UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F

 

 

(Mark One)

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

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

 

For the fiscal year ended December 31, 2023

OR

 

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

 

OR

 

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

 

Date of event requiring this shell company report .

For the transition period from to .

Commission file number 001-36891

 

 

CELLECTIS S.A.

(Exact name of Registrant as specified in its charter)

 

 

(Translation of Registrant’s name into English)

 

 

France

(Jurisdiction of incorporation or organization)

Cellectis S.A.

8, rue de la Croix Jarry

75013 Paris, France

(Address of principal executive office)

Marie-Bleuenn Terrier General Counsel Cellectis S.A.

8, rue de la Croix Jarry

75013 Paris, France

Tel: +33 (0)1 81 69 16 00, Fax: +33 (0)1 81 69 16 06

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

 

Title of each class		Trading Symbol		Name of each exchange on which registered
American Depositary Shares, each representing one		“CLLS”		Nasdaq Global Market
American Depositary Shares, each representing one
Ordinary shares, nominal value €0.05 per share*				Nasdaq Global Market*

 

* Not for trading, but only in connection with the registration of the American Depositary Shares.

Securities registered pursuant to Section 12(g) of the Act.

None

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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

 

 

Indicate the number of outstanding shares of common stock as of the close of the period covered by the annual report.

Ordinary shares, nominal value €0.05 per share: 71,751,201 as of December 31, 2023

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark, if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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 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, accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated file	☐	Emerging Growth Company	☐

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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

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

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

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP ☐		International Financial Reporting Standards as issued by the International Accounting Standards Board ☒		Other ☐

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No

 

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TABLE OF CONTENTS

 

			PAGE
INTRODUCTION			2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			3
PART I
Item 1.	Identity of Directors, Senior Management and Advisers		5
Item 2.	Offer Statistics and Expected Timetable		5
Item 3.	Key Information		5
Item 4.	Information on the Company		40
Item 4A.	Unresolved Staff Comments		77
Item 5.	Operating and Financial Review and Prospects		78
Item 6.	Directors, Senior Management and Employees		97
Item 7.	Major Shareholders and Related Party Transactions		106
Item 8.	Financial Information		110
Item 9.	The Offer and Listing		112
Item 10.	Additional Information		112
Item 11.	Quantitative and Qualitative Disclosures About Market Risk		121
Item 12.	Description of Securities Other than Equity Securities		121
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies		124
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		124
Item 15.	Controls and Procedures		124
Item 16.	Reserved		125
Item 16A.	Audit Committee Financial Expert		125
Item 16B.	Code of Ethics		125
Item 16C.	Principal Accountant Fees and Services		125
Item 16D.	Exemptions from the Listing Standards for Audit Committees		126
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		126
Item 16F.	Change in Registrant’s Certifying Accountant		126
Item 16G.	Corporate Governance		126
Item 16H.	Mine Safety Disclosure		127
Item 16I.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		127
Item 16J.	Insider Trading Policies		127
Item 16H.	Cybersecurity		127
PART III
Item 17.	Financial Statements		129
Item 18.	Financial Statements		129
Item 19.	Exhibits		129

 

 

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INTRODUCTION

Unless otherwise indicated or the context otherwise requires, references in this Annual Report on Form 20-F for the year ended December 31, 2023 (the “Annual Report”) to, “Cellectis,” the “Company,”” “we,” “our,” “us,” and “the Company” refer to Cellectis S.A. and its subsidiaries, taken as a whole (in the case of Calyxt, Inc., only until May 31, 2023), unless the context otherwise requires. References to “Calyxt” refer to Calyxt, Inc. (renamed Cibus, Inc,. as of May 31,, 2023) and its subsidiaries, taken as a whole. With respect to disclosures relating to the period before May 31, 2023, references to the “Group” refer to Cellectis S.A., Cellectis, Inc., Cellectis Biologics, Inc. and Calyxt, Inc., collectively. With respect to disclosures relating to the period after May 31, 2023, references to the “Group” refer to Cellectis S.A., Cellectis, Inc. and Cellectis Biologics, Inc.

We own various trademark registrations and applications, and unregistered trademarks and service marks, including Cellectis®, TALEN® and our corporate logos, and all such trademarks and service marks appearing in this Annual Report on Form 20-F are the property of Cellectis. All other trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 20-F are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Annual Report may be referred to without the ® and ™ symbols, but such references, or the failure of such symbols to appear, should not be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

Our audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our consolidated financial statements are presented in U.S. dollars. All financial information (unless indicated otherwise) is presented in thousands of U.S. dollars.

All references in this Annual Report to “$,” “U.S. dollars” and “dollars” mean U.S. dollars and all references to “€” and “euros” mean euros. Throughout this Annual Report, references to ADSs mean American Depositary Shares or ordinary shares represented by ADSs, as the case may be.

Note Regarding Use of Non-IFRS Financial Measures

Cellectis presents Adjusted Net Income (Loss) attributable to shareholders of Cellectis in this Annual Report. Adjusted Net Income (Loss) attributable to shareholders of Cellectis is not a measure calculated in accordance with IFRS. We have included in this Annual Report a reconciliation of this figure to Net Income (Loss) attributable to shareholders of Cellectis, the most directly comparable financial measure calculated in accordance with IFRS. Because Adjusted Net Income (Loss) attributable to shareholders of Cellectis excludes Non-cash stock-based compensation expense—a non-cash expense, we believe that this financial measure, when considered together with our IFRS financial statements, can enhance an overall understanding of Cellectis’ financial performance. Moreover, our management views the Company’s operations, and manages its business, based, in part, on this financial measure. In particular, we believe that the elimination of Non-cash stock-based expenses from Net Income (Loss) attributable to shareholders of Cellectis can provide a useful measure for period-to-period comparisons of our core businesses. Our use of Adjusted Net Income (Loss) attributable to shareholders of Cellectis has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under IFRS. Some of these limitations are: (a) other companies, including companies in our industries which have similar stock-based compensations, may address the impact of Non-cash stock-based compensation expense differently; and (b) other companies may report Adjusted Net Income (Loss) attributable to shareholders or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted Net Income (Loss) attributable to shareholders of Cellectis alongside our other IFRS financial results, including Net Income (Loss) attributable to shareholders of Cellectis.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains “forward-looking statements” within the meaning of applicable federal securities laws, including the Private Securities Litigation Reform Act of 1995. All statements other than present and historical facts and conditions contained in this Annual Report, including statements regarding our future results of operations and financial position, business strategy, plans and our objectives for future operations, are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties and are made in light of information currently available to us. Many important factors, in addition to the factors described in this Annual Report, may adversely affect such forward-looking statements. When used in this Annual Report, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

 

 

You should refer to the section of this Annual Report titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward- looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. We qualify all of our forward-looking statements by these cautionary statements.

Market Data

This Annual Report contains market data and industry forecasts that were obtained from various industry publications. In presenting this information, we have also made assumptions based on such data and other similar sources, and on our knowledge of, and our experience to date in, the biotechnology industry. Market data and industry forecasts involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market position, market opportunity and market size information included in this Annual Report is generally reliable, such information is inherently imprecise.

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Various risks, including those described in the section of this Annual Report entitled “Risk Factors,” could cause results to differ materially from those expressed in the estimates made by us and independent parties.

Website Disclosure

We use our website (www.cellectis.com) and our corporate Twitter account (@cellectis) and our corporate LinkedIn account (https://www.linkedin.com/company/cellectis) as routine channels of distribution of company information, including press releases, analyst presentations, and supplemental financial information, as a means of disclosing otherwise material non-public information and for complying with our disclosure obligations. Accordingly, investors should monitor these corporate websites and corporate Twitter and LinkedIn accounts in addition to following press releases, filings with the SEC, and public conference calls and webcasts. Additionally, we provide notifications of announcements as part of our website. Investors and others can receive notifications of new press releases posted on our website by signing up for email alerts.

None of the information provided on these websites, in our press releases or public conference calls and webcasts or through social media is incorporated into, or deemed to be a part of, this Annual Report or in any other report or document we file with the SEC, and any references to such websites or corporate Twitter accounts are intended to be inactive textual references only.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Not applicable.

Not applicable.

Our business and our industry are subject to significant risks. You should carefully consider all of the information set forth in this Annual Report, including the following risk factors. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Additional risks not currently known to us or that we currently deem immaterial may also affect our business operations. Additional risks not currently known to us or that we currently deem immaterial may also affect our business operations.

 

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Summary of Risk Factors Associated with Our Business

Our business and our industry are subject to numerous risks described in “Risk Factors” and elsewhere in this Annual Report. You should carefully consider these risks before making a decision to invest in our securities. Key risks include, but are not limited to, the following:

Risks Related to Our Therapeutics Business:

Risks Related to the Discovery, Development and Commercialization of Our Therapeutic Product Candidates:

Risks Related to Our Reliance on Third Parties:

Risks Related to Operational Compliance and Risk Management:

 

 

 

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Risks Relating to our Relationships with AstraZeneca:

 

Risks Related to Regulatory Approvals for Our Product Candidates:

Risks Related to Intellectual Property.

Risks Related to Human Capital.

Risks Relating to Our Status as a Foreign Private Issuer and a French Company:

Risks Related to Ownership of Our ADSs:

 

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Risks Related to Our Therapeutics Business

As a clinical-stage biopharmaceutical company, we have incurred net losses in every period since our inception and anticipate that we will incur substantial net losses in the future.

We are a clinical-stage biopharmaceutical company and devote most of our financial resources to research and development relating to our CAR T-cell immunotherapy product candidates and the advancement of our clinical trials. Investment in biopharmaceutical product development is highly speculative because it entails both substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, to gain required regulatory approvals or to become commercially viable. Our most advanced product candidates remain in clinical development. We have no products approved for commercial sale and have not generated any revenue from product sales to date. We will continue to incur significant research and development and other expenses related to our ongoing clinical trials and operations. As a result, we are not profitable and have incurred net losses in each period since our inception. For the year ended December 31, 2023, we reported a net loss of $116.8 million from continuing operations, our research and development expenses were $87.6 million. As of December 31, 2023, we had an accumulated deficit attributable to the shareholders of Cellectis of $405.8 million.

Notwithstanding our ongoing clinical trials, it will be several years, if ever, before we obtain regulatory approval for, and are ready for commercialization of, a biopharmaceutical product. Even if we or our licensees or partners successfully commence and complete clinical trials and obtain regulatory approval to market a product, any future revenues will depend upon the size of any markets in which the products are approved for sale as well as the market share captured by such products, market acceptance of such products and levels of reimbursement from third-party payors.

We expect to continue to incur significant expenses and operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from year to year and quarter to quarter. We expect our expenditures to increase as we conduct our clinical studies, file IND and/or foreign equivalent filings for additional product candidates, conduct research and development for product candidates, invest in deploying and scaling our manufacturing capabilities, seek regulatory and marketing approvals, and establish necessary infrastructure for the commercialization of any products for which we obtain marketing approval.

In addition, we have encountered, and may encounter in the future, unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. For example, we and our licensees have had clinical trials placed on hold by the FDA, which have had the effect of temporarily suspending these clinical programs until the resolution of the hold with the FDA. You should consider our business and prospects in light of the risks and difficulties we face as a clinical-stage biopharmaceutical company.

We face substantial competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

The biopharmaceutical industry, and the immuno-oncology industry in particular, is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are more effective, safer, more easily commercialized, or less costly than our product candidates. Further, competitors may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products.

We face competition from major multinational pharmaceutical companies, new and established biotechnology and specialty pharmaceutical companies, academic research institutions, government agencies and public and private research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff, greater expertise in large scale pharmaceutical manufacturing, and/or well-established marketing and sales teams. Smaller or early-stage companies may compete with us through collaborative arrangements with large, established companies. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

The success of other therapies developed by our competitors could impact our regulatory strategy and delay or prevent regulatory approval of our product candidates. Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products may limit demand for, or the price that we are able to charge for, our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances.

We are subject to various risks related to public health crises, that could have material and adverse impacts on our business, financial condition, liquidity, and results of operations.

Any outbreaks of contagious diseases and other adverse public health developments could have a material and adverse impact on our business, financial condition, liquidity, and results of operations. As has occurred with the COVID-19 global pandemic, a regional epidemic or a global pandemic could cause disruptions to national and global economies and financial markets as well as raw materials supply chains, and could have a negative impact on our clinical trials, including with respect to patient recruitment.

We may need to raise additional funding, which may not be available on acceptable terms or at all. Failure to obtain necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

The process of developing and manufacturing CAR T-cell product candidates and conducting clinical studies is expensive, lengthy and risky. We are currently sponsoring three clinical studies, preparing regulatory filings to commence new clinical studies and/or to add additional investigational sites for ongoing studies, advancing pre-clinical testing for additional product candidates, and conducting manufacturing at our in-house manufacturing facilities. Accordingly, we expect our operational expenses to increase in connection with our ongoing activities. In addition, subject to obtaining regulatory approval of any biopharmaceutical product candidates, we expect to incur significant commercialization expenses. Further, our operating plans, including product development and commercialization plans, may change in light of changed circumstances or as a result of factors currently unknown to us, which may require us to seek additional funds sooner than planned.

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With cash and cash equivalents of $136.7 million as of December 31, 2023, and taking into account the €15.0 million under Tranche B of the €40.0 million Finance Contract with the European Investment Bank (the "EIB") received in January 2024, and the $140 million equity investment we expect to receive (the "Additional Investment") pursuant to the subsequent investment agreement dated November 14, 2023 (the "Subsequent Investment Agreement") between us and AZ Holdings, the Company believes its cash and cash equivalents will be sufficient to fund its operations into, assuming receipt of such funds, 2026 and therefore for at least twelve months following the consolidated financial statements’ publication.

Our ability to raise additional capital may be limited. If we raise additional capital through the sale of additional equity or convertible securities, current ownership interests may be diluted and the terms of these securities may include liquidation or other preferences that adversely affect stockholders’ rights. For example, in connection with the Finance Contract, the Company has also agreed to enter into a warrant agreement with the EIB with respect to the issuance of warrants to the EIB in connection with, and as a condition to, the funding of each tranche under the Finance Contract. In April 2023, in connection with the disbursement of the €20.0 million Tranche A, the Company issued 2,799,188 warrants to the EIB, and in January 2024, the Company announced the issuance of 1,460,053 warrants to the EIB in connection with the disbursement of €15.0 million Tranche B of the EIB financing. In addition, in November 2023, the Company announced the issuance of 16,000,000 new ordinary shares to AZ Holdings under the Initial Investment Agreement signed between us and AZ Holdings dated November 1, 2023 (the "Initial Investment Agreement"), and following the filing of this Annual Report, the Company expects to issue 10,000,000 “class A” convertible preferred shares and 18,000,000 “class B” convertible preferred shares to AZ Holdings pursuant to the Subsequent Investment Agreement signed between us and AZ Holdings. Due to any future issuances of shares of our common stock, including pursuant to the warrants issuable to the EIB if any, and the Subsequent Investment Agreement, our shareholders may experience immediate dilution and, as a result, our stock price may decline.

Debt financing, if available, would result in increased fixed payment obligations and a portion of our operating cash flows, if any, being dedicated to the payment of principal and interest on such indebtedness. In addition, debt financing may involve agreements that include restrictive covenants that impose operating restrictions, such as restrictions on the incurrence of additional debt, the making of certain capital expenditures or the declaration of dividends. For example, in connection with the Finance Contract, we agreed to certain negative undertakings, which include: restrictions on dispositions of assets by us and our subsidiaries, restrictions on changes to the general nature of our business, restrictions on us and our subsidiaries engaging in mergers and other restructuring transactions, restrictions on certain ownership changes with respect to subsidiaries, restrictions on us and our subsidiaries engaging in acquisitions or making investments, restrictions on us and our subsidiaries incurring additional indebtedness or guarantees, restrictions on the making of intercompany loans, restrictions on us and our subsidiaries engaging in certain hedging or derivative transactions, restrictions on us and our subsidiaries making specified restricted payments including dividends and share repurchases, restrictions on us and our subsidiaries becoming creditors in respect of certain indebtedness, and restrictions on the incurrence of security over any of our or our subsidiaries’ assets. To the extent we raise additional funds through arrangements with research and development partners or otherwise, we may be required to relinquish some of our technologies, product candidates or revenue streams, license our technologies or product candidates on unfavorable terms, or otherwise agree to terms unfavorable to us. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.

Global financial markets have been negatively impacted as a result of global pandemics such as COVID-19 and military and regional conflicts, such as the invasion of Ukraine by Russia and the Middle East conflict. If these disruptions persist or deepen, or if other global events have a significant impact on the global financial markets, we could experience an inability to access additional capital or an increase in our costs of borrowing, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research and development programs or product candidate development programs, or the commercialization of any product candidate that may receive regulatory approval, which could materially affect our business, operating results and prospects.

Risks Related to the Discovery, Development and Commercialization of Our Therapeutic Product Candidates

Gene-editing remains relatively new technology, and if we are unable to use this technology in our intended applications, our revenue opportunities will be limited.

Our TALEN technology involves a relatively new approach to gene editing, using sequence-specific deoxyribonucleic acid (DNA)-cutting enzymes, or nucleases, to perform precise and stable modifications in the DNA of living-cells and organisms. Although we have generated nucleases for many specific gene sequences, we have not created nucleases for all gene sequences that we may seek to target, and we may have difficulty creating nucleases for certain gene sequences that we may seek to target, which could limit the usefulness of our technology. Our technology may also not be shown to be effective in clinical studies that we or licensees of our technology may conduct, or may be associated with safety issues that may negatively affect our development programs. For instance, gene-editing may create unintended changes to the DNA such as a non-target site gene-editing, a large deletion, or a DNA translocation, any of which could lead to oncogenesis. In the ALPHA2 trial being conducted by our licensee, Allogene, Allogene observed a chromosomal abnormality, and the FDA placed Allogene’s clinical trials on hold following this observation. While Allogene reported that its investigation concluded that gene editing was not responsible for the chromosomal abnormality and the hold was resolved, we or our licensees may discover future abnormalities caused by gene editing or other factors that would impact our development plans.

In addition, the field of gene-editing is rapidly developing. Our competitors may introduce new technologies that render our technology obsolete, uneconomical or less attractive. Similarly, our licensees may improve upon our technology in ways that makes our underlying technology, without such improvements, less attractive. New technology could emerge at any point in the development cycle of our product candidates. As competitors use or develop new technologies, any failures of such technology could adversely impact our programs. We also may be placed at a competitive disadvantage, and competitive pressures may force us to implement new technologies at a substantial cost. In addition, our competitors may have greater financial, technical and personnel resources that allow them to enjoy technological advantages and may in the future allow them to implement new technologies before we can. We cannot be certain that we will be able to implement technologies on a timely basis or at a cost that is acceptable to us. If we are unable to maintain technological advancements consistent with industry standards, our operations and financial condition may be adversely affected.

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Our therapeutic product candidate development programs are in various phases of development and may be unsuccessful.

Our therapeutic product candidates are in various phases of development. At each stage of development, there is typically an extremely high rate of attrition from the failure of product candidates advancing to subsequent stages of development.

Because some of our product candidates are in the early stages of discovery or pre-clinical development, there can be no assurance that our research and development activities will result in these product candidates advancing into clinical development. Product candidates in these development phases undergo testing in animal studies, and the results from these animal studies may not be sufficiently compelling to warrant further advancement. Moreover, even if results from animal studies are positive, such results are not necessarily predictive of positive results in clinical studies.

Even where product candidates do progress into and through clinical studies, these product candidates may fail to show the desired safety and efficacy in clinical development despite demonstrating positive preliminary clinical data and/or results in animal studies. Because of the early stages of our currently ongoing clinical studies, the safety, specificity and clinical benefits of our clinical-stage product candidates have not yet been demonstrated, and we cannot assure you that the results of any clinical trials will demonstrate the value and efficacy of our platform. The results of clinical studies are subject to a variety of factors, and there can be no assurance that any product candidate will advance to regulatory approval, be approved by applicable regulatory agencies, or be successfully commercialized.

Although there are a large number of drugs and biologics in development globally, only a very small percentage obtain regulatory approval, even fewer are approved for commercialization, and only a small number of these achieve widespread physician and consumer acceptance. Accordingly, despite expending significant resources in pursuit of their development, our product candidates may never achieve commercial success, and any time, effort and financial resources we expend on the product candidate development programs that we pursue may adversely affect our ability to develop and commercialize other product candidates.

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

From time to time, we or our licensee partners may publish initial, interim or preliminary data from clinical studies. Interim and preliminary data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. For instance, while we and our licensees or partners have published preliminary data from on-going clinical studies, such data is preliminary in nature, does not bear statistical significance, and should not be viewed as predictive of the ultimate success of the respective clinical trials. Particular caution should be exercised when interpreting preliminary results and results relating to a small number of patients or individually presented case studies—such results should not be viewed as predictive of future results. It is possible that such results will not continue or may not be repeated in ongoing or future clinical trials for the same product candidates or in clinical trials for other allogeneic Chimeric Antigen Receptor T-cells (“UCART”) product candidates.

Preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, initial, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between initial, preliminary or interim data and final data could significantly harm our business prospects.

We may encounter substantial delays in our clinical trials, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Clinical trials are long, expensive and unpredictable processes that can be subject to extensive delays. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. It will take several years to complete the clinical development necessary to obtain adequate data to file for a marketing authorization or to commercialize a product candidate, and failure can occur at any stage.

Positive interim or preliminary results of clinical trials do not necessarily predict positive final results, and success in early clinical trials does not ensure that later clinical trials will be successful. Product candidates in later stages of clinical trials may still fail to show the desired safety and efficacy profile despite having successfully progressed through initial clinical trials. A number of pharmaceutical and biopharmaceutical companies have suffered significant setbacks—lack of efficacy, insufficient durability of efficacy or unacceptable safety issues (including a number of patient deaths in CAR-T trials conducted in the United States)—in advanced clinical trials, even after promising results in earlier trials. We cannot be certain that our product candidates will not face similar setbacks.

An unfavorable outcome in one or more of our or our licensees’ or partners’ clinical trials would be a major setback for our product candidates and for us and may require us or our licensees or partners' to delay, reduce or re-define the scope of, or eliminate one or more product candidate development programs, any of which could have a material adverse effect on our business, financial condition and prospects.

In addition, a number of events, including any of the following, could delay clinical trials, negatively impact the ability to obtain regulatory approval for, and to market and sell, a particular product candidate, or result in suspension or termination of a clinical trial: conditions imposed by the FDA or any foreign regulatory authority regarding the scope or design of clinical trials;

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Our product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and obtaining regulatory approval.

We have concentrated our research, development and manufacturing efforts on our gene-edited CAR T-cell immunotherapy product candidates, and our future success depends on the successful development of this therapeutic approach. We are in the early stages of developing our UCART platform, and we have experienced significant development challenges, including with prior clinical holds by the FDA. There can be no assurance that any development problems we experience in the future will not cause significant delays or unanticipated costs, or that such development problems can be overcome. We may also experience delays in fully or effectively deploying a sustainable, reproducible and scalable manufacturing process at our new manufacturing facilities, which may prevent us from completing our clinical studies or commercializing our products on a timely or profitable basis, if at all. Our expectations with regard to the scalability and cost of manufacturing may change significantly as we further progress the development of our product candidates.

In addition, the clinical study requirements of the U.S. Food and Drug Administration (the “FDA”), the European Medicines Agency (the “EMA”) and other regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate are determined according to the type, complexity, novelty and intended use and market of the potential products. The regulatory approval process for novel product candidates such as ours can be more complex and consequently more expensive and take longer than for other, better known or extensively studied pharmaceutical or other product candidates. In addition, we may experience additional regulatory challenges with respect to clinical trials in which patients receive a lymphodepletion regimen. For example, regulatory authorities may require us to demonstrate the safety of such a lymphodepletion regimen as well as its contribution to the overall benefit to risk ratio, which could require that we collect additional clinical data.

Approvals by the European Commission, on the basis of the opinion issued by the EMA, and FDA for existing autologous CAR T-cell therapies may not be indicative of what these regulators may require for approval of our therapies. Also, while we expect reduced variability in our products candidates compared to autologous products, we do not have significant clinical data supporting any benefit of lower variability and the use of healthy donor material may create separate variability challenges for us. More generally, approvals by any regulatory agency may not be indicative of what any other regulatory agency may require for approval or what such regulatory agencies may require for approval in connection with new product candidates.

Our business is highly dependent on the success of our lead product candidates, and we cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, these product candidates.

Our business and future success depends on our ability to successfully develop, obtain regulatory approval for, and successfully commercialize our most advanced product candidates, UCART123, UCART22 and UCART20x22, our ability to develop and manufacture products candidates for AstraZeneca, and the ability of our licensees or partners to advance the product candidates that they are developing pursuant to licenses from us. Because our lead product candidates, and UCART product candidates of our licensees or partners, are among the first allogeneic products to be clinically evaluated, the failure of any such product candidate, or the failure of other allogeneic T cell therapies, may impede our ability to develop our product candidates, and significantly influence physicians’ and regulators’ opinions in regards to the viability of our entire pipeline of allogeneic T cell therapies. If significant events, such as significant GvHD or chromosomal abnormality events, are observed with the administration of our or our licensees’ product candidates, or if any of the product candidates is viewed as less safe or effective than autologous therapies, our ability to develop other allogeneic therapies may be significantly harmed. For example, all of the clinical trials of our licensee, Allogene, were put on clinical hold due to an observation in Allogene’s ALPHA2 trial. While that clinical hold has been resolved, we could be subject to clinical holds in the future due to any similar unexpected observations or as a result of adverse patient outcomes or other issues.

Our therapeutic product candidates will require substantial additional clinical and non-clinical development, testing, and regulatory review and approval in multiple jurisdictions, substantial investment, implementation and scaling of our commercial manufacturing capabilities, and significant marketing efforts before we can generate any revenue from product sales. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate, with substantial evidence gathered in well-controlled clinical trials and to the satisfaction regulatory authorities (including the FDA in the United States and the EMA in the EU) that the product candidate is safe and effective for use in each target indication. Following this extensive regulatory process, the manufacturing and marketing of our product candidates will be subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to pursue commercialization.

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Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. The process can take many years and may include post-marketing studies and surveillance, which will require the expenditure of substantial resources beyond our existing cash on hand. There can be no assurance that any of our product candidates will successfully complete the foregoing regulatory approval processes. We do not expect any of the product candidates we or our licensees or partners develop to be commercially available for many years and some or all may never become commercially available.

The size of the initial market for our product candidates may be limited.

We expect that, if approved, several of the product candidates we develop will initially receive regulatory approval as treatment for advanced disease or rare diseases with few other treatment options. This could limit the initial size of the market for these product candidates, and we cannot predict when, if ever, such product candidates would receive regulatory approval for indications treating a more expansive patient population.

Any issues that arise in the highly complex manufacturing process for our product candidates could have an adverse effect on our business, financial position or prospects.

Our CAR T-cell immunotherapy products undergo a complex, highly-regulated manufacturing process. The process is subject to strict controls and procedures to ensure no more than very minimal batch-to-batch variability. As a result, our manufacturing process is subject to multiple risks, and the cost to manufacture our products is generally higher than traditional small molecule chemical compounds. The complexity of our manufacturing process makes it susceptible to product loss or failure due to issues associated with the collection of T-cells from healthy donors, manufacturing or supply of raw material or starting material, shipping such material to the manufacturing site, ensuring standardized production batch-to-batch in the context of mass production, freezing the manufactured product, shipping the final product globally, and infusing patients with the product.

Manufacturers of cell therapy products often encounter difficulties in production, particularly in scaling out and validating initial production and ensuring the absence of contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, inconsistency in cell growth, quality assurance testing, improper installation or operation of equipment, operator error, shortages of qualified personnel, shortage of raw material or starting material and other procurement issues, as well as compliance with strictly enforced federal, state and foreign regulations.

Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If microbial, viral, or other contaminations are discovered in our supply of product candidates or in the manufacturing facilities in which our product candidates are made, such supply may have to be discarded and the manufacturing may be stopped or such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.

We operate two in-house manufacturing facilities—a facility in Paris, France, which is dedicated to the manufacturing of certain raw and starting material for our investigational products, and a facility in Raleigh, North Carolina, which is dedicated to the production of our investigational products. Both facilities are fully operational and in December 2022, the first patient was dosed with our in-house manufactured product candidate UCART22. Despite our manufacturing success to date, we have very limited experience in operating a manufacturing infrastructure for clinical or commercial pharmaceutical products, and we may never be successful in effectively exploiting such in-house manufacturing capabilities at the scale required for advanced clinical trials or commercialization. We may face additional challenges, including, among others, cost overruns, process scale-up and/or scale-out, process reproducibility, stability issues, lot consistency, timely availability of reagents or raw materials, equipment failures, labor shortages, natural disasters and power failures. Further, the application of new regulatory guidelines or parameters, such as those related to release testing, may also adversely affect our ability to effectively and efficiently manufacture our product candidates. Any of these factors could prevent us from realizing the intended benefits of our internalized manufacturing capabilities and have a material adverse effect on our business. We may ultimately be unable to reduce the cost of goods for the product candidates to levels that will allow for an attractive return on investment if and when those product candidates are commercialized. In addition, we may never obtain the regulatory approvals to manufacture our commercial products in our in-house manufacturing facilities.

Any changes to manufacturing processes may result in additional regulatory approvals.

The manufacturing process for any products that we may develop is subject to FDA and foreign regulatory authority approval for the jurisdictions in which we or our licensees or partners will seek marketing approval for commercialization as well as ongoing compliance requirements. If the manufacturing process is changed during the course of product development or subsequent to a product’s commercialization, FDA or foreign regulatory authorities could require us to repeat some or all previously conducted trials or conduct additional bridging trials, which could delay or impede our ability to obtain marketing approval. If we or any CMOs on which we rely are unable to reliably produce product candidates or products to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the approvals we need to further develop, conduct clinical trials for, and commercialize such products in the relevant territories.

Negative publicity and increased regulatory scrutiny of genetic research and therapies involving gene editing may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

Our gene-editing technologies are relatively novel. Public perception may be influenced by claims that gene editing is unsafe, and products incorporating gene editing may not gain the acceptance of the public or the medical community. In particular, our success will depend upon physicians specializing in our targeted diseases prescribing our product candidates as treatments in lieu of, or in addition to, existing, more familiar, treatments, including those for which greater clinical data may be available. Any increase in negative perceptions of gene editing may result in fewer physicians prescribing our treatments or may reduce the willingness of patients to utilize our treatments or participate in clinical trials for our product candidates. Increased negative public opinion or more restrictive government regulations in response thereto, would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for such product candidates.

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For example, there have been adverse events (including, in some instances, patient deaths) in CAR-T trials conducted in the United States by our competitors as well as in our AMELI-01 clinical study and now discontinued MELANI-01 clinical study, which have led to clinical trial holds or protocol-based pauses in patient recruitment. In addition, on October 7, 2021, the FDA placed a clinical hold on all of our licensee Allogene Therapeutics’ clinical trials following a chromosomal abnormality detected in ALLO-501A, which hold was removed by the FDA in January 2022. Adverse events in clinical studies for the product candidates we develop or those of our competitors, even if not ultimately attributable to the respective product candidates and any resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays, stronger labeling for approved product candidates and a decrease in demand for any such product candidates.

Monitoring and managing toxicities in patients receiving our product candidates is challenging, which could adversely affect our ability to obtain regulatory approval and commercialize.

For our clinical trials of our product candidates, we contract or will contract with academic medical centers and hospitals experienced in the assessment and management of toxicities arising during clinical trials. Nonetheless, these centers and hospitals may have difficulty observing patients and treating toxicities, which may be more challenging due to personnel changes, inexperience, shift changes, house staff coverage or related issues. This could lead to more severe or prolonged toxicities or even patient deaths, which could result in us or the FDA or equivalent foreign regulatory authority delaying, suspending or terminating one or more of our clinical trials, and which could jeopardize regulatory approval. We also expect the centers using our product candidates, if approved, on a commercial basis could have similar difficulty in managing adverse events. Medicines used at centers to help manage adverse side effects of our product candidates may not adequately control the side effects and/or may have a detrimental impact on the efficacy of the treatment. Use of these medicines may increase with new physicians and centers administering our product candidates.

Difficulty enrolling patients could delay or prevent clinical studies of product candidates.

Identifying and qualifying patients to participate in clinical studies is critical to the success of the relevant product candidate. The timing of clinical studies depends, in part, on the speed of recruitment of patients to participate in testing such product candidates as well as completion of required follow-up periods. We or those evaluating product candidates pursuant to licenses from us may not be able to identify, recruit and enroll a sufficient number of patients or patients with required or desired characteristics to achieve the objectives of the study. If patients are unable or unwilling to participate in such studies, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our technology, failure to meet study endpoints or objectives or termination of the clinical studies altogether.

In addition, competition among clinical trials in the same therapeutic areas may reduce the number and types of patients available to participate in our or our licensees’ or partners' clinical trials. Because the number of qualified clinical investigators is limited, we expect to conduct some clinical trials at the same sites as our competitors, which may reduce the number of patients available for our clinical trials at such sites. Certain of our competitors may have greater success than us in enrolling patients as a result of a variety of factors. Moreover, because of the novel nature of our product candidates, potential patients and their doctors may be less likely to enroll in our clinical trials relative to clinical trials for more conventional therapies.

Patient enrollment is affected by a variety of factors, including:

If we or our licensees’ or partners are unable to enroll a sufficient number of patients to conduct clinical studies as planned, it may be necessary to delay, limit or terminate such clinical studies, which could have a material adverse effect on our business and financial condition. Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of the product candidates we develop.

As certain of our clinical trials require conditioning patients with chemotherapy, including agents such as fludarabine, cyclophosphamide and alemtuzumab, our ability to enroll may also be impacted by the shortage of such agents. For example, the FDA has reported a shortage of fludarabine and any failure or delays by us or by our clinical trial sites to obtain sufficient quantities of fludarabine may delay our ability to enroll and treat patients in our clinical trials.

Our product candidates may cause undesirable side effects that have halted and could in the future halt their clinical development, delay or prevent their regulatory approval, limit their commercial potential, or result in other significant negative consequences.

Undesirable or unacceptable side effects caused by our product candidates have and could in the future cause us or regulatory authorities to interrupt, delay, suspend or halt clinical trials. Such side effects could also result in the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities, or could lead to a more restrictive label for our product candidates.

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Results of our clinical trials could reveal a high and unacceptable incidence and severity of side effects or unexpected characteristics. Approved autologous CAR T therapies and those under development have shown frequent rates of CRS, neurotoxicity, serious infections, and prolonged cytopenia, and adverse events have resulted in the death of patients.

We have seen similar adverse events for allogeneic CAR T product candidates. In the currently ongoing UCART product candidate clinical studies, the most common severe or life-threatening adverse events include CRS, cytopenia and infections. As reported, there have been patient deaths in the AMELI-01 Study and the now discontinued MELANI-01 Study as well as in clinical trials conducted by our licensees or partners, including deaths attributable to UCART immuno-therapy. In the future, additional patients may experience severe adverse events related to UCART product candidates, some of which may result in death. In addition, our allogeneic CAR T cell product candidates undergo gene engineering by using lentivirus and TALEN nucleases that can cause insertion, deletion, or chromosomal translocation. These changes can cause allogeneic CAR T cells to cause additional adverse events.

The allogeneic nature of our CAR T cell product candidates may also cause unique adverse events related to the differences between the donor material used to manufacture the product candidates and patients, such as GvHD. GvHD results when allogeneic CAR T cells start recognizing the patient’s normal tissue as foreign. We use our TALEN gene-editing technology to inactivate a gene coding for TCRα, a key component of the natural antigen receptor of T cells, to cause the engineered T cells to be incapable of recognizing foreign antigens. Accordingly, when injected into a patient, the intent is for the engineered T cell not to recognize the tissue of the patient as foreign and thus avoid attacking the patient’s tissue. However, our CAR T cell product candidates may not have the benefits that we anticipate and may not be successful in limiting the risk of GvHD.

In addition, in certain of our clinical trials, we utilize a lymphodepletion regimen, which generally includes fludarabine, cyclophosphamide and alemtuzumab, that may cause serious adverse events. For instance, because the regimen will cause a transient and sometimes prolonged immune suppression, patients will have an increased risk of infection, such as to COVID-19, that may be unable to be cleared by the patient and ultimately lead to other serious adverse events or death. Our lymphodepletion regimen has caused and may also cause prolonged cytopenia. We are also exploring various dosing strategies for lymphodepletion in our clinical trials, which may increase the risk of serious adverse events.

As more patients are included in our and our licensee’s clinical trials, previously less common, side effects and adverse events may also emerge. Additional UCART product candidates that enter clinical development may also cause similar or more severe toxicities, particularly if such product candidates require higher dose levels or are administered to higher risk patient populations.

Any undesirable side effects could cause us, our licensees or partners or regulatory authorities to interrupt, delay, halt or terminate clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other regulatory authorities. Treatment-related side effects could also adversely affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. In addition, certain side effects of UCART product candidates are not normally encountered in the general patient population or by medical personnel familiar with more conventional therapies. Although we provide training to medical personnel involved in clinical trials for our product candidates, failure of medical personnel to recognize or manage potential side effects of our product candidates could exacerbate adverse outcomes and potentially result in patient deaths.

Any of these occurrences could prevent our product candidates from achieving or maintaining market acceptance and could increase the cost of development and commercialization, and may harm our business, financial condition and prospects significantly.

The incorporation of an anti-CD52 monoclonal antibody as part of our lymphodepletion regimen prior to administration of UCART product candidates may increase the risk of adverse side effects.

In certain of our clinical trials, we utilize an anti-CD52 monoclonal antibody as part of a lymphodepletion regimen to be infused prior to infusing patients with our product candidates. We believe that using an anti-CD52 antibody in a lymphodepletion regimen may delay rejection of our allogeneic T cells by the patient’s immune system, and therefore improve the window of persistence during which such engineered allogeneic T cells can expand and actively target and destroy cancer cells. However, the anti-CD52 antibody may not have the benefits that we anticipate and could result in adverse effects or confounding other adverse effects. For instance, our lymphodepletion regimen, including the use of an anti-CD52 antibody, will cause a transient and sometimes prolonged immune suppression, which is associated with an increased risk of infection, such as COVID-19, that may be unable to be cleared by the patient and ultimately lead to other serious adverse events or death.

We currently use alemtuzumab, a monoclonal antibody that binds CD52, as the anti-CD52 antibody for our lymphodepletion regimen. Alemtuzumab is known to have risk of causing certain adverse events. On November 14, 2019, the EMA completed a pharmacovigilance review of alemtuzumab in the context of the treatment of multiple sclerosis (Lemtrada®) following reports of immune-related disorders and cardiovascular disorders, including fatal cases. Among other things, the EMA recommended that alemtuzumab not be used in patients with certain heart, circulation or bleeding disorders or in patients who have autoimmune disorders other than multiple sclerosis. The EMA also recommended that alemtuzumab only be given in a hospital with ready access to intensive care facilities and specialists who can manage serious adverse reactions. In each of June 2021 and June 2022, the European Commission decided to update the product information of Lemtrada® to add additional adverse reaction warnings. Because of the risk of autoimmunity, infusion reactions, and malignancies, Lemtrada®is available in the United States only through restricted distribution under an FDA-approved and mandated Risk Evaluation and Mitigation Strategy (REMS) Program.

On May 11, 2021, we entered into each of a partnership agreement and a supply agreement with Genzyme Corporation, or Genzyme, regarding alemtuzumab to be used as part of the lymphodepleting regimen in certain Cellectis-sponsored UCART clinical trials. As part of the agreement, Genzyme supplies alemtuzumab to support Cellectis’ clinical studies, and the parties agreed to enter into discussions to execute an additional agreement for the commercial supply of alemtuzumab by Genzyme to Cellectis under pre-agreed financial conditions. Following this agreement, we are implementing the use of alementuzumab as a Cellectis investigational medicinal product, coded as CLLS52, in the clinical protocols AMELI-01, BALLI-01, and NaThaLi-01 in the United States and in the relevant European Union member states. These clinical studies are currently conducted at specialized centers that are experienced at managing patients with advanced malignancies as well as toxicities associated with immunomodulatory therapies. We will monitor the safety profile of CLLS52 and ensure our pharmacovigilance reporting responsibilities as sponsor. If the EMA, FDA or other regulatory agencies further limit the use of alemtuzumab or anti-CD52 antibodies, or if the FDA, EMA or other relevant regulatory agencies issues additional requirements for the use of CLLS52, our clinical programs could be adversely affected.

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If we are unable to successfully secure an adequate source of CLLS52 in the timeframe we anticipate, or if regulatory authorities do not approve the use of CLLS52 in combination with our UCART product candidates, we could face delays in our product development efforts and/or the commercialization of our product candidates.

If the product candidates we develop do not achieve projected development and commercialization in the announced or expected timeframes, the further development or commercialization of our product candidates may be delayed, and our business may be harmed.

We sometimes estimate, or may in the future estimate, for planning purposes, the timing of the accomplishment of various scientific, clinical, manufacturing, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies, clinical trials, the submission of regulatory filings, the receipt of marketing approval or commercialization objectives. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions, including assumptions regarding capital resources and constraints, progress of development activities, and the receipt of key regulatory approvals or actions, any of which may cause the timing of achievement of the milestones to vary considerably from our estimates.

If we or our licensees or partners fail to achieve announced milestones in the expected timeframes, the commercialization of the product candidates may be delayed, our credibility may be undermined, and our business and results of operations may be harmed.

Even if we or our licensees or partners successfully complete clinical trials of product candidates, those candidates may not be commercialized successfully for other reasons.

Even if we or our licensees or partners successfully complete clinical trials for one or more product candidates, those candidates may not be commercialized for other reasons, including:

In addition, for any product candidates developed by a licensee pursuant to a licensing agreement, we will depend entirely upon such licensee for marketing and sales of that product. These partners may not devote sufficient time or resources to the marketing and commercialization, or may determine not to pursue marketing and commercialization at all, which could prevent the affected products from reaching milestones or sales that would trigger payments to Cellectis.

Even if any of our product candidates are commercialized, they may not be accepted by physicians, patients, or others in the medical community.

The use of engineered T-cells as a cancer treatment is a recent development and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers or others in the medical community. Even if any of our product candidates receive marketing approval, the medical community may not accept such products as adequately safe and efficacious for their indicated use. We expect physicians in the large bone marrow transplant centers to be particularly important to the medical community’s acceptance of our products, and we may not be able to educate them on the benefits of using our product candidates for many reasons. Moreover, physicians may choose to restrict the use of the product, if, based on experience, clinical data, side-effect profiles and other factors, they are not convinced that the product is preferable to alternative drugs or treatments.

Additional factors that may influence whether our product candidates are accepted in the market, include:

We cannot predict the degree of market acceptance of any product candidate that receives marketing approval. If our product candidates are approved but fail to achieve market acceptance in the medical community, we will not be able to generate significant revenue. Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.

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Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

Successful sales of our product candidates, if approved, depend, in part, on the availability of adequate coverage and reimbursement from third- party payors including governmental healthcare programs, such as Medicare and Medicaid, managed care organizations and commercial payors, among others. Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In addition, because our product candidates represent new approaches to the treatment of cancer, we cannot accurately estimate the potential revenue from our product candidates.

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from third-party payors are critical to new product acceptance. The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if government and other third-party payors fail to provide coverage and adequate reimbursement. Coverage and reimbursement may depend upon a number of factors, including determinations as to whether a product is:

Coverage and reimbursement policies vary, and obtaining coverage and reimbursement approval of a product from a government or other third- party payor is a time-consuming and costly process that could require us or our licensees or partners to furnish on a payor-by-payor basis supporting scientific, clinical and cost-effectiveness data for the use of our products, with no assurance that coverage or adequate reimbursement will be obtained. Even if coverage for a product is obtained, reimbursement rates may be inadequate to achieve profitability or may require co-payments that patients find unacceptably high.

If coverage is unavailable or reimbursement rates are inadequate, patients may not use our products. Because our product candidates represent a new approach to treatment, they may have a higher cost than conventional therapies and may require long-term follow-up evaluations, which may increase the risk that coverage and/or reimbursement rates may be inadequate for us to achieve profitability.

Our future profitability, if any, depends, in part, on our ability to penetrate global markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future profitability, if any, will depend, in part, on our ability and the ability of our licensees or partners to commercialize the product candidates we develop in markets throughout the world. Commercialization of our product candidates in various markets could subject us to additional risks and uncertainties related to operating in foreign countries, including:

Risks Related to Our Reliance on Third Parties

Third parties on whom we rely to conduct some aspects of our development programs may not perform satisfactorily.

We do not, and do not expect in the future to, independently conduct all aspects of our development programs. We rely, and will continue to rely, on third parties for certain aspects of manufacturing, quality control, protocol development, material supply, research and pre-clinical development, translational activities, and clinical testing, clinical trial conduct and distribution activities. With respect to the clinical trials that we sponsor, we rely on clinical research organizations, or CROs, medical institutions and clinical investigators to conduct our clinical studies. Such reliance on third parties reduces our control over these activities, but does not relieve us of our responsibility to ensure compliance with all required regulations and study and trial protocols.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct their activities in accordance with regulatory requirements and our stated study and trial plans and protocols, or if there are disagreements between us and these third parties, we may not be able to complete, or may be delayed in completing, the pre-clinical studies and clinical trials required to support future regulatory submissions and approval of the product candidates we develop.

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Reliance on such third-parties entails additional risks to which we would not be subject if we conducted the above-mentioned activities ourselves, including:

Under certain circumstances, third party service providers may be entitled to terminate their engagements with us. In such circumstances, product development activities could be delayed while we seek to identify, validate, and negotiate an agreement with a replacement service provider. In some such cases an appropriate replacement may not be readily available or available on acceptable terms, which could cause additional delays to our development process.

Any of these events could lead to manufacturing, supply and/or clinical study delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize future products, which could, in each case, have a material adverse effect on our business, financial condition, results of operations and prospects.

Although we manufacture and store our clinical product supplies internally, we may have to rely on third parties for commercial production and processing of our product candidates, if approved.

Although our two in-house manufacturing facilities in Paris, France, and Raleigh, North Carolina, are both operational for manufacturing of clinical supplies, we may not be able to effectively scale our manufacturing to meet our anticipated commercial needs, in the event that any of our product candidates are approved. We continue to rely on third parties to manage other aspects, including some testing, as well as distribution and release logistics. We do not have long-term agreements in place with such third parties for these testing, distribution and logistics activities. Accordingly, there can be no assurance that we will not experience supply or manufacturing disruptions in the future and any such issues may limit our ability to recruit new patients for our clinical trials.

We have not yet caused our product candidates to be manufactured or processed on a commercial scale and may not be able to achieve manufacturing and processing and may be unable to create an inventory of mass-produced, off-the-shelf product to satisfy commercial demands for any of our product candidates. Our self-manufactured clinical supply is also limited to small quantities and any latent defects discovered in our supply could significantly delay our development timelines. We do not have agreements in place with CMOs to support commercial production of our cell therapies in the event that our internal manufacturing capabilities are insufficient.

In addition, although we have an agreement with Genzyme for the supply of alemtuzumab to be used in our sponsored UCART clinical trials, we have not executed an agreement for the commercial supply of alemtuzumab and Genzyme has the right to terminate the agreement under certain conditions. If we are unable to contract with CMOs on acceptable terms or at all, this could result in delays in our product development efforts and/or the commercialization of our product candidates.

To the extent we rely on CMOs in the future, they will be subject to the same risks we face in our own manufacturing operations, as described above. See “Any issues that arise in the highly complex manufacturing process for our product candidates could have an adverse effect on our business, financial position or prospects.”

We also rely on third parties to store our released product candidates, and any failure to adequately store our product candidates could result in significant delay to our development timelines. Any additional or future damage or loss of raw materials or product candidates could materially impact our ability to manufacture and supply our product candidates. Each of these risks could delay our clinical trials, the approval, if any of our product candidates by the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenue.

Third parties on whom we rely may not perform satisfactorily.

We and our licensees or partners rely on medical institutions, clinical investigators, CROs and contract laboratories to carry out, or otherwise assist with, clinical trials or to perform data collection and analysis and on CMOs for the manufacturing of certain product candidates and starting materials. While we and our licensees or partners have agreements governing these services, we and our licensees or partners have limited control over such third parties’ actual performance. Nevertheless, we or our licensees or partners, as applicable, are responsible for ensuring that such clinical trial is conducted in accordance with the applicable protocol, legal, regulatory, ethical and scientific standards. Reliance on a third party does not relieve the sponsor of a clinical trial of any regulatory responsibilities, including compliance with the FDA’s and other regulatory authorities’ good clinical practices, or GCP, good manufacturing practices, or GMP, good laboratory practices, or GLP, and other applicable requirements for conducting, recording and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected.

If we, our licensees or partners, our respective CROs, or our respective investigators or trial sites, or our respective CMOs fail to comply with applicable GCP, GLP, GMP or other applicable regulatory requirements, the clinical data generated in the applicable clinical trial may be deemed unreliable or otherwise not usable and the regulatory authorities and they may require the performance of additional clinical trials before issuing any marketing authorizations for the relevant product candidates.

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Third party performance failures may increase our costs, delay our ability to obtain regulatory approval, and delay or prevent starting or completion of clinical trials and delay or prevent commercialization of our product candidates. While we believe that there are numerous alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without incurring delays or additional costs.

We are party to licensing or collaboration relationships, which may not advance or be successful.

We have entered into licensing or collaboration agreements with partners, such as Allogene, Servier and AstraZeneca under which our partners have or have the right to obtain exclusive development and commercialization rights with respect to certain product candidates. We may in the future enter into additional similar relationships. All of the risks relating to product development, regulatory approval and commercialization described in this Annual Report apply to the activities of our licensees or partners.

Our reliance on certain licensing or collaboration arrangements may pose a number of risks, including the following:

We rely on these licensing or collaboration arrangements to help us finance the development and commercialization of our own biopharmaceutical products. Our success depends, in part, on our ability to collect milestone and royalty payments from our licensees or partners. To the extent our licensees or partners do not aggressively and effectively pursue product candidates for which we are entitled to such payments, we will not realize these significant revenue streams, which may slow our overall development progress and could have an adverse effect on our business and future prospects.

In addition, our license or collaboration agreements are generally terminable at will upon specified prior notice. If one or more collaborator terminates a license or collaboration agreement, this could have an adverse effect on our revenues. If we do not receive anticipated payments, our development of product candidates could be delayed and we may need additional resources to develop our product candidates.

Servier’s discontinuation of its involvement in the development of CD19 Products and related disagreements may have adverse consequences,

Under the License, Development and Commercialization Agreement dated March 6, 2019, between us and Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS (collectively, “Servier”), as amended on March 4, 2020 (as so amended, the “Servier License Agreement”), Servier currently holds an exclusive worldwide license to develop and commercialize gene-edited allogeneic CAR T-cell products targeting CD19, including UCART19, ALLO-501 and ALLO-501A, in the field of anti-tumor adoptive immunotherapy (collectively, “CD19 Products”). The exclusive rights for the development and commercialization of CD19 Products in the United States have been sublicensed by Servier to Allogene.

On September 15, 2022, Servier sent to us and Allogene a notice of discontinuation of its involvement in the development of the CD19 Products and purported to provide Allogene with the ability to elect to obtain a license to the CD19 Products outside of the United States. We do not believe that the Servier License Agreement permits Servier to grant such a world-wide sub-license to Allogene. We also believe that Servier has not complied with its performance obligations under the Servier License Agreement, which we believe may involve material breaches of the Servier License Agreement.

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While we are envisaging all available options and contractual remedies to address the foregoing matters, we have initiated an arbitration proceeding through the Centre de Médiation et d'Arbitrage de Paris. We are requesting that the arbitral tribunal issue a decision (i) terminating the Servier License Agreement, and (ii) requiring Servier to pay us fair financial compensation for losses incurred due to the lack of development of the licensed products and for non-payment of milestone payments for milestones that have been achieved under the Servier License Agreement. Although a favorable determination by the arbitral tribunal, if achieved, would return development and commercialization rights for the licensed products to us, and potentially provide monetary compensation to us for incurred losses, such determination could also increase our costs and expenses and would terminate Servier's financial obligations to us under the Servier License Agreement. If the arbitral tribunal does not rule in our favor or grants counterclaims made by Servier, this could have negative financial impact on our business.

Unless an amicable resolution is reached with Servier, we may incur additional costs and expenses relating to any dispute with Servier. In addition, the development and commercialization of the CD19 Products may be delayed, and our relationship with Servier and its sublicensee, Allogene, may be further strained. Any failure to successfully resolve these issues could have a significant adverse impact on our business, financial condition and prospects.

We rely on T cells from healthy donors to manufacture our product candidates, and if we do not obtain an adequate supply of T cells from qualified donors, development of those product candidates may be adversely impacted.

Unlike autologous CAR T companies, we are reliant on receiving healthy donor material to manufacture our product candidates. Healthy donor T cells vary in type and quality, and this variation makes producing standardized product candidates more difficult and makes the development and commercialization pathway of those product candidates more uncertain. We have developed a screening process designed to enhance the quality and consistency of T cells used in the manufacture of our CAR T cell product candidates, but our screening process may fail to identify suitable donor material and we may discover unacceptable variability with the material after production. We may also have to update our specifications for new risks that may emerge, such as to screen for new viruses or chromosomal abnormalities.

We have strict specifications for donor material, which include specifications required by regulatory authorities. If we are unable to identify and obtain donor material that satisfy specifications, agree with regulatory authorities on appropriate specifications, or address variability in donor T cells, there may be inconsistencies in the product candidates we produce or we may be unable to initiate or continue clinical trials on the timelines we expect, which could harm our reputation and adversely impact our business and prospects.

In addition, certain vendors faced challenges in obtaining donor material during the COVID-19 pandemic. Future health crises could result in challenges to our vendors’ abilities to secure sufficient donor material to manufacture our product candidates.

Access to raw materials, starting material and products necessary for the conduct of clinical trials and manufacturing of our product candidates is not guaranteed.

We are dependent on third parties for the supply of various of materials, including certain biological materials, that are necessary to produce our product candidates. The supply of these materials could be reduced or interrupted at any time. In such case, we may not be able to find other acceptable suppliers or on acceptable terms. If key suppliers or manufacturers are lost or the supply of the materials is diminished or discontinued, we may not be able to develop, manufacture, and market our product candidates in a timely and competitive manner. In addition, biological materials are subject to stringent manufacturing process and rigorous testing. Certain of our suppliers are small-scale business and may not have the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms.

Some raw materials are currently available from a single supplier, or a small number of suppliers. We cannot be sure that these suppliers will remain in business or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose. In addition, the lead time needed to establish a relationship with a new supplier can be lengthy, and we may experience delays in meeting demand in the event we must switch to a new supplier. The time and effort to qualify a new supplier, including to meet any regulatory requirements for such qualification, could result in additional costs, delays, diversion of resources or reduced manufacturing yields, any of which would negatively impact our operating results. Further, we may be unable to enter into agreements with a new supplier on commercially reasonable terms, which could have a material adverse impact on our business. We also face competition for supplies from other cell therapy companies. Such competition may make it difficult for us to secure raw materials or the testing of such materials on commercially reasonable terms or in a timely manner.

Delays in the completion and validation of manufacturing processes for these materials could adversely affect the ability to complete trials and commercialize our product candidates. In addition, our suppliers or manufacturers may, from time to time, change their internal manufacturing or testing processes and procedures. Such changes may require us to perform or have performed studies to demonstrate equivalence of the materials produced or tested under such new procedures. Such equivalence testing may impose significant delays in the development of our product candidates. Furthermore, our suppliers may face quality issues or findings from regulatory authorities’ inspections that could lead to delays or interruption of the supply of our product candidates.

We may enter into agreements with third parties to sell, distribute and/or market any of the products candidates we develop for which we obtain regulatory approval, which may adversely affect our ability to generate revenues.

As a company, we have no experience in sales, marketing and distribution of biopharmaceutical products. If any of our product candidates obtain marketing approval, we intend to develop sales and marketing capabilities, either in-house or with partners. Outsourcing sales, distribution and marketing may subject us to a variety of risks, including:

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There can be no assurance that we will be able to establish or maintain such arrangements, or if we are able to do so, that they will have effective sales forces or be on favorable terms. If we are unable to partner with a third party that has adequate sales, marketing, and distribution capabilities, we may have difficulty commercializing our product candidates, which would adversely affect our business, financial condition, and ability to generate product revenues.

Our reliance on third parties and our licensees or partners requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we rely on third party service providers for certain activities in our development process, we must, at times, share trade secrets with them. In addition, we are required to share certain trade secrets with our licensees or partners pursuant to the terms of our licensing and collaboration agreements. We also conduct joint research and product development that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements.

We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, licensing agreements, consulting agreements or other similar agreements with our licensees, partners, subcontractors, advisors, employees and consultants prior to beginning research, services or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite these contractual provisions, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are incorporated into the technology of others, or are disclosed or used in violation of these agreements. Parties with whom we share confidential information may also be acquired by competitors, which may increase the risk that these entities might breach their confidentiality obligations and share our confidential information with the acquirer.

Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

Risks Related to Operational Compliance and Risk Management

We will need to develop and expand our company, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations.

As of December 31, 2023, we had 216 full-time employees. To manage our anticipated continued development and expansion, including the operation of our manufacturing facilities and the commercialization of our product candidates, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel.

Current and future growth imposes significant responsibility on our management team, including:

Our future financial performance and our ability to commercialize our product candidates, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future development and growth of our company. To achieve this, our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these activities.

If our management is unable to effectively manage our expected development and growth, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business strategy.

Product liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our product candidates.

The risk that we may be sued on product liability claims is inherent in the development and commercialization of biopharmaceutical products. Side effects of, or manufacturing defects in, products that we develop could result in the deterioration of a patient’s condition, injury or even death. For example, we may be sued if our product candidates cause, or are perceived to cause, injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Once a product is approved for sale and commercialized, the likelihood of product liability lawsuits increases. Criminal or civil proceedings might be filed against us by patients, regulatory authorities, our licensees, our partners, biopharmaceutical companies and any other third party using or marketing our products. These actions could include claims resulting from acts by our partners, licensees and subcontractors, over which we have little or no control. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates.

In addition, regardless of merit or eventual outcome, product liability claims may result in: decreased demand for our product candidates; impairment of our business reputation; withdrawal of clinical trial participants; initiation of investigations by regulators; costs due to related litigation; distraction of management’s attention from our primary business; substantial monetary awards to trial participants, patients or other claimants; loss of revenue; exhaustion of any available insurance and our capital resources; the inability by us and our licensees and partners to commercialize our product candidates; and a decline in our share price.

We maintain product liability insurance coverage for damages caused by our product candidates, including clinical trial insurance coverage, with coverage limits that we believe are customary for companies in our industry. This coverage may be insufficient to reimburse us for any expenses or losses we may suffer. In addition, in the future, we may not be able to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability claims by us or our partners, licensees or subcontractors, which could prevent or inhibit the commercial production and sale of any of our product candidates that receive regulatory approval, which could adversely affect our business.

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Our insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage.

We may use hazardous chemicals and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, manufacture and disposal of hazardous materials and wastes. Our research and development processes may involve the controlled use of hazardous materials, including chemicals and biological materials. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed any insurance coverage and our total assets. Federal, state, local or foreign laws and regulations govern to use, manufacture, storage handling and disposal of these hazardous materials and specified waste products, as well as the discharge of pollutants into the environment and human health and safety matters. Compliance with environmental laws and regulations may be expensive and may impair our research and development efforts. If we fail to comply with these requirements, we could incur delays, substantial costs, including civil or criminal fines and penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance. In addition, we cannot predict the impact on our business of new or amended environmental laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced. These current or future laws and regulations may impair our research, development or production efforts.

Our internal computer systems, or those of our third-party contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs or loss of personal data.

In the ordinary course of our business, we may collect, process, store and transmit proprietary, confidential and sensitive information, including personal data (including health information), intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other parties. We may also share or receive sensitive information with our partners, CROs, CMOs, or other third parties. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.

Despite the implementation of security measures, our internal computer systems and those of our third-party contractors and consultants are vulnerable to damage from computer viruses, cyber-attacks, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. These threats come from a variety of sources, including traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, and the third parties upon which we rely, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce and distribute our product candidates. Cyberattacks could include, but are not limited to, the deployment of harmful malware (including as a result of advanced persistent threat intrusions), denial-of-service (such as credential stuffing), credential harvesting, social engineering attacks (including through phishing attacks), viruses, ransomware, supply chain attacks, personnel misconduct or error and other similar threats. We may also be the subject of software bugs, server malfunction, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures or other similar issues. In particular, ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, disruptions to our clinical trials, loss of data (including data related to clinical trials), significant expense to restore data or systems, reputational loss and the diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach to our information technology systems or the third-party information technology systems that support us and our services. Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Although we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We have experienced attempts to compromise our information technology systems or otherwise cause a security incident. While we do not believe that we have experienced any significant system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to manufacture or deliver our product candidates. For example, the loss of clinical trial data for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be delayed.

We may be unable to detect vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred. Despite our efforts to identify and remediate exploitable critical vulnerabilities, if any, in our information technology systems, our efforts may not be successful. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Any failure to prevent or mitigate security incidents or improper access to, use of, or disclosure of our clinical data or patients’ personal data could result in significant liability under state, federal, and international law and may cause a material adverse impact to our reputation, affect our ability to conduct our clinical trials and potentially disrupt our business.

Data privacy regulations could adversely affect our business, results of operations and financial condition.

We are subject to data privacy and protection laws and regulations that impose requirements relating to the collection, transmission, storage and use of personally-identifying information, including comprehensive regulatory systems in the U.S. and EU.

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The legislative and regulatory landscape for privacy and data protection continues to evolve in jurisdictions worldwide, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business. Failure to comply with any of these laws and regulations could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.

There are numerous U.S. federal and state laws and regulations related to the privacy and security of personal information, including regulations promulgated pursuant to HIPAA that establish privacy and security standards for the use and disclosure of individually identifiable health information and require the implementation of administrative, physical and technological safeguards to protect the privacy of such protected health information. Determining whether protected health information has been handled in compliance with applicable privacy standards and our contractual obligations can be complex and may be subject to changing interpretation. We cannot be sure how these regulations will be interpreted, enforced or applied to our operations. If we fail to comply with applicable privacy laws, including applicable HIPAA privacy and security standards, we could face civil and criminal penalties.

In the EU, we are subject to the European Regulation (EU) No. 2016/679, known as the General Data Protection Regulation (GDPR), as well as EU Member State legislations complementing the GDPR. GDPR and EU Member State legislation apply to the collection and processing of personal data, including health-related information, of individuals in the EU by companies established in the EU and, in certain circumstances established outside of the EU. These laws impose strict obligations on the ability to process personal data, including health-related information, in particular in relation to their collection, use, disclosure and transfer. These include several requirements relating to (i) obtaining, in some situations, the informed consent of the individuals to whom the personal data relates, (ii) the Information provided to the individuals about how their personal information is used, (iii) ensuring the security and confidentiality of the personal data, (iv) the obligation to notify personal data breaches to regulatory authorities and, as applicable, to communicate such breaches to affected individuals, (v) extensive internal privacy governance obligations, and (vi) obligations to honor rights of individuals in relation to their personal data (for example, the right to access, correct and delete their data). The GDPR also imposes restrictions on the transfer of personal data from countries in the European Economic Area (EEA) to most countries in the world, including the U.S., unless the parties to the transfer have implemented specific safeguards to protect the transferred personal information. One of the primary safeguards allowing U.S. companies to import personal information from the EEA has been the European Commission’s Standard Contractual Clauses (SCCs). In addition, pursuant to an EU Commission decision dated July 10, 2023, data recipients located in the United States that have self-certified as complying with the principles of the Data Privacy Framework are deemed to provide a level of personal data protection equivalent to that of the European Union and transfers of personal data from the EU to such U.S.-based organizations can now take place, without additional framework. At present, there are few, if any, viable alternatives to the SCCs, on which we have relied for personal information transfers from Europe to the United States organizations that have not taken steps to comply with the new "Data Privacy Framework" (the list of the compliant organizations is managed and published by the U.S. Department of Commerce) and other countries outside of the EEA. In relation to SCCs, new sets of SCCs were published on June 4, 2021 and, since December 27, 2022, such new sets must be used for all transfers relying on SCCs. Most importantly, the use of SCCs no longer automatically ensures compliance with the GDPR. Instead, companies remain required to conduct a data transfer impact assessment for each transfer, which adds a compliance burden. The GDPR has thus increased our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional potential mechanisms to ensure compliance with the new EU data protection rules. Also, some uncertainty remains around the legal and regulatory environment for these evolving privacy and data protection laws and regulations. Potential pecuniary fines for noncompliant companies may be up to €20 million or 4% of annual global revenue, whichever is higher.

We may become the subject of investigations and/or claims in respect of privacy matters and unfavorable outcomes in any of such matters could preclude the commercialization of products, harm our reputation, negatively affect the profitability of our products and subject us to substantial fines. In addition, our ongoing efforts to comply with evolving laws and regulations in the US, EU and elsewhere may be costly and require ongoing modifications to our policies, procedures and systems.

Provisions in our collaboration agreement with Servier may prevent or delay a change in control.

The Servier License Agreement provides that if a third party, meeting certain criteria, acquires control of us, directly or indirectly, by any means, or in the event that we sell or otherwise convey to a third party all or substantially all of our assets (or all or substantially all of our assets that are material to the performance of our obligations under the Servier License Agreement), and such third party successor conducts research, development, manufacturing or commercialization activities on the primary CD19 target or any other CAR-T products within the indications developed by Servier, then Servier has the right to acquire for one lump sum payment an exclusive fully paid-up worldwide license under our intellectual property, subject to certain exceptions including TAL technologies, to develop, manufacture and commercialize UCART19 products for use in anti-tumor immuno-therapy (the “Servier buy out”). If we and Servier fail to agree on the amount of payment for the Servier buy out within ten days following Servier’s provision of a buy-out notice, then the amount of the buy-out payment would be determined based a valuation process involving third-party valuators selected by us and Servier, respectively.

The Servier buy-out mechanism may have the effect of delaying or preventing a change in control transaction involving us, or may reduce the number of companies interested in acquiring us. If Servier were to exercise the Servier buy-out upon a change of control, our successor would not receive milestone payments or royalty payments on net sales of any of the UCART19 products acquired by Servier in the Servier buy-out.

 

We identified a material weakness in our internal control over financial reporting as of December 31, 2023. The failure to establish and maintain effective internal control over financial reporting could adversely affect our ability to produce timely and accurate financial statements and could harm investor confidence in our Company and the trading price of ordinary shares and ADSs.

As a U.S. public company, the Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our disclosure controls and procedures and the effectiveness of our internal control over financial reporting at the end of each fiscal year.

In connection with the preparation of our audited financial statements for the year ended December 31, 2023, we identified a material weakness in our internal controls over financial reporting related to a lack of formality of accounting processes and controls over significant non-routine transactions and a design and operating deficiency associated with a lack of sufficient qualified resources with sufficient technical knowledge to identify and timely resolve complex accounting matters.

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This material weakness arose primarily as a result of material errors in the accounting treatment for the Astrazeneca arrangements and the deconsolidation of Calyxt at the closing date of the merger between Calyxt and Cibus Global, LLC. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

In response to the material weakness discussed above, our management is implementing a remediation plan, discussed further in Item 15 of this Annual Report, which it believes will remediate the material weakness that has been identified. Effective internal controls are necessary for us to provide reliable financial reports. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

 

If we fail to remediate our material weakness and to maintain effective internal control over financial reporting adequate to meet the requirements of the Sarbanes-Oxley Act, investors may lose confidence in our financial reporting, the price of our ordinary shares and ADSs could decline and our access to the capital markets could be restricted, and our business and reputation may be harmed.

 

The remediation of our material weakness and compliance with the requirements of the Sarbanes-Oxley Act require that we incur substantial accounting expense and expend significant management attention and time on compliance-related issues. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate our existing material weakness and to avoid potential future material weaknesses.

 

Risks Relating to our Relationships with AstraZeneca

AstraZeneca has significant influence over us.

 

AZ Holdings is our single largest shareholder. As of December 31, 2023, AZ Holdings beneficially owned approximately 22,4% of our ordinary shares, and immediately following the Additional Investment contemplated by the Subsequent Investment Agreement, AZ Holdings is expected to own approximately 44.0% of our ordinary shares representing approximately 30% of the voting rights of the Company's ordinary shares (based on the number of voting rights outstanding as of the date of this Annual Report). In light of such ownership, AstraZeneca may be in a position to exercise significant influence over matters affecting shareholders or requiring shareholder approval, including the election of the board of directors of the Company, amendments to our By-laws, and any delegation to the board of directors of the power to issue new shares or other equity securities.

 

In addition, pursuant to the Subsequent Investment Agreement, AZ Holdings has certain rights, including the right to nominate up to two directors to our board of directors, approval rights over a limited number of material Company actions and pre-emptive rights entitling AZ Holdings to maintain its pro rata beneficial ownership in the Company. Upon the consummation of the Additional Investment contemplated by the Subsequent Investment Agreement, two AZ Holdings nominees, Mr. Marc Dunoyer and Mr. Tyrell Rivers, will be appointed to our board of directors which will be expanded to 11 members at such time. For more information, see "Item 4. Information on the Company—B. Business Overview—Our Licensing Relationships."

 

Further, AZ Ireland is a significant collaboration partner for the Company. Pursuant to the AZ JRCA with AZ Ireland 25 genetic targets have been exclusively reserved for AZ Ireland, from which up to 10 candidate products could be explored for development, and AZ Ireland will have an option for a worldwide exclusive license on the candidate products.

 

Accordingly, while not controlling the Company, AstraZeneca has significant influence over us. There can be no assurance that AstraZeneca’s interests will align with our interests or the interests of other shareholders.

Moreover, our ordinary shares may be less liquid and trade at a discount relative to the trading that could occur in circumstances where AstraZeneca did not have the ability to significantly influence or determine matters affecting us. Also, AstraZeneca’s significant interest in us may discourage transactions involving a change of control of the Company or may otherwise limit the price that a potential acquirer might be willing to pay in the future for our ordinary shares.

 

Future sales of our ordinary shares by AZ Holdings could cause the market price for our ordinary shares and ADSs to fall.

 

Sales of a substantial number of our ordinary shares by AZ Holdings could occur at any time. Such sales, or the market perception that such sales may occur, could significantly reduce the market price of our securities. We cannot predict the effect, if any, that future public sales of our ordinary shares beneficially owned by AZ Holdings or the availability of these ordinary shares for sale will have on the market price of our ordinary shares and ADSs. If the market price of our securities were to drop as a result, this might impede our ability to raise additional capital and might cause a significant decline in the value of the investments of our other shareholders.

 

The intentions of AZ Holdings regarding its long-term economic ownership of our ordinary shares are subject to change as a result of changes in the circumstances of AstraZeneca, changes in our management and operation and changes in laws and regulations, market conditions and our financial performance.

 

Conflicts of interest may arise as a result of the continuing involvement of certain of our directors with AstraZeneca.

 

In light of AZ Holdings' right effective following the closing of the Additional Investment to nominate two directors for appointment by our board of directors, some of our directors, from time to time, may have relationships with or be employed by AstraZeneca. For example, Mr. Marc Dunoyer is Chief Strategy Officer of AstraZeneca and Chief Executive Officer of Alexion, AstraZeneca Rare Disease, and Dr. Tyrell Rivers is Executive Director of Corporate Ventures at AstraZeneca. While all of our directors are required to act in our best interests and we implement policies and procedures to mitigate potential conflicts of interest, our relationship with AstraZeneca may appear to create conflicts of interest when our board of directors is faced with decisions that could have different implications for us and AstraZeneca. If our policies and procedures to address and manage potential conflicts of interest are ineffective, conflicts of interest could materialize or fail to be properly addressed.

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Such potential conflicts of interest and the appearance of conflicts, even if such conflicts do not materialize, might adversely affect the public’s perception of us, as well as our relationship with other companies and our ability to enter into new relationships in the future, including with competitors of such related parties, which could harm our business and results of operations.

Risks Related to Regulatory Approvals for Our Product Candidates

The regulatory landscape that governs our product candidates is uncertain; regulations relating to more established gene therapy and cell therapy products are still developing, and changes in regulatory requirements could result in delays or discontinuation of development of our product candidates or unexpected costs in obtaining regulatory approval.

Because we are developing novel CAR T-cell immunotherapy product candidates that are unique biological entities, the regulatory requirements that we will be subject to are not entirely clear. Even with respect to more established products that fit into the categories of gene therapies or cell therapies, the regulatory landscape is still developing, and requirements have changed frequently and may continue to change in the future. Moreover, there is substantial, and sometimes uncoordinated, overlap in oversight responsibilities of gene therapy products and cell therapy products. In addition to FDA review and oversight, gene therapy clinical trials are also subject to review and oversight by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at the institution participating in the clinical trial. Although the FDA decides whether individual gene therapy protocols may proceed, review processes and determinations of other reviewing bodies can impede or delay the initiation of a clinical study, even if the FDA has reviewed the study and allowed its initiation. Conversely, the FDA can place an IND application on clinical hold even if such other entities have provided a favorable review. Furthermore, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which a clinical trial will be conducted. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other regulatory bodies to change the requirements for approval of any of our product candidates.

Complex regulatory environments exist in other jurisdictions in which we might consider seeking regulatory approvals for our product candidates, further complicating the regulatory landscape. For example, in the EU a special committee called the Committee for Advanced Therapies (CAT) was established within the EMA in accordance with Regulation (EC) No 1394/2007 on advanced-therapy medicinal products (ATMPs) to assess the quality, safety and efficacy of ATMPs, and to follow scientific developments in the field. ATMPs include gene therapy products as well as somatic cell therapy products and tissue engineered products. In this regard, on May 28, 2014, the EMA issued a recommendation that Cellectis’ UCART19 be considered a gene therapy product under Regulation (EC) No 1394/2007 on ATMPs. We believe this recommendation is likely to be applicable to each of our UCART product candidates; however, this recommendation is not definitive until such products obtain regulatory approval for commercialization.

These various regulatory authorities, review committees and advisory groups, their rules and guidelines, as well as new or revised rules or guidelines that they promulgate or recommend from time to time may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. Because the regulatory landscape for our CAR T-cell immunotherapy product candidates is new, we may face even more cumbersome and complex regulations than those emerging for gene therapy products and cell therapy products. Furthermore, even if our product candidates obtain required regulatory approvals, such approvals may later be withdrawn as a result of changes in regulations or the interpretation of regulations by applicable regulatory agencies.

As we or our licensees or partners advance product candidates, we and they will be required to consult with these regulatory groups and comply with all applicable guidelines, rules and regulations. Because the UCART19 studies are being sponsored by Servier and Allogene, they are directly interacting with the relevant regulatory agencies and we are not able to direct such interactions. Some of the discussions among our licensees or partners and relevant regulatory agencies could generate additional unexpected requirements from regulatory agencies that may apply to our wholly-controlled UCART product candidates, including UCART123, UCART22 and UCART 20x22 and could lead to potential delays or additional requirements, such as additional studies or modifications to our controlled clinical studies.

Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue to maintain our business.

Even if we obtain regulatory approval for a product candidate, our products will remain subject to ongoing regulatory requirements.

Even if we obtain regulatory approval in a jurisdiction for the product candidates we develop, the approval will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, and submission of safety and other post-market information. Any regulatory approvals received for the product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product. For example, the holder of an approved BLA in the United States is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. FDA guidance advises that patients treated with some types of gene therapy undergo follow-up observations for potential adverse events for as long as 15 years. Similarly, in the EU, pharmacovigilance obligations are applicable to all medicinal products. In particular, any marketing authorization holder has legal obligations to continuously collect data and conduct pharmacovigilance, i.e., the activities relating to the detection, assessment, understanding and prevention of adverse reactions and other medicine-related problems. Data have to be transmitted to the authorities within defined timelines, and any emerging concern about the benefit-risk balance has to be notified immediately. If necessary, competent authorities may request further investigations, including formal studies. Regulatory procedures exist for updating product information and implementing other safety measures. In addition to those obligations, holders of a marketing authorization for gene or cell therapy products must detail, in their application, the measures they envisage to ensure follow-up of the efficacy and safety of these products. In cases of particular concern, marketing authorization holders for gene or cell therapy products in the EU may be required to design a risk management system with a view to identifying, characterizing, preventing or minimizing risks related to those products, and may be obliged to carry out post- marketing studies and submit them to the EMA for review. In the United States, the holder of an approved BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Similar provisions apply in the EU. In particular, any amendment to the marketing authorization (e.g., manufacturing processes, therapeutic indication(s), product information, etc.) must be reviewed by the EMA for medicinal products having received a centralized marketing authorization valid across the entire EU. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.

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Similarly, in the EU any promotion of medicinal products is highly regulated. For example, in the EU, it is prohibited to promote prescription medicinal products to the general public and is permitted exclusively to healthcare professionals. Additional and stricter rules may apply to promotional materials and activities, depending on the specific jurisdiction involved, and these may require their prior vetting by the competent national regulatory authorities.

In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence to commitments made in the BLA or foreign marketing application. If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured or if a regulatory agency disagrees with the promotion, marketing or labeling of that product, a regulatory agency may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market, suspension or revocation of the marketing authorization or suspension of manufacturing.

If we or our licensees or partners fail to comply with applicable regulatory requirements following approval of any of the product candidates we develop, national competent authorities may:

Any of the foregoing regulatory actions could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit the ability to commercialize products and generate revenues. In addition, the FDA’s policies, and policies of foreign regulatory agencies, may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we or our licensees or partners are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our licensees or partners are not able to maintain regulatory compliance, marketing approval that has been obtained may be lost and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

We expect the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be subject to competition sooner than anticipated.

The Biologics Price Competition and Innovation Act of 2009, or BPCIA, was enacted as part of the 2010 Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, to establish an abbreviated pathway for the approval of products that are biosimilar to or interchangeable with an FDA-approved biological product. The regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the reference product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty.

We believe that if any of our product candidates is approved in the United States as a biological product under a BLA, it should qualify for the 12-year period of referenced product exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider the subject product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Similarly in EU, a biosimilar is typically defined as a biological medicine highly similar to another already approved biological medicine (the ‘reference medicine’). Developers of biosimilars are required to demonstrate through comprehensive comparability studies with the reference medicine that:

Biosimilars can only be commercialized in the EU once the period of market exclusivity on the reference medicine has expired. In general, this means that the biological reference medicine must have been authorized for at least eight years before another company can apply for approval of a similar biological medicine (that protection is referred to data exclusivity). Also, this typically means that the biological reference medicine must have been commercialized for at least ten years before another company’s biosimilar medicine can be commercialized (that protection is referred to as market exclusivity).

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The overall ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are deemed to bring a significant clinical benefit in comparison with existing therapies. However, data and market exclusivity can be challenged under certain circumstances and there is therefore no guarantee that our products will benefit from the associated protection.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

We must obtain regulatory approval to market and sell our product candidates. For example, in the U.S., we must obtain FDA approval for each product candidate that we intend to commercialize, and in the EU we must obtain approval from the European Commission (EC), based on the opinion of the EMA. The approval processes are typically expensive, and the time required to obtain approval by the FDA, the EC and comparable foreign authorities is inherently unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for the commercialization of any product candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain such regulatory approval.

The FDA or other regulatory authority, as applicable, may delay, limit or deny approval of our product candidates for many reasons, including disagreement with clinical trial design or implementation, determinations that a product candidate is not sufficiently safe or efficacious, objections to the statistical significance of data or our interpretation of data, objections to the production, formulation or labeling of our product candidates, and any other discretionary factors such regulators deem relevant.

This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market the product candidates we develop, which would significantly harm our business, results of operations and prospects. In addition, even if we or our licensees or partners were able to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products (in jurisdictions where pricing is approved), may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a drug candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for the product candidates we develop.

We plan to seek orphan drug status for some or all of our product candidates, but we may be unable to obtain such designations or to maintain the benefits associated with such status, which may cause our revenue, if any, to be reduced.

We plan to seek orphan drug designation for some or all of our product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested at any time before submitting a BLA. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Although we intend to seek orphan product designation for some or all of our product candidates, we may never receive such designations.

If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the FDA may grant orphan product exclusivity, which means that the FDA may not approve any other applications, including a BLA, to market the same biologic for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority of the subsequent product to the product with orphan product exclusivity or if FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Even if we obtain orphan drug designation for a product candidate, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. Orphan drug exclusive marketing rights in the United States may be limited or lost if we seek and obtain approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective, the disease or condition exceeded the population threshold, or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient supply of our product.

Similarly, in EU, a medicinal product may receive orphan designation under Article 3 of Regulation (EC) No 141/2000 (Orphan Regulation). This applies to products that are intended for a life-threatening or chronically debilitating condition and either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would unlikely generate sufficient return in the EU to justify the necessary investment. Moreover, in order to obtain orphan designation in the EU it is necessary to demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition. Orphan designation is lost if it is established that the product no longer meets the orphan criteria before market authorization is granted.

In EU, orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and applicants can benefit from specific regulatory assistance and scientific advice. Products receiving orphan designation in the EU can receive ten years of market exclusivity from the date on which they are granted a market authorization in the EU, during which time no similar medicinal product for the same indication may be placed on the market.

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The period of market exclusivity is extended by two years for orphan drug products that have also complied with an agreed Pediatric Investigation Plan (Article 37 of the Orphan Regulation). However, the 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, i.e. the prevalence of the condition has increased above the orphan designation threshold or it is judged that the product is sufficiently profitable so as not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same therapeutic indication at any time if:

If we do not obtain, or if – despite having obtained it— we subsequently loose, orphan exclusivity for our products that do not have broad patent protection, our competitors may sell the same drug to treat the same condition and our revenues will be reduced.

Although we may seek fast-track designation from the FDA for some or all of our product candidates, there is no assurance that such designation will be granted or, if granted that it will lead to a faster development or regulatory review or approval process.

We may seek fast-track designation and review for some or all of our product candidates. If a drug is intended for the treatment of a serious or life- threatening condition or disease, the drug sponsor may apply for FDA fast track designation. The FDA has broad discretion whether or not to grant this designation. Thus, even if we believe a particular product candidate is eligible for this designation, we cannot assure that the FDA would decide to grant it. Moreover, even if we do receive fast track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures and such designation does not assure ultimate approval. In addition, the FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

Although we may seek a regenerative medicine advanced therapy (RMAT) designation, a breakthrough therapy designation and/or priority medicines (PRIME) support for our product candidates, there is no assurance that such designations will be granted or, if granted that they will lead to a faster development or regulatory review or approval process.

We may seek special designations for some or all of our product candidates, including RMAT designation or breakthrough therapy designation from the FDA, or PRIME support from the EMA.

A drug is eligible for RMAT designation if, (i) the drug is a regenerative medicine therapy, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, except for those regulated solely under Section 361 of the Public Health Service Act and part 1271 of Title 21, Code of Federal Regulations; (ii) the drug is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (iii) preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such disease or condition.

A drug may be designated as a breakthrough if the product is defined as a product that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

The EMA’s PRIME scheme focuses on medicines that may offer a major therapeutic advantage over existing treatments, or benefit patients without treatment options. To be accepted for PRIME support, a medicine has to show its potential to benefit patients with unmet medical needs based on early clinical data. Through PRIME, the EMA offers early, proactive and enhanced support to drug developers to optimize the generation of robust data on a therapy’s benefits and risks and enable accelerated assessment of medicinal products applications.

For product candidates that obtain an RMAT designation, breakthrough therapy designation or are accepted for PRIME support, interaction and communication between the FDA or the EMA, as applicable, and the sponsor of the trial can help to identify the most efficient path for clinical development. However, the granting of such designations and provisions of support is within the discretion of the FDA or the EMA, respectively. Accordingly, even if we believe, after completing early clinical trials, that one of our product candidates meets the criteria for RMAT designation, breakthrough therapy designation, or PRIME support, the FDA or EMA, as the case may be, may disagree and instead decide not to grant such designation or support. In any event, the receipt of RMAT designation, breakthrough therapy designation or PRIME support for a product candidate may not result in a faster development process, review or approval compared to products considered for approval under conventional regulatory procedures and does not assure ultimate regulatory approval. In addition, even if one or more of our product candidates qualify for RMAT designation, breakthrough therapy designation or PRIME support, the FDA or EMA, may later decide that such product candidates no longer meet the conditions for qualification.

Even if we or our licensees or partners obtain and maintain approval for product candidates in the United States or another jurisdiction, we or our licensees or partners may never obtain approval for the same product candidates in other jurisdictions, which would limit market opportunities and adversely affect our business.

Approval of a product candidate in the United States by the FDA or in another jurisdiction by the requisite regulatory agencies in such other jurisdiction does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. The approval process varies among countries and may limit our or our licensees or partners’ ability to develop, manufacture, promote and sell our product candidates internationally. Failure to obtain marketing approval in international jurisdictions would prevent the product candidates from being marketed outside of the jurisdictions in which regulatory approvals have been received. In order to market and sell the product candidates in the EU and many other jurisdictions, we and our licensees or partners must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and may involve additional pre-clinical studies or clinical trials both before and post approval. In many countries, a product candidate must be approved for reimbursement before it can be approved for sale in that country.

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In some cases, the intended price for the product is also subject to approval. Further, while regulatory approval of a product candidate in one country does not ensure approval in any other country, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. If we or our licensees or partners fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, the target market will be reduced and the ability to realize the full market potential of the subject product candidates will be harmed and our business may be adversely affected.

Depending on the results of clinical trials and the process for obtaining regulatory approvals in other countries, we or our licensees or partners may decide to first seek regulatory approvals of a product candidate in countries other than the United States, or we or our licensees or partners may simultaneously seek regulatory approvals in the United States and other countries, in which case we or our licensees or partners will be subject to the regulatory requirements of health authorities in each country in which we seek approvals. Obtaining regulatory approvals from health authorities in countries outside the United States and the EU is likely to subject us or our licensees or partners to risks in such countries that are substantially similar to the risks associated with obtaining approval in the United States or the EU described herein.

Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues if we obtain regulatory approval for any of our product candidates.

Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. The continuing efforts of various governments, insurance companies, managed care organizations and other payors to contain or reduce healthcare costs may adversely affect our ability or our licensees or partners’ ability to set a price for our products that we believe is fair, to achieve profitability, and to obtain and maintain market acceptance by patients and the medical community.

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory initiatives to contain healthcare costs. By way of example, in the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the ACA) was enacted in March 2010.

The ACA expanded health care coverage through Medicaid expansion and the implementation of a tax penalty for individuals who do not maintain mandated health insurance coverage (the so-called ‘individual mandate’). The ACA also contains a number of provisions that affect coverage and reimbursement of drug products. Uncertainty remains regarding the implementation and impact of the ACA. There have been sustained Congressional and legal efforts to modify or repeal all or certain provisions of the ACA. For example, tax reform legislation was enacted at the end of 2017 that eliminated the individual mandate beginning in 2019. We cannot predict the ultimate content, timing or effect of any changes to the ACA or other federal and state reform efforts, and there can be no assurance that any such health care reforms will not adversely affect our future business and financial results.

U.S. federal and state governments have shown significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls, waivers from Medicaid drug rebate law requirements, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. For example, in August 2022, the United States enacted the Inflation Reduction Act of 2022 (IRA), which includes two policies that are designed to have a direct impact on drug prices. The IRA requires the federal government to negotiate prices for certain high-cost drugs covered under Medicare and requires drug manufacturers to pay rebates to Medicare if they increase prices faster than inflation for drugs used by Medicare beneficiaries. The private sector has also sought to control healthcare costs by limiting coverage or reimbursement or requiring discounts and rebates on products. We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare industry or third party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business. Any cost containment measures could significantly decrease the available coverage and the price we might establish for our potential products, which would have an adverse effect on our net revenues and operating results.

Likewise, in many EU Member States, legislators and other policymakers continue to propose and implement healthcare cost-containing measures in response to the increased attention being paid to healthcare costs in the EU. Certain of these changes could impose limitations on the prices we will be able to charge for our products and any approved product candidates or the amounts of reimbursement available for these products from governmental and private third-party payers, may increase the tax obligations on pharmaceutical companies or may facilitate the introduction of generic competition with respect to our products. Further, an increasing number of EU countries Member States and other non-U.S. countries use prices for medicinal products established in other countries as “reference prices” to help determine the price of the product in their own territory. If the price of one of our products decreases substantially in a reference price country, that could impact the price for such product in other countries. Consequently, a downward trend in prices of our products in some countries could contribute to similar downward trends elsewhere, which would have a material adverse effect on our revenues and results of operations. Also, in order to obtain reimbursement for our products in some countries, we may be required to conduct clinical trials that compare the cost-effectiveness of our products to other available therapies.

Moreover, this political and legislative uncertainty could harm our and our licensees or partners’ ability to market any products and generate revenues. Cost containment measures that healthcare payors and providers are instituting and the effect of further healthcare reform could significantly reduce potential revenues from the sale of any of our product candidates approved in the future, and could cause an increase in our compliance, manufacturing, or other operating expenses.

In some countries, the proposed pricing for a biopharmaceutical product must be approved before it may be lawfully marketed. In addition, in certain foreign markets, the pricing of a biopharmaceutical product is subject to government control and reimbursement may in some cases be unavailable. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its Member States to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. An EU Member State may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for biopharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, biopharmaceutical products launched in the EU do not follow price structures of the United States and generally tend to have significantly lower prices.

We believe that pricing pressures will continue and may increase, which may make it difficult for us to sell our potential products that may be approved in the future at a price acceptable to us or any of our future collaborators.

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We are subject to healthcare laws and regulations, which could expose us to the potential for criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and others will play a primary role in the recommendation and prescription of our products, if approved. Our arrangements with such persons and third-party payors must be structured in accordance with the broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, market, sell and distribute our products, if we obtain marketing approval. Restrictions under applicable federal, state and foreign healthcare laws and regulations include but are not limited to the following:

Similar legislation is applicable in other countries, including by way of example and without limitation: the UK’s Bribery Act 2010 or Article D1453-1 to D1453-9 of the French Public Health Code on Transparency of Benefits Given by Companies Manufacturing or Marketing Health and Cosmetic Products for Human Use. Furthermore, in the EU, harmonized rules prohibit gifts, pecuniary advantages or benefits in kind to Health Care Professionals (HCPs) unless they are inexpensive and relevant to the practice of medicine or pharmacy. Similarly, strict rules apply to hospitality at sales promotion events. Based on these rules, a body of industry guidelines and sometimes national laws in force in individual EU Member States has been introduced to fight improper payments or other transfers of value to HCPs, and in general inducements that may have a broadly promotional character.

Ensuring that our business practices and that our business arrangements with third parties comply with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment and exclusion from government funded healthcare programs, such as Medicare and Medicaid, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Significant regulation applies to the manufacturing of our products and the manufacturing facilities on which we rely may not meet regulatory requirements or may have limited capacity.

All entities involved in the preparation of products for clinical studies or commercial sale, including our existing CMOs as well as our in-house manufacturing facilities in Raleigh, North Carolina, and Paris, France, are subject to extensive regulations. For example, in the United States, components of a finished CAR T-cell immunotherapy product approved for commercial sale or used in clinical studies must be manufactured in accordance with the relevant current Good Manufacturing Practices (cGMP) requirements. Similarly, in the EU, manufacturers and importers of active substances and/or medicinal products must be authorized to carry out these activities. Each of their facilities must comply with cGMP to obtain a manufacturing or import authorization. Also, applicants for a marketing authorization are responsible to ensure that the proposed manufacturing sites included in the marketing authorization application comply with cGMP.

The FDA’s cGMP regulations and comparable regulations in other jurisdictions govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of the product candidates we develop that may not be detectable in final product testing. In the United States, we or our contract manufacturers must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s cGMP requirements enforced by the FDA through its facilities inspection program. Our facilities and quality systems and the facilities and quality systems of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates. In addition, the regulatory authorities may, at any time, inspect a manufacturing facility involved with the preparation and/or control of our product candidates as well as the associated quality systems for compliance with the regulations applicable to the activities being conducted.

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Similarly, in the EU, Directive 2003/94/EC, Regulation (EU) No 1252/2014 and Regulation (EU) 2017/1569 lay down the principles and guidelines of cGMP in respect of active substances for medicinal products for human use as well as investigational and medicinal products for human use and require that products are consistently produced and controlled in accordance with the applicable quality standards. EU legislation also requires that medicinal products and investigational medicinal products that are imported from third countries are manufactured in accordance with standards at least equivalent to the GMP standards laid down in the EU. These rules, together with the detailed EU Guidelines on cGMP that are laid down in EudraLex—Volume 4, provide guidance on, inter alia, quality management, personnel, premises, documentation, production operations, quality control, outsources activities, complaints and product recall and self-inspection. GMP inspections are performed by the competent authorities of the EU Member States, and are coordinated by the EMA in the case of medicinal products that are authorized through the EU centralized procedure. Furthermore, specific guidance laying down GMP requirements for the manufacturing of ATMPs that have been granted a marketing authorization and of ATMPs used in a clinical trial setting have been adopted by the EMA.

If we or any of our third-party CMOs fail to provide appropriate products or maintain regulatory compliance, the regulator can impose regulatory sanctions including, among other things, the imposition of a hold on clinical trials, the refusal to permit a clinical trial to commence, the refusal to use certain batches of product candidates intended to be used in the clinical trials, the refusal to approve a pending application for a new product, the revocation or non-renewal of a pre-existing approval, or the refusal to accept some non-clinical and/or clinical data generated with material for which that third-party was responsible. As a result, our business, financial condition and results of operations may be materially harmed.

Manufacturing at our in-house manufacturing facilities requires significant resources and substantial regulatory engagement. Our commercial manufacturing facility in Raleigh, North Carolina, will be subject to FDA inspection, including preapproval inspections, which we may never successfully complete. Even if the facility is appropriately qualified, we will be subject to ongoing periodic announced or unannounced inspection by the FDA, the Drug Enforcement Administration and other foreign agencies to ensure strict compliance with cGMPs, and other government regulations. Accordingly, bringing our own commercial manufacturing capabilities online and maintaining compliant manufacturing capabilities may be costlier than we anticipate or may result in delays.

In addition, if supply from one approved manufacturer or supplier, including our own in-house manufacturing facilities, is interrupted, there could be a significant disruption in commercial and/or clinical supply of our products. Identifying and engaging an alternative manufacturer or supplier that complies with applicable regulatory requirements could result in further delay. Applicable regulatory agencies may also require additional studies if a new manufacturer or supplier is relied upon in connection with commercial production. Switching manufacturers or suppliers may involve substantial costs and time and is likely to result in a delay in our desired clinical and commercial timelines.

These factors could cause commercialization of our product candidates to be delayed, cause us to incur higher costs, or prevent us from commercializing our products successfully. Furthermore, if our manufacturing facilities are unable to produce high quality product for our clinical and commercial needs, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical studies may be delayed or we could lose potential revenue.

Risks Related to Calyxt, Inc.

On May 31, 2023, Calyxt, Inc. completed its all-stock, reverse merger business combination with Cibus Global, LLC (the "Merger"). Following the closing of the Merger, effective on June 1, 2023, the combined company operates under the name of Cibus, Inc. (referred to as “Cibus”). Cellectis’ equity interest in Calyxt was reduced to 2.9% after the closing of the Merger, which resulted in Cellectis losing control of Calyxt. Calyxt is therefore no longer consolidated since June 1, 2023 and continue to be presented as the results of discontinued operations until that date.

On June 1, 2023, we owned 2.9% of the equity interests of Cibus.. In connection with the Merger Agreement, we executed a voting agreement with Cibus to vote in favor of and approve all the transactions contemplated by the Merger Agreement, subject to the terms and conditions thereof. Pursuant to the voting agreement, at such time that the annual revenues of Calyxt Inc. equals $25.0 million or more for two consecutive 12-month periods after the closing of the Merger, Cibus will use commercially reasonable efforts to terminate our guaranty of Calyxt’s lease agreement with respect to its headquarters, which we provided in favor of the landlord of that property. As of December 31, 2023, our lease guaranty represents a liability in the amount of $22.9 million over the remaining 14-year lease period. Cibus, however, will not be required to replace us as guarantor or pay any fees in connection with termination of the guaranty. Until the parties are able to terminate our lease guaranty, Cibus. may not renew or extend Cibus’s lease or enter into any amendment that would increase our liability under the lease guaranty. Further, Cibus, from and after the closing of the Merger, agrees to indemnify us and our affiliates in connection with the Cibus lease and our guaranty thereof. However, due to the potential amount of the payment obligation and the uncertainty about Cibus' ability to make payments under or indemnify us in connection with the lease and guaranty, this indemnification may not be sufficient to cover the possible payment obligation arising out of this guaranty. As a result, our continuing potential liability pursuant to the lease guaranty and our potential obligation to pay the remaining liability amount could have a material adverse effect on our business, financial condition, cash flows or results of operations.

 

Risks Related to Intellectual Property

Our ability to compete may decline if we do not adequately protect our proprietary rights.

Our commercial success depends, in part, on obtaining and maintaining proprietary rights to our and our licensors’ intellectual property estate, including with respect to our product candidates, as well as successfully defending these rights against third-party challenges. We will only be able to protect our product candidates from unauthorized use by third parties to the extent that valid and enforceable patents, or effectively protected trade secrets, cover them. Our ability to obtain patent protection for our product candidates is uncertain due to a number of factors, including:

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Even if we own, obtain or in-license patents covering our product candidates or compositions, we may still be barred from making, using and selling our product candidates or technologies because of the patent rights or other intellectual property rights of others. Others may have filed, and in the future may file, patent applications covering compositions, products or methods that are similar or identical to ours, which could materially affect our ability to successfully develop and, if approved, commercialize our product candidates. In addition, because patent applications can take many years to issue, there may be currently pending applications unknown to us that may later result in issued patents that our product candidates or compositions may infringe. These patent applications, including intermediate documents, may have priority over patent applications filed by us or our licensors.

Obtaining and maintaining a patent portfolio entails significant expense of resources. Part of such expense includes periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications due over the course of several stages of prosecuting patent applications, and over the lifetime of maintaining and enforcing issued patents. We or our licensors may or may not choose to pursue or maintain protection for particular intellectual property in our or our licensors portfolio. If we or our licensors choose to forgo patent protection or to allow a patent application or patent to lapse purposefully or inadvertently, our competitive position could suffer. In some cases, the prosecution and maintenance of our licensed patents is controlled by the applicable licensor. If such licensor fails to properly prosecute and maintain such patents, we could lose our rights to them, which could materially impair any competitive advantage afforded by such patents. Furthermore, we and our licensors employ reputable law firms and other professionals to help us comply with the various procedural, documentary, fee payment and other similar provisions we and they are subject to and, in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules.

There are situations, however, in which failure to make certain payments or noncompliance with certain requirements in the patent prosecution and maintenance process can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

Legal action that may be required to enforce our patent rights can be expensive and may involve the diversion of significant management time. In addition, these legal actions could be unsuccessful and could also result in the invalidation or transfer of ownership of our or our licensors’ patents or a finding that they are unenforceable. We or our licensors may or may not choose to pursue litigation or other actions against those that have infringed on our or their patents, or have used them without authorization, due to the associated expense and time commitment of monitoring these activities. In some cases, the enforcement and defense of patents we in-license is controlled by the applicable licensor. If such licensor fails to actively enforce and defend such patents, any competitive advantage afforded by such patents could be materially impaired. In addition, some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we or our licensors can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or from successfully challenging or claiming ownership over our intellectual property rights. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our results of operations.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to patent protection, because we operate in the highly technical field of development of therapies, we rely in part on trade secret protection in order to protect our proprietary technology and processes. However, trade secrets are difficult to protect. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective or sufficient.

In addition to contractual measures that we implement in our agreements with third-party service providers and in licensing agreements, we try to protect the confidential nature of our proprietary information using physical and technological security measures. Such measures may not provide adequate protection for our proprietary information. For example, our security measures may not prevent an employee, consultant, or collaborator with authorized access from misappropriating our trade secrets and providing them to a competitor, and the recourse we have available against such misconduct may not provide an adequate or sufficiently swift remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Furthermore, our proprietary information may be independently developed or lawfully reverse-engineered by others in a manner that could prevent legal recourse by us.

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We cannot guarantee that our trade secrets and other proprietary and confidential information will not be disclosed or that competitors will not otherwise gain access to our trade secrets. If any of our confidential or proprietary information, including our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position could be harmed.

Patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our competitive position.

The patent positions of biotechnology and biopharmaceutical companies and other actors in our fields of business can be highly uncertain and typically involve complex scientific, legal and factual analyses. In particular, the interpretation and breadth of claims allowed in some patents covering biological and biopharmaceutical compositions may be uncertain and difficult to determine, and are often affected materially by the facts and circumstances that pertain to the patented compositions and the related patent claims. The standards of the United States Patent and Trademark Office, or USPTO, and foreign patent offices are sometimes uncertain and could change in the future. Consequently, the issuance and scope of patents cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated, narrowed or circumvented. U.S. patents and patent applications may also be subject to interference proceedings, and U.S. patents may be subject to reexamination proceedings, post- grant review, inter partes review, or other administrative proceedings in the USPTO. Foreign patents as well may be subject to opposition or comparable proceedings in the corresponding foreign patent offices. Challenges to our or our licensors’ patents and patent applications, if successful, may result in the denial of our or our licensors’ patent applications or the loss or reduction in their scope. For example, on February 2022, following an opposition before the European Patent Office, the EP3004349 patent entitled “a method for producing precise DNA cleavage using CAS9 double nickase activity” was revoked. In addition, such interference, reexamination, post-grant review, inter partes review, opposition proceedings and other administrative proceedings may be costly and involve the diversion of significant management time. Accordingly, rights under any of our or our licensors’ patents may not provide us with sufficient protection against competitive products or processes and any loss, denial or reduction in scope of any such patents and patent applications may have a material adverse effect on our business.

Furthermore, even if not challenged, our or our licensors’ patents and patent applications may not adequately protect our product candidates or technology or prevent others from designing their products or technology to avoid being covered by our or our licensors’ patent claims. If the breadth or strength of protection provided by the patents we own or license with respect to our product candidates is threatened, it could dissuade companies from collaborating with us to develop, and could threaten our ability to successfully commercialize, our product candidates. Furthermore, for U.S. patent applications in which claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third party or instituted by the USPTO in order to determine who was the first to invent any of the subject matter covered by such patent claims.

In addition, changes in, or different interpretations of, patent laws in the United States and other countries may permit others to use our discoveries or to develop and commercialize our technology and products without providing any notice or compensation to us, or may limit the scope of patent protection that we or our licensors are able to obtain. The laws of some countries do not protect intellectual property rights to the same extent as U.S. laws and those countries may lack adequate rules and procedures for defending our intellectual property rights.

If we or our licensors fail to obtain and maintain patent protection and trade secret protection of our product candidates and technology, we could lose our competitive advantage and competition we face would increase, reducing any potential revenues and have a material adverse effect on our business.

The lives of our patents may not be sufficient to effectively protect our products and business.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Our or our licensors’ issued patents and pending patent applications will expire on dates ranging from 2024 to 2042, subject to any patent extensions that may be available for such patents. In addition, although upon issuance in the United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. In the EU, Supplementary Protection Certificates (SPCs) are available to extend a patent term for up to five years to compensate for patent protection lost during regulatory review. Although all EU Member States must provide SPCs, SPCs must still be applied for and granted on a country-by-country basis and their protection is subject to exceptions. If we or our licensors do not have sufficient patent life to protect our products, our business and results of operations will be adversely affected.

We will not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing, prosecuting and defending patents on our product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States, assuming that rights are obtained in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we or our licensors do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where we or our licensors have patent protection, but where the ability to enforce our or our licensors’ patent rights is not as strong as in the United States. These products may compete with our products and our intellectual property rights and such rights may not be effective or sufficient to prevent such competition.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Patent protection must be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we or our licensors may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries. In addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biopharmaceuticals or biotechnologies, and the requirements for patentability differ, in varying degrees, from country to country, and the laws of some foreign countries do not protect intellectual property rights, including trade secrets, to the same extent as federal and state laws of the United States. As a result, many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.

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Such issues may make it difficult for us to stop the infringement, misappropriation or other violation of our intellectual property rights. For example, many foreign countries, including the EU countries, have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our and our licensors’ efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license. Similarly, if our trade secrets are disclosed in a foreign jurisdiction, competitors worldwide could have access to our proprietary information and we may be without satisfactory recourse. Such disclosure could have a material adverse effect on our business. Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws.

Furthermore, proceedings to enforce our and our licensors’ patent rights and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our or our licensors’ patents at risk of being invalidated or interpreted narrowly, could put our or our licensors’ patent applications at risk of not issuing and could provoke third parties to assert claims against us or our licensors. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded to us, if any, may not be commercially meaningful, while the damages and other remedies we may be ordered to pay such third parties may be significant. Accordingly, our or our licensors’ efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Third parties may assert rights to inventions we develop or otherwise regard as our own.

Third parties may in the future make claims challenging the inventorship or ownership of our or our licensors’ intellectual property. We have written agreements with collaborators that provide for the ownership of intellectual property arising from our licensing arrangements. These agreements provide that we must negotiate certain commercial rights with such collaborators with respect to joint inventions or inventions made by our collaborators that arise from the results of the arrangement. In some instances, there may not be adequate written provisions to address clearly the allocation of intellectual property rights that may arise from the respective licensing arrangement. If we cannot successfully negotiate sufficient ownership and commercial rights to the inventions that result from our use of a third-party collaborator’s materials when required, or if disputes otherwise arise with respect to the intellectual property developed through the use of a collaborator’s samples, we may be limited in our ability to capitalize on the full market potential of these inventions. In addition, we may face claims by third parties that our agreements with employees, contractors, or consultants obligating them to assign intellectual property to us are ineffective, or are in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and could interfere with our ability to capture the full commercial value of such inventions. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property and associated products and technology, or may lose our rights in that intellectual property. Either outcome could have a material adverse effect on our business.

In addition, the research resulting in certain of our in-licensed patent rights and technology was funded in part by the United States government. As a result, the United States government has certain rights to such patent rights and technology, which include march-in rights. When new technologies are developed with government funding, the government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the government to use the invention or to have others use the invention on its behalf. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the government-funded technology, or because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to the United States industry. Any exercise by the government of any of the foregoing rights could have a material adverse effect on our business.

We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent which might adversely affect our ability to develop and market our products.

We cannot guarantee that any of our patent searches or analyses, including but not limited to the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction.

The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history.

Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products are not covered by a third-party patent or may incorrectly predict whether a third party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our product candidates. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products.

Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.

We currently employ, and may in the future employ, individuals who were previously employed or worked as an intern at universities or other biotechnology or biopharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and costly, and an unfavorable outcome could harm our business.

There is significant litigation in the biopharmaceutical industry regarding patent and other intellectual property rights. Although we are not currently subject to any material pending intellectual property litigation, and are not aware of any such threatened litigation, we may be exposed to future litigation by third parties based on claims that our product candidates, technologies or activities infringe the intellectual property rights of others.

Our success will depend in part on our ability to operate without infringing, misappropriating or otherwise violating the intellectual property and proprietary rights of third parties. Other parties may allege that our or our collaborators’ products or product candidates or the use of our or our collaborators’ technologies infringe, misappropriate or otherwise violate patent claims or other intellectual property rights held by them or that we or our collaborators’ are employing their proprietary technology without authorization.

If our development activities are found to infringe any such patents or other intellectual property rights, we may have to pay significant damages or seek licenses to such patents or other intellectual property. A patentee could prevent us from using the patented drugs or compositions. We may need to resort to litigation to enforce a patent issued to us, to protect our trade secrets, or to determine the scope and validity of third-party proprietary rights.

If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a material adverse impact on our cash position. Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain.

Any legal action against us or our collaborators could lead to:

Any of these outcomes could have a material adverse impact on our cash position and financial condition and our ability to develop and commercialize our product candidates.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.

If we or one of our licensing partners initiated legal proceedings against a third party to enforce a patent covering our product candidate, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Furthermore, third parties may petition courts for declarations of invalidity or unenforceability with respect to our patents or individual claims. If successful, such claims could narrow the scope of protection afforded our product candidates and future products, if any. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review and equivalent proceedings in foreign jurisdictions. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover our product candidates or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection would have a material adverse impact on our business.

We may be unsuccessful in licensing or acquiring intellectual property that may be required to develop and commercialize our product candidates from third parties.

We have rights, through licenses from third parties and under patents that we own, to the intellectual property to develop our product candidates. Because our programs may involve additional product candidates or improved formulations of existing product candidates that may require the use of intellectual property or proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire, in-license or use such intellectual property and proprietary rights. We may be unable to acquire or in-license any third-party intellectual property or proprietary rights or to do so on commercially reasonable terms. For example, we sometimes collaborate with academic institutions to accelerate our research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified time frame or under terms that are acceptable to us, and the institution may license such intellectual property rights to third parties, potentially blocking our ability to pursue our development and commercialization plans.

The licensing and acquisition of third-party intellectual property and proprietary rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property and proprietary rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size and greater capital resources and development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license intellectual property and proprietary rights to us.

If we are unable to successfully acquire or in-license rights to required third-party intellectual property and proprietary rights or maintain the existing intellectual property and proprietary rights we have, we may have to cease development of the relevant the relevant program, product or product candidate, which could have a material adverse effect on our business.

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If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

We are a party to a number of intellectual property license agreements that are important to our business and expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, our licensors may have the right to terminate the license, in which event we would not be able to market products or product candidates covered by the license.

In addition, disputes may arise regarding the payment of the royalties or other consideration due to licensors in connection with our exploitation of the rights we license from them. Licensors may contest the basis of payments we retained and claim that we are obligated to make payments under a broader basis. In addition to the costs of any litigation we may face as a result, any legal action against us could increase our payment obligations under the respective agreement and require us to pay interest and potentially damages to such licensors.

In some cases, patent prosecution of our licensed technology is controlled solely by the licensor. If such licensor fails to obtain and maintain patent or other protection for the proprietary intellectual property we license from such licensor, we could lose our rights to such intellectual property or the exclusivity of such rights, and our competitors could market competing products using such intellectual property. In addition, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected products and product candidates, which could harm our business significantly. In other cases, we control the prosecution of patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our licensing partners. We may also require the cooperation of our licensors to enforce any licensed patent rights, and such cooperation may not be provided. Moreover, we have obligations under these license agreements, and any failure to satisfy those obligations could give our licensor the right to terminate the agreement. Termination of a necessary license agreement could have a material adverse impact on our business.

Disputes may arise regarding intellectual property subject to a licensing agreement, including:

If disputes over intellectual property that we have licensed from third parties prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

Risks Related to Human Capital

We depend on key management personnel and attracting and retaining other qualified personnel, and our business could be harmed if we lose key management personnel or cannot attract and retain other qualified personnel.

Our success depends to a significant degree upon the technical skills and continued service of certain members of our management team, including Dr. André Choulika, our co-founder and Chief Executive Officer and Dr. David Sourdive, our co-founder and Executive Vice President CMC and Manufacturing. Although we maintain “key person” insurance policies on the lives of our co-founders, the loss of the services of our co-founders or other key executive officers could have a material adverse effect on us.

Our success also will depend upon our ability to attract and retain additional qualified management, regulatory, medical, and technical executives and personnel. The failure to attract, integrate, motivate, and retain additional skilled and qualified personnel, or to find suitable replacements upon departures, could have a material adverse effect on our business. We compete for such personnel against numerous companies, including larger, more established companies with significantly greater financial resources than we possess. In addition, failure to succeed in our product candidates’ development may make it more challenging to recruit and retain qualified personnel. There can be no assurance that we will be successful in attracting or retaining such personnel and the failure to do so could have a material adverse effect on our business, financial condition, and results of operations.

In order to induce valuable employees to remain at Cellectis, we have provided from time to time free shares and stock options to purchase ordinary shares that vest over time. The value to employees of free shares and stock options that vest over time may be significantly affected by movements in the price of our ordinary shares that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies. In addition, our board’s authority to grant equity incentive instruments is subject to an approval of a two-thirds majority of the votes cast of our shareholders. Our shareholders may vote against some or all resolutions giving authority to our board to grant such equity awards.

Risks Relating to Our Status as a Foreign Private Issuer and a French Company

We are limited in our ability to raise additional share capital, which may make it difficult for us to fund our operations.

Under French law, our share capital generally may be increased with the approval of a two-thirds majority of the votes cast of the shareholders present, represented by proxy, or voting by mail at an extraordinary general shareholders’ meeting following the recommendation of our board of directors.

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The shareholders may delegate to our board of directors either the authority (délégation de compétence) or the power (délégation de pouvoir) to carry out any increase in the share capital. Accordingly, our board of directors may be precluded from issuing additional share capital if the prior approval of the shareholders is not duly obtained.

Our By-laws and French corporate law contain provisions that may delay or discourage a takeover attempt.

Provisions contained in our By-laws and French corporate law could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. In addition, provisions of French law and our By-laws impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. These provisions include the following:

The rights of shareholders in companies subject to French corporate law differ in material respects from the rights of shareholders of corporations incorporated in the United States.

We are a French company with limited liability. Our corporate affairs are governed by our By-laws and by the laws governing companies incorporated in France. The rights of shareholders and the responsibilities of members of our board of directors are in many ways different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. For example, in the performance of its duties, our board of directors is required by French law to consider the interests of our company, its shareholders, its employees and other stakeholders, rather than solely our shareholders and/or creditors. It is possible that some of these parties will have interests that are different from, or in addition to, the interests of our shareholders. See the sections of this Annual Report titled “Memorandum and Articles of Association” and “Corporate Governance.”

French law may limit the amount of dividends we are able to distribute, and we do not currently intend to pay dividends.

We have never declared or paid any cash dividends on our share capital and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, holders of our ordinary shares and ADSs are not likely to receive any dividends for the foreseeable future and any increase in value will depend solely upon any future appreciation.

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Consequently, holders of our equity securities may need to sell all or part of their holdings after price appreciation, which may never occur, as the only way to realize any future gains.

Further, under French law, the determination of whether we have been sufficiently profitable to pay dividends is made on the basis of our statutory financial statements prepared and presented in accordance with standard applicable in France. Please see the section of this Annual Report titled “Memorandum and Articles of Association” for further details on the limitations on our ability to declare and pay dividends. Therefore, we may be more restricted in our ability to declare dividends than companies not based in France.

Our failure to maintain certain tax benefits applicable to French technology companies may adversely affect our results of operations.

As a French technology company, we have benefited from certain tax advantages, including the French research tax credit (Crédit d’Impôt Recherche), or CIR. The CIR is a French tax credit aimed at stimulating research and development. The CIR can be offset against French corporate income tax due and the portion in excess (if any) may be refunded at the end of a three fiscal-year period (or, sooner, in certain cases). The Research tax credit receivables as of December 31, 2023 include the accrual for a French research tax credit related to 2022 for $5.6 million and research tax credit related to previous periods for $15 million. The CIR is calculated based on our claimed amount of eligible research and development expenditures in France. The French tax authority with the assistance of the Research and Technology Ministry may audit each research and development program in respect of which a CIR benefit has been claimed and assess whether such program qualifies in their view for the CIR benefit, in accordance with the French tax code (code général des impôts) and the relevant official guidelines.

 

During December 2018, the French Tax Authority initiated an audit related to the 2014, 2015, 2016 and 2017 French research tax credits. In January 2022, the administrative court (tribunal administratif) of Paris confirmed that Cellectis was entitled to receive the amounts related to 2017 and 2018 tax credits. $0.8 million were collected in February 2022. On March 15, 2022, the French tax authorities appealed this decision to the Paris Administrative Court of Appeal (Cour administrative d'appel de Paris) and requested that the decision be reversed. On May 18, 2022, the Company filed its observations in defense. By a decision dated December 13, 2023, the Paris Administrative Court of Appeal overturned the first-instance decision and ordered the reimbursement by the Company of $0.7 million.

Furthermore, if the French Parliament decides to eliminate, modify, or reduce the scope of the CIR benefit, which it could decide to do at any time, our results of operations could be adversely affected.

We may be exposed to significant foreign exchange risk, which may adversely affect our financial condition, results of operations and cash flows.

We incur portions of our expenses and may in the future derive revenues in currencies other than the euro, including, in particular, the U.S. dollar. As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. While we are engaged in hedging transactions to minimize the impact of uncertainty in future exchange rates on cash flows, we may not hedge all of our foreign currency exchange rate risk. In addition, hedging transactions carry their own risks and costs, including the possibility of a default by the counterpart to the hedge transaction. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of operations and cash flows.

Although not free from doubt, we do not believe we were a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for the taxable year ended December 31, 2023. However, we cannot assure you that we will not be classified as a PFIC for the taxable year ended December 31, 2023 or any future taxable year, which may result in adverse U.S. federal income tax consequences to U.S. holders (as defined in the section titled “Taxation—Material U.S. Federal Income Tax Considerations” in this Annual Report).

A non-U.S. corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during such year) is attributable to assets that produce or are held for the production of passive income. Although the matter is not free from doubt, we do not believe that we were a PFIC for U.S. federal income tax purposes for the taxable year ended December 31, 2023. Because certain aspects of the PFIC rules are not entirely certain and because this determination is dependent upon a number of factors, there can be no assurance that we were not a PFIC for such taxable year or that the IRS will agree with any position we take regarding our PFIC status.

Further, no assurances may be given at this time as to our PFIC status for the current or future taxable years. The determination of PFIC status is fact-specific, and a separate determination must be made each taxable year as to whether we are a PFIC (after the close of each such taxable year). It is possible that we could be classified as a PFIC for taxable year ended December 31, 2023 or future taxable years due to changes in the composition of our assets or income, as well as changes to the market value of our assets. The market value of our assets may be determined in large part by reference to our market capitalization (and, therefore, the market price of the ADSs and our ordinary shares, which has fluctuated and is likely to continue to fluctuate, substantially).

If we are a PFIC for any taxable year during which a U.S. holder holds ADSs, the U.S. holder may be subject to adverse tax consequences, including (1) the treatment of all or a portion of any gain on disposition of the ADSs as ordinary income, (2) the application of an interest charge with respect to such gain and certain dividends and (3) compliance with certain reporting requirements. Each U.S. holder is strongly urged to consult its tax advisor regarding these issues and any available elections to mitigate such tax consequences. See the section titled “Taxation—Material U.S. Federal Income Tax Considerations” in this Annual Report.

We may have to take undesirable actions to avoid being deemed an investment company under the US Investment Company Act of 1940.

We are engaged in the development of therapeutic products based on gene-editing, with a portfolio of allogeneic Chimeric Antigen Receptor T-cell product candidates in the field of immune-oncology and gene-edited hematopoietic stem and progenitor cells product candidates in other therapeutic indications. Although we do not make speculative investments in third-party companies’ securities, from time to time, we have entered into licensing or other commercial agreements for which we have agreed to accept company securities as consideration.

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Currently, we have entered into such arrangements with Primera Therapeutics, Inc. We believe we are not an investment company within the meaning of Section 3(a)(1)(C) of the Investment Company Act of 1940, or the US Investment Company Act. However, as a result of these and other investments, volatility in the value of our investments could result in us being deemed an investment company within the meaning of Section 3(a)(1)(C). We will monitor our assets regularly and take all necessary steps in order to seek to ensure that we are not deemed an investment company within the meaning of Section 3(a)(1)(C) or otherwise are required to register as an investment company under the US Investment Company Act in the future. The steps we may need to take could include selling all or part of our investments in those companies or investing in a greater proportion of tangible assets relative to our total assets. Depending on timing and other factors, taking one or more of these steps may serve as a distraction of management’s attention from our primary business or may require us to transact at undesirable market prices. If we are unable to take the necessary steps to avoid being inadvertently deemed an investment company or otherwise being required to register under the US Investment Company Act, we would not be able to offer our securities in the United States until we were no longer deemed an investment company under the US Investment Company Act. We could also be subject to other adverse consequences as a result thereof.

As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company. This may limit the information available to holders of ADSs.

We are a “foreign private issuer,” as defined in the SEC’s rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, our officers and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, while we currently make annual and quarterly filings with the SEC, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. domestic public companies and are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act. Accordingly, there may be less publicly available information concerning our company than there would be if we were a U.S. domestic issuer.

As a foreign private issuer, we follow certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq’s corporate governance standards.

As a foreign private issuer listed on the Nasdaq Global Market, we are subject to Nasdaq’s corporate governance standards. However, as a foreign private issuer, Nasdaq’s rules permit us to follow the corporate governance practices of France, which differ significantly from certain corporate governance standards of the Nasdaq. For example, neither the corporate laws of France nor our By-laws require a majority of our directors to be independent and our independent directors are not required to hold regularly scheduled meetings at which only independent directors are present. In addition, French governance practice does not require us to maintain a nominating and corporate governance committee or to maintain a compensation committee composed entirely of independent directors. Currently, we follow home country practice in certain key respects. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers. A discussion of our corporate governance practices is set forth in the section titled “Management—Corporate Governance Practices.”

We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.

Based on our determination made on June 30, 2023 (the last business day of our most recently completed second fiscal quarter), we currently qualify as a foreign private issuer. The next determination will be made with respect to us on June 30, 2024.

We will lose our foreign private issuer status if, as of the relevant determination date, more than 50% of our securities are held by U.S. residents and (i) more than 50% of our executive officers or more than 50% of the members of our board of directors are residents or citizens of the United States, (ii) more than 50% of our assets are located in the United States, or (iii) our business is principally administered within the United States we could lose our foreign private issuer status.

As of June 30, 2023, approximately 22.4% of our securities were held by persons who were U.S. residents.

The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic public company would be significantly more than the costs we currently incur as a foreign private issuer.

It may be difficult to enforce civil liabilities against our company and directors and senior management and the experts named in this Annual Report.

Certain members of our board of directors and senior management are not residents of the United States, and all or a substantial portion of our assets and the assets of such persons are located outside the United States. As a result, it may not be possible to serve process on such persons or us in the United States, to obtain jurisdiction over us or our non-U.S. resident senior management and directors in U.S. courts or obtain evidence in France or from French citizen or any individual being resident in France or any officer, representative, agent or employee of a legal person having its registered office or an establishment in a territory of France, in connection with those actions in actions predicated on the civil liability provisions of the US federal securities laws. In addition, it may also not be possible to enforce judgments obtained in U.S. courts against our non-U.S. resident senior management and directors or us based on civil liability provisions of the securities laws of the United States. Additionally, it may be difficult to assert U.S. securities law claims in actions originally instituted outside of the United States. Foreign courts may refuse to hear a U.S. securities law claim because foreign courts may not be the most appropriate forums in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that the law of the jurisdiction in which the foreign court resides, and not U.S. law, is applicable to the claim. Further, if U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would still be governed by the law of the jurisdiction in which the foreign court resides. In particular, there is some doubt as to whether French courts would recognize and enforce certain civil liabilities under U.S. securities laws in original actions or judgments of U.S. courts based upon these civil liability provisions. In addition, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in France. An award for monetary damages under the U.S. securities laws would be considered punitive if it does not seek to compensate the claimant for loss or damage suffered but is intended to punish the defendant. French law provides that a shareholder, or a group of shareholders, may initiate a legal action to seek indemnification from the directors of a company in the company’s interest if it fails to bring such legal action itself.

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If so, any damages awarded by the court are paid to the company and any legal fees relating to such action are borne by the relevant shareholder or the group of shareholders.

The enforceability of any judgment in France will depend on the particular facts of the case as well as the laws and treaties in effect at the time. The United States and France do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters.

Risks Related to Ownership of Our ADSs

Holders of our ADSs do not directly hold our ordinary shares.

Holders of ADSs are not treated as one of our shareholders and do not have ordinary shareholder rights. French law governs shareholder rights. The depositary, through the custodian or the custodian’s nominee, is the holder of the ordinary shares underlying all ADSs. Holders of ADSs have only ADS holder rights. Among other things, ADS holder rights do not provide for double voting rights, which otherwise would be available to holders of ordinary shares held in a shareholders’ name for a period of at least two years. A double voting right is attached to each registered share which is held in the name of the same shareholder for at least two years. The deposit agreement among us, the depositary and purchasers of ADSs in the U.S. offering, as an ADS holder, and all other persons directly and indirectly holding ADSs, sets out ADS holder rights, as well as the rights and obligations of us and the depositary.

Holders of our ADSs may not be able to exercise their right to vote the ordinary shares underlying such ADSs.

Holders of ADSs may exercise voting rights with respect to the ordinary shares represented by the ADSs only in accordance with the provisions of the deposit agreement and not as a direct shareholder. The deposit agreement provides that, upon receipt of notice of any meeting of holders of our ordinary shares, the depositary will fix a record date for the determination of ADS holders who shall be entitled to give instructions for the exercise of voting rights. Upon timely receipt of notice from us, if we so request, the depositary shall distribute to the holders as of the record date (1) the notice of the meeting or solicitation of consent or proxy sent by us and (2) a statement as to the manner in which instructions may be given by the holders.

Holders of ADSs may instruct the depositary of the ADSs to vote the ordinary shares underlying such ADSs. Otherwise, holders of our ADSs will not be able to exercise their right to vote, unless they withdraw the ordinary shares underlying such ADSs. However, holders of our ADSs may not know about the meeting far enough in advance to withdraw those ordinary shares. If we ask for instructions, the depositary, upon timely notice from us, will notify holders of our ADSs of the upcoming vote and arrange to deliver our voting materials to such holders. We cannot guarantee that holders of our ADSs will receive the voting materials in time to ensure that they can instruct the depositary to vote such ordinary shares or to withdraw such ordinary shares so as to vote them directly. If the depositary does not receive timely voting instructions from holders of our ADSs, it may give a proxy to a person designated by us to vote the ordinary shares underlying such ADSs in accordance with the recommendation of our board of directors. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that holders of our ADSs may not be able to exercise their right to vote, and there may be nothing such holders can do if the ordinary shares underlying such ADSs are not voted as requested.

The rights of shareholders in companies subject to French corporate law differ in material respects from the rights of shareholders of corporations incorporated in the United States.

We are French société anonyme with our registered office in France. Our corporate affairs are governed by our By-laws and by the laws governing companies incorporated in France. The rights of shareholders and the responsibilities of members of our board of directors are in many ways different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. For example, in accordance with French law, while a double voting right is attached to each ordinary share which is held in registered form in the name of the same shareholder for at least two years, ordinary shares deposited with the depositary will not be entitled to double voting rights. Therefore, holders of ADSs who wish to obtain double voting rights will need to surrender their ADSs, withdraw the deposited shares, and take the necessary steps to hold such ordinary shares in registered form in the holder's name for at least two years. See "Item 16G—Corporate Governance".

The right of holders of our ADSs to participate in any future preferential subscription rights or to elect to receive dividends in shares may be limited, which may cause dilution to holders of ADSs; Our preferred shares may cause further dilution.

According to French law, if we issue additional shares or securities for cash, current shareholders will have preferential subscription rights for these securities proportionally to their shareholding unless they waive those rights at an extraordinary meeting of our shareholders (by a two-thirds majority vote) or individually by each shareholder. However, our ADS holders in the United States will not be entitled to exercise or sell such rights unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. In addition, the deposit agreement for our ADSs provides that the depositary will not make rights available to holders of our ADSs unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted from registration under the Securities Act. Further, if we offer holders of our ordinary shares the option to receive dividends in either cash or shares, the depositary may require satisfactory assurances from us that extending the offer to holders of ADSs does not require registration of any securities under the Securities Act before making the option available to holders of ADSs. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, ADS holders may be unable to participate in our rights offerings or to elect to receive dividends in shares and may experience dilution in their holdings and may receive no value for these rights.

Our "class A" preferred shares and our "class B" preferred shares once issued pursuant to the Subsequent Investment Agreement would benefit from a preferential distribution right in the event of a liquidation of the Company, which could cause substantial dilution and have an adverse effect on the value of our ordinary shares. In addition, our "class A" preferred shares and our "class B" preferred shares would be convertible, in whole or in part, at their holder’s option, into ordinary shares of the Company. Such conversion of our "class A" preferred shares and our "class B" preferred shares could result in significant dilution to our shareholders. For more information on our "class A" preferred shares and our "class B" preferred shares to be issued, see Exhibit 2.3 to this Annual Report, which is incorporated by reference herein.

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Holders of our ADSs may be subject to limitations on the transfer of such ADSs and the withdrawal of the underlying ordinary shares.

ADSs, which may be evidenced by American Depositary Receipts, or ADRs, are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason subject to an ADS holders’ right to cancel such ADSs and withdraw the underlying ordinary shares. Temporary delays in the cancellation of such ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting or we are paying a dividend on our ordinary shares. In addition, holders of our ADSs may not be able to cancel such ADSs and withdraw the underlying ordinary shares when such holders owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities.

The market price for our ADSs may be volatile or may decline regardless of our operating performance.

The trading price of the ADSs has fluctuated, and is likely to continue to fluctuate, substantially. Since the ADSs were sold in our initial public offering in March 2015 at a price of $41.50 per share, the price per ADS has ranged as low as $0.97 and as high as $47.66 through April 29, 2024. The market price of the ADSs may fluctuate significant in response to numerous factors, including those described in this “Risk Factors” section, many of which are beyond our control. The market price and demand for our ADSs may also fluctuate substantially, regardless of our actual operating performance, which may limit or prevent holders from readily selling their ADSs and may otherwise negatively affect the liquidity of our capital shares.

Share ownership is concentrated in the hands of our principal shareholders and management, who will continue to be able to exercise substantial influence on us.

Our executive officers, directors, current 5% or greater shareholders and affiliated entities beneficially own approximately 42.35% of our ordinary shares outstanding (including those underlying our ADSs, but excluding shares that may be acquired upon exercise of stock options or warrants) as of December 31, 2023. As a result, these shareholders have significant influence over all matters that require approval by our shareholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other shareholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other shareholders may view as beneficial.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Our legal name is Cellectis SA and our commercial name is Cellectis. We were incorporated as a société anonyme, or S.A., under the laws of the French Republic on January 4, 2000 for a period of 99 years. We are registered at the Paris Registre du Commerce et des Sociétés under the number 428 859 052. Our principal executive offices are located at 8, rue de la Croix Jarry, 75013 Paris, France, and our telephone number is +33 1 81 69 16 00. Our agent for service of process in the United States is Cellectis, Inc. located at 430 East 29th Street, New York, New York 10016. We also maintain a website at www.cellectis.com. The reference to our website is an inactive textual reference only and the information contained in, or that can be accessed through, our website is not a part of this Annual Report.

On May 31, 2023, Calyxt, Inc. completed its all-stock, reverse merger business combination with Cibus Global. Following the closing of the Merger, effective on June 1, 2023, the combined company operates under the name of Cibus, Inc. (referred to as “Cibus”). Cellectis’ equity interest in Cibus was reduced to 2.9% after the closing of the Merger, which resulted in Cellectis losing control of Cibus. Cibus was deconsolidated on June 1, 2023. Cibus's results are included in the Group's results until May 31, 2023, and continue to be presented as the results of discontinued operations until that date.

Our capital expenditures and additions to tangible and intangible assets for the years ended December 31, 2021, 2022 and 2023 together amounted to $19.7 million, $3.3 and $1.1 million respectively. These expenditures primarily consisted of the acquisitions of industrial and laboratory equipment and fittings required to conduct our research programs, the improvements of Cellectis’ sites and investments in connection with the construction of our new manufacturing facilities in Paris and in the United States. We expect our capital expenditures to increase in absolute terms in the near term as we continue to advance our research and development programs and grow our operations. We anticipate our capital expenditure in 2024 to be financed from our cash and cash equivalents on hand. Primarily, these capital expenditures will be made both in France and in the United States, where our research and development facilities are currently located.

For information on the SEC’s website and our website, please refer to “Item 10.H. Documents on Display”.

Business Overview

We are a clinical stage biotechnological company, employing our core proprietary technologies to develop products based on gene-editing, with a portfolio of allogeneic Chimeric Antigen Receptor T-cells, or UCART, product candidates in the field of immuno-oncology and gene-edited hematopoietic stem and progenitor cells, or HSPC, product candidates in other therapeutic indications.

Our UCART product candidates, based on gene-edited T-cells that express chimeric antigen receptors, or CARs, seek to harness the power of the immune system to target and eradicate cancer cells. We believe that CAR-based immunotherapy is one of the most promising areas of cancer research, representing a new paradigm for cancer treatment. We are designing next-generation immunotherapies that are based on gene-edited CAR T-cells. Our gene-editing technologies allow us to create allogeneic CAR T-cells, meaning they are derived from healthy donors rather than the patients themselves. We believe that the production of allogeneic CAR T-cells will allow us to develop cost-effective, “off-the-shelf” products that are capable of being stored and distributed worldwide. Our gene-editing expertise also enables us to develop product candidates that feature certain safety and efficacy attributes, including control properties designed to prevent them from attacking healthy tissues, to enable them to tolerate standard oncology treatments, and to equip them to resist mechanisms that inhibit immune-system activity.

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Together with our focus on immuno-oncology, we are using, through our .HEAL platform, our gene-editing technologies to develop HSPC product candidates for genetic diseases. .HEAL is a new gene-editing platform developed by Cellectis that leverages the power of TALEN technology to allow highly efficient gene inactivation, insertion and correction in hematopoietic stem and progenitor cells.

Cancer is the second-leading cause of death in the United States and accounts for around one in four deaths. Immuno-oncology seeks to harness the power of the body’s immune system to target and kill cancer. A key to this effort is a type of white blood cell known as the T-cell, which plays an important role in identifying and killing cancer cells. Unfortunately, cancer cells often develop mechanisms to evade the immune system. CARs, which are engineered receptors that can be expressed on the surface of T-cells, provide the T-cells with a specific targeting mechanism, thereby enhancing its ability to seek, identify, interact with and destroy tumor cells bearing a selected antigen. Research and development of CAR T-cell immunotherapies currently focuses on two approaches: autologous and allogeneic therapies. Autologous CAR T-cell immunotherapies modify a patient’s own T-cells to target specific antigens that are located on cancer cells. This type of therapy requires an individualized immunotherapy product for each patient and is currently being tested in clinical trials by several academic institutions, and biotechnology and pharmaceutical companies. In contrast, an allogeneic CAR T-cell immunotherapy is an approach by which a cancer patient is infused with a mass-produced, off-the-shelf immunotherapy product derived from a healthy T-cell donor. Our initial focus is on developing allogeneic treatments, and we believe that we are the leading company pursuing this approach.

Limitations of Current Autologous Treatments and Key Benefits of our UCART approach

Many of the CAR T-cell immunotherapy treatments currently under development are created through an autologous approach in which the patient’s own T-cells are engineered to fight cancer cells. Part of our scientific basis for pursuing allogeneic approaches rests in the recognized limitations of autologous approaches, including:

Although some autologous approaches to CAR T-cell have demonstrated encouraging clinical data, we believe our CAR-T approach and manufacturing process has the potential to provide the following benefits:

A key enabler of the allogeneic approach is our gene editing technology, relying on a particular class of proteins derived from transcription activator-like effectors fused to the nuclease domain of a type II restriction endonuclease (TALEN). Gene editing is a type of genetic engineering in which DNA is inserted, deleted, repaired or replaced from a precise location in the genome. The most fundamental challenge of gene editing is the need to specifically and efficiently target a precise DNA sequence within a gene. Our proprietary nuclease-based gene-editing technologies, combined with over 20 years of genome engineering experience, allow us to edit any gene with highly precise insertion, deletion, repair and replacement of DNA sequences. Our nucleases, including TALEN, act like DNA scissors to edit genes at precise target sites and allow us to design allogeneic CAR T-cells. Our patented PulseAgile electroporation technology allows us to efficiently deliver our clinical grade nucleases into human cells while preserving cell viability, making it particularly well-suited for a large-scale manufacturing process. We believe these technologies will enable our clinical-grade drug therapeutic products to be manufactured, cryopreserved, stored, distributed broadly and infused into patients in an off-the-shelf approach.

Our candidate products

We are directly developing product candidates internally and have also entered into licensing relationships with AstraZeneca, Allogene, and Servier. We believe that our agreements with AstraZeneca, Allogene and Servier have validated our technology platform, our strong expertise in the allogeneic CAR T-cells field, in the field of gene editing and the strength of our intellectual property portfolio.

Under the AZ JRCA (as defined below), AZ Ireland has an exclusive right to pursue the development and commercialization of products for a total of 10 selected candidate products.

Under the License Agreement dated March 8, 2019 between Allogene and us (the “Allogene License Agreement”), Allogene has exclusive rights to pursue development and commercialization of products for a total of fifteen selected targets, including BCMA (targeted by the Allogene’s product candidates named “ALLO-715” and “ALLO-605”), FLT3 (targeted by the Allogene’s product candidate named “ALLO-819”), CD70 (targeted by the Allogene’s product candidate named “ALLO-316”), DLL3 (targeted by Allogene’s product candidate named “ALLO-213”) and claudin 18.2 (targeted by Allogene’s product candidate named “ALLO-182”).

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We have also a license agreement with Iovance Biotherapeutics, Inc. ("Iovance"). In addition, under the License, Development and Commercialization Agreement dated March 6, 2019, between Servier and us, and as amended on March 4, 2020 (as so amended, the “Servier License Agreement”), Servier has an exclusive worldwide license to develop and commercialize gene-edited allogeneic CAR T-cell products targeting CD19, including ALLO-501A, in the field of anti-tumor adoptive immunotherapy (Allogene’s product candidate developed pursuant to a sublicense by Servier to Allogene).

The exclusive rights for the development and commercialization of UCART19 in the United States have been sublicensed by Servier to Allogene.

For more information about these licensing relationships, see "Item 4. Information on the Company—B. Business Overview—Our Licensing Relationships."

Historical Overview – Product Candidates Being Developed Pursuant to Licenses

AstraZeneca

Under the AZ JRCA, AZ Ireland has an exclusive right to pursue the development and commercialization of products for a total of 10 selected candidate products.

 

UCART19

In 2016, Servier commenced two Phase 1 clinical studies for the first version of UCART19, one in adult Acute Lymphoblastic Leukemia (ALL), referred to as the CALM study, and one in pediatric ALL, referred to as the PALL study. We refer in this Annual Report to the CALM and the PALL Studies, collectively as the UCART19 Studies.

In November 2020, the Phase 1 of the UCART19 Studies were completed. Servier has informed us that no additional patients are planned for enrollment.

ALLO-501 and cemacabtagene ansegedleucel or cema-cel (previously known as ALLO-501A)

In January 2019, Allogene announced, in collaboration with Servier, that the FDA approved the Investigational New Drug (IND) for a Phase 1 clinical study for ALLO-501, in relapsed or refractory Non-Hodgkin Lymphoma (NHL), which is referred to as the “ALPHA Study”. The ALLO-501 candidate product is similar to UCART19 and is licensed to Allogene, pursuant to the sublicense from Servier discussed above.

In February 2020, Allogene announced that the FDA had approved the IND for a Phase 1/2 clinical study for ALLO-501A in NHL, which is referred to as the “ALPHA2 Study”. The ALLO-501A candidate product was created to omit the rituximab recognition domains originally added in ALLO-501, allowing for use in a broader patient population, including those NHL patients with recent rituximab exposure.

In February 2021, Allogene announced that the FDA had granted fast track designation to ALLO-501A for r/r LCBL.

In October 2021, Allogene announced that the FDA had placed a hold on all Allogene’s CAR T clinical trials based on a report of a chromosomal abnormality detected post-Allo CAR T administration in a single patient treated with ALLO-501A in the ALPHA2 Study. In January 2022, Allogene announced that the FDA removed the clinical hold on all of its AlloCAR T clinical trials.

In June 2022, Allogene announced that the FDA granted Regenerative Medicine Advance Therapy (RMAT) designation to ALLO-501A in relapsed or refractory diffuse large B cell lymphoma (LBCL).

In October 2022, Allogene announced the initiation of the “potentially” pivotal Phase 2 clinical trial of ALPHA2 trial in patients with relapsed or refractory large B-cell lymphoma. Allogene also announced that it was in the process of initiating the EXPAND trial, which is a separate potentially registration trial for ALLO-647—Allogene’s anti-CD52 monoclonal antibody. Allogene has stated that, assuming favorable outcomes and subject to FDA discussions, Allogene plans to seek FDA approval of ALLO-501A and ALLO-647 on the basis of the ALPHA2 trial and the EXPAND companion trial.

In January 2024, Allogene announced it will focus on the development of its investigational product cemacabtagene ansegedleucel, or cema-cel (previously known as ALLO-501A), as part of a first line treatment plan for newly diagnosed and treated LBCL patients who are likely to relapse and need further therapy (ALPHA3 pivotal Phase 2 clinical trial). As a result, Allogene announced it will deprioritize the currently enrolling third line (3L) LBCL ALPHA2 and EXPAND trials. Furthermore, Allogene announced a new Phase 1b ALPHA2 cohort of up to 40 relapsed/refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) patients to be treated with the investigational product cema-cel.

ALLO-316

In December 2020, Allogene announced that the FDA had approved the IND for a Phase 1 clinical study for ALLO-316, in Renal Cell Carcinoma (RCC), which is referred to as the “TRAVERSE Study.” ALLO-316 is a gene-edited allogeneic CAR T-cell product targeting CD70 and is licensed to Allogene pursuant to the Allogene License Agreement.

In October 2021, Allogene announced that the FDA had placed a hold on all Allogene’s AlloCAR T clinical trials based on a report of a chromosomal abnormality detected post-Allo CAR T administration in a single patient treated with ALLO-501A in the ALPHA2 study. In January 2022, Allogene announced that the FDA has removed the clinical hold on all of its AlloCAR T clinical trials.

In March 2022, Allogene announced that the FDA has granted fast track designation to ALLO-316.

Allogene - Other Programs

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Allogene has additional programs in its pipeline under license, including ALLO-715 and ALLO-605, which target BCMA for the treatment of MM, ALLO-819, which targets FLT3 for the treatment of acute myeloid leukemia, ALLO-213, which targets DLL3 for the treatment of small cell lung cancer, and ALLO-182, which targets Claudin 18.2 for the treatment of gastric and pancreatic cancer.

Historical Overview – UCART Product Candidates We Are Developing

UCART123

In December 2016, we submitted an IND application for UCART123 with respect to two proposed Phase 1 studies to be conducted, one in Acute Myeloid Leukemia (AML) and one in Blastic Plasmacytoid Dendritic Cell Neoplasm (BPDCN). In June 2019, we decided to focus on the AML clinical trial and terminated the BPDCN study. This discontinuation of the BPDCN study was not a consequence of any safety concern.

In June 2019, we submitted a new IND application with respect to a proposed Phase 1 study to be conducted in relapsed/refractory Acute Myeloid Leukemia (r/r AML) with a new version of the UCART123 product candidate. In July 2019, the FDA approved the IND and the first patient was dosed in January 2020 at MD Anderson Cancer Center (Houston, Texas). We refer in this Annual Report to this study as the UCART123 Study or AMELI-01 Study.

UCART22

In April 2018, we submitted an IND application with respect to a proposed Phase 1/2 study to be conducted in relapsed or refractory B-cell Acute Lymphoblastic Leukemia (r/r B-ALL). In May 2018, the FDA approved the IND, and the first patient was dosed in November 2019 at MD Anderson Cancer Center (Houston, Texas). We refer in this Annual Report to this study as the UCART22 Study or BALLI-01 Study.

UCARTCS1

In December 2018, we submitted an IND application with respect to a proposed Phase 1 study to be conducted in r/r MM. In January 2019, the FDA approved the IND, and the first patient was dosed in October 2019 at MD Anderson Cancer Center (Houston, Texas). We refer in this Annual Report to this study as the UCARTCS1 Study or MELANI-01 Study.

On July 6, 2020, we announced that the MELANI-01 Study was placed on clinical hold by the FDA,which hold has been lifted by the FDA on November 17, 2020.

In May 2023, we announced our decision to stop enrollment and treatment of patients with UCARTCS1 under the MELANI-01 Study.

UCART20x22

In June 2022, we submitted an IND application with respect to a proposed Phase 1/2a study to be conducted in relapsed or refractory B-Cell Non-Hodgkin’s Lymphoma (B-NHL). In August 2022, the FDA approved the IND, and the trial is enrolling patients. We refer in this Annual Report to this study as the NaThaLi-01 Study.

Calyxt

Until July 2017, we fully owned Calyxt, Inc. Calyxt, through which our former Plants segment was carried out, was operating as a plant-based synthetic biology company that leveraged its proprietary technology to engineer plant metabolism to produce innovative, high-value, and sustainable materials and products for use in helping customers meet their sustainability targets and financial goals.

 

As of December 31, 2022 and February 28, 2023, Cellectis owned approximately 49.1% and 48.6%, respectively, of Calyxt’s common stock. On January 13, 2023, Calyxt and Cibus entered into the Merger Agreement, pursuant to which, subject to the terms and conditions thereof, Calyxt and Cibus would merge in an all-stock transaction. On May 31, 2023, Calyxt, Inc. completed its all-stock, reverse merger business combination with Cibus Global. Following the closing of the Merger, effective on June 1, 2023, the combined company operates under the name of Cibus, Inc. (referred to as “Cibus”). Cellectis’ equity interest in Cibus was reduced to 2.9% as of June 1, 2023, after the closing of the Merger, which resulted in Cellectis losing control of Cibus.

 

Our Strategy

Our strategy is to leverage the transformative potential of our unique gene-editing technologies and expertise through our cell therapy platform.

The key elements of our strategy are to:

UCART Pipeline

We are developing a series of product candidates for advanced hematologic cancers. Our lead immuno-oncology product candidates, which we refer to as Universal CAR T-cells (UCARTs), are allogeneic CAR T-cells engineered to be used as an “off-the-shelf” treatment.

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Each UCART product candidate is designed to target a selected antigen expressed on tumor cells and bears specific engineered attributes, such as inhibition of alloreactivity and compatibility with specific medical regimens that cancer patients may undergo. UCART is the first therapeutic product line that we are developing with our gene-editing platform to address unmet medical needs in oncology. We are focusing our initial internal pipeline in the hematologic cancer space, targeting diseases with high unmet needs such as ALL, AML, and NHL.

The following chart highlights our and our licensee's most advanced product candidates in clinical development:

 

1 cemacabtagene ansegedleucel has been developed under a collaboration agreement between Servier and Allogene based on an exclusive right to cemacabtagene ansegedleucel in the U.S. The ALPHA3 and ALPHA 2 studies target LBCL and CLL, respectively.

2 Phase 3 may not be required if Phase 2 is registrational.

3 ALLO-715 and ALLO-605 utilize TALEN® gene-editing technology pioneered and owned by Cellectis. Allogene has an exclusive license to the Cellectis technology for allogeneic products directed at the BCMA target. Allogene holds global development and commercial rights for this investigational candidate.

4 ALLO-316 utilizes TALEN® gene-editing technology pioneered and owned by Cellectis. Allogene has an exclusive license to the Cellectis technology for allogeneic products directed at the CD70 target. Allogene holds global development and commercial rights for this investigational candidate.

Definitional key to the above table: ALL. Acute Lymphoblastic Leukemia; AML. Acute Myeloid Leukemia; NHL. Non-Hodgkin's Lymphoma; RCC. Renal Cell Carcinoma; LBCL. Large B-Cell Lymphoma; CLL. Chronic Lymphocytic Leukemia.

 

Targeted Indications

r/r Acute Lymphoblastic Leukemia (ALL)

ALL is a heterogeneous hematologic disease characterized by the proliferation of immature lymphoid cells in the bone marrow, peripheral blood, and other organs. The proliferation and accumulation of blast cells in the marrow results in suppression of hematopoiesis and, thereafter, anemia, thrombocytopenia, and neutropenia. Extramedullary accumulations of lymphoblasts may occur in various sites, especially the meninges, gonads, thymus, liver, spleen, or lymph nodes. Data from the Surveillance, Epidemiology, and End Results (SEER) database have shown an age-adjusted incidence rate of ALL in the United States of 1.8 per 100,000 individuals per year, with approximately 6,660 new cases and 1,560 deaths estimated in 2022. The median age at diagnosis for ALL is 17 years with 53.9% of patients diagnosed at younger than 20 years of age. In contrast, 28.8% of cases are diagnosed at 45 years or older and only 13.5% of patients are diagnosed at 65 years or older. ALL represents 75% to 80% of acute leukemia among children, making it the most common form of childhood leukemia; by contrast, ALL represents approximately 20% of all leukemia among adults. The cure rates and survival outcomes for patients with ALL have improved dramatically over the past several decades, primarily among children. Improvements are largely owed to advances in the understanding of the molecular genetics and pathogenesis of the disease, the incorporation of risk- adapted therapy, and the advent of new targeted agents. Despite great progress in the development of curative therapies, ALL remains a leading cause of pediatric cancer-related mortality for patients presenting with a relapsed or refractory disease. New therapies are needed to overcome chemotherapy resistance and reduce non-specific treatment associated side effects.

r/r Acute Myeloid Leukemia (AML)

AML is a form of cancer that is characterized by infiltration of the bone marrow, blood, and other tissues by proliferative, clonal, abnormally and/or poorly differentiated cells of the hematopoietic system called blast cells. These cells interfere with normal hematopoiesis, thus contributing to the bone marrow failure which is the most common underlying cause of death. AML is the most common type of acute leukemia in adults with an age-adjusted incidence rate in the United States of 4.1 per 100,000 individuals per year, with approximately 20,050 new cases and 11,540 deaths estimated in 2022. Although it can occur in children and adults, AML is primarily a disease of the elderly. The median age at onset is 68 years and only 15.1% of patients are younger than 45 years of age at diagnosis. While complete response rates can be as high as 80% in patients undergoing initial induction cytotoxic chemotherapy, the majority of AML patients will ultimately be diagnosed with relapsed or refractory disease with a poor prognosis. The outcome in older patients who are unable to receive intensive chemotherapy without unacceptable side effects remains dismal, with a median survival of only 5 to 10 months.

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CD123 is highly expressed on AML leukemic stem cells and blast cells, as well as in other hematologic malignancies, and constitutes an attractive target for AML.

r/r Multiple Myeloma (MM)

MM is a clonal plasma cell malignant neoplasm that is characterized by the proliferation of a single clone of plasma cells producing a monoclonal immunoglobulin. This clone of plasma cells proliferates in the bone marrow and often results in extensive skeletal destruction with osteolytic lesions, osteopenia, and/or pathologic fractures. Additional disease-related complications include hypercalcemia, renal insufficiency, anemia, and infections. MM accounts for approximately 10% of hematologic malignant disorders. The annual incidence, age-adjusted to the US population, is 7.1 per 100,000, resulting in over 34,470 new patients and 12,640 deaths in the United States in 2022. The median age at onset is 69 years, and only 3.1% of patients are younger than 45 years of age at diagnosis. Several drugs have been approved over the last few years for the treatment of MM, substantially expanding the number of treatment regimens available for patients in all stages of the disease. In the last decade, survival of MM patients has markedly improved with a median survival of approximately 7 to 10 years but with major variation depending on host factors, stage of the disease, cytogenetic abnormalities, and response to therapy. However, despite this progress, patients with disease refractory to both immunomodulatory drugs (iMiDs) and proteasome inhibitors have a median overall survival (OS) of only 9 to 13 months.

r/r Non-Hodgkin Lymphoma (NHL)

NHL is a heterogeneous disease resulting from the malignant transformation of lymphocytes with distinctive morphologic, immunophenotypic, genetic, and clinical features. NHL is more common than the other general type of lymphoma, Hodgkin lymphoma (HL). The past several decades have seen a steady increase in incidence rates of NHL, with overall rates in the United States nearly doubling over the period 1975 to 2008. In 2022, there were 80,470 estimated new cases with 20,250 estimated deaths. In 2019, there were an estimated 763,401 people living with NHL in the United States. The median age at onset is 67 years, and only 10.0% of patients are younger than 45 years of age at diagnosis. Many different subtypes of non-Hodgkin’s lymphoma exist. The most common NHL subtypes include diffuse large B-cell lymphoma (DLBCL) and follicular lymphoma (FL).

Renal Cell Carcinoma (RCC)

Clear cell renal cell carcinoma (ccRCC) is the most common subtype of renal cancer. Approximately 79,000 new cases across all kidney and renal pelvis cancers are estimated to be diagnosed in the United States and 13,920 deaths were estimated in 2022, . While the median survival for patients with stage IV disease was a little over one year when cytokines were the predominant systemic therapies, analyses from the International Metastatic Renal Cell Carcinoma Database Consortium (IMDC) based upon more than 2,200 patients treated with targeted therapies report a median survival of 28 months in patients who were eligible for clinical trials. Another contemporary trial using targeted therapy reported a median survival of 28 to 29 months in patients treated with sunitinib or pazopanib, mirroring the IMDC results. Analysis using proteomic and immunohistochemistry techniques have demonstrated a high level of CD70 expression in clear cell renal cell carcinoma (ccRCC) cell lines and in more than 80% of human ccRCC tumor samples.

r/r Chronic Lymphocytic Leukemia (CLL)

The American Cancer Society's estimates for leukemia in the United States for 2024 are about 62,770 new cases of leukemia and about 23,670 deaths from leukemia (all kinds), of which about 20,700 new cases of CLL and about 4,440 deaths from CLL. CLL accounts for about one-quarter of the new cases of leukemia. The average person's lifetime risk of getting CLL is about 1 in 175 (0.57%). The risk is slightly higher in men than in women. CLL mainly affects older adults. The average age of people when they are diagnosed is around 70 years. It's rarely seen in people under age 40, and is extremely rare in children..

UCART123 for AML

UCART123 is an allogeneic engineered T-cell product designed for the treatment of hematologic malignancies expressing the alpha chain of the interleukin-3 receptor (IL3RA), or CD123, and is currently being developed for the treatment of AML.

Product Features

UCART123 is designed to become active, proliferate, secrete cytokines and kill CD123 expressing cells. UCART123 bears a CAR targeting the CD123 antigen, providing specificity for CD123 expressing cells. In addition, as with all UCART products, UCART123 lacks the TCR and is intended to be used in an allogeneic context. UCART123 activity could potentially lead to eradication of CD123-expressing cancer cells through T-cell mediated killing, pro-inflammatory cytokine production as well as CAR T-cell amplification. The current version of UCART123 has, in addition of the suppression of the TRAC gene, the suppression of the CD52 gene in order to potentially induce resistance to an anti-CD52 monoclonal antibody, such a alemtuzumab, as part of the preconditioning.

Clinical Development Status

The AMELI-01 Study is an open-label, Phase 1, single arm, multicenter clinical trial designed to evaluate the safety, expansion, persistence and clinical activities of UCART123 in patients with r/r AML. This trial is a dose-escalation study for UCART123 with 4 separate dose cohorts across different lymphodepletion regimens—lymphodepletion with either fludarabine and cyclophosphamide (FC) or FC with alemtuzumab (FCA). The primary endpoints of the trial are to assess the safety and tolerability of Universal Chimeric Antigen Receptor (UCAR) T-cells targeting CD123 (UCART123) administered to patients with r/r AML; and to determine the maximum tolerated dose (MTD) of UCART123. An optimal dose of UCART123 will be recommended for Phase 2. The clinical study protocol allows for up to 60 patients to enroll in the dose escalation period and 18-37 patients in the dose expansion period of the Phase 1 study.

In March 2020, we filed an amendment to the protocol of the AMELI-01 Study to evaluate the addition of an anti-CD52 antibody to the lymphodepletion regimen compared to the pre-amendment fludarabine (F)-cyclophosphamide lymphodepletion regimen. An anti-CD52 antibody (alemtuzumab, A)-based lymphodepletion regimen is evaluated in separate cohorts of patients, to guide the future development of UCART123 in AML. The optimal lymphodepletion regimen prior to the administration of CAR-T product candidates remains an area of investigation in the field of CAR T-cell therapy. The AMELI-01 Study is currently open for patient recruitment at University of Texas, MD Anderson Cancer Center (Houston, Texas), H. Lee Moffitt Cancer Center & Research Institute Hospital Inc.

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(Tampa, Florida), Dana Farber/ Partners Cancer Care, Inc (Boston, Massachusetts), Cornell University for and on behalf of its Joan and Sanford I. Weill Medical College and the New York and Presbyterian Hospital (New York, New York), Northwestern University (Chicago, Illinois), University of Miami (Miami, Florida), the Regent of the University of California on behalf of its San Francisco Campus (San Francisco, California), The Trustee of University of Pennsylvania (Philadelphia, Pennsylvania), and Roswell Park Cancer Institute Corporation D/B/A Roswell Park Comprehensive Cancer Center (Buffalo, New York).

After a protocol-based pause in patient recruitment following a grade 5 event related to CRS, the protocol treatment strategy was modified and as of the date of this Annual Report, AMELI-01 is enrolling patients in the FCA 2-dose regimen arm. The arm incorporated the use of prophylactic tocilizumab, which is associated with reduced incidence of CRS.

Clinical Findings

In December 2022, we reported preliminary safety and efficacy clinical data from the Phase 1 AMELI-01 Study, at the American Society of Hematology annual meeting. This preliminary clinical data was collected prior to the protocol amendment described above.

The oral presentation reviewed preliminary data from patients who received UCART123 at one of the following dose levels: dose level 1 (DL1) 2.5x105 cells/kg; dose level 2 (DL2) 6.25x105 cells/kg; intermediate dose level 2 (DL2i) 1.5x106 cells/kg; or dose level 3 (DL3) 3.30x106 cells/kg after lymphodepletion with a combination of fludarabine and cyclophosphamide (FC) or after lymphodepletion with a combination of fludarabine, cyclophosphamide and alemtuzumab (FCA).

The preliminary safety data showed that the FCA lymphodepletion regimen resulted in robust lymphodepletion for greater than 28 days in all patients. Seven out of nine patients demonstrated UCART123 expansion, with maximum concentration (Cmax) ranging from 13,177 to 330,530 copies/ μg DNA, an almost nine-fold increase compared with FC lymphodepletion regimen, and a significant increase in area under the curve.

Cytokine release syndrome (CRS) occurred in eight patients in the FC lymphodepletion arm and nine patients in the FCA lymphodepletion arm. In the FC arm, one patient experienced grade 3 immune effector cell-associated neurotoxicity syndrome (ICANS) and two patients experienced grade 4 protocol-defined dose limiting toxicities (DLTs) secondary to CRS. In the FCA arm, two patients experienced Grade 5 DLTs secondary to CRS. Grade 4 toxicities are potentially life threatening and grade 5 toxicities result in death.

With respect to preliminary efficacy data, evidence of UCART123 anti-tumor activity was observed in four patients out of fifteen at DL2 or above with best overall responses in the FCA arm. Two out of eight patients (25%) at DL2 with FCA arm achieved meaningful response. One patient who failed five prior lines of therapy experienced a durable minimal residual disease (MRD) negative complete response (CR) with full count recovery at Day 56 that continued beyond one year as of December 22, 2022, and one patient with stable disease achieved greater than 90% bone marrow blast reduction (60% to 5%) at Day 28.

These preliminary data show that adding alemtuzumab to the FC lymphodepletion regimen was associated with sustained lymphodepletion and significantly higher UCART123 cell expansion, which correlated with improved anti-tumor activity.

As of the date of this Annual Report, the AMELI-01 Study is currently enrolling patients.

UCART22 for B-ALL

UCART22 is an allogeneic engineered T-cell product candidate designed for the treatment of CD22-expressing hematologic malignancies and is currently being developed for the treatment of B-ALL.

Product Features

UCART22 is an allogeneic engineered T-cell product candidate intended for the treatment of CD22-expressing hematologic malignancies. UCART22 is designed to become active, proliferate, secrete cytokines and kill CD22 expressing cells (i.e. either CD22 positive tumor cells or non-malignant CD22-positive B lineage cells). UCART22 bears a CAR targeting the CD22 antigen, providing specificity for CD22 expressing cells. As with all UCART products, UCART22 lacks the TCR and is intended to be used in an allogeneic context. In addition, UCART22 has undergone the suppression of the CD52 gene in order to potentially induce resistance to an anti-CD52 monoclonal antibody, such as alemtuzumab, as part of the preconditioning.

UCART22 activity could potentially lead to eradication of CD22-expressing cancer cells through T-cell mediated killing, pro-inflammatory cytokine production as well as CAR T-cell amplification.

Clinical Development Status

The BALLI-01 Study is an open-label, Phase 1/2, single arm, multicenter clinical trial designed to evaluate the safety, expansion, persistence, and clinical activities of UCART22 in patients with r/r ALL. This trial is a dose-escalation and expansion study for UCART22 with 4 separate dose cohorts currently. The primary endpoints are to assess the safety and tolerability of Universal Chimeric Antigen Receptor (UCAR) T-cells targeting CD22 (UCART22) administered to patients with r/r B-ALL and to determine the MTD and/or Recommended Phase 2 Dose (RP2D) of UCART22 in patients with relapsed or refractory B-cell Acute Lymphoblastic Leukemia (r/r B-ALL). Secondary objectives/endpoints include assessing the efficacy of UCART22 (rate of objective response) in relapsed or refractory B-ALL patients, and minimal residual disease (MRD)+ B-ALL patients; assessment of the duration of response, time to response, progression- free survival, and overall survival, MRD negative rate, and evaluating the pharmacokinetic and pharmacodynamic profile of alemtuzumab. An optimal dose of UCART22 will be recommended for the expansion phase. The clinical study protocol allows for up to 40 patients to enroll in the dose escalation period and 18-53 patients in the dose expansion period of the Phase 1/2 study.

In April 2020 and December 2020, we filed amendments to the protocol of the BALLI-01 Study to open the study to young adults and adolescents and to evaluate the addition of an anti-CD52 antibody (alemtuzumab) to the lymphodepletion regimen with this FCA lymphodepletion regiment compared to the pre-amendment FC lymphodepletion regimen. Alemtuzumab was added to the lymphodepletion regimen to sustain host T-cell and Natural Killer (NK) cell depletion and to promote UCART22 cell expansion and persistence. The anti-CD52 antibody-based lymphodepletion regimen is evaluated in separate cohorts of patients, to guide the future development of UCART22 in ALL. The optimal lymphodepletion regimen prior to the administration of CAR-T product candidates remains an area of investigation in the field of CAR T-cell therapy.

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In December 2021, the BALLI-01 Study was approved in France by the French drug agency, the ANSM.

The BALLI-01 Study is currently open to patient recruitment at Memorial Sloan Kettering Cancer Center (New York, New York), Children’s Hospital of Philadelphia (Philadelphia, Pennsylvania), the University of Chicago (Chicago, Illinois), University of Texas, MD Anderson Cancer Center (Houston, Texas), The Regents of the University of California on behalf of its Los Angeles campus (Los Angeles, California), Dana Farber/Mass General Brigham Cancer Care, Inc. (Boston, Massachusetts), Hôpital Saint-Louis AP-HP (Paris, France), Hôpital Robert Debré AP-HP (Paris, France), CHU de Nantes (Nantes, France), and CHU de Rennes (Rennes, France), Sarah Cannon Research Institute, LLC and TriStar Bone Marrow Transplant, LLC (Nashville, Tennessee), Sarah Cannon Research Institute, LLC and HCA-HealthONE, LLC d/b/a Presbyterian/St. Luke’s Medical Center (Nashville, Tennessee and Denver, Colorado), Sarah Cannon Research Institute, LLC and St. David’s Healthcare Partnership, L.P., LLP d/b/a St. David’s South Austin Medical Center (Nashville, Tennessee and Austin, Texas), Sarah Cannon Research Institute, LLC and Methodist Healthcare System of San Antonio, Ltd., LLP d/b/a Methodist Hospital (Nashville, Tennessee and San Antonio, Texas), Regents of the University of Colorado for and behalf of the University of Colorado Anschutz medical Campus (Denver, Colorado), Hospices Civils de Lyon (Lyon, France).

As of the date of this Annual Report, we are enrolling patients of the BALLI-01 Study and the BALLI-01 Study is being conducted with UCART22 product candidate that has been fully manufactured in-house at our facility in Raleigh, North Carolina.

Clinical Findings

In December 2022, we presented positive preliminary clinical data from the Phase 1 BALLI-01 Study at a Live Webcast during the American Society of Hematology annual meeting. These data were from five patients who received UCART22 at DL3 (5x106 cells/kg) after lymphodepletion with FCA. No dose limiting toxicities were reported and no Grade 2 or higher CRS, ICANS or adverse events of special interest were observed. Evidence of UCART22 anti-tumor activity was observed in 60% (n=3) of the five patients at: (i) a patient experienced a durable minimal residual disease (MRD) negative complete response with incomplete count recovery (CRi) that continued beyond 6 months as of December 2022, (ii) a patient experienced an MRD negative complete response (CR) that continued beyond Day 56 as of December 2022, and (iii) patient experienced a morphologic leukemia-free state (MLFS) that continued beyond Day 84. All three of the responders failed multiple lines of prior therapy including multiagent chemotherapy, CD19- directed autologous CAR T cell therapy, and allogeneic stem cell transplant. Additionally, the patient with the MRD negative CR also failed both prior blinatumomab (a CD19-directed bi-specific antibody) and inotuzumab (a CD22-directed antibody-drug conjugate), while the two additional responders failed venetoclax based regimens.

In December 2023, we presented updated data of the Phase I BALLI-01 clinical trial at the American Society of Hematology Annual Meeting, including the following data:

 

As of the date of this Annual Report, the BALLI-01 Study is currently enrolling patients.

UCART20x22 for NHL

UCART20x22 is an allogeneic engineered T-cell product candidate targeting CD20 and CD22, both of which are expressed in B-cell malignancies, and is currently being developed for the treatment of relapsed or refractory B-cell NHL.

Product Features

UCART20x22 is a derivative of UCART22, that includes an additional CAR targeting CD20 to increase breadth of antigen targeting. We believe that targeting both CD20 and CD22 is more likely to prevent tumor escape and is an alternative to approved autologous CAR-T products targeting CD19. As all our UCART product candidates, UCART20x22 lacks the TCR and is intended to be used in an allogeneic context. In addition, UCART20x22 has the suppression of CD52 gene in order to potentially induce resistance to an anti-CD52 monoclonal antibody, such as alemtuzumab, as part of the preconditioning.

Pre-clinical Findings

In April 2022, we presented positive preclinical data of UCART20x22 at the American Association for Cancer Research 2022 annual meeting. These data showed that UCART20x22 has a strong activity against tumor cell lines expressing either a single antigen, CD20 or CD22, or both simultaneously. The in vivo pre-clinical models demonstrated that UCART20x22 efficiently eradicates tumors expressing both or either antigen, and sustained presence of UCART20x22 cells was observed in the bone marrow after tumor clearance. in vitro assays against primary cells from non-Hodgkin lymphoma patients with diverse CD22 and CD20 antigen levels demonstrate that UCART20x22 has potent and specific cytotoxic activity.

Clinical Development Status

The NaThaLi-01 Study is currently open to patient recruitment at Dana-Farber/Mass General Brigham Cancer Care, Inc (Boston, Massachusetts), and Sarah Cannon Research Institute, LLC and St. David’s Healthcare Partnership, LP., LLP d/b/a St. David’s South Austin Medical Center (Austin, Texas), Rutgers, The State University (Piscataway, New Jersey), Clinica Universidad de Navarra (Pamplona, Spain), Hospices Civils de Lyon (Lyon, France), CHU Montpellier (Montpellier, France), Hôpital Saint Louis (Paris, France), The University of Chicago (Chicago, Illinois), and H.U. Virgen del Rocio and Andalusian Public Foundation for Health Research Management in Seville (Seville, Spain).

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In December 2023, we presented preliminary results of the Phase I NaThaLi-01 clinical trial evaluating UCART20x22 in patients with relapsed or refractory non-Hodgkin lymphoma (r/r NHL) at the American Society of Hematology Annual Meeting, including the following data:

As of the date of this Annual Report, the NaThaLi-01 Study is currently enrolling patients.

CLLS52 (alemtuzumab) as anti-CD52 monoclonal antibody

Following the execution of the supply agreement we entered into with Genzyme relating to the supply of alemtuzumab, we are implementing the use of alementuzumab as a Cellectis investigational medicinal product, coded as CLLS52, in the clinical protocols AMELI-01, BALLI-01, and NaThaLi-01 in the United States and in the relevant European Union member states.

Self-owned UCART programs for solid tumors

We are currently applying our UCART platform to develop CAR-T candidates targeting solid tumors. Our self-owned UCART programs for solid tumors is currently in the preclinical phase of development.

UCARTMESO

UCARTMESO is an allogeneic CAR T-cell product candidate targeting Mesothelin.

In November 2021, we presented the first preclinical data on UCARTMESO at the annual meeting of the Society for Immunotherapy of Cancer (SITC). The poster presentation highlighted Mesothelin as an interesting target for CAR-T cell therapy for solid tumors because it is highly and consistently expressed in mesothelioma and pancreatic cancers. It is also over-expressed in subsets of other solid tumors (ovarian cancer, non-small cell lung cancer, gastric cancer, triple-negative breast cancer) while modestly expressed in healthy cells, indicating that targeting mesothelin may result in a safe and effective therapy. UCARTMESO product candidate is composed of allogeneic non-alloreactive T cells edited with TALEN-encoding mRNAs to disrupt TRAC, CD52 and TGFBR2 genes, and transduced ex vivo with a recombinant lentiviral vector to express a second-generation CAR targeting Mesothelin. It is the first TALEN-induced triple knock out (KO) product candidate in the allogeneic CAR-T space. The preclinical data demonstrated potent activity of UCARTMESO in vitro and in vivo against MSLN expressing cell lines, and in vivo activity in pancreatic and pleural mesothelioma mouse models. Due to TGFBR2 KO, UCARTMESO was shown to restore IL2RA upregulation upon in vitro activation, even in media rich in TGFB1, which contributes to the immune suppressive microenvironment in tumors.

UCARTFAP

UCARTFAP is an allogeneic CAR-T cell targeting Cancer Associated Fibroblasts (CAFs) in the tumor microenvironment. CAFs secrete a number of factors amounting to physical and chemical barriers preventing T-cell activity. Reducing the amount of CAFs, will, in turn reduce the immunosuppressive signals emitted from the tumor and hopefully convert “cold” tumors into “hot” tumors that can then be targeted with checkpoint inhibitor therapy. By targeting the cancer-associated fibroblasts, Cellectis aims to erode the physical barrier encasing the tumor microenvironment that prevents T-cell (and CAR T-cell) infiltration into the tumor. The TCR knockout is to prevent GVHD and the beta-2 microglobulin knocked out to provide resistance to the patient’s own T-cells.

UCARTMUC1

UCARMUC1 is an allogeneic CAR T-cell targeting Mucin 1 for triple negative breast cancer and a variety of epithelial cancers. As other solid tumor targets can be plagued by safety concerns due to off-tumor expression, MUC1 is of high interest as its expression in normal epithelium is restricted to apical membranes. Additionally, its heavy glycosylation in normal tissue renders MUC1 undetectable by Cellectis’ MUC1 CAR that only recognizes hypoglycosylated MUC1 present in cancer cells. UCARTMUC1 now incorporates four TALEN knockouts (TCR, B2M, PD-1, and TGFBR2) with two knockins (IL-12 and HLA-E). In lieu of the deleted beta-2 microglobulin gene (part of MHC-1 complex), Cellectis has inserted the HLA-E gene to cloak the cells from immune detection by NK cells, thus increasing CART persistence. In lieu of the PD-1 gene, Cellectis has inserted the IL-12 gene to enhance tumor cell killing and attract other pro-inflammatory cells when induced by the MUC1 CAR binding tumor cells. Preclinical data indicates that UCARTMUC1 shows strong intratumoral expansion translating into promising preclinical anti-tumor activity in vivo.

Programs Under Licensing Agreements

UCART19 for ALL (discontinued)

Product Features

UCART19 is designed to become active, proliferate, secrete cytokines and kill CD19-bearing B-cell malignancies upon contact with such cells, following administration to patients. Activation of UCART19 is driven by contact between its anti-CD19 CAR and the CD19 protein on the surface of tumor cells.

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UCART19 cells bear a CAR targeting the CD19 antigen that drives their capacity to kill CD19-bearing cells. Moreover, as with all UCART product candidates, UCART19 lacks the TCR responsible for recognition of non-self antigens by the T-cells, which allows use of healthy donor T-cells to produce UCART19, with reduced potential for GvHD. In addition, some UCART19 cells lack CD52, a protein expressed on the cell surface that makes T-cells sensitive to alemtuzumab. This feature permits the use of UCART19 in patients recently treated or being treated with the immunosuppressing/lymphodepleting agent alemtuzumab.

Clinical Development Status

In 2016, Servier commenced the UCART19 Studies – a Phase 1 clinical study in pediatric ALL, the PALL study, and a Phase 1 clinical study in adult patients with ALL, the CALM study.

As of the date of this Annual Report, the Phase 1 of the UCART19 Studies have been completed. Servier has reported that no additional patients are planned for enrollment and all patients from both studies will continue the long-term follow-up as planned.

On September 15, 2022, Servier sent to us and Allogene a notice of discontinuation of its involvement in the development of the CD19 Products. See “Risk Factors— Risks Related to Our Reliance on Third Parties—Servier’s discontinuation of its involvement in the development of CD19 Products and related disagreements may have adverse consequences.”

Clinical Findings

In December 2020, Servier published, in the Lancet journal, pooled results of the UCART19 Studies. Between June 2016 and October 2018, seven children and 14 adults were enrolled in the two studies and received UCART19. Cytokine release syndrome, or CRS, was the most common adverse event and was observed in 19 patients (91%); three (14%) of whom had grade 3 or 4 CRS. Other adverse events were grade 1 or 2 neurotoxicity in eight patients (38%), grade 1 acute skin graft-versus-host disease, or GvHD, in two patients (10%), and grade 4 prolonged cytopenia in six patients (32%). Two treatment-related deaths occurred; one caused by neutropenic sepsis in a patient with concurrent CRS and one from pulmonary hemorrhage in a patient with persistent cytopenia. 14 (67%) of 21 patients had a complete response (CR) or complete response with incomplete (Cri) hematological recovery 28 days after infusion.

Patients not receiving alemtuzumab (n=4) showed no UCART19 expansion or antileukemic activity. The median duration of response was 4.1 months with ten (71%) of 14 responders proceeding to a subsequent allogeneic stem-cell transplant. Progression-free survival at 6 months was 27%, and overall survival was 55%.

According to the article, these two studies show, for the first time, the feasibility of using allogeneic, genome-edited CAR T cells to treat patients with aggressive leukemia. UCART19 exhibited in-vivo expansion and antileukemic activity with a manageable safety profile in heavily pretreated pediatric and adult patients with relapsed or refractory B-cell acute lymphoblastic leukemia.

ALLO-501 and cema-cel (ALLO-501A), for NHL and CLL

ALLO-501 (which we exclusively license to Servier pursuant to the Servier License Agreement, and which has been sublicensed to Allogene by Servier in the United States) is an allogeneic engineered T-cell product intended for the treatment of CD19-expressing hematologic malignancies. On September 15, 2022, Servier sent to us and Allogene a notice of discontinuation of its involvement in the development of the CD19 Products. See “Risk Factors— Risks Related to Our Reliance on Third Parties—Servier’s discontinuation of its involvement in the development of CD19 Products and related disagreements may have adverse consequences.”

ALLO-501A was created as a second-generation version of ALLO-501, designed to omit the rituximab recognition domains originally added in ALLO-501. Because rituximab is a typical part of the treatment regimen for a patient with NHL, this change is intended to facilitated treatment of a broader patient population.

Development Status

In January 2019, Allogene announced, in collaboration with Servier, that the FDA approved the IND for Phase 1 clinical study for ALLO-501 in relapsed or refractory NHL (the “ALPHA Study”). The ALPHA Study is an open-label, Phase 1, single arm, multicenter clinical trial evaluating the safety and tolerability of ALLO-501 in adult patients with the most common r/r NHL subtypes, including r/r large B-cell lymphoma, including DLBCL, and r/r follicular lymphoma (FL). The trial is a dose-escalation study for ALLO-501 with three separate dose cohorts. Prior to ALLO-501 treatment, all patients undergo lymphodepletion with a regimen of fludarabine, cyclophosphamide and ALLO-647 (an anti-CD52 monoclonal antibody).

In February 2020, Allogene announced that the FDA had approved the IND for the ALPHA2 Study. The ALPHA2 Study is an open-label, Phase 1/2, single arm, multicenter clinical trial of ALLO-501A in adult patients with R/R large B-cell lymphoma, including DLBCL, or transformed FL. The Phase 1 portion of the ALPHA2 Study is designed to assess the safety and tolerability at increasing dose levels of ALLO-501A and identify the recommended doses of ALLO-501A and ALLO-647 (an anti-CD52 monoclonal antibody) for use in the Phase 2 portion of the trial. Allogene initiated the ALPHA2 Study in the second quarter of 2020.

In February 2021, Allogene announced that the FDA had granted fast track designation to ALLO-501A for relapsed or refractory diffuse large B cell lymphoma (LCBL).

In June 2022, Allogene announced that the FDA granted Regenerative Medicine Advance Therapy (RMAT) designation to ALLO-501A in relapsed or refractory large B cell lymphoma (LBCL).

In October 2022, Allogene announced the initiation of the Phase 2 clinical trial of ALPHA2 trial in patients with relapsed or refractory LBCL. Allogene also announced that it was in the process of initiating the EXPAND trial, which is a separate potentially registration trial for ALLO-647—Allogene’s anti-CD52 monoclonal antibody that Allogene is developing with the goal of potentially enabling expansion, persistence and improved clinical outcomes of allogeneic CAR T cell product candidates, including ALLO-501A. Allogene has stated that, assuming favorable outcomes and subject to FDA discussions, Allogene plans to seek FDA approval of ALLO-501A and ALLO-647 on the basis of the ALPHA2 trial and the EXPAND companion trial.

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In January 2024, Allogene announced it will focus development of cema-cel (or ALLO-501A), as part of the first line (1L) treatment plan for newly diagnosed and treated LBCL patients who are likely to relapse and need further therapy. Allogene announced it will deprioritize the currently enrolling third line (3L) ALPHA2 and EXPAND trials. Furthermore, Allogene announced a new Phase 1 ALPHA2 cohort of 12 CLL patients treated with the investigational product cema-cel.

Clinical Findings

In December 2021, Allogene, in collaboration with Servier, reported Phase 1 data on ALLO-501 and ALLO-501A r/r NHL at the annual meeting of the American Society of Hematology. As of the October 18, 2021 data cutoff, 50 patients were enrolled in the ALPHA Study, of whom 49 were evaluable for safety and 40 were evaluable for efficacy, and 29 patients were enrolled in the ALPHA2 Study, of whom 28 were evaluable for safety and 25 were evaluable for efficacy. ALLO-501 and ALLO-501A therapy was associated with consistent and manageable safety with no DLTs or GvHD; low rates of Grade 3 ICANs and CRS. No relapses were observed in Large B Cell Lymphoma (LBCL) CAR T naïve patients who achieved a CR at six months. The longest CRs at this time was 18+ months with ALLO-501 and 15+ months with ALLO-501A. Patients received lymphodepletion containing fludarabine, cyclophosphamide and ALLO-647 (an anti-CD52 antibody) followed by escalating doses of ALLO-501 or ALLO-501A. In consolidation, patients with stable disease or better at Day 28 received a chemotherapy-free lymphodepletion (ALLO-647 only) and AlloCAR T cell infusion. The trials explored two consolidation cohorts. Consolidation 1 used the standard cyclophosphamide dosing. Second consolidation explored a higher cyclophosphamide dose. The consolidation regimen was well tolerated with low rate of adverse events, yielded a 44% CR with ongoing CRs at 9 months, and consolidation produced an 88% Overall Response Rate (ORR) and 75% CR rate in Follicular Lymphoma. Key Advantage of allogeneic delivery was established with >97% of patients treated with a median time from enrollment to initiation of treatment of five days for ALLO-501 and two days for ALLO-501A.

In November 2022, Allogene presented an update on clinical data for the Phase 1 ALPHA Studies. Allogene reported that the Phase 1 ALPHA Studies support the ability of a single administration of CAR T cells to generate responses similar to approved autologous CAR T therapies and that the ALPHA Studies demonstrated a manageable safety profile.

Allogene observed that a single infusion of CAR+ cells with aFCA90 lymphodepletion regimen consisting of fludarabine (30 mg/m2/day x 3 days) and cyclophosphamide (300 mg/m2/day x 3 days) (standard flu/cy) plus 90 mg of ALLO-647 (“Single Dose FCA90”) was deemed preferrable to two infusions of CAR+ cells (“Consolidation Regimen”), where ALLO-647 dosing was split into 60 mg and 30 mg prior to the first and second infusion of CAR+ cells. Among 12 patients treated with the Single Dose FCA90 regimen, the overall response rate (“ORR”) was 67% and 58% achieved CRs. Among the eight patients in the Single Dose FCA90 cohort who had the opportunity to be followed for six months or more, four (50%) were in CR at both six and 12 months. According to Allogene there were no observed dose limiting toxicities or graft versus host disease. Among patients treated with single dose FCA regimen, there was no grade 3+ CRS or neurotoxicity. One patient (8%) experiences a grade 3+ infection and two patients (17%) experienced prolonged grade 3+ cytopenia. One grade 5 event occurred.

In June 2023, Allogene presented long-term follow up data from the Phase 1 ALPHA/ALPHA2 trials of ALLO-501/501A in patients with r/r LBCL at the American Society of Clinical Oncology Annual Meeting. The updated analysis of ALPHA/ALPHA2 examined data from 12 CAR T-naïve patients with r/r LBCL who received a single dose of ALLO-501/501A manufactured using the Alloy™ process following a lymphodepletion regimen (FCA90) comprised of fludarabine and cyclophosphamide plus ALLO-647. The median time from enrollment to the start of therapy was three days and all 12 patients were followed through a minimum of six months (data cutoff April 20, 2023). As of the data cutoff, 7 of 12 (58%) patients achieved a CR and five (42%) maintained a CR through Month 6. Of the five patients who were in CR at 6 months, four (80%) remained in CR. The fifth patient had disease progression at 24 months. The median duration of response was 23.1 months with three patients remaining in remission for over 24 months and the longest remaining in remission for over 31 months. A safety analysis of 33 CAR T-naïve LBCL patients receiving Alloy™ process ALLO-501/501A product candidates at any dose and lymphodepletion schedule, including the 12 patients treated with the Phase 2 regimen, was also conducted. Treatment was generally well tolerated with no incidences of Grade 3 or greater cytokine release syndrome, and no cases of immune effector cell-associated neurotoxicity syndrome or graft versus host disease. Cytopenias and infections were manageable and comparable to the experience with autologous CAR T cell therapies in patients with r/r LBCL.

ALLO-316, for RCC

ALLO-316, which we exclusively license to Allogene pursuant to the Allogene License Agreement, is an allogeneic engineered CAR T-cell product targeting CD70.

Development Status

In December 2020, Allogene announced that the FDA had approved the IND for a Phase 1 clinical study for ALLO-316, in RCC, which is referred to as the “TRAVERSE Study”.

In March 2022, Allogene announced that the FDA has granted fast track designation to ALLO-316.

Clinical findings

In November 2022, Allogene presented initial data from TRAVERSE Study and reported that observed anti-tumor activity was largely confined to patients with CD70 expressing tumors. As of the data extract date of November 17, 2022, in the nine patients with tumors known to express CD70, the disease control rate (DCR) was 100% including three patients who achieved a partial response (PR) (two confirmed and one unconfirmed with the longest response lasting until month eight). Cell expansion in patients with CD70 positive disease was robust, and there was a trend toward greater tumor shrinkage in patients with the highest levels of CD70 expression Allogene reported that ALLO-316 demonstrated a generally manageable safety profile with no GvHD. One dose limiting toxicity of liver enzyme elevation occurred in the second dose level. Grade 3+ prolonged cytopenia was observed in three patients (18%). CRS was all low grade with the exception of one case of Grade 3 CRS. Neurotoxicity was low grade, reversible and seen in only three patients (18%). No grade 5 events have occurred.

In April 2023, Allogene presented interim data from its Phase 1 TRAVERSE trial of ALLO-316, in an oral presentation at the American Association for Cancer Research Annual Meeting. As of the March 23, 2023 data cutoff, 19 patients were enrolled in the Phase 1 trial, 10 of whom had RCC confirmed to express CD70. The median time from enrollment to the start of therapy was five days. In the ongoing dose escalation phase of the TRAVERSE trial, patients will receive lymphodepletion followed by ALLO-316 at one of four cell dose levels (DL1= 40M cells, DL2= 80M cells, DL3=120M cells, DL4= 240M cells).

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The data reported to date is primarily from the DL1 and DL2 cohorts. Anti-tumor activity was primarily observed in patients with tumors confirmed to express CD70. Among 18 patients evaluable for efficacy, the DCR was 89%. In the 10 patients whose tumors were known to express CD70, the disease control rate was 100%, which included three patients who achieved partial remission (two confirmed, one unconfirmed). The longest response lasted until month eight. There was a trend toward greater tumor shrinkage in patients with higher levels of CD70 expression. There were 19 patients evaluable for safety. To date, ALLO-316 has demonstrated an adverse event profile generally consistent with autologous CAR T therapies. One dose-limiting toxicity of Grade 3 autoimmune hepatitis occurred in the second dose level. CRS was all low-grade with the exception of one Grade 3. Neurotoxicity, which is now defined more broadly, was generally low grade and reversible with most events being fatigue or headache. There were no cases of ICANS. Infections occurred in eight patients of which four were Grade 3+ including one Grade 5 respiratory failure due to Covid-19 infection deemed unrelated to study treatment. Grade 3+ prolonged cytopenia was observed in three patients (16%). There were no cases of graft-versus-host disease.

Other gene editing programs

Beyond our CAR-T programs, we are leveraging our TALEN gene editing platform to pursue additional development opportunities, both internally and in collaboration with third party companies and academic centers. We aim to enter the clinic with one or more gene editing programs beyond UCARTs in the future.

HEAL, the hematopoietic stem and progenitor cells platform for genetic diseases

We are developing a gene editing platform that leverages the power of TALEN technology, to allow highly efficient gene inactivation, insertion and correction in hematopoietic stem and progenitor cells (HSPCs). We used this platform to develop programs in sickle cell disease (SCD), lysosomal storage disease (LSD) and primary immunodeficiencies.

TalGlobin

TalGlobin is developed with TALEN technology intended to induce a double DNA strand break at the HBB gene causing SCD, and AAV particles containing a DNA repair template designed to correct the faulty HBB gene via endogenous homology directed repair (HDR).

In December 2021, we presented initial pre-clinical data from TalGlobin at the American Society of Hematology Annual Meeting. Initial pre-clinical data from TALGlobin show that TALEN is specific and efficient in correcting the mutated beta-globin gene, the underlying cause of SCD. The data also demonstrate that TALEN-based engineering could be used to correct the beta-globin gene mutation in HbSS patient-derived hematopoietic stem and progenitor cells. The data show up to 70% of HBB allelic correction, with only 9% of HBB biallelic inactivation and a low level of TALEN off-target cleavage. Genetic correction of HBB translates into high level of hemoglobin A expression (up to 47% HbA detected among total hemoglobin) and reversion of the sickling phenotype in differentiated red blood cells. Preclinical data show the capacity of TALGlobin01 edited cells to engraft in vivo using an immunodeficient mouse model. Collectively, the preclinical data demonstrate efficiency and safety of TALEN treatment in SCD patient- derived hematopoietic stem and progenitor cells.

In October 2022, we presented pre-clinical data from TalGlobin at the European Society of Gene and Cell Therapy 29th Congress. Overall, the results showed that non-viral DNA delivery associated with our TALEN gene editing technology reduces the toxicity observed with viral DNA delivery and allows high levels of HBB gene correction in long-term repopulating hematopoietic stem cells.

ArtEx

We have also developed an artificial exon (ArtEx) strategy to introduce a corrected gene copy coding for a relevant LSD enzyme into the intronic region of a gene expressed in myeloid cells. This approach would avoid the potential collateral effect of knocking out the endogenous gene without a correct replacement. This editing strategy opens new avenues for the treatment of LSDs, as it would allow to address the systemic lack of lysosomal enzyme activity, including in the brain, and could be used to produce virtually any defective LSD enzyme. It represents a new platform, in which a single safe and well characterized TALEN could be used to treat different LSDs.

In October 2022, we presented a TALEN-based gene editing approach that reprograms HSPCs to secrete alpha-L-iduronidase (IDUA), an enzyme missing in Mucopolysaccharidosis type I (MPS-I). MPS-I is associated with severe morbidity representing a significant unmet medical need. We established a TALEN-based ex vivo gene editing protocol to insert an IDUA-expression cassette into a specific locus of HSPC. Editing rates in vivo were 6 to 9% sixteen weeks after injection, depending on the tissue analyzed (blood, spleen, bone marrow). Lastly, 8.3% of human cells were edited in the brain compartment.

Our Licensing Relationships

In addition to the development of our own portfolio of product candidates targeting tumor-associated antigens, we have established a relationship with AstraZeneca in addition to pursuing a strategy of forging strong relationships with pharmaceutical or clinical stage biopharmaceutical companies.

License Agreement with Allogene

In June 2014, we entered into a Research Collaboration and License Agreement (the “Collaboration and License Agreement”) with Pfizer, Inc. (“Pfizer”) pursuant to which we agreed to collaborate to conduct discovery and pre-clinical development activities to generate CAR T-cells directed at Pfizer- and Cellectis-selected targets in the field of human oncology. We granted Pfizer an exclusive, worldwide, royalty-bearing, sublicensable license, on a target-by-target basis, under certain of our intellectual property to make, use, sell, import, and otherwise commercialize products directed at the Pfizer-selected targets in the field of human oncology. Pursuant to the Collaboration and License Agreement, Pfizer made an upfront, non-refundable $80.0 million payment to us. Concurrent with this upfront payment, Pfizer also made a €25.8 million equity investment in our company.

On April 3, 2018, Pfizer and Allogene Therapeutic, Inc. (“Allogene”) announced that they entered into an asset contribution agreement, pursuant to which Allogene purchased Pfizer’s portfolio of assets related to allogeneic CAR T-cell therapy (the “Asset Contribution Transaction”).

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Pursuant to the Asset Contribution Transaction, effective as of April 6, 2018, Allogene purchased Pfizer’s portfolio of assets related to allogeneic CAR T-cell Therapy, including the Collaboration and License Agreement.

On March 8, 2019, we and Allogene agreed to terminate the Collaboration and License Agreement and entered into a new license agreement (the “Allogene License Agreement”) to reflect the relationship between us and Allogene following the Asset Contribution Transaction. The Allogene License Agreement establishes the rights and obligations of Cellectis and Allogene with respect to their collaboration program.

Pursuant to the Allogene License Agreement, we granted to Allogene an exclusive, worldwide, royalty-bearing, license, on a target-by-target basis, with sublicensing rights under certain conditions, under certain of our intellectual property, including our TALEN and electroporation technology, to make, use, sell, import, and otherwise exploit and commercialize chimeric antigen receptor (CAR) T cells products directed at a total of 15 selected targets, including BCMA, FLT3, DLL3 and CD70, for human oncologic therapeutic, diagnostic, prophylactic and prognostic purposes. In addition, the Allogene License Agreement accommodates an exclusive global license and collaboration agreement under which Allogene has obtained from Servier exclusive rights to develop and commercialize UCART19 in the United States. Further, Allogene granted us a non-exclusive, worldwide, royalty-free, perpetual and irrevocable license, with sublicensing rights under certain conditions, under certain of Allogene’s intellectual property, to make, use, sell, import and otherwise commercialize CAR T products directed at certain targets.

The Allogene License Agreement provides for development and sales milestone payments by Allogene in a per target aggregate amount of up to $185.0 million, with aggregate potential development and sales milestone payments across all targets totaling up to $2.8 billion. In connection with (i) the dosing of the first patient in its UNIVERSAL Study for ALLO-715, Allogene made a milestone payment of $5.0 million, (ii) the dosing of the first patient in its IGNITE Study for ALLO-605, Allogene made a milestone payment of $5.0 million, and (iii) the dosing of the first patient in its TRAVERSE Study for ALLO-316, Allogene made a milestone payment of $5.0 million. We are also eligible to receive tiered royalties on annual worldwide net sales of any products that are commercialized by Allogene that contain or incorporate, are made using or are claimed or covered by, our intellectual property licensed to Allogene under the Allogene License Agreement at rates in the high single-digit percentages.

Unless earlier terminated in accordance with the agreement, our agreement with Allogene will expire on a product-by-product and country-by-country basis, upon the later of (1) the expiration of the last to expire of the licensed patents covering such product; (2) the loss of regulatory exclusivity afforded such product in such country, and (3) the tenth anniversary of the date of the first commercial sale of such product in such country; however, in no event shall the term extend, with respect to a particular licensed product, past the twentieth anniversary of the first commercial sale for such product. In addition, Allogene has the right to terminate the agreement at will upon 60 days’ prior written notice, either in its entirety or on a target-by-target basis. Either party may terminate the agreement, in its entirety or on a target-by-target basis, upon 90 days’ prior written notice in the event of the other party’s uncured material breach. The agreement may also be terminated upon written notice by Allogene at any time in the event that we become bankrupt or insolvent or upon written notice within 60 days of a consummation of a change of control of Cellectis.

License, Development and Commercialization Agreement with Servier

In February 2014, we entered into a Research, Product Development, Option, License and Commercialization Agreement (the “Prior Servier Agreement”) with Servier. Pursuant to the Prior Servier Agreement, we were responsible for the research and development up to and including the Phase 1 clinical trial of candidate products directed against five targets, including the UCART19 product candidate. Pursuant to the Prior Servier Agreement, we granted Servier the right to exercise an exclusive option to obtain an exclusive, worldwide license, on a product candidate-by-product candidate basis, with respect to each product candidate selected by Servier and developed under the agreement. Pursuant to the Prior Servier Agreement, Servier made upfront payments of $48.5 million.

On March 6, 2019, we and Servier entered into a new License, Development and Commercialization Agreement (the “March Servier License Agreement”). The March Servier License Agreement superseded and replaced the Prior Servier Agreement in order to modify the targets covered by our license to Servier, to establish the terms of our and Servier’s collaboration and to reflect the status of products in development.

On February 18, 2020, we and Servier entered into a binding term sheet to enter into an amendment to the March Servier License Agreement to grant to Servier an exclusive license limited to CD19 target, but extended to all gene-edited allogeneic CAR T-cell products targeting CD19 and gene edited exclusively by Cellectis’ TALEN. On March 4, 2020, we and Servier entered into the amendment to the March Servier License Agreement contemplated by this term sheet (such March Servier License Agreement as amended on March 4, 2020, the “Servier License Agreement”).

Under the Servier License Agreement, Cellectis grants to Servier, an exclusive worldwide, royalty bearing license with sublicensing rights under certain conditions, under certain of our patents and know-how to develop, manufacture and commercialize gene-edited allogeneic CAR T-cell products targeting CD19 and gene edited exclusively by Cellectis’ TALEN, in the field of anti-tumor adoptive immunotherapy. Servier, directly or through its sublicensees, will be solely responsible for the research, development and commercialization of these products. In addition, Servier confirms it will not pursue the development of five other targets for products using Cellectis technology and consequently Cellectis retains control over them.

In addition to an upfront payment of €25 million made by Servier following the execution of the amendment, the Servier License Agreement provides for aggregate additional payments that we initially estimated could total up to $410 million (although this amount may be adversely impacted by Servier's discontinuation of its involvement in the development of the CD19 Products), comprising payments for certain specified development and commercial milestones. We are also eligible to receive flat low double-digit royalties based on annual net sales of commercialized products. We are also entitled to a low double-digit royalty on certain development milestone payments received by Servier under sublicenses.

For so long as the agreement remains in effect, we are restricted from researching, developing, or commercializing any product directed against a CD19 target that is used for the same purpose as it is used with a product candidate developed under the agreement.

The agreement will expire, unless earlier terminated in accordance with its terms, upon the expiration of the last to expire of the patents covering a product licensed pursuant to the agreement. The parties may terminate the Servier License Agreement at any time by mutual consent.

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At its sole discretion, Servier has the right to terminate the agreement in its entirety or with respect to specific products, upon three months’ prior written notice to us.

In addition, either party may terminate the agreement following the other party’s uncured material breach upon 90 days’ prior written notice to the breaching party, or 30 days’ notice if such breach relates to a payment obligation. The agreement immediately and automatically terminates upon the expiration of Servier’s last license option in the event Servier has not exercised any option to license in accordance with the agreement prior to such expiration. Servier may terminate the agreement at any time for product-related safety reasons. Either party may terminate the agreement in the event of the other party’s bankruptcy or insolvency.

On September 15, 2022, Servier sent to us and Allogene a notice of discontinuation of its involvement in the development of the CD19 Products and purported to provide Allogene with the ability to elect to obtain a license to the CD19 Products outside of the United States. We do not believe that the Servier License Agreement permits Servier to grant such a world-wide sub-license to Allogene. We also believe that Servier has not complied with its performance obligations under the Servier License Agreement, which we believe may involve material breaches of the Servier License Agreement. See “Risk Factors—Risks Related to Our Reliance on Third Parties—Servier’s discontinuation of its involvement in the development of CD19 Products and related disagreements may have adverse consequences.”

 

Research Collaboration and Exclusive License Agreement with Iovance Biotherapeutics

On December 30, 2019, we entered into a research collaboration and exclusive worldwide license agreement with Iovance. Iovance licensed our TALEN technology in order to develop tumor infiltrating lymphocytes (TIL) that have been genetically edited to create more potent cancer therapeutics. The worldwide exclusive license enables Iovance to use TALEN® technology to address multiple gene targets to modify TIL for therapeutic use in several cancer indications. Financial terms of this license include development, regulatory and sales milestone payments to us, as well as royalty payments based on net sales of TALEN-modified TIL products.

Collaboration and License with Cytovia Therapeutics

On February 12, 2021, we entered into a research collaboration and non-exclusive license agreement with Cytovia Therapeutics, Inc., or Cytovia to develop induced Pluripotent Stem Cell (iPSC) iPSC-derived Natural Killer (NK) and CAR-NK cells edited with our TALEN (the “Cytovia Agreement”).

Pursuant to the Cytovia Agreement, as expanded in November 2021 to include a new CAR target and development in China by Cytovia’ joint venture entity, CytoLynkx Therapeutics, Cellectis is eligible to receive an upfront cash payment or equity stake in Cytovia of $20 million, if certain conditions (the “Cytovia Conditions”) were met by December 31, 2021 as well as aggregate additional payment of up to $805 million of development, regulatory and sales milestones from Cytovia. Cellectis is also eligible to receive single-digit royalty payments on the net sales of the partnered products commercialized by Cytovia. Cellectis also received an option to participate in certain future financing rounds by Cytovia.

The Cytovia Agreement initially provided for an upfront cash payment or equity stake in Cytovia of $20 million (the “Upfront Collaboration Consideration”), if certain conditions were met by December 31, 2021. Because the conditions of an equity stake transaction were not met by December 31, 2021, we recognized a trade receivable corresponding to the expected cash payment as of December 31, 2021. In April 2022, in connection with Cytovia’s entering into a definitive business combination agreement with a publicly traded Special Purpose Acquisition Company (“SPAC”), we entered into an amendment to the Cytovia Agreement, pursuant to which we received a $20 million convertible note in payment of the Upfront Collaboration Consideration. The terms of the note provided for (i) conversion into common stock of the combined company upon completion of the business combination or, (ii) in certain circumstances, our ability to elect to be paid in cash on or before December 31, 2022. In connection with this amendment, Cellectis also received a warrant to purchase additional shares of the combined company representing up to 35% of the shares issued upon conversion of the note at a predetermined exercise price, with the number of shares issuable upon exercise and the exercise subject to certain adjustments (the “SPAC Warrant”).

Because the SPAC business combination was abandoned and the conditions of the note were not met, we and Cytovia entered into an amended and restated note, which became effective as of December 22, 2022. Although the SPAC Warrant remains outstanding, it only applies in connection with Cytovia’s business combination with a SPAC.

The amended and restated note provides for automatic conversion into common stock of Cytovia in the case of certain fundamental transactions pursuant to which Cytovia becomes a public reporting company and for conversion at Cellectis’ option in connection with certain financing transactions, upon a company sale and at final maturity. In each case such conversion is subject to a 9.9% ownership cap, with the balance issuable in the form of pre-funded warrants. Among other changes, the amended and restated note increases the applicable interest rate of the note to 10% per annum, subject to a 10% step up upon the occurrence and continuation of an event of default, provides for the repayment of 50% of the outstanding amount on April 30, 2023 and extends the final maturity date for the repayment of the remaining outstanding amount to June 30, 2023.

 

On November 30, 2023, considering that the progress made in our negotiations with Cytovia was insufficient and in light of their failures to pay due and payable amounts under the note, we notified Cytovia of the termination of the Cytovia Agreement with immediate effect. Under the terms of the termination letter, Cytovia is no longer authorized to use the licenses and rights granted under the Cytovia Agreement, but remains liable for the outstanding amount of the Cytovia Note and for which Cytovia is currently in default.

 

Collaboration and Investment Agreements with AstraZeneca

On November 1, 2023, Cellectis and AstraZeneca announced that they entered into a Joint Research and Collaboration Agreement, an Initial Investment Agreement and the Subsequent Investment Agreement, each as discussed below.

 

Joint Research and Collaboration Agreement.

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On November 1, 2023, we entered into a Joint Research and Collaboration Agreement with AZ Ireland (the “AZ JRCA”). Pursuant to the AZ JRCA, the parties will collaborate to develop up to 10 novel cell and gene therapy candidate products, selected from a larger pool of potential targets identified by AZ Ireland, for human therapeutic, prophylactic, palliative, and analgesic purposes. Each party will be responsible for performing research and development activities based on research plans to be agreed upon throughout the initial five-year collaboration term under the AZ JRCA.

 

During the period in which research activities are being conducted, Cellectis grants to AZ Ireland and its affiliates a non-exclusive, royalty-free, sublicenseable (under certain conditions) license to certain know-how and patents of Cellectis that are necessary for AZ Ireland to perform its research activities (the “Licensed Technology”).

 

Cellectis also granted AZ Ireland an exclusive option, on a candidate product by candidate product basis, to receive a worldwide, exclusive, royalty-bearing, sublicenseable (under certain conditions) license under the Licensed Technology to exploit (to make, have made, import, use, sell, or offer for sale) the relevant candidate product (any candidate product for which AZ Ireland exercises this option, a “Licensed Product”). AZ Ireland will have the sole right, at its expense, to develop and commercialize the Licensed Products following the exercise of such option, and Cellectis will provide a knowledge transfer of product, technology, and certain manufacturing information necessary to enable AZ Ireland to do the foregoing.

 

Prior to AZ Ireland’s exercise of an option with respect to any Licensed Product, Cellectis will have sole responsibility for all manufacturing activities for candidate products, at AZ Ireland’s cost and expense to the extent such costs constitute research costs under the AZ JRCA.

 

Until the earlier of the fifth anniversary of the effective date or the date upon which ten candidate products have been selected by AZ Ireland, Cellectis and its affiliates may not directly or indirectly exploit any product that is directed to a target identified under the AZ JRCA. Additionally, Cellectis and its affiliates may not, during the term, directly or indirectly exploit any product that is of the same modality as a candidate product or Licensed Product and directed to the same target (excluding specified targets).

 

In addition to an upfront payment of $25 million made by AZ Ireland to Cellectis, AZ Ireland will reimburse Cellectis for its budgeted research costs associated with targets identified under the AZ JRCA. Cellectis is also eligible to receive an option exercise fee and development, regulatory and sales-related milestone payments, ranging from approximately $70 million up to $220 million, per each of the 10 candidate products, plus tiered royalties, which may range from mid-single to low-double digits, based on the sale of Licensed Products.

 

Activities under the AZ JRCA will be implemented through joint research teams with oversight from a joint steering committee, each comprising representatives of Cellectis and AZ Ireland.

 

Unless earlier terminated in accordance with its terms, the AZ JRCA will expire on a Licensed Product by Licensed Product and country by country basis, upon the later of (i) the expiration of the last to expire of the patent rights covering a Licensed Product, (ii) the expiration of the first to expire regulatory exclusivity period in a given country, and (iii) the expiration of a customary term following the first commercial sale of a Licensed Product in a given country. If AZ Ireland does not exercise any options for Licensed Products, then the AZ JRCA will expire sixty days following the completion of the last research plan. Both parties may also terminate (i) for a material breach by the other party that is not cured within 90 days of the breaching party’s receipt of notice from the non-breaching party of such material breach, and (ii) for the other party’s insolvency or bankruptcy.

 

The AZ JRCA includes customary provisions in respect of confidentiality obligations, representations and warranties, indemnification, and audit and information rights.

 

 

Initial Investment Agreement

AZ Holdings made an initial equity investment of $80 million in Cellectis by subscribing for 16,000,000 ordinary shares, at a price of $5.00 per share (the “Initial Investment”). Following the Initial Investment, AZ Holdings owned approximately 22% of the share capital, and 21% of the voting rights of the Company, Pursuant to the Initial Investment Agreement, for so long as AZ Holdings and its affiliates hold, in aggregate, at least 20% of the share capital and voting rights of the Company. AZ Holdings shall be entitled to subscribe on the same terms as other investors for its pro rata share on a non-diluted basis of any securities issued by the Company, subject to certain customary exceptions such as issuances of securities of the Company pursuant to incentive equity compensation plans.

In addition, under the Initial Investment Agreement, AZ Holdings is entitled to nominate an individual as a non-voting observer (censeur) on the board of directors of the Company and is entitled to certain information rights to allow it to comply with its legal, regulatory and accounting obligations and manage its tax affairs.

 

The Company has agreed to provide AZ Holdings with certain registration rights in connection with the Initial Investment, including agreeing to register the resale of any shares acquired by AZ Holdings pursuant to the Initial Investment and the Subsequent Investment Agreement. AZ Holdings’ registration rights include demand rights, including with respect to up to two underwritten offerings in any calendar year, as well as customary piggyback rights, in each case subject to customary suspension and cut-back provisions.

 

The Initial Investment Agreement includes customary representations and warranties of the parties and provides for certain indemnification rights of the Company and AZ Holdings in respect of specified losses.

 

Subsequent Investment Agreement

 

 

In addition to the AZ JRCA and the Initial Investment Agreement, on November 7, 2023, the Company and AZ Holdings entered into the Subsequent Investment Agreement.

Under the Subsequent Investment Agreement, AZ Holdings would make a further equity investment in Cellectis of $140 million by subscribing for two newly created classes of convertible preferred shares of Cellectis: 10,000,000 “class A” convertible preferred shares and 18,000,000 “class B” convertible preferred shares, in each case at a price of $5.00 per share (the “Additional Investment”).

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Until they convert into ordinary shares, the “class A" convertible preferred shares would have single voting rights and would not carry any double voting right at any moment, and the “class B” would carry no voting rights except on any distribution of dividends or reserves. Both class of preferred shares would have a liquidation preference (if any liquidation surplus remains after repayment of Cellectis’ creditors and of par value to all shareholders) and would be convertible into the same number of ordinary shares with the same rights as the outstanding ordinary shares. All the conditions precedents to the closing are met and the closing should occur on the earlier of (i) the third business day following the approval by the Cellectis' board of directors of the Company's annual and consolidated account for the financial year ended on December 31, 2023, and (ii) May 7, 2024 or such other date as may be agreed in writing by the parties. Immediately after the closing of the Additional Investment, it is anticipated that AstraZeneca would own approximately 44.0% of the share capital of the Company and 30% of the voting rights of the Company (based on the number of voting rights outstanding as of the date of this Annual Report) and pursuant to the Subsequent Investment Agreement and the Company's shareholders decision dated December 22, 2023, Mr. Marc Dunoyer and Mr. Tyrell Rivers will, subject to closing of the Additional Investment, serve on the Company's board of directors as members designed by AZ Holdings. Further, certain business decisions are subject to AZ Holdings’ approval, including, in particular, winding up any company of the Cellectis group, issuing securities senior to or pari passu with the convertible preferred shares or any shares without offering AZ Holdings the option to purchase its pro rata share of such securities (subject to customary exceptions, including issuances under employee equity incentive plans), declaring or paying dividends, prepaying indebtedness before due, and disposing of any material assets concerning gene editing tools or manufacturing facilities and selling, assigning, licensing, encumbering or otherwise disposing of certain material IP rights.

 

The Additional Investment was approved on December 22, 2023, at an extraordinary general meeting of the shareholders of Cellectis.

Immunotherapy: Turning the Immune System into “Smart Drugs”

The immune system has evolved to protect the body from invading pathogens or external harmful materials by identifying these foreign bodies through “non-self” antigens, which are molecular signatures that they carry and are foreign to the body. A central function of the immune system is to discriminate between “self,” which is recognized through antigens normally present in the body and borne by cells, proteins, sugars or lipids, and “non-self”, which is detected through abnormal or foreign antigens. Cancer cells thrive, in part, because they trick the immune system into treating them as self, even though they express abnormal antigens, and thus immune tolerance occurs when the immune system fails to recognize and attack tumors. Breaking immune tolerance is an important aspect of most immuno-oncology-based therapeutics because it enables the immune system to recognize and treat tumors as non-self and leads to tumor destruction.

The immune system recognizes non-self danger signals and responds to threats at a cellular level. The immune system may be conceptualized as comprising two arms. The first arm, known as the innate immune system, recognizes non-specific signals of infection or abnormalities as a first line of defense. The innate immune system is the initial response to an infection, and the response is the same every time regardless of prior exposure to the infectious agent. The second arm, known as the adaptive immune system, is composed of highly specialized cells and provides long-term specific recognition and protection from infectious agents and abnormal processes such as cancer. The adaptive immune response is further subdivided into antibody-based responses and cellular responses, which include T-cell-based immune responses. The most significant components of the cellular aspect of the adaptive immune response are T-cells, which are specialized cells that generally mature in the thymus. T-cells are involved in sensing and killing infected or abnormal cells, as well as coordinating the activation of other cells and mounting an immune response.

Although the immune system is designed to identify and destroy foreign or abnormal protein-bearing tumor cells, this process is often defective in cancer patients. Additionally, cancer cells employ a number of mechanisms to escape immune detection and attack to suppress the effect of the immune response.

Immunotherapy is a type of treatment that modifies, stimulates, or re-directs certain parts of the immune system to fight diseases, such as cancer. Immunotherapy works by stimulating a patient’s own immune system or by turning its attacks towards harmful targets, such as cancer cells. Immunotherapy can also be pursued by giving patients engineered immune cells, such as CAR T-cells to target certain cells. Immunotherapy is playing an increasingly large role in treating cancer, chronic infectious diseases, autoimmune diseases and allergic diseases.

T-cells and T-cell Receptors (TCRs)

T-cells are a class of white blood cells that carry a specific TCR at their surface that allows them to recognize and kill other cells that express antigens foreign to the individual. Normal cells express a set of specific molecules, called human leukocyte antigen, or HLA, at their surface. HLA is associated with small fragments, or peptides of the proteins expressed inside the cell or processed from the extracellular body fluids. Fragments of abnormal or foreign proteins (viruses, for example) can attach to HLAs, be presented at the cell’s surface, be recognized by T-cells through these HLA-peptide complexes and identified as foreign antigens. This recognition triggers the activation of the T-cells, which destroy the foreign HLA-peptide complex-bearing cell, secrete specific cytokines attracting other immune-competent cells to their location, and start multiplying to establish a full immune response.

Unlike antibodies that mainly diffuse passively through the body and its circulating fluids, T-cells actively leave blood vessels or lymphoid organs and travel through the tissues of the body where they can attack foreign antigens. Once the antigen is eliminated from the body, the T-cells run out of stimulation and die off, with only a fraction surviving as “memory T-cells,” which can react promptly should the antigen reappear in the body.

There is a high variability of HLA molecules in the population. Therefore, if a cell is introduced into a person and originally comes from another individual that is not HLA-matched, it will bear, at its surface, HLA-peptide complexes that are recognized as foreign and will be killed by the T-cells of the recipient. This mechanism of graft rejection has been a major limitation to transplanting patients with allogeneic tissues. Reciprocally, if T-cells are grafted from one individual to another and start recognizing as foreign the normal HLA-peptide complexes at the surface of all tissues of the grafted individual, then they may attack and kill those healthy tissues, leading to Graft-versus-Host disease (GvHD), which can be very severe, and potentially fatal, if left untreated.

Cancerous cells express abnormal antigens and can be killed by T-cells. However, cancer may grow and spread to various organs when T-cells with cancer-specific receptors are in low numbers, of poor quality, or rendered inactive by suppressive mechanisms employed by tumor tissues. T-cells are a key armament when fighting cancers.

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They play a particularly significant role if they are tailored to target tumors, and potentially even more so if their genes are edited to overcome tumor defenses, to make T-cells compatible with other anti-cancer drugs that can be combined with them, and to prevent GvHD, which would allow the use of allogeneic T-cells.

Chimeric Antigen Receptor (CAR)

CARs are engineered molecules that, when present at the surface of T-cells, enable them to recognize specific proteins or antigens that are present on the surface of other cells. These receptors are typically used to graft the specificity of an antibody derived from a single cell, or a monoclonal antibody, onto a T-cell and provide it with a specific targeting mechanism to seek, identify, interact with and destroy the tumor cells bearing a selected antigen associated with that tumor also known as tumor-associated antigen, or TAA and tumor-specific antigens, or TSA. The expression of some genes, or combinations of genes, can be associated with certain classes of cancers. It is sometimes possible to identify TAAs that are expressed at various levels by tumor cells from a given cancer type. These TAAs may also be normally expressed by other tissues at different stages of development.

T-cells with CARs are referred to as CAR T-cells. Whereas natural T-cell receptors, or TCRs, only recognize antigens bound to an HLA molecule at a cell’s surface, a CAR is able to directly recognize antigens that are present at the targeted cell’s surface. It is believed that upon cell-to-cell contact between a CAR T-cell and an antigen-bearing targeted cell, antigen recognition by the CAR “activates” the CAR T-cell, triggering it to multiply, attack and kill its target through the release of “hole-forming” proteins, known as perforins, and “degradation enzymes,” known as granzymes, that enter the targeted cell through the perforin-formed holes and carry out the killing. The activation of a T-cell through a CAR results in a target-associated “kill and amplify” chain reaction that eradicates the tumor.

CARs are constructed by assembling components, or domains, from different proteins, including:

The following diagram shows the mechanism by which a CAR T-cell is believed to attack a tumor cell:

 

Recent immuno-oncology advancements have supported the potential to cure certain cancers by harnessing the body’s immune system to fight cancer cells (see “Competition” section for more details). Based on these, immuno-oncology has become a new frontier for treatment, and we believe it is one of the most promising areas of development within oncology.

Our Gene-Editing Approach to Allogeneic CAR T-cell Therapy

The most fundamental challenge of genome engineering is the need to target a precise DNA sequence specifically and efficiently target a precise DNA sequence within a complex genome. Our founder and CEO, Dr. André Choulika, was one of the pioneers and first researchers in nuclease-based genome engineering in the early 1990s and has been integral in the development and advancement of gene-editing tools.

Our proprietary gene-editing platform relies on our capacity to custom design DNA-sequence specific cutting enzymes, or nucleases, for any chosen gene we need to modify and our capability to introduce such custom-made nucleases into the living cells we want to engineer. Our platform relies on precisely chosen protein families that can specifically recognize unique DNA sequences and can be tailored to target such sequences in any chosen gene or genetic region.

Our allogeneic CAR T-cell therapy approach is based on our technology platform which combines CARs, TALEN and PulseAgile, our electroporation device. Our approach aims to deliver off-the-shelf products with the following benefits:

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TALEN—Proprietary Gene-editing Technology

The flagship nuclease structure we use for gene editing is based on a class of proteins derived from transcription activator-like effectors, or TALE. TALEN products are designed by fusing the DNA-cutting domain of a nuclease to TALE domains, which can be tailored to specifically recognize a unique DNA sequence. These fusion proteins serve as readily targetable “DNA scissors” for genome engineering applications that enable us to perform targeted genome modifications such as sequence insertion, deletion, repair and replacement in living cells.

The following diagram shows the structure of a TALEN. The DNA binding domain of TALEN is composed of DNA binding units that individually recognize a single base pair, and that are assembled to collectively recognize a DNA sequence. The specificity of this single base pair recognition is mediated by two of the amino-acids (repeat variable diresidues or RVDs) within each DNA binding units. RVDs (NN, NI, NG, HD, or others) directly interact with the base of the DNA.

 

We believe the key benefits of TALEN technology are:

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The following diagram shows the various gene editing mechanisms enabled by TALEN:

 

We are able to assemble long arrays of modular domains with predictable specificity for a chosen sequence of DNA unique within a genome.

When a TALEN is present, its TALE domains recognize its target DNA sequence and thereby direct the enzyme to the proper chromosomal location. Once bound to their target DNA sequences, DNA cleaving-domains of the TALEN can induce a DNA break at the targeted location to induce permanent DNA modifications. We believe TALEN stands out among nucleases as exceptionally precise, accurate and efficient to perform gene inactivation.

Other Types of Gene Editing Technologies

We have developed a strong expertise and capacity in meganuclease technologies, which involve enzymes capable of recognizing very large unique DNA sequences. In addition, using the flexibility of the TALE domain, we have developed new classes of custom-designed nucleases, such as compact TALEN and mega-TALE nucleases that combine meganucleases and TALEN technology. Compact-TALEN is built with a single TALE molecule fused to a fragment of a chosen meganuclease that carries limited DNA sequence recognition functionality but fully functional DNA-cleaving activity. These chimeric proteins are smaller in size than classical TALEN, which can facilitate their delivery to cells. In contrast, mega-TALE use a full-size meganuclease to enhance their DNA sequence recognition capacities, while demonstrating enhanced precision. We also have discovered a new class of nuclease that we named BurrH nucleases, also based on arrays of single DNA-base recognizing modular domains.

We also capitalized on our expertise with TALEN technology to develop new gene editing approaches, such as base-editing technology.

PulseAgile—Electroporation Technology

In order to perform gene editing, we use our proprietary PulseAgile electroporation technology to introduce nucleases inside the target T-cell where they can access the cell’s DNA. Electroporation allows messenger RNA, or mRNA, molecules coding for the nuclease to enter into the cell, where they are translated into the nuclease protein that can cut into the cell’s DNA. The mRNA molecules are rapidly degraded by the cell, which means that the nuclease is only expressed for a short time.

PulseAgile electroporation uses a unique electrical field wave-form that, in combination with a proprietary buffer solution, enables molecules, such as nucleases, to enter efficiently into the cell while maintaining a high percentage of viable cells. PulseAgile technology is particularly effective due to the shape of the electrical field that includes high voltage peaks, which are optimized to create transient holes in the cell membrane, followed by lower voltage pulses that help mRNA (for example TALEN-encoding mRNA) migrate into the cells. In addition, PulseAgile is optimized to preserve high cell viability and thus suited for large-scale manufacturing.

Nuclease Technology and T-cells: The Design Process

Our T-cell gene-editing process involves two engineering rounds:

Gene Editing to add Genes, such as a CAR

Genetic material is added to the T-cell’s genome using a viral vector—a benign modified virus that cannot replicate autonomously but can efficiently deliver such genetic material into a cell with which it is in contact. The genetic material added includes a gene coding for a CAR, which becomes a new receptor at the T-cell’s surface that allows it to recognize and bind to a target molecule that is present at the surface of other cells. At this stage, we can also add other genes to these cells that confer specific properties. For example, we may add “suicide switch” genes, which code for proteins that can make T-cells susceptible to certain drugs and enable us to deplete our engineered T-cells at our discretion by administering a drug to the patient. This system can also be integrated within the CAR itself.

Gene Editing to Inactivate Genes, such as the TCRα and CD52

We use our PulseAgile electroporation technology to introduce specific TALEN mRNA into the T-cells to inactivate a number of genes that are naturally present in the genome of these T-cells.

TCRs at the surface of T-cells allow them to recognize cells that express foreign, non-self, antigens (for example, cells infected by a virus or cells coming from another individual). Non-modified allogeneic T-cells bear functional TCRs and, if injected into a patient, can potentially recognize non-self on that patient’s tissues and start attacking them.

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For this reason, to suppress their alloreactivity, all of our UCART product candidates undergo the inactivation of a gene coding for TCRα, a key component of TCRß, the natural antigen receptor of T-cells. The engineered T-cells lack functional TCRs and are no longer capable of recognizing foreign antigens. As a result, when injected into a patient, the engineered T-cell would not recognize the tissues of the host patient as foreign and thus would avoid attacking the patient’s tissues. This could avoid the GvHD that can sometimes be observed when allogeneic TCR-positive T-cells are infused into some patients. The figure below depicts the suppression of alloreactivity in T-cells engineered to lack functional TCRs. The figure summarizes experiments in which we injected mice with T-cells engineered for the inactivation of TCRα while injecting other mice with non-engineered T-cells with functional TCRs. We then measured the effects of such injections on mean body weight, which serves as a proxy for the impact of GvHD.

 

During the manufacturing process, the T cells from a healthy donor are first engineered. The CAR gene is transduced and cell attributes like the TCR alpha gene are knocked out by TALEN. Then, the T-cells of our UCART products are amplified. The desired TCR alpha deleted cells are finally purified from the cells that may still bear a TCR, and are finally frozen. We perform a battery of specialized testing techniques and various quality assurance and quality control assays to further validate cellular functional integrity following gene editing.

The lack of a TCR at the surface of our UCART product candidates is a key feature that allows them to be used as allogeneic off-the-shelf products. Other genes can also be inactivated in this round to confer additional specific attributes to the T-cells. They can be made resistant to, and therefore compatible with, specific medical regimens used during the course of cancer treatments. For example, we inactivate the CD52 gene, which codes for the target of alemtuzumab, a monoclonal antibody sometimes used in CLL patients, that can also be part of the medication given to patient prior to receiving a UCART (a lymphodepletion regimen), and that would otherwise destroy our engineered T-cells. Likewise, we believe we can inactivate the deoxycytidine kinase (dCK) or glucocorticoid receptor (GR) genes in order to make our T-cells respectively resistant to purine nucleotide analogs (e.g., fludarabine, clofarabine or cytarabine) or to corticoids that are used for several types of cancer patients.

The following diagram shows the key stages in our engineering of UCARTCS1:

 

Next-Generation Products – Inactivate Additional Genes, such as ß2M and PD-1

The allogeneic CAR T-cell approach developed by Cellectis aims at increasing accessibility to treatment for patients by using healthy donor cells to manufacture CAR T-cells. The inactivation of the TCRα gene reduces the risk of graft vs. host disease. In addition, the use of a lymphodepletion regimen in patients aims at supporting early engraftment of the candidate product, with the optimal lymphodepletion regimen prior to the administration of CAR-T product candidates remaining an area of investigation in the field of CAR T-cell therapy.

We are investigating the inactivation of the beta2-microglobulin (ß2M) gene to increase persistence of allogeneic cells in this context. ß2M is necessary for presentation of antigens on HLA class I major histocompatibility complex (MHC) to cytotoxic T-cells. Allogeneic TRCαß2M double knock-out CAR T-cells infused into a patient are expected not to be recognized by the patient’s own cytotoxicT-cells and therefore to potentially show prolonged survival after patients’ T-cells recover following lymphodepletion.

We have developed several ß2M-specific TALEN allowing high efficiency of gene inactivation in combination with TRCα-specific TALEN (up to 88% double knock-out). We have shown on human and mouse cell models that ß2M inactivation improves allogeneic cell survival in the presence of alloreactive T-cells, and we are pursuing the ß2M inactivation approach for some of our preclinical candidates.

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We have also developed a single gene editing modification allowing resistance to both alloreactive T-cells and NK cells at the same time, by inserting the HLA-E molecule at the ß2M locus with high efficiency. While ß2M inactivation provides resistance to alloreactive T-cells ß2M knock-out cells can become the target of NK cells (missing- self response). HLA-E acts as a ligand to NK cell inhibitory receptors.

Our engineered T-cell could also be made insensitive to inhibition signals, which diminish immune system activity, that may be present within the tumor microenvironment and that usually block T-cell attacks. For example, we inactivate the programmed cell death 1 (PD-1) gene in our engineered T-cells in order to suppress the checkpoint regulator inhibition by tumors expressing PD-1 ligand (PD-L1), a common anti-immune defense mechanism found in cancer. The following diagram shows the inactivation of the PD-1 gene to suppress checkpoint inhibition in the T-cell:

 

 

Using our ability to add and to inactivate genes, our platform has the potential to deliver smart T-cells designed for specific indications and purposes.

 

 

Next-Generation Products – Armored CARs

While CAR T-cell therapies have led to instances of complete remission in previously untreatable diseases such relapse/refractory ALL, not all patients respond, and even among those that respond, some patients end up relapsing. There is therefore a need to investigate strategies to make CAR T-cells even more effective, such as boosting their activity through overexpression of an immunomodulatory molecule (i.e. a cytokine or a costimulatory receptor). In order to limit toxicity effects due to immunostimulatory molecules being produced uncontrollably and systemically, we have developed strategies exploiting cellular endogenous pathways to restrict expression of a gene of interest only when CAR T-cells are activated. This is made possible by inserting genes of interest at a desired position in the genome by combining a locus-specific nuclease and a donor template vectorized with an adeno-associated viral (AAV) vector. Since PD-1 and CD25 are known to be upregulated upon T-cell activation, inserting certain cytokine coding sequence under the control of PD-1 or CD25 genetic regulatory elements allows secretion of that certain cytokine only upon activation of the CAR T-cells and enhances antitumor activity.

This strategy could be extended to the use of various genetic loci to express genes with therapeutic benefits at desirable expression level or with a specific temporal or regional expression pattern.

 

UCART Manufacturing: How can we turn a procedure into a large-scale, widely available drug?

Autologous CAR-T cell approaches are therapeutic procedures conducted for each patient, which involve the engineering of T-cells by addition of a transgene coding for a chimeric antigen receptor into the patient’s own T cells. Our UCART approach goes one step further in engineering and also in moving the CAR concept from a patient-by-patient therapeutic procedure to an off-the-shelf widely available pharmaceutical compound.

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The manufacturing process of our allogeneic CAR T-cell product line, Universal CARTs or UCARTs, yields frozen, off-the-shelf, allogeneic, engineered CAR T-cells. UCARTs are meant to be readily available CAR T-cells for a large patient population. The specificity of those allogeneic therapies is that T-cells from healthy donors are genetically edited with our proprietary technology, TALEN®, to seek and destroy cancer cells. TALEN- based gene editing is designed to suppress T-cell alloreactivity (and, for certain UCART product candidates, to confer resistance to alemtuzumab to the T-cells). New properties may also be introduced by inserting genes with potential therapeutic benefits at various loci.

Our UCARTs are designed and manufactured through a common platform that relies on defined unit operations and technologies combined into a single process adapted to each individual UCART. The process is gradually developed from small to larger scales, incorporating elements that are eventually used in GMP conditions. Notwithstanding this central unit operations-based model, each product is unique and for each new UCART, a developmental phase is necessary to individually customize each engineering step and to create a robust procedure that can later be implemented in a GMP environment to ensure the production of clinical batches. This work is performed in our research & development environment to evaluate and assess variability in each step of the process in order to define the most reliable experimental conditions.

The following diagram summarizes the generic UCART production process made of distinct unit operations. The engineering steps for transduction and electroporation can take place one before another (and several times), depending on the product.

 

We aim to continuously improve our manufacturing processes for better safety and robustness of our product lines.

Towards manufacturing autonomy with two state-of-the-art plants

In order to enhance our manufacturing autonomy, we have established two manufacturing facilities. First, in Raleigh, North Carolina, USA, we have developed an approximately 80,000 sq. ft. in-house manufacturing facility, which is dedicated to the production of clinical and commercial UCART products. The Raleigh facility commenced production of UCART product candidates in 2021. Our product candidates UCART22 and UCART20x22 used respectively in the BALLI-01 and NaThaLi-01 Studies have been manufactured in our Raleigh site. Second, in Paris, France, we have completed construction of an approximately 14,000 sq. ft. in-house manufacturing facility, which is dedicated to the production of certain critical raw and starting material for clinical supply, with the potential to supply commercial raw and starting materials. The Paris facility commenced production of raw and starting materials in 2020. We expect to continue to use certain third-parties manufacturers to complement Cellectis’ internal manufacturing facilities.

Raw Materials

We are currently dependent on specialized third parties, who are subject to stringent manufacturing requirements and regulations, for the supply of various critical and biological materials – such as cells, chemicals, water, cytokines, vectors, nucleic acids, antibodies, medium, serum, buffers —that are necessary to produce our product candidates. We source these materials through service agreements or supply agreements and do not systematically have long-term supply contracts in place. However, we believe that competitive pricing is achieved because there are a number of potential long-term replacements to each of our suppliers. Generally, the prices of the principal biological raw and starting materials that we purchase are stable or fluctuate within a limited range. To the extent that we are exposed to price fluctuations, we generally do not expect, in the near term, to be able to pass on cost increases because of the early development stage of our product candidates. However, with the completion of our manufacturing facility project in Paris, we expect to become independent for the supply of our most critical raw and starting materials.

 

Intellectual Property

We seek to protect and enhance proprietary technology, inventions, and improvements that are commercially important to the development of our business by seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. We will also seek to rely on regulatory protection afforded through orphan drug designations, data exclusivity, market exclusivity and patent term extensions where available.

To achieve this objective, we maintain a strategic focus on identifying and licensing key patents that provide protection and serve as an optimal platform to enhance our intellectual property and technology base.

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Historical Perspectives

Cellectis was founded in early 2000. In June 2000, Institut Pasteur provided us with exclusive rights to its gene-editing patent portfolio. This patent portfolio includes patents relating to homologous recombination and rare-cutting endonucleases (also named meganucleases), respectively, for genetic engineering in living cells. Our license agreements with Institut Pasteur expired in the first quarter of 2020 with the expiration of the last to expire patents under such agreements.

Since 2002, we have filed a large number of patent applications, many issued as patents, for custom-made meganucleases, and uses thereof, that specifically target a desired genetic sequence in a genome. In 2014, we entered into a cross-licensing agreement with Precision Biosciences, Inc., or Precision, in settlement of patent litigation and patent proceedings related to this technology. Pursuant to this cross-license, we licensed our patents and patent applications in this area to Precision, and Precision licensed its relevant patents and patent applications to us.

In 2010, we acquired a portfolio of patents and patent applications relating to electroporation methods and devices. In 2011, we entered into an exclusive license agreement with the Regents of the University of Minnesota (UMN) pursuant to which we in-licensed one patent family related to customized rare-cutting endonucleases, in connection with which we have registered the trademark TALEN in certain jurisdictions. This patent portfolio comprises ten patents in the United States and two European patents. In addition, in 2014, we entered into a series of agreements with Life Technologies Corporation (controlled by Thermo Fisher Scientific Inc.) pursuant to which we received a non-exclusive sublicense under certain patents and patent applications related to the research and therapeutic uses of TALE-nucleases and we granted certain rights to Life Technologies under our TALEN technology. In addition, we entered into a license agreement with Calyxt, pursuant to which Calyxt has been granted certain rights in connection with our gene editing and plant intellectual property portfolio.

Since 2012, we have filed about 54 new patent applications families related to the CAR T-cell technology. Included in this patent portfolio are patent applications relating to manufacturing allogeneic immune cells and to CAR design, including multi-subunit CARs and conditional expression CARs. In addition, we have filed a number of patent applications related to new TALEN structures and alternatives to the TALEN structure.

In October 2014 and March 2014, we exclusively in-licensed two patent portfolios from Ohio State Innovation Foundation and University College London, respectively. The Ohio State Innovation Foundation patent portfolio includes patent applications relating to CARs directed to cancer marker CS1. The University College London patent portfolio includes patent applications relating to a polypeptide expressing the “suicide switch” gene RQR8, and uses thereof.

Current Intellectual Property Portfolio

As a result of the licensing opportunities described above and our continuing research and development efforts, our intellectual property estate now contains patent applications that cover our products, including claims that cover:

The most relevant issued patents in our portfolio consist of approximately 66 Cellectis-owned and 12 in-licensed U.S. patents, 49 Cellectis-owned and 5 in-licensed European patents, and 214 Cellectis-owned and 26 in-licensed patents in other jurisdictions, such as Australia, Canada, China, Hong Kong, India, Israel, Japan, Korea, Mexico and Singapore.

The most relevant pending patent applications in our portfolio consist of approximately 31 Cellectis-owned and 2 in-licensed U.S. patent applications, 41 Cellectis-owned and 1 in-licensed European patent applications, 141 Cellectis-owned and 7 in-licensed patent applications pending in other jurisdictions, such as Australia, Brazil, Canada, China, Hong Kong, India, Israel, Japan, Korea, Mexico and Singapore.

Our most relevant portfolio includes a total of 372 owned and in-licensed granted patents, and 223 owned and in-licensed patent applications.

Our UCART product candidates rely for each product candidate upon one or more patent rights protecting various aspects of the technologies, including rights relating to:

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For additional information, see “—Gene-Editing Platform” below.

Individual patent terms extend for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance, and the legal term of patents in the countries in which they are obtained. In most countries in which we file patent applications, including the United States, the patent term is 20 years from the date of filing of the first non-provisional application to which priority is claimed. In certain instances, a patent term can be extended under certain circumstances. For example, in the United States, the term of a patent that covers an FDA-approved drug may be eligible for a patent term restoration of up to five years to effectively compensate for the patent term lost during the FDA regulatory review process, subject to several limitations discussed below under “ —Our Intellectual Property Strategy.” Also, in the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier-filed patent. Our issued patents will expire on dates ranging from 2024 to 2038. If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2024 to 2041. However, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country, and the validity and enforceability of the patent.

The patent portfolio for our most advanced product candidates, UCART19, UCART123, UCART22, UCARTCS1 and UCART20x22 are summarized below.

Gene Editing Platform

Our UCART product candidates rely upon our gene-editing platform and T-cell and CAR technology platforms. The patent portfolio covering these platforms and technologies, includes approximately 214 patents or pending patent applications in various countries, comprising 43 in-licensed and 98 Cellectis owned issued patents among which 26 are US granted patents and 13 European granted patents. Certain of these issued patents and pending patent applications, which expire between 2031 and 2041, cover product claims or process claims relevant to each of our product candidates, including UCART19, UCART123, UCART22, UCARTCS1 and UCART20x22.

Our gene-editing platform and each of our UCART product candidates benefits from the protections conferred by several patents and patent applications in our patent portfolio. As a result of this broad range of patent protection, very few individual patents in our portfolio are critical to our ability to effectively conduct our product development activities. Although certain patents relating to our electroporation technology have expired, other patents and patent applications covering this technology remain in force, and additional patents protect the nucleases delivered by our electroporation technology, as well as the methods to modify the cells by use of such nucleases. Among our main patents EP2997141, EP3189073, EP3126390, EP3004349 and EP3116902 are under opposition before the European Patent Office.

UCART19

In addition to the patent portfolio relating to our platform and technologies, described above, our patent portfolio relating specifically to UCART19 includes granted patents and pending patent applications from the patent family WO2014184143 (CD19 Specific Chimeric Antigen Receptor and Uses Thereof).

We believe these patents and pending patent applications, which, if issued, would expire in 2034, include claims to cover the composition of matter of UCART19, methods of manufacture of UCART19, and methods to use UCART19 in treatment.

UCART123

In addition to the patent portfolio relating to our platform and technologies, described above, our patent portfolio relating specifically to UCART123 includes granted patents and pending patent applications from the patent family WO2018178377 (CD123 Specific Chimeric Antigen Receptors for Cancer Immunotherapy). We believe these patent and patent applications, which, if issued, would expire in 2035, include claims to cover the composition of matter of UCART123, methods of manufacture of UCART123, and methods to use UCART123 in cancer treatment.

UCART22

In addition to the patent portfolio relating to our platform and technologies, described above, our patent portfolio relating specifically to UCART22 includes pending patent applications from the families WO2018173878 and WO2028278377. We believe these patent applications, which if issued, would expire in 2038, include claim directed to the composition of matter of UCART22, methods of manufacture of UCART22, and methods to use UCART22 in cancer treatment.

UCART20x22

In addition to the patent portfolio relating to our platform and technologies, described above, our patent portfolio relating specifically to UCART20x22 includes pending patent applications from the family WO2022023529. We believe these patent applications, which if issued, would expire in 2041, include claims directed to the composition of matter of UCART20x22, methods of manufacture of UCART20x22, and methods to use UCART20x22 in cancer treatment.

In each case, some of the issued patents and pending patent applications, if issued, may be eligible for patent term extension and patent term adjustment, thereby extending their terms, as described above.

Material Exclusive Licenses Granted to Cellectis

License from Regents of the University of Minnesota

In January 2011, we entered into an exclusive license agreement with Regents of the University of Minnesota, or UMN. Pursuant to this agreement, as amended in 2012, 2014, 2015 and 2022 we and our affiliates were granted an exclusive, worldwide, royalty-bearing, sublicensable license, under certain patents and patent applications owned by UMN, to make, use, sell, import, and otherwise dispose of products covered by the licensed patents, for all fields of use.

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These licensed patents relate to TALEN technology. Pursuant to the agreement, we are required to achieve certain specified research- and sales-related milestones

Pursuant to the terms of the agreement, we paid UMN an upfront license fee in the amount of $250,000 upon the effective date of the license agreement, and a second upfront payment in the amount of $1,000,000 following execution of the third amendment. In the non-agricultural field we are also required to pay to UMN low single digit percentage royalties on net sales of licensed products, as well as a percentage of all revenues received by us under sublicenses. Pursuant to the agreement, UMN is entitled to minimum annual royalties of $30,000 per year. In the agricultural field, no royalties are due on net sales of licensed products, but an annual fee of $150,000 per year is due to UMN and commercial milestones are due upon the occurrence of certain commercial sale milestones. We are also required to pay UMN milestone payments up to a total of $290,000 in the aggregate upon the occurrence of specified events and to pay certain patent-related expenses incurred under the agreement for prosecuting and maintaining the licensed patents. If we undergo a change of control and wish to assign our rights and duties under the agreement, we will be required to pay UMN an additional transfer fee.

The license agreement will expire upon the expiration of the last to expire valid claim of the licensed patents. UMN may terminate the agreement upon advance written notice in the event of our insolvency or bankruptcy, and immediately upon written notice in the event that we challenge the validity or enforceability of any licensed patent in a court or other applicable authority. UMN and we may terminate the agreement by written notice in the event of the other party’s breach that has not been cured within a specified number of days after receiving notice of such breach.

 

Our Intellectual Property Strategy

We believe our current layered patent estate, together with our efforts to develop and patent next generation technologies, provides us with substantial intellectual property protection. However, the area of patent and other intellectual property rights in biotechnology is an evolving one with many risks and uncertainties.

Our strategy is also to develop and obtain additional intellectual property covering innovative manufacturing processes and methods for genetically engineering T-cells expressing new constructs and for genetically engineering plants expressing new traits. To support this effort, we have established expertise and development capabilities focused in the areas of pre-clinical research and development, manufacturing and manufacturing process scale-up, quality control, quality assurance, regulatory affairs and clinical trial design and implementation. Thus, we expect to file additional patent applications to expand this layer of our intellectual property estate.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the date of filing of the first non-provisional application to which priority is claimed. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier-filed patent. The term of a patent that covers an FDA-approved drug may also be eligible for a patent term restoration of up to five years under the Hatch-Waxman Act, which is designed to compensate for the patent term lost during the FDA regulatory review process. The length of the patent term restoration is calculated based on the length of time the drug is under regulatory review. A patent term restoration under the Hatch-Waxman Act cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be restored. Moreover, a patent can only be restored once, and thus, if a single patent is applicable to multiple products, it can only be extended based on one product. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. When possible, depending upon the length of clinical trials and other factors involved in the filing of a BLA, we expect to apply for patent term extensions for patents covering our product candidates and their methods of use.

Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business; defend and enforce our patents; preserve the confidentiality of our trade secrets; and operate without infringing the valid enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same.

We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered or lawfully reverse-engineered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Competition

The biotechnology and pharmaceutical industries put significant resources toward developing novel and proprietary therapies for the treatment of cancer, which often incorporate novel technologies and incorporate valuable intellectual property. We compete with companies in the immunotherapy space, as well as companies developing novel targeted therapies for cancer. In addition, our products will compete with existing standards of care for the diseases that our product candidates target. We anticipate that we will face intense and increasing competition from many different sources, including new and established biotechnology and pharmaceutical companies, academic research institutions, governmental agencies and public and private research institutions.

The immuno-oncology cell therapy competitive landscape is increasing, with the main approaches including CAR-T cells (autologous and allogeneic), autologous T-cell receptors (TCRs) and natural killer (NK) cells approaches.

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The approved autologous CAR-T cell programs are:

Due to the promising therapeutic effect of T-cell therapies in clinical exploratory trials, we anticipate substantial direct competition from other existing and new competitors developing these therapies. In particular, we expect to compete with therapies with tumor infiltrating lymphocytes, or TILs, that are naturally occurring tumor-reactive T-cells harvested, propagated ex vivo and re-infused into patients. In February 2024, Iovance announced that the FDA has approved the commercialization of lifileucel (Amtagvi™) for the treatment of adult patients with unresectable or metastatic melanoma previously treated with a PD-1 blocking antibody, and if BRAF V600 mutation positive, a BRAF inhibitor with or without a MEK inhibitor. We also expect to compete with therapies using genetically engineered T-cells, rendered reactive against tumor-associated antigens prior to their administration to patients. While a substantial part of our competitors are currently focused on autologous therapies, an increasing number of companies are developing an allogeneic CAR-T cell approach. Here, we differentiate ourselves by using our proprietary gene-editing capabilities to add specific features to our T-cell products, such as cancer drug resistance or resistance to checkpoint inhibition.

Our competitors include:

We also face competition from non-cell based treatments offered by companies such as Amgen Inc., AstraZeneca plc, Bristol-Myers Squibb Company, Incyte Corporation, Merck & Co., Inc., Novartis AG and F. Hoffman-La Roche AG. Immunotherapy is further being pursued by several biotech companies as well as by large-cap pharmaceuticals. Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and gene therapy industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market or make our development more complicated. The key competitive factors affecting the success of all of our programs are likely to be their efficacy, safety, and convenience.

Government Regulation and Product Approval

Government Regulation of Biological Products

We are subject to extensive regulation. Our product candidates, cell based gene therapies, are regulated as biologics. Governmental authorities, including the FDA and comparable regulatory authorities in other countries, regulate the design, development, production / manufacturing, testing, safety, efficacy, labeling, storage, record-keeping, advertising, promotion and marketing of pharmaceutical products, including biologics.

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Non-compliance with applicable requirements can result in fines and other judicially imposed sanctions, including product seizures, import restrictions, injunctive actions and criminal prosecutions of both companies and individuals. In addition, administrative remedies can involve requests to recall violative products; the refusal of the government to enter into supply contracts; or the refusal to approve pending product approval applications until manufacturing or other alleged deficiencies are brought into compliance. The FDA and similar authorities around the world also have the authority to cause the withdrawal of approval of a marketed product, to impose labeling restrictions or to require that we redo some non-clinical and/or clinical studies.

The FDA categorizes human cell- or tissue-based products as either minimally manipulated or more than minimally manipulated, and has determined that more than minimally manipulated products require clinical trials to demonstrate product safety and efficacy and the submission of a BLA for marketing authorization.

Our product candidates must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agencies before they may be legally marketed in foreign countries. Generally, our activities in foreign countries will be subject to regulation that is similar in nature and scope as that imposed in the United States, although there can be important differences. Additionally, some significant aspects of regulation in the EU are addressed in a centralized way, but country-specific regulation remains essential in many respects. The process for obtaining regulatory marketing approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

Ethical, social and legal concerns about gene therapy, gene modifications, genetic testing and genetic research could result in additional regulations restricting or prohibiting the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulating biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing any products in one or more jurisdictions. New government requirements may be established that could delay or prevent regulatory approval of our product candidates under development. It is impossible to predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what the impact of such changes, if any, may be.

Set forth below is a description of the process of obtaining U.S. government approval for biological product development. Similar processes apply in other jurisdictions.

U.S. Biological Product Development

In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic Act, or FDCA, and the Public Health Service Act, or PHSA, and their implementing regulations. Biologics are also subject to other federal, state and local statutes and regulations. The process required by the FDA before biologic product candidates may be marketed in the United States and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recall requests or withdrawals from the market, labeling restrictions, non-clinical and/or clinical studies to be performed again, product seizures, product destruction, total or partial suspension of production or distribution injunctions, import restrictions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties for both companies and individuals. Any agency or judicial enforcement action could have a material adverse effect on us.

Our biological product candidates must be approved by the FDA through the Biologics License Application, or BLA, process before they may be legally marketed in the United States. The process required by the FDA before a biologic may be marketed in the United States generally involves the following:

The data required to support a BLA is generated in three development segments: manufacturing, pre-clinical and clinical. The manufacturing development stage generally involves laboratory evaluations of drug chemistry and biology properties, formulation and stability. The pre-clinical stage generally involves studies to evaluate pharmacology and toxicity in animals, which support subsequent clinical testing. The conduct of the manufacturing and pre-clinical studies must comply with federal regulations, including GMPs and GLPs for the main Toxicology Studies.

The sponsor must submit the results of the pre-clinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of an IND before any clinical testing may proceed. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. The IND must become effective before clinical trials may begin. The IND is automatically effective 30 days after receipt by the FDA, unless during that time the FDA raises concerns or questions regarding the proposed clinical trials.

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In such a case, the FDA may place the IND on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a product candidate at any time before or during clinical trials due to safety concerns or non-compliance. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that could cause the trial to be suspended or terminated.

Before the IND becomes active, the clinical protocol will also need to be approved by the relevant Institutional Review Boards, or IRBs, and Institutional Biosafety Committees, or IBCs, which are the cornerstone of institutional oversight of recombinant DNA clinical research.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.

All gene therapy experiments and clinical trials are also subject to review and oversight by an IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.

There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Sponsors of applicable clinical trials of FDA-regulated products, including biologics, are required to register and disclose certain clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved.

Human clinical trials are typically conducted in three sequential phases. However, these phases may overlap or be combined:

Post-approval clinical trials, sometimes referred to as “Phase 4” clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. The FDA recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a 15-year period following exposure to the investigational product, including a minimum of five years of annual examinations followed by ten years of annual queries, either in person or by questionnaire, of study subjects.

During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA, IRB, and the investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a significant risk for human patients, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life- threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information.

Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research patients are being exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated with unexpected serious harm to patients.

Human immunotherapy products and gene therapy products are a new category of therapeutics. Because this is a relatively new and expanding area of novel therapeutic interventions, there can be no assurance as to the length of the trial period, the number of patients the FDA will require to be enrolled in the trials in order to establish the safety, efficacy, purity and potency of immunotherapy products, or that the data generated in these trials will be acceptable to the FDA to support marketing approval.

Concurrently with clinical trials, companies usually complete additional animal studies and must also develop additional information about the biological and physical characteristics of the biological product as well as finalize a process for production and testing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined.

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The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop and validate methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.

U.S. Review and Approval Processes for Biological Product Candidates

After the completion of clinical trials, non-clinical and manufacturing activities of a biological product candidate, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must include results of product development, laboratory and animal studies, human trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. The approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual product fee for biological products and an annual establishment fee on facilities used to manufacture prescription biological products. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP regulations to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product candidate. A REMS may be imposed to ensure safe use of the drug, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required.

Before approving a BLA, the FDA will inspect the facilities at which the product candidate, the associated vector and other key raw or starting materials are manufactured. The FDA will not approve the product candidate unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. For cell based immunotherapy products, the FDA also will not approve the product if the manufacturer is not in compliance with the current good tissue practice, or GTP requirements, to the extent applicable. These requirements are set out in FDA regulations and guidance documents and govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues, and cellular and tissue based products, or HCT/Ps, which are human cells or tissue intended for use in implantation, transplantation, infusion, or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing. Additionally, before approving a BLA, the FDA may inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements. To assure cGMP, GTP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.

Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. If the agency decides not to approve the BLA in its submitted form, the FDA will issue a complete response letter that describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product candidate receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product.

Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, or additional studies like safety studies, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.

In addition, unless a waiver is granted, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The Food and Drug Administration Safety and Innovation Act, or FDASIA, requires that a sponsor who is planning to submit a marketing application for a drug or biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within sixty days after an end-of-Phase 2 or an end-of-Phase 1 meeting or as may be agreed between the sponsor and FDA.

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The initial PSP must include, among other things, an outline of the pediatric study or studies that the sponsor plans to conduct, including to the extent practicable study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, and/or other clinical development programs. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any product for an indication for which orphan designation has been granted. However, if only one indication for a product has orphan designation, a pediatric assessment may still be required for any applications to market that same product for the non-orphan indications.

One of the performance goals agreed to by the FDA under the PDUFA is to review 90% of standard BLAs in 10 months and 90% of priority BLAs in six months, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.

Orphan Drug Designation

Under the Orphan Drug Act, a sponsor may request and the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and making available in the United States drug or biologic for this type of disease or condition will be recovered from sales in the United States for that product. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic and trade name, if any, of the drug or biologic and the rare disease or condition for which orphan-drug designation was granted are disclosed publicly by the FDA. While the orphan drug designation affords the holder certain incentives in terms of tax credits, user fee waiver, eligibility for orphan drug exclusivity, and financial incentives, the orphan drug designation does not convey any advantage during, or shorten the duration of, the regulatory review or approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, FDA may grant the product orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority of the subsequent product to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.

A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Orphan exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same drug or biologic for the same use as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

The criteria for designating an “orphan medicinal product” in the EU are similar to those in the United States. Such designation can be requested in the case of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition and either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would unlikely generate sufficient return in the EU to justify the necessary investment. Moreover, in order to obtain orphan designation it is necessary to demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition. Orphan designation is lost in the EU if it is established that the product no longer meets the orphan criteria before market authorization is granted.

In the EU, orphan medicinal products are eligible for financial incentives as well as specific regulatory assistance and scientific advice. Products receiving orphan status in the EU can receive ten years of market exclusivity, during which time no similar medicinal product for the same indication may be placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the EU for pediatric studies. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.

However, the 10-year market exclusivity may be reduced to six years in certain circumstances, including for example if, at the end of the fifth year, it is established that the product is sufficiently profitable not to justify maintenance of market exclusivity.

There can be no assurance that we will receive orphan drug designation for any product candidates in the United States, in the EU or in any other market. If we receive orphan drug designation, there can be no assurance that we will receive orphan drug exclusivity for any product candidate in United States, in the EU or in any other market. Additionally, there can be no assurance that orphan exclusivity from a competitor could not block the approval of one of our products for a certain period of time, in the United States, in the EU or in any other market.

Expedited Development and Review Programs

The FDA has a Fast Track program that is intended to facilitate the development, and expedite the process for reviewing new drugs and biological products that meet certain criteria. Specifically, new products are eligible for Fast Track designation if they are intended to treat a serious or life- threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as a Fast Track product candidate at any time during the clinical development of the product candidate. Under the Fast Track program, the FDA may consider the review of sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.

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Any product candidate for a serious condition, submitted to the FDA for approval, including a product with a Fast Track designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product candidate is eligible for priority review if it has the potential to treat a serious condition and, if approved, would provide safe and effective therapy where no satisfactory alternative therapy exists or is a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new product candidate designated for priority review in an effort to facilitate the review, and aims to review such applications within six months as opposed to ten months for standard review. Additionally, a product candidate may be eligible for accelerated approval. Product candidates studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval which means that they may be approved on the basis of adequate and well-controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on the basis of an effect on a clinical endpoint other than irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug or biological product candidate receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Track designation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.

Breakthrough Therapy / Regenerative Medicine Advanced Therapy Designation

Under the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, the FDA established a Breakthrough Therapy Designation which is intended to expedite the development and review of products that treat serious or life-threatening conditions. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life- threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the features of Fast Track designation, as well as more intensive FDA interaction and guidance. The Breakthrough Therapy Designation is a distinct status from both accelerated approval and priority review, but these can also be granted to the same product candidate if the relevant criteria are met.

The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy. All requests for breakthrough therapy designation will be reviewed within 60 days of receipt, and FDA will either grant or deny the request.

In addition, as described in Section 3033 of the 21st Century Cures Act, signed into law in December 2016, a drug is eligible for Regenerative Medicine Advanced Therapy, or RMAT, designation if:

The RMAT designation carries all of benefits of Breakthrough and Fast Track therapy designations, including: intensive interaction with FDA on an efficient drug development program beginning as early as Phase 1, organizational commitment involving senior FDA personnel, and rolling BLA review. RMAT designees are also eligible for accelerated approval and priority review if relevant criteria are met.

Where applicable, we plan to request Fast Track and/or Breakthrough Therapy Designation for our product candidates. Even if we receive one of these designations for our product candidates, the FDA may later decide that our product candidates no longer meet the conditions for qualification. In addition, these designations may not provide us with a material commercial advantage.

Post-Approval Requirements

Maintaining compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time and financial resources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to cGMP and pharmacovigilance requirements as well as post marketing commitments. Any products for which we receive FDA approval will be subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved uses (known as off-label use), limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available products for off-label use that they deem to be appropriate in their professional medical judgment, manufacturers may not market or promote such off-label uses.

Other post-approval requirements applicable to biological products include reporting of cGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements. After a BLA is approved, the product may also be subject to official lot release. In this case, as part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products before releasing the lots for distribution by the manufacturer.

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In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products.

In addition, we and any third-party manufacturers of our products will be required to comply with applicable requirements in the cGMP regulations, including quality control and quality assurance and maintenance of records and documentation. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic announced and unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. The FDA also may require post-marketing studies, known as Phase 4 studies, and surveillance to monitor the effects of an approved product. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly regulated, and depending on the significance of the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and claims, are also subject to further FDA review and approval.

Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.

U.S. Patent Term Restoration and Pediatric Marketing Exclusivity

The Biologics Price Competition and Innovation Act, or BPCIA, amended the PHSA to authorize the FDA to approve similar versions of innovative biologics, commonly known as biosimilars. A competitor seeking approval of a biosimilar must file an application to establish its molecule as highly similar to an approved innovator biologic, among other requirements. The BPCIA, however, bars the FDA from approving biosimilar applications for 12 years after an innovator biological product receives initial marketing approval. This 12-year period of data exclusivity may be extended by six months, for a total of 12.5 years, if the FDA requests that the innovator company conduct pediatric clinical investigations of the product.

The first biological product submitted under the abbreviated approval pathway that is approved as interchangeable with the reference product has exclusivity against other biologics submitting applications under the abbreviated approval pathway for the lesser of (1) one year after the first commercial marketing, (2) 18 months after approval if there is no legal challenge, (3) 18 months after the resolution in the applicant’s favor of a lawsuit challenging the reference biologic’s patents if an application has been submitted, or (4) 42 months after the application has been approved if a lawsuit is ongoing within the 42-month period.

Depending upon the timing, duration and specifics of the FDA approval of the use of our product candidates, some of our U.S. patents, if granted, may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years, as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to an approved product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future as applicable, we may apply for restoration of patent term for one of our currently owned or licensed patents seeking restored patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.

In addition to the forms of exclusivity previously described, pediatric exclusivity is an available market exclusivity in the United States. Pediatric exclusivity, if granted by the FDA, adds six months to existing periods of exclusivity and patent terms. This six-month exclusivity, which attaches to and runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.

Other U.S. Healthcare Laws and Compliance Requirements

In the United States, our activities are subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice, or DOJ, and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy provisions of the Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended.

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

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Our practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor.

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

The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

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

HIPAA created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

We may also be subject to data privacy and security regulations by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Additionally, the federal Physician Payments Sunshine Act, enacted as part of the ACA, and its implementing regulations, require certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.

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

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

Coverage, Pricing and Reimbursement

Sales of our products will depend, in part, on the extent to which our products, if approved, will be covered and reimbursed by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for medical products and services. The process for determining whether a third-party payor will provide coverage for a drug product typically is separate from the process for setting the price of a drug product or for establishing the reimbursement rate that a payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the approved drugs for a particular indication.

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In order to secure coverage and reimbursement for any product candidate that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product candidate, in addition to the costs required to obtain FDA or other comparable regulatory approvals. Whether or not we conduct such studies, our product candidates may not be considered medically necessary or cost-effective. A third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Even if coverage is obtained from third party payors, reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development.

The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Similar policies and laws have been adopted by many EU Member States. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our product candidate or a decision by a third-party payor to not cover our product candidate could reduce physician usage of the product candidate and have a material adverse effect on our sales, results of operations and financial condition.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its Member States to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A Member State may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. For example, in France, effective access to the market assumes that our future products will be approved for use by the hospital (through a ministerial order) and reimbursed by social security. The price of medications is negotiated with the Economic Committee for Health Products, or CEPS. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our product candidates. Historically, products launched in the EU do not follow price structures of the United States and generally tend to be significantly lower.

Healthcare Reform and Subsequent Legislation

In March 2010, President Obama signed the ACA, which continues to have the potential to substantially change healthcare financing and delivery by both governmental and private insurers, and significantly impact the pharmaceutical and biotechnology industry. The ACA has and will continue to impact existing government healthcare programs and will result in the development of new programs.

Among the ACA’s provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the following:

The ACA is intended to exert additional downward pressure on coverage and the price that we receive for any approved product in the United States, and could seriously harm our business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates, if approved. In addition, it is possible that there will be further legislation or regulation that could change parts of the ACA that affect public and private healthcare coverage. Those changes could harm our business, financial condition, and results of operations.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of 2% per fiscal year, which started in April 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

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Congress may also consider subsequent legislation to replace elements of the ACA that are repealed or to enhance the coverage and operation of the ACA. As a result, the full impact of the ACA, any law repealing and/or replacing elements of it, and the political uncertainty surrounding any repeal or replacement legislation remains unclear.

These initiatives recently culminated in the enactment of the Inflation Reduction Act, or IRA, in August 2022, which, among other things, will allow the U.S. Department of Health and Human Services, or HHS, to negotiate the selling price of certain biologics that CMS reimburses under Medicare Part B and Part D, although this will only apply to high-expenditure single-source biologics that have been approved for at least 11 years. The negotiated prices, which will first become effective in 2026, will be capped at a statutory ceiling price representing a significant discount from average prices to wholesalers and direct purchasers. Also, beginning in October 2023, the law will penalize manufacturers that increase prices of Medicare Part B and Part D drugs at a rate greater than the rate of inflation. In addition, the law eliminates the “donut hole” under Medicare Part D beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program. The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. For that and other reasons, it is currently unclear how the IRA will be effectuated, and while the impact of the IRA on the biotechnology industry cannot yet be fully determined, it has the potential to be significant.

Additional Regulation

In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.

European Union Drug Development

Similarly to the U.S., pharmaceutical product development in the EU typically involves preclinical laboratory and animal tests, the submission to the applicable regulatory agency of a Clinical Trial Application (CTA), as well as appropriate filings with Ethics Committees, before clinical testing may commence.

Analogously as to the U.S., clinical trials that are deployed to support marketing authorization application are typically conducted in three sequential phases, but the phases may overlap or be combined.

On January 31, 2022, Regulation EU No 536/2014 (CTR) became fully applicable in the EU. The CTR established a centralized application procedure where one of the National Competent Authorities (NCA) of the EU Member States where the trial is to be deployed takes the lead in reviewing certain aspects of the application, while the other NCAs have a lesser involvement than they had under the previous regime established by Directive 2001/20/EC (CTD). The CTD indeed introduced the first set of harmonized rules on clinical trials in the EU but resulted in a patchwork of different national regimes. The CTR was adopted with a view to introducing a more uniform set of the rules across the EU for the authorization of clinical trials. Such authorization still involves NCAs and Ethics Committees of each of the EU Member States where the trial is to be conducted. However, the relevant procedures have now been streamlined with a view to facilitating a swifter and more seamless authorization and deployment of multi-center trials occurring in more than one EU Member State. More in particular, the CTR allows sponsors to rely on one single submission for CTAs regardless of the number of EU Member States where the trial takes place and based on a single harmonized application.

Furthermore, under the CTR, deadlines for regulatory approvals are shortened with a view to accelerating the authorization process. The CTR also established an EU Portal which is designed to act as a single entry point for submission of data and information relating to clinical trials. The CTD will continue to apply in parallel to the CTR until January 30, 2025 to certain trials only. From January 31, 2025 onwards, only the CTR will apply, and all ongoing clinical trials that are under the regime of the CTD and expected to be ongoing after January 30, 2025 need to be transitioned to the legal framework of the CTR by means of the Clinical Trials Information System (CTIS).

Under the CTR, NCAs may order the temporary halt or permanent discontinuation of a clinical trial at any time or impose other sanctions if they believe that the clinical trial is not being conducted in accordance with applicable requirements or presents an unacceptable risk to the clinical trial patients. An Ethics Committee may also require the clinical trial to be halted, either temporarily or permanently, for failure to comply with the applicable requirements, or may impose other conditions.

After completion of the required clinical testing, as in the United States, an application for a marketing authorization is prepared and submitted to the EMA (or NCA in case of a purely national authorization procedure).

EU Marketing Authorization

In the EU, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. The same rules also apply in the EEA Member States (Norway, Iceland and Liechtenstein). There are two types of marketing authorizations, namely: (i) the Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use (CHMP) of the EMA, and which is valid throughout the entire territory of the EEA; and

(ii) “national MAs,” which are issued by the competent NCAs and only cover their respective national territory.

The Centralized Procedure is mandatory for certain types of products, namely: medicinal products derived from certain biotechnology processes, orphan medicinal products, medicinal products containing a new active substance indicated for the treatment of HIV/AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune diseases and other autoimmune dysfunctions and viral diseases. The Centralized Procedure is also mandatory for ATMPs, which comprise gene therapy, somatic cell therapy and tissue engineered products. In this regard, on May 28, 2014, the EMA issued a recommendation that Cellectis’ UCART19 be considered a gene therapy product under Regulation (EC) No 1394/2007 on ATMPs.

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The Centralized Procedure is optional for other products containing a new active substance not yet authorized in the EEA, or for products that are deemed to constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU. Under the Centralized Procedure, the CHMP serves as the scientific committee that renders opinions about the safety, efficacy and quality of human products on behalf of the EMA. The CHMP is composed of experts nominated by each Member State’s national drug authority, with one of them appointed to act as Rapporteur for the co-ordination of the evaluation with the possible assistance of a further member of the Committee acting as a Co-Rapporteur. The CHMP has 210 days to adopt an opinion as to whether a MA should be granted. The process usually takes longer as additional information is requested, which triggers clock- stops in the procedural timelines. Based on the CHMP’s opinion the European Commission will adopt a decision on the granting of the marketing authorization. In case of ATMPs, the CHMP must consult with the CAT on any scientific assessment necessary to draw up its scientific opinion.

Under the above-described procedures, before granting the MA, the relevant authorities make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

EU Adaptive Pathways

The EMA has an adaptive pathways approach which allows for early and progressive patient access to a medicine in cases of high medical need. To achieve this goal, several approaches are envisaged including for example identifying small populations with severe disease where a medicine’s benefit-risk balance could be favorable or making more use of real-world data where appropriate to support clinical trial data. The adaptive pathways concept applies primarily to treatments in areas of high medical need where it is difficult to collect data via traditional routes and where large clinical trials would unnecessarily expose patients who are unlikely to benefit from the medicine. The approach builds on regulatory processes already in place within the existing EU legal framework. These include: scientific advice; compassionate use; the conditional MA; patient registries and other pharmacovigilance tools that allow collection of real-life data and development of a risk-management plan for each medicine.

A conditional MA may be granted prior to the submission of comprehensive clinical data if the benefit of the immediate availability on the market of the product is deemed to outweigh the risk inherent in the fact that additional data are still required. In emergency situations, a MA for such medicinal products may be granted also where comprehensive pre-clinical or pharmaceutical data have not been provided. Under this procedure a MA can be granted as soon as sufficient data becomes available to demonstrate that the drug’s benefits outweigh its risks, with safeguards and controls in place post-authorisation. This procedure can also be combined with a rolling review of data during the development of a promising medicine, to further expedite its evaluation. Conditional MAs are typically subject to obligations that are reviewed annually. These include the obligation to complete ongoing studies, or to conduct new studies, with a view to confirming that the risk-benefit balance is favourable. Conditional MAs are valid for one year, renewable.

EMA PRIME Scheme

The EMA launched its PRIME regulatory initiative to enhance support for the development of therapies that target an unmet medical need. The initiative focuses on drugs that may offer a major therapeutic advantage over existing treatments, or benefit patients with no treatment options. These therapies are considered priority medicines within the EU. Through PRIME, the EMA offers early, proactive and enhanced support to drug developers to optimize the generation of robust data on a therapy’s benefits and risks and enable accelerated assessment of drug applications.

Post-approval Requirements in the EU

Following approval, the EMA, or the NCAs, as applicable, may impose certain post-approval requirements related to a product such obligation to perform post-authorization efficacy studies (PAES) or post-authorization safety studies (PASS) imposed as conditions to the MA, or other Risk Minimization Measures (RMMs), such as educational programs or controlled access programs, which may sometimes vary from one EU Member State to another. Moreover, if a company obtains original approval for a product via an accelerated approval pathway, the company will be typically required to conduct a post-marketing confirmatory trial to verify and describe the clinical benefit in support of full approval. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of the MA for a product.

Moreover, NCAs closely regulate the marketing and promotion of approved products, including standards and regulations for direct-to-consumer advertising (which is prohibited in the EU for prescription products), off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Furthermore, approved products may be marketed only for the approved indications and in accordance with the provisions of the approved label. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, may require a submission to and approval by the European Commission, or by the NCA, as applicable.

In addition, adverse event reporting and submission of periodic reports is required following marketing approval. Either the European Commission, or NCAs, as applicable, may also require post-marketing testing, known as Phase 4 testing, a risk evaluation and mitigation strategy, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as well as the manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug and biological product manufacturers and certain of their subcontractors are subject to periodic unannounced inspections during which the inspectors audit manufacturing facilities to assess compliance with cGMPs. MAs may be suspended or withdrawn if, for example, the MA holder fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered. Moreover, stringent rules have been introduced in the EU to fight medicine falsifications and to ensure that the trade in medicines is subject to rigorous controls.

Furthermore, EU harmonized rules prohibit gifts, pecuniary advantages or benefits in kind to Health Care Professionals (HCPs) unless they are inexpensive and relevant to the practice of medicine or pharmacy. Similarly, strict rules apply to hospitality at sales promotion events. Based on these rules, a body of industry guidelines and sometimes national laws in force in individual EU Member States has been introduced to fight improper payments or other transfers of value to HCPs, and in general inducements that may have a broadly promotional character. Historically, pharmaceutical companies have been the target of anti-corruption and similar investigations, as well as of wide media attention, sometimes resulting in significant penalties, image and other costs for such companies.

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Finally, very stringent data privacy requirements apply in the EU. In particular, Regulation (EU) 2016/679 (GDPR) requires that personal data only be collected for specified, explicit and legal purposes, and the data may then only be processed in a manner consistent with those purposes. Personal data collected and processed must be adequate, relevant and not excessive in relation to the purposes for which it is collected and processed, it must be held securely, not transferred outside of the EEA (unless certain steps are taken to ensure an adequate level of protection), and must not be retained for longer than necessary for the purposes for which it was collected. The GDPR also requires companies processing personal data to implement adequate technical measures in order to ensure the most appropriate level of security which may vary depending on different factors such as the categories of processed personal data, the state of the art, the costs of implementation and the nature, scope, context and purposes of processing as well as the risk of varying likelihood and severity for the rights and freedoms of natural persons. In addition, the GDPR requires companies processing personal data to take certain organizational steps to ensure that they have adequate records, policies, security, training and governance frameworks in place to ensure the protection of data subject rights, including as required to respond to complaints and requests from data subjects. For instance, the GDPR requires companies to make detailed disclosures to data subjects, requires disclosure of the legal basis on which personal data is processed, provides for conditions under which a valid consent for processing can be obtained, requires the appointment of a data protection officer where sensitive personal data (e.g., health data) is processed on a large scale, imposes mandatory data breach notification throughout the EEA and imposes additional obligations when contracting with service providers or partners. In addition, to the extent a company processes, controls or otherwise uses “special category” of personal data (including patients’ health or medical information, genetic information and biometric information), more stringent rules apply, further limiting the circumstances and the manner in which a company is legally permitted to process that data.

Data Exclusivity And Market Exclusivity in the EU

In the EU, new products authorized for marketing (i.e., reference products) qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic applicant from commercializing its product in the EU until ten years have elapsed from the initial authorization of the reference product in the EU. The ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

Moreover, products receiving orphan designation in the EU can receive ten years of market exclusivity, during which time no similar medicinal product for the same indication may be placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the EU for pediatric studies. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.

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

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

EU Supplementary Protection Certificates

In the EU, Supplementary Protection Certificates (SCPs) are available to extend a patent term for up to five years to compensate patent protection lost during regulatory review. Although all EU Member States must provide SPCs, SPCs must currently be applied for and granted on a country-by-country basis. On April 27, 2023, the European Commission issued proposals for a new EU regime for a unitary SPC complementing the unitary patent. If adopted, these new rules could introduce a centralized procedure for the grant of national SPCs, as well as a centralized examination procedure for the grant of a new unitary SPC.

Additional Protection for Pediatric Indications in the EU

In the EU, companies developing a new medicinal product must agree to a PIP with the EMA and must conduct pediatric clinical trials in accordance with that PIP, unless a deferral or waiver is granted by the EMA on request by the applicant (e.g., because the relevant disease or condition occurs only in adults). The PIP requirement also applies when a MA holder intends to add a new indication, pharmaceutical form or route of administration for a medicinal product that has already been authorized. The MA application for the product must include the results of pediatric clinical trials conducted in accordance with the PIP, unless a waiver applies, or a deferral has been granted, in which case the pediatric clinical trials must be completed at a later date. Once all the studies and measures agreed have been conducted in accordance with the PIP, products are eligible for a six month extension of the protection under a supplementary protection certificate – or “SPC”—(if any is in effect at the time of approval) or, in the case of orphan medicinal products, a two year extension of the orphan market exclusivity. This pediatric reward is granted subject to specific conditions. These conditions include that the applicant demonstrates having complied with all the measures contained in the PIP, that the summary of product characteristics, and if appropriate the package leaflet, reflects the results of studies conducted in compliance with such PIP, and that the product is authorized in all EU Member States. The rewards for conducting studies in the pediatric population can be granted irrespective of the fact that the information generated in compliance with the agreed PIP fails to lead to the authorization of a pediatric indication.

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EU Pharmaceutical Reform

 

On April 26, 2023, the European Commission issued its proposal for a revision of several legislative instruments related to medicinal products, including orphan and pediatric products. Amongst other things, the proposal aims to revise, and potentially reduce, the duration of the data and market exclusivity, revise the marketing authorization procedure, broaden the possible post-authorization conditions, extend the reasons for a refusal of a marketing authorization, introduce more restrictive PIP waivers, increase the possible PIP obligations, etc. The proposed revisions must be adopted by the European Parliament and European Council before they can become law. The proposals may be substantially revised before adoption, and there is no guarantee that they will ultimately be adopted.

Other Regulatory Matters

French Pharmaceutical Company Status

To date, we do not have the status of pharmaceutical establishment, and therefore, cannot either manufacture the product candidates we develop or directly consider their marketing. Obtaining the pharmaceutical establishment license, either as distributor, operator, importer or as manufacturer, requires the submission of a request file specific to each of the mentioned qualifications with the Agence nationale de sécurité du médicament et des produits de santé (ANSM), which only grants it after review of this file and evaluation, usually after verification that the company has adequate premises, the necessary personnel and an adapted structure with satisfactory procedures for carrying out the proposed pharmaceutical activities.

We currently entrust CMOs and Cellectis Biologics Inc., for which the status pharmaceutical establishment is not yet required, with the manufacturing of clinical batches for certain product candidates. Import and certification into the European Union will continue to be done via CMOs.

Legal Proceedings

From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. Other than as set forth in "Item 8.A—Financial Information—Consolidated Statements and Other Financial Information—Legal Proceedings", we are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Cellectis, or Cellectis S.A., is a société anonyme, or S.A., organized under the laws of the French Republic.

Group Structure as of December 31, 2023

 

Subsidiary Name	Jurisdiction of Incorporation	Ownership & Voting Interest Held By Cellectis S.A.
Cellectis, Inc.	Delaware	100% (held directly)
Cellectis Biologics, Inc.	Delaware	100% (held indirectly through Cellectis, Inc.)

 

See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Transactions with subsidiaries

Cellectis S.A. leases a 5,846 square-meter facility in Paris for administrative and research and development activities. The lease commenced on April 1, 2011 and has a term that expires on November 30, 2028. This property includes, our approximately 14,000 sq. ft. in-house manufacturing facility, which is dedicated to the production of certain raw and starting material for clinical supply, with the potential to supply commercial raw and starting material.

Cellectis, Inc. leases a 24,375 square feet facility in New York, New York for administrative and research and development activities. The lease, which commenced on March 30, 2015, has a term that expires on March 1, 2031 (128 months from July 1st, 2020). In June 2022, a partial sublease of Cellectis’ New York commercial facility was signed with Sanavia for a total square feet of 3,562.

Cellectis Biologics, Inc. leases an 82,783 square feet facility in Raleigh, North Carolina. The lease, which commenced in April 2019 has a term that expires on December 31, 2034. We completed construction of our manufacturing facility at this property in 2021, which is dedicated to the production of clinical and commercial UCART products.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS ITEM 5.

Not applicable.

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OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following Operating and Financial Review and Prospects should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this Annual Report. In addition to historical consolidated financial information, this discussion also contains forward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors” and elsewhere in this Annual Report.

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements”.

Financial Overview

The following selected statements of consolidated operations data for the years ended December 31, 2021, 2022 and 2023 and the selected statement of consolidated financial position data as of December 31, 2022 and 2023 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report. Our audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

The audited consolidated financial statements for the years, and as of, December 31, 2021, 2022 and 2023 are presented in U.S. dollars, which differs from the functional currency of Cellectis S.A., which is the Euro.

The following selected consolidated financial data for the periods and as of the dates indicated are qualified by reference to and should be read in conjunction with our consolidated financial statements and related notes beginning on page F-1 of this Annual Report.

Our historical results for any prior period do not necessarily indicate our results to be expected for any future period.

 

		For the year ended December 31,
		2021						2022						2023
		$ in thousands
Revenues and other income			38,597						25,725						9,193
Operating expenses
Cost of revenue			(1,844	)					(1,772	)					(737	)
Research and development expenses			(117,840	)					(97,501	)					(87,646	)
Selling, general and administrative expenses			(22,882	)					(17,494	)					(16,812	)
Other operating income and expenses			488						1,377						(1,300	)
Operating income (loss)			(103,481	)					(89,666	)					(97,302	)
Financial gain (loss)			6,731			-			(8,935	)		-			(19,163	)
Income tax			-						(87	)					(371	)
Income (loss) from continuing operations			(96,749	)					(98,688	)					(116,835	)
Income (loss) from discontinued operations			(28,358	)					(15,345	)					8,392
Net income (loss)			(125,107	)					(114,034	)					(108,443	)
Attributable to shareholders of Cellectis			(114,197	)					(106,139	)					(101,059	)
Attributable to non-controlling interests			(10,910	)					(7,894	)					(7,384	)
Earnings per share attributable to shareholders of Cellectis (1)
Basic and diluted (2)			(2.55	)					(2.33	)					(1.77	)
Number of shares used for computing
Basic and diluted (1)			44,820,279						45,547,359						57,012,815
Other operating data
Adjusted Net Income (Loss) attributable to shareholders of Cellectis (3)			(101,700	)					(98,069	)					(93,973	)

 

 

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Statement of Consolidated Financial Position Data

 

		As of December 31,
		2021				2022				2023
		$ in thousands
Current financial assets and Cash and cash equivalents			186,135				97,697				203,815
Other assets			195,941				163,519				130,456
Total assets			382,076				261,216				334,270
Shareholders' equity			236,474				125,941				84,695
Non current liabilities			96,254				72,279				94,431
Current liabilities			49,348				62,996				155,144
Total shareholders' equity and liabilities			382,076				261,216				334,270

 

 

Reconciliation of Adjusted Net Income (Loss) attributable to shareholders of Cellectis to Net Income (Loss) attributable to shareholders of Cellectis

 

		For the year ended December 31,
		2021				2022				2023
		$ in thousands
Net Income (Loss) attributable to shareholders of Cellectis			(114,197	)			(106,139	)			(101,059	)
Adjustment of non-cash stock-based compensation expense from continued operations:
Research and development expenses			9,381				4,098				3,952
Selling, general and administrative expenses			2,113				1,945				1,281
Total non-cash stock-based compensation expense from continued operations			11,493				6,043				5,233
Adjustment of non-cash stock-based compensation expense from discontinued operations			1,625				4,132				3,859
Non-cash stock-based compensation expense attributable to non controlling interests			(621	)			(2,105	)			(2,006	)
Adjusted Net Income (Loss) attributable to shareholders of Cellectis **			(101,700	)			(98,069	)			(93,973	)

 

** Non-IFRS financial measure. See "Note Regarding Use of Non-IFRS Financial Measures" for important information.

Overview

We are a clinical stage biotechnological company, employing our core proprietary technologies to develop products based on gene-editing with a portfolio of allogeneic UCART product candidates in the field of immuno-oncology, gene-edited hematopoietic stem and progenitor cells (“HSPC”) product candidates in other therapeutic indications.

Our UCART product candidates, based on gene-edited T-cells that express chimeric antigen receptors, or CARs, seek to harness the power of the immune system to target and eradicate cancers. We believe that CAR-based immunotherapy is one of the most promising areas of cancer research, representing a new paradigm for cancer treatment. We are designing next-generation immunotherapies that are based on gene-edited CAR T-cells. Our gene-editing technologies allow us to create allogeneic CAR T-cells, meaning they are derived from healthy donors rather than the patients themselves. We believe that the allogeneic production of CAR T-cells will allow us to develop cost-effective, “off-the-shelf” products that are capable of being stored and distributed worldwide. Our gene-editing expertise also enables us to develop product candidates that feature additional safety and efficacy attributes, including control properties designed to prevent them from attacking healthy tissues, to enable them to tolerate standard oncology treatments, and to equip them to resist mechanisms that inhibit immune- system activity.

Together with our focus on immuno-oncology, we are using, through our .HEAL platform, our gene-editing technologies to develop HSC product candidates in genetic diseases. .HEAL is a new gene editing platform developed by Cellectis that leverages the power of TALEN® technology, to allow highly efficient gene inactivation, insertion and correction in HSPCs.

As from June 1, 2023 and the deconsolidation of Calyxt, we view our operations and manage our business in a single operating and reportable segment corresponding to the Therapeutics segment. Our Therapeutics segment is focused on the development of products in the field of immuno-oncology and monogenic diseases. Our former Plants segment is presented as assets held for sale as of December 31, 2022 and discontinued operations for the year-end periods ended December 31, 2023 and 2022. All tables referring to the year-end period ended December 31, 2023 present Calyxt’s results over a five-month period from January 1, 2023 to May 31, 2023.

Since our inception in early 2000, we have devoted substantially all of our financial resources to research and development efforts. Our current research and development focuses primarily on our CAR T-cell immunotherapy and HSPC product candidates, including conducting the pre-clinical activities, and preparing to conduct clinical studies of our UCART product candidates, providing general and administrative support for these operations and protecting our intellectual property.

We do not have any therapeutics products approved for sale and have not generated any revenues from therapeutic product sales.

As of December 31, 2023, we were eligible to receive potential development and commercial milestone payments pursuant to (i) the License, Development and Commercialization Agreement dated March 6, 2019 between Servier and Cellectis, as amended on March 4, 2020 (the “Servier License Agreement”) of up to $410 million and (ii) the License Agreement dated March 8, 2019 between Allogene and Cellectis (the “Allogene License Agreement”) of up to $2.8 billion.

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Under the Allogene License Agreement, we are eligible to receive tiered royalties on annual worldwide net sales of any products that are commercialized by Allogene that contain or incorporate, are made using or are claimed or covered by, our intellectual property licensed to Allogene under the Allogene License Agreement at rates in the high single-digit percentages. Under the Servier License Agreement, we are eligible to receive flat low double-digit royalties based on annual net sales of commercialized products as well as a low double-digit royalty on certain development milestone payments received by Servier.

 

As of December 31, 2023, we were eligible to receive payments pursuant to the AZ JRCA of an option exercise fee and development, regulatory and sales-related milestone payments, ranging from $70 million up to $220 million, per each of the 10 candidate products covered by the AZ JRCA, plus tiered royalties, which may range from mid-single to low-double digits, based on the sale of Licensed Products.

For the twelve-month period ended December 31, 2023, we mainly derived our Therapeutics revenues from the research collaboration and exclusive license agreement with Iovance, and from other license agreements for the use of our TALEN technology.

On September 15, 2022, Servier sent to us and Allogene a notice of discontinuation of its involvement in the development of the CD19 Products. See “Risk Factors— Risks Related to Our Reliance on Third Parties—Servier’s discontinuation of its involvement in the development of CD19 Products and related disagreements may have adverse consequences.”

We are currently sponsoring clinical studies with respect to three proprietary Cellectis UCART product candidates at eight sites for the AMELI-01 Study, at sixteen sites for the BALLI-01 Study, and at nine sites for the NatHaLi-01 Study as follow, each as described above under “Item 4. Information on the Company—B. Business Overview—UCART Pipeline.”

For a discussion of our operating capital requirements and funding sources, please see “Liquidity and Capital Resources” below.

Financial Operations Overview

We have incurred net losses in nearly each year since our inception. Substantially all of our net losses resulted from costs incurred in connection with our development programs and from selling, general and administrative expenses associated with our operations. As we continue our intensive research and development programs, we expect to continue to incur significant expenses and expect to incur losses for near-term future periods. We anticipate that such expenses will increase substantially if and as we:

We do not expect to generate material revenues from sales of our therapeutic product candidates unless and until we successfully complete development of, and obtain marketing approval for, one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital prior to completing clinical development of any of our therapeutic product candidates. Until such time that we can generate substantial revenues from sales of our product candidates, if ever, we expect to finance our operating activities through a combination of milestone payments received pursuant to our collaboration and license agreements, equity offerings, debt financings, government or other third-party funding and collaborations, and licensing arrangements. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs or commercialization efforts or grant to other rights to develop or market product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to cease operations, in part or in full.

Our consolidated financial statements for 2021, 2022 and 2023 have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

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Financial Operations Overview

Revenues and Other Income

Collaboration agreements and licenses

We derive substantially all of our therapeutics revenues from milestone payments and royalties on licensed technologies. For the year ended December 31, 2023, substantially all of our revenue was derived from the research collaboration and exclusive license agreement with Iovance, and from other license agreements for the use of our TALEN technology

At the date of the Annual Report, no revenues were recognized under the AZ JRCA.

Upfront payments for research and development programs are deferred as a contract liability and recognized when the performance obligation is satisfied, as the customer receives the benefits of the services. When a specific research and development program is put on hold, as agreed by our customer as part of a joint executive committee decision, the revenue recognition continues to be deferred until research and development efforts resume. If the joint decision is to abandon the project, deferred revenue is fully recognized.

The triggering event for a milestone payment may be scientific results achieved by us or another party to the arrangement, regulatory approvals, or the marketing of products developed under the arrangement.

Research and development costs reimbursements are recognized on a time and material basis over the length of the specific research and development project.

Royalties are based on sales of licensed products or technologies. They are recognized in accordance with the terms of the licensing agreement when performance obligation can be determined reliably and there is reasonable assurance that the receivables from outstanding royalties will be collected.

Our ability to generate product revenues and become profitable depends upon our and our collaborators’ ability to successfully develop and commercialize products. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.

Sales of products and services

Revenues on sales of products are recognized once the control over the delivered products is transferred to the customer. Sales include shipping and handling charges if billed to the customer and are reported net of trade promotion and other costs, including estimated allowances for returns, unsalable product and prompt pay discounts. Sales, use, value-added and other excise taxes are not recognized in revenue. Trade promotions are recorded based on estimated participation and performance levels for offered programs at the time of sale. We generally do not allow a right of return.

We also offer research services, which revenue is recognized over time, as the customer receives the benefits of the services.

Other Income

Research Tax Credit

The main research tax credit that we benefit from is the Crédit d’Impôt Recherche, or CIR, which is granted to companies by the French tax authorities in order to encourage them to conduct technical and scientific research. Companies demonstrating that they have research expenditures that meet the required CIR criteria receive a tax credit that may be used for the payment of their income tax due for the fiscal year in which the expenditures were incurred and during the next three fiscal years. Any unused portion of the credit is then refunded by the French treasury (except for specific cases like e.g. if the Company can be qualified as small and medium-sized enterprises (in France the “PME”). Indeed, if a company meets certain criteria in terms of sales, headcount or assets to be considered a small/middle size company, such company can request immediate refund of the remaining tax credit, without application of the three-year period. As from January 2021, Cellectis S.A. no longer meets such criteria.

The expenditures taken into account for the calculation of the CIR only involve research expenses.

The main characteristics of the CIR are the following:

We have concluded that the CIR meets the definition of a government grant as defined in IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, and that the classification as other income within operating loss in our statement of operations is appropriate.

Research tax credit receivables as of December 31, 2023 include the accrual for a French research tax credit related to 2023 for $5.6 million and to previous periods for $15 million.

 

During December 2018, the French Tax Authority initiated an audit related to the 2014, 2015, 2016 and 2017 French research tax credits. In January 2022, the administrative court (tribunal administratif) of Paris confirmed that Cellectis was entitled to receive the amounts related to 2017 and 2018 tax credits. $0.8 million were collected in February 2022. On March 15, 2022, the French tax authorities appealed this decision to the Paris Administrative Court of Appeal (Cour administrative d'appel de Paris) and requested that the decision be reversed. On May 18, 2022, the Company filed its observations in defense. By a decision dated December 13, 2023, the Paris Administrative Court of Appeal overturned the first-instance decision and ordered the reimbursement by the Company of $0.7 million.

Operating Expenses

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Our operating expenses consist primarily of cost of revenue, research and development expenses and selling, general and administrative expenses.

Cost of revenue

Cost of goods sold

Calyxt historically capitalized all grain and seed costs into inventory. Grain and risk management costs, net of the benefit from Calyxt’s seed activity, were capitalized to inventory and relieved to cost of goods sold as the high oleic soybean oil and high oleic soybean meal is sold. Any valuation adjustments to inventory were recognized as incurred. Cost of goods sold also included crush and refining losses that are expensed as incurred since they do not add to the value of the finished products. Since 2022, Calyxt cost of good sold are included in income (loss) from discontinued operations.

Royalty expenses

We have entered into several license agreements to obtain access to technology that we use in our product development efforts. Royalty expenses consist of in-licensing costs, which reflect royalties we pay to use rights granted to us. Depending on the contractual provisions, royalty expenses are either proportional to revenues generated by using the patents or fixed annual royalties or conditioned by milestones.

Research and Development Expenses

We engage in substantial research and development efforts to develop innovative CAR T-cell immunotherapy and agricultural product candidates.

Research and development expenses consist primarily of:

We classify personnel and other costs related to information technology, human resources, business development, legal, intellectual property and general management in research and development expense based on the time that employees spent contributing to research and development activities versus general and administrative activities.

Our research and development efforts are focused on our existing product candidates, (i) UCART123 product candidate evaluated in the AMELI-01 Study since February 2017, (ii) UCART22 product candidate evaluated in the BALLI-01 Study since November 2019, (iii) UCART20x22 product candidate evaluated in the NaThaLi-01 Study since August 2022 and (v) other product candidates which are in the pre-clinical development phases. We use our employee and infrastructure resources across multiple research and development programs directed toward developing our cell-based platform and for identifying and developing product candidates. We manage certain activities such as pre-clinical and clinical research and manufacture of product candidates through our partner institutions or other third-party vendors. Due to the number of ongoing projects and our ability to use resources across several projects, we do not record or maintain information regarding the costs incurred for our research and development programs on a program-specific basis.

Our research and development efforts are central to our business and account for a significant portion of our operating expenses. We expect that our research and development costs will increase in the foreseeable future as we continue to implement our new clinical trials, manufacture pre-commercial clinical trial and pre-clinical study materials, expand our research and development and process development efforts, seek regulatory approvals for our product candidates that successfully complete clinical trials, as well as access and develop additional technologies, and hire additional personnel to support our research and development efforts. This is because product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of development, primarily due to the increased size and duration of later-stage clinical trials.

We cannot determine with certainty the duration and completion costs of our future clinical trials of our therapeutic product candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of such product candidates, or those of our collaborators, that might obtain regulatory approval. We may never succeed in achieving regulatory approval for any therapeutic product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

Selling, General and Administrative Expenses

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Administrative expenses also include facility-related costs and service fees, other professional services and recruiting fees.

We classify personnel and other costs related to information technology, human resources, business development, legal, intellectual property and general management in research and development expense based on the time that employees spent contributing to research and development activities versus general and administrative activities.

We anticipate that our selling, general and administrative expenses will increase in the future as we increase our headcount to support the expected growth in our research and development activities and the potential commercialization of our product candidates. We also expect to continue to incur significant expenses associated with Cellectis S.A. being a public company in the United States, including costs related to audit, legal, regulatory and tax-related services associated with maintaining compliance with U.S. exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs.

Financial Gain (Loss)

Financial gain (loss) mainly consists of interest income related to our savings accounts and bank deposits, exchange gains and losses associated with transactions in foreign currencies and fair value of our financial assets, derivative instruments and interests associated with lease debts and financial liabilities. Significant transactions in foreign currencies are translated into euros at the exchange rates effective at the transaction dates, while the average rate for the previous month is used for non-significant transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into euros using the exchange rate effective at that date. The resulting exchange gains or losses are recorded in the statements of consolidated operations as financial income or expense. Financial gain (loss) reflects the net impact of financial income and financial expenses.

Critical Accounting Policies and Estimates

Some of the accounting methods and policies used in preparing our financial statements under IFRS are based on complex and subjective assessments by our management or on estimates based on past experience and assumptions deemed realistic and reasonable based on the circumstances concerned. The actual value of our assets, liabilities and shareholders’ equity and of our losses could differ from the value derived from these estimates if conditions changed and these changes had an impact on the assumptions adopted. We believe that the most significant management judgments and assumptions in the preparation of our financial statements are named below. For further details, see Notes to our consolidated financial statements.

Revenue is recognized when the Company satisfies a performance obligation by transferring a distinct good or service (or a distinct bundle of goods and or/ services) to a customer, i.e. when the customer obtains control of these goods or services. The Company uses judgement to determine the performance obligations and when they are met.

The amount of the research tax credit for which we are eligible depends on internal and external research and development expenditures. The calculation of eligible expenditures requires management to make judgments and estimates as to whether expenditures qualify as eligible research and development expenditures according to the French tax code (code général des impôts) and the relevant official guidelines, as the amount of tax credit granted is based on our claimed amounts of eligible expenditures.

We do not expect the impact of a potential discrepancy between the management calculation and the actual amount collected to have a material impact on our Consolidated Financial Statements.

We account for share-based compensation in accordance with IFRS 2 Share-based payment.

We use judgement to determine the fair value of share-based awards at the grant date. Fair value is estimated using the Black-Scholes valuation model for stock options valuation. The determination of the fair value using an option-pricing model is affected by assumptions and variables including the expected term, expected volatility, risk-free interest rates and expected dividends.

If any of the assumptions change significantly, share-based compensation for future awards may differ materially compared with the awards granted previously

We use judgement to determine the expected outcome and timing of realization of non-market performance obligations related to free shares awards

A potential discrepancy between the Company’s estimate and the actual realization of the non-market performance conditions could have a material impact on our Consolidated Financial Statements.

A provision is recognized if, as a result of a past event, we have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date.

A potential discrepancy between the management estimate and the actual settlement of a litigation or commitment could have a material impact on our Consolidated Financial Statements.

Financial assets and certain financial liabilities are measured at fair value through profit or loss in accordance with IFRS 9. Fair value is determined in accordance with IFRS 13.

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Financial assets

For certain Level 2 and Level 3 financial instruments, considering the complexity of the valuation model, we decided to engage independent valuation experts to assist us on the valuation of such instruments based on the information shared by the management. An adapted valuation model is used for each instrument according to its characteristics. The selected valuation models include Black-Scholes models for equity payments and credit risk models for cash payments. Depending on the nature of the instrument, the model is enriched to reflect our management's economic and strategic vision.

Financial liabilities

Financial liabilities measured at fair value through profit or loss include the share subscription warrants granted to EIB. Considering the complexity of the valuation model applicable to this instrument, we decided to engage an independent valuation expert to assist us on its valuation. The fair value of the warrants, including related put and call options, has been estimated using a Longstaff Schwartz approach, based on observable data and enriched with assumptions provided by management.

Day-one profit or loss on fair value measurement

Any difference between the transaction price and the initial fair value of financial assets and liabilities is deferred when the fair value includes any non-observable data. This day-one profit or loss is recognized as a gain or loss to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability. If the input remains unobservable throughout the asset’s or liability’s lifetime, the day-one profit or loss is recognized in profit and loss on a straight-line basis over the lifetime of the asset or liability.

Preliminary Note Regarding Calyxt

Our former Plants segment was carried out through Calyxt, in which we held 49.1% of all of its outstanding common stock as of December 31, 2022. On January 13, 2023, Calyxt, Calypso Merger Subsidiary, LLC, a wholly-owned subsidiary of Calyxt, Cibus and certain other parties named therein, entered into the Merger Agreement, pursuant to which, subject to the terms and conditions thereof, Calyxt and Cibus merged in an all-stock transaction.

Accordingly, Calyxt met the “held-for-sale” criteria specified in IFRS 5 and qualifies as a discontinued operation in accordance with IFRS 5 for all periods presented.

The closing of the Merger occurred on May 31, 2023, after the market closed, resulting in the Company holding 2.9% of all outstanding common stock of Cibus (as of June 1, 2023). Pursuant to the closing of the Merger, the Group considered it has lost control on Calyxt which is therefore deconsolidated as from June 1, 2023. Calyxt’s results are included in the Group’s results until May 31, 2023, and continue to be presented as the results of discontinued operations until that date. The former Plants segment corresponded to the activity of Calyxt.

As from June 1, 2023 and the deconsolidation of Calyxt, we view our operations and manage our business in a single operating and reportable segment corresponding to the Therapeutics segment. As of May 31, 2023, immediately prior the consummation of the Merger, we owned a 48.0% equity interest in Calyxt. This former segment was only related to assets held for sale until May 31, 2023. This segment is presented as assets held for sale as of December 31, 2022 and discontinued operations for the year-end periods ended December 31, 2023 and 2022. For more information on our reportable segments, see Note 4.5 to our consolidated financial statements. All tables referring to the year-end period ended December 31, 2023 present Calyxt’s results over a five-month period from January 1, 2023 to May 31, 2023.

Operating Results

The following table sets forth our selected consolidated statement of income data:

 

		For the year ended December 31,
		2021				2022				2023
		$ in thousands
Revenues and other income
Revenues			30,347				19,171				755
Other income			8,250				6,553				8,438
Total revenues and other income			38,597				25,725				9,193
Operating expenses
Cost of revenue			(1,844	)			(1,772	)			(737	)
Research and development expenses			(117,840	)			(97,501	)			(87,646	)
Selling, general and administrative expenses			(22,882	)			(17,494	)			(16,812	)
Other operating income (expenses)			488				1,377				(1,300	)
Total operating expenses			(142,077	)			(115,390	)			(106,495	)
Operating income (loss)			(103,480	)			(89,666	)			(97,302	)
Financial income			13,218				8,880				21,479
Financial expenses			(6,486	)			(17,815	)			(40,642	)
Net Financial gain (loss)			6,731				(8,935	)			(19,163	)
Income tax			-				(87	)			(371	)
Income (loss) from continuing operations			(96,749	)			(98,688	)			(116,835	)
Income (loss) from discontinued operations			(28,358	)			(15,345	)			8,392
Net income (loss)			(125,107	)			(114,034	)			(108,443	)
Attributable to shareholders of Cellectis			(114,197	)			(106,139	)			(101,059	)
Attributable to non-controlling interests			(10,910	)			(7,894	)			(7,384	)

 

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Revenues.

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Collaboration agreements			29,971				18,230				-				-100.0	%
Other revenues			376				941				755				-19.8	%
Revenues			30,347				19,171				755				-96.1	%

 

 

The decrease in revenue between the years ended December 31, 2022 and 2023 mainly reflects (i) the recognition of a $15.8 million milestone from Servier in connection with the first patient dosed in the Allogene ALPHA2 Study in 2022, (ii) the recognition of two milestones under the collaboration and license with Cytovia for an aggregate of $1.5 million in 2022 and (iii) the recognition of $1.0 million related to the change of control of a licensee pursuant to the terms of its license agreement with Cellectis and the amendment to such license agreement in 2022. Recognition of revenues for the year ended December 31, 2023 is mainly related to research collaboration and exclusive license agreement with Iovance.

The decrease in revenues of $11.2 million or 36.8%, between the years ended December 31, 2021 and 2022 primarily reflects a decrease of revenue pursuant to our collaboration agreements. Recognition of revenues for the year ended December 31, 2022 mainly reflects (i) the recognition of a $15.8 million milestone payment from Servier in connection with the first patient dosed in the Allogene ALPHA2 Study, (ii) the recognition of two milestone payments pursuant to Cellectis’ agreement with Cytovia for an aggregate of $1.5 million and (iii) the recognition of $1.0 million related to the change of control of a licensee pursuant to the terms of a license agreement with Cellectis and the amendment to such license agreement (extension of its option term), compared to the amounts recognized in the year ended December 31, 2021 of $20.0 million related to a trade receivable obtained as consideration for a license granted to Cytovia and $10.0 million for Allogene milestones.

 

Other income

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Research tax credit			8,239				6,546				6,582				0.5	%
Other income			11				7				1,856				26473.2	%
Other income			8,250				6,553				8,438				28.8	%

 

 

The increase in other income of $1.9 million between the years ended December 31, 2022 and 2023 is mainly related to the recognition of a $1.4 million income related to the achievement of two milestones under the grant and refundable advance agreement signed with Bpifrance (“BPI”) to partially support a R&D program related to Cellectis’ UCART 20x22. We received on June 19, 2023 a $0.9 million refundable advance payment from BPI. We received on October 6, 2023, an additional payment of $1.9 million refundable advance payment from BPI. This refundable advance is accounted for as a government loan as defined by IAS 20. Because this loan bears a below market interest rate, we measured the fair value of the loan using a market interest rate and recognize as a grant the difference between the cash received and the estimated fair value of the loan. The fair value of the loan on June 19, 2023 was $0.4 million, resulting in a grant of $0.5 million. The fair value of the loan on October 6, 2023 was $1.0 million, resulting in a grant of $0.9 million.We therefore recognized a $1.4 million grant in profit and loss for the year ended December 31, 2023, in addition to the $0.3 million contractual grant, as the subsidized expenses have been incurred and the contractual conditions for obtaining the subsidy have been met.

The decrease of $1.7 million in other income between the years ended December 31, 2021 and 2022 reflects a decrease of $1.7 million in research tax credit, due to lower research and development purchases and external expenses that are eligible for the tax credit during the year ended December 31, 2022 compared to the same period in 2021.

Cost of revenue

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Cost of goods sold			0				0.00				-				-100.0	%
Royalty expenses			(1,844	)			(1,772	)			(737	)			-58.4	%
Cost of revenue			(1,844	)			(1,772	)			(737	)			-58.4	%

 

 

The decrease in cost of revenues between the years ended December 31, 2022 and 2023 is the direct consequence of the decrease in milestones revenues.

The decrease in cost of revenues between the years ended December 31, 2021 and 2022 is immaterial.

Research and development expenses.

 

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		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Personnel expenses			(49,210	)			(42,610	)			(37,158	)			-12.8	%
Purchases, external expenses and other			(68,630	)			(54,890	)			(50,488	)			-8.0	%
Research and development expenses			(117,840	)			(97,501	)			(87,646	)			-10.1	%

 

 

Between the years ended December 31, 2022 and 2023, research and development expenses decreased by $9.9 million. Personnel expenses decreased by $5.5 million from $42.6 million in 2022 to $37.2 million in 2023 primarily due to 2022 and 2023 departures. Purchases, external expenses and other decreased by $4.4 million (from $54.9 million in 2022 to $50.5 million in 2023) mainly relating to lower consumables purchases and subcontracting expenses due to continuing internalization of our manufacturing and quality activities to support our R&D pipeline.

Between the years ended December 31, 2021 and 2022, research and development expenses decreased by $20.4 million. Personnel expenses decreased by $6.6 million from $49.2 million in 2021 to $42.6 million in 2022 primarily due to a $0.9 million decrease in social charges on stock option due to the stock price diminution in 2022 and departures, as well as a $5.3 million decrease in non-cash stock-based compensation expense mainly related to 2022 departures. Purchases, external expenses and other decreased by $13.7 million (from $68.6 million in 2021 to $54.9 million in 2022) mainly explained by less consumables purchases and subcontracting expenses due to continuing internalization of our manufacturing activities to support our R&D pipeline.

 

Selling, general and administrative expenses.

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Personnel expenses			(9,740	)			(7,674	)			(7,381	)			-3.8	%
Purchases, external expenses and other			(13,142	)			(9,820	)			(9,431	)			-4.0	%
Selling, general and administrative expenses			(22,882	)			(17,494	)			(16,812	)			-3.9	%

 

 

Between the years ended December 31, 2022 and 2023, selling, general and administrative expenses decreased by $0.7 million. Personnel expenses decreased by $0.3 million from $7.7 million in 2022 to $7.4 million in 2023 primarily due to a $0.7 million decrease in non-cash stock-based compensation expense mainly consecutive to the probable non achievement of certain performance obligations . Purchases, external expenses and other decreased by $0.4 million (from $9.8 million in 2022 to $9.4 million in 2023) mainly explained by less subcontracting expenses due to reprioritization of activities.

Between the years ended December 31, 2021 and 2022, selling, general and administrative expenses decreased by $5.4 million. Personnel expenses decreased by $2.1 million from $9.7 million in 2021 to $7.7 million in 2022 primarily due to a $1.6 million decrease in wages and salaries due to departures not replaced, and $0.3 million decrease in social charges on stock option due to the stock price diminution in 2022 and departures, as well as a $0.2 million decrease in non-cash stock-based compensation expense mainly related to 2022 departures. Purchases, external expenses and other decreased by $3.3 million (from $13.1 million in 2021 to $9.8 million in 2022) mainly explained by expenses associated with a new enterprise resource planning (ERP) software that was implemented in 2022.

 

Other operating income and expenses.

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Other operating income (expenses)			488				1,377				(1,300	)			-194.4	%

 

The increase in other operating expenses between the years ended December 31, 2022 and 2023 amounted to $2.7 million and is mainly related to the recognition of costs related to a commercial litigation for $0.5 million and the unfavorable outcome of the litigation with the French administration which led to the reimbursement of $0.7million of research tax credit and the provision for risk of $0.5 million related to 2015 and 2016 research tax credit and the favorable outcome of a claim with the French social tax authorities regarding tax on stock options for $1.0 million that was a one-time item recognized in 2022.

The increase in other operating income between the years ended December 31, 2021 and 2022 amounted to $0.9 million and is mainly related to the favorable outcome of a claim with the French social tax authorities regarding tax on stock options for $1.0 million.

 

Financial income and expenses

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Financial income			13,218				8,880				21,479				141.9	%
Financial expenses			(6,486	)			(17,815	)			(40,642	)			128.1	%
Net Financial gain (loss)			6,731				(8,935	)			(19,163	)			114.5	%

 

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The increase in financial income of $12.6 million between the year periods ended December 31, 2022 and 2023 is mainly attributable to an increase in gain from our financial investments of $2.5 million and a $0.2 million gain on money market funds fair value measurement, an increase in the foreign exchange gain of $10.1 million (from a $7.5 million gain in 2022 to a $17.6 million gain in 2023, of which $8.0 million are reclassified from other comprehensive income pursuant to Calyxt’s deconsolidation).

The increase in financial expenses of $22.8 million between the years ended December 31, 2022 and 2023 is mainly attributable to the loss in fair value on our retained investment in Cibus since Calyxt's deconsolidation for $5.9 million, the $5.7 million loss in fair value of the derivative instrument on the Subsequent Investment Agreement with AstraZeneca (see following paragraph), a $11.9 million increase in foreign exchange loss (from a $1.5 million loss in 2022 to a $13.4 million loss in 2023), a $2.4 million loss on change in fair value of the EIB warrants, an interest expense on EIB loan of $1.5 million, and a BPI research tax credit prefinancing interest expense of $0.4 million, partially offset by a $4.4 million decrease in the financial loss related to Cytovia's receivable ($7.8 million loss in 2023 compared with a $12.1 million loss in 2022) and a $0.4 million decrease of interest expense on lease liabilities.

Cellectis signed the Subsequent Investment Agreement on November 14, 2023, for an additional equity investment of $140 million by AstraZeneca Holdings, which was subject to certain closing conditions and is expected to close shortly after the date of this Annual Report. For more information, see Item 4. "Information on the Company—B. Business Overview—Our Licensing Relationships.” The Subsequent Investment Agreement is treated as a derivative instrument and shall therefore be recognized according to the principles of IFRS 9 (see Note 2.6 to our consolidated financial statements). The derivative is initially recognized at its fair value and measured subsequently at fair value through profit or loss. The derivative fair value is $48.4 million at initial recognition on November 14, 2023, and is $42.7 million as of December 31, 2023, resulting in a $5.7 million loss in fair value recognized in profit and loss over the period.

The decrease in financial income of $4.3 million between the years ended December 31, 2021 and 2022 was mainly attributable to a decrease of the foreign exchange gain for $4.3 million (from a $11.9 million gain in 2021 to a $7.5 million gain in 2022). The increase in financial expenses of $11.3 million between the year ended December 31, 2021 and 2022 was mainly attributable to Cytovia’s convertible note change in fair value of $(12.1) million, partially offset by a $0.6 million decrease in foreign exchange loss (from a $2.1 million loss in 2021 to a $1.5 million loss in 2022) and a $0.4 million decrease in lease debt interest expenses.

 

With respect to the Cytovia convertible note,and its incapacity to pay, we notified Cytovia of the termination of the Cytovia Agreement on November 30, 2023, pursuant to which Cytovia is no longer authorized to use the licenses and rights granted under the Cytovia Agreement, but remains liable for the outstanding amount of the Cytovia convertible note. Considering new developments that occurred since June 30, 2023, including the termination of our negotiations with Cytovia, Cytovia's resources and financing options and our ability to recover the receivable, we reassessed the expected credit losses and recognized a carrying value of Cytovia’s note receivable of $0.0 million as of December 31, 2023. See Notes 4.3 and 12.1 to our consolidated financial statements for our accounting treatment of the Cytovia note.

 

For more information on these agreements, see “Item 4. Information on the Company—B. Business Overview—Our Licensing Relationships.”

Income (loss) from discontinued operations

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Income (loss) from discontinued operations			(28,358	)			(15,345	)			8,392				-154.7	%

 

 

Income loss from discontinued operations include Calyxt loss until deconsolidation. All tables referring to the year-end period ended December 31, 2023 present Calyxt’s results over a five-month period from January 1, 2023 to May 31, 2023.

The $23.7 million decrease in net loss from discontinued operations between the year-end period ended December 31, 2022 and 2023 is primarily driven by the profit from Calyxt's deconsolidation of $22.6 million, Calyxt's $8.5 million net loss in the third and fourth quarter of 2022 compared with $0 in the third and fourth quarter of 2023 as Calyxt was deconsolidated, partially offset by a $7.3 million increase in the net loss over the first two quarters between 2022 and 2023. This $7.3 million increase breaks down as follows: (i) an increase of $9.2 million of net financial loss and (ii) a $1.9 million decrease of expenses driven by the decrease of operating expenses partially offset by restructuring and transaction costs,

 

The $13.0 million decrease of net income loss from discontinued operations between the years ended December 31, 2021 and 2022 is primarily driven by (i) the decrease of $29.5 million of cost of revenue, (ii) the decrease of $4.4 million of R&D expenses (from $11.2 million in 2021 to $11.4 in 2022) and SG&A expenses (from $15 million in 2021 to $10.4 million in 2022) and (iii) the increase of $7.9 million of net financial gain partially offset by the $28.3 million decrease of revenue and other income.

 

Income tax.

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Income tax			0				(87	)			(371	)			326.0	%

 

The income tax expense of the year ended December 31, 2023 amounting to $0.4 million corresponds to the cumulated income tax expense of Cellectis Inc. and Cellectis Biologics Inc., both entities filing a consolidated tax return.

The income tax expense of the year ended December 31, 2022 amounting to $0.1 million corresponds to the cumulated income tax expense of Cellectis Inc. and Cellectis Biologics Inc., both entities filing a consolidated tax return.

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Net Income / loss.

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Net income (loss)			(125,107	)			(114,034	)			(108,443	)			-4.9	%

 

Net income includes net income from discontinued operations.

The decrease in net loss of $5.6 million between the years ended December 31, 2022 and 2023 was mainly due to (i) a decrease of $1.0 million in cost of revenue, (ii) a decrease of $4.8 million in purchases, external expenses and other, (iii) a decrease of $5.3 million in wages, (iv) a $0.8 million decrease in non-cash stock-based compensation expense and (v) a $23.7 million decrease in net loss of discontinued operations, partially offset by (i) a $16.5 million decrease in revenues and other income, (ii) a $2.7 million decrease of net other operating income, (iii) a $0.3 million increase in social charges on stock option grants expenses, (iv) a $0.3 million increase in income tax expense and (v) an increase of net financial loss of $10.2 million.

The decrease in net loss of $11.1 million between the years ended December 31, 2021 and 2022 was mainly due to (i) a decrease of $17.0 million in purchases, external expenses and other, (ii) a decrease of $2.0 million in wages (iii) a $5.5 million decrease in non-cash stock-based compensation expense, (iv) a $1.2 million decrease in social charges on stock option grants expenses, (v) a $13.0 million decrease in net loss of discontinued operations, partially offset by (i) a $12.9 million decrease in revenues and other income and (ii) an increase of net financial loss of $15.7 million.

Gain/Loss attributable to non-controlling interests.

 

		For the year ended December 31,												% change
		2021				2022				2023				2023 vs 2022
Gain (loss) attributable to non-controlling interests			(10,910	)			(7,894	)			(7,384	)			-6.5	%

 

During the year ended December 31, 2023, we recorded $7.4 million in loss attributable to non-controlling interests. The decrease in net loss attributable to non-controlling interests of $0.5 million is mainly due to the deconsolidation of Calyxt on June 1, 2023, partially offset by the increase of Calyxt's net loss over the first five months of 2023 compared to the same period in 2022

 

During the year ended December 31, 2022, we recorded $7.9 million in loss attributable to non-controlling interests. The decrease in net loss attributable to non-controlling interests of $3 million is a result of a decrease in Calyxt’s net loss partially offset by the decrease of Cellectis’s ownership interest in Calyxt.

Segment Results

Information related to each of our reportable segments is set out below. Segment revenues and other income, research and development expenses, selling, general and administrative expenses, and royalties and other operating income and expenses, and adjusted net income (loss) attributable to shareholders of Cellectis (which does not include non-cash stock-based expense) are used by the CODM to measure performance of each segment. The CODM does not review any asset or liability information by segment or by region.

In light of the Merger completed pursuant to the Merger Agreement, Calyxt met the “held-for-sale” criteria specified in IFRS 5 and qualifies as a discontinued operation in accordance with IFRS 5 until loss of control from the Group. Consequently, Calyxt was deconsolidated on June 1, 2023. Calyxt’s results are included in the Group’s results until May 31, 2023, and continue to be presented as the results of discontinued operations until that date.

Adjusted Net Income (Loss) attributable to shareholders of Cellectis is not a measure calculated in accordance with IFRS. Because Adjusted Net Income (Loss) attributable to shareholders of Cellectis excludes Non-cash stock-based compensation expense—a non-cash expense, we believe that this financial measure, when considered together with our IFRS financial statements, can enhance an overall understanding of Cellectis’ financial performance. Moreover, our management views the Company’s operations, and manages its business, based, in part, on this financial measure. See also “Note Regarding Use of Non-IFRS Financial Measures.”

The intersegment revenues represent the transactions between segments. Intra-segment transactions are eliminated within a segment’s results and intersegment transactions are eliminated in consolidation as well as in key performance indicators by reportable segment.

The following table summarizes segment revenues and segment operating profit (loss) for the years ended December 31, 2021, 2022 and 2023.

 

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		For the year ended December 31,
		2021				2022				2023
		$ in thousands
Net Income (Loss) attributable to shareholders of Cellectis			(114,197	)			(106,139	)			(101,059	)
Adjustment of non-cash stock-based compensation expense from continued operations:
Research and development expenses			9,381				4,098				3,952
Selling, general and administrative expenses			2,113				1,945				1,281
Total non-cash stock-based compensation expense from continued operations			11,493				6,043				5,233
Adjustment of non-cash stock-based compensation expense from discontinued operations			1,625				4,132				3,859
Non-cash stock-based compensation expense attributable to non controlling interests			(621	)			(2,105	)			(2,006	)
Adjusted Net Income (Loss) attributable to shareholders of Cellectis **			(101,700	)			(98,069	)			(93,973	)

** Non-IFRS financial measure. See "Note Regarding Use of non-IFRS Financial Measures."

We allocate the share-based compensation to the share-related entity, (rather than the entity related to the employee that benefited from such compensation), considering that the share-based compensation is linked to entity’s performance. Consequently, all share-based compensation based on Cellectis shares is charged in the Therapeutics segment, even if some Calyxt employees are included in a Cellectis stock-option plan.

2022 vs. 2023

External revenues and other income decreased by $16.5 million, from $25.7 million for the year ended December 31, 2022, to $9.2 million for the year ended December 31, 2023. The decrease was primarily due to a decrease in collaboration agreement revenues as described in sections “Revenues” and “Other income” under “Results of Operations” for the consolidated Group.

The decrease in total operating expenses of $8.9 million from the year ended December 31, 2022 to the year ended December 31, 2023 resulted primarily from (i) lower purchases, external expenses and other of $4.8 million and (ii) lower personnel expenses of $5.7 million mainly attributable to a decrease of $5.3 million in personnel wages and salaries and partially offset by an increase of $2.7 million in other operating expenses

Operating loss before tax for decreased by $7.6 million from year ended December 31, 2022 to the year ended December 31, 2023.

Adjusted net loss attributable to shareholders of Cellectis decreased by $4.1 million from year ended December 31, 2022 to year ended December 31, 2023

2021 vs. 2022

External revenues and other income decreased by $12.9 million, from $38.6 million for the year ended December 31, 2021, to $25.7 million for the year ended December 31, 2022. The decrease was primarily due to a decrease in collaboration agreement revenues as described in sections “Revenues” and “Other income” under “Results of Operations” for the consolidated Group.

The decrease in total operating expenses of $26.6 million from the year ended December 31, 2021 to the year ended December 31, 2022 resulted primarily from (i) lower purchases, external expenses and other of $17.0 million and (ii) lower personnel expenses of $8.7 million mainly attributable to a decrease of $2.0 million in personnel wages and salaries, a decrease of $1.2 million in social charges on stock option grants, and a decrease of $5.5 million in non-cash stock-based compensation expenses and (iii) an increase of $0.9 million in other operating income

Operating loss before tax for decreased by $13.7 million from year ended December 31, 2021 to the year ended December 31, 2022.

Adjusted net loss attributable to shareholders of Cellectis increased by $7.4 million from year ended December 31, 2021 to year ended December 31, 2022.

 

We have incurred losses and cumulative negative cash flows from operations since our inception in 2000, and we anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and selling, general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, alliances and licensing arrangements.

We have funded our operations since inception primarily through private and public offerings of our equity securities, grant revenues, payments received under patent licenses, reimbursements of research tax credit claims and payments under our licensing agreements with Allogene and Servier.

Our ordinary shares have been traded on the Euronext Growth market of Euronext in Paris since February 7, 2007 and our ADSs have traded on the Nasdaq Global Market in New York since March 30, 2015.

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Liquidity management

As of December 31, 2023, we had cash, cash equivalents, fixed-term deposits classified as current financial assets of $151.7 million comprising cash and cash equivalents of $136.7 million.

Long term restricted cash amounts to $4.7 million and is classified in Other non-current financial assets.

Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our cash and cash equivalents are held in bank accounts, money market funds, and fixed bank deposits, in each case primarily in France. The portion of cash and cash equivalents denominated in U.S. dollars is $118.7 million as of December 31, 2023. Current financial assets denominated in U.S. dollars amounted to $15.0 million as of December 31, 2023.

 

Historical Changes in Cash Flows

The table below summarizes our sources and uses of cash for the years ended December 31, 2021, 2022 and 2023.

Cash flows from Calyxt, which is classified as discontinued operations in the financial statements as of December 31, 2023, are included in the figures presented below.

 

		For the year ended December 31,
		2021				2022				2023
		$ in thousands
Net cash flows provided by (used in) operating activities			(104,562	)			(87,444	)			(24,746	)
Net cash flows provided by (used in) investing activities			7,279				(2,761	)			(15,510	)
Net cash flows provided by (used in) financing activities			47,525				1,145				82,865
Total			(49,758	)			(89,060	)			42,608
Effect of exchange rate changes on cash			(5,754	)			(3,360	)			884

 

With respect to Calyxt, see Note 3 to our consolidated financial statements for more information on our scope of consolidation and non-consolidated entities, and Note 5 to our consolidated financial statements for more information on discontinued operations.

Year Ended December 31, 2023

Our net cash flows used in operating activities of $24.7 million are mainly due to cash payments from Cellectis to suppliers of $47.7 million, Cellectis’ wages and social expenses paid of $39.7 million and Calyxt’s operating payments of $3.6 million, offset mainly by the $35.7 million of the proceeds from the Initial Investment Agreement with AstraZeneca reallocated to the AZ JRCA and therefore classified within operating activities, $25.0 million of upfront payment from the Joint Research and Collaboration Agreement with AstraZeneca, $2.0 million of cash-in from licensing revenue of Cellectis, $1.0 million of cash-in on from tax refund related to stock-options and $3.6 million of cash-in from income on financial investments.

 

Our net cash flows used in investing activities of $15.5 million primarily reflect the contracting of a $15.0 million term deposit classified as a current financial asset, the cash and cash equivalents disposed of following the loss of control over Calyxt of $1.6 million and $1.1 million of investments in R&D equipment and building fittings under construction in France, partially offset by the reimbursement of a security deposit from a supplier in the United States of $0.4 million and the $1.3 million change to our current financial assets denominated in a currency other than the functional currency due to foreign exchange impact.

 

Our net cash flows provided by financing activities of $82.9 million reflect mainly a $44.9 million inflow from AZ Holdings' $80.0 million Initial Investment after reallocation of $35.7 million to operating activities, the $25.0 million gross proceeds from Cellectis' follow-on offering in February 2023, the $21.2 million cash received from EIB pursuant to the disbursement of the Tranche A net of transaction costs, the $5.7 million received in respect of the 2022 research tax credit pre-financing, the $2.8 million refundable advance received from BPI, $2.5 million of Interim Funding received by Calyxt from Cibus, partially offset by transaction costs related to AZ Holdings' Initial Investment of $0.6 million and to Cellectis' follow-on offering of $1.5 million, the payments of lease debts of $11.8 million and the repayment of the “PGE” loan of $5.0 million.

Year Ended December 31, 2022

Our net cash provided by operating activities is primarily attributable to net income for the period after adjusting for non-cash items of $63.1 million for the Therapeutics segment and $14.9 million for the Plants segment, an increase in tax credit receivable of $5.8 million, an increase in trade receivables of $3.2 million for the Therapeutics segment, a decrease in trade payables and other current liabilities of $4.3 for the Plants segment, partially offset by an increase in trade payables and other current liabilities of $3.2 million for the Therapeutics segment.

Our net cash flows used in investing activities primarily reflects our investments in R&D equipment and building fittings in both the United States and France of $2.4 million, and the remainder attributable to investing activity in the Plants segment for $0.9 million, partially offset by a $0.2 million decrease in deposits for the Therapeutics segment and a $0.4 million decrease in other current financial assets for the Plants segment.

Our net cash provided by financing activities reflects mainly the net proceeds of $10.5 million from Calyxt’s follow-on offering and proceeds under Calyxt’s ATM equity program, after $0.8 million transaction costs and the payment of $5.8 million received in respect of the 2021 research tax credit pre-financing, partially offset by the payments of lease debts for $12.8 million and of the “PGE” loan for $1.3 million, $0.6 million of transaction costs related to the Cellectis ATM program and the follow-on offering of Cellectis, each launched in 2023, as well as $0.4 million of interest paid on the “PGE” loan along with interests and capital paid on a loan with our landlord in New-York. The ”PGE” loan refers to a loan from a bank syndicate formed with HSBC, Société Générale, Banque Palatine and Bpifrance in the form of a state-guaranteed loan (Prêt Garanti par l’Etat) (the “PGE”) for $18.5 million (including interest) of which $14.1 million remains outstanding.

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Year Ended December 31, 2021

The net cash flows used in operating activities are mainly due to Cellectis cash payments of $65.6 million to suppliers, wages and social expenses of $49.9 million, Calyxt operating payments net of receipts of $16.6 million, partially offset by $8.9 million of tax credit, the collection of two Allogene milestone payments for $10.0 million, $2.0 million of licensing revenue at Cellectis, and $5.7 million of taxes and others.

The net cash flows used in investing activities primarily reflects our investments in R&D equipment and building fittings in both the United States and France of $19.7 million, including $5.8 million that relates to Cellectis’ new raw material manufacturing facility and offices in Paris, $12.6 million relates to the new commercial manufacturing facility in Raleigh, North Carolina, $0.2 million relates to our innovation center in New York, and the remainder attributable to investing activity in the Plants segment, offset by $27.0 million of current and non-current financial assets variation.

The net cash provided by financing activities reflects mainly the net proceeds of $44.6 million from sales under the Cellectis ATM-program in April 2021, the net proceeds of $3.9 million from sales under the Calyxt ATM-program over the past quarter, the collection of $11.8 million of proceeds from stock option exercises and is partially offset by the payments of lease debts for $12.5 million as well as $0.3 million of interest paid on the “PGE” loan along with interests paid on a loan with our landlord in New-York.

 

Operating capital requirements—Cellectis S.A.

Our cash consumption is driven by our internal operational activities, including manufacturing activity conducted at our in-house manufacturing facilities, as well as our outsourced activities, including the pre-clinical research and development activities, manufacturing and technology transfer expenses payable to CMO providers, costs and expenses associated with our clinical trials, including payments to clinical research centers, CROs involved in the clinical trials, and third-parties providing logistics and testing services. In addition, we incur significant annual payment and royalty expenses related to our in-licensing agreements with different parties including LifeTechnologies and University of Minnesota. We also incur substantial expenses related to audit, legal, regulatory and tax related services associated with our public company obligations in the United States and our continued compliance with applicable U.S. exchange listing and SEC requirements.

To date, we have not generated any revenues from therapeutic product sales. In addition to our cash generated by operations (including payments under our collaboration agreements), we have funded our operations primarily through private and public offerings of our equity securities, grant revenues, payments received under intellectual property licenses, and reimbursements of research tax credits.

We do not know when, or if, we will generate any revenues from therapeutic product sales. We do not expect to generate significant revenues from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future therapeutic product candidates.

We are subject to all risks incident in the development of new gene therapy products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

We anticipate that we will need additional funding in connection with our continuing operations, including for the further development of our existing product candidates and to pursue other development activities related to additional product candidates.

On November 1, 2023, we entered into (i) the AZ JRCA, (ii) the Initial Investment Agreement with AZ Holdings relating to an initial equity investment of $80 million, and on November 14, 2023, we and AZ Holdings entered into the Subsequent Investment Agreement relating to the additional equity investment of $140 million. In connection with these transactions, Cellectis received the following payments during the fourth quarter of 2023 that were not subject to conditions precedent (i) an upfront payment of $25 million, pursuant to the AZ JRCA, and (ii) a payment of $80 million pursuant to the AZ Initial Investment Agreement. All the conditions precedents to the closing are met and the closing should occur on the earlier of (i) the third business day following the approval by the Cellectis' board of directors of the Company's annual and consolidated account for the financial year ended on December 31, 2023, and (ii) May 7, 2024 or such other date as may be agreed in writing by the parties.

With cash and cash equivalents of $136.7 million as of December 31, 2023, and taking into account the €15.0 million under Tranche B of the €40.0 million Finance Contract with EIB received in January 2024, and the $140 million equity investment we expect to receive pursuant to the Subsequent Investment Agreement, the Company believes its cash and cash equivalents will be sufficient to fund its operations into, assuming receipt of such funds, 2026 and therefore for at least twelve months following the consolidated financial statements’ publication.

Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

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If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition and results of operations could be materially adversely affected.

Sources of capital

Until we can generate a sufficient amount of revenues from our products, if ever, we expect to finance a portion of future cash needs through public or private equity or debt offerings. 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 product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing shareholders, increased fixed payment obligations and these securities may have rights senior to those of our ordinary shares. 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. Any of these events could significantly harm our business, financial condition and prospects.

EIB Finance Contract

On December 28, 2022, we entered into a Finance Contract with the EIB for up to €40.0 million in loans to support research and development activities to advance our pipeline of gene-edited allogeneic cell therapy candidate products for oncology indications (the “R&D Activities”). The Finance Contract provides for funding in three tranches as follows: (i) an initial tranche of €20.0 million (“Tranche A”); (ii) a second tranche of €15.0 million (“Tranche B”); and (iii) a third tranche of €5.0 million (“Tranche C,” and each of Tranche A, Tranche B, and Tranche C, a “Tranche”), each issuable only in full. Each of our material subsidiaries guarantees our obligations under the Finance Contract. References to our subsidiaries exclude Calyxt, Inc.

The disbursement of each Tranche is conditioned upon certain documentary conditions, including the execution of a warrant agreement with respect to the EIB Warrants (as defined below). Each Tranche is subject to additional specific conditions precedent. The disbursement of Tranche A is subject to, among other conditions, the issuance of the Tranche A Warrants (as defined below), the satisfaction of an arrangement fee obligation, and the satisfaction by a licensee of ours of a specified clinical milestone. The disbursement of Tranche B is subject to, among other conditions, the full drawdown of Tranche A, the issuance of the Tranche B Warrants (as defined below), the satisfaction of an arrangement fee obligation, the receipt by us of a cash injection subsequent to October 31, 2022 of an aggregate amount of at least €20.0 million through the issuance of new ordinary shares or other securities subordinated to the loans from the EIB under the Finance Contract, the receipt by us of an aggregate amount of at least €15.0 million subsequent to October 31, 2022 through upfront and milestone payments in connection with existing or new partnerships, at least two of our clinical trials actively recruiting, and no more than one of our clinical trials being subject to ongoing mandatory holds. The disbursement of Tranche C is subject to, among other conditions, the full drawdown of Tranche B, the issuance of the Tranche C Warrants (as defined below), the satisfaction of an arrangement fee obligation, the receipt by us of a cash injection subsequent to October 31, 2022 of an aggregate amount of at least €25.0 million through the issuance of new ordinary shares or other securities subordinated to the loans from the EIB under the Finance Contract, the receipt by us of an aggregate amount of at least €25.0 million subsequent to October 31, 2022 through upfront and milestone payments in connection with existing or new partnerships, at least two of our clinical trials actively recruiting (with either one in the context of a pivotal study or two in the context of an expansion phase study), and two or more of our clinical trials not being subject to ongoing mandatory holds. Any funds not disbursed within 36 months following the execution of the Finance Contract will be cancelled.

Borrowings under the Finance Contract will mature with respect to each Tranche six years from the respective disbursement date for such Tranche. Interest on each Tranche shall be paid in kind, shall be capitalized annually by increasing the principal amount of the respective Tranche, and shall accrue at a rate equal to (i) 8.0% per annum with respect to Tranche A, (ii) 7.0% per annum with respect to Tranche B, and (iii) 6.0% per annum with respect to Tranche C. Interest on any overdue amounts related to a Tranche shall be payable in cash and shall accrue from the due date through the actual payment of such overdue amount at an annual rate equal to the higher of the rate applicable to a relevant Tranche as noted above plus 2.0% and the one-month EURIBOR rate plus 2.0%.

In connection with the Finance Contract, we also agreed to enter into a warrant agreement with EIB with respect to the issuance of warrants to the EIB in connection with, and as a condition to, the funding of each of Tranche (the “Tranche A Warrants,” Tranche B Warrants” and “Tranche C Warrants,” respectively to each Tranche, and collectively, the “EIB Warrants”). The Finance Contract includes certain preliminary and non-exhaustive terms of the EIB Warrants. The final EIB Warrant terms and conditions will be set forth in a definitive Warrant Agreement to be negotiated with EIB, and the preliminary terms and conditions described in this report are subject in all respects to such final terms and conditions as shall be negotiated in respect of the definitive Warrant Agreement. The number of warrants to be issued to the EIB will be determined as follows: (i) with respect to Tranche A, an aggregate number of warrants equal to 20,000,000 divided by the product of the average price of the ordinary shares for the five trading days prior to issuance (the “5-Day AP”) multiplied by 3.5, up to a maximum number of warrants representing 5% of the outstanding ordinary shares at the time of disbursement of Tranche A; (ii) with respect to Tranche B, (a) if the sum of cash injections through the issuance of new ordinary shares or other securities subordinated to the Finance Contract and upfront and milestone payments in connection with existing or new partnerships between October 31, 2022 and the Tranche B disbursement exceeds €42,500,000, an aggregate number of warrants equal to 15,000,000 divided by the product of the 5-Day AP multiplied by four and (b) otherwise, an aggregate number of warrants equal to 15,000,000 divided by the product of the 5-Day AP multiplied by 3.75; and (iii) with respect to Tranche C, (a) if the sum of cash injections through the issuance of new ordinary shares or other securities subordinated to the Finance Contract and upfront and milestone payments in connection with existing or new partnerships between October 31, 2022 and the Tranche C disbursement exceeds €70,000,000, an aggregate number of warrants equal to 5,000,000 divided by product of the 5-Day AP multiplied by 4.75; and (b) otherwise, an aggregate number of warrants equal to 5,000,000 divided by the product of the 5-Day AP multiplied by 4.25. The EIB Warrants will have an exercise price per share equal to 99% of the weighted average price per share of Cellectis over the last 5 trading days prior to the issuance of the EIB Warrants.

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The warrant agreement shall include anti-dilution protections, which shall not apply in specified circumstances. The EIB Warrants will also include a put option, which shall be subject to a cap at one time the aggregate principal amount disbursed by the EIB pursuant to the Finance Contract at the time of exercise of the put option.

EIB may cancel any undisbursed amount under the Finance Contract upon the occurrence of, or any event or circumstance that would, with notice or the passage of time constitute, any event of default or mandatory prepayment event. In the event of such a cancellation by EIB prior to the expiration of a period of three years after disbursement of a relevant Tranche, we shall be required to pay a cancellation fee representing a low-single digit percentage of the cancelled amount.

Mandatory prepayment events include: (i) any reduction in the total cost of our R&D Activities such that the €40.0 million amount of the Finance Contract, together with certain other funds from the European Union, exceeds specified percentages of the aggregate cost of our R&D Activities, in which case the prepayment amount shall be the amount by which such limits are exceeded, together with accrued interest and all other accrued and outstanding amounts, (ii) any voluntary prepayment, in whole or in part, by us or its subsidiaries has occurred or is likely to occur of any indebtedness or other repayment obligation granted by a party other than EIB, in which case the prepayment amount shall be proportionate to the prepaid amount of such non-EIB indebtedness, together with accrued interest, (iii) any change of control of us or any change in law or regulation that would materially impair our or the guarantors’ ability to perform under the Finance Contract, in which case the prepayment amount shall be the full outstanding amount, together with accrued interest and all other accrued and outstanding amounts, and (iv) any event that renders performance under the Finance Contract unlawful, in which case the prepayment amount shall be the full outstanding amount, together with accrued interest and all other accrued and outstanding amounts, and the remaining undisbursed portion shall be cancelled. In addition, any Tranche may be voluntarily prepaid by us, in whole or in part, upon 30 days’ notice. Except in connection with a prepayment pursuant to clause (iii) or (iv), all prepayments prior to the expiration of a period of three years after disbursement of a relevant Tranche are subject to a prepayment fee representing a low single-digit percentage of the prepayment amount, which steps down at each anniversary of the applicable disbursement date.

The Finance Contract also includes customary events of default, including: payment defaults; defaults arising from the provision of incorrect, incomplete or misleading representations to the EIB; cross defaults resulting in acceleration or cancellation of any other loan or obligation; cross defaults with respect to any other obligation granted by EIB or the European Union; the occurrence of any material adverse change; any EIB Warrants ceasing to be in full force and effect (other than as a result of exercise), and certain bankruptcy and insolvency events of default. Upon the occurrence of an event of default, EIB may demand immediate repayment by us of all or part of the outstanding funds, together with accrued interest, and all other accrued or outstanding amounts under the Finance Contract.

In connection with the Finance Contract, we agreed to certain customary affirmative and negative undertakings. The negative undertakings include: restrictions on dispositions of assets by us and our subsidiaries, restrictions on changes to the general nature of our business, restrictions on us and our subsidiaries engaging in mergers and other restructuring transactions, restrictions on certain ownership changes with respect to subsidiaries, restrictions on us and our subsidiaries engaging in acquisitions or making investments, restrictions on us and our subsidiaries incurring additional indebtedness or guarantees, restrictions on the making of intercompany loans, restrictions on us and our subsidiaries engaging in certain hedging or derivative transactions, restrictions on us and our subsidiaries making specified restricted payments including dividends and share repurchases, restrictions on us and our subsidiaries becoming creditors in respect of certain indebtedness, and restrictions on the incurrence of security over any of our or our subsidiaries’ assets. In addition, we granted EIB most favored nation rights with respect to any obligation, clause or undertaking, whether positive or negative (including, without limitation, events of default, mandatory prepayment events, a loss-of-rating clause or financial covenants) included in any other financing agreement (excluding underwriting agreements in connection with securities offerings). We also granted certain information and inspection rights to the EIB in connection with the Finance Contract. The Finance Contract contains certain customary representations and warranties by us and is governed by French law.

The Warrant Agreement

On March 30, 2023, the Company and EIB entered into a Subscription Agreement for Warrants to be Issued by Cellectis S.A. (the “Warrant Agreement”), the execution of which was a condition precedent to the Company’s ability to draw amounts under the Finance Contract.

The Warrant Agreement establishes the terms and conditions of the EIB Warrants.

With respect to Tranche A, 2,799,188 Tranche A Warrants were issued, representing 5.0% of the Company’s outstanding share capital as indicated above. With respect to Tranche B, 1,460,053 Tranche B Warrants were issued, representing approximately 2.0% of the Company’s outstanding share capital.

With respect to Tranche C, the number of warrants to be issued will be determined as follows: (a) if the sum of cash injections through the issuance of new ordinary shares or other securities subordinated to the Finance Contract and upfront and milestone payments in connection with existing or new partnerships between October 31, 2022 and the Tranche C disbursement exceeds €70,000,000, an aggregate number of warrants equal to 5,000,000 divided by product of the 5-Day AP multiplied by 4.75; and (b) otherwise, an aggregate number of warrants equal to 5,000,000 divided by the product of the 5-Day AP multiplied by 4.25.

The EIB Warrants will have an exercise price per share equal to €1.92, corresponding to 99% of the weighted average price per share of Cellectis over the last 3 trading days prior to their issuance. Each EIB Warrant will entitle its holder to one ordinary share of the Company in exchange for the exercise price, subject to all applicable adjustments. The EIB Warrants with respect to Tranche C are only issuable if the Company elects to drawdown such Tranche.

The EIB Warrants expire on the twentieth anniversary of their issuance date at which time they will be automatically deemed null and void. Any outstanding EIB Warrants will become exercisable upon the earliest to occur of (i) a change of control event, (ii) the maturity date of Tranche A, (iii) a public take-over bid approved by the Company’s board of directors, (iv) a sale of all or substantially all of the assets of Cellectis and its subsidiaries, (v) a debt repayment event—i.e., any mandatory repayment pursuant to the Finance Contract or any voluntary payment of more than 75% of any Tranche—in respect of one or more Tranches, or (vi) the receipt of a written demand for repayment from EIB in connection with an event of default under the Finance Contract (each an “Exercise Event”).

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Following any Exercise Event and until expiration of the applicable EIB Warrants, the EIB may exercise a put option by which the EIB may request the Company to repurchase all or part of such then-exercisable EIB Warrants. The exercise of such put options would be at the fair market value of the EIB Warrants, subject to a cap equal to the aggregate principal amount disbursed by EIB pursuant to the Finance Contract, reduced by certain repaid amounts, at the time of exercise of the put option.

Furthermore, in the case of any public take-over bid from a third party or a sale of all outstanding shares of the Company to any person or group of persons acting in concert, in the context of a group of specified Company shareholders acting in concert, the Company shall be entitled to repurchase all, but not less than all, of the EIB Warrants at a price equal to the greater of (a) 0.3 times the amount disbursed under the Finance Contract divided by the aggregate number of EIB Warrants issued (reduced by the number of exercised EIB Warrants) and (b) the fair market value of the EIB Warrants.

The Company has also a right of first refusal to repurchase the EIB Warrants that are offered for sale to a third party under the same terms and conditions of such third party’s offer, provided that such right of first refusal do not apply if the contemplated sale occurs within the scope of a public take-over bid by a third-party.

Subject to the right of first refusal and compliance with applicable securities laws, the EIB Warrants may be transferred following an Exercise Event, to certain affiliates of EIB, or otherwise with the prior written approval of the Company.

 

The Warrant Agreement provides for customary anti-dilution adjustments in connection with changes to the structure of the Company’s share capital.

In connection with the Warrant Agreement, the Company agreed to certain customary affirmative and negative undertakings. The negative undertakings include: restrictions on certain dispositions of assets by the Company and its subsidiaries and restrictions on the Company and its subsidiaries making specified restricted payments, including loan repayments, dividends and share repurchases.

The Warrant Agreement contains certain customary representations and warranties by the Company and is governed by French law.

 

Drawdowns under the Finance Contract – Tranches A and B

On March 30, 2023, the Company announced the drawdown of the first tranche under the Finance Contract in the amount of €20 million (“Tranche A”), disbursed by the EIB in April 2023.

The disbursement of Tranche A was subject to, among other conditions, the issuance of the specified number of Tranche A Warrants, and the satisfaction by a licensee of the Company of a specified clinical milestone. On March 28, 2023, the Company issued 2,799,188 Tranche A Warrants to EIB, representing 5.0% of the Company’s outstanding share capital as at their issuance date.

Tranche A will mature six years from the disbursement date and interest on Tranche A shall be paid in kind, shall be capitalized annually by increasing the principal amount of Tranche A, and shall accrue at a rate equal to 8.0% per annum.

The EIB may cancel any undisbursed amount of Tranche A upon the occurrence of, or any event or circumstance that would, with notice or the passage of time constitute, any event of default or mandatory prepayment event. In the event of such a cancellation by the EIB prior to the expiration of a period of three years after disbursement of Tranche A.

On January 16, 2024, Cellectis drew down on the second tranche of €15 million under the Finance Contract, pursuant to which the Company issued 1,460,053 warrants to the EIB in connection with the disbursement of the €15.0 million Tranche B. Each Tranche B Warrant allows the EIB to subscribe for one ordinary share of the Company, at a price of €2.53, corresponding to 99% of the volume-weighted average price of the Company’s ordinary shares over the last 3 trading days preceding the decision of the board of directors of the Company to issue the Tranche B Warrants.

The total number of shares issuable upon exercise of the Tranche B Warrants represented approximately 2.0% of the Company’s outstanding share capital as at their issuance date. Tranche B will mature six years from its disbursement date and will accrue interest at a rate of 7% per annum capitalized annually and payable at maturity. Tranche B was disbursed in January 2024.

Follow-on offering

 

On February 7, 2023, Cellectis launched of a follow-on offering of $22 million of its ADS for which . Jefferies LLC and Barclays Capital Inc. acted as joint book-running managers for the Global Offering. Pricing occured on February 2, 2023, at $2.50 per ADS . Bpifrance Participations, Baillie Gifford & Co. and Long Focus Capital Management LLC, existing shareholders of the Company, were allocated in the aggregate more than half of the ADS sold in the global offering. On February 7, 2023, Cellectis has announced the exercise by the underwriters, Jefferies LLC and Barclays Capital Inc., of their option (the “Option”) to purchase an additional 1,107,800 ordinary shares (the “Additional Ordinary Shares”) of the Company to be delivered in the form of an aggregate of 1,107,800 ADSs The total number of ordinary shares issued in the form of ADSs amounted to 9,907,800 with gross proceed of $24.8 million and the aggregate net proceeds to the Company, after deducting underwriting commissions and estimated offering expenses of approximately $22.8 million.

ATM Program

On January 4, 2023, we entered into an amendment to the Sales Agreement, dated as of March 29, 2021, with Jefferies LLC with respect to an equity offering program under which we may offer and sell ADS having an aggregate offering price of up to $60.0 million from time to time following January 4, 2023, through Jefferies as our sales agent. As of the date of this Annual Report, we have not sold any ADS under the amended program subsequent to such date.

Cellectis decided to discontinue the ATM.

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Joint Research Collaboration Agreement and Investment Agreements with AstraZeneca

In addition to an upfront payment of $25 million made by AZ Ireland to Cellectis, under the AZ JRCA, AZ Ireland will reimburse Cellectis for its budgeted research costs associated with targets identified under the AZ JRCA. Cellectis is also eligible to receive an option exercise fee and development, regulatory and sales-related milestone payments, ranging from $70 million up to $220 million, per each of the 10 candidate products, plus tiered royalties, which may range from mid-single to low-double digits, based on the sale of Licensed Products.

AstraZeneca made an initial equity investment of $80 million in Cellectis by subscribing for 16,000,000 ordinary shares, at a price of $5.00 per share (the “Initial Investment”).

Additionally, we entered into the Subsequent Investment Agreement with AZ Holdings under which AZ Holdings would make a further equity investment in Cellectis of $140 million by subscribing for two newly created classes of convertible preferred shares of Cellectis: 10,000,000 “class A” convertible preferred shares and 18,000,000 “class B” convertible preferred shares, in each case at a price of $5.00 per share (the “Additional Investment”). Closing of the Additional Investment is expected to occur shortly after the date of this Annual Report.

 

State Guaranteed Loan (“PGE”)

 

We received the PGE loan on July 2020 of $18.5 million (including interest) (or $20.4 million using exchange rate as of December 31, 2023) of which $14.1 million remains outstanding, from a bank syndicate formed with HSBC, Société Générale, Banque Palatine and BPI. Initiated by the French Government to support companies during the COVID-19 crisis, the PGE is a bank loan with a fixed interest rate ranging from 0.31% to 3.35%. After an initial interest-only term of two years, the loan is amortized over up to four years at the option of the Company. The French government guarantees 90% of the borrowed amount. See Note 13 to our consolidated financial statements for more information about the amounts outstanding under the PGE loan.

 

 

Cellectis’ Contractual Obligations and Commitments

As of December 31, 2023, Cellectis had the following contractual obligations:

 

As of December 31, 2023		Total				Less than 1 year				1 - 3 years				3 - 5 years				More than 5 years
		$ in thousands
Lease agreement			63,349				11,107				19,647				15,046				17,548
License and collaboration agreements			13,480				1,400				2,800				2,800				6,480
Clinical & Research and Development agreements			71				71				-				-				-
IT licensing agreements			319				233				86				-				-
State Guaranteed loan « PGE »			14,057				5,107				8,950				-				-
EIB loan			22,100				-				-				-				22,100
Bpifrance's advance			1,910				-				-				433				1,477
Total contractual obligations			115,286				17,918				31,483				18,279				47,606

 

 

Cellectis’ short-term and long-term material requirements are reflected in the table above and mainly relate to:

An analysis as to Cellectis’ ability to meet these requirements is provided under the caption “Operating capital requirements – Cellectis S.A.”, discussed above

 

Calyxt Lease Guaranty

In September 2017, Calyxt entered into a lease agreement with a third party for its corporate headquarters and laboratory facilities in Roseville, Minnesota, which encompasses approximately 44,000 square feet including office and research and development space. The lease has a term of twenty years with four options to extend its term for five years each subject to there being no default under the lease terms beyond any cure period and Calyxt occupying the property at the time of extension.

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The lease commenced in May 2018. Under the lease, Calyxt pays an annual base rent of eight percent of the total project cost with scheduled increases in rent of 7.5 percent on the sixth, eleventh, and sixteenth anniversaries of the start of the lease commencement as well as on the first day of each renewal term.

Concurrent with entering the lease, Cellectis guaranteed the lease agreement for Calyxt’s headquarters. However, Calyxt previously agreed to indemnify Cellectis for any obligations under this guaranty, effective upon Cellectis’ ownership falling to 50 percent or less of Calyxt’s outstanding common stock. Accordingly, Calyxt’s indemnification obligation was triggered in October 2022.

In connection with the Merger Agreement, we executed a voting agreement with Cibus to vote in favor of and approve all the transactions contemplated by the Merger Agreement, subject to the terms and conditions thereof. Pursuant to the voting agreement, at such time that the annual revenues of Calyxt Inc. equals $25.0 million or more for two consecutive 12-month periods after the closing of the Merger, Cibus will use commercially reasonable efforts to terminate our guaranty of Calyxt’s lease agreement with respect to its headquarters, which we provided in favor of the landlord of that property. As of December 31, 2023, our lease guaranty represents a liability in the amount of $22.9 million over the remaining 14 years lease period. Cibus, however, will not be required to replace us as guarantor or pay any fees in connection with termination of the guaranty. Until the parties are able to terminate our lease guaranty, Cibus. may not renew or extend Cibus’s lease or enter into any amendment that would increase our liability under the lease guaranty. Further, Cibus, from and after the closing of the Merger, agrees to indemnify us and our affiliates in connection with the Cibus lease and our guaranty thereof.

 

 

Our research and development teams utilize our deep expertise to contribute to the growth of our business. As of December 31, 2023, we had 169 employees engaged in research and development activities. In the years ended December 31, 2021, 2022 and 2023 we spent $117.8 million, $97.5 million and $87.6 million respectively, on research and development. For a discussion of our research and development activities, see “Item 4.B—Business Overview” and “Item 5.A—Operating Results.”

For a discussion of trends, see “Item 4.B—Business Overview,” “Item 5.A—Operating Results” and “Item 5.B—Liquidity and Capital Resources.” Other than as disclosed in these sections, we are not aware of any trends, uncertainties, demands, commitments or events since December 31, 2023 that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

Not applicable.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report:

 

Name		Age		Position(s)
Executive Officers:
André Choulika, Ph.D.		59		Director, Chief Executive Officer and Co-Founder
Mark Frattini, MD		58		Chief Medical Officer
Steven Doares, Ph.D.		64		Senior Vice President of US Manufacturing
Philippe Duchateau, Ph.D.		61		Chief Scientific Officer
Kyung Nam-Wortman		54		Chief Human Resources Officer
Stephan Reynier		54		Chief Regulatory & Pharmaceutical Compliance Officer
David Sourdive, Ph.D.		57		Director, Deputy Chief Executive Officer, Executive Vice President, CMC and Manufacturing
Arthur Stril		35		Chief Business Officer
Marie-Bleuenn Terrier		42		General Counsel
Bing Wang, Ph.D.		48		Chief Financial Officer
Non-Employee Directors:
Jean-Pierre Garnier, Ph.D.		76		Chairman of the Board and Director
Laurent Arthaud		61		Director
Pierre Bastid		69		Director
Rainer Boehm		63		Director
Axel-Sven Malkomes		57		Director
Cécile Chartier, Ph.D.		57		Director
Donald A. Bergstrom, Ph.D.		52		Director

 

Executive Officers

André Choulika, Ph.D., is one of the founders of Cellectis and served as Chief Executive Officer since the Company’s inception in 1999. He served as Chairman of our board of directors from 2011 to November 2020 and Chairman of the board of directors of Calyxt from August 2010 to July 2020. He is CEO and Chairman of Cellectis, Inc. since December 2014 and Cellectis Biologics, Inc. since January 2019. From 1997 to 1999, Dr. Choulika worked as a post-doctoral fellow in the Division of Molecular Medicine at Boston Children’s Hospital, where he was one of the inventors of nuclease-based genome editing technologies and a pioneer in the analysis and use of meganucleases to modify complex genomes. After receiving his Ph.D. in molecular virology from the University of Paris VI (Pierre et Marie Curie), he completed a research fellowship in the Harvard Medical School Department of Genetics. His management training is from the HEC (Challenge +). Since June 2019, Dr. Choulika served at the board of directors of Institut Pasteur. André Choulika was awarded Chevalier of the Légion d’Honneur in France.

Steven Doares, Ph.D. joined Cellectis in July 2020 as Senior Vice President, US Manufacturing and Site Head of the Raleigh, North Carolina manufacturing facility. Dr. Doares is responsible for the deployment of Cellectis’ manufacturing facility in Raleigh, for clinical and commercial supplies of the Cellectis’ current immuno-oncology UCART product candidates. Prior joining Cellectis, Dr. Doares worked at Biogen, Inc. from 2010 to 2020, most recently serving as Vice President, Global Manufacturing Sciences, responsible for technology transfer into cGMP manufacturing of processes from clinical through commercialization stages for Biogen’s therapeutic product portfolio, both internally and externally. Dr. Doares holds a Ph.D. in Biochemistry from the University of Georgia.

Philippe Duchateau, Ph.D., joined Cellectis in 2001 to pioneer the field of genome engineering and has served as Chief Scientific Officer since 2012. After receiving his Ph.D. in 1993 in biochemistry and molecular biology at the Institut Pasteur (Lille, France), he completed a research fellowship from 1993 to 2001 at the University of California, San Francisco (United States) within the Cardiovascular Research Institute. He is co-inventor of numerous patents in the field of nucleases and genome engineering and co-author on more than 50 scientific publications and co-editor of one book entitled “Site-directed Insertion of Transgenes.” As head of Cellectis’s Research department since 2004, he helped to the development of the key Cellectis technologies.

Mark Frattini, M.D., Ph.D., joined Cellectis in August 2020. He serves as Chief Medical Officer since September 2022. Prior to that date, Dr. Frattini served as Senior Vice President of Clinical Sciences since August 2022. Prior joining Cellectis, Dr. Frattini was Executive Medical Director, Program Lead, Global Research and Development at Celgene. Before joining Celgene, Dr. Frattini spent over 16 years as a physician-scientist specialized in hematology malignancies at Memorial Sloan-Kettering Cancer Center and Columbia University where he was a member of the adult leukemia service and the Experimental Therapeutics Center at both institutions. From 2013 to 2018, Dr. Frattini served as the Director of Research for Hematology Malignancies at Columbia University. Dr. Frattini holds a M.D. and Ph.D. in Biochemistry and Molecular Biology from the University of Chicago and received his Internal Medicine residency and Medical Oncology fellowship training at Johns Hopkins Hospital.

Kyung Nam-Wortman, joined Cellectis in November 2020 as Executive Vice President, Chief Human Resources Officer. Before joining Cellectis, Ms. Nam-Wortman was Senior Vice President, Head of Human Resources, Head of Information Technology, Facilities and Internal Communications at Achillion (recently acquired by Alexion in January 2020) since October 2014. Prior to her tenure at Achillion, Ms. Nam-Wortman was Vice President and Head of Global Talent and Organization Capability at Zoetis, where she supported the spin-off of Pfizer’s animal health business unit through its IPO and was responsible for the stand up of Zoetis’ global talent management function to support the company’s growth worldwide. She also held various human resource leadership roles for Pfizer’s business units, divisions, and functions with regional and global accountabilities. In addition to her experience in biotech/biopharma, Ms. Nam-Wortman has 14 years of experience in the consulting industry focused on strategic and organization change management from Delta Consulting Group and IBM. She received her bachelor’s degree in marketing from New York University Stern School of Business and MS in human resources management / organization development from the New School of Social Research.

Stephan Reynier, MSc, joined Cellectis in April 2011. He serves as Chief Regulatory and Pharmaceutical Compliance Officer. Mr. Reynier has extensive experience, from his previous positions as Senior Director at Voisin Consulting Life Sciences and European Associate Director Medical Affairs at Gilead Sciences, in the design and implementation of regulatory strategies for the development of drugs and biologics, with a strong focus on cell and gene therapy.

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Mr Reynier graduated as Agro-Engineer in France and received a Master of Science in Chemical Engineering from the University of Toronto, Canada.

David Sourdive, Ph.D., is a co-founder of Cellectis and holds the position of Executive Vice President, Technical Operations since 2017. Prior to that date, Dr. Sourdive served as Executive Vice President, Corporate Development since 2008. Dr. Sourdive has also been a member of our board of directors since 2000. Since February 2014, Dr. Sourdive also served on the board of directors of Mediterranean Institute for Life Sciences (MEDILS). Since September 2019, he serves on the board of directors of Exeliom S.A.S., since February 2021, he serves on the board of directors of Cell-Easy S.A.S, from June 2023 he has served on the board of directors of hema.to GmbH, and from October 2023, he serves at the board of directors of Aqemia SAS. From 2021 to December 2023, he served on the board of directors of Mablink S.A.S. From December 2018 to December 2021, he served on the board of directors of Enobraq SAS. From October 2017 to May 2020, Dr. Sourdive served on the Board of Omics SAS. From June 2015 to December 2019, he has served on the board of directors of Eukarÿs SAS. From 1998 to 2000, he directed the biotechnologies laboratory of the Centre d’Etudes du Bouchet for the French Ministry of Defense. From 1997 to 1998, Dr. Sourdive worked at one of the leading laboratories in viral immunology at Emory University in Atlanta, Georgia. His work there was focused on immunological T-cell memory. Dr. Sourdive graduated from the École Polytechnique and received his PhD in molecular virology at the Institut Pasteur. He also has management training from the HEC (Challenge +).

Arthur Stril joined Cellectis in July 2018 as Vice President, Corporate Development, and was appointed Chief Business Officer in 2020. Mr. Stril serves on the board of directors of Primera Therapeutics, Inc. since May 2023, serving as a director designated by Cellectis Mr. Stril began his career at the European Commission’s Directorate-General for Competition, controlling global pharmaceutical mergers. He later became Head of the Hospital Financing Unit at the French Ministry of Health. Mr. Stril graduated from the École Normale Supérieure, Paris & Cambridge University, and holds a diploma in Immunotherapy from the Université Paris-Descartes. Mr. Stril is also a member of the French Corps des Mines.

Marie-Bleuenn Terrier joined Cellectis as Legal Counsel in 2008, and was appointed General Counsel in 2013. Prior to joining Cellectis, she worked as Legal Counsel for Pfizer from 2004 to 2006, and for Boehringer-Ingelheim from 2006 to 2008. Marie-Bleuenn Terrier also serves as Secretary of our board of directors since 2015. From July 2020 to September 2022, Mrs. Terrier served as president of Standing Ovation S.A.S. She holds a Master’s degree in Law from the Panthéon La Sorbonne University in Paris.

Bing Wang, Ph.D. joined Cellectis in February 2022 as Chief Financial Officer. Before joining Cellectis, from March 2016 to December 2021, Mr. Wang was Chief Executive Officer and director of Refuge Biotechnologies, Inc., a private cell immuno-oncology biotechnology company co-founded by him. Mr. Wang holds approximatively 12% of the share capital of Refuge Biotechnologies. Prior to his tenure at Refuge Biotechnologies, Inc., Mr. Wang was director of healthcare investment banking at Barclays Capital, Inc. and served on the board of director of KPB Biosciences from August 2017 to October 2018. Since April 2019, he served on the advisory board of the Healthcare and Pharmaceutical Management Program at Columbia Business School. Mr. Wang holds a Bachelor of Science in Applied Physics from Columbia University and Ph.D. in Electrical Engineering from Princeton University, and a MBA from Columbia Business School.

Non-employee Directors

Jean-Pierre Garnier, M.D., has served as a member and Chairman of our board of directors since November 2020. Since 2019, he served as director of the board of directors of Carrier Global Corp., a public company. From 2015 to 2022, Dr. Garnier has served as director of the board of directors of Radius Therapuetic, and from 2018 to 2022, he served as Chairman of the board of directors of Carmat, a public company based in France. From 2018 to 2020, Dr. Garnier was Chairman of Idorsia, a public bio-technology company based in Switzerland and listed on the Swiss Stock Exchange (SIX), which was spun off of Actelion LTD with a billion-dollar investment from Johnson & Johnson (J&J). Previous to his tenure at Idorsia, he was Chairman of Actelion Ltd., a Swiss pharmaceuticals and bio-technology company, sold for $30 billion to Johnson & Johnson. From 2008 to 2010, Dr. Garnier served as Chief Executive Officer of Pierre Fabre, from 2000 to 2008 he served as Chief Executive Officer and Executive Member of the board of directors of GlaxoSmithKline plc, and in 2000, he was Chief Executive Officer of SmithKline Beecham plc. Dr. Garnier has served as board member of Renault S.A., from 2008 to 2016, United Technologies Corporation from 1997 to 2019, and Max Planck Institute from 2013 to 2019. Dr. Garnier holds an MS in pharmaceutical science and a Ph.D. in pharmacology from the Louis Pasteur University of Strasbourg, France. He subsequently earned his MBA at Stanford University, California, as a Fulbright Scholar. He was recently promoted from Chevalier to Officier de la Légion d’Honneur of France.

Laurent Arthaud serves as a member of our board of directors since October 28, 2011. Mr. Arthaud is the Managing Director of Life Sciences and Ecotechnologies for Bpifrance Investissement (formerly CDC Enterprises, a subsidiary of Caisse des Dépôts) since 2012. He currently serves on the boards of directors of Kurma Life Sciences Partners, Sparingvision, a public company based in France, Aledia, Ribogenics, Inc., Enyo Pharma and Argobio. Mr. Arthaud served at the board of directors of Calyxt from 2020 to May 2023, serving as a director designated by Cellectis. He previously served at the Calyxt’s board of directors from July 2017 to May 2019. He served on the board of directors of TxCell from 2012 to 2018, on the board of directors of Adocia from 2009 to 2022. From 2006 to 2012, Mr. Arthaud held the position of Deputy CEO at CDC Entreprises. Since 2009 Mr. Arthaud has also directed InnoBio, an investment fund managed by Bpifrance Investissement as part of the FSI France Investissement program. From 1999 to 2004 he served as Vice President of Aventis Capital, an investment subsidiary of the pharmaceuticals group Aventis, and as President of Pharmavent Partners from 2004 to 2006. Mr. Arthaud is a graduate of the École Polytechnique and the École Nationale de Statistique et d’Administration Économique.

Pierre Bastid serves as a member of Cellectis’ board of directors since 2011. Mr. Bastid has 25 years of experience in turning around, developing and running technology businesses in Asia, Europe and the United States. In addition to Cellectis, Mr. Bastid is currently serving on the board of directors of Pharnext (a biotechnology company), Carmat S.A., DCTV Center New-York, and of a series of his owned investment and private equity companies and was Chairman of Z Nautic SAS from November 2019 to January 2020.

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Rainer Boehm serves as a member of Cellectis’ board of directors since 2017. In addition, Mr. Boehm is the founder and owner of Rainer Boehm GmbH and is currently serving on the board of directors of BioCopy AG since February 2020, Berlin Cure AG since January 2022, and Omega Therapeutics since September 2022. From July 2018 to 2022, Mr. Boehm served on the board of directors of Nordic Nanoverctor SA from July 2018 to April 2022, and of Humanigen Inc from February 2018 to February 2024. Mr. Boehm spent 29 years at Novartis, working locally, regionally and globally in various senior management roles, after building his career in Marketing & Sales and Medical Affairs. At Novartis, he led all emerging markets regions as well as the United States and Canada, either for Oncology or the Pharmaceuticals division. His most recent assignments were Chief Commercial and Medical Affairs Officer globally for Novartis Pharma from 2010 to 2017, as well as ad interim Chief Executive Officer and Division Head Pharma. Rainer launched and oversaw the commercialization of many brands during his career, amongst them Femara, Zometa and Glivec, as well as Cosentyx and Entresto. Rainer has a medical degree from the University of Ulm in Germany, and a Master of Business Administration from Schiller University in France.

Donald A. Bergstrom, M.D., Ph.D., serves as a member of our board of directors since June 2022, after having served as observer of our board of directors since November 2021. Dr. Bergstrom, currently serves as Executive Vice President, Head of Research and Development at Relay Therapeutics, Inc., a public clinical-stage precision medicines company. Prior to his tenure at Relay Therapeutics, from January 2014 to March 2018, Dr. Bergstrom was Chief Medical Officer at Mersana Therapeutics, where he led the advancement of two products based on Mersana’s proprietary antibody-drug conjugate platform through non-clinical development and into Phase 1 clinical trials. Prior to Mersana, he was Global Head of Translational and Experimental Medicine at Sanofi Oncology. At Sanofi, Dr. Bergstrom held roles of increasing responsibility at Merck Research Laboratories, culminating in his role as Oncology Franchise Lead, Experimental Medicine. Since April 2021, Dr. Bergstrom served on the board of directors at Fusion Pharmaceuticals, a public biotechnologies company. Dr. Bergstrom holds an M.D. from the University of Washington, Seattle, and a Ph.D. from the Fred Hutchinson Cancer Research Center, where he also completed his post-doctoral training. He was a resident in clinical pathology at the University of Washington.

Axel-Sven Malkomes serves as a member of our board of directors since June 2022. Mr. Malkomes currently serves as chief financial officer of Cardior Pharmaceuticals GmbH, a biopharmaceutical company based in Germany. Prior to joining Cardior Pharmaceuticals GmbH, Mr. Malkomes was Chief Financial Officer and Chief Business Officer at Medigene AG until March 31, 2022. Prior to his tenure at Medigene, he served as Vice Chairman and Managing Director of the Life Sciences Practice for Barclays PLC, in Europe.

Cécile Chartier serves as a member of our board of directors since June 2023. Dr Chartier serves as Chief Scientific Officer at NextVivo, Inc. since November 2022, a position she also held from July through December 2021.Dr Chartier also serves at the Scientific Board of Advisors of CTRL Therapeutics. Prior to her tenure at NextVivo, Dr. Chartier was Vice President of Research at Iovance Biotherapeutics Inc. from 2017 to 2021 where she led the development of next generation of tumor-infiltrating lymphocytes (TIL) therapies through research to early-stage clinical trials. Prior to her time at Iovance Biotherapeutics, Inc., she spent 12 years at OncoMed Pharmaceuticals, where she served as Senior Director of Target Validation and led multiple antibody therapeutics project teams through Research and Development to IND filing. She also worked at Shering (US Berlex) and Transgene (France), where she focused on gene therapy. Dr. Chartier also founded CHartier consulting in 2022. Dr Chartier obtained her Ph.D. in molecular biology from the Université Louis Pasteur in Strasbourg, France and completed post-doctoral training at Harvard Medical School.

Board Diversity

The table below provides certain information regarding the diversity of our board of directors as of the date of this Annual Report.

Board Diversity Matrix

 

Country of Principal Executive Offices:		France
Foreign Private Issuer		Yes
Disclosure Prohibited under Home Country Law		No
Total Number of Directors and Board Observers		9

 

	Female		Male		Non- Binary		Did Not Disclose Gender
Part I: Gender Identity
Directors	1		8		0		0
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction					0
LGBTQ+					0
Did Not Disclose Demographic Background					0

 

Family Relationships

While there are no family relationships among any of our executive officers or directors, Dr. Choulika and Ms. Terrier are domestic partners.

Compensation of Directors and Executive Officers

The aggregate cash compensation paid and benefits in kind granted by us to our current executive officers and directors, for the year ended December 31, 2023, was $5.6 million. For the year ended December 31, 2023, 260,000 stock options with an exercise price of €1.80 per ordinary share, and 1,239,821 stock options with an exercise price of €3.17 per ordinary share were issued to executive officers as compensation under the 2022 Stock Option Plan. The total amount set aside or accrued to provide pension, retirement or similar benefits was $0.6 million for the year ended December 31, 2023.

 

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Directors	Compensation (Gross Salary+Bonus)*	Board fees*	Out-of- pocket expenses*	Equity awards granted in 2023
A. Choulika	874,938	—	1,659	250,000 SO
D. Sourdive	557,755	—	83	100,000 SO
J.P. Garnier	—	97,344	16,634	89,821 SO
L. Arthaud	—	—	—	—
P. Bastid	—	97,344	—	—
R. Boehm	—	99,597	—	—
D. Bergstrom	—	102,751	—	—
H. Hoppenot	—	51,376	—	—
A. Schwebig	—	48,672	—	—
A-S Malkomes	—	102,752	—	—
C. Chartier	—	47,770	—	—

* The conversion rate used is the average rate of the period

Service Agreements

Mr. Godard, a former member of our board of directors, entered into a service agreement with us and provided consultancy services in the area of global development strategy, especially inre the field of agricultural biotechnology activities. Compensation paid for those services in the years ended December 31, 2021 amounted to $71 thousand respectively. The service agreement was not renewed in 2022, no compensation was paid for those services in the year ended December 31, 2022 and 2023. As of December 31, 2023, there were no service agreements between the Company or any of its subsidiaries and any director providing for benefits upon termination of employment.

Change of Control Benefits

We seek to balance the potential costs of change of control provisions with the costs that would arise from fear of job loss and other distractions that may result from potential, rumored or actual changes of control.

As a result, after careful evaluation of the implications and economics of a change of control plan, on September 4, 2014, our board of directors adopted a change of control plan, which was amended by our board of directors on December 11, 2014 applicable to certain of our executive officers and several of our senior employees, as implemented by change of control agreements or amendments to an existing agreement. On March 4, 2020 and November 5, 2020, our board of directors decided to extend the benefits of the change of control plan adopted in 2014 to also cover any members of the Cellectis executive committee not already covered by the plan adopted in 2014. On September 15, 2022, our board of directors amended the change of control plan applicable to all our executive officers including future executive officers.

Accordingly, as of the date of this Annual Report, the change of control plan applies with respect to each member of the executive committee of Cellectis: Dr. Choulika (Chief Executive Officer, and Director), Dr. Mark Frattini (Chief Medical Officer), Dr. Steve Doares (Senior Vice President, US Manufacturing and Site Head), Dr. Phillippe Duchateau (Chief Scientific Officer), Ms. Kyung Nam-Wortman (Executive Vice President, Chief Human Resources Officer), Mr. Stephan Reynier (Chief Regulatory and Compliance Officer), Dr. David Sourdive (Executive Vice President CMC and Manufacturing, and Director), Mr. Arthur Stril (Chief Business Officer), Dr. Bing Wang (Chief Financial Officer), and Ms. Marie-Bleuenn Terrier (General Counsel). The change of control plan also applies to Ms. Delphine Jay (Human Resources Director), and Dr. Laurent Poirot (Senior Vice President Immunology).

Pursuant to the amended change of control plan applicable to our executive officers, a severance package shall be paid if, within the 24-month period following a change of control of Cellectis S.A., one of the following triggering event occurs, in each case without the agreement of such executive officer:

Pursuant to the change of control plan applicable to certain of our senior managers (i.e. Mrs Delphine Jay and Dr. Laurent Poirot), a severance package shall be paid if, within the 36-month period following a change of control of Cellectis S.A., the following triggering event occurs, without the agreement of such employee: termination (including by non-renewal) of such person’s employment other than for gross misconduct (faute lourde).

Under the change of control plan, the severance package shall be equal to 24 months of compensation increased by an amount equal to the annual performance bonus to which the senior managers or executive officers concerned may be entitled for the year of their departure (or for Dr. Choulika only, two times such target bonus), or, in the absence of such a target bonus, 1.5 times the last annual bonus paid to them during the 12 months prior to their departure. The US executive officers are also eligible for 12 months medical benefits.

The severance package shall be in addition to any legal and conventional severance payments owed to the employees or executives concerned under applicable law.

A “change of control” is defined by reference to Article L.233-3 of the French Commercial Code, which provides that one or more persons acting alone or in concert are considered to control a company if (1) they have direct or indirect ownership of a majority of the voting rights or a proportion of the voting rights allowing de facto control of the decisions made by the shareholders, provided that such control is presumed if said persons hold more than 40% of the voting rights and no shareholder holds a greater proportion thereof; or (2) they have the power to appoint or dismiss a majority of the board of directors.

Limitations on Liability and Indemnification Matters

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Under French law, provisions of By-laws that limit the liability of directors and officers are prohibited. However, French law allows sociétés anonymes to contract for and maintain liability insurance against civil liabilities incurred by any of their directors and officers involved in a third-party action, provided that they acted in good faith and within their capacities as directors or officers of the company. Criminal liability cannot be indemnified under French law, whether directly by the company or through liability insurance.

We maintain customary liability insurance coverage for our directors and executive officers, including insurance against liability under the Securities Act. With certain exceptions and subject to limitations on indemnification under French law, this insurance coverage will provide for indemnification for damages and expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding arising out of his or her actions in that capacity. We believe that this insurance coverage is necessary to attract qualified directors and executive officers.

This insurance coverage may discourage shareholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duty. It also may have the effect of reducing the likelihood of derivative litigation against directors and executive officers, even though such an action, if successful, might otherwise benefit us and our shareholders. Furthermore, a shareholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to this insurance coverage.

Certain of our non-employee directors may, through their relationships with their employers or partnerships, be insured against certain liabilities in their capacity as members of our board of directors.

Equity Incentives

We believe that our ability to grant equity awards is a valuable and necessary compensation tool that allows us to attract and retain the best available personnel for positions of substantial responsibility, provides additional incentives to employees and promotes the success of our business. In accordance with French corporate law and tax considerations, we have granted several different equity incentive instruments to our directors, executive officers, employees and other service providers. These are:

Our board of directors’ authority to grant these equity incentive instruments and the aggregate number of shares authorized to be granted under these instruments must be approved by a two-thirds majority of the votes cast of our shareholders present, represented or voting by mail at the relevant extraordinary shareholders’ meeting. Such extraordinary general meeting shall determine the aggregate amount of equity incentive instruments to be granted and the period during which such authorization may be used by our board of directors, which cannot exceed 18 months for non-employee warrants and employee warrants and 38 months for stock option and restricted (free) shares, in each case beginning from the date of the applicable shareholders’ approval.

The authority of our board of directors to grant equity incentives may be extended or increased only by extraordinary shareholders’ meetings. As a result, we typically request that our shareholders authorize new pools of equity incentive instruments at every annual shareholders’ meeting and cancel the unallocated portions of the previous pools.

Employee warrants and non-employee warrants are usually granted under similar terms. They expire ten years after the date of grant if not exercised earlier according to their vesting schedule (see below). In general, employee warrants (BSPCE) and non-employee warrants (BSA) no longer continue to vest following termination of the employment, office or service of the holder and all vested shares must be exercised within post-termination exercise periods set forth in the applicable equity award grant documents. In the event of certain changes in our share capital structure, such as a consolidation or share split or dividend, French law and applicable equity award grant documentation provide for appropriate adjustments of the numbers of shares issuable and/or the exercise price of the outstanding warrants or share options.

Non-Employee Warrants (BSA)

Non-employee warrants are granted by our board of directors to third-party service providers, consultants and non-employee directors of the Company. In addition to any exercise price payable by a holder upon the exercise of any non-employee warrant, non-employee warrants need to be subscribed for at fair market value and in any case at a price at least equal to five percent (5%) of the volume weighted average price for a company share on the market or markets on which the company shares are listed during the five (5) trading days prior to the date of the grant of said non-employee warrant by the board of directors (rounded up to the next euro cent, if necessary).

Pursuant to delegations granted at our annual shareholders’ meeting, our board of directors determines the recipients, dates of grant and exercise price of non-employee warrants, the number of non-employee warrants to be granted and the terms and conditions thereof, including their vesting schedule. The term of each non-employee warrant is generally 10 years from the date of grant.

Our non-employee warrants are generally granted subject to a three-year vesting, subject to continued service.

As of December 31, 2023, 3,118,063 non-employee warrants exercisable for an aggregate of 3,118,063 ordinary shares at a weighted average exercise price of €4.61 per share, were outstanding. As of December 31, 2023, 228,875 of the 3,118,963 warrants are held by certain of our directors and some of our consultants and exercisable, and 2,779,188 he 3,118,963 warrants are held by the EIB.

Free Shares

Under our 2012, 2013, 2014, 2015, 2018, Second 2018, 2021, 2022 and 2023 Free Share Plans, or collectively the Free Shares Plans, we have granted free shares to certain of our employees and officers. Our current plan, the 2023 Free Share Plan, was adopted by our board of directors on August 3, 2023 according to the authorization granted by the combined ordinary and extraordinary shareholders’ general meeting dated June 27, 2023.

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Free shares may be granted to any individual employed by us or by any affiliated company. Free shares may also be granted to our Chief Executive Officer. However, no free share may be granted to a beneficiary holding more than 10% of our share capital or to a beneficiary who would hold more than 10% of our share capital as a result of such grant.

Our board of directors has the authority to administer the Free Share Plans.

Pursuant to the shareholders authorization dated June 27, 2023, the maximum aggregate number of ordinary shares, which may be issued is 2,779,188, provided that our board of directors may decide of new grant of free shares only under our current 2023 Free Share Plan and within the overall limit on the amount of issuance made to grant free shares and upon exercise of stock options, which is 2,779,188. As of the date of this Annual Report, 448,262 ordinary shares remain available for issuance under the 2023 Free Share Plan and 2023 Stock Option Plan.

Subject to the terms of the Free Share Plans, our board of directors determines the recipients, the dates of grant, the number of free shares to be granted and the terms and conditions of the free shares, including the length of their vesting period (starting on the grant date, during which the beneficiary holds a right to acquire shares for free but has not yet acquired any shares) and holding period (starting when the shares are issued and definitively acquired but may not be transferred by the recipient) within the limits determined by the shareholders.

For the 2012, 2013, 2014 and 2015 Free Shares Plans, our shareholders have determined that the vesting period must be at least two years from the date of grant and the holding period must be two years from the end of the vesting period, with no holding period applicable to beneficiaries for whom the vesting period was four years or longer.

For the Second 2018 Free Share Plan, our shareholders have determined that the vesting period must be at least one year from the date of grant and the holding period must be one year from the end of the vesting period, with no holding period applicable to beneficiaries for whom the vesting period was two years or longer.

For the 2021, 2022 and 2023 Free Share Plans, our shareholders have determined that the vesting period must be at least three years from the date of grant with no holding period applicable, and that the vesting of free shares granted to our corporate officer and members of our executive committee are subject to performance conditions.

The board of directors has the authority to modify awards outstanding under our Free Share Plans, subject to the consent of the beneficiary for any modification adverse to such beneficiary. For example, the board has the authority to release a beneficiary from the continued service condition during the vesting period after the termination of the employment.

The free shares granted under the Free Share Plans will be definitively acquired at the end of the vesting period as set by our board of directors subject to continued service during the vesting period, except if the board releases a given beneficiary from this condition upon termination of his/her employment contract. At the end of the vesting period, the beneficiary will be the owner of the shares. However, the shares may not be sold, transferred or pledged during the holding period. In the event of disability before the end of the vesting period, the free shares shall be definitively acquired by the beneficiary on the date of disability. In the event the beneficiary dies during the vesting period, the free shares shall be definitively acquired at the date of the request of allocation made by his or her beneficiaries in the framework of the inheritance provided that such request is made within six months from the date of death.

Stock Options

Under our 2015, 2016, 2017, 2018, 2021, 2022 and 2023 Stock Options Plans, or collectively the Stock Options Plans, we have granted stock options to certain of our employees, officers and chairman of the board of directors. Our current plan, the 2022 Stock Option Plan, was adopted by our board of directors on September 15, 2022 according to the authorization granted by the combined ordinary and extraordinary shareholders’ general meeting dated June 27, 2023.

The Stock Options Plans follow the same rules. Stock Options issued pursuant to the Stock Option Plans provide the holder with the right to purchase a specified number of ordinary shares from the Company at a fixed exercise price payable at the time the Stock Option is exercised, as determined by our board of directors. The Stock Option Plans generally provides that the exercise price for any Stock Option shall be at least equal to the highest closing price of a share of the Company on Euronext Growth or Nasdaq prior to the date of grant, without in any event be less than ninety- five percent (95%) of the average selling prices of a share at close of trading on said market quoted during the twenty trading days immediately preceding the day of our board of directors decision to grant the options.

Pursuant to the shareholders authorization dated June 27, 2023, the maximum aggregate number of ordinary shares, which may be is 2,779,188, provided that our board of directors may decide of new grant of stock options only under our current 2023 Stock Option Plan, and within the overall limit on the amount of issuance made to grant free shares and upon exercise of stock options, which is 2,779,188. Incentive stock options and non-qualified stock options may be granted under the Stock Option Plans, except for the 2021, 2022 and 2023 Stock Options under which only non-qualified stock options are available. As of the date of this Annual Report 411,120 ordinary shares remain available for issuance under the 2023 Stock Option Plan and 2023 Free Share Plan.

For the 2021, 2022 and 2023 Stock Options Plans, our shareholders have determined that the vesting period must be at least three years from the date of grant, and that the vesting of stock options granted to our corporate officer and members of our executive committee are subject to performance conditions.

Stock options may be granted to any individual employed by us or by any affiliated company. Stock options may also be granted to the chairman of our board of directors, our chief executive officer and to our deputy chief executive officers. No stock options may be granted to a beneficiary holding more that 10% of our share capital.

Our board of directors has the authority to administer and interpret the Stock Option Plans. Subject to the terms of the Stock Option Plans, our board of directors determines the recipients, the dates of grant, the exercise price of the stock options, the number of stock options to be granted and the terms and conditions of the stock options, including the length of their vesting period. Our board of directors is not required to grant stock options with vesting and exercise terms that are the same for every participant.

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The term of each stock option granted under the Stock Option Plans will generally be ten years from the date of grant. Further, stock options will generally terminate on the earlier of when the beneficiary ceases to be an employee or the Company or upon certain transactions involving the Company. Under the 2015, 2016, 2018, and 2021 Stock Options Plans, in the event of a voluntary retirement of the beneficiary, the beneficiary will continue to benefit from the stock options which may be exercised according to the vesting schedule decided by the board of directors during the grant of the corresponding stock options until their expiration date.

The board of directors has the authority to modify awards outstanding under our Stock Option Plans, subject to the written consent of the beneficiary for any modification adverse to such beneficiary. For example, the board has the authority to extend a post-termination exercise period.

Stock Options granted under the Stock Option Plans generally may not be sold, transferred or pledged in any manner other than by will or by the laws of descent or distribution. In the event of disability, unless otherwise resolved by our board of directors, the beneficiary’s right to exercise the vested portion of his or her option generally terminates six months after the last day of such beneficiary’s service, but in any event no later than the expiration of the maximum term of the applicable stock options. In the event the beneficiary dies during the vesting period, then, unless otherwise resolved by our board of directors, the beneficiary’s estate or any recipient by inheritance or bequest may exercise any vested portion within the six months following the date of death, but in any event no later than the expiration of the maximum term of the applicable stock options.

During the year ended December 31, 2023:

Board Composition

Under French law and our By-laws, our board of directors must be composed of between three and eighteen members. Within this limit, the number of directors is determined by our shareholders. Directors are elected, re-elected and may be removed at a shareholders’ general meeting with a simple majority of the votes cast of our shareholders. Pursuant to our By-laws, our directors are elected for three-year terms. In accordance with French law, our By-laws also provide that our directors may be removed with or without cause by the votes cast of at least a majority of the shareholders present, represented by a proxy or voting by mail at the relevant ordinary shareholders’ meeting, and that any vacancy on our board of directors resulting from the death or resignation of a director, provided there are at least three directors remaining, may be filled by vote of a majority of our directors then in office provided that there has been no shareholders meeting since such death or resignation. Directors chosen or appointed to fill a vacancy shall be elected by the board for the remaining duration of the current term of the replaced director. The appointment must then be ratified at the next shareholders’ general meeting. In the event the board would be composed of less than three directors as a result of a vacancy, the remaining directors shall immediately convene a shareholders’ general meeting to elect one or several new directors so there are at least three directors serving on the board, in accordance with French law.

We currently have nine directors. The following table sets forth the names of our directors, the years of their initial appointment as directors and the expiration dates of their current term.

 

Name		Current Position		Year of Initial Appointment		Term Expiration Year
Jean-Pierre Garnier, M.D.		Chairman and Director		2020		2026
André Choulika, Ph.D.		Director and CEO		1999		2024
David Sourdive, Ph.D.		Director and Deputy CEO		2000		2024
Pierre Bastid		Director		2011		2026
Laurent Arthaud		Director		2011		2026
Cécile Chartier		Director		2023		2026
Axel-Sven Malkomes		Director		2022		2025
Rainer Boehm		Director		2017		2026
Donald A. Bergstrom		Director		2022		2025

 

Pursuant to French regulations, any company having more than 50 employees must, implement a Comité Social et Économique or Social and Economic Committee, which replaces and regroups the former various employee representative bodies, including the Délégation Unique du Personnel initially in place at Cellectis. We proceeded with the re-election, for a two-year term, of this Social and Economic Committee on September 14, 2022.

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Director Independence

As a foreign private issuer, under the listing requirements and rules of Nasdaq, we are not required to have independent directors on our board of directors, except with respect to our audit and finance committee.

Our board of directors has determined that, applying the applicable rules and regulations of the SEC and the Nasdaq listing standards, all of our directors, except Drs. Choulika and Sourdive and Mr. Arthaud, qualify as “independent directors”. In making such determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances our board of directors deemed relevant in determining the director’s independence, including the number of ordinary shares beneficially owned by the director and his or her affiliated entities.

Role of the Board in Risk Oversight

Our board of directors is primarily responsible for the oversight of our risk management activities and has delegated to the audit and finance committee the responsibility to assist our board of directors in this task. While our board of directors oversees our risk management, our management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks we face. Our board of directors expects our management to consider risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities and to effectively implement risk management strategies adopted by the board.

Corporate Governance Practices

As a French société anonyme, we are subject to various corporate governance requirements under French law. In addition, as a foreign private issuer listed on the Nasdaq Global Market, we are subject to the Nasdaq corporate governance listing standards. However, the Nasdaq Global Market’s listing standards provide that foreign private issuers, as defined in the rules promulgated under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), are permitted, pursuant to Nasdaq Listing Rule 5615(a)(3), to follow home country corporate governance practices in lieu of the Nasdaq Listing Rules, with certain exceptions. Certain corporate governance practices in France may differ significantly from Nasdaq’s corporate governance listing standards. For example, neither the corporate laws of France nor our By-laws require that (i) a majority of our directors be independent, (ii) our compensation committee include only independent directors, or (iii) our independent directors hold regularly scheduled meetings at which only independent directors are present. Other than as set forth below, we currently intend to comply with the Nasdaq corporate governance listing standards to the extent possible under French law. However, we may choose to change such practices to follow home country practice in the future.

Although we are a foreign private issuer, we are required to comply with Rule 10A-3 under the Exchange Act, relating to audit committee composition and responsibilities. Rule 10A-3 provides that the audit committee must have direct responsibility for the nomination, compensation and choice of our auditors, as well as control over the performance of their duties, management of complaints made, and selection of consultants. Under Rule 10A-3, if the laws of a foreign private issuer’s home country require that any such matter be approved by the board of directors or the shareholders of the Company, the audit committee’s responsibilities or powers with respect to such matter may instead be advisory. Under French law, the audit committee may only have an advisory role and appointment of our statutory auditors, in particular, must be decided by our shareholders at our annual meeting. In addition, in accordance with French law, committees of our board of directors will only have an advisory role and can only make recommendations to our board of directors. As a result, decisions will be made by our board of directors taking into account nonbinding recommendations of the relevant board committee.

Nasdaq Listing Rules require that a listed company specify that the quorum for any meeting of the holders of share capital be at least 331/3% of the outstanding shares of the company’s common voting stock. We follow our French home country practice, rather than complying with this Nasdaq Listing Rule. Consistent with French Law, our By-laws provide that when first convened, general meetings of shareholders may validly convene only if the shareholders present or represented hold at least (1) 20% of the voting shares in the case of an ordinary general meeting or of an extraordinary general meeting where shareholders are voting on a capital increase by capitalization of reserves, profits or share premium, or (2) 25% of the voting shares in the case of any other extraordinary general meeting. If such quorum required by French law is not met, the meeting is adjourned. There is no quorum requirement under French law when an ordinary general meeting or an extraordinary general meeting where shareholders are voting on a capital increase by capitalization of reserves, profits or share premium is reconvened, but the reconvened meeting may consider only questions that were on the agenda of the adjourned meeting. When any other extraordinary general meeting is reconvened, the required quorum under French law is 20% of the shares entitled to vote. The reconvened meeting may consider only questions that were on the agenda of the adjourned meeting. If a quorum is not met at a reconvened meeting requiring a quorum, then the meeting may be adjourned for a maximum of two months.

 

Finally, we follow French law with respect to shareholder approval requirements in lieu of the various shareholder approval requirements of Nasdaq Listing Rule 5635, which requires a Nasdaq listed company to obtain shareholder approval prior to certain issuances of securities, including: (a) issuances in connection with the acquisition of the stock or assets of another company if upon issuance the issued shares will equal 20% or more of the number of shares or voting power outstanding prior to the issuance, or if certain specified persons have a 5% or greater interest in the assets or company to be acquired (Nasdaq Listing Rule 5635(a)); (b) issuances or potential issuances that will result in a change of control of us (Nasdaq Listing Rule 5635(b)); (c) issuances in connection with equity compensation arrangements (Nasdaq Listing Rule 5635(c)); and (d) 20% or greater issuances in transactions other than public offerings, as defined in the Nasdaq rules (Nasdaq Listing Rule 5635(d)). Under French law, our shareholders may approve issuances of equity, as a general matter, through the adoption of delegation of authority resolutions at the Company’s shareholders’ meeting pursuant to which shareholders may delegate their authority to the board of directors to increase the Company’s share capital within specified parameters set by the shareholders, which may include a time limitation to carry out the share capital increase, the cancellation of their preferential subscription rights to the benefit of named persons or a category of persons, specified price limitations and/or specific or aggregate limitations on the size of the share capital increase. Due to differences between French law and corporate governance practices and Nasdaq Listing Rule 5635, we follow our French home country practice, rather than complying with this Nasdaq Listing Rule.

Board Committees

Our board of directors has established an audit and finance committee, a compensation committee and an environmental and social committee, each of which operates pursuant to a separate charter adopted by our board of directors. The composition and functioning of all of our committees will comply with all applicable requirements of the French Commercial Code, the Exchange Act, Nasdaq, and the rules and regulations of the SEC.

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In accordance with French law, committees of our board of directors will only have an advisory role and can only make recommendations to our board of directors. As a result, decisions will be made by our board of directors taking into account non-binding recommendations of the relevant board committee.

Audit and Finance Committee. Our audit and finance committee reviews our internal accounting procedures, consults with and reviews the services provided by our independent registered public accountants and assists our board of directors in its oversight of our corporate accounting and financial reporting. Currently, our audit and finance committee is comprised of three members of the board of directors: Messrs. Malkomes, Bastid, and Bergstrom.

The duties specifically assigned to the audit and finance committee by our board of directors include, but are not limited to:

with regard to our financial statements:

with regard to internal controls:

with regard to external controls:

with regard to risks:

Compensation Committee. Our compensation committee assists our board of directors in reviewing the compensation of our executive officers and directors and makes recommendations in respect thereof. Currently, our compensation committee is comprised of two members of the board of directors: Mr. Boehm and Ms. Chartier. The principal duties and responsibilities of our compensation committee include, but are not limited to:

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Environmental and Social Committee. Our environmental and social committee assists our board in reviewing the environmental and social matters within the Company. Currently, our environmental and social committee, which is included in the Audit and Finance Committee, is comprised of three members of the board of directors: Mr. Malkomes, Mr. Bastid and Don Bergstrom. The principal duties and responsibilities of our environmental and social committee include but are not limited to:

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, that is applicable to all of our employees, executive officers and directors. The Code of Conduct is available on our website at www.cellectis.com. Our board of directors will be responsible for overseeing the Code of Conduct and will be required to approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website.

As of December 31, 2023, we had 221 employees, 216 of whom were full-time, 57 of whom hold M.D, Ph.D. or Pharm.D. degrees, 169 of whom were engaged in research and development activities and 52 of whom are engaged in business development, commercial, legal, finance, information systems, human resources or administrative support. As of December 31, 2023, 137 of our employees were located in France and 84 of our employees were located in the United States. None of our employees is subject to a collective bargaining agreement. We consider our relationship with our employees to be good.

For information regarding the share ownership of our directors and executive officers, see “Item 6.B—Compensation” and “Item 7.A—Major Shareholders.”

 

 

F. Disclosure of Actions to Recover Erroneously Awarded Compensation

 

Because no annual period presented in this Annual Report on Form 20-F is being restated, we are not required to check the box on the cover page hereof regarding the correction of an error to previously issued financial statements. The Company did not award any incentive-based compensation based on any financial measure affected by the above-mentioned accounting errors

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of February 14, 2024 for:

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares that can be acquired within 60 days of February 15, 2024. The percentage ownership information shown in the table is based upon 71,751,201 ordinary shares outstanding as of February 15, 2024.

Except as otherwise indicated, all of the shares reflected in the table are ordinary shares and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.

In computing the number of ordinary shares beneficially owned by a person and the percentage ownership of that person, we deemed outstanding ordinary shares subject to options and warrants held by that person that are immediately exercisable or exercisable within 60 days of February 15, 2024.

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We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*). The information in the table below is based on information known to us or ascertained by us from public filings made by the shareholders in France. Except as otherwise indicated in the table below, addresses of the directors, executive officers and named beneficial owners are in care of Cellectis, 8, rue de la Croix Jarry, 75013 Paris, France.

 

Name of Beneficial Owner		Ordinary Shares Beneficially Owned
		Number		Percentage
5% Shareholders:
AstraZeneca (1)		16,000,000		22.24%
Bpifrance Participations (2)		6,913,153		9.61%
Long Focus Capital Management LLC (3)		4,615,293		6.41%
Directors and Executive Officers:
André Choulika, Ph.D. (4)		2,361,168		3.28%
David Sourdive, Ph.D. (5)		1,897,930		2.64%
Philippe Duchateau, Ph.D. (6)		786,296		1.09%
Marie-Bleuenn Terrier (7)		768,211		1.07%
Stephan Reynier (8)		413,686		*
Mark Frattini (9)		122,700		*
Steven Doares (10)		110,956		*
Kyung Nam-Wortman (11)		99,426		*
Arthur Stril (12)		99,230		*
Bing Wang, PhD(13)		77,000		*
Pierre Bastid (14)		2,019,753		2.81%
Laurent Arthaud		—		*
Rainer Boehm (15)		40,000		*
Jean-Pierre Garnier (16)		64,369		*
Donald A. Bergstrom		—		*
Axel-Sven Malkomes		—		*
Cécile Chartier		—		*
All directors and executive officers as a group (17 persons)		8,860,725		12.31%

 

* Represents beneficial ownership of less than one per cent.

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Voting Rights

A double voting right is attached to each registered share which is held in the name of the same shareholder for at least two years. Any of our principal shareholders who have held our ordinary shares in registered form for at least two years have this double voting rights. Until they convert into ordinary shares, the "class A" convertible preferred shares would have single voting rights and would not carry any double voting right at any moment, and the "class B" would carry no voting rights except on any distribution of dividends or reserves. Other than as stated above, none of our principal shareholders has voting rights different than our other shareholders.

Shareholders in the United States

As of June 30, 2023 and December 31, 2023, we estimate that approximately 22.4% and 27.9%, respectively, of our outstanding ordinary shares were held in the United States.

Since January 1, 2023, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our outstanding voting securities and their affiliates, which we refer to as our related-parties.

Transactions with Our Principal Shareholders, Directors and Executive Officers

BPI, which is a shareholder of Cellectis, participated in a bank syndicate that granted to Cellectis the PGE loan. Since January 1, 2023, we have made payments of $1.6 million in principal and $0.2 million in interest pursuant to the PGE loan. For more information, see “Item 5.B—Liquidity and Capital Resources.”

We entered into a transfer of receivables agreement with BPI, to provide to Cellectis financing of 80% of the tax receivables due to Cellectis in connection with the research tax credit (Crédit Impôts Recherche). Pursuant to this agreement and according to market standards, BPI advanced 5,456,000 € over the period from June 15, 2022 to June 15, 2023, with a commitment fee to be charged to Cellectis of 0.40%. The agreement was amended to extend the period to June, 15, 2024.

We entered into a transfer of receivables agreement with BPI , to provide to Cellectis financing of 80% of the tax receivables due to Cellectis in connection with the research tax credit (Crédit Impôts Recherche). Pursuant to this agreement and according to market standards, Bpifrance advances 5,284,000 € over the period from July 15, 2023 to July 15, 2024, with a commitment fee to be charged to Cellectis of 0.40%.

BPI, has signed a grant and refundable advance to partially support a R&D program related to Cellectis UCART 20x22 for up to €6.4 million subject to specific conditions. In 2023, Cellectis received $3.1 million pursuant to this advance.

As part of the AZ JRCA with AZ Ireland, twenty five genetic targets have been exclusively reserved for AZ Ireland, from which up to 10 candidate products could be explored for development. AZ Ireland will have an option for a worldwide exclusive license on the candidate products, to be exercised before IND filing. Pursuant to the AZ JRCA, Cellectis’ research costs under the collaboration will be funded by AZ Ireland and Cellectis has received an upfront payment of $25 million in November 2023. For more information, see “Item 4. Information on the Company—B. Business Overview—Our Licensing Relationships.”

Agreements with Our Directors and Executive Officers

Director and Executive Officer Compensation

See “Item 6.B—Compensation of Directors and Executive Officers” for information regarding compensation of directors and executive officers and service agreement with Director.

Equity Awards

Since January 1, 2023, we have granted equity awards to certain of our directors and executive officers:

See “Item. 7A—Major Shareholders” for information regarding equity awards to certain of our executive officers.

Indemnification Agreements

See “Item. 6B—Limitations on Liability and Indemnification Matters.”

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

Related-Party Transactions Policy

We have adopted a related-party transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related-party transactions. The policy became effective immediately upon the completion of our initial public offering.

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For purposes of our policy only, a related-party transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related parties are, were or will be participants, which are not (1) in the ordinary course of business, (2) at arms’ length and (3) in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. For purposes of this policy, a related party is any executive officer, director (or nominee for director) or beneficial owner of more than five percent (5%) of any class of our voting securities, including any of their respective immediate family members and any entity owned or controlled by such persons.

Under the policy, related-party transactions must be reported to us by all related parties. If a transaction has been identified as a related-party transaction, our management must present information regarding the related-party transaction to our board of directors for review, consideration and approval. Certain transactions may be presented to the Audit and Finance Committee, which will determine whether the transaction is a related-party transaction, in which case the related-party transaction will be submitted to our board of directors. The presentation will include a description of, among other things, the material facts, the interests in the transaction, direct and indirect, of the related parties, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third-party or to or from employees generally. In addition, under our Code of Business Conduct and Ethics, our employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related-party transactions, our board of directors, or to the extent permitted by applicable law an independent committee of our board of directors, will take into account the relevant available facts and circumstances including, but not limited to:

The policy requires that, in determining whether to approve, ratify or reject a related-party transaction, our board of directors, or if permitted by applicable law an independent committee of our board of directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our shareholders, as our board of directors, or if permitted by applicable law an independent committee of our board of directors, determines in the good faith exercise of its discretion.

Not applicable.

ITEM 8. FINANCIAL INFORMATION

Our consolidated financial statements are appended at the end of this Annual Report starting at page F-1, and form a part hereof.

Legal Proceedings

From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We have initiated an arbitration proceeding through the Centre de Médiation et d'Arbitrage de Paris, which, if the arbitral tribunal does not rule in our favor, may have negative impact on our business. For more information, see "Risk Factors - Risks Related to Our Reliance on Third Parties - Servier's discontinuation of its involvement in the development of CD19 Products and related disagreements may have adverse consequences". Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Dividend Distribution

Approval of Dividends. Pursuant to French law, our board of directors may propose a dividend and/or reserve distribution for approval by the shareholders at the annual ordinary general meeting related to the statutory financial statements of Cellectis S.A.

Upon recommendation of our board of directors, our shareholders may decide to allocate all or part of any distributable profits to special or general reserves, to carry them forward to the next fiscal year as retained earnings or to allocate them to the shareholders as dividends. However, dividends may not be distributed when as a result of such distribution, our net assets are or would become lower than the amount of the share capital plus the amount of the legal reserves which, under French law, may not be distributed to shareholders (the amount of our share capital plus the amount of our legal and other reserves which may not be distributed was equal to $4.1 million on December 31, 2023). Moreover, Cellectis accumulated deficit is $112.9 million as of December 31, 2023 which only corresponds to 2023 net result. During the annual shareholders meeting of June 27, 2023, the shareholders, in accordance with French Law, approved the absorption of $134.1 million of retained earnings into share premium. This transaction has no impact on the total equity, comprehensive income (loss), assets (including cash) nor liabilities.

Our board of directors may distribute interim dividends after the end of the fiscal year but before the approval of the financial statements for the relevant fiscal year when the interim balance sheet, established during such year and certified by an auditor, reflects that we have earned distributable profits since the close of the last financial year, after recognizing the necessary depreciation and provisions and after deducting prior losses, if any, and the sums to be allocated to reserves, as required by law or the By-laws, and including any retained earnings. The amount of such interim dividends may not exceed the amount of the profit so defined.

Distribution of Dividends. Dividends are distributed to shareholders proportionally to their shareholding interests. In the case of interim dividends, distributions are made to shareholders on the date set by our board of directors during the meeting in which the distribution of interim dividends is approved. The actual dividend payment date is decided by the shareholders at an ordinary general shareholders’ meeting or by our board of directors in the absence of such a decision by the shareholders. Shareholders that own shares on the actual payment date are entitled to the dividend.

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Dividends may be paid in cash or, if the shareholders’ meeting so decides, in kind, provided that all the shareholders receive a whole number of assets of the same nature paid in lieu of cash. Our By-laws provide that, subject to a decision of the shareholders’ meeting taken by ordinary resolution, each shareholder may be given the choice to receive his dividend in cash or in shares.

Calyxt deconsolidation

On November 23, 2022, Calyxt received a non-binding letter of intent from Cibus Global regarding a potential reverse merger with Calyxt (with Calyxt absorbing Cibus Global). With Calyxt as the surviving entity, current equity holders of Cibus Global would receive shares of Calyxt common stock issued for the purpose of the transaction. On January 13, 2023, Calyxt, Calypso Merger Subsidiary, LLC, a wholly-owned subsidiary of Calyxt, Cibus Global and certain other parties, entered into the Merger Agreement with respect to this Merger. Upon completion of the proposed Merger, Cellectis S.A. was expected to own approximately 2.4% of the equity interests of the merged combined company, resulting in a loss of control by Cellectis over Calyxt.

In this context, since November 23, 2022, and for so long as Cellectis retained control over Calyxt, the assets and liabilities of Calyxt are presented in the financial statements as non-current assets and liabilities held for sale for all periods presented, in accordance with IFRS 5. The statements of consolidated operations, statements of consolidated comprehensive income and statements of consolidated cash flows reflect the presentation of Calyxt as a discontinued operation for all period presented, with a restatement of the 2022 statements.

On May 31, 2023 immediately prior to the consummation of the Merger, Cellectis S.A.’s ownership interest in Calyxt amounted to 48.0%. Cellectis’ voting rights continued to give Cellectis the power to direct relevant activities of Calyxt and therefore Calyxt continued to be consolidated through the May 31, 2023 consummation of the Merger. On May 31, 2023, Calyxt consummated the Merger, and effective on June 1, 2023, the combined company operates under the name of Cibus, Inc.

Among other things, as part of the Merger, each share of Calyxt’s common stock existing and outstanding immediately prior to the Merger remained outstanding as a share of Class A Common Stock, without any conversion or exchange thereof, and Calyxt issued approximately 16,527,484 shares of Class A Common Stock to unitholders of Cibus Global based on an exchange ratio set forth in the Merger Agreement. Cellectis’ equity interest in Cibus was reduced to 2.9% after the closing of the Merger, which resulted in Cellectis losing control of Cibus. Consequently, Calyxt was deconsolidated on June 1, 2023. Calyxt’s results are included in the Group’s results until May 31, 2023, and continue to be presented as the results of discontinued operations until that date.

 

Collaboration and Investment Agreements with AstraZeneca

 

Joint Research and Collaboration Agreement

 

On November 1, 2023, we and AZ Ireland entered into the AZ JRCA. Pursuant to the AZ JRCA, the parties will collaborate to develop up to 10 novel cell and gene therapy candidate products, selected from a larger pool of potential targets identified by AZ Ireland, for human therapeutic, prophylactic, palliative, and analgesic purposes. Each party will be responsible for performing research and development activities based on research plans to be agreed upon throughout the initial five-year collaboration term under the AZ JRCA. Cellectis granted AZ Ireland an exclusive option, on a candidate product by candidate product basis, to receive a worldwide, exclusive, royalty bearing, sublicenseable (under certain conditions) license under the Licensed Technology to exploit the relevant product candidate.

 

Initial Investment Agreement

 

AZ Holdings made an initial equity investment of $80 million in Cellectis by subscribing for 16,000,000 ordinary shares, at a price of $5,00 per share.

 

Subsequent Investment Agreement

 

On November 14, 2023, AZ Holdings and Cellectis entered into the Subsequent Investment Agreement, under which AZ Holdings would make a further investment in Cellectis of $140 million by subscribing for two newly created classes of convertible preferred shares of Cellectis : 10,000,000 "class A" convertible preferred shares and 18,000,000 "class B" convertible preferred shares. Until they convert into ordinary shares, the "class A" convertible preferred shares would have single voting rights and would not carry any double voting right at any moment, and the "class B" convertible preferred shares would carry no voting rights except on any distribution of dividends or reserves.

 

For more information, see “Item 4. Information on the Company—B. Business Overview—Our Licensing Relationships- Collaboration and Investmnet Agreements with AstraZeneca.”

 

 

 

 

 

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ITEM 9. THE OFFER AND LISTING

Our ADS have been listed on Nasdaq Global Market under the symbol “CLLS” since March 24, 2015. Prior to that date, there was no public trading market for ADSs. Our ordinary shares have been trading on Euronext Growth market of Euronext Paris under the symbol “ALCLS” since February 7, 2007. Prior to that date, there was no public trading market for ADSs or our ordinary shares.

Not applicable.

The ADS have been listed on Nasdaq Global Market under the symbol “CLLS” since March 24, 2015 and our ordinary shares have been listed on the Euronext Growth market of Euronext in Paris under the symbol “ALCLS” since February 7, 2007.

Not applicable.

Not applicable.

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

Not applicable.

Key Provisions of Our By-laws and French Law

The description below reflects the terms of our By-laws, and summarizes the material rights of holders of our ordinary shares under French law. Please note that this is only a summary and is not intended to be exhaustive. For further information, please refer to the full version of our By-laws which is included as an exhibit to this Annual Report.

Corporate Purpose

Our corporate purpose, which is set forth in Article 3 of our By-laws, in France and abroad includes:

Directors

Quorum and Voting. The board of directors may only deliberate if at least half of the directors attend the applicable meeting in the manner provided for in our By-laws. In particular, French law and the charter of the board of directors allow directors to attend meetings of the board of directors in person or, to the extent permitted by applicable law, by videoconference or other telecommunications arrangements. The board of directors may also take by written consultation certain decisions restrictively listed by French law.

In addition, our By-laws allow a director to grant another director a proxy to represent him or her at a meeting of the board of directors, but no director can hold more than one proxy at any meeting. Decisions of the board of directors are adopted by the majority of the voting rights held by the directors present or represented, it being specified that in case of a vote-split, the Chairman of the board of directors shall have a casting vote.

Directors’ Voting Powers on Proposal, Arrangement or Contract in which any Director is Materially Interested. Under French law, any agreement entered into (directly or through an intermediary) between us and any director that is not entered into (1) in the ordinary course of business and (2) under standard terms and conditions is subject to the prior authorization of the board of directors, excluding the vote of the interested director.

The foregoing requirements also apply to agreements between us and another company, provided that the company is not one of our wholly-owned subsidiaries, if one of our directors is the owner or a general partner, manager, director, general manager or member of the executive or supervisory board of the other company, as well as to agreements in which one of our directors has an indirect interest.

Directors’ Compensation. The aggregate amount of compensation (formerly named “jetons de présence”) of the board of directors is determined at the shareholders’ annual ordinary general meeting. The board of directors then divides all or part (at the board’s discretion) of this aggregate amount among some or all of its members by a simple majority of the votes cast.

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In addition, the board of directors may grant exceptional compensation (“rémunérations exceptionnelles”) to a director on a case-by-case basis for special and temporary assignments. The board of directors may also authorize the reimbursement of reasonable travel and accommodation expenses, as well as other expenses incurred by directors in the corporate interest.

Board of Directors’ Borrowing Powers. There are currently no limits imposed by our By-laws on the amounts of loans or borrowings that the board of directors may approve.

Directors’ Age Limits. The number of directors who are more than seventy-five (75) years old may not exceed one third of the directors in office. The Chairman of the Board cannot be more than eighty (80) years old.

Term of Director Office. Our By-laws provide that members of our board of directors are elected for a tenure of three years.

Employee Director Limits. The number of directors who are also party to employment contracts with the Company may not exceed one third of the directors in office.

Directors’ Share Ownership Requirements. None.

For a discussion of the information required by Item 10.B. 2 through 10, please refer to Exhibit 2.3 to this Annual Report, which is incorporated by reference herein.

Listing

Our ADSs have been listed on the Nasdaq Global Market under the symbol “CLLS” and our ordinary shares have been listed on the Euronext Growth market of Euronext in Paris under the symbol ALCLS”.

Transfer Agent and Registrar

The transfer agent and registrar for our ADSs is Citibank, N.A. The transfer agent and registrar for our ordinary shares is Société Générale Securities Services.

For information on our material contracts, please refer to Items 4, 6 and 7.B. of this Annual Report.

Under current French foreign exchange control regulations there are no limitations on the amount of cash payments that we may remit to residents of foreign countries (subject to the absence of any specific decision taken by the government otherwise). Laws and regulations concerning foreign exchange controls do, however, require that all payments or transfers of funds made by a French resident to a non-resident such as dividend payments be handled by an accredited intermediary. All registered banks and substantially all credit institutions in France are accredited intermediaries. In addition, there is a reporting obligation to a customs officer for transfer of cash in banknotes and coins of €10,000 or more carried in, or out of, the European Union.

Material U.S. Federal Income Tax Considerations

The following is a discussion of the material U.S. federal income tax consequences of owning and disposing of ADSs. This summary does not address any aspect of U.S. federal non-income tax laws, such as U.S. federal estate and gift tax laws, or state, local or non-U.S. tax laws, and does not purport to be a comprehensive description of all of the U.S. tax considerations that may be relevant to particular holders, such as the effects of section 451(b) of the Internal Revenue Code of 1986, as amended (the “Code”).

The discussion applies to you only if you hold the ADSs as capital assets for U.S. federal income tax purposes (generally, for investment). This section does not apply to you if you are a member of a special class of holders subject to special tax rules, including:

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This section is based on the Code, existing and proposed income tax regulations issued under the Code, legislative history, and judicial and administrative interpretations thereof, all as of the date of this Annual Report. All of the foregoing are subject to change at any time, and any change could be retroactive and could affect the accuracy of this discussion. In addition, the application and interpretation of certain aspects of the PFIC rules, referred to below, require the issuance of regulations which in many instances have not been promulgated and which may have retroactive effect. There can be no assurance that any of these regulations will be enacted or promulgated, and if so, the form they will take or the effect that they may have on this discussion. This discussion is not binding on the U.S. Internal Revenue Service, or IRS, or the courts. No ruling has been or will be sought from the IRS with respect to the positions and issues discussed herein, and there can be no assurance that the IRS or a court will not take a different position concerning the U.S. federal income tax consequences of an investment in the ADSs or that any such position would not be sustained.

YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF OWNING AND DISPOSING OF THE ADSs IN YOUR PARTICULAR SITUATION.

You are a “U.S. holder” if you are a beneficial owner of ADSs or are treated for U.S. federal income tax purpose as:

In addition, this discussion is limited to holders who are not resident in France for purposes of the income tax treaty between the United States and France.

If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of the ADSs, the U.S. tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. A holder of the ADSs that is a partnership and partners in such a partnership should consult their own tax advisors concerning the U.S. federal income tax consequences of owning and disposing of ADSs.

A “non-U.S. holder” is a beneficial owner of ADSs that is neither a U.S. holder nor a partnership for U.S. federal income tax purposes. Generally, holders of ADSs should be treated for U.S. federal income tax purposes as holding the ordinary shares represented by the ADSs.

Accordingly, no gain or loss will be recognized upon an exchange of ordinary shares for ADSs or an exchange of ADSs for ordinary shares. The U.S.

Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. holders of ADSs. Accordingly, the credibility of foreign taxes, if any, as described below, could be affected by actions taken by intermediaries in the chain of ownership between the holder of an ADS and the company.

PFIC Considerations

The Code provides special rules regarding certain distributions received by U.S. persons with respect to, and sales, exchanges and other dispositions, including pledges, of, shares of stock (including ordinary shares represented by ADSs) in a PFIC. A non-U.S. corporation will be treated as a PFIC for any taxable year in which either: (1) at least 75 % of its gross income is “passive income” or (2) at least 50 % of its gross assets during the taxable year (based on the average of the fair market values of the assets determined at the end of each quarterly period) are “passive assets,” which generally means that they produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, rents, royalties, gains from commodities and securities transactions, and gains from assets that produce passive income. In determining whether a foreign corporation is a PFIC, a pro rata portion of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.

Although the matter is not free from doubt, we do not believe that we were a PFIC for U.S. federal income tax purposes for the taxable year ended December 31, 2023. No assurances may be given at this time as to our PFIC status for the taxable year ended December 31, 2024 or future taxable years. PFIC status must be determined annually and therefore is subject to change. Because this determination is made annually at the end of each taxable year and is dependent upon a number of factors, some of which are beyond our control, including the amount and nature of our income, as well as on the market valuation of our assets (which may be determined in large part by reference to the market value of the ADSs and our ordinary shares, which may fluctuate substantially) and our spending schedule for our cash balances, and because certain aspects of the PFIC rules are not entirely certain, there can be no assurance that we were not a PFIC, that we are not or will not become a PFIC or that the IRS will agree with any position we take regarding our PFIC status. If we are not a PFIC during any taxable year in which you hold ADSs, then the remainder of the discussion under “Taxation—Material U.S. Federal Income Tax Considerations,” outside of this “— PFIC Considerations” portion may be relevant to you. U.S. holders should consult their tax advisors as to the applicability of the PFIC rules.

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A U.S. holder that holds ADSs during any taxable year in which we qualify as a PFIC is subject to special tax rules with respect to (a) any gain realized on the sale, exchange or other disposition of the ADSs and (b) any “excess distribution” by the corporation to the holder, unless the holder elects to treat the PFIC as a “qualified electing fund,” or QEF, or makes a “mark-to-market” election, each as discussed below. An “excess distribution” is that portion of a distribution with respect to ADSs that exceeds 125% of the annual average of such distributions over the preceding three-year period or, if shorter, the U.S. holder’s holding period for its ADSs. Excess distributions and gains on the sale, exchange or other disposition of ADSs of a corporation which was a PFIC at any time during the U.S. holder’s holding period are allocated ratably to each day of the U.S. holder’s holding period. Amounts allocated to the taxable year in which the disposition occurs and amounts allocated to any period in the shareholder’s holding period before the first day of the first taxable year that the corporation was a PFIC will be taxed as ordinary income (rather than capital gain) earned in the taxable year of the disposition. Amounts allocated to each of the other taxable years in the U.S. holder’s holding period are not included in gross income for the year of the disposition, but are subject to the highest ordinary income tax rates in effect for individuals or corporations, as applicable, for each such year and the interest charge generally applicable to income tax deficiencies will be imposed on the resulting tax attributable to each year. The tax liability for amounts allocated to years before the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ADSs cannot be treated as capital, even if a U.S. holder held such ADSs as capital assets.

If we are a PFIC for any taxable year during which a U.S. holder holds ADSs, then we generally will continue to be treated as a PFIC with respect to the holder for all succeeding years during which such holder holds ADSs, even if we no longer satisfy either the passive income or passive asset tests described above, unless the U.S. holder terminates this deemed PFIC status by making a “deemed sale” election. If such election is made, a U.S. holder will be deemed to have sold the ADSs at their fair market value on the last day of the last taxable year for which we were a PFIC, and any gain from such deemed sale would be subject to the excess distribution rules as described above. After the deemed sale election, the ADSs with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.

If we are or become a PFIC, the excess distribution rules may be avoided if a U.S. holder makes a QEF election effective beginning with the first taxable year in the holder’s holding period in which we are treated as a PFIC with respect to such holder. A U.S. holder that makes a QEF election with respect to a PFIC is required to include in income its pro rata share of the PFIC’s ordinary earnings and net capital gain as ordinary income and capital gain, respectively, subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge. If a foreign corporation ceases to be a PFIC, the U.S. holder’s QEF election would no longer require an annual income inclusion. However, cessation of a foreign corporation’s status as a PFIC will not terminate a QEF election and if the corporation becomes a PFIC again, an annual income inclusion may be required.

In general, a U.S. holder makes a QEF election by attaching a completed IRS Form 8621 to a timely filed (taking into account any extensions) U.S. federal income tax return for the year beginning with which the QEF election is to be effective. In certain circumstances, a U.S. holder may be able to make a retroactive QEF election. A QEF election can be revoked only with the consent of the IRS. In order for a U.S. holder to make a valid QEF election, the non-U.S. corporation must annually provide or make available to the holder certain information. For any taxable year in which we are a PFIC, we will determine whether we will provide to U.S. holders the information required to make a valid QEF election. There can be no assurance that we will make such information available for any taxable year in which we are or may be a PFIC.

As an alternative to making a QEF election, a U.S. holder may make a “mark-to-market” election with respect to its ADSs if the ADSs meet certain minimum trading requirements, as described below. If a U.S. holder makes a valid mark-to-market election for the first taxable year in which such holder holds (or is deemed to hold) ADSs in a corporation and for which such corporation is determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect of its ADSs. Instead, a U.S. holder that makes a mark-to-market election will be required to include in income each year an amount equal to the excess, if any, of the fair market value of the ADSs that the holder owns as of the close of the taxable year over the holder’s adjusted tax basis in the ADSs. The U.S. holder will be entitled to a deduction for the excess, if any, of the holder’s adjusted tax basis in the ADSs over the fair market value of the ADSs as of the close of the taxable year; provided, however, that the deduction will be limited to the extent of any net mark-to-market gains with respect to the ADSs included by the U.S. holder under the election for prior taxable years. The U.S. holder’s basis in the ADSs will be adjusted to reflect the amounts included or deducted pursuant to the election. Amounts included in income pursuant to a mark-to-market election, as well as gain on the sale, exchange or other disposition of the ADSs, will be treated as ordinary income. The deductible portion of any mark-to-market loss, as well as loss on a sale, exchange or other disposition of ADSs to the extent that the amount of such loss does not exceed net mark-to-market gains previously included in income, will be treated as ordinary loss. If a U.S. holder makes a valid mark-to-market election, any distributions made by us in a year in which we are a PFIC would generally be subject to the rules discussed below under “—Taxation of Dividends,” except the lower rate applicable to qualified dividend income would not apply. If we are not a PFIC when a U.S. holder has a mark-to-market election in effect, gain or loss realized by a U.S. holder on the sale of our ADSs will be a capital gain or loss and taxed in the manner described below under “—Taxation of Sale, Exchange or other Disposition of ADSs.”

The mark-to-market election applies to the taxable year for which the election is made and all subsequent taxable years, unless the ADSs cease to meet applicable trading requirements (described below) or the IRS consents to its revocation. The excess distribution rules generally do not apply to a U.S. holder for taxable years for which a mark-to-market election is in effect. If we are a PFIC for any year in which the U.S. holder owns ADSs but before a mark-to-market election is made, the interest charge rules described above will apply to any mark-to-market gain recognized in the year the election is made. Generally, if a foreign corporation ceases to be a PFIC, the U.S. holder’s mark-to-market election would no longer require the income inclusion described above. However, cessation of a foreign corporation’s status as a PFIC will not terminate a mark-to-market election and if the corporation becomes a PFIC again, mark-to-market income inclusions may be required.

A mark-to-mark election is available only if the ADSs are considered “marketable” for these purposes. ADSs will be marketable if they are regularly traded on a national securities exchange that is registered with the SEC (such as the Nasdaq Global Market) or on a non-U.S. exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. For these purposes, ADSs will be considered regularly traded during any calendar year during which more than a de minimis quantity of the ADSs is traded on at least 15 days during each calendar quarter. Any trades that have as their principal purpose meeting this requirement will be disregarded. Each U.S. holder should ask its own tax advisor whether a mark-to-market election is available or desirable.

If we are a PFIC for any year in which a U.S. holder holds ADSs, such U.S. holder must generally file an IRS Form 8621 annually. A U.S. holder must also provide such other information as may be required by the U.S. Treasury Department if the U.S. holder (1)

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receives certain direct or indirect distributions from a PFIC, (2) recognizes gain on a direct or indirect disposition of ADSs, or (3) makes certain elections (including a QEF election or a mark-to-market election) reportable on IRS Form 8621.

Under attribution rules, if we are a PFIC, U.S. holders of our ADSs will be deemed to own their proportionate shares of our subsidiaries that are PFICs, if any. Like the determination of whether we are a PFIC, the determination of whether any of our subsidiaries is a PFIC is made annually at the end of each taxable year Assuming a U.S. holder does not receive from a PFIC subsidiary the information that the U.S. holder needs to make a QEF election with respect to such a subsidiary, a U.S. holder generally will be deemed to own a portion of the shares of such lower-tier PFIC and may incur liability for a deferred tax and interest charge if we receive a distribution from, or dispose of all or part of our interest in, or the U.S. holder otherwise is deemed to have disposed of an interest in, the lower-tier PFIC, even though the U.S. holder has not received the proceeds of those distributions or dispositions directly. We currently do not have any non-U.S. subsidiaries that could be PFIC subsidiaries.

U.S. holders are urged to consult their tax advisors as to our status as a PFIC, and, if we are treated as a PFIC, as to the effect on them of, and the reporting requirements with respect to, the PFIC rules and the desirability of making, and the availability of, either a QEF election or a mark-to-market election with respect to our ADSs.

Taxation of Dividends

U.S. Holders. Subject to the PFIC rules described above under “—PFIC Considerations,” if you are a U.S. holder, you must include in your gross income the gross amount of any distributions of cash or property (other than certain pro rata distributions of ADSs) with respect to ADSs, to the extent the distribution is paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. A U.S. holder must include the dividend as ordinary income at the time of actual or constructive receipt. The amount of any dividend income paid in Euro will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the ADSs and thereafter as capital gain from the sale or exchange of such ADSs. Notwithstanding the foregoing, we do not intend to maintain calculations of our earnings and profits as determined for U.S. federal income tax purposes. Consequently, distributions generally will be reported as dividend income for U.S. information reporting purposes. The dividend will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations.

Subject to the PFIC rules described above under “—PFIC Considerations,” dividends paid by a non-U.S. corporation generally will be taxed at the preferential tax rates applicable to long-term capital gain of non-corporate taxpayers if (a) such non-U.S. corporation is eligible for the benefits of certain U.S. treaties or the dividend is paid by such non-U.S. corporation with respect to stock that is readily tradable on an established securities market in the United States, (b) the U.S. holder receiving such dividend is an individual, estate, or trust, (c) such dividend is paid on shares that have been held by such U.S. holder for at least 61 days during the 121-day period beginning 60 days before the “ex-dividend date,” and (d) we are not a PFIC in the year of the dividend or the immediately preceding year. If the requirements of the immediately preceding sentence are not satisfied, a dividend paid by a non-U.S. corporation to a U.S. holder, including a U.S. holder that is an individual, estate, or trust, generally will be taxed at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains). As discussed above under “PFIC Considerations,” although the matter is not free from doubt (and while we can give no assurances as to our PFIC status for the taxable year ending December 31, 2024 or future taxable years), we do not believe that we were a PFIC for U.S. federal income tax purposes for the taxable year ending December 31, 2023. The dividend rules are complex, and each U.S. holder should consult its own tax advisor regarding the dividend rules.

The amount of dividend will include any amounts withheld by the Company in respect of French taxes. Subject to applicable limitations, some of which vary depending upon the U.S. holder’s circumstances and subject to the discussion above regarding concerns expressed by the U.S. Treasury and the Final FTC Treasury Regulations (as defined below), French income taxes withheld from dividends on ADSs at a rate not exceeding the rate provided by the Treaty will be creditable against the U.S. holder’s U.S. federal income tax liability. Treasury Regulations issued on December 28, 2021, which apply to foreign taxes paid or accrued in taxable years beginning on or after December 28, 2021, or the Final FTC Treasury Regulations, impose additional requirements for foreign taxes to be eligible for credit. However, the IRS has indicated that taxpayers may defer the application of many of the additional requirements until further notice. U.S. holders should consult their tax advisors regarding the availability of foreign tax credits for any amounts withheld with respect to dividends on ADSs or ordinary shares, including under the Final FTC Treasury Regulations.

Dividends received generally will be income from non-U.S. sources, which may be relevant in calculating your U.S. foreign tax credit limitation. Such non-U.S. source income generally will be “passive category income,” or in certain cases “general category income” or “foreign branch income,” which is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you. The rules with respect to the foreign tax credit are complex and involve the application of rules that depend upon a U.S. holder’s particular circumstances. You should consult your own tax advisor to determine the foreign tax credit implications of owning the ADSs.

Non-U.S. Holders. If you are a non-U.S. holder, dividends paid to you generally will not be subject to U.S. income tax unless the dividends are “effectively connected” with your conduct of a trade or business within the United States, and the dividends are attributable to a permanent establishment (or in the case of an individual, a fixed place of business) that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis. In such cases you generally will be taxed in the same manner as a U.S. holder (other than with respect to the Medicare Tax described below). If you are a corporate non-U.S. holder, “effectively connected” dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Taxation of Sale, Exchange or other Disposition of ADSs

U.S. Holders. Subject to the PFIC rules described above under “—PFIC Considerations,” if you are a U.S. holder and you sell, exchange or otherwise dispose of your ADSs, you generally will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the value of the amount realized and your tax basis in your ADSs. Gain or loss recognized on such a sale, exchange or other disposition of ADSs generally will be long-term capital gain if you have held the ADSs for more than one year. Long-term capital gains of U.S. holders who are individuals (as well as certain trusts and estates) are generally taxed at preferential rates. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes, unless it is attributable to an office or other fixed place of business outside the United States and certain other conditions are met.

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Your ability to deduct capital losses is subject to limitations. As discussed above under “—PFIC Considerations,” although the matter is not free from doubt (and while we can give no assurances as to our PFIC status for taxable year ending December 31, 2024 or future taxable years), we do not believe that we were a PFIC for U.S. federal income tax purposes for the taxable year ended December 31, 2023.

Non-U.S. Holders. If you are a non-U.S. holder, you will not be subject to U.S. federal income tax on gain recognized on the sale, exchange or other disposition of your ADSs unless:

In the first case, the non-U.S. holder will be taxed in the same manner as a U.S. holder (other than with respect to the Medicare Tax described below). In the second case, the non-U.S. holder will be subject to U.S. federal income tax at a rate of 30% on the amount by which such non-U.S. holder’s U.S. source capital gains exceed such non-U.S. holder’s U.S. -source capital losses.

If you are a corporate non-U.S. holder, “effectively connected” gains that you recognize may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Medicare Tax

Certain U.S. holders who are individuals, estates or trusts are required to pay a 3.8% Medicare surtax on all or part of that holder’s “net investment income”, which includes, among other items, dividends on, and capital gains from the sale or other taxable disposition of, the ADSs, subject to certain limitations and exceptions. U.S. holders should consult their own tax advisors regarding the effect, if any, of this surtax on their ownership and disposition of the ADSs.

Information with Respect to Foreign Financial Assets

U.S. holders that are individuals (and, to the extent provided in regulations, certain entities) that own “specified foreign financial assets,” including possibly the ADSs, with an aggregate value in excess of $50,000 are generally required to file IRS Form 8938 with information regarding such assets. Depending on the circumstances, higher threshold amounts may apply. Specified foreign financial assets include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in non-U.S. entities. If a U.S. holder is subject to this information reporting regime, the failure to timely file IRS Form 8938 may subject the U.S. holder to penalties. In addition to these requirements, U.S. holders may be required to annually file FinCEN Report 114, Report of Foreign Bank and Financial Accounts with the U.S. Department of Treasury. U.S. holders are thus encouraged to consult their U.S. tax advisors with respect to these and other reporting requirements that may apply to their acquisition of the ADSs.

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to distributions made on our ADSs within the United States to a non-corporate U.S. holder and to the proceeds from the sale, exchange, redemption or other disposition of ADSs by a non-corporate U.S. holder to or through a U.S. office of a broker. Payments made (and sales or other dispositions effected at an office) outside the U.S. will be subject to information reporting in limited circumstances.

In addition, U.S. holders may be subject to backup withholding with respect to dividends on and proceeds from the sale, exchange or other disposition of the ADSs. A paying agent within the United States will be required to withhold at the applicable statutory rate, currently 24%, in respect of any payments of dividends on, and the proceeds from the disposition of, ADSs within the United States to a U.S. holder (other than U.S. holders that are exempt from backup withholding and properly certify their exemption) if the holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with applicable backup withholding requirements. U.S. holders who are required to establish their exempt status generally must provide a properly completed IRS Form W-9.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. holder’s U.S. federal income tax liability. A U.S. holder generally may obtain a refund of any amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS in a timely manner and furnishing any required information. U.S. holders are advised to consult with their own tax advisors regarding the application of the United States information reporting rules to their particular circumstances.

A non-U.S. holder generally may eliminate the requirement for information reporting and backup withholding by providing a properly completed and duly executed certification of its non-U.S. status to the payor, under penalties of perjury, on IRS Form W-8BEN, W-8BEN-E or other appropriate W-8, as applicable. You should consult your own tax advisor as to the qualifications for exemption from backup withholding and the procedures for obtaining the exemption.

The foregoing does not purport to be a complete analysis of the potential tax considerations relating to the ownership and disposition of the ADSs. Prospective investors should consult their own tax advisors as to the particular tax considerations applicable to them relating to the ownership and disposition of the ADSs, including the applicability of U.S. federal, state and local tax laws or non-tax laws, foreign tax laws, and any changes in applicable tax laws, and any pending or proposed legislation or regulations.

 

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Material French Income Tax Considerations

The following describes the material French income tax consequences to U.S. Holders (as defined below) of purchasing, owning and disposing of the ordinary shares or ADSs and, unless otherwise noted, this discussion is the opinion of Jones Day, our French tax counsel, insofar as it relates to matters of French tax law and legal conclusions with respect to those matters.

This discussion does not purport to be a complete analysis or listing of all potential tax effects of the acquisition, ownership or disposition of our securities to any particular investor, and does not discuss tax considerations that arise from rules of general application or that are generally assumed to be known by investors. All of the following is subject to change. Such changes could apply retroactively and could affect the consequences described below.

In 2011, France introduced a comprehensive set of new tax rules applicable to French assets that are held by or in foreign trusts. These rules, among other things, provide for the inclusion of trust assets in the settlor’s net assets for purpose of applying the French wealth tax, for the application of French gift and death duties to French assets held in trust, for a specific tax on capital on the French assets of foreign trusts not already subject to the French wealth tax and for a number of French tax reporting and disclosure obligations. The following discussion does not address the French tax consequences applicable to securities (including ADSs) held in trusts. If securities are held in trust, the grantor, trustee and beneficiary are urged to consult their own tax advisor regarding the specific tax consequences of acquiring, owning and disposing of securities.

The description of the French income tax and wealth tax consequences set forth below is based on the Convention between the Government of the United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital of August 31, 1994 which came into force on December 30, 1995 (as amended by any subsequent protocols, including the protocol of January 13, 2009), and the tax guidelines issued by the French tax authorities in force as of the date of this Annual Report, or the Treaty.

For the purposes of this discussion, the term “U.S. Holder” means a beneficial owner of securities that is (1) an individual who is a U.S. citizen or resident for U.S. federal income tax purposes, (2) a U.S. domestic corporation or certain other entities created or organized in or under the laws of the United States or any state thereof, including the District of Columbia, or (3) otherwise subject to U.S. federal income taxation on a net income basis in respect of securities.

If a partnership holds securities, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If a U.S. Holder is a partner in a partnership that holds securities, such holder is urged to consult its own tax advisor regarding the specific tax consequences of acquiring, owning and disposing of securities.

This discussion applies only to investors that hold our securities as capital assets that have the U.S. dollar as their functional currency, that are entitled to Treaty benefits under the “Limitation on Benefits” provision contained in the Treaty, and whose ownership of the securities is not effectively connected to a permanent establishment or a fixed base in France. Certain U.S. Holders (including, but not limited to, U.S. expatriates, partnerships or other entities classified as partnerships for U.S. federal income tax purposes, banks, insurance companies, regulated investment companies, tax-exempt organizations, financial institutions, persons subject to the alternative minimum tax, persons who acquired the securities pursuant to the exercise of employee share options or otherwise as compensation, persons that own (directly, indirectly or by attribution) 5% or more of our voting stock or 5% or more of our outstanding share capital, dealers in securities or currencies, persons that elect to mark their securities to market for U.S. federal income tax purposes and persons holding securities as a position in a synthetic security, straddle or conversion transaction) may be subject to special rules not discussed below.

U.S. Holders are urged to consult their own tax advisors regarding the tax consequences of the purchase, ownership and disposition of securities in light of their particular circumstances, especially with regard to the “Limitations on Benefits” provision.

Estate and Gift Taxes and Transfer Taxes

In general, a transfer of securities by gift or by reason of death of a U.S. Holder that would otherwise be subject to French gift or inheritance tax, respectively, will not be subject to such French tax by reason of the Convention between the Government of the United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Estates, Inheritances and Gifts, dated November 24, 1978, unless the donor or the transferor is domiciled in France at the time of making the gift or at the time of his or her death, or the securities were used in, or held for use in, the conduct of a business through a permanent establishment or a fixed base in France.

Financial Transactions Tax

Pursuant to Article 235 ter ZD of the French Tax Code (Code général des impôts), or the FTC, purchases of certain securities issued by a French company, including ordinary shares and ADSs, which are listed on a regulated market of the EU or an exchange market formally acknowledged by the AMF (in each case within the meaning of the French Monetary and Financial Code, or the FMFC) are subject in France to a 0.3% tax on financial transactions, or the TFT, provided inter alia that the issuer’s market capitalization exceeds €1 billion as of December 1 of the year preceding the taxation year.

A list of relevant French companies whose market capitalization exceeds €1.0 billion as of December 1 of the year preceding the taxation year within the meaning of Article 235 ter ZD of the FTC is published by the French tax authorities, and could be amended at any time. Pursuant to Regulations BOI-ANNX-000467-20/12/2023 issued on December 20, 2023, Cellectis is currently not included in such list. Please note that such list may be updated from time to time, or may not be published anymore in the future.

As a result, neither the ADSs nor the ordinary shares are currently within the scope of the TFT.

Purchases of Cellectis’s securities may however become subject to the TFT if Cellectis’s market capitalization exceeds €1.0 billion.

Registration Duties

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In the case where the TFT is not applicable, (1) transfers of shares issued by a French company which are listed on a regulated or organized market within the meaning of the FMFC are subject to uncapped registration duties at the rate of 0.1% if the transfer is evidenced by a written statement (acte) executed either in France or outside France, whereas (2) transfers of shares issued by a French company which are not listed on a regulated or organized market within the meaning of the FMFC are subject to uncapped registration duties at the rate of 0.1% notwithstanding the existence of a written statement (acte).

As ordinary shares of Cellectis are listed on Euronext Growth market of Euronext in Paris, which is an organized market within the meaning of the FMFC, their transfer should be subject to uncapped registration duties at the rate of 0.1% subject to the existence of a written agreement (acte).

Although there is neither case law nor official guidelines published by the French tax authorities on this point, transfers of ADSs should remain outside of the scope of the aforementioned 0.1% registration duties. U.S. Holders are urged to consult their own tax advisor about the possible application of the registration duty upon the transfer of ADSs.

Wealth Tax

The French wealth tax (impôt de solidarité sur la fortune) has been repealed by the finance bill for 2018 (loi de finances pour 2018) dated December 30, 2017. It used to apply only to individuals and did not generally apply to securities held by a U.S. Holder who is a resident pursuant to the provisions of the Treaty, provided that such U.S. Holder does not own directly or indirectly more than 25% of the issuer’s financial rights.

As from January 1, 2018, it has been replaced by a new real estate wealth tax (impôt sur la fortune immobilière) which applies only to individuals owning French real estate assets or rights, directly or indirectly through one or more legal entities and whose net taxable assets amount to at least 1,300,000 euros.

French real estate wealth tax may only apply to a U.S. individual to the extent such individual holds, directly or indirectly, financial rights into a company the assets of which comprise French real estate assets that are not allocated to its operational activity. Such financial rights may be taxable for the fraction of their value representing the French real estate assets that are not allocated to an operational activity. In any case, pursuant to Article 965, 2° of the FTC, shares of an operating company holding French real estate assets in which the relevant individual holds, directly and indirectly, less than 10% of the share capital or voting rights are exempt from real estate wealth tax.

Taxation of Dividends

Dividends paid by a French corporation to non-residents of France are generally subject to French withholding tax at a rate of 25%. Such withholding tax may be reduced to 12.8% for dividends paid to non-resident individuals. Dividends paid by a French corporation in a non-cooperative State or territory, as defined in Article 238-0 A of the FTC, other than those mentioned in 2° of 2 bis of the same Article 238-0 A of the FTC, will generally be subject to French withholding tax at a rate of 75%. The list of non-cooperative State or territory is published by decree and is in principle updated annually. However, eligible U.S. Holders entitled to Treaty benefits under the “Limitation on Benefits” provision contained in the Treaty who are U.S. residents, as defined pursuant to the provisions of the Treaty, will not be subject to this 12.8%, 25% or 75% withholding tax rate, but may be subject to the withholding tax at a reduced rate (as described below).

Under the Treaty, the rate of French withholding tax on dividends paid to an eligible U.S. Holder who is a U.S. resident as defined pursuant to the provisions of the Treaty and whose ownership of ordinary shares or the ADSs is not effectively connected with a permanent establishment or fixed base that such U.S. Holder has in France, is generally reduced to 15%, or to 5% if such U.S. Holder is a corporation and owns directly or indirectly at least 10% of the share capital of the issuer; such U.S. Holder may claim a refund from the French tax authorities of the amount withheld in excess of the Treaty rates of 15% or 5%, if any.

For U.S. Holders that are not individuals but are U.S. residents, as defined pursuant to the provisions of the Treaty, the requirements for eligibility for Treaty benefits, including the reduced 5% or 15% withholding tax rates contained in the “Limitation on Benefits” provision of the Treaty, are complicated, and certain technical changes were made to these requirements by the protocol of January 13, 2009. U.S. Holders are advised to consult their own tax advisers regarding their eligibility for Treaty benefits in light of their own particular circumstances.

In the event that dividends are paid by Cellectis, dividends paid to an eligible U.S. Holder may immediately be subject to the reduced rates of 5% or 15% provided that such holder establishes before the date of payment that it is a U.S. resident under the Treaty by completing and providing the depositary with a treaty form (Form 5000). Otherwise, dividends paid to a U.S. Holder that is a legal person or another legal entity and has not filed the Form 5000 before the dividend payment date will be subject to French withholding tax at the rate of 25%, or 75% for any U.S. Holder if paid in a non-cooperative State or territory (as defined in Article 238-0 A of the FTC) other than those mentioned in 2° of 2 bis of the same Article 238-0 A of the FTC (unless the Company proves that neither the purpose nor the effect of paying the dividend in that State or territory are that of allowing, with the intent of tax evasion or avoidance, their location in such a State or territory), and then reduced at a later date to 5% or 15%, provided that such holder duly completes and provides the French tax authorities with the treaty forms Form 5000 and Form 5001 (due to recent case law regarding status of limitation for filing a withholding tax claim; U.S. Holders are advised to consult their own tax advisors in this respect).

Certain qualifying pension funds and certain other tax-exempt entities are subject to the same general filing requirements as other U.S. Holders except that they may have to supply additional documentation evidencing their entitlement to these benefits.

Form 5000 and Form 5001, together with appropriate instructions, will be provided by the depositary to all U.S. Holders registered with the depositary. The depositary will arrange for the filing with the French tax authorities of all such forms properly completed and executed by U.S. Holders of ordinary shares or ADSs and returned to the depositary in sufficient time so that they may be filed with the French tax authorities before the distribution in order to obtain immediately a reduced withholding tax rate.

Since the withholding tax rate applicable under French domestic law to U.S. holders who are individuals does not exceed the cap provided in the Treaty (i.e., 15%), the 12.8% rate shall apply, without any reduction provided under the Treaty. (except in the particular situation when the dividends are paid to such U.S. holders out of France in a non-cooperative State or territory as defined in Article 238-0 A of the FTC other than those mentioned in 2° of 2 bis of the same Article 238-0 A of the FTC and are subject to the 75% withholding tax in France).

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In addition, please note that pursuant to Article 235 quater of the FTC (introduced by the French finance bill No. 2019-1479 for 2020) and under certain conditions (in particular, in addition to certain reporting obligations, the interest held in the distributing company must not enable the beneficiary to participate effectively in the management or control of that company and the beneficiary company is located in a country that has signed an administrative assistance agreement with France to combat tax evasion and avoidance, as well as an administrative assistance agreement on tax collection, and that is not a non-cooperative country), a corporate U.S. Holder which is in a tax loss position or which tax result is nil due to offset of tax losses (French Administrative Supreme Court, October 18, 2022, n°466329) for the fiscal year during which the dividend is received may be entitled to a deferral regime, and obtain a withholding tax refund. The tax deferral ends in respect of the first financial year during which this U.S. Holder is in a profit making position, as well as in the cases set out in Article 235 quater of the FTC. The refund must be claimed within the same period applicable to claim related to taxes other than local taxes. Also, pursuant to Article 235 quinquies of the FTC and under certain conditions, a corporate U.S. Holder may be entitled to a refund of a fraction of the withholding tax, up to the difference between the withholding tax paid (on a gross basis) and the withholding tax based on the dividend net of the expenses incurred for the acquisition and conservation directly related to the income, provided (i) that these expenses would have been tax deductible had the U.S. Holder been established in France, and (ii) that the tax rules in the United States do not allow the U.S. Holder to offset the withholding tax.

Given the special features of the ADSs, U.S. Holders are urged to consult their own tax advisor about the possible application to ADSs of such provisions in light of their own circumstances.

Tax on Sale or Other Disposition

As a matter of principle, under French tax law, a U.S. Holder should not be subject to any French tax on any capital gain from the sale, exchange, repurchase or redemption by us of ordinary shares or ADSs, provided that all of the following apply to such holder:

In case an applicable double tax treaty between France and the U.S. Holder country of residence contains more favorable provisions, a U.S. Holder may not be subject to any French income tax or capital gains tax in case of sale or disposal of any ordinary shares or ADSs of Cellectis even if one or more of the above mentioned statements are not applicable.

Particularly, a U.S. Holder who is a U.S. tax resident for purposes of the Treaty and is entitled to Treaty benefit will not be subject to French tax on any such capital gain, unless the ordinary shares or the ADSs form part of the business property of a permanent establishment or fixed base that the U.S. Holder has in France.

U.S. Holders who own ordinary shares or ADSs through U.S. partnerships that are not residents for Treaty purposes are advised to consult their own tax advisors regarding their French tax treatment and their eligibility for Treaty benefits in light of their own particular circumstances.

A U.S. Holder that is not a U.S. resident for Treaty purposes or is not entitled to Treaty benefit (and in both cases is not resident, established or incorporated in a non-cooperative State or territory as defined in Article 238-0 A of the FTC) and has held more than 25% of our dividend rights, known as “droits aux bénéfices sociaux” at any time during the preceding five years, either directly or indirectly, and, as relates to individuals, alone or with relatives will be subject to a levy in France at the rate of 25%, if such U.S. Holder is a legal person, or 12.8%, if such U.S. Holder is an individual.

Special rules apply to U.S. Holders who are residents of more than one country.

Not applicable.

Not applicable.

We are subject to the information reporting requirements of the Exchange Act applicable to foreign private issuers and under those requirements file reports with the U.S. Securities Exchange Commission (the "SEC"). Those reports may be inspected without charge at the locations described below. As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. Nevertheless, we file with the SEC an Annual Report containing financial statements that have been examined and reported on, with and opinion expressed by an independent registered public accounting firm, and we submit quarterly interim consolidated financial data to the SEC under cover of the SEC’s Form 6-K.

We maintain a corporate website at www.cellectis.com. We intend to post our Annual Report on our website promptly following it being filed with the SEC. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report. We have included our website address in this Annual Report solely as an inactive textual reference.

You may also review a copy of this Annual Report, including exhibits and any schedule filed herewith, and obtain copies of such materials at prescribed rates, at the Securities and Exchange Commission’s Public Reference Room in Room 1580, 100 F Street, NE, Washington, D.C. 20549-0102. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as Cellectis, that file electronically with the SEC.

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With respect to references made in this Annual Report to any contract or other document of Cellectis, such references are not necessarily complete and you should refer to the exhibits attached or incorporated by reference to this Annual Report for copies of the actual contract or document.

Not applicable

To the extent we furnish an annual report to security holders, we will promptly submit an English version of this annual report to U.S. security holders under the cover of Form 6-K.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

We derive a significant portion of our revenues, including payments under our collaboration agreement with Allogene, in U.S. dollars. Since the beginning of fiscal year 2015, we have been significantly expanding our activities in the United States, but there continues to be a currency mismatch in our cash flows since most of our expenses remain denominated primarily in Euros. If the average value of the U.S. Dollar had been 2.6% higher relative to the euro during 2023. Our exposure to currencies other than the U.S. dollar is negligible.

Our financial condition and results of operations are measured and recorded in the relevant local base currency and then translated into Euros for inclusion in our Consolidated Financial Statements. We translate balance sheet amounts at the exchange rates in effect on the date of the balance sheet, while income and cash flow items are translated at the average rate of exchange in effect for the relevant period. Our exposure to currencies other than the U.S. dollar is negligible.

For the year ended December 31, 2023, our revenues denominated in U.S. dollars are mainly related to Iovance collaboration agreements. Our cash and cash equivalents and marketable securities denominated in U.S dollars amounted to $118.6 million as of December 31, 2023. Current financial assets denominated in U.S. dollars amounted to $72.0 million as of December 31, 2023. For more information, see “Item 5.A—Operating Results.”

The net foreign exchange result of continuing operations for the fiscal year 2023 is a gain of $2.4 million. We cannot rule out the possibility that a significant increase in our business, particularly in the United States, may result in greater exposure to exchange rate risk. We would then consider adopting an appropriate policy for hedging against these risks.

Interest Rate Risk

We seek to engage in prudent management of our cash and cash equivalents, mainly cash on hand and common financial instruments (typically short- and mid-term deposits). Furthermore, the interest rate risk related to cash, cash equivalents and common financial instruments is not significant based on the quality of the financial institutions with which we work.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

 

Liquidity risk

As of December 31, 2023, our financial debt primarily consists of lease debts for $51.5 million, a loan from a bank syndicate formed with HSBC, Société Générale, Banque Palatine and Bpifrance in the form of the PGE for $18.5 million (including interest) of which $14.1 million remains as outstanding debt, the 2021 and 2022 Research Tax Credit financing with BPI for $11.9 million, and a liability related to the EIB loan of €20 million .

See Note 10.3 to our consolidated financial statements for more information on these and other market risks.

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

Not applicable.

Not applicable.

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Citibank, N.A., as depositary for our ADSs, registers and delivers ADSs. Each ADS represents one ordinary share deposited with Citibank Europe PLC, located at EGSP 186, 1 North Wall Quay, Dublin 1 Ireland or any successor, as custodian for the depositary. Each ADS will also represent any other securities, cash or other property which may be held by the depositary in respect of the depositary facility. The depositary’s corporate trust office at which the ADSs will be administered is located at 388 Greenwich Street, New York, New York 10013.

A deposit agreement among us, the depositary and the ADS holders sets out the ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs. A copy of the Agreement is incorporated by reference as an exhibit to this Annual Report.

Fees and Charges

As an ADS holder, you will be required to pay the following fees under the terms of the depositary agreement:

 

Service		Fees
• Issuance of ADSs upon deposit of shares (excluding issuance as a result of distributions of shares)		Up to U.S. 5¢ per ADS issued
• Cancellation of ADSs		Up to U.S. 5¢ per ADS canceled
• Distribution of cash dividends or other cash distributions (i.e., sale of rights and other entitlements)		Up to U.S. 5¢ per ADS held

 

Service		Fees
• Distribution of ADSs pursuant to (1) stock dividends or other free stock distributions, or (2) exercise of rights to purchase additional ADSs		Up to U.S. 5¢ per ADS held
• Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares)		Up to U.S. 5¢ per ADS held
• ADS Services		Up to U.S. 5¢ per ADS held on the applicable record date(s) established by the depositary

 

As an ADS holder you will also be responsible to pay certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:

ADS fees and charges payable upon (1) deposit of ordinary shares against issuance of ADSs and (2) surrender of ADSs for cancellation and withdrawal of ordinary shares are charged to the person to whom the ADSs are delivered (in the case of ADS issuances) and to the person who delivers the ADS, for cancellation (in the case of ADS cancellations). In the case of ADSs issued by the depositary into DTC or presented to the depositary via DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions made through DTC, and may be charged to the DTC participant(s) receiving the ADSs or the DTC participant(s) surrendering the ADSs for cancellation, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account(s) of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC participant(s) as in effect at the time. ADS fees and charges in respect of distributions and the ADS service fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed. In the case of (1) distributions other than cash and (2) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged to the DTC participants in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees and charges to the beneficial owners for whom they hold ADSs.

In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder. Certain ADS fees and charges (such as the ADS service fee) may become payable shortly after the closing of the ADS offering.

Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of such changes. The depositary may reimburse us for certain expenses incurred by us in respect of the ADR program, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary agree from time to time.

---

Depositary Payments for 2023

From time to time, the Depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders, or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADS program. In performing its duties under the deposit agreement, the Depositary may use brokers, dealers or other service providers that are affiliates of the Depositary and that may earn or share fees or commissions.

For the year ended December 31, 2023, Citibank, N.A., as Depositary, had made reimbursements to the Company of $392 thousand.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective because of the existence of a material weakness in internal control over financial reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, has assessed the effectiveness of internal control over financial reporting as of December 31, 2023. Management’s assessment was based on the framework in “Internal Control – Integrated Framework”, or 2013 framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

Based on that assessment, management concluded that, as of December 31, 2023, the Company’s internal control over financial reporting was not effective because of the existence of a material weakness in internal control over financial reporting, related to a lack of formality of accounting processes and controls over significant non-routine transactions and a design and operating deficiency associated with a lack of sufficient qualified resources with sufficient technical knowledge to identify and timely resolve complex accounting matters. This material weakness arose primarily as a result of an incorrect accounting treatment for the AstraZeneca arrangement and the deconsolidation of Calyxt at the closing date of the merger with Cibus, which have been corrected and appropriately reflected in the financial statements as of and for the year ended December 31, 2023.

Notwithstanding this material weakness and management’s assessment that internal control over financial reporting was not effective as of December 31, 2023, our management, including our Chief Executive Officer and our Chief Financial Officer, believe that the consolidated financial statements contained in this Annual Report on Form 20-F present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with IFRS.

The Company’s failure to design and maintain effective controls to adequately review and analyze the accounting for complex and non-recurring transactions resulted in certain adjustments to the Company’s consolidated financial statements from prior quarters, as presented in this Annual Report. This did not result in a restatement of prior periods.

Remediation

In response to the material weakness described above, the Company’s management has begun, and will continue, to implement measures designed to ensure that the control deficiencies contributing to the material weakness are remediated, such that the controls are designed, implemented, and operating effectively.

The remediation actions include:

We believe that these actions will remediate the material weakness. The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed prior to the end of fiscal year 2024.

As the Company continues to implement its remediation actions, it may determine to take additional measures to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure that the measures we have taken to date and may take in the future, will be sufficient to remediate the control deficiencies that led to our material weakness in internal control over financial reporting or that we will prevent or avoid potential future material weaknesses.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, and can only provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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The effectiveness of the Company’s internal control over financial reporting has been audited by Ernst & Young et Autres, independent registered public accounting firm, as stated in their report on the Company’s internal control over financial reporting as of December 31, 2023, which is included herein. See paragraph (c) of the present Item 15, below.

ITEM 16. RESERVED

Not applicable.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Mr. Axel-Sven Malkomes, Mr. Pierre Bastid, and Donald Bergstrom are audit and finance committee financial experts as defined by the SEC rules and have the requisite financial sophistication under the applicable rules and regulations of the Nasdaq Global Market. Mr. Axel-Sven Malkomes, Mr. Pierre Bastid, and Donald Bergstrom are independent as such term is defined in Rule 10A-3 under the Exchange Act and under the listing standards of the Nasdaq Global Market.

ITEM 16B. CODE OF ETHICS

We have adopted a Code of Business Conduct and Ethics, or the Code of Conduct that is applicable to all of our employees, executive officers and directors. Following the completion of our initial public offering, the Code of Conduct became available on our website at www.cellectis.com. Our board of directors is responsible for overseeing the Code of Conduct and is required to approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Ernst & Young et Autres, or Ernst & Young LLP, has served as our independent registered public accounting firm for 2022 and 2023. Our accountants billed the following fees to us for professional services in each of those fiscal years:

 

	Year Ended
	December 31,
	2022				2023
	($, in thousands)
Audit Fees *	995					825
Audit-Related Fees	—				—
Tax Fees	—				—
Other Fees *		241				198
Total		1,235				1,022

 

(*) $1,235 thousands and $853 thousands respectively for the years ended December 31, 2022 and 2023.

“Audit Fees” are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC.

“Audit-Related Fees” are the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit and are not reported under Audit Fees.

“Tax Fees” are the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning related services.

“Other Fees” relate to services provided with respect to our registration statement for Cellectis' ATM programs and offerings.

There were no “Audit Related Fees,” “Tax Fees” either billed or paid during 2022 or 2023.

Audit and Non-Audit Services Pre-Approval Policy

The audit and finance committee has responsibility for appointing, setting compensation of and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the audit and finance committee has adopted a policy governing the pre-approval of all audit and permitted non-audit services performed by our independent registered public accounting firm to ensure that the provision of such services does not impair the independent registered public accounting firm’s independence from us and our management. Unless a type of service to be provided by our independent registered public accounting firm has received general pre-approval from the audit and finance committee, it requires specific pre-approval by the audit and finance committee. The payment for any proposed services in excess of pre-approved cost levels requires specific pre- approval by the audit and finance committee. All audit and non-audit services rendered by our independent registered public accounting firm in 2023 were pre-approved by the audit and finance committee.

Pursuant to its pre-approval policy, the audit and finance committee may delegate its authority to pre-approve services to the chairperson of the audit and finance committee. The decisions of the chairperson to grant pre-approvals must be presented to the full audit and finance committee at its next scheduled meeting. The audit and finance committee may not delegate its responsibilities to pre-approve services to the management.

The audit and finance committee has considered the non-audit services provided by Ernst & Young as described above and believes that they are compatible with maintaining Ernst & Young’s independence as our independent registered public accounting firm.

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ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

The terms of office of Ernst & Young et Autres, independent registered public accounting firm of the Company since 2012, will expire at the end of the Annual Shareholders’ Meeting to be held in 2024 convened to approve the financial statements for the year 2023. Ernst & Young et Autres’ terms of office cannot be legally extended as it reached the maximum legal duration.

 

The selection procedure of the auditors to be appointed by the Annual Shareholders’ Meeting in 2024 was overseen by the audit and finance committee, following which a recommendation to the board of directors was issued.

 

The board of directors, at its meeting of January 25, 2024 approved the audit and finance committee’s recommendation and decided to propose the appointment of KPMG SA as independent registered public accounting firm. Consequently, the board of directors will propose to the Annual Shareholders’ Meeting to be held in 2024 to appoint KPMG SA as new independent registered public accounting firm for a 6-year term, i.e. until the Annual Shareholders’ Meeting to be held in 2030, which will be convened to approve the financial statements for the year 2029.

 

The reports of Ernst & Young et Autres on the consolidated financial statements for each of the years ended December 31, 2023 and 2022 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. During each of the years ended December 31, 2023 and 2022:

 

During the Company’s two most recent fiscal years, and any subsequent interim period prior to engaging KPMG SA, which must be approved by an affirmative vote of shareholders at the next Annual Shareholders’ Meeting), neither the Company, nor anyone on its behalf, has consulted KPMG SA regarding:

 

The Company has furnished Ernst & Young et Autres with a copy of the statements made under this Item 16F and requested that Ernst & Young et Autres furnish a letter addressed to the SEC stating whether or not it agrees with the above statements and, if not, stating the respects in which it does not agree. A copy of Ernst & Young et Autres' letter, dated April 29, 2024, is filed as Exhibit 15.2 to this Annual Report.

ITEM 16G. CORPORATE GOVERNANCE

As a French société anonyme, we are subject to various corporate governance requirements under French law. In addition, as a foreign private issuer listed on the Nasdaq Global Market, we are subject to the Nasdaq corporate governance listing standards. However, the Nasdaq Global Market’s listing standards provide that foreign private issuers as defined in the rules promulgated under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), are permitted pursuant to Nasdaq Listing Rule 5615(a)(3) to follow home country corporate governance practices in lieu of the Nasdaq Listing Rules, with certain exceptions. Certain corporate governance practices in France may differ significantly from Nasdaq’s corporate governance listing standards. For example, neither the corporate laws of France nor our By-laws require that (i) a majority of our directors be independent, (ii) our compensation committee include only independent directors, or (iii) our independent directors hold regularly scheduled meetings at which only independent directors are present. Other than as set forth below, we currently intend to comply with applicable Nasdaq corporate governance listing standards of Nasdaq to the extent possible under French law. However, we may choose to change such practices to follow home country practice in the future.

Although we are a foreign private issuer, we are required to comply with Rule 10A-3 under the Exchange Act, relating to audit committee composition and responsibilities. Rule 10A-3 provides that the audit committee must have direct responsibility for the nomination, compensation and choice of our auditors, as well as control over the performance of their duties, management of complaints made, and selection of consultants. Under Rule 10A-3, if the laws of a foreign private issuer’s home country require that any such matter be approved by the board of directors or the shareholders of the Company, the audit committee’s responsibilities or powers with respect to such matter may instead be advisory. Under French law, the audit committee may only have an advisory role and appointment of our statutory auditors, in particular, must be decided by our shareholders at our annual meeting.

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In addition, Nasdaq Listing Rules require that a listed company specify that the quorum for any meeting of the holders of share capital be at least 33 1⁄3% of the outstanding shares of the company’s common voting stock. We follow our French home country practice, rather than complying with this Nasdaq Listing Rule. Consistent with French Law, our By-laws provide that when first convened, general meetings of shareholders may validly convene only if the shareholders present or represented hold at least (1) 20% of the voting shares in the case of an ordinary general meeting or of an extraordinary general meeting where shareholders are voting on a capital increase by capitalization of reserves, profits or share premium, or (2) 25% of the voting shares in the case of any other extraordinary general meeting. If such quorum required by French law is not met, the meeting is adjourned. There is no quorum requirement under French law when an ordinary general meeting or an extraordinary general meeting where shareholders are voting on a capital increase by capitalization of reserves, profits or share premium is reconvened, but the reconvened meeting may consider only questions that were on the agenda of the adjourned meeting. When any other extraordinary general meeting is reconvened, the required quorum under French law is 20% of the shares entitled to vote. The reconvened meeting may consider only questions that were on the agenda of the adjourned meeting. If a quorum is not met at a reconvened meeting requiring a quorum, then the meeting may be adjourned for a maximum of two months.

Finally, we follow French law with respect to shareholder approval requirements in lieu of the various shareholder approval requirements of Nasdaq Listing Rule 5635, which requires a Nasdaq listed company to obtain shareholder approval prior to certain issuances of securities, including: (a) issuances in connection with the acquisition of the stock or assets of another company if upon issuance the issued shares will equal 20% or more of the number of shares or voting power outstanding prior to the issuance, or if certain specified persons have a 5% or greater interest in the assets or company to be acquired (Nasdaq Listing Rules 5635(a)); (b) issuances or potential issuances that will result in a change of control of us (Nasdaq Listing Rule 5635(b)); (c) issuances in connection with equity compensation arrangements (Nasdaq Listing Rule 5635(c)); and (d) 20% or greater issuances in transactions other than public offerings, as defined in the Nasdaq Listing Rules (Nasdaq Listing Rule 5635(d)). Under French law, our shareholders may approve issuances of equity, as a general matter, through the adoption of delegation of authority resolutions at the Company’s shareholders’ meeting pursuant to which shareholders may delegate their authority to the Executive Board to increase the Company’s share capital within specified parameters set by the shareholders, which may include a time limitation to carry out the share capital increase, the cancellation of their preferential subscription rights to the benefit of named persons or a category of persons, specified price limitations and/or specific or aggregate limitations on the size of the share capital increase. Due to differences between French law and corporate governance practices and Nasdaq Listing Rule 5635, we follow our French home country practice, rather than complying with this Nasdaq Listing Rule.

In accordance with French law, committees of our board of directors will only have an advisory role and can only make recommendations to our board of directors. As a result, decisions will be made by our board of directors taking into account nonbinding recommendations of the relevant board committee.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

 

ITEM 16J. INSIDER TRADING POLICIES

 

Pursuant to applicable SEC transition guidance, the disclosure required by Item 16J will be applicable to the Company starting the fiscal year ending December 31, 2024.

 

 

ITEM 16K. CYBERSECURITY

We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats. These risks include, among other things, operational risks; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risk; and reputational risks. Our cybersecurity policies, standards, processes, and practices are based on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization and other applicable industry standards. However, this does not mean that our policies, standards, processes, or practices meet any particular technical standards, specifications, or requirements, but only that we use these frameworks as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.

Our cybersecurity policies, standards, and practices are integrated into our overall risk management system and processes as part of our IT security policy and IT security incident response plan.

 

Cybersecurity Risk Management and Strategy

Our cybersecurity risk management strategy focuses on several areas:

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We conduct periodic assessments and testing of our policies, standards, processes, and practices in a manner intended to address cybersecurity threats and events. The results of such assessments, audits, and reviews are evaluated by management and reported to our audit and finance committee and our board of directors, and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on information provided by these assessments, audits, and reviews. Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and are not reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition. See “Risk Factors—Risks Related to Operational Compliance and Risk Management—Our internal computer systems, or those of our third-party contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs or loss of personal data.”

 

Governance

 

Cybersecurity is an important part of our risk management processes and an area of increasing focus for our board of directors and management. Our audit and finance committee is responsible for the oversight of risks from cybersecurity threats. At least annually, the audit and finance committee receives an overview from management of our cybersecurity threat risk management and strategy processes covering topics such as data security posture, results from third-party assessments, progress towards pre-determined risk-mitigation-related goals, our incident response plan, and material cybersecurity threat risks or incidents and developments, as well as the steps management has taken to respond to such risks. Members of the audit and finance committee are also encouraged to regularly engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs. Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by a team of senior level management, including our Chief Executive Officer, Chief Financial Officer, General Counsel, and Chief Information Officer. These members of management are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan. As discussed above, these members of management report to the audit and finance committee about material risks from cybersecurity threats, among other cybersecurity related matters.

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PART III

ITEM 17. FINANCIAL STATEMENTS

See pages F-1 through F-67 of this Annual Report.

ITEM 18. FINANCIAL STATEMENTS

Not applicable.

ITEM 19. EXHIBITS

Exhibit Index

The following exhibits are filed as part of this Annual Report:

 

Exhibit Number		Description of Exhibit		Schedule/ Form		File Number		Exhibit		File Date
1.1		By-laws (Statuts) of the registrant		20-F						Filed herewith
2.1#		Form of Deposit Agreement		F-1		333-202205		4.1		March 10, 2015
2.2#		Form of American Depositary Receipt (included in Exhibit 2.1)		F-1		333-202205		Included in 4.1		March 10, 2015
2.3		Description of Securities registered under Section 12 of the Exchange Act								Filed herewith
4.1#*		Exclusive Patent License Agreement between Regents of the University of Minnesota and Cellectis S.A., dated January 10, 2011		F-1		333-202205		10.6		March 12, 2015
4.1.1#*		First Amendment to the Exclusive Patent License Agreement between Regents of the University of Minnesota and Cellectis S.A., dated May 24, 2012		F-1		333-202205		10.6.1		March 12, 2015
4.1.2#*		Second Amendment to the Exclusive Patent License Agreement between Regents of the University of Minnesota and Cellectis S.A., dated April 1, 2014		F-1		333-202205		10.6.2		March 12, 2015
4.1.3#*		Third Amendment to the Exclusive Patent License Agreement between Regents of the University of Minnesota and Cellectis S.A., dated December 16, 2015		20-F		001-36891		4.6.3		March 13, 2018
4.1.4#**		Fourth Amendment to the Exclusive Patent License Agreement between Regents of the University of Minnesota and Cellectis S.A., dated November 4, 2022		20-F		001-36891		4.1.4		March 14, 2023
4.2#		Patent & Technology License Agreement between Ohio State Innovation Foundation and Cellectis S.A., dated October 23, 2014		20-F		001-36891		4.7		March 12, 2019
4.3		Form Change in Control Agreement		20-F		001-36891		4.3		March 14, 2023
4.4†#		2012 Free Share Plan		F-1		333-202205		10.13		March 10, 2015
4.5†#		2013 Free Share Plan		F-1		333-202205		10.14		March 10, 2015
4.6†#		2014 Free Share Plan		F-1		333-202205		10.15		March 10, 2015
4.7†#		2015 Free Share Plan		20-F		001-36891		4.16		March 10, 2015
4.8†#		2015 Stock Option Plan		20-F		001-36891		4.17		March 10, 2015
4.9†#		2016 Stock Option Plan		S-8		333-214884		99.1		December 2, 2016
4.10†#		2017 Stock Option Plan		S-8		333-222482		99.1		January 9, 2018
4.11†#		Free Share 2018 Plan		S-8 POS		333-222482		99.3		April 13, 2018
4.12†#		2018 Stock Option Plan		S-8		333-227717		99.1		October 5, 2018
4.13†#		Summary of BSA Plan		S-8		333-227717		99.2		October 5, 2018
4.14†#		Second Free Share 2018 Plan		S-8 POS		333-227717		99.3		March 4, 2021
4.15†#		2021 Stock Option Plan		S-8		333-258514		99.1		August 5, 2021
4.16†#		2021 Free Shares Plan		S-8		333-258514		99.2		August 5, 2021
4.17†#		2022 Stock Option Plan		S-8		333-267760		99.1		October 6, 2022
4.18†#		2022 Free Shares Plan		S-8		333-267760		99.2		October 6, 2022

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4.19†#		2023 Stock Option Plan		S-8		333-273777		99.1		August 7, 2023
4.20†#		2023 Free Shares Plan		S-8		333-273777		99.2		August 7, 2023
4.21#**		License Agreement between Allogene Therapeutics, Inc. and Cellectis S.A. dated March 7, 2019		20-F/A		001-36891		4.25		April 25, 2019
4.22#**		License, Development and Commercialization Agreement between Les Laboratoires Servier and Cellectis S.A. dated March 6, 2019		20-F/A		001-36891		4.26		April 25, 2019
4.23#**		Amendment No. 1 to License, Development and Commercialization Agreement between Les Laboratoires Servier and Cellectis S.A. dated March 4, 2020		20-F		001-36891		4.26.1		March 5, 2020
4.24		[Reserved.]
4.25		[Reserved.]
4.26		[Reserved.]
4.27		[Reserved.]
4.28#		Sales Agreement, dated as of March 29, 2021, by and between Cellectis S.A. and Jefferies LLC		6-K		001-36891		1.1		March 29, 2021
4.28.1#		Amendment No. 1 to the Sales Agreement between Jefferies LLC and Cellectis S.A., dated January 4, 2023		6-K		001-36891		1.2		January 4, 2023
4.29#**		Credit Facility Agreement between the European Investment Bank and Cellectis S.A., dated December 28, 2022		20-F		001-36891		4.26		March 14, 2023
4.30#**		Joint Research and Collaboration Agreement dated November 1, 2023 between Cellectis S.A. and AstraZeneca Ireland Limited		6-K		001-36891		99.1		November 9, 2023
4.31#**		Initial Investment Agreement dated November 1, 2023 between AstraZeneca Holdings B.V. and Cellectis S.A.		6-K		001-36891		99.2		November 9, 2023
4.32#**		Subsequent Investment Agreement dated November 14, 2023 between AstraZeneca Holdings B.V. and Cellectis S.A		6-K		001-36891		99.3		November 9, 2023
4.33#**		Subscription Agreement for Warrants to be issued by Cellectis S.A. dated March 30, 2023								Filed herewith
8.1		List of subsidiaries of the registrant								Filed herewith
12.1		Certificate of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002								Filed herewith
12.2		Certification by the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002								Filed herewith
13.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002								Filed herewith
13.2		Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002								Filed herewith
15.1		Consent of Ernst & Young et Autres (PCAOB # 1704)								Filed herewith
15.2		Letter from Ernst & Young et Autres pursuant to Item 16.F								Filed herewith

---

97.1		Compensation Recoupment Policy of Cellectis								Filed herewith
101		The following materials from Cellectis S.A.’s Report on Form 20.F formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Interim Statements of Consolidated Financial Position, (ii) the Unaudited Statements of Consolidated Operations, (iii) the Interim Statements of Consolidated Comprehensive Income (Loss), (iv) the Interim Statements of Consolidated Cash Flows, (v) the Statements of Changes in Consolidated Shareholders’ Equity, and (vi) Notes to the Interim Consolidated Financial Statements.
104.1		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

† Indicates a management contract or any compensatory plan, contract or arrangement.

# Indicates a document previously filed with the Commission.

* Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment.

** Portions of this exhibit (indicated by asterisks) have been omitted because they are not material and would likely cause competitive harm if disclosed.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements for the Years Ended December 31, 2021, 2022 and 2023:

 

Report of Independent Registered Public Accounting Firm	F-2
Statements of Consolidated Financial Position as of December 31, 2022 and 2023	F-5
Statements of Consolidated Operations for the Years Ended December 31, 2021, 2022 and 2023	F-6
Statements of Consolidated Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2022 and 2023	F-7
Statements of Consolidated Cash Flows for the Years Ended December 31, 2021, 2022 and 2023	F-8
Statements of Consolidated Changes in Shareholders’ Equity for the Years Ended December 31, 2021, 2022 and 2023	F-10
Notes to the Consolidated Financial Statements	F-12

 

Auditor Firm Id: 1704	Auditor Name: Ernst & Young et Autres	Auditor Location: Courbevoie, France

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of Cellectis S.A.

 

Opinion on the Financial Statements

 

We have audited the accompanying statements of consolidated financial position of Cellectis S.A. (the Company) as of December 31, 2023 and 2022, the related statements of consolidated operations, consolidated comprehensive income (loss), consolidated cash flows and changes in consolidated shareholders’ equity for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and in accordance with International Financial Reporting Standards as endorsed by the European Union.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 29, 2024, expressed an adverse opinion thereon.

 

Basis for Opinion

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

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

 

Critical Audit Matter

 

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

		Accounting for joint research and collaboration agreement and initial and subsequent investment agreements
Description of the Matter		As discussed in Notes 2.6, 4.3, 12.1, 15 and 16.1 to the consolidated financial statements, on November 1, 2023, the Company signed the Joint Research and Collaboration Agreement (JRCA) with AstraZeneca Ireland and, on November 1, 2023 and November 14, 2023, signed the Initial and Subsequent Investment Agreements with AstraZeneca Holdings, respectively. The Company received an upfront payment of $25 million under the terms of the JRCA and $80 million under the terms of the Initial Investment Agreement (IIA). Additionally, under the terms of the Subsequent Investment Agreements (SIA), AstraZeneca Holdings is expected to make an equity investment in the Company of $140 million, subject to the fulfilment of certain closing conditions. The Company concluded that the JRCA, IIA and SIA required evaluation on a combined basis and, in addition to the $25 million upfront payment received under the terms of the JRCA, allocated $35.7 million of the proceeds from the IIA and the fair value of the derivative associated with the SIA of $48.4 million to the JRCA. Total consideration allocated to the JRCA of $84.1 million was reflected as deferred revenue as of December 31, 2023, and no revenue was recognized under the JRCA for the year ended December 31, 2023. The Company valued the derivative instrument associated with the SIA at fair value of $48.4 million at the inception of the arrangement. The fair value of the derivative as of December 31, 2023 totaled $42.7 million, with the change in fair value of $5.7 million recognized as financial expense in the statements of consolidated operations. Auditing the Company’s accounting for the JRCA, IIA and SIA was complex due to the significant judgment required to determine the portion of the total combined consideration associated with these arrangements that is allocable to the JRCA as deferred revenue. In particular, significant judgment was required in determining the appropriate accounting standard applicable in determining the portion of the IIA and SIA that were applicable to the revenue generating

---

		components of the overall relationship. Additionally, auditing the Company’s estimate of fair value of the derivative instrument associated with the SIA was complex due to the significant judgment required to estimate the probability of transaction completion.
How We Addressed the Matter in Our Audit		Our audit procedures on the Company’s accounting analysis included, among others, evaluating the application of authoritative accounting standards in determining total consideration allocable to the revenue generating component of the relationship, the valuation methodology, and the assumptions utilized in the valuation of the derivative instrument associated with the SIA. We inspected the JRCA, IIA and SIA agreements to evaluate applicable terms and conditions and confirmed key provisions with the counterparty. We inquired of operational and accounting personnel, executive management and in-house legal counsel to corroborate our understanding of the terms of the agreements that impact the nature and timing of goods and services transferred to the customer and the valuation of the derivative instrument. We assessed, with the assistance of our valuation specialists, the reasonableness of the underlying estimates and evidence supporting the Company’s assumptions, including the probability of transaction completion, by testing the completeness, accuracy, and relevance of underlying data used in the model and assessing whether these assumptions were consistent with historical trends and evidence obtained, including in other areas of the audit, such as internal company communications and presentations and external communications. We performed sensitivity analyses of significant assumptions to evaluate the changes in fair value of the derivative from changes in these assumptions. We also assessed the adequacy of the Company’s related disclosures in the consolidated financial statements.

 

 

/s/ Ernst & Young et Autres

 

Ernst & Young et Autres has served as the Company’s auditor since 2012.

Lille, France

 

April 29, 2024

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and the Board of Directors of Cellectis S.A.

Opinion on Internal Control over Financial Reporting

We have audited Cellectis S.A.’s (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Cellectis S.A. (and subsidiaries) (the Company) has not maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. The Company lacks formality of accounting processes and controls over significant non-routine transactions and sufficient qualified resources with sufficient technical knowledge to identify and timely resolve complex accounting matters, which led to the correction of identified accounting misstatements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the statements of consolidated financial position of the Company as of December 31, 2023 and 2022, and the related statements of consolidated operations, consolidated comprehensive income (loss), consolidated cash flows and changes in consolidated shareholders’ equity for each of the three years in the period ended December 31, 2023, and the related notes. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated April 29, 2024, which expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young et Autres

Lille, France

April 29, 2024

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Cellectis S.A.

STATEMENTS OF CONSOLIDATED FINANCIAL POSITION

$ in thousands

 

			As of
	Notes		December 31, 2022				December 31, 2023
ASSETS
Non-current assets
Intangible assets	7			718				671
Property, plant and equipment	9			63,621				54,681
Right-of-use assets	8			44,275				38,060
Non-current financial assets	10			8,791				7,853
Total non-current assets				117,406				101,265
Current assets
Trade receivables	11.1			772				569
Subsidies receivables	11.2			14,496				20,900
Other current assets	11.3			9,078				7,722
Current financial assets	12.1			7,907				67,107
Cash and cash equivalents	12.2			89,789				136,708
Total current assets				122,043				233,005
Total assets held for sale	5			21,768				-
TOTAL ASSETS				261,216				334,270
LIABILITIES
Shareholders’ equity
Share capital	16			2,955				4,365
Premiums related to the share capital	16			583,122				522,785
Currency translation adjustment				(28,605	)			(36,690	)
Retained earnings				(333,365	)			(304,707	)
Net income (loss)				(106,139	)			(101,059	)
Total shareholders’ equity - Group Share				117,968				84,695
Non-controlling interests				7,973				-
Total shareholders’ equity				125,941				84,695
Non-current liabilities
Non-current financial liabilities	13			20,531				49,125
Non-current lease debts	12			49,358				42,948
Non-current provisions	19			2,390				2,200
Deferred tax liabilities	4.4							158
Total non-current liabilities				72,279				94,431
Current liabilities
Current financial liabilities	13			5,088				5,289
Current lease debts	13			7,872				8,502
Trade payables	13			21,456				19,069
Deferred income and contract liabilities	15			59				110,325
Current provisions	19			477				1,740
Other current liabilities	14			13,179				10,219
Total current liabilities				48,131				155,144
Total liabilities related to asset held for sale	5			14,864				-
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY				261,216				334,270

 

The accompanying notes form an integral part of these Consolidated Financial Statements

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Cellectis S.A.

STATEMENTS OF CONSOLIDATED OPERATIONS

For the year ended December 31

$ in thousands, except per share amounts

 

			For the year ended December 31,
	Notes		2021				2022				2023
Revenues and other income
Revenues	4.1			30,347				19,171				755
Other income	4.1			8,250				6,553				8,438
Total revenues and other income				38,597				25,725				9,193
Operating expenses
Cost of revenue	4.2			(1,844	)			(1,772	)			(737	)
Research and development expenses	4.2			(117,840	)			(97,501	)			(87,646	)
Selling, general and administrative expenses	4.2			(22,882	)			(17,494	)			(16,812	)
Other operating income (expenses)				488				1,377				(1,300	)
Total operating expenses				(142,077	)			(115,390	)			(106,495	)
Operating income (loss)				(103,481	)			(89,666	)			(97,302	)
Financial income	4.3			13,218				8,880				21,479
Financial expenses	4.3			(6,486	)			(17,815	)			(40,642	)
Net Financial gain (loss)				6,731				(8,935	)			(19,163	)
Income tax	4.4			-				(87	)			(371	)
Income (loss) from continuing operations				(96,749	)			(98,688	)			(116,835	)
Income (loss) from discontinued operations				(28,358	)			(15,345	)			8,392
Net income (loss)				(125,107	)			(114,034	)			(108,443	)
Attributable to shareholders of Cellectis				(114,197	)			(106,139	)			(101,059	)
Attributable to non-controlling interests				(10,910	)			(7,894	)			(7,384	)
Basic / Diluted net income (loss) per share attributable to shareholders of Cellectis	18
Basic and diluted net income (loss) attributable to shareholders of Cellectis, per share ($ /share)				(2.55	)			(2.33	)			(1.77	)
Basic and diluted net income (loss) attributable to shareholders of Cellectis from discontinued operations, per share ($ /share)				(0.39	)			(0.16	)			0.28
Number of shares used for computing
Basic and diluted				44,820,279				45,547,359				57,012,815

 

When we have adjusted net loss, we use the weighted average number of outstanding shares, basic to compute the diluted adjusted net income (loss) attributable to shareholders of Cellectis ($/share). When we have adjusted net income, we use the weighted average number of outstanding shares, diluted to compute the diluted adjusted net income (loss) attributable to shareholders of Cellectis ($/share).

The accompanying notes form an integral part of these Consolidated Financial Statements

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STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

For the year ended December 31

$ in thousands

 

			For the year ended December 31,
			2021				2022				2023
Net income (loss)				(125,107	)			(114,034	)			(108,443	)
Actuarial gains and losses				240				1,983				597
Other comprehensive income (loss) that will not be reclassified subsequently to income or loss from continued operations				240				1,983				597
Currency translation adjustment				(21,458	)			(16,770	)			2,919
Other comprehensive income (loss) that will be reclassified subsequently to income or loss from continuing operations				(21,458	)			(16,770	)			2,919
Other comprehensive income (loss) from discontinued operations				6,220				5,831				(1,522	)
Total Comprehensive income (loss)				(140,106	)			(122,989	)			(106,449	)
Attributable to shareholders of Cellectis				(127,890	)			(114,739	)			(100,535	)
Attributable to non-controlling interests				(12,216	)			(8,250	)			(5,914	)

 

The accompanying notes form an integral part of these Consolidated Financial Statements

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Cellectis S.A.

STATEMENTS OF CONSOLIDATED CASH FLOWS

For the year ended December: 31

$ in thousands

We present our consolidated statements of cash flows using the indirect method:

 

			For the year ended December 31,
	Notes		2021				2022				2023
Cash flows from operating activities
Net income (loss) for the period				(125,107	)			(114,034	)			(108,443	)
Net loss for the period from discontinued operations				(28,358	)			(15,345	)			8,392
Net (loss) income for the period from continuing operations				(96,749	)			(98,688	)			(116,835	)
Adjustment to reconcile net income (loss) to cash provided by (used in) operating activities
Adjustments for
Intercompany transactions between continuing and discontinued operations (1)				203				152
Amortization and depreciation				14,156				18,435				18,523
Net loss (income) on disposals				2				1,612				0
Net financial loss (gain)				(6,731	)			8,935				19,163
Income tax				-				87				371
Expenses related to share-based payments				11,493				6,043				5,233
Provisions				421				270				1,352
Other non-cash items				-				(460	)			(1,402	)
Realized foreign exchange gain (loss)				719				(664	)			8
Interest (paid) / received (2)				969				1,158				3,627
Operating cash flows before change in working capital				(75,518	)			(63,120	)			(69,961	)
Decrease (increase) in inventories				215				-				-
Decrease (increase) in trade receivables and other current assets				(13,091	)			(3,187	)			2,252
Decrease (increase) in subsidies receivables				654				(5,806	)			(6,238	)
(Decrease) increase in trade payables and other current liabilities				177				3,247				(6,305	)
(Decrease) increase in deferred revenues and contract liabilities				(252	)			23				59,149
Change in working capital				(12,297	)			(5,723	)			48,859
Net cash flows provided by (used in) operating activities of continuing operations				(87,815	)			(68,843	)			(21,103	)
Net cash flows provided by (used in) operating activities of discontinued operations				(16,746	)			(18,601	)			(3,644	)
Net cash flows provided by (used in) operating activities				(104,562	)			(87,444	)			(24,746	)
Cash flows from investment activities
Acquisition of intangible assets				(13	)			(10	)			-
Calyxt’s cash and cash equivalents disposed of (3)				-				-				(1,642	)
Acquisition of property, plant and equipment	8			(18,543	)			(2,431	)			(1,073	)
Net change in non-current financial assets	9			(143	)			126				489
Sale (Acquisition) of current financial assets	7			15,000				-				(13,363	)
Net cash flows provided by (used in) investing activities of continuing operations				(3,699	)			(2,315	)			(15,589	)
Net cash flows provided by (used in) investing activities of discontinued operations				10,979				(446	)			79
Cash flows provided by (used in) investment activities				7,279				(2,761	)			(15,510	)
				-
Cash flows from financing activities
Proceeds from the exercise of Cellectis stock options	15			11,601				-				-
Increase in share capital of Cellectis after deduction of transaction costs (4)	15			44,638				(569	)			67,936
Increase in borrowings	12			-				5,750				29,671
Decrease in borrowings	12			-				(1,343	)			(5,107	)
Interest paid on financial debt				(368	)			(332	)			(333	)
Payments on lease debts	12			(10,641	)			(11,011	)			(11,084	)
Net cash flows provided by financing activities of continuing operations				45,230				(7,505	)			81,084
Net cash flows provided by (used in) financing activities of discontinued operations				2,294				8,650				1,781
Net cash flows provided by (used in) financing activities				47,525				1,145				82,865
(Decrease) increase in cash and cash equivalents				(49,758	)			(89,060	)			42,608
				-				-
Cash and cash equivalents at the beginning of the year				241,148				185,636				93,216
Effect of exchange rate changes on cash				(5,754	)			(3,360	)			884
Cash from discontinued operations				13,823				3,427				-
Cash from continuing operations				171,813				89,789				136,708
Cash and cash equivalents at the end of the period	11			185,636				93,216				136,708

 

 

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The accompanying notes form an integral part of these Consolidated Financial Statements

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Cellectis S.A.

For the year ended December 31

$ in thousands, except share date

 

		Share Capital Ordinary Shares																												Equity
	Notes	Number of shares				Amount				Premiums related to share capital				Currency translation adjustment				Retained earnings (deficit)						Income (Loss)						attributable to shareholders of Cellectis						Non controlling interests						Total Shareholders’ Equity
As of January 1, 2021			42,780,186				2,785				872,134				(4,089	)			(505,961	)					(81,074	)					283,795						25,051						308,846
Net Loss			-				-				-				-				-						(114,197	)					(114,197	)					(10,910	)					(125,107	)
Other comprehensive income (loss)			-				-				-				(13,932	)			240						-						(13,693	)					(1,306	)					(14,999	)
Total comprehensive income (loss)			-				-				-				(13,932	)			240						(114,197	)					(127,890	)					(12,216	)					(140,106	)
Allocation of prior period loss			-				-				-				-				(81,074	)					81,074						-						-						-
Exercise of stock options and capital increase Calyxt			-				-				-				-				2,699						-						2,699						1,668						4,367
Capital Increase Cellectis (ATM)			2,415,630				143				46,811				-				-						-						46,954						-						46,954
Transaction costs			-				-				(2,316	)			-				-						-						(2,316	)					-						(2,316	)
Transaction with subsidiaries	15		-				-				-				-				(58	)					-						(58	)					58						-
Exercise of share warrants, employee warrants, stock-options and free-shares vesting Cellectis			288,494				17				5,597				-				(2	)					-						5,612						-						5,612
Non-cash stock-based compensation expense			-				-				12,497				-				-						-						12,497						621						13,118
Other movements			-				-				(27	)			-				27						-						-						-						-
As of December 31, 2021			45,484,310				2,945				934,696				(18,021	)			(584,129	)					(114,197	)					221,293						15,181						236,474
As of January 1, 2022			45,484,310				2,945				934,696				(18,021	)			(584,129	)					(114,197	)					221,293						15,181						236,474
Net Loss																						-			(106,139	)		-			(106,139	)		-			(7,894	)		-			(114,034	)
Other comprehensive income (loss)															(10,583	)			1,983			-						-			(8,600	)		-			(355	)		-			(8,955	)
Total comprehensive income (loss)															(10,583	)			1,983						(106,139	)					(114,739	)					(8,250	)					(122,989	)
Allocation of prior period loss																			(114,197	)					114,197
Issuance of Calyxt's common stock and exercise of Calyxt's pre-funded warrants																			1,341			-						-			1,341			-			1,392			-			2,733
Capital Increase of Calyxt																			162			-						-			162			-			168			-			329
Transaction costs related to Calyxt's capital increase																			(104	)		-						-			(104	)		-			(108	)		-			(212	)
Transaction costs related to Cellectis' capital increase											(570	)										-						-			(570	)		-									(570	)
Transaction with subsidiaries																			2,515												2,515						(2,515	)
Exercise of share warrants, employee warrants, stock-options and free-shares vesting Cellectis			191,658				10												(10	)
Non-cash stock-based compensation expense	15										8,071																				8,071			-			2,105						10,175
Other movements											(359,076	)							359,076
As of December 31, 2022			45,675,968				2,955				583,122				(28,605	)			(333,365	)					(106,139	)					117,968		#REF!				7,973						125,941
As of January 1, 2023			45,675,968				2,955				583,122				(28,605	)			(333,365	)					(106,139	)					117,968						7,973						125,941
Net Loss															-				-						(101,059	)					(101,059	)					(7,384	)					(108,443	)
Other comprehensive income (loss)															(73	)			597						-						524						1,470						1,994
Total comprehensive income (loss)															(73	)			597						(101,059	)					(100,535	)					(5,914	)					(106,449	)
Allocation of prior period loss																			(106,139	)					106,139
Capital increase of Cellectis (1)			25,907,800				1,401				68,584																				69,985												69,985
Transaction costs related to Cellectis’ capital increase (2)											(2,049	)																			(2,049	)											(2,049	)
Operation between shareholders (3)																			343												343						(343	)
Exercise of share warrants, employee warrants, stock-options and free-shares vesting Cellectis	13		167,433				9				-																				9						-						9
Loss of control over Calyxt (4)																																					(3,625	)					(3,625	)
OCI Reclassification pursuant to Calyxt's deconsolidation (5)															(8,012	)			(10	)											(8,022	)											(8,022	)
Non-cash stock-based compensation expense	15										7,086																				7,086						2,006						9,092
Other movements (6)											(133,958	)							133,868												(90	)					(97	)					(187	)
As of December 31, 2023			71,751,201				4,365				522,785				(36,690	)			(304,707	)					(101,059	)					84,695						0						84,695

 

During the year ended December 31, 2023, 16,000,000 shares were issued on November 6, 2023 in connection with the AstraZeneca Initial Investment Agreement (the "IIA") of $80.0 million at a price of $5 per share. Following settlement and delivery of the new shares, AstraZeneca owns approximately 22% of the share capital, and 21% of the voting rights of the Company, has the right to nominate a non-voting observer on the board of directors of Cellectis, and has the right to participate pro rata in Cellectis’s future share offerings. A portion of the Initial Investment Agreement proceeds equal to $35.7 million was reallocated to the transaction price of the Joint Research and Collaboration Agreement ("AZ JRCA") with AstraZeneca collaboration agreement and recorded as deferred revenue. The amount is reflected as a deduction from the share premium. The remaining consideration received, after reallocation of the AZ JRCA and foreign exchange impact as of December 31, 2023, representing $44.9 million is reflected in share capital for $0.9 million and share premium for $44.0 million. Further details on the interdependence between the AZ JRCA and SIA are provided in Note 2.6 to the financial statements "Accounting treatment of significant transactions of the period".

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The accompanying notes form an integral part of these Consolidated Financial Statements

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

 

 

 

 

 

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

		CELLECTIS S.A.
		/s/ André Choulika
		By:	André Choulika
		Title:	Chief Executive Officer
Date: April 29, 2024

 

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