjustments discussed in Note 2 are not presented herein).

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively reflect the exchange ratio described in Note 2, and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant net operating losses and negative cash flows from operations since inception that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements, before the effects of the adjustments described above, based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements, before the effects of the adjustments described above, in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We ~~have~~ served as the ~~Company’s~~Company's auditor ~~since 2017.~~from 2016 to 2020.

~~See~~The accompanying notes toare an integral part of these consolidated financial statements.

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Series A Redeemable
Convertible Preferred Stock

Series B Redeemable
Convertible Preferred Stock

Common Stock

Additional
Paid In

Accumulated

Comprehensive

Shareholders'
(Deficit)

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

Income (Loss)

Equity

Balance at December 31, 2016

—

$
—

—

$
—

2,082,860

$
1

$
—

$
(1
)

$
—

$
—

Issuance of common shares to PureTech

—

—

—

—

1,886,363

—

—

—

—

—

Issuance of Series A redeemable convertible preferred stock, net of tranche liability

15,527,951

41,674

—

—

—

—

1,379

—

—

1,379

Issuance of Series B redeemable convertible preferred stock, net of issuance costs of $54

—

—

4,792,716

39,946

—

—

—

—

—

—

Vesting of restricted stock

—

—

—

—

593,417

—

—

—

—

—

Stock-based compensation expense

—

—

—

—

—

—

470

—

—

470

Net loss

—

—

—

—

—

—

—

(33,778
)

—

(33,778
)
Balance at December 31, 2017

15,527,951

$
41,674

4,792,716

$
39,946

4,562,640

$
1

$
1,849

$
(33,779
)

$
—

$
(31,929
)
Conversion of convertible preferred stock into common stock upon the closing of initial public offering

(15,527,951
)

(41,674
)

(4,792,716
)

(39,946
)

15,870,559

1

81,619

—

—

81,620

Issuance of common stock upon closing of initial public offering, net of issuance costs of $8,379

—

—

—

—

6,516,667

1

89,369

—

—

89,370

Vesting of restricted stock

—

—

—

—

1,097,449

—

865

—

—

865

Exercise of stock options

—

—

—

—

7,029

—

5

—

—

5

Stock-based compensation expense

—

—

—

—

—

—

1,928

—

—

1,928

Net loss

—

—

—

—

—

—

—

(37,614
)

—

(37,614
)
Net unrealized losses on marketable securities

—

—

—

—

—

—

—

—

(41
)

(41
)
Balance at December 31, 2018

—

$
—

—

$
—

28,054,344

$
3

$
175,635

$
(71,393
)

$
(41
)

$
104,204

Issuance of common stock upon closing of public offering, net of issuance costs of $3,683

—

—

—

—

7,687,934

1

49,746

—

—

49,747

Issuance of common stock pursuant to the at-the-market offering, net of issuance costs of $285

—

—

—

—

687,800

—

6,716

—

—

6,716

Vesting of restricted stock

—

—

—

—

1,000

—

1

—

—

1

Vesting of restricted stock units, net of shares withheld for taxes

6,625

—

(20
)

—

—

(20
)
Exercise of stock options

—

—

—

—

7,029

—

6

—

—

6

Stock-based compensation expense

—

—

—

—

—

—

3,693

—

—

3,693

Net loss

—

—

—

—

—

—

—

(82,739
)

—

(82,739
)
Net unrealized gains on marketable securities

—

—

—

—

—

—

—

—

90

90

Balance at December 31, 2019

—

$
—

—

$
—

36,444,732

$
4

$
235,777

$
(154,132
)

$
49

$
81,698

	Redeemable Convertible Preferred Stock						Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Capital		Deficit			Income (Loss)			(Deficit)
Balance at January 1, 2018		31,074,017		$	26,341			2,016,838	$	—	$	5,262	$	(32,210	)	$	—		$	(26,948	)
Issuance of Series A redeemable convertible preferred stock		9,020,833			10,825			—		—		—		—			—			—
Exercise of the redeemable convertible preferred stock tranche liability		—			902			—		—		—		—			—			—
Issuance of common stock upon exercise of stock options		—			—			123,949		—		221		—			—			221
Vesting of early exercised stock options		—			—			—		—		44		—			—			44
Stock-based compensation expense		—			—			—		—		2,479		—			—			2,479
Net loss		—			—			—		—		—		(9,299	)		—			(9,299	)
Unrealized loss on marketable securities		—			—			—		—		—		—			(13	)		(13	)
Balance at December 31, 2018		40,094,850			38,068			2,140,787		—		8,006		(41,509	)		(13	)		(33,516	)
Issuance of Series A redeemable convertible preferred stock related to TRDF liability		67,656			88			—		—		—		—			—			—
Issuance of Series B redeemable convertible preferred stock, net of issuance cost of $5,216		57,004,415			74,784			—		—		—		—			—			—
Termination of redeemable convertible preferred stock tranche liability		—			1,143			—		—		—		—			—			—
Issuance of common stock upon exercise of stock options		—			—			14,791		—		30		—			—			30
Vesting of early exercised stock options		—			—			—		—		47		—			—			47
Stock-based compensation expense		—			—			—		—		1,175		—			—			1,175
Net loss		—			—			—		—		—		(28,138	)		—			(28,138	)
Unrealized gain on marketable securities		—			—			—		—		—		—			36			36
Balance at December 31, 2019		97,166,921			114,083			2,155,578		—		9,258		(69,647	)		23			(60,366	)
Issuance of common stock upon exercise of stock options		—			—			210,752		1		459		—			—			460
Stock-based compensation expense		—			—			—		—		5,263		—			—			5,263
Conversion of shares of redeemable convertible preferred stock to shares of common stock in connection with the Merger		(97,166,921	)		(114,083	)		12,048,671		1		114,082		—			—			114,083
Exchange of common stock in connection with the Merger		—			—			5,207,695		—		83,516		—			—			83,516
Issuance of common stock upon accelerated vesting of restricted stock units in connection with the Merger		—			—			54,553				626								626
Conversion of redeemable convertible preferred stock warrants to common stock warrants		—			—			—		—		2,922		—			—			2,922
Net loss		—			—			—		—		—		(36,678	)		—			(36,678	)
Unrealized gain on marketable securities		—			—			—		—		—		—			1			1
Balance at December 31, 2020		—		$	—			19,677,249	$	2	$	216,126	$	(106,325	)	$	24		$	109,827

~~See~~The accompanying notes toare an integral part of these consolidated financial statements.

	Year ended December 31,
	2020			2019			2018
Cash flows from operating activities
Net loss	$	(36,678	)	$	(28,138	)	$	(9,299	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization expense		1,226			1,238			1,222
Noncash lease expense		725			—			—
Stock-based compensation expense		5,263			1,175			2,479
Gain on disposal of property and equipment		—			(27	)		—
Net amortization of premiums and accretion of discounts on investments		5			(197	)		—
Change in fair value of redeemable convertible preferred stock tranche liability and TRDF liability		—			(2,024	)		(4,536	)
Change in fair value of redeemable convertible preferred stock warrant liability		897			(250	)		—
Impairment of in-process research and development		2,300			—			—
Remeasurement of contingent consideration liability		(1,900	)		—			—
Amortization of deferred debt issuance costs		134			—			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(3,233	)		1,405			(2,825	)
Other non-current assets		(1,260	)		(88	)		(302	)
Accounts payable		(814	)		527			(282	)
Contract liabilities—related party		(7,903	)		(995	)		(3,181	)
Deferred rent		—			(148	)		(132	)
Operating lease liabilities		(859	)		—			—
Accrued and other current liabilities		787			(360	)		(1,324	)
Deferred tax liability		(242	)		—			—
Net cash used in operating activities		(41,552	)		(27,882	)		(18,180	)
Cash flows from investing activities
Cash and restricted cash acquired in connection with the Merger		64,114			—			—
Purchases of marketable debt securities		(5,700	)		(76,078	)		(15,182	)
Proceeds from maturities of marketable debt securities		57,793			29,099			—
Proceeds from sale of property and equipment		—			118			—
Purchase of property and equipment		(990	)		(1,070	)		(876	)
Net cash provided by (used in) investing activities		115,217			(47,931	)		(16,058	)
Cash flows from financing activities
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs		—			76,915			10,825
Proceeds from exercise of stock options		460			30			221
Payment of debt issuance costs		(157	)		—			—
Net cash provided by financing activities		303			76,945			11,046
Net change in cash, cash equivalents and restricted cash		73,968			1,132			(23,192	)
Cash, cash equivalents and restricted cash, at the beginning of the period		14,889			13,757			36,949
Cash, cash equivalents and restricted cash, at the end of the period	$	88,857		$	14,889		$	13,757
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets:
Cash and cash equivalents	$	84,330		$	10,607		$	9,475
Restricted cash		4,527			4,282			4,282
Cash, cash equivalents and restricted cash in consolidated balance sheets	$	88,857		$	14,889		$	13,757
Supplemental cash flow information
Cash paid for income taxes	$	3		$	1		$	5,109
Cash received for income tax refunds	$	664		$	—		$	—
Supplemental disclosures of noncash investing and financing activities
Purchase of property and equipment included in accounts payable	$	115		$	48		$	61
Right-of-use assets recognized upon adoption of ASC 842	$	1,424		$	—		$	—
Operating lease right-of-use asset obtained in exchange for operating lease liability	$	22,367		$	—		$	—
Issuance of redeemable convertible preferred stock warrants in connection with the Loan Agreement	$	144		$	—		$	—
Redeemable convertible preferred stock warrants issued in connection with issuance of Series B redeemable convertible preferred stock, net of issuance costs	$	—		$	2,131		$	—
Conversion of redeemable convertible preferred stock into common stock	$	114,083		$	—		$	—
Conversion of redeemable convertible preferred stock warrants into common stock warrants	$	2,922		$	—		$	—
Fair value of net assets acquired in Merger	$	84,142		$	—		$	—
Measurement period adjustment to goodwill	$	650		$	—		$	—
Vesting of early exercised stock options	$	—		$	47		$	44
Exercise of redeemable convertible preferred stock tranche liability	$	—		$	—		$	902
Termination of redeemable convertible preferred stock tranche liability	$	—		$	1,143		$	—
Settlement of TRDF liability	$	—		$	88		$	—

Notes to ~~these consolidated financial statements.~~Consolidated Financial Statements

Adicet Bio, Inc. (formerly resTORbio, Inc. (~~collectively~~(resTORbio)), together with its subsidiaries, (the Company) is a biotechnology company discovering and developing allogeneic gamma delta T cell therapies for cancer and other diseases. The Company is advancing a pipeline of off-the-shelf gamma delta T cells, engineered with chimeric antigen receptors (CARs) and T cell receptor-like antibodies to enhance selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and improve persistence for durable activity in patients. The Company believes its approach has potentially significant advantages over alpha beta T cells, which are the basis of standard CAR-T cell therapies. The Company was incorporated in November 2014 in Delaware. The principal executive offices are located in Boston, Massachusetts. The Company also has another office in Menlo Park, California.

Adicet Bio, Inc. (when referred to ~~with its wholly-owned, controlled subsidiary, resTORbio Securities Corp. as “resTORbio” or~~prior to the ~~“the Company”~~ Merger (as defined below), (Former Adicet)) was incorporated in November 2014 in Delaware and was headquartered in Menlo Park, CA. Adicet Bio Israel Ltd. (formerly Applied Immune Technologies Ltd.) (Adicet Israel) is a wholly owned subsidiary of Former Adicet and is located in Haifa, Israel. Adicet Israel was founded in 2006. During 2019, Former Adicet consolidated its operations, including research and development activities, in the ~~State of Delaware on July 5, 2016. The~~U.S. and as a result substantially reduced its operations in Israel.

Prior to September 15, 2020, the Company iswas a clinical-stage biopharmaceutical company known as resTORbio that had historically focused on developing innovative medicines that target the biology of aging, to prevent or treat ~~aging-related~~age-related diseases with the potential to extend healthy ~~lifespan~~lifespans. On April 28, 2020, resTORbio entered into a definitive Merger Agreement with Former Adicet. Under the terms of the Merger Agreement, Former Adicet agreed to merge with a wholly owned subsidiary of resTORbio in an all-stock transaction with Former Adicet surviving as a wholly owned subsidiary of resTORbio and changing its name to “Adicet Therapeutics, Inc.” (such transactions, the Merger). Under the exchange ratio formula in the Merger Agreement, immediately following the Effective Time of the Merger, the securityholders of Former Adicet as of immediately prior to the Effective Time of the Merger owned approximately 75% of the outstanding shares of the Company’s common stock on a fully-diluted basis and securityholders of resTORbio as of immediately prior to the Effective Time of the Merger owned approximately 25% of the outstanding shares of the Company’s common stock on a fully-diluted basis (in each case excluding equity incentives available for grant).

The ~~Company’s principal operations~~Company concluded that the transaction represented a business combination pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations. Further, Former Adicet was determined to be the accounting acquirer based upon the terms of the Merger and other factors including: (i) Former Adicet’s securityholders own approximately 75% of the voting rights of the combined company (on a fully-diluted basis excluding equity incentives available for grant); (ii) Former Adicet designated a majority (five of seven) of the initial members of the Board of Directors of the combined company; and (iii) the terms of the exchange of equity interests based on the exchange ratio at the announcement of the Merger factored in an implied premium to resTORbio’s stockholders. The composition of senior management of the combined company was determined to be a neutral factor in the accounting acquirer determination, as the combined company will leverage the expertise of the senior management of both companies. Accordingly, the reported operating results prior to the business combination are ~~located in Boston, Massachusetts.~~those of Former Adicet.

In November 2019, the Company announced that top line data from the PROTECTOR 1 Phase 3 study, evaluating the safety and efficacy of RTB101 in preventing clinically symptomatic respiratory illness in adults age 65 and older, did not meet its primary endpoint and the Company has stopped the development of RTB101 for clinically symptomatic respiratory illness. In addition, in FebruaryOn September 15, 2020, the Company ~~retained JMP Securities LLC~~completed the Merger pursuant to the Merger Agreement (the Effective Time). In connection with the Merger, and immediately prior to the Effective Time, resTORbio effected a reverse stock split of its common stock at a ratio of 1-for-7 (the Reverse Stock Split). Also, in connection with the Merger, the Company changed its name from “resTORbio, Inc.” to “Adicet Bio, Inc.” (the Name Change), Former Adicet changed its name from “Adicet Bio, Inc.” to “Adicet Therapeutics, Inc.” and the business conducted by the Company became primarily the business, which was previously conducted by Former Adicet, which is a biotechnology company discovering and developing allogeneic gamma delta T cell therapies for cancer and other diseases.

At the Effective Time, each outstanding share of Former Adicet capital stock was converted into the right to receive 0.1240 (the Exchange Ratio) shares of Company’s common stock, as a financial advisor to assist it in its evaluation of a broad range of strategic alternatives to enhance stockholder value, including additional capital raising transactions, an acquisition, merger, business combination, licensing and/or other strategic transaction involving the Company. There is no assurance that the review of strategic alternatives will resultset forth in the ~~Company changing its business plan, pursuing any particular transaction, or, if it pursues any such transaction, that it will be completed.~~

~~Since inception,~~Merger Agreement. The Exchange Ratio was determined based on the total number of outstanding shares of Company’s common stock and Former Adicet capital stock, each on a fully diluted basis, and the respective valuations of Former Adicet and resTORbio at the time of execution of the Merger Agreement. In connection with the Merger, the Company ~~has been primarily involved~~also assumed certain outstanding Former Adicet warrants and Former Adicet stock options under Former Adicet’s 2015 Stock Incentive Plan (the 2015 Adicet Stock Incentive Plan) and Former Adicet’s 2014 Share Option Plan (the 2014 Share Option Plan and, together with the 2015 Adicet Stock Incentive Plan, the Former Adicet Plans), with such stock options and warrants henceforth representing the right to purchase a number of shares of Company’s common stock equal to the Exchange Ratio multiplied by the number of shares of Former Adicet’s capital stock previously represented by such stock options and warrants, as applicable, with a proportionate adjustment in ~~research~~exercise price.

Immediately following the Effective Time, there were approximately 19,589,828 shares of the Company’s common stock outstanding (post Reverse Stock Split), with the former equity holders of Former Adicet holding approximately 75% of the outstanding shares of Company’s common stock on a fully-diluted basis and ~~development activities.~~ the former equity holders of resTORbio holding approximately 25% of the outstanding shares of Company’s common stock on a fully-diluted basis (in each case excluding equity incentives available for grant).

Please refer to Note 3 “Business Combinations” for further discussions of the Merger.

The Company ~~devotes substantially all~~has incurred significant net operating losses and negative cash flows from operations since inception and had an accumulated deficit of $106.5 million as of December 31, 2020. The Company has historically financed its ~~efforts to~~operations primarily through a collaboration and licensing arrangement, the private placement of equity securities and debt, and cash received in the Merger. To date, none of the Company’s product ~~research~~candidates have been approved for sale and ~~development, initial market development and raising capital. The~~therefore the Company has not generated any revenue from product ~~revenue related~~sales. Management expects operating losses and negative cash flows to ~~its primary business purpose to date and is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals, competition from other companies,~~continue for the ~~need for development of commercially viable products and the need to obtain adequate additional financing to fund the development~~foreseeable future, until such time, if ever, that it can generate significant sales of its product ~~candidates. The~~candidates currently in development.

As of June 23, 2020, the issuance date of the Company’s consolidated financial statements for the year ended December 31, 2019, the Company ~~is also subject~~had concluded that there was substantial doubt about its ability to continue as a ~~number~~going concern. As of ~~risks similar to other companies~~December 31, 2020, the Company had $94.6 million in ~~the life sciences industry, including regulatory approval of products, uncertainty of market acceptance of products, competition from substitute products~~cash, cash equivalents, and larger companies, the need to obtain additional financing, compliance with government regulations, protection of proprietary technology, dependence on third parties, product liability and dependence on key individuals.

~~On March 22, 2019,~~marketable debt securities. In February 2021, the Company completed an underwritten public offering ~~whereby the Company sold 7,200,000~~of 10,575,513 shares of its common stock, ~~at a price of $6.95 per share. The aggregate net proceeds received~~including the exercise in full by the ~~Company from the offering were approximately $46.6 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company~~underwriters of ~~$3.5 million. In addition, the Company granted the underwriters a 30-day~~their option to purchase up to an additional ~~1,080,000~~1,344,743 shares of common stock at ~~the~~a public offering price ~~less underwriting discounts and commissions. On April 10, 2019, the Company sold an additional 487,934 shares~~ of ~~its common stock at a price of $6.95~~$13.00 per share. The company received aggregate ~~net~~gross proceeds ~~received by~~from the ~~Company were approximately $3.2 million, after~~offering, before deducting underwriting discounts and commissions and ~~other~~ offering expenses ~~payable by~~of approximately $137.5 million.In connection with the offering, the Company ~~of $0.2 million. The remainder of the option expired unexercised.~~

On February 1, 2019, the Company filed a Registration Statement on Form S-3 (the “Shelf”) with the Securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, warrants and/or units of any combination thereof (collectively, the “Securities”). The Company also ~~simultaneously~~ entered into a ~~Controlled Equity Offering Sales Agreement (the “Sales Agreement”)~~stock purchase agreement with ~~SVB Leerink LLC and Cantor Fitzgerald & Co. (collectively, the “Sales Agents”), to provide~~certain existing investors for ~~the offering, issuance and sale by the Company of up to an aggregate of $50.0~~$15.0 million of ~~its common stock from time to time in “at-the-market” offerings under the Shelf and subject to the limitations thereof. The Company will pay to the Sales Agents cash commissions of 3.0 percent~~shares of the ~~gross proceeds of sales of common stock under the Sales Agreement. Beginning in June 2019 through September 19, 2019, based on settlement date, the Company sold approximately 688,000 shares of~~Company’s common stock at a ~~weighted-average selling~~ price ~~of $10.18~~ per share ~~in accordance~~equal to the public offering price, with an initial closing for certain investors held simultaneously with the ~~Sales Agreement for aggregate net proceeds of $6.7 million, after payment of cash commissions of 3.0 percent~~closing of the ~~gross proceeds to~~offering and a subsequent closing for certain additional investors.These two recent events have alleviated the ~~Sales Agent and incurred issuance costs of approximately $75,000 related to legal, accounting, and other fees in connection with~~substantial doubt about the ~~sale. As of December 31, 2019, $43.0 million remained available for sale under the Sales Agreement.~~

~~In the course of its development activities, the Company has sustained operating losses and expects such losses~~Company’s ability to continue ~~over the next several years. The Company’s ultimate success depends on the outcome of its research and development activities.~~as a going concern. The Company ~~has incurred net losses from operations since inception and has an accumulated deficit of $154.1 million as of December 31, 2019. As of December 31, 2019, the Company had $91.5 million of~~expects that its cash, cash equivalents and marketable debt securities, ~~which~~including the ~~Company believes~~gross proceeds it received in February 2021 from its underwritten public offering and the proceeds received from a stock purchase agreement with certain existing investors, will be sufficient to fund ~~the Company’s current~~its forecasted operating ~~plan through~~expenses, capital expenditure requirements and debt service payments for at least the next twelve months from the issuance of these annual consolidated financial statements.

All of the Company’s revenue to date is generated from the Regeneron Agreement, which is a collaboration and license agreement with Regeneron Pharmaceuticals, Inc. (Regeneron). The Company does not expect to generate any significant product revenue until it obtains regulatory approval of ~~filing this Annual Report~~and commercialize any of the Company’s product candidates or enter into additional collaborative agreements with third parties, and it does not know when, or if, either will occur. The Company expects to continue to incur significant losses for the foreseeable future, and it expects the losses to increase as the Company continues the development of, and seek regulatory approvals for, its product candidates and begin to commercialize any approved products. The Company is subject to all of the risks typically related to the development of new product candidates, including, but not limited to, raising additional capital, development by its competitors of new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of relying on ~~Form 10-K.~~external parties such as contract research organizations (CROs) and contract manufacturing organizations (CMOs), the regulatory approval process, market acceptance of the Company’s products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology and it may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect its business.

Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of equity, debt financings, collaborative or other arrangements with corporate or other sources of financing. Adequate funding may not be available to the Company on acceptable terms or at all. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and the Company’s ability to pursue its business strategies. Although the Company continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

The consolidated financial statements and related disclosures have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP or GAAP).

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The U.S. dollar is the functional and reporting currency of the Company and its subsidiaries.

At the Effective Time, each outstanding share of Former Adicet capital stock was converted into the right to receive 0.1240 (the Exchange Ratio) shares of Company’s common stock, as set forth in the merger agreement. Accordingly, all shares and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the Exchange Ratio.

The ~~accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company’s fiscal year end is December 31~~^st. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). The preparation of 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 ~~the disclosure~~disclosures of contingent ~~assets and~~ liabilities ~~as of~~at the date of the consolidated financial statements ~~and~~as well as the reported amounts of ~~any~~revenues and expenses during the reporting period. ~~On an ongoing basis, management evaluates its~~Such estimates ~~including those related to accrued liabilities~~include the valuation of the intangible assets acquired in business combinations, redeemable convertible preferred stock warrant liability, redeemable convertible preferred stock tranche liability, the Technion Research and Development Foundation liability (TRDF Liability), contingent consideration liability for contingent value right (CVR), deferred tax assets, useful lives of property and equipment, accruals for research and development activities, revenue recognition and stock-based compensation ~~expense. Management bases its estimates on historical experience,~~ and ~~on various other market-specific relevant assumptions that management believes to be reasonable, under~~ the ~~circumstances.~~Company’s incremental borrowing rate. Actual results ~~may~~could differ from those estimates.

Business combinations are accounted for under the acquisition method. The Company recognizes the assets acquired and liabilities assumed in business combinations on the basis of their fair values at the date of acquisition. The Company assesses the fair value of assets acquired, including intangible assets, and liabilities assumed using a variety of methods. Each asset acquired and liability assumed is measured at fair value from the perspective of a market participant. The method used to estimate the fair values of intangible assets incorporates significant estimates and assumptions regarding the estimates a market participant would make in order to evaluate an asset, including a market participant’s use of the asset, future cash inflows and outflows, probabilities of success, asset lives, and the appropriate discount rates. Acquired in-process research and development (IPR&D) is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Transaction costs and restructuring costs associated with a business combination are expensed as incurred.

During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, all adjustments are recorded in the consolidated statements of operations as operating expenses or ~~assumptions.~~income.

The estimated fair value of the CVR, initially measured and recorded on the acquisition date, is considered to be a Level 3 instrument. The contingent consideration liability is recorded at fair value at the end of each reporting period with changes in estimated fair values recorded in research and development expenses in the consolidated ~~financial~~ statements of operations and comprehensive loss. The Company performed a remeasurement of the fair value of the CVR as of December 31, 2020 and recognized a gain of $1.9 million in research and development expense in the statements of operations and comprehensive loss for the year ended December 31, 2020.

Goodwill represents the excess of the purchase price over the fair value of net tangible and identified intangible assets acquired in a business combination. Goodwill is not amortized but is evaluated at least annually for impairment or when a change in facts and circumstances indicate that the fair value of the goodwill may be below the carrying value.

Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company has determined that it operates in a single operating segment and has a single reporting unit.

Prior to performing the ~~accounts~~impairment test, the Company assesses qualitative factors to determine whether the existence of ~~resTORbio, Inc.~~events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit was less than the carrying amount. If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then the Company would perform a quantitative impairment test.

The quantitative impairment test involves comparing the fair value of the reporting unit to the carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets, goodwill is not impaired, and ~~its wholly owned subsidiary, resTORbio Securities Corp. All inter-company transactions~~no further testing is required. If the fair value of the reporting unit is less than the carrying value, the Company measures the amount of impairment loss, if any, as the excess of the carrying value over the fair value of the reporting unit. The Company performed an annual test for goodwill impairment in the fourth quarter of the fiscal year ended December 31, 2020 and ~~balances~~determined that goodwill was 0t impaired.

In connection with the Merger, the Company acquired certain IPR&D assets, which were classified as indefinite-lived intangible assets. Acquired IPR&D represents the fair value assigned to research and development assets that the Company acquires and have not been ~~eliminated~~completed at the acquisition date. The fair value of IPR&D acquired in ~~consolidation.~~a business combination is recorded on the Company’s consolidated balance sheets at the acquisition-date fair value and is determined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the products, and discounting the projected net cash flows to present value. IPR&D is not amortized, but rather is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party. The Company performed an annual review for impairment of IPR&D in the fourth quarter of the year ended December 31, 2020 and recognized an impairment charge of $2.3 million as of December 31, 2020, which was recorded as research and development expenses in the consolidated statement of operations and comprehensive loss.

The Company ~~classifies~~operates and manages its business as one reportable and operating segment, which is the business of research and development of allogeneic immunotherapies for cancer and other diseases. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, and marketable debt securities. The Company’s cash and cash equivalents are held at two financial institutions in the U.S. and one financial institution in Israel and such amounts may, at times, exceed insured limits. The Company invests its cash equivalents and marketable debt securities in money market funds, U.S. government securities, commercial paper, corporate bonds, and asset-backed securities. The Company limits its credit risk associated with cash equivalents and marketable debt securities by placing them with banks and institutions it believes are highly creditworthy and in highly rated investments. The Company has not experienced any losses on its deposits of cash and cash equivalents and marketable debt securities to date.

The Company has 1 customer, Regeneron Pharmaceuticals, Inc. (Regeneron), which represents 100% of the Company’s total revenue during the years ended December 31, 2020, 2019 and 2018 (see Note 10).

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials, and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting.

The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale and, therefore, the Company has not generated any revenue from product sales.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies.

The current COVID-19 (coronavirus) pandemic, which is impacting worldwide economic activity, poses risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. The extent to which the coronavirus impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that will emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. COVID-19 may impact the timing of regulatory approval of the INDs for clinical trials, the enrollment of any clinical trials that are approved, the availability of clinical trial materials and regulatory approval and commercialization of our products. COVID-19 may also impact the Company’s ability to access capital, which could negatively impact short-term and long-term liquidity.

The Company considers all highly liquid investments purchased with maturities of three months or less from the purchase date to be cash equivalents. As of December 31, 2020 and 2019, cash and cash equivalents consist of cash deposited with banks and investments in money market funds with maturities of three months or less from the date of purchase.

Marketable debt securities are investments in marketable debt securities with ~~remaining~~ maturities ~~when purchased of~~ greater than three months at the time of purchase. The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable debt securities as available-for-sale. ~~Marketable~~The Company classifies highly liquid securities with ~~a remaining maturity date greater than one year are classified~~maturities beyond 12 months as ~~non-current. Available-for-sale~~long-term marketable debt securities ~~are maintained by investment managers and consist of U.S. treasury securities and U.S. government agency securities. Available-for-sale~~in the consolidated balance sheet. These securities are carried at fair value ~~with the unrealized~~as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses, ~~included in other comprehensive income (loss)~~if any, are excluded from earnings and are reported as a component of ~~stockholders’ equity until realized. Any premium or discount arising at purchase~~accumulated other comprehensive income (loss). The amortized cost of debt securities is ~~amortized and/or accreted~~adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income ~~and/or expensed over~~on the ~~life of the instrument.~~

If any adjustment to fair value reflects a decline in the value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other-than-temporary” and, if so, marks the investment to market through a change to the Company’s statementconsolidated statements of operations and comprehensive loss. Realized gains and losses, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. The Company did not identify any of its marketable debt securities as other-than-temporarily impaired as of December 31, 2020 and 2019.

The Company ~~maintains a letter of credit for the benefit~~has 1 customer, Regeneron Pharmaceuticals, Inc. (Regeneron), which represents 100% of the ~~landlord in connection with the~~ Company’s ~~office lease. As of December 31, 2019 and 2018, restricted cash (non-current) related to this letter of credit consisted of $245,000 and $84,000, respectively.~~

Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. 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. 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 authoritative accounting guidance describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last is considered unobservable. These levels of inputs are as follows:

~~Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.~~

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3—Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

~~The following table summarizes assets measured at fair value on a recurring basis at December 31, 2019 (in thousands):~~

~~The following table summarizes assets measured at fair value on a recurring basis at December 31, 2018 (in thousands):~~

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

An entity may elect to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in net loss. The Company did not elect to measure any additional financial instruments or other items at fair value.

~~There have been no changes to the valuation methods utilized by the Company~~total revenue during the years ended December 31, 2020, 2019 and ~~2018.~~ 2018 (see Note 10).

The Company ~~evaluates transfers between levels~~is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials, and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting.

Marketable debt securities are investments in marketable debt securities with maturities greater than three months at the ~~end~~time of purchase. The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such designation at each ~~reporting period. There were no transfers~~balance sheet date. The Company has classified and accounted for its marketable debt securities as available-for-sale. The Company classifies highly liquid securities with maturities beyond 12 months as long-term marketable debt securities in the consolidated balance sheet. These securities are carried at fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses, if any, are excluded from earnings and are reported as a component of ~~financial instruments between levels during~~accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the ~~years ended~~consolidated statements of operations and comprehensive loss. Realized gains and losses, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. The Company did not identify any of its marketable debt securities as other-than-temporarily impaired as of December 31, ~~2019~~2020 and ~~2018.~~2019.

Financial instruments, ~~that~~which potentially subject the Company to ~~a concentration~~concentrations of credit risk, consist principally of cash and cash equivalents, and marketable debt securities. The Company’s cash and cash equivalents are held at two financial institutions in the U.S. and one financial institution in Israel and such amounts may, at times, exceed insured limits. The Company invests its cash equivalents and marketable debt securities in money market funds, U.S. government securities, commercial paper, corporate bonds, and asset-backed securities. The Company limits its credit risk associated with cash equivalents and marketable debt securities by placing them with banks and institutions it believes are ~~held by financial institutions~~highly creditworthy and in highly rated investments. The Company has not experienced any losses on its deposits of cash and cash equivalents and marketable debt securities to date.

The Company has 1 customer, Regeneron Pharmaceuticals, Inc. (Regeneron), which represents 100% of the Company’s total revenue during the years ended December 31, 2020, 2019 and 2018 (see Note 10).

The Company is subject to risks and uncertainties common to early-stage companies in the ~~United States. Amounts~~biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on ~~deposit may at times exceed federally insured limits. Management believes~~key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials, and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting.

There can be no assurance that the ~~financial institution~~Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is ~~financially sound,~~uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and ~~accordingly, minimal credit~~substantial competition from other pharmaceutical and biotechnology companies.

The current COVID-19 (coronavirus) pandemic, which is impacting worldwide economic activity, poses risk ~~exists~~that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. The extent to which the coronavirus impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with ~~respect~~confidence, including the duration of the outbreak, new information that will emerge concerning the severity of the coronavirus and the actions to contain the ~~financial institution.~~coronavirus or treat its impact, among others. COVID-19 may impact the timing of regulatory approval of the INDs for clinical trials, the enrollment of any clinical trials that are approved, the availability of clinical trial materials and regulatory approval and commercialization of our products. COVID-19 may also impact the Company’s ability to access capital, which could negatively impact short-term and long-term liquidity.

The Company considers all highly liquid investments purchased with maturities of ~~Manufacturing Risk~~

three months or less from the purchase date to be cash equivalents. As of December 31, 2020 and 2019, cash and cash equivalents consist of cash deposited with banks and investments in money market funds with maturities of three months or less from the date of purchase.

Marketable debt securities are investments in marketable debt securities with maturities greater than three months at the time of purchase. The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable debt securities as available-for-sale. The Company classifies highly liquid securities with maturities beyond 12 months as long-term marketable debt securities in the consolidated balance sheet. These securities are carried at fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses, if any, are excluded from earnings and are reported as a component of accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the consolidated statements of operations and comprehensive loss. Realized gains and losses, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. The Company did not identify any of its marketable debt securities as other-than-temporarily impaired as of December 31, 2020 and 2019.

Restricted cash is comprised of cash that is restricted as to withdrawal or use under the terms of certain contractual agreements. Restricted cash for years ended December 31, 2020 and 2019 consists of collateral for letters of credit issued in connection with the real estate leases (see Note 12).

The carrying amounts of certain financial instruments of the Company, ~~had manufacturing arrangements~~including cash equivalents, restricted cash, accounts payable and accrued and other current liabilities approximate fair value due to their relatively short maturities. The Company’s marketable debt securities, CVR, redeemable convertible preferred stock warrant liability, redeemable convertible preferred stock tranche liability and TRDF Liability are carried at fair value (see Notes 4 and 5).

The Company recorded all shares of redeemable convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs, if applicable. The redeemable convertible preferred stock was recorded outside of permanent equity because while it was not mandatorily redeemable, in certain events considered not solely within the Company’s control,

such as a merger, acquisition or sale of all or substantially all of the Company’s assets (each, a deemed liquidation event), the redeemable convertible preferred stock became redeemable at the option of the holders of at least a majority of the then outstanding shares. The Company has not adjusted the carrying values of the redeemable convertible preferred stock to its liquidation preference because a deemed liquidation event obligating the Company to pay the liquidation preferences to holders of shares of redeemable convertible preferred stock was not probable of occurring. All outstanding shares of redeemable convertible preferred stock converted into common stock upon Effective Time of the Merger.

The Company determined that its obligations to issue additional shares of redeemable convertible preferred stock upon the achievement of certain milestones or at the option of the respective holders of such shares represent freestanding financial instruments. These instruments were initially measured at fair value and were subject to remeasurement with ~~vendors~~changes in fair value recognized in other income (expense), net in the consolidated statements of operations and comprehensive loss until they were exercised, terminated, or settled (see Note 14).

The Company’s redeemable convertible preferred stock warrants required liability classification and accounting as the underlying redeemable convertible preferred stock was considered contingently redeemable and could have obligated the Company to transfer assets to the holders at a future date upon occurrence of a deemed liquidation event. The warrants were initially recorded at fair value upon issuance and were subject to remeasurement to fair value at each balance sheet date, with any changes in fair value recognized in other income (expense), net in the consolidated statements of operations and comprehensive loss. Upon the closing of the Merger, pursuant to the Merger Agreement, all of the outstanding redeemable convertible preferred stock was converted to shares of the Company’s common stock and the redeemable convertible preferred stock warrants converted to warrants for the ~~supply~~purchase of ~~materials for use in preclinical and clinical studies. If~~ the ~~Company were~~shares of the Company’s common stock. Upon the closing of the Merger, the warrant liability was reclassified to experience any disruptions in either party’s 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.additional paid-in capital (see Note 1).

Property and equipment are stated at cost less accumulated ~~depreciation.~~depreciation and amortization. Depreciation is ~~recorded using the~~computed on a straight-line ~~method~~basis over the estimated useful lives of the ~~respective assets. Depreciation begins at~~related assets, generally three years. Leasehold improvements are amortized using the ~~time~~straight-line method over the ~~asset is placed in service.~~shorter of the assets’ estimated useful lives or the remaining term of the lease. Maintenance and repairs ~~that do not improve or extend the lives of the respective assets~~ are ~~expensed~~charged to operations as incurred. ~~Upon sale~~When assets are retired or ~~retirement~~otherwise disposed of, ~~assets,~~ the cost and ~~related~~ accumulated depreciation are removed from the consolidated balance ~~sheets~~sheet and ~~the~~any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive ~~loss.~~

The Company ~~evaluates its~~reviews long-lived assets ~~including property and equipment,~~ for impairment whenever events or changes in circumstances indicate that the carrying ~~value~~amount of ~~these assets~~an asset or asset group may not be recoverable. Recoverability ~~of these assets~~ is measured by comparison of the carrying amount of ~~each~~the asset or asset group to the future ~~undiscounted~~net cash flows which the asset or asset group is expected to ~~generate over its remaining life.~~generate. If ~~the~~such asset or asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of ~~any impairment is measured as~~ the ~~difference between the carrying value and~~asset or asset group exceeds the fair value of the ~~impaired asset.~~asset or asset group. There has been 0 such impairment of long-lived assets during the years ended December 31, 2020 and 2019.

Under ASC 606, Revenue from Contracts with Customers (ASC 606), the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps as prescribed by ASC 606:

A contract with a customer exists when (i) the Company enters into a legally enforceable contract with a customer that defines each party’s rights regarding the products or services to be transferred and identifies the payment terms related to these products or services, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration for products or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company identifies the goods or services promised and determines the performance obligations by assessing whether each promised good or service is distinct. Goods or services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. The Company ~~has recorded no impairment during any~~then recognizes as revenue the amount of the ~~periods presented.~~transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

~~Accrued Research~~All of the Company’s revenues are derived through a license and ~~Development Costs~~collaboration agreement (see Note 10).

For revenue recognition purposes, the Company determines the term of its license or collaboration agreements by evaluating the period during which present and enforceable rights and obligations exist. This determination is impacted by the existence of substantive termination penalties, among other factors.

The Company ~~accrues for estimated costs~~recognizes revenue under the Company’s license or collaboration agreements that are within the scope of ASC 606. These agreements include promises related to licenses to intellectual property and research and development ~~activities conducted by third-party service providers, which include~~services. If the ~~conduct~~license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgement to assess the nature of ~~preclinical studies~~the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, ~~clinical trials,~~if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and ~~contract manufacturing activities.~~at specified future dates, variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products. The Company ~~records~~measures the ~~estimated costs of research and development activities~~transaction price based ~~upon~~on the ~~estimated~~ amount of consideration to which it expects to be entitled in exchange for transferring the promised goods and/or services ~~provided and includes these costs in accrued liabilities~~to the customer. The Company utilizes the “most likely amount” method to estimate the amount of variable consideration to which it will be entitled for the contract. Amounts of variable consideration are included in the ~~consolidated balance sheets and within research and development expenses~~transaction price to the extent that it is probable that a significant reversal in the ~~consolidated statements~~amount of ~~operations~~cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of each arrangement that includes development and ~~comprehensive loss. These costs are a significant component of~~regulatory milestone payments, the Company evaluates whether the associated event is considered most likely to be achieved and estimates the amount to be included in the transaction price.

Payments or reimbursements for the Company’s research and development ~~expenses.~~efforts where such efforts are considered part of or a single performance obligation are recognized over time using a measure of progress that best reflects the Company’s performance in satisfying the obligation.

Upfront payments are recorded as contract liabilities upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs its obligation under these arrangements. Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company ~~accrues for these costs based on factors~~does not assess whether a contract has a significant financing component if the expectation at contract inception is such ~~as estimates~~that the period between payment by the customer and the transfer of the work completed and in accordance with agreements established with its third-party service providers. The Company estimates the amount of work completed by its third-party service providers through discussions with internal personnel and external service providers aspromised goods or services to the ~~progress~~customer will be one year or stage of completion of the services and the agreed-upon fee to be paid for such services. The majority of the Company’s service providers invoice in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. The Company makes significant judgments and estimates in determining the accrued balance in each reporting periodless.

For arrangements that include sales-based royalties, including milestone payments based on the ~~facts~~level of sales, and ~~circumstances known at that time. As actual costs become known,~~the license is deemed to be the predominant item to which the royalties relate, the Company ~~adjusts its accrued estimates. Although~~recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company ~~does~~has not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed, the number of patients enrolled, and the rate of patient enrollment may varyrecognized any royalty revenue resulting from its ~~estimates~~collaboration arrangement.

Research and ~~could result in it reporting amounts that are too high or too low in any particular period. The Company’s accrued~~Development Expenses

Research and development expenses ~~are dependent, in part, upon~~include costs directly attributable to the receipt of timely and accurate reporting from clinical research organizations, or CROs, clinical manufacturing organizations, or CMOs, and other third-party service providers. To date, there have been no material differences between estimated costsconduct of research and development ~~activities accrued by~~programs, including payroll and related expenses, costs for CMOs, costs for CROs, materials, supplies, depreciation on and maintenance of research equipment, consulting costs, and the ~~Company each reporting period~~allocated portions of facility costs, such as rent, utilities,

~~Research~~maintenance, depreciation, information technology costs and ~~Development Costs~~

~~Research and development~~general support services. All costs ~~are expensed as incurred and consist of personnel costs, lab supplies and other costs, as well as fees paid to third parties to conduct~~associated with research and development ~~activities on the Company’s behalf. Amounts incurred in connection with license agreements~~ are also included in research and development expenses. The Company records payments made to outside vendors for services performed or goods being delivered for use in research and development activities as either prepaid expenses or accrued expenses, depending on the timing of when services are performed or goods are delivered.

The Company recognizes equity-based compensation expense for awards of equity instruments to employees and non-employees based on the grant date fair value of those awards in accordance with FASB ASC Topic 718, ~~Stock Compensation~~ (“ASC 718”). ASC 718 requires all equity-based compensation awards to employees and non-employee directors, including grants of restricted stock, restricted stock units, and stock options, to be recognized as expense inexpensed within the consolidated statements of operations and comprehensive loss ~~based on their grant date fair values. The Company estimates~~as incurred.

Costs incurred in obtaining technology licenses are charged to research and development expense as acquired in-process research and development if the ~~fair value of stock options using the Black-Scholes option pricing model. The Company uses the value of its common stock to determine the fair value of restricted stock~~technology licensed has not reached technological feasibility and ~~restricted stock units.~~has no alternative future use.

The Company ~~accounts for restricted stock~~has entered into various agreements with CMOs and ~~common stock options issued~~CROs. The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced are included in accrued and other current liabilities on the consolidated balance sheets. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to ~~non-employees~~CMOs and CROs under ~~FASB~~these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the consolidated balance sheets until the services are rendered. Through December 31, 2020 there had been no material adjustments to the Company’s prior period estimates of accrued research and development expenses.

Effective January 1, 2020, the Company adopted ASC Topic ~~505-50,~~ ~~Equity- Based Payments to Non-Employees~~ (“ASC 505-50”). As such, the value of such awards is periodically remeasured and income or expense is recognized over their vesting terms. Compensation cost related to awards with service-based vesting schedules is recognized842, “Leases” (ASC 842), using the ~~straight-line method.~~modified retrospective approach and utilizing the effective date as its date of initial application, for which prior periods are presented in accordance with the previous guidance in ASC Topic 840, “Leases” (ASC 840).

Prior to January 1, 2020, the Company met the requirements to account for these leases as operating leases under ASC 840. The Company ~~determines the fair value of the restricted stock and common stock granted to non-employees as either the fair value of the consideration received or the fair value of the equity instruments issued.~~

The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (i) the expected share price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) the expected dividend yield. Due to the lack of company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the life science industry. The Company uses the simplified method, which is the average of the final vesting tranche date and the contractual term, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. For options granted to non-employees,

the Company utilizes the contractual term of the arrangement as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

~~The Company expenses the fair value of its equity-based compensation awards granted to employees~~recognized rent expense on a straight-line basis over the ~~associated~~non-cancelable lease term. Where leases contained escalation clauses, rent abatements or concessions, such as rent holidays and landlord or tenant incentives or allowances, the Company applied them in the determination of straight-line rent expense over the lease term. As of December 31, 2019, the Company recorded the difference between the rent paid and the straight-line rent as a deferred rent liability. The leasehold improvements funded by landlord incentives or allowances were recorded as leasehold improvement assets and a corresponding deferred rent liability. The leasehold improvement asset was amortized over the lesser of the term of the lease or life of the asset. The deferred rent liability was amortized on a straight-line basis as a reduction to rent expense over the term of the lease agreement.

Upon adoption of ASC 842, as described below under Recently Adopted Accounting Pronouncements, the Company determined if an arrangement is a lease, or contains a lease, at inception. Leases with a term greater than 12 months are recognized on the balance sheet as Right-of-Use (ROU) assets and current and long-term operating lease liabilities, as applicable. The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew. The Company monitors its plan to renew its leases no less than on a quarterly basis. In addition, the Company’s lease agreements generally do not contain any residual value guarantees or restrictive covenants.

In accordance with ASC 842, the ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate (IBR), which is the estimated rate the Company would be required to pay for a fully collateralized borrowing equal to the total lease payments over the term of the lease, to determine the present value of future minimum lease payments. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of ASC 842, the Company does not combine lease and non-lease components. Variable lease payments are expenses as incurred.

Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

Upon the adoption of ASC 842, the Company recognized an ROU asset of $1.4 million and lease liabilities of $1.8 million as of January 1, 2020, primarily related to office leases based on the present value of future lease payments. As of December 31, 2020, the Company has recorded an ROU asset of $23.1 million and lease liabilities of $21.6 million on its consolidated

balance sheets. There was no impact to retained earnings upon the adoption of ASC 842. As of December 31, 2020, the Company had no finance leases.

Prior to the Merger the fair value of the Company’s common stock was determined by its Board of Directors with input from management and third-party valuation specialists. The Company’s approach to estimate the fair value of the Company’s common stock is consistent with the methods outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Determining the best estimated fair value of the Company’s common stock requires significant judgement and management considers several factors, including the Company’s stage of development, equity market conditions affecting comparable public companies, significant milestones and progress of research and development efforts. Subsequent to the Merger, the fair value of the Company’s common stock is determined based on its closing market price.

The Company accounts for stock-based compensation arrangements with employees and non-employees using a fair value method which requires the recognition of compensation expense for costs related to all stock-based payments including stock options. The fair value method requires the Company to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model to estimate the fair value of options granted that are expensed on a straight-line basis over the requisite service period, which is generally the period in which the related services are received. The Company measures equity-based compensation awards granted to non-employees at fair value as the awards vest and recognizes the resulting value as compensation expense at each financial reportingvesting period. The Company accounts for ~~award~~ forfeitures as they occur. Option valuation models, including the Black-Scholes option-pricing model, require the input of several assumptions. Changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility and the expected life of the award.

The Company ~~uses~~accounts for income taxes using the asset and liability method, which requires the recognition of ~~accounting~~deferred tax assets and liabilities for the expected future tax consequences attributable to differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income ~~taxes~~tax reporting purposes and for operating loss and tax credit carryforwards. Changes in ~~accordance with FASB ASC Topic 740,~~ ~~Income Taxes. Under this method,~~ deferred tax assets and liabilities are ~~determined based on~~recorded in the ~~differences between the financial reporting and the~~provision for income taxes.

The Company’s deferred tax ~~basis of~~ assets and liabilities ~~and~~ are measured using ~~the~~ enacted tax rates ~~and laws that will be~~expected to apply in ~~effect when~~ the years in which these temporary differences are expected to ~~reverse. The Company must then assess the likelihood that the resulting deferred tax assets will~~ be ~~realized.~~recovered or settled. A valuation allowance is ~~provided when~~recorded to reduce deferred tax assets if it is determined that it is more likely than not that ~~some~~all or a portion ~~or all~~ of athe deferred tax asset will not be realized. ~~Due to~~The Company considers many factors when assessing the ~~Company’s lack~~likelihood of ~~earnings history, the net~~future realization of deferred tax assets, ~~have been fully offset by a~~including recent earnings results, expectations of future taxable income, carryforward periods available and other relevant factors. The Company records changes in the required valuation ~~allowance.~~allowance in the period that the determination is made.

The Company ~~recognizes benefits of uncertain~~assesses its income tax positions ifand records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where it is more likely than not that ~~such positions~~a tax benefit will be sustained, ~~upon examination based solely on their technical merits, as~~the Company records the largest amount of tax benefit ~~that~~with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not tothat a tax benefit will be ~~realized upon~~sustained, the ~~ultimate settlement.~~Company does not recognize a tax benefit in the consolidated financial statements. The ~~Company’s policy is to recognize~~Company records interest and penalties related to ~~the underpayment of income taxes~~uncertain tax positions, if applicable, as a component of income tax expense ~~or benefit. To date,~~(benefit).

Comprehensive income (loss) is defined as a change in equity of a business enterprise during a period, resulting from transactions from non-owner sources. The other comprehensive loss disclosed in the ~~Company has no uncertain tax positions~~Company’s consolidated statements of operations and ~~there have been no interest charges or penalties related to unrecognized tax benefits.~~comprehensive loss for the years ended December 31, 2020, 2019 and 2018 consists of changes in unrealized gains and losses on marketable debt securities.

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the ~~weighted average~~weighted-average number ~~of shares~~ of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-

average number of common stock ~~equivalents. Diluted~~and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the redeemable convertible preferred stock, redeemable convertible preferred stock warrants, redeemable convertible preferred stock tranche liability, common stock subject to repurchase and stock options are considered to be potentially dilutive securities. Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities as the redeemable convertible preferred stock and early exercised stock options are considered to be participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in undistributed earnings as if all income (loss) for the period had been distributed. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss is attributed entirely to common stockholders. Since the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for ~~all periods presented, since~~those periods.

From time to time, new accounting pronouncements are issued by the ~~effects~~FASB under its ASC or other standard setting bodies and adopted by the Company as of ~~potentially dilutive securities are antidilutive.~~the specified effective date, unless otherwise discussed below.

In ~~May 2017,~~February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (ASC 842), which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In July 2018, the FASB issued ASU ~~2017-09,~~ ~~Compensation—Stock Compensation~~ ~~(Topic 718): Scope of Modification Accounting (“~~2018-10, Codification Improvements to Topic 842, Leases, which provides clarification to ASU 2017-09”). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The guidance is effective for annual periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company adopted the provisions of ASU 2017-09 on January 1, 2018. No modifications of share-based payment awards have occurred as of December 31, 2019.

2016-02. In ~~November 2016,~~March 2019, the FASB issued ASU ~~2016-18,~~ ~~Statement of Cash Flows~~ (“2019-01, which provides clarification on implementation issues associated with adopting ASU ~~2016-18”), which~~2016-02. These ASUs (collectively the new leasing standard) requires ~~that amounts generally described~~lessees to apply a dual approach, classifying leases as ~~restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown~~either finance or operating leases based on the ~~statement~~principle of ~~cash flows. ASU 2016-18~~whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a ROU and a lease liability for all leases with a term of greater than 12 months regardless of their classification. ASC 842 provides a lessee with an option to not account for leases with a term of 12 month or less as leases in the scope of ASC 842. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The new leasing standard is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows entities to elect an optional transition method where entities may continue to apply the existing lease guidance during the comparative periods and apply the new lease requirements through a cumulative effect adjustment in the period of adoptions rather than in the earliest period presented. In June 2020, the FASB issued ASU 2020-05, which delays the adoption dates for ASU 2016-02 for non-public entities to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application continues to be allowed.

The Company adopted ASC 842 effective January 1, 2020, using the modified retrospective approach to recognize a cumulative-effect adjustment as of the adoption date. Results for reporting periods beginning after January 1, 2020 are presented under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which allowed the Company to carry forward the historical lease classification, retain the initial direct costs for any leases that existed prior to the adoption of the standard and not reassess whether any contracts entered into prior to the adoption are leases. The Company also elected to account for lease and non-lease components in the Company’s lease agreements as a single lease component in determining lease assets and liabilities. In addition, the Company elected not to recognize the ROU assets and liabilities for leases with lease terms of 12 months or less. Upon the adoption of ASC 842, the Company recognized an ROU asset of $1.4 million and lease liabilities of $1.8 million as of January 1, 2020, primarily related to office leases based on the present value of future lease payments. The adoption of the new leasing standard during 2020 resulted in the recognition of ROU asset of $23.1 million and operating lease liability of $21.6 million and derecognition of deferred rent of $0.4 million related to the operating leases on the consolidated balance sheets as of December 31, 2020 with no material impact to the consolidated statements of operations and comprehensive loss, consolidated statements of redeemable convertible preferred stock and stockholder’s deficit or consolidated statements of cash flows. The additional disclosures required by the new standard have been included in Note 12, Commitments and Contingencies.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The new disclosure requirements include disclosure related to changes in unrealized gains or losses

included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of each reporting period and the explicit requirement to disclose the range and weighted-average of significant unobservable inputs used for Level 3 fair value measurements. This ASU removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. For all entities, this ASU is effective for fiscal years beginning after December 15, 2019, ~~with early~~and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU ~~2016-18 on December 31, 2019. Upon~~effective January 1, 2020. The adoption of this ASU ~~2016-18,~~did not have a material effect on the ~~Company applied the retrospective transition method for each period presented~~Company’s consolidated financial statements and included $0 and $84,000 of restricted cash in the beginning-of-period and end-of-period cash, cash equivalents and restricted cash balance, respectively, in the consolidated statement of cash flows for the year ended December 31, 2018.related disclosures.

In ~~February~~June 2016, the FASB issued ASU ~~2016-02,~~ ~~Leases~~ ~~(“ASU 2016-02”)~~No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This ASU replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a ~~lessee to recognize a right-of-use asset and a lease liability for operating leases, initially measured at~~reduction in the ~~present value~~amortized cost basis of the ~~future lease payments,~~securities. These changes will result in earlier recognition of credit losses. For public business entities that meet the ~~balance sheet. ASU 2016-02 also requires~~definition of a ~~lessee~~Securities and Exchange Commission (SEC) filer, excluding entities eligible to ~~recognize a single lease cost, calculated so that~~be smaller reporting companies as defined by the ~~cost of the lease is allocated over the lease term, generally on a straight-line basis. This new guidance~~SEC, adoption is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For SEC filers that are eligible to be smaller reporting companies and for all other entities, this ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

In November 2018, FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which is intended to clarify the circumstances under which certain transactions in collaborative arrangements should be accounted for under the revenue recognition standard. Certain transactions between collaboration arrangement participants should be accounted for as revenue under ASC Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2020. Early adoption is permitted. ~~The adoption of this standard is expected to have an impact on the amount of the Company’s assets and liabilities presented.~~ The Company expects to utilize the new transition method described in ASU No. 2018-11 and use the effective date as the Company’s date of initial application for the new standard. The Company expects to elect the available package of practical expedients in transition which would allow it to not re-assess whether existing or expired arrangements contain a lease, the lease classification of existing or expired leases, or whether previous initial direct costs would qualify for capitalization under the new lease standard. As of December 31, 2019, the Company has not elected to early adopt the guidance and is currently evaluating the impact ~~that~~ the adoption of this ASU ~~2016-02~~ will have on its consolidated financial ~~statements.~~statements and related disclosures.

In ~~June 2016,~~December 2019, the FASB issued ASU No. ~~2016-13, “Financial Instruments - Credit Losses~~2019-12, Income Taxes (Topic ~~326): Measurement of Credit Losses on Financial Instruments”~~.740)—Simplifying the Accounting for Income Taxes, which simplify various aspects related to the accounting for income taxes. This ASU ~~requires that credit losses be reported using an expected losses model rather than~~removes exceptions to the ~~incurred losses model that is currently used, and establishes additional disclosures~~general principles in Topic 740 related to ~~credit risks.~~the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. For ~~available-for-sale debt securities with unrealized losses,~~public companies, this ~~standard now requires allowances to be recorded instead of reducing~~ASU is effective for interim and annual reporting periods beginning after December 15, 2020. For all other entities, the amortized cost of the investment. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. ASU 2016-13 will beamendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (ASU 2020-04). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning an interim period that includes or is subsequent to March 12, 2020, or prospectively from the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company may elect to apply ASU 2020-04 as its contracts referenced in London Interbank Offered Rate (LIBOR) are impacted by reference rate reform. The Company is currently evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements.

On September 15, 2020, Former Adicet completed its merger with ~~early adoption permitted, and requires adoption using a modified retrospective approach, with certain exceptions.~~resTORbio. Based on the ~~composition~~Exchange Ratio of 0.1240, immediately following the Merger, resTORbio stockholders and holders of resTORbio restricted stock units and options to acquire resTORbio common stock owned approximately 25.0% of the outstanding capital stock of the combined company on a fully diluted basis, and Former Adicet stockholders, holders of options or warrants to acquire Former Adicet capital stock owned approximately 75.0% of the outstanding capital stock of the combined company on a fully diluted basis.

The Company has determined that the combined performance obligation is satisfied over time. ASC 606 requires the Company to select a single revenue recognition method for the performance obligation that depicts the Company’s performance in transferring control of the services. Accordingly, the Company utilizes a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. The Company believes this is the best measure of progress because it reflects how the Company transfers its performance obligation to Regeneron. In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of internal full-time equivalent effort and third-party contract costs. Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligations over the research term of five years. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the ~~Company’s consolidated financial statements.~~timing and amount of revenue recognized in future periods.

~~In July 2017, the FASB issued ASU 2017-11,~~ ~~Accounting for Certain Financial Instruments with Down Round Features~~ (“ASU 2017-11”), which updates the guidance related to the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. Under ASU 2017-11, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”)The following table presents changes in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. ASU 2017-11 is effective for public entities for all annual and interim periods beginning after December 15, 2019. Early adoption is permitted. The Company does not expect the impact of ASU 2017-11 to be material to its consolidated financial statements.

~~In June 2018, the FASB issued ASU No. 2018-07,~~ ~~Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting~~ (“ASU 2018-07”), which intends to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. For public entities, ASU 2018-07 is required to be adopted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. For non-public entities and emerging growth companies that choose to take advantage of the extended transition period, ASU 2018-07 is effective for annual periods beginning after December 15, 2019. Early adoption is permitted for all entities but no earlier than the Company’s ~~adoption of ASC 606. The Company does not expect the impact of ASU 2018-07 to be material to its consolidated financial statements.~~

~~As of December 31, 2019, the fair value of marketable securities by type of security was as follows~~contract liabilities (in thousands):

AsContract assets are reflected as accounts receivable—related party on the consolidated balance sheet. The Company achieved the milestone for the selection of a clinical candidate to the second collaboration target under the Regeneron Agreement in June 2020 and was entitled to receive a payment of $10.0 million from Regeneron. The Company received the payment from Regeneron in July 2020.

Contract liabilities related to the Regeneron Agreement of $14.0 million and $21.9 million as of December 31, ~~2018, the fair value of marketable securities by type of security~~2020 and 2019, respectively, which was ~~as following (in thousands):~~

~~The estimated fair value and amortized cost~~comprised of the ~~Company’s available-for-sale securities by contractual maturity are summarized as follows:~~

~~Property~~additional $5.0 million research funding fees in each of 2017 and ~~equipment, net consists~~2018, and $10.0 million for achievement of the ~~following:~~milestone for the selection of a clinical candidate to the second collaboration target in June 2020, less $31.0 million and $13.1 million of license and collaboration revenue recognized from the inception of the Regeneron Agreement as of December 31, 2020 and 2019, respectively, will be recognized as the combined performance obligation is satisfied.

~~Depreciation expense was $0.1 million, $80,000, and $5,000 for~~During the years ended December 31, 2020, 2019 and 2018, the Company recognized $17.9 million, $1.0 million and ~~2017, respectively.~~

~~Accrued liabilities consist~~$8.2 million of license and collaboration revenue, respectively, from amounts included in the contract liability balances at the beginning of the ~~following:~~period. There were no costs to obtain or fulfill the contract that meet the criteria to be capitalized.

As discussed in Note 3, in connection with the Merger, the Company entered into the CVR Agreement with Computershare Inc. and Computershare Trust Company, N.A. as joint rights agent. The CVR holders are entitled to receive net proceeds from the commercialization, if any, received from a third-party commercial partner of RTB101 for a COVID-19 related indication. The total fees and expenses of the Company’s clinical trials for a COVID-19 related indication of RTB101 is limited to $3.0 million under the CVR Agreement. Through October 31, 2020, the Company’s total accumulated spend was $1.1 million of expenses. In November 2020, management terminated the nursing home study due to poor enrollment and as a consequence lowered the probability of finding a partner due to the delay in time to commercialization of RTB101.As a result, the fair value of the CVR liability was decreased by $1.9 million to $1.0 million.

On March 23, 2017, ~~the Company~~resTORbio entered into an exclusive license agreement with Novartis International Pharmaceutical Ltd. ~~(“Novartis”)~~(Novartis). Under the agreement, Novartis granted ~~the Company~~resTORbio an exclusive, field-restricted, worldwide license, to certain intellectual property rights owned or controlled by Novartis, to develop, commercialize and sell one or more therapeutic products comprising RTB101 or RTB101 in combination with everolimus in a fixed dose combination. The exclusive field under the license agreement is for the treatment, prevention and diagnosis of disease and other conditions in all indications in humans and animals.

As consideration for the licensed rights, the Company issued Novartis Institutes for Biomedical Research (“NIBR”) 2,587,992 shares of the Company’s Series A Preferred Stock. The fair value of the Novartis license was $3.2 million based on the fair value of the Series A Preferred Stock which was determined to be $1.22 per share based on an independent third-party valuation and is recorded as research and development expenses in the consolidated statements of operations and comprehensive loss.

The agreement may be terminated by either party upon a material breach of obligation by the other party that is not cured ~~within~~with 60 days after written notice. ~~The Company~~resTORbio may terminate the agreement in its entirety or on a product-by-product or country-by-country basis with or without cause with 60 days’ prior written notice.

Novartis may terminate the portion of the agreement related to everolimus if the Company fails to use commercially reasonable efforts to research, develop and commercialize a product utilizing everolimus for a period of three years. Novartis may terminate the license agreement upon the Company’s bankruptcy, insolvency, dissolution or winding up.

As ~~additional~~ consideration for the license, ~~the Company~~resTORbio is required to pay up to an aggregate of $4.3 million upon the satisfaction of clinical milestones, up to an aggregate of $24 million upon the satisfaction of regulatory milestones for the first indication approved, and up to an aggregate of $18 million upon the satisfaction of regulatory milestones for the second indication approved. In addition, ~~the Company~~resTORbio is required to pay up to an aggregate of $125 million upon the satisfaction of commercial milestones, based on the amount of annual net sales. ~~The Company~~resTORbio is also required to pay tiered royalties ranging from a ~~mid single-digit~~mid-single digit percentage to a ~~low teen-digit~~low-teen digit percentage on annual net sales of products. These royalty obligations last on a product-by-product and country-by-country basis until the latest of (i) the expiration of the last valid claim of a Novartis patent covering a subject product, (ii) the expiration of any regulatory exclusivity for the subject product in a country, or (iii) the 10^th anniversary of the first commercial sale in the country, and are subject to a reduction after the expiration of the last valid claim of a Novartis patent or the introduction of a generic equivalent of a product in a country.

Milestone payments to Novartis are recorded as research and development expenses in the consolidated statements of operations and comprehensive loss once achievement of each associated milestone has occurred or the achievement is considered probable. In May 2017, the Company initiated a Phase 2b clinical trial for a first indication, triggering the first milestone payment under the agreement. Accordingly, the Company paid the related $0.3 million payment in May 2017. In May 2019, the Company initiated a Phase 3 clinical trial for the first indication, triggering another milestone payment of $2.5 million under the agreement. As of December 31, ~~2019,~~2020, none of the remaining clinical milestones, regulatory milestones, sales milestones, or royalties had been reached or were probable of achievement.

On March 6, 2018, the Company and the Silverstein Foundation for Parkinson’s with GBA (the “Silverstein Foundation”) entered into a research funding agreement (the “Silverstein Funding Agreement”). One of the Company’s directors is a co-founder and current trustee of the Silverstein Foundation. Under the terms of the Silverstein Funding Agreement, the Silverstein Foundation will partially fund the preclinical research, development work, and Phase 2 clinical trial expenses (the “Research”) to be conducted and borne by the Company in connection with the development of RTB101, alone or in combination with other products (the “Product”).

Upon execution of the Silverstein Funding Agreement, the Silverstein Foundation paid the Company an upfront sum of $0.5 million (the “Funding Amount”). The Company is entitled to use the Funding Amount solely to conduct the Research and is obligated to repay the Funding Amount in full to the Silverstein Foundation if it successfully conducts a positive Phase 3 clinical trial of the Product for PD. The Company is solely responsible for commencing and conducting the Research and will furnish periodic progress updates to the Silverstein Foundation throughout the term of the Silverstein Funding Agreement. After completing the Research, the Company must provide the Silverstein Foundation with a formal report describing the work performed and the results of the Research.

The Company recognizes proceeds received from the Silverstein Foundation as a reduction to research and development expenses, rather than as revenue, in the consolidated statements of operations and comprehensive loss because the corresponding Silverstein Funding Agreement does not contain specified performance obligations other than to conduct research on a particular program or in a particular field and there are no obligations to deliver specified products or technology.

For funds received under the Silverstein Funding Agreement, the Company recognizes a reduction in research and development expenses. During the year ended December 31, 2018, $0.5 million qualifying expenses have been incurred. Therefore, all amounts received have been recorded as a reduction of the research and development expense.

In May 2019, ~~the Company~~resTORbio was awarded a 5-year grant for up to $1.5 million from the National Institutes of Health (the ~~“NIH”)~~ NIH) to study RTB101 and the regulation of antiviral immunity in the elderly. ~~The Company~~resTORbio is entitled to use the award solely to conduct the ~~research. The Company~~research and is solely responsible for commencing and conducting the research and will furnish periodic progress

updates to the NIH throughout the term of the award. After completing the research, ~~the Company~~resTORbio must provide the NIH with a formal report describing the work performed and the results of the research.

For funds received under the NIH funding agreement, ~~the Company~~resTORbio recognizes a reduction in research and development expenses in an amount equal to the qualifying expenses incurred in each period up to the amount funded by the NIH. Qualifying expenses incurred by ~~the Company~~resTORbio in advance of funding by the NIH are recorded in the consolidated balance sheets as other current assets. ~~As of~~For the year ended December 31, ~~2019, $0.1~~2020, $0.7 million qualifying expenses have been incurred and ~~$41,000~~$0.6 million have been funded by the NIH. ~~Therefore, $61,000~~

On September 30, 2015, the Company entered into a lease agreement (the Menlo Park Lease) to lease approximately 17,352 square feet of office and laboratory space located in Menlo Park, CA. The total base lease payments over the life of the lease are $3.4 million, offset by $0.8 million in tenant improvement allowances. The lease expires on March 31, 2022. The landlord maintains responsibility for maintenance and risk of loss throughout the term of the lease agreement. The lease is ~~included~~recorded as an operating lease.

On September 30, 2019 and October 19, 2020, the Company entered into amendments to the Menlo Park lease agreement for the office and laboratory space in ~~other current assets~~Menlo Park to lease from the same landlord additional nearby buildings with approximately 7,973 and 4,862 square feet of office and laboratory space, respectively. The leases commenced on October 1, 2019 and October 1, 2020, respectively, and both amendment leases expire on March 31, 2022. The total base lease payments over the life of the lease amendments are $0.4 million and $0.3 million, respectively.

On October 28, 2018, the Company entered into a new lease agreement to lease approximately 50,305 square feet of office and laboratory space located in Redwood City, CA. The total base lease payments over the life of the lease are $29.5 million, offset by $3.0 million in tenant improvement allowances. On December 30, 2020, the Company entered an amendment to the Redwood City lease to change the manner in which tenant improvements will be constructed at the premises. The lease has not commenced as the office and laboratory space is not available for use by the Company. The lease expires on February 28, 2030.

In April 2019, the Company amended its multi-year lease agreement to relocate its office space in Boston, MA under an operating lease agreement. The amended lease term is for a period of seven years from the date of relocation on August 1, 2019. The total base lease payments over the remaining lease term are $3.5 million.

The Company recognized rent expense of $0.9 million, $0.7 million and $0.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As a result of adopting ASC 842 in 2020, the Company recorded lease right-of-use, (ROU) asset of $1.4 million and lease liabilities of $1.8 million as of January 1, 2020, primarily related to office leases based on the ~~accompanying~~present value of future lease payments. There was no impact to retained earnings upon the adoption of ASC 842. As of December 31, 2020, the Company had 0 finance lease.

The adoption of ASC 842 resulted in the recognition of an operating lease ROU asset and corresponding liability in 2020 based on the present value of remaining lease payments discounted at the Company’s estimated IBR. The IBR and the remaining lease terms of our facilities and their weighted average IBR and remaining terms are as follows as of December 31, 2020:

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the year ended December 31, 2020:

As of December 31, 2020, operating lease assets were $23.1 million and operating lease liabilities were $21.6 million. The Company has 0 finance leases.The maturities of the operating lease liabilities as of December 31, 2020 were as follows (in thousands):

The future minimum lease payments under all non-cancelable operating lease obligations as of December 31, 2019 under ASC 840 were as follows (in thousands):

In conjunction with the Menlo Park lease agreement, the Company issued a cash-collateralized letter of credit in lieu of security deposit of $0.2 million. In addition, the Company issued a cash-collateralized letter of credit for $4.1 million in 2018 for the new office lease in Redwood City, CA. The Company also maintains a letter of credit of $0.2 million for the benefit of the landlord in connection with the Company’s office lease in Boston, MA. All cash amounts are recorded as restricted cash on the consolidated balance sheet as of December 31, 2020 and 2019.

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never

incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors’ and officers’ liability insurance.

In connection with the Merger, 7 lawsuits were filed against the Company, its directors, Former Adicet, and/or Merger Sub. which were either dismissed or settled for of $0.2 million in the fourth quarter of 2020.

As of December 31, 2019, redeemable convertible preferred stock consists of the following (in thousands, except per share and share amounts):

Following the closing of the Merger, all outstanding shares of the redeemable convertible preferred stock converted into 12,048,671 shares of common stock and the related carrying value was reclassified to common stock and additional paid-in capital. There were 0 shares of redeemable convertible preferred stock outstanding as of December 31, 2020.

The Company determined that the obligations to issue additional shares of Series A redeemable convertible preferred stock at the Milestone Closing and Additional Closing were freestanding instruments that are required to be accounted as a liability initially recorded and subsequently remeasured at fair value until such instruments are exercised or expire. The Milestone Closing liability and Additional Closing liability were initially recorded at $6.2 million and $5.0 million, respectively.

The Milestone Closing liability was settled in November 2018 upon the Milestone Closing and the related TRDF liability was settled in March 2019. In July 2019, as part of the Series B redeemable convertible preferred stock purchase agreement the Additional Closing liability and the related TRDF liability were terminated. The Company recorded $2.0 million gain from the remeasurement of the redeemable convertible preferred stock tranche liability in other income (expense), net in its consolidated statements of operations and comprehensive loss during the years ended December 31, 2019.

The Additional Closing liability was valued using the following assumptions under the option-pricing method:

In connection with Series B redeemable convertible preferred stock financing transactions, the Company ~~had 10,000,000~~issued to its financial advisor warrants to purchase 1,781,387 shares of our Series B redeemable convertible preferred stock ~~authorized~~at an exercise price of at $1.4034 per share. These warrants will terminate at the earlier of seven-year anniversary from the issuance date and ~~none~~a liquidation of the company. Additionally, in connection with the entrance into the Loan Agreement, the Company issued

Pacific Western Bank a warrant to purchase shares of its Series B redeemable convertible preferred stock (see Note 9). These warrants together are referred to as Series B Warrants.

Prior to the Merger, the Company classified the Series B Warrants as a liability on its consolidated balance sheet because the warrants are freestanding financial instruments that may have required the Company to transfer assets upon exercise. The liability associated with each of these warrants was ~~issued~~initially recorded at fair value upon the issuance date of each warrant and ~~outstanding.~~was subsequently remeasured to fair value as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. Upon the closing of the Merger (see Note 3), pursuant to the Merger Agreement, all of the Series B Warrants converted to warrants for the purchase of the shares of the Company’s common stock. The Company assessed the features of the warrants and determined that they qualify for classification as permanent equity upon the closing of the Merger. Accordingly, the Company remeasured the warrants to fair value upon the closing of the Merger, which was $2.9 million on September 15, 2020. Upon the closing of the Merger, the warrant liability was reclassified to additional paid-in capital. The fair value of the warrants to purchase shares of the Company’s common stock was equal to the fair value of the Series B Warrants on the Merger date. Accordingly, no incremental expense was recognized at the Merger date.

~~9. Common Stock~~The Series B Warrants had a fair value of $1.9 million as of December 31, 2019. The change in fair value of $0.8 and $0.2 million during the years ended December 31, 2020 and 2019, respectively, was recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

~~General~~The redeemable convertible preferred stock warrant liability was valued using the following assumptions under the Black-Scholes option-pricing model:

As of December 31, 2020, the Company’s outstanding warrants to purchase shares of common stock, including the New PacWest Warrant, consisted of the following:

As of December 31, 2019, the ~~Company had 150,000,000~~Company’s outstanding warrants to purchase shares of redeemable convertible preferred stock (which converted into warrants to purchase common stock ~~authorized,~~upon close of ~~which 36,444,732 shares were issued and outstanding. The common stock has~~the Merger) consisted of the following ~~characteristics:~~(not adjusted for the Exchange Ratio):

The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders and written actions in lieu of meetings, provided, however, that except as otherwise required by law, holders of common stock as such shall not be entitled to vote on any amendment to the Company’s Certificate of Incorporation, ~~that relates solely~~as amended, authorized the Company to ~~the terms~~issue 150,000,000 shares of ~~one or more outstanding series~~$0.0001 par value common stock as of ~~preferred stock if the holders of such affected series~~December 31, 2020.

Common stockholders are entitled ~~either separately or together with the holders of one or more other such series,~~ to ~~vote thereon pursuant to the Company’s Certificate of Incorporation or pursuant to Delaware General Corporation Law. There shall be no cumulative voting.~~

~~The holders of shares of common stock are entitled to receive~~ dividends if and when declared by the Board of ~~Directors. Cash dividends may not be declared or paid~~Directors subject to the ~~holders~~prior rights of ~~common stock until paid on~~ the preferred ~~stock.~~stockholders. As of December 31, 2020 and 2019, no dividends ~~have~~on common stock had been declared ~~or paid since~~by the ~~Company’s inception.~~Board of Directors.

After payment to the holders of shares of preferred stock of their liquidation preference, the holders of the common stock are entitled to share ratably in the Company’s assets available for distribution to stockholders, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or upon the occurrence of a deemed liquidation event.

~~As of December 31, 2019 and 2018, the~~The Company has ~~reserved~~ the following ~~number of~~ shares of common stock reserved for future ~~issuance upon the exercise of options, vesting of restricted stock units or grant of equity awards:~~issuance:

On December 1, 2020, the Company ~~adopted~~entered into a Sales Agreement (the 2020 Sales Agreement) with Evercore Group L.L.C. and H.C. Wainwright & Co., LLC (collectively, the ~~2017 Stock Incentive Plan (the “2017 Plan”). Under~~Agents), pursuant to which the ~~2017 Plan,~~Company may sell, from time to time, at its option, up to an aggregate of $50.0 million of shares of the Company’s common stock, through the Agents, as its sales agents. No sales of Shares have been ~~reserved for~~made under the ~~issuance~~2020 Sales Agreement. The ATM offering was terminated in February 2021.

Upon completion of the Merger with resTORbio on September 15, 2020, Former Adicet’s 2014 Share Option Plan (the 2014 Plan), Former Adicet’s 2015 Stock Incentive Plan (the 2015 Plan), resTORbio’s 2017 Stock Incentive Plan (the 2017 Plan), resTORbio’s 2018 Stock Incentive Plan (the 2018 Plan) and ~~restricted stock units to employees, directors,~~resTORbio’s 2018 Employee Stock Purchase Plan (the 2018 ESPP, and, ~~consultants under terms~~collectively with the 2014 Plan, the 2015 Plan, the 2017 Plan and ~~provisions established~~the 2018 Plan, the Plans) were assumed by the Company. The Plans are administered by the Board of Directors or, at the discretion of the Board of Directors, by a committee of the Board of Directors. ~~A total~~No further shares will be issued from the 2014 Plan or 2017 Plan. The exercise prices, vesting and other restrictions are determined at the discretion of ~~537,914 shares were reserved for issuance~~the Board of Directors, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of the stock option may not be greater than ten years. Incentive stock options granted to employees and restricted stock awards granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over four years. Non-statutory options granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over three or four years. Shares that are expired, terminated, surrendered or canceled under the ~~2017 Plan. Under the terms~~Plans without having been fully exercised will be available for future awards. In addition, shares of the 2017 Plan, options may be granted at an exercise price not less than fair market value. The terms of options granted under the 2017 Plan may not exceed ten years. The Board shall determine the terms and conditions of a restrictedcommon stock ~~Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any. On October 11, 2017,~~that are tendered to the Company ~~increased~~by a participant to exercise an award are added to the number of shares of common stock available for ~~issuance under~~the grant of awards.

In 2017, resTORbio adopted the 2017 Plan from 537,914 shares to 630,662 shares. On November 29, 2017, the Company increased the number of shares of common stock available for issuance under the 2017 Plan from 630,662 shares to 1,866,009 shares.

Plan. In connection with resTORbio’s initial public offering completed in January 2018, the ~~Company’s IPO, the~~resTORbio Board adopted and ~~the Company’s~~resTORbio’s stockholders approved the 2018 Stock Option and Incentive Plan (“2018 Plan”), which became effective on the date immediately preceding the date on which the Company’s registration statement became effective. The 2018 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, stock appreciation rights, and other stock-based awards. The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2018 Plan. ~~The number of shares of common stock that were initially reserved for issuance under the 2018 Plan was 2,200,260 shares.~~ The 2018 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2019, by 4% of the outstanding number of shares of ~~the Company’s~~resTORbio’s common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board. On January 1, ~~2019, as a result of the foregoing evergreen provision,~~2021, the number of ~~common stock~~shares reserved and available for issuance under the 2018 Plan automatically increased ~~from 2,200,260~~by 787,089 shares of Common Stock equal to ~~3,322,473 shares.~~4% of the number of shares of Common Stock issued and outstanding on December 31, 2020.

Since the date of effectiveness of the 2018 Plan, ~~the Company~~resTORbio has not and the Company will not grant any further awards under the 2017 Plan. However, any shares of common stock subject to awards under the 2017 Plan that expire, terminate, or otherwise are surrendered, canceled, forfeited or repurchased without having been fully exercised or resulting in any common stock being issued will become available for issuance under the 2018 Plan.

As of December 31, ~~2019, no such~~2020, the number of shares ~~became~~of common stock available for ~~issuance~~grant under the 2017 and 2018 ~~Plan.~~

~~Total stock-based compensation expense~~Plan is ~~recognized for stock-based awards granted to employees and non-employees and has been reported in~~1,456,492.As of December 31, 2020, an aggregate of 1,317,892 shares of common stock were issuable upon the ~~Company’s consolidated statements~~exercise of ~~operations and comprehensive loss as follows:~~

~~The following table summarizes~~outstanding stock ~~option activity~~options under the ~~Plan:~~

~~The aggregate intrinsic values of options outstanding, exercisable, vested~~2017 Plan and ~~expected to vest were calculated as the difference between the~~2018 Plans at a weighted average exercise price of $15.62 per share.

At the Effective Time of the Merger, each outstanding and unexercised option to purchase Former Adicet’s common stock, whether vested or unvested, pursuant to the 2015 Plan and a subset of options ~~and~~issued pursuant to the ~~fair value~~2014 Plan were converted into options to purchase a number of shares of the Company’s common stock ~~as of December 31, 2019. The aggregate intrinsic value of options exercised during~~based on the ~~year ended December 31, 2019, was $67,000. The aggregate intrinsic values of options exercised during the year ended December 31, 2018 was $78,000.~~

During the year ended December 31, 2019, the Company granted options to employees and directors to purchase an aggregate of 1,886,687 common shares with a weighted-average grant date fair value of $4.83. During the year ended December 31, 2018, the Company granted options to employees to purchase an aggregate of 926,838 common shares with a weighted-average grant date fair value of $9.23. During the year ended December 31, 2019, the Company granted options to non-employees to purchase an aggregate of 9,840 common shares with a weighted-average grant date fair value of $7.61. During the year ended December 31, 2018, the Company granted options to non-employees to purchase an aggregate of 7,200 common shares with a weighted-average grant date fair value of $12.51.Exchange Ratio.

As of December 31, ~~2019,~~2020, the ~~total unrecognized compensation expense related to unvested employee options was $9.4 million which~~number of shares of common stock available for grant under the ~~Company expects to recognize over an estimated weighted-average period of 2.80 years.~~ 2014 and 2015 Plan is 283,129.As of December 31, ~~2019,~~2020, an aggregate of 1,957,536 shares of common stock were issuable upon the ~~total unrecognized compensation expense related to unvested non-employee~~exercise of outstanding stock options ~~was $26,000 which~~under the 2015 plan at a weighted average exercise price of $7.43 per share and an aggregate of 69,014 shares of common stock were issuable upon the exercise of outstanding stock options under the 2014 Plan at a weighted average exercise price of $1.27 per share.

Since the date of effectiveness of the Merger, the Company ~~expects to recognize over an estimated weighted-average period of 2.14 years.~~has not and will not grant any further awards under the 2014 Plan.

~~The fair value of stock options for employees and non-employees was estimated using a Black-Scholes option pricing model with the following assumptions:~~

On April 17, 2018, the Company granted 2,000 shares of restricted stock to a consultant. The restrictions lapsed in four equal quarterly installments and was fully vested on the first anniversary of such grant. Compensation expenses of such unvested shares was remeasured at fair value until vested at each reporting date.

The Company recognized $4,000, $0.9 million and $0.4 million of stock-based compensation expense related to restricted shares during the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, there was no unrecognized stock-based compensation expense related to unvested restricted stock.

In May 2018, the Company granted 24,960 restricted stock units to an employee with a grant date fair value of $9.03 per share. In December 2019, the Company granted 813,335 restricted stock units to employees with a weighted-average grant date fair value of $1.27.

~~The summary of restricted stock unit activity and related information follows:~~

The Company recognized $74,000 and $35,000, of stock-based compensation expense related to restricted stock units during the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, there was $1.1 million of unrecognized stock-based compensation expense related to unvested restricted stock units which the Company expects to recognize over a remaining weighted-average period of 3.75 years.

The resTORbio Board adopted and ~~the Company’s~~resTORbio’s stockholders approved the 2018 ~~Employee Stock Purchase Plan (“2018 ESPP”),~~ESPP, which became effective on the date immediately preceding the date on which ~~the Company’s~~resTORbio’s registration statement on Form S-1 became effective. ~~The~~As a result of the Merger, the 2018 ESPP enables eligible employees to purchase shares of the Company’s ~~Common Stock~~common stock at a discount. ~~The~~Prior to the Merger, the number of shares of common stock ~~that were initially~~originally reserved for issuance under the 2018 ESPP ~~was 275,030~~were 39,290 shares. The 2018 ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2019 and increasing each January 1 thereafter through January 1, 2028, by the least of (i) 1% of the outstanding number of shares of

the Company’s common stock on the immediately preceding December 31; (ii) ~~543,926~~77,703 shares or (iii) such number of shares as determined by the ESPP administrator. On January 1, 2019, as a result of the foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018 ESPP automatically increased from ~~275,030~~39,290 to ~~555,583~~79,369 shares. NoOn January 1, 2020, as a result of the foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018 ESPP automatically increased from 79,369 to 131,432 shares. NaN shares have been issued under the 2018 ESPP during the ~~years~~year ended December 31, 2020.

As of December 31, 2020, an aggregate of 362,503 shares were issuable upon the exercise of inducement grants of stock options approved by the Company in accordance with Nasdaq listing Rule 5635(c)(4) at a weighted average exercise price of $14.33 per share.

In connection with the Merger, the stock options granted to Dr. Singhal were modified (see Note 3), which resulted in acceleration and recognition of the stock compensation expense of $0.6 million during the quarter ended September 30, 2020. The modification also resulted in incremental stock compensation expense of $0.1 million that will be recognized through May 7, 2021 as the Company determined that Dr. Singhal will be providing substantial services under the ICSA through that date. The ICSA was terminated in February 2021.

On July 14, 2020, the Company’s Board of Directors confirmed that the conditions for Dr. Singhal’s Second Target Milestone Option (as defined in Dr. Singhal’s amendment to his employment agreement with the Company, dated October 15, 2019) had been fulfilled as the Company achieved the milestone for the selection of a clinical candidate to the second collaboration target under the Regeneron Agreement. According to Dr. Singhal’s employment agreement, Dr. Singhal would be granted an option to purchase 22,574 shares of the Company’s common stock related to the achievement of this milestone option. However, as this milestone option was earned during his transition from Chief Executive Officer to an advisory role, only 75% of this option vested. As a result, following the Merger, on September 17, 2020, the Company’s Board of Directors granted this option to Dr. Singhal to purchase 16,931 shares of the Company’s common stock at an exercise price of $16.11 per share, (i) one-third of the shares vesting on the first anniversary of May 6, 2019, (ii) one-third of the shares vesting in 12 equal monthly installments following such first anniversary, and (iii) one-third of the shares vesting in accordance with the terms of his Transition Agreement which consisted of 12 months’ of accelerated vesting of his unvested options to purchase the Company’s common stock upon completion of the Merger. The Company recognized $0.1 million in stock compensation expense associated with this reward during the year ended December 31, 2020.

A summary of stock option activity is set forth below (in thousands, except share and per share data):

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money at December 31, 2020, 2019 and 2018.

~~11. Income Taxes~~The aggregate intrinsic value of stock options exercised during the years ended on December 31, 2020, 2019 and 2018 was $2.5 million, $0.1 million and $0.4 million, respectively.

The total fair value of options that vested during the years ended December 31, 2020, 2019 and 2018 was $2.4 million, $0.9 million and ~~2017, the Company did not record a federal current or deferred income tax expense. For~~$1.8 million, respectively. The options granted during the years ended December 31, 2020, 2019 and 2018 had a weighted-average per share grant-date fair value of $9.96 per share, $2.98 per share and $3.95 per share, respectively. As of December 31, 2020, the ~~Company did record a state current tax expense. The Company’s consolidated loss before income taxes consists solely~~total unrecognized stock-based compensation expense related to unvested stock options was $21.6 million, which is expected to be recognized over the remaining weighted-average vesting period of ~~a domestic loss.~~3.6 years.

~~A reconciliation of income tax expense computed at the statutory federal income tax rate~~Restricted Stock

Activity with respect to ~~income taxes as reflected in the consolidated financial statements is~~restricted stock was as follows:

As of December 31, 2020, there was 0 unrecognized compensation cost related to restricted stock.

The fair value of restricted stock vested during the years ended December 31, 2020, 2019 and 2018 was $0, $0.1 million and $0.6 million, respectively.

Total stock-based compensation expense recognized was as follows (in thousands):

The Company estimated the fair value of stock options using the Black Scholes option-pricing model. The fair value of stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of stock options was estimated using the following weighted-average assumptions:

In addition to the assumptions used in the Black-Scholes option-pricing model, the Company recognizes the actual forfeitures by reducing the employee stock-based compensation expense in the same period the forfeiture occurs.

The Company will continue to use judgment in evaluating the expected volatility, risk-free interest rates, dividend yield and expected term, utilized for stock-based compensation on a prospective basis.

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders, which excludes unvested restricted shares and shares which are legally outstanding, but subject to repurchase by the Company (in thousands, except share and per share data):

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive:

The components of the provision for (benefit from) income taxes are as follows (in thousands):

On ~~December 22, 2017,~~March 27, 2020, the ~~Tax Cuts~~Coronavirus Aid, Relief and ~~Jobs~~Economic Security Act (“~~TCJA”~~CARES Act”) was ~~signed into United States law.~~enacted in response to the COVID-19 Pandemic. The ~~TCJA includes~~tax relief measures under the CARES Act for businesses include a ~~number~~five-year net operating loss carryback, suspension of ~~changes to existing tax law, including, among other things, a permanent reduction in the federal corporate income tax rate from 34% to 21%, effective as of January 1, 2018, as well as~~annual deduction limitation of ~~the deduction for~~80% of taxable income from net operating losses ~~to 80% of annual taxable income and elimination of net operating loss carrybacks,~~generated in ~~each case, for losses arising in taxable years~~a tax year beginning after December 31, 2017, ~~(though any such~~changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property.

The Company recognized income tax benefit of $2.8 million for the year ended December 31, 2020 due to the net operating ~~losses may be carried forward indefinitely).~~loss carryback under the CARES Act which generated a refund of income taxes paid in 2017 and revaluation of IPR&D at year-end. The state tax ~~rate change resulted in (i) a reduction in~~expense for the ~~gross amount of our deferred tax assets as of~~year ended December 31, ~~2017, without an impact on~~2020 is due to state minimum and franchise taxes, and true-up of state tax refund.

For the ~~net amount of our deferred tax assets, which are recorded with a full valuation allowance, and (ii) no income tax expense or~~rate table below the (provision for) benefit ~~being recognized as of the enactment date of the TCJA.~~

~~Deferred~~from income taxes ~~reflect~~differ from the ~~net tax effects of~~amount expected by applying the federal statutory rate to the loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred incomebefore taxes ~~were~~ as follows:

The tax effects of temporary differences and carryforwards of the deferred tax assets ~~is dependent~~are presented below (in thousands):

On September 15, 2020 Adicet Bio and resTORbio completed the Merger upon ~~future earnings, if any,~~which Adicet Bio became the ~~timing and amount~~parent company of ~~which are uncertain. Due~~the consolidated group. The Merger did not create a step up in basis for tax basis of the asset as it was considered a tax-free merger. The above deferred tax table includes deferred related to ~~the lack of earnings history, the net~~resTORbio.

The Company has established a valuation allowance against its deferred tax assets ~~have been fully offset by~~due to the uncertainty surrounding the realization of such assets.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. A

The valuation allowance ~~of $40.2~~increased by $37.9 million during 2020 and ~~$15.4~~$8.1 million ~~has been recorded for the years ended December 31, 2019 and 2018, respectively.~~

As of December 31, ~~2019,~~2020, the Company had net operating loss carryforwards of $211.4 million, $82.2 million and $16.7 million to reduce future taxable income, if any, for federal, state and foreign income tax purposes, ~~of approximately $127.0 million, of which $14.0~~respectively. Of the federal net operating loss carryforwards, $7.6 million will begin to expire in ~~2036~~2037 if not utilized, and ~~$113.0~~$203.8 million can be carried forward indefinitely. ~~As of December 31, 2019, the Company had total~~The state ~~net operating loss~~ carryforwards ~~of approximately $130.8 million which~~ will begin to expire in ~~2036.~~ 2035.

The Company also had California research and development credit carryforwards of less than $0.1 million as of December 31, 2020. The California research credit can be carried forward indefinitely.

Utilization of ~~some of~~ the ~~federal and state~~ net operating loss carryforwards and research and development tax credit carryforwards ~~are~~may be subject to an annual ~~limitations due to the “change of ownership” provisions~~limitation under ~~Sections~~Section 382 ~~and 383~~ of the Internal Revenue Code of 1986, ~~as amended,~~ and ~~similar~~corresponding provisions of state ~~provisions. The annual limitations may result~~law, due to ownership changes that have occurred previously or that could occur in the ~~expiration~~future. These ownership changes may limit the amount of ~~net operating losses and credits before utilization.~~carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not ~~performed an ownership change analysis.~~

As of December 31, 2019 and 2018, the Company had federal research credits of $3.8 million and $0.9 million, respectively, which will begin to expire in 2037 and state research credits of $0.5 million and $0.2 million, respectively, which will begin to expire in 2032. These tax credits are subject to the same limitations discussed above. The Company has not yet conducted a study to assess whether a change of ~~its~~control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit ~~carryforwards. This study~~carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in ~~an increase~~expiration of a portion of the net operating loss carryforwards or ~~decrease to the Company's~~research and development tax credit carryforwards ~~however,~~before utilization. Further, until a study is completed and

any ~~adjustment~~limitation is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company's credits, and if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. As a result, there would be no impact to the statements of operations and comprehensive loss or statements of cash flows if an adjustment were required.

The Company has incurred net operating losses since inception and has no significant unrecognized tax benefits. If in the future the Company recognizes uncertain tax positions, the Company’s effective tax rate will be reduced. Currently, the Company has a full valuation allowance against its net deferred tax asset which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future. Any adjustmentsliability related to uncertain tax positions ~~would result~~is recorded in ~~an adjustment~~the consolidated financial statements. The Company does not expect its unrecognized tax benefit balance to change materially over the next 12 months.

The Company files income tax returns in the U.S. federal jurisdiction, California, Massachusetts, New York and Israel. The tax years 2015 to 2020 remains open to U.S. federal and state examination to the extent of the utilization of net operating loss orand credit carryovers.

As of December 31, 2020, the Company had unrecognized tax ~~credit carry forwards rather than resulting in~~benefits of $0.8 million related to the transfer of certain intellectual property from its Israeli subsidiary.

A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows (in thousands):

The Company recognizes interest expense and penalties related to the above unrecognized tax benefits within income tax expense (benefit). Management determined that no accrual for interest and penalties was required as of December 31, 2020.

The Company maintains a ~~cash outlay.~~defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all full-time U.S. employees. Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax regulations. The Company did 0t make contributions to the 401(k) plan during 2020.

As of December 31, 2020, Regeneron owned 883,568 shares of the Company’s common stock. As of December 31, 2019, Regeneron owned 7,125,552 shares (not adjusted for the ~~Company had no unrecognized tax benefits and no accrued interest or penalties related to uncertain tax positions.~~

~~Income tax returns are filed in the U.S. and Massachusetts. The Company is not currently under examination. Due to net operating losses and research credit carryovers, all~~Exchange Ratio) of the ~~tax years remain open to examination.~~

~~The Company is not~~Company’s redeemable convertible preferred stock. Regeneron became a related party ~~to any litigation and does not have contingency reserves established for any litigation liabilities~~in July 2019 as a result of ~~December 31, 2019.~~

~~In April 2019,~~Series B redeemable convertible preferred stock financing. Upon closing the Company amended its multi-year lease agreement to relocate its office space in Boston, Massachusetts under an operating lease agreement. The amended lease term is for a period of seven years from the date of relocation on August 1, 2019. The initial annual base rentMerger 7,125,552 shares of the ~~relocation premises is $0.6 million per year, increasing 2% annually. In connection with the lease amendment, the Company issued a new cash-collateralized letter of credit for the benefit~~redeemable convertible preferred stock converted into 883,568 shares of the ~~landlord in the amount of $0.2 million. Rent expense was $0.5 million, $0.3 million and $0~~Company’s common stock. For the years ended December 31, 2020, 2019 and 2018, the Company recorded revenue of $17.9 million, $1.0 million and ~~2017,~~$8.2 million, respectively. ~~Obligations to make future minimum lease payments as~~As of December 31, ~~2019, are as follows:~~2020, the Company recorded 0 accounts receivable and has deferred revenue of $14.0 million related to the Regeneron Agreement (See Note 10).

~~The Company is required~~In February 2021, we completed an underwritten public offering of 10,575,513 shares of our common stock, including the exercise in full by the underwriters of their option to ~~pay~~purchase up to an aggregate of $1.5 million upon the satisfaction of clinical milestones, up to an aggregate of $24 million upon the satisfaction of regulatory milestones for the first indication approved, and up to an aggregate of $18 million upon the satisfaction of regulatory milestones for the second indication approved. In addition, the Company is required to pay up to an aggregate of $125 million upon the satisfaction of commercial milestones, based on the amount of annual net sales. The Company is also required to pay tiered royalties ranging from a mid single-digit percentage to a low teen-digit percentage on annual net sales of products. These royalty obligations last on a product-by-product and country-by-country basis until the latest of (i) the expiration of the last valid claim of a Novartis patent covering a subject product, (ii) the expiration of any regulatory exclusivity for the subject product in a country, or (iii) the 10^th anniversary of the first commercial sale in the country, and are subject to a reduction after the expiration of the last valid claim of a Novartis patent or the introduction of a generic equivalent of a product in a country.

~~The Company is obligated to repay the Funding Amount in full to the Silverstein Foundation if it successfully conducts a positive Phase 3 clinical trial of the Product for PD (see Note 7).~~

As described in Note 2, the Company computes basic and diluted earnings (losses) per share using a methodology that gives effect to the impact of outstanding participating securities (the “two-class” method). Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period and excludes any dilutive effects of share-based awards. Diluted net loss per share is computed giving effect to all potential dilutive common shares, including common stock issuable upon exercise of stock options, convertible preferred stock, unvested restricted stock, and unvested restricted stock units. For periods in which the Company has reported net losses, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their affect is anti-dilutive.

The following potentially dilutive securities, prior to the use of the treasury stock method, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive effect (in common stock equivalent shares):

~~Since the Company’s incorporation in July 2016, the Company has engaged in transactions with related parties.~~

~~During the year ended December 31, 2017, the Company issued 1,886,363~~additional 1,344,743 shares of common stock ~~and made payments to PureTech for certain founding services and cost reimbursements. PureTech is~~at a ~~founder~~public offering price of ~~the Company and holds shares of common stock and preferred stock of the Company.~~

$13.00 per share. The ~~Company is a party to an intellectual property license agreement with Novartis. In addition, NIBR is a preferred stock shareholder of the Company (see Note 6).~~

~~Aggregate payments for the above related party transactions totaled $2.5 million, $0, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.~~

The Company is a party to a Funding Agreement with the Silverstein Foundation, an entity in which one of the Company’s directors is a co-founder and current trustee (See Note 7). No funds were receivedaggregate gross proceeds from the ~~Silverstein Foundation during the year ended December 31, 2019~~offering, before deducting underwriting discounts and ~~2017. The Company received $0.5 million during the year ended December 31, 2018.~~

~~15. Reduction in Workforce~~commissions and offering expenses were approximately $137.5 million.

In December 2019, the Company’s Board of Directors approved a restructuring plan to reduce operating costs and better align the Company’s workforce with its business needs following the Company’s November 2019 announcement regarding that top line data from the PROTECTOR 1 Phase 3 study, evaluating the safety and efficacy of RTB101 in preventing clinically symptomatic respiratory illness in adults age 65 and older, did not meet its primary endpoint, and that the Company has stopped the development of RTB101 in this indication.

Under the restructuring plan, the Company reduced its workforce by 8 employees (approximately 22% of total employees). Affected employees are eligible to receive severance payments and outplacement services in connection with the ~~reduction. During~~offering, we also entered into a stock purchase agreement with certain existing investors for $15.0 million of shares of our common stock at a price per share equal to the ~~year ended December 31, 2019,~~public offering price, with an initial closing for certain investors held simultaneously with the Company recorded aggregate restructuring charges of approximately $0.6 million related to severance payments and other employee-related costs. The Company does not expect to incur any additional significant costs associated with this restructuring. During the year ended December 31, 2019, $66,000closing of the ~~estimated restructuring charges were paid. The Company expects the remaining accrued restructuring costs of $0.5 million will be paid in the next 12 months.~~

~~The following table shows the total amount expected to be incurred~~offering and ~~the liability related to the 2019 restructuring as of December 31, 2019:~~

~~The following table summarizes the restructuring charges reported in the consolidated statements of operations and comprehensive loss~~a subsequent closing for ~~the year ended December 31, 2019:~~

The following table contains quarterly financial information for 2019 and 2018. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair statement of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Each person whose individual signature appears below hereby authorizes and appoints Chen Schor and Nick Harvey, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	~~TORC~~ACET	The Nasdaq Global ~~Select~~ Market

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


PART I		15
Item 1.	Business	15
Item 1A.	Risk Factors	2745
Item 1B.	Unresolved Staff Comments	83
Item 2.	Properties	83
Item 3.	Legal Proceedings	83
Item 4.	Mine Safety Disclosures	83

PART II		84
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	84
Item 6.	~~Selected Financial Data~~Reserved	84
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	85
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	95100
Item 8.	Financial Statements and Supplementary Data	95100
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	95100
Item 9A.	Controls and Procedures	95100
Item 9B.	Other Information	96102

PART III		97103
Item 10.	Directors, Executive Officers and Corporate Governance	97103
Item 11.	Executive Compensation	97103
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	97103
Item 13.	Certain Relationships and Related Transactions, and Director Independence	97103
Item 14.	Principal Accountant Fees and Services	97103

PART IV		98104
Item 15.	Exhibits and Financial Statement Schedules	98104
Item 16.	Form 10-K Summary	98104

	No. (%) Staining
Tumor Entity	No. of Cases		Negative	Positive
Hepatocellular carcinoma		44	15 (34)	29 (66)
Squamous cell carcinoma of the lung		50	23 (46)	27 (54)
Liposarcoma		29	14 (48)	15 (52)
Testicular nonseminomatous germ cell tumor		62	30 (48)	32 (52)
Cervical intraepithelial neoplasia (grade 3)		29	17 (59)	12 (41)
Malignant melanoma		48	34 (71)	14 (29)
Adenoma of the adrenal gland		15	11 (73)	4 (27)
Schwannoma		46	34 (74)	12 (26)
Malignant fibrous histiocytoma		29	22 (76)	7 (24)
Adenocarcinoma of the stomach (intestinal subtype)		45	36 (80)	9 (20)
Chromophobe renal cell carcinoma		15	12 (80)	3 (20)
Invasive lobular carcinoma of the breast		46	37 (80)	9 (20)
Medullary carcinoma of the breast		30	25 (83)	5 (17)
Squamous cell carcinoma of the larynx		49	41 (84)	8 (16)
Small cell carcinoma of the lung		49	41 (84)	8 (16)
Invasive transitional cell carcinoma of the urinary bladder		43	36 (84)	7 (16)
Mucinous carcinoma of the breast		26	22 (85)	4 (15)
Squamous cell carcinoma of the cervix		41	35 (85)	6 (15)

	Year Ended December 31,
	2019	2018
Employees:
Fair value of common stock	$1.27 - $10.66	$8.57 - $15.45
Expected term (in years)	5.5 - 6.1	5.8 - 6.2
Expected volatility	92.0% - 104.9%	75.9% - 90.6%
Risk-free interest rate	1.4% - 2.6%	2.4% - 3.1%
Expected dividend yield	0.0%	0.0%
Non-employees:
Fair value of common stock	$1.23 - $10.26	$8.62 - $15.45
Expected term (in years)	7.4 - 10.0	8.4 - 10.0
Expected volatility	89.7% - 99.5%	78.0% - 91.2%
Risk-free interest rate	1.7% - 2.8%	2.7% - 3.1%
Expected dividend yield	0.0%	0.0%

EXPLANATORY NOTE		3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3


~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~
		Page
~~Report of Independent Registered Public Accounting Firm~~		~~F-2~~

~~Financial Statements~~

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, ~~2019~~2020 and ~~2018~~2019		~~F-3~~F-4
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2020, 2019 and 2018~~and~~ ~~2017~~		~~F-4~~F-5
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, ~~2017,~~2020, 2019 and 2018~~and~~ ~~2019~~		~~F-5~~F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 ~~2018,~~ and ~~2017~~2018		~~F-6~~
~~Notes to Consolidated Financial Statements~~		F-7
Notes to Consolidated Financial Statements		F-8

	December 31,						December 31,
	2019			2018			2020			2019
Assets
Current assets:
Cash and cash equivalents	$	33,774		$	7,042		$	84,330		$	10,607
Marketable securities		57,699			100,986
Prepaid expenses		1,707			1,491
Other current assets		73			15
Short-term marketable debt securities								10,284			51,793
Prepaid expenses and other current assets								5,722			1,786
Total current assets		93,253			109,534			100,336			64,186
Property and equipment, net								2,790			2,121
Operating lease right-of-use asset								23,066			—
Goodwill								20,089			—
In-process research and development								1,190			—
Restricted cash		245			84			4,527			4,282
Property and equipment, net		414			321
Long-term marketable debt securities								—			10,588
Other non-current assets								1,837			410
Total assets	$	93,912		$	109,939		$	153,835		$	81,587
Liabilities and stockholders’ equity
Liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	6,716		$	2,989		$	1,552		$	1,052
Accrued liabilities		5,483			2,727
Contract liabilities—related party, current								13,980			10,993
Accrued and other current liabilities								5,732			2,820
Operating lease liability								1,215			—
Total current liabilities		12,199			5,716			22,479			14,865
Other liabilities		15			19
Contract liabilities—related party, net of current portion								—			10,890
Deferred rent, net of current portion								—			234
Operating lease liability, net of current portion								20,424			—
Redeemable convertible preferred stock warrant liability								—			1,881
Contingent consideration liability								980			—
Deferred tax liability								125			—
Total liabilities		12,214			5,735			44,008			27,870
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of December 31, 2019 and 2018; none issued and outstanding as of December 31, 2019 and 2018		—			—
Common stock, $0.0001 par value, 150,000,000 shares authorized as of December 31, 2019 and 2018; 36,444,732 and 28,055,344 shares issued and outstanding as of December 31, 2019 and 2018, respectively; 36,444,732 and 28,054,344 shares vested as of December 31, 2019 and 2018, respectively		4			3
Commitments and contingencies (Note 12)
Redeemable convertible preferred stock, $0.0001 par value; NaN and 99,363,444 shares authorized as of December 31, 2020 and 2019, respectively; NaN and 97,166,921 shares issued and outstanding as of December 31, 2020 and 2019, respectively; liquidation preference $0 and $128,195 as of December 31, 2020 and 2019, respectively								—			114,083
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of December 31, 2020 and 2019, respectively; NaN issued and outstanding as of December 31, 2020 and 2019, respectively								—			—
Common stock, $0.0001 par value; 150,000,000 and 140,200,938 shares authorized as of December 31, 2020 and 2019, respectively; 19,677,249 and 2,155,578 shares issued and outstanding as of December 31, 2020 and 2019, respectively								2			—
Additional paid-in capital		235,777			175,635			216,126			9,258
Accumulated deficit		(154,132	)		(71,393	)		(106,325	)		(69,647	)
Other comprehensive income (loss)		49			(41	)
Total stockholders’ equity		81,698			104,204
Total liabilities and stockholders’ equity	$	93,912		$	109,939
Accumulated other comprehensive income								24			23
Total stockholders’ equity (deficit)								109,827			(60,366	)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)							$	153,835		$	81,587

	Series A Redeemable Convertible Preferred Stock						Series B Redeemable Convertible Preferred Stock						Common Stock				Additional Paid In			Accumulated			Comprehensive			Shareholders' (Deficit)
	Shares			Amount			Shares			Amount			Shares		Amount		Capital			Deficit			Income (Loss)			Equity
Balance at December 31, 2016		—		$	—			—		$	—			2,082,860	$	1	$	—		$	(1	)	$	—		$	—
Issuance of common shares to PureTech		—			—			—			—			1,886,363		—		—			—			—			—
Issuance of Series A redeemable convertible preferred stock, net of tranche liability		15,527,951			41,674			—			—			—		—		1,379			—			—			1,379
Issuance of Series B redeemable convertible preferred stock, net of issuance costs of $54		—			—			4,792,716			39,946			—		—		—			—			—			—
Vesting of restricted stock		—			—			—			—			593,417		—		—			—			—			—
Stock-based compensation expense		—			—			—			—			—		—	470				—			—		470
Net loss		—			—			—			—			—		—		—			(33,778	)		—			(33,778	)
Balance at December 31, 2017		15,527,951		$	41,674			4,792,716		$	39,946			4,562,640	$	1	$	1,849		$	(33,779	)	$	—		$	(31,929	)
Conversion of convertible preferred stock into common stock upon the closing of initial public offering		(15,527,951	)		(41,674	)		(4,792,716	)		(39,946	)		15,870,559		1		81,619			—			—			81,620
Issuance of common stock upon closing of initial public offering, net of issuance costs of $8,379		—			—			—			—			6,516,667		1		89,369			—			—			89,370
Vesting of restricted stock		—			—			—			—			1,097,449		—		865			—			—			865
Exercise of stock options		—			—			—			—			7,029		—		5			—			—			5
Stock-based compensation expense		—			—			—			—			—		—		1,928			—			—			1,928
Net loss		—			—			—			—			—		—		—			(37,614	)		—			(37,614	)
Net unrealized losses on marketable securities		—			—			—			—			—		—		—			—			(41	)		(41	)
Balance at December 31, 2018		—		$	—			—		$	—			28,054,344	$	3	$	175,635		$	(71,393	)	$	(41	)	$	104,204
Issuance of common stock upon closing of public offering, net of issuance costs of $3,683		—			—			—			—			7,687,934		1		49,746			—			—			49,747
Issuance of common stock pursuant to the at-the-market offering, net of issuance costs of $285		—			—			—			—			687,800		—		6,716			—			—			6,716
Vesting of restricted stock		—			—			—			—			1,000		—		1			—			—			1
Vesting of restricted stock units, net of shares withheld for taxes														6,625		—		(20	)		—			—			(20	)
Exercise of stock options		—			—			—			—			7,029		—		6			—			—			6
Stock-based compensation expense		—			—			—			—			—		—		3,693			—			—			3,693
Net loss		—			—			—			—			—		—		—			(82,739	)		—			(82,739	)
Net unrealized gains on marketable securities		—			—			—			—			—		—		—			—			90			90
Balance at December 31, 2019		—		$	—			—		$	—			36,444,732	$	4	$	235,777		$	(154,132	)	$	49		$	81,698

			Active		Observable		Unobservable
	December 31,		Markets		Inputs		Inputs
Description	2019		(Level 1)		(Level 2)		(Level 3)
Money market funds (included in cash and cash equivalents)	$	33,774	$	33,774	$	—	$	—
U.S. treasury securities (included in marketable securities)		57,699		57,699		—		—
Total	$	91,473	$	91,473	$	—	$	—

		~~Useful Life~~ ~~(in years)~~
~~Leasehold improvements~~		~~Lesser of useful life or~~ ~~remaining lease term~~
~~Machinery and equipment~~		~~2-8 years~~
~~Furniture and fixtures~~		~~3-5 years~~
~~Computers~~		~~1-5 years~~
~~Office equipment~~		~~3-5 years~~
~~Software~~		~~3-5 years~~

Number of shares of the combined company owned by resTORbio stockholders (a)		5,207,695
Multiplied by the fair value per share of resTORbio common stock (b)	$	16.59
Acquisition date fair value of resTORbio common shares		86,396
Acceleration of 54,553 shares of restricted stock units upon merger (3)		626
Less: portion of the fair value to be distributed as CVR (c)		(2,880	)
Fair value of shares of the combined company owned by resTORbio stockholders	$	84,142

	As of September 15, 2020 (preliminary)			Measurement Period Adjustments			As of December 31, 2020 (as adjusted)
Net assets acquired:
Cash and cash equivalents	$	63,869		$	—		$	63,869
Prepaid expenses and other current assets		2,505			554			3,059
Property and equipment		318			—			318
IPR&D		3,490			—			3,490
Restricted cash		245			—			245
Accounts payable		(1,316	)		—			(1,316	)
Accrued and other current liabilities		(2,421	)		56			(2,365	)
Other liabilities		(40	)		40			—
Deferred tax liability		(367	)		—			(367	)
Goodwill		20,739			(650	)		20,089
Purchase price	$	87,022		$	—		$	87,022

	For the Year Ended December 31,
	2020			2019
Revenue - related party	$	17,903		$	995
Net loss	$	(35,757	)	$	(113,151	)

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds⁽¹⁾	$	63,817	$	—	$	—	$	63,817
Marketable debt securities
Asset-backed securities		—		7,522		—		7,522
Corporate debt securities		—		1,762		—		1,762
Commercial paper		—		1,000		—		1,000
Marketable debt securities		—		10,284		—		10,284
Total fair value of assets	$	63,817	$	10,284	$	—	$	74,101
Liabilities:
Contingent consideration	$	—	$	—	$	980	$	980
Total fair value of liabilities	$	—	$	—	$	980	$	980

	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds⁽¹⁾	$	7,232	$	—	$	—	$	7,232
Marketable debt securities
Asset-backed securities		—		19,598		—		19,598
Corporate debt securities		—		19,394		—		19,394
Commercial paper		—		17,892		—		17,892
U.S. Government agency bonds		—		5,497		—		5,497
Marketable debt securities		—		62,381		—		62,381
Total fair value of assets	$	7,232	$	62,381	$	—	$	69,613
Liabilities:
Redeemable convertible preferred stock warrant liability	$	—	$	—	$	1,881	$	1,881
Total fair value of liabilities	$	—	$	—	$	1,881	$	1,881

	Redeemable Convertible Preferred Stock Tranche Liability			TRDF Liability			Redeemable Convertible Preferred Stock Warrant Liability			Contingent Consideration Liability
Fair value as of January 1, 2018	$	8,557		$	136		$	—		$	—
Change in the fair value included in other income (expense), net		(4,542	)		6			—			—
Exercise		(902	)		—			—			—
Fair value as of December 31, 2018		3,113			142			—			—
Recognition of preferred stock warrant liabilities		—			—			2,131			—
Settlement		—			(88	)		—			—
Change in the fair value included in other income (expense), net		(1,970	)		(54	)		(250	)		—
Termination		(1,143	)		—			—			—
Fair value as of December 31, 2019		—			—			1,881			—
Recognition of preferred stock warrant liability		—			—			144			—
Recognition of contingent consideration liability		—			—			—			2,880
Change in the fair value included in other income (expense), net		—			—			897			—
Change in the fair value included in research and development expense		—			—			—			(1,900	)
Conversion of convertible preferred stock warrant into common stock warrant in connection with Merger		—			—			(2,922	)		—
Fair value as of December 31, 2020	$	—		$	—		$	—		$	980

	December 31, 2020
	Amortized Cost		Unrealized Losses		Unrealized Gains		Fair Value
Asset-backed securities	$	7,507	$	—	$	15	$	7,522
Corporate debt securities		1,754		—		8		1,762
Commercial paper		999		—		1		1,000
Total	$	10,260	$	—	$	24	$	10,284

	December 31
	2020		2019
Short-term marketable debt securities	$	10,284	$	51,793
Long-term marketable debt securities		—		10,588
Total	$	10,284	$	62,381

			As of December 31,
	Useful life (years)		2020			2019
Laboratory equipment	3		$	4,350		$	3,872
Leasehold improvements	Lesser of useful life or lease term			1,427			1,327
Furniture and fixtures	3			524			68
Construction in progress		—		1,090			300
Computer equipment	3			93			42
Software	3			170			150
				7,654			5,759
Less: Accumulated depreciation and amortization				(4,864	)		(3,638	)
Property and equipment, net			$	2,790		$	2,121

	Amortized		Unrealized		Unrealized		Fair
Description	Cost		Gains		Losses		Value
U.S. government agency treasuries and securities	$	57,650	$	49	$	—	$	57,699
Total	$	57,650	$	49	$	—	$	57,699

Year ended December 31, 2020	Balance at beginning of period		Additions		Additions (Deductions) ⁽¹⁾			Balance at end of period
Contract asset	$	—	$	10,000	$	(10,000	)	$	—
Contract liability	$	21,883	$	10,000	$	(17,903	)	$	13,980

Year ended December 31, 2019	Balance at beginning of period		Additions		Additions (Deductions) ⁽¹⁾			Balance at end of period
Contract liability	$	22,878	$	—	$	(995	)	$	21,883

	December 31, 2019
	Amortized Cost		Fair Value
	(In thousands)
Due in one year or less	$	57,650	$	57,699
Total	$	57,650	$	57,699

	December 31, 2018
	Amortized Cost		Fair Value
	(In thousands)
Due in one year or less	$	101,027	$	100,986
Total	$	101,027	$	100,986

Lease Locations	IBR	Remaining Terms (in years)
Redwood City, CA	6.90%	9.2
Boston, MA	9.30%	5.6
Menlo Park, CA	6.80%	1.3
Weighted Average	7.20%	8.4

	For the Year Ended December 31, 2020
Lease Cost	(in thousands)
Operating lease cost	$	894
Short-term lease cost		56
Variable lease cost		—
Total lease cost	$	950
Other Information
Operating cash flows used for lease payments	$	3,168
Operating cash flows used for lease liabilities	$	859
Operating lease right of use asset obtained in exchange of operating lease liability	$	22,367

2021	$	2,505
2022		2,818
2023		3,429
2024		3,525
2025		3,624
2026 and thereafter		13,747
Total undiscounted lease payments		29,648
Less: imputed interest		8,009
Total operating lease liability		21,639
Less: current portion		1,215
Operating lease liability, net of current maturities	$	20,424

2020	$	2,721
2021		3,518
2022		2,942
2023		2,798
2024		2,882
2025 and thereafter		16,328
Total	$	31,189

	Shares Authorized		Original Issue Price		Shares Issued and Outstanding		Carrying Value		Liquidation Preference		Common Stock Issued Upon Conversion ⁽¹⁾
Series A		37,104,185	$	1.20		37,104,185	$	35,960	$	44,525		4,600,920
Series A-1		629,633		1.20		629,633		447		756		78,074
Series A-2		2,428,688		1.20		2,428,688		1,749		2,914		301,157
Series B		59,200,938		1.40		57,004,415		75,927		80,000		7,068,520
		99,363,444				97,166,921	$	114,083	$	128,195		12,048,671

	September 14, 2020 (Conversion Date)			April 28, 2020 (Issuance Date of PacWest Warrants)			December 31, 2019
Stock price	$	16.59		$	11.61		$	11.32
Expected term (years)	5.86 - 6.62				7.00		6.57 - 6.74
Expected volatility	81.1% - 82.1%				91.17	%	82.1% - 93.3%
Risk-free interest rate	0.35% - 0.42%				0.52	%	1.53% - 1.93%
Dividend yield		0	%		0	%		0	%

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Contractual Term (Years)
Outstanding and exercisable warrants to purchase preferred shares as of December 31, 2019		1,781,387		$	1.4034
Issued		128,260
Impact of converting to warrants for the purchase of common stock and adjusted for the Exchange Ratio and Reverse Stock Split		(1,683,456	)
Outstanding and exercisable warrants to purchase common stock as of December 31, 2020		226,191		$	11.3177		5.66

Issuance Date	Number of Shares of Common Stock Issuable		Exercise Price		Classification	Expiration Date
September 15, 2020		101,610	$	11.3177	Equity	July 25, 2026
September 15, 2020		30,924	$	11.3177	Equity	August 21, 2026
September 15, 2020		77,312	$	11.3177	Equity	September 19, 2026
September 15, 2020		11,044	$	11.3177	Equity	September 26, 2026
September 15, 2020		5,301	$	11.3177	Equity	April 28, 2027
		226,191

	Shares Available for Grant			Number of Options Outstanding			Weighted- Average Exercise Price per Option ($)		Weighted- Average Remaining Contract Term (Years)		Aggregate Intrinsic Value ($)
	(In thousands)
Outstanding, December 31, 2018		1,350,582			1,122,677			11.63		9.22
Shares reserved for issuance		1,122,213
Options granted		(1,896,527	)		1,896,527			6.28
Restricted stock units granted		(813,335	)
Options exercised		—			(7,029	)		0.79
Options forfeited		449,375			(449,375	)		10.77
Outstanding, December 31, 2019		212,308			2,562,800			7.85		8.84		200
Exercisable, December 31, 2019					461,150			11.40		7.06		37
Vested and expected to vest, December 31, 2019					2,562,800			7.85		8.84		200

	~~Number of~~ ~~Restricted~~ ~~Shares~~ ~~Outstanding~~
~~Unvested shares — December 31, 2018~~		~~1,000~~
~~Vested~~		~~(1,000~~	)
~~Unvested shares — December 31, 2019~~		—

	~~Number of~~ ~~Restricted~~ ~~Stock Units~~ ~~Outstanding~~
~~Unvested shares — December 31, 2018~~		~~24,960~~
~~Granted~~		~~813,335~~
~~Vested~~		~~(9,360~~	)
~~Unvested shares — December 31, 2019~~		~~828,935~~