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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Financial Statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in Part I. Item 1A. “Risk Factors” of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, these forward-looking statements. As used in this Annual Report on Form 10-K, unless the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Precision” refer to Precision BioSciences, Inc.

A discussion regarding our financial condition and results of operation, including liquidity and capital resources, for the year ended December 31, 2023 compared to the year ended December 31, 2022 is presented below.

Overview

We are an advanced gene editing company dedicated to improving life by developing in vivo therapies for genetic and infectious diseases with the application of our wholly-owned proprietary ARCUS genome editing platform. The foundation of ARCUS is a natural homing endonuclease which allows us to replicate precise gene editing as it evolved in nature for sophisticated gene edits, including gene insertion, excision, and elimination. ARCUS is also unique in its relatively small size which potentially allows delivery to a wider range of cells and tissues using viral and non-viral gene delivery methods.

Business Updates

In August 2023, we completed a strategic transaction with Imugene Limited and its wholly-owned subsidiary Imugene (USA) Inc. (“Imugene US” and, together with Imugene Limited, “Imugene”) for our lead allogeneic chimeric antigen receptor (“CAR”) T candidate for cancer, azercabtagene zapreleucel (“azer-cel”). In exchange for global rights to azer-cel for cancer, as well as our CAR T infrastructure and experienced cell therapy team, we received upfront consideration valued at $21 million, consisting of cash and convertible notes. We are eligible for an $8 million milestone payment upon successful completion of the Phase 1b dosing in the CAR T relapsed large B cell lymphoma (“LBCL”) patient population, up to $198 million in additional milestone payments and double-digit royalties on net sales of azer-cel, as well as $145 million in milestone payments and tiered royalties for up to three additional research programs to be developed by Imugene. Imugene has assumed ongoing clinical execution for azer-cel in the LBCL population who have relapsed following CAR T treatment.

In January 2024, we entered into a license agreement with TG Cell Therapy, Inc. (“TG Subsidiary”) and its parent company TG Therapeutics, Inc. (“TG Parent” and, together with TG Subsidiary, “TG Therapeutics”) for non-oncological applications of azer-cel (the “TG License Agreement”). In connection with the TG License Agreement, we received upfront, and are also entitled to receive potential near-term economics, valued in the aggregate at $17.5 million. The upfront payment was received on February 5, 2024 and is comprised of a (i) $5.25 million cash payment and (ii) $2.25 million cash payment in exchange for 97,360 shares of our common stock by TG Therapeutics at a price of $23.10 per share, a 100% premium to the 30-day volume-weighted average price (“VWAP”) prior to the date of the TG License Agreement. We will also receive $2.5 million within 12 months as an equity investment in our common stock at 100% premium to the then 30-day VWAP prior to purchase. Upon the achievement of certain near-term clinical milestones, we will receive an additional $7.5 million payment in cash and the purchase of our common stock by TG Therapeutics at a 100% premium to the then current 30-day VWAP. We are eligible to receive up to $288 million in additional milestone payments based on the achievement of certain clinical, regulatory, and commercial milestones, in addition to high-single-digit to low-double-digit royalties on net sales.

In February 2024, we announced that we had granted Caribou Biosciences, Inc. (“Caribou”), a leading CRISPR genome-editing cell therapy company, a non-exclusive, worldwide license, with the right to sublicense, to one of our foundational cell therapy patent families for use with CRISPR-based therapies in the field of human therapeutics. Under the terms of the agreement, we received an upfront payment and, upon commercialization by Caribou, will receive royalties on net sales of licensed products. In addition, for each occurrence of certain strategic transactions involving Caribou, we are entitled to receive a specific tiered milestone payment.

We are now solely focused on leveraging our proprietary ARCUS genome editing platform to advance in vivo gene editing programs that go beyond gene knockouts in the liver and carry out more sophisticated edits such as gene insertions, gene excision, and gene elimination, unlocking a broader potential for ARCUS in vivo gene editing in human therapeutics.

Corporate Updates

We presented two poster presentations at the European Society of Gene & Cell Therapy (“ESGCT”) congress in October 2023, “Unique features of ARCUS nucleases enable high efficiency, targeted gene insertion in vivo” and “ARCUS-mediated excision of the “hot spot” region of the human dystrophin gene results in functional improvement in a mouse model of Duchenne muscular dystrophy (“DMD”).”

Our gene editing program PBGENE-HBV, for the potential treatment of chronic hepatitis B virus (“HBV”), remains a top priority, and we expect to submit an investigational new drug (“IND”) application or clinical trial application (“CTA”) in 2024. HBV causes inflammation and damage to the liver, leading to chronic infection and increased risk of death from liver cancer or cirrhosis. There is no cure for chronic hepatitis B and current treatments rarely result in functional cure, primarily due to persistence of viral DNA in the liver. In patients with chronic HBV, genetic material of the virus is converted within infected liver cells into covalently closed circular DNA (“cccDNA”) that acts as a template to make HBV copies. HBV also inserts its DNA into the human genome of infected liver cells. This integrated HBV DNA produces the viral protein, hepatitis B surface antigen (“HBsAg”), which is secreted in the blood. Presence of HBsAg is associated with poorer outcomes and elimination of HBsAg is necessary for functional cure of chronic hepatitis B.

PBGENE-HBV is designed to inactivate cccDNA with direct cuts and edits as well as to inactivate integrated HBV DNA with the goal of long-lasting reductions in HBsAg. We believe specificity is of particular importance for developing a safe gene editing approach to eliminating HBV, as a lack of nuclease specificity can lead to unfavorable off-target results including increased integrations of HBV genomes into the human genome, as well as translocations between integrations. Preclinical data from the PBGENE-HBV program was presented in April 2023 at an oral presentation at the Global Hepatitis Summit 2023, in June 2023 at an oral presentation at the European Association for Study of the Liver Congress 2023, and in November 2023 at the American Association for the Study of Liver Diseases Annual Meeting. Data highlighted that ARCUS nucleases exhibited high levels of on-target editing and demonstrated substantial reductions of both intracellular cccDNA and secreted HBsAg with no detectable translocations in primary human hepatocytes. In February 2024, we announced that we had received pre-IND regulatory feedback from the U.S. FDA in addition to regulatory feedback from agencies outside the U.S. providing clarity and alignment on PBGENE-HBV IND/CTA-enabling preclinical plans and clinical strategy.

At our R&D Day in September 2023, we announced that we intend to pursue development of PBGENE-PMM as a potential first-in-class opportunity for treatment of m.3243 associated primary mitochondrial myopathy (“PMM”). Mitochondrial diseases are the most common hereditary metabolic disorder, affecting 1 in 4,300 people. PMM currently lacks a curative treatment and impacts approximately 50% of patients with mitochondrial disease. The high specificity and single component nature of our mitoARCUS nucleases are designed to enable specific editing of mutant mitochondrial DNA while allowing normal (wild-type) mitochondrial DNA to repopulate in the mitochondria and restore normal function. Preclinical data from the PBGENE-PMM program presented in March 2024 at a poster presentation at the Mitochondrial Medicine – Therapeutic Development Annual Conference demonstrated ARCUS’ ability to efficiently eliminate mutant mitochondrial DNA without nuclear off-target editing. We expect to submit an IND and/or CTA application in 2025 with respect to PBGENE-PMM.

Also in September 2023, we received a Notice of Allowance from the U.S. Patent and Trademark Office (“USPTO”) for U.S. Patent Application No. 18/161,560, titled “Engineered Meganucleases That Target Human Mitochondrial Genomes.” The allowed patent includes composition of matter claims encompassing a mitochondria-targeted ARCUS nuclease (“mitoARCUS”) that is designed to specifically target, cleave, and eliminate mutant mitochondrial DNA comprising an m.3243A>G mutation.

We, along with our collaboration partners, intend to continue to evaluate the ARCUS platform with regards to safety, on-target editing, gene insertion, complex gene edits, and compatibility with viral and non-viral delivery. In June 2023, we entered into an amended and restated development and license agreement (the “Prevail Agreement”) with Prevail Therapeutics, Inc. (“Prevail”), a wholly-owned subsidiary of Eli Lilly and Company. Pursuant to the terms of the Prevail Agreement, we and Prevail will continue to collaborate on developing our ARCUS nucleases for the research and development of potential in vivo therapies for genetic disorders, including DMD and two additional gene targets. We will continue to oversee creation, selection, in vitro development, and optimization of ARCUS nucleases with respect to the gene targets subject to the collaboration. Prevail will oversee and fund preclinical research and IND-enabling activities, which we previously were to conduct at our expense. We believe that shifting portions of the preclinical and IND-enabling activities on the collaboration targets to Prevail will allow us to further leverage our core capabilities in nuclease generation, development, and characterization for our internal wholly-owned programs. During the September 2023 R&D Day, we highlighted preclinical data demonstrating the potential of ARCUS in vivo gene editing for large gene excisions and that the edited dystrophin variant was observed in multiple tissue types frequently involved in progression of DMD, including skeletal muscle, heart, and diaphragm, thereby enabling significantly improved muscle function. We also shared data for another Prevail program during the R&D Day highlighting high efficiency gene insertion in adult non-human primates (“NHPs”).

In June 2022, we announced we entered into an exclusive in vivo gene editing research and development collaboration and license agreement (the “Novartis Agreement”) with Novartis Pharma AG (“Novartis”). In connection with this partnership, we are developing

a custom ARCUS nuclease that will be designed to insert, in vivo, a therapeutic transgene at a “safe harbor” location in the genome as a potential one-time transformative treatment option for diseases including certain hemoglobinopathies such as sickle cell disease and beta thalassemia. Under the terms of the Novartis Agreement, we will develop an ARCUS nuclease and conduct in vitro characterization, with Novartis then assuming responsibility for all subsequent research, development, manufacturing and commercialization activities.

In partnership with iECURE, Inc. (“iECURE”), an ARCUS-mediated gene insertion approach is being pursued as a potential treatment option for neonatal onset ornithine transcarbamylase (“OTC”) deficiency. NHP data presented by researchers from the University of Pennsylvania’s Gene Therapy Program demonstrated sustained gene insertion of a therapeutic OTC transgene one-year post-dosing in newborn and infant NHPs with high efficiency. iECURE received approval from the Australian Therapeutic Goods Administration for the initiation of a first-in-human Phase 1/2 trial evaluating ECUR-506, an investigational therapy incorporating an ARCUS nuclease in development for the treatment of OTC deficiency in pediatric (or neonatal) patients. In March 2024, iECURE also received approval from the U.K. Medicines & Healthcare products Regulatory Agency for the company’s CTA application to expand the Phase 1/2 OTC-HOPE study evaluating ECUR-506 into the U.K. iECURE is preparing sites and anticipates initiating the global clinical trial in the first half of 2024.

Reverse Stock Split

On January 18, 2024, our stockholders approved a proposal to amend our amended and restated certificate of incorporation to effect a reverse stock split of our common stock at a ratio of not less than 1-for-10 and not more than 1-for-30, with such ratio and the implementation and timing of such reverse stock split to be determined by our board of directors in its sole discretion. On February 6, 2024, our board of directors approved a 1-for-30 reverse stock split of our issued and outstanding common stock, and on February 13, 2024, we filed with the Secretary of State of the State of Delaware a certificate of amendment to our amended and restated certificate of incorporation in order to effect the reverse stock split. Trading of our common stock on The Nasdaq Capital Market commenced on a split-adjusted basis on February 14, 2024. As a result of the reverse stock split, every 30 shares of our common stock issued or outstanding were automatically reclassified into and became one new share of common stock, and the number of our issued and outstanding shares of common stock was reduced to 4,191,053 and 4,164,038, respectively. All references to numbers of shares of common stock and per-share information in this Annual Report on Form 10-K have been adjusted retroactively, as appropriate, to reflect the reverse stock split.

Common Stock Offering

License and Collaboration Transactions

TG Therapeutics

On January 7, 2024, we entered into a license agreement (the “TG License Agreement”) with TG Cell Therapy, Inc. (“TG Subsidiary”) and its parent company TG Therapeutics, Inc. (“TG Parent” and, together with TG Subsidiary, “TG Therapeutics”), pursuant to which we granted TG Subsidiary certain exclusive and non-exclusive license rights to develop, manufacture, and commercialize azer-cel for autoimmune diseases and other indications outside of cancer pursuant to the terms of the TG License Agreement.

Under the TG License Agreement, we are entitled to receive an upfront cash payment of $10.0 million (the “Upfront Payment”), an additional cash payment of $7.5 million in the event that TG Therapeutics achieves a certain clinical milestone that is expected to be achieved in the near-term (the “Initial Milestone Payment”), and additional payments upon the achievement of additional specified milestones of up to $288.6 million (the “Additional Milestone Payments”). As described below, up to $10.0 million of the cash payments potentially payable us are payable in exchange for the issuance (the “Company Stock Issuances”) to TG Subsidiary of shares of our common stock.

The Upfront Payment of $10.0 million is comprised of (i) a $5.25 million cash payment that was paid to us on February 5, 2024, (ii) a $2.25 million cash payment that was paid to us on February 5, 2024 payable in exchange for 97,360 shares of our common stock, based on a price per share equal to 200% of the VWAP of our common stock for the 30 trading days prior to the date of the TG License Agreement, and (iii) a deferred cash payment of $2.5 million due within 12 months following the date of the TG License Agreement, payable in exchange for such number of shares of our common stock determined based on a price per share equal to the

greater of (A) 200% of the VWAP of our common stock for the 30 trading days prior to the date of payment or (B) a minimum price of $11.1660 determined in accordance with Nasdaq Listing Rule 5635(d) (the “Minimum Price”).

The Initial Milestone Payment of $7.5 million, if payable, will consist of (i) a $5.25 million cash milestone payment and (ii) a $2.25 million cash payment payable in exchange for such number of shares of our common stock determined based on a price per share equal to the greater of (A) 200% of the VWAP of our common stock for the 30 trading days prior to the achievement of such milestone or (B) the Minimum Price.

The Additional Milestone Payments become due upon the achievement of certain milestones as specified in the TG License Agreement. Included within the Additional Milestone Payments is a potential payment of $3.0 million in connection with achievement of a milestone specified in the TG License Agreement, payable in exchange for such number of shares of our common stock determined based on a price per share equal to the greater of (A) 200% of the VWAP of our common stock for the 30 trading days prior to the achievement of such milestone or (B) the Minimum Price.

Subject to the terms and conditions of the TG License Agreement, TG Therapeutics is permitted to pay up to 50% of the value of each Additional Milestone Payment (other than the Additional Milestone Payment described above that would, upon achievement, involve the issuance of $3.0 million of Shares by Precision) in freely tradable shares of common stock of TG Parent, valued based on the VWAP of the TG Parent shares of common stock on Nasdaq for the 30 trading days prior to the achievement of the applicable milestone.

If a licensed product under the TG License Agreement is approved and sold, TG Therapeutics is also required to pay us tiered royalties ranging from high-single-digit to low-double-digit percentages on net sales of the licensed product. TG Therapeutics’ obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of (i) the expiration of the last-to-expire valid claim in such country covering such licensed product; (ii) the expiration of any period of data, regulatory, or market exclusivity, or supplemental protection certificates (other than patents) covering the licensed product in such country; and (iii) a period of ten years following the first commercial sale of the respective licensed product in such country.

Unless earlier terminated, the TG License Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. We may terminate the TG License Agreement if TG Therapeutics fails to initiate certain development activities with respect to the licensed product by a specified date or ceases active development of the licensed product for a specified period of time. In addition, we may terminate the TG License Agreement if TG Therapeutics or any of its affiliates or sublicensees challenges the validity of any patents controlled by us. We or TG Therapeutics may terminate the TG License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the TG License Agreement or (ii) the other party’s insolvency.

Sale of CAR T Platform to Imugene

On August 15, 2023 we entered into an asset purchase agreement with Imugene (the “Imugene Purchase Agreement”). Pursuant to and simultaneously with the execution of the Imugene Purchase Agreement, on August 15, 2023 (the “Closing Date”), Imugene US acquired our manufacturing infrastructure used in the development and manufacture of azer-cel, including assuming the lease to our manufacturing facility and certain contracts with respect to our manufacturing facility, and related equipment, supplies, azer-cel clinical trial inventory and other assets related to our CAR T cell therapy platform (the “Acquired Assets”). As part of the Imugene Purchase Agreement, Imugene US hired a number of the Company’s employees who were associated with our historical CAR T cell therapy operations.

In consideration for the Acquired Assets, Imugene US assumed certain liabilities, paid us $8 million in cash, and issued us convertible notes pursuant to the terms and conditions set forth in a convertible note subscription deed (collectively, the “Imugene Convertible Note”) in an aggregate principal amount of $13 million. The Imugene Convertible Note is non-interest bearing and matures on the first anniversary of the Closing Date (the “Maturity Date”). On the Maturity Date, the Imugene Convertible Note will be redeemed with cash, converted into ordinary shares of Imugene Limited at a conversion price based on the 10-day volume weighted average price of Imugene Limited’s ordinary shares prior to the date of conversion, or partially redeemed with cash and partially converted into shares, at Imugene’s discretion.

Additionally, we entered into a license agreement with Imugene (the “Imugene License Agreement”) on the Closing Date, pursuant to which we granted Imugene US certain exclusive and non-exclusive license rights to develop, manufacture, and commercialize oncological applications of our allogeneic CAR T therapy, azer-cel, and up to three additional research product candidates directed to targets that Imugene US may nominate prior to the fifth anniversary of the effective date of the Imugene License Agreement, pursuant to the terms of the Imugene License Agreement.

In addition, under the License Agreement, we are eligible to receive milestone payments of up to an aggregate of $206 million for azer-cel, inclusive of a payment of $8 million in cash and equity upon successful completion of the Phase 1b dosing in the CAR T relapsed LBCL patient population. For azer-cel, we are eligible to receive double-digit royalties on net sales. For up to three additional research programs to be developed by Imugene, we are eligible for up to $145 million in milestone payments and, if licensed products are approved and sold, tiered royalties ranging from the mid-single digit to low-double digit percentages on net sales of such licensed products. In addition, we are eligible to receive mid-single digit percentage-based fees for certain change of control transactions involving Imugene and for partnering transactions involving a licensed product. Imugene’s obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following the first commercial sale of the respective licensed product.

Unless earlier terminated, the Imugene License Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. We may terminate the entire Imugene License Agreement due to a challenge to our patents brought by Imugene and a breach by Imugene in any material respect of the Imugene License Agreement, the Imugene Purchase Agreement or any related transaction documents. We may also terminate the Imugene License Agreement with respect to azer-cel if Imugene fails to initiate certain development activities with respect to azer-cel by a specified date, if Imugene fails to expend certain amounts on the development of azer-cel or if Imugene ceases active development of azer-cel for a specified period of time. Either party may terminate the Imugene License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the agreement or (ii) the other party’s insolvency.

In connection with the Imugene Purchase Agreement and the Imugene License Agreement, we and Imugene have entered into other related agreements and documents, including a registration rights agreement, a transition services agreement, a sublease for laboratory space at our headquarters and a parent company guaranty from Imugene Limited.

We concluded the Imugene License Agreement represents functional intellectual property in accordance with ASC 606 given we do not expect to provide any additional services to Imugene outside of the right to use the licensed intellectual property. As of December 31, 2023 management has constrained all variable consideration related to milestone payments in the Imugene License Agreement given the level of uncertainty associated with achievement of the milestone payments. Accordingly, no revenue was recognized under the Imugene License Agreement during the year ended December 31, 2023.

Novartis Pharma AG

On June 14, 2022, we entered into the Novartis Agreement, which became effective on June 15, 2022 (the “Novartis Effective Date”), to collaborate to discover and develop in vivo gene editing products incorporating our custom ARCUS nucleases for the purpose of seeking to research and develop potential treatments for certain diseases (collectively referred to as licensed products). Any initial licensed products under the Novartis Agreement will be developed for the potential treatment of certain hemoglobinopathies, including sickle cell disease and beta thalassemia.

Pursuant to the terms of the Novartis Agreement, we will develop an ARCUS nuclease and conduct in vitro characterization for the licensed products, with Novartis then assuming responsibility for all subsequent development, manufacturing and commercialization activities. Novartis will receive an exclusive license for, and be required to use commercially reasonable efforts to conduct all subsequent research, development, manufacture and commercialization activities with respect to the licensed products. We will initially develop a single, custom ARCUS nuclease for a defined “safe harbor” target site for insertion of specified therapeutic payloads in the patient’s genome (the “Initial Nuclease”) for Novartis to further develop as a potential in vivo treatment option for certain hemoglobinopathies, including sickle cell disease and beta thalassemia. Pursuant to the terms of the Novartis Agreement, Novartis may elect, subject to payment of a fee to us, to replace licensed products based on the Initial Nuclease with licensed products based on a second custom ARCUS nuclease we design for gene editing of a specified human gene target associated with hemoglobinopathies (the “Replacement Nuclease”). Additionally, Novartis has the option, upon payment of a fee to us for each exercise of the option, to include licensed products utilizing the Initial Nuclease for insertion of up to three additional specified therapeutic payloads at the “safe harbor” target site, each intended to treat a particular genetic disease. The exercise period for such option ends on the earlier of (a) the fourth anniversary of the Novartis Effective Date and (b) the replacement of the Initial Nuclease with the Replacement Nuclease as described above.

In July 2022, we received a $50.0 million upfront cash payment under the Novartis Agreement. Additionally, on the Novartis Effective Date, Novartis made an equity investment in our common stock pursuant to a stock purchase agreement (the “Novartis Stock Purchase Agreement”) pursuant to which, on the Novartis Effective Date, we issued and sold to Novartis 413,581 shares of our common stock (the “Novartis Shares”) in a private placement transaction for an aggregate purchase price of $25.0 million, or approximately $60.30 per share. The price per share of our common stock under the Novartis Stock Purchase Agreement represented a

20% premium over the volume-weighted-average-price of our common stock over the 10 trading days preceding the execution date of the Novartis Stock Purchase Agreement.

Pursuant to the Novartis Stock Purchase Agreement, subject to certain exceptions, Novartis may not sell the Novartis Shares without our approval for a period of two years following the Novartis Effective Date. In addition, for a period of two years following the Novartis Effective Date, Novartis and its affiliates may not (a) effect or otherwise participate in, directly or indirectly, any acquisition of any of our securities or material assets, any tender offer or exchange offer, merger or other business combination or change of control involving us, any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to us, or any solicitation of proxies or consents to vote any of our securities or (b) act with any other person, or publicly disclose any intention, to do any of the foregoing. The Novartis Stock Purchase Agreement also contains customary representations, warranties, and covenants of both parties.

On the Novartis Effective Date, we and Novartis also entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which we have agreed, within the time periods specified in the Registration Rights Agreement, to register the resale of the Novartis Shares on a registration statement to be filed with the SEC. The Registration Rights Agreement contains customary indemnification provisions, and all registration rights terminate in their entirety effective on the first date on which there cease to be any Registrable Securities (as defined in the Registration Rights Agreement) outstanding.

We will also be eligible to receive milestone payments of up to an aggregate of approximately $1.4 billion as well as certain research funding. If licensed products resulting from the collaboration are approved and sold, we will also be entitled to receive tiered royalties ranging from the mid-single digit to low-double digit percentages on net sales of licensed products, subject to customary potential reductions. Novartis’s obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following the first commercial sale of the licensed product.

Unless earlier terminated, the Novartis Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. Novartis has the right to terminate the Novartis Agreement without cause by providing advance notice to us. Either party may terminate the Novartis Agreement for material breach by the other party and a failure to cure such breach within the time period specified in the Novartis Agreement. We may also terminate the Novartis Agreement in the event that Novartis brings a challenge to our patents.

During the years ended December 31, 2023 and 2022 we recognized revenue under the Novartis Agreement of $22.7 million and $9.5 million, respectively. Deferred revenue related to the Novartis Agreement amounted to $32.4 million and $54.2 million as of December 31, 2023 and December 31, 2022, respectively, of which $7.4 million and $27.9 million, respectively, was included in current liabilities within the balance sheets.

Prevail Therapeutics, Inc.

On November 19, 2020, we entered into a development and license agreement with Eli Lilly and Company (“Lilly”) to collaborate to discover and develop in vivo gene editing products incorporating our ARCUS nucleases to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders. This agreement was subsequently assigned to Prevail Therapeutics, a wholly-owned subsidiary of Lilly, effective November 1, 2022 (the “Original Prevail Agreement”).

On June 30, 2023, we entered into the Prevail Agreement which amended and restated the Original Prevail Agreement. Pursuant to the terms of the Prevail Agreement, we and Prevail will continue to collaborate on developing our ARCUS nucleases for the research and development of potential in vivo therapies for genetic disorders, including DMD, a liver-directed target, and a central nervous system directed target. Prevail also continues to have the right to nominate up to three additional gene targets for genetic disorders over the initial nomination period of four years. Prevail may extend the nomination period for an additional two years from the date on which such initial nomination period ends, upon Prevail’s election and payment of an extension fee. Additionally, Prevail has the option to replace up to two gene targets upon Prevail's election and payment of a replacement target fee.

Prevail will oversee and fund preclinical research and IND-enabling activities following creation, selection, in vitro development, and optimization of ARCUS nucleases with respect to the gene targets subject to the collaboration, which were previously conducted by us at our expense. Manufacturing initial clinical trial material for the first licensed product, which was previously our responsibility to conduct at Prevail’s expense, will instead be Prevail’s responsibility at Prevail’s expense. Prevail will continue to be responsible for, and must use commercially reasonable efforts with respect to, conducting clinical development and commercialization activities for licensed products resulting from the collaboration.

In connection with the closing of the original development and license agreement with Lilly, we received an upfront cash payment of $100.0 million as well as $35.0 million from Lilly’s purchase of 125,406 newly issued shares of our common stock. Under the Prevail Agreement, we will also be eligible to receive milestone payments of up to an aggregate of $390 million to $395 million per licensed product as well as nomination fees for additional targets and certain research funding. If licensed products resulting from the collaboration are approved and sold, we will also be entitled to receive tiered royalties ranging from the mid-single digit percentages to the low-teens percentages on world-wide net sales of the licensed products, subject to customary potential reductions. Prevail’s obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following first commercial sale of the licensed product.

During the years ended December 31, 2023 and 2022, we recognized revenue under the Prevail Agreement of $26.0 million and $15.6 million, respectively. Deferred revenue related to the Prevail Agreement was $52.7 million and $74.8 million as of December 31, 2023 and December 31, 2022, respectively, of which $4.7 million and $18.3 million, respectively, was included in current liabilities within the balance sheets.

iECURE

In August 2021, we entered into a development and license agreement with iECURE (the “iECURE DLA”) under which iECURE was to advance our PBGENE-PCSK9 candidate through preclinical activities as well as a Phase 1 clinical trial in order to gain access to a license to use our PCSK9-directed ARCUS nuclease to insert genes into the PCSK9 locus to develop treatments for four pre-specified rare genetic diseases, including OTC deficiency (the “PCSK9 License”). Simultaneously with the entry into the iECURE DLA, we and iECURE entered into an equity issuance agreement (the “iECURE Equity Agreement”), pursuant to which iECURE issued us common stock in iECURE as additional consideration for the PCSK9 license. Additionally, we are eligible to receive milestone and mid-single digit to low double digit royalty payments on sales of iECURE products developed with ARCUS.

We adjust the carrying value of the iECURE equity to fair value each reporting period with any changes in fair value recorded to other income (expense). During the year ended December 31, 2023, we recorded a $0.6 million increase in the carrying value of our iECURE equity to adjust to fair value.

The fair value of the costs to be incurred by iECURE to progress the Company’s PBGENE-PCSK9 candidate through the Phase 1 clinical trial (the “PCSK9 Prepaid”) were recorded to the prepaid expenses and other assets line items of the balance sheets. The PCSK9 Prepaid was amortized to research and development expense on a pro-rata basis as iECURE incurred costs to progress the PBGENE-PCSK9 candidate through the Phase 1 clinical trial. During the year ended December 31, 2022, we recognized $2.1 million of research and development expense related to amortization of the PCSK9 Prepaid. The remaining unamortized PCSK9 Prepaid was fully impaired during the year ended December 31, 2022 as we made the decision to cease pursuit of PBGENE-PCSK9 for familial hypercholesterolemia with iECURE as our partner in December 2022. Accordingly, there was no PCSK9 Prepaid balance as of December 31, 2023 or 2022.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales in the foreseeable future. We record revenue from collaboration agreements, including amounts related to upfront payments, milestone payments, fees for licenses of our intellectual property and research and development funding.

Research and Development Expenses

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

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salaries, benefits and other related costs, including share-based compensation expense, for personnel engaged in research and development functions;

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expenses incurred under agreements with third parties, including third parties that conduct preclinical research and development activities on our behalf;

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costs of manufacturing drug products for use in our preclinical studies, including the costs of contract manufacturing organizations (“CMOs”);

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costs of outside consultants;

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costs of laboratory supplies and acquiring, developing and manufacturing preclinical study materials;

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license payments made for intellectual property used in research and development activities; and

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facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs if specifically identifiable to research activities.

We expense research and development costs as incurred. We track external research and development costs by product candidate beginning when it is publicly named as a development program. Internal and external costs that are not identifiable to specific development candidates are included in the platform development expenses category.

Research and development activities are central to our business model. We expect that our research and development expenses will increase over the long term and will comprise a larger percentage of our total expenses as we progress development of our product candidates.

We cannot determine with certainty the duration and costs of future clinical trials for our product candidates we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

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the scope, rate of progress, expense and results of future clinical trials of our product candidates and other research and development activities that we may conduct;

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the ability to collaborate and partner with third parties to fund any or all of our programs;

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uncertainties in clinical trial design and patient enrollment rates;

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the actual probability of success for our product candidates, including their safety and efficacy, early clinical data, competition, manufacturing capability and commercial viability;

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significant and changing government regulation and regulatory guidance;

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the timing and receipt of any marketing approvals; and

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the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, consulting fees, recruitment-related costs and other employee-related costs, including share-based compensation, for personnel in our executive, finance, business development, operations and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; information technology costs; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs that are not specifically attributable to research activities.

Impairment Charges

Impairment charges represents our impairment of intangible assets and long-term prepaid assets. An impairment loss is assessed when future undiscounted cash flows are less than the assets’ carrying value and is recognized when the carrying value of the asset exceeds fair value. An impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the asset.

Loss on Disposal of Assets

Loss on disposal of assets represents the remaining net book value of disposed assets at the time of their disposal and impairment recognized on assets held for sale.

Gain (Loss) on Changes in Fair Value

The change in fair value of represents the assessed changes in fair value of assets and liabilities carried at fair value.

Loss from Equity Method Investment

Loss from equity method investment represents our proportionate share of the net loss of our equity method investee, Elo Life Systems, Inc. (“Elo”).

Interest Expense

Interest expense consists of interest payments incurred and discount amortization on debt outstanding.

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents and note receivable from Elo.

Loss from Discontinued Operations

Loss from discontinued operations represents the gain on the sale of our CAR T infrastructure to Imugene and the results of operations of our historical cell therapy operations.

Results of Operations

Comparison of the Years Ended December 31, 2023 and December 31, 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and December 31, 2022, together with the changes in those items in dollars:

Years ended December 31,

Operating expenses:

Other income (expense), net:

Loss on disposal of assets (461 ) (30 ) (431 )

Loss from equity method investment (4,931 ) (1,579 ) (3,352 )

Revenue

Revenue for the year ended December 31, 2023 was $48.7 million, compared to $25.1 million for the year ended December 31, 2022. The increase of $23.6 million in revenue during the year ended December 31, 2023 was primarily the result of a $10.4 million increase in revenue recognized under the Prevail Agreement. On June 30, 2023, we amended the Original Prevail Agreement, which resulted in a decrease in total estimated effort required to satisfy the performance obligation under the agreement, as so amended and restated, and an increase in the transaction price.

Also contributing to the increase in revenue was an increase of $13.2 million in revenue recognized under the Novartis Agreement as 2023 was the first full year of revenue recognized under the Novartis Agreement.

Research and Development Expenses

Years ended December 31,

Direct research and development expenses by product candidate:

PBGENE-PMM external development costs 352 — 352

Platform development and early-stage research expenses:

Employee-related costs (other than share based compensation) 19,788 18,732 1,056

CMOs and research organizations 71 45 26

Laboratory equipment and maintenance 938 1,049 (111 )

Other research and development costs 40 8 32

Research and development expenses for the year ended December 31, 2023 were $53.4 million, compared to $46.1 million for the year ended December 31, 2022. The increase of $7.3 million was primarily due to an $8.5 million increase in PBGENE-HBV external development costs related to CTA/IND-enabling studies. Also contributing to the increase was a $1.2 million increase in outsourced research and development costs primarily related to consulting fees, a $1.1 million increase in employee-related costs (other than share based compensation) as a result of increases in performance based compensation, a $0.5 million increase in licensing fees, and a $0.3 million increase in facility-related costs. Additionally, PBGENE-PMM external development costs increased by $0.4 million as we began pursuing development of PBGENE-PMM during the year ended December 31, 2023.

Partially offsetting the increases in research and development expenses was a $2.8 million decrease in laboratory supplies and services expenses primarily related to a decrease in expense related to partnered programs. Additionally share based compensation expenses decreased $1.8 million due to forfeitures.

General and Administrative Expenses

General and administrative expenses were $39.1 million for the year ended December 31, 2023 compared to $41.3 million for the year ended December 31, 2022. The decrease of $2.2 million was primarily due to a $1.5 million decrease in share-based compensation expense and a $0.7 million decrease in insurance expense driven by a market-related reduction in director and officer insurance premiums.

Impairment Charges

There were no impairment charges during the year ended December 31, 2023. Impairment charges were $10.8 million during the year ended December 31, 2022 which is comprised of the $10.8 million impairment of the iECURE PCSK9 Prepaid as we made the decision to cease pursuit of PBGENE-PCSK9 for FH with iECURE as our partner. The impairment charge represented the remaining unamortized balance of the PCSK9 Prepaid.

Loss on Disposal of Assets

Loss on disposal of assets was $0.5 million during the year ended December 31, 2023 which included the proceeds from sales of equipment less the remaining net book value at the time of the equipment’s disposal and impairment losses recognized on assets held for sale. Loss on disposal of assets was less than $0.1 million for the year ended December 31, 2022 which represented the remaining net book value at the time of the equipment’s disposal.

Gain (Loss) on Changes in Fair Value

Gain from changes in fair value was $1.1 million for the year ended December 31, 2023, which is primarily the result of an increase in the assessed fair value of the iECURE equity investment as iECURE has progressed towards a clinical trial for OTC deficiency. The loss from changes in fair value was $0.5 million for the year ended December 31, 2022, which primarily represents the change in fair value of the iECURE equity investment as a result of dilution from iECURE's Series A-1 equity raise during the year ended December 31, 2022.

Loss from Equity Method Investment

Loss from equity method investment was $4.9 million during the year ended December 31, 2023 and represented our proportionate share of Elo’s net loss for such period. Loss from equity method investment was $1.6 million during the year ended December 31, 2022 and represented our proportionate share of Elo’s net loss for such period, partially offset by a gain recorded from an increase in our proportionate share of Elo's net assets resulting from an equity issuance by Elo.

Interest Expense

Interest expense was $2.2 million for the year ended December 31, 2023 compared to $1.1 million during the year ended December 31, 2022. The $1.1 million increase in interest expense was primarily the result of a higher average balance on our debt and with higher interest rates during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Interest Income

Interest income was $7.7 million during the year ended December 31, 2023 compared to $3.5 million during the year ended December 31, 2022. The $4.2 million increase in interest income was primarily driven by higher interest rates on our cash and cash equivalents during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Loss from Discontinued Operations

Loss from discontinued operations was $18.8 million during the year ended December 31, 2023 compared to $38.7 million during the year ended December 31, 2022. The $19.9 million decrease in loss from discontinued operations was the result of the $8.4 million gain on sale of our CAR T infrastructure to Imugene and a $11.5 million decrease in cell therapy expenses during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Income Taxes

Since our inception in 2006, we have generated cumulative federal and state NOL and R&D credit carryforwards for which we have not recorded any net tax benefit due to the uncertainty around utilizing these tax attributes within their respective carryforward periods. As of December 31, 2023, we had federal and state NOL carryforwards of $195.0 million and $166.8 million respectively, which may be available to offset future taxable income. The U.S. federal NOLs carryforward indefinitely. The state NOL carryforwards begin to expire in 2027. As of December 31, 2023, we also had federal and state R&D tax credits of $17.2 million and an amount less than $0.1 million, which begin to expire in 2029 and 2030, respectively. As of December 31, 2023 we had federal Orphan Drug credits of $13.5 million which begin to expire in 2038. As of December 31, 2023, we also have federal contribution carryforwards of $0.2 million, which began to expire in 2023. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

Liquidity and Capital Resources

Since our formation in 2006, we have devoted substantially all of our resources to developing ARCUS, conducting research and development activities, recruiting skilled personnel, developing manufacturing processes, establishing our intellectual property portfolio and providing general and administrative support for these operations.

We have incurred significant operating losses since our inception and have not generated any revenue from the sale of products. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates or the product candidates of our collaborators or other licensees for which we may receive milestone payments or royalties. As of December 31, 2023, we had an accumulated deficit of $489.6 million.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the development of our product candidates. We expect that our research and development and general and administrative costs will increase over the long term, including in connection with conducting preclinical studies and potential clinical trials for our product candidates, contracting with

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CROs and CMOs, expanding our intellectual property portfolio and providing general and administrative support for our operations. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.

As of December 31, 2023, we had cash and cash equivalents of $116.7 million and available borrowings under our loan and security agreement (as amended from time to time, the “Revolving Line”) with Pacific Western Bank (“PWB”) of $7.5 million. Covenants on our Revolving Line require that we maintain an aggregate balance of unrestricted cash at PWB (not including amounts in certain specified accounts) equal to or greater than $10.0 million. Our sources of funding to finance our cash needs include proceeds from third parties through a combination of financings including our initial public offering (“IPO”), preferred stock and convertible note financings, underwritten offerings of our common stock, ATM offerings of our common stock as part of our shelf registration statement, upfront and milestone payments from partners, borrowings under bank facilities and funding from other strategic alliances and grants.

There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all, particularly in light of current global macroeconomic conditions. If we are unable to obtain sufficient financing on a timely basis or on favorable terms, we may be required to significantly delay, alter reduce or eliminate one or more of our research or product development programs and/or commercialization efforts, or to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves. We may also be otherwise unable to execute our business plan or growth strategy, or capitalize on business opportunities as desired. Any of these events could materially adversely affect our financial condition and business prospects.

Because of the numerous risks and uncertainties associated with the development of therapeutic products, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be required to raise additional capital, potentially on terms that are unfavorable to us, or we may be unable to continue our operations at planned levels and be forced to reduce or terminate operations.

Cash Flows

Our cash and cash equivalents totaled $116.7 million and $189.6 as of December 31, 2023, and 2022, respectively.

The following table summarizes our sources and uses of cash for the periods presented:

For the Years Ended December 31,

Net cash used in operating activities $ (84,114 ) $ (45,753 )

Net cash provided by (used in) investing activities 5,829 (3,319 )

Net cash provided by financing activities 5,387 94,985

(Decrease) increase in cash and cash equivalents $ (72,898 ) $ 45,913

We experienced a decrease in cash and cash equivalents during the year ended December 31, 2023 of $72.9 million, compared to a $45.9 million increase in cash and cash equivalents during the year ended December 31, 2022. The $118.8 million decrease in cash flows in the comparable periods was primarily due to the year over year decrease in net cash provided by financing activities and an increase in cash used in operating activities.

Cash Used in Operating Activities

Our primary use of cash is to fund operating expenses, which consist primarily of research and development and general and administrative costs. The use of cash in operating activities during the years ended December 31, 2023 and December 31, 2022 resulted from our net loss adjusted for non-cash items and changes in working capital.

Cash used in operating activities during the year ended December 31, 2023 was $84.1 million, compared to $45.8 million during the year ended December 31, 2022. The $38.3 million increase in cash used in operating activities was primarily driven by the $50.0 million upfront payment received from Novartis pursuant to the terms of the Novartis Agreement during the year ended December 31, 2022.

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Cash Provided by (Used in) Investing Activities

Cash provided by investing activities relates to proceeds received from disposed assets. Cash used in investing activities primarily relates to cash expenditures to acquire leasehold additions, equipment, software and intangible assets. Net cash provided by investing activities during the year ended December 31, 2023 was $5.8 million, compared to $3.3 million net cash used in investing activities during the year ended December 31, 2022. The $9.1 million net increase in cash provided by investing activities was primarily driven by $8.0 million in proceeds received from Imugene as partial consideration for assets acquired under the Purchase Agreement and a $1.4 million decrease in cash paid to purchase property, equipment and software during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Cash Provided by Financing Activities

Net cash provided by financing activities during the year ended December 31, 2023 was $5.4 million, compared to $95.0 million during the year ended December 31, 2022. The $89.6 million decrease in cash provided by financing activities during the year ended December 31, 2023 was primarily due a $44.0 million decrease in common stock issuance proceeds, $25.0 million in proceeds from the Novartis Stock Purchase Agreement in June 2022, and $20.0 million in borrowings from our revolving credit facility in May 2022.

Debt Obligations

Revolving Line

We may request advances on our Revolving Line with PWB up to an aggregate principal amount of $30.0 million. The Revolving Line maturity date is June 23, 2024 and all outstanding principal amounts are due upon maturity. We must also maintain an aggregate balance of unrestricted cash at PWB (not including amounts in certain specified accounts) equal to or greater than $10.0 million. The interest rate on Revolving Line borrowings is a variable annual rate equal to the greater of (a) 0.75% above the Prime Rate (as defined in the Revolving Line), or (b) 4.25%. As of December 31, 2023, the outstanding principal balance on the Revolving Line was $22.5 million, the stated interest rate was 9.25% and the effective interest rate was 10.3%.

Funding Requirements

We will continue to have funding requirements in connection with the continuation of our research and development efforts, potential IND and CTA submissions, potential clinical trials, and expected growth in our in vivo portfolios.

We believe that, as of the date of this Annual Report on Form 10-K, existing cash and cash equivalents, expected operational receipts, including near-term consideration to be received from licensees, operational efficiencies gained from divestment of our historical CAR T operations, and availability of our ATM facility will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2026. We expect our cash runway to be sufficient to achieve first-in-human Phase 1 clinical data for our lead in vivo gene editing programs. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:

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the ability to collaborate and partner with third parties to fund any or all of our programs;

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the progress, costs and results of our additional research and preclinical development programs including our in vivo pipeline and our planned IND or CTA submissions and potential BLA submissions;

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

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our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;

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the scope, progress, results and costs of any product candidates that we may derive from ARCUS or any other product candidates we may develop alone or with collaborators;

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

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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims; and

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•

the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any product candidates for which we or our collaborators obtain marketing approval.

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity or debt financings, collaboration agreements, other third‐party funding, strategic alliances, licensing arrangements and marketing and/or distribution arrangements. See “Risk Factors–– We will need substantial additional funding, and if we are unable to raise a sufficient amount of capital when needed on acceptable terms, or at all, we may be forced to delay, reduce or eliminate some or all of our research programs, product development activities and commercialization efforts.” in Part I, Item 1A. of this Annual Report on Form 10-K for a further discussion of our ability to generate and obtain adequate amounts of funding in connection with our continuing operations.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, product development and research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to significantly delay, alter reduce or eliminate one or more of our research or product development programs and/or commercialization efforts, or to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves. We may also be otherwise unable to execute our business plan, growth strategy, or capitalize on business opportunities as desired.

Common Stock Offering

In March 2024, we entered into an underwriting agreement relating to the issuance and sale of an aggregate of 2,500,000 shares of our common stock and warrants to purchase 2,500,000 shares of our common stock at a combined offering price of $16.00 per share. Each warrant has an exercise price per share of $20.00, is immediately exercisable and will expire on March 5, 2029. The offering was made pursuant to a registration statement on Form S-3. Gross proceeds from the transaction were $40.0 million before deducting underwriting discounts and commissions and offering expenses of approximately $2.9 million. In addition, we granted the underwriters a 30-day option to purchase up to an additional 375,000 shares of its common stock at $16.00 per share, less underwriting discounts and commissions. We intend to use the net proceeds of the offering to fund ongoing and planned research and development, and for working capital and other general corporate purposes.

Contractual Obligations and Commitments

In addition to the contractual obligations and commitments as described elsewhere in this Annual Report on Form 10-K with respect to leases, the Revolving Line, and intellectual property licenses, we also enter into contracts in the normal course of business with CMOs, universities, and other third parties for preclinical research studies, testing, manufacturing services, and other services and products for operating purposes. These contract are generally cancelable upon written notice.

The Company does not have any material capital expenditure commitments at December 31, 2023.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our Financial Statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our Financial Statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our Financial Statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our Financial Statements.

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Revenue Recognition

Our revenues are generated primarily through collaborative research, license, development and commercialization agreements. The terms of these agreements generally contain multiple elements, or deliverables, which may include (i) licenses, or options to obtain licenses, to use our technology, (ii) research and development activities to be performed on behalf of the collaborative partner, and (iii) in certain cases, services in connection with the manufacturing of preclinical and clinical material. Payments we receive under these arrangements typically include one or more of the following: non-refundable, upfront license fees; option exercise fees; funding of research and/or development efforts; clinical and development, regulatory, and sales milestone payments; and royalties on future product sales. We classify payments received under these agreements as revenues within our statements of operations.

ASC 606, Revenue from Contracts with Customers, applies to all contracts with customers, except for contracts that are within the scope of other standards. 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. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, we evaluate the performance obligations promised in the contract that are based on goods and services that will be transferred to the customer and determine whether those obligations are both (i) capable of being distinct and (ii) distinct in the context of the contract. Goods or services that meet these criteria are considered distinct performance obligations. If both these criteria are not met, the goods and services are combined into a single performance obligation. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. We assess if these options provide a material right to the customer and, if so, these options are considered performance obligations. The exercise of a material right is accounted for as a contract modification for accounting purposes.

We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.

Invoices issued as stipulated in contracts prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue within current liabilities in our balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as noncurrent deferred revenue. Amounts recognized as revenue, but not yet invoiced are generally recognized as contract assets in the other current assets line item in our balance sheets.

Milestone Payments – If an arrangement includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

Royalties – For arrangements that include sales-based royalties, including milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, we have not recognized any royalty revenue resulting from any of our licensing arrangements.

Significant Financing Component – In determining the transaction price, we adjust consideration for the effects of the time value of money if the timing of payments provides us with a significant benefit of financing. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. We assessed each of our revenue arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does not exist in any of our arrangements.

Collaborative Arrangements – We have entered into collaboration agreements, which are within the scope of ASC 606, to discover, develop, manufacture and commercialize product candidates. The terms of these agreements typically contain multiple promises or

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obligations, which may include: (1) licenses, or options to obtain licenses, to use our technology, (2) research and development activities to be performed on behalf of the collaboration partner, and (3) in certain cases, services in connection with the manufacturing of preclinical and clinical material. Payments we receive under these arrangements typically include one or more of the following: non-refundable, upfront license fees; option exercise fees; funding of research and/or development efforts; clinical and development, regulatory, and sales milestone payments; and royalties on future product sales.

We analyze our collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements, 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 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 within the scope of ASC 808 that contain multiple elements, we first determine which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, are within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606. For those elements of the arrangement that are accounted for pursuant to ASC 606, we apply the five-step model described above.

Revenue related to performance obligations satisfied over time could be materially impacted as a result of changes in the estimated research effort to satisfy performance obligations or changes in the transaction price related to variable consideration. For example, in in the year ended December 31, 2023, we recorded cumulative catch up adjustments that increased revenue by $7.6 million related to the Prevail Agreement and decreased revenue by $6.0 million related to the Novartis Agreement as a result of changes in total estimated effort required to satisfy performance obligations and changes in variable consideration included in the transaction price related to estimated fees to be received from partners. If we were to increase total estimated effort required to satisfy the performance obligations by 10%, it would result in cumulative catch up adjustments that decrease revenue recognition by $8.6 million in the current year and those amounts would be recognized in the future as the incremental effort is provided. Alternatively, if we were to decrease total estimated effort required to satisfy the performance obligations by 10%, it would result in cumulative catch up adjustments that increase revenue recognition by $10.5 million in the current year.

Accrued Research and Development Expenses

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

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third parties in connection with performing research and development activities, conducting preclinical studies and clinical trials on our behalf;

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Vendors in connection with preclinical development activities; and

•

CMOs and other vendors in connection with product manufacturing and development and distribution of preclinical supplies.

We base our expenses related to preclinical studies on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct and manage preclinical studies and CMOs that manufacture product for our research and development activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly.

Share-Based Compensation

We measure stock options and other share-based awards granted to our employees, directors, consultants and advisors based on the fair value on the date of the grant and recognize compensation expense for those awards, net of actual forfeitures, over the requisite service period, which is generally the vesting period of the respective award.

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The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the expected volatility of our common stock, the expected term of the stock options, the risk-free interest rate for a period that approximates the expected term of the stock options and the our expected dividend yield. Expected volatility is estimated based on the historical volatility of our and other comparable publicly traded peer companies. The expected term of the options has been determined utilizing a weighted average value considering actual exercise history and estimated expected term based on the midpoint of final vest date and expiration date. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The fair value of each restricted stock unit is determined based on the closing market price of our common stock on the date of grant.

Recent Accounting Pronouncements

Accounting standards updates that have been issued, but are not effective until after December 31, 2023, are not expected to have a material effect on the our financial position, statements of operations or cash flows.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards. As an “emerging growth company,” we are also exempted from having to provide an auditor attestation of internal control over financial reporting under Sarbanes-Oxley Act Section 404(b).

We will remain an “emerging growth company” until the earliest of (1) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (2) December 31, 2024, (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, which means the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30th.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. Our interest-earning assets consist of cash and cash equivalents, which are denominated in U.S. dollars. We had cash and cash equivalents of $116.7 million, or 73% of our total assets, on December 31, 2023 and $189.6 million, or 80% of our total assets, on December 31, 2022. Interest income earned on our assets was $7.7 million and $3.5 million for the years ended December 31, 2023 and December 31, 2022, respectively. Our interest income is sensitive to changes in the general level of interest rates, primarily U.S. interest rates, however, we do not anticipate fluctuations in interest rates to have a material impact on our financial statements. A hypothetical 10% change in existing interest rates would not have had a material impact on the value of our cash and cash equivalents as of December 31, 2023.

Item 8. Financial Statements and Supplementary Data.

The financial statements required to be filed pursuant to this Item 8 are appended to this report and are incorporated herein by reference. An index of those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition,

106

the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2023.

Management’s annual report on internal control over financial reporting

Our management, with the participation of our principal executive officer and our principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control–Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2023, our internal control over financial reporting was effective.

Attestation Report of the Registered Public Accounting Firm

Our independent registered accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 of Sarbanes-Oxley Act of 2002 until we are no longer a non-accelerated filer as defined in the Exchange Act.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

INFORMATION ABOUT OUR DIRECTORS & EXECUTIVE OFFICERS

The following information with respect to our board of directors and executive officers is presented as of February 29, 2024:

Name Age Position at Precision BioSciences, Inc. Principal Employment

Executive Officers

Michael Amoroso 46 President, Chief Executive Officer and Director Same

John Alexander Kelly 57 Chief Financial Officer Same

Alan List, M.D. 69 Chief Medical Officer Same

Dario Scimeca 48 General Counsel and Secretary Same

Jeff Smith, Ph.D. 50 Chief Research Officer Same

Non-Employee Directors

Insider Trading Arrangements and Policies

We are committed to promoting high standards of ethical business conduct and compliance with applicable laws, rules and regulations. As part of this commitment, we have adopted our Insider Trading Policy governing the purchase, sale, and/or other dispositions of our securities by our directors, officers, and other employees, as well as by the Company itself, that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.

The remaining information required by this item will be included in our definitive proxy statement (“2024 Proxy Statement”) to be filed with the SEC within 120 days of the end of our fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.

108

Item 11. Executive Compensation.

The information required by this item will be included in our 2024 Proxy Statement to be filed with the SEC within 120 days of the end of our fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accountant Fees and Services.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements

The following documents are included on pages F-1 through F-32 attached hereto and are filed as part of this Annual Report on Form 10-K.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 34) F-1

Notes to Financial Statements F-8

(a)(2) Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.

(a)(3) Exhibits

The following is a list of exhibits filed, furnished or incorporated by reference as part of this Annual Report on Form 10-K.

110

Exhibit Index

ExhibitNumber Description Form File No. Exhibit FilingDate FiledHerewith

4.6 Description of Registrant’s Securities. *

111

ExhibitNumber Description Form File No. Exhibit FilingDate FiledHerewith

21.1 Subsidiaries of Precision BioSciences, Inc. *

23.1 Consent of Deloitte & Touche LLP. *

97 Clawback policy

101.INS XBRL Instance Document *

112

ExhibitNumber Description Form File No. Exhibit FilingDate FiledHerewith

101.SCH XBRL Taxonomy Extension Schema Document *

* Filed herewith

** Furnished herewith

† Confidential treatment of certain provisions has been granted by the SEC pursuant to Rule 406 under the Securities Act of 1933, as amended.

†† Portions of this exhibit have been omitted pursuant to Item 601(b)(2)(ii) of Regulation S-K.

††† Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

# Denotes a management contract or compensatory plan or arrangement

Item 16. Form 10-K Summary.

None.

113

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Precision BioSciences, Inc.

Date: March 27, 2024 By: /s/ Michael Amoroso

Michael Amoroso

Date: March 27, 2024 By: /s/ John Alexander Kelly

John Alexander Kelly

Chief Financial Officer(principal financial and accounting officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

Michael Amoroso

John Alexander Kelly

/s/ Kevin Buehler Chair of the Board and Director March 27, 2024

Kevin Buehler

/s/ Melinda Brown Director March 27, 2024

Melinda Brown

/s/ Stanley Frankel, M.D. Director March 27, 2024

Stanley Frankel, M.D.

/s/ Geno Germano Director March 27, 2024

Geno Germano

/s/ Shari Lisa Piré Director March 27, 2024

Shari Lisa Piré

/s/ Sam Wadsworth, Ph.D. Director March 27, 2024

Sam Wadsworth, Ph.D.

114

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Precision BioSciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Precision BioSciences, Inc. (the "Company") as of December 31, 2023 and 2022, the related statements of operations, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Raleigh, North Carolina

March 27, 2024

We have served as the Company's auditor since 2017.

F-1

PART I. FINANCIAL INFORMATION

F-2

Item 1. Financial Statements.

PRECISION BIOSCIENCES, INC.

BALANCE SHEETS

(In thousands, except share and per share amounts)

Assets

Current assets:

Convertible note receivable 11,897 —

Assets held for sale 487 —

Current assets of discontinued operations — 1,556

Property, equipment, and software—net 6,338 11,815

Investment in equity securities 3,206 2,576

Equity method investment — 2,172

Noncurrent assets of discontinued operations — 12,346

Liabilities and Stockholders’ Equity

Current liabilities:

Accrued research and development expenses 1,557 1,827

Current liabilities of discontinued operations 2,513 3,465

Long term debt—net — 22,223

Other liabilities — 201

Noncurrent liabilities of discontinued operations 128 1,717

Commitments and contingencies (Note 13)

Stockholders’ equity:

Total liabilities and stockholders’ equity $ 159,781 $ 238,169

F-3

See notes to financial statements

F-4

PRECISION BIOSCIENCES, INC.

STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

For the Years Ended December 31,

Operating expenses

Other income (expense), net:

Impairment charges — (10,844 )

Loss on disposal of assets (461 ) (30 )

Gain (loss) on changes in fair value 1,145 (510 )

Loss from equity method investment (4,931 ) (1,579 )

Total other income (expense), net 1,209 (10,601 )

Loss from continuing operations $ (42,527 ) $ (72,909 )

Net loss per share - basic and diluted $ (15.96 ) $ (38.10 )

See notes to financial statements

F-5

PRECISION BIOSCIENCES, INC.

STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

Common Stock AdditionalPaid-In Accumulated Treasury TotalStockholders'

Shares Amount Capital Deficit Stock Equity

Issuance of common stock under employee stock purchase plan 6,419 1 442 — — 443

Share-based compensation expense — — 19,197 — — 19,197

Restricted stock units vested 9,556 — — — — —

Issuance of common stock to collaboration partners 28,822 — 11,553 — — 11,553

Issuance of common stock under employee stock purchase plan 18,101 — 370 — — 370

Share-based compensation expense — — 14,040 — — 14,040

Restricted stock units vested 46,893 — — — — —

See notes to financial statements

F-6

PRECISION BIOSCIENCES, INC.

STATEMENTS OF CASH FLOWS

(In thousands)

For the Years Ended December 31,

Cash flows from operating activities:

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

Depreciation and amortization 6,817 7,798

Loss on disposal of assets 563 106

Gain on disposal of business (8,446 ) —

Non-cash interest expense 368 295

Amortization of right-of-use assets 1,438 1,206

(Gain) Loss on changes in fair value (1,145 ) 510

Loss from equity method investment 4,931 1,579

Amortization of discount on note receivable (515 ) (355 )

Changes in operating assets and liabilities:

Accounts receivable (181 ) (232 )

Other assets and other current assets 1,752 1,431

Other liabilities and other current liabilities (724 ) (1,816 )

Contract liabilities — —

Net cash used in operating activities (84,114 ) (45,753 )

Cash flows from investing activities:

Proceeds from disposal of business 8,000 —

Proceeds from sale of equipment 107 —

Purchases of property, equipment and software (1,957 ) (3,319 )

Purchases of intangibles assets (321 ) —

Net cash provided by (used in) investing activities 5,829 (3,319 )

Cash flows from financing activities:

Proceeds from stock option exercises 31 392

Proceeds from employee stock purchase plan 370 443

Proceeds from offering of common stock, net of issuance costs 4,986 49,345

Proceeds from offering of common stock to collaboration partners — 25,000

Net cash provided by financing activities 5,387 94,985

Net (decrease) increase in cash and cash equivalents (72,898 ) 45,913

Cash and cash equivalents—beginning of period 189,576 143,663

Supplemental disclosures of noncash financing and investing activities:

Cash paid for interest $ 2,018 $ 824

See notes to financial statements

F-7

Precision BioSciences, Inc.

Notes to Financial Statements

NOTE 1:DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Precision BioSciences, Inc. (the “Company”) was incorporated on January 26, 2006 under the laws of the State of Delaware and is based in Durham, North Carolina. The Company is a gene editing company dedicated to improving life by developing in vivo therapies for genetic and infectious diseases with the application of the Company’s wholly-owned proprietary ARCUS genome editing platform.

Since its inception, the Company has devoted substantially all of its efforts to research and development activities, recruiting skilled personnel, establishing its intellectual property portfolio and providing general and administrative support for these operations. The Company is subject to a number of risks similar to those of other companies conducting early-stage research and development of product candidates. Principal among these risks are dependence on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development and clinical manufacturing of its product candidates. The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, obtain regulatory approval of its products, successfully commercialize its products, generate revenue, meet its obligations, and, ultimately, attain profitable operations.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Actual results could differ from those estimates. Significant estimates include recording revenue for performance obligations recognized over time, determination of the fair value of share-based compensation grants, estimating services expended by third-party service providers used to recognize research and development expense and determination of the fair value of investments.

Basis of Presentation

These financial statements have been prepared in accordance with GAAP. Additionally, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The accompanying financial statements have been recast for all periods presented to reflect the assets, liabilities and expenses related to discontinued operations (discussed below). The accompanying financial statements are generally presented in conformity with the Company's historical format.

Reverse Stock Split

On February 13, 2024, the Company amended its amended and restated certificate of incorporation in order to effect a 1-for-30 reverse stock split of its outstanding shares of capital stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every 30 shares of the Company’s common stock issued or outstanding were automatically reclassified into one new share of common stock, subject to the treatment of fractional shares as described below, without any action on the part of the holders. All historical share and per-share amounts reflected throughout the accompanying consolidated financial statements and other financial information in this Annual Report on Form 10-K have been retroactively adjusted to reflect the 2024 Reverse Stock Split as if the split occurred as of the earliest period presented. The Reverse Stock Split did not affect the number of authorized shares of common stock or the par value of the common stock. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise have been entitled to receive fractional shares as a result of the Reverse Stock Split were entitled to a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing sales price per share of the common stock (as adjusted to give effect to the Reverse Stock Split) on The Nasdaq Capital Market on February 13, 2024, the last trading day immediately preceding the effective time of the Reverse Stock Split.

Summary of Significant Accounting Policies

Cash and Cash Equivalents

F-8

As of December 31, 2023, the Company held cash equivalents which are composed of money market funds. As of December 31, 2022, the Company held cash equivalents which were composed of money market funds and repurchase agreements that were purchased through repurchase intermediary banks and collateralized by deposits in the form of government securities and obligations.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, and notes receivable. All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The Company may maintain cash deposits in financial institutions in excess of government insured limits. The Company regularly invests excess cash deposits in money market funds and repurchase agreements. The Company believes that the credit risk arising from the holdings of these financial instruments is mitigated by the fact that these securities are of short duration, government backed and of high credit rating. The Company has not experienced any losses on cash and cash equivalents to date.

Revenue from Prevail and Novartis accounted for 53% and 47% of revenue during the year ended December 31, 2023, respectively. Revenue from Prevail and Novartis accounted for 62% and 38% of revenue during the year ended December 31, 2022, respectively. Prevail and Novartis accounted for 62% and 38% of deferred revenue as of December 31, 2023, respectively.

In addition, the Company currently holds a $10.0 million promissory note payable from Elo (defined below) and a $13.0 million convertible note from Imugene US (defined below), which exposes the Company to potential losses in the event of default. Counterparty credit risk is monitored through periodic reviews of financial records. As of December 31, 2023, the Company considers the risk of counterparty default to be minimal.

Property, Equipment and Software

Property, equipment and software (“PP&E”) are stated at cost, net of depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets ranging from three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset.

The depreciation and amortization periods for the Company’s significant PP&E categories are as follows:

Laboratory equipment 5 to 7 years

Furniture and fixtures and office equipment 3 to 5 years

Leasehold improvements Lesser of remaining lease term or useful life

Repairs and maintenance are charged to operations as incurred, and expenditures for additions and improvements that extend the useful life of the asset are capitalized.

Intangible Assets

Intangible assets primarily include in-licenses and capitalized patent costs. The Company capitalizes license fees paid to acquire access to proprietary technology if the technology is expected to have alternative future use in multiple research and development projects. The cost of licensed technology rights is amortized using the straight-line method over the estimated useful life of the technology. If the access to use the technology rights is one year or less, the cost is recorded as a prepaid expense and amortized over the period identified in the agreement. Amortization expense for licensed technology and capitalized patent costs is included in research and development expenses within the accompanying statement of operations.

Impairment Charges

Long-lived assets, such as PP&E, intangible assets, and long-term prepaid assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is assessed when future undiscounted cash flows are less than the assets’ carrying value and recognized when the carrying value of the asset exceeds fair value. Fair value is calculated by estimating the discounted future cash flows expected to be generated by the asset as well as other valuation techniques. An impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the asset.

F-9

Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. ASC 820, Fair Value Measurement, 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 assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from our independent sources. 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. The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used to value the assets and liabilities:

•

Level 1 - Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities

•

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

•

Level 3 - Unobservable inputs for which there is little or no market date, which require the Company to develop its own assumptions

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. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Investments in Equity Securities

The Company carries investments in equity securities for which it does not possess the ability to exercise significant influence or control at fair value in the balance sheets and records changes in fair value in the statements of operations as a component of other income or expense.

As of December 31, 2023 and December 31, 2022 the Company held common stock in iECURE (defined below) with a fair value of $3.2 million and $2.6 million, respectively.

Investments under the Equity Method

The Company utilizes the equity method to account for investments when it is determined that the Company possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the investor possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted.

In applying the equity method, the Company subsequently increases or decreases the carrying amount of the investment by the Company’s proportionate share of the net earnings or losses and other comprehensive income of the investee. In the event that net losses of the investee reduce the carrying amount to zero, additional net losses are recorded if other investments in the investee are at-risk, even if the Company has not committed to provide financial support to the investee.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Lease liabilities and corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. As the rate implicit in the Company's leases are not readily determinable, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

F-10

Revenue Recognition for Contracts with Customers

The Company’s revenues are generated primarily through collaborative research, license, development and commercialization agreements.

ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards. 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. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company evaluates the performance obligations promised in the contract that are based on goods and services that will be transferred to the customer and determines whether those obligations are both (i) capable of being distinct and (ii) distinct in the context of the contract. Goods or services that meet these criteria are considered distinct performance obligations. If both these criteria are not met, the goods and services are combined into a single performance obligation. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, these options are considered performance obligations. The exercise of a material right is accounted for as a contract modification for accounting purposes.

The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method. For the year ended December 31, 2023, the Company recorded cumulative catch up adjustments on its contracts with partners that increased revenue recognition by $1.6 million; the cumulative catch-up adjustments resulted from a change in total estimated effort required to satisfy performance obligations and changes in variable consideration included in the transaction price related to estimated fees to be received from partners. During the year ended December 31, 2023, the Company recorded $48.7 million in revenue that was included in deferred revenue as of December 31, 2022.

Invoices issued as stipulated in contracts prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue within current liabilities in the accompanying balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as noncurrent deferred revenue. Amounts recognized as revenue, but not yet invoiced are generally recognized as contract assets in the other current assets line item in the accompanying balance sheets.

Milestone Payments –If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore revenue recognized is constrained as management is unable to assert that a reversal of revenue would not be probable. The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment.

Royalties –For arrangements that include sales-based royalties, including milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation linked to some or all of the royalty has been satisfied or partially satisfied. To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

Significant Financing Component – In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. The Company

F-11

assessed each of its revenue arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does not exist in any of its arrangements.

Collaborative Arrangements – The Company has entered into collaboration agreements, which are within the scope of ASC 606, to discover, develop, manufacture and commercialize product candidates. The terms of these agreements typically contain multiple promises or obligations, which may include: (1) licenses, or options to obtain licenses, to use the Company’s technology, (2) research and development activities to be performed on behalf of the collaboration partner, and (3) in certain cases, services in connection with the manufacturing of preclinical and clinical material. Payments the Company receives under these arrangements typically include one or more of the following: non-refundable, upfront license fees; option exercise fees; funding of research and/or development efforts; clinical and development, regulatory, and sales milestone payments; and royalties on future product sales.

The Company analyzes its collaboration arrangements to assess whether the collaboration agreements are within the scope of ASC 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 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 within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, are within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606. For those elements of the arrangement that are accounted for pursuant to ASC 606, the Company applies the five-step model described above.

For additional discussion of accounting for collaboration revenues, see Note 10, Collaboration and License Agreements.

Research and Development

Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities including salaries, benefits, share-based compensation, allocations for rent and facility costs, depreciation, preclinical manufacturing expenses, costs of services provided by contract research organizations (“CROs”) in connection with clinical trials and contract manufacturing organizations (“CMOs”) engaged to manufacture clinical trial material, costs of licensing technology, and costs of services provided by research and development service providers. Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed rather than when the payment is made.

The Company is required to estimate accrued research and development expenses resulting from its obligations under contracts with CROs, CMOs, research organizations, service providers, vendors and consultants in connection with research and development activities. The financial terms of these contracts are subject to negotiations and vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts. The Company’s objective is to reflect the appropriate research and development expenses in its statements of operations by matching those expenses with the period in which the services and efforts are expended. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing fees, 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 Company’s estimate, the Company adjusts the accrual or amount of prepaid expense accordingly.

Discontinued Operations

The Company determined that its decision to no longer internally develop ex vivo allogeneic chimeric antigen receptor (“CAR T”) immunotherapies and related sale of our CAR T infrastructure to Imugene (defined below) met the criteria for classification as a discontinued operation in accordance with ASC Subtopic 205-20, Discontinued Operations. Accordingly, the accompanying financial statements for all periods have been updated to present the assets and liabilities associated with the development of ex vivo allogeneic CAR T immunotherapies separately as discontinued operations on the balance sheets and the results of all discontinued operations are reported as a separate component in the statements of operations.

For additional information related to discontinued operations, refer to Note 6, Discontinued Operations.

Comprehensive Loss

F-12

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. For the years ended December 31, 2023 and December 31, 2022, there was no difference between net loss and comprehensive loss in the accompanying statements of operations.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock.

The Company’s diluted net loss per share is the same as basic net loss per share for the years ended December 31, 2023 and December 31, 2022, given all potential shares of common stock are anti-dilutive as a result of the net loss.

Share-Based Compensation

The Company accounts for all share-based compensation awards, including stock options, restricted stock units and its employee stock purchase plan, at fair value. Compensation expense is recognized for the Company’s share-based compensation awards, net of actual forfeitures, over the requisite service period, which is the vesting period of the respective award.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of the Company’s common stock and assumptions the Company makes for the expected volatility of its common stock, the expected term of the stock options, the risk-free interest rate for a period that approximates the expected term of the stock options and the Company’s expected dividend yield. Expected volatility is estimated based on the historical volatility of the Company and other comparable publicly traded peer companies. The expected term of the options has been determined utilizing a weighted average value considering actual exercise history and estimated expected term based on the midpoint of final vest date and expiration date. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The fair value of each restricted stock unit is determined based on the closing market price of the Company’s common stock on the date of grant.

Income Taxes

Deferred tax assets and liabilities are determined based on the temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse. In estimating future tax consequences, all expected future events are considered other than the enactment of changes in the tax law or rates. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

Accounting Standards Updates

Accounting standards updates issued, but not effective until after December 31, 2023, are not expected to have a material effect on the Company’s financial position, statements of operations or cash flows.

NOTE 2: COLLABORATION AND LICENSE AGREEMENTS

TG Therapeutics

F-13

On January 7, 2024, the Company entered into a license agreement (the “TG License Agreement”) with TG Cell Therapy, Inc. (“TG Subsidiary”) and its parent company TG Therapeutics, Inc. (“TG Parent” and, together with TG Subsidiary, “TG Therapeutics”), pursuant to which the Company granted TG Subsidiary certain exclusive and non-exclusive license rights to develop, manufacture, and commercialize the Company’s allogeneic CAR T therapy azer-cel for autoimmune diseases and other indications outside of cancer (collectively referred to as licensed products).

Under the TG License Agreement, the Company is entitled to receive an upfront cash payment of $10.0 million (the “TG Upfront Payment”), an additional cash payment of $7.5 million in the event that TG Therapeutics achieves a certain clinical milestone that is expected to be achieved in the near-term (the “Initial Milestone Payment”), and additional payments upon the achievement of additional specified milestones of up to $288.6 million (the “Additional TG Milestone Payments”). As described below, up to $10.0 million of the cash payments potentially payable to the Company are payable in exchange for the issuance to TG Subsidiary by the Company of shares of the Company’s common stock (the “Company Stock Issuances”).

The TG Upfront Payment of $10.0 million is comprised of (i) a $5.25 million cash payment that was paid to the Company on February 5, 2024, (ii) a $2.25 million cash payment that was paid to the Company on February 4, 2024, in exchange for 97,360 shares of the Company’s common stock, based on a price per share equal to 200% of the volume-weighted-average-price (“VWAP”) of the Company’s common stock for the 30 trading days prior to the date of the TG License Agreement, and (iii) a deferred cash payment of $2.5 million due within 12 months following the date of the TG License Agreement, payable in exchange for such number of shares of the Company’s common stock determined based on a price per share equal to the greater of (A) 200% of the VWAP of the Company’s common stock for the 30 trading days prior to the date of payment or (B) a minimum price of $11.1660 determined in accordance with Nasdaq Listing Rule 5635(d) (the “Minimum Price”).

The Initial Milestone Payment of $7.5 million, if payable, will consist of (i) a $5.25 million cash milestone payment and (ii) a $2.25 million cash payment payable in exchange for such number of shares of the Company’s common stock determined based on a price per share equal to the greater of (A) 200% of the VWAP of the Company’s common stock for the 30 trading days prior to the achievement of such milestone or (B) the Minimum Price.

The Additional TG Milestone Payments become due upon the achievement of certain milestones as specified in the TG License Agreement. Included within the Additional TG Milestone Payments is a potential payment of $3.0 million in connection with achievement of a milestone specified in the TG License Agreement, payable in exchange for such number of shares of the Company’s common stock determined based on a price per share equal to the greater of (A) 200% of the VWAP of the Company’s common stock for the 30 trading days prior to the achievement of such milestone or (B) the Minimum Price.

If a licensed product under the TG License Agreement is approved and sold, TG Therapeutics is also required to pay the Company tiered royalties ranging from high-single-digit to low-double-digit percentages on net sales of the licensed product. TG Therapeutics’ obligation to pay royalties to the Company expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of (i) the expiration of the last-to-expire valid claim in such country covering such licensed product; (ii) the expiration of any period of data, regulatory, or market exclusivity, or supplemental protection certificates (other than patents) covering the licensed product in such country; and (iii) a period of ten years following the first commercial sale of the respective licensed product in such country.

Unless earlier terminated, the TG License Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. The Company may terminate the TG License Agreement if TG Therapeutics fails to initiate certain development activities with respect to the licensed product by a specified date or ceases active development of the licensed product for a specified period of time. In addition, the Company may terminate the TG License Agreement if TG Therapeutics or any of its affiliates or sublicensees challenges the validity of any patents controlled by the Company. Each of the Company and TG Therapeutics may terminate the TG License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the TG License Agreement or (ii) the other party’s insolvency.

Sale of Azer-cel CAR T Platform to Imugene

F-14

On August 15, 2023, the Company entered into an asset purchase agreement (the “Imugene Purchase Agreement”) with Imugene Limited, and its wholly-owned subsidiary Imugene (USA) Inc. (“Imugene US” and together with Imugene Limited, “Imugene”). Pursuant to and simultaneously with the execution of the Imugene Purchase Agreement, on August 15, 2023 (the “Closing Date”), Imugene US acquired the Company’s manufacturing infrastructure used in the development and manufacture of azer-cel, including assuming the lease to the Company’s manufacturing facility and certain contracts of the Company with respect to the Company’s manufacturing facility, and related equipment, supplies, azer-cel clinical trial inventory and other assets related to the Company’s CAR T cell therapy platform. As part of the Imugene Purchase Agreement, Imugene US hired a number of employees of the Company who were associated with the Company’s historical CAR T cell therapy operations.

In consideration for the assets acquired under the Imugene Purchase Agreement, Imugene US assumed certain liabilities of the Company, paid the Company $8 million in cash, and issued to the Company convertible notes pursuant to the terms and conditions set forth in a convertible note subscription deed (collectively, the “Imugene Convertible Note”) in an aggregate principal amount of $13 million. The Imugene Convertible Note is non-interest bearing and matures on the first anniversary of the Closing Date (the “Maturity Date”). On the Maturity Date, the Imugene Convertible Note will be redeemed with cash, converted into ordinary shares of Imugene Limited at a conversion price based on the 10-day volume weighted average price of Imugene Limited’s ordinary shares prior to the date of conversion, or partially redeemed with cash and partially converted into shares, at Imugene's discretion.

Additionally, the Company and Imugene US entered into a license agreement (the “Imugene License Agreement”) on the Closing Date, pursuant to which the Company granted Imugene US certain exclusive and non-exclusive license rights to develop, manufacture, and commercialize oncological applications of the Company’s allogeneic CAR T therapy, azer-cel, and up to three additional research product candidates directed to targets that Imugene US may nominate prior to the fifth anniversary of the effective date of the Imugene License Agreement, pursuant to the terms of the Imugene License Agreement.

In addition, under the Imugene License Agreement, the Company is eligible to receive milestone payments of up to an aggregate of $206 million for azer-cel, inclusive of a payment of $8 million in cash and equity upon successful completion of the Phase 1b dosing in the CAR T relapsed large B cell lymphoma (“LBCL”) patient population. For azer-cel, the Company is eligible to receive double-digit royalties on net sales. For up to three additional research programs to be developed by Imugene, the Company is eligible for up to $145 million in milestone payments and, if licensed products are approved and sold, tiered royalties ranging from the mid-single digit to low-double digit percentages on net sales of such licensed products. In addition, the Company is eligible to receive mid-single digit percentage-based fees for certain change of control transactions involving Imugene and for partnering transactions involving a licensed product. Imugene’s obligation to pay royalties to the Company expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following the first commercial sale of the respective licensed product.

Unless earlier terminated, the Imugene License Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. The Company may terminate the entire Imugene License Agreement due to a challenge to its patents brought by Imugene and a breach by Imugene in any material respect of the Imugene License Agreement, the Imugene Purchase Agreement or any related transaction documents. The Company may also terminate the Imugene License Agreement with respect to azer-cel if Imugene fails to initiate certain development activities with respect to azer-cel by a specified date, if Imugene fails to expend certain amounts on the development of azer-cel or if Imugene ceases active development of azer-cel for a specified period of time. Either party may terminate the License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the agreement or (ii) the other party’s insolvency.

The Company assessed the Imugene License Agreement in accordance with ASC 606 and concluded that the promises in the Imugene License represent a transaction with a customer. The Company has concluded that the Imugene License Agreement contains the following promises: (i) the license to develop, manufacture, and commercialize oncological applications of the azer-cel and up to three additional research product candidates and (ii) JSC (“Joint Steering Committee”) Participation. The JSC participation was determined to be an immaterial promise as the time commitment and related cost associated with performance of JSC participation is expected to be inconsequential to the total consideration in the contract. Accordingly, the Company concluded that the promise of the license is a single performance obligation.

The Company concluded the Imugene License Agreement represents functional intellectual property in accordance with ASC 606 given the Company will not be providing any additional services to Imugene outside of the right to use the licensed intellectual property. As of December 31, 2023, management has constrained all variable consideration related to milestone payments in the Imugene License given the level of uncertainty associated with achievement of the milestone payments. Accordingly, no revenue was recognized under the Imugene License Agreement during the year ended December 31, 2023.

F-15

Collaboration and License Agreement with Novartis

On June 14, 2022, the Company entered into a collaboration and license agreement (the “Novartis Agreement”) with Novartis Pharma AG (“Novartis”), which became effective on June 15, 2022 (the “Novartis Effective Date”), to collaborate to discover and develop in vivo gene editing products incorporating our custom ARCUS nucleases for the purpose of seeking to research and develop potential treatments for certain diseases (collectively referred to as licensed products). Any initial licensed products under the Novartis Agreement will be developed for the potential treatment of certain hemoglobinopathies, including sickle cell disease and beta thalassemia.

Pursuant to the terms of the Novartis Agreement, the Company will develop an ARCUS nuclease and conduct in vitro characterization for the licensed products, with Novartis then assuming responsibility for all subsequent development, manufacturing and commercialization activities. Novartis will receive an exclusive license for, and be required to use commercially reasonable efforts to conduct all subsequent research, development, manufacture and commercialization activities with respect to the licensed products. The Company will initially develop a single, custom ARCUS nuclease for a defined “safe harbor” target site for insertion of specified therapeutic payloads in the patient’s genome (the “Initial Nuclease”) for Novartis to further develop as a potential in vivo treatment option for certain hemoglobinopathies, including sickle cell disease and beta thalassemia. Pursuant to the terms of the Novartis Agreement, Novartis may elect, subject to payment of a fee to the Company, to replace licensed products based on the Initial Nuclease with licensed products based on a second custom ARCUS nuclease the Company designs for gene editing of a specified human gene target associated with hemoglobinopathies (the “Replacement Nuclease”). Additionally, Novartis has the option, upon payment of a fee to the Company for each exercise of the option, to include licensed products utilizing the Initial Nuclease for insertion of up to three additional specified therapeutic payloads at the “safe harbor” target site, each intended to treat a particular genetic disease. The exercise period for such option ends on the earlier of (a) the fourth anniversary of the Novartis Effective Date and (b) the replacement of the Initial Nuclease with the Replacement Nuclease as described above.

In July 2022, the Company received a $50.0 million upfront cash payment under the Novartis Agreement. Additionally, on the Novartis Effective Date, Novartis made an equity investment in the Company’s common stock pursuant to a stock purchase agreement (the “Novartis Stock Purchase Agreement”) pursuant to which, on the Novartis Effective Date, the Company issued and sold to Novartis 413,581 shares of the Company’s common stock (the “Novartis Shares”) in a private placement transaction for an aggregate purchase price of $25.0 million, or approximately $60.30 per share. The price per share of the Company’s common stock under the Novartis Stock Purchase Agreement represented a 20% premium over the volume-weighted-average-price of the Company’s common stock over the 10 trading days preceding the execution date of the Novartis Stock Purchase Agreement. Management concluded that the Novartis Stock Purchase Agreement was to be combined with the Novartis Agreement for accounting purposes. Of the total $75.0 million upfront compensation, the Company applied equity accounting guidance to measure the $11.6 million recorded in equity upon the issuance of the shares, and $63.4 million was identified as transaction price allocated to the revenue arrangement.

Pursuant to the Novartis Stock Purchase Agreement, subject to certain exceptions, Novartis may not sell the Novartis Shares without the Company’s approval for a period of two years following the Novartis Effective Date. In addition, for a period of two years following the Novartis Effective Date, Novartis and its affiliates may not (a) effect or otherwise participate in, directly or indirectly, any acquisition of any of our securities or material assets, any tender offer or exchange offer, merger or other business combination or change of control involving the Company, any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company, or any solicitation of proxies or consents to vote any of the Company’s securities or (b) act with any other person, or publicly disclose any intention, to do any of the foregoing. The Novartis Stock Purchase Agreement also contains customary representations, warranties, and covenants of both parties.

On the Novartis Effective Date, the Company and Novartis also entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which the Company has agreed, within the time periods specified in the Registration Rights Agreement, to register the resale of the Novartis Shares on a registration statement to be filed with the SEC. The Registration Rights Agreement contains customary indemnification provisions, and all registration rights terminate in their entirety effective on the first date on which there cease to be any Registrable Securities (as defined in the Registration Rights Agreement) outstanding.

The Company will also be eligible to receive milestone payments of up to an aggregate of approximately $1.4 billion as well as certain research funding. If licensed products resulting from the collaboration are approved and sold, the Company will also be entitled to receive tiered royalties ranging from the mid-single digit to low-double digit percentages on net sales of licensed products, subject to customary potential reductions. Novartis’s obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following the first commercial sale of the licensed product.

F-16

Unless earlier terminated, the Novartis Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. Novartis has the right to terminate the Novartis Agreement without cause by providing advance notice to the Company. Either party may terminate the Novartis Agreement for material breach by the other party and a failure to cure such breach within the time period specified in the Novartis Agreement. The Company may also terminate the Novartis Agreement in the event that Novartis brings a challenge to our patents.

The Company assessed the Novartis Agreement in accordance with ASC 606 and concluded that the promises in the agreement represent transactions with a customer. The Company has determined that the promises associated with the research and development activities for each of the targets are not distinct because they are all based on the ARCUS proprietary genome editing platform. The Company has concluded that the agreement with Novartis contains the following promises: (i) license of intellectual property; (ii) performance of research and development (“R&D”) services, and (iii) Joint Steering Committee (“JSC”) participation. The Company determined that the license of intellectual property and R&D services were not distinct from each other, as the license and R&D services are highly interdependent upon one another. The JSC participation was determined to be an immaterial promise as the time commitment and related cost associated with performance of JSC participation is expected to be inconsequential to the total consideration in the contract. As such, the Company determined that these promises should be combined into a single performance obligation.

The Company recognizes revenue from the $50.0 million upfront cash payment, $13.4 million allocated to the transaction price from the Novartis Stock Purchase Agreement, and variable consideration on an input method in the form of research effort relative to expected research effort at the completion of the performance obligation, which is based on the actual hours of research work performed relative to expected hours of research work to be incurred in the future to satisfy the performance obligation. Management will evaluate and adjust the total expected research effort for the performance obligation on a quarterly basis based upon actual research hours incurred to date relative to research hour forecasts. The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.

During the years ended December 31, 2023 and 2022, the Company recognized revenue under the Novartis Agreement of $22.7 million and $9.5 million, respectively. Deferred revenue related to the Novartis Agreement amounted to $32.4 million and $54.2 million as of December 31, 2023 and December 31, 2022, respectively, of which $7.4 million and $27.9 million, respectively, was included in current liabilities within the balance sheets.

Development and License Agreement with Prevail

On November 19, 2020, the Company entered into a development and license agreement with Eli Lilly and Company (“Lilly”) to collaborate to discover and develop in vivo gene editing products incorporating the Company’s ARCUS nucleases to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders, which was subsequently assigned to Prevail Therapeutics Inc., a wholly-owned subsidiary of Eli Lilly and Company (“Prevail”), effective November 1, 2022 (the “Original Prevail Agreement”).

DTIL US Equity

DTIL · 10-K · period ended 2023-12-31

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accountant Fees and Services.

Item 15. Exhibits and Financial Statement Schedules.

Item 16. Form 10-K Summary.

DTIL US Equity☆

DTIL · 10-K · period ended 2023-12-31

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accountant Fees and Services.

Item 15. Exhibits and Financial Statement Schedules.

Item 16. Form 10-K Summary.

DTIL US Equity