lyel-20221231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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(Mark One)

For the fiscal year ended December 31, 2022

For the transition period from to

Commission file number 001-40502

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Lyell Immunopharma, Inc.

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(Exact name of registrant as specified in its charter)

South San Francisco, California 94080

(Address of Principal Executive Offices) (Zip Code)

(650) 695-0677

Registrant’s telephone number, including area code

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

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, $0.0001 par value per share LYEL The Nasdaq Global Select Market

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yesx No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes oNox

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

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

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

Large accelerated filer x Accelerated filer o

Non-accelerated filer o Smaller reporting company o

Emerging growth company o

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

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

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

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

The aggregate market value of the common stock held by non-affiliates of the registrant on June 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $1.1 billion based on the closing price reported for such date on the Nasdaq Global Select Market.

The registrant had outstanding 249,609,247 shares of common stock as of February 24, 2023.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2023 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2022.

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Lyell Immunopharma, Inc.

2022 Annual Report on Form 10-K

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Page

Special Note Regarding Forward-Looking Statements 1

Summary of Risk Factors 2

PART I

Item 1. Business 5

Item 1A. Risk Factors 35

Item 1B. Unresolved Staff Comments 70

Item 2. Properties 70

Item 3. Legal Proceedings 70

Item 4. Mine Safety Disclosures 70

PART II

Item 6. [Reserved] 72

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 83

Item 8. Financial Statements and Supplementary Data 85

Item 9A. Controls and Procedures 115

Item 9B. Other Information 117

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 117

PART III

Item 10. Directors, Executive Officers and Corporate Governance 118

Item 11. Executive Compensation 118

Item 14. Principal Accountant Fees and Services 118

PART IV

Item 15. Exhibit and Financial Statement Schedules 119

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned nonclinical studies and clinical trials, results of nonclinical studies and clinical trials, research and development costs, planned regulatory submissions, regulatory approval, and the timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:

•the sufficiency of our existing cash to fund our future operating expenses and capital expenditure requirements;

•the accuracy and timing of our estimates regarding expenses, revenue opportunities, capital requirements and needs for additional financing;

•the scope, progress, results and costs of developing LYL797, LYL845, LYL119 or any other product candidates we may develop, and conducting nonclinical studies and clinical trials, including for LYL797, LYL845 and LYL119;

•the timing and costs involved in obtaining and maintaining regulatory approval of LYL797, LYL845, LYL119 or any other product candidates we may develop, and the timing or likelihood of regulatory filings and approvals, including any expectations regarding seeking special designations for our product candidates for various diseases;

•our plans relating to the commercialization of LYL797, LYL845, LYL119 or any other product candidates we may develop, if approved, including the geographic areas of focus and our ability to grow a sales force;

•the size of the market opportunity for LYL797, LYL845, LYL119 or any other product candidates we may develop in each of the diseases we may target;

•our reliance on third parties to conduct nonclinical research activities for LYL797, LYL845, LYL119 or any other product candidates we may develop;

•the characteristics, safety, efficacy and therapeutic effects of LYL797, LYL845, LYL119 or any other product candidates we may develop;

•our estimates of the number of patients in the United States who suffer from the diseases we target and the number of subjects that will enroll in our clinical trials;

•the progress and focus of our current and planned clinical trials of our product candidates, and the reporting of data from those trials, including the timing thereof;

•the ability of our clinical trials to demonstrate the safety and efficacy of LYL797, LYL845, LYL119 or any other product candidates we may develop, and other positive results;

•the success of competing therapies that are, or may become, available;

•developments relating to our competitors and our industry, including any existing or future competing product candidates and therapies;

•our plans relating to the further development and manufacturing of LYL797, LYL845, LYL119 or any other product candidates we may develop, including additional indications that we may pursue;

•existing regulations and regulatory developments in the United States and other jurisdictions;

•our potential and ability to successfully manufacture and supply LYL797, LYL845, LYL119 or any other product candidates we may develop for clinical trials and for commercial use, if approved;

•the rate and degree of market acceptance of LYL797, LYL845, LYL119 or any other product candidates we may develop, as well as the pricing and reimbursement of LYL797, LYL845, LYL119 or any other product candidates we may develop, if approved;

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•our continued reliance on third parties to conduct additional clinical trials of LYL797, LYL845, LYL119 or any other product candidates we may develop, and for the manufacture of our product candidates;

•the scope of protection we are able to establish and maintain for intellectual property rights, including LYL797, LYL845, LYL119 or any other product candidates we may develop;

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

•our expectations regarding the impact of the COVID-19 pandemic on our business and operations, including clinical trials, manufacturing suppliers, collaborators, use of contract research organizations (CROs) and employees;

•our expectations regarding the impact of inflation, macroeconomic conditions and geopolitical conflicts on our business and operations, including on our manufacturing suppliers, collaborators, CROs and employees; and

•our anticipated use of our existing cash, cash equivalents and marketable securities.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to a number of risks, uncertainties and assumptions described under “Risk Factors” in Part I, Item 1A, and elsewhere in this Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in these forward-looking statements. Except as required by applicable law, we undertake no obligation to update or supplement any forward-looking statements publicly, or to update or supplement the reasons that actual results could differ materially from those projected in these forward-looking statements, even if new information becomes available in the future.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

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SUMMARY OF RISK FACTORS

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. This summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should carefully consider the risks and uncertainties described under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K as part of your evaluation of an investment in our common stock.

•We are an early clinical stage biopharmaceutical company and have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing net losses for the foreseeable future.

•We operate in a rapidly evolving field and have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

•We currently have no products approved for sale and have never generated revenue from product sales. We may never generate revenue from product sales or achieve profitability.

•We will require substantial additional capital to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

•Our success payment obligations in our success payment agreements may result in dilution to our stockholders or may be a drain on our cash resources to satisfy the payment obligations.

•We are early in our research and development efforts and just beginning clinical development of our product candidates. If we are unable to successfully develop and commercialize product candidates or experience significant delays in doing so, our business may be harmed.

•Our product candidates and technology platforms are based on novel technologies that are unproven and may not result in approvable or marketable products, which exposes us to unforeseen risks and makes it difficult for us to predict the time and cost of product development and potential for regulatory approval, and we may not be successful in our efforts to use and expand our technology platforms to build a pipeline of product candidates.

•We currently have no marketing, sales or distribution infrastructure, and we intend to either establish a sales and marketing infrastructure or outsource this function to a third party. Either of these commercialization strategies carries substantial risks to us.

•Our business could continue to be adversely affected by the effects of health epidemics, including the COVID-19 pandemic, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of potential clinical trial sites or other business operations.

•We intend to manufacture at least a portion of our product candidates ourselves. Delays in further qualifying or in receiving regulatory approvals for our manufacturing facility and product candidates could delay our development plans and thereby limit our ability to generate product revenues.

•The manufacturing of cellular therapies is very complex. We are subject to a multitude of manufacturing risks, including risks associated with supply chain complexity related to patient materials, any of which could substantially increase our costs, delay our programs or limit supply of our product candidates.

•If our sole clinical or commercial manufacturing facility or our contract manufacturing organization is damaged or destroyed or production at these facilities is otherwise interrupted, our business would be negatively affected.

•If we are unable to develop or scale our own manufacturing, we may have to rely on third parties to manufacture our product candidates, which subjects us to risks and could delay or prevent our development and/or commercialization, if approved, of our product candidates.

•Cell-based therapies rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or at all.

•We intend to rely on third parties to conduct, supervise and monitor a significant portion of our research and nonclinical studies and clinical trials for our product candidates, and, if those third parties do not successfully carry out their contractual duties, comply with regulatory requirements or otherwise perform satisfactorily, we may not be able to obtain regulatory approval or commercialize product candidates, or such approval or commercialization may be delayed, and our business may be substantially harmed.

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

•We depend on the enrollment and retention of patients in our current and planned clinical trials for our product candidates. If we experience delays or difficulties enrolling or retaining patients in our clinical trials, our research and development efforts and business, financial condition and results of operations could be materially adversely affected.

•We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

•Our cellular therapy product candidates represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinical development or delays in or our inability to achieve regulatory approval, commercialization or payor coverage of our product candidates.

•The results of research, nonclinical studies or earlier clinical trials are not necessarily predictive of future results. Any product candidate we advance into clinical trials may not have favorable results in later clinical trials or receive regulatory approval.

•Clinical development involves a lengthy and expensive process with an uncertain outcome.

•Interim, topline or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available or as we make changes to our manufacturing processes and are subject to audit and verification procedures that could result in material changes in the final data.

•Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

•If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete effectively may be adversely affected.

•We have in-licensed a significant portion of our intellectual property from our partners. If we breach any of our license agreements with these partners, we could potentially lose the ability to continue the development and potential commercialization of one or more of our product candidates.

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PART I

Item 1. Business

Overview

We are a clinical-stage cell therapy company advancing a pipeline of product candidates for patients with solid tumors utilizing our proprietary ex vivo genetic and epigenetic T‐cell reprogramming technologies. Our investigational therapies use the patient’s own cells as the starting point to generate highly tumor-reactive, longer-lasting functional T cells with enhanced ability to defeat solid tumors. Our innovative reprogramming technologies address what we believe are the primary barriers that limit consistent and long-lasting responses to T‐cell therapy in solid tumors: T‐cell exhaustion and lack of durable stemness. Our technologies are designed to generate T cells with the ability to persist and self‐renew while driving durable tumor cytotoxicity, even in the setting of an immunosuppressive tumor microenvironment. The goal is for our technologies to provide patients with T cells that are potent and long-lasting enough to achieve durable antitumor responses.Furthermore, our technologies can be applied in a target agnostic manner to multiple T‐cell modalities, including chimeric antigen receptor (CAR), tumor-infiltrating lymphocytes (TIL) and T‐cell receptor (TCR) therapies.

We apply our technologies with the aim to develop T‐cell therapies with improved durable clinical outcomes. Our growing pipeline of promising cell product candidates targets solid tumor indications with large unmet needs that are collectively responsible for approximately 180,000 deaths in the US annually. Each of our programs provide opportunities to expand into additional indications beyond the patient populations we are initially targeting. Our product candidates are summarized in the Table 1 below:

Table 1: Lyell’s Pipeline

Our Strategy

Our goal is to develop innovative therapies for patients with solid tumors based on our proprietary T‐cell reprogramming technologies, which generate tumor-reactive, long-lasting functional T cells that resist exhaustion and maintain the ability to self-renew and persist to drive durable tumor cytotoxicity.

Key components of our business strategy to achieve this goal include:

•Efficiently advance our diverse pipeline of product candidates — We believe our autologous T‐cell therapies will deliver improved, durable clinical outcomes for patients with solid tumors. We have two wholly owned product candidates in two distinct T‐cell modalities, CAR T cell and TIL, currently in Phase 1 development targeting indications with unmet medical needs in large commercial opportunities. We anticipate having initial clinical data for both programs in 2024 and filing a new Investigational New Drug (IND) applicationfor our third wholly-owned product candidate in the first half of 2024.

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•Leverage our proprietary, cell reprogramming technology platforms to create highly tumor-reactive, longer‐lasting functional T cells with enhanced ability to defeat solid tumors — We seek to develop T‐cell therapies to defeat solid tumors by addressing the major barriers to successful cell therapy in solid tumors, including overcoming exhaustion of T cells and creating populations of T cells with properties of durable stemness. Our pipeline of therapeutic candidates includes programs designed to outlast and eradicate solid tumors utilizing our proprietary, stackable genetic and epigenetic T‐cell reprogramming technologies: c-Jun overexpression, NR4A3 knockout, Epi‐RTM and Stim‐RTM.

•Continually innovate to develop and advance novel, breakthrough technologies for cell therapy — We are committed to continuing to discover, develop and advance disruptive technologies that have the potential to revolutionize cell therapy and its promise to improve the lives of patients with solid tumors. For example, our new NR4A3 gene knockout and Stim‐R reprogramming technologies are designed to further improve the potency and durability of T cells. These novel technologies are being utilized in our new CAR T-cell product candidate, LYL119, in addition to c-Jun overexpression and Epi‐R, with the goal of creating even greater benefit to patients with cancer.

•Maintain proprietary state‐of‐the‐art infrastructure and capabilities to control all aspects of cell product manufacturing — We have and will continue to invest in manufacturing with the goal to reliably produce the highest quality cell therapy products for patients. This is achieved through implementing consistent processes and mitigating risks, including risks arising from the challenges of managing production, supply chain, patient specimen chain of custody and quality. We have built and operate a wholly-owned manufacturing facility, LyFETM, which is a multi-product manufacturing center that can produce plasmid, lentiviral vector and cell products. LyFE has been commissioned and qualified in compliance with U.S. Food and Drug Administration’s Current Good Manufacturing Practices (cGMP) and is manufacturing cell product for our clinical trials. We expect maintaining our own manufacturing facility to not only enable us to implement consistent processes and manage risk, but also to protect proprietary aspects of our reprogramming technologies, support seamless collaboration across research, development and manufacturing, access more detailed and timely product characterization information and rapidly incorporate new innovations. Our technology infrastructure enables real‐time monitoring of our manufacturing process and the ability to incorporate insights into our research, manufacturing and clinical development efforts.

•Generate, secure and defend intellectual property on our differentiated technology platforms and product candidates — We have developed and secured intellectual property, including know-how, through our internal research efforts, licensing agreements and collaborations. We rigorously analyze, file and protect our intellectual property in an ongoing manner.

Our Reprogramming Technologies

Cell therapy has demonstrated profound results in some patients suffering from hematologic malignancies, but solid tumors are more complex and have evolved multiple mechanisms to evade and ultimately resist clearance by the immune system. This has limited the use of cell therapy in solid tumors. Based on clinical data and other scientific evidence, we believe T‐cell exhaustion and lack of durable stemness, which include the ability of T cells to persist and self-renew to drive durable tumor cytotoxicity, are two apical barriers limiting the efficacy of cell therapy in solid tumors.

We have developed proprietary, stackable genetic and epigenetic reprogramming technologies to address these two major barriers. Our reprogramming technologies are designed to generate potent T cells with durable cytotoxic function, irrespective of target and irrespective of whether they are delivered as CAR, TIL or TCR therapies. We have generated T cells that have demonstrated in nonclinical studies the ability to sustain cancer cell killing in murine models of solid tumors and an increased ability to maintain stemness to drive more durable tumor cytotoxicity.

T‐cell exhaustion describes a dysfunctional cellular state characterized by increased expression of cell surface markers such as PD-1, TIM-3, and LAG-3, and importantly the functional inability to respond to antigen and elimination of target cells. A clinical study previously conducted by one of our founders, Stanley Riddell, M.D., Professor in Immunology, Burke O’Reilly Family Endowed Chair in Immunotherapy, Fred Hutchinson Cancer Center, illustrated the different fates of CAR T cells in solid tumors versus hematologic malignancies and identified T-cell exhaustion as a key barrier to successful cell therapy in the solid tumor microenvironment. In this study, conceptually depicted in Figure 1, autologous ROR1-targeted CAR T cells infused into patients with chronic lymphocytic leukemia underwent rapid expansion and retained T‐cell effector functions, leading to tumor cell clearance and clinical responses. However, when CAR T cells generated with the same method are infused into patients with solid tumor such as triple-negative breast cancer (TNBC) or non-small cell lung cancer (NSCLC), these T cells often failed to expand adequately, rapidly developed

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cell surface markers of T‐cell exhaustion and adopted a dysfunctional state. The outcome of these studies clearly demonstrated that T‐cell exhaustion is a major barrier to successful cell therapy in solid tumors.

Figure 1: Solid tumors drive T cells down a path to exhaustion.

Durable stemness describes the quality of a population of T cells to persist through self-renewal, as well as generate differentiated effector cell progenies to provide durable tumor cytotoxicity. Emerging research has shown that effective immunotherapy requires T‐cell populations with stem‐like characteristics to produce clinical responses, where the presence of stem-like T cells correlates with solid tumor responses to cancer immunotherapy in the setting of solid tumors, including TIL and immune checkpoint blockade therapy (Sade-Feldman et al., Cell, Nov. 2018; Krishna et al., Science, Dec. 2020)

Genetic reprogramming technologies: Our two proprietary ex vivo genetic reprogramming technologies are c‐Jun overexpression and NR4A3 gene knockout. c-Jun and NR4A3 are involved in the regulation of the activator protein 1 (AP-1) transcription factor pathway, which plays a key role in T‐cell effector function. These complementary reprogramming technologies function within this critical biological pathway to endow resistance to T‐cell exhaustion.

Overexpression of c-Jun is based on the work of Lyell co-founder, Crystal Mackall, M.D., the Ernest and Amelia Gallo Family Professor of Pediatrics and Medicine at Stanford University and Founding Director of the Stanford Center for Cancer Cell Therapy. Dr. Mackall discovered that exhausted T cells have an imbalance in the AP‐1 family of transcription factors, and that correcting for this imbalance by overexpression of c-Jun enables T cells to resist exhaustion, infiltrate solid tumors and maintain their functionality and potency.This work was fully described in a Nature publication in 2019 (Lynn et al., Nature, Dec. 2019).

Our second genetic reprogramming technology, NR4A3 gene knockout, builds on the approach of reprogramming of the AP-1 transcription factor pathway to delay exhaustion and improve antitumor function. We and others have previously observed that the NR4A family of transcription factors is upregulated in exhausted T cells and may contribute to T‐cell exhaustion in part by restricting the activity of AP-1. We hypothesize that disruption of NR4A3 expression, along with c-Jun overexpression, can further unleash the potential for maximal c-Jun activity and endow greater functional resistance to exhaustion. Our nonclinical data suggest the combination of these two technologies, NR4A3 gene knockout and c-Jun overexpression, can act in a complementary fashion and have the potential to further improve the potency and durability of our CAR therapy.

Epigenetic reprogramming technologies:Our two proprietary ex vivo epigenetic reprogramming technologies are Epi‐R and Stim‐R.These novel manufacturing technologies generate product candidates with more stem-like cells and with greater potency during ex vivo T‐cell expansion.

Epi‐R is our proprietary ex vivo epigenetic reprogramming technology that intentionally and reproducibly generates a population of T cells with durable stemness. T cells with properties of durable stemness have an increased ability to self-renew and persist to drive durable tumor cytotoxicity. This technology is built upon the groundbreaking science conducted at the National Cancer Institute (NCI), where it was demonstrated that products with more stem-like and functional T cells can be achieved by altering the metabolic state of the cells during expansion

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(Vodnala et al., Science, Mar. 2019). Key NCI scientists conducting this research subsequently joined Lyell where they advanced this research substantially to create the Epi‐R manufacturing protocol, which intentionally produces T‐cell populations with desirable stem-like properties that can be measured both phenotypically and functionally. This novel Epi‐R protocol includes proprietary media, well-defined cell activation and expansion processes, as well as customized cytokine combinations. Lyell’s Epi‐R protocol enables manufacturing of T‐cell therapy product candidates that are highly potent against cancer cells but also retain characteristics of stemness, which have been clinically associated with effective antitumor immunotherapies (Figure 2). Furthermore, relating specifically to TIL, the application of Epi‐R has generated T‐cell populations that exhibit a high degree of polyclonality, i.e., the retention of a broad repertoire of TCR clonotypes that may react to a broader set of tumor antigens, thus improving the potential of our TIL therapy to counteract the heterogeneous nature of solid tumors. Additionally, we are able to reliably and reproducibly manufacture our TIL products from a variety of solid tumors, including those that have been traditionally hard to manufacture such as from checkpoint refractory malignant melanoma, NSCLC and colorectal cancer (CRC).

Figure 2: Lyell’s proprietary Epi-R protocol produces T-cell populations with long-lived stem-like characteristics. This protocol is used in both our LYL797 CAR T cell product candidate and in our LYL845 TIL product candidate as shown below.

Our second epigenetic reprogramming technology, Stim‐R, is a proprietary synthetic cell mimetic that mediates more precise and natural T‐cell activation in the manufacturing process. Current manufacturing platforms typically utilize antibody-conjugated beads that were developed decades ago for expanding T cells. This standard approach does not provide precise control over the strength or duration of the signaling that drives T‐cell expansion ex vivo. Our Stim‐R platform optimizes signaling parameters during T‐cell activation using degradable lipid-coated silica rods that can be functionalized to regulate cell activation more closely mimicking natural T‐cell stimulation. This technology allows for greater control over the duration, intensity and type of signals delivered during cell expansion and manufacturing, resulting in the generation of more potent T‐cell products.

T‐cell rejuvenation technologies:We and others have documented the impact of aging on T‐cell function, which begins to decline after puberty, and at an increasingly accelerated rate after age 65. Morbidity and mortality from cancer also increase with age. Thus, we are working to advance another novel reprogramming technology that focuses on rejuvenation of antitumor T cells. We are developing a method to maintain T‐cell identity while reducing the epigenetic age of the cells. This technology is currently in the research stage. We have generated data illustrating the ability to “turn back” the epigenetic clock in a process called cellular rejuvenation, without changing the T‐cell’s identity as would occur in the setting of induced pluripotent stem cell-derived T cells.

Our Clinical Programs

We are advancing a diverse pipeline of CAR T cell and TIL product candidates that incorporate our stackable reprogramming technologies designed to generate potent T cells with durable cytotoxic function, irrespective of target and irrespective of whether they are delivered as CAR T, TIL or TCR T therapies. Each of our programs currently target

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cancers with large unmet need and provide opportunity to expand into additional indications. We have deployed our technologies in our pipeline in the following manner to provide rapid clinical proof-of-concept (Table 1):

•LYL797 incorporates our c-Jun and Epi‐R technologies and is undergoing evaluation in a Phase 1 clinical trial enrolling patients with relapsed/refractory TNBC or NSCLC.

•LYL119 incorporates our c-Jun, NR4A3, Epi‐R and Stim‐R technologies and is currently in preclinical development.

•LYL845 incorporates our Epi‐R technology and is undergoing evaluation in a Phase 1 clinical trial including patients with advanced melanoma, relapsed/refractory NSCLC or CRC.

LYL797: A genetically and epigenetically reprogrammed ROR1 CAR T‐cell product candidate designed for differentiated potency and durability targeting multiple solid tumor indications.

We are applying our c-Jun and Epi‐R technologies to our lead CAR T‐cell product candidate, LYL797, which is expected to be an intravenously‐administered CAR T‐cell product targeting the receptor tyrosine kinase-like orphan receptor 1 (ROR1) protein. ROR1 is a fetal protein expressed during embryogenesis and is believed to be important in cell migration, polarity and survival. It is expressed in several cancer types, including TNBC, NSCLC, ovarian cancer and chronic lymphocytic leukemia, and is generally associated with a poor prognosis. LYL797 (Figure 3) contains a CAR with a 4-1BB/CD3ζ intracellular domain, a transmembrane domain, an optimized spacer domain and a single-chain variable fragment (scFv) derived from an R12 rabbit monoclonal antibody that recognizes and binds with high specificity to human ROR1. LYL797 also incorporates c-Jun and a proprietary optimized truncated version of human EGFR (EGFRopt) used for tracking the CAR T cells in the peripheral blood post treatment and can also be used as a safety measure with the administration of cetuximab, if needed. LYL797 is manufactured utilizing our proprietary Epi‐R technology.

Figure 3: LYL797 construct.

Phase 1 Clinical Trial

Our Phase 1 clinical trial (NCT05274451) is designed to evaluate the safety and antitumor activity of LYL797 in patients with ROR1-positive TNBC or NSCLC.

The trial is designed as an open label, dose escalation and expansion trial in patients with relapsed/refractory TNBC who have failed at least two lines of therapy and patients with relapsed/refractory NSCLC who have failed at least one line of therapy. Per protocol, dose expansion at the recommended dose identified during dose escalation is expected to occur in at least 15 patients with TNBC and 15 patients with NSCLC. The primary outcome measure assesses the safety and tolerability of LYL797. Patients will be monitored for cytokine release syndrome (CRS) and immune effector cell‐associated neurotoxicity syndrome, as well as tissue-specific toxicities in ROR1-expressing organs. Secondary outcome measures include clinical activity based on the evaluation of antitumor activity as evaluated by Response Evaluation Criteria in Solid Tumors (RECIST) criteria and characterization of the pharmacokinetic profile of LYL797. Exploratory biomarkers of T‐cell function – exhaustion and stemness – will also be assessed.

We plan to share initial data from the trial when we have a meaningful number of patients and an indication of clinical effect, which we expect to occur in the first half of 2024.

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Target Indications

We are initially developing LYL797 for the treatment of ROR1-positive TNBC and NSCLC. Significant subsets of patients with common cancers express ROR1, including TNBC (~60%) and NSCLC (~40%), two of the highest ROR1‐expressing solid tumor indications. If successful, we may expand into other ROR1-positive cancers with a lower incidence of ROR1 expression, including potentially hormone-receptor positive breast cancer, ovarian and other solid tumors.

Breast cancer is the second most common cancer in American women. Currently, the average risk for a woman in the United States to develop breast cancer is approximately 13%. Breast cancers that demonstrate the absence of estrogen receptor and progesterone receptor and no overexpression of HER2 are referred to as TNBC. Approximately 10-15% of patients with breast cancer have TNBC and triple negative status tends to be more common in women younger than age 40, who are African American or who have a BRCA1 mutation. TNBCs have a high tendency to metastasize, and patients are at a higher risk to relapse compared to other molecular types. TNBCs differ from other types of invasive breast cancer in that TNBC tumors grow and spread faster, have limited treatment options and have a worse prognosis. In the United States, there are approximately 40,000 new cases of TNBC annually and approximately 22% of breast cancer deaths are from TNBC. Once TNBC has spread to distant parts of the body, the 5-year survival rate is only 11.5% despite currently available treatment options. Available treatments include surgery, neoadjuvant and adjuvant chemotherapy such as capecitabine or gemcitabine, taxanes, anthracyclines and eribulin, check-point inhibitors such as pembrolizumab, and poly ADP ribose polymerase or PARP inhibitors such as olaparib and talazoparib. At recurrence, the antibody-drug conjugate sacituzumab govitecan-hziy may be prescribed.

Lung cancer is the second most common cancer and is the leading cause of cancer mortality worldwide. NSCLC, defined as any type of epithelial lung cancer other than small-cell lung carcinoma, accounts for about 84% of all lung cancers. In 2016, the incidence of NSCLC varied widely, ranging from 3 to 57 per 100,000 in Africa and North America respectively, with ~2 million cases diagnosed globally. It is estimated that 110,000 deaths from this disease occurred in the United States in 2022. For people with localized NSCLC, the overall 5-year survival rate is ~61%. For regional NSCLC, the 5-year survival rate is ~35%. Based on current data, when cancer metastasizes, the 5-year survival rate is 6% despite surgery, radiation and treatment with multiple currently-approved therapies, including chemotherapy, immunotherapy and targeted drug therapy.

Nonclinical Data

We have conducted extensive nonclinical in vitro and in vivo studies supporting development of LYL797. Nonclinical studies of ROR1 CAR T cells that overexpress c-Jun have demonstrated tumor reduction, enhanced cytokine production and tumor infiltration in an aggressive NSCLC syngeneic animal model (Figure 4). CAR T cells generated with our Epi‐R manufacturing protocol exhibit enhanced durability and cytotoxicity (Figure 5). Additionally, in a nonclinical xenograft tumor model, LYL797, combining c-Jun overexpression and Epi‐R, demonstrated prolonged survival in a xenograft NSCLC animal model (Figure 6). During the past year, we have presented these and other nonclinical findings at scientific and medical conferences, including in April, at the American Association of Cancer Research Annual Meeting.

Our scientific co-founder, Stanley Riddell, M.D., first tested the hypothesis that overexpression of c-Jun could improve T‐cell function in a rigorous solid tumor model of NSCLC (Figure 4). Riddell and colleagues utilized a transgenic mouse model with inducible oncogenic driver mutations KRASG12D and p53 deletion. Once triggered, these mice developed tumors de novo that recapitulate an immunosuppressive tumor microenvironment, akin to human NSCLC. Previous studies have shown that this aggressive tumor model does not respond to chemotherapy or PD-L1 immunotherapy. In our study, we observed that this aggressive tumor model is also resistant to treatment with ROR1 CAR T cells, just as was observed in treating human NSCLC with ROR1 CAR T cells. In contrast, tumor-bearing mice treated with ROR1 CAR T cells that overexpressed c-Jun demonstrated greater infiltration by the T cells into the tumor, enhanced function of those T cells and tumor regression or stabilization in 50% of the mice versus the 100% tumor progression observed in mice treated with ROR1 CAR without overexpression of c-Jun.

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Figure 4: Nonclinical efficacy demonstrated with c-Jun overexpressing ROR1 CAR T cells in aggressive NSCLC model.

We have also demonstrated that CAR T cells generated with Epi‐R are able to kill tumor cells over time in an experiment where the CAR T cells are repeatedly challenged to kill tumor cells over multiple rounds (Figure 5). In this experiment, CAR T cells are co-cultured with ROR1-positive tumor cells, and tumor cell killing can be assessed and quantified by measurement of decreasing fluorescence. CAR T cells were repeatedly challenged with tumor cells over multiple rounds to assess the durability of tumor cell killing. Cells generated through standard expansion protocols gradually lose their functionality by the third round and are significantly less effective in killing tumor cells by the fourth round of tumor cell killing. In contrast, cells generated with the Epi‐R protocol continue to kill tumor cells. Importantly, the Epi‐R cells are no longer in the Epi‐R protocol, suggesting that the stem-like attribute derived from the epigenetic reprogramming is sustained after the manufacturing protocol and for the duration of the experiment.

Figure 5: The Epi‐R protocol produces populations of T cells with durable cytotoxicity.

In May, at the American Society of Gene and Cell Therapy Annual Meeting, we presented a study that assessed in vivo functional activity of LYL797 (ROR1 CAR T cells with c-Jun and Epi‐R) compared to conventional ROR1 CAR T cells in an established human ROR1-positive H1975 mouse xenograft model. In this study, LYL797 demonstrated improved expansion in the peripheral blood of tumor-bearing animals and control of tumor growth, which led to prolonged survival (Figure 6).

Taken together, these nonclinical data characterize LYL797 and demonstrate that ROR1-targeted CAR T cells reprogrammed with c-Jun and Epi-R can overcome barriers of T-cell exhaustion and lack of durable stemness.

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Figure 6: LYL797 prolongs survival in NSCLC (H1975) xenograft model.

LYL845: A novel epigenetically reprogrammed TIL product candidate designed for differentiated potency and durability targeting multiple solid tumor indications.

We are applying our epigenetic reprogramming technology, Epi‐R, to develop LYL845, which is expected to be an intravenously‐administered autologous TIL therapy for multiple solid tumors. Our Epi‐R protocol comprises proprietary media, optimized cytokine compositions and well-defined cell activation and expansion protocols used during our manufacturing process.

TIL have previously shown clinical benefit in patients with advanced melanoma and other solid tumors with high mutational burden. Published data from third-party TIL trials show that treating metastatic melanoma patients with TIL can result in complete and durable responses. Response rates to TIL therapy in patients with other advanced solid tumors such as lung, colorectal and breast are much lower than that observed in advanced melanoma.Broad TIL efficacy has been limited by poor enrichment of tumor-reactive T cells and the poor quality and limited growth potential of expanded T cells. Failure to maintain polyclonality of TIL during production may also limit their ability to eradicate cancer cells given the inherent heterogeneous nature of solid tumors. LYL845 incorporates our Epi‐R technology that has shown promising improvements in enhancing T-cell potency, antitumor activity and increased polyclonality of TIL in nonclinical experiments.

Phase 1 Clinical Trial

Our Phase 1 clinical trial (NCT05573035) is designed to evaluate the safety and antitumor activity of LYL845 in patients with advanced melanoma, NSCLC and CRC. If successful, we expect to expand into additional indications.

The trial is designed as an open label, dose escalation and expansion trial in patients with relapsed and/or refractory metastatic or locally advanced solid tumors. Per protocol, dose expansion at the recommended dose identified during dose escalation is expected to occur in at least 15 patients with advanced melanoma, 15 patients with NSCLC and 15 patients with CRC. The primary outcome measure assesses the safety and tolerability of LYL845. Secondary outcome measures include clinical activity based on the evaluation of antitumor activity as evaluated by RECIST criteria and characterization of the pharmacokinetic profile of LYL845. Evaluation of T-cell expansion, phenotype, clonal diversity and persistence will also be assessed. Patients will be monitored for CRS and auto-immunity.

We plan to share initial data from the trial when we have a meaningful number of patients and an indication of clinical effect, which we expect to occur in 2024.

Target Indications

We are initially developing LYL845 for advanced melanoma, NSCLC and CRC. Based on our success with those, we plan to include patients with other solid tumors, potentially including head and neck, cervical, breast and pancreatic cancer. Although patients with these cancers may benefit initially from radiation therapy, chemotherapy, surgery, and more advanced alternatives such as checkpoint therapies, immunotherapies or targeted therapies, most patients with these types of cancers eventually relapse. After becoming resistant to initial lines of therapy, patients are limited to palliative care, experimental therapies in clinical trials or chemotherapy regimens that are often highly toxic and largely ineffective. Overall, despite recent advances in therapeutic development, for most patients diagnosed with advanced solid tumors, long-term survival rates remain low.

Melanoma of the skin is among the most common cancers in the United States behind breast, prostate, lung and CRC. It is one of the most common cancers in young adults and especially in young women. It is estimated there are over 100,000 new cases of melanoma diagnosed in the United States per year. Melanoma arises due to genetic mutations in melanocytes, the pigment producing cells, which can be found in the skin, eye, inner ear and leptomeninges, and represents

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the most aggressive and the deadliest form of skin cancer. Although melanoma accounts for only ~1% of all dermatologic cancers, it is responsible for ~80% of deaths from skin cancer. Only ~14% of patients with advanced melanoma survive for five years. Available treatment options include surgery, radiation therapy, immunotherapy (PD-1 inhibitors), chemotherapy and targeted therapies (MEK and BRAF inhibitors).

A description of NSCLC can be found above in the section describing the Phase 1 clinical trial for LYL797.

Colorectal cancer is the third leading cause of cancer-related deaths in both men and women in the United States. Most colorectal cancers are a type of tumor called adenocarcinoma, which is cancer of the cells that line the inside tissue of the colon and rectum. In 2022, it was estimated that there were approximately 150,000 new cases of CRC in the United States with an estimated cause of approximately 53,000 deaths each year. For patients diagnosed with metastatic disease, the 5-year survival rate is 14%. Approximately 25% of patients have metastatic disease at diagnosis, and about 50% of patients with colorectal cancer will eventually develop metastases. Over 35% of the patients with a new diagnosis of CRC will die within five years. Currently available treatments include surgery, radiation therapy, chemotherapy, immunotherapy and targeted therapy (vascular endothelial growth factor, epidermal growth factor receptor, BRAF, NTRK, HER2 and kinase inhibitors).

Nonclinical Data

We have conducted nonclinical studies supporting the development of LYL845. These studies have demonstrated that TIL generated with our Epi‐R technology have phenotypes (stemness markers and cytotoxic T cells) associated with clinical responses in published literature and preserved polyclonal tumor reactive cells. In addition, using Epi‐R allows us to expand TIL in not only immunologically hot tumors such as melanoma, but also immunologically colder tumors such as NSCLC and CRC. During the past year, we have presented these findings at scientific and medical conferences. These presentations are summarized below:

In November, at the 2022 Annual Meeting of the Society for Immunotherapy of Cancer (SITC), we presented data that demonstrated the ability of our Epi‐R technology to successfully and reliably expand TIL across three tumor types as compared to the standard (control) process. In this study, expanding TIL with Epi‐R technology resulted in a 100% success rate (at least 10B cells) vs. 58% with control, including across twelve more difficult-to-expand tumor samples collected from checkpoint inhibitor refractory melanoma, NSCLC and CRC patients (Figure 7). Further, in this study Epi‐R technology yielded a product (LYL845) with qualities that have been linked with antitumor functionality and improved outcomes in previous TIL clinical trials, including a greater proportion of CD8+ cytotoxic T cells and enrichment of T cells with stem-like profiles (Figure 8), and better metabolic fitness compared to control TIL.

Figure 7: Our Epi‐R protocol more consistently successfully expands TIL from immunologically cold solid tumors vs. standard expansion processes.

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Figure 8: LYL845 is enriched for cells with characteristics associated with improved clinical outcomes (Krishna et al., Science, Dec. 2020).

We also presented at the 2022 meeting of SITC comprehensive analyses of transcriptomic profiles, polyclonality and prediction of tumor reactive T cell clones in our LYL845 product candidate. In particular, our bioinformatic analyses demonstrated that LYL845 products expanded using Epi‐R technology at clinical scale were highly polyclonal and preserved approximately 94% of the predicted tumor reactive clones (Figure 9). Further, preserved putative tumor reactive clones in LYL845 products have increased stemness and reduced exhaustion-associated genes compared to TIL products derived from the standard process. Moreover, the tumor-specific reactivity of LYL845 was confirmed by demonstrating dose-dependent antitumor cytolytic activity and cytokine secretion in tumor cell specific co-culture assays.

Figure 9: LYL845 TIL preserve ~94% of predicted tumor reactive clones to enable targeting of heterogeneous solid tumors.

LYL119: An innovative ROR1 CAR T-cell product candidate designed for enhanced cytotoxicity.

A key pillar of our strategy is to continually innovate to develop and advance novel, breakthrough technologies that address key barriers to successful cell therapy for solid tumors. We have advanced a new genetic reprogramming

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technology, NR4A3 knockout, and a new epigenetic reprogramming technology, Stim‐R, that are being applied in our new CAR T-cell product candidate, LYL119. These technologies are stackable and complementary to c-Jun and Epi‐R and are designed to further improve the antitumor potency and durability of T cells. LYL119 is being advanced with the goal of potentially creating even greater benefit for patients with ROR1-positive solid tumors. An IND application is expected to be submitted for LYL119 in the first half of 2024.

Nonclinical Data

In November at the 2022 meeting of SITC, we presented nonclinical data demonstrating that our NR4A3 knockout and Stim‐R technologies further enhance survival in vivo in a murine H1975 xenograft tumor model at a reduced CAR T‐cell dose. We presented data demonstrating that the combination of our two genetic reprogramming technologies, NR4A3 gene knockout and c-Jun overexpression, enhances the functional activity of ROR1 CAR T cells as shown by higher levels of cytokine production, increased CAR T‐cell persistence and reduced surface expression of inhibitory receptors after repetitive antigen stimulation, as well as significant improvement in tumor control in vivo (Figure 10). In a separate abstract, we also presented nonclinical data demonstrating that Stim‐R generates potent CAR T‐cell products with increased cell proliferation and persistence in vivo, as well as improved tumor control (Figure 11).

Figure 10: Combining c-Jun overexpression with NR4A3 knockout enables T cells to further resist exhaustion and prolongs survival.

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Figure 11: Stim‐R ROR1 CAR T cells demonstrate improved potency and prolongs survival.

Our Manufacturing Capabilities

We believe it is critically important to own, control and continuously monitor all aspects of the cell therapy manufacturing process to mitigate risks, including challenges in managing production, supply chain, patient specimen chain of custody and quality control. We made a strategic decision to invest in building our own manufacturing facility to control our supply chain, maximize efficiencies in cell product production time, optimize cost and quality, and have the ability to rapidly incorporate disruptive advancements and new innovations. Controlling manufacturing also enables us to protect proprietary aspects of our reprogramming technologies. We view our manufacturing team and capabilities as a significant competitive advantage.

Our LyFE manufacturing center located in Bothell, Washington is approximately 73,000 square feet and is comprised of manufacturing suites, laboratories and offices. LyFE is commissioned and designed to be in compliance with U.S. and European Union cGMP standards and has a flexible and modular design enabling CAR T cell, TIL, TCR T cell and GMP viral vector production to control and de-risk the manufacturing sequence and timing of the major components of our supply chain. Owning our own facility encourages seamless collaboration across research, process development and manufacturing for high-quality reproducibility at manufacturing scale.

We are currently producing clinical supply for our Phase 1 trials at LyFE. At full staffing and capacity, we expect to be able to manufacture approximately 500 infusions per year depending on product candidate mix. At this time, we believe this capacity is sufficient to support our pipeline programs into pivotal trials and, if approved, early commercialization.

Competition

The pharmaceutical industry is highly competitive and dynamic, owing to rapidly advancing technologies. We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, government agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing treatments and new treatments that may become available in the future. In addition, during development, our product candidates may compete against other experimental treatments, whether cell therapy or other modalities, for patients with certain histologies or patients with tumors expressing certain antigen targets of interest.

We are aware of a number of companies using ex vivo cell therapy approaches to treat solid tumors. Some of these companies may have substantially greater financial and other resources than we have, such as larger research and development staff and well-established marketing and sales forces, or may operate in jurisdictions where lower standards of evidence are required to bring products to market.

T‐cell therapies for the treatment of solid tumors are being developed by a number of companies, including but not limited to Adaptimmune Therapeutics plc, ArsenalBio, AstraZeneca plc, Bristol Myers Squibb Co.,

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Gilead Sciences Inc., Immunocore Holdings plc, Iovance Biotherapeutics Inc., the Janssen Pharmaceutical Companies of Johnson & Johnson, Nanjing Legend Biotech, Novartis AG, Nurix Therapeutics Inc., Precigen Inc. and Turnstone Biologics. We are also aware that other companies are developing therapies in modalities such as monoclonal antibodies and antibody drug conjugates for cancers that express ROR1, such as Merck & Co., Inc.

Among companies developing cell therapies for solid tumors, we believe we are substantially differentiated by our reprogramming technologies, knowledge, experience, scientific personnel and robust intellectual property portfolio. We believe the key competitive factors affecting the success of any of our product candidates will include efficacy, safety, accessibility, price and cost of manufacturing.

License, Collaboration and Success Payment Agreements

Fred Hutch License Agreement and Success Payment Agreement

In December 2018, we entered into a license agreement with Fred Hutchinson Cancer Center (Fred Hutch) (as amended in June 2019, September 2019, January 2020, and August 2020) that grants us a worldwide, sublicensable license under certain patent rights (exclusive) and certain technology (non-exclusive), to research, develop and commercialize products and processes for all fields of use utilizing CARs and/or TCRs. We paid Fred Hutch an upfront payment of $150,000. In connection with the license agreement, we entered into a letter agreement with Fred Hutch pursuant to which we issued to Fred Hutch 1,075,000 shares of our common stock.

The license agreement will expire, on a product-by-product and country-by-country basis, on the later of (a) the expiration of the last to expire valid claim of the patents rights covering such product in such country and (b) ten (10) years after the date of the first commercial sale of such product in such country. We may terminate the agreement at will in its entirety or with respect to any patent. Fred Hutch has the right to terminate the agreement in the event of our uncured breach.

We also entered into a letter agreement with Fred Hutch in December 2018 under which we agreed to make success payments to Fred Hutch, payable in cash or publicly tradable equity at our discretion. These success payments are based on increases in the per share fair market value of our common stock (as all our Series A convertible preferred stock were converted into an equivalent number of shares of our common stock upon the closing of our initial public offering) during the success payment period, which is a period of time that begins on the date of our letter agreement with Fred Hutch and ends on the earlier of: (a) the ninth anniversary of that date and (b) the earlier of (i) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company and (ii) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity). Success payments will be owed (if applicable) after measurement of the value of our common stock in connection with the following valuation dates during the success payment period: (1) the date of the first anniversary of our initial public offering; (2) the second anniversary of such date; (3) each two year anniversary thereafter (i.e., the four year anniversary, six year anniversary, etc. of such date); (4) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company; (5) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); and (6) the last day of the nine-year period. Any success payment will generally be made within 45 days after the applicable valuation date, except that in the case of a merger or sale of all of our company’s assets, the success payment will be made on the earlier of the 90th day following the transaction or the first date that transaction proceeds are paid to any of our stockholders. In the case of (1), (2) and (3), the value of our common stock will be determined by the average trading price of a share of our common stock over the consecutive 90-day period preceding the date the success payment is made; the value will otherwise be determined either, in the case of a merger or stock sale, by the consideration paid in the transaction for each share of our stock or the stock of the acquiring entity (or their parent or affiliate). The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending from $18.29 per share to $91.44 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares or other similar events. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to a cumulative total of $200.0 million at $91.44 per share, payable if such threshold is reached. Any previous success payments made to Fred Hutch are credited against the success payment owed as of any valuation date, so that Fred Hutch does not receive multiple success payments in connection with the same threshold. The success payments paid to Fred Hutch will not exceed, in aggregate, $200.0 million, which would be owed only when the value of the common stock reaches $91.44 per share. To date, no success payments have been incurred as the per share fair value of our common stock was below the price required for payment.

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Stanford License Agreement and Success Payment Agreement

In January 2019, we entered into a license agreement with The Board of Trustees of the Leland Stanford Junior University (Stanford) that grants us a worldwide, sublicensable license under certain patent rights (exclusive), and certain other patent rights and technology (non-exclusive), to research, develop and commercialize products and processes for all fields of use utilizing CARs and/or TCRs. We also have the right to add certain Stanford patent applications covering certain inventions that are improvements to the existing patents and patent applications, as well as a right of first negotiation for other patent applications covering inventions made in the principal investigator’s lab that relate to and are necessary or useful for utilizing CARs and/or TCRs.

We paid Stanford an upfront payment of $400,000. In connection with the license agreement, we entered into a letter agreement in January 2019 with Stanford pursuant to which we issued to Stanford 910,000 shares of our common stock. We are required to pay Stanford an annual maintenance fee in the mid tens of thousands of dollars on the second anniversary of entering into this agreement, and each anniversary thereafter until the date of the first commercial sale of a licensed product. We are obligated to pay Stanford up to a maximum of $3.7 million per target upon achievement of certain specified clinical and regulatory milestones. We are also obligated to pay Stanford $2.5 million collectively for all licensed products upon our achievement of a certain commercial milestone. In addition, the license agreement provides that we are required to pay Stanford low single-digit tiered royalties based on annual net sales of the licensed products by us and by our sublicensees. If we seek to challenge the validity of any of the licensed patents, during the pendency of such action our royalty rate will increase, and if the outcome of such challenge finds that patent is both valid and infringed our royalty rate will increase further. We are also required to pay Stanford (a) royalties in the mid-teens percentage of the payments that we receive from sublicensees of the rights solely licensed to us by Stanford, or (b) sublicensing fees if sublicensed with other intellectual property on a tiered basis up to $300,000.

The license agreement will expire, on a licensed product-by-licensed product and country-by-country basis, on the expiration of the last to expire valid claim of the licensed patents rights covering such licensed product in such country. We may terminate the agreement at will in its entirety or with respect to any licensed patent. Stanford has the right to terminate the agreement in the event of our uncured breach.

We also entered into a letter agreement with Stanford in October 2020, under which we agreed to make success payments to Stanford, payable in cash or publicly tradable equity at our discretion. These success payments are based on increases in the per share fair market value of our common stock (as all our Series A convertible preferred stock were converted into an equivalent number of shares of our common stock upon the closing of our initial public offering) during the success payment period, which is a period of time that begins on the date of our letter agreement with Stanford and ends on the earlier of: (a) the ninth anniversary of that date and (b) the earlier of (i) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company and (ii) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity). Success payments will be owed (if applicable) after measurement of the value of our common stock in connection with the following valuation dates during the success payment period: (1) the date of the first anniversary of our initial public offering; (2) the second anniversary of such date; (3) each two year anniversary thereafter (i.e., the four year anniversary, six year anniversary, etc. of such date); (4) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company; (5) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); and (6) the last day of the nine-year period. Any success payment will generally be made within 45 days after the applicable valuation date, except that in the case of a merger or sale of all of our company’s assets, the success payment will be made on the earlier of the 90th day following the transaction or the first date that transaction proceeds are paid to any of our stockholders. In the case of (1), (2) and (3), the value of our common stock will be determined by the average trading price of a share of our common stock over the consecutive 90-day period preceding the date the success payment is made; the value will otherwise be determined either, in the case of a merger or stock sale, by the consideration paid in the transaction for each share of our stock or the stock of the acquiring entity (or their parent or affiliate). The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending from $18.29 per share to $91.44 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares or other similar events. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to a cumulative total of $200.0 million at $91.44 per share, payable if such threshold is reached. Any previous success payments made to Stanford are credited against the success payment owed as of any valuation date, so that Stanford does not receive multiple success payments in connection with the same threshold. The success payments paid to Stanford will not exceed, in aggregate, $200.0 million, which would be owed only when the value of the common stock reaches $91.44 per share. To date, no success payments have been incurred as the per share fair value of our common stock was below the price required for payment.

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GSK Collaboration and License Agreement

In 2019, we entered into a collaboration and license agreement with GlaxoSmithKline (GSK) that became effective on July 7, 2019 and was amended in June 2020 and December 2021 (GSK Agreement) for potential T‐cell therapies that apply our platform technologies and cell therapy innovations with T‐cell receptors (TCRs) or chimeric antigen receptors (CARs) under distinct collaboration programs. The GSK Agreement defined two initial collaboration targets, CD19 and NY-ESO-1, and allowed GSK to nominate seven additional targets through July 2024. After agreeing on the programs for those targets, we were expected to perform research and development services for each agreed program up until a defined point (GSK Option Point), at which time GSK would decide whether or not to exercise an option to obtain a license from us (License Option) and take over the future development and commercialization. For the LYL331 program (NY-ESO-1 TCR with c-Jun), GSK exercised the License Option in April 2021 and assumed sole responsibility for future development and commercialization of the program at its own cost and expense. No IND for LYL331 was submitted to the U.S. Food and Drug Administration (FDA). For the LYL132 program (NY-ESO-1 TCR with Epi‐R), we filed an IND application, which cleared in January 2022, though no patients were treated. The program targeting CD19 was a research effort. No additional targets were nominated over the term of the GSK Agreement. GSK terminated the GSK Agreement effective December 24, 2022 and Lyell has discontinued any further work on these programs.

We received a non-refundable upfront payment of $45.0 million under the GSK Agreement. In connection with the GSK Agreement, in May 2019, we also entered into a stock purchase agreement with GSK (GSK Stock Purchase Agreement), pursuant to which we agreed to sell 30,253,189 shares of Series AA convertible preferred stock at a price of $6.78 per share, which was above the issuance date estimated fair value of $4.84 per share. The difference between the per share values resulted in $58.6 million additional deemed consideration, bringing the total upfront payment of the GSK Agreement to $103.6 million.

Intellectual Property

We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to our business, including seeking, maintaining and defending patent rights, whether developed internally or licensed from our collaborators or other third parties. Our policy is to seek to protect our proprietary position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation of our business. We also rely on trade secrets and know-how relating to our proprietary technology and product candidates, continuing innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of cell and gene therapy. We additionally plan to rely on data exclusivity, market exclusivity and patent term extensions when available, and if appropriate, may seek and rely on regulatory protection afforded through orphan drug designations. Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions and improvements; to preserve the confidentiality of our trade secrets; to maintain our licenses to use intellectual property owned by third parties; to defend and enforce our proprietary rights, including our patents; and to operate without infringing on the valid and enforceable patents and other proprietary rights of third parties.

We have in-licensed and procured, and filed for numerous patent applications, which include claims directed to compositions, methods of use, processes, dosing and formulations, and possess substantial know-how and trade secrets relating to the development and commercialization of our cell engineering technology platforms and related product candidates, including related manufacturing processes and protocols. Our intellectual property strategy is designed to provide multi-layered protection covering our T‐cell reprogramming technologies, including but not limited to c-Jun, NR4A3, Epi‐R and Stim‐R, as well as various aspects of our product candidates. For all patent applications, we determine claiming strategy on a case-by-case basis. We may file patent applications containing claims for protection of all useful applications of our proprietary technology platforms and any products, as well as new applications and/or uses we discover for existing technology platforms and products. We continuously reassess the number and type of patent applications, as well as the pending and issued patent claims, to ensure that maximum coverage and value are obtained for our processes and compositions. Further, claims may be modified during patent prosecution to meet our intellectual property and business needs. Notwithstanding these efforts, we cannot be sure that any patents will be granted with respect to any patent application we have licensed or filed or may license or file in the future, and we cannot be sure that any patents we have licensed or patents that may be licensed or granted to us in the future will not be challenged, invalidated or circumvented or that such patents will be commercially useful in protecting our technologies.

As of February 1, 2023, our in-licensed and owned patent portfolio consists of over 40 issued patents and over 135 pending patent applications that we have licensed and over 100 pending patent applications that we own. Our portfolio

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covers various aspects of our T‐cell reprogramming technologies, c-Jun, NR4A3, Epi‐R and Stim‐R, as well as our product candidates. The patents and patent applications in our portfolio are held primarily in the United States, Europe, Canada, Japan and Australia. For information related to our in-licensed intellectual property, see the subsection titled under “—License, Collaboration and Success Payment Agreements.”

Individual patents extend for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued for applications filed in the United States are effective for 20 years from the earliest nonprovisional filing date. In the United States, a patent’s term may be lengthened by patent term adjustment (PTA), which compensates a patentee for administrative delays by the USPTO in examining and granting a patent or may be shortened if a patent is terminally disclaimed over an earlier filed patent. In addition, in certain instances, the patent term of a U.S. patent that covers an FDA‐approved drug may also be eligible for extension to recapture a portion of the term effectively lost as a result of clinical trials and the FDA regulatory review period, such extension is referred to as patent term extension. The restoration period cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. However, there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions. The duration of patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest nonprovisional filing date. The actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

As of February 1, 2023, our registered trademark portfolio currently contains over 165 registered trademarks and pending trademark applications, consisting of approximately 9 pending trademark applications in the United States, over 80 foreign pending trademark applications in Argentina, Brazil, Canada, China, Hong Kong, India, Israel, Mexico, Oman, South Korea, Russia, Singapore, South Africa, the United Arab Emirates and Venezuela; and over 75 trademark registrations in the following countries through national filings: Australia, Brazil, China, Colombia, Costa Rica, European Union, Hong Kong, India, Israel, Japan, Mexico, New Zealand, Oman, Russia, South Korea, Switzerland, the United Arab Emirates, the United Kingdom and Venezuela.

We may also rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our technology and product candidates, in part, by entering into confidentiality agreements with those who have access to our confidential information, including our employees, contractors, consultants, collaborators and advisors. We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems. Although we have confidence in these individuals, organizations and systems, agreements or security measures may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or may be independently discovered by competitors. To the extent that our employees, contractors, consultants, collaborators and advisors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. For this and more comprehensive risks related to our proprietary technology, inventions, improvements and product candidates, see the subsection titled “Risk Factors —Risks Relating to Our Intellectual Property.”

Sales and Marketing

Given our stage of development, we have not yet established a commercial organization or distribution capabilities. We intend to either build a commercial infrastructure to support sales of any approved products or outsource this function to third parties. We intend to evaluate opportunities to work with partners that enhance our capabilities with respect to the development and commercialization of LYL797, LYL845, LYL119 and any other product candidates we may develop. In addition, we intend to commercialize our product candidates, if approved, in key markets either alone or with partners to maximize the worldwide commercial potential of our programs.

Government Regulation

The FDA and other regulatory authorities at federal, state and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of biologics such as those we are developing. We, along

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with third-party contractors, will be required to navigate the various nonclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct trials or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

U.S. Biologics Regulation

In the United States, biological products are subject to regulation under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal, state, local and foreign statutes and regulations. The process required by the FDA before biologics may be marketed in the United States generally involves the following:

•completion of nonclinical laboratory tests and animal studies performed in accordance with the FDA’s Good Laboratory Practice requirements (GLP);

•submission to the FDA of an IND application, which must become effective before clinical trials may begin;

•approval by an Institutional Review Board (IRB) or ethics committee at each clinical site before the trial is commenced;

•performance of adequate and well-controlled human clinical trials according to the FDA’s regulations (commonly referred to as GCP), regulations and any additional requirements for the protection of human research subjects and their health information to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose;

•preparation of and submission to the FDA of a Biologics License Application (BLA), after completion of all pivotal clinical trials;

•satisfactory completion of an FDA Advisory Committee review, if applicable;

•a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;

•satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency and, if applicable, to assess compliance with the FDA’s current Good Tissue Practices (cGTPs) requirements for the use of human cellular and tissue products, and of selected clinical investigation sites to assess compliance with GCPs;

•potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the BLA; and

•FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States.

Before testing any biological product candidate in humans, the product candidate enters the nonclinical testing stage. Nonclinical tests, also referred to as preclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the nonclinical tests must comply with federal regulations and requirements including GLPs.

Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical trials. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology and pharmacodynamic characteristics of the product; chemistry, manufacturing and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involving recombinant or synthetic nucleic acid molecules are subject to oversight of an Institutional Biosafety Committee (IBC) as set forth in the National Institutes of Health (NIH) Guidelines for Research Involving Recombinant DNA Molecules (the NIH Guidelines). Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an IBC, a local institutional committee that reviews and oversees

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research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.

For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

•Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These trials are designed to test the safety, dosage tolerance, absorption, metabolism and excretion of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

•Phase 2—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

•Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product in the intended therapeutic indication, particularly for long-term safety follow-up. These so-called Phase 4 trials may also be made a condition to approval of the BLA.

Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

BLA Submission and Review by the FDA

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from nonclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including trials initiated by independent investigators. The submission of a BLA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies.

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Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the FDA accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. Once a BLA has been accepted for filing, the FDA’s goal is to review standard applications within 10 months after the filing date, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the review process may also be extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may also convene an advisory committee to provide clinical insight on application review questions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. For a product candidate that is also a human cellular or tissue product, the FDA also will not approve the application if the manufacturer is not in compliance with cGTPs. These are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues and cellular and tissue-based products (HCT/Ps), which are human cells or tissue intended for implantation, transplant, infusion or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities, or data collected from clinical trial sites are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter (CRL). An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A CRL will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a REMS, to ensure the benefits of the product outweigh its risks, or otherwise limit the scope of any approval. A REMS is a safety strategy implemented to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post-marketing trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization and may limit further marketing of the product based on the results of these post-marketing studies.

Expedited Development and Review Programs

The FDA offers a number of expedited development and review programs for qualifying product candidates. For example, the fast track program is intended to expedite or facilitate the process for reviewing new products that are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Specifically, new biological products are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new biologic may request that the FDA designate the biologic as a

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fast track product at any time during the clinical development of the product. The sponsor of a fast track product has opportunities for more frequent interactions with the applicable FDA review team during product development and, once a BLA is submitted, the product candidate may be eligible for priority review. A fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.

A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review. A product candidate can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers.

Any marketing application for a drug or biologic submitted to the FDA for approval, including a product candidate with a fast track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product candidate is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new biological product designated for priority review in an effort to facilitate the review. For original BLAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (as compared to 10 months under standard review).

Additionally, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical trials to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required post-marketing studies or if such studies fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

In 2017, the FDA established a new regenerative medicine advanced therapy (RMAT) designation, which is intended to facilitate an efficient development program for, and expedite review of, any drug or biologic that meets the following criteria: (i) the drug or biologic qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (ii) the drug or biologic is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition; and (iii) preliminary clinical evidence indicates that the drug or biologic has the potential to address unmet medical needs for such a disease or condition. RMAT designation provides all the benefits of breakthrough therapy designation, including more frequent meetings with the FDA to discuss the development plan for the product candidate and eligibility for rolling review and priority review. Product candidates granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of clinical trial sites, including through expansion of trials to additional sites. RMAT-designated products that receive accelerated approval may, as appropriate, fulfill their post-approval requirements through submission of clinical evidence, clinical trials, patient registries or other sources of real-world evidence (such as electronic health records); through the collection of larger confirmatory data sets; or via post-approval monitoring of all patients treated with such therapy prior to approval of such therapy. Fast track designation, breakthrough therapy designation, priority review, accelerated approval and RMAT designation do not change the standards for approval but may expedite the development or approval process. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

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Orphan Drug Designation and Exclusivity

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

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for a particular drug or biologic for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease.

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

Post-Approval Requirements

Biologics are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products. Biologic manufacturers and other entities involved in the manufacture and distribution of approved biological products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain GMP compliance. Changes to the manufacturing process or facility are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

•restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

•fines, warning letters or untitled letters;

•clinical holds on clinical trials;

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•refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;

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

•consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

•mandated modification of promotional materials and labeling and the issuance of corrective information;

•the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or

•injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits or civil or criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe, in their independent medical judgment, that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

Biosimilars and Reference Product Exclusivity

The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA), includes a subtitle called the Biologics Price Competition and Innovation Act (BPCIA), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars.

Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical trial or trials. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until twelve (12) years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own nonclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study. The BPCIA is complex and continues to be interpreted

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and implemented by the FDA. In addition, government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation and impact of the BPCIA is subject to significant uncertainty.

Government Regulation Outside of the United States

In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials.

In the European Union, for example, a clinical trial application (CTA) must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and the IRB, respectively. Once the CTA is approved in accordance with the applicable requirements, clinical trial development may proceed. The requirements and process governing the conduct of clinical trials are to a significant extent harmonized at the European Union-level but could vary from country to country. In all cases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. The way clinical trials are conducted in the European Union underwent a major change when the Clinical Trial Regulation (Regulation (EU) 536/2014) came into application in January 2022. The Regulation harmonizes the assessment and supervision processes for clinical trials throughout the European Union via a Clinical Trials Information System, which will contain a centralized European Union portal and database.

To obtain regulatory approval of an investigational biological product under European Union regulatory systems, we must submit a marketing authorization application. The application used to file the BLA in the United States is similar to that required in the European Union, with the exception of, among other things, country-specific document requirements. Innovative products that target an unmet medical need may be eligible for a number of expedited development and review programs in the European Union, such as the PRIME scheme, which provides incentives similar to the breakthrough therapy designation in the United States. Such products are generally eligible for accelerated assessment and may also benefit from different types of fast track approvals, such as a conditional marketing authorization or a marketing authorization under exceptional circumstances granted on the basis of less comprehensive clinical data than normally required (respectively in the likelihood that the sponsor will provide such data within an agreed timeframe or when comprehensive data cannot be obtained even after authorization).

The European Union also provides opportunities for market exclusivity. For example, in the European Union, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic or biosimilar application. During the additional two-year period of market exclusivity, a generic or biosimilar marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar product can be marketed until the expiration of the market exclusivity. However, there is no guarantee that a product will be considered by the European Union’s regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity. Products receiving orphan designation in the European Union can receive ten years of market exclusivity, during which time no similar medicinal product for the same indication may be placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the European Union for pediatric trials. No extension to any supplementary protection certificate can be granted on the basis of pediatric trials for orphan indications.

The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the European Union, or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing

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authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan drug designation must be submitted before the application for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designation has been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if:

•The second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior;

•The applicant consents to a second orphan medicinal product application; or

•The applicant cannot supply enough orphan medicinal product.

The medicinal products we are developing, which are based on genes, cells or tissues, may be considered advanced therapy medicinal products (ATMPs) in the European Union if they meet the scientific criteria for defining an ATMP. The principles of the aforementioned medicines legislation apply to ATMPs. All ATMPs must obtain a marketing authorization from the EMA and are regulated through the centralized authorization procedure. Regulation (EC) No 1394/2007 (the ATMP Regulation) provides specific incentives to accelerate the development of such products, including fee reductions for scientific advice, an ATMP classification procedure (for all developers) and a certification procedure for quality and nonclinical data (for SMEs only).

If tissues and cells are being used as starting materials in a medicinal product we may also need to comply with the requirements of Directive 2004/23/EC (the European Tissues and Cells Directive) covering standards for donation, procurement and testing, processing, preservation, storage and distribution of human tissues and cells, as well as its technical implementing directives; and Directive 2015/566, as regards the procedures for verifying the equivalent standards of quality and safety of imported tissues and cells.

In the European Union, early access mechanisms for innovative medicines (such as compassionate use programs and named patient supplies), pricing and reimbursement and promotion and advertising are subject to national regulations and oversight by national competent authorities and therefore significantly vary from country to country.

Sanctions for non-compliance with the aforementioned requirements, which may include administrative and criminal penalties, are generally determined and enforced at national level. However, under the European Union financial penalties regime, the EMA can investigate and report on alleged breaches of the European Union pharmaceutical rules by holders of a marketing authorization for centrally authorized medicinal products and the European Commission could adopt decisions imposing significant financial penalties on infringing marketing authorization holders.

The United Kingdom left the European Union on January 31, 2020 (Brexit). Following the Transition Period which ended on December 31, 2020, Brexit could materially impact the regulatory regime with respect to the development, manufacture, importation, approval and commercialization of our product candidates in the United Kingdom in the coming years.

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

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

Other Healthcare Laws

Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business and may

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constrain the financial arrangements and relationships through which we research, sell, market and distribute any products for which we obtain marketing approval. Such laws include, without limitation, federal and state anti-kickback, fraud and abuse, false claims, data privacy and security, price reporting and physician and other health care provider transparency laws and regulations. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and imprisonment.

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

Additionally, the intent standard under the Anti-Kickback Statute and the criminal healthcare fraud statutes under the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) was amended by the ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (FCA) (discussed below).

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

HIPAA also created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

Additionally, the federal Physician Payments Sunshine Act within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) annually report information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physician assistants and nurse practitioners) and teaching hospitals and certain ownership and investment interests held by these physicians and their immediate family members.

We may also be subject to data privacy and security regulations by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and its implementing regulations, impose requirements on covered entities, including certain healthcare providers, health plans, healthcare clearinghouses and their respective business associates that create, receive,

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maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

In order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of pharmaceutical products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, track and report gifts, compensation and other remuneration made to physicians and other healthcare providers, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.

If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations

Coverage and Reimbursement

Sales of any product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that a product is safe, effective and medically necessary; appropriate for the specific patient; cost-effective; supported by peer-reviewed medical journals; included in clinical practice guidelines; and neither cosmetic, experimental, nor investigational. A third-party payor could also require that certain lines of therapy be completed or failed prior to reimbursing our therapy. The principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and Human Services (HHS). CMS decides whether and to what extent products will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Third-party payors determine which products and procedures they will cover and establish reimbursement levels. Even if a third-party payor covers a particular product or procedure, the resulting reimbursement payment rates may not be adequate. These third-party payors are increasingly reducing coverage and reimbursement for medical products, drugs and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product and also have a material adverse effect on sales.

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Healthcare Reform

In the United States, in March 2010, the ACA was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affected the pharmaceutical industry. The ACA contained a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement adjustments and changes to fraud and abuse laws. For example, the ACA:

•increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1% of the average manufacturer price;

•required collection of rebates for drugs paid by Medicaid managed care organizations;

•required manufacturers to participate in a coverage gap discount program, under which they must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

•imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs” to specified federal government programs;

•expanded the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and

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

There have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example, the Tax Act was enacted, which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such additional challenges and healthcare reform measures of the Biden administration will impact the ACA and our business.

Other legislative changes have also been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which began in 2013 and will remain in effect through 2031. However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

There has been heightened governmental scrutiny recently over the manner in which pharmaceutical companies set prices for their marketed products, which has resulted in several Congressional inquiries and proposed federal legislation, as well as state efforts, designed to, among other things, bring more transparency to product pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently unclear how the IRA will be implemented, but it is likely to have a significant impact on the pharmaceutical industry.

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Further, the Biden administration released an additional executive order on October 14, 2022, directing HHS to submit a report within ninety (90) days on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. It is unclear whether this executive order or similar policy initiatives will be implemented in the future. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We anticipate that these new laws will result in additional downward pressure on coverage and the price that we receive for any approved product, and could seriously harm our business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products (if approved). In addition, it is possible that there will be further legislation or regulation that could harm our business, financial condition and results of operations. For example, it is possible that additional governmental action is taken in response to address the COVID-19 pandemic.

Other Privacy and Security Laws

We may become subject to privacy laws in the jurisdictions in which we are established or in which we sell or market our products or run clinical trials. For example, in Europe we may be subject to Regulation (EU) 2016/679, the General Data Protection Regulation (GDPR) in relation to our collection, control, processing and other use of personal data (i.e., data relating to an identifiable living individual). The GDPR is directly applicable in each European Union Member State, however, it provides that European Union Member States may introduce further conditions, including limitations that could limit our ability to collect, use and share personal data (including health and medical information), or could cause our compliance costs to increase, ultimately having an adverse impact on our business.

The GDPR imposes onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and implement policies as part of its mandated privacy governance framework. It also requires data controllers to be transparent and disclose to data subjects (in a concise, intelligible and easily accessible form) how their personal information is to be used, imposes limitations on retention of personal data; defines pseudonymized (i.e., key-coded) data; introduces mandatory data breach notification requirements; and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. We are subject to the supervision of local data protection authorities in those European Union jurisdictions where we are established or otherwise subject to the GDPR. Fines for certain breaches of the GDPR are significant: up to the greater of €20 million or 4% of total global annual turnover. Further, following the withdrawal of the United Kingdom from the European Union on January 31, 2020, pursuant to the transitional arrangements agreed between the United Kingdom and the European Union, we will have to comply with the GDPR and separately the GDPR as implemented in the United Kingdom, each regime having the ability to fine up to the greater of €20 million/ £17 million or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, including how data transfers between European Union member states and the United Kingdom will be treated. These changes may lead to additional compliance costs and could increase our overall risk. In addition to the foregoing, a breach of the GDPR or other applicable privacy and data protection laws and regulations could result in regulatory investigations, reputational damage, orders to cease/change our use of data, enforcement notices, or potential civil claims including class action type litigation.

LYEL US Equity

LYEL · 10-K · period ended 2022-12-31

Item 1. Business

LYEL US Equity☆

LYEL · 10-K · period ended 2022-12-31

Item 1. Business

LYEL US Equity