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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from to

Commission file number: 001-38663

Gritstone bio, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware |  | 47-4859534
(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
5959 Horton Street, Suite 300 Emeryville, California |  | 94608
(Address of Principal Executive Offices) |  | (Zip Code)

(510) 871-6100

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $0.0001 par value per share |  | GRTS |  | The Nasdaq Global Select Market

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

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

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

Large accelerated filer | ☐ |  | Accelerated filer | ☒
Non-accelerated filer | ☐ |  | Smaller reporting company | ☒
|  |  | Emerging growth company | ☒

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

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

As of November 1, 2022, there were 83,366,277 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Gritstone bio, Inc.

Table of Contents

|  |  |  | Page
PART I. FINANCIAL INFORMATION |  | 1
Item 1. |  | Financial Statements (unaudited) |  | 1
|  | Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 |  | 1
|  | Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2022 and 2021 |  | 2
|  | Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 |  | 3
|  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 |  | 5
|  | Notes to Condensed Consolidated Financial Statements (unaudited) |  | 6
Item 2. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 32
Item 3. |  | Quantitative and Qualitative Disclosures About Market Risks |  | 45
Item 4. |  | Controls and Procedures |  | 45
PART II. OTHER INFORMATION |  | 46
Item 1. |  | Legal Proceedings |  | 46
Item 1A. |  | Risk Factors |  | 46
Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 46
Item 3. |  | Defaults Upon Senior Securities |  | 46
Item 4. |  | Mine Safety Disclosures |  | 46
Item 5. |  | Other Information |  | 46
Item 6. |  | Exhibits |  | 47
SIGNATURES |  | 48

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Gritstone bio, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share amounts and par value)

|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Assets |  |  |  |  |  |
Current assets: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 64,909 |  |  | $ | 93,287 |
Marketable securities |  |  | 74,900 |  |  |  | 108,346 |
Restricted cash |  |  | 6,727 |  |  |  | 11,285 |
Prepaid expenses and other current assets |  |  | 6,891 |  |  |  | 7,672 |
Total current assets |  |  | 153,427 |  |  |  | 220,590 |
Long-term restricted cash |  |  | 5,290 |  |  |  | 6,005 |
Property and equipment, net |  |  | 21,672 |  |  |  | 21,622 |
Lease right-of-use assets |  |  | 19,321 |  |  |  | 22,920 |
Deposits and other long-term assets |  |  | 5,532 |  |  |  | 2,352 |
Long-term marketable securities |  |  | — |  |  |  | 4,617 |
Total assets |  | $ | 205,242 |  |  | $ | 278,106 |
Liabilities and stockholders’ equity |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |
Accounts payable |  | $ | 2,885 |  |  | $ | 4,230 |
Accrued compensation |  |  | 6,708 |  |  |  | 6,925 |
Accrued liabilities |  |  | 2,670 |  |  |  | 411 |
Accrued research and development expenses |  |  | 5,037 |  |  |  | 3,706 |
Lease liabilities, current portion |  |  | 6,325 |  |  |  | 7,483 |
Deferred revenue, current portion |  |  | 8,688 |  |  |  | 17,201 |
Total current liabilities |  |  | 32,313 |  |  |  | 39,956 |
Other liabilities, noncurrent |  |  | 49 |  |  |  | — |
Lease liabilities, net of current portion |  |  | 16,752 |  |  |  | 18,936 |
Deferred revenue, net of current portion |  |  | — |  |  |  | 3,128 |
Debt, noncurrent |  |  | 19,281 |  |  |  | — |
Total liabilities |  |  | 68,395 |  |  |  | 62,020 |
Commitments and contingencies (Notes 6, 8, and 9) |  |  |  |  |  |
Stockholders’ equity: |  |  |  |  |  |
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2022 and December 31, 2021 |  |  | — |  |  |  | — |
Common stock, $0.0001 par value; 300,000,000 shares authorized at September 30, 2022 and December 31, 2021; 73,134,051 and 69,047,878 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively |  |  | 20 |  |  |  | 20 |
Additional paid-in capital |  |  | 626,889 |  |  |  | 617,523 |
Accumulated other comprehensive loss |  |  | (281 | ) |  |  | (73 | )
Accumulated deficit |  |  | (489,781 | ) |  |  | (401,384 | )
Total stockholders’ equity |  |  | 136,847 |  |  |  | 216,086 |
Total liabilities and stockholders’ equity |  | $ | 205,242 |  |  | $ | 278,106 |

See accompanying notes to the unaudited condensed consolidated financial statements.

1

Gritstone bio, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
Collaboration and license revenues |  | $ | 436 |  |  | $ | 2,401 |  |  | $ | 7,942 |  |  | $ | 44,937 |
Grant revenues |  |  | 2,585 |  |  |  | 213 |  |  |  | 7,741 |  |  |  | 213 |
Total revenues |  |  | 3,021 |  |  |  | 2,614 |  |  |  | 15,683 |  |  |  | 45,150 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Research and development |  |  | 26,436 |  |  |  | 24,396 |  |  |  | 81,983 |  |  |  | 71,324 |
General and administrative |  |  | 6,462 |  |  |  | 6,373 |  |  |  | 22,209 |  |  |  | 19,251 |
Total operating expenses |  |  | 32,898 |  |  |  | 30,769 |  |  |  | 104,192 |  |  |  | 90,575 |
Loss from operations |  |  | (29,877 | ) |  |  | (28,155 | ) |  |  | (88,509 | ) |  |  | (45,425 | )
Interest income |  |  | 462 |  |  |  | 37 |  |  |  | 663 |  |  |  | 112 |
Interest expense |  |  | (551 | ) |  |  | — |  |  |  | (551 | ) |  |  | — |
Net loss |  |  | (29,966 | ) |  |  | (28,118 | ) |  |  | (88,397 | ) |  |  | (45,313 | )
Other comprehensive gain (loss): |  |  |  |  |  |  |  |  |  |  |  |
Unrealized gain (loss) on marketable securities |  |  | 129 |  |  |  | (7 | ) |  |  | (208 | ) |  |  | 7 |
Comprehensive loss |  | $ | (29,837 | ) |  | $ | (28,125 | ) |  | $ | (88,605 | ) |  | $ | (45,306 | )
Net loss per share, basic and diluted |  | $ | (0.35 | ) |  | $ | (0.36 | ) |  | $ | (1.02 | ) |  | $ | (0.59 | )
Weighted-average number of shares used in computing net loss per share, basic and diluted |  |  | 86,597,405 |  |  |  | 77,775,497 |  |  |  | 86,441,212 |  |  |  | 76,837,503 |

See accompanying notes to the unaudited condensed consolidated financial statements.

2

Gritstone bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

Three Months Ended September 30, 2022:

|  | Common Stock |  |  | Additional Paid-In |  |  | Accumulated Other Comprehensive |  |  | Accumulated |  |  | Total Stockholders’ |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Gain (Loss) |  |  | Deficit |  |  | Equity |
Balance at June 30, 2022 |  |  | 73,006,089 |  |  | $ | 20 |  |  | $ | 623,583 |  |  | $ | (410 | ) |  | $ | (459,815 | ) |  | $ | 163,378 |
Issuance of common stock under the ATM equity offering program, net of issuance costs of $48 |  |  | 95,000 |  |  |  | — |  |  |  | 197 |  |  |  | — |  |  |  | — |  |  |  | 197 |
Issuance of common stock upon exercise of stock options |  |  | 32,962 |  |  |  | — |  |  |  | 45 |  |  |  | — |  |  |  | — |  |  |  | 45 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 3,064 |  |  |  | — |  |  |  | — |  |  |  | 3,064 |
Unrealized gain on marketable securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 129 |  |  |  | — |  |  |  | 129 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (29,966 | ) |  |  | (29,966 | )
Balance at September 30, 2022 |  |  | 73,134,051 |  |  | $ | 20 |  |  | $ | 626,889 |  |  | $ | (281 | ) |  | $ | (489,781 | ) |  | $ | 136,847 |

Three Months Ended September 30, 2021:

|  | Common Stock |  |  | Additional Paid-In |  |  | Accumulated Other Comprehensive |  |  | Accumulated |  |  | Total Stockholders’ |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Gain (Loss) |  |  | Deficit |  |  | Equity |
Balance at June 30, 2021 |  |  | 49,433,361 |  |  | $ | 18 |  |  | $ | 522,290 |  |  | $ | 14 |  |  | $ | (343,497 | ) |  | $ | 178,825 |
Issuance of common stock under the ATM equity offering program, net of issuance costs of $49 |  |  | 55,062 |  |  |  | — |  |  |  | 602 |  |  |  | — |  |  |  | — |  |  |  | 602 |
Issuance of common stock under private investment in public entity (“PIPE”) financing, net of issuance costs of $2,269 |  |  | 5,000,000 |  |  |  | 1 |  |  |  | 52,731 |  |  |  | — |  |  |  | — |  |  |  | 52,732 |
Issuance of common stock for warrant exercises |  |  | 9,555,876 |  |  |  | 1 |  |  |  | 39 |  |  |  | — |  |  |  | — |  |  |  | 40 |
Issuance of common stock upon exercise of stock options |  |  | 207,282 |  |  |  | — |  |  |  | 1,062 |  |  |  | — |  |  |  | — |  |  |  | 1,062 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 2,819 |  |  |  | — |  |  |  | — |  |  |  | 2,819 |
Unrealized loss on marketable securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (7 | ) |  |  | — |  |  |  | (7 | )
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (28,118 | ) |  |  | (28,118 | )
Balance at September 30, 2021 |  |  | 64,251,581 |  |  | $ | 20 |  |  | $ | 579,543 |  |  | $ | 7 |  |  | $ | (371,615 | ) |  | $ | 207,955 |

Continued on next page.

See accompanying notes to the unaudited condensed consolidated financial statements.

3

Gritstone bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

Nine Months Ended September 30, 2022:

|  | Common Stock |  |  | Additional Paid-In |  |  | Accumulated Other Comprehensive |  |  | Accumulated |  |  | Total Stockholders’ |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Gain (Loss) |  |  | Deficit |  |  | Equity |
Balance at December 31, 2021 |  |  | 69,047,878 |  |  | $ | 20 |  |  | $ | 617,523 |  |  | $ | (73 | ) |  | $ | (401,384 | ) |  | $ | 216,086 |
Issuance of common stock under the ATM equity offering program, net of issuance costs of $48 |  |  | 95,000 |  |  |  | — |  |  |  | 197 |  |  |  | — |  |  |  | — |  |  |  | 197 |
Issuance of common stock for warrant exercises |  |  | 3,442,567 |  |  |  | — |  |  |  | 34 |  |  |  | — |  |  |  | — |  |  |  | 34 |
Issuance of common stock upon restricted stock units vesting |  |  | 215,350 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Tax payments related to shares withheld for vested restricted stock units |  |  | — |  |  |  | — |  |  |  | (890 | ) |  |  | — |  |  |  | — |  |  |  | (890 | )
Issuance of common stock upon exercise of stock options |  |  | 140,000 |  |  |  | — |  |  |  | 145 |  |  |  | — |  |  |  | — |  |  |  | 145 |
Issuance of common stock under the ESPP |  |  | 193,256 |  |  |  | — |  |  |  | 331 |  |  |  | — |  |  |  | — |  |  |  | 331 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 9,549 |  |  |  | — |  |  |  | — |  |  |  | 9,549 |
Unrealized loss on marketable securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (208 | ) |  |  | — |  |  |  | (208 | )
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (88,397 | ) |  |  | (88,397 | )
Balance at September 30, 2022 |  |  | 73,134,051 |  |  | $ | 20 |  |  | $ | 626,889 |  |  | $ | (281 | ) |  | $ | (489,781 | ) |  | $ | 136,847 |

Nine Months Ended September 30, 2021:

|  | Common Stock |  |  | Additional Paid-In |  |  | Accumulated Other Comprehensive |  |  | Accumulated |  |  | Total Stockholders’ |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Gain (Loss) |  |  | Deficit |  |  | Equity |
Balance at December 31, 2020 |  |  | 47,552,693 |  |  | $ | 18 |  |  | $ | 493,023 |  |  | $ | — |  |  | $ | (326,302 | ) |  | $ | 166,739 |
Offering costs related to the sale of common stock and pre-funded warrants |  |  | — |  |  |  | — |  |  |  | (451 | ) |  |  | — |  |  |  | — |  |  |  | (451 | )
Issuance of common stock under Sales Purchase Agreement, net of issuance costs of $339 |  |  | 1,169,591 |  |  |  | — |  |  |  | 20,830 |  |  |  | — |  |  |  | — |  |  |  | 20,830 |
Issuance of common stock under the ATM equity offering program, net of issuance costs of $80 |  |  | 225,165 |  |  |  | — |  |  |  | 2,231 |  |  |  | — |  |  |  | — |  |  |  | 2,231 |
Issuance of common stock under private investment in PIPE financing, net of issuance costs of $2,269 |  |  | 5,000,000 |  |  |  | 1 |  |  |  | 52,731 |  |  |  | — |  |  |  | — |  |  |  | 52,732 |
Issuance of common stock for warrant exercises |  |  | 9,555,876 |  |  |  | 1 |  |  |  | 39 |  |  |  | — |  |  |  | — |  |  |  | 40 |
Issuance of common stock upon exercise of stock options |  |  | 638,692 |  |  |  | — |  |  |  | 3,108 |  |  |  | — |  |  |  | — |  |  |  | 3,108 |
Issuance of common stock under the ESPP |  |  | 109,564 |  |  |  | — |  |  |  | 279 |  |  |  | — |  |  |  | — |  |  |  | 279 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 7,753 |  |  |  | — |  |  |  | — |  |  |  | 7,753 |
Unrealized gain on marketable securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7 |  |  |  | — |  |  |  | 7 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (45,313 | ) |  |  | (45,313 | )
Balance at September 30, 2021 |  |  | 64,251,581 |  |  | $ | 20 |  |  | $ | 579,543 |  |  | $ | 7 |  |  | $ | (371,615 | ) |  | $ | 207,955 |

See accompanying notes to the unaudited condensed consolidated financial statements.

4

Gritstone bio, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

|  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |
Operating activities |  |  |  |  |  |
Net loss |  | $ | (88,397 | ) |  | $ | (45,313 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |
Depreciation and amortization |  |  | 4,769 |  |  |  | 4,782 |
Net amortization of premiums and discounts on marketable securities |  |  | 278 |  |  |  | 549 |
Amortization of debt discount and issuance costs |  |  | 127 |  |  |  | — |
Stock-based compensation |  |  | 9,549 |  |  |  | 7,753 |
Non-cash operating lease expense |  |  | 6,891 |  |  |  | 5,743 |
Changes in operating assets and liabilities: |  |  |  |  |  |
Prepaid expenses and other current assets |  |  | 781 |  |  |  | (3,484 | )
Deposits and other long-term assets |  |  | (3,180 | ) |  |  | (327 | )
Accounts payable |  |  | (943 | ) |  |  | (942 | )
Accrued compensation |  |  | (217 | ) |  |  | (216 | )
Accrued and other non-current liabilities |  |  | 1,543 |  |  |  | 106 |
Accrued research and development expenses |  |  | 1,331 |  |  |  | 1,487 |
Lease liability |  |  | (6,463 | ) |  |  | (5,902 | )
Deferred revenue |  |  | (11,641 | ) |  |  | 8,865 |
Net cash used in operating activities |  |  | (85,572 | ) |  |  | (26,899 | )
Investing activities |  |  |  |  |  |
Purchase of marketable securities |  |  | (64,641 | ) |  |  | (133,409 | )
Maturities of marketable securities |  |  | 102,218 |  |  |  | 59,390 |
Sales of marketable securities |  |  | — |  |  |  | 6,225 |
Purchase of property and equipment |  |  | (4,389 | ) |  |  | (4,133 | )
Net cash provided by (used in) investing activities |  |  | 33,188 |  |  |  | (71,927 | )
Financing activities |  |  |  |  |  |
Proceeds from issuance of common stock from public offering |  |  | — |  |  |  | 21,170 |
Proceeds from issuance of common stock from PIPE financing |  |  | — |  |  |  | 55,000 |
Proceeds from issuance of common stock upon exercise of stock options, warrants, and other |  |  | 179 |  |  |  | 3,148 |
Proceeds from issuance of common stock under the ATM equity offering program |  |  | 245 |  |  |  | 2,312 |
Proceeds from issuance of common stock under the ESPP |  |  | 331 |  |  |  | 279 |
Proceeds from long-term debt, net of debt discount and issuance costs |  |  | 19,154 |  |  |  | — |
Payments of financing costs |  |  | (115 | ) |  |  | (6,026 | )
Payments of financing lease |  |  | (171 | ) |  |  | — |
Tax payments related to shares withheld for vested restricted stock units |  |  | (890 | ) |  |  | — |
Net cash provided by financing activities |  |  | 18,733 |  |  |  | 75,883 |
Net decrease in cash, cash equivalents and restricted cash |  |  | (33,651 | ) |  |  | (22,943 | )
Cash, cash equivalents and restricted cash at beginning of period |  |  | 110,577 |  |  |  | 171,048 |
Cash, cash equivalents and restricted cash at end of period |  | $ | 76,926 |  |  | $ | 148,105 |
Supplemental disclosures of non-cash investing and financing information |  |  |  |  |  |
Property and equipment purchases accrued but not yet paid |  | $ | 1,174 |  |  | $ | 199 |
Financing costs included in accrued liabilities and accounts payable |  | $ | 2 |  |  | $ | 2,313 |
Lease liabilities arising from obtaining right-of-use asset from new leases |  | $ | 553 |  |  | $ | 109 |
Remeasurement of operating lease right-of-use asset for lease modification |  | $ | 1,406 |  |  | $ | 6,453 |
Cash paid for interest on debt |  | $ | 208 |  |  | $ | — |

See accompanying notes to the unaudited condensed consolidated financial statements.

5

Gritstone bio, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization

Description of Business

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

Liquidity

The Company has incurred operating losses and has an accumulated deficit as a result of ongoing efforts to develop drug product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. The Company had net losses of $30.0 million and $88.4 million for the three and nine months ended September 30, 2022, respectively, and $28.1 million and $45.3 million for the three and nine months ended September 30, 2021, respectively. During the nine months ended September 30, 2022, cash used by operating activities was $85.6 million. During the nine months ended September 30, 2021, cash used by operating activities was $26.9 million. The Company had an accumulated deficit of $489.8 million and $401.4 million as of September 30, 2022 and December 31, 2021, respectively. To date, none of the Company’s product candidates have been approved for sale and, therefore the Company has not generated any revenue from sales of commercial products. Management expects operating losses to continue for the foreseeable future. The Company has funded its operations to date primarily through private placements of its convertible preferred stock, the sale of common stock in public offerings and under its “at-the-market” offering programs, the private placement of common stock and pre-funded warrants, and through proceeds received from its collaboration arrangements. As of September 30, 2022, the Company had cash, cash equivalents and marketable securities of $139.8 million, which the Company believes will be sufficient to fund its planned operations for a period of at least twelve months following the filing date of this report.

2. Summary of Significant Accounting Policies

Basis of Presentation

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

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

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

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

6

Use of Estimates

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

Fair Value of Financial Instruments

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

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

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

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value instrument.

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

Concentrations of Credit Risk

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

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

7

Other Risks and Uncertainties

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

Cash, Cash Equivalents and Restricted Cash

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

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

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

|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Cash and cash equivalents |  | $ | 64,909 |  |  | $ | 93,287 |
Restricted cash |  |  | 6,727 |  |  |  | 11,285 |
Long-term restricted cash |  |  | 5,290 |  |  |  | 6,005 |
Total cash, cash equivalents and restricted cash |  | $ | 76,926 |  |  | $ | 110,577 |

Leases

The Company determines whether the arrangement is or contains a lease at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease. The majority of the Company’s leases are classified as operating leases. Leases with a term greater than one year are included in operating lease ROU Assets, lease liabilities, current portion, and lease liabilities, net of current portion in the Company’s condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021. The Company has elected not to recognize on the condensed consolidated balance sheets leases with terms of one year or less. Lease liabilities and their corresponding ROU Assets are recorded based on the present value of lease payments over the expected lease term. In determining the net present value of lease payments, the interest rate implicit in lease contracts is typically not readily determinable. As such, the Company estimates the appropriate incremental borrowing rate, which is the rate that would be incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the ROU Assets may be required for items such as initial direct costs paid or incentives received and impairment charges if we determine the ROU Asset is impaired.

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

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

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

8

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

Debt Issuance Costs and Debt Discounts

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

Revenue Recognition

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

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

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

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

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

9

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

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

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

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

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

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

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

Income Taxes

On March 18, 2020, the Families First Coronavirus Response Act (the “FFCR Act”), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) were each enacted in response to the COVID-19 pandemic. The FFCR Act and the CARES Act contain numerous income tax provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

On June 29, 2020, Assembly Bill 85 (“A.B. 85”) was signed into California law. A.B. 85 provides for a three-year suspension of the use of net operating losses for medium and large businesses and a three-year cap on the use of business incentive tax credits to offset no more than $5.0 million of tax per year. A.B. 85 suspends the use of net operating losses for taxable years 2020 and 2021 for certain taxpayers with taxable income of $1.0 million or more. The carryover period for any net operating losses that are suspended under this provision will be extended. A.B. 85 also requires that business incentive tax credits, including carryovers, may not reduce the applicable tax by more than $5.0 million for taxable years 2020 and 2021.

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

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Recently Adopted Accounting Pronouncements

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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

3. Cash Equivalents and Marketable Securities

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

|  | September 30, 2022 |
Description |  | Amortized Cost |  |  | Unrealized Gains |  |  | Unrealized Losses |  |  | Fair Value |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 39,915 |  |  | $ | — |  |  | $ | — |  |  | $ | 39,915 |
Commercial paper |  |  | 1,990 |  |  |  | — |  |  |  | — |  |  |  | 1,990 |
Total cash equivalents |  |  | 41,905 |  |  |  | — |  |  |  | — |  |  |  | 41,905 |
Short-term marketable securities: |  |  |  |  |  |  |  |  |  |  |  |
Certificates of deposit |  |  | 3,750 |  |  |  | — |  |  |  | (14 | ) |  |  | 3,736 |
Commercial paper |  |  | 22,333 |  |  |  | — |  |  |  | (31 | ) |  |  | 22,302 |
Corporate debt securities |  |  | 11,239 |  |  |  | — |  |  |  | (74 | ) |  |  | 11,165 |
U.S. treasuries |  |  | 32,659 |  |  |  | — |  |  |  | (153 | ) |  |  | 32,506 |
U.S. government debt securities |  |  | 5,200 |  |  |  | — |  |  |  | (9 | ) |  |  | 5,191 |
Total short-term marketable securities |  |  | 75,181 |  |  |  | — |  |  |  | (281 | ) |  |  | 74,900 |
Total |  | $ | 117,086 |  |  | $ | — |  |  | $ | (281 | ) |  | $ | 116,805 |

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|  | December 31, 2021 |
Description |  | Amortized Cost |  |  | Unrealized Gains |  |  | Unrealized Losses |  |  | Fair Value |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 79,281 |  |  | $ | — |  |  | $ | — |  |  | $ | 79,281 |
Commercial paper |  |  | 1,000 |  |  |  | — |  |  |  | — |  |  |  | 1,000 |
Corporate debt securities |  |  | 1,031 |  |  |  | — |  |  |  | — |  |  |  | 1,031 |
Total cash equivalents |  |  | 81,312 |  |  |  | — |  |  |  | — |  |  |  | 81,312 |
Short-term marketable securities: |  |  |  |  |  |  |  |  |  |  |  |
Certificates of deposit |  |  | 5,600 |  |  |  | — |  |  |  | (6 | ) |  |  | 5,594 |
Commercial paper |  |  | 44,990 |  |  |  | — |  |  |  | (16 | ) |  |  | 44,974 |
Corporate debt securities |  |  | 26,976 |  |  |  | — |  |  |  | (23 | ) |  |  | 26,953 |
U.S. treasuries |  |  | 12,277 |  |  |  | — |  |  |  | (8 | ) |  |  | 12,269 |
U.S. government debt securities |  |  | 2,000 |  |  |  | — |  |  |  | (1 | ) |  |  | 1,999 |
Asset backed securities |  |  | 16,565 |  |  |  | — |  |  |  | (8 | ) |  |  | 16,557 |
Total short-term marketable securities |  |  | 108,408 |  |  |  | — |  |  |  | (62 | ) |  |  | 108,346 |
Long-term marketable securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate debt securities |  |  | 1,637 |  |  |  | — |  |  |  | (6 | ) |  |  | 1,631 |
U.S. treasuries |  |  | 2,991 |  |  |  | — |  |  |  | (5 | ) |  |  | 2,986 |
Total long-term marketable securities |  |  | 4,628 |  |  |  | — |  |  |  | (11 | ) |  |  | 4,617 |
Total |  | $ | 194,348 |  |  | $ | — |  |  | $ | (73 | ) |  | $ | 194,275 |

All marketable securities held as of September 30, 2022 had contractual maturities of less than one year. There have been no material realized gains or losses on marketable securities for the periods presented. As of September 30, 2022, the Company did no t hold any individual securities in an unrealized loss position for 12 months or greater. The Company has the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery. No significant facts or circumstances have arisen to indicate that there has been any significant deterioration in the creditworthiness of the issuers of the securities held by us. The Company considered the current and expected future economic and market conditions and determined that the estimate of credit losses was not significantly impacted. Thus, no credit loss existed as of or for the three and nine months ended September 30, 2022 or the three and nine months ended September 30, 2021. The Company will continue to assess the current and expected future economic and market conditions as further development arises.

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

4. Fair Value Measurements

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

|  | September 30, 2022 |
Description |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 39,915 |  |  | $ | 39,915 |  |  | $ | — |  |  | $ | — |
Commercial paper |  |  | 1,990 |  |  |  | — |  |  |  | 1,990 |  |  |  | — |
Total cash equivalents |  |  | 41,905 |  |  |  | 39,915 |  |  |  | 1,990 |  |  |  | — |
Short-term marketable securities: |  |  |  |  |  |  |  |  |  |  |  |
Certificates of deposit |  |  | 3,736 |  |  |  | — |  |  |  | 3,736 |  |  |  | — |
Commercial paper |  |  | 22,302 |  |  |  | — |  |  |  | 22,302 |  |  |  | — |
Corporate debt securities |  |  | 11,165 |  |  |  | — |  |  |  | 11,165 |  |  |  | — |
U.S. treasuries |  |  | 32,506 |  |  |  | 32,506 |  |  |  | — |  |  |  | — |
U.S. government debt securities |  |  | 5,191 |  |  |  | — |  |  |  | 5,191 |  |  |  | — |
Total short-term marketable securities |  |  | 74,900 |  |  |  | 32,506 |  |  |  | 42,394 |  |  |  | — |
Total |  | $ | 116,805 |  |  | $ | 72,421 |  |  | $ | 44,384 |  |  | $ | — |

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|  | December 31, 2021 |
Description |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 79,281 |  |  | $ | 79,281 |  |  | $ | — |  |  | $ | — |
Commercial paper |  |  | 1,000 |  |  |  | — |  |  |  | 1,000 |  |  |  | — |
Corporate debt securities |  |  | 1,031 |  |  |  | — |  |  |  | 1,031 |  |  |  | — |
Total cash equivalents |  |  | 81,312 |  |  |  | 79,281 |  |  |  | 2,031 |  |  |  | — |
Short-term marketable securities: |  |  |  |  |  |  |  |  |  |  |  |
Certificates of deposit |  |  | 5,594 |  |  |  | — |  |  |  | 5,594 |  |  |  | — |
Commercial paper |  |  | 44,974 |  |  |  | — |  |  |  | 44,974 |  |  |  | — |
Corporate debt securities |  |  | 26,953 |  |  |  | — |  |  |  | 26,953 |  |  |  | — |
U.S. treasuries |  |  | 12,269 |  |  |  | 12,269 |  |  |  | — |  |  |  | — |
U.S. government debt securities |  |  | 1,999 |  |  |  | — |  |  |  | 1,999 |  |  |  | — |
Asset backed securities |  |  | 16,557 |  |  |  | — |  |  |  | 16,557 |  |  |  | — |
Total short-term marketable securities |  |  | 108,346 |  |  |  | 12,269 |  |  |  | 96,077 |  |  |  | — |
Long-term marketable securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate debt securities |  |  | 1,631 |  |  |  | — |  |  |  | 1,631 |  |  |  | — |
U.S. treasuries |  |  | 2,986 |  |  |  | 2,986 |  |  |  | — |  |  |  | — |
Total long-term marketable securities |  |  | 4,617 |  |  |  | 2,986 |  |  |  | 1,631 |  |  |  | — |
Total |  | $ | 194,275 |  |  | $ | 94,536 |  |  | $ | 99,739 |  |  | $ | — |

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

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

5. Property and Equipment, Net

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

|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Computer equipment and software |  | $ | 1,051 |  |  | $ | 987 |
Furniture and fixtures |  |  | 2,285 |  |  |  | 2,113 |
Laboratory equipment |  |  | 25,343 |  |  |  | 24,679 |
Leasehold improvements |  |  | 17,676 |  |  |  | 14,128 |
|  |  | 46,355 |  |  |  | 41,907 |
Less accumulated depreciation and amortization |  |  | (27,018 | ) |  |  | (22,276 | )
Construction-in-progress |  |  | 2,335 |  |  |  | 1,991 |
Total property and equipment, net |  | $ | 21,672 |  |  | $ | 21,622 |

Depreciation and amortization expense was $1.7 million and $4.8 million for the three and nine months ended September 30, 2022, respectively, and $1.6 million and $4.8 million for the three and nine months ended September 30, 2021, respectively.

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6. Commitments and Contingencies

Leases

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

Emeryville Lease

The Company’s principal executive offices in Emeryville, California, consisting of office and laboratory space, are leased pursuant to a 120-month operating lease (the “Emeryville Lease”), which the Company entered into in January 2019, with the obligation to pay rent commencing in November 2019. In conjunction with signing the Emeryville Lease, the Company paid a cash security deposit of $0.6 million, which is recorded as a deposit on the Company’s condensed consolidated balance sheet as of September 30, 2022. The Emeryville Lease includes a free rent period, an escalation clause for increased rent and a renewal provision allowing the Company to extend this lease for an additional two five-year periods at the then market rental rate. The lessor provided the Company a tenant improvement allowance for a total of $4.0 million to complete the laboratory and office renovation. The Company has determined the tenant improvements to be lessee owned and therefore has recorded a $8.3 million ROU Asset and a $13.1 million lease liability on the condensed consolidated balance sheet as of September 30, 2022. The Company recorded a $8.7 million ROU Asset and a $13.9 million lease liability on the condensed consolidated balance sheet as of December 31, 2021.

Pleasanton Leases

The Company leases 42,620 square feet of office, cleanroom, and laboratory support manufacturing space in Pleasanton, California pursuant to a non-cancelable operating lease (the “Pleasanton Lease”), which the Company entered into in March 2017, with the obligation to pay rent commencing in December 2017. The Pleasanton Lease includes a free rent period, escalating rent payments and a term that expires on November 30, 2024. The Company may extend the lease term for a period of five years at the then market rental rate. The Company obtained an irrevocable letter of credit in March 2017 in the initial amount of approximately $1.0 million as a security deposit to the Pleasanton Lease, which may be drawn down by the landlord in the event the Company fails to fully and faithfully perform its obligations under the Pleasanton lease. The letter of credit may be reduced based on certain levels of cash and cash equivalents the Company holds. As of September 30, 2022, none of the irrevocable letter of credit amount had been drawn. The Pleasanton Lease further provides that the Company is obligated to pay to the landlord its proportionate share of certain basic operating costs, including taxes and operating expenses.

In connection with the Pleasanton Lease, the Company received a tenant improvement allowance of $1.2 million from the landlord for the costs associated with the design, development and construction of tenant improvements. The unamortized tenant improvement balance is recognized as a component of operating lease ROU Assets on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021.

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

Cambridge Leases

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

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

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

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

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Company also paid an insignificant cash security deposit. The Cambridge Storage Lease was amended in June 2022 to extend the lease term through June 30, 2023.

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

Boston Lease

The Company plans to occupy a newly-built facility in Boston, Massachusetts, with office and laboratory space, in 2023 pursuant to a 120-month operating lease (the “Boston Lease”), which the Company entered into in September 2021. The Boston Lease includes a free rent period, an escalation clause for increased rent and a renewal provision allowing the Company to extend the Boston Lease for two additional five-year periods at the then market rental rate. The landlord provided the Company with a tenant improvement allowance of up to approximately $19.1 million for costs relating to the design, permitting and construction of improvements. The Company’s obligation to pay rent is expected to commence in the second half of 2023, subject to free rent periods of three and six months with respect to certain premises. The Company expects to be provided early access to the premises to install fixtures and equipment 60 days prior to the anticipated rent commencement date. The Boston Lease is expected to expire in 2033. The Boston Lease further provides that the Company is obligated to pay to the landlord its proportionate share of certain basic operating costs, including taxes and operating expenses. In connection with the Boston Lease and as a security deposit thereunder, the Company has provided the landlord an irrevocable letter of credit in the amount of approximately $4.6 million, which is collateralized by a restricted cash deposit of $4.7 million, and which may be reduced in the fifth and seventh years of the Boston Lease. As of September 30, 2022, none of the irrevocable letter of credit amount had been drawn.

As of September 30, 2022, the Company has not recognized a ROU Asset or lease liability for the Boston Lease as it did not control the underlying assets at any time in the nine months ended September 30, 2022. Under the Boston Lease, the Company is obligated to make minimum lease payments of approximately $79.1 million for the years from 2023 to 2033, which includes rent abatement during the free rent periods.

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

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Lease cost |  |  |  |  |  |  |  |  |  |  |  |
Operating lease cost |  | $ | 2,112 |  |  | $ | 1,922 |  |  | $ | 6,633 |  |  | $ | 5,743 |
Total lease cost |  | $ | 2,112 |  |  | $ | 1,922 |  |  | $ | 6,633 |  |  | $ | 5,743 |

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Supplemental information related to leases was as follows:

|  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |
Cash paid for amounts included in the measurement of lease liabilities (in thousands): |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 6,467 |  |  | $ | 5,902 |
New right-of-use assets obtained in exchange for lease obligations (in thousands): |  |  |  |  |  |
Operating leases |  | $ | 1,959 |  |  | $ | 6,562 |
Weighted-average remaining lease term (years): |  |  |  |  |  |
Operating leases |  |  | 5.0 |  |  |  | 5.4 |
Weighted-average discount rate: |  |  |  |  |  |
Operating leases |  |  | 7.5 | % |  |  | 7.3 | %

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

|  | Lease Financing Obligation |
Year ending December 31, |  |  |
2022 (remaining three months) |  | $ | 2,523 |
2023 |  |  | 9,192 |
2024 |  |  | 12,527 |
2025 |  |  | 10,658 |
2026 |  |  | 10,376 |
Thereafter |  |  | 62,812 |
Total minimum payments |  |  | 108,088 |
Less: Amounts representing interest expense |  |  | (5,310 | )
Less: Amounts representing lease payments under the Boston Lease |  |  | (79,701 | )
Present value of future minimum lease payments |  |  | 23,077 |
Less: Current portion of lease liability |  |  | (6,325 | )
Noncurrent portion of lease liability |  | $ | 16,752 |

Agreements with CROs

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

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

Guarantees and Indemnifications

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

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

7. Balance Sheet Components

Prepaid Expenses and Other Current Assets

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

|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Prepaid research and development-related expenses |  | $ | 4,839 |  |  | $ | 2,672 |
Net contract asset |  |  | — |  |  |  | 1,385 |
Collaboration receivable |  |  | 291 |  |  |  | 688 |
Prepaid insurance |  |  | 52 |  |  |  | 1,769 |
Interest and other receivables |  |  | 529 |  |  |  | 292 |
Facilities-related deposits |  |  | 384 |  |  |  | — |
Other |  |  | 796 |  |  |  | 866 |
Total prepaid expenses and other current assets |  | $ | 6,891 |  |  | $ | 7,672 |

Deposits and Other Long-Term Assets

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

|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Lease security deposits |  | $ | 934 |  |  | $ | 1,305 |
Prepaid research and development-related expenses |  |  | 1,123 |  |  |  | 1,047 |
Prepaid rent |  |  | 3,475 |  |  |  | — |
Total deposits and other long-term assets |  | $ | 5,532 |  |  | $ | 2,352 |

8. Debt

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

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

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

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

Beginning on April 1, 2023, so long as the Company’s market capitalization is equal to or less than $400.0 million, the Company is subject to a minimum liquidity requirement equal to the then outstanding balance under the Loan Agreement multiplied by 0.55 or 0.45, which multiplier depends on whether the Company achieves certain performance milestones.

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

As of September 30, 2022, there were unamortized issuance costs and debt discounts of $1.9 million which were recorded as a direct deduction from the term loan on the condensed consolidated balance sheet. Interest expense related to the Loan Agreement was $0.5 million for the three and nine months ended September 30, 2022. The effective interest rate on the term loan, including the amortization of the debt discount and issuance costs, and accretion of the final payment, was 13%. The components of the long-term debt balance are as follows:

|  | September 30, |
|  | 2022 |
Principal loan balance |  | $ | 20,000 |
Final fee |  |  | 1,150 |
Unamortized debt discount and issuance costs |  |  | (1,869 | )
Long term debt, net |  | $ | 19,281 |

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

2022 (remaining three months) |  | $ | — |
2023 |  |  | — |
2024 |  |  | — |
2025 |  |  | 7,092 |
2026 |  |  | 7,712 |
2027 |  |  | 5,196 |
Total principal payments |  | $ | 20,000 |

9. Collaboration and License Agreements and Grant Revenue

2seventy bio, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

Revenue is recognized when, or as, the Company satisfies its performance obligation by transferring the promised services to 2seventy. Revenue is being recognized over time using a cost-based input method, based on internal labor cost effort to perform the research services, since the internal labor cost incurred over time is thought to best reflect the transfer of services to 2seventy. In applying a cost-based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. A cost-based input method of revenue recognition requires us to make estimates of costs to complete the performance obligation. The cumulative effect of any revisions to estimated costs to complete the performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

The Company recognized $0.2 million and $6.5 million, respectively, during the three and nine months ended September 30, 2022, and $0.8 million and $2.1 million, respectively, during the three and nine months ended September 30, 2021 in collaboration revenue under the 2seventy Agreement. The amount of collaboration revenue recognized during the nine months ended September 30, 2022 included a cumulative catch-up adjustment increasing contribution revenue by $5.5 million, respectively, due to revisions to estimated costs to complete the remaining performance obligation. The adjustment resulted in a decrease in the Company’s loss from operations of $5.5 million and a decrease in loss per share of $0.06 for the nine months ended September 30, 2022. Deferred revenue of $2.2 million and $8.7 million was recorded on the condensed consolidated balance sheets in both current and long-term liabilities as of September 30, 2022 and December 31, 2021, respectively. Deferred revenue relates to the performance obligations identified under the 2seventy Agreement and will be recognized over the period the performance obligations are expected to be satisfied, which is currently estimated to be through August 2023.

Changes in the deferred revenue balance during the nine months ended September 30, 2022 for the 2seventy Agreement are as follows (in thousands):

|  | Deferred Revenue |
Balance at December 31, 2021 |  | $ | 8,725 |
Additions |  |  | — |
Deductions |  |  | (6,488 | )
Balance at September 30, 2022 |  | $ | 2,237 |

There were no receivables or net contract assets recorded as of September 30, 2022 and December 31, 2021 associated with the 2seventy Agreement.

Gilead Sciences, Inc.

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

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joint manufacturing team (collectively, “product supply activities”). In addition, the Company also concurrently entered into a Stock Purchase Agreement (the “Gilead Stock Purchase Agreement”) under which Gilead acquired, in a private placement transaction, 1,169,591 shares of the Company’s common stock. The common shares were issued to Gilead with certain registration rights and certain standstill and market stand-off provisions. The Company determined that these concurrent contracts represent a combined arrangement (the “Gilead Arrangement”).

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

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

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

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

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

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

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identifiable in the context of the contract; however, the research and development activities are dependent on the research product supply, which is accounted for as a combined performance obligation. As a result, the Company identified three performance obligations in the Gilead Arrangement: (i) exclusive licenses and know-how, (ii) research and development activities and product supply, and (iii) GMP product supply.

The transaction price at the inception of the Gilead Collaboration Agreement consisted of the upfront payment of $30.0 million and the $30.0 million received for the sale of the Company’s common stock. The sale of the common stock was not considered to be a performance obligation, as it was a separate financing component of the transaction. Accordingly, $21.2 million of the transaction price was allocated to the issuance of 1,169,591 shares of the Company’s common stock at fair value on closing of $18.10 per share and recorded in stockholders’ equity. The remaining $8.8 million of the common stock purchase price in excess of the fair value of the shares received is added to the transaction price for the Gilead Collaboration Agreement. In addition, the initial transaction price includes estimated variable consideration for budgeted reimbursement of research and development costs and product supply. The variable consideration related to reimbursable costs and product supply has been constrained as of September 30, 2022 based on the current research and development plan forecast. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

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

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

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

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

For the three and nine months ended September 30, 2022, the Company did no t record any license revenue. For the three and nine months ended September 30, 2022, the Company recorded $0.2 million and $1.5 million, respectively, as collaboration revenue as a result of satisfying its performance obligations by transferring the promised goods and services estimated by the costs incurred for the Gilead Collaboration Agreement. For the three months ended September 30, 2021, the Company did no t record any license revenue, while $38.6 million was recognized as license revenue for the nine months ended September 30, 2021. For the three and nine months ended September 30, 2021, the Company recognized $1.6 million and $4.1 million, respectively, as collaboration revenue as a result of satisfying its performance obligations by transferring the promised goods and services estimated by the costs incurred

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

Changes in the contract asset and deferred revenue balance during the nine months ended September 30, 2022 for the Gilead Collaboration Agreement are as follows (in thousands):

|  | Contract Asset |  |  | Deferred Revenue |
Balance at December 31, 2021 |  | $ | 1,385 |  |  | $ | — |
Additions |  |  | 123 |  |  |  | 122 |
Deductions |  |  | (1,508 | ) |  |  | (1 | )
Balance at September 30, 2022 |  | $ | — |  |  | $ | 121 |

There was $0.2 million and $0.7 million of receivables recorded on the condensed consolidated balance sheet as a current asset in the prepaid expenses and other current assets balance as of September 30, 2022 and December 31, 2021, respectively, associated with the Gilead Collaboration Agreement.

The Company deferred $0.1 million in incremental costs to acquire the Gilead Collaboration Agreement in the first quarter of 2021 allocated to performance obligations recognized over time, which will be recognized over time in each period proportionate to revenue recognition. As of September 30, 2022, deferred contract acquisition costs were zero. Deferred contract acquisition costs amortized during the three and nine months ended September 30, 2022 and 2021 were negligible.

Arbutus Biopharma Corporation

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

Non-Profit Hospital Cancer Center

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

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Genevant Sciences GmbH

In October 2020, the Company entered into an Option and License and Development Agreement (the “2020 Genevant License Agreement”) with Genevant Sciences GmbH (“Genevant”), pursuant to which Genevant granted the Company exclusive license rights under certain intellectual property related to Genevant’s LNP technology for a single therapeutic indication, and the Company agreed to pay Genevant an initial payment of $2.0 million, up to an aggregate of $71.0 million in specified development, regulatory, and commercial milestones, and low to mid-single digit royalties on net sales of licensed products. The upfront payment of $2.0 million was included in research and development expense for the year ended December 31, 2020. Genevant is a spin-off of Arbutus, and the 2020 Genevant License Agreement expands Gritstone’s intellectual property rights to such LNP technology originally obtained pursuant to the Company’s license agreement with Arbutus. Prior to the 2020 Genevant License Agreement, the Company licensed Arbutus’ LNP technology for indications in the oncology space. The remainder of Arbutus’ IP portfolio was transferred to Genevant in the spin-off. In March 2022, a milestone in the amount of $1.0 million was met, which was included in research and development expense for the nine months ended September 30, 2022.

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

In January 2021, the Company entered into a Non-Exclusive License and Development Agreement (the “2021 Genevant License Agreement”) with Genevant. Pursuant to the 2021 Genevant License Agreement, the Company obtained a nonexclusive license to Genevant’s LNP technology to develop and commercialize self-amplifying RNA (“samRNA”) vaccines against SARS-CoV-2, the virus that causes COVID-19. Under the 2021 Genevant License Agreement, the Company made a $1.5 million upfront payment to Genevant, and Genevant is eligible to receive from the Company up to an aggregate of $141.0 million in contingent milestone payments per product, plus certain tiered royalties, upon achievement of development and commercial milestones. In certain scenarios, in lieu of milestones and royalties, Genevant will be entitled to a percentage of amounts that the Company receives from sublicenses under the 2021 Genevant License Agreement, subject to certain conditions. In March 2021, a milestone in the amount of $1.0 million was met following the initial patient treatment in the Phase 1 clinical trial conducted through the NIAID-supported Infectious Diseases Clinical Research Consortium (“IDCRC”). Both the $1.5 million upfront and $1.0 million milestone payments were recorded as research and development expense for the nine months ended September 30, 2021. None of the other milestone events had occurred as of September 30, 2022.

Coalition for Epidemic Preparedness Innovations (CEPI)

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

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

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

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

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

CEPI advances grant funds upon request by the Company consistent with the agreed upon amounts and schedules as provided in the CEPI Funding Agreement. The first tranche of funding of $11.3 million was received in September 2021, and the second tranche of funding of $2.7 million was received in April 2022.

Payments received in advance that are related to future performance are deferred and recognized as grant revenue when the research and development activities are performed. Cash payments received under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in the agreement are incurred. During the three and nine months ended September 30, 2022, the Company recognized grant revenue of $2.3 million and $6.9 million, respectively, under the CEPI Funding Agreement. During the three and nine months ended September 30, 2021, the Company recognized grant revenue of $0.2 million under the CEPI Funding Agreement. As of September 30, 2022 and December 31, 2021, short term deferred revenue of $4.9 million and $9.4 million, respectively, was recorded on the condensed consolidated balance sheet. Deferred revenue will be recognized over the period in which the CEPI Funding Agreement activities related to the first and second tranches of funding are expected to take place, which is currently estimated to be through the first half of 2023. As of September 30, 2022 and December 31, 2021, $4.9 million and $9.4 million, respectively, was recorded as short-term restricted cash on the condensed consolidated balance sheet.

Changes in the deferred revenue balance during the nine months ended September 30, 2022 for the CEPI Funding Agreement are as follows (in thousands):

|  | Deferred Revenue |
Balance at December 31, 2021 |  | $ | 9,379 |
Additions |  |  | 2,697 |
Deductions |  |  | (7,166 | )
Balance at September 30, 2022 |  | $ | 4,910 |

Gates Foundation

In November 2021, the Company entered into a Grant Agreement with the Gates Foundation (the “Gates Grant Agreement”), which provides funding for the Company’s development of an optimal immunogen in the context of a therapeutic human papillomavirus (“HPV”) vaccine. In consideration for the work to be performed, the Gates Foundation provided the Company with an upfront payment of $2.2 million in December 2021, and future funding of $1.0 million is expected to be received by the Company in the first quarter of 2023, for a total grant amount of up to $3.2 million.

Payments received in advance that are related to future performance are deferred and recognized as grant revenue when the research and development activities are performed. Cash payments received under the Gates Grant Agreement are restricted as to their use until expenditures contemplated in the funding agreement are incurred. The Company did not recognize any grant revenue under the Gates Grant Agreement in 2021. During the three and nine months ended September 30, 2022, the Company recognized $0.3 million and $0.8 million, respectively, in revenue under the Gates Grant Agreement. As of September 30, 2022, restricted cash and short-term deferred revenue of $1.4 million was recorded on the condensed consolidated balance sheet. Deferred revenue will be recognized over the period in which the funding agreement activities related to the first tranche of funding are expected to take place, which is currently estimated to be through the first half of 2023.

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Changes in the deferred revenue balance during the nine months ended September 30, 2022 for the Gates Grant Agreement are as follows (in thousands):

|  | Deferred Revenue |
Balance at December 31, 2021 |  | $ | 2,225 |
Additions |  |  | — |
Deductions |  |  | (805 | )
Balance at September 30, 2022 |  | $ | 1,420 |

10. Stockholders’ Equity

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

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

As of September 30, 2022 and December 31, 2021, there were 73,134,051 and 69,047,878 shares of common stock issued and outstanding, respectively. Holders of the Company’s common stock are entitled to one vote per share.

Sale of Common Stock and Pre-Funded Warrants

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

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

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

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

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

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

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

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

In connection with the 2022 ATM Offering Program, in March 2022, the Company also entered into a sales agreement (the “2022 Sales Agreement”) with Cowen, pursuant to which Cowen will act as the Company’s sales agent and, from time to time, offer and sell shares of the Company’s common stock having an aggregate offering price of up to $100.0 million. Cowen is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold under the 2022 Sales Agreement. In addition, the Company agreed to reimburse a portion of Cowen’s expenses in connection with the 2022 ATM Offering Program up to $50,000. As of September 30, 2022, the Company has received aggregate proceeds from its 2022 ATM Offering Program of $0.2 million, net of commissions and offering costs, pursuant to the issuance of 95,000 shares of its common stock.

Common Stock Warrants

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

Issue Date |  | Expiration Date |  | Exercise Price |  |  | Number of Warrants Outstanding |
December 28, 2020 |  | None |  | $ | 0.01 |  |  |  | 13,573,704 |

During the nine months ended September 30, 2022, 3,442,567 warrants were exercised, resulting in the Company issuing 3,442,567 shares of common stock. No warrants were exercised during the three and nine months ended September 30, 2021.

11. Stock-Based Compensation

Award Incentive Plans

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

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

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

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

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

Material Features of the 2021 Employment Inducement Incentive Award Plan

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

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

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

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Stock Option Activity

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

|  |  |  |  | Options Outstanding |
|  | Number of Shares Available for Issuance |  |  | Number of Shares |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Term (in years) |  |  | Aggregate Intrinsic Value (in thousands) |
Balance at December 31, 2021 |  |  | 3,459,187 |  |  |  | 5,107,335 |  |  | $ | 9.82 |  |  |  | 8.13 |  |  | $ | 17,153 |
Authorized |  |  | 3,461,915 |  |  |  | — |  |  | $ | — |  |  |  |  |  |  |
Granted |  |  | (3,289,384 | ) |  |  | 2,939,211 |  |  | $ | 4.88 |  |  |  |  |  |  |
Exercised |  |  | — |  |  |  | (140,000 | ) |  | $ | 1.03 |  |  |  |  |  |  |
Cancelled |  |  | 1,054,304 |  |  |  | (911,676 | ) |  | $ | 8.61 |  |  |  |  |  |  |
Balance at September 30, 2022 |  |  | 4,686,022 |  |  |  | 6,994,870 |  |  | $ | 8.07 |  |  |  | 8.22 |  |  | $ | 532 |
Vested and exercisable at September 30, 2022 |  |  |  |  |  | 3,008,491 |  |  | $ | 9.15 |  |  |  | 7.24 |  |  | $ | 354 |
Vested and expected to vest at September 30, 2022 |  |  |  |  |  | 6,400,481 |  |  | $ | 8.19 |  |  |  | 8.14 |  |  | $ | 504 |

For the nine months ended September 30, 2022 and 2021, the total intrinsic value of stock option awards exercised was $0.4 million and $5.4 million, respectively, determined at the date of option exercise, and the total cash received upon exercise of stock options was not significant for either period. The aggregate intrinsic value was calculated as the difference between the exercise prices of the underlying stock option awards and the estimated fair value of the common stock on the date of exercise.

As of September 30, 2022, $15.9 million of total unrecognized compensation cost related to non-vested employee and consultant options is expected to be recognized over a weighted-average period of 2.6 years. The total fair value of shares vested during the nine months ended September 30, 2022 was $2.6 million.

Stock-based compensation expense and awards granted to non-employees were $0.5 million and immaterial for the nine months ended September 30, 2022 and 2021.

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Restricted Stock Units

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

|  | Number of Shares |  |  | Weighted- Average Grant Date Fair Value |
Outstanding, unvested at December 31, 2021 |  |  | 708,800 |  |  | $ | 5.29 |
Issued |  |  | 350,173 |  |  | $ | 5.46 |
Vested |  |  | (353,300 | ) |  | $ | 5.29 |
Canceled/Forfeited |  |  | (142,628 | ) |  | $ | 5.35 |
Outstanding, unvested at September 30, 2022 |  |  | 563,045 |  |  | $ | 5.38 |

Stock-Based Compensation Expense

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Research and development expenses |  | $ | 1,615 |  |  | $ | 1,688 |  |  | $ | 5,083 |  |  | $ | 5,033 |
General and administrative expenses |  |  | 1,449 |  |  |  | 1,131 |  |  |  | 4,466 |  |  |  | 2,720 |
Total |  | $ | 3,064 |  |  | $ | 2,819 |  |  | $ | 9,549 |  |  | $ | 7,753 |

12. Net Loss Per Common Share

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

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | (29,966 | ) |  | $ | (28,118 | ) |  | $ | (88,397 | ) |  | $ | (45,313 | )
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average common shares outstanding, basic and diluted |  |  | 86,597,405 |  |  |  | 77,775,497 |  |  |  | 86,441,212 |  |  |  | 76,837,503 |
Net loss per share, basic and diluted |  | $ | (0.35 | ) |  | $ | (0.36 | ) |  | $ | (1.02 | ) |  | $ | (0.59 | )

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

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

|  | September 30, |
|  | 2022 |  |  | 2021 |
Options issued and outstanding and ESPP shares issuable and outstanding |  |  | 7,117,085 |  |  |  | 5,281,474 |
Restricted stock subject to future vesting |  |  | 563,045 |  |  |  | — |
Total |  |  | 7,680,130 |  |  |  | 5,281,474 |

13. Subsequent Events

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

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and notes thereto included elsewhere in this report, and our audited financial statements and related notes thereto included as part of our Annual Report on Form 10‑K for the year ended December 31, 2021. This discussion and analysis, and other parts of this report, contain forward-looking statements, including, but not limited to, statements related to the potential of Gritstone’s programs. Such forward-looking statements involve substantial risks and uncertainties that could cause the outcome of Gritstone’s programs, future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements, including interim results obtained may differ from those at completion of the studies and clinical trials. Such risks and uncertainties include, among others, the uncertainties inherent in the drug development process, including Gritstone’s programs’ clinical development, the process of designing and conducting preclinical and clinical trials, the regulatory approval processes, the timing of regulatory filings, the challenges associated with manufacturing drug products, Gritstone’s ability to successfully establish, protect and defend its intellectual property and other matters that could affect the sufficiency of existing cash to fund Gritstone’s operations. Our actual results could differ materially from those discussed in these forward-looking statements. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to our business in general, see the section titled “Risk Factors”. These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason.

Overview

We discover, develop, manufacture and deliver next generation cancer and infectious disease vaccine candidates with the aim of improving patient outcomes and eliminating disease. The immune system sits at the nexus of many diseases, and manipulation of the immune system has enormous potential to drive transformational therapeutic and preventative benefits. Our approach seeks to generate a potent and durable therapeutic or protective immune response by leveraging insights into the immune system’s ability to recognize and destroy diseased cells and eliminate virally-infected cells. Specifically, we focus on the induction of T cells, critical but underexplored components in treatment and prevention of disease, to generate differentiated immune responses that extend and improve the quality of life.

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

Self-amplifying mRNA (samRNA)

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

The samRNA platform is a key asset for Gritstone. Within our oncology programs, we have presented clinical data supporting the identification and selection of an optimal dosing regimen for our novel samRNA vector against

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

The success of first-generation mRNA vaccines for SARS-CoV-2 (Comirnaty® and Spikevax) has validated mRNA as a vaccine technology and we believe the samRNA vector has the potential to offer key benefits over mRNA, including dose sparing and more potent CD8+ T cell induction, within both oncology and viral diseases.

Chimpanzee Adenovirus (ChAd)

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

In-house Manufacturing

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

Our manufacturing know-how also contributes to our translational science and optimization of our production candidates. Through our work, we gain insights from “bench to manufacturing to bedside” and back. We translate such insights across functions and systems to optimize antigen cassette design, dose and vaccine regimen to induce differentiated immune response.

Clinical Programs

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

Program |  | Phase |  | Status |  | Indication(s) |  | Collaborator |  | Commercial Rights
GRANITE |  | 1/2 |  | Enrollment Complete; Treatment Ongoing |  | Early stage & advanced solid tumors |  | — |  | Gritstone
GRANITE |  | 2/3 |  | Enrolling; Treatment Ongoing |  | MSS-CRC* first line maintenance |  | — |  | Gritstone
GRANITE |  | 2 |  | Terminated |  | MSS-colon cancer adjuvant |  | — |  | Gritstone
SLATE |  | 1/2 |  | Complete |  | p53, KRAS Advanced Solid Tumors |  | — |  | Gritstone
SLATE |  | 2 |  | Enrolling |  | KRAS mut |  | — |  | Gritstone
CORAL |  | 1 |  | Enrollment Complete |  | COVID-19 naïve & booster |  | NIAID, IDCRC |  | Gritstone
CORAL |  | 1 |  | Enrollment Complete |  | COVID-19 booster |  | — |  | Gritstone
CORAL |  | 1 |  | Enrolling |  | COVID-19 in South Africa (naïve, convalescent, HIV+) |  | CEPI |  | Gritstone
HIV |  | 1 |  | Ongoing |  | HIV treatment/cure |  | Gilead Sciences |  | Gilead**

* MSS-CRC = microsatellite stable colorectal cancer

** Gilead is responsible for conducting a Phase 1 study

COVID-19 Update

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

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

In response to the COVID-19 pandemic, we have implemented heightened health and safety measures designed to comply with applicable federal, state and local guidelines, and transitioned to a flexible work environment, where employees who can work from home effectively are allowed to do so. We have implemented virtual meeting and messaging technology and encourage employees to follow local health authority guidance. As the pandemic and its impacts continue to evolve, we may need to undertake additional actions that could impact our operations if required by applicable laws or regulations or if we determine such actions to be in the best interests of our employees.

Oncology Program Updates

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

GRANITE Individualized Vaccine Program for Solid Tumors

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

In an ongoing Phase 1/2 study evaluating GRANITE in combination with checkpoint inhibitors for patients with MSS-CRC that have been treated with FOLFOX/FOLFIRI therapy as well as in patients with gastro-esophageal (GEA) cancer that have been treated with platinum-based chemotherapy, GRANITE has shown to be generally well-tolerated, with no dose limiting toxicities, and demonstrated consistent and potent immunogenicity (CD8+ neoantigen-specific T cell induction in all subjects), in addition to tumor lesion size reductions and molecular responses as measured by reduction in circulating tumor DNA (cDNA). Initial results from this study were presented during the European Society of Medical Oncology (ESMO) Congress in September 2021, and follow-up for patients in the study continues. As of the August 5, 2021 data cutoff, 4 of 9 treated patients with MSS-CRC had a molecular response. Patients who demonstrated molecular response had median overall survival of >17 months (median not reached) whereas those without molecular response exhibited a median overall survival of 7.8 months, consistent with expected outcomes in 3rd line treatment of MSS-CRC. As of the next data cutoff on May 9, 2022, the observed median overall survival in this group exceeded 18 months with median OS not yet reached. All patients with MSS-CRC assessed for molecular response and alive at the time of our ESMO 2021 data presentation remained alive after an additional 35 weeks of follow-up. We believe these data demonstrate a correlation between a decrease in ctDNA and extended overall survival. Interim results from the Phase 1/2 study were published in Nature Medicine in August 2022 (“Individualized, heterologous chimpanzee adenovirus and self-amplifying mRNA neoantigen vaccine for advanced metastatic solid tumors: phase 1 trial interim results”).

In the first quarter of 2022, we initiated a randomized Phase 2/3 study (GRANITE-CRC-1L, NCT05141721), evaluating GRANITE as a maintenance treatment in patients with newly diagnosed, metastatic MSS-CRC who have completed FOLFOX-bevacizumab induction therapy. This Phase 2/3 study has registrational intent and has been discussed with the FDA. In support of this study, we entered into a clinical trial collaboration and supply agreement with F. Hoffman-La Roche Ltd to evaluate the safety and tolerability of GRANITE in combination with TECENTRIQ (atezolizumab). Enrollment in GRANITE-CRC-1L study is ongoing, and the first patient was treated in July 2022. Initial data from GRANITE-CRC-1L are expected in the fourth quarter of 2023. In August 2022, we terminated the GRANITE-ADJUVANT study (NCT05456165), a randomized Phase 2 trial evaluating GRANITE in patients with stage II/III colon cancer who are circulating tumor DNA (ctDNA)+ after definitive surgery, due to reprioritization of resources. No patients had been enrolled at the time of study termination.

SLATE “Off the shelf” Vaccine Program for Solid Tumors

Our second oncology program, SLATE, consists of “off-the-shelf”, TSNA-directed immunotherapy product candidates. SLATE contains a fixed cassette with TSNA that are shared across a subset of cancer patients rather than a cassette unique to an individual patient, which distinguishes it as a potential off-the-shelf alternative candidate to

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

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

Subsequently, we developed a next-generation, optimized SLATE candidate, SLATE-KRAS, (formerly referred to as SLATE v2) that exclusively includes epitopes from mutated KRAS and exhibited immunogenic superiority over v1 in human HLA-transgenic mice. SLATE-KRAS is now in Phase 2 testing under the same IND and protocol as SLATE v1 in patients with advanced NSCLC and CRC. We disclosed the initial results from the Phase 2 portion of the Phase 1/2 study, including data from both SLATE v1 and SLATE-KRAS, at the 2022 AACR Annual Meeting in April 2022 and at the 2022 ESMO Congress in September 2022. These data demonstrate a favorable safety and tolerability profile, support the potential of SLATE-KRAS to drive stronger CD8+ T cell responses to mutant KRAS than SLATE v1 and provide early signals of efficacy as measured by reduction in ctDNA (molecular response). Specifically, we saw a molecular response rate (MRR) of 39% in evaluable patients with advanced NSCLC and CRC, a figure consistent with the MRR seen in the Phase 1/2 studies of GRANITE (MRR of 44%). We believe these initial data also demonstrate a correlation between molecular response and overall survival (OS) among patients with NSCLC. Based on these data, we have begun evaluating moving SLATE-KRAS into additional studies and earlier lines of treatment.

Infectious Disease Program Updates

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

CORAL – Second Generation COVID-19 Vaccine Program

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

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

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

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

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

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

HIV Vaccine Collaboration with Gilead Sciences

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

Preclinical Research Updates

Beyond GRANITE, SLATE, CORAL and the collaboration with Gilead, we continue to apply our broad set of capabilities in oncology and infectious diseases through promising preclinical work and partnerships. These projects include a pan-coronavirus program, a flu program, and a program aiming to develop an optimal immunogen in the context of human papillomavirus (HPV), which is supported by the Gates Foundation.

Components of Our Operating Results

Collaboration and Grant Revenue

We have no products approved for sale and have never generated any revenue from product sales. For the three and nine months ended September 30, 2022, respectively, we recognized $3.0 million and $15.7 million of revenue from the 2seventy Agreement, the Gilead Collaboration Agreement, and the grant agreements with CEPI and the Gates Foundation. For the three and nine months ended September 30, 2021, we recognized $2.6 million and $45.1 million for the three and nine months ended September 30, 2021, respectively, of revenue from the 2seventy Agreement, the Gilead Collaboration Agreement, another small collaboration agreement, and the grant agreement with CEPI. See Note 9 to our condensed consolidated financial statements for additional information.

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

Operating Expenses

Research and Development Expenses

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

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

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

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

Pursuant to our 2020 Genevant License Agreement, Genevant granted us exclusive license rights under certain intellectual property related to Genevant’s LNP technology for a single indication, and we agreed to pay Genevant an initial payment of $2.0 million, and up to an aggregate of $71.0 million in specified development, regulatory, and commercial milestones, and low to mid-single digit royalties on net sales of licensed products. The upfront payment of $2.0 million was included in research and development expenses during 2020. In March 2022, a milestone in the amount of $1.0 million was met, which was included in research and development expense for the nine months ended September 30, 2022.

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

We expect our research and development expenses to increase substantially in the future as we continue to advance our product candidates into and through clinical studies and pursue regulatory approval. Such activities are costly and time-consuming and we expect our clinical studies to generally become larger and more costly to conduct as they advance into later stages. The successful development of our product candidates is highly uncertain. The actual probability of success for our product candidates may be affected by a variety of risks and uncertainties associated with drug development, including those described in the section entitled “Risk Factors” included in Part II, Section 1A and elsewhere in this report.

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
GRANITE program external expenses |  | $ | 3,088 |  |  | $ | 3,387 |  |  | $ | 9,232 |  |  | $ | 8,767 |
SLATE program external expenses |  |  | 604 |  |  |  | 1,024 |  |  |  | 2,076 |  |  |  | 2,935 |
CORAL program external expenses |  |  | 2,802 |  |  |  | 1,193 |  |  |  | 9,002 |  |  |  | 2,828 |
Other program external research and development expenses |  |  | 5,463 |  |  |  | 5,996 |  |  |  | 17,702 |  |  |  | 19,533 |
Personnel-related expenses (1) |  |  | 10,159 |  |  |  | 8,624 |  |  |  | 31,117 |  |  |  | 25,171 |
Other unallocated research and development expenses |  |  | 4,320 |  |  |  | 4,172 |  |  |  | 12,854 |  |  |  | 12,090 |
Total research and development expenses |  | $ | 26,436 |  |  | $ | 24,396 |  |  | $ | 81,983 |  |  | $ | 71,324 |

(1)
Personnel-related expenses include stock-based compensation expense of $1.6 million and $5.1 million, respectively, for the three and nine months ended September 30, 2022, and $1.7 million and $5.0 million, respectively, for the three and nine months ended September 30, 2021.

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

General and Administrative Expenses

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

Interest Income

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

Interest Expense

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

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Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2022 and 2021

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

|  | Three Months Ended September 30, |  |  |  |
|  | 2022 |  |  | 2021 |  |  | Change |
Revenues: |  |  |  |  |  |  |  |  |
Collaboration and license revenues |  | $ | 436 |  |  | $ | 2,401 |  |  | $ | (1,965 | )
Grant revenues |  |  | 2,585 |  |  |  | 213 |  |  |  | 2,372 |
Total revenues |  |  | 3,021 |  |  |  | 2,614 |  |  |  | 407 |
Operating expenses: |  |  |  |  |  |  |  |  |
Research and development |  |  | 26,436 |  |  |  | 24,396 |  |  |  | 2,040 |
General and administrative |  |  | 6,462 |  |  |  | 6,373 |  |  |  | 89 |
Total operating expenses |  |  | 32,898 |  |  |  | 30,769 |  |  |  | 2,129 |
Net loss from operations |  |  | (29,877 | ) |  |  | (28,155 | ) |  |  | (1,722 | )
Interest income |  |  | 462 |  |  |  | 37 |  |  |  | 425 |
Interest expense |  |  | (551 | ) |  |  | — |  |  |  | (551 | )
Net loss |  | $ | (29,966 | ) |  | $ | (28,118 | ) |  | $ | (1,848 | )

|  | Nine Months Ended September 30, |  |  |  |
|  | 2022 |  |  | 2021 |  |  | Change |
Revenues: |  |  |  |  |  |  |  |  |
Collaboration and license revenues |  | $ | 7,942 |  |  | $ | 44,937 |  |  | $ | (36,995 | )
Grant revenues |  |  | 7,741 |  |  |  | 213 |  |  |  | 7,528 |
Total revenues |  |  | 15,683 |  |  |  | 45,150 |  |  |  | (29,467 | )
Operating expenses: |  |  |  |  |  |  |  |  |
Research and development |  |  | 81,983 |  |  |  | 71,324 |  |  |  | 10,659 |
General and administrative |  |  | 22,209 |  |  |  | 19,251 |  |  |  | 2,958 |
Total operating expenses |  |  | 104,192 |  |  |  | 90,575 |  |  |  | 13,617 |
Net loss from operations |  |  | (88,509 | ) |  |  | (45,425 | ) |  |  | (43,084 | )
Interest income |  |  | 663 |  |  |  | 112 |  |  |  | 551 |
Interest expense |  |  | (551 | ) |  |  | — |  |  |  | (551 | )
Net loss |  | $ | (88,397 | ) |  | $ | (45,313 | ) |  | $ | (43,084 | )

Collaboration and License and Grant Revenues

Collaboration and license revenues from our collaboration arrangements and grant revenues were $3.0 million and $15.7 million for the three and nine months ended September 30, 2022, respectively. During the three months ended September 30, 2022, we recognized $0.2 million in collaboration revenue related to the 2seventy Agreement, $0.2 million in collaboration revenue related to the Gilead Collaboration Agreement, $2.3 million in grant revenue from the CEPI Funding Agreement, and $0.3 million in grant revenue from the Gates Foundation. During the nine months ended September 30, 2022, we recognized $6.5 million in collaboration revenue related to the 2seventy Agreement, $1.5 million in collaboration revenue related to the Gilead Collaboration Agreement, $6.9 million in grant revenue from the CEPI Funding Agreement, and $0.8 million in grant revenue from the Gates Foundation. The amount of collaboration revenue recognized related to the 2seventy Agreement during the nine months ended September 30, 2022 included cumulative catch-up adjustments increasing contribution revenue by $5.5 million due to revisions to estimated costs to complete the remaining performance obligation.

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

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

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

Research and Development Expenses

Research and development expenses were $26.4 million and $82.0 million for the three and nine months ended September 30, 2022, respectively, and $24.4 million and $71.3 million for the three and nine months ended September 30, 2021, respectively.

The increase of $2.0 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to increases of $1.6 million in personnel-related expenses, $1.0 million in outside services, consisting primarily of clinical trial and other chemistry, manufacturing and controls (“CMC”) related expenses, and $0.6 million in facilities-related costs, offset by a decrease of $1.2 million in laboratory supplies.

The increase of $10.7 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to increases of $6.4 million in personnel-related expenses, $7.1 million in outside services, consisting primarily of clinical trial and other CMC related expenses, and $1.7 million in facilities-related costs, offset by decreases of $2.7 million in laboratory supplies and $1.8 million in milestone and license payments.

General and Administrative Expenses

General and administrative expenses were $6.5 million for the three months ended September 30, 2022 compared to $6.4 million for the three months ended September 30, 2021. The increase of $0.1 million was primarily attributable to an increase of $0.7 million in personnel-related expenses, offset by decreases of $0.4 million in outside services and $0.2 million in facilities-related costs.

General and administrative expenses were $22.2 million for the nine months ended September 30, 2022 compared to $19.2 million for the nine months ended September 30, 2021. The increase of $3.0 million was primarily attributable to increases of $3.7 million in personnel-related expenses, offset by decreases of $0.4 million in outside services and $0.3 million in facilities-related costs.

Interest Income

Interest income was $0.5 million and $0.7 million for the three and nine months ended September 30, 2022, respectively. Interest income was immaterial and $0.1 million for the three and nine months ended September 30, 2021, respectively. The income for both periods represent interest and investment income from cash, cash equivalents and marketable securities.

Interest Expense

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

Liquidity and Capital Resources

Sources of Liquidity

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

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will enable us to fund our current and planned operating expenses and capital expenditures for at least the next 12 months from the date of the filing of this report.

In October 2019, we filed the 2019 Shelf Registration Statement, covering the offering of up to $250.0 million of various equity and debt securities, including the sale and issuance of up to $75.0 million worth of shares of our common stock under the 2019 ATM Offering Program. Through September 30, 2022, we have received aggregate proceeds from our 2019 ATM Offering Program of $50.0 million, net of commissions and offering costs, pursuant to the issuance of 5,642,712 shares.

In March 2022, we filed the 2022 Shelf Registration Statement, covering the offering of up to $250.0 million of various equity and debt securities, including the sale and issuance of up to $100.0 million worth of shares of our common stock under the 2022 ATM Offering Program. As of September 30, 2022, we have received $0.2 million in gross proceeds from our 2022 ATM Offering Program and have $99.8 million available thereunder.

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

In July 2022, we entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”) and Silicon Valley Bank (“SVB”), which provides us with a 60-month term loan facility for the Company up to $80.0 million in borrowing capacity across five potential tranches. At the closing of the Loan Agreement, we drew $20.0 million from the first tranche, and we can draw up to an additional $10.0 million through March 2023. The remaining tranches provide up to $50.0 million borrowing capacity and become available if and when we meet certain milestones set forth in the Loan Agreement. The term loan is secured by substantially all of our assets, other than intellectual property. There are no warrants associated with the Loan Agreement.

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

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

Beginning on April 1, 2023, so long as our market capitalization is equal to or less than $400.0 million, we are subject to a minimum liquidity requirement equal to the then outstanding balance under the Loan Agreement multiplied by 0.55 or 0.45, which multiplier depends on whether we achieve certain performance milestones. Our obligations under the Loan Agreement are subject to acceleration upon the occurrence of customary events of default, including payment default, insolvency and the occurrence of certain events having a material adverse effect, including (but not limited to) material adverse effects upon the business, operations, properties, assets or financial condition of us and our subsidiaries, taken as a whole.

Future Funding Requirements

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

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

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

Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $489.8 million through September 30, 2022. We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the next twelve (12) months from the date of this Quarterly Report on Form 10-Q. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our operating capital requirements. Our future capital requirements depend on many factors, including:

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

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

A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with such operating plans.

Cash Flows

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

|  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |
Cash used in operating activities |  | $ | (85,572 | ) |  | $ | (26,899 | )
Cash provided by (used in) investing activities |  |  | 33,188 |  |  |  | (71,927 | )
Cash provided by financing activities |  |  | 18,733 |  |  |  | 75,883 |
Net decrease in cash and cash equivalents |  | $ | (33,651 | ) |  | $ | (22,943 | )

Cash Used in Operating Activities

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

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

Cash Provided by (Used in) Investing Activities

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

During the nine months ended September 30, 2021, cash used in investing activities was $71.9 million, which consisted of $133.4 million in purchases of marketable securities and $4.1 million of capital expenditures to purchase property and equipment, offset by $59.4 million in proceeds from the maturity of marketable securities and $6.2 million from sales of marketable securities.

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Cash Provided by Financing Activities

During the nine months ended September 30, 2022, cash provided by financing activities was $18.7 million, which primarily consisted of $19.2 million in proceeds from long-term debt, $0.2 million in proceeds from the 2022 ATM Offering Program, $0.2 million in proceeds from the issuance of common stock from option and warrant exercises and $0.3 million in proceeds from issuance of common stock under the employee stock purchase plan, offset by $0.9 million in tax withholding on vesting of restricted stock units, $0.1 million in payment of financing costs, and $0.2 million in payment of financing lease.

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

Off-Balance Sheet Arrangements

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

Contractual Obligations and Commitments

We lease office, laboratory and storage space in facilities at several locations in California and Massachusetts. The terms of our lease agreements have expiration dates between 2023 to 2033. The total future minimum lease payments under the agreements are $108.1 million, of which $2.5 million of the payments are due in the fourth quarter of 2022. See Note 6 to our condensed consolidated financial statements.

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

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

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

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

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Critical Accounting Policies and Use of Estimates

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

There have been no changes to our critical accounting policies since we filed our Annual Report on Form 10-K for the year ended December 31, 2021 with the SEC on March 10, 2022. For a description of our critical accounting policies, please refer to our Annual Report on Form 10-K we filed with the SEC on March 10, 2022.

Recent Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(e) and 15d-15(e) of the Exchange Act that occurred during the nine months ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

ITEM 1A. Risk Factors

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

There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 10, 2022, as updated by the risk factors set forth in Part II, Item 1A of our Quarterly Report on Form 10-Q for the six months ended June 30, 2022 filed with the SEC on August 4, 2022.

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

Unregistered Sales of Equity Securities

Not applicable.

Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

Not applicable.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

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ITEM 6. EXHIBITS

Exhibit Number |  | Exhibit Description |  | Incorporated by Reference |  | Filed Herewith |  |
|  |  |  | Form |  | Date |  | Number |  |  |  |
3.1(a) |  | Amended and Restated Certificate of Incorporation. |  | 8-K |  | 10/02/2018 |  |  | 3.1 |  |  |  |  |
3.1(b) |  | Certificate of Amendment to Amended and Restated Certificate of Incorporation. |  | 8-K |  | 05/06/2021 |  |  | 3.1 |  |  |  |  |
3.2 |  | Amended and Restated Bylaws. |  | 8-K |  | 05/06/2021 |  |  | 3.2 |  |  |  |  |
4.1 |  | Reference is made to exhibits 3.1 through 3.2. |  |  |  |  |  |  |  |  |  |  |  |
4.2 |  | Form of Common Stock Certificate. |  | S-1/A |  | 09/17/2018 |  |  | 4.2 |  |  |  |  |
4.3 |  | Description of Common Stock. |  | 10-K |  | 03/10/2022 |  |  | 4.3 |  |  |  |  |
10.1# |  | Loan and Security Agreement between the Company, Hercules Capital, Inc. and Silicon Valley Bank and certain other parties thereto, dated as of July 19, 2022. |  |  |  |  |  |  |  |  |  | X |  |
31.1 |  | Certification of Chief Executive Officer of Gritstone bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. |  |  |  |  |  |  |  |  |  | X |  |
31.2 |  | Certification of Chief Financial Officer of Gritstone bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. |  |  |  |  |  |  |  |  |  | X |  |
32.1* |  | Certification by the Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 36 of Title 18 of the United States Code (18 U.S.C. §1350). |  |  |  |  |  |  |  |  |  | X |  |
101.INS |  | Inline XBRL Instance Document |  |  |  |  |  |  |  |  |  | X |  |
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document |  |  |  |  |  |  |  |  |  | X |  |
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  |  |  |  |  |  |  | X |  |
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document |  |  |  |  |  |  |  |  |  | X |  |
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document |  |  |  |  |  |  |  |  |  | X |  |
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  |  |  |  |  |  | X |  |
104 |  | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 has been formatted in Inline XBRL. |  |  |  |  |  |  |  |  |  | X |  |

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

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  |  | Gritstone bio, Inc.
Date: |  | November 3, 2022 | By: |  | /s/ Andrew Allen
|  |  |  |  | Andrew Allen, M.D., Ph.D.
|  |  |  |  | President and Chief Executive Officer (Principal Executive Officer)
|  |  | By: |  | /s/ Vassiliki “Celia” Economides
|  |  |  |  | Vassiliki “Celia” Economides
|  |  |  |  | Chief Financial Officer (Principal Financial Officer)

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