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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended SeptemberJune 30, 20202021

OR

From the transition period from            to             .

Commission File Number 001-36076

FATE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

(858) 875-1800

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

As of November 3, 2020, 87,244,032August 2, 2021, 95,184,547 shares of the registrant’s common stock, par value $0.001 per share, were issued and outstanding.

FATE THERAPEUTICS, INC.

FORM 10-Q

TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements (unaudited)

Fate Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

See accompanying notes.

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Fate Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

See accompanying notes.

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Fate Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

See accompanying notes.

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Fate Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Organization

Fate Therapeutics, Inc. (the Company) was incorporated in the state of Delaware on April 27, 2007 and has its principal operations in San Diego, California. The Company is a clinical-stage biopharmaceutical company dedicated to the development of programmed cellular immunotherapies for patients with cancer, and immune disorders. The Company’s therapeutic pipeline is comprised of immuno-oncology programs, including off-the-shelf engineered natural killer (NK) and T-cell product candidates derived from clonal master engineered induced pluripotent stem cell (iPSC) lines, and immuno-regulatory programs, including product candidates to prevent life-threatening complications in patients undergoing hematopoietic cell transplantation. The Company’s product candidates are based on its proprietary cell programming approach, which it applies to modulate the therapeutic function and direct the fate of immune cells.lines.

As of SeptemberJune 30, 2020,2021, the Company has devoted substantially all of its efforts to product development, raising capital and building infrastructure and has not generated any revenues from any sales of its therapeutic products. To date, the Company’s revenues have been derived from collaboration agreements and government grants.

Public Equity Offerings

In January 2021, the Company completed a public offering of common stock in which investors, certain of which are affiliated with a director of the Company, purchased 5.1 million shares of the Company’s common stock at a price of $85.50 per share under a shelf registration statement. In addition, the Company issued pre-funded warrants, in lieu of common stock to certain investors, to purchase 257,310 shares of the Company’s common stock (Pre-Funded Warrants). The purchase price of the Pre-Funded Warrants was $85.499 per Pre-Funded Warrant, which equals the per share public offering price for the shares of common stock less the $0.001 exercise price for each such Pre-Funded Warrant. See Note 8 for additional detail. Gross proceeds from the public offering and the issuance of the Pre-Funded Warrants were $460.0 million, and after giving effect to $27.6 million of costs related to the public offering and the issuance of Pre-Funded Warrants, net proceeds were $432.4 million.

In June 2020, the Company completed a public offering of common stock in which investors, certain of which are affiliated with a director of the Company, purchased 7.1 million shares of the Company’s common stock at a price of $28.31 per share under a shelf registration statement. Gross proceeds from the public offering were $201.3 million, and, after giving effect to $12.5 million of costs related to the public offering, net proceeds were $188.8 million.

In September 2019, the Company completed a public offering of common stock in which investors, certain of which are affiliated with a director of the Company, purchased 9.9 million shares of the Company’s common stock at a price of $17.50 per share under a shelf registration statement. Gross proceeds from the offering were $173.1 million, and, after giving effect to $10.7 million of costs related to the offering, net proceeds were $162.4 million.

Private Placements of Common Stock

In June 2020, in connection with the June 2020 public offering of common stock, the Company exercised its right to cause an existing shareholder, Johnson & Johnson Innovation-JJDC, Inc (JJDC), to purchase $50.0 million of the Company’s common stock, and JJDC purchased in a private placement 1.8 million shares of the Company’s common stock at a price of $28.31 per share, for aggregate proceeds of $50.0 million. In April 2020, in connection with the Janssen Agreement described in Note 2, JJDC purchased in a private placement 1.6 million shares of the Company’s common stock at a price of $31.00 per share, for aggregate proceeds of $50.0 million. The shares of common stock purchased in the private placements were not subject to any underwriting discounts or commissions.

Use of Estimates

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The preparation of the Company’s unaudited condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed consolidated financial statements and accompanying notes. The most significant estimates and assumptions in the Company’s unaudited condensed consolidated financial statements relate to its stock price appreciation milestone obligations, contracts containing leases, accrued expenses, stock-based compensation, and the estimated total costs expected to be incurred under the Company’s collaboration agreements. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

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Risks and Uncertainties

Due to the global outbreak of SARS-CoV-2, the novel strain of coronavirus that causes Coronavirus disease 19 (COVID-19), the Company experienced impacts on certain aspects of its business, including its clinical trial and research and development activities, during the ninesix months ended SeptemberJune 30, 2020.2021. For example, certain of the Company’s research and development activities have been delayed or disrupted as a result of measures the Company implemented in response to governmental “stay at home” orders and in the interests of public health and safety, and the Company has experienced delays or disruptions in the initiation and conduct of its clinical trials as a result of prioritization of hospital and other medical resources toward pandemic efforts, policies and procedures implemented at clinical sites with respect to the conduct of clinical trials, and other precautionary measures taken in treating patients or in practicing medicine in response to the COVID-19 pandemic. The scope and duration of these delays and disruptions, and the ultimate impacts of the COVID-19 pandemic on the Company’s operations, are currently unknown. While certain measures have been relaxed in certain parts of the world as increasing numbers of people have received COVID-19 vaccines, others have remained in place with some areas continuing to experience renewed outbreaks and surges in infection rates. The extent to which such measures are removed or new measures are put in place will depend upon how the pandemic evolves, as well as the distribution of available vaccines, the rates at which they are administered and the emergence of new variants of the virus. The Company is continuing to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that it determines are in the best interests of public health and safety and that of the Company’s patient community, employees, partners, and stockholders. The Company cannot predict the effects that such actions, or the impact of the ongoing COVID-19 pandemic on global business operations and economic conditions, may have on its business, strategy, collaborations, or financial and operating results.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, Fate Therapeutics Ltd., incorporated in the United Kingdom, Fate Therapeutics, B.V., incorporated in the Netherlands and Tfinity Therapeutics, Inc., incorporated in the United States. To date, the aggregate operations of these subsidiaries have not been significant and all intercompany transactions and balances have been eliminated in consolidation.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash in readily available checking and savings accounts, money market accounts and money market funds. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same such amount shown in the unaudited condensed consolidated statements of cash flows as of SeptemberJune 30, 20202021 and 20192020 (in thousands):

In January 2020, the Company entered into a lease for a facility in San Diego that it intends to use as its new corporate headquarters. In lieu of a security deposit, Silicon Valley Bank issued a $15.0 million letter of credit on the Company’s behalf, which letter of credit is secured by a deposit of equal amount. For each of the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the restricted cash balance includes cash-collateralized irrevocable standby letters of credit in the amounts of $15.2 million and $0.2 million, respectively, associated with the Company’s facilities leases.

Investments

Investments are accounted for as available-for-sale securities and are carried at fair value on the unaudited condensed consolidated balance sheets. Upon initial recognition of the investment and at each reporting period, the Company evaluates whether any unrealized losses on investments are attributable to a credit loss or other factors. Any unrealized losses attributable to credit loss are recorded through an allowance for credit losses, limited to the amount by which the fair value is below amortized cost, with the offsetting amount recorded in other income or expense in the unaudited condensed consolidated statement of operations and comprehensive loss. Unrealized losses not attributable to an expected credit loss and unrealized gains on investments are recorded in

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other comprehensive income (loss) on the unaudited condensed consolidated statements of operations and comprehensive loss. Realized gains and losses, if any, on investments classified as available-for-sale securities are included in other income or expense.

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The amortized cost of investments classified as available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and following the requirements of the United States Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required can be condensed or omitted. The interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2019,2020, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 20192020 filed by the Company with the SEC on March 2, 2020.February 24, 2021. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position and its results of operations and comprehensive loss and its cash flows for the periods presented. The results for the three and ninesix months ended SeptemberJune 30, 20202021 are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.

Revenue Recognition

The Company recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration the Company is entitled to receive in exchange for such product or service. In doing so, the Company follows a five-step approach: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) the customer obtains control of the product or service. The Company considers the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard. The Company applies the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.

A customer is a party that has entered into a contract with the Company, where the purpose of the contract is to obtain a product or a service that is an output of the Company’s ordinary activities in exchange for consideration. To be considered a contract, (i) the contract must be approved (in writing, orally, or in accordance with other customary business practices), (ii) each party’s rights regarding the product or the service to be transferred can be identified, (iii) the payment terms for the product or the service to be transferred can be identified, (iv) the contract must have commercial substance (that is, the risk, timing or amount of future cash flows is expected to change as a result of the contract), and (v) it is probable that the Company will collect substantially all of the consideration to which it is entitled to receive in exchange for the transfer of the product or the service.

A performance obligation is defined as a promise to transfer a product or a service to a customer. The Company identifies each promise to transfer a product or a service (or a bundle of products or services, or a series of products and services that are substantially the same and have the same pattern of transfer) that is distinct. A product or a service is distinct if both (i) the customer can benefit from the product or the service either on its own or together with other resources that are readily available to the customer and (ii) the Company’s promise to transfer the product or the service to the customer is separately identifiable from other promises in the contract. Each distinct promise to transfer a product or a service is a unit of accounting for revenue recognition. If a promise to transfer a product or a service is not separately identifiable from other promises in the contract, such promises should be combined into a single performance obligation.

The transaction price is the amount of consideration the Company is entitled to receive in exchange for the transfer of control of a product or a service to a customer. To determine the transaction price, the Company considers the existence of any significant financing component, the effects of any variable elements, noncash considerations and consideration payable to the customer. If a significant financing component exists, the transaction price is adjusted for the time value of money. If an element of variability exists, the Company must estimate the consideration it expects to receive and uses that amount as the basis for recognizing revenue as the product or the service is transferred to the customer. There are two methods for determining the amount of variable consideration: (i) the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts, and (ii) the mostly likely amount method, which identifies the single most likely amount in a range of possible consideration amounts.

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If a contract has multiple performance obligations, the Company allocates the transaction price to each distinct performance obligation in an amount that reflects the consideration the Company is entitled to receive in exchange for satisfying each distinct performance obligation. For each distinct performance obligation, revenue is recognized when (or as) the Company transfers control of the product or the service applicable to such performance obligation.

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In those instances where the Company first receives consideration in advance of satisfying its performance obligation, the Company classifies such consideration as deferred revenue until (or as) the Company satisfies such performance obligation. In those instances where the Company first satisfies its performance obligation prior to its receipt of consideration, the consideration is recorded as accounts receivable.

The Company expenses incremental costs of obtaining and fulfilling a contract as and when incurred if the expected amortization period of the asset that would be recognized is one year or less, or if the amount of the asset is immaterial. Otherwise, such costs are capitalized as contract assets if they are incremental to the contract and amortized to expense proportionate to revenue recognition of the underlying contract.

Stock Price Appreciation Milestones

The Company estimates the fair value of the stock price appreciation milestones defined as enterprise value milestones inassociated with the Amended and Restated Exclusive License Agreement with Memorial Sloan Kettering Cancer Center (see Note 2), using a Monte Carlo simulation model, which relies on the Company’s current stock price as well as significant estimates and assumptions to determine the estimated liability associated with the contingent milestone payments. The Company accounts for the fair value of the enterprise valuestock price appreciation milestones in accordance with ASCAccounting Standards Codification (ASC) 815, Derivatives and Hedging, with fair value marked to market.marked-to-market at each reporting date. The assumptions used to calculate the fair value of the enterprise valuestock price appreciation milestones are subject to a significant amount of judgment including the assessmentprobability of achieving a specified clinical milestone, the expected volatility of the Company’s common stock, the risk-free interest rate, and the estimated term, which is based in part on the last valid patent claim date. The Company remeasures the fair value of the enterprise valuestock price appreciation milestones at each balance sheet date, with changes in fair value recorded in earnings as a non-operating expense.income or expense on the unaudited condensed consolidated statements of operations and comprehensive loss.

Leases

The Company determines if a contract contains a lease at the inception of the contract. The Company currently has leases related to its facilities leased for office and laboratory space, which are classified as operating leases. These leases result in operating right-of-use (ROU) assets, current operating lease liabilities, and non-current operating lease liabilities in the unaudited condensed consolidated balance sheets. The Company does not have any financing leases. Leases with a term of 12 months or less are considered short-term and ROU assets and lease obligations are not recognized. Payments associated with short-term leases are expensed on a straight-line basis over the lease term.

Lease liabilities represent an obligation to make lease payments arising from the lease and ROU assets represent the right to use the underlying asset identified in the lease for the lease term. Lease liabilities are measured at the present value of the lease payments not yet paid discounted using the discount rate for the lease established at the lease commencement date. To determine the present value, the implicit rate is used when readily determinable. For those leases where the implicit rate is not provided, the Company determines an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. ROU assets are measured as the present value of the lease payments and also include any prepaid lease payments made and any other indirect costs incurred, and exclude any lease incentives received. Lease terms may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company aggregates all lease and non-lease components for each class of underlying assets into a single lease component.

Stock-Based Compensation

Stock-based compensation expense represents the cost of the grant date fair value of employee stock option and restricted stock unit grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. For stock option grants for which vesting is subject to performance-based milestones, the expense is recorded over the remaining service period after the point when the achievement of the milestone is probable or the performance condition has been achieved. For stock option grants for which vesting is subject to both performance-based milestones and market conditions, expense is recorded over the derived service period after the point when the achievement of the performance-based milestone is probable or the performance condition has been achieved. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, with the exception of option grants for which vesting is subject to both performance-based milestones and market conditions, which are valued using a lattice-based model. The fair value of restricted stock units is based on the closing price of the Company’s common stock as reported on The Nasdaq Global Market on the date of grant. The Company recognizes forfeitures for all awards as such forfeitures occur.

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Convertible Preferred Stock

The Company applies the relevant accounting standards to distinguish liabilities from equity when assessing the classification and measurement of preferred stock. Preferred shares subject to mandatory redemptions are considered liabilities and measured at fair value. Conditionally redeemable preferred shares are considered temporary equity. All other preferred shares are considered as stockholders’ equity.

The Company applies the relevant accounting standards for derivatives and hedging (in addition to distinguishing liabilities from equity) when accounting for hybrid contracts that contain conversion options. Conversion options must be bifurcated from the host instruments and accounted for as free-standing financial instruments according to certain criteria. These criteria include circumstances when (i) the economic characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable accounting principles with changes in fair value reported in earnings as they occurred, and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The derivative is subsequently measured at fair value at each reporting date, with the changes in fair value reported in earnings.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non‑owner sources. Other comprehensive loss includes unrealized gains and losses, other than losses attributable to a credit loss which are included in other income and expense, on investments classified as available-for-sale securities, which was the only difference between net loss and comprehensive loss for the applicable periods.

Net Loss per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. The Pre-Funded Warrants associated with the January 2021 public equity offering (see Note 8) are considered outstanding shares in the basic earnings per share calculation given their nominal exercise price. Dilutive common stock equivalents for the periods presented include convertible preferred stock, warrants for the purchase of common stock, and common stock options and restricted stock units outstanding under the Company’s stock option and incentive plans. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

For the three and ninesix months ended SeptemberJune 30, 2021, the Company realized a net loss of $55.1 million and $100.2 million, respectively. Shares of potentially dilutive securities totaled 25.1 million for the three and six months ended June 30, 2021, including 14.0 million shares associated with a hypothetical conversion of all outstanding shares of the Company’s Class A convertible preferred stock, and an aggregate of 11.1 million shares of common stock issuable upon the exercise of outstanding stock options and the settlement of outstanding restricted stock units.

For the three and six months ended June 30, 2020, the Company realized a net loss of $58.7$28.1 million and $120.3$61.6 million, respectively. Shares of potentially dilutive securities totaled 26.125.8 million for the three and ninesix months ended SeptemberJune 30, 2020, including 14.0 million shares associated with a hypothetical conversion of all outstanding shares of the Company’s Class A convertible preferred stock, and an aggregate of 12.1 million shares of common stock issuable upon the exercise of outstanding stock options and the settlement of outstanding restricted stock units.

For the three and nine months ended September 30, 2019, the Company realized a net loss of $26.6 million and $69.8 million, respectively. Shares of potentially dilutive securities totaled 24.0 million for the three and nine months ended September 30, 2019, including 14.0 million shares associated with a hypothetical conversion of all outstanding shares of the Company’s Class A convertible preferred stock, and an aggregate of 10.011.8 million shares of common stock issuable upon the exercise of outstanding stock options and the settlement of outstanding restricted stock units.

Going Concern Assessment

Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The Company determined that there are no conditions or events that raise substantial doubt about its ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.

Recently AdoptedIssued Accounting Pronouncements

In December 2019,August 2020, the FinancialFASB issued ASU 2020-06,Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes, Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (ASC) Topic 740financial instruments with characteristics of liabilities and equity, including convertible instruments, and amends existing earnings-per-share, or EPS, guidance to improve consistent application.by requiring that an entity use the if-converted method when calculating diluted EPS for convertible instruments. ASU 2019-122020-06 is effective for fiscal years beginning after December 15, 2020 and2021, including interim periods within those fiscal years, with early adoption is permitted. The only exception addressed inCompany

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plans to adopt ASU 2019-12 applicable to the Company is the elimination of the intra-period exception to allocating income taxes when there are losses from continuing operations. The guidance is to be applied prospectively at the beginning in the year of adoption. The Company elected to early adopt the standard as of2020-06 effective January 1, 2020 using2022 and is currently evaluating the prospective method, and such adoption did noteffect ASU 2020-06 will have a material impact on the Company’s consolidated financial statements.

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In November 2018, the FASB issued ASU 2018-18, which clarifies the interaction between ASC Topic 808, Collaborative Arrangements, and ASC Topic 606, Revenue from Contracts with Customers. The guidance, among other items, clarifies that certain transactions between collaborative participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019. The Company adopted the standard effective January 1, 2020, and such adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which amends the disclosure requirements in ASC 820 by adding, changing, or removing certain disclosures. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019. The Company adopted the standard effective January 1, 2020, and such adoption did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. The standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company adopted the standard effective January 1, 2020 using the modified retrospective approach. Due to the nature of the Company’s investment portfolio, the adoption of the guidance did not have a material effect on the Company’s unaudited condensed consolidated financial statements and no allowance was recorded for expected credit losses.related disclosures.

Janssen Collaboration and Option Agreement

On April 2, 2020 (the Janssen Agreement Effective Date), the Company entered into a Collaboration and Option Agreement (the Janssen Agreement) with Janssen Biotech, Inc. (Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson. Additionally, on the Janssen Agreement Effective Date, the Company entered into a Stock Purchase Agreement (the Stock Purchase Agreement) with Johnson & Johnson Innovation – JJDC, Inc. (JJDC).

Upon entering the Janssen Agreement, the Company received an upfront, non-refundable and non-creditable payment of $50.0 million. Under the Janssen Agreement, Janssen and the Company will collaborate to develop iPSC-derived CAR NKNK- and CAR T-cell product candidates for the treatment of cancer. Janssen will contribute proprietary antigen binding domains directed to up to four tumor-associated antigen targets (the Janssen Cancer Targets). The Company will research and construct iPSC-derived CAR NKNK- and CAR T-cell product candidates directed to each of the Janssen Cancer Targets (the Collaboration Candidates) and perform preclinical development of Collaboration Candidates. Upon the Company’s completion of activities sufficient to allow the filing of an Investigational New Drug (IND) application for a Collaboration Candidate, Janssen will have the right to exercise an exclusive option and obtain an exclusive license to the Company’s intellectual property rights for the development and commercialization of such Collaboration Candidate. Upon the exercise of such exclusive option, Janssen will be solely responsible for the worldwide clinical development and commercialization of such Collaboration Candidate, and the Company will be primarily responsible for the manufacture, at Janssen’s cost, of such Collaboration Candidate. For each Collaboration Candidate, upon attaining clinical proof-of-concept, the Company shall have the right to elect to co-commercialize and share equally in the profits and losses in the United States, subject to the Company sharing in certain development costs.

Under the Stock Purchase Agreement, the Company sold 1.6 million shares of common stock to JJDC at $31.00 per share, for an aggregate purchase price of approximately $50.0 million, on April 7, 2020. The Company determined that this common stock purchase represented a premium of $9.93 per share, or $16.0 million in aggregate (the Equity Premium), and the remaining $34.0 million was recorded as an issuance of common stock in shareholders’ equity.

In addition, under the Stock Purchase Agreement, the Company had the right to require that JJDC purchase an aggregate of $50.0 million in shares of the Company’s common stock in a private placement at the same price per share as that paid by investors in a public offering. In June 2020, in connection with the Company’s June 2020 public offering, the Company exercised this right and JJDC purchased in a private placement 1.8 million shares of the Company’s common stock at a price of $28.31 per share, for aggregate proceeds of $50.0 million.  

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Under the terms of the Janssen Agreement, the Company is entitled to receive full funding for all research, preclinical development and IND-enabling activities performed by the Company for Collaboration Candidates, and is eligible to receive (i) with respect to the first Janssen Cancer Target, payments of up to $898.0 million upon the achievement of specified development, regulatory and sales milestones (the Janssen Milestone Payments) for the first Collaboration Candidate, and up to $460.0 million in Janssen Milestone Payments for each additional Collaboration Candidate, directed to the first Janssen Cancer Target; and (ii) with respect to each of the second, third and fourth Janssen Cancer Targets, up to $706.0 million in Janssen Milestone Payments for each of the first Collaboration Candidates, and up to $340.0 million in Janssen Milestone Payments for each additional Collaboration Candidate, directed to the applicable Janssen Cancer Target, where certain Janssen Milestone Payments under (i) and (ii) are subject to reduction in the event the Company elects to co-commercialize and share equally in the profits and losses in the United States of a respective Collaboration Candidate. The Company is further eligible to receive double-digit tiered royalties ranging up to the mid-teens on net sales of Collaboration Candidates that are commercialized by Janssen under the Janssen Agreement, subject to reduction under certain circumstances.

Janssen may terminate the Janssen Agreement with respect to one or more Janssen Cancer Targets, or in its entirety, at any time on or after the second anniversary of the Janssen Agreement Effective Date, and the Company may terminate the Janssen Agreement with respect to a particular Janssen Cancer Target if a Collaboration Candidate has not been selected for IND-enabling studies for such Janssen Cancer Target within specified time periods under certain conditions. The Janssen Agreement contains customary provisions for termination by either party in the event of a material breach of the Janssen Agreement, subject to cure, by the other party and in the event of any bankruptcy, insolvency or similar events with respect to the other party.

The Company applied ASC Topic 808, Collaborative Arrangements (ASC 808) and determined the Janssen Agreement is applicable to such guidance. The Company concluded that Janssen represented a customer and applied relevant guidance from ASC Topic 606, Revenue from Contracts with Customers (ASC 606) to evaluate the appropriate accounting for the Janssen Agreement. In accordance with this guidance, the Company identified its potential performance obligations, including its grant of a license to Janssen to certain of its intellectual property subject to certain conditions, its conduct of research and development services, and its participation in various joint oversight committees. The Company determined that its grant of a license to Janssen to certain of its intellectual property subject to certain conditions was not distinct from other performance obligations because such grant is

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dependent on the conduct and results of the research and development services. Accordingly, the Company determined that its grant of a license to Janssen and its conduct of research and development services should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research and development services, which is estimated to be four years. Additionally, the Company determined that participation in the various joint oversight committees did not constitute a performance obligation as the Company’s participation in the various joint oversight committees does not transfer a service.

The Company also assessed the effects of any variable elements under the Janssen Agreement. Such assessment evaluated, among other things, the funding to be received by the Company for its conduct of research and development services. Based on its assessment, the Company concluded that the total amount to be received by the Company for its conduct of research and development services is variable and cannot be readily estimated and, therefore, no amounts associated with such services were included in the initial transaction price. In addition, the Company also assessed its likelihood of receiving (i) preclinical milestones, (ii) various clinical, regulatory and commercial milestone payments, and (iii) royalties on net sales of the Collaboration Candidates. Based on the likelihood of receiving such milestone payments and royalties, no amounts associated with milestones or royalties were included in the initial transaction price.

In accordance with ASC 606, the Company determined that the initial transaction price under the Janssen Agreement equals $66.0 million, consisting of the upfront, non-refundable and non-creditable payment of $50.0 million and the Equity Premium of $16.0 million. The Company concluded that there was not a significant financing component under the Janssen Agreement. The upfront payment of $66.0 million was recorded as deferred revenue and is being recognized as revenue consistent with the Company’s efforts related to the conduct of research and development services, as the research and development services are the primary component of the combined performance obligation. Since the total amount to be received by the Company for its research and development services under the Janssen Agreement could not be readily estimated, revenue associated with the upfront payment will be recognized based on actual headcount utilized as a percentage of total headcount expected to be utilized over the expected term of the conduct of the research and development services. Revenue associated with the research and development services will be recognized in an amount equal to the actual costs incurred during the period in which the research and development services are performed by the Company.

AsDuring the three months ended June 30, 2021, the Company achieved a direct resultresearch milestone under the Janssen Agreement and recorded a $3.0 million receivable. In accordance with ASC 606, the Company determined that the $3.0 million milestone receivable represented an increase in the initial transaction price under the Janssen Agreement in the form of the Company’s entry intoreceipt of variable consideration that was previously constrained. The Company recognized revenue associated with the $3.0 million milestone receivable in an amount equal to the proportional percentage of actual headcount incurred under the Janssen Agreement since its inception as a percentage of the total headcount expected to be utilized over the expected term of conduct of research and development services under the Janssen Agreement. The remaining unrecognized revenue associated with the $3.0 million milestone was recorded to deferred revenue, and is being recognized as revenue over the expected term of conduct of research and development services.

In connection with the Janssen Agreement, the Company has incurred $13.3$13.6 million in sublicense fees to certain of its existing licensors.licensors as of June 30, 2021. The $13.3$13.6 million in sublicense consideration represents an asset under ASC Topic 340, Other Assets and Deferred Costs (ASC 340) and is amortized to research and development expense ratably with the Company’s revenue recognition under the Janssen Agreement. During the three and nine months ended SeptemberJune 30, 2021 and 2020, the Company recognized $0.5$0.7 million and $0.8$0.3 million of such expense, respectively, and during the six months ended June 30, 2021 and 2020, the Company recognized $1.1 million and $0.3 million of such expense, respectively. As of SeptemberJune 30, 2020,2021, the Janssen Agreement contract asset balance was $12.4$11.2 million.

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The Company recognized revenue of $5.6$10.9 million and $9.1$19.5 million under the Janssen Agreement for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively. Such revenue comprised $2.4$7.1 million associated with research and development services and $3.2$3.8 million associated with the upfront fee and Equity Premium for the three months ended SeptemberJune 30, 20202021, and $4.1$13.8 million associated with research and development services and $5.0$5.7 million associated with the upfront fee and Equity Premium for the ninesix months ended SeptemberJune 30, 2020.2021. During both the three and six months ended June 30, 2020, the Company recognized revenue $3.5 million under the Janssen Agreement, which revenue comprised $1.7 million associated with research and development services and $1.8 million associated with the upfront fee and Equity Premium. As of SeptemberJune 30, 2020,2021, aggregate deferred revenue related to the Janssen Agreement was $61.9$56.8 million, of which $14.5$18.8 million is classified as current.

As of SeptemberJune 30, 2020,2021, the Company has received $1.7$16.8 million in aggregate research and development fees from Janssen.

Ono Collaboration and Option Agreement

On September 14, 2018 (the Ono Agreement Effective Date), the Company entered into a Collaboration and Option Agreement (the Ono Agreement) with Ono Pharmaceutical Co. Ltd. (Ono) for the joint development and commercialization of two off-the-shelf iPSC-derived chimeric antigen receptor (CAR) T-cell product candidates. The first off-the-shelf, iPSC-derived CAR T-cell candidate (Candidate 1) targets an antigen expressed on certain lymphoblastic leukemias, and the second off-the-shelf, iPSC-derived CAR T-cell candidate (Candidate 2) targets a novel antigen identified by Ono expressed on certain solid tumors (each a Candidate and collectively the Candidates).

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On December 4, 2020, the Company and Ono entered into a letter agreement (the Ono Letter Agreement) in connection with the Ono Agreement. Pursuant to the Ono Letter Agreement, Ono delivered to the Company proprietary antigen binding domains targeting an antigen expressed on certain solid tumors and nominated such antigen binding domains as the Ono Antigen Binding Domain for incorporation into Candidate 2. In connection with such nomination and pursuant to the original agreement, in December 2020, Ono paid the Company a milestone fee of $10.0 million for further research and development of Candidate 2 and Ono maintains its option to this candidate. In addition, in connection with the Ono Letter Agreement, the Company and Ono agreed to the termination of the Ono Agreement with respect to Candidate 1. The Company retains all rights, in its sole discretion, to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono.

Pursuant to the Ono Agreement, the Company and Ono are jointly conducting research and development activities under a joint development plan, with the goal of advancing each Candidate 2 to a pre-defined preclinical milestone. The Company has granted to Ono, during a specified period of time, an option to obtain an exclusive license under certain intellectual property rights to develop and commercialize (a) Candidate 1 in Asia, with the Company retaining rights for development and commercialization in all other territories of the world and (b) Candidate 2 in all territories of the world, with the Company retaining the right to co-develop and co-commercialize Candidate 2 in the United States and Europe under a joint arrangement whereby it is eligible to share at least 50% of the profits and losses (each, an(the Option).

For each Candidate, theThe Option will expire upon the earliest of: (a) the achievement of the pre-defined preclinical milestone, (b) termination by Ono of research and development activities for the Candidate 2 and (c) the date that is the later of (i) four years after the Ono Agreement Effective Date and (ii) completion of all applicable activities contemplated under the joint development plan (the Option Period). The Company has maintained worldwide rights of manufacture for both Candidates.Candidate 2.

Under the terms of the Ono Agreement, Ono paid the Company an upfront, non-refundable and non-creditable payment of $10.0 million in connection with entering into the Ono Agreement. Additionally, as consideration for the Company’s conduct of research and preclinical development under a joint development plan, Ono pays the Company annual research and development fees set forth in the annual budget included in the joint development plan, which fees are estimated to be $20.0 million in aggregate over the course of the joint development plan.

Further, under the terms of the Ono Agreement, Ono has agreed to pay the Company up to an additional $40.0$20.0 million, subject to the achievement of a preclinical milestone (Ono Option Milestone) and the exercise by Ono of the Options (Ono Option (Option Exercise Fees) during the Option Period.Period for Candidate 2. Such fees are in addition to the upfront payment, and research and development fees.fees, and the previously paid $10.0 million milestone associated with the Ono Letter Agreement.

Subject to Ono’s exercise of the OptionsOption and to the achievement of certain clinical, regulatory and commercial milestones (Ono(the Ono Milestones) with respect to eachthe Candidate in specified territories, the Company is eligibleentitled to receive an aggregate of up to $285.0$885.0 million in milestone payments for Candidate 1 and an aggregate of up to $895.0 million inadditional milestone payments for Candidate 2, with the applicable milestone payments for Candidate 2 for the United States and Europe subject to reduction by 50% if the Company elects to co-develop and co-commercialize Candidate 2 as described above. The Company is also eligible to receive tiered royalties (Ono Royalties)(Royalties) ranging from the mid-single digits to the low-double digits based on annual net sales by Ono of eachfor Candidate 2 in specified territories, with such royalties subject to certain reductions.

No milestone payments specific to Candidate 1 are payable under the Ono Agreement, given the termination of the agreement with respect to such candidate.

The Ono Agreement will terminate with respect to a Candidate if Ono does not exercise its Option for a Candidate within the Option Period, or in its entirety if Ono does not exercise any of its Options for the Candidates within their respective Option Periods. In addition, either party may terminate the Ono Agreement in the event of breach, insolvency or patent challenges by the other party; provided, that Ono may terminate the Ono Agreement in its sole discretion (x) on a Candidate-by-Candidate basis at any time after the second anniversary of the effective date of the Ono Agreement or (y) on a Candidate-by-Candidate or country-by-country basis at any time after the expiration of the Option Period, subject to certain limitations. The Ono Agreement will expire on a Candidate-by-Candidate and country-by-country basis upon the expiration of the applicable royalty term, or in its entirety upon the expiration of all applicable payment obligations under the Ono Agreement.

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The Company applied ASC 808 to the Ono Agreement and Ono Letter Agreement and determined that the Ono Agreement isagreements are applicable to such guidance. The Company concluded that Ono represented a customer and applied relevant guidance from ASC 606 to evaluate the appropriate accounting for the Ono Agreement and the Ono Letter Agreement. In accordance with this guidance, the Company identified its performance obligations, including its grant of a license to Ono to certain of its intellectual property subject to certain conditions, its conduct of research services, and its participation in a joint steering committee. The Company determined that its grant of a license to Ono to certain of its intellectual property subject to certain conditions was not distinct from other performance obligations because such grant is dependent on the conduct and results of the research services. Additionally, the Company determined that its conduct of research services was not distinct from other performance obligations since such conduct is dependent on the guidance of the joint steering committee. Accordingly, the Company determined that all performance obligations should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research services, which is estimated to be four years. The termination of the Ono Agreement with respect to Candidate 1 did not impact this assessment.

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The Company also assessed, in connection with the upfront, non-refundable and non-creditable payment of $10.0 million received in September 2018 and the $5.0 million prepayment of the first-year research and development fees in October 2018 and concluded that there was not a significant financing component to the Ono Agreement.

The Company also assessed the effects of any variable elements under the Ono Agreement. Such assessment evaluated, among other things, the likelihood of receiving (i) preclinical milestone and option fees, (ii) various clinical, regulatory and commercial milestone payments, and (iii) royalties on net sales of either product Candidate. Based on its assessment, the Company concluded that, based on the likelihood of these variable components occurring, there was not a significant variable element included in the transaction price. Accordingly, the Company has not assigned a transaction price to any Ono Option Milestone, Ono Milestones or Ono Option Exercise Fees, other than the $10.0 million milestone triggered as part of the Ono Letter Agreement in December 2020, given the substantial uncertainty related to their achievement and has not assigned a transaction price to any Ono Royalties.

In accordance with ASC 606, the Company determined that the initial transaction price under the Ono Agreement equals $30.0 million, consisting of the upfront, non-refundable and non-creditable payment of $10.0 million and the aggregate estimated research and development fees of $20.0 million. The upfront payment of $10.0 million was recorded as deferred revenue and is being recognized as revenue over time in conjunction with the Company’s conduct of research services as the research services are the primary component of the combined performance obligations. Revenue associated with the upfront payment will be recognized based on actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services. The Company recorded the $5.0 million prepayment of the first-year research and development fees as deferred revenue, and such fees were recognized as revenue as the research services were delivered.

TheIn accordance with ASC 606, the Company has not assigned aconcluded that the $10.0 million milestone payment associated with the Ono Letter Agreement represented an increase in the initial transaction price to any Ono Option Milestone, Ono Milestones or Ono Option Exercise Fees given the substantial uncertainty related to their achievement and has not assigned a transaction price to any Ono Royalties.

As a direct result of the Company’s entry intounder the Ono Agreement in the form of the receipt of variable consideration that was previously constrained. The Company recognized revenue associated with the $10.0 milestone payment in an amount equal to the proportional percentage of actual costs incurred under the Ono Agreement as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services. The remaining unrecognized revenue associated with the $10.0 million milestone was recorded to deferred revenue and is being recognized as revenue over the expected term of conduct of research services.

In connection with the Ono Agreement and the Ono Letter Agreement, the Company has incurred an aggregate of $2.0$4.0 million in sublicense considerationfees to certain of its existing licensors as of the Company.June 30, 2021. The $2.0$4.0 million in sublicense consideration represents an asset under ASC 340 Other Assets and Deferred Costs and is being amortized to research and development expense ratably with the Company’s revenue recognition under the Ono Agreement. During the three months ended SeptemberJune 30, 20202021 and 2019,2020, the Company recognized $0.1$0.3 million and $0.2$0.1 million of such expense, respectively, and during both the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company recognized $0.4$0.5 million and $0.3 million of such expense.expense, respectively. As of SeptemberJune 30, 2020,2021, the Ono Agreement contract asset balance was $0.9$1.1 million.

The Company recognized revenue of $1.9$2.5 million and $6.5$5.0 million under the Ono Agreement for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively. Such revenue comprised $1.3 million associated with research services and $0.6$1.2 million associated with the upfront payment for the three months ended SeptemberJune 30, 2020,2021, and $4.3$2.5 million associated with research services and $2.2$2.5 million associated with the upfront payment for the ninesix months ended SeptemberJune 30, 2020. 2021. During the three and ninesix months ended SeptemberJune 30, 2019, the2020, the Company recognized revenue of $2.4$2.0 million and $6.5$4.5 million, respectively, under the Ono Agreement, respectively.Agreement. Such revenue comprised $1.6$1.3 million associated with research services and $0.8$0.7 million associated with the upfront payment for the three months ended SeptemberJune 30, 2019,2020, and $4.3$3.0 million associated with research services and $2.2$1.5 million associated with the upfront payment for the ninesix months ended SeptemberJune 30, 2019.2020. As of SeptemberJune 30, 2020,2021, aggregate deferred revenue related to the Ono Agreement was $4.6$5.2 million, of which $2.6$4.2 million is classified as current.

As of SeptemberJune 30, 2020,2021, the Company has received $11.0$14.7 million in aggregate research and development fees from Ono.

Juno Collaboration and License Agreement

On May 4, 2015, the Company entered into a strategic research collaboration and license agreement (the Juno Agreement) with Juno Therapeutics, Inc. (Juno) to screen for and identify small molecules that enhance the therapeutic properties of Juno’s genetically-engineered T-cell immunotherapies. The four-year initial research term under the Juno Agreement concluded as scheduled on May 4, 2019, and the overall agreement was terminated upon the receipt of the last quarterly research payment of $0.2 million, which occurred in May 2019.

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NaN revenue was recognized under the Juno Agreement for either the three or nine months ended September 30, 2020. During the nine months ended September 30, 2019, revenue recognized under the Juno Agreement was $1.4 million. NaN revenue was recognized during the three months ended September 30, 2019. NaN additional revenue is expected to be recognized under the Juno Agreement in future periods. 

Memorial Sloan Kettering Cancer Center License Agreement

On May 15, 2018, the Company entered into an Amended and Restated Exclusive License Agreement (the Amended MSK License) with Memorial Sloan Kettering Cancer Center (MSK). The Amended MSK License amends and restates the Exclusive License Agreement entered into between the Company and MSK on August 19, 2016 (the Original MSK License), pursuant to which the Company entered into an exclusive license agreement with MSK for rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK-cells derived from iPSCs engineered with CARs.  

Pursuant to the Amended MSK License, MSK granted to the Company additional licenses to certain patents and patent applications relating to new CAR constructs and off-the-shelf CAR T cells,T-cells, including the use of clustered regularly interspaced short palindromic repeat (CRISPR) and other innovative technologies for their production, in each case to research, develop, and commercialize licensed products in the field of all human therapeutic uses worldwide. The Company has the right to grant sublicenses to certain licensed rights in accordance with the terms of the Amended MSK License, in which case it is obligated to pay MSK a percentage of certain sublicense income received by the Company.Company.

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In the event a licensed product achieves a specified clinical milestone, MSK is then eligible to receive certain milestone payments totaling up to $75.0 million based on the price of the Company’s common stock, where the amount of such payments owed to MSK is contingent upon certain increases in the price of the Company’s common stock following the date of achievement of such clinical milestone. These payments are based on common stock price multiples, with the numerator being the fair value of the ten-trading day trailing average closing price of the Company’s common stock and the denominator being the ten-trading day trailing average closing price of the Company’s common stock as of the effective date of the Amended MSK License, adjusted for any stock splits, cash dividends, stock dividends, other distributions, combinations, recapitalizations, or similar events. Under the terms of the Amended MSK License, upon a change of control of the Company, in certain circumstances, the Company may be required to pay a portion of these payments to MSK based on the price of the Company’s common stock in connection with such change of control.control.

The following table summarizes the common stock multiples and the enterprise valuestock price appreciation milestone payments none of which have been triggered as of SeptemberJune 30, 2020:2021:

To determine the estimated fair value of the enterprise valuestock price appreciation milestones, the Company uses a Monte Carlo simulation methodology which models future Company common stock prices based on the current stock price and several key variables. The following variables were incorporated in the calculation of the estimated fair value of the enterprise valuestock price appreciation milestones as of SeptemberJune 30, 2020:2021:

The key inputs to the Monte Carlo simulation to determine the fair value of the enterprise valuestock price appreciation milestones include the Company’s stock price as of the measurement date; the estimated term, which is based in part on the last valid patent claim date; the expected volatility of the Company’s common stock, estimated using the Company’s historical common stock volatility as of the remeasurementmeasurement date; and the risk-free rate based on the U.S. Treasury yield for the estimated term determined. Fair value measurements are highly sensitive to changes in these inputs and significant changes could result in a significantly higher or lower fair value and resulting expense or gain.

As the enterprise value milestones are first contingent upon the achievement of a specified clinical milestone, the Company estimates the fair value of the enterprise value milestones based on the probability of achieving the clinical milestone.  This assessment is based on several factors including the successful achievement of technological, manufacturing, and regulatory requirements.

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At each balance sheet date, the Company remeasures the fair value of the stock price appreciation milestones, with changes in fair value recognized as a component of other income (expense) in the unaudited condensed consolidated statements of operations.operations and comprehensive loss. Amounts are included in short-termcurrent or long-termnon-current liabilities based on the estimated timeline associated with the individual potential payments. During the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company recorded $27.6$8.7 million and $8.0 million of expense, respectively, associated with the change in fair value of the enterprise valuestock price appreciation milestones. As of SeptemberJune 30, 2020,2021, the Company recorded a liability of $27.6$55.7 million associated with the enterprise valuestock price appreciation milestones for the Amended MSK License.

To date, no licensed products have achieved the specified clinical milestone, and no enterprise value milestone payments are currently owed to MSK.

On April 5, 2018, the Company executed an award agreement with the California Institute for Regenerative Medicine (CIRM) pursuant to which CIRM awarded the Company $4.0 million to advance the Company’s FT516 product candidate into a first-in-human clinical trial for the treatment of subjects with advanced solid tumors, including in combination with monoclonal antibody therapy (the Award). Pursuant to the terms of the Award, the Company is eligible to receive 5 disbursements in varying amounts totaling $4.0 million, with 1 disbursement receivable upon the execution of the Award, and 4 disbursements receivable upon the completion of certain milestones throughout the project period. The Award is subject to certain co-funding requirements by the Company, and the Company is required to provide CIRM progress and financial update reports under the Award.

Pursuant to the terms of the Award, the Company, in its sole discretion, has the option to treat the Award either as a loan or as a grant. In the event the Company elects to treat the Award as a loan, the Company will be obligated to repay (i) 60%, (ii) 80%, (iii) 100% or (iv) 100% plus interest at 7% plus LIBOR, of the total Award to CIRM, where such repayment rate is dependent upon the phase of clinical development of FT516 at the time of the Company’s election. If the Company does not elect to treat the Award as a loan within 10 years of the date of the Award, the Award will be considered a grant and the Company will be obligated to pay to CIRM a royalty on commercial sales of FT516 until such royalty payments equal nine times the total amount awarded to the Company under the Award.

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Since the Company may, at its election, repay some or all of the Award, the Company accounts for the Award as a liability until the time of election. As of SeptemberJune 30, 2020,2021, the Company has received aggregate disbursements under the Award in the amount of $4.0 million. The aggregate amount received is recorded as a CIRM Liability on the accompanying unaudited condensed consolidated balance sheets and classified as current or non-current based on the potential amount payable within twelve months of the current balance sheet.

The Company invests portions of excess cash in United States treasuries, andnon-U.S. government securities, municipal securities, corporate debt securities and commercial paper with maturities ranging from three to eighteen months from the purchase date. These securities are classified as short-term and long-term investments in the accompanying unaudited condensed consolidated balance sheets based on each security’s contractual maturity date and are accounted for as available-for-sale securities.

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The following table summarizes the Company’s investments accounted for as available-for-sale securities as of SeptemberJune 30, 20202021 and December 31, 20192020 (in thousands)thousands, except for maturity in years):

As of SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company had $0.8$2.1 million and $1.0$1.5 million, respectively, of accrued interest on investments recorded in prepaid expenses and other assets on the unaudited condensed consolidated balance sheets.

The Company reviews its investment holdings at the end of each reporting period and evaluates any unrealized losses using the expected credit loss model to determine if the unrealized loss is a result of a credit loss or other factors. The Company also evaluates its investment holdings for impairment using a variety of factors including the Company’s intent to sell the underlying securities prior to maturity and whether it is more likely than not that the Company would be required to sell the securities before the recovery of their amortized basis. During each of the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company did 0t recognize any impairment or realized gains or losses on sales of investments, and the Company did 0t record an allowance for, or recognize, any expected credit losses.

The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, stock price appreciation milestones, accounts payable, and accrued liabilities. The carrying amounts of accounts receivable, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the relatively short-term nature of those instruments. Based on the borrowing rates available to the Company for loans with similar terms, which is considered a Level 2 input as described below, the Company believes that the fair value of long-term debt approximated its carrying value during the periods the debt was outstanding.

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The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

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Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of SeptemberJune 30, 20202021 and December 31, 20192020 (in thousands):