wa

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended SeptemberJune 30, 20222023

OR

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

For the transition period from to

Commission file number: 001-38663

Gritstone bio, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

47-4859534

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

5959 Horton Street, Suite 300

Emeryville, California

94608

(Address of Principal Executive Offices)

(Zip Code)

(510) 871-6100

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

GRTS

The Nasdaq Global Select Market

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.

Large accelerated filer

Accelerated filer

Accelerated

Non-accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

As of November 1, 2022,August 7, 2023, there were 83,366,27793,075,427 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.


Gritstone bio, Inc.

Table of Contents

Page

PART I. FINANCIAL INFORMATION

1

Item 1.

Financial Statements (unaudited)

1

Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20222023 and December 31, 20212022

1

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 20212022

2

Condensed Consolidated Statements of Stockholders’ Equity for the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 20212022

3

Condensed Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20222023 and 20212022

5

Notes to Condensed Consolidated Financial Statements (unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3231

Item 3.

Quantitative and Qualitative Disclosures About Market Risks

4543

Item 4.

Controls and Procedures

4543

PART II. OTHER INFORMATION

4644

Item 1.

Legal Proceedings

4644

Item 1A.

Risk Factors

4644

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

4644

Item 3.

Defaults Upon Senior Securities

4644

Item 4.

Mine Safety Disclosures

4645

Item 5.

Other Information

4645

Item 6.

Exhibits

4746

SIGNATURES

48


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Gritstone bio, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share

amounts and par value)

 

September 30,

 

 

December 31,

 

 

June 30,

 

 

December 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

64,909

 

 

$

93,287

 

 

$

41,414

 

 

$

55,498

 

Marketable securities

 

 

74,900

 

 

 

108,346

 

 

 

73,119

 

 

 

116,389

 

Restricted cash

 

 

6,727

 

 

 

11,285

 

 

 

2,437

 

 

 

3,977

 

Prepaid expenses and other current assets

 

 

6,891

 

 

 

7,672

 

 

 

5,406

 

 

 

7,014

 

Total current assets

 

 

153,427

 

 

 

220,590

 

 

 

122,376

 

 

 

182,878

 

Long-term restricted cash

 

 

5,290

 

 

 

6,005

 

 

 

5,290

 

 

 

5,290

 

Property and equipment, net

 

 

21,672

 

 

 

21,622

 

 

 

20,443

 

 

 

21,335

 

Lease right-of-use assets

 

 

19,321

 

 

 

22,920

 

 

 

71,985

 

 

 

17,481

 

Deposits and other long-term assets

 

 

5,532

 

 

 

2,352

 

 

 

2,529

 

 

 

9,739

 

Long-term marketable securities

 

 

 

 

 

4,617

 

 

 

 

 

 

4,031

 

Total assets

 

$

205,242

 

 

$

278,106

 

 

$

222,623

 

 

$

240,754

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,885

 

 

$

4,230

 

 

$

4,925

 

 

$

8,694

 

Accrued compensation

 

 

6,708

 

 

 

6,925

 

 

 

6,036

 

 

 

8,215

 

Accrued liabilities

 

 

2,670

 

 

 

411

 

 

 

1,452

 

 

 

4,124

 

Accrued research and development expenses

 

 

5,037

 

 

 

3,706

 

 

 

2,042

 

 

 

3,343

 

Lease liabilities, current portion

 

 

6,325

 

 

 

7,483

 

 

 

4,838

 

 

 

5,294

 

Deferred revenue, current portion

 

 

8,688

 

 

 

17,201

 

 

 

2,818

 

 

 

5,131

 

Total current liabilities

 

 

32,313

 

 

 

39,956

 

 

 

22,111

 

 

 

34,801

 

Other liabilities, noncurrent

 

 

49

 

 

 

 

 

 

398

 

 

 

150

 

Lease liabilities, net of current portion

 

 

16,752

 

 

 

18,936

 

 

 

60,824

 

 

 

15,673

 

Deferred revenue, net of current portion

 

 

 

 

 

3,128

 

Debt, noncurrent

 

 

19,281

 

 

 

 

 

 

29,723

 

 

 

19,349

 

Total liabilities

 

 

68,395

 

 

 

62,020

 

 

 

113,056

 

 

 

69,973

 

Commitments and contingencies (Notes 6, 8, and 9)

 

 

 

 

 

 

Commitments and contingencies (Notes 6, 8 and 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized;
no shares issued and outstanding at September 30, 2022 and
December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 300,000,000 shares authorized
at September 30, 2022 and December 31, 2021;
73,134,051 and
69,047,878 shares issued and outstanding at September 30, 2022 and
December 31, 2021, respectively

 

 

20

 

 

 

20

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized;
no shares issued and outstanding at June 30, 2023 and
December 31, 2022

 

 

 

 

 

 

Common stock, $0.0001 par value; 300,000,000 shares authorized
at June 30, 2023 and December 31, 2022;
91,224,210 and
86,894,901 shares issued and outstanding at June 30, 2023 and
December 31, 2022, respectively

 

 

22

 

 

 

22

 

Additional paid-in capital

 

 

626,889

 

 

 

617,523

 

 

 

699,979

 

 

 

691,910

 

Accumulated other comprehensive loss

 

 

(281

)

 

 

(73

)

 

 

(125

)

 

 

(80

)

Accumulated deficit

 

 

(489,781

)

 

 

(401,384

)

 

 

(590,309

)

 

 

(521,071

)

Total stockholders’ equity

 

 

136,847

 

 

 

216,086

 

 

 

109,567

 

 

 

170,781

 

Total liabilities and stockholders’ equity

 

$

205,242

 

 

$

278,106

 

 

$

222,623

 

 

$

240,754

 

See accompanying notes to the unaudited condensed consolidated financial statements.

1


Gritstone bio, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration and license revenues

 

$

436

 

 

$

2,401

 

 

$

7,942

 

 

$

44,937

 

 

$

400

 

 

$

2,761

 

 

$

941

 

 

$

7,506

 

Grant revenues

 

 

2,585

 

 

 

213

 

 

 

7,741

 

 

 

213

 

 

 

1,555

 

 

 

2,710

 

 

 

3,456

 

 

 

5,156

 

Total revenues

 

 

3,021

 

 

 

2,614

 

 

 

15,683

 

 

 

45,150

 

 

 

1,955

 

 

 

5,471

 

 

 

4,397

 

 

 

12,662

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

26,436

 

 

 

24,396

 

 

 

81,983

 

 

 

71,324

 

 

 

30,967

 

 

 

27,347

 

 

 

61,481

 

 

 

55,546

 

General and administrative

 

 

6,462

 

 

 

6,373

 

 

 

22,209

 

 

 

19,251

 

 

 

6,716

 

 

 

7,792

 

 

 

13,461

 

 

 

15,747

 

Total operating expenses

 

 

32,898

 

 

 

30,769

 

 

 

104,192

 

 

 

90,575

 

 

 

37,683

 

 

 

35,139

 

 

 

74,942

 

 

 

71,293

 

Loss from operations

 

 

(29,877

)

 

 

(28,155

)

 

 

(88,509

)

 

 

(45,425

)

 

 

(35,728

)

 

 

(29,668

)

 

 

(70,545

)

 

 

(58,631

)

Interest income

 

 

462

 

 

 

37

 

 

 

663

 

 

 

112

 

 

 

1,479

 

 

 

153

 

 

 

3,157

 

 

 

200

 

Interest expense

 

 

(551

)

 

 

 

 

 

(551

)

 

 

 

 

 

(985

)

 

 

 

 

 

(1,828

)

 

 

 

Other expense

 

 

(22

)

 

 

 

 

 

(22

)

 

 

 

Net loss

 

 

(29,966

)

 

 

(28,118

)

 

 

(88,397

)

 

 

(45,313

)

 

 

(35,256

)

 

 

(29,515

)

 

 

(69,238

)

 

 

(58,431

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

 

129

 

 

 

(7

)

 

 

(208

)

 

 

7

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

(73

)

 

 

(19

)

 

 

(45

)

 

 

(337

)

Comprehensive loss

 

$

(29,837

)

 

$

(28,125

)

 

$

(88,605

)

 

$

(45,306

)

 

$

(35,329

)

 

$

(29,534

)

 

$

(69,283

)

 

$

(58,768

)

Net loss per share, basic and diluted

 

$

(0.35

)

 

$

(0.36

)

 

$

(1.02

)

 

$

(0.59

)

 

$

(0.31

)

 

$

(0.34

)

 

$

(0.60

)

 

$

(0.68

)

Weighted-average number of shares used in
computing net loss per share,
basic and diluted

 

 

86,597,405

 

 

 

77,775,497

 

 

 

86,441,212

 

 

 

76,837,503

 

 

 

114,929,523

 

 

 

86,448,632

 

 

 

114,676,261

 

 

 

86,363,116

 

See accompanying notes to the unaudited condensed consolidated financial statements.

2


Gritstone bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

Three Months Ended SeptemberJune 30, 2023:

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2023

 

 

87,848,417

 

 

$

22

 

 

$

695,961

 

 

$

(52

)

 

$

(555,053

)

 

$

140,878

 

Issuance of common stock upon exercise of
   stock options

 

 

6,000

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Issuance of common stock under the
   ATM equity offering program, net of
   issuance costs of $
21

 

 

246,199

 

 

 

 

 

 

623

 

 

 

 

 

 

 

 

 

623

 

Issuance of common stock for warrant exercises

 

 

2,849,405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under the ESPP

 

 

274,189

 

 

 

 

 

 

450

 

 

 

 

 

 

 

 

 

450

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,940

 

 

 

 

 

 

 

 

 

2,940

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(73

)

 

 

 

 

 

(73

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,256

)

 

 

(35,256

)

Balance at June 30, 2023

 

 

91,224,210

 

 

$

22

 

 

$

699,979

 

 

$

(125

)

 

$

(590,309

)

 

$

109,567

 

Three Months Ended June 30, 2022:

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2022

 

 

72,779,508

 

 

$

20

 

 

$

619,862

 

 

$

(391

)

 

$

(430,300

)

 

$

189,191

 

Issuance of common stock upon exercise of
stock options

 

 

33,325

 

 

 

 

 

 

36

 

 

 

 

 

 

 

 

 

36

 

Issuance of common stock under the ESPP

 

 

193,256

 

 

 

 

 

 

331

 

 

 

 

 

 

 

 

 

331

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,354

 

 

 

 

 

 

 

 

 

3,354

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,515

)

 

 

(29,515

)

Balance at June 30, 2022

 

 

73,006,089

 

 

$

20

 

 

$

623,583

 

 

$

(410

)

 

$

(459,815

)

 

$

163,378

 

 

 

73,006,089

 

 

$

20

 

 

$

623,583

 

 

$

(410

)

 

$

(459,815

)

 

$

163,378

 

Issuance of common stock under the
ATM equity offering program, net of
issuance costs of $
48

 

 

95,000

 

 

 

 

 

 

197

 

 

 

 

 

 

 

 

 

197

 

Issuance of common stock upon exercise of
stock options

 

 

32,962

 

 

 

 

 

 

45

 

 

 

 

 

 

 

 

 

45

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,064

 

 

 

 

 

 

 

 

 

3,064

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

129

 

 

 

 

 

 

129

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,966

)

 

 

(29,966

)

Balance at September 30, 2022

 

 

73,134,051

 

 

$

20

 

 

$

626,889

 

 

$

(281

)

 

$

(489,781

)

 

$

136,847

 

Three Months Ended September 30, 2021:

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2021

 

 

49,433,361

 

 

$

18

 

 

$

522,290

 

 

$

14

 

 

$

(343,497

)

 

$

178,825

 

Issuance of common stock under the
   ATM equity offering program, net of
   issuance costs of $
49

 

 

55,062

 

 

 

 

 

 

602

 

 

 

 

 

 

 

 

 

602

 

Issuance of common stock under private
   investment in public entity (“PIPE”)
   financing, net of issuance costs of
   $
2,269

 

 

5,000,000

 

 

 

1

 

 

 

52,731

 

 

 

 

 

 

 

 

 

52,732

 

Issuance of common stock for warrant
   exercises

 

 

9,555,876

 

 

 

1

 

 

 

39

 

 

 

 

 

 

 

 

 

40

 

Issuance of common stock upon exercise
   of stock options

 

 

207,282

 

 

 

 

 

 

1,062

 

 

 

 

 

 

 

 

 

1,062

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,819

 

 

 

 

 

 

 

 

 

2,819

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,118

)

 

 

(28,118

)

Balance at September 30, 2021

 

 

64,251,581

 

 

$

20

 

 

$

579,543

 

 

$

7

 

 

$

(371,615

)

 

$

207,955

 

Continued on next page.

See accompanying notes to the unaudited condensed consolidated financial statements.

3


Gritstone bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

NineSix Months Ended SeptemberJune 30, 2023:

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

86,894,901

 

 

$

22

 

 

$

691,910

 

 

$

(80

)

 

$

(521,071

)

 

$

170,781

 

Issuance of common stock under the
   ATM equity offering program, net of
   issuance costs of $
79

 

 

854,052

 

 

 

 

 

 

2,525

 

 

 

 

 

 

 

 

 

2,525

 

Issuance of common stock upon
restricted stock units vesting

 

 

345,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments related to shares withheld
for vested restricted stock units

 

 

 

 

 

 

 

 

(742

)

 

 

 

 

 

 

 

 

(742

)

Issuance of common stock upon exercise
   of stock options

 

 

6,000

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Issuance of common stock for warrant exercises

 

 

2,849,405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under the
   ESPP

 

 

274,189

 

 

 

 

 

 

450

 

 

 

 

 

 

 

 

 

450

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,831

 

 

 

 

 

 

 

 

 

5,831

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

(45

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(69,238

)

 

 

(69,238

)

Balance at June 30, 2023

 

 

91,224,210

 

 

$

22

 

 

$

699,979

 

 

$

(125

)

 

$

(590,309

)

 

$

109,567

 

Six Months Ended June 30, 2022:

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

69,047,878

 

 

$

20

 

 

$

617,523

 

 

$

(73

)

 

$

(401,384

)

 

$

216,086

 

 

 

69,047,878

 

 

$

20

 

 

$

617,523

 

 

$

(73

)

 

$

(401,384

)

 

$

216,086

 

Issuance of common stock under the
ATM equity offering program, net of
issuance costs of $
48

 

 

95,000

 

 

 

 

 

 

197

 

 

 

 

 

 

 

 

 

197

 

Issuance of common stock for warrant
exercises

 

 

3,442,567

 

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

34

 

 

 

3,442,567

 

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

34

 

Issuance of common stock upon restricted
stock units vesting

 

 

215,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

215,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments related to shares withheld for
vested restricted stock units

 

 

 

 

 

 

 

 

(890

)

 

 

 

 

 

 

 

 

(890

)

 

 

 

 

 

 

 

 

(890

)

 

 

 

 

 

 

 

 

(890

)

Issuance of common stock upon exercise
of stock options

 

 

140,000

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

145

 

 

 

107,038

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

 

100

 

Issuance of common stock under the ESPP

 

 

193,256

 

 

 

 

 

 

331

 

 

 

 

 

 

 

 

 

331

 

 

 

193,256

 

 

 

 

 

 

331

 

 

 

 

 

 

 

 

 

331

 

Stock-based compensation

 

 

 

 

 

 

 

 

9,549

 

 

 

 

 

 

 

 

 

9,549

 

 

 

 

 

 

 

 

 

6,485

 

 

 

 

 

 

 

 

 

6,485

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(208

)

 

 

 

 

 

(208

)

 

 

 

 

 

 

 

 

 

 

 

(337

)

 

 

 

 

 

(337

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(88,397

)

 

 

(88,397

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(58,431

)

 

 

(58,431

)

Balance at September 30, 2022

 

 

73,134,051

 

 

$

20

 

 

$

626,889

 

 

$

(281

)

 

$

(489,781

)

 

$

136,847

 

Balance at June 30, 2022

 

 

73,006,089

 

 

$

20

 

 

$

623,583

 

 

$

(410

)

 

$

(459,815

)

 

$

163,378

 

Nine Months Ended September 30, 2021:

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

47,552,693

 

 

$

18

 

 

$

493,023

 

 

$

 

 

$

(326,302

)

 

$

166,739

 

Offering costs related to the sale of
   common stock and pre-funded warrants

 

 

 

 

 

 

 

 

(451

)

 

 

 

 

 

 

 

 

(451

)

Issuance of common stock under Sales
   Purchase Agreement, net of issuance
   costs of $
339

 

 

1,169,591

 

 

 

 

 

 

20,830

 

 

 

 

 

 

 

 

 

20,830

 

Issuance of common stock under the
   ATM equity offering program, net of
   issuance costs of $
80

 

 

225,165

 

 

 

 

 

 

2,231

 

 

 

 

 

 

 

 

 

2,231

 

Issuance of common stock under private
   investment in PIPE financing, net of
   issuance costs of $
2,269

 

 

5,000,000

 

 

 

1

 

 

 

52,731

 

 

 

 

 

 

 

 

 

52,732

 

Issuance of common stock for warrant
   exercises

 

 

9,555,876

 

 

 

1

 

 

 

39

 

 

 

 

 

 

 

 

 

40

 

Issuance of common stock upon exercise
   of stock options

 

 

638,692

 

 

 

 

 

 

3,108

 

 

 

 

 

 

 

 

 

3,108

 

Issuance of common stock under the ESPP

 

 

109,564

 

 

 

 

 

 

279

 

 

 

 

 

 

 

 

 

279

 

Stock-based compensation

 

 

 

 

 

 

 

 

7,753

 

 

 

 

 

 

 

 

 

7,753

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,313

)

 

 

(45,313

)

Balance at September 30, 2021

 

 

64,251,581

 

 

$

20

 

 

$

579,543

 

 

$

7

 

 

$

(371,615

)

 

$

207,955

 

See accompanying notes to the unaudited condensed consolidated financial statements.

4


Gritstone bio, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(69,238

)

 

$

(58,431

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

3,706

 

 

 

3,093

 

Net amortization of premiums and discounts on marketable securities

 

 

(1,797

)

 

 

309

 

Amortization of debt discount and issuance costs

 

 

637

 

 

 

 

Stock-based compensation

 

 

5,831

 

 

 

6,485

 

Non-cash operating lease expense

 

 

6,762

 

 

 

4,655

 

Loss on disposition of property and equipment

 

 

21

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,608

 

 

 

(119

)

Deposits and other long-term assets

 

 

3,014

 

 

 

(738

)

Accounts payable

 

 

(1,295

)

 

 

(1,437

)

Accrued compensation

 

 

(2,179

)

 

 

(1,594

)

Accrued and other non-current liabilities

 

 

(2,253

)

 

 

363

 

Accrued research and development expenses

 

 

(1,301

)

 

 

680

 

Lease liability

 

 

(12,256

)

 

 

(4,193

)

Deferred revenue

 

 

(2,313

)

 

 

(8,861

)

Net cash used in operating activities

 

 

(71,053

)

 

 

(59,788

)

Investing activities

 

 

 

 

 

 

Purchase of marketable securities

 

 

(17,814

)

 

 

(28,341

)

Maturities of marketable securities

 

 

66,867

 

 

 

61,719

 

Purchase of property and equipment

 

 

(3,288

)

 

 

(3,265

)

Net cash provided by investing activities

 

 

45,765

 

 

 

30,113

 

Financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock upon exercise of
   stock options, warrants, and other

 

 

5

 

 

 

134

 

Proceeds from issuance of common stock from the ATM
   equity offering program

 

 

2,604

 

 

 

 

Proceeds from long-term debt, net of debt discount and issuance costs

 

 

9,962

 

 

 

 

Proceeds from issuance of common stock under the ESPP

 

 

450

 

 

 

331

 

Payments of financing costs

 

 

(2,496

)

 

 

(69

)

Payments of financing lease

 

 

(119

)

 

 

(113

)

Tax payments related to shares withheld for vested restricted stock units

 

 

(742

)

 

 

(890

)

Net cash provided by (used in) financing activities

 

 

9,664

 

 

 

(607

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(15,624

)

 

 

(30,282

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

64,765

 

 

 

110,577

 

Cash, cash equivalents and restricted cash at end of period

 

$

49,141

 

 

$

80,295

 

Supplemental disclosures of non-cash investing and financing
   information

 

 

 

 

 

 

Property and equipment purchases accrued but not yet paid

 

$

692

 

 

$

1,662

 

Financing costs included in accrued liabilities and
   accounts payable

 

$

16

 

 

$

 

Remeasurement of operating lease right-of-use asset for
   lease modification

 

$

 

 

$

1,406

 

Cash paid for interest on debt

 

$

1,073

 

 

$

 

Assets acquired under leasing obligations

 

$

59,320

 

 

$

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(88,397

)

 

$

(45,313

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

4,769

 

 

 

4,782

 

Net amortization of premiums and discounts on marketable securities

 

 

278

 

 

 

549

 

Amortization of debt discount and issuance costs

 

 

127

 

 

 

 

Stock-based compensation

 

 

9,549

 

 

 

7,753

 

Non-cash operating lease expense

 

 

6,891

 

 

 

5,743

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

781

 

 

 

(3,484

)

Deposits and other long-term assets

 

 

(3,180

)

 

 

(327

)

Accounts payable

 

 

(943

)

 

 

(942

)

Accrued compensation

 

 

(217

)

 

 

(216

)

Accrued and other non-current liabilities

 

 

1,543

 

 

 

106

 

Accrued research and development expenses

 

 

1,331

 

 

 

1,487

 

Lease liability

 

 

(6,463

)

 

 

(5,902

)

Deferred revenue

 

 

(11,641

)

 

 

8,865

 

Net cash used in operating activities

 

 

(85,572

)

 

 

(26,899

)

Investing activities

 

 

 

 

 

 

Purchase of marketable securities

 

 

(64,641

)

 

 

(133,409

)

Maturities of marketable securities

 

 

102,218

 

 

 

59,390

 

Sales of marketable securities

 

 

 

 

 

6,225

 

Purchase of property and equipment

 

 

(4,389

)

 

 

(4,133

)

Net cash provided by (used in) investing activities

 

 

33,188

 

 

 

(71,927

)

Financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock from public offering

 

 

 

 

 

21,170

 

Proceeds from issuance of common stock from PIPE financing

 

 

 

 

 

55,000

 

Proceeds from issuance of common stock upon exercise of
   stock options, warrants, and other

 

 

179

 

 

 

3,148

 

Proceeds from issuance of common stock under the ATM
   equity offering program

 

 

245

 

 

 

2,312

 

Proceeds from issuance of common stock under the ESPP

 

 

331

 

 

 

279

 

Proceeds from long-term debt, net of debt discount and issuance costs

 

 

19,154

 

 

 

 

Payments of financing costs

 

 

(115

)

 

 

(6,026

)

Payments of financing lease

 

 

(171

)

 

 

 

Tax payments related to shares withheld for vested restricted stock units

 

 

(890

)

 

 

 

Net cash provided by financing activities

 

 

18,733

 

 

 

75,883

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(33,651

)

 

 

(22,943

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

110,577

 

 

 

171,048

 

Cash, cash equivalents and restricted cash at end of period

 

$

76,926

 

 

$

148,105

 

Supplemental disclosures of non-cash investing and financing
   information

 

 

 

 

 

 

Property and equipment purchases accrued but not yet paid

 

$

1,174

 

 

$

199

 

Financing costs included in accrued liabilities and accounts payable

 

$

2

 

 

$

2,313

 

Lease liabilities arising from obtaining right-of-use asset from new leases

 

$

553

 

 

$

109

 

Remeasurement of operating lease right-of-use asset for lease modification

 

$

1,406

 

 

$

6,453

 

Cash paid for interest on debt

 

$

208

 

 

$

 

See accompanying notes to the unaudited condensed consolidated financial statements.

5


Gritstone bio, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization

Description of Business

Gritstone bio, Inc. (“Gritstone” or the “Company”“the Company”) is a clinical-stage biotechnologyclinical stage biotechnology company developing next generation vaccinestargeted immunotherapies for solid tumorscancer and viral diseases.infectious disease. The Company was incorporated in the state of Delaware in August 2015, and is headquarteredbased in Emeryville, California with a site inand Cambridge, Massachusetts, andwith a manufacturing facility in Pleasanton, California. The Company operates in one segment.

Liquidity

The Company has incurred operating losses and has an accumulated deficit as a result of ongoing efforts to develop drug product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. The Company had net losses of $30.0 million and $88.4 million for the three and nine months ended September 30, 2022, respectively, and $28.1 million and $45.3 million for the three and nine months ended September 30, 2021, respectively. During the nine months ended September 30, 2022, cash used by operating activities was $85.6 million. During the nine months ended September 30, 2021, cash used by operating activities was $26.9 million. The Company had an accumulated deficit of $489.8 million and $401.4 million as of September 30, 2022 and December 31, 2021, respectively. To date, none of the Company’s product candidates have been approved for sale and therefore the Company has not generated any revenue from sales of commercial products. Management expects operating losses to continue for the foreseeable future. The Company has funded its operations to date primarily through private placements of its convertible preferred stock, the sale of common stock in public offerings and under its “at-the-market”“at the market” offering programs, the private placement of common stock and pre-funded warrants, and through proceeds received from its collaboration arrangements. The Company had net losses of $35.3 million and $69.2 million for the three and six months ended June 30, 2023, respectively, and $29.5 million and 58.4 million for the three and six months ended June 30, 2022, respectively. Cash used by operating activities was $71.1 million and $59.8 million during the six months ended June 30, 2023 and 2022, respectively. The Company had an accumulated deficit of $590.3 million and $521.1 million as of June 30, 2023 and December 31, 2022, respectively. As of SeptemberJune 30, 2022,2023, the Company had cash, cash equivalents and marketable securities of $139.8114.5 million, which the Company believes will bemillion. The Company’s cash, cash equivalents and marketable securities are not sufficient to fund itsthe Company’s planned operations for a period of 12 months from the date the financial statements are issued. To fund the Company's planned operations, the Company will need to raise additional capital. The Company intends to raise additional capital through private and public equity offerings, including our “at-the-market” offering programs, debt financings, and potential future collaboration, license and development agreements. However, there can be no assurance that the Company will be successful in acquiring additional funding at least twelve months followinglevels sufficient to fund its operations or on terms acceptable to the filingCompany. If the Company is unsuccessful in its efforts to raise additional capital or if sufficient funds on acceptable terms are not available when needed, the Company could be required to significantly reduce operating expenses and delay, reduce the scope of or eliminate one or more of its development programs or its future commercialization efforts, out-license intellectual property rights to its product candidates and sell unsecured assets, or a combination of the above, any of which may have a material adverse effect on the Company’s business, results of operations, financial condition and/or its ability to fund its scheduled obligations on a timely basis or at all. Failure to manage discretionary spending or raise additional capital, as needed, may adversely impact the Company’s ability to achieve its intended business objectives. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this report.the issuance of these condensed consolidated financial statements. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited and are comprised of the consolidation of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. The Company has no unconsolidated subsidiaries or investments accounted for under the equity method.

6


The accompanying interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting.

The interim condensed consolidated financial statements are unaudited and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation for interim reporting. The results of operations for any interim period are not necessarily indicative of results of operations for any future period.

Certain information and footnote disclosures typically included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2021,2022, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 10, 2022, as amended by Amendment No 1. to the Company’s Annual Report on Form 10-K/A, as filed with the SEC on May 3, 20229, 2023.

6


Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Fair Value of Financial Instruments

U.S. GAAP establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

Fair value is established as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, an established three-tier fair value hierarchy distinguishes between the following:

Level 1 inputs are quoted prices in active markets that are accessible at the market date for identical assets or liabilities.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the assets or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

To the extent that the 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 instrument.

The carrying amounts reflected on the condensed consolidated balance sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued compensation and accrued liabilities approximate their fair values due to their short-term nature.

Debt Issuance Costs and Debt Discounts

Debt issuance costs include legal fees, accounting fees and other direct costs incurred in connection with the execution of the Company’s debt financing. Debt discounts represent costs paid to the lenders. Debt issuance costs

7


and debt discounts are deducted from the carrying amount of the debt liability and are amortized to interest expense over the term of the related debt using the effective interest method.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and marketable securities. Cash, cash equivalents and marketable securities are invested through banks and other financial institutions in the United States. Such deposits may be in excess of federally insured limits. The Company maintains cash equivalents and marketable securities with various high-credit-quality and capitalized financial institutions. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds.

The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the condensed consolidated balance sheets. As of SeptemberJune 30, 2022,2023, the Company has no off-balance sheet concentrations of credit risk.

7


Other Risks and Uncertainties

The Company is subject to a number of risks similar to those of other clinical-stage biotechnology companies, including dependence on key individuals; the need to develop commercially viable therapeutics; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of its products. The Company currently depends on third-party suppliers for key materials and services used in its research and development manufacturing process and is subject to certain risks related to the loss of these third-party suppliers or their inability to supply the Company with adequate materials and services. Further, the Company is subject to broad market risks and uncertainties resulting from recent events, such as the COVID-19 pandemic, the Russian invasion of Ukraine, inflation, rising interest rates and recession risks, as well as supply chain and labor shortages.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents, which consist primarily of highly liquid investments with original maturities of three (3) months or less when purchased, are stated at fair value. These assets include investments in money market funds that invest in U.S. Treasury obligations and certificates of deposit, which are stated at fair value.

The Company has issued letters of credit under certain lease agreements that have been collateralized by cash deposits for an equal amount and are recorded within short-term restricted cash and deposits and other long-term assets on the condensed consolidated balance sheets based on the term of the underlying lease. Additionally, the Company’s restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) Funding Agreement, dated as of August 14, 2021 (the “CEPI Funding Agreement”) and the Gates Foundation Grant Agreement (see Note 9). The Company will utilize the CEPI and Gates Foundation funds as it incurs expenses for services performed under the agreements.

The following table provides a reconciliation of cash, cash equivalents and short-term and long-term restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (in thousands):

 

September 30,

 

 

December 31,

 

 

June 30,

 

 

December 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Cash and cash equivalents

 

$

64,909

 

 

$

93,287

 

 

$

41,414

 

 

$

55,498

 

Restricted cash

 

 

6,727

 

 

 

11,285

 

 

 

2,437

 

 

 

3,977

 

Long-term restricted cash

 

 

5,290

 

 

 

6,005

 

 

 

5,290

 

 

 

5,290

 

Total cash, cash equivalents and restricted cash

 

$

76,926

 

 

$

110,577

 

 

$

49,141

 

 

$

64,765

 

8


Leases

The Company determines whether the arrangement is or contains a lease at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease. The majority of the Company’s leases are classified as operating leases. Leases with a term greater than one year are included in operating lease ROU Assets, lease liabilities, current portion, and lease liabilities, net of current portion in the Company’s condensed consolidated balance sheets as of SeptemberJune 30, 20222023 and December 31, 2021.2022. The Company has elected not to recognize on the condensed consolidated balance sheets leases with terms of one year or less. Lease liabilities and their corresponding ROU Assets are recorded based on the present value of lease payments over the expected lease term. In determining the net present value of lease payments, the interest rate implicit in lease contracts is typically not readily determinable. As such, the Company estimates the appropriate incremental borrowing rate, which is the rate that would be incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the ROU Assets may be required for items such as initial direct costs paid or incentives received and impairment charges if we determinethe Company determines the ROU Asset is impaired.

The Company considers a lease term to be the non-cancelable period that it has the right to use the underlying asset, including any periods where it is reasonably assured the Company will exercise the option to extend the contract. Periods covered by an option to extend are included in the lease term if the lessor controls the exercise of that option.

The Company recognizes lease expense on a straight-line basis over the expected lease term.

The Company has elected not to separate lease and non-lease components for its leased assets and accounts for all lease and non-lease components of its agreements as a single lease component. The lease components resulting

8


in aan ROU Asset have been recorded on the condensed consolidated balance sheets and amortized as lease expense on a straight-line basis over the lease term.

Debt Issuance Costs and Debt Discounts

Debt issuance costs include legal fees, accounting fees, and other direct costs incurred in connection with the execution of the Company’s debt financing. Debt discounts represent costs paid to the lenders. Debt issuance costs and debt discounts are deducted from the carrying amount of the debt liability and are amortized to interest expense over the term of the related debt using the effective interest method.

Revenue Recognition

The Company performs research and development under collaboration, license, grant and clinical development agreements. The Company’s revenue primarily consists of collaboration agreements and grant agreements. At contract inception, the Company analyzes a revenue arrangement to determine the appropriate accounting under U.S. GAAP. Currently, the Company’s revenue arrangements represent customer contracts within the scope of ASC Topic 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) or are subject to the contribution guidance in ASC Topic 958-605, Not-for-Profit Entities – Revenue Recognition (“ASC 958-605”), which applies to business entities that receive contributions within the scope of ASC 958-605.

For collaboration agreements, the Company analyzes such arrangements to assess whether such arrangementsthey involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements that are considered to be in the scope of the collaboration guidance and that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of the revenue with contracts with customers guidance. Elements of collaboration arrangements that are reflective of a vendor-customer relationship are accounted for pursuant to the revenue from contracts with customers guidance. The terms of the licensing and collaboration agreements entered into typically include payment of one or more of the following: non-refundable, up-front fees; development, regulatory, and commercial milestone payments; payments for manufacturing supply services; and royalties on net sales of licensed products. Each of these payments results in license, collaboration and other revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. The core principle of the accounting for revenue from contracts with customers guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based

9


on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve (12) months, this will be classified in current liabilities. Amounts recognized as revenue prior to receipt are recorded as contract assets in the Company’s condensed consolidated balance sheets. If the Company expects to have an unconditional right to receive consideration in the next twelve (12) months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

At contract inception, the Company assesses the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or

9


because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.

The Company considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations, based on the relative standalone selling prices. The relative selling price for each performance obligation is estimated using objective evidence if it is available. If objective evidence is not available, the Company uses its best estimate of the selling price for the performance obligation.

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service is considered to be as the services are received and used. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation, using an appropriate input or output method based on the nature of the good or service promised to the customer.

After contract inception, the transaction price is reassessed at every period end and updated for changes, such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling prices of identified performance obligations (which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success) and estimating the progress towards satisfaction of performance obligations.

For grant funding agreements, grant revenue is recognized during the period that the research and development services occur, as qualifying expenses are incurred. The Company concluded that payments received under these grants represent nonreciprocal contributions, as described in ASC Topic 958, Not-for-Profit Entities, and that the grants are not within the scope of ASC 606 as the organization providing the grant does not meet the definition of a customer. Grant revenue relates primarily to the CEPI and Gates GrantFunding Agreements (see Note 9).

Income Taxes

On March 18, 2020,The Company did not record income tax expense for the Families First Coronavirus Responsethree and six months ended June 30, 2023 and 2022, respectively, as the Company expected to be in a cumulative taxable loss position in 2023 and 2022, and the net deferred tax assets are fully offset by a valuation allowance as it is not more likely than not that the benefit will be realized. As of June 30, 2023, the Company remains in a cumulative book loss position and does not have sufficient positive evidence to realize its net deferred tax assets. As such, the Company continues to maintain a full valuation allowance against its net deferred tax assets.

10


Effective January 1, 2022, a provision of the Tax Cuts and Jobs Act (the “FFCR Act”), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) were each enacted in response(TCJA) took effect creating a significant change to the COVID-19 pandemic. The FFCR Acttreatment of research and the CARES Act contain numerous income tax provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

On June 29, 2020, Assembly Bill 85 (“A.B. 85”) was signed into California law. A.B. 85 provides for a three-year suspensionexperimental expenditures under Section 174 of the useInternal Revenue Code (Sec. 174 expenses). Historically, businesses have had the option of net operating losses for mediumdeducting Sec. 174 expenses in the year incurred or capitalizing and large businessesamortizing the costs over five years. The new TCJA provision, however, eliminates this option and a three-year cap onwill require Sec. 174 expenses associated with research conducted in the useUnited States to be capitalized and amortized over a five-year period. For expenses associated with research outside of business incentive tax credits to offset no more than $5.0 million of tax per year. A.B. 85 suspends the use of net operating losses for taxable years 2020 and 2021 for certain taxpayers with taxable income of $1.0 million or more. The carryover period for any net operating losses that are suspended under this provisionUnited States, Sec. 174 expenses will be extended. A.B. 85 also requires that business incentive tax credits, including carryovers, may not reduce the applicable tax by more than $5.0 million for taxable years 2020capitalized and 2021.

The FFCR Act, CARES Act and A.B. 85amortized over a 15-year period. This provision did not have a material impact onto the Company’sCompany's condensed consolidated financial statements as of September 30, 2022; however, the Company continues to examine the impacts the FFCR Act, CARES Act and A.B. 85 may have on its business, results of operations, financial condition, liquidity and related disclosures.statements.

10


Recently Adopted Accounting Pronouncements

In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements (“ASU 2020-10”). The standard contains improvements to the FASB Accounting Standards Codification (the “Codification”) by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the Codification. The standard also improves various topics in the Codification so that entities can apply guidance more consistently on codifications that are varied in nature where the original guidance may have been unclear. The amendments in ASU 2020-10 are effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. We adopted ASU 2020-10 on January 1, 2022 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (“ASU 2020-06”). The standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the standard modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in ASU 2020-06 are effective for the Company as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning after December 15, 2020. The Company does not expect the adoption of ASU 2020-06 to have a material impact on its condensed consolidated financial statements and related disclosures.

3. Cash Equivalents and Marketable Securities

The amortized costs, unrealized gains and losses and fair values of cash equivalents and marketable securities were as follows (in thousands):

 

September 30, 2022

 

 

June 30, 2023

 

Description

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

39,915

 

 

$

 

 

$

 

 

$

39,915

 

 

$

31,922

 

 

$

 

 

$

 

 

$

31,922

 

Commercial paper

 

 

1,990

 

 

 

 

 

 

 

 

 

1,990

 

Total cash equivalents

 

 

41,905

 

 

 

 

 

 

 

 

 

41,905

 

 

 

31,922

 

 

 

 

 

 

 

 

 

31,922

 

Short-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

3,750

 

 

 

 

 

 

(14

)

 

 

3,736

 

 

 

948

 

 

 

 

 

 

 

 

 

948

 

Commercial paper

 

 

22,333

 

 

 

 

 

 

(31

)

 

 

22,302

 

 

 

13,494

 

 

 

1

 

 

 

(24

)

 

 

13,471

 

Corporate debt securities

 

 

11,239

 

 

 

 

 

 

(74

)

 

 

11,165

 

 

 

13,233

 

 

 

 

 

 

(27

)

 

 

13,206

 

U.S. treasuries

 

 

32,659

 

 

 

 

 

 

(153

)

 

 

32,506

 

U.S. government treasuries

 

 

17,923

 

 

 

 

 

 

(32

)

 

 

17,891

 

U.S. government debt securities

 

 

5,200

 

 

 

 

 

 

(9

)

 

 

5,191

 

 

 

27,157

 

 

 

1

 

 

 

(43

)

 

 

27,115

 

Asset backed securities

 

 

489

 

 

 

 

 

 

(1

)

 

 

488

 

Total short-term marketable securities

 

 

75,181

 

 

 

 

 

 

(281

)

 

 

74,900

 

 

 

73,244

 

 

 

2

 

 

 

(127

)

 

 

73,119

 

Total

 

$

117,086

 

 

$

 

 

$

(281

)

 

$

116,805

 

 

$

105,166

 

 

$

2

 

 

$

(127

)

 

$

105,041

 

11


 

December 31, 2021

 

 

December 31, 2022

 

Description

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

79,281

 

 

$

 

 

$

 

 

$

79,281

 

 

$

38,191

 

 

$

 

 

$

 

 

$

38,191

 

Commercial paper

 

 

1,000

 

 

 

 

 

 

 

 

 

1,000

 

Corporate debt securities

 

 

1,031

 

 

 

 

 

 

 

 

 

1,031

 

Total cash equivalents

 

 

81,312

 

 

 

 

 

 

 

 

 

81,312

 

 

 

38,191

 

 

 

 

 

 

 

 

 

38,191

 

Short-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

5,600

 

 

 

 

 

 

(6

)

 

 

5,594

 

 

 

948

 

 

 

1

 

 

 

 

 

 

949

 

Commercial paper

 

 

44,990

 

 

 

 

 

 

(16

)

 

 

44,974

 

 

 

33,318

 

 

 

23

 

 

 

(13

)

 

 

33,328

 

Corporate debt securities

 

 

26,976

 

 

 

 

 

 

(23

)

 

 

26,953

 

 

 

21,887

 

 

 

6

 

 

 

(40

)

 

 

21,853

 

U.S. treasuries

 

 

12,277

 

 

 

 

 

 

(8

)

 

 

12,269

 

U.S. government treasuries

 

 

35,608

 

 

 

3

 

 

 

(71

)

 

 

35,540

 

U.S. government debt securities

 

 

2,000

 

 

 

 

 

 

(1

)

 

 

1,999

 

 

 

24,703

 

 

 

22

 

 

 

(6

)

 

 

24,719

 

Asset backed securities

 

 

16,565

 

 

 

 

 

 

(8

)

 

 

16,557

 

Total short-term marketable securities

 

 

108,408

 

 

 

 

 

 

(62

)

 

 

108,346

 

 

 

116,464

 

 

 

55

 

 

 

(130

)

 

 

116,389

 

Long-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

1,637

 

 

 

 

 

 

(6

)

 

 

1,631

 

 

 

933

 

 

 

 

 

 

(1

)

 

 

932

 

U.S. treasuries

 

 

2,991

 

 

 

 

 

 

(5

)

 

 

2,986

 

U.S. government treasuries

 

 

3,103

 

 

 

 

 

 

(4

)

 

 

3,099

 

Total long-term marketable securities

 

 

4,628

 

 

 

 

 

 

(11

)

 

 

4,617

 

 

 

4,036

 

 

 

 

 

 

(5

)

 

 

4,031

 

Total

 

$

194,348

 

 

$

 

 

$

(73

)

 

$

194,275

 

 

$

158,691

 

 

$

55

 

 

$

(135

)

 

$

158,611

 

All marketable securities held as of SeptemberJune 30, 20222023 had contractual maturities of less than one year. There have been no material realized gains or losses on marketable securities for the periods presented. As of SeptemberJune 30, 2022,2023, the Company did not hold any individual securities in an unrealized loss position for 12 months or greater. The Company has the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery. No significant facts or circumstances have arisen to indicate that there has been any significant deterioration in the creditworthiness of the issuers of the securities held by us. The Company considered the current and expected future economic and market conditions and determined that the estimate of credit losses was not significantly impacted. Thus, there has been no change in estimate of expected credit loss existed as of or forduring the three and ninesix months ended SeptemberJune 30, 2023 and 2022 or the three and nine months ended Septemberno allowance for credit loss was recorded at June 30, 2021.2023 and December 31, 2022. The Company will continue to assess the current and expected future economic and market conditions as further development arises.

See Note 4 for further information regarding the fair value of the Company’s financial instruments.

4. Fair Value Measurements

The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows (in thousands):

 

September 30, 2022

 

 

June 30, 2023

 

Description

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

39,915

 

 

$

39,915

 

 

$

 

 

$

 

 

$

31,922

 

 

$

31,922

 

 

$

 

 

$

 

Commercial paper

 

 

1,990

 

 

 

 

 

 

1,990

 

 

 

 

Total cash equivalents

 

 

41,905

 

 

 

39,915

 

 

 

1,990

 

 

 

 

 

 

31,922

 

 

 

31,922

 

 

 

 

 

 

 

Short-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

3,736

 

 

 

 

 

 

3,736

 

 

 

 

 

 

948

 

 

 

 

 

 

948

 

 

 

 

Commercial paper

 

 

22,302

 

 

 

 

 

 

22,302

 

 

 

 

 

 

13,471

 

 

 

 

 

 

13,471

 

 

 

 

Corporate debt securities

 

 

11,165

 

 

 

 

 

 

11,165

 

 

 

 

 

 

13,206

 

 

 

 

 

 

13,206

 

 

 

 

U.S. treasuries

 

 

32,506

 

 

 

32,506

 

 

 

 

 

 

 

U.S. government treasuries

 

 

17,891

 

 

 

17,891

 

 

 

 

 

 

 

U.S. government debt securities

 

 

5,191

 

 

 

 

 

 

5,191

 

 

 

 

 

 

27,115

 

 

 

 

 

 

27,115

 

 

 

 

Asset backed securities

 

 

488

 

 

 

 

 

 

488

 

 

 

 

Total short-term marketable securities

 

 

74,900

 

 

 

32,506

 

 

 

42,394

 

 

 

 

 

 

73,119

 

 

 

17,891

 

 

 

55,228

 

 

 

 

Total

 

$

116,805

 

 

$

72,421

 

 

$

44,384

 

 

$

 

 

$

105,041

 

 

$

49,813

 

 

$

55,228

 

 

$

 

12


 

December 31, 2021

 

 

December 31, 2022

 

Description

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

79,281

 

 

$

79,281

 

 

$

 

 

$

 

 

$

38,191

 

 

$

38,191

 

 

$

 

 

$

 

Commercial paper

 

 

1,000

 

 

 

 

 

 

1,000

 

 

 

 

Corporate debt securities

 

 

1,031

 

 

 

 

 

 

1,031

 

 

 

 

Total cash equivalents

 

 

81,312

 

 

 

79,281

 

 

 

2,031

 

 

 

 

 

 

38,191

 

 

 

38,191

 

 

 

 

 

 

 

Short-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

5,594

 

 

 

 

 

 

5,594

 

 

 

 

 

 

949

 

 

 

 

 

 

949

 

 

 

 

Commercial paper

 

 

44,974

 

 

 

 

 

 

44,974

 

 

 

 

 

 

33,328

 

 

 

 

 

 

33,328

 

 

 

 

Corporate debt securities

 

 

26,953

 

 

 

 

 

 

26,953

 

 

 

 

 

 

21,853

 

 

 

 

 

 

21,853

 

 

 

 

U.S. treasuries

 

 

12,269

 

 

 

12,269

 

 

 

 

 

 

 

U.S. government treasuries

 

 

35,540

 

 

 

35,540

 

 

 

 

 

 

 

U.S. government debt securities

 

 

1,999

 

 

 

 

 

 

1,999

 

 

 

 

 

 

24,719

 

 

 

 

 

 

24,719

 

 

 

 

Asset backed securities

 

 

16,557

 

 

 

 

 

 

16,557

 

 

 

 

Total short-term marketable securities

 

 

108,346

 

 

 

12,269

 

 

 

96,077

 

 

 

 

 

 

116,389

 

 

 

35,540

 

 

 

80,849

 

 

 

 

Long-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

1,631

 

 

 

 

 

 

1,631

 

 

 

 

 

 

932

 

 

 

 

 

 

932

 

 

 

 

U.S. treasuries

 

 

2,986

 

 

 

2,986

 

 

 

 

 

 

 

U.S. government treasuries

 

 

3,099

 

 

 

3,099

 

 

 

 

 

 

 

Total long-term marketable securities

 

 

4,617

 

 

 

2,986

 

 

 

1,631

 

 

 

 

 

 

4,031

 

 

 

3,099

 

 

 

932

 

 

 

 

Total

 

$

194,275

 

 

$

94,536

 

 

$

99,739

 

 

$

 

 

$

158,611

 

 

$

76,830

 

 

$

81,781

 

 

$

 

The Company measures the fair value of money market funds and U.S. treasuries based on quoted prices in active markets for identical securities. Commercial paper, corporate debt securities, certificates of deposits, asset backed securities, and U.S. government debt securities are valued taking into consideration valuations obtained from third-party pricing services. These pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of, and broker/dealer quotes on, the same or similar securities, issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs.

There were no transfers between Level 1 and Level 2 during the periods presented. See Note 3 for further information regarding the amortized cost of ourthe Company’s financial instruments.

5. Property and Equipment, Net

Property and equipment and related accumulated depreciation and amortization are as follows (in thousands):

 

September 30,

 

December 31,

 

 

June 30,

 

December 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Computer equipment and software

 

$

1,051

 

 

$

987

 

 

$

1,716

 

 

$

1,155

 

Furniture and fixtures

 

 

2,285

 

 

 

2,113

 

 

 

3,006

 

 

 

2,285

 

Laboratory equipment

 

 

25,343

 

 

 

24,679

 

 

 

28,011

 

 

 

27,309

 

Leasehold improvements

 

 

17,676

 

 

 

14,128

 

 

 

18,634

 

 

 

18,024

 

 

 

46,355

 

 

 

41,907

 

 

 

51,367

 

 

 

48,773

 

Less accumulated depreciation and amortization

 

 

(27,018

)

 

 

(22,276

)

 

 

(32,096

)

 

 

(28,782

)

Construction-in-progress

 

 

2,335

 

 

 

1,991

 

 

 

1,172

 

 

 

1,344

 

Total property and equipment, net

 

$

21,672

 

 

$

21,622

 

 

$

20,443

 

 

$

21,335

 

Depreciation and amortization expense was $1.71.9 million and $4.83.7 million for the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, and $1.61.5 million and $4.83.1 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively.

13


6. Commitments and Contingencies

Leases

The Company leases office, laboratory and storage space in facilities at several locations.locations:

Emeryville Lease

The Company’s principal executive offices in Emeryville, California, consisting of office and laboratory space, are leased pursuant to a 120-month operating lease (the “Emeryville Lease”), which the Company entered into in January 2019, with the obligation to pay rent commencing in November 2019. In conjunction with signing the Emeryville Lease, the Company paid a cash security deposit of $0.6 million, which is recorded as a deposit on the Company’s condensed consolidated balance sheet as of SeptemberJune 30, 2022.2023. The Emeryville Lease includes a free rent period, an escalation clause for increased rent and a renewal provision allowing the Company to extend this lease for an additional two five-year periods at the then market rental rate. The lessor provided the Company a tenant improvement allowance for a total of $4.0 million to complete the laboratory and office renovation. The Company has determined the tenant improvements to be lessee owned and therefore has recorded a $8.37.7 million ROU Asset and a $13.112.2 million lease liability on the condensed consolidated balance sheet as of SeptemberJune 30, 2022.2023. The Company recorded a $8.78.1 million ROU Asset and a $13.912.8 million lease liability on the condensed consolidated balance sheet as of December 31, 2021.2022.

Pleasanton Leases

The Company leases 42,620 square feet of office, cleanroom, and laboratory support manufacturing space in Pleasanton, California pursuant to a non-cancelable operating lease (the “Pleasanton Lease”), which the Company entered into in March 2017, with the obligation to pay rent commencing in December 2017. The Pleasanton Lease includes a free rent period, escalating rent payments and a term that expires on November 30, 2024. The Company may extend the lease term for a period of five years at the then market rental rate. The Company obtained an irrevocable letter of credit in March 2017 in the initial amount of approximately $1.0 million as a security deposit to the Pleasanton Lease, which may be drawn down by the landlord in the event the Company fails to fully and faithfully perform its obligations under the Pleasanton lease. The letter of credit may be reduced based on certain levels of cash and cash equivalents the Company holds. In October 2022, the letter of credit was reduced to a balance of $0.6 million. As of SeptemberJune 30, 2022,2023, nonenone of the irrevocable letter of credit amount had been drawn. The Pleasanton Lease further provides that the Company is obligated to pay to the landlord its proportionate share of certain basic operating costs, including taxes and operating expenses.

In connection with the Pleasanton Lease, the Company received a tenant improvement allowance of $1.2 million from the landlord for the costs associated with the design, development and construction of tenant improvements. The unamortized tenant improvement balance is recognized as a component of operating lease ROU Assets on the condensed consolidated balance sheets as of SeptemberJune 30, 20222023 and December 31, 2021.2022.

In addition, in May 2019, the Company entered into a 64-month non-cancelable operating lease for additional office space in Pleasanton, California, with an obligation to pay rent commencing in August 2019. In January 2022, the Company amended the lease to add additional leased space and extend the lease expiration date to February 2027.

Cambridge Leases

The Company leases laboratory, office and storage space in several facilities in Cambridge, Massachusetts, pursuant to three separate agreements:

The Company’s facility located at 40 Erie Street in Cambridge, Massachusetts is leased pursuant to a 67-month non-cancelable operating lease (the “40 Erie Lease”), which the Company entered into in February 2016, with an obligation to pay rent commencing in October 2016. The lessor provided the Company a tenant improvement allowance for a total of $2.1 million to complete the laboratory and office renovation. In September 2021, the Company executed an amendment to the 40 Erie Lease, which extends its term through April 2025 and provides for monthly base rent amounts, subject to annual increases over the term of the lease.

The Company’s facility located at 21 Erie Street in Cambridge, Massachusetts is leased pursuant to a 24-month non-cancelable operating lease (the “21 Erie Lease”), which the Company entered into in September 2018. The 21 Erie Lease has since been amended five times, as a result of which the lease term extends through June 2023.

14


In March 2021, the Company entered into a 17-month operating lease (the “Cambridge Storage Lease”) for additional office and laboratory storage space in Cambridge, Massachusetts, which commenced on April 1, 2021. The

14


Company also paid an insignificant cash security deposit. The Cambridge Storage Lease was amended in June 2022 to extend the lease term through June 30, 2023.2023.

In conjunction with the 40 Erie Lease, the 21 Erie Lease and the Cambridge Storage Lease, each as amended (if applicable), the Company has paid certain cash security deposits, which in each case included amounts for the applicable last month’s rent and has been classified as part of the operating lease ROU Assets. OfAs of June 30, 2023, of the $0.5 million security deposits, $0.2 million was recorded in prepaids and other assets and the remaining $0.3 million was recorded in deposits and other long-term assets on the Company's condensed consolidated balance sheet. As of December 31, 2022, of the $0.7 million security deposits, $0.4 million was recorded in prepaids and other assets on the Company’s condensed consolidated balance sheet and the remaining $0.3 million was recorded in deposits and other long-term assets on the Company’sCompany's condensed consolidated balance sheet as of September 30, 2022. Security deposits of $0.7 million are recorded in deposits and other long-term assets on the Company’s condensed consolidated balance sheet as of December 31, 2021.sheet.

Boston Lease

The Company plans to occupy a newly-builtnewly built facility in Boston, Massachusetts, with office and laboratory space, in the second half of 2023 pursuant to a 120-month operating lease (the “Boston Lease”), which the Company entered into in September 2021. The Boston Lease includes a free rent period, an escalation clause for increased rent and a renewal provision allowing the Company to extend the Boston Lease for two additional five-year periods at the then market rental rate. The landlord provided the Company with a tenant improvement allowance of up to approximately $19.1 million for costs relating to the design, permitting and construction of improvements. improvements owned by the landlord. The Company has incurred tenant improvement costs relating to the initial design and construction of the improvements before the commencement date which is accounted for as lease prepayments.The Company’s obligation to pay rent is expected to commence in the second half of 2023, subject to free rent periods of three and six months with respect to certain premises. The Company expects to bewas provided early access to the premises to install fixtures and equipment 60 days prior to the anticipated rent commencement date. The Boston Lease is expected to expireexpires in 2033. The Boston Lease further provides that the Company is obligated to pay to the landlord its proportionate share of certain basic operating costs, including taxes and operating expenses. In connection with the Boston Lease and as a security deposit thereunder, the Company has provided the landlord an irrevocable letter of credit in the amount of approximately $4.6 million, which is collateralized by a restricted cash deposit of $4.7 million, and which may be reduced in the fifth and seventh years of the Boston Lease. As of SeptemberJune 30, 2022,2023, nonenone of the irrevocable letter of credit amount had been drawn.

As of September 30, 2022,The Boston Lease commenced in April 2023, when the Company has notwas provided early access to the premises and gained control over the use of the underlying assets. Upon commencement, the Company recognized aan ROU Asset orasset of $59.3 million and a lease liability for the Boston Lease as it did not control the underlying assets at any time in the nine months ended September 30, 2022. Under the Boston Lease, the Company is obligated to make minimum lease payments of approximately $79.150.9 million foron the years from 2023condensed consolidated balance sheet. Upon commencement, the ROU asset includes $8.4 million of lease prepayments made before the commencement date, which is primarily related to 2033, which includes rent abatement during the free rent periods.lessor owned tenant improvement cost.

The Company’s operating leases include various covenants, indemnities, defaults, termination rights, security deposits and other provisions customary for lease transactions of this nature.

The components of lease costs, which were included in the Company’sour condensed consolidated statements of operations and comprehensive income (loss),loss, were as follows (in thousands):

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Lease cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

2,112

 

 

$

1,922

 

 

$

6,633

 

 

$

5,743

 

 

$

4,439

 

 

$

2,268

 

 

$

6,603

 

 

$

4,521

 

Total lease cost

 

$

2,112

 

 

$

1,922

 

 

$

6,633

 

 

$

5,743

 

 

$

4,439

 

 

$

2,268

 

 

$

6,603

 

 

$

4,521

 

15


Supplemental information related to leases was as follows:

 

Nine Months Ended September 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Cash paid for amounts included in the measurement of
lease liabilities (in thousands):

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

6,467

 

 

$

5,902

 

 

$

12,256

 

 

$

4,193

 

New right-of-use assets obtained in exchange for lease
obligations (in thousands):

 

 

 

 

 

 

 

 

 

 

Operating leases

 

$

1,959

 

 

$

6,562

 

 

$

59,320

 

 

$

781

 

Weighted-average remaining lease term (years):

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

5.0

 

 

 

5.4

 

 

 

8.6

 

 

 

5.1

 

Weighted-average discount rate:

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

7.5

%

 

 

7.3

%

 

 

9.9

%

 

 

7.4

%

As of SeptemberJune 30, 2022,2023, minimum annual rental payments under the Company’s lease agreements are as follows (in thousands):

 

 

Lease Financing
Obligation

 

Year ending December 31,

 

 

 

2022 (remaining three months)

 

$

2,523

 

2023

 

 

9,192

 

2024

 

 

12,527

 

2025

 

 

10,658

 

2026

 

 

10,376

 

Thereafter

 

 

62,812

 

Total minimum payments

 

 

108,088

 

Less: Amounts representing interest expense

 

 

(5,310

)

Less: Amounts representing lease payments under the Boston Lease

 

 

(79,701

)

Present value of future minimum lease payments

 

 

23,077

 

Less: Current portion of lease liability

 

 

(6,325

)

Noncurrent portion of lease liability

 

$

16,752

 

Agreements with CROs

In September 2017, the Company entered into a contract research and development agreement with a third-party contract research organization (“CRO”) to provide research, analysis and antibody samples to further the Company’s development of its antibody drug candidates. In June 2022, the Company notified the CRO of its intent to terminate the agreement effective in August 2022. The Company is also obligated to pay the CRO certain milestone payments of up to an aggregate of $36.4 million on achievement of specified events. None of these events had occurred as of September 30, 2022. During the three and nine months ended September 30, 2022, the Company had no research and development expense under the agreement. During the three and nine months ended September 30, 2021, the Company had immaterial research and development expense under the agreement.

In May 2019, the Company entered into a contract research and testing agreement with another third-party CRO to provide antibody discovery related services. In March 2022, the Company notified that CRO of its intent to terminate the agreement effective in May 2022. Under the agreement, the Company is obligated to pay the CRO certain milestone payments of up to $34.8 million on achievement of specified events. None of these events had occurred as of September 30, 2022. No research and development expense was recorded under the agreement during the three and nine months ended September 30, 2022 and 2021.

 

 

Lease Financing
Obligation

 

Year ending December 31,

 

 

 

2023 (remaining six months)

 

$

4,625

 

2024

 

 

12,637

 

2025

 

 

10,695

 

2026

 

 

10,413

 

2027

 

 

10,504

 

Thereafter

 

 

51,024

 

Total minimum payments

 

 

99,898

 

Less: Amounts representing interest expense

 

 

(34,236

)

Present value of future minimum lease payments

 

 

65,662

 

Less: Current portion of lease liability

 

 

(4,838

)

Noncurrent portion of lease liability

 

$

60,824

 

Guarantees and Indemnifications

The Company, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws, and pursuant to indemnification agreements with certain of its officers and directors, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, with respect to which the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period lasts as long as

16


an officer or director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer liability insurance. This insurance limits the Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations for any period presented.

16


7. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

 

September 30,

 

 

December 31,

 

 

June 30,

 

 

December 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Prepaid research and development-related expenses

 

$

4,839

 

 

$

2,672

 

 

$

3,694

 

 

$

4,241

 

Net contract asset

 

 

 

 

 

1,385

 

Collaboration receivable

 

 

291

 

 

 

688

 

 

 

56

 

 

 

135

 

Prepaid insurance

 

 

52

 

 

 

1,769

 

 

 

391

 

 

 

1,158

 

Interest and other receivables

 

 

529

 

 

 

292

 

 

 

343

 

 

 

529

 

Facilities-related deposits

 

 

384

 

 

 

 

 

 

204

 

 

 

384

 

Other

 

 

796

 

 

 

866

 

 

 

718

 

 

 

567

 

Total prepaid expenses and other current assets

 

$

6,891

 

 

$

7,672

 

 

$

5,406

 

 

$

7,014

 

Deposits and Other Long-Term Assets

Deposits and other long-term assets consist of the following (in thousands):

 

September 30,

 

 

December 31,

 

 

June 30,

 

 

December 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Lease security deposits

 

$

934

 

 

$

1,305

 

 

$

934

 

 

$

934

 

Prepaid research and development-related expenses

 

 

1,123

 

 

 

1,047

 

 

 

450

 

 

 

643

 

Prepaid rent

 

 

3,475

 

 

 

 

 

 

1,145

 

 

 

8,162

 

Total deposits and other long-term assets

 

$

5,532

 

 

$

2,352

 

 

$

2,529

 

 

$

9,739

 

8. Debt

In July 2022, the Company entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”) and Silicon Valley Bank (“SVB”), which provides the Company a 60-month term loan facility for up to $80.0 million in borrowing capacity across five potential tranches. At the closing of the Loan Agreement, the Company drew $20.0 million from the first tranche and can draw up toin March 2023, the Company drew an additional $10.0 million through March 2023.million. The remaining tranches provide up to $50.0 million borrowing capacity and become available upon the Company meeting certain milestones set forth in the Loan Agreement. In the fourth quarter of 2022, one milestone had been achieved, which provides the Company the ability to draw up to $10 million through December 15, 2023. As of June 30, 2023, the additional $10 million remains available to be drawn by the Company. The term loan is secured by substantially all of the Company’s assets, other than intellectual property. There are no warrants associated with the Loan Agreement.

Borrowings under the Loan Agreement bear interest (i) at an annual cash rate equal to the greater of (x) the lesser of (1) the prime rate (as customarily defined) and (2) 5.50%, in either case, plus 3.15%, and (y) 7.15% and (ii) at an annual payment-in-kind rate which may equal 2.00%.. The Company is required to make monthly interest-only payments prior to the amortization date of January 1, 2025, subject to a potential six-month and one-year extension upon satisfaction of certain conditions. The interest-only payment date has been extended an additional six months based on the Company's achievement of one of the milestones as set forth in the Loan Agreement. In addition, the Company paid a $150,000 facility charge upon closing, and the Company must pay a facility charge equal to 0.50% of the principal amount of any borrowings made pursuant to the amounts under the last four tranches.

All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on July 19, 2027. At the Company’s option, the Company may prepay all or any portion of the outstanding borrowings, plus accrued and unpaid interest thereon and fees and expenses, subject to a prepayment premium ranging from zero

17


to 2.5%, during the first three years after closing, depending on the year of such prepayment. Upon repayment of the term loan, the Company is required to make a final payment fee to the lenders equal to 5.75% of the aggregate original principal amount of the loan. Debt issuance costs have been treated as debt discounts on the Company’s condensed consolidated balance sheet and together with the final payment are being amortized to interest expense throughout the life of the term loan using the effective interest rate method.

Beginning17


In March 2023, Gritstone, Hercules and SVB amended the Loan Agreement to change the minimum liquidity requirements. Under the amended Loan Agreement, beginning on the earliest occurrence of certain milestones or April 1, 2023,2024, and at all times thereafter, so long as the Company’s market capitalization is equal to or lessno greater than $400.0 million,the Company is subject to a minimum liquidity requirement equal to the then outstanding balance under the Loan Agreement multiplied by 0.55 or 0.45, which multiplier depends on whether the Company achieves certain performance milestones.milestones.

The Company’s obligations under the Loan Agreement, as amended, are subject to acceleration upon the occurrence of customary events of default, including payment default, insolvency and the occurrence of certain events having a material adverse effect on the Company, including (but not limited to) material adverse effects upon the business, operations, properties, assets or financial condition of the Company and its subsidiaries, taken as a whole. As of SeptemberJune 30, 2022,2023, the Company is in compliance with all covenants in the Loan Agreement.Agreement, as amended.

As of SeptemberJune 30, 2022,2023, there were debt discounts, unamortized issuance costs and debt discountsunaccreted value of the final fee of $1.92.0 million which were recorded as a direct deduction from the term loan on the condensed consolidated balance sheet. Interest expense related to the Loan Agreement was $0.51.0 and $1.8 million, respectively, for the three and ninesix months ended SeptemberJune 30, 2022.2023. The effective interest rate on the term loan, including the amortization of the debt discount and issuance costs, and accretion of the final payment, was 13%. The components of the long-term debt balance are as follows:

 

September 30,

 

 

June 30,

 

 

2022

 

 

2023

 

Principal loan balance

 

$

20,000

 

 

$

30,000

 

Final fee

 

 

1,150

 

 

 

1,725

 

Unamortized debt discount and issuance costs

 

 

(1,869

)

Unamortized debt discount, issuance costs, and unaccreted value of final fee

 

 

(2,002

)

Long term debt, net

 

$

19,281

 

 

$

29,723

 

As of SeptemberJune 30, 2022,2023, the estimated future principal payments due (excluding the final payment fee) were as follows:

2022 (remaining three months)

 

$

 

2023

 

 

 

2023 (remaining six months)

 

$

 

2024

 

 

 

 

 

 

2025

 

 

7,092

 

 

 

6,616

 

2026

 

 

7,712

 

 

 

14,108

 

2027

 

 

5,196

 

 

 

9,276

 

Total principal payments

 

$

20,000

 

 

$

30,000

 

9.9. Collaboration and License Agreements and Grant Revenue

2seventy bio, Inc.

In August 2018, the Company entered into a Research Collaboration and License Agreement with bluebird bio, Inc. (“bluebird”). In November 2021, bluebird assigned the Research Collaboration and License Agreement (the “2seventy Agreement”) to its affiliate, 2seventy bio, Inc. (“2seventy”), in connection with bluebird’sbluebirds restructuring and subsequent spin-out of 2seventy. Under the terms of the 2seventy Agreement, the Company provides to 2seventy tumor-specific targets across several tumor types and, in certain cases, T cell receptors (TCR) directed to those targets. The Company received a non-refundable upfront payment of $20.0 million, and 2seventy also concurrently acquired 768,115 shares of the Company’s Series C convertible preferred stock for $10.0 million at $13.04 per share. Per the 2seventy Agreement, 2seventy was also provided an option to acquire shares of the Company’s common stock at the same price as all other investors in connection with the Company’s initial public offering (“IPO”). In October 2018, 2seventy purchased 666,667 shares of the Company’s common stock at the price to the public of $15.00 per share for a total of $10.0 million. Under the terms of the 2seventy Agreement, the Company is eligible to earn development, regulatory, and sales-based milestones in an amount of up to $1.2 billion, and single-digit royalties on sales of products

18


that utilize the technology subject to the 2seventy Agreement. None of these events had occurred as of SeptemberJune 30, 2022,2023, and no royalties were due from the sale of licensed products.

18


In August 2019, the Company entered into a First Amendment to the 2seventy Agreement, which extended the timeline for the Company and 2seventy to execute a Patient Selection Services Agreement from within one year to within two years after the Effective Dateeffective date of the 2seventy Agreement. In August 2020, the Company entered into a Second Amendment, which extended the timeline of the Patient Selection Services Agreement to within three years and also extended the Tissue Analysis Period from February 28, 2021 to June 30, 2021. In April 2021, the Company entered into a Third Amendment, which removed the Patient Selection Services Agreement in its entirety and extended the Tissue Analysis Period from June 30, 2021 to December 31, 2021. The amendments were entered into for administrative purposes, and the Company determined the amendments were not a modification of contract under the contract with customers guidance.

2seventy may terminate the 2seventy Agreement by giving a 120-day prior written notice to the Company at any time after the effective date of the agreement. Unless terminated early, the agreement has a term that ends upon the last payment owed by the Company on a licensed product. The 2seventy Agreement may be terminated for cause by either party based on an uncured material breach by the other party or bankruptcy of the other party. Upon early termination, all ongoing activities under the agreement and all mutual collaboration, development and commercialization licenses and sublicenses will terminate. The licenses granted by the Company to 2seventy under the licensed intellectual property will remain in effect in accordance with their respective terms. Additionally, all of 2seventy’s payment obligations that have not yet accrued related to future milestone and royalty payments will be reduced by 50% for the remainder of the agreement term.

The Company concluded that 2seventy is a customer, and the contract is not subject to guidance on collaborative arrangements. This is because the Company granted to 2seventy a license to the Company’sits intellectual property and provided research and development services, all of which are outputs of the Company’s ongoing activities, in exchange for consideration.

The Company identified the following three material promises under the 2seventy Agreement: (i) transfer of a license to intellectual property and related technology know-how (“License and Know-How”); (ii) the obligation to perform target selection and TCR generation services (“Research and Development Services”); and (iii) participation on the Joint Steering Committee (the “JSC”). The Company provided to 2seventy standard indemnification and protection of licensed intellectual property, which is part of assurance that the license meets the contract’s specifications and is not an obligation to provide goods or services.

The Company considered that the License and Know-How has standalone functionality, was considered to be functional intellectual property, and is capable of being distinct. However, the Company determined that the License and Know-How is not distinct from the Research and Development Services or participation on the JSC within the context of the 2seventy Agreement, because 2seventy is dependent on the Company to execute the Research and Development Services and participate on the JSC in order for 2seventy to benefit from the License and Know-How. As such, the License and Know-How is combined with the Research and Development Services and participation on the JSC into a single performance obligation, and the transaction price under this arrangement will be allocated to this single performance obligation.

The Company has also determined that all other goods or services that are contingent upon 2seventy reaching various milestones are not considered performance obligations at the inception of the arrangement.

The transaction price at the inception of the 2seventy Agreement consisted of the upfront payment of $20.0 million and the $10.0 million received from 2seventy for the purchase of the Company’s Series C convertible preferred stock. The sale of the Series C convertible preferred stock was not considered to be a performance obligation, as it was a separate financing component of the transaction. Accordingly, $10.0 million of the transaction price was allocated to the issuance of 768,115 shares of Series C convertible preferred stock at fair value of $13.04 per share and recorded in stockholders’ equity.

The variable consideration related to the remaining development, regulatory, and sales-based milestones payments has not been included in the initial transaction price and continues to be fully constrained as of December 31, 2021.June 30, 2023. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon initiation of clinical trials for early-stage targets and 2seventy’s development efforts. Any variable consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur, as they were determined to relate predominantly to the

19


License and Know-How granted to 2seventy. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

19


For revenue recognition purposes, the Company determined that the duration of the 2seventy Agreement began on the effective date in August 2018 and ends upon completion of the Research and Development Services, which is also when the participation on the JSC is no longer an obligation. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. The Company also analyzed the impact of 2seventy terminating the agreement prior to August 2023 and determined, considering both quantitative and qualitative factors, that there were substantive non-monetary penalties to 2seventy for doing so.

Revenue is recognized when, or as, the Company satisfies its performance obligation by transferring the promised services to 2seventy. Revenue is being recognized over time using a cost-based input method, based on internal labor cost effort to perform the research services, since the internal labor cost incurred over time is thought to best reflect the transfer of services to 2seventy. In applying a cost-based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. A cost-based input method of revenue recognition requires us to make estimates of costs to complete the performance obligation. The cumulative effect of any revisions to estimated costs to complete the performance obligation 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 timing and amount of revenue recognized in future periods.

TheDuring the three and six months ended June 30, 2023, the Company recognized $0.20.3 million and $6.50.7 million, respectively, and during the three and ninesix months ended SeptemberJune 30, 2022, andthe Company recognized $0.82.3 million and $2.16.3 million, respectively, during the three and nine months ended September 30, 2021 in collaboration revenue under the 2seventy Agreement. The amount of collaboration revenue recognized during the ninethree and six months ended SeptemberJune 30, 2022 included a cumulative catch-up adjustmentadjustments increasing contribution revenue by $2.0 million and $5.5 million, respectively, due to revisions to estimated costs to complete the remaining performance obligation. The adjustmentadjustments resulted in a decrease in the Company’s loss from operations of $2.0 million and a decrease in loss per share of $0.02 for the three months ended June 30, 2022, and a decrease in the Company's loss from operations of $5.5 million and a decrease in loss per share of $0.06 for the ninesix months ended SeptemberJune 30, 2022. Deferred revenue of $2.20.3 million and $8.71.0 million was recorded on the condensed consolidated balance sheets in both current and long-term liabilities as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. Deferred revenue relates to the performance obligations identified under the 2seventy Agreement and will be recognized over the period the performance obligations are expected to be satisfied, which is currently estimated to be through AugustSeptember 2023.

Changes in the deferred revenue balance during the ninesix months ended SeptemberJune 30, 20222023 for the 2seventy Agreement are as follows (in thousands):

 

Deferred Revenue

 

 

Deferred Revenue

 

Balance at December 31, 2021

 

$

8,725

 

Balance at December 31, 2022

 

$

1,047

 

Additions

 

 

 

 

 

 

Deductions

 

 

(6,488

)

 

 

(747

)

Balance at September 30, 2022

 

$

2,237

 

Balance at June 30, 2023

 

$

300

 

There were no receivables or net contract assets recorded as of SeptemberJune 30, 20222023 and December 31, 20212022 associated with the 2seventy Agreement.

Gilead Sciences, Inc.

In January 2021, the Company entered into a Collaboration, Option and License Agreement (the “Gilead Collaboration Agreement”) with Gilead Sciences, Inc. (“Gilead”) to research and develop a vaccine-based immunotherapy as part of Gilead’s efforts to find a curative treatment for HIV infection. Under the terms of the Gilead Collaboration Agreement, the Company granted to Gilead an exclusive, worldwide license to develop and commercialize a HIV-specific therapeutic vaccine utilizing the Company’s technology. Gilead is responsible for conducting all development and commercialization activities beginning with a Phase 1 study, and the Company is responsible for contributing to preclinical research studies and participation in a joint steering committee (collectively, “research and development activities”). Concurrently with the execution of the Gilead Collaboration Agreement, the Company and Gilead entered into a Supply Agreement (the “Gilead Supply Agreement”) under which the Company will supply research product and GMP product (“Product Supply”) that may be required under the Gilead Collaboration Agreement until Gilead completes its first GMP product batch, and the Company will participate in a

20


joint manufacturing team (collectively, “product supply activities”). In addition, the Company also concurrently entered into a Stock Purchase Agreement (the “Gilead Stock Purchase Agreement”) under which Gilead acquired, in

20


a private placement transaction, 1,169,591 shares of the Company’s common stock. The common shares were issued to Gilead with certain registration rights and certain standstill and market stand-off provisions. The Company determined that these concurrent contracts represent a combined arrangement (the “Gilead(“the Gilead Arrangement”).

Under the Gilead Collaboration Agreement, the Company received a non-refundable upfront payment of $30.0 million. Under the Gilead Collaboration Agreement and the Gilead Supply Agreement, the Company will receive additional reimbursement payments for expenses incurred in the research and development activities and product supply activities. Under the Gilead Stock Purchase Agreement, the common shares were sold at a price of $25.65 per share for a total of $30.0 million. The Company’s common stock at fair value on closing was $18.10 per share. If Gilead decides to move forward with development beyond the initial Phase 1 study (the “Option”), the Company will receive a $40.0 million non-refundable option fee and will be eligible to receive up to an aggregate of $685.0 million if certain clinical, regulatory and commercial milestones are achieved, as well as tiered royalties ranging from the mid-single digits to low double-digits on net sales of a therapeutic product utilizing its technology. None of these events had occurred as of SeptemberJune 30, 2022,2023 and no royalties were due from the sale of licensed products.

Gilead may terminate the Gilead Collaboration Agreement for convenience by giving a 90-day prior written notice to the Company at any time after the effective date of the agreement. Unless terminated early, the agreement has a term that ends upon the expiration of the royalty term, or, if the Option is not exercised, by the end of the Option term. The Gilead Collaboration Agreement may be terminated for cause by either party based on an uncured material breach by the other party, insolvency of the other party, or patent challenge. Upon early termination, all ongoing activities under the agreement and all mutual collaboration, development and commercialization licenses and sublicenses will terminate. The licenses granted by the Company to Gilead under the licensed intellectual property will remain in effect in accordance with their respective terms. Additionally, if terminated early by Gilead for convenience or by the Company for material breach or insolvency, all of Gilead’s payment obligations for reimbursable costs or for future milestone and royalty payments remain. If terminated early by Gilead for material breach or insolvency, all of Gilead’s unaccrued payment obligations related to future milestone and royalty payments will be reduced by 50% for the remainder of the agreement term. Furthermore, Gilead may terminate the Gilead Supply Agreement without cause by giving six months prior written notice and may terminate any active orders with 60-day notice without terminating the agreement, and either party may terminate based on an uncured material breach, insolvency of the other party, or in the event that the Gilead Collaboration Agreement is terminated. Upon termination, the Company will deliver all supply products that have been produced and destroy, reimburse or deliver materials that Gilead has reimbursed, and Gilead must pay for any manufacturing costs that the Company has actually incurred or committed to pay, including any cancellation costs owed to subcontractors.

The Company concluded that Gilead is a customer and therefore revenue recognition should be accounted for in accordance with ASC 606, because the Company granted to Gilead licenses to its intellectual property and will provide research and development services and Supply of Product, Supply,as defined below, all of which are outputs of the Company’s ongoing activities, in exchange for consideration. The Option, if exercised by Gilead, will be considered a modification that increases the scope of the arrangement beyond the Option term.Term.

The Company identified the following performance obligations under the Gilead Collaboration Agreement: (i) licenses including an exclusive (in the HIV field), royalty-free, worldwide collaboration license and transfer of know-how and an exclusive (in the HIV field) worldwide, royalty-bearing development and commercializationcommercial license subject to restrictions on its use during the Option termTerm and an exclusive option to release such restrictions; (ii) preclinical research and development activities, manufacturing-related activities, and participation on a Joint Steering Committee; and (iii) product supply, including research and GMP product, until Gilead completes its first GMP batch, and participation on a Joint Manufacturing Team.

The Company considered that the licenses and know-how have standalone functionality, are considered to be functional intellectual property and are capable of being distinct. The Company also determined that the research and development activities and product supply by Gritstone could be provided by resources otherwise available to Gilead and thus are capable of being distinct.

The Company has also determined that the pricing for optional goods and services and release of license restrictions upon exercise of the Option do not constitute material rights and are not a potential performance obligation. The Company evaluated whether there is an interdependence between the promises and determined that the licenses are a combined solution and the predominant performance obligation, while the other promises are separately

21


identifiable in the context of the contract; however, the research and development activities are dependent on the research product supply, which is accounted for as a combined performance obligation. As a result, the Company

21


identified three performance obligations in the Gilead Arrangement: (i) exclusive licenses and know-how, (ii) research and development activities and product supply, and (iii) GMP product supply.

The transaction price at the inception of the Gilead Collaboration Agreement consisted of the upfront payment of $30.0 million and the $30.0 million received for the sale of the Company’s common stock. The sale of the common stock was not considered to be a performance obligation, as it was a separate financing component of the transaction. Accordingly, $21.2 million of the transaction price was allocated to the issuance of 1,169,591 shares of the Company’s common stock at fair value on closing of $18.10 per share and recorded in stockholders’ equity. The remaining $8.8 million of the common stock purchase price in excess of the fair value of the shares received is added to the transaction price for the Gilead Collaboration Agreement. In addition, the initial transaction price includes estimated variable consideration for budgeted reimbursement of research and development costs and product supply. The variable consideration related to reimbursable costs and product supply has been constrained as of SeptemberJune 30, 20222023 based on the current research and development plan forecast. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company determined that the variable consideration for the $40.0 million option exercise fee and for the development, regulatory, and sales-based milestones payments were probable of significant revenue reversal as their achievement was highly dependent on factors outside the Company’s control. As a result, these payments were fully constrained and were not included in the transaction price. Any variable consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur, as they were determined to relate predominantly to the exclusive licenses and know-how granted to Gilead.

The transaction price is allocated to the performance obligation based upon relative standalone selling prices, which were determined for the exclusive licenses and know-how using an adjusted market approach and for the research and development activities and product supply using a cost plus reasonable margin approach. Variable consideration is allocated to the specific performance obligations to which it relates.

For revenue recognition purposes, the Company determined that the duration of the contract began on the effective date in January 2021 and ends upon (i) the completion of the Option term, which is expected to end two towithin four years after the effective date, if the Option is not exercised or (ii) the expiration of the royalty-term on a product-by-product and country-by-country basis. The Company also analyzed the impact of Gilead terminating the agreement prior to the end of the Option term and determined, considering both quantitative and qualitative factors, that there were substantive non-monetary penalties to Gilead for doing so.

Revenue for the exclusive licenses and know-how was recognized on the effective date of the Gilead Collaboration Agreement at the point in time that the licenses are effective. The research and development activities and product combined performance obligation and the GMP product supply performance obligation are recognized over time when, or as, the Company transfers the promised goods and services to Gilead. Research and development service and product supply revenues will be recognized over time using a cost-based input method, based on internal and external labor cost effort to perform the services, costs to acquire research materials, and costs of product supply, since the costs incurred over time are thought to best reflect the transfer of goods and services to Gilead. In applying a cost-based input method of revenue recognition, we use actual costs incurred relative to estimated total costs to fulfill each performance obligation. A cost-based input method of revenue recognition requires us to make estimates of costs to complete the performance obligation. The cumulative effect of any revisions to estimated costs to complete the performance obligation and associated variable consideration 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 timing and amount of revenue recognized in future periods.

For the three and ninesix months ended SeptemberJune 30, 2022,2023, the Company did notnot record any license revenue. For the threerevenue and nine months ended September 30, 2022, the Company recorded $0.20.1 million and $1.50.2 million, respectively, as collaboration revenue as a result of satisfying its performance obligations by transferring the promised goods and services estimated by the costs incurred for the Gilead Collaboration Agreement. For the three and six months ended SeptemberJune 30, 2021,2022, the Company did notnot record any license revenue whileand recorded $38.6 million was recognized as license revenue for the nine months ended September 30, 2021. For the three and nine months ended September 30, 2021, the Company recognized $1.60.5 million and $4.11.2 million, respectively, as collaboration revenue as a result of satisfying its performance obligations by transferring the promised goods and services estimated by the costs incurred

22


for the Gilead Collaboration Agreement. There was no contract asset recorded on the condensed consolidated balance sheetsheets as of SeptemberJune 30, 2022. A contract asset of $1.4 million was recorded on the condensed consolidated balance sheet as of2023 or December 31, 2021 for supply costs that were incurred during the year ended December 31, 2021, but not billable until future periods when the asset is released. The contract asset relates to the performance obligations yet to be satisfied identified under the Gilead Collaboration Agreement.2022. There was $0.1 million recorded as deferred revenue as of SeptemberJune 30, 20222023 andno deferred revenue as of December 31, 20212022 associated with the Gilead Collaboration Agreement.

22


Changes in the contract asset and deferred revenue balance during the ninesix months ended SeptemberJune 30, 20222023 for the Gilead Collaboration Agreement are as follows (in thousands):

 

Contract Asset

 

 

Deferred Revenue

 

 

Deferred Revenue

 

 

Balance at December 31, 2021

 

$

1,385

 

 

$

 

Balance at December 31, 2022

 

$

107

 

 

Additions

 

 

123

 

 

 

122

 

 

 

 

 

Deductions

 

 

(1,508

)

 

 

(1

)

 

 

(26

)

 

Balance at September 30, 2022

 

$

 

 

$

121

 

Balance at June 30, 2023

 

$

81

 

 

There was $0.2 million and $0.70.1 million of receivables recorded on the condensed consolidated balance sheet as a current asset in the prepaid expenses and other current assets balance as of SeptemberJune 30, 20222023 and December 31, 2021, respectively,2022, associated with the Gilead Collaboration Agreement.

The Company deferred $0.1 million in incremental costs to acquire the Gilead Collaboration Agreement in the first quarter of 2021 allocated to performance obligations recognized over time, which will be recognized over time in each period proportionate to revenue recognition. As of September 30, 2022,There were no deferred contract acquisition costs amortized during the three and six months ended June 30, 2023 as they were zero.fully amortized during the year ended December 31, 2022. Deferred contract acquisition costs amortized during the three and ninesix months ended SeptemberJune 30, 2022 and 2021 were negligible.

Arbutus Biopharma Corporation

In October 2017, the Company entered into an Exclusive License Agreement with Arbutus Biopharma Corporation (“Arbutus”) and its wholly-owned subsidiary, Protiva Biotherapeutics Inc. Certain terms of thisthe agreement were modified by an amendment in July 2018 (such amended2018. Under the license agreement, the “Arbutus License Agreement”). Under the Arbutus License Agreement, Arbutus granted the Company has an exclusive license rights underto utilize certain Arbutus intellectual property, relatedincluding patents and know-how relating to Arbutus’ lipid nanoparticle (“LNP”) technology.immunotherapy. During the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, the Company had no research and development expense under the Arbutus License Agreement.agreement. The Company is obligated to pay Arbutus certain milestone payments up to $123.5 million on achievement of specified events, and royalties on sales of its licensed products. Following the acceptance of our investigational new drug application for GRANITE by the U.S. Food and Drug Administration (the “FDA”),FDA, the Company made a $2.5 million development milestone payment to Arbutus in September 2018 that was recorded as research and development expense. In August 2019, a milestone was met following the initial patient treatment of SLATE in the Company’s GO-005 clinical trial. In 2019, the Company recorded $3.0 million as research and development expense in connection with the milestone. None of the other events had occurred as of SeptemberJune 30, 2022,2023, and no royalties were due from the sale of licensed products.

Non-Profit Hospital Cancer Center

In January 2016, the Company entered into an Exclusive License Agreement with a non-profit hospital cancer center. Under the license agreement, the Company has an exclusive license to utilize certain patents and know-how relating to immunotherapy for an insignificant upfront payment, cash milestone payments on achievement of specified events, and a low single digit royaltyroyalties on sales of licensed products. The achievement of the milestones and payment of royalties is dependent upon obtaining regulatory approval. Upon achievement of a milestone related to the Company’s Phase 1 clinical trial for GRANITE, GO-004, in December 2018 the Company recorded an insignificant amount to research and development expense for amounts owed to the Hospital Cancer Center, which was paid to the hospital in February 2019. None of the other milestone events had occurred as of SeptemberJune 30, 2022,2023 and no royalties were due from the sales of licensed products.

23


Genevant Sciences GmbH

In October 2020, the Company entered into an Option and License and Development Agreement (the “2020 Genevant License Agreement”) with Genevant Sciences GmbH (“Genevant”), pursuant to which Genevant granted the Company exclusive license rights under certain intellectual property related to Genevant’s LNP technology for a single therapeutic indication, and the Company agreed to pay Genevant an initial payment of $2.0 million, up to an aggregate of $71.0 million in specified development, regulatory, and commercial milestones, and low to mid-single digit royalties on net sales of licensed products. The upfront payment of $2.0 million was included in research and development expense for the year ended December 31, 2020. Genevant is a spin-off of Arbutus, and the 2020 Genevant License Agreement expands Gritstone’s intellectual property rights to such LNP technology originally obtained pursuant to the Company’s license agreement with Arbutus. Prior to the 2020 Genevant License Agreement, the

23


Company licensed Arbutus’ LNP technology for indications in the oncology space. The remainder of Arbutus’ IP portfolio was transferred to Genevant in the spin-off. In March 2022, a milestone in the amount of $1.0 million was met, which was included in research and development expense for the nine monthsyear ended September 30,December 31, 2022.

Pursuant to the 2020 Genevant License Agreement, Genevant also granted the Company certain options to license the LNP technology for additional therapeutic indications of up to $1.5 million for each indication and $1.0 million to extend the option term. The 2020 Genevant License Agreement continues in effect until the last to expire royalty term or early termination. It is terminable by the Company for convenience with 90 days prior written notice or immediately if based on certain product safety or efficacy or regulatory criteria. Either party may terminate the agreement for material breach, subject to a cure period, and Genevant may terminate the agreement if the Company challenges a licensed patent.

In January 2021, the Company entered into a Non-Exclusive License and Development Agreement (the “2021 Genevant License Agreement”) with Genevant. Pursuant to the 2021 Genevant License Agreement, the Company obtained a nonexclusive license to Genevant’s LNP technology to develop and commercialize self-amplifying RNA (“samRNA”) vaccines against SARS-CoV-2, the virus that causes COVID-19. Under the 2021 Genevant License Agreement, the Company made a $1.5 million upfront payment to Genevant, and Genevant is eligible to receive from the Company up to an aggregate of $141.0 million in contingent milestone payments per product, plus certain tiered royalties, upon achievement of development and commercial milestones. In certain scenarios, in lieu of milestones and royalties, Genevant will be entitled to a percentage of amounts that the Company receives from sublicenses under the 2021 Genevant License Agreement, subject to certain conditions. In March 2021, a milestone in the amount of $1.0 million was met following the initial patient treatment in the Phase 1 clinical trial conducted through the NIAID-supported Infectious Diseases Clinical Research Consortium (“IDCRC”). Both the $1.5 million upfront and $1.0 million milestone payments were recorded as research and development expense for the nine monthsyear ended September 30,December 31, 2021. None of the other milestone events had occurred as of SeptemberJune 30, 2022.2023.

Coalition for Epidemic Preparedness Innovations (CEPI)

On August 14, 2021, the Company entered into the CEPI Funding Agreement with CEPI, under which CEPI agreed to provide funding of up to $20.6 million to the Company to advance the Company’s CORAL program, which is developing a second-generation COVID-19 vaccine, program, with an initial clinical trial in South Africa. Under the terms of the agreement, CEPI is fundingwill fund a multi-arm Phase 1 study evaluating the CORAL program’s samRNA vaccine in naïve, convalescent, and HIV+ patients. The study is evaluatingwill evaluate three different samRNA vaccine constructs that each target both the spike protein and other SARS-CoV-2 targets and are designed to drive both robust B and T cell immune responses. The funding iswill also supportingsupport pre-clinical studies, scale-up and formulation development to enable manufacturing of large quantities of stable vaccine product.

Under the terms of the CEPI Funding Agreement, among other things, the Company and CEPI agreed on the importance of global equitable access to the vaccine produced pursuant to the CEPI Funding Agreement. The vaccine, if approved, is expected to be made available to the COVAX Facility for procurement and allocation. The COVAX Facility aims to deliver equitable access to COVID-19 vaccines for all countries, at all levels of development, that wish to participate.

The scope and continuation of the CEPI Funding Agreement may be amended depending on ongoing developments of the COVID-19 outbreak and the success of the Company’s COVID-19 vaccine candidate developed under the CEPI Funding Agreement relative to other third-party COVID-19 vaccine candidates or treatments. If the World Health Organization (“WHO”)(WHO), CEPI or a regulatory authority having jurisdiction over a clinical trial performed under the CEPI Funding Agreement determines that a third-party product candidate has substantially

24


greater potential than the Company’s COVID-19 vaccine candidate developed under the CEPI Funding Agreement and should be prioritized instead for a particular trial, the Company must consider in good faith any written request of CEPI not to proceed with a clinical trial of such COVID-19 vaccine candidate; however thecandidate (the determination of whether to proceed or not to proceed with such trial shall be made by the Company in its sole discretion.discretion). In addition, CEPI has the right to unilaterally terminate the CEPI Funding Agreement upon prior written notice if CEPI determines that (i) there are material safety, regulatory, scientific misconduct or ethical issues with the project undertaken by the Company under the CEPI Funding Agreement, (ii) the project undertaken by the Company under the CEPI Funding Agreement should be terminated, (iii) the Company becomes unable to discharge its obligations under the CEPI Funding Agreement, (iv) the Company fails to meet certain criteria set forth in the CEPI Funding Agreement, or (v) the Company commits fraud or a financial irregularity, as such terms are defined in the CEPI Funding Agreement.

24


In December 2021, the Company and CEPI entered into an amendment to the CEPI Funding Agreement, under which CEPI agreed to provide additional funding of up to $5.0 million, for a total of up to $25.6 million, to the Company to conduct a Phase I clinical trial of the Company’sCompany's Omicron vaccine candidate in South Africa.

CEPI advances grant funds upon request by the Company consistent with the agreed upon amounts and schedules as provided in the CEPI Funding Agreement. The first tranche of funding of $11.3 million was received in September 2021, and the second tranche of funding of $2.7 million was received in April 2022.2022 and the third tranche of funding of $1.2 million was received in June 2023.

Payments received in advance that are related to future performance are deferred and recognized as grant revenue when the research and development activities are performed. Cash payments received under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in the funding agreement are incurred. During the three and nine months ended September 30, 2022, theThe Company recognized grant revenue of $2.31.1 million and $6.92.6 million, respectively, under the CEPI Funding Agreement. Duringduring the three and ninesix months ended SeptemberJune 30, 2021, the Company recognized grant revenue of2023, and $0.22.4 million and $4.7 million, respectively, during the three and six months ended June 30, 2022 under the CEPI Funding Agreement. As of SeptemberJune 30, 20222023 and December 31, 2021, short term2022, short-term deferred revenue of $4.91.7 million and $9.43.0 million, respectively, was recorded on the condensed consolidated balance sheet.sheets. Deferred revenue will be recognized over the period in which the CEPI Funding Agreementfunding agreement activities related to the first and second tranches of funding are expected to take place, which is currently estimated to be through the first halfend of the year 2023. As of SeptemberJune 30, 20222023 and December 31, 2021,2022, $4.91.7 million and $9.43.0 million, respectively, was recorded as short-term restricted cash on the condensed consolidated balance sheet.

Changes in the deferred revenue balance during the ninesix months ended SeptemberJune 30, 20222023 for the CEPI Funding Agreement are as follows (in thousands):

 

Deferred Revenue

 

 

Deferred Revenue

 

Balance at December 31, 2021

 

$

9,379

 

Balance at December 31, 2022

 

$

2,952

 

Additions

 

 

2,697

 

 

 

1,215

 

Deductions

 

 

(7,166

)

 

 

(2,509

)

Balance at September 30, 2022

 

$

4,910

 

Balance at June 30, 2023

 

$

1,658

 

Gates Foundation

In November 2021, the Company entered into a Grant Agreement with the Gates Foundation (the “Gates("Gates Grant Agreement”Agreement"), under which provides funding for the Company’s development ofCompany will develop an optimal immunogen in the context of a therapeutic human papillomavirus (“HPV”("HPV") vaccine. In consideration for the work to be performed, the Gates Foundation provided the Company with an upfront payment of $2.2 million in December 2021, and future funding ofadditional $1.00.7 million is expected to bewas received by the Company in the first quarter of 2023, for a total grant amount of up to $3.2 million.April 2023.

Payments received in advance that are related to future performance are deferred and recognized as grant revenue when the research and development activities are performed. Cash payments received under the Gates Grant Agreement are restricted as to their use until expenditures contemplated in the funding agreement are incurred. The Company did not recognize any grant revenue under the Gates Grant Agreement in 2021. DuringThe Company recognized grant revenue of $0.5 million and $0.9 million, respectively, during the three and ninesix months ended SeptemberJune 30, 2022, the Company recognized2023, and $0.3 million and $0.80.5 million, respectively, in revenueduring the three and six months ended June 30, 2022 under the Gates Grant Agreement. As of SeptemberJune 30, 2023 and December 31, 2022, restricted cash and short-term deferred revenue of $1.40.8 million and $1.0 million, respectively, was recorded on the condensed consolidated balance sheet.sheets. Deferred revenue will be recognized over the period in which the funding agreement activities related to the first tranchetranches of funding are expected to take place, which is currently estimated to be through the first half ofyear ended 2023.

25


Changes in the deferred revenue balance during the ninesix months ended SeptemberJune 30, 20222023 for the Gates Grant Agreement are as follows (in thousands):

 

Deferred Revenue

 

 

Deferred Revenue

 

Balance at December 31, 2021

 

$

2,225

 

Balance at December 31, 2022

 

$

1,025

 

Additions

 

 

 

 

 

700

 

Deductions

 

 

(805

)

 

 

(946

)

Balance at September 30, 2022

 

$

1,420

 

Balance at June 30, 2023

 

$

779

 

10.25


10. Stockholders’ Equity

The Company’s amended and restated certificate of incorporation provides for 300,000,000 shares of common stock and 10,000,000 shares of preferred stock authorized for issuance, each with a par value of $0.0001 per share.

As of SeptemberJune 30, 20222023 and December 31, 2021,2022, no shares of preferred stock were issued and outstanding.

As of SeptemberJune 30, 20222023 and December 31, 2021,2022, there were 73,134,05191,224,210 and 69,047,87886,894,901 shares of common stock issued and outstanding, respectively. Holders of the Company’s common stock are entitled to one vote per share.

Sale of Common Stock and Pre-Funded Warrants

In October 2019, the Company filed a Registration Statement on Form S-3 (the “2019 Shelf Registration Statement”) with the SEC, covering the offering of up to $250.0 million of common stock, preferred stock, debt securities, warrants and units. The 2019 Shelf Registration Statement included a prospectus supplement covering the issuance and sale of up to $75.0 million of the Company’s common stock, from time to time, through an “at-the-market” offering program (the “2019 ATM Offering Program”) under the Securities Act of 1933, as amended (the “Securities Act”). The SEC declared the 2019 Shelf Registration Statement effective on November 8, 2019.

In connection with the 2019 ATM Offering Program, in October 2019, the Company entered into a sales agreement (the “2019 Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which Cowen acts as the Company’s sales agent and, from time to time, offers and sells shares of the Company’s common stock having an aggregate offering price of up to $75.0 million. Cowen is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold under the 2019 Sales Agreement. In addition, the Company agreed to reimburse a portion of Cowen’s expenses in connection with the 2019 ATM Offering Program up to $50,000. During the year ended December 31, 2021, the Company issued and sold 3,990,869 shares of its common stock through its 2019 ATM Offering Program and received net proceeds of approximately $36.6 million, net of commissions and other offering costs. During the nine months ended September 30, 2022, there have been no sales of shares of the Company’s common stock through its 2019 ATM Offering Program.

In December 2020, the Company entered into two private placement financing transactions (collectively, the “First PIPE Financing”), as follows: (i) to sell 5,543,351 shares of its common stock at a price of $3.34 per share and pre-funded warrants (the “Warrants”) to purchase 27,480,719 shares of common stock at a price of $3.34 per share (of which $3.33 per share was prepaid by each purchaser), and (ii) to sell an additional 4,043,127 shares of its common stock at a price per share of $3.71. In connection with the First PIPE Financing, the Company received aggregate net proceeds of approximately $119.8 million. The Warrants are exercisable upon issuance at an exercise price of $0.01 per share.

The outstanding Warrants generally may not be exercised if the holder’s aggregate beneficial ownership would be more than 9.99% of the total issued and outstanding shares of the Company’s common stock following such exercise. The exercise price and number of shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) are subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrant agreements. Under certain circumstances, the Warrants may be exercisable on a “cashless” basis. In connection with the issuance and sale of the common stock and Warrants, the Company granted the purchasers certain registration rights with respect to the Warrants and the Warrant Shares.

The Warrants were classified as a component of permanent stockholders’ equity within additional paid-in-capital and were recorded at the issuance date using a relative fair value allocation method. The Warrants are equity

26


classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of common shares upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria. In addition, such Warrants do not provide any guarantee of value or return. The Company valued the Warrants at issuance, concluding their sales price approximated their fair value, and allocated net proceeds from the sale proportionately to the common stock and Warrants, of which $87.7 million, net of issuance costs, was allocated to the Warrants and recorded as a component of additional paid-in-capital.

In September 2021, the Company completed a PIPE financing transaction, in which it sold 5,000,000 shares of its common stock at a price of $11.00 per share pursuant to a securities purchase agreement entered into on September 16, 2021 (the “Second PIPE Financing”). The Company received aggregate net proceeds of approximately $52.7 million after deducting placement agent commissions and offering expenses payable by the Company. In connection with the issuance and sale of the common stock, the Company filedagreed to file a registration statement with the SEC registering the resale of the shares of common stock issued in the Second PIPE Financing.

In March 2022, the Company filed a Registration Statement on Form S-3 with the SEC (the “2022 Shelf Registration Statement”), covering the offering of up to $250.0 million of common stock, preferred stock, debt securities, warrants and units. The 2022 Shelf Registration Statement included a prospectus supplement covering the issuance and sale of up to $100.0 million of the Company’s common stock, from time to time, through an “at-the-market” offering program (the “2022 ATM Offering Program”) under the Securities Act. The SEC declared the 2022 Shelf Registration Statement effective as of May 6, 2022.

In connection with the 2022 ATM Offering Program, in March 2022, the Company also entered into a sales agreement (the “2022 Sales Agreement”) with Cowen, pursuant to which Cowen will act as the Company’s sales agent and, from time to time, offer and sell shares of the Company’s common stock having an aggregate offering price of up to $100.0 million. Cowen is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold under the 2022 Sales Agreement. In addition, the Company agreed to reimburse a portion of Cowen’s expenses in connection with the 2022 ATM Offering Program up to $50,000

26


. As of September 30,December 31, 2022, the Company has received aggregate proceeds from its 2022 ATM Offering Program of $0.219.6 million, net of commissions and offering costs, pursuant to the issuance of 95,0007,034,948 shares of its common stock. As of June 30, 2023, the Company has received aggregate proceeds from its 2022 ATM Offering Program of $22.1 million, net of commissions and offering costs, pursuant to the issuance of 7,889,000 shares of its common stock.

In October 2022, the Company completed a PIPE financing transaction, in which it sold 6,637,165 shares of its common stock at a price of $2.26 per share pursuant to a securities purchase agreement entered into on October 24, 2022 and pre-funded warrants (the “Warrants”) to purchase 13,274,923 shares of common stock at a price of $2.26 per share (of which $2.2599 per share was prepaid by each purchaser) (the “Third PIPE Financing”). The Company received aggregate net proceeds of approximately $42.4 million after deducting placement agent commissions and offering expenses payable by the Company. In connection with the issuance and sale of the common stock, the Company agreed to file a registration statement with the SEC registering the resale of the shares of common stock issued in the Third PIPE Financing. The Warrants are exercisable upon issuance at an exercise price of $0.0001 per share.

The outstanding Warrants generally may not be exercised if the holder’s aggregate beneficial ownership would be more than 9.99% of the total issued and outstanding shares of the Company’s common stock following such exercise. The exercise price and number of shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) are subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrant agreements. Under certain circumstances, the Warrants may be exercisable on a “cashless” basis. In connection with the issuance and sale of the common stock and Warrants, the Company granted the purchasers certain registration rights with respect to the Warrants and the Warrant Shares.

The Warrants were classified as a component of permanent stockholders’ equity within additional paid-in-capital and were recorded at the issuance date using a relative fair value allocation method. The Warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of common shares upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria. In addition, such Warrants do not provide any guarantee of value or return. The Company valued the Warrants at issuance, concluding their sales price approximated their fair value, and allocated net proceeds from the sale proportionately to the common stock and Warrants, of which $28.2 million, net of issuance costs, was allocated to the Warrants and recorded as a component of additional paid-in-capital.

Common Stock Warrants

As of SeptemberJune 30, 2022,2023, the following warrants to purchase shares of the Company’s common stock were issued and outstanding:

Issue Date

 

Expiration Date

 

Exercise Price

 

 

Number of Warrants Outstanding

 

 

Expiration Date

 

Exercise Price

 

 

Number of Warrants Outstanding

 

December 28, 2020

 

None

 

$

0.01

 

 

 

13,573,704

 

 

None

 

$

0.01

 

 

 

10,713,733

 

October 24, 2022

 

None

 

$

0.0001

 

 

 

13,274,923

 

 

 

 

 

 

 

 

23,988,656

 

There were 2,859,971 warrants exercised during the three and six months ended June 30, 2023 resulting in the Company issuing 2,849,405 shares of common stock due to net exercise of some of the warrants. During the ninesix months ended SeptemberJune 30, 2022, 3,442,567 warrants were exercised resulting in the Company issuing 3,442,567 shares of common stock.No warrants were exercised during the three and nine months ended September 30, 2021.

27


11. Stock-Based Compensation

Award Incentive Plans

In August 2015, the Company’s board of directors approved the 2015 Equity Incentive Plan (“2015 Plan”). In connection with the Company’s IPO and the effectiveness of the 2018 Award Incentive Plan (“2018 Plan”), discussed below, the 2015 Plan terminated. The 92,815 shares of common stock that were then unissued and available for future issuance under the 2015 Plan became available under the 2018 Plan.

In September 2018, the Company’s board of directors approved the 2018 Plan. Under the 2018 Plan, a total of 2,690,000

27


shares of common stock were initially reserved for issuance under the 2018 Plan, plus the number of shares remaining available for future awards under the 2015 Plan, as of the effective date of the 2018 Plan. The number of shares of common stock reserved for issuance under the 2018 Plan will automatically increasesincrease on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by 4% of the total number of shares of the Company’s outstanding stock on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors. The 2018 Plan provides, among other things,others, for the grant of options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance bonus awards.

The maximum number of shares that may be issued upon the exercise of stock options under the 2018 Plan is 45,000,000.

The Company’s board of directors has the authority to determine to whom options will be granted, the number of shares, the term, and the exercise price. If an individual owns stock representing 10% or more of the outstanding shares, the price of each share shall be at least 110% of the fair market value, as determined by the board of directors. Options granted have a term of up to 10 years and generally vest over a 4-year period with a straight-line vesting.

Material Features of the 2021 Employment Inducement Incentive Award Plan

In April 2021, the Company’s board of directors adopted the 2021 Employment Inducement Incentive Award Plan (the “2021 Plan”), pursuant to Nasdaq Listing Rule 5635(c)(4). The principal purpose of the 2021 Plan is to enhance our ability to attract, retain and motivate employees who are expected to make important contributions to us by providing such individuals with equity ownership opportunities. Awards granted under the 2021 Plan are intended to constitute “employment inducement awards” under Nasdaq Listing Rule 5635(c)(4), and, as such, the 2021 Plan is intended to be exempt from the Nasdaq Listing Rules regarding shareholder approval of stock option and stock purchase plans. A total of 790,400 shares of our common stock (the “Share Limit”("Share Limit") were initially reserved for issuance under the 2021 Plan. The Share Limit may be increased by the Company’sCompany's board of directors. The 2021 Plan provides for the grant of non-qualified stock options, restricted stock units, restricted stock awards, stock appreciation rights, and other stock-based and cash-based awards. The 2021 Plan does not provide for the grant of incentive stock options. Awards under the 2021 Plan may be granted to eligible employees who are either new employees or who are commencing employment with the Company or one of its subsidiaries following a bona fide period of non-employment with the Company, and for whom such awards are granted as a material inducement to commencing employment with the Company or one of its subsidiaries. Awards under the 2021 Plan may not be granted to the Company’sCompany's consultants or non-employee directors.

The 2021 Plan is administered by our board of directors and the Company's compensation committee, acting pursuant to the extent the Company’sdelegation by our board of directors delegates its authority to it, the Company’s compensation committee.directors. In the event of a change in control in which the Company’sCompany's successor refuses to assume or substitute any outstanding award under the 2021 Plan, the vesting of such award will accelerate in full. The Company’sCompany's board of directors may terminate, amend, or modify the 2021 Plan at any time, provided that no termination or amendment may materially impair any rights under any outstanding award under the 2021 Plan without the consent of the holder.

On April 21, 2022, the Company’s board of directors increased the number of shares available under the 2021 Plan by 700,000 shares. On February 2, 2023, the Company’s board of directors increased the number of shares available under the 2021 Plan by 1,300,000 shares.

28


Stock Option Activity

A summary of the 2018 Plan and 2021 Plan activity is as follows:

 

 

 

 

 

Options Outstanding

 

 

 

Number of
Shares
Available
for
Issuance

 

 

Number
of Shares

 

 

Weighted-
Average
Exercise Price

 

 

Weighted-
Average
Remaining
Contractual
Term (in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Balance at December 31, 2021

 

 

3,459,187

 

 

 

5,107,335

 

 

$

9.82

 

 

 

8.13

 

 

$

17,153

 

Authorized

 

 

3,461,915

 

 

 

 

 

$

 

 

 

 

 

 

 

Granted

 

 

(3,289,384

)

 

 

2,939,211

 

 

$

4.88

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

(140,000

)

 

$

1.03

 

 

 

 

 

 

 

Cancelled

 

 

1,054,304

 

 

 

(911,676

)

 

$

8.61

 

 

 

 

 

 

 

Balance at September 30, 2022

 

 

4,686,022

 

 

 

6,994,870

 

 

$

8.07

 

 

 

8.22

 

 

$

532

 

Vested and exercisable at
   September 30, 2022

 

 

 

 

 

3,008,491

 

 

$

9.15

 

 

 

7.24

 

 

$

354

 

Vested and expected to vest at
   September 30, 2022

 

 

 

 

 

6,400,481

 

 

$

8.19

 

 

 

8.14

 

 

$

504

 

 

 

 

 

 

Options Outstanding

 

 

 

Number of
Shares
Available
for
Issuance

 

 

Number
of Shares

 

 

Weighted-
Average
Exercise Price

 

 

Weighted-
Average
Remaining
Contractual
Term (in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Balance at December 31, 2022

 

 

4,814,394

 

 

 

6,951,620

 

 

$

7.92

 

 

 

8.08

 

 

$

1,089

 

Authorized

 

 

4,775,796

 

 

 

 

 

$

 

 

 

 

 

 

 

Granted

 

 

(4,046,553

)

 

 

531,766

 

 

$

2.31

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

(6,000

)

 

$

0.76

 

 

 

 

 

 

 

Canceled

 

 

410,882

 

 

 

(137,273

)

 

$

6.30

 

 

 

 

 

 

 

Balance at June 30, 2023

 

 

5,954,519

 

 

 

7,340,113

 

 

$

7.55

 

 

 

7.74

 

 

$

188

 

Vested and exercisable at
   June 30, 2023

 

 

 

 

 

3,963,515

 

 

$

8.74

 

 

 

6.98

 

 

$

174

 

Vested and expected to vest at
   June 30, 2023

 

 

 

 

 

6,924,135

 

 

$

7.66

 

 

 

7.68

 

 

$

186

 

For the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, the total intrinsic value of stock option awards exercised was $0.4immaterial million and $5.40.3 million, respectively, determined at the date of option exercise, and the total cash received upon exercise of stock options was not significant for either period. The aggregate intrinsic value was calculated as the difference between the exercise prices of the underlying stock option awards and the estimated fair value of the common stock on the date of exercise.

As of SeptemberJune 30, 2022,2023, $15.911.8 million of total unrecognized compensation cost related to non-vested employee and consultant options is expected to be recognized over a weighted-average period of 2.62.0 years. The total fair value of shares vested during the ninesix months ended SeptemberJune 30, 20222023 was $2.64.2 million.

Stock-based compensation expense and awards granted to non-employees were $0.50.3 million and immaterial, respectively, for the ninesix months ended SeptemberJune 30, 20222023 and 2021.2022.

29


Restricted Stock Units

We have granted restricted stock unit awards under the 2018 Equity Plan. Our restricted stock unit awards have a term of up to 10 years and generally vest over a 6 month, 1 or 2-year period.The following table summarizes our restricted stock unit activity during the ninesix months ended SeptemberJune 30, 2022:2023:

 

Number of Shares

 

 

Weighted-
Average
Grant Date
Fair Value

 

 

Number of Shares

 

 

Weighted-
Average
Grant Date
Fair Value

 

Outstanding, unvested at December 31, 2021

 

 

708,800

 

 

$

5.29

 

Outstanding, unvested at December 31, 2022

 

 

561,526

 

 

$

5.38

 

Issued

 

 

350,173

 

 

$

5.46

 

 

 

3,514,787

 

 

$

3.29

 

Vested

 

 

(353,300

)

 

$

5.29

 

 

 

(561,526

)

 

$

5.38

 

Canceled/Forfeited

 

 

(142,628

)

 

$

5.35

 

 

 

(57,746

)

 

$

3.29

 

Outstanding, unvested at September 30, 2022

 

 

563,045

 

 

$

5.38

 

Outstanding, unvested at June 30, 2023

 

 

3,457,041

 

 

$

3.29

 

29


Stock-Based Compensation Expense

Total stock-based compensation for all awards granted to employees, consultants and ourthe Company's 2018 Employee Stock Purchase Plan (“ESPP”), before taxes, is as follows (in thousands):

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Research and development expenses

 

$

1,615

 

 

$

1,688

 

 

$

5,083

 

 

$

5,033

 

 

$

1,631

 

 

$

1,723

 

 

$

3,244

 

 

$

3,468

 

General and administrative expenses

 

 

1,449

 

 

 

1,131

 

 

 

4,466

 

 

 

2,720

 

 

 

1,309

 

 

 

1,631

 

 

 

2,587

 

 

 

3,017

 

Total

 

$

3,064

 

 

$

2,819

 

 

$

9,549

 

 

$

7,753

 

 

$

2,940

 

 

$

3,354

 

 

$

5,831

 

 

$

6,485

 

12. Net Loss Per Common Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents.

The following table sets forth the computation of the basic and diluted net income (loss)loss per share (in thousands, except for share and per share amounts):

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(29,966

)

 

$

(28,118

)

 

$

(88,397

)

 

$

(45,313

)

 

$

(35,256

)

 

$

(29,515

)

 

$

(69,238

)

 

$

(58,431

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic
and diluted

 

 

86,597,405

 

 

 

77,775,497

 

 

 

86,441,212

 

 

 

76,837,503

 

 

 

114,929,523

 

 

 

86,448,632

 

 

 

114,676,261

 

 

 

86,363,116

 

Net loss per share, basic and diluted

 

$

(0.35

)

 

$

(0.36

)

 

$

(1.02

)

 

$

(0.59

)

 

$

(0.31

)

 

$

(0.34

)

 

$

(0.60

)

 

$

(0.68

)

In December 2020, the Company issued and sold the 2020 Warrants to purchase 27,480,719 shares of common stock at a nominal exercise price of $0.01 per share and, in October 2022, the Company issued and sold the 2022 Warrants to purchase 13,274,923 shares of common stock at a nominal exercise price of $0.0001 per share (see Note 10). The shares of common stock into which the 2020 and 2022 Warrants may be exercised are considered outstanding for the purposes of computing earnings per share, because the shares may be issued for little or no consideration, they are fully vested and the Warrants are immediately exercisable upon their issuance date.

30


During a period of net loss, basic net loss per share is the same as diluted net loss per share, as the inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

 

September 30,

 

 

June 30,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Options issued and outstanding and ESPP shares issuable and outstanding

 

 

7,117,085

 

 

 

5,281,474

 

 

 

7,596,222

 

 

 

7,200,540

 

Restricted stock subject to future vesting

 

 

563,045

 

 

 

 

 

 

3,457,041

 

 

 

627,863

 

Total

 

 

7,680,130

 

 

 

5,281,474

 

 

 

11,053,263

 

 

 

7,828,403

 

13. Subsequent Events

In October 2022, the Company completed a PIPE financing transaction, in which it sold 6,637,165 shares of its common stock at a price of $2.26 per share and pre-funded warrants to purchase an aggregate of 13,274,923 shares of common stock at a per warrant share price of $2.2599 pursuant to a securities purchase agreement entered into on October 24, 2022. The Company received aggregate gross proceeds of approximately $45.0 million before deducting placement agent commissions and offering expenses. The pre-funded warrants will expire when exercised in full, will have a nominal exercise price of $0.0001 per share, and are immediately exercisable upon issuance. The exercise price and number of shares of Common Stock issuable upon the exercise of the pre-funded warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the pre-funded warrants.

3130


ITEM 2. 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 the condensed consolidated financial statements and notes thereto included elsewhere in this report, and our audited financial statements and related notes thereto included as part of our Annual Report on Form 10‑K for the year ended December 31, 2021.2022. This discussion and analysis, and other parts of this report, contain forward-looking statements, including, but not limited to, our clinical and regulatory development plans for our product candidates; our expectations regarding the data to be derived in our ongoing and planned clinical trials; the timing of commencement of our future nonclinical studies, clinical trials and research and development programs; our ability to discover, develop and advance product candidates into, and successfully complete, clinical trials; our plans and strategy regarding maintaining existing and entering into new collaborations and/or partnerships; the timing or likelihood of regulatory filings and approvals for our product candidates; our expectations regarding the impact of the COVID-19 pandemic or the end of the COVID-19 pandemic on our operations; and the sufficiency of our capital resources. These forward-looking statements relatedare identified by their use of terms and phrases, such as “believe,” “could,” “aim,” “expect,” “intend,” “may,” “plan,” “will,” and other similar terms and phrases, including references to the potential of Gritstone’s programs.assumptions. Such forward-looking statements involve substantial risks and uncertainties that could cause the outcome of Gritstone’s programs, future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements, including that interim results obtained may differ from those at completion of the studies and clinical trials. Such risks and uncertainties include, among others, the uncertainties inherent in the drug development process, including Gritstone’sour programs’ clinical development, the process of designing and conducting preclinical and clinical trials, the regulatory approval processes, the timing of regulatory filings, the challenges associated with manufacturing drug products, Gritstone’sour ability to successfully establish, protect and defend its intellectual property and other matters that could affect the sufficiency of existing cash to fund Gritstone’sour operations. Our actual results could differ materially from those discussed in these forward-looking statements. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to our business in general, see the section titled “Risk Factors”. included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022. These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason.

Overview

We are a clinical-stage biotechnology company focused on combining immunological insights with proprietary technologies and capabilities to develop next-generation vaccines. Specifically, we discover, develop, manufacture and deliver next generationvaccine-based immunotherapy candidates against cancer and infectious diseasedisease. Our goal is to unlock more potent and durable immunity by harnessing vaccine candidates withinnovation. We aim to achieve that goal by leveraging our in-house capabilities and technologies to address the aimshortcomings of improving patient outcomescurrently available vaccines and eliminating disease. immunotherapies.

The immune system sits at the nexus of many diseases, and manipulationwe believe that immune response modulation is core to several transformational product classes. Recent advances have pointed to T cells as being central to the success of cancer immunotherapy and critical in the immune systemelimination of virally infected cells. We believe that our scientific approach of focusing on generating antigen-specific T cells, particularly the challenging but critical cytotoxic CD8+ T cell subclass, has enormousthe potential to drive transformational therapeutic and preventativeprophylactic benefits. Our approach seeks to generate a potent and durable therapeutic or protective immune response by leveraging insights into the immune system’s ability to recognize and destroy diseased cells and eliminate virally-infected cells. Specifically, we focus on the induction of T cells, critical but underexplored components in treatment and prevention of disease, to generate differentiated immune responses that extend and improve the quality of life.

Our programs are built on two key platforms. The first platform is our proprietary EDGE™ epitope identification platform, which enables us to identify antigens that can be recognized by the immune system on tumors or virally-infected cells with a high degree of accuracy. The second platform is our potent, flexible, vaccine platform, which we have engineered to deliver immunogens to the immune system to drive the destruction of tumors or virally-infected cells. Our vaccine platform leverages our two proprietary vaccine vectors, self-amplifying mRNA (samRNA) and chimpanzee adenovirus (ChAd). We utilize these “mix and match” vectors in a variety of ways, including as a heterologous prime-boost (one vector followed by the other) or homologous prime-boost (use the same vector twice). Together, these proprietary and synergistic technologies enable us to build robust and distinct pipelines in oncology and infectious disease. Additionally, our in-house manufacturing capabilities enable us to drive down cost and production time, as well as maintain control over intellectual property and product quality of our products.

Self-amplifying mRNA (samRNA)

Our samRNA vector is based on a synthetic RNA molecule derived from a wild-type Venezuelan Equine Encephalitis Virus (VEEV) replicon with the goal of extending the duration and magnitude of immunogen expression to drive potent and durable immune responses. The samRNA is delivered in a lipid nanoparticle (LNP) formulation. Like traditional mRNA vaccines, samRNA vaccines use the host cell’s transcription system to produce target antigens to stimulate adaptive immunity. Unlike traditional mRNA, samRNA has an inherent ability to replicate by creating copies of the original strand of RNA once it is in the cell. Potential benefits of samRNA may include extended duration and magnitude of antigen expression, strong and durable induction of neutralizing antibody and T cell immunity (CD4+ and CD8+), dose sparing, and a refrigerator stable product.

The samRNAIn oncology, we develop personalized vaccines that aim to destroy tumors through CD8+ (killer) T cell recognition of tumor cells by virtue of their surface display of neoantigens, peptides that are presented on cancer cells when certain mutations occur in tumor DNA. In infectious disease, we develop both therapeutic and prophylactic vaccines targeting both T cells and B cells. We believe we are leading the field of development and application of self-amplifying mRNA (samRNA), a rapidly emerging platform is a key asset for Gritstone. Withintechnology. Our unique approach to immunogen design, whereby our oncology programs, we have presented clinical data supporting the identification and selection of an optimal dosing regimen for our novel samRNA vector against

32


solid tumors. We also leverage our samRNA platform for infectious diseases, and our preclinical and clinical studiesvaccines deliver, as appropriate, whole proteins to date demonstrate the potential overall potency and dose sparing opportunity of samRNA in viral diseases.

The success of first-generation mRNA vaccines for SARS-CoV-2 (Comirnaty® and Spikevax) has validated mRNA as a vaccine technology and we believe the samRNA vectordrive neutralizing antibodies (nAbs) and/or protein fragments to drive T cell responses, has the potential to offer key benefits over mRNA, including dose sparingboth neutralize incoming pathogens (through nAbs) and more potentkill infected cells through CD8+ T cell induction, within both oncology and viral diseases.recognition of foreign, pathogen-derived peptides displayed on the surface of infected cells.

Chimpanzee Adenovirus (ChAd)31


Chimpanzee Adenoviral (ChAd) vectors have been utilized in clinical studies in infectious disease and oncology over the last 20 years and have been demonstrated to be well tolerated and effective at generating rapid and substantial CD4+ and CD8+ T cell responses. Additionally, ChAd vectors can induce B cell immune responses, i.e., elicit nAbs.

In-house Manufacturing

We manufacture our product candidates at our own fully integrated current good manufacturing practice (cGMP) biomanufacturing facilities. Our ability to control the manufacturing of high-quality tumor-specific immunotherapy and infectious disease vaccine candidates, and scale production, if early data are positive, is critical for efficient clinical development of our vaccine candidates and commercialization.

Our manufacturing know-how also contributes to our translational scienceclinical programs include GRANITE, an individualized neoantigen-based vaccine program; SLATE, an “off-the-shelf” neoantigen-based vaccine program; CORAL, a second-generation SARS-CoV-2 vaccine program; and optimization of our production candidates. Through our work, we gain insights from “bench to manufacturing to bedside” and back. We translate such insights across functions and systems to optimize antigen cassette design, dose andHIV, an HIV vaccine regimen to induce differentiated immune response.

Clinical Programsprogram in collaboration with Gilead Sciences, Inc (Gilead).

The table below summarizes key information about our ongoing clinical trials.

Program

Phase

Status

Indication(s)

Collaborator

Commercial Rights

GRANITE

2/3

Enrollment Completed (Ph2 portion); Treatment Ongoing

MSS-CRC* first line maintenance

Gritstone

GRANITE

1/2

Enrollment Complete; Treatment Ongoing

Completed

Early stage & advanced solid tumors

Gritstone

GRANITE

2/3

Enrolling; Treatment Ongoing

MSS-CRC* first line maintenance

Gritstone

GRANITE

2

Terminated

MSS-colon cancer adjuvant

Gritstone

SLATE

1/2

Complete

Active, not recruiting

p53,

KRAS Advanced Solid Tumors

Gritstone

SLATEHIV

2

Enrolling1

KRASmut

Ongoing

HIV treatment/cure

Gilead Sciences

Gilead**

CORAL

1

Active, not recruiting

SARS-CoV-2 in South Africa

CEPI

Gritstone

CORAL

1

Enrollment Complete

Completed

COVID-19 naïve &

SARS-CoV-2 booster

NIAID, IDCRC

Gritstone

CORAL

1

Enrollment Complete

Active, not recruiting

COVID-19

SARS-CoV-2 naïve & booster

NIAID, IDCRC

Gritstone

CORAL

1

Enrolling

COVID-19 in South Africa (naïve, convalescent, HIV+)

CEPI

Gritstone

HIV

1

Ongoing

HIV treatment/cure

Gilead Sciences

Gilead**

* MSS-CRC = microsatellite stable colorectal cancer

** Gilead is responsible for conducting a Phase 1 study

Beyond GRANITE, SLATE, CORAL and the HIV collaboration with Gilead, we continue to apply our broad set of capabilities in oncology and infectious diseases through promising preclinical work and partnerships.

COVID-19 UpdateImpact on our Business

Since the COVID-19 pandemic began, providers of healthcare services have had to deal with significant strains on their operations. These strains have affected all healthcare institutions, including those where we conduct our clinical trials, with some institutions prohibiting or postponing the initiation of new clinical trials, slowing or halting enrollment in existing trials and restricting the on-site monitoring of clinical trials. Although our operations have not been materially impacted by the COVID-19 pandemic, we have experienced slowing of patient recruitment and sample collection in our ongoing clinical trials. Additionally, as a result of the COVID-19 pandemic, competition for potential patients in our trials may be further exaggerated as a result of multiple clinical site closures. To date, the COVID-19 pandemic has not materially affected our supply chain or production schedule, but further escalation of the health

33


crisis has the potential to cause delays in our supply chain and manufacturing operations, which could materially adversely impact our business.

In response to the COVID-19 pandemic, we have implemented heightened health and safety measures designed to comply with applicable federal, state and local guidelines, and transitioned to a flexible work environment, where employees who can work from home effectively are allowed to do so. We have implemented virtual meeting and messaging technology and encourage employees to follow local health authority guidance. As the pandemic and its impacts continue to evolve, we may need to undertake additional actions that could impact our operations if required by applicable laws or regulations or if we determine such actions to be in the best interests of our employees. Yet, we note that on May 11, 2023, the COVID-19 Public Health Emergency declared by the U.S. Department of Health and Human Services, declared under Section 319 of the Public Health Service Act, expired. Previously, on May 4, 2023, the World Health Organization Director-General determined that COVD-19 is now an established and ongoing health issue which no longer constitutes a public health emergency of international concern. At this time, it is not clear what, if any, impact these developments may have on our business, financial condition, results of operations or prospects.

Oncology Program Updates

We are developing a portfolio of vaccine-based cancer immunotherapy product candidates using a heterologous prime (ChAd)/boost (samRNA) approach aimed at the highly targeted activation of tumor-specific neoantigens (TSNA) in solid tumors. Our two clinical-stage programs (GRANITE, which is “individualized” and SLATE, which is “off-the-shelf”) aim to induce a substantial neoantigen-specific CD8+ T cell response using neoantigen-containing immunotherapies. GRANITE patients receive a product candidate made specifically for them, based upon their tumor DNA/RNA sequence. In contrast, SLATE patients receive an off-the-shelf product candidate made for a subset of patients based on common driver mutations.

32


GRANITE Individualized Vaccine Program for Solid Tumors

Our first oncology program, GRANITE, consists of individualized neoantigen-based immunotherapy candidates for solid tumors. GRANITE was granted Fast Track designation by the FDA for the treatment of microsatellite stable colorectal cancer (MSS-CRC). in 2018.

In an ongoingData generated from our Phase 1/2 study evaluating GRANITE in combination with checkpoint inhibitors for patients within 3rd line MSS-CRC that have been treated with FOLFOX/FOLFIRI therapy as well as in patients with gastro-esophageal (GEA) cancer that have been treated with platinum-based chemotherapy, GRANITE hasand other advanced solid tumors demonstrated positive results. Among all cohorts (n=29), the vaccine regimen was shown to be generally well-tolerated with no dose limiting toxicities and demonstrated consistent and potent immunogenicity (CD8+CD8+ neoantigen-specific T cell induction in all subjects), in addition to tumor lesion size reductions andinduction. Additionally, an association between molecular responses as(as measured by a >30% reduction from baseline in circulating tumor DNA, (cDNA)ctDNA) and improved clinical outcomes (including overall survival) was observed in patients with MSS-CRC.

As of August 31, 2022, 55% of patients within the MSS-CRC cohort (n=13) demonstrated a molecular response (6/11 evaluable patients). Initial results from this study were presented duringAmong molecular responders (n=6), the European Societymedian overall survival (mOS) had not yet been reached and was expected to exceed at least 22 months. This compares to mOS of Medical Oncology (ESMO) Congress7.8 months in September 2021, and follow-up forevaluable MSS-CRC patients who did not exhibit a molecular response in the study, continues. Asand a mOS of the August 5, 2021 data cutoff, 46-7 months for patients who receive standard of 9 treated patients with MSS-CRC had a molecular response. Patients who demonstrated molecular response had median overall survival of >17 months (median not reached) whereas those without molecular response exhibited a median overall survival of 7.8 months, consistent with expected outcomes in 3rd line treatment of MSS-CRC. As of the next data cutoff on May 9, 2022, the observed median overall survival in this group exceeded 18 months with median OS not yet reached. All patients with MSS-CRC assessed for molecular responsecare (Trifluridine/tipiracil combo and alive at the time of our ESMO 2021 data presentation remained alive after an additional 35 weeks of follow-up. We believe these data demonstrate a correlation between a decrease in ctDNA and extended overall survival.Regorafenib monotherapy). Interim results from the Phase 1/2 study of GRANITE were published in Nature Medicine in August 2022 (“Individualized, heterologous chimpanzee adenovirus and self-amplifying mRNA neoantigen vaccine for advanced metastatic solid tumors: phase 1 trial interim results”).2022.

InUpon assessing initial results of the first quarter of 2022,GRANITE Phase 1/2 study, we discussed potential registrational paths with the FDA and subsequently initiated a randomized, controlled Phase 2/3 trial in newly diagnosed metastatic CRC patients that has registrational intent (NCT05141721). The study, (GRANITE-CRC-1L, NCT05141721),which is evaluating GRANITE as a maintenance treatment in patients with newly diagnosed, metastaticfirst-line MSS-CRC who have completed FOLFOX-bevacizumabFOLFOX (or FOLFOXFIRI)-bevacizumab induction therapy. Thistherapy, was announced in late 2021. The first patient was enrolled in the ongoing Phase 2 portion of the Phase 2/3 study has registrational intentin January 2022, and has been discussed withenrollment in the FDA. In supportPhase 2 portion of thisthe study we entered into a clinical trial collaboration and supply agreement with F. Hoffman-La Roche Ltdwas completed in August 2023. We expect to evaluateshare preliminary efficacy data from the safety and tolerabilityPhase 2 portion of GRANITEthe Phase 2/3 study in combination with TECENTRIQ (atezolizumab). Enrollment in GRANITE-CRC-1L study is ongoing, and the first patient was treated in July 2022. Initial data from GRANITE-CRC-1L are expected in the fourth quarter of 2023. In August 2022, we terminated the GRANITE-ADJUVANT study (NCT05456165), a randomized Phase 2 trial evaluating GRANITE in patients with stage II/III colon cancer who are circulating tumor DNA (ctDNA)+ after definitive surgery, due to reprioritization of resources. No patients had been enrolled at the time of study termination.2024.

SLATE “Off "Off the shelf” Vaccine Program for Solid Tumors

Our second oncology program, SLATE, consists of “off-the-shelf”, TSNA-directed immunotherapy product candidates. SLATE contains a fixed cassette with TSNA that are shared across a subset of cancer patients rather than a cassette unique to an individual patient, which distinguishes it as a potential off-the-shelf alternative candidate to GRANITE. The key differentiator and advantage of SLATE as compared to GRANITE is speed. SLATE vaccines are produced and delivered to clinical sites proactively and can be administered rapidly upon patient selection (achieved by standard commercial screening for driver mutations). We believe vaccines capable of targeting neoantigens from common tumor driver mutations, such as SLATE, have a clear potential clinical utility and commercialization advantages that are complementary to individualized vaccines.

34


GRANITE. Our long-term vision for the SLATE program is to develop a suite of novel vaccine candidates that target common tumor antigens to broaden addressable patient population and drive multiple antigens per patient.

The firstAn initial version of SLATE (SLATE v1) was studied in a Phase 1/2 study in collaboration with Bristol-Myers Squibb, in 26 patients with metastatic solid tumors most of whom had KRAS-mutant tumors largely focused on non-small cell lung cancer (NSCLC), MSS-CRC, and pancreatic ductal adenocarcinoma. In the initial part of this study, which was focused on KRAS and p53 mutations,(n = 26). SLATE v1 demonstrated induction of CD8+ T cells against multiple KRAS driver mutations and greatest activity was observed in a subset of NSCLC patients with the KRASmut G12C mutations. AlthoughWith these initial outcomes were promising, we believed our SLATE candidate could be further optimized to maximize potential clinical benefit.

Subsequently,data, we developed a next-generation, optimizedsecond SLATE candidate SLATE-KRAS, (formerly referred to as SLATE v2) that exclusively includes epitopes from mutated KRAS (SLATE-KRAS) and evaluated it under the same study protocol. In results shared during ESMO 2022, SLATE-KRAS exhibited immunogenic superiority over SLATE v1 in human HLA-transgenic mice. SLATE-KRAS is now in Phase 2 testing under the same INDmice and protocol as SLATE v1 incancer patients with advanced NSCLC and CRC. We disclosed the initial results from the Phase 2 portion of the Phase 1/2 study, including data from both SLATE v1 and SLATE-KRAS, at the 2022 AACR Annual Meeting in April 2022 and at the 2022 ESMO Congress in September 2022. These data demonstrate a favorable safety and tolerability profile, support the potential of SLATE-KRAS to drive stronger CD8+ T cell responses to mutant KRAS than SLATE v1 and provide early signals of efficacy as measured by reduction in ctDNA (molecular response). Specifically, we saw ademonstrated similar molecular response rate (MRR) of 39% in evaluable patients with advanced NSCLC and CRC, a figure consistent with the MRRoverall survival trends as those seen in the Phase 1/2 studiesstudy of GRANITEGRANITE. In 38 patients with advanced solid tumors evaluating both SLATE v1 (n =26) and SLATE-KRAS (n=12), the candidates demonstrated a 39% molecular response rate (MRR, molecular response defined as >30% reduction in ctDNA from baseline) in evaluable patients with MSS-CRC and NSCLC and among the 18 patients with NSCLC, a molecular response was correlated with extended mOS (mOS of 44%)9.6 months in molecular responders versus 4.5 months in non-responders).

We believe these initial data alsothe results to date demonstrate our ability to both accurately define shared neoantigen targets and engineer the SLATE cassette and vaccine to optimize immune response based on those specific mutations. Having optimized and validated the SLATE cassette, we now believe the SLATE platform is ready for “plug and play” application across solid tumor indications and shared tumor neoantigen classes. In advancing SLATE, we aim to combine the potential benefits of the full spectrum of tumor antigens with the practicality of the “off-the-shelf” approach.

33


In February 2023, we announced that we entered into a correlation between molecular response and overall survival (OS) among patientsclinical trial agreement with NSCLC. Based on these data, we have begun evaluating movingthe National Cancer Institute (NCI) to evaluate an autologous T cell therapy expressing a T cell receptor targeting mutated KRAS in combination with our KRAS-directed vaccine candidate, SLATE-KRAS, into additional studies and earlier linesin a Phase 1 study led by Steven A. Rosenberg, M.D., Ph.D. Under the terms of treatment.the agreement, Gritstone will provide the SLATE-KRAS vaccine as requested by NCI. NCI is responsible for conducting the study.

Infectious Disease Program Updates

In early 2021, we initiated two programs in infectious diseases: CORAL, a second-generation prophylactic program against COVID-19, and a collaboration with Gilead Sciences to develop a therapeutic vaccine against HIV. Our infectious disease programs aim to deliver vaccine candidates that induce both B cell and T cell immunity with the potential to drive potent and durable immune response that can be applied for either protective or therapeutic benefit. This approach has demonstrated the ability to generate robust CD8+ T cells and neutralizing antibodies against SARS-CoV-2 in multiple preclinical and clinical studies and is being evaluated against multiple other pathogens in Gritstone-owned and partnered studies. We believe that initially evaluating our approach inagainst SARS-CoV-2 can provide proof of concept for a number of infectious diseases.

CORAL Second Generation COVID-19 Vaccine Program

Our CORAL program is a second-generation SARS-CoV-2 vaccine platform delivering spike and additional SARS-CoV-2 T cell epitopes. We believe this approach of inducing both neutralizing antibodies and T cell responses could offer the potential for more durable protection and broader immunity against SARS-CoV-2 variants than that provided by first-generation SARS-CoV-2 vaccines and serve as a basis for developing a pan-coronavirus vaccine. Within our CORAL program, we developed an optimized samRNA vaccine candidate that we believe is differentiated from first-generation mRNA vaccines. The program is supported by key relationships with the Gates Foundation, the National Institute of Allergy and Infectious Disease (NIAID), the Coalition for Epidemic Preparedness Innovations (CEPI), and through a license agreement with the La Jolla Institute for Immunology (LJI).

We have conducted preclinical studies demonstrating that our SARS-CoV-2 vaccine candidate induced significant and sustained levels of neutralizing antibodies and T cells against the Spike protein, plus a broad T cell response against epitopes from multiple viral genes outside of Spike. Results from one of these studies, a non-human primate challenge study (NHP Challenge Study), were published in Nature Communications in June 2022.

We are currently evaluating four distinct SARS-CoV-2 product candidates across three different Phase 1 clinical trials containing Spike plus additional non-Spike T cell epitope (TCE) sequences (and also full-length nucleocapsid). These studies include homologous and heterologous prime-boost regimens. All of these studies are ongoing and data from all are expected in the fourth quarter of 2022.

In January 2022, we shared data from the first cohort of our Phase 1 CORAL-BOOST study which showed our samRNA vaccine candidate induced robust neutralizing antibody titers and elicited broad T cell responses when

35


administered at 10ug following two-dose administration of Vaxzervria. The neutralizing antibody titer levels against SARS-CoV-2 Spike protein shared at this time were consistent with published data from higher doses of first-generation mRNA vaccines in a similar clinical context.

In August 2022, we reported 6-month follow-up data from a subset of patients within the first two cohorts of the CORAL-BOOST study who elected to receive only a single 10µg or 30µg samRNA boost vaccination (n=7). The data demonstrated the neutralizing antibody levels reported in January 2022 persisted after 6 months, and durable neutralizing antibodies against wild type Spike as well as key Spike variants of concern (Beta, Delta and Omicron) were observed. Additionally, T cell responses to Spike and non-Spike T cell epitopes (TCEs) remained generally stable over the 6-month observation period.

HIV Vaccine Collaboration with Gilead Sciences

In January 2021, we entered into a collaboration, option and license agreement with Gilead Sciences, Inc. (Gilead) to research and develop a vaccine-based immunotherapy for HIV. Together, we plan to develop an HIV-specific therapeutic vaccine using our proprietary prime-boost vaccine platform, comprised of samRNA and adenoviral vectors, with antigens developed by Gilead. The collaboration and the program are progressing, well and a Phase I trial is ongoing. If Gilead decides to progress development beyond the Phase 1 study by exercising their exclusive option, the Company will receive a $40.0 million non-refundable option exercise fee.

Preclinical Research Updates

Beyond GRANITE, SLATE, CORAL andIn February 2023, the first data from a preclinical study conducted in collaboration with Gilead we continuewere presented at the Conference on Retroviruses and Opportunistic Infections (CROI) 2023. The results showed that simian immunodeficiency virus (SIV), Chimpanzee Adenovirus (ChAd) and self-amplifying mRNA (samRNA) vaccines induced a strong and broad CD8+ T cell immune response, which was significantly enhanced in combination with immune modulators.

CORAL Second Generation COVID-19 Vaccine Program

The CORAL program was initiated in 2021 in response to applyemerging limitations of first-generation COVID-19 vaccines. Today it serves as proof-of-concept for our ability to drive more potent and durable responses than those of current vaccines in prophylactic applications. As seen in COVID-19 and other infectious diseases, immune responses can vary, viruses mutate, and neutralizing antibodies wane, necessitating re-dosing (boosters). An approach capable of inducing a potent, broad setimmune response could have utility across a variety of capabilities in oncologyviral and infectious diseases, through promising preclinical work

In multiple ongoing Phase 1 trials, we have generated early data demonstrating the potential ability of our vaccines to elicit potent and partnerships.durable neutralizing antibody responses, and potent cytotoxic cellular responses against Spike and other conserved targets regions of the virus. These projects includeresults have also provided early signals of the potential advantages of self-amplifying mRNA over first-generation mRNA.

Across the three active Phase 1 trials (CORAL-BOOST, CORAL-CEPI and CORAL-NIH), there are multiple constructs being evaluated with various antigenic cassettes designed to target Wild Type, Beta and Omicron variants. The trials are evaluating our approach in different populations including elderly adults, immunocompromised individuals, those naïve to the virus and previously vaccinated individuals using different vaccine regimens. In all, these trials are designed to answer core questions regarding self-amplifying mRNA dose regimen, and the patient populations that could be applicable to other infectious diseases.

We believe that our CORAL vaccine candidates have the potential to improve both B cell and T cell responses to Spike and other viral proteins. By creating a cassette that targets several viral antigens including Spike protein and additional T cell epitopes from the SARS-CoV-2 virus, some of which are highly conserved between viral strains (such as SARS and SARS-CoV-2), we believe our vaccine candidates may have pan-coronavirus program, a flu program, and a program aimingpotential to develop an optimal immunogenprotect against future coronavirus pandemics. While mutations in the contextSpike protein may reduce protection by antibodies (since the antibody target changes its shape), broad T cell immunity and long-term memory to different viral proteins may

34


provide a second layer of human papillomavirus (HPV), whichclinical protection. The CORAL program is supported by the Gates Foundation.Foundation, the Coalition for Epidemic Preparedness Innovation (CEPI) and the National Institute of Allergy and Infectious Diseases (NIAID).

Components of Our Operating Results

Collaboration and License and Grant Revenue

WeTo date, we have no products approved for sale and have nevernot generated any revenue from product sales.sales, and we do not expect to generate any revenue from product sales for the foreseeable future. For the three and ninesix months ended SeptemberJune 30, 2022, respectively,2023, we recognized $3.0$2.0 million and $15.7$4.4 million, respectively, of revenue from the 2seventy Agreement, the Gilead Collaboration Agreement and the grant agreements with CEPI and the Gates Foundation. For the three and nine months ended September 30, 2021, weWe recognized $2.6$5.5 million and $45.1$12.7 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, of revenue from the 2seventy Agreement, the Gilead Collaboration Agreement, another small collaboration agreement, and the grant agreementagreements with CEPI.CEPI and the Gates Foundation. See Note 9 to our condensed consolidated financial statements for additional information.

In the future, we expect to continue to recognize revenue from the 2seventy Agreement, and the Gilead Collaboration Agreement and our grant agreements with CEPI and the Gates Foundation and may generate revenue from product sales or other collaboration agreements, strategic alliances and licensing arrangements. We expect our revenue to fluctuate onfrom quarter-to-quarter and year-to-year as a quarterly and annual basis due toresult of the timing and amount of license fees, milestones, reimbursement of costs incurred milestone and other payments as well asand product sales, to the extent that any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

Operating Expenses

Research and Development Expenses

Since our inception, we have committedfocused significant resources toon our research and development activities, including conducting preclinical studies, manufacturing development efforts and related development activities for our product candidates.

36


Research and development activities account for a significant portion of our operating expenses. Research and development costs are expensed as incurred. These costs include:

External research and development expenses, including:
o
expenses incurred under arrangements with third parties, including clinical research organizations or CROs,(CROs), preclinical testing organizations, CMOs,contract manufacturing organizations (CMOs), academic and non-profit institutions and consultants;
o
fees related to our license agreements;
Internal research and development expenses, including (i) headcount-related expenses, such as salaries, payroll taxes, benefits, non-cash stock-based compensation and travel, for employees contributing to research and (ii) development activities, including the costs associated with the development of our EDGE™ platform; and
Other expenses, which include direct and allocated expenses for laboratories, facilities and other costs.

Pursuant to our Arbutus License Agreement, Arbutus granted us a worldwide, exclusive license to certain technology of Arbutus, including Arbutus’ portfolio of proprietary and clinically-validatedclinically validated LNP products and associated intellectual property, as well as technology transfer of Arbutus’ manufacturing know-how. During the ninethree and six months ended SeptemberJune 30, 20222023 and 2021,2022, we had no research and development expense under the agreement.

Pursuant to our 2020 Genevant License Agreement, Genevant granted us exclusive license rights under certain intellectual property related to Genevant’s LNP technology for a single indication, and we agreed to pay Genevant an initial payment of $2.0 million, and up to an aggregate of $71.0 million in specified development, regulatory, and commercial milestones, and low to mid-single digit royalties on net sales of licensed products. The upfront payment of $2.0 million was included in research and development expensesexpense during 2020. In March 2022, a milestone in the

35


amount of $1.0 million was met, which was included in research and development expense for the ninesix months ended SeptemberJune 30, 2022. No research and development expense was recorded for the three and six months ended June 30, 2023.

Pursuant to our 2021 Genevant License Agreement, we obtained a nonexclusive license to Genevant’s LNP technology to develop and commercialize self-amplifying RNA, or samRNA vaccines against SARS-CoV-2, the virus that causes COVID-19. Under the 2021 Genevant License Agreement, we made a $1.5 million upfront payment to Genevant, and Genevant is eligible to receive from us up to $141.0 million in contingent milestone payments per product, plus certain royalties on future product sales or licensing (or, in certain scenarios and subject to certain conditions, in lieu of these milestonesmilestone payments and royalties Genevant would receive a percentage of amounts we receive from sublicenses). In March 2021, a milestone was met following the initial patient treatment in the Phase 1 clinical trial conducted through the NIAID-supported IDCRC. Both the $1.5 million upfront and $1.0 million milestone payments were recorded as research and development expense for the ninesix months ended SeptemberJune 30, 2021. No research and development expense was recorded for the ninethree and six months ended SeptemberJune 30, 2023 or 2022.

We expect our research and development expenses to increase substantially in the future as we continue to advance our product candidates into and through clinical studies and pursue regulatory approval. Such activities areConducting the necessary clinical studies to obtain regulatory approval is costly and time-consuming, and we expect oursuch clinical studies to generally become larger and more costly to conduct as they advance into later stages. The successful development of our product candidates is highly uncertain. The actual probability of success for our product candidates may be affected by a variety of risks and uncertainties associated with drug development, including those describedset forth in the section entitled Risk Factors“Risk Factors” included in Part II, Section 1A of this Quarterly Report on Form 10-Q and elsewhere in this report.Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

37


The following table summarizes our research and development expenses by program and category (in thousands):

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

GRANITE program external expenses

 

$

3,088

 

 

$

3,387

 

 

$

9,232

 

 

$

8,767

 

 

$

5,108

 

 

$

3,446

 

 

$

10,517

 

 

$

6,144

 

SLATE program external expenses

 

 

604

 

 

 

1,024

 

 

 

2,076

 

 

 

2,935

 

 

 

727

 

 

 

676

 

 

 

1,343

 

 

 

1,472

 

CORAL program external expenses

 

 

2,802

 

 

 

1,193

 

 

 

9,002

 

 

 

2,828

 

 

 

1,347

 

 

 

3,196

 

 

 

3,480

 

 

 

6,200

 

Other program external research and development expenses

 

 

5,463

 

 

 

5,996

 

 

 

17,702

 

 

 

19,533

 

 

 

6,267

 

 

 

5,536

 

 

 

12,019

 

 

 

12,239

 

Personnel-related expenses (1)

 

 

10,159

 

 

 

8,624

 

 

 

31,117

 

 

 

25,171

 

 

 

11,161

 

 

 

10,371

 

 

 

23,012

 

 

 

20,958

 

Other unallocated research and development expenses

 

 

4,320

 

 

 

4,172

 

 

 

12,854

 

 

 

12,090

 

 

 

6,357

 

 

 

4,122

 

 

 

11,110

 

 

 

8,533

 

Total research and development expenses

 

$

26,436

 

 

$

24,396

 

 

$

81,983

 

 

$

71,324

 

 

$

30,967

 

 

$

27,347

 

 

$

61,481

 

 

$

55,546

 

(1)
Personnel-related expenses include stock-based compensation expense of $1.6 million and $5.1$3.2 million, respectively, for the three and ninesix months ended SeptemberJune 30, 2022,2023, and $1.7 million and $5.0$3.5 million, respectively, for the three and ninesix months ended SeptemberJune 30, 2021.2022.

SinceWe do not track internal related expenses on a program-by-program basis, because our research and development employees and infrastructure resources are utilized across our development programs, we do not track internal related expenses on a program-by-program basis.programs.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and related costs, including but not limited to, payroll taxes, benefits, non-cash stock-based compensation and travel. Other general and administrative expenses include legal costs of pursuing patent protection of our intellectual property, and professional service fees for auditing, tax and general legal services. We expect our general and administrative expenses to continue to increase in the future as we expand our operating activities and prepare for potential commercialization of our current and future product candidates, increase our headcount and support our operations, as a public company, including increased expenses related to legal, accounting, regulatory and tax-related services associated with maintaining compliance with requirements of the Nasdaq Global Select Market and the SEC, directors and officers liability insurance premiums and investor relations activities. Allocated expenses consist of rent expenses related to our office and research and development facilities, depreciation and other allocated costs not otherwise included in research and development expenses.

36


Interest Income

Interest income consists primarily of interest income and investment income earned on our cash, cash equivalents and marketable securities.

Interest Expense

Interest expense consists primarily of interest expense related to our debt facility. A portion of the interest expense is non-cash expense relating to the accretion of the final payment fees and amortization of debt discount and debt issuance costs associated with the Loan Agreement (as defined below).Agreement.

38


Results of Operations

Comparison of the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 20212022

The following table sets forth the significant components of our results of operations (in thousands):

 

Three Months Ended September 30,

 

 

 

 

 

Three Months Ended June 30,

 

 

 

 

 

2022

 

 

2021

 

 

Change

 

 

2023

 

 

2022

 

 

Change

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration and license revenues

 

$

436

 

 

$

2,401

 

 

$

(1,965

)

 

$

400

 

 

$

2,761

 

 

$

(2,361

)

Grant revenues

 

 

2,585

 

 

 

213

 

 

 

2,372

 

 

 

1,555

 

 

 

2,710

 

 

 

(1,155

)

Total revenues

 

 

3,021

 

 

 

2,614

 

 

 

407

 

 

 

1,955

 

 

 

5,471

 

 

 

(3,516

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

26,436

 

 

 

24,396

 

 

 

2,040

 

 

 

30,967

 

 

 

27,347

 

 

 

3,620

 

General and administrative

 

 

6,462

 

 

 

6,373

 

 

 

89

 

 

 

6,716

 

 

 

7,792

 

 

 

(1,076

)

Total operating expenses

 

 

32,898

 

 

 

30,769

 

 

 

2,129

 

 

 

37,683

 

 

 

35,139

 

 

 

2,544

 

Net loss from operations

 

 

(29,877

)

 

 

(28,155

)

 

 

(1,722

)

Loss from operations

 

 

(35,728

)

 

 

(29,668

)

 

 

(6,060

)

Interest income

 

 

462

 

 

 

37

 

 

 

425

 

 

 

1,479

 

 

 

153

 

 

 

1,326

 

Interest expense

 

 

(551

)

 

 

 

 

 

(551

)

 

 

(985

)

 

 

 

 

 

(985

)

Other expense

 

 

(22

)

 

 

 

 

 

(22

)

Net loss

 

$

(29,966

)

 

$

(28,118

)

 

$

(1,848

)

 

$

(35,256

)

 

$

(29,515

)

 

$

(5,741

)

 

Nine Months Ended September 30,

 

 

 

 

 

Six Months Ended June 30,

 

 

 

 

 

2022

 

 

2021

 

 

Change

 

 

2023

 

 

2022

 

 

Change

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

Collaboration and license revenues

 

$

7,942

 

 

$

44,937

 

 

$

(36,995

)

 

$

941

 

 

$

7,506

 

 

$

(6,565

)

Grant revenues

 

 

7,741

 

 

 

213

 

 

 

7,528

 

 

 

3,456

 

 

 

5,156

 

 

 

(1,700

)

Total revenues

 

 

15,683

 

 

 

45,150

 

 

 

(29,467

)

Total revenue

 

 

4,397

 

 

 

12,662

 

 

 

(8,265

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

81,983

 

 

 

71,324

 

 

 

10,659

 

 

 

61,481

 

 

 

55,546

 

 

 

5,935

 

General and administrative

 

 

22,209

 

 

 

19,251

 

 

 

2,958

 

 

 

13,461

 

 

 

15,747

 

 

 

(2,286

)

Total operating expenses

 

 

104,192

 

 

 

90,575

 

 

 

13,617

 

 

 

74,942

 

 

 

71,293

 

 

 

3,649

 

Net loss from operations

 

 

(88,509

)

 

 

(45,425

)

 

 

(43,084

)

Loss from operations

 

 

(70,545

)

 

 

(58,631

)

 

 

(11,914

)

Interest income

 

 

663

 

 

 

112

 

 

 

551

 

 

 

3,157

 

 

 

200

 

 

 

2,957

 

Interest expense

 

 

(551

)

 

 

 

 

 

(551

)

Interest income

 

 

(1,828

)

 

 

 

 

 

(1,828

)

Other expense

 

 

(22

)

 

 

 

 

 

(22

)

Net loss

 

$

(88,397

)

 

$

(45,313

)

 

$

(43,084

)

 

$

(69,238

)

 

$

(58,431

)

 

$

(10,807

)

Collaboration and License and Grant Revenues

Collaboration and license revenues from our collaboration arrangements and grant revenues were $3.0$2.0 million and $15.7$4.4 million for the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively. During the three months ended SeptemberJune 30, 2022,2023, we recorded $0.1 million in collaboration revenue related to the Gilead Collaboration Agreement, $0.3 million in collaboration revenue related to the 2seventy Agreement, $1.1 million in grant revenue from the CEPI Funding Agreement, and $0.5 million in grant revenue from the Gates Foundation. During the six months ended June

37


30, 2023, we recognized $0.2$0.7 million in collaboration revenue related to the 2seventy Agreement, $0.2 million in collaboration revenue related to the Gilead Collaboration Agreement, $2.6 million in grant revenue from the CEPI Funding Agreement, and $0.9 million in grant revenue from the Gates Foundation.

Collaboration and license revenues from our collaboration arrangements and grant revenues were $5.5 million and $12.7 million for the three and six months ended June 30, 2022, respectively. During the three months ended June 30, 2022, we recognized $2.3 million in collaboration revenue related to the 2seventy Agreement, $0.5 million in collaboration revenue related to the Gilead Collaboration Agreement, $2.4 million in grant revenue from the CEPI Funding Agreement, and $0.3 million in grant revenue from the Gates Foundation. During the ninesix months ended SeptemberJune 30, 2022, we recognized $6.5$6.3 million in collaboration revenue related to the 2seventy Agreement, $1.5$1.2 million in collaboration revenue related to the Gilead Collaboration Agreement, $6.9$4.7 million in grant revenue from the CEPI Funding Agreement, and $0.8$0.5 million in grant revenue from the Gates Foundation. The amount of collaboration revenue recognized related to the 2seventy Agreement during the ninethree and six months ended SeptemberJune 30, 2022 included cumulative catch-up adjustments increasing contribution revenue by $2.0 million and $5.5 million, respectively, due to revisions to estimated costs to complete the remaining performance obligation.

Collaboration and license revenues from our collaboration arrangements and grant revenues were $2.6 million and $45.1 million for the three and nine months ended September 30, 2021, respectively. During the three months ended September 30, 2021, we recorded $1.6 million in collaboration revenue related to the Gilead Collaboration Agreement, $0.8 million in collaboration revenue related to the 2seventy Agreement, and $0.2 million in grant revenue related to the CEPI agreement. During the nine months ended September 30, 2021, we recorded $38.6 million in license revenue and $4.1 million in collaboration revenue related to the Gilead Collaboration Agreement, $2.1 million

39


in collaboration revenue related to the 2seventy Agreement, $0.1 million in collaboration revenue related to another small collaboration agreement, and $0.2 million in grant revenue related to the CEPI agreement.

See Note 9 to our condensed consolidated financial statements for additional information.

Research and Development Expenses

Research and development expenses were $26.4$31.0 million and $82.0$61.5 million for the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, and $24.4$27.3 million and $71.3$55.5 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively.

The increase of $2.0$3.6 million for the three months ended SeptemberJune 30, 20222023 compared to the three months ended SeptemberJune 30, 20212022 was primarily due to increases of $1.6$1.0 million in personnel-related expenses, $1.0 million in laboratory supplies, and $2.5 million in facilities related costs, offset by decreases of $0.8 million in outside services, consisting primarily of clinical trial and other chemistry, manufacturing and controls (“CMC”("CMC") related expenses and $0.6$0.1 million in facilities-related costs, offset by a decrease of $1.2 million in laboratory supplies.milestone and license payments.

The increase of $10.7$5.9 million for the ninesix months ended SeptemberJune 30, 20222023 compared to the ninesix months ended SeptemberJune 30, 20212022 was primarily due to increases of $6.4$2.5 million in personnel-related expenses, $7.1$1.8 million in laboratory supplies, $3.2 million in facilities related costs, offset by decreases of $1.1 million in milestone and license payments and $0.5 million in outside services, consisting primarily of clinical trial and other CMC related expenses, and $1.7 million in facilities-related costs, offset by decreases of $2.7 million in laboratory supplies and $1.8 million in milestone and license payments.expenses.

General and Administrative Expenses

General and administrative expenses were $6.5$6.7 million for the three months ended SeptemberJune 30, 20222023 compared to $6.4$7.8 million for the three months ended SeptemberJune 30, 2021.2022. The increasedecrease of $0.1$1.1 million was primarily attributable to an increasedecreases of $0.7$1.3 million in outside services and $0.1 million in personnel-related expenses, offset by decreasesan increase of $0.4$0.3 million in outside services and $0.2 million in facilities-relatedfacilities related costs.

General and administrative expenses were $22.2$13.5 million for the ninesix months ended SeptemberJune 30, 20222023 compared to $19.2$15.7 million for the ninesix months ended SeptemberJune 30, 2021.2022. The increasedecrease of $3.0$2.2 million was primarily attributable to increases of $3.7 million in personnel-related expenses, offset by decreases of $0.4$2.3 million in outside services, and $0.3offset by increase of $0.1 million in facilities-relatedfacilities related costs.

Interest Income

Interest income was $0.5$1.5 million and $0.7$3.2 million, respectively, for the three and ninesix months ended SeptemberJune 30, 2022, respectively. Interest income was immaterial2023, and $0.1$0.2 million for each of the three and ninesix months ended SeptemberJune 30, 2021, respectively.2022. The income for both periods representrepresents interest and investment income from cash, cash equivalents and marketable securities. The increase for both periods was primarily due to higher interest rates in 2023 as compared to 2022.

Interest ExpenseExpense

Interest expense was $0.6$1.0 million and $1.8 million for the three and ninesix months ended SeptemberJune 30, 2022. There was no interest expense2023, and nil for each of the three and ninesix months ended SeptemberJune 30, 2021. The interest2022. Interest expense is primarily comprised of the contractual coupon interest expense, the amortization of the debt discount and issuance costs and the accretion of the final payment fee associated with the Loan Agreement (as defined below).Agreement.

38


Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations primarily through sales of our convertible preferred stock, sales of our common stock in public offerings and under our “at-the-market”"at-the-market" offering programs, private placements of our common stock and pre-funded warrants, proceeds from the Loan Agreement (as defined below), and our collaborations, including with the receipt of proceeds under the 2seventy Agreement and the Gilead Collaboration Agreement, and non-dilutive grants from various nonprofit organizations. As of SeptemberJune 30, 2022,2023, we had cash, cash equivalents, and marketable securities of $139.8$114.5 million and an accumulated deficit of $489.8$590.3 million, compared to cash, cash equivalents, and marketable securities of $206.3$175.9 million and an accumulated deficit of $401.4$521.1 million as of December 31, 2021. We expect that our2022. The Company’s cash, cash equivalents and marketable securities as of September 30, 2022

40


will enable usare not sufficient to fund the Company’s planned operations for a period of 12 months from the date the financial statements are issued. Additionally, we do not expect positive cash flows from operations in the foreseeable future. Historically, we have incurred operating losses as a result of ongoing efforts to develop our currentcancer immunotherapy candidates, including conducting ongoing research and planneddevelopment and providing general and administrative support for these operations. We expect to continue to incur net operating expenses and capital expenditureslosses for at least the next 12 months from the date of the filing of this report.several years as we advance GRANITE, SLATE, and CORAL and any future product candidates through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, continue our research and development efforts and invest in our manufacturing facility.

In October 2019,September 2021, we filedcompleted the 2019 Shelf Registration Statement, covering the offeringSecond PIPE Financing, pursuant to which we sold an aggregate of up to $250.0 million of various equity and debt securities, including the sale and issuance of up to $75.0 million worth of5,000,000 shares of our common stock at a per share purchase price of $11.00. In connection with the Second PIPE Financing, we received $55.0 million in aggregate gross cash proceeds and incurred related costs of $2.3 million.

In February 2021, we received a non-refundable upfront payment of $30.0 million under the 2019 ATM Offering Program. ThroughGilead Collaboration Agreement and $30.0 million under the Gilead Stock Purchase Agreement.

In September 30, 2022,2021, we have received aggregate proceeds from our 2019 ATM Offering Programan upfront payment of $50.0$11.3 million net of commissions and offering costs, pursuant tounder the issuance of 5,642,712 shares.CEPI Funding Agreement.

In March 2022, we filed the 2022 Shelf Registration Statement, covering the offering of up to $250.0 million of various equity and debt securities, including the sale and issuance of up to $100.0 million worth of shares of our common stock under the 2022 ATM Offering Program. As of SeptemberThrough June 30, 2022,2023, we have received $0.2 million in grossaggregate proceeds from our 2022 ATM Offering Program of $22.1 million, net of commissions and offering costs, pursuant to the issuance of 7,889,000 shares. As of June 30, 2023, we have $99.8$77.2 million available thereunder.under the 2022 ATM Offering Program.

In April 2022, we received the second tranche payment of $2.7 million under the CEPI Funding Agreement.

In July 2022, we entered into a loan and security agreement (the “Loan Agreement”)Loan Agreement with Hercules Capital, Inc. (“Hercules”) and Silicon Valley Bank (“SVB”),SVB, which provides us with a 60-month term loan facility for the Company up to $80.0 million in borrowing capacity across five potential tranches. At the closing of the Loan Agreement, we drew $20.0 million from the first tranche, and we can draw up to andrew the additional $10.0 million throughin March 2023. The remaining tranches provide up to $50.0 million borrowing capacity and become available if and when we meet certain milestones set forth in the Loan Agreement. In the fourth quarter of 2022, one milestone had been achieved, which provides the Company the ability to draw up to $10 million through December 15, 2023. As of June 30, 2023, the Company has not drawn the additional $10 million. The term loan is secured by substantially all of our assets, other than intellectual property. There are no warrants associated with the Loan Agreement. See Note 8 to our condensed consolidated financial statements for additional information.

Borrowings underIn March 2023, Gritstone, Hercules and SVB amended the Loan Agreement bear interest (i) at an annual cash rate equal to change the greater of (x)minimum liquidity requirements. Under the lesser of (1)amended Loan Agreement, beginning on the prime rate (as customarily defined) and (2) 5.50%, in either case, plus 3.15%, and (y) 7.15% and (ii) at an annual payment-in-kind rate, which may equal 2.00%. We are required to make monthly interest-only payments prior to the amortization date of January 1, 2025, subject to a potential six-month and one-year extension upon satisfactionearliest occurrence of certain conditions. We will also be required to pay a facility charge equal to 0.50% of the principal amount of any borrowings made pursuant to the last four tranches.

All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on July 19, 2027. At our option, we may prepay allmilestones or any portion of the outstanding borrowings, plus accrued and unpaid interest thereon and fees and expenses, subject to a prepayment premium ranging from zero to 2.5%, during the first three years after closing, depending on the year of such prepayment. Upon repayment of the term loan, we will be required to make a final payment fee to the lenders equal to 5.75% of the aggregate original principal amount of the loan.

Beginning on April 1, 2023,2024, and at all times thereafter, so long as ourthe Company’s market capitalization is equal to or lessno greater than $400.0 million, we arethe Company is subject to a minimum liquidity requirement equal to the then outstanding balance under the Loan Agreement multiplied by 0.55 or 0.45, which multiplier depends on whether we achievethe Company achieves certain performance milestones. Our obligations

In October 2022, we completed the Third PIPE Financing, pursuant to which we sold an aggregate of 6,637,165 shares of common stock at a per share purchase price of $2.26 and pre-funded warrants to purchase 13,274,923 shares of common stock at a price of $2.26 per share (of which $2.2599 per share was prepaid by each purchaser). The aggregate gross cash proceeds to us for the securities sold in the Third PIPE Financing was $45.0 million, and related costs were $2.6 million.

39


In April 2023, we received $0.7 million under the Loan Agreement are subject to acceleration uponGates Grant Agreement.

In June 2023, we received the occurrencethird tranche payment of customary events of default, including payment default, insolvency and$1.2 million under the occurrence of certain events having a material adverse effect, including (but not limited to) material adverse effects upon the business, operations, properties, assets or financial condition of us and our subsidiaries, taken as a whole.CEPI Funding Agreement.

Future Funding Requirements

We do not expect positive cash flows from operations in the foreseeable future. Historically, we have incurred operating losses as a result of ongoing efforts to develop our cancer and infectious disease immunotherapy candidates, including conducting ongoing research and development, clinical and preclinical studies and providing general and administrative support for these operations. We do not have any products approved for sale, and we do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current and future product candidates and/or enter into additional significant collaboration or grant agreements with third parties, and weparties. We do not know when, or if, either will occur. We expect to continue to incur net operating losses for at least the next several years and we expect the losses to increase as we advance our CORAL, GRANITE, SLATE, and SLATECORAL programs, as well as any future product candidates, through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, continue our research and development efforts and invest in our manufacturing facility. We are subject to all 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

41


business. Moreover, we incur substantial costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

Until we can generate a sufficient amount of revenue from the commercialization of immunotherapy product candidates or from additional significant collaboration or license agreements with third parties, if ever, we expect to finance our future cash needs through private and public equity offerings, including our “at-the-market” offering programs, debt financings, and potential future collaboration, license and development agreements. Additional capital may not be available on reasonable terms, if at all. 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 one or more of our current or future product candidates. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term, but we may have to relinquish valuable rights to our product candidates or grant licenses on terms that are not favorable to us. Any of the foregoing could significantly harm our business, financial condition and prospects.

Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $489.8$590.3 million through Septemberas of June 30, 2022.2023. We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities. We believe thatThese conditions raise substantial doubt about our existing cash, cash equivalents and marketable securities will be sufficientability to enable us to fund our projected operations through at least the next twelve (12) monthscontinue as a going concern for a period of one year from the date of this Quarterly Report on Form 10-Q. the issuance of our unaudited interim condensed consolidated financial statements. The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The unaudited interim condensed consolidated financial statements and related notes do not reflect any adjustments relating to the recoverability and classification of assets or amounts and classification of liabilities that might be necessary if we are unable to continue as a going concern.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our operating capital requirements. Our future capital requirements depend on many factors, including:

the scope, progress, results and costs of developing our product candidates, and of conducting preclinical studies and clinical trials, including our clinical trials for GRANITE, SLATE and CORAL;

40


the timing of, and the costs involved in, obtaining regulatory approvals for our oncology and infectious disease immunotherapy product candidates; in particular, any costs incurred in connection with any future regulatory requirements that may be imposed by the FDA or foreign regulatory bodies;
the number and characteristics of any additional product candidates we develop or acquire;
the timing and amount of any milestone, royalty or other payments we are required to make pursuant to any current or future collaboration or license agreements;
potential delays in our ongoing clinical trials as a result of the COVID-19 pandemic;
the cost of manufacturing our product candidates we successfully commercialize, including the cost of scaling up our internal manufacturing operations;
the cost of building a sales force in anticipation of product commercialization;
the cost of commercialization activities, including building a commercial infrastructure, marketing, sales and distribution costs;
our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements, and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;
any product liability or other lawsuits related to our products;
the costs to attract, hire and retain skilled personnel;
the costs associated with being a public company;

42


the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and
the timing, receipt and amount of sales of any future approved products, if any.

A change in the outcome of any of these or other variables with respect to the development of any of our current and future 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 need additional funds to meet operational needs and capital requirements associated with such operating plans.

Cash Flows

The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below (in thousands):

 

Nine Months Ended September 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Cash used in operating activities

 

$

(85,572

)

 

$

(26,899

)

 

$

(71,053

)

 

$

(59,788

)

Cash provided by (used in) investing activities

 

 

33,188

 

 

 

(71,927

)

Cash provided by financing activities

 

 

18,733

 

 

 

75,883

 

Cash provided by investing activities

 

 

45,765

 

 

 

30,113

 

Cash provided by (used in) financing activities

 

 

9,664

 

 

 

(607

)

Net decrease in cash and cash equivalents

 

$

(33,651

)

 

$

(22,943

)

 

$

(15,624

)

 

$

(30,282

)

Cash Used in Operating Activities

During the ninesix months ended SeptemberJune 30, 2022,2023, cash used in operating activities was $85.6$71.1 million, which consisted of net loss of $88.4$69.2 million, adjusted by non-cash charges of $21.6$15.1 million and net changes in our operating assets and liabilities of $18.8$17.0 million. The non-cash charges consisted primarily of depreciation and amortization expense of $4.8$3.7 million, stock-based compensation of $9.5 million, non-cash operating lease expense of $6.9 million and net amortization of premiums and discounts on marketable securities of $0.3$1.8 million and amortization of debt discount and issuance costs of $0.1$0.6 million, stock-based compensation of $5.8 million and non-cash operating lease expense of $6.8 million. The change in our operating assets and liabilities was primarily due to decreases of $11.6 million in deferred revenue, $0.2$2.2 million in accrued compensation, $6.5 million in lease liability, $0.9 million in accounts payable, and $3.2 million in deposits and other long term assets, offset by increases of $1.5$2.3 million in accrued and other non-current liabilities, $1.3$1.2 million in accrued research and development expenses,expense, $12.3 million in lease liability, $2.3 million in deferred revenue, $1.3 million in accounts payable and $0.8increases of $3.0 million in deposits and other long-term assets and $1.6 million in prepaid expenses and other current assets.

41


During the ninesix months ended SeptemberJune 30, 2021,2022, cash used in operating activities was $26.9$59.8 million, which consisted of net loss of $45.3$58.4 million, adjusted by non-cash charges of $18.8$14.5 million and net changes in our operating assets and liabilities of $0.4$15.9 million. The non-cash charges consisted primarily of depreciation and amortization expense of $4.8$3.1 million, stock-based compensation of $7.8$6.5 million, non-cash operating lease expense of $5.7$4.6 million and net amortization of premiums and discounts on marketable securities of $0.5$0.3 million. The change in our operating assets and liabilities was primarily due to decreases of $5.9$8.9 million in deferred revenue, $1.6 million in accrued compensation, $4.2 million in lease liability, $0.9$1.4 million in accounts payable, and $0.2 million in accrued compensation, and increases of $3.5$0.1 million in prepaid expenses and other current assets, and $0.3$0.7 million in deposits and other long-termlong term assets, offset by increases $8.9of $0.3 million in deferred revenue, $1.5accrued and other non-current liabilities and $0.7 million in accrued research and development and $0.1 million in accrued and other non-current liabilities.expenses.

Cash Provided by (Used in) Investing Activities

During the ninesix months ended SeptemberJune 30, 2022,2023, cash provided by investing activities was $33.2$45.8 million, which consisted of $102.2$66.9 million in proceeds from the maturity of marketable securities, offset by $64.6$17.8 million in purchases of marketable securities and $4.4$3.3 million of capital expenditures to purchase property and equipment.

During the ninesix months ended SeptemberJune 30, 2021,2022, cash used inprovided by investing activities was $71.9$30.1 million, which consisted of $133.4 million in purchases of marketable securities and $4.1 million of capital expenditures to purchase property and equipment, offset by $59.4$61.7 million in proceeds from the maturity of marketable securities, and $6.2offset by $28.3 million from salesin purchases of marketable securities.securities and $3.3 million of capital expenditures to purchase property and equipment.

43


Cash Provided by (Used in) Financing Activities

During the ninesix months ended SeptemberJune 30, 2022,2023, cash provided by financing activities was $18.7$9.7 million, which primarily consisted of $19.2$9.9 million in proceeds from long-term debt, $0.2net of debt discount and issuance costs, $2.6 million in proceeds from the issuance of common stock under the 2022 ATM Offering Program, $0.2program, and $0.5 million in proceeds from the issuance of common stock under the employee stock purchase plan, offset by $2.5 million in financing and offering costs, $0.7 million in taxes paid related to net share settlement of restricted stock units and $0.1 million in payment of financing lease.

During the six months ended June 30, 2022, cash used in financing activities was $0.6 million, which primarily consisted of $0.9 million in tax withholding on vesting of restricted stock units and $0.1 million in payment of financing costs, offset by $0.1 million in proceeds from the issuance of common stock from option and warrant exercises and $0.3 million in proceeds from issuance of common stock under the employee stock purchase plan, offset by $0.9 million in tax withholding on vesting of restricted stock units, $0.1 million in payment of financing costs, and $0.2 million in payment of financing lease.

During the nine months ended September 30, 2021, cash provided by financing activities was $75.9 million, which primarily consisted of $21.2 million in proceeds from the issuance of common stock pursuant to the Gilead Stock Purchase Agreement, $55.0 million in proceeds from the Second PIPE Financing, $0.3 million in proceeds from the issuance of common stock under the employee stock purchase plan, $2.3 million in proceeds from the issuance of common stock through the 2019 ATM Offering Program and $3.1 million in proceeds from the exercise of stock options, warrants and other, offset by $6.0 million in financing and offering costs.plan.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements, as defined under SEC rules.

Contractual Obligations and Commitments

We lease office, laboratory and storage space in facilities at several locations in California and Massachusetts. The terms of our lease agreements have expiration dates between 2023 to 2033. The total future minimum lease payments under the agreements are $108.1$99.9 million, of which $2.5$4.6 million of the payments are due in the fourth quarter of 2022.2023. See Note 6 to our condensed consolidated financial statements.

We are party to license agreements pursuant to which we have in-licensed various intellectual property rights. TheseThe license agreements obligate us to make certain milestone payments related to achievement of specified events, as well as royalties in the low-single digits based on sales of licensed products. During the ninethree and six months ended SeptemberJune 30, 20222023 and 2021,2022, no royalties were due from the sales of licensed products. The table above does not include any milestone or royalty payments to the counterparties to these agreements as the amounts, timing and likelihood of such payments are not known. See Note 9 to our condensed consolidated financial statements for additional information.

In September 2017, we entered into a contract research and development agreement with a third party CRO to provide research, analysis and antibody samples to further the development of our antibody drug candidates. In June 2022, we notified the CRO of our intent to terminate the agreement effective in August 2022. During the three and nine months ended September 30, 2022, we had no research and development expense under this agreement. During the three and nine months ended September 30, 2021, we had immaterial research and development expense under this agreement. We are also obligated to pay the CRO certain milestone payments of up to $36.4 million on achievement of specified events. None of these events had occurred as of September 30, 2022. However, we are unable to estimate the timing or likelihood of achieving the milestones and, therefore, any related payments are not included in the table above.

In May 2019, we entered into a contract research and testing agreement with another third-party CRO to provide antibody discovery related services. In March 2022, we notified such CRO of our intent to terminate the agreement effective as of May 17, 2022. Under the agreement, we are obligated to pay such CRO certain milestone payments of up to $34.8 million on achievement of specified events. None of these events had occurred as of September 30, 2022. No research and development expense was recorded under the agreement during the three and nine months ended September 30, 2022 and 2021.

From time to time, in the normal course of business, we enter into contracts with CROs for clinical trials, CMOs for clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes, which generally provide for termination within 30 days of notice. Therefore, all such contracts are cancelable contracts and not included in the table above.

4442


Critical Accounting Policies and Use of Estimates

This discussion and analysis of financial condition and results of operation is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to preclinical study trial accruals, fair value of assets and liabilities, and the fair value of common stock and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

There have been no changes to our critical accounting policies since we filed our Annual Report on Form 10-K for the year ended December 31, 20212022 with the SEC on March 10, 2022.9, 2023. For a description of our critical accounting policies, please refer to ourthat Annual Report on Form 10-K we filed with the SEC on March 10, 2022.10-K.

Recent Accounting Pronouncements

Refer to “NoteNote 2. Summary of Significant Accounting Policies”Policies in the notes to our unaudited interim condensed consolidated financial statements in Part I, Item 1 of this report,Quarterly Report, for a discussion of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

There have been no material changes in market risk from the information provided in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2021, as amended by Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2021.2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of SeptemberJune 30, 2022,2023, our management, with the participation of our principal executive, financial and accounting officers, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the principal executive, financial and accounting officers, to allow timely decisions regarding required disclosures.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of SeptemberJune 30, 2022,2023, the design and operation of our disclosure controls and procedures were effective at athe reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(e) and 15d-15(e) of the Exchange Act that occurred during the ninethree and six months ended SeptemberJune 30, 20222023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4543


PART II. OTHER INFORMATION

From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely 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 time and other factors.

ITEM 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this report, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below, or in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on March 10, 2022 or in Part II, Item 1A of our Quarterly Report on Form 10-Q filed on August 4, 2022,9, 2023 could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Many of the following risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic, inflation, the high interest rate environment, and any worsening of the global business and economic environment as a result. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20212022 filed with the SEC on March 10, 2022,9, 2023, except as updated by the risk factors set forth in Part II, Item 1Abelow.

Our recurring losses from operations and negative cash flows have raised substantial doubt regarding our ability to continue as a going concern. We will require substantial additional funding to finance our operations, and if we are unable to raise capital, we could be forced to delay, reduce the scope of or eliminate certain of our Quarterly Report on Form 10-Qdevelopment programs, or explore other strategic options.

Our recurring losses from operations and negative cash flows raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will require us to obtain additional capital to fund our operations. The perception of our ability to continue as a going concern may make it more difficult for us to obtain financing for the six months ended June 30, 2022 filedcontinuation of our operations and could result in the loss of confidence by our investors, vendors, collaborators and employees.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital through outside sources. We plan to raise additional capital through the sale of convertible stock, additional equity, debt financings or strategic alliances with the SECthird parties. Such financing and funding may not be available at all, or on August 4, 2022.terms that are favorable to us. Failure to raise additional capital could have a material adverse effect on our business, results of operations, financial condition and/or our ability to fund our scheduled obligations on a timely basis or at all.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

Not applicable.

Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

Not applicable.

ITEM 3. Defaults Upon Senior Securities

None.

44


ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

4645


ITEM 6. EXHIBITS

 

Exhibit

Number

 

Exhibit Description

 

Incorporated by Reference

 

Filed

Herewith

 

 

 

 

 

 

Form

 

Date

 

Number

 

 

 

 

 

 

 

 

 

 

3.1(a)

 

Amended and Restated Certificate of Incorporation.

 

8-K

 

10/02/2018

 

 

3.1

 

 

 

 

 

 

 

 

 

 

 

3.1(b)

 

Certificate of Amendment to Amended and Restated Certificate of Incorporation.

 

8-K

 

05/06/2021

 

 

3.1

 

 

 

 

 

 

 

 

 

 

 

3.2

 

Amended and Restated Bylaws.

 

8-K

 

05/06/2021

 

 

3.2

 

 

 

 

 

 

 

 

 

 

 

4.1

 

Reference is made to exhibits 3.1 through 3.2.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.2

 

Form of Common Stock Certificate.

 

S-1/A

 

09/17/2018

 

 

4.2

 

 

 

 

 

 

 

 

 

 

 

4.3

 

Description of Common Stock.

 

10-K

 

03/10/2022

 

 

4.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1#

 

Loan and Security Agreement between the Company, Hercules Capital, Inc. and Silicon Valley Bank and certain other parties thereto, dated as of July 19, 2022.

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.1

 

Certification of Chief Executive Officer of Gritstone bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Certification of Chief Financial Officer of Gritstone bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1*

 

Certification by the Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 36 of Title 18 of the United States Code (18 U.S.C. §1350).

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

Inline XBRL Instance Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

104

 

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 has been formatted in Inline XBRL.

 

 

 

 

 

 

 

 

 

X

 

 

 

Exhibit

Number

 

Exhibit Description

 

Incorporated by Reference

 

Filed

Herewith

 

 

 

 

 

 

Form

 

Date

 

Number

 

 

 

 

 

 

 

 

 

 

3.1(a)

 

Amended and Restated Certificate of Incorporation.

 

8-K

 

10/02/2018

 

 

3.1

 

 

 

 

 

 

 

 

 

 

 

3.1(b)

 

Certificate of Amendment to Amended and Restated Certificate of Incorporation.

 

8-K

 

05/06/2021

 

 

3.1

 

 

 

 

 

 

 

 

 

 

 

3.2

 

Amended and Restated Bylaws.

 

8-K

 

05/06/2021

 

 

3.2

 

 

 

 

 

 

 

 

 

 

 

4.1

 

Reference is made to exhibits 3.1 through 3.2.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.2

 

Form of Common Stock Certificate.

 

S-1/A

 

09/17/2018

 

 

4.2

 

 

 

 

 

 

 

 

 

 

 

4.3

 

Description of Common Stock.

 

10-K

 

03/10/2022

 

 

4.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.1

 

Certification of Chief Executive Officer of Gritstone bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Certification of Chief Financial Officer of Gritstone bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1*

 

Certification by the Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 36 of Title 18 of the United States Code (18 U.S.C. §1350).

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46


101.INS

Inline XBRL Instance Document

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

X

104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 has been formatted in Inline XBRL.

X

* The certification attached as Exhibit 32.1 that accompanies this report is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Gritstone bio, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

# Portions of the exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. A copy of any omitted portions will be furnished to the SEC upon request.

47


SIGNATURES

Pursuant to the requirements 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.

Gritstone bio, Inc.

Date:

 November 3, 2022August 9, 2023

By:

/s/ Andrew Allen

Andrew Allen, M.D., Ph.D.

President and Chief Executive Officer

(Principal Executive Officer)

By:

/s/ Vassiliki “Celia” Economides

Vassiliki “Celia” Economides

Chief Financial Officer

(Principal Financial Officer)

48