LYEL US Equity☆

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

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. See also the section titled “Special Note Regarding Forward-Looking Statements.”

This section under Management’s Discussion and Analysis of Financial Condition and Results of Operations generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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. We apply our technologies with the aim of developing T‐cell therapies with improved and durable antitumor responses for patients with solid tumors. 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.

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 United States annually. Each of our programs provide opportunities to expand into additional indications beyond the patient populations we are initially targeting.

For additional information regarding our business, see “Business” in Part I, Item 1 of this Annual Report on Form 10-K.

Pipeline Programs and Operational Updates

Pipeline Programs

We are advancing four wholly-owned product candidates. Two product candidates, LYL797 and LYL845 are in Phase 1 clinical development. Two additional product candidates, LYL119 and a second-generation tumor infiltrating lymphocyte (TIL) product candidate, are in preclinical development and our T-cell rejuvenation technology is in research.

LYL797 – A ROR1-targeted Chimeric Antigen Receptor (CAR) T-cell product candidate genetically reprogrammed to overexpress c-Jun and epigenetically reprogrammed using Lyell’s proprietary Epi-RTM manufacturing protocol, designed for differentiated potency and durability

•Enrollment in the Phase 1 clinical trial of LYL797 is ongoing. The study includes patients with relapsed or refractory triple-negative breast cancer (TNBC) or non-small cell lung cancer (NSCLC).

•Initial clinical and translational data from at least 20 patients in the Phase 1 trial of LYL797 are expected in the first half of 2024.

•Initiated a CAR T-cell manufacturing proof-of-concept collaboration with Cellares as part of an overall manufacturing strategy to build scale and reduce cost. Under the collaboration, the companies have agreed on a proof-of-concept technology transfer process for the manufacture of Lyell’s LYL797 CAR T-cell therapy, using Cellares’ Cell ShuttleTM.

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•Announced initial results from Lyell’s ROR1 screening program indicating that expression of ROR1 in TNBC and NSCLC, 53% (N=77) and 33% (N=18), respectively, is consistent with what has been reported in the literature. The screening program is designed to support Lyell’s current and future clinical trials.

•Presented a LYL797 Trial in Progress poster at the 38th Annual Meeting of the Society for Immunotherapy of Cancer (SITC).

LYL845 – A novel epigenetically reprogrammed TIL product candidate using Lyell’s proprietary Epi-RTM manufacturing protocol, designed for differentiated potency and durability

•Enrollment in the Phase 1 clinical trial for LYL845 is ongoing. The study includes patients with relapsed and/or refractory metastatic or locally advanced melanoma, NSCLC and colorectal cancer.

•Initial clinical and translational data from the Phase 1 trial of LYL845 are expected in the second half of 2024.

•Received FDA Orphan Drug designation (ODD) for LYL845 for the treatment of stage IIB-IV melanoma.

•Presented nonclinical data at SITC highlighting the Epi-R P2 manufacturing process, which is designed to shorten TIL manufacturing time to less than three weeks without impacting cell number and phenotype. Epi-R P2 is expected to be incorporated into the Phase 1 trial of LYL845 in 2024.

•Presented a LYL845 Trial in Progress poster at SITC.

LYL119 – A ROR1-targeted CAR T-cell product candidate incorporating Lyell’s four stackable and complementary reprogramming technologies for enhanced cytotoxicity

•LYL119 is a ROR1-targeted CAR T-cell product enhanced with Lyell’s four novel genetic and epigenetic reprogramming technologies: c-Jun overexpression, NR4A3 knockout, Epi-R manufacturing protocol and Stim‐RTM T-cell activation technology.

•An IND application for LYL119 is expected to be submitted in the first half of 2024.

•Presented posters highlighting preclinical development of LYL119 at the American Society for Gene and Cell Therapy and at SITC. In preclinical studies, LYL119 demonstrated superior cytotoxicity and sustained cytokine production upon repeated antigen stimulation compared to various controls lacking one or more of the reprogramming technologies and showed robust in vivo antitumor efficacy and prolonged survival in a mouse xenograft tumor model at very low cell doses.

Rejuvenation – Novel partial reprogramming technology designed to maintain T-cell identity while reducing cells’ epigenetic age

•Presented nonclinical data at the International Society for Stem Cell Research (ISSCR) 2023 Annual Meeting demonstrating that Lyell’s T‐cell Rejuvenation technology generates cells with improved expansion capacity and increased expression of biomarkers associated with T-cell stemness, that also exhibit improved antitumor properties compared with non-rejuvenated T-cell controls in sequential cell-killing assays.

•Presented nonclinical data at SITC demonstrating that TIL generated with Lyell’s Rejuvenation technology retain a broad TCR repertoire and demonstrate improved T-cell function and antitumor properties.

Corporate Updates

•Appointed Matt Lang, J.D., Chief Business Officer. Mr. Lang, who also serves as Lyell’s Chief Legal Officer and Corporate Secretary, is an experienced company builder who has successfully led growth in complex organizations.

Macroeconomic Environment

Our business and operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges such as the effects of the ongoing geopolitical conflicts in Ukraine, escalating armed conflicts and turmoil in the Middle East, tensions in U.S.-China relations, inflationary pressures, interest rate environment, instability in the banking industry and overall market volatility. The first half of 2023 was marked by significant market uncertainty, inflationary pressures, banking upheaval and supply constraints. Although these negative impacts improved throughout the fiscal year, economic uncertainty persists and could continue in 2024, and these market dynamics and similar adverse market conditions may negatively impact our business.

For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

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Reduction in Workforce

In the fourth quarter of 2023, we implemented a reduction in our workforce of approximately 25% to reduce operating costs and improve operating efficiency. The restructuring prioritized investment in our clinical stage programs and core research platforms and streamlined operations. In connection with this reduction in workforce, we incurred approximately $5.5 million in expenses for one-time severance payments and other employee-related costs for the year ended December 31, 2023.

License, Collaboration and Success Payment Agreements

For a detailed description of our license, collaboration and success payment agreements, see the section titled “Business—License, Collaboration and Success Payment Agreements” in Part I, Item 1 of this Annual Report on Form 10‐K and Notes 2 and 3 to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Components of Results of Operations

Revenue

We have no products approved for sale and have never generated any revenue from product sales.

We have generated revenue primarily from the recognition of the upfront payment under the Collaboration and License Agreement, entered into in 2019 and amended in June 2020 and December 2021 (GSK Agreement) with GlaxoSmithKline Intellectual Property (No. 5) Limited and Glaxo Group Limited (together, GSK). GSK terminated the GSK Agreement effective December 2022 and we do not expect further revenue from the collaboration. See Note 3, License, Collaboration and Success Payment Agreements, in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional details regarding termination of the GSK Agreement.

In the future, we may generate additional revenue from other collaborations, strategic alliances, licensing agreements, product sales, or a combination of these.

Operating Expenses

Research and Development

To date, research and development expenses consist of costs incurred by us for the discovery and development of our technology platforms and product candidates, and include costs incurred in connection with strategic collaborations, costs to license technology, personnel-related costs, including stock-based compensation expense, facility and technology related costs, research and laboratory expenses, as well as other expenses, which include consulting fees and other costs. Upfront payments and milestones paid to third parties in connection with technology platforms that have not reached technological feasibility and do not have an alternative future use are expensed as incurred. Research and development costs also include expenses related to the reduction in workforce, which was substantially completed in 2023.

Research and development expenses also include non-cash expenses related to the change in the estimated fair value of the success payment obligations over their respective requisite service terms granted to Fred Hutchinson Cancer Center (Fred Hutch) and The Board of Trustees of the Leland Stanford Junior University (Stanford). See the subsection titled “Critical Accounting Policies and Estimates—Success Payments” below. As of December 31, 2022, Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration. For the year ended December 31, 2023 and future periods, the change in the Fred Hutch success payment liability fair value is recognized in other income (expense), net, as the requisite service obligation had been met. Research and development expenses related to our success payment liabilities are unpredictable and may vary significantly from year‐to‐year due to changes in our assumptions used in the calculation.

We deploy our employee and infrastructure resources across multiple research and development programs for identifying and developing product candidates and establishing manufacturing capabilities. Due to the stage of development and number of ongoing programs and our ability to use resources across several programs, most of our research and development costs are not recorded on a program-specific basis. These include costs for personnel, laboratory and other indirect facility and operating costs.

Research and development activities account for a significant portion of our operating expenses. We anticipate that our research and development expenses will increase over the foreseeable future as we expand our research and

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development efforts including completing nonclinical studies, commencing planned clinical trials, conducting and completing current and planned clinical trials, seeking regulatory approvals of our product candidates, identifying new product candidates and incurring costs to acquire and license technology platforms. A change in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates. Because we are early in our research and clinical development efforts of our product candidates, and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the nonclinical development, clinical development and commercialization of product candidates or whether, or when, we may achieve profitability.

Our research and development expenses may vary significantly based on factors such as:

•the number and scope of nonclinical and IND-enabling studies;

•per patient trial costs;

•the number of trials required for approval;

•the number of sites included in the trials;

•the countries in which the trials are conducted;

•the length of time required to enroll eligible patients;

•the number of patients that participate in the trials;

•the drop-out or discontinuation rates of patients;

•potential additional safety monitoring requested by regulatory agencies;

•the duration of patient participation in the trials and follow-up;

•the cost and timing of manufacturing our product candidates;

•the phase of development of our product candidates;

•the efficacy and safety profile of our product candidates;

•the extent to which we establish additional collaboration or license agreements; and

•whether we choose to partner any of our product candidates and the terms of such partnership.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates. We may obtain unexpected results from our nonclinical studies and clinical trials.

General and Administrative

General and administrative costs include personnel-related expenses, including stock-based compensation expense for personnel in executive, legal, finance and other administrative functions, legal costs, transaction costs related to collaboration and licensing agreements, as well as fees paid for accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expenses. Legal costs include those related to corporate, dispute and patent matters. General and administrative costs also include expenses related to the reduction in workforce, which was substantially completed in 2023.

We anticipate that our general and administrative expenses will increase over the foreseeable future to support our continued research and development activities, operations generally, future business development opportunities, consulting fees, as well as the costs of operating as a public company such as costs related to accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission (SEC) requirements, director and officer insurance costs and investor and public relations costs.

Other Operating Income, Net

Other operating income, net consists primarily of service and occupancy fees received associated with subleases as well as losses on the retirement of property and equipment.

Interest Income, Net

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

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Other Income (Expense), Net

Other income (expense), net consists primarily of the change in fair value associated with our success payment liabilities to Fred Hutch for the year ended December 31, 2023 and primarily of a gain to record the PACT Series D convertible preferred shares for the year ended December 31, 2022 and changes in the fair value of an equity warrant investment held for the years ended December 31, 2022 and 2021.

Impairment of Other Investments

Impairment of other investments consists of reductions in the value of certain other investments.

Results of Operations

Years Ended December 31, 2023, 2022 and 2021

The following table summarizes our results of operations for the periods presented (in thousands):

Year Ended December 31, Change

Operating expenses:

Revenue

Revenue was $0.1 million and $84.7 million for the years ended December 31, 2023 and 2022, respectively. The GSK Agreement was terminated in December 2022 and, therefore, no further research and development pursuant to the GSK Agreement was performed in 2023, which drove the decrease in revenue of $84.6 million for the year ended December 31, 2023. The revenue for the year ended December 31, 2022 was primarily due to $83.6 million in revenue adjustments driven by the mutual agreement with GSK to conclude certain research activities in June 2022 and GSK’s subsequent termination of the GSK Agreement, both of which resulted in changes to the measure of proportional cumulative performance. See Note 3, License, Collaboration and Success Payment Agreements – GSK, in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information about the termination of the GSK Agreement.

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Research and Development Expenses

The following table summarizes the components of our research and development expenses for the periods presented (in thousands):

Year Ended December 31, Change

Research and development expenses were $182.9 million and $159.2 million for the years ended December 31, 2023 and 2022, respectively. The increase of $23.8 million was primarily due to an increase of $17.5 million in research and laboratory costs principally due to clinical trials as part of the $8.8 million increase in research activities, collaborations and outside services, partially offset by a reduction of $5.2 million in collaboration and license fees primarily related to the completion of certain sponsored research agreements and a reduction of $3.6 million in professional services; an increase of $11.2 million in personnel‐related expenses to support our growth, including $4.6 million for one-time severance payments and other employee-related costs in connection with the reduction in workforce that occurred during the fourth quarter of 2023; a change of $4.2 million in success payments associated with the decrease in fair value of our Fred Hutch and Stanford success payment liabilities, including a $3.9 million change due to recognizing the Fred Hutch success payment liability fair value change in other income (expense), net for the year ended December 31, 2023; partially offset by a decrease of $0.5 million in facilities and technology costs, primarily related to lower software implementation costs.

General and Administrative Expenses

General and administrative expenses were $67.0 million and $117.3 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $50.3 million was primarily due to a decrease of $36.3 million in stock-based compensation expense, primarily related to significant awards being fully expensed, a decrease of $9.7 million in outside services primarily due to a decrease in legal and consulting expenses and a decrease of $2.8 million in other administrative expenses. Included in general and administrative expenses for the year ended December 31, 2023 is $0.9 million for one‐time severance payments and other employee-related costs in connection with the reduction in workforce that occurred during the fourth quarter of 2023.

Other Operating Income, Net

Other operating income, net was $2.8 million and $4.8 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $2.0 million was due primarily to increased losses on property and equipment disposals offsetting sublease income and operating fees related to our subleases.

Interest Income, Net

Interest income, net was $23.5 million and $7.1 million for the years ended December 31, 2023 and 2022, respectively. The increase of $16.4 million was primarily driven by higher interest rates in 2023.

Other Income (Expense), Net

Other income (expense), net was $1.8 million and $1.9 million for the years ended December 31, 2023 and 2022, respectively. Other income (expense), net of $1.8 million consisted primarily of a gain associated with the change in fair value associated with our Fred Hutch success payment liabilities. For fiscal 2023, changes in the Fred Hutch success payment liability were recognized in other income (expense) net as Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration as of December 2022. Other income (expense), net of $1.9 million for the year ended December 31, 2022 consisted primarily of a gain of $2.9 million for the year ended December 31, 2022 to record the estimated fair value of PACT Pharma Inc. (PACT) Series D convertible preferred shares acquired, offset by a decrease of $1.1 million in the fair value of an equity warrant investment held for the year ended December 31, 2022.

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Impairment of Other Investments

For the year ended December 31, 2023, the $12.9 million impairment consisted of the full impairment of two of our other investments. For the year ended December 31, 2022, the $5.0 million impairment consisted of the full impairment of one of our other investments. See Note 5, Other Investments, in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8, of this Annual Report on Form 10-K for additional information.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations primarily through the sale and issuance of convertible preferred stock, the sale of common stock in connection with our IPO and business development activities. As of December 31, 2023, we had $562.7 million in cash, cash equivalents and marketable securities. Since our inception, we have incurred significant operating losses. We have not yet commercialized any product candidates and we do not expect to generate revenue from sales of any product candidates for a number of years, if ever. We had an accumulated deficit of $1.0 billion as of December 31, 2023. From June 29, 2018 (inception) through December 31, 2023, we raised an aggregate of $1.4 billion in gross proceeds from the sales of our convertible preferred stock and the IPO.

On February 28, 2024, we entered into a sales agreement (the Sales Agreement) with Cowen and Company, LLC as the Company’s sales agent (Agent) with respect to an at-the-market offering program. In accordance with the terms of the Sales Agreement, we may offer and sell from time to time through the Agent shares of our common stock having an aggregate offering amount of up to $150.0 million (the Placement Shares). Sales of the Placement Shares, if any, will be made at prevailing market prices on Nasdaq at the time of sale, or as otherwise agreed with the Agent, by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415 of the Securities Act. We will pay commissions to the Agent of up to 3% of the gross proceeds of the sale of the Placement Shares sold under the Sales Agreement and reimburse the Agent for certain expenses. Neither us nor the Agent is obligated to sell any shares and, to date, we have not made any sales under the Sales Agreement.

Future Funding Requirements

We expect to incur additional losses in the foreseeable future as we conduct and expand our research and development efforts, including conducting nonclinical studies and clinical trials, developing new product candidates, establishing internal manufacturing capabilities and funding our operations generally. Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure needs into 2027. However, we anticipate that we will need to raise additional capital in the future to fund our operations, including further development of our product candidates and the commercialization of any approved product candidates. In addition, we regularly consider fund-raising opportunities and may decide, from time to time, to raise additional capital, including pursuant to the Sales Agreement, based on various factors, including market conditions and our plans of operation. We are subject to the risks typically related to the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

Our future capital requirements will depend on many factors, including:

•the scope, timing, progress, costs and results of discovery, nonclinical development and clinical trials for our current and future product candidates and any additional nonclinical studies;

•the number of clinical trials required for regulatory approval of our current and future product candidates;

•the costs, timing and outcome of regulatory review of any of our current and future product candidates;

•the cost of manufacturing clinical and commercial supplies of our current and future product candidates;

•the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

•further investment to build additional manufacturing facilities or expand the capacity of our existing ones;

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

•our ability to maintain existing, and establish new, collaborations, licenses, product acquisitions or other strategic transactions and the fulfillment of our financial obligations under any such agreements, including the

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timing and amount of any success payment, future contingent payments, milestone, royalty or other payments due under any such agreement;

•the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

•expenses to attract, hire and retain skilled personnel;

•the costs and estimated financial impact of our reduction in workforce in the fourth quarter of 2023;

•the costs of operating as a public company, including legal, accounting and other related expenses as well as costs relating to maintaining or expanding our operational, financial and management systems;

•addressing or responding to any potential disputes or litigation; and

•the extent to which we acquire or invest in businesses, products and technology platforms.

Until such time as we complete nonclinical and clinical development and receive regulatory approval of our product candidates and can generate significant revenue from product sales, if ever, we expect to finance our operations from the sale of additional equity or debt financings, or other capital which come in the form of strategic collaborations, licensing, or other arrangements. In the event that additional capital is required, we may not be able to raise it on terms acceptable to us, or at all. If we raise additional funds through the issuance of equity or convertible debt securities, including pursuant to the Sales Agreement, it may result in dilution to our existing stockholders. Debt financing or preferred equity financing, if available, may result in increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that may restrict our operations. If we raise funds through strategic collaboration, licensing, or other arrangements, we may relinquish significant rights or grant licenses on terms that are not favorable to us. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from actual or perceived changes in interest rates and economic inflation, and otherwise. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be adversely affected.

Material Cash Requirements

We continually evaluate our liquidity and capital resources to ensure that we can adequately and efficiently finance our operations. As of December 31, 2023, our material cash requirements consisted primarily of paying salaries and benefits, administering clinical trials, conducting research, improving our manufacturing capabilities, providing the technology and facilities necessary to support our operations, funding operating lease obligations and other payments related to our collaborative agreements. See Note 3, License, Collaboration and Success Payment Agreements, and Note 9, Leases, in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8, of this Annual Report on Form 10-K for additional information.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

Year Ended December 31,

Net cash (used in) provided by:

Operating Activities

During the year ended December 31, 2023, net cash used in operating activities was $163.7 million, primarily reflecting our net loss of $234.6 million, partially offset by non-cash items primarily related to stock-based compensation expense of $47.1 million, depreciation and amortization expense of $20.3 million and impairment of other investments of $12.9 million. Non-cash net amortization and accretion on marketable securities of $9.6 million also contributed to net cash used in operating activities.

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During the year ended December 31, 2022, net cash used in operating activities was $169.6 million, primarily reflecting our net loss of $183.1 million, partially offset by non-cash items mainly related to stock-based compensation expense of $81.9 million, depreciation and amortization expense of $18.0 million and impairment of other investments of $5.0 million. Non-cash deferred revenue of $84.7 million also contributed to net cash used in operating activities.

Investing Activities

During the year ended December 31, 2023, cash provided by investing activities was $184.0 million, consisting of net maturities, sales and purchases of marketable securities of $186.7 million, partially offset by purchases of property and equipment of $2.7 million. During the year ended December 31, 2022, cash used in investing activities was $11.5 million, consisting of purchases of property and equipment of $24.3 million offset by net maturities, sales and purchases of marketable securities of $12.7 million.

Financing Activities

During the year ended December 31, 2023, cash provided by financing activities was $1.7 million, consisting of $1.9 million in proceeds from our employee stock purchase plan and $0.3 million in proceeds from the exercise of stock options, partially offset by $0.5 million in taxes paid related to the net share settlement of equity awards. During the year ended December 31, 2022, cash provided by financing activities was $10.6 million, consisting of $9.6 million in proceeds from the exercise of stock options and $1.5 million in proceeds from our employee stock purchase plan, partially offset by $0.5 million in taxes paid related to the net share settlement of equity awards.

Critical Accounting Policies and Significant Judgments and Estimates

Our audited consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the audited consolidated financial statements, as well as the reported revenue and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Revenue Recognition

We recognize revenue from research services generally as services are provided while revenue from non‐refundable upfront fees are recognized over time by measuring progress towards satisfaction of the relevant performance obligation using the input method (i.e., cumulative actual costs incurred relative to total estimated costs).

The estimation of measure of progress is complex, involves significant judgment and is affected by our estimates of the total costs required to complete the performance obligations including the total internal personnel costs and external costs to be incurred. Changes in these estimates can have a material effect on our revenue recognition.

For a further description of our revenue recognition, see Note 2, Basis of Presentation and Significant Accounting Policies, in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8, of this Annual Report on Form 10-K.

Success Payments

We are required to make success payments to Fred Hutch and Stanford based on increases in the per share market value of our common stock, payable in cash or cash equivalents or, at our discretion, publicly tradeable shares of our common stock. The success payments are accounted for under Accounting Standards Codification (ASC) 718, Compensation – Stock Compensation, and are initially recorded at fair value with a corresponding charge to research and development expense. The liabilities are marked to market at each balance sheet date with all changes in value recognized in research and development expense in the Consolidated Statements of Operations and Comprehensive Loss. Once their service periods are complete, the success payment fair value changes are recorded in other income (expense), net. We will continue to adjust the liabilities for changes in fair value until the earlier of the achievement or expiration of the success payment obligation. To determine the estimated fair value of the success payments, we use a Monte Carlo simulation

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model, which models the value of the liability based on several key variables that require judgment, including the expected fair value and volatility of our common stock, estimated term and number of valuation measurement dates.

Stock-based Compensation

Stock-based compensation cost is recognized for restricted stock awards (RSAs), restricted stock units (RSUs), employee stock purchases related to the Employee Stock Purchase Plan and stock options. Stock-based compensation cost is measured at the grant date based on the fair value of the award. The fair value of stock-based awards is recognized as an expense on a straight-line basis over the requisite service period, with forfeitures recognized as they occur.

We use the Black-Scholes model to determine the fair value of our options. The Black-Scholes option pricing model requires the use of assumptions, including stock price volatility, the expected life of stock options, risk-free interest rate and the fair value of the underlying common stock on the date of grant. Our restricted stock awards and restricted stock units are valued based on the fair market value of the award on the grant date.

Valuation of Other Investments

We have non-marketable equity investments that are accounted for using the measurement alternative. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and obligations of the investments. Recording upward and downward adjustments to the carrying value of our equity investments as a result of observable price changes requires quantitative assessments of the fair value of our investments using various valuation methodologies and involves the use of estimates.

We determine at the inception of each arrangement whether an investment or other interest is considered a variable interest entity (VIE). If the investment or other interest is determined to be a VIE, we evaluate whether we are considered the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) has the obligation to absorb losses or the right to receive benefits from the VIE. For any investments in VIEs in which we are considered the primary beneficiary, the assets, liabilities and results of operations of the VIE would be included in our consolidated financial statements. As of December 31, 2023 and 2022, there were no VIEs for which we were the primary beneficiary.

Non-marketable equity investments are also subject to periodic impairment reviews. Our quarterly impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the investment’s fair value. Qualitative factors considered include the companies’ financial and liquidity position, access to capital resources and the time since the last adjustment to fair value, among others. When indicators of impairment exist, we prepare quantitative assessments of the fair value of our equity investments using both the market and income approaches that require judgment and the use of estimates, including discount rates, investee revenues and costs, and comparable market data of private and public companies reasonably available, among others. When our assessment indicates that an impairment exists, we write down the investment to its fair value.

We perform quarterly qualitative assessments of potential indicators of impairment and determined that indicators existed for certain of our other investments during the years ended December 31, 2023, 2022 and 2021. While there was no single event or factor in each instance, we considered the underlying companies’ operating cash flow requirements over the next year, liquid asset balances to fund those requirements and the uncertainty regarding the underlying companies’ ability to raise funds as indicators of impairment. Due to these indicators, we assessed the valuation of these investments and determined the fair values to be negligible and the impairments to be other-than-temporary in nature. As a result, we recorded impairment expense of $12.9 million for our PACT Series D convertible preferred stock and another investment for the year ended December 31, 2023, $5.0 million for one investment for the year ended December 31, 2022 and $36.4 million for our PACT Series C-1 convertible preferred stock investment for the year ended December 31, 2021. The impairment expenses were recorded within impairment of other investments on the Consolidated Statements of Operations and Comprehensive Loss and as a reduction of the other investments on the Consolidated Balance Sheets.

Recently Adopted and Recent Accounting Pronouncements

See Note 2, Basis of Presentation and Significant Accounting Policies,in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for information about recent accounting pronouncements, the timing of their adoption and our assessment, to the extent we have made one yet, of their potential impact on our financial condition or results of operations.

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

We are exposed to market risks in the ordinary course of our business. Our primary risks include interest rate sensitivities.

Interest Rate Risk

We had cash equivalents of $127.7 million as of December 31, 2023, which consisted of money market funds and highly liquid investments purchased with original maturities of three months or less from the purchase date. We also had marketable securities of $417.1 million as of December 31, 2023. The primary objective of our investment activities is to preserve capital to fund our operations, and we currently do not hedge our interest rate risk exposure. Because our marketable securities are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant, and a hypothetical 10% relative change in interest rates during any of the periods presented would not have had a material effect on our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. We had no debt outstanding as of December 31, 2023.

Foreign Currency Exchange Risk

All of our employees and operations are currently located in the United States and our expenses are generally denominated in U.S. dollars. We therefore are not currently exposed to significant market risk related to changes in foreign currency exchange rates. However, we have contracted with and may continue to contract with non-U.S. vendors who we may pay in their local currency. Our operations may be subject to fluctuations in foreign currency exchange rates in the future. To date, foreign currency transaction gains and losses have not been material to our consolidated financial statements, and we have not had a formal hedging program with respect to foreign currency. We believe a hypothetical 1% change in exchange rates during any of the periods presented would not have a material effect on our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and our clinical trial costs. We believe that inflation has not had a material effect on our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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Item 8. Financial Statements and Supplementary Data.

LYELL IMMUNOPHARMA, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2023, 2022 and 2021

CONTENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 88

Audited Consolidated Financial Statements:

Consolidated Balance Sheets 90

Consolidated Statements of Operations and Comprehensive Loss 91

Consolidated Statements of Cash Flows 93

Notes to Consolidated Financial Statements 94

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Lyell Immunopharma, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lyell Immunopharma, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Accrued clinical expenses

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2019.

San Mateo, California

February 28, 2024

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Lyell Immunopharma, Inc.

Consolidated Balance Sheets

(in thousands, except per share amounts)

As of December 31,

ASSETS

Current assets:

Prepaid expenses and other current assets 8,463 11,143

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accrued liabilities and other current liabilities 28,126 28,755

Operating lease liabilities, non-current 56,894 63,168

Other non-current liabilities 3,664 4,113

Commitments and contingencies (Note 16)

Stockholders’ equity:

Accumulated other comprehensive loss (94) (7,599)

Total liabilities and stockholders’ equity $ 750,029 $ 937,561

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

Year Ended December 31,

Operating expenses:

Other comprehensive loss:

Net unrealized gain (loss) on marketable securities 7,505 (5,976) (1,879)

Net loss per common share, basic and diluted $ (0.93) $ (0.74) $ (1.84)

(1) Includes related-party revenue of zero, $84,653 and $10,509 for the years ended December 31, 2023, 2022 and 2021, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands)

Shares Amount Shares Amount

Other comprehensive loss — — — — — (1,879) — (1,879)

Other comprehensive loss — — — — — (5,976) — (5,976)

Issuance of common stock upon exercise of stock options — — 2,996 — 306 — — 306

Other comprehensive income — — — — — 7,505 — 7,505

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

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

Net amortization and accretion on marketable securities (9,596) (930) 1,901

Change in fair value of success payment liabilities (2,780) (5,130) 3,713

Loss on property and equipment disposals, net 1,509 103 1,210

Change in fair value of equity warrant — 1,067 256

Gain on other investments — (2,923) —

Gain on net operating lease liability disposal — — (308)

Changes in operating assets and liabilities:

Prepaid expenses, other current assets and other assets 3,125 (1,968) (6,987)

Accrued liabilities and other current liabilities (719) (463) 4,542

Operating lease liabilities, non-current — 4,855 13,202

CASH FLOWS FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from employee stock purchase plan 1,894 1,519 —

Taxes paid related to net share settlement of equity awards (457) (461) —

Proceeds from initial public offering, net of issuance costs — — 391,802

Represented by:

SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing and financing activities:

Acquisition of PACT Series D convertible preferred shares $ — $ 2,923 $ —

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to Consolidated Financial Statements

1. Organization

Lyell Immunopharma, Inc. (the “Company”) was incorporated in Delaware in June 2018. The Company is a clinical-stage cell therapy company advancing a pipeline of product candidates for patients with solid tumors utilizing its proprietary ex vivo genetic and epigenetic T‐cell reprogramming technologies. The Company’s primary activities since incorporation have been to develop T‐cell therapies, conduct research and development, acquire technology, enter into strategic collaboration and license arrangements, enable and execute manufacturing activities in support of its product candidate development efforts, organize and staff the Company, conduct business planning, establish its intellectual property portfolio, submit regulatory submissions, execute clinical trials, raise capital and provide general and administrative support for these activities.

Initial Public Offering

In June 2021, the Company successfully completed its initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company issued and sold 25,000,000 shares of common stock at an IPO price of $17.00 per share. The Company received $391.8 million in net proceeds, after deducting underwriting discounts and commissions of $29.8 million and offering expenses of $3.4 million. Upon the closing of the IPO, 194,474,431 shares of convertible preferred stock then outstanding converted into an equal number of shares of common stock. The related carrying value of the converted preferred stock of $1.0 billion was reclassified to common stock and additional paid in-capital.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.All significant intercompany transactions and balances have been eliminated in consolidation.

Liquidity and Management’s Plan

The Company discovers and develops product candidates that involve experimental technologies. The product candidates may require several years and substantial expenditures to complete and ultimately may be unsuccessful. The Company plans to finance operations with available cash resources or from the issuance of equity or debt securities. The Company believes that its available cash, cash equivalents and marketable securities as of December 31, 2023 will be adequate to fund its operations at least through the next 12 months from the date these consolidated financial statements are issued.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect reported amounts and related disclosures. Specific accounts that require management estimates include, but are not limited to, stock-based compensation, valuation of success payments, valuation of other investments, revenue recognition and accrued expenses. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.

In June 2022, the Company recorded adjustments to revenue related to a change in estimate in connection with the Collaboration and License Agreement, entered into in 2019 and amended in June 2020 and December 2021 (“GSK Agreement”) with GlaxoSmithKline Intellectual Property (No. 5) Limited and Glaxo Group Limited (together, “GSK”). The Company and GSK mutually agreed to conclude research activities on an undisclosed target for hematological cancers in June 2022. As a result, the Company decreased the related estimated project costs, which resulted in an increase in the measure of proportional cumulative performance. These adjustments increased revenue by $83.6 million, decreased net loss by $83.6 million and resulted in a $0.34 reduction in the Company’s basic and diluted net loss per common share for the year ended December 31, 2022.

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Notes to Consolidated Financial Statements—(Continued)

Comprehensive Loss

Comprehensive loss includes net loss and certain changes in stockholders’ equity that are excluded from net loss. For the years ended December 31, 2023, 2022 and 2021, this was comprised of net unrealized gains and losses on the Company’s marketable securities.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in commercial paper and money market accounts.

Restricted cash is cash held in a bank account and is used as collateral associated with the Company’s corporate credit card program.

Marketable Securities

The Company generally invests its excess cash in investment grade short- to intermediate-term fixed income securities. Such investments are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses reported as a component of comprehensive loss. Realized gains and losses on available-for-sale securities are included in other income (expense), net. The cost of investments sold is based on the specific-identification method. The Company classifies those investments that are not required for use in current operations and that mature in more than 12 months as non-current marketable securities in the accompanying consolidated balance sheets.

Each reporting period, the Company evaluates whether declines in fair value below carrying value are due to expected credit losses, as well as the Company’s ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses, if any, are recorded as an allowance through other income (expense), net.

Valuation of Other Investments

The Company determines at the inception of each arrangement whether an investment or other interest is considered a variable interest entity (“VIE”). If the investment or other interest is determined to be a VIE, the Company evaluates whether it is considered the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) has the obligation to absorb losses or the right to receive benefits from the VIE. For any investments in VIEs in which the Company is considered the primary beneficiary, the assets, liabilities and results of operations of the VIE would be included in its consolidated financial statements. As of December 31, 2023 and 2022, there were no VIEs for which the Company was the primary beneficiary.

The Company accounts for its strategic equity interests in common stock and in-substance common stock in non‐publicly traded companies for which it does not have the ability to exercise significant influence in accordance with Accounting Standards Codification (“ASC”) 321, Investments – Equity Securities (“ASC 321”). Upon acquisition, these investments are measured at cost, which represents the then fair value. Under ASC 321, the Company can elect to subsequently measure the investments at initial cost, minus impairment and any changes, plus or minus, resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (“measurement alternative”). This election must be made for each investment separately. The Company has made this election for all investments in this category and will continue to measure these investments using this method until they no longer qualify to be measured in accordance with this method. Changes in the carrying value of other investments are recognized through net loss. Each reporting period, the Company performs a qualitative assessment to evaluate whether the investment is impaired. The Company’s assessment includes a review of recent operating results and trends, recent sales/acquisitions of the investee securities and other factors that raise concerns about the investee’s ability to continue as a going concern. If the investment is impaired, an impairment charge is recognized in the amount by which the carrying amount of the investment exceeds the estimated fair value of the investment, with the impairment charge recognized through net loss. See Note 5, Other Investments, for details related to investment impairments recognized during the years ended December 31, 2023, 2022 and 2021.

Additionally, the Company holds an equity warrant investment giving it the right to acquire stock of a non‐publicly traded company. Equity warrant investments are recorded within other assets at the estimated fair value, with gains and losses recognized in other income (expense), net.For the year ended December 31, 2022, in conjunction with the impairment of one of the Company’s other investments, the associated equity warrant investment’s fair value was

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Notes to Consolidated Financial Statements—(Continued)

determined to be negligible. The Company reduced the equity warrant investment’s fair value to zero for the year ended December 31, 2022. See Note 6, Fair Value Measurements, for additional details regarding the equity warrant investment.

Property and Equipment, Net

Property and equipment primarily consist of laboratory equipment, computer equipment and software, furniture and fixtures and leasehold improvements. Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets, which are generally three to five years. For leasehold improvements, amortization is calculated using the straight‐line method based on the shorter of the useful life or the lease term. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is recorded in other operating income, net in the period realized. Maintenance and repairs are expensed as incurred. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Valuation of Long-lived Assets

Long-lived assets are reviewed each reporting period for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, which may warrant adjustments to carrying values or estimated useful lives. Recoverability is measured by comparison of the carrying amount of an asset group to the future net undiscounted cash flows that the assets are expected to generate. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. There has beenno impairment of long-lived assets for any of the periods presented.

Leases

The Company leases certain office, laboratory and manufacturing spaces. In addition to minimum rent, the leases require payment of real estate taxes, insurance, common area maintenance charges and other executory costs. At inception of a contract, the Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. For all leases, the Company determines the classification of the lease as either operating or financing. As of December 31, 2023 and 2022, all of the Company’s leases were classified as operating leases.

The Company recognizes right-of-use (“ROU”) assets and lease liabilities at the lease commencement date based on the present value of future lease payments over the lease term. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate at each lease commencement date is used to determine the present value of future lease payments. The incremental borrowing rate is the rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. To estimate the incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the Company does not currently have a rating agency-based credit rating. The ROU asset includes any lease payments made prior to the lease commencement date and is reduced by any lease incentives received or deemed payable to the Company. The lease term may include options to extend or terminate the lease when it is reasonably certain that a lease option will be exercised. Lease expense is recognized on a straight-line basis over the lease term within operating expenses on the Consolidated Statements of Operations and Comprehensive Loss.

The Company has elected the practical expedient to not separate lease and non-lease components for real estate leases. Additionally, the Company has elected the short-term lease recognition exemption for all short-term leases and as a result, lease liabilities and ROU assets are not included on the consolidated balance sheets for leases with an initial term of 12 months or less.

Fair Value Measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in

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Notes to Consolidated Financial Statements—(Continued)

determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The Company’s financial instruments, in addition to those presented in Note 6, Fair Value Measurements, include cash, restricted cash, other investments, accounts payable and accrued liabilities and other current liabilities. The carrying amount of cash, restricted cash, accounts payable and accrued liabilities and other current liabilities approximate fair value because of the short-term nature of these instruments. As described in Note 5, Other Investments, other investments are carried at cost, minus impairment and any changes, plus or minus, resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Revenue Recognition

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, Revenue from Contracts with Customers, (“ASC 606”) the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the performance obligation is satisfied.

In applying the ASC 606 framework, the Company must apply judgment to determine the nature of the promises within a revenue contract and whether those promises represent distinct performance obligations. In determining the transaction price, the Company does not include amounts subject to uncertainties unless it is probable that there will be no significant reversal of cumulative revenue when the uncertainty is resolved. Milestone and other forms of variable consideration that the Company may earn are subject to significant uncertainties of research and development related achievements, which generally are deemed not probable until such milestones are actually achieved. For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Additionally, the Company develops assumptions that require judgment to determine the standalone selling price of each performance obligation identified in the contract. The Company then allocates the total transaction price to each performance obligation based on the estimated standalone selling prices of each performance obligation, for which it recognizes revenue as or when the performance obligations are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the variable consideration and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis.

Under the Company’s license agreements, the Company grants the license to a customer as it exists at the point of transfer and the nature of the license is a right to use the Company’s intellectual property as transferred. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.

Research and Development Expense

The Company records expense for research and development costs as incurred. Research and development expenses consist of costs incurred by the Company for the discovery and development of its technology platforms and product candidates and includes costs incurred in connection with strategic collaborations, costs to license technology, personnel-related costs, including stock-based compensation expense, facility and technology related costs, research and laboratory expenses, as well as other expenses, which include consulting fees and other costs. Upfront payments and milestones paid to third parties in connection with technology platforms that have not reached technological feasibility and do not have an alternative future use are expensed as incurred.

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Notes to Consolidated Financial Statements—(Continued)

Clinical expenses are a component of research and development expense. The Company accrues and expenses clinical trial services performed by third parties based upon actual work completed in accordance with agreements established with its service providers. The Company estimates the costs through discussions with internal personnel and external service providers as to the progress or stage of completion of services and the agreed-upon fees to be paid for such services.

General and Administrative Expense

General and administrative costs are expensed as incurred and include personnel-related expenses, including stock-based compensation expense for personnel in executive, legal, finance and other administrative functions, legal costs, transaction costs related to collaboration and licensing agreements, as well as fees paid for accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expenses. Legal costs include those related to corporate, dispute and patent matters.

Success Payments

The Company granted rights to success payments to Fred Hutchinson Cancer Center (“Fred Hutch”) and The Board of Trustees of the Leland Stanford Junior University (“Stanford”) pursuant to the terms of its research and collaboration agreements with each of those entities. Pursuant to the terms of these agreements, on each contractually prescribed measurement date, the Company may be required to make success payments based on increases in the estimated per share fair value of the Company’s common stock. See Note 3, License, Collaboration and Success Payment Agreements. The success payments are accounted for under ASC 718, Compensation – Stock Compensation, with the expense being recorded in research and development expenses. Once the service period is complete, the instrument continues to be remeasured each reporting period with all changes in value recognized immediately in other income (expense), net.

The success payment liability is estimated at fair value at inception and at each subsequent reporting period, and the expense is accreted over the service period of the research and collaboration agreement. To determine the estimated fair value of the success payments, the Company uses a Monte Carlo simulation methodology which models the future movement of stock prices based on several key variables combined with empirical knowledge of the process governing the behavior of the stock price. The following variables were incorporated in the estimated fair value of the success payment liability: estimated fair value of the Company’s common stock, expected volatility, risk-free interest rate and the estimated number and timing of valuation measurement dates on the basis of which payments may be triggered. The computation of expected volatility was estimated based on available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption.

Concentrations of Credit Risk and Off-balance Sheet Risk

The Company maintains its cash, cash equivalents and restricted cash with high quality, accredited financial institutions. Restricted cash is cash held in a bank account and is used as collateral associated with the Company’s corporate credit card program. Cash, cash equivalents and restricted cash amounts, at times, may exceed federally insured limits. The Company also makes short-term investments in money market funds, U.S. Treasury securities, U.S. government agency securities and corporate debt securities, which can be subject to certain credit risk. However, the Company mitigates the risks by investing in high-grade instruments, limiting exposure to any one issuer or type of investment and monitoring the ongoing creditworthiness of the financial institutions and issuers. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to significant risk on these funds.The Company has no off‐balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Claims and Contingencies

From time to time, the Company may become involved in litigation and proceedings relating to claims arising from the ordinary course of business. The Company accrues a liability if the likelihood of an adverse outcome is probable and the amount is estimable. If the likelihood of an adverse outcome is only reasonably possible (as opposed to probable), or if an estimate is not determinable, the Company provides disclosure of a material claim or contingency.

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Notes to Consolidated Financial Statements—(Continued)

Stock-based Compensation

Under ASC 718, the Company measures and recognizes expense for restricted stock awards (“RSAs”), restricted stock units (“RSUs”), employee stock purchases related to the Employee Stock Purchase Plan and stock options granted to employees, directors and consultants based on the fair value of the awards on the date of grant. The fair value of stock options is estimated using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires inputs based on certain subjective assumptions including: stock price volatility, the expected term of stock options, the risk-free interest rate, expected dividends, and the fair value of the underlying common stock on the date of grant.

The expected volatility is based on the historical volatility of the stock of similar entities within the Company’s industry over periods commensurate with the Company’s expected term assumption. The expected term of stock option grants represents the period the options are expected to remain outstanding and is based on the “simplified” method where the expected term is the midpoint between the vesting date and the end of the contractual term for each option. The Company generally uses the simplified method as provided for under the applicable guidance for entities with a limited history of relevant stock option exercise activity. The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term. In reference to the expected dividend yield assumption, the Company has not historically paid, and does not expect for the foreseeable future to pay, a dividend.

Stock-based compensation expense for RSAs, RSUs and stock options is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. The Company accounts for forfeitures as they occur.

The Company also granted stock options that vest in conjunction with certain performance conditions to certain key employees. At each reporting date, the Company is required to evaluate whether achievement of the performance conditions is probable. Compensation expense is recorded over the appropriate service period based upon the Company’s assessment of accomplishing each performance provision.

Income Taxes

The Company determines its deferred tax assets and liabilities based on the differences between the financial reporting and tax basis of assets and liabilities. The deferred tax assets and liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered. The Company applies judgment in the determination of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes any material interest and penalties related to unrecognized tax benefits in income tax expense.

Segments

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment and one reportable segment.

Recently Issued Accounting Pronouncements

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. Entities with a single reportable segment are required to provide all the updated and existing segment disclosures required by Topic 280. The amendments are effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years

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beginning after December 15, 2024 on a retrospective basis. The Company is assessing the effect of the new disclosure requirements and does not anticipate the adoption will have a material impact.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024 and may be applied either prospectively or retrospectively. The Company is assessing the effect of the new disclosure requirements and does not anticipate the adoption will have a material impact.

3. License, Collaboration and Success Payment Agreements

Fred Hutch

License Agreement - In 2018, the Company entered into a license agreement with Fred Hutch that grants the Company 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 employing chimeric antigen receptors (“CARs”) and/or T-cell receptors (“TCRs”), subject to certain exceptions.

The Company is required to pay Fred Hutch annual license maintenance payments of $50,000 on the second anniversary of the effective date, and each anniversary of the effective date thereafter until the first commercial sale of a licensed product.

Collaboration - In 2018, the Company entered into a research and collaboration agreement with Fred Hutch (“Fred Hutch Collaboration Agreement”) focused on research and development of cancer immunotherapy products. The Company funded aggregate research performed by Fred Hutch of $12.0 million under the Fred Hutch Collaboration Agreement with the research conducted in accordance with a research plan and budget approved by the parties. The Fred Hutch Collaboration Agreement has a six-year term. The Company incurred $0.9 million, $1.7 million and $4.2 million in expense in connection with the Fred Hutch Collaboration Agreement for the years ended December 31, 2023, 2022 and 2021, respectively.

Success Payments - In 2018, the Company granted Fred Hutch rights to certain success payments, pursuant to the terms of the Fred Hutch Collaboration Agreement. The potential payments for the Fred Hutch success payments are based on multiples of increased value ranging from 10x to 50x based on a comparison of the per share fair market value of the Company’s common stock relative to the original $1.83 per share issuance price of the Company’s Series A convertible preferred stock, which converted into an equal number of shares of the Company’s common stock in connection with the Company’s IPO. The aggregate success payments to Fred Hutch are not to exceed $200.0 million, which would only occur upon a 50x increase in value. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to $200.0 million at $91.44 per share, payable if such threshold is reached during the measurement period. Any previous success payments made are credited against the success payment owed as of any valuation date, such that Fred Hutch does not receive multiple success payments in connection with the same threshold. The term of the success payment agreement ends on the earlier to occur of (i) the nine-year anniversary of the date of the agreement and (ii) a change in control transaction.

The following table summarizes the aggregate potential success payments, which are payable to Fred Hutch in cash or cash equivalents, or at the Company’s discretion, publicly-tradeable shares of the Company’s common stock:

Multiple of initial equity value at issuance 10x 20x 30x 40x 50x

Aggregate success payment(s) (in millions) $ 10 $ 40 $ 90 $ 140 $ 200

The success payments will be owed if the per share fair value of the Company’s common stock on the contractually specified valuation measurement dates during the term of the success payment agreement equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by the following events: the one-year anniversary of the Company’s IPO and each two-year anniversary of the Company’s IPO thereafter, the closing of a change in control transaction and the last day of the term of the success payment agreement, unless the term has ended due to the

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closing of a change of control transaction. As of December 31, 2023, no success payments have been incurred as the per share fair value of the Company’s common stock was below the price required for payment.

The success payment liability was estimated at fair value at inception and at each subsequent reporting period and the associated expense was accreted over the service period of the success payment obligations as research and development expense through 2022. As of December 31, 2022, the Company’s associated success payment liability was fully accreted to fair value as Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration. For the year ended December 31, 2023 and future periods, the change in the Fred Hutch success payment liability fair value is recognized in other income (expense), net. The success payment liability was $0.7 million and $2.5 million as of December 31, 2023 and 2022, respectively. With respect to the Fred Hutch Collaboration Agreement success payment obligations, the Company recognized gains of $1.9 million and $3.9 million for the years ended December 31, 2023 and 2022, respectively and success payment expense of $1.2 million for the year ended December 31, 2021.

Stanford

License Agreement- In 2019, the Company entered into a license agreement with Stanford to license specified patent rights. The Company is required to pay Stanford annual license maintenance payments of $50,000 on the second anniversary of the effective date, and each anniversary of the effective date thereafter until the date of the first commercial sale of a licensed product.

Milestone payments to Stanford of up to a maximum of $3.7 million per target are payable upon achievement of certain specified clinical and regulatory milestones. The Company is also obligated to pay Stanford $2.5 million collectively for all licensed products upon the achievement of a certain commercial milestone. Additionally, low single‐digit tiered royalties based on annual net sales of the licensed products are payable to Stanford.

Collaboration Agreement- In October 2020, the Company entered into a research and collaboration agreement with Stanford (“Stanford Collaboration Agreement”), focused on research and development of cellular immunotherapy products. The Stanford Collaboration Agreement has a four-year term. The Company is committed to fund aggregate research performed by Stanford of $12.0 million under the Stanford Collaboration Agreement, and the research will be conducted in accordance with a research plan and budget approved by the parties. The Company incurred $3.0 million in expense in connection with the Stanford Collaboration Agreement for each of the years ended December 31, 2023, 2022, and 2021, respectively.

Success Payments - In October 2020, the Company granted Stanford rights to certain success payments, pursuant to the terms of the Stanford Collaboration Agreement. The potential payments for the Stanford Collaboration Agreement success payments are based on multiples of increased value ranging from 10x to 50x based on a comparison of the per share fair market value of the Company’s common stock relative to the original $1.83 per share issuance price of the Company’s Series A convertible preferred stock, which converted into an equal number of shares of the Company’s common stock in connection with the closing of the Company’s IPO. The aggregate success payments to Stanford are not to exceed $200.0 million, which would only occur upon a 50 times increase in value. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to $200.0 million at $91.44 per share, payable if such threshold is reached during the measurement period. Any previous success payments made 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 term of each success payment agreement ends on the earlier to occur of (i) the nine year anniversary of the date of the agreement and (ii) a change in control transaction.

The following table summarizes the aggregate potential success payments, which are payable to Stanford in cash or cash equivalents, or at the Company’s discretion, publicly-tradeable shares of the Company’s common stock:

Multiple of initial equity value at issuance 10x 20x 30x 40x 50x

Aggregate success payment(s) (in millions) $ 10 $ 40 $ 90 $ 140 $ 200

The success payments will be owed if the per share fair value of the Company’s common stock on the contractually specified valuation measurement dates during the term of the success payment agreement equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by the following events: the one-year anniversary of the Company’s IPO and each two-year anniversary of the Company’s IPO thereafter, the closing of a change in control transaction and the last day of the term of the success payment agreement, unless the term has ended due to the

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closing of a change of control transaction. As of December 31, 2023, no success payments have been incurred as the per share fair value of the Company’s common stock was below the price required for payment.

The estimated fair values of the success payments to Stanford as of December 31, 2023 and 2022 were $1.1 million and $3.3 million, respectively. The success payment liability is estimated at the fair value at inception and at each subsequent reporting period and the expense is accreted over the service period of the Stanford Collaboration Agreement as research and development expense. The success payment liability was $0.9 million and $1.9 million as of December 31, 2023 and 2022, respectively. With respect to the Stanford Collaboration Agreement success payment obligations, the Company recognized gains of $0.9 million and $1.2 million for the year ended December 31, 2023 and2022, respectively and success payment expense of $2.5 million for the year ended December 31, 2021.

GSK

In 2019, the Company entered into the GSK Agreement with GSK for potential T‐cell therapies that apply the Company’s platform technologies and cell therapy innovations with TCRs or CARs under distinct collaboration programs. The GSK Agreement defined two initial collaboration targets, LYL331 and LYL132, and allowed GSK to nominate seven additional targets through July 2024, though no additional targets were nominated over the life of the GSK Agreement. The Company was expected to perform research and development services for each selected target up until a defined point (the “GSK Option Point”), at which time GSK would decide whether or not to exercise an option to obtain a license from the Company (“License Option”) and take over the future development and commercialization. In April 2021, GSK exercised the License Option on LYL331 (NY-ESO-1 TCR with c-Jun) and assumed sole responsibility for future development and commercialization of the program at its own cost and expense. The investigational new drug (“IND”) application for LYL132 was cleared in January 2022, though no patients were treated, and the IND for LYL331 was not submitted to the U.S. Food and Drug Administration. GSK terminated the GSK Agreement effective December 24, 2022 and Lyell has also discontinued any further work on these programs. There are no future performance obligations associated with the GSK Agreement.

The Company received a non-refundable upfront payment of $45.0 million under the GSK Agreement. In connection with the GSK Agreement, in May 2019, the Company also entered into a stock purchase agreement with GSK, pursuant to which the Company 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 consideration of the GSK Agreement to $103.6 million.

The GSK Agreement was deemed to be within the scope of ASC 606, Revenue from Contracts with Customers, because GSK engaged the Company to initially provide research and development services, which were outputs of its ongoing activities, in exchange for consideration. In June 2022, the Company recorded adjustments to revenue related to a change in estimate in connection with the GSK Agreement due to GSK and the Company mutually agreeing to conclude research activities on an undisclosed target for hematological cancers. The change in estimate decreased the related estimated project costs, which resulted in an increase in the measure of proportional cumulative performance. These adjustments increased revenue by $83.6 million, decreased net loss by $83.6 million and resulted in a $0.34 reduction in the Company’s basic and diluted net loss per common share for the year ended December 31, 2022.

The Company recognized revenue related to the research and development services related to the two initial targets of zero, $84.7 million and $10.5 million for the years ended December 31, 2023, 2022 and 2021 respectively. As of December 31, 2023, there were no contract assets or contract liabilities related to the license contract.

PACT

In June 2020, the Company entered into a commitment agreement (“PACT Commitment Agreement”) with PACT Pharma, Inc. (“PACT”) to jointly develop and test an anti-cancer T-cell therapy against solid tumors, in connection with which it also purchased PACT Series C-1 convertible preferred stock, which was recorded in other investments at $36.4 million in the Company’s Consolidated Balance Sheet. In December 2021, the Company recorded a $36.4 million impairment expense for its investment in PACT.

In February 2021, the Company filed a demand for arbitration seeking, among other things, rescission of the PACT Commitment Agreement. On October 1, 2022, the Company entered into a settlement agreement to resolve its outstanding legal dispute with PACT, pursuant to which PACT issued shares of PACT’s Series D convertible preferred stock to the Company in exchange for the Company’s tender of its PACT Series C-1 convertible preferred stock. The settlement agreement also included the termination of the PACT Commitment Agreement. The Company recorded a gain

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of $2.9 million in October 2022 for the estimated fair value of the PACT Series D convertible preferred stock, which was included in other investments in the Company’s Consolidated Balance Sheet as of December 31, 2022. In September 2023, the Company performed a qualitative assessment of potential indicators of impairment of the PACT Series D convertible preferred stock investment, resulting in $2.9 million impairment expense for the year ended December 31, 2023. See Note 5, Other Investments, for additional details regarding the PACT investment impairment.

4. Cash Equivalents and Marketable Securities

The fair value and amortized cost of cash equivalents and marketable securities by major security type are as follows (in thousands):

AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value

Classified as: Fair Value

Marketable securities, non-current 16,506

Total cash equivalents and marketable securities $ 544,787

AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value

Classified as: Fair Value

Marketable securities, non-current 70,117

Total cash equivalents and marketable securities $ 694,495

The fair values of securities held by the Company in an unrealized loss position for less than 12 months were $117.8 million and $287.8 million, as of December 31, 2023 and 2022, respectively. The fair values of securities held by the Company in an unrealized loss position for greater than 12 months were $43.6 million and $278.7 million as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, all of the Company’s marketable securities had a maturity date of two years or less, were available for use and were classified as available-for-sale. The Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before recovery of their amortized cost basis. The Company determined that there was no material change in the credit risk of the above investments as of both December 31, 2023 and 2022. As such, an allowance for credit losses has not been recognized. Gross realized gains and losses were de minimisfor the years ended December 31, 2023 and 2022 and as a

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result, amounts reclassified out of accumulated other comprehensive loss for the years ended December 31, 2023 and 2022 were also de minimis. See Note 6, Fair Value Measurements, for additional information regarding cash equivalents and marketable securities.

5. Other Investments

From time to time, the Company makes minority ownership strategic investments. As of December 31, 2023 and 2022, the aggregate carrying amounts of the Company’s strategic investments in non-publicly traded companies were $32.0 million and $44.9 million, respectively. These investments are measured at initial cost, minus impairment, if any, and plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Cumulative impairments of strategic investments in equity investments without readily determinable fair values still held as of December 31, 2023 and 2022 were $15.0 million and $5.0 million, respectively.

As a part of the acquisition of each of the Company’s other investments, the Company determines whether an investment or other interest is considered a variable interest. The Company held an interest in one entity as of December 31, 2023 and two entities as of December 31, 2022, that were concluded to be variable interests for which the Company was not the primary beneficiary as the Company did not have the not have the power to direct the activities that most significantly impact the economic performance of the VIEs. As of December 31, 2023 and 2022, the carrying value and maximum exposure to loss of the Company’s variable interests were $13.0 million and $15.9 million, respectively, which are recorded in other investments in the Company’s Consolidated Balance Sheets.

In October 2022, the Company received shares of PACT’s Series D non-voting convertible preferred stock (See Note 3, License, Collaboration and Success Payment Agreements). The Company recognized its investment in PACT preferred stock at its estimated fair value of $2.9 million on October 1, 2022, which was included in the Company’s Consolidated Balance Sheet within other investments as of December 31, 2022.

During the years ended December 31, 2023, 2022 and 2021, the Company performed qualitative assessments of potential indicators of impairment and determined that indicators existed for certain of its other investments. While there was no single event or factor in each instance, the Company considered the underlying companies’ operating cash flow requirements over the next year, liquid asset balances to fund those requirements and the underlying companies’ inability to raise funds as indicators of impairment. Due to these indicators, the Company assessed the valuation of these investments and determined the fair values to be negligible and the impairments to be other-than-temporary in nature. As a result, the Company recorded impairment expenses of $2.9 million for the PACT Series D convertible preferred stock investment and $10.0 million for another investment for the year ended December 31, 2023, $5.0 million for an investment for the year ended December 31, 2022 and $36.4 million for the PACT Series C-1 convertible preferred stock investment for the year ended December 31, 2021. The impairment expenses were recorded within impairment of other investments on the Consolidated Statements of Operations and Comprehensive Loss and as reductions to the investment balances within other investments on the Consolidated Balance Sheets.

6. Fair Value Measurements

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):

Level 1 Level 2 Level 3 Total

Financial assets:

U.S. government agency securities — 48,750 — 48,750

Financial liabilities:

Success payment liabilities $ — $ — $ 1,576 $ 1,576

Total financial liabilities $ — $ — $ 1,576 $ 1,576

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Level 1 Level 2 Level 3 Total

Financial assets:

Financial liabilities:

Success payment liabilities $ — $ — $ 4,356 $ 4,356

Total financial liabilities $ — $ — $ 4,356 $ 4,356

The Company measures the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities. The Level 2 marketable securities include U.S. Treasury securities, U.S. government agency securities and corporate debt securities, which securities are valued using third-party pricing sources. The pricing services applied industry standard valuation models. Inputs utilized include market pricing based on real-time trade data for the same or similar securities and other significant inputs derived from or corroborated by observable market data.

The Company’s success payment liabilities are Level 3 financial instruments, which are estimated using Monte Carlo simulations. Monte Carlo simulations model the future movement of stock prices based on several key variables combined with empirical knowledge of the process governing the behavior of the stock price. The following variables were incorporated in the estimated fair value of the success payment liabilities: fair value of the Company’s common stock, expected volatility, the risk-free interest rate and the estimated number and timing of valuation measurement dates on the basis of which payments may be triggered. The computation of expected volatility was estimated based on available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption.

The following assumptions were incorporated into the calculation of the estimated fair value of the Fred Hutch success payment liability:

December 31,

Fair value of common stock $ 1.94 $ 3.47

Expected volatility 80.0 % 80.0 %

The following assumptions were incorporated into the calculation of the estimated fair value of the Stanford success payment liability:

December 31,

Fair value of common stock $ 1.94 $ 3.47

Expected volatility 80.0 % 80.0 %

The Company utilizes estimates and assumptions in determining the estimated success payment liabilities and associated changes in fair value. A small change in the valuation of the Company’s common stock may have a relatively large change in the estimated fair value of the success payment liability and associated changes in fair value.

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The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets and liabilities (in thousands):

Equity WarrantInvestment Success PaymentLiabilities

Change in fair value (1) — (2,780)

__________

(1)The change in the fair value associated with the Fred Hutch success payment liabilities for the year ended December 31, 2023 is recorded in other income (expense), net. The change in the fair value associated with the Fred Hutch success payment liabilities for the year ended December 31, 2022, and the change in the fair value associated with the Stanford success payment liabilities for the years ended December 31, 2023 and 2022, respectively, are recorded as research and development expenses. (See Note 3, License, Collaboration and Success Payment Agreements). Changes in fair value associated with the equity warrant investment held are recorded in other income (expense), net.

In October 2022, the Company received non-voting PACT Series D convertible preferred stock with an estimated fair value of $2.9 million using the cost approach (See Note 3, License, Collaboration and Success Payment Agreements). Under this approach, the fair value of an asset is measured by the cost to reconstruct or replace such asset with another one of like utility. The fair value of PACT was estimated by using significant unobservable inputs, including an estimate of insignificant fair value associated with PACT intangible assets. Accordingly, the Company classified the fair value measurement of PACT preferred stock on October 1, 2022 as Level 3 under the fair value hierarchy. In June 2023, the Company performed a qualitative assessment of potential indicators of impairment of the PACT Series D convertible preferred stock investment, resulting in a $2.9 million impairment expense for the year ended December 31, 2023. See Note 5, Other Investments, for additional details regarding the PACT investment impairment.

7. Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

December 31,

Computer equipment and software 1,672 1,630

Less: Accumulated depreciation and amortization (51,647) (32,384)

Depreciation and amortization expense was $20.2 million, $18.0 million and $13.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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8. Accrued Liabilities and Other Current Liabilities

Accrued liabilities and other current liabilities consisted of the following (in thousands):

December 31,

Accrued compensation and related benefits $ 14,634 $ 15,447

Accrued research and development expenses 5,331 4,760

Accrued property and equipment — 732

Total accrued liabilities and other current liabilities $ 28,126 $ 28,755

9. Leases

The Company’s lease portfolio is comprised of operating leases for laboratory, office and manufacturing facilities located in South San Francisco, California, and Seattle and Bothell, Washington with contractual periods expiring between December 2028 and March 2031. In addition to minimum rent, the leases require payment of real estate taxes, insurance, common area maintenance charges and other executory costs. These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred.

In 2018, the Company entered into an operating lease for approximately 34,000 square feet of office and laboratory space in Seattle, Washington, with an initial lease term expiring in December 2028. The Company has twofive‐year options to extend the lease, which are not reasonably assured.

In 2019, the Company entered into two operating lease agreements for a combined approximately 73,000 square feet of space to develop a cell therapy manufacturing facility located in Bothell, Washington, with initial terms expiring in May 2030. The Company has two90-month options to extend the leases, which are not reasonably assured.

In 2019, the Company entered into an operating lease agreement for approximately 108,000 square feet of office and laboratory space located in South San Francisco, California. The initial lease term expires in January 2031 with the option to extend the term for another 10 years, which is not reasonably assured. In January 2021, the Company amended the lease term to extend the lease expiration to March 2031, which resulted in an increase to the right-of-use asset and lease liability of $4.2 million.

The following table summarizes the Company’s future minimum operating lease commitments, including expected lease incentives to be received, as of December 31, 2023 (in thousands):

Year Ending December 31:

Total undiscounted lease payments 83,509

Less: imputed interest (20,342)

Total operating lease liabilities $ 63,167

Reported as of December 31, 2023:

Operating lease liabilities, non-current 56,894

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The operating lease costs for all operating leases were $9.0 million, $9.3 million and $9.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. The operating lease costs and total commitments for short-term leases were de minimis for the years ended December 31, 2023, 2022 and 2021. Variable lease costs for operating leases were $5.4 million, $5.1 million and $4.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. The weighted-average remaining lease terms for operating leases were 6.8 years and 7.8 years as of December 31, 2023 and 2022, respectively. The weighted-average discount rates for operating leases were 8.5% as of both December 31, 2023 and 2022.

In May 2021, the Company entered into a sublease, whereby the Company agreed to sublease approximately 11,000 square feet of its space in South San Francisco, California currently leased by the Company. The sublease is classified as an operating lease and will expire in March 2031. The Company recognized sublease income for this sublease of $0.8 million for both the years ended December 31, 2023 and 2022 and $0.4 million for the year ended December 31, 2021.

In September 2021, the Company entered into a sublease with Sonoma Biotherapeutics, Inc. (“Sonoma”), a related party, whereby the Company agreed to sublease approximately 18,000 square feet of space in South San Francisco, California currently leased by the Company. See Note 17, Related-Party Transactions. As a part of the sublease, in September 2021, the Company received a $4.6 million tenant improvement contribution payment, which will be recognized over the term of the sublease. The sublease is classified as an operating lease and will expire in March 2031. The Company recognized Sonoma sublease income of $1.9 million for both the years ended December 31, 2023 and 2022 and $0.6 million for the year ended December 31, 2021.

The Company’s sublease income is recognized within other operating income, net in the Consolidated Statements of Operations and Comprehensive Loss.

10. Convertible Preferred Stock

Upon the closing of the IPO, 194,474,431 shares of convertible preferred stock then outstanding converted into an equal number of shares of common stock. As of December 31, 2023, no shares of convertible preferred stock were outstanding.

11. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10.0 million shares of preferred stock with a par value $0.0001 per share. As of December 31, 2023 and 2022, no shares of preferred stock were outstanding.

Common Stock

The Company is authorized to issue 500.0 million shares of common stock with a par value of $0.0001 per share. As of December 31, 2023 and 2022, there were 253,957,709 shares and 249,567,343 shares of the Company’s common stock outstanding, respectively.

12. Stock-based Compensation

2021 Equity Incentive Plan

In June 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”), which on the date of the underwriting agreement related to the Company’s IPO became effective with an initial reserve of 26,662,087 shares, plus any shares subject to outstanding awards granted under the 2018 Equity Incentive Plan (“2018 Plan”) that, on or after the effectiveness of the 2021 Plan, terminate or expire before exercise or settlement, are not issued because the award is settled in cash, are forfeited because of the failure to vest or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares reserved for issuance under the 2021 Plan automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, in an amount equal to (1) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors no later than December 31 of the immediately preceding year. On January 1, 2023, the Company reserved an additional 12,478,367 shares of common stock for issuance under the 2021 Plan representing 5% of

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the total common shares outstanding as of December 31, 2022. Under the 2021 Plan, the Company may grant incentive stock options, non-statutory stock options, RSAs, RSUs, stock appreciation rights, performance awards and other stock‐based awards. Terms of stock awards, including vesting requirements, are determined by the Company’s board of directors or by a committee authorized by the Company’s board of directors, subject to provisions of the 2021 Plan. The term of any stock option granted under the 2021 Plan cannot exceed ten years. Generally, awards granted by the Company vest over four years, but may be granted with different vesting terms. In conjunction with adopting the 2021 Plan, the Company discontinued the 2018 Plan with respect to new equity awards.

As of December 31, 2023, 26,390,351shares were available for future issuance pursuant to the 2021 Plan.

2021 Employee Stock Purchase Plan

In June 2021, the Company adopted the 2021 Employee Stock Purchase Plan (“2021 ESPP”), which became effective immediately prior to the execution of the underwriting agreement related to the Company’s IPO with an initial reserve of 2,470,000 shares. The 2021 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their earnings, subject to plan limitations. Unless otherwise determined by the Company’s board of directors, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first date of an offering or on the purchase date. The number of shares of the Company’s common stock reserved for issuance under the 2021 ESPP automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (1) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, and (2) 4,940,000 shares; provided, however, that the Company’s board of directors may act to provide a lesser increase in number of shares. The Company’s board of directors elected to reserve no additional shares under the 2021 ESPP for the year beginning January 1, 2023. The Company may specify offerings with durations not more than 27 months and may specify shorter purchase periods within each offering. Under the 2021 ESPP, 986,391, 475,363 and zero shares have been issued for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023, 3,461,629 shares were available for future issuance pursuant to the 2021 ESPP.

2018 Equity Incentive Plan

In 2018, the Company established the 2018 Plan that provided for the grant of incentive stock options, non‐statutory stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards. Terms of stock awards, including vesting requirements, were determined by the board of directors or by a committee authorized by the Company’s board of directors, subject to provisions of the 2018 Plan. The term of any stock option granted under the 2018 Plan cannot exceed ten years. Generally, awards granted by the Company vest over four years, but could have been granted with different vesting terms. Pursuant to the terms of the 2021 Plan, any shares subject to outstanding options originally granted under the 2018 Plan that terminate, expire or lapse for any reason without the delivery of shares to the holder thereof become available for issuance pursuant to awards granted under the 2021 Plan. While no shares are available for future issuance under the 2018 Plan, it continues to govern outstanding equity awards granted thereunder.

Stock-based Compensation Expense

Stock-based compensation expense by classification included within the Consolidated Statements of Operations and Comprehensive Loss was as follows (in thousands):

Year Ended December 31,

Stock-based compensation expense for the year ended December 31, 2021 included the impact of an award accelerated in connection with the Company’s IPO of $2.6 million.

Stock Options and RSA Modifications

In November 2023, the Board of Directors of the Company approved, effective November 16, 2023, a one-time repricing of certain stock option awards that had been granted to date under the 2021 Plan and 2018 Plan. The repricing

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impacted stock options with exercise prices greater than $2.37 held by employees who remained employed as-of November 16, 2023 and were not impacted by the reduction in workforce. The original exercise prices of the repriced stock options ranged from $2.61 to $17.95 per share for 200 total grantees with 23,416,860 shares repriced. Each stock option was repriced to have a per share exercise price of $1.87, which was the closing price of the Company’s common stock on November 16, 2023. To receive the new exercise price, option holders must remain employed with the Company through November 15, 2024. Additionally, the vesting schedule for the unvested shares underlying repriced stock options held by executives at the level of senior vice president and above was extended for an additional year. There were no changes to the vesting schedules for employees below the level of senior vice president. No changes were made to the expiration dates of or number of shares underlying the repriced stock options. Incremental stock-based compensation expense resulting from the repricing was $8.9 million in the aggregate. Expense for vested awards will be recognized through November 15, 2024 and expense for unvested awards will be recognized over the remaining service life of the option.

In December 2022, the Company’s former chief executive officer (“CEO”) resigned. Under the terms of the separation agreement, the former CEO will be available to provide consulting services to the Company through June 15, 2024, with vested options continuing to be exercisable and unvested options continuing to vest through that date. The Company concluded that the obligation to provide consulting services was nonsubstantive, and therefore resulted in a modification of their options due to the reduction of their service level. As the remaining service period was determined to be nonsubstantive, the entire incremental expense of $3.7 million associated with the modification was recognized in the fourth quarter of 2022.

In 2021, the Company had modifications due to the reduction in the service level for a previous CEO, who resigned as Executive Chairman in the fourth quarter of 2021, as well as an increase to certain awards’ post-termination exercise periods. The modifications in 2021 impacted both vested and unvested awards. Expense associated with vested awards is recognized in the period of the modification and expense associated with unvested awards is recognized over the remaining service life of the options or RSAs. The Company also had option modifications in 2021 for one individual resulting in incremental stock-based compensation expense of $1.0 million.

The following table shows the total incremental stock-based compensation expense associated with modifications for previous CEOs by the year in which the modification occurred in the years December 31, 2023, 2022 and 2021 (in thousands):

December 31,

Previous CEO - Options(1) $ — $ 3,741 $ —

Previous CEO - Options(2) — — 21,948

Previous CEO - RSA(2) — — 10,908

__________

(1)The modification for Previous CEO - Options for 2022 is for Ms. Elizabeth Homans, who resigned in December 2022.

(2)The modifications for Previous CEO - Options and Previous CEO - RSA for 2021 are for Dr. Richard Klausner, who resigned as Executive Chairman in October 2021 and is now the Chair of Lyell’s Board.

At December 31, 2023, total stock-based compensation cost related to unvested awards not yet recognized was $65.3 million, which is expected to be recognized over a remaining weighted-average period of 2.7 years.

Restricted Stock Awards

The Company had no unvested RSAs as of both December 31, 2023 and 2022. The fair value of RSAs vested during the years ended December 31, 2023, 2022 and 2021 was zero, $15.2 million and $57.1 million, respectively.

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Restricted Stock Units

A summary of the Company’s RSU activity was as follows:

Number of Shares Weighted-AverageValue at Grant DatePer Share

The fair value of RSUs vested during the years ended December 31, 2023 and 2022 was $1.4 million and $1.5 million, respectively. No RSUs vested during the year ended December 31, 2021.

Stock Options

A summary of the Company’s stock option activity was as follows:

The fair value of stock options granted to employees, directors and consultants was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted-average assumptions:

Year Ended December 31,

Expected dividend yield 0 % 0 % 0 %

The weighted-average grant date fair value of options granted for the years ended December 31, 2023, 2022 and 2021 was $1.69 per share, $3.60 per share and $6.59 per share, respectively. The intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021 was $6.5 million, $13.9 million and $16.1 million, respectively.

13. Income Taxes

The Company has reported pre-tax operating losses for all periods presented. The Company’s net losses are derived solely from within the U.S. The Company has not reflected any benefit for corresponding tax net operating loss carryforwards in the accompanying consolidated financial statements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

As of December 31, 2023 and 2022, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $455.2 million and $383.3 million, respectively, which were available to reduce future taxable income and do not expire. The Company also had U.S. state NOL carryforwards of $537.2 million that begin to expire in 2038. The Company had gross U.S. federal and state tax credits of $24.2 million and $15.8 million as of December 31, 2023 and

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2022, respectively, which may be used to offset future tax liabilities. The federal NOL carryforward period is indefinite, while the tax credits will begin to expire in 2039. The attributed carryforwards may become subject to annual limitations in the event of certain cumulative changes in the ownership interest of significant stockholders. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. As of December 31, 2023, the Company had a capital loss carryforward of $52.5 million, which will expire in 2028.

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:

Year Ended December 31,

State tax, net of federal benefit 7.45 5.10 6.39

Collaboration revenue — 6.72 —

Effective income tax rate 0.00 % 0.00 % 0.00 %

The principal components of the Company’s net deferred tax assets were as follows (in thousands):

Year Ended December 31,

Deferred tax assets:

Capital loss carryforward 14,368 —