| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation H istorically, the
Company qualified as a foreign private issuer and prepared its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Effective
January 1, 2024, the Company no longer qualifies as a foreign private issuer as defined in Rule 405 of Regulation C under the Securities Act and Rule 3b-4 under the Exchange Act and therefore has become a domestic filer and must file this Form
10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 and in accordance with accounting principles generally accepted in the U.S (U.S. GAAP). The Company’s consolidated financial statements were prepared in accordance
with U.S. GAAP retrospectively for the fiscal years ended December 31, 2023, 2022, and 2021 and include the financial results of all wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation and
the consolidated financial statements are presented in U.S. dollars Significant Accounting Policies Use of estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions. These
judgments, estimates and assumptions affect the reported assets and liabilities as well as income and expenses in the financial period. The estimates and associated assumptions are based on information available when the consolidated financial statements are prepared, historical
experience and various other factors which are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond
the Company’s control. Actual results could differ from those estimates. Estimates are primarily made in relation to revenue recognition, estimation of operating lease incremental borrowing rates, share-based compensation expense, clinical
accruals, and deferred tax asset valuation allowances. Segment reporting The Company operates in one
operating segment: immunotherapies. We generate our
revenue from two streams, collaboration revenue and revenue from the sale of therapies. Operating segments are identified as
components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (CODM), the Chief Executive Officer, in making decisions regarding resource allocation and
assessing performance. The CODM evaluates financial performance and allocates resources using financial information reported on a company-wide basis Foreign currencies The reporting currency of the Company is U.S. dollars. The functional currency of the Company’s ultimate parent and each subsidiary is based on the
currency of the economic environment in which they operate. Assets and liabilities of each subsidiary with a functional currency that differs to the Company’s ultimate parent are translated into sterling and consolidated. The consolidated
balances are then converted into U.S. dollars at period-end exchange rates. Revenues and expenses are translated into sterling, and then reported in U.S. dollars using average exchange rates for each reporting period. Translation adjustments are
reflected as accumulated other comprehensive (loss) income. Revenues Pursuant to Accounting Standards Codification, ASC, Topic 606, the Company recognizes revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for agreements, the Company performs the following five
steps: (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations, and (v)
recognizing revenue when, or as, an entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the
consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, the Company identifies the goods or services promised within each contract, assesses whether each promised good or service is
distinct and determines those that are performance obligations. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. Product revenue, net Product revenue, net, relates to the sale of KIMMTRAK following marketing approval. The Company recognizes revenue at the point in time that control
transfers to a customer, which is typically on delivery. The Company also operates under consignment arrangements where control passes when the Company’s distributors take KIMMTRAK out of consignment inventory. The amount of revenue recognized
under its arrangements reflects the consideration to which the Company expects to be entitled, net of estimated deductions for rebates, chargebacks, levies, other customer fees and product returns. Estimated revenue deductions are updated at the
end of each reporting period using the latest available data. The Company considers whether any part of amounts expected to be received should be constrained to ensure that it is probable that a significant reversal in the cumulative revenue
recognized will not occur. Rebates: Chargebacks Product returns The Company’s main customers in the United States and Europe are its distributors. These distributors are invoiced at contractual list prices with
standard payment terms typically between one In certain countries, the Company’s customers are hospitals and healthcare providers, where KIMMTRAK is sold through an agent acting on the Company’s
behalf. Product revenue also includes amounts for partnered revenue, which is recognised on delivery and transfer of title to Medison Pharma Ltd, or Medison, the Company’s exclusive distributor in certain countries outside the U.S. Pre-product revenue, net Pre-product revenue, net, relates to the sale of tebentafusp under a compassionate use and an early access program in France up to September 2022.
These programs provided patients with access to tebentafusp before KIMMTRAK became available as a marketed product in France. Pre-product revenue is recognized on delivery of tebentafusp to healthcare providers, which is the point in time when
control is transferred. Such revenue is recognized net and represents the prices set by the Company that are expected to be retained after estimated deductions and to the extent that it is probable that a significant reversal of revenue will not
occur. These variable estimated deductions include both an estimate of government rebates and levies payable, and an estimate of returns in the case of expiry, damage or other instances. The total rebate payable by the Company is dependent on the
outcome of price negotiations with the French government, and the Company makes an estimate of these amounts payable each reporting period based on available pricing information and the applicable regulations. The estimates for rebates and returns deducted from pre-product revenue are recorded in the period the related pre-product revenue is recognized and
are classified under Accrued expenses and other current liabilities and Accrued expenses, non-current in the Consolidated Balance Sheets. Costs of pre-product revenue are expensed when incurred and include costs associated with previous
manufacturing of tebentafusp and other third-party selling expenses. Previous manufacturing costs were recognized in research and development (R&D) expenses at the time, and third-party selling expenses are recognized within Selling and
administrative expenses. Collaboration revenue We analyze our collaboration agreements to assess whether they are within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”) to
determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such
activities. To the extent the arrangement is within the scope of ASC 808, we assess whether aspects of the arrangement between us and the collaboration partner are within the scope of other accounting literature. If we conclude that some or all
aspects of the arrangement represent a transaction with a customer, we account for those aspects of the arrangement within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). If we conclude that some or all aspects of
the arrangement are within the scope of ASC 808 and do not represent a transaction with a customer, we recognize our share of the allocation of the shared costs incurred with respect to the jointly conducted activities as a component of the
related expense in the period incurred. Pursuant to ASC 606, a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. Under ASC 606,
an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. If we conclude a counterparty
to a transaction is not a customer or otherwise not within the scope of ASC 606 or ASC 808, we consider the guidance in other accounting literature as applicable or by analogy to account for such transaction. We determine the units of account
within the Collaboration Agreement utilizing the guidance in ASC 606 to determine which promised goods or services are distinct. In order for a promised good or service to be considered “distinct” under ASC 606, the customer can benefit from the
good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is
separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). The Company has concluded that it has customer relationships with its collaborators
and therefore, the Company follows the guidance in ASC Topic 606, Revenue from Contracts with Customers. Under ASC 606, the Company determines whether milestones or other variable consideration should be included in the transaction price, whether
performance obligations are satisfied at a point in time or over time, and the appropriate method of measuring progress for the purposes of revenue recognition for performance obligations satisfied over time. Under each of its collaboration agreements, the Company granted rights to technology with respect to the development of specified
targets and the commercialization of future product candidates for such targets defined in the respective agreements. In addition, the Company was required to perform R&D services, participate on a joint steering committee and the
agreements also provided parties with the option to obtain exclusive rights to the associated intellectual property license. The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance
obligations in the contract. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer
(that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
(that is, the promise to transfer the good or service is distinct within the context of the contract). The Company determined that these promises represented specialized, combined performance obligations, which were satisfied over time and
deemed fully satisfied on completion of the development services for the specified period and when the collaborator is contractually entitled to benefit from the exclusive rights to the associated intellectual property license either through
the collaborator exercising an option to do so or at the Company’s election. Further, the Company determined that their collaborators cannot benefit from the associated intellectual property licenses separately from the R&D activities and
participation on the joint steering committee because these services are specialized and rely on the Company’s expertise such that these activities are highly interrelated and therefore not distinct. The Company estimates the transaction price based on the amount it expects to be entitled to for transferring the promised goods or services in
the contract. The consideration may include fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential payment and the likelihood that
the underlying constraint will be released. Under certain of the Company’s collaboration agreements, development milestones and reimbursements of research and development costs incurred either in excess of a defined amount, or in accordance with
a cost sharing agreement are considered variable consideration.Variable consideration may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative
revenue recognized will not occur in a future period. Revenue is recognized as the programs progress through stages of R&D using an estimate of percentage completion which takes into consideration
the estimated timelines required to satisfy the performance obligation and the time taken since program nomination. The determination of the percentage of completion requires the estimation of when the performance obligation will be completed,
based on the latest project plan and discussions with project teams and will consider progress achieved to date, historical experience on similar programs and other internal factors as may be available. The difference between the cumulative revenue recognized based on the previous estimate and the revenue recognized based on the revised estimate is
recognized as an adjustment to revenue in the period in which the change in estimate occurs. The Company’s collaboration revenue arrangements have standard payment terms and do not contain a significant financing component. Deferred revenue The Company’s deferred revenue as of December 31, 2023 and 2022 is related to the collaboration agreements further outlined below in Note 3.
“Revenue.” Following termination of its collaborations with GSK and Eli Lilly, and the agreement with Genentech in 2023 to close the IMC-C103C trial, the Company currently expects no further revenue or deferred revenue from its collaborations. The Company has a revenue partnership with Medison relating to the supply and distribution of KIMMTRAK and is classified within Product revenue in
accordance with ASC 606 . Accounts receivable Accounts receivable includes amounts invoiced or contractually accrued where only the passage of time is required before payment is received under
the Company’s revenue arrangements. Such receivables principally relate to KIMMTRAK sales. An allowance for lifetime expected credit losses on accounts receivable is measured using historical credit loss experience, conditions at the end of each
reporting period, and reasonable and supportable forecasts that affect collectability. Expected credit losses at the end of Decem ber 31, 2023 and 2022 were Inventory Inventory includes KIMMTRAK manufactured for commercial sale, items in the process of being manufactured for sale, and materials to be used in the
manufacturing process for such sale. The principal costs in manufacturing the Company’s inventory are raw materials, external manufacturing costs, and other costs incurred in bringing inventory to its location and condition prior to sale. Inventory is recorded at weighted average cost and presented as an asset in the Consolidated Balance Sheets at the lower of cost and net realizable
value. The Company assesses whether an expense should be recognized as a result of writing down inventory values at each reporting period for excess inventory at risk of expiry. Such expenses are recorded as a component of Cost of product revenue
in the Consolidated Statements of Operations and Comprehensive Loss in the period during which they are first identified. The Company records inventory costs for potential products within R&D expenses until regulatory approval is considered probable, after which the
Company capitalizes subsequent costs related to the production of inventories. Certain inventory can be used for clinical purposes or for commercial products, and the Company records such items within R&D expenses at the point that the vials
are assigned for clinical use. Cost of product revenue Cost of product revenue represents production costs including raw materials, external manufacturing costs, and other costs incurred in bringing
inventory to its location and condition prior to sale. Overheads and internal costs of product revenue are minimal under our manufacturing arrangements. Cost of product revenue may also include write-off costs and provisions related to excess or
obsolete inventory. Research and development (R&D) expense R&D costs are expensed as incurred and include (i) employee-related expenses, including salaries, benefits, travel and share-based compensation
expense for employees engaged in R&D functions; (ii) external R&D expenses incurred under arrangements with third parties, such as contract research organization (CRO) agreements, investigational sites and consultants; (iii) the cost of
acquiring, developing and manufacturing clinical study materials, including the cost of consultants and contract manufacturing organization (CMOs); (iv) costs associated with preclinical and clinical activities and regulatory operations; (v)
costs incurred in development of intellectual property, (vi) and depreciation and R&D facilities costs. The Company estimates accrued expenses at each balance sheet date based on facts and circumstances known at that time. These estimates are based on
reviews of open contracts, reports provided by the CROs and internal reviews to estimate the level of service performed and the associated cost incurred for those services when the Company has not yet been invoiced or otherwise notified of the
actual cost. In accruing clinical trial expenses, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level
of effort varies from the estimate made, the expense is adjusted accordingly. Where payments made to CROs or other parties exceed the level of services provided, a prepayment is recorded in the Consolidated Balance Sheets. Share-based compensation The Company operates equity-settled, share-based compensation plans whereby employees and directors are granted options to purchase shares in the
Company. The fair value of grants is expensed over the vesting period, which is the period in which the services are received. The majority of the Company’s awards have graded vesting schedules, and the expense for these options is recognized
over the requisite service period for each separately vesting portion as if the grant of options, in substance, represented multiple awards. The grant date fair value of options is calculated using the Black Scholes valuation model. Estimation of fair value requires judgement, including assumptions about the expected term of share-based options and expected volatility, which are
used to determine the fair value of the Company’s options granted. The expected term is based on the Company’s assessment of the period within which participants are expected to exercise options, which requires consideration of employee groups,
expected employee service, and other internal factors, and the degree to which these are expected to shorten the term of options in comparison to contractual expiry dates. Estimated expected volatility is based on a combination of the Company’s
share price volatility since its IPO and the historical data of a group of comparator companies. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the awards is indicative of
future trends, which may not necessarily be the actual outcome. The Company does not assume dividend payments for the purposes of estimating fair value and uses a zero-coupon U.S. Treasury yield curve applicable
for the period of the expected term to form an estimate of the risk-free rate. Forfeitures expected to occur are estimated considering both market and company-specific data and the available internal information at the end of
each reporting period. Income tax Income tax includes components of current and deferred tax and is recognized in the Consolidated Statements of Operations and Comprehensive Loss. Current tax is the expected tax payable or receivable on the taxable income or loss for the current or prior periods using tax rates enacted at the
balance sheet date. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement
carrying amount and the tax bases of assets and liabilities at the applicable tax rates and for operating loss and tax credit carryforwards. A valuation allowance reduces deferred tax assets in the Consolidated Balance Sheets to reflect the
amount that is more likely than not to be realized. The Company evaluates the realizability of its deferred tax assets at each reporting period and adjusts the valuation allowance accordingly, considering income forecasts, availability of
carrybacks, taxable temporary differences and other factors affecting the realization of deferred tax assets. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company
recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax
position as well as consideration of the available facts and circumstances. As of December 31, 2023 and 2022, the Company has not
recorded any provision for uncertain tax positions. Changes in the Company’s estimate of income tax positions relating to the more-likely-than-not threshold are recognized in the first subsequent period following the
threshold being met or ceasing to be met. R&D expenditure credits The Company receives R&D expenditure credits to compensate for its research activities, which are recognized when it is more likely than not the
Company will meet the terms for receiving and realizing the benefit of the credits. Recognition is on a systematic basis over the periods in which the Company recognizes costs for which the credits are intended to compensate (i.e. qualified
expenses). The Company benefits in the United Kingdom from His Majesty’s Revenue & Customs (“HMRC”) R&D expenditure (“RDEC”), which
provides relief against U.K. corporation tax. Based on criteria established by HMRC a portion of the Company’s expenditures incurred on R&D activities are eligible for RDEC relief. The Company recognizes the benefit as a reduction of the
related expenses included in R&D costs on the Consolidated Statements of Operations and Comprehensive Loss. Historically, the Company satisfied the definition of a Small and Medium-sized Enterprise
(“SME”) and was able to surrender some of its U.K. tax losses for a cash rebate of up to 33.35% of expenditures related to eligible
R&D projects. The Company exceeded the size limit thresholds and no longer qualifies for tax relief under the U.K. SME R&D regime in 2023. Leases The Company assesses whether contracts represent or contain leases at inception by determining whether the Company has the right to use, or control
the use of, an identified asset from which it can obtain substantially all the economic benefits for a defined period. The Company leases its corporate headquarters in the United Kingdom, where its facilities contain R&D, laboratory and office space of
approximately 123,000 square feet. In addition, the Company leases approximately 20,000 square feet of office space in the United States, and small offices in Ireland and Switzerland. The leases in the United Kingdom expire between 2037 and 2043.
Estimates of the term consider non-cancellable periods and include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date. Right-of-use assets are initially measured at
cost, representing the initial amount of the lease liability and any initial direct costs incurred, with a reduction for any lease incentives received. Lease liabilities are initially measured at the present value of the lease payments. Since the rate implicit in leases is not readily determinable, the Company uses available information to determine its incremental borrowing rates,
which represent the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. Fixed lease components include rental payments at inception and termination costs for leases not reasonably certain of extension. Such components are
accounted for as part of the right-of-use assets and lease liabilities and recognized on a straight-line basis over the lease term. Variable lease components include subsequent indexation-related rental increases. If such variable components do
not coincide with a remeasurement of the lease term, the additional costs are recorded as a variable component of the lease expense in the Consolidated Statements of Operations and Comprehensive Loss as incurred. Non-lease components such as
maintenance costs and service charges are separated from lease components and recognized separately in the Consolidated Statements of Operations and Comprehensive Loss. Operating lease costs are allocated to R&D and Selling, general and administrative expenses in the Consolidated Statements of Operations and
Comprehensive Loss. The related lease cash flows are categorized under Net cash used in operating activities in the Consolidated Statements of Cash Flows. The Company elects not to recognize right-of-use assets and lease liabilities for
short-term leases with a term of 12 months or less containing no repurchase options reasonably certain of exercise, and the expense for these short-term leases is immaterial. The Company does not have financing leases. Property and equipment Property and equipment are stated at cost net of accumulated depreciation and impairment losses. The Company expenses repairs and maintenance related
to property and equipment in the Consolidated Statements of Operations and Comprehensive Loss when the costs are incurred. Depreciation is charged to the Consolidated Statements of Operations and Comprehensive Loss on a straight-line basis over the estimated useful lives
of assets as follows:
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Leasehold improvements
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shorter of expected lease term and useful life of the asset
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Laboratory equipment
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3 to 5 years
•
Office equipment and other assets
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3 to 5 years Impairment of long-lived assets The Company periodically assesses whether circumstances indicate that the estimated remaining useful life of its long-lived assets should be changed
or that the carrying value of such assets may be impaired. The Company did not identify any such circumstances or recognize any
impairment charges for the years ended December 31, 2023, 2022 and 2021. Cash and cash equivalents Cash and cash equivalents comprise cash balances and short-term money market funds with an original maturity of less than three months. Money market
funds are presented at fair value in the Consolidated Balance Sheets. Concentrations of credit risk and off-balance sheet risk Financial instruments that potentially subject the Company to concentrations of credit risk are accounts receivable, cash
equivalents and deposits held with banks and financial institutions. Cash, cash equivalents and deposits are maintained with high-quality financial institutions in Europe and the United States. The Company has not experienced any credit
losses with such institutions and has incurred an immaterial amount of losses in relation to its accounts receivable from customers The Company has no financial instruments with off-balance sheet risk of loss. As of December 31, 2023 and
2022, the amounts of expected credit losses recognized in the Consolidated Balance Sheets were not materia Interest-bearing loans and borrowings The Company offsets issuance costs against the initial value of the debt on the Company’s Consolidated Balance Sheets and amortizes the costs over
the loan term using the effective interest method. Such costs are recognized under Interest expense in the Consolidated Statements of Operations and Comprehensive Loss and under Accrued expenses on the Consolidated Balance Sheets. Fair value measurements Where financial and non-financial assets and liabilities are measured at fair value, the Company uses appropriate valuation techniques for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
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Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
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Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
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Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs), and that are significant to the fair value of the assets or liabilities. As of December 31, 2023 and 2022, the Company held $331.0
million and $191.9 million, respectively, of money market funds required to be measured at fair value on a recurring basis. The fair
value of these cash equivalents is based on quoted prices from active markets (Level 1 inputs). The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the changes have occurred.
There were no transfers between levels of fair value hierarchy in the years ended December 31, 2023 and 2022. Other financial
instruments, although not recorded at fair value on a recurring basis, include cash, accounts receivable, accounts payable and debt obligations. The fair value of borrowings under the Pharmakon Loan Agreement (disclosed in Note 7. “Non-current interest-bearing loans and borrowings”) were based
on Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk, and the contractual terms of debt instruments. After initial recognition, borrowings are
measured at amortized cost using the effective interest method. Net loss per share Basic and diluted net loss per share is calculated by dividing the net loss for the period by the weighted average number of ordinary shares
outstanding during the period. The dilutive effect of potential ordinary shares through share options are considered to be anti-dilutive as they would decrease the net loss per share and are therefore excluded from the calculation of diluted net
loss per share. Recently issued and recently adopted accounting pronoun |
