CMVLF Cellectis (PK)

PART I

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

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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.

Risks Related to Our Business and Industry

We and Calyxt have limited operating histories, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment.

We are a clinical-stage biopharmaceutical company and, as of December 31, 2018, we own 69.5% of Calyxt, Inc., a U.S. agricultural biotechnology company, each with a limited operating history. Investment in biopharmaceutical and agricultural biotechnology product development is a highly speculative endeavor. Biopharmaceutical and agricultural biotechnology product development entails substantial upfront capital expenditures and there is significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, to gain any required regulatory approvals or to become commercially viable. In our therapeutics business, we are focused on developing products using our gene-editing platform to develop genetically modified T-cells that express a CAR and are designed to target and kill cancer cells. While there have been significant advances in cell-based immunotherapy, our gene-editing platform and T-cell and CAR technologies are new and unproven. Several of the product candidates that we are developing or co-developing are in pre-clinical stages. We are sponsoring two ongoing clinical studies in the United States, for one of our product candidates, UCART123 – one targeting acute myeloid leukemia (AML) and the other targeting blastic plasmacytoid dendritic cell neoplasm (BPDCN). We have received approvals from the Medicines & Health products Regulatory Agency (MHRA) to commence a Phase I clinical study for UCART123 in the United Kingdom, and from the U.S. Food and Drug Administration (FDA) to start Phase I clinical trials for UCART22 and UCARTCS1, such approvals being subject to approval of the Institutional Review Boards of the investigational sites. In addition, UCART19, which we exclusively license to Les Laboratories Servier S.A.S., or Servier, is currently the subject of clinical development through two clinical studies being sponsored by Servier both targeting Acute Lymphoblastic Leukemia, and one clinical study being sponsored by Allogene Therapeutics, Inc., or Allogene, targeting Non-Hodgkin Lymphoma. We have not yet generated any revenue from biopharmaceutical product sales to date. In our agricultural biotechnology business, we are exploring the use of our gene-editing technologies to develop healthier food products for a growing population. Calyxt’s plant products are in various stages of development. Although Calyxt has achieved commercialization of its High Oleic Soybean Oil and Meal in the first quarter of 2019, it has not yet generated significant revenues from sales of its plant products.

Our limited operating history may make it difficult to evaluate our current business and our future prospects. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly developing and changing industries, such as the biopharmaceutical and agricultural biotechnology industries, including challenges in forecasting accuracy, determining appropriate investments of our limited resources, gaining market acceptance of the products created using our gene-editing platform, managing a complex regulatory landscape and developing new product candidates. Our current operating model may require changes in order for us to scale our operations efficiently. You should consider our business and prospects in light of the risks and difficulties we face as an early-stage company focused on developing products in the fields of immunotherapy and agricultural biotechnology.

We have incurred significant losses since our inception, have no commercial biopharmaceutical products and anticipate that we will continue to incur significant losses for the foreseeable future.

We devote most of our financial resources to research and development relating to our CAR T-cell immunotherapy product candidates. We finance our current immuno-oncology operations primarily through strategic alliances with pharmaceutical companies, including Servier and Allogene (pursuant to assets transferred from Pfizer in April 2018), as well as through the sale of equity securities and, to a lesser extent, obtaining public funding in support of innovation, reimbursements of research tax credit claims, and royalties on our licensed technology. For the year ended December 31, 2018, we raised gross proceeds of $190.5 million in a follow-on equity offering and received $4.7 million in payments pursuant to our principal collaboration agreements, and Calyxt raised $60.9 million in gross proceeds, inclusive of $8.25 million from Cellectis’s participation, in a follow-on offering. In the year ended December 31, 2018, our research and development expenses were $76.6 million including $18.1 million of non-cash stock based compensation expenses.

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We currently have no commercial biopharmaceutical products. Notwithstanding the commencement of several clinical studies, it will be several years, if ever, before we obtain regulatory approval for, and are ready for commercialization of, a product candidate. Even if we or our collaborators successfully commence and complete clinical studies and obtain regulatory approval to market a product candidate, any future revenues will depend upon the size of any markets in which the product candidates are approved for sale as well as the market share captured by such product candidates, market acceptance of such product candidates and levels of reimbursement from third-party payors.

We expect to continue to incur significant expenses and operating losses for the foreseeable future. We expect our losses and our cash utilization to increase in the near term as we conduct our clinical studies, file IND and/or foreign equivalent filings for additional product candidates and conduct research and development for product candidates. In addition, we anticipate that such expenses will increase further and such increases may be substantial if and as we:

The net losses we incur may fluctuate significantly from year to year and quarter to quarter, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular period or periods, our operating result could be below the expectations of securities analysts or investors which could cause the price of our ADSs to decline.

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

We are currently sponsoring five clinical studies. In addition, we are preparing to file additional IND and/or foreign equivalent filings with respect to new clinical studies for certain of our product candidates and/or extend the number of investigational sites, and we are advancing our product candidates to and through pre-clinical testing. The process of developing and manufacturing CAR T-cell product candidates and conducting clinical studies is expensive, lengthy and risky, and we expect our research and development expenses to increase substantially 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.

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As of December 31, 2018, we had cash and cash equivalents and current financial assets of approximately $451.9 million. We believe our cash and cash equivalents and our cash flow from operations (including payments we expect to receive pursuant to our collaboration agreements) and government funding of research programs will be sufficient to fund our operations through 2021. However, in order to complete the development process, manufacturing, development, building out our manufacturing capabilities and obtaining regulatory approval for and commercialize, if approved, any of our biopharmaceutical product candidates, we may require additional funding. Also, our operating plan, including our product development plans, may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. To commercialize our products, if approved, we will require significant working capital to operate our business and maintain our operations.

In addition, our ability to raise additional capital may be limited. To the extent that 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. 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. To the extent we raise additional funds through arrangements with collaborators 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.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or in light of specific strategic considerations.

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 or product candidate development programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, operating results and prospects.

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

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

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

Our therapeutic product candidate development programs are in the discovery, pre-clinical proof-of-concept or clinical phase and may be unsuccessful.

We are currently sponsoring five clinical studies and pursuant to an exclusive license, three clinical studies are being sponsored by Servier or its sublicensee, and several of our therapeutic product candidates are still in discovery or pre-clinical proof of concept stages of development and have only undergone limited testing in animals.

Even if certain of our product candidates progress 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. The results from animal studies are not necessarily predictive of results in current or future clinical studies. For example, while our animal studies of product candidates may result in evidence of tumor cell elimination, there can be no assurance that the success we achieve in such animal studies for these product candidates will result in success in any clinical studies.

Because many of our current product candidates are still in the early stages of development, with the majority of our product candidates in the discovery or pre-clinical proof-of-concept phase, there can be no assurance that our research and development

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activities will result in product candidates we can advance through clinical development. Although we and our collaborators commenced various clinical studies on UCART candidate products, the results of such clinical studies are subject to a variety of factors and considerations and we cannot assure you that we or our collaborators will achieve the applicable targets in these studies. For our other product candidates, which remain in various stages of discovery or pre-clinical development, we have limited data.

Because of the early stage of development of our product candidates, we have not yet demonstrated the safety, specificity and clinical benefits of our product candidates in humans, and we cannot assure you that the results of any human trials will demonstrate the value and efficacy of our platform. Moreover, there are a number of regulatory requirements that we must satisfy before additional clinical studies may be commenced in the United States and the European Union, with respect to our product candidates. Satisfaction of these requirements will entail substantial time, effort and financial resources. We may never satisfy these requirements. Any time, effort and financial resources we expend on our other early-stage product candidate development programs may adversely affect our ability to continue development and commercialization of our more advanced product candidates and we may never commence additional clinical studies despite expending significant resources in pursuit of their development. Further, our clinical studies may not be successful and such product candidates may never be approved by the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, or any other regulatory agency.

Early data from compassionate use treatment and from clinical trials are not predictive of success in later clinical trials.

In December 2016, during a meeting with the National Institutes of Health’s Office of Biotechnology Activities’ Recombinant DNA Advisory Committee, or the RAC, Pfizer and Servier presented preliminary clinical data for UCART19, including data from UCART19 Clinical Studies and from three clinical uses of UCART19 on a compassionate basis. These three compassionate use patients have been treated under U.K. “specials” licenses from the Medicines & Healthcare products Regulatory Agency (MHRA) to administer the UCART19 product candidate to a patient on compassionate use base. Compassionate use refers to the use of an investigational drug outside of a clinical trial to treat a patient with a serious or immediately life-threatening disease or condition who has no comparable or satisfactory alternative treatment options. More recently, in December 2018, during the American Society of Hematology (ASH) Conference, Servier presented intermediate results from its current pediatric and adult clinical studies on UCART19 in the United Kingdom, the United States, Belgium and France. Results from the pediatric and adult UCART19 Clinical Studies, showing that 82% of patients (14/17) who received a lymphodepletion regimen (consisting of fludarabine, cyclophosphamide and alemtuzumab, an anti-CD52 monoclonal antibody) achieved a complete remission (CR) or complete remission with incomplete blood cell recovery (CRi) by day 28 or day 42, after infusion. Within the 14 responder patients, 71% of them showed a “minimum residual disease” (MRD) negative (MRD- stands for less than 1 leukemic cell among 10E4 normal cells) assessed by flow or qPCR. When considering all treated patients (lymphodepleted or not), 67% (14/21) of them did achieve CR/CRi. Regarding safety considerations, there was no serious adverse events (grade ³ 3) for graft versus host disease (GvHD) and neurological events. Grade 3-4 toxicities did only regard events of cytokine release syndrome (14%, 3/21), prolonged cytopenia (29%, 6/21) and viral infections (24%, 5/21).

We cannot assure you that the administration of UCART19 to other patients will have results that are similar to those reported by Servier. Such results are preliminary in nature, do not bear statistical significance and should not be viewed as predictive of ultimate success. It is possible that such results will not continue or may not be repeated in other potential compassionate uses or in ongoing or future clinical trials on UCART19 or other UCART product candidates.

We have limited experience in conducting or managing clinical trials for potential therapeutic products.

We are currently sponsoring clinical studies at four sites and anticipate expanding existing clinical studies to additional sites and commencing additional clinical studies. We have limited experience in conducting or managing the clinical trials necessary to obtain regulatory approvals for any product candidate. We rely on a clinical research organization, or CRO, medical institutions and clinical investigators to conduct our clinical studies. Our reliance on third parties for clinical development activities reduces our control over these activities. Third-party contractors may not complete activities on schedule, or may not conduct clinical trials in accordance with regulatory requirements or our trial design. If these third parties do not successfully carry out their contractual duties or meet required performance standards or expected deadlines, we might be required to replace them or the data that they provide could be rejected by the FDA or comparable foreign regulatory bodies, all of which may result in a delay of the affected trial and additional program costs.

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.

Pre-clinical testing and clinical trials are long, expensive and unpredictable processes that can be subject to extensive delays. For example, in September 2017, a clinical hold was placed on our UCART123 clinical studies in acute myeloid leukemia (AML)

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and in blastic plasmacytoid dendritic cell neoplasm (BPDCN) and remained in place until the FDA permitted these clinical studies to restart in November 2017 according to revised protocols, and in 2018, manufacturing events slowed down the advancement of our UCART123 clinical studies and the commencement of our UCART22 clinical study.

We cannot guarantee that any pre-clinical studies or clinical trials will be conducted as planned or completed on schedule, if at all. It may take several years to complete the pre-clinical testing and clinical development necessary to commercialize a product candidate, and delays or failure can occur at any stage. Interim results of clinical trials do not necessarily predict final results, and success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful. A number of companies in the pharmaceutical, biopharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials even after promising results in earlier trials, including a number of patient deaths in CAR-T trials conducted in the United States, and we cannot be certain that our product candidates will not face similar setbacks. In addition, the design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. An unfavorable outcome in one or more clinical trials would be a major setback for our product candidates and for us and may require us or our collaborators 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 connection with clinical testing and trials on product candidates we develop for ourselves or on behalf of our collaborators, we may face a number of risks, including:

In addition, a number of events, including any of the following, could delay the completion of our current and future clinical trials and negatively impact the ability to obtain regulatory approval for, and to market and sell, a particular product candidate:

Data obtained from pre-clinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we cannot assure you that, in the course of clinical trials, some drawbacks would not appear that reveal that it is not possible or practical to continue development efforts for the subject product candidates.

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us or our collaborators, the FDA, the IRBs at the sites where the IRBs are overseeing a trial, or a data safety monitoring board, or DSMB, overseeing the clinical trial at issue, or other regulatory authorities due to a number of factors, including:

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In addition, changes in regulatory requirements and guidance may occur and we or our collaborators may need to amend clinical trial protocols to reflect these changes. Amendments may require us or our collaborators to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the cost, timing or successful completion of a clinical trial.

Even if a product candidate successfully completes clinical trials, those results are not necessarily predictive of results of additional trials that may be needed before regulatory approval may be obtained. Although there are a large number of drugs and biologics in development globally, only a small percentage obtain regulatory approval, even fewer are approved for commercialization, and only a small number achieve widespread physician and consumer acceptance.

If the results of our clinical trials are inconclusive or if there are safety concerns or adverse events associated with the product candidates we develop, we may:

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. Currently, only a very limited number of gene therapy products have been approved in the United States or Europe.

We have concentrated our research and development efforts on our CAR T-cell immunotherapy product development, including our gene-editing technologies, and our future success depends on the successful development of this therapeutic approach. We are in the early stages of developing our UCART product candidates’ platform and there can be no assurance that any development problems we experience in the future related to our gene-editing technologies will not cause significant delays or unanticipated costs, or that such development problems can be overcome. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical studies or commercializing our products on a timely or profitable basis, if at all.

In addition, the clinical study requirements of the FDA, 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

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be more complex and consequently more expensive and take longer than for other, better known or extensively studied pharmaceutical or other product candidates. In August 2017, Novartis AG obtained approval from the FDA to commercialize the first CAR T-cell therapy, for children and young adults with relapsed or refractory, or r/r, B-cell ALL, and has recently been granted FDA priority review for adults with r/r diffuse large B-cell lymphoma (DLBCL). In October 2017, Kite Pharma (acquired by Gilead) obtained approval from the FDA to commercialize the first CAR T-cell therapy for the treatment of adult patients with r/r large B-cell lymphoma. Approvals by the EMA and FDA for existing gene therapy products may not be indicative of what these regulators may require for approval of further gene therapy products. 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.

The regulatory landscape that will govern 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. For example, regulatory requirements governing gene therapy products and cell therapy products have changed frequently and may continue to change in the future. Moreover, there is substantial, and sometimes uncoordinated, overlap in those responsible for regulation of existing gene therapy products and cell therapy products. For example, in the United States, the FDA has established the Office of Tissues and Advanced Therapies (OTAT, formerly known as the Office of Cellular, Tissue and Gene Therapies, or OCTGT) within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. 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. Gene therapy clinical studies conducted at institutions that receive funding for recombinant DNA research from the U.S. National Institutes of Health, or the NIH, are also subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee, or the RAC. Although the FDA decides whether individual gene therapy protocols may proceed, review process 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 approved 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 our UCART product candidates; however, this recommendation is not definitive until such products obtain regulatory approval for commercialization.    

These various regulatory review committees and advisory groups and new or revised guidelines that they promulgate 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 collaborators advance our product candidates, we and they will be required to consult with these regulatory and advisory groups and comply with all applicable guidelines, rules and regulations. Because the UCART19 Clinical Studies are being sponsored by Servier or 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 commercial collaborators and relevant regulatory agencies could generate additional unexpected requirements from regulatory agencies that would apply to our wholly-controlled UCART product candidates, including UCART123, and could lead to potential delays or additional requirements. For example, as a result of such interactions, regulators may require that we implement additional studies or testing with respect to our product candidates or modify our clinical studies, including the UCART123 Clinical Studies.

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If we fail to do so, we may be required to delay or discontinue development of our product candidates.

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.

The results of the United Kingdom’s referendum on withdrawal from the European Union may have a negative effect on our business, results of operations and financial condition.

The United Kingdom’s decision to leave the European Union, taken by national referendum on June 23, 2016, commonly referred to as Brexit, had created an uncertain political and economic environment in the United Kingdom and potentially across other European Union member states. On March 29, 2017, the United Kingdom’s government invoked article 50 of the Treaty of the European Union, starting a negotiation period of up to two years. At the end of this two-year period, on March 29, 2019, the United Kingdom’s membership in the European Union will end automatically, unless an extension of the negotiation period is unanimously agreed upon by the European Council. Negotiations between the United Kingdom and the European Union are ongoing to determine their future relations, including trade, financial and legal agreements.

The nature, timeline and political and economic effects of Brexit remain quite uncertain to this date. Depending on the outcome of the negotiations, a certain number of risks could materialize, including:

The occurrence of such events or risks could adversely affect our business, our prospects, our ability to achieve our objectives, generate revenue and achieve and sustain profitability.

Our gene-editing technology is relatively new, and if we are unable to use this technology in all of our intended applications, our revenue opportunities will be limited.

Even if the use of gene editing technologies increases, our technology involves a relatively new approach to gene editing, using sequence-specific 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 not be able do so, which could limit the usefulness of our technology.

The expected value and utility of our nucleases is, in part, based on our belief that the targeted modification of genes or specific regulation of gene expression may enable us to develop a new therapeutic approach. There is only a limited understanding of the role of specific genes in these applications. Life sciences companies have only been able to successfully develop or commercialize a few products in this biopharmaceutical space based on results from genome research or the ability to regulate gene expression. We or our collaborators may not be able to use our technology to develop commercial products.

In addition, the industry is rapidly developing, and our competitors may introduce new technologies that render our technology obsolete or less attractive. New technology could emerge at any point in the development cycle of our product candidates. As competitors use or develop new technologies, we 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 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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We depend almost entirely on the successful development of our product candidates. We cannot be certain that we or our collaborators will be able to obtain regulatory approval for, or successfully commercialize, these products.

Our business depends primarily on the successful clinical development, regulatory approval and commercialization of our CAR T-cell immunotherapy product candidates. Notwithstanding our ongoing clinical studies, we may never be able to develop products that will be approved or commercialized. We are also studying in pre-clinical studies, on our own or through our collaborators, other product candidates based on gene-edited cells for immunotherapy.

Our therapeutic product candidates will require substantial additional clinical development, testing, and regulatory approval before we are permitted to commence their commercialization. The clinical trials of our product candidates are, and 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 test and, if approved, market any product candidate. 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, with respect to approval in the United States, to the satisfaction of the FDA or, with respect to approval in other countries, similar regulatory authorities in those countries, that the product candidate is safe and effective for use in each target indication. In the United States, we expect that the requisite regulatory submission to seek marketing approval for our gene therapy products will be a Biologic License Application, or BLA, and the competent regulatory authority is the FDA. In the EU, the requisite approval is a Marketing Authorization, or MA, which for products developed by the means of recombinant DNA technology, gene or cell therapy products as well as tissue engineered products, is issued through a centralized procedure involving the EMA. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. Despite our efforts, our product candidates may not:

This 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. Of the large number of drugs in development globally, only a small percentage successfully completes the regulatory approval process and even fewer are commercialized. Furthermore, we have not marketed, distributed or sold any products. Our success will, in addition to the factors discussed above, depend on the successful commercialization of the product candidates we develop on our own or on behalf of our collaborators, which may require:

Many of these factors are beyond our control. We do not expect any of the product candidates we develop on our own and those we develop on behalf of our collaborators to be commercially available for many years and some or all may never become commercially available. We may never generate revenues through the sale of products.

Accordingly, even if we are able to obtain the requisite financing to continue to fund our development and clinical programs, we cannot assure you that our product candidates will be successfully developed or commercialized.

We face substantial competition from companies, including biotechnology and pharmaceutical companies, many of which have considerably more resources and experience than we have, which may result in competitors discovering, developing, receiving approval for, or commercializing products before or more successfully than us.

The biotechnology and pharmaceutical industries are characterized by intense competition and rapid innovation, and many companies put significant resources toward developing novel and proprietary therapies for the treatment of cancer, which often incorporate novel technologies and valuable intellectual property. We compete with companies in the immunotherapy space, as well as companies developing novel targeted therapies for cancer. In addition, our product candidates, if approved, will compete with existing standards of care for the diseases that our product candidates target as well as new compounds, drugs or therapies, some of which may achieve better results than our product candidates. 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.

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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., and F. Hoffman-La Roche AG. Immunotherapy is further being pursued by several biotech companies as well as by large-cap pharmaceutical companies. Many of our competitors, either alone or with their collaboration partners, have substantially greater financial, technical and other resources, such as larger research and development staff and/or greater expertise in research and development, manufacturing, pre-clinical testing and conducting clinical trials. In addition, smaller or early-stage companies may compete with us through collaborative arrangements with more established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these enterprises. 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. Our 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.

Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborators, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized, or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products.

Even if we obtain regulatory approval of our product candidates, we may not be the first to market and that may affect the price or demand for our product candidates. Additionally, the availability and price of our competitors’ products could limit the demand and the price 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. A competitor could obtain orphan product exclusivity from the FDA with respect to such competitor’s product. If such competitor product is determined to be the same product as one of the product candidates we develop, that may prevent us or our collaborators from obtaining approval from the FDA for such product candidate for the same indication for seven years, except in limited circumstances.

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.

The time required to obtain approval by the FDA 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.

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The FDA or other regulatory authority, as applicable, may delay, limit or deny approval of our product candidates for many reasons, including the following:

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 collaborators 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, 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 expect several of the product candidates we develop will initially be available as treatment for patients with advanced disease, or with a rare disease with no other treatment option, which could limit the size of the market for these product candidates.

We expect that, if approved, several of the product candidates we develop will initially receive regulatory approval as treatment for advanced or rare diseases. 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 extensive patient population.

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

The product candidates we develop undergo a complex, highly-regulated manufacturing process that is subject to multiple risks. As a result of the complexities of this process, the cost to manufacture our CAR T-cell immunotherapy products is generally higher than traditional small molecule chemical compounds, and the manufacturing process requires very minimal batch-to-batch variability, which is expensive to ensure. Our manufacturing process is susceptible to product loss or failure due to issues associated with the collection of white blood cells from healthy third-party 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. In addition, we may face manufacturing issues associated with interruptions in the manufacturing process, contamination, equipment or reagent failure, shortage of raw material or starting material and other procurement issues, changes in regulation, improper installation or operation of equipment, vendor or operator error, inconsistency in cell growth, and variability in product characteristics. 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 product candidates or in the manufacturing facilities in which our product candidates are made, 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. Further, as our product candidates are developed through pre-clinical to late stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results or adapt to the regulatory agencies’ requirements. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials.

Currently, the product candidates we develop are manufactured using processes intended for pre-clinical and clinical stage production by third-party contract manufacturing organizations, or CMOs. Although we work with CMOs to ensure that commercially viable processes will be available for mass production, there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including, among others, cost overruns, potential problems with process scale-up and/or scale-out, process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. 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.

We expect our manufacturing strategy for the product candidates we develop will continue to involve the use of one or more CMOs as well as our own manufacturing facility, which we intend to establish. However, we have no experience as a company in developing a manufacturing infrastructure that complies with all standards applicable to the manufacturing of a product to be used by or administered to patients, and may never be successful in developing such a manufacturing facility or capability. We may engage additional CMOs or establish multiple manufacturing facilities as we expand our commercial footprint to multiple geographies, which may lead to regulatory delays or prove costly. Even if we successfully develop our own manufacturing facility, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, natural disasters, power failures, regulatory issues and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

In addition, the manufacturing process for any products that we may develop is subject to FDA and foreign regulatory authority approval processes for the jurisdictions in which we or our collaborators will seek marketing approval for commercialization, and we will need to contract with manufacturers who can meet all applicable FDA and foreign regulatory authority requirements on an ongoing basis. If the manufacturing process is changed during the course of product development, 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 our CMOs are unable to reliably produce product candidates or products to specifications acceptable to the FDA or other regulatory authorities, such as the FDA’s cGMP standards compliance, 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. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product according to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand or need. Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations and growth prospects.

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Negative public opinion 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 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. For example, in 2003, 20 subjects treated for X-linked severe combined immunodeficiency in two gene therapy studies using a murine gamma-retroviral vector, a viral delivery system, showed correction of the disease, but the studies were terminated after five subjects developed leukemia. Although none of our current product candidates utilize these gamma-retroviruses, our product candidates use a viral delivery system. Additionally, there have been patient deaths in recent CAR-T trials conducted in the United States by our competitors as well as in our UCART123 Clinical Studies, which have led to clinical trial holds. Adverse events in clinical studies for the product candidates we develop or those of our competitors, even if not ultimately attributable to our or their product candidates, respectively (such as the many adverse events that typically arise from the transplant process), and any resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stronger labeling for those product candidates that are approved and a decrease in demand for any such product candidates.

We or our collaborators may find it difficult to enroll patients in clinical studies on the product candidates we develop, which could delay or prevent clinical studies of the product candidates.

Identifying and qualifying patients to participate in clinical studies of the product candidates we develop is critical to our success. The timing of these clinical studies will depend, 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 our collaborators may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in a study, to complete the clinical studies for our product candidates in a timely manner. If patients are unwilling to participate in such studies because of negative publicity from adverse events in the biotechnology or gene or cell therapy industries or for other reasons, 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 or termination of the clinical studies altogether.

In addition, clinical trials for the product candidates we develop will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition may reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we expect to conduct some of the clinical trials at the same clinical trial sites that some of our competitors use, which may reduce the number of patients who are available for our clinical trials at such clinical trial sites. Certain of our competitors may have greater success than us in enrolling patients as a result of a variety of factors. Moreover, because the product candidates we develop represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and stem cell transplants, rather than enroll patients in our future clinical trial or clinical trial of our collaborators.

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

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Our competitors in the immuno-oncology space are developing products that similarly use CAR T-cells to seek out and destroy cancer cells. In addition to the factors identified above, patient enrollment in any clinical trials we may conduct may be adversely impacted by any negative outcomes our competitors may experience, including adverse side effects (including fatalities), clinical data showing inadequate efficacy or failures to obtain regulatory approval.

If we or our collaborators have difficulty enrolling a sufficient number of patients to conduct clinical studies as planned, we or our collaborators may need to delay, limit or terminate ongoing or planned clinical studies, any of 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.

Our product candidates may fail safety studies in clinical trials or may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Our gene-editing technologies may not be sufficiently specific for their target sites, or they may not target unique sites within the genome of interest, which may result in random DNA recombination events. For example, off-target cleavage may lead to the production of double-strand breaks that overwhelm the cell’s repair machinery and, as a consequence, yield chromosomal rearrangements and/or cell death. Off-target cleavage events also may result in random integration of donor DNA. As a result, off-target cleavage in T-cells may lead to undesirable side effects for patients, and consequently could cause delays, interruptions or suspensions of clinical trials and delays or denial of regulatory approval by the FDA or other regulatory authorities. Because the products we develop have had only very limited clinical application, we do not yet have sufficient information to know whether any of our product candidates will cause undesirable side effects.

Any undesirable side effects could cause us, our collaborators or regulatory authorities to interrupt, delay or halt 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. Further, if the product candidates we develop receive marketing approval and we or others identify undesirable side effects caused by the products or any other similar products after the approval, a number of potentially significant negative consequences could result, including:

Any of these events could prevent the affected products from reaching the milestones triggering payment to Cellectis or achieving or maintaining market acceptance and could substantially increase the costs of commercializing such products and significantly impact the ability of such products to generate revenues.

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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 will 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 collaborators 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.

Further development and commercialization of our product candidates will depend, in part, on strategic alliances with our collaborators. If our collaborators do not diligently pursue product development efforts, our progress may be delayed and our revenues may be deferred.

We expect to rely, to some extent, on our collaborators to provide funding in support of our own independent research and pre-clinical and clinical testing. Our technology is broad based, and we do not currently possess the financial resources necessary to fully develop and commercialize potential products that may result from our technologies or the resources or capabilities to complete the lengthy marketing approval processes that may be required for the products. Therefore, we plan to rely on strategic alliances to financially help us develop and commercialize our own biopharmaceutical products. As a result, our success depends, in part, on our ability to collect milestone and royalty payments from our collaborators. To the extent our collaborators do not aggressively pursue product candidates for which we are entitled to such payments or pursue such product candidates ineffectively, we will fail to realize these significant revenue streams, which could have an adverse effect on our business and future prospects. For example, since Servier has obtained exclusive rights on UCART19, it controls this product candidate and its future development (including the UCART19 Clinical Studies) and commercialization. We will receive royalties on sales of the product, but will have no control over such further development and commercialization.

If collaborators with whom we currently have alliances, such as Allogene and Servier, or future collaborators with whom we may engage, are unable or unwilling to advance our programs, or if they do not diligently pursue product development and product approval, this may slow our progress and defer or negatively impact our revenues. Such failures would have an adverse effect on our ability to collect key revenue streams and, for this reason, would adversely impact our business, financial position and prospects. Our collaborators may assign, sublicense or abandon product candidates or we may have disagreements with our collaborators, which would cause associated product development to slow or cease. There can be no assurance that our current strategic alliances will continue or be successful, and we may require significant time to secure new strategic alliances because we need to effectively market the benefits of our technology to these future alliance partners, which may direct the attention and resources of our research and development personnel and management away from our primary business operations. Further, each strategic alliance arrangement will involve the negotiation of terms that may be unique to each collaborator. These business development efforts may not result in a strategic alliance or may result in unfavorable arrangements.

The loss of existing or future collaboration agreements would not only delay or potentially terminate the possible development or commercialization of products we may derive from our technologies, but it may also delay or terminate our ability to test target candidates for specific genes. If any collaborator fails to conduct the collaborative activities successfully and in a timely manner, the pre-clinical or clinical development or commercialization of the affected target candidates or research programs would be delayed or could be terminated.

Under typical collaboration agreements, we would expect to receive revenue for the research and development of a CAR T-cell immunotherapy product based on achievement of specific milestones, as well as royalties based on a percentage of sales of the commercialized products. Achieving these milestones will depend, in part, on the efforts of our partner as well as, in most cases and for a limited period of time, our own. If we, or any alliance partner, fail to meet specific milestones, then the strategic alliance may be terminated, which could reduce our revenues.

Under our collaboration agreement with Allogene, Allogene will have 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 upon written notice, if the other party commits a material breach that fundamentally frustrates the objectives or transactions contemplated by the agreement and such breach remains uncured for 90 days from the date such written notice is provided. Either party may terminate the agreement on a target-by-target basis upon written notice, if the other party commits a material breach that relates to such target and such breach remains uncured for 90 days from the date such written notice is

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provided. The agreement may also be terminated upon written notice by Allogene at any time in the event that we become bankrupt or insolvent. Further, the agreement provides Allogene with a right to terminate any specific research project or research program under the agreement if we undergo a change of control.

Under our collaboration agreement with Servier, either party may terminate the agreement in its entirety in the event of the other party’s material breach, which continues or remains uncured for 90 days after written notice is provided to the breaching party, or 30 days after written notice is provided with respect to a payment obligation breach. The parties may also terminate the agreement by mutual written consent. Servier has the right, at its sole discretion, to terminate the agreement in its entirety or with respect to specific products or product candidates, upon three months’ prior written notice to us. Servier may also 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. Further, the agreement provides Servier with buy-out rights with respect to our interest in products and product candidates under the agreement if we undergo a change of control.

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

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

In addition, for any product candidates we develop through our strategic alliances, we will depend entirely upon the other party 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. Our business and results of operations will be negatively impacted by any failure of our collaborators to effectively market and commercialize an approved product.

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, they 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 addition to those, 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, preventing or minimizing risks, and may be obliged to carry out post-marketing studies. 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. 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. Similarly, in the EU any promotion of medicinal products is highly regulated and, depending on the specific jurisdiction involved, may require prior vetting by the competent national regulatory authority.

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

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manufactured or 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 or suspension of manufacturing.

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

Any government investigation of alleged violations of law 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 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 our 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 collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators 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 biosimilar and interchangeable biological products. 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. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any of the product candidates we develop that is approved in the United States as a biological product under a BLA should qualify for the 12-year period of 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.

Even if we or our collaborators obtain and maintain approval for product candidates in the United States or another jurisdiction, we or our collaborators 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 by the requisite regulatory agencies in any 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

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FDA. The approval process varies among countries and may limit our or our collaborators’ 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 collaborators 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. 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 collaborators 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 will be adversely affected.

Depending on the results of clinical trials and the process for obtaining regulatory approvals in other countries, we or our collaborators may decide to first seek regulatory approvals of a product candidate in countries other than the United States, or we or our collaborators may simultaneously seek regulatory approvals in the United States and other countries, in which case we or our collaborators 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 is likely to subject us or our collaborators to all of the risks associated with obtaining approval in the United States or the EU described herein.

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 orphan drug status, including market exclusivity, 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 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 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 product is entitled to 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 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. Exclusive marketing rights in the United States may be limited if we seek 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 Europe, a medicinal product may receive orphan designation under Article 3 of Regulation (EC) 141/2000. 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.

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In the 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, 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 (Article 37, Regulation 1901/2006). 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—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:

We may seek fast-track designation for some or all of our product candidates. There is no assurance that the FDA will grant such designation and, even if it does grant fast track designation to any of our product candidates, that designation may not actually lead to a faster development or regulatory review or approval process and it does not increase the likelihood that our product candidates will receive marketing approval in the United States.

We may seek fast-track designation and review for some or all of our other 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. 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.

We may seek a regenerative advanced therapy (RAT) designation and/or a breakthrough therapy designation for our product candidates. Even if we achieve a RAT designation or a breakthrough designation from the FDA for the product candidates we develop, or, if applicable, by other national or international regulatory agencies, such designation may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.

We may seek a RAT designation or a breakthrough therapy designation for our product candidates in the future.

A drug is eligible for RAT 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 breakthrough therapy 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.

For product candidates that have been designated as a RAT or a breakthrough therapy, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Designation as a RAT or breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe that our product candidates meet the criteria for designation as a RAT or a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a RAT designation or a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as RAT or a breakthrough therapy, the FDA may later decide that such product no longer meet the conditions for qualification.

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Even if any of our product candidates are commercialized, they may not be accepted by physicians, patients, or the medical community in general, and may also become subject to market conditions that could harm our business.

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. 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 existing drugs or treatments. We cannot predict the degree of market acceptance of any product candidate that receives marketing approval, which will depend on a number of factors, including, but not limited to:

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, our liability could be sought by patients participating in the clinical trials for our product candidates as a result of unexpected side effects resulting from the administration of these products. 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 collaborators, 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. These lawsuits may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forgo further commercialization of the affected products.

In addition, regardless of merit or eventual outcome, product liability claims may result in: 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 collaborators to commercialize our product candidates; and decreased demand for our product candidates, if approved for commercial sale.

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.

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.

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 governmental healthcare programs, such as Medicare and Medicaid in the United States, and commercial payors are critical to new product acceptance.

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

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Policies for coverage and reimbursement for products vary among third-party payors. As a result, 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 collaborators to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our product candidates.

Patients are unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates. Because our product candidates represent new approaches to the treatment of cancer and accordingly, may have a higher cost than conventional therapies and may require long-term follow up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to achieve profitability may be elevated.

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 one or more of the following:

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our or our collaborators’ ability to sell our products profitably. 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 has been expected to have a significant impact on the provision of, and payment for, health care in the United States. The ACA was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

Among the provisions of the ACA of importance to our potential product candidates are:

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In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2024 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law which, among other things, further reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Further, in January 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provisions of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturer of pharmaceutical products. Congress may also consider subsequent legislation to replace elements of the ACA that are repealed. 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.

This legislative uncertainty could harm our or our collaborators’ 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 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.

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 collaborators to commercialize the product candidates we develop in markets throughout the world. Commercialization of our product candidates in various markets could subject us to risks and uncertainties, including:

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Sales of the products could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs.

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:

Ensuring 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 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

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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.

Risks Related to Our Reliance on Third Parties

We expect to continue to rely on third parties to conduct some or all aspects of our product manufacturing, quality control, protocol development, material supply, research and pre-clinical development, clinical testing and distribution, and these third parties may not perform satisfactorily.

We do not, and do not expect in the future to, independently conduct all aspects of our product manufacturing, quality control, protocol development, material supply, research and pre-clinical development and clinical testing as well as distribution and rely, and will continue to rely, on third parties for some of these activities. Under certain circumstances, these third parties may be entitled to terminate their engagements with us. If we need to enter into alternative arrangements, it could delay our product development activities.

In addition, in connection with our engagement of third parties, we control only certain aspects of their activities. Our reliance on these third parties for product manufacturing, quality control, protocol development, material supply, research and pre-clinical development and clinical testing and distribution activities 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 our studies in accordance with regulatory requirements or 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. In some such cases we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay with respect to the approval of our product candidates and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, reliance on third-party manufacturers, suppliers, research organizations and/or distributors entails risks to which we would not be subject if we conducted the above-mentioned activities ourselves, including:

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.

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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 contract manufacturers for our product candidates, 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 current Good Manufacturing Practices (cGMP) requirements. Similarly, all investigational medicinal products in the EU must be manufactured in compliance with Good Manufacturing Practices, or GMP. 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 some or all 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, including starting and raw material, excipients, equipment and consumables, as well as the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval inspection, FDA approval of the products will not be granted.

Similarly, in the EU, Directive 2003/94/EC lays down the principles and guidelines of GMP in respect of medicinal products and investigational medicinal products and requires that products are consistently produced and controlled in accordance with the applicable quality standards. It 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. Directive 2003/94/EC, together with the detailed EU Guidelines on GMP, govern the 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.

If we or any of our third-party manufacturers, directly or indirectly (due to failure of their own sub-contractors or suppliers), 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.

In addition, if supply from one approved manufacturer or supplier 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. Although we have started construction of two of our own manufacturing facilities, we may never be successful in developing these facilities or our manufacturing capabilities. Even if we are successful, developing our own manufacturing capabilities may be costlier than we anticipate or may result in delays.

These factors could cause the delay of some non-clinical and clinical studies, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, 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.

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 without limitation, biological materials—such as cells, cell culture media, cytokines, vectors, nucleic acids or antibodies—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

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competitive manner. In addition, these materials are subject to stringent manufacturing process and rigorous testing. Delays in the completion and validation of facilities and manufacturing processes of these materials could adversely affect the ability to complete trials and commercialize our products 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 or our collaborators rely on third parties to conduct, supervise and monitor our or their clinical studies, and if these third parties perform in an unsatisfactory manner, it may harm our business.

We or our collaborators rely on medical institutions, clinical investigators, contract research organizations, or CROs, contract laboratories, and collaborators to carry out or otherwise assist us in connection with our or their clinical trials and to perform data collection and analysis. While we will have agreements governing their activities, we will have limited influence over their actual performance and will control only certain aspects of such third parties’ activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory, ethical and scientific standards, and our reliance on the third party does not relieve us of our regulatory responsibilities.

We and our CROs are required to comply with the FDA’s and other regulatory authorities’ good clinical practices, or GCP, cGMP, good laboratory practices, or GLP, and other applicable requirements for conducting, recording and reporting the results of our pre-clinical studies and 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. Regulatory authorities around the world, including the FDA and European authorities, enforce these requirements through periodic inspections of study sponsors, CROs, principal investigators and clinical trial sites. If we, our CROs, our investigators or trial sites fail to comply with applicable GCP, GLP, GMP or other applicable regulatory requirements, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA, EMA or other regulatory authorities around the world may require us to perform additional clinical trials before issuing any marketing authorizations for our product candidates. Upon inspection, the FDA or EMA may determine that our clinical trials did not comply with GCP, GLP and GMP requirements, which may render the data generated in those trials unreliable or otherwise not usable for the purpose of supporting the marketing authorization applications for our products. In addition, our future clinical trials will require a sufficient number of study subjects to evaluate the safety and efficacy of our product candidates. Accordingly, if, for example, our CROs fail to comply with these regulations or if trial sites fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, or anyway incur delays in the performance of such trials, which would delay the regulatory approval process for the approval of our product candidates.

Clinical trials conducted in reliance on third parties may be delayed, suspended, or terminated if:

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

Given our early development stage, we have no experience in sales, marketing and distribution of biopharmaceutical products. However, if any of our product candidates obtain marketing approval, we intend to develop sales and marketing capacity, either alone or with partners, by contracting with, or licensing, them to market any of our own products. Outsourcing sales, distribution and marketing in this manner may subject us to a variety of risks, including:

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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 collaborations require 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 parties for the advancement of our products platform, pre-clinical testing, quality control, clinical trials, and manufacturing activities, we must, at times, share trade secrets with them. The sharing of our trade secrets with certain collaborators and CMOs may arise from our collaborations with Servier and Allogene, any collaborations we may enter into in the future, as well as our agreements with our past, present or future CMOs. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, 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 the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. 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. In addition, agreements with third parties typically restrict the ability of such third parties to publish data potentially relating to our trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual property rights arising from the strategic alliance. In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties. 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. Our collaborators or CMOs may be acquired by competitors, which may increase the risk that these entities may breach their confidentiality obligations and share our confidential information with the acquirer. For example, in December 2018, Novartis announced its intention to acquire CellForCure, which currently serves as a CMO for us.

Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.

Risks Related to Calyxt, Our Plant Products Business

Calyxt faces significant competition and many of its competitors have substantially greater financial, technical and other resources than it does.

The market for agricultural biotechnology products is highly competitive, and Calyxt faces significant direct and indirect competition in several aspects of its business. Competition for improving plant genetics comes from conventional and advanced plant breeding techniques, as well as from the development of advanced biotechnology traits. Other potentially competitive sources of improvement in crop yields include improvements in crop protection chemicals, fertilizer formulations, farm mechanization, other biotechnology, and information management. Programs to improve genetics and crop protection chemicals are generally concentrated within a relatively small number of large companies, while non-genetic approaches are underway with a broader set of companies. Mergers and acquisitions in the plant science, specialty food ingredient and agricultural biotechnology, seed and chemical industries may result in even more resources being concentrated among a smaller number of Calyxt’s competitors. Additionally, competition for providing more nutritious ingredients for food companies come from chemical-based ingredients, additives and substitutes, which are developed by various companies. The majority of these competitors have substantially greater financial, technical, marketing, sales, distribution and other resources than Calyxt does, such as larger research and development staff, more experienced marketing and manufacturing organizations and more well-established sales forces. As a result, Calyxt may be unable to compete successfully against its current or future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for its plant products. We expect Calyxt to continue to face significant competition in the markets in which Calyxt intends to commercialize its plant products.

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Many of Calyxt competitors engage in ongoing research and development, and technological developments by Calyxt competitors could render its plant products less competitive or obsolete, resulting in reduced sales compared to our expectations. Calyxt ability to compete effectively and to achieve commercial success depends, in part, on Calyxt ability to: control manufacturing and marketing costs; effectively price and market Calyxt’s plant products; successfully develop an effective marketing program and an efficient supply chain; develop new plant products with properties attractive to food manufacturers or farmers; and commercialize its plant products quickly without incurring major regulatory costs. Calyxt may not be successful in achieving these factors and any such failure may adversely affect its business, results of operations and financial condition.

From time to time, certain seed and chemical companies that are potential competitors of Calyxt may seek new traits or trait development technologies and may seek to license its technology. Calyxt has, in the past, entered into such licensing arrangements and may continue to enter into such arrangements in the future. Some of these companies may have significantly greater financial resources and may even compete with Calyxt’s business. In determining whether to license traits and/or trait development technologies to a potential competitor, Calyxt evaluates the potential financial benefits to it in addition to the focus of such companies’ trait pipelines and the likelihood that their plant product candidate programs could compete with Calyxt’s own plant product candidate pipeline. Although we do not believe that any of Calyxt’s existing licenses pose a competitive threat to Calyxt’s business model or existing plant product candidate pipeline, in such circumstances, competitors could use its technologies to develop their own products that would compete with Calyxt’s product candidates.

Calyxt also anticipates increased competition in the future as new companies enter the market and new technologies become available, particularly in the area of gene editing. Calyxt’s technology may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of Calyxt’s competitors, which will prevent or limit Calyxt’s ability to generate revenue from the commercialization of Calyxt’s plant products. At the same time, the expiration of patents covering existing plant products reduces the barriers to entry for competitors.

Calyxt relies on certain gene-editing technologies that may become obsolete in the future.

Calyxt relies on its proprietary gene editing technologies to develop its product candidates. If Calyxt’s competitors are able to refine existing gene-editing technologies, or develop new gene-editing technologies that are superior to Calyxt’s technologies, we and Calyxt may face reputational damage and a decline in the demand for Calyxt’s products. Calyxt’s technologies may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of Calyxt’s competitors that are more effective or that enable them to develop and commercialize products more quickly or with lower expense than Calyxt is able to do. If for any reason Calyxt’s technology becomes obsolete or uneconomical relative to its competitors’ technologies, this would prevent or limit Calyxt’s ability to generate revenues from the commercialization of Calyxt’s products.

Calyxt’s business activities are currently conducted at a limited number of locations, which makes Calyxt susceptible to damage or business disruptions caused by natural disasters or acts of vandalism.

Calyxt’s current headquarters and research and development facilities, which include an office, labs, greenhouses, field testing acreage, and a demonstration test kitchen, are located in Roseville, Minnesota. Calyxt seed production takes place primarily in the United States and Argentina. Third party warehousing for seed storage, and Calyxt’s limited number of processing partners ( e.g. storage, transportation, crushers and refiners) are all located in the Upper Midwest region of the United States. Calyxt takes precautions to safeguard its facilities, including insurance, health and safety protocols, and off-site storage of critical research results and computer data. However, a natural disaster, such as a hurricane, drought, fire, flood, tornado, earthquake, or acts of vandalism, could cause substantial delays in Calyxt operations, damage or destroy Calyxt equipment, inventory or development projects, and cause Calyxt to incur additional expenses.

Loss of or damage to Calyxt’s germplasm libraries or inability to access new germplasm would significantly slow Calyxt’s product development efforts.

Calyxt has access to a collection of germplasm for its product candidates, in part through licensing agreements with leading institutions. Germplasm comprises genetic material covering the diversity of a crop, the attributes of which are inherited from generation to generation. Germplasm is a key strategic asset since it forms the basis of plant breeding programs. To the extent that Calyxt loses access to germplasm because of the termination or breach of its licensing agreements or as a result of insufficient quantities of germplasm or are unable to access new germplasm for testing, breeding and commercial use in relevant geographies, Calyxt’s product development capabilities could be negatively impacted. In addition, loss of or damage to Calyxt’s germplasm or Calyxt’s inability to access new germplasm would significantly impair Calyxt’s research and development activities.

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Calyxt’s plant product development efforts use complex integrated technology platforms and require substantial time and resources; these efforts may not be successful, or the rate of product improvement may be slower than expected.

Development of successful agricultural products using gene-editing technologies requires significant levels of investment in research and development, including laboratory, greenhouse and field testing, to demonstrate product effectiveness and can take several years or more. For the three years ended December 31, 2018, 2017 and 2016, we incurred $8.6 million, $6.1 million, and $4.1 million, respectively, on plant sciences research and development expenses. Calyxt intends to continue to invest in plant research and development, including additional and expanded field testing to validate Calyxt’s product candidates in real world conditions. Calyxt’s investment in plant sciences research and development may not result in significant product revenue over the next several years, if ever. Moreover, the successful application of gene-editing technologies can be unpredictable, and may prove to be unsuccessful when attempting to achieve desired traits in different crops and plants. For example, Calyxt’s gene-editing techniques may prove to be unsuccessful very early on during the discovery phase of new crop development based on technology limitations. Alternatively, even though Calyxt successfully implemented gene edits during the discovery phase, that trait may not ultimately appear in crops during field testing or crops may also exhibit other undesirable traits that adversely affect their commercial value.

Development of new or improved agricultural products involves risks of failure inherent in the development of products based on innovative and complex technologies. These risks include the possibility that:

The field of gene editing, particularly in the area of plants, is in its infancy. Negative developments in the field of gene editing, such as adverse side effects, could harm the reputation of the industry and negatively impact Calyxt’s business.

Calyxt may direct its limited resources toward product candidates that prove to be less profitable or less successful than others that Calyxt did not pursue.

Calyxt has limited financial and managerial resources. As a result, Calyxt may forego or delay pursuit of opportunities with other product candidates that later prove to have greater commercial potential. Calyxt’s resource allocation decisions may cause Calyxt to fail to capitalize on viable commercial products or profitable market opportunities. Calyxt spending on current and future research and development programs and product candidates may not yield any commercially viable products.

Any partnerships that Calyxt may enter into in the future may not be successful, which could adversely affect Calyxt’s ability to develop and commercialize its plant product candidates.

Calyxt may seek research and development partnerships or joint venture arrangements with third parties for the development or commercialization of its product candidates depending on the merits of retaining commercialization rights for itself as compared to entering into partnerships or joint venture arrangements. Calyxt will face, to the extent that it decides to enter into partnerships or joint venture agreements, significant competition in seeking appropriate partners. Moreover, partnerships or joint venture arrangements are complex and time-consuming to negotiate, document, implement and maintain. Calyxt may not be successful in its efforts to establish and implement partnerships, joint ventures, or other alternative arrangements should it so chose to enter into such arrangements. The terms of any partnerships, joint ventures, or other arrangements that Calyxt may establish may not be favorable to Calyxt or to us.

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Any future partnerships or joint ventures that Calyxt enters into may not be successful. The success of its partnerships or joint venture arrangements will depend heavily on the efforts and activities of Calyxt’s partners. Partnerships and joint ventures are subject to numerous risks, which may include that:

If ongoing or future field trials are unsuccessful, Calyxt may be unable to complete the development of product candidates on a timely basis or at all.

Calyxt relies on field trials to demonstrate the efficacy of the product candidates that it has developed and evaluated in greenhouse conditions. Field trials allow Calyxt to test the product candidates in the field as well as to increase seed production, and to measure performance across multiple geographies and conditions. The successful completion of field trials is critical to the success of Calyxt’s product development efforts with respect to its product candidates. If Calyxt’s ongoing or future field trials are unsuccessful or produce inconsistent results or unanticipated adverse effects on the agronomic performance of Calyxt’s crops, or if the field trials do not produce reliable data, Calyxt’s product development efforts could be delayed, subject to additional regulatory review or abandoned entirely. In addition, in order to support Calyxt’s commercialization efforts, it is necessary to collect data across multiple growing seasons and from different geographies. Even in cases where initial field trials are successful, Calyxt cannot be certain that additional field trials conducted on a greater number of acres or in different geographies will also be successful. Many factors that are beyond Calyxt’s control may adversely affect the success of these field trials, including unique geographic conditions, weather and climatic variations, disease or pests, or acts of protest or vandalism. Field trials, which may take up to 2–3 years, are costly, and any field trial failures that Calyxt may experience may not be covered by insurance and, therefore, could result in increased costs, which may negatively impact Calyxt’s business and results of operations.

Calyxt relies on third parties to conduct, monitor, support, and oversee field trials and other research services for plant product candidates in development, and any performance issues by third parties, or Calyxt’s inability to engage third parties on acceptable terms, may impact Calyxt’s ability to successfully commercialize such product candidates.

Calyxt currently relies on third parties, such as growers, consultants, contractors and universities to conduct, monitor, support and oversee these field trials. In some cases, these field trials are conducted outside of the United States, making it difficult for Calyxt to monitor the daily activity of the work being conducted by the third parties that it engages. Although Calyxt provides its third-party contractors with protocols regarding the production and handling of its product candidates, Calyxt has limited control over the execution of field trials. Poor field trial execution or data collection, failure to follow required agronomic practices, protocols or regulatory requirements, or mishandling of product candidates by these third parties could impair the success of Calyxt’s field trials. Any such failures may result in delays in the development of Calyxt’s plant product candidates or the incurrence of additional costs. Even if Calyxt’s third-party contractors adhere to its suggested protocols, field trials may fail to

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succeed for a variety of other reasons, including weather, disease or pests, improper timing of planting Calyxt’s seeds, or incorrect fertilizer use. Ultimately, Calyxt remains responsible for ensuring that each of its field trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and Calyxt’s reliance on third parties does not relieve Calyxt of its responsibilities. Should such third parties fail to comply with these standards, Calyxt’s ability to develop its product candidates could be adversely impacted.

Additionally, if Calyxt is unable to maintain or enter into agreements with third-party contractors on acceptable terms, or if engagement is terminated prematurely, Calyxt may be unable to conduct or complete its field trials in the manner Calyxt anticipates. If Calyxt’s relationship with any of these third-party contractors is terminated, Calyxt may be unable to enter into arrangements with alternative contractors on commercially reasonable terms, or at all. Switching or adding third party contractors can involve substantial cost and require extensive management time and focus. In addition, there is a natural transition period when any new third party commences field trial work. As a result, delays may occur, which could materially impact Calyxt’s ability to meet its desired development timelines.

Calyxt may lack the necessary expertise, personnel and resources to successfully commercialize its product candidates.

Other than Calyxt’s High Oleic Soybean, which was commercialized in the first quarter of 2019, Calyxt’s product candidates are still in development and there is no established market for them. Completion of product development for these other product candidates could be protracted and there is no certainty of success. Future products may not be ready for commercial launch for several years, if ever. If Calyxt is not able to commercialize its High Oleic Soybean product or other product candidates on a significant scale, then it may not be successful in building a sustainable or profitable business at Calyxt. Moreover, we expect Calyxt to price its plant products based on its assessment of the value that it believes they will provide to food manufacturers or farmers, rather than on the cost of production. If food manufacturers or farmers attribute a lower value to such products than Calyxt does, they may not be willing to pay the premium prices that Calyxt expects to charge. Pricing levels may also be negatively affected if Calyxt’s plant products are unsuccessful in producing the yields or traits Calyxt expects. Food manufacturers or farmers may also be cautious in their adoption of new plant products and technologies, with conservative initial purchases and proof of product required prior to widespread deployment. It may take several growing seasons for food manufacturers or farmers to adopt Calyxt’s plant products on a large scale.

To achieve commercial success of its product candidates, Calyxt will need to develop and build-out its own sales and marketing capabilities while we intend to outsource our supply capabilities to third parties. Factors that may affect Calyxt’s ability to commercialize its product candidates on its own include recruiting and retaining adequate numbers of effective sales and marketing personnel, obtaining access to or persuading adequate numbers of food manufacturers or farmers to purchase and use its product candidates and other unforeseen costs associated with creating an independent sales and marketing organization. Developing and maintaining a sales and marketing organization requires significant investment, is time-consuming and could delay the launch of its product candidates. Calyxt may not be able to build or maintain an effective sales and marketing organization in North America or other key global markets. If Calyxt is unable to find suitable partners for the commercialization of its product candidates, it may have difficulties generating revenue from them.

The successful commercialization of Calyxt’s plant products depends on Calyxt’s ability to produce high-quality plants and seeds cost-effectively on a large scale and to accurately forecast demand for Calyxt’s plant products and Calyxt may be unable to do so.

The production of commercial-scale quantities of seeds requires the multiplication of the plants or seeds through a succession of plantings and seed harvests. The cost-effective production of high-quality, high-volume quantities of any product candidates Calyxt successfully develops depends on Calyxt’s ability to scale its production processes to produce plants and seeds in sufficient quantity to meet demand. For example, food ingredients such as soybean oil and wheat flour, will require optimized production and commercialization of the underlying plant and seed harvests. We cannot assure that Calyxt’s existing or future seed production techniques will enable Calyxt to meet its large-scale production goals cost-effectively for the plant products in its pipeline. Even if Calyxt is successful in developing ways to increase yields and enhance quality, Calyxt may not be able to do so cost-effectively or on a timely basis, which could adversely affect Calyxt’s ability to achieve profitability. If Calyxt is unable to maintain or enhance the quality of its plants and seeds as increase Calyxt production capacity, including through the expected use of third parties, Calyxt may experience reductions in food manufacturer or farmer demand, higher costs and increased inventory write-offs.

In addition, because of the length of time it takes to produce commercial quantities of marketable seeds, Calyxt will need to make seed production decisions well in advance of plant product sales. Calyxt’s ability to accurately forecast demand can be adversely affected by a number of factors outside of Calyxt’s control, including changes in market conditions, environmental factors, such as pests and diseases, and adverse weather conditions. A shortfall in the supply of Calyxt’s products may reduce product revenue, damage our or Calyxt’s reputation in the market and adversely affect relationships. Any product surplus Calyxt has on hand may negatively impact cash flows, reduce the quality of Calyxt’s inventory and ultimately result in write-offs of

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inventory. Additionally, we or Calyxt will take financial risk in Calyxt’s plant product inventory given that Calyxt will have to keep the inventory marked to market on its balance sheet. Fluctuations in the spot price of Calyxt’s crops in inventory could have negative impacts on its financial statements. Any failure on Calyxt part to produce sufficient inventory, or overproduction of a particular product, could harm its business, results of operations and financial condition. In addition, food manufacturers or farmers may cancel orders or request a decrease in quantity at any time prior to delivery of the plants or seeds, which may lead to a surplus of Calyxt plant products.

While Calyxt estimates that the potential size of Calyxt target markets for Calyxt plant products is significant, that estimate has not been independently verified and is based on certain assumptions that may not prove to be accurate. As a result, these estimates could differ materially from actual market sizes, which could result in decreased demand for Calyxt plant products and therefore adversely impact Calyxt future business prospects, results of operation and financial condition.

Calyxt will rely on contractual counterparties and they may fail to perform adequately.

Calyxt’s commercial strategy depends on its ability to contract with counterparties that provide, and in the future may provide, a variety of services, including seed production companies, seed distributors, farmers, crushers, refiners, millers, transportation and logistics companies and lab equipment service providers. Calyxt relies on these third parties to provide services along its supply chain and in its research and development functions. Calyxt faces challenges in establishing relationships and contracts with these parties, which may jeopardize its ability to build a supply chain. While Calyxt has established relationships with several providers, Calyxt faces the possibility that counterparties may not fulfill the terms of agreements and will be required to enter into additional relationships to meet its business objectives. This may cause disruptions in Calyxt’s supply chains, research efforts, commercialization efforts, and otherwise inhibit Calyxt’s ability to bring its products to market at the times and in the quantities as planned. For example, if Calyxt’s crushers and refiners fail to process Calyxt’s crops at the times and at the quantities as agreed, Calyxt may be unable to meet the demands of food manufacturers who Calyxt has contracted with to purchase its products, leading to lower sales and potential reputational damage and contractual liabilities. While Calyxt may have certain indemnification rights in its contracts with such counterparties, there is no assurance that such indemnification rights will be sufficient to cover any damage to us that would result from a failure of such a counterparty in their contractual arrangements with Calyxt.

Interruptions in the production or transportation of Calyxt’s seeds could adversely affect its operations and profitability.

In some cases, Calyxt may produce seed with respect to its product candidates and Calyxt will rely on contract seed producers for such seed production. Poor execution, failure to follow required agronomic practices, protocols or regulatory requirements, or mishandling of product candidates by these contract seed producers could adversely affect Calyxt’s products. Any such failures may result in delays in Calyxt’s ability to obtain seed for its seed production needs in a timely manner. Such delays could adversely affect Calyxt’s ability to deliver seed to farmers to meet their planting window. Calyxt’s dependency upon timely seed deliveries means that interruptions or stoppages in such deliveries, or delays or limitations with respect to seed production, could adversely affect Calyxt’s operations until alternative arrangements could be made. Such a delay would adversely affect our and Calyxt’s reputation and revenues. If Calyxt were unable to produce the necessary seed for an extended period of time for any reason, its business, customer relations, and operating results could suffer.

Calyxt may not be able to identify suitable seed producers to meet its production needs. If Calyxt does identify suitable seed producers, it may not be able to enter into cost effective agreements on acceptable terms. If any contract seed producers whom Calyxt engages fail to perform their obligations as expected or breach or terminate their agreements with Calyxt, or if Calyxt is unable to secure the services of such third parties when and as needed, it may lose opportunities with its supply chain.

The unintended presence of Calyxt’s traits in other products or plants may negatively affect it.

Trace amounts of Calyxt’s traits may unintentionally be found in the products of third parties, which may result in negative publicity and claims of liability brought by such third parties or others against us or Calyxt. Furthermore, in the event of an unintended dissemination of Calyxt’s gene-edited germplasm into the environment, or the presence of unintended trace amounts of Calyxt’s traits in conventional seed, or in the grain or products produced from conventional crops, we or Calyxt could be subject to claims by multiple parties, including environmental advocacy groups, as well as governmental actions such as mandated crop destruction, product recalls, or additional stewardship practices and environmental cleanup or monitoring.

Calyxt’s crops are new, and if farmers and food processors are unable to work effectively with its crops, Calyxt’s various relationships, Calyxt’s reputation and its results of operations will be harmed.

Calyxt plans to provide farmers with information and protocols regarding the establishment, management, harvest, transportation and storage of Calyxt’s crops. These crop management recommendations may include equipment selection, planting

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and harvest timing, application of crop protection chemicals and storage systems and protocols. Calyxt’s general or specific protocols may not apply in all circumstances, may be improperly implemented, may not be sufficient, or may be incorrect, leading to reduced yields, crop failures or other production problems or losses. If farmers that are producing crops for Calyxt’s food ingredients experience these challenges, Calyxt may be unable to provide plant product ingredients to food manufacturers on a timely basis or at all. If Calyxt is unable to deliver plant products in a timely basis or at all, or if farmers that are purchasing Calyxt’s seed experience challenges, or if Calyxt’s food processors are unable to process Calyxt’s crops effectively and efficiently, Calyxt may jeopardize Calyxt’s relationships, reputation and ability to successfully market its plant products. Further, the use of Calyxt’s seeds may require a change in current planting, rotation or agronomic practices, which may be difficult to implement or may discourage the use of Calyxt’s plant products by agricultural producers.

There are various reasons why Calyxt’s crops, once available, may not succeed, including weather, disease or pests, improper timing of planting Calyxt’s seeds, or incorrect fertilizer or herbicide use. Statements by potential customers about negative experiences with Calyxt’s plant products could harm Calyxt’s reputation, and the decision by these parties not to proceed with large-scale seed purchases could harm Calyxt’s business, revenue and the ability to achieve profitability.

The successful commercialization of Calyxt plant products may face challenges from public perceptions of gene-edited products and ethical, legal, environmental, health and social concerns.

The successful commercialization of Calyxt’s product candidates depends, in part, on public acceptance of gene-edited agricultural products. Farmers, seed companies and end-product consumers may not understand the nature of Calyxt technologies or the scientific distinction between Calyxt’s non-transgenic gene-edited products and transgenic products of competitors. As a result, these parties may transfer negative perceptions and attitudes regarding transgenic products to Calyxt’s products and product candidates. A lack of understanding of Calyxt’s technologies may also make consumers more susceptible to the influence of negative information provided by opponents of biotechnology. Some opponents of biotechnology actively seek to raise public concern about gene editing, whether transgenic or non-transgenic, by claiming that plant products developed using biotechnology are unsafe for consumption or their use, poses a risk of damage to the environment, or creates legal, social and ethical dilemmas. The commercial success of Calyxt’s products may be adversely affected by such claims, even if unsubstantiated. In addition, extreme opponents of biotechnology have vandalized the fields of farmers planting biotech seeds and facilities used by biotechnology companies. Any such acts of vandalism targeting the fields of Calyxt’s farmer customers, Calyxt field testing sites or Calyxt research, production or other facilities, could adversely affect Calyxt sales and costs.

Negative public perceptions about gene editing can also affect the regulatory environment in the jurisdictions in which Calyxt is targeting the sale of Calyxt’s products and the commercialization of Calyxt’s product candidates. Any increase in such negative perceptions or any restrictive government regulations in response thereto, could have a negative effect on Calyxt business and may delay or impair the sale of Calyxt products or the development or commercialization of Calyxt product candidates. Even in light of compliance with stringent existing regulatory protocols or following receipt of confirmation of non-regulated status in a jurisdiction, public pressure in that jurisdiction may lead to increased regulation of products produced using biotechnology, further legislation regarding novel trait development technologies, or administrative litigation concerning prior regulatory determinations, each of which could adversely affect Calyxt’s ability to sell its product or commercialize its product candidates. In addition, labeling requirements in effect from time to time could heighten public concerns and make consumers less likely to purchase food products containing gene-edited ingredients.

Products that Calyxt develops, and food containing Calyxt’s products may fail to meet standards established by third-party non-GMO verification organizations, which could reduce the value of Calyxt’s products to customers.

Certain third-party organizations offer verification programs that seek to identify non-GMO products to consumers. These organizations verify the status of products (such as foods, beverages and vitamins) as non-GMO based on independently developed standards, and often authorize the display of specific markers or labels illustrating such status on the verified product’s packaging. Although the verification programs seek to identify finished products as non-GMO verified, the processes that they employ typically examine the individual ingredients and precursors, rather than the finished products.

Standards established by such third-party organizations for the verification of non-GMO status may differ from applicable regulatory legal standards applied by regulators in the United States. As a result, notwithstanding a determination as to the non-regulated status of Calyxt’s products pursuant to APHIS’s regulatory procedures (or a similar determination in other jurisdictions), Calyxt’s products, and third-party products that utilize Calyxt’s gene-edited products as ingredients, may fail to meet more restrictive or non-scientific standards imposed by these independent verification organizations. For example, a third-party verification organization could determine that it will withhold its non-GMO verification from any product developed using any biotechnology whatsoever.

If third-party verification organizations were to determine that any of Calyxt’s products, or third-party products that utilize Calyxt’s products as ingredients, or gene-edited products generally, did not meet their non-GMO verification standards, and

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certified non-GMO seals or labels were not available for such products, our or Calyxt’s reputation could be harmed, these products may be unable to demand non-GMO premiums, which could reduce the value of Calyxt traits to farmer customers, and Calyxt’s operating results could be adversely affected.

The commercial success of Calyxt consumer-centric plant products is reliant on the needs of food manufacturers and the recognition of shifting consumer preferences.

The commercial success of Calyxt consumer-centric plant products will depend in part on the success of the food manufacturer’s products that Calyxt plant products are included in. Calyxt will not control the marketing, distribution, labeling or any other aspects of the sale and commercialization of the food manufacturers’ food products in which Calyxt plant products are an ingredient. Consumer preferences may be a significant driver in the success of Calyxt’s food manufacturer customers in their efforts to sell foods products including Calyxt’s plant products. While current trends indicate that consumer preferences may be moving towards “healthier” options, we cannot predict whether such trends will continue or which types of food products will be demanded by consumers in the future. Additionally, as health and nutritional science continues to progress, consumer perception of what foods, nutrients and ingredients are considered “healthy” may shift. Calyxt and its food manufacturer customers may not be dynamic enough in responding to consumer trends and making products that will be demanded by consumers in the future. Failure by Calyxt food manufacturer customers to successfully recognize consumer trends and commercialize and sell their products which contain Calyxt ingredients could lower demand for Calyxt products and harm its business, results of operations and financial condition.

If Calyxt is sued for defective products and if such lawsuits were determined adversely, Calyxt could be subject to substantial damages, for which insurance coverage is not available.

Calyxt may be held liable if any product it develops, or any product that uses or incorporates any of Calyxt’s technologies is found unsuitable during marketing, sale or consumption. For example, the detection of an unintended trait in a commercial seed variety or the crops and products produced may result in governmental actions such as mandated crop destruction, product recalls or environmental cleanup or monitoring. Concerns about seed quality could also lead to additional regulations being imposed on Calyxt’s business, such as regulations related to testing procedures, mandatory governmental reviews of biotechnology advances, or additional regulations relating to the integrity of the food supply chain from the farm to the finished product.

The overall agricultural industry is susceptible to commodity price changes and Calyxt, along with its food manufacturing customers and farmer customers, are exposed to market risks from changes in commodity prices.

Changes in the prices of certain commodity products could result in higher overall cost along the agricultural supply chain, which may negatively affect Calyxt’s ability to commercialize its products. Calyxt will be susceptible to changes in costs in the agricultural industry as a result of factors beyond its control, such as general economic conditions, seasonal fluctuations, weather conditions, demand, food safety concerns, product recalls and government regulations. As a result, Calyxt may not be able to anticipate or react to changing costs by adjusting its practices, which could cause its operating results to deteriorate. While Calyxt enters into supply agreements for grain and seed production with settlement values based on commodity market futures pricing, Calyxt does not engage in hedging or speculative financial transactions nor does it hold or issue financial instruments for trading purposes.

Adverse weather conditions, natural disasters, crop disease, pests and other natural conditions can impose significant costs and losses on Calyxt.

The ability to grow Calyxt’s plant products is vulnerable to adverse weather conditions, including windstorms, floods, drought and temperature extremes, which are quite common but difficult to predict, the effects of which may be influenced and intensified by ongoing global climate change. Unfavorable growing conditions can reduce both crop size and crop quality. This risk is particularly acute with respect to regions or countries in which Calyxt plans to source a significant percentage of Calyxt’s plant products. In extreme cases, entire harvests may be lost in some geographic areas. Such adverse conditions can increase costs, decrease revenues and lead to additional charges to earnings, which may have a material adverse effect on Calyxt’s business, financial position and results of operations.

The ability to grow Calyxt’s plant products is also vulnerable to crop disease and to pests, which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied, climatic conditions and the risks associated with ongoing global climate change. The costs to control disease and other infestations vary depending on the severity of the damage and the extent of the plantings affected. Moreover, there can be no assurance that available technologies to control such infestations will continue to be effective. These infestations can also increase costs, decrease revenues and lead to additional charges to earnings, which may have a material adverse effect on Calyxt’s business, financial position and results of operations.

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Calyxt expects its business will be highly seasonal and subject to weather conditions and other factors beyond its control, which may cause Calyxt’s sales and operating results to fluctuate significantly.

The sale of plant products is dependent upon planting and growing seasons, which vary from year to year, and are expected to result in both highly seasonal patterns and substantial fluctuations in quarterly sales and profitability. Furthermore, significant fluctuations in market prices for agricultural inputs and crops could also have an adverse effect on the value of Calyxt plant products. Weather conditions and natural disasters, such as heavy rains, hurricanes, hail, floods, tornadoes, freezing conditions, drought or fire, also affect decisions by food manufacturers or farmers about the types and amounts of seeds to plant and the timing of harvesting and planting such seeds, as well as adversely impact the agricultural industry as a whole in various regions. Disruptions that cause delays by food manufacturers or farmers in harvesting or planting can result in the movement of orders to a future quarter. Disruptions that cause delays by Calyxt farmers in harvesting could cause Calyxt to be delayed, or to fail entirely in delivering food ingredients to food manufacturers. Any of those delays or failures would negatively affect the quarter in which they occur and cause fluctuations in Calyxt operating results.

The regulatory environment in the United States for genetically engineered plant products is uncertain and evolving. Changes in the current application of these laws and regulations would have a significant adverse impact on Calyxt’s ability to develop and commercialize Calyxt’s plant products.

Changes in applicable regulatory requirements could result in a substantial increase in the time and costs associated with developing Calyxt plant products and negatively impact Calyxt’s operating results. In the United States, the United States Department of Agriculture, or USDA, regulates, among other things, the introduction (including the importation, interstate movement, or release into the environment such as field testing) of organisms and products altered or produced through genetic engineering that are plant pests or that there is reason to believe are plant pests. Such organisms and products are considered “regulated articles.” However, a petitioner may submit a request for a determination by the USDA of “nonregulated status” for a particular article. A petition for determination of nonregulated status must include detailed information, including relevant experimental data and publications, and a description of the genotypic differences between the potentially regulated article and the nonmodified recipient organism, among other things. Calyxt previously submitted a request for a determination of “nonregulated status” to the USDA for its potato product candidates, its high oleic and low linolenic soybean product candidates, its improved quality alfalfa product candidate and its powdery mildew-resistant wheat product candidate. The USDA confirmed in writing that each of these product candidates is not deemed to be a “regulated article” under the Plant Protection Act because it does not contain genetic material from plant pests. In the event any of Calyxt’s product candidates are found to contain inserted genetic material or otherwise differ from the descriptions Calyxt has provided to the USDA, the USDA could determine that such agricultural product candidates are regulated articles, which would require Calyxt to comply with the permit and notification requirements of the Plant Protection Act. While we believe that the USDA’s reasoning will continue to extend to other Calyxt’s agricultural product candidates, we or Calyxt have not obtained a determination from the USDA that any of other Calyxt’s agricultural product candidates are not “regulated articles” under these regulations. USDA’s regulations also require that companies obtain a permit or file a notification before engaging in the introduction (including the importation, interstate movement, or release into the environment such as field testing) of “regulated articles.”

We cannot predict whether advocacy groups will challenge existing regulations and USDA determinations or whether the USDA will alter the manner in which it interprets its own regulations or institutes new regulations, or otherwise modifies regulations in a way that will subject Calyxt’s plant products to more burdensome standards, thereby substantially increasing the time and costs associated with developing Calyxt’s plant product candidates. Moreover, we cannot provide any assurance that the USDA will apply this same analysis to any of Calyxt’s other plant product candidates in development. Complying with USDA’s plant pest regulations, including permitting requirements, is a costly, time-consuming process and could substantially delay or prevent the commercialization of Calyxt’s plant products.

On December 20, 2018, the USDA announced the National Bioengineered Food Disclosure Standard (the “Standard”). The National Bioengineered Food Disclosure Law, passed by Congress in July 2016, directed USDA to establish this national mandatory standard for disclosing foods that may or may not be bioengineered. The implementation date is January 1, 2020 (January 1, 2021 for small food manufacturers), with mandatory compliance by January 1, 2022. The Standard requires food manufacturers, importers, and certain retailers to ensure bioengineered foods are appropriately disclosed. The impact of the standard remains to be seen; our preliminary analysis and understanding is that gene edited foods do not fall within the definition of bioengineered under the Standard.

Calyxt plant products may also be subject to extensive FDA food product regulations. Under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act, or FDCA, any substance that is reasonably expected to become a component of food

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added to food is a food additive, and is therefore subject to FDA premarket review and approval, unless the substance is generally recognized, among qualified experts, as having been adequately shown to be safe under the conditions of its intended use (generally recognized as safe, or GRAS), or unless the use of the substance is otherwise excluded from the definition of a food additive. Any food that contains an unsafe food additive is considered adulterated under section 402(a)(2)(C) of the FDCA. The FDA may classify some or all of Calyxt agricultural product candidates as containing a food additive that is not GRAS or otherwise determine that Calyxt plant products contain significant compositional differences from existing plant products that require further review. Such classification would cause these agricultural product candidates to require pre-market approval, which could delay the commercialization of these plant products. In addition, the FDA is currently evaluating its approach to the regulation of gene-edited plants. For example, on January 18, 2017, the FDA announced a Request for Comments, or RFC, seeking public input to help inform its regulatory approach to human and animal foods derived from plants produced using gene editing. Among other things, the RFC asks for data and information in response to questions about the safety of foods from gene-edited plants, such as whether categories of gene-edited plants present food safety risks different from other plants produced through traditional plant breeding. If the FDA enacts new regulations or policies with respect to gene-edited plants, such policies could result in additional compliance costs and/or delay the commercialization of Calyxt’s plant product candidates, which could negatively affect Calyxt’s profitability. Any delay in the regulatory consultation process, or a determination that Calyxt plant products do not meet regulatory requirements, by the FDA could cause a delay in the commercialization of Calyxt plant products, which may lead to reduced acceptance by food manufacturers, farmers or the public and an increase in competitor products that may directly compete with Calyxt’s products.

The regulatory environment outside the United States varies greatly from region to region and is less developed than in the United States.

The regulatory environment around gene editing in plants for food ingredients is greatly uncertain outside of the United States and varies greatly from jurisdiction to jurisdiction. Each jurisdiction may have its own regulatory framework regarding genetically modified foods, which may include restrictions and regulations on planting and growing genetically modified plants and in the consumption and labeling of genetically modified foods, and which may encapsulate Calyxt’s plant products. To the extent regulatory frameworks outside of the United States are not receptive to Calyxt’s gene-editing technologies, this may limit Calyxt’s ability to expand into other global markets.

The two leading jurisdictions, the United States and the European Union, or the EU, do, and may continue to in the future, have distinctly different regulatory regimes with different rules and requirements. We cannot predict how the global regulatory landscape regarding gene editing in plants for food ingredients will evolve and may incur increased regulatory costs as regulations in the jurisdictions in which Calyxt operates change.

In the European Union (the ‘‘EU’’), genetically modified organisms (“GMOs”) and genetically modified food and feed products can only be sold in the market once they have been properly authorized. The procedures for evaluation and authorization of GMOs and genetically modified food and feed products are established by Regulation (EC) 1829/2003 on genetically modified food and feed (‘‘Regulation (EC) 1829/2003’’) and Directive 2001/18/EC on the release of GMOs into the environment (‘‘Directive 2001/18/EC’’). An application for authorization must be submitted under Directive 2001/18/EC if a company seeks to release GMOs for experimental purposes (e.g., field tests) and/or to sell GMOs, as such or in products, in the market (e.g., cultivation, importation or processing). In turn, an application for authorization must be submitted under Regulation (EC) 1829/2003 if a company seeks to sell GMOs in the market for food and feed use and/or food and feed products containing or produced from GMOs. At the national level, EU member states have the ability to restrict or prohibit GMO cultivation in their territories by invoking grounds such as environmental or agricultural policy objectives, town and country-planning, land use, coexistence, socio-economic impacts or public policy.

In addition, Directive 2001/18/EC, Regulation (EC) 1829/2003 and Regulation (EC) 1830/2003 establish specific labeling and traceability requirements for GMOs and products that contain or are produced from GMOs. Finally, Directives 2002/53/EC and 2002/55/EC require genetically modified varieties to be authorized in accordance with Directive 2001/18/EC and/or Regulation (EC) 1829/2003, as applicable, before they can be included in a ‘‘Common Catalogue of Varieties,’’ which would permit the seeds of such genetically modified varieties to be marketed in the EU.

A recent ruling of the European Court of Justice (‘‘ECJ’’) in July 2018 concluded that organisms obtained by new mutagenesis plant breeding techniques involving the use of genetic engineering are GMOs and therefore fall, in principle, under Directive 2001/18/EC described above. The ECJ found further that varieties obtained by modern forms of mutagenesis are genetically modified varieties covered by Directive 2002/53/EC, and are therefore subject to the obligations of such directive. The ECJ clarified that only mutagenesis techniques which (a) have been used in a number of applications and (b) have a long safety record, can be exempted from these requirements, although EU member states remain free to subject even such exempted organisms to the obligations under Directive 2001/18/EC, or to other obligations.

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Complying with such EU rules, as strictly interpreted by the ECJ, including the pre-market risk assessment and product authorization requirements, is extremely costly and time-consuming, and has no guarantee of success and could therefore substantially delay or totally prevent the commercialization of Calyxt’s products in the EU should Calyxt wish to expand its sales there.

We cannot predict whether or when any jurisdiction will change its regulations with respect to Calyxt’s products. Advocacy groups have engaged in publicity campaigns and filed lawsuits in various countries against companies and regulatory authorities, seeking to halt regulatory approval or clearance activities or influence public opinion against genetically engineered and/or gene-edited products. In addition, governmental reaction to negative publicity concerning Calyxt’s products could result in greater regulation of genetic research and derivative products or regulatory costs that render Calyxt’s products cost prohibitive,

The scale of the commodity food industry may make it difficult to monitor and control the distribution of Calyxt’s products. As a result, Calyxt’s products may be sold inadvertently within jurisdictions where they are not approved for distribution. Such sales may lead to regulatory challenges or lawsuits against us, which could result in significant expenses and management attention.

Adverse outcomes in future legal proceedings could subject Calyxt to substantial damages, adversely affect Calyxt results of operations, harm our or Calyxt reputation and result in governmental actions.

We or Calyxt may become party to legal proceedings, including matters involving personnel and employment issues, personal injury, product liability, environmental matters, intellectual property disputes and other proceedings. We or Calyxt may be held liable if Calyxt traits do not perform as anticipated by Calyxt customers, or if any product that Calyxt develop or any product that uses Calyxt technologies or incorporates any of Calyxt traits causes injury or is found otherwise unsuitable during marketing, sale or consumption. Courts could levy substantial damages against us in connection with claims for injuries allegedly caused by use of Calyxt products.

The detection of unintended traits in Calyxt seeds could result in governmental actions such as mandated crop destruction, product recalls or environmental cleanup or monitoring. Concerns about seed quality could also lead to additional regulations being imposed on Calyxt business, such as regulations related to testing procedures, mandatory governmental reviews of biotechnology advances, or the integrity of the food supply chain from the farm to the finished product.

Depending on their nature, certain future legal proceedings could result in substantial damages or payment awards that exceed Calyxt’s insurance coverage. Calyxt will estimate its exposure to any future legal proceedings and establish provisions for the estimated liabilities where it is reasonably possible to estimate and where an adverse outcome is probable. Assessing and predicting the outcome of these matters will involve substantial uncertainties. Furthermore, even if the outcome is ultimately in Calyxt favor, Calyxt costs associated with such litigation may be material. Adverse outcomes in future legal proceedings or the costs and expenses associated therewith could damage our or Calyxt market reputation and have an adverse effect on our or Calyxt results of operations.

Government policies and regulations, particularly those affecting the agricultural sector and related industries, could adversely affect Calyxt operations and profitability.

Agricultural production and trade flows are subject to government policies and regulations. Governmental policies and approvals of technologies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies, incentives and import and export restrictions on agricultural commodities and commodity products can influence the planting of certain crops, the location and size of crop production, and the volume and types of imports and exports. Future government policies in the United States or in other countries may discourage food manufacturers or farmers from using Calyxt’s products or encourage the use of products more advantageous to Calyxt’s competitors, which would put Calyxt at a commercial disadvantage and could negatively impact Calyxt’s future revenues and results of operations.

Recent U.S. tax legislation could adversely affect Calyxt’s business and financial condition

On December 22, 2017, U.S. tax reform legislation known as the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act makes substantial changes to U.S. tax law, including a reduction in the corporate tax rate, a limitation on the use of new operating losses to offset future taxable income, the modification or repeal of certain business deductions and credits, and new rules designed to prevent erosion of the U.S. income tax base such as a new minimum tax, called the Base Erosion and Anti-abuse Tax, applicable to certain U.S. corporations that make certain payments to related foreign persons. We expect the Act to have significant effects on our U.S. subsidiaries, some of which may be adverse. The full extent of the impact remains uncertain at this time, and our current interpretations of, and assumptions regarding, the Act are subject to additional regulatory or administrative developments, including any regulations or other guidance promulgated by the U.S. Internal Revenue Service, or IRS, and other regulators. We can provide no assurance our current interpretations of, and assumptions regarding, the Act and any related regulations or guidance will not be reviewed or investigated by regulators in the future.

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The overall agricultural industry is susceptible to commodity price changes and Calyxt, along with Calyxt food manufacturing customers and farmer customers, are exposed to market risks from changes in commodity prices.

Changes in the prices of certain commodity products could result in higher overall cost along the agricultural supply chain, which may negatively affect Calyxt’s ability to commercialize Calyxt’s products. Calyxt will be susceptible to changes in costs in the agricultural industry as a result of factors beyond Calyxt control, such as general economic conditions, seasonal fluctuations, weather conditions, demand, food safety concerns, product recalls and government regulations. As a result, Calyxt may not be able to anticipate or react to changing costs by adjusting its practices, which could cause Calyxt operating results to deteriorate. Calyxt does not engage in hedging or speculative financial transactions nor does Calyxt hold or issue financial instruments for trading purposes.

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

The process of developing and commercializing product candidates is lengthy, risky and expensive. Calyxt expects its research and development expenses to increase substantially as it continues to develop its existing product candidates and to identify new product candidates for development As a result, Calyxt’s selling, general and administrative expense will also increase significantly.

In order to complete the development process, obtain, to the extent necessary, any regulatory approval for, and commercialize its products, Calyxt may require additional funding. Also, Calyxt’s operating plan, including its product development plans, may change as a result of many currently unknown factors, and Calyxt may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other strategic alliances and licensing arrangements, or a combination of these approaches. To commercialize its products, Calyxt will require significant working capital to operate its business and maintain its supply chain.

To the extent that Calyxt raises additional capital through the sale of additional equity or convertible securities, our ownership interest in Calyxt may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our rights, as a stockholder. Debt financing, if available, would result in increased fixed payment obligations and a portion of Calyxt’s 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. To the extent Calyxt raises additional funds through arrangements with research and development partners or otherwise, Calyxt may be required to relinquish some of its technologies, product candidates or revenue streams, license its technologies or product candidates on unfavorable terms, or otherwise agree to terms unfavorable to it. Any additional fundraising efforts may divert Calyxt’s management from their day-to-day activities, which may adversely affect Calyxt’s ability to develop and commercialize its product candidates.

In addition, there can be no guarantee that future financing will be available in sufficient amounts or on terms acceptable to Calyxt, if at all. If Calyxt is unable to obtain funding on a timely basis, it may be required to significantly curtail, delay or discontinue one or more of its research or product candidate development programs or the commercialization of any product candidate or be unable to expand its operations or otherwise capitalize on its business opportunities, as desired, which could materially affect its business, operating results and prospects.

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 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 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 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.

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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. 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 2019 to 2033, 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. 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.

Developments in patent law could have a negative impact on our business.

From time to time, the United States Supreme Court, or the Supreme Court, other federal courts, the United States Congress, the USPTO and similar foreign authorities may change the standards of patentability and any such changes could have a negative impact on our business.

The Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law in 2011, includes a number of significant changes to U.S. patent law. These changes include a transition from a “first-to-invent” system to a “first-to-file” system, changes to the way issued patents are challenged, and changes to the way patent applications are disputed during the examination process. As a result of these changes, the patent law in the United States may favor larger and more established companies that have greater resources to devote to patent application filing and prosecution. The USPTO has developed new and untested regulations and procedures to govern the full implementation of the America Invents Act, and many of the substantive changes to patent law associated with the America Invents Act, and, in particular, the first-to-file provisions became effective on

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March 16, 2013. Substantive changes to patent law associated with the America Invents Act may affect our ability to obtain patents, and if obtained, to enforce or defend them. Accordingly, it is not clear what, if any, impact the America Invents Act will have on the cost of prosecuting our or our licensors’ patent applications and our ability and that of our licensors to obtain patents and to enforce or defend any patents that may issue from such patent applications, all of which could have a material adverse effect on our business.

In addition, recent Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the Supreme Court, the United States Congress, the federal courts, the USPTO and similar foreign authorities, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future.

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. 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. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.

Because we rely on third parties for the advancement of our products platform, pre-clinical testing, quality control, clinical trials, and manufacturing activities, we must, at times, share trade secrets with them, and our collaborations with Servier and Allogene, and any collaborations we may enter into in the future, may also lead to share certain of our trade secrets with our collaborators.

We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, intellectual property assignment, collaborative research agreements, consulting agreements or other similar agreements with our employees, consultants, outside collaborators or sub-contractors sponsored researchers, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party’s relationship with us. These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may be breached or held unenforceable and may not effectively assign intellectual property rights to us.

In addition to contractual measures, 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 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 by others in a manner that could prevent legal recourse by us. 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.

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.

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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. In addition, 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. 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 strategic alliances. 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 strategic alliance. 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 alliance. 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.

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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 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.

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. If our development activities are found to infringe any such patents, we may have to pay significant damages or seek licenses to such patents. 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.

From time to time, we may hire scientific personnel or consultants formerly employed by other companies involved in one or more areas similar to the activities conducted by us. Either we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of prior affiliations. 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. We may not be able to afford the costs of litigation. 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. Any legal action against us or our collaborators could lead to:

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Any infringement, misappropriation or other violation by us of intellectual property rights of others may prevent or delay our product development efforts and may prevent or increase the costs of our successfully commercializing our product candidates, if approved.

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. We cannot assure that our business operations, products, product candidates and methods and the business operations, products, product candidates and methods of our collaborators do not or will not infringe, misappropriate or otherwise violate the patents or other intellectual property rights of third parties.

The biotechnology and biopharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that our products, product candidates or the use of our technologies infringe, misappropriate or otherwise violate patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. Any claim relating to intellectual property infringement that is successfully asserted against us may require us to pay substantial damages, including treble damages and attorneys’ fees if we or our collaborators are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties and other consideration going forward if we are forced to take a license. Such a license may not be available on commercially reasonable terms, or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same intellectual property rights or technologies licensed to us. In addition, if any such claim were successfully asserted against us and we could not obtain a license, we or our collaborators may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing our products, product candidates or other infringing technology, or those we develop with our collaborators.

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention pursuing these proceedings, which could have a material adverse effect on us. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign our products. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, intellectual property litigation or claims could force us to do one or more of the following:

Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition and prospects.

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 there. 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, e.g., opposition proceedings. 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

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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 that may require the use of intellectual property or proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use these intellectual property and proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently, and these rights may be held by others. We may be unable to acquire or in-license any third-party intellectual property or proprietary rights. Even if we are able to acquire or in-license such rights, we may be unable to do so on commercially reasonable terms. 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.

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 strategic alliance. 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.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license to us intellectual property and proprietary rights. We also may be unable to license or acquire third-party intellectual property and proprietary rights on terms that would allow us to make an appropriate return on our investment or at all. 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 program, product or product candidate, which could have a material adverse effect on our business.

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.

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Under each of the material exclusive licenses granted to us, the licensor controls the prosecution of patents covered by the license. Under our collaboration agreement with Allogene, we and Allogene each generally control the prosecution of our respective owned patents, and Allogene has the first right to elect to control the prosecution of certain jointly-developed intellectual property. Under our collaboration agreement with Servier, we and Servier each generally control the prosecution of our respective owned patents, and we generally control the prosecution of joint patents, unless Servier exercises its option under the agreement to obtain an exclusive license to further develop, manufacture and commercialize a product candidate, in which case Servier will control prosecution of the joint patents. In addition, Servier currently controls prosecution of those patent rights covering solely UCART19. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and is complicated by the rapid pace of scientific discovery in our industry. 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 Our Organization, Structure and Operation

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, 2018, we had 161 full-time employees (including Calyxt, Inc.) and we expect to increase our number of employees and the scope and location of our operations. To manage our anticipated development and expansion, including the development 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. Also, 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 development activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the development of our product candidates. If our management is unable to effectively manage our expected development and expansion, 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. 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 expansion of our company.

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; Dr. David Sourdive, our co-founder and Executive Vice President, Technical Operations; and Eric Dutang, our Chief Financial Officer. The loss of the services of these 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, technical, and sales and marketing executives and personnel. The failure to attract, integrate, motivate, and retain additional skilled and qualified personnel 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.

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In order to induce valuable employees to remain at Cellectis, we have provided over the last years 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.

Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us. The loss of the services of any of our key executive officers or other officers or senior employees within a short timeframe, and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations. We do maintain “key man” insurance policies on the lives of our co-founders. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel.

The requirements of being a U.S. public company require significant resources and management attention and affect our ability to attract and retain executive management and qualified board members.

As a U.S. public company, we incur significant legal, accounting, and other expenses. We are subject to the Exchange Act, including the reporting requirements thereunder, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Nasdaq listing requirements and other applicable securities rules and regulations. Compliance with these rules and regulations results in substantial legal and financial compliance costs and makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources. These costs and other impacts would increase if we ceased to qualify as a foreign private issuer, in which case we would be required to comply with the enhanced reporting and governance requirements applicable to U.S. domestic reporting companies.

In addition, our subsidiary Calyxt is a U.S. public company, and is also subject to the Exchange Act, including the reporting requirements thereunder, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Nasdaq listing requirements and other applicable securities rules and regulations. Having a U.S. public company subsidiary has impacted the disclosure of our financial information and has increased our legal and financial compliance costs.

Further, being a U.S. public company and a French public company has impacted the disclosure of information and required compliance with two sets of applicable rules. From time to time, this may result in uncertainty regarding compliance matters and has resulted in higher costs necessitated by legal analysis of dual legal regimes, ongoing revisions to disclosure and adherence to heightened governance practices. As a result of the enhanced disclosure requirements of the U.S. securities laws, business and financial information that we report is broadly disseminated and highly visible to investors, which we believe may increase the likelihood of threatened or actual litigation, including by competitors and other third parties, which could, even if unsuccessful, divert financial resources and the attention of our management from our operations.

We must maintain effective internal control over financial reporting, and if we are unable to do so, the accuracy and timeliness of our financial reporting may be adversely affected, which could have a material adverse effect on our business, investor confidence and market price.

We must maintain effective internal control over financial reporting in order to accurately and timely report our results of operations and financial condition. In addition, as a public company, the Sarbanes-Oxley Act of 2002, or 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. Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to furnish a report by our management on our internal control over financial reporting, and we are required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. The rules governing the standards that must be met for our management to assess our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act are complex and require significant documentation, testing and possible remediation. These stringent standards require that our audit and finance committee be advised and regularly updated on management’s review of internal control over financial reporting.

Our compliance with applicable provisions of Section 404 requires that we incur substantial accounting expense and expend significant management attention and time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements.

If we fail to staff our accounting and finance function adequately or maintain internal control over financial reporting adequate to meet the requirements of the Sarbanes-Oxley Act, our business and reputation may be harmed. Moreover, if we are not able to comply with the applicable requirements of Section 404 in a timely manner, we may be subject to sanctions or

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investigations by regulatory authorities, including the SEC and Nasdaq. Furthermore, if we are unable to conclude that our internal control over financial reporting is effective or if our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC, Nasdaq or other regulatory authorities. Failure to implement or maintain effective internal control systems required of public companies could also restrict our access to the capital markets. The occurrence of any of the foregoing would also require additional financial and management resources.

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, for example, 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, for smaller companies such as ours). The Research tax credit receivables as of December 31, 2018 include the accrual for a French research tax credit related to 2017 for $8.0 million and to 2018 for $7.8 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 has initiated an audit related to the 2014, 2015, 2016 and 2017 French research tax credits. We do not believe that a provision should be recorded at this stage of this audit. As a result of such audit, the reimbursement of the French research tax credit related to 2017 is currently pending. The French tax authorities may challenge our eligibility to, or our calculation of certain tax reductions and/or deductions in respect of our research and development activities and, should the French tax authorities be successful, we may be liable for additional corporate income tax, and penalties and interest related thereto, or we may not obtain the refunds for which we have applied, which could have a significant impact on our results of operations and future cash flows. 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, 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.

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 the 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.

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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.

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, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we do not believe that we have experienced any such 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 significant damages including without limitation in a material disruption of our programs. 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.

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

The European Regulation 2016/679, known as the General Data Protection Regulation (GDPR), as well as EU Member State implementing legislations, apply to the collection and processing of personal data, including health-related information, by companies located in the EU and processing personal information of individuals located in 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 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 to countries outside of the European Economic Area (EEA). The GDPR has 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. 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.

We may acquire businesses or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.

Our current strategy does not involve plans to acquire companies or technologies facilitating or enabling us to access to new medicines, new technologies, new research projects, or new geographical areas, or enabling us to express synergies with our existing operations. However, if such acquisitions were to become necessary or attractive in the future, we may not be able to identify appropriate targets or make acquisitions under satisfactory conditions, in particular, satisfactory price conditions. In addition, we may be unable to obtain the financing for these acquisitions under favorable conditions, and could be led to finance these acquisitions using cash that could be allocated to other purposes in the context of existing operations. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction, which could have a material adverse effect on our business, financial conditions, earnings and prospects.

Risks Related to Ownership of Our Ordinary Shares and ADSs

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 2018 taxable year. However, we cannot assure you that we will not be classified as a PFIC for 2019 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 2018 taxable year. 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 2019 or future taxable years due to changes in the

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composition of our assets or income, as well as changes to our market capitalization. The market value of our assets may be determined in large part by reference to the market price of our stock, 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.

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. The trading price of our ADSs depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance.

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 $15.34 and as high as $50.00 through March 11, 2019. The market price of the ADSs may fluctuate significant in response to numerous factors, many of which are beyond our control, including:

These and other market and industry factors may cause the market price and demand for our ADSs to 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. In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.

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

Our executive officers, directors, current 5% or greater shareholders and affiliated entities beneficially own approximately 35.96% of our ordinary shares outstanding (including those underlying our ADSs) as of December 31, 2018. As a result, these shareholders, acting together, 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.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price of our ADSs and trading volume could decline.

The trading market for our ADSs depends in part on the research and reports that securities or industry analysts publish about us or our business. If few or no securities or industry analysts cover us, the trading price for our ADSs would be negatively impacted. If one or more of the analysts who covers us downgrades our ADSs or publishes incorrect or unfavorable research about our business, the price of our ADSs would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, or downgrades our ADSs, could also cause the price of our ADSs or trading volume to decline.

We do not currently intend to pay dividends on our securities. In addition, French law may limit the amount of dividends we are able to distribute.

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. 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 standards 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.

In addition, exchange rate fluctuations may affect the amount of euros that we are able to distribute, and the amount in U.S. dollars that our shareholders receive upon the payment of cash dividends or other distributions we declare and pay in euros, if any. These factors could harm the value of our equity securities, and, in turn, the U.S. dollar proceeds that holders receive from the sale of ADSs.

Future sales of ordinary shares or ADSs by existing shareholders could depress the market price of the ADSs.

We believe that additional capital may be needed in the future to continue our planned operations, including conducting our planned clinical trials, manufacturing and commercialization efforts, expanded research and development activities and costs associated with operating as a public company.

Moreover, as of February 28, 2019, approximately 8,597,614 of our outstanding ordinary shares (excluding those underlying ADSs) are held by directors, executive officers and other affiliates and continue to be subject to resale limitations under Rule 144 under the Securities Act. If our existing shareholders sell, or indicate an intent to sell, substantial amounts of ordinary shares or ADSs in the public market, the trading price of our ordinary shares and/or ADSs could decline significantly. In addition, the sale of these securities could impair our ability to raise capital through the sale of additional securities.

Risks Relating to Investing in a Foreign Private Issuer or French Company

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

Provisions contained in our By-laws and the corporate laws of France, the country in which we are incorporated, 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

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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:

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

As an ADS holder, you are not treated as one of our shareholders and you do not have ordinary shareholder rights. French law governs shareholder rights. The depositary, Citibank, N.A., is the holder of the ordinary shares underlying your ADSs. As a holder of ADSs, you have ADS holder rights. The deposit agreement among us, the depositary and you, 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 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 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.

According to French law, if we issue additional shares or securities for cash giving right, immediately or in the future, to new shares, current shareholders will have preferential subscription rights for these securities proportionally to their shareholding in our company 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, under the deposit agreement 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. In addition, if the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case holders of our ADSs will receive no value for these rights.

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

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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.

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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 corporate governance standards. However, Nasdaq’s rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in France, which is our home country, may differ significantly from 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, home country practice in France 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.

While we currently qualify as a foreign private issuer, the determination of foreign private issuer status is made annually on the last business day of our most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2019.

In the future, we would lose our foreign private issuer status if we to fail to meet the requirements necessary to maintain our foreign private issuer status as of the relevant determination date. For example, if more than 50% of our securities are held by U.S. residents and more than 50% of our executive officers or members of our board of directors are residents or citizens of the United States, we could lose our foreign private issuer status.

The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic public company would be significantly more than costs we currently incur as a foreign private issuer. If we lost our foreign private issuer status, we would be required to file periodic reports on Form 10-Q and current reports on Form 8-K, to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. We would be required under current SEC rules to prepare our financial statements in accordance with U.S. GAAP, rather than IFRS, in U.S. dollars rather than euros. Such conversion of our financial statements to U.S. GAAP would involve significant time and cost. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements of the Nasdaq that are available to foreign private issuers, such as the ones described above, and we would be required to modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers. Moreover, we would lose our ability to rely upon exemptions from procedural requirements related to the solicitation of proxies.

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 and those of our subsidiaries, are non-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 or to enforce judgments obtained in U.S. courts against them 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.

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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 corporation in the corporation’s interest if it fails to bring such legal action itself. If so, any damages awarded by the court are paid to the corporation 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.

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

Our collaboration agreement with Servier provides that if any third party begins to control us, directly or indirectly, by any means, or in the event that we engage in a change of control transaction, including, but not limited to, the sale of 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 collaboration agreement, then Servier has the right to buy-out our interest in the pre-candidate products, product candidates, and products as described under the collaboration agreement. We refer to this right to acquire such interest as the buy-out. In the event we fail to agree with Servier on the amount of payment for our interest in the pre-candidate products, product candidates or products within twenty days following Servier’s provision of a buy-out notice, then the buy-out payment would be determined by-third party valuators.

The buy-out 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 buy-out, it would gain exclusive development and marketing rights to the pre-candidate products, product candidates and products developed under the collaboration agreement. Were this to happen, our successor would not receive milestone payments or royalty payments on net sales of any of the products sold to Servier in connection with the buy-out. These provisions could have the effect of delaying or preventing a change in control transaction involving Cellectis, or could reduce the number of companies interested in acquiring us.

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.”

The acquisition of intangible assets, property, plant and equipment for the years ended December 31, 2016, 2017 and 2018 together amounted to $14.6 million, $2.6 million and $4.9 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 Calyxt’s and Cellectis’ sites and the first investments to start 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 2019 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.

On January 21, 2015, we signed a lease for an administrative and research facility in New York, New York to enhance our presence in the United States. This facility, which includes large state-of-the-art research laboratories, opened on April 8, 2015, and essentially supports our innovation activities. In March 2016, we entered into a lease for a 26,928 square-foot space in Montvale, New Jersey, which we intend to discontinue before its scheduled expiration in September 2026.

In March 2016, Calyxt acquired 10-acres in 2 parcels in Roseville, Minnesota, and a headhouse and a greenhouse were built and they have been in operations since September 2016. In the third quarter of 2017, Calyxt entered into a sale and lease-back agreement related to these land and buildings. See Item 4D for further information.

In March 2019, we entered into a lease agreement for a 82,000 square foot commercial-scale manufacturing facility, called the IMPACT site, which stands for “Innovative Manufacturing Plant for Allogeneic Cellular Therapies”. The IMPACT facility is located in Raleigh, North Carolina. The new manufacturing facility is being designed to provide GMP manufacturing for clinical supply and commercial product upon potential regulatory approval. The facility is planned to be operational by 2021.

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

We are a clinical stage biotechnological company, employing our core proprietary technologies to develop best-in-class products in the field of immuno-oncology. Our 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 cryopreserved, 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. In addition to our focus on immuno-oncology, we are exploring the use of our gene-editing technologies in other therapeutic applications, as well as to develop healthier food products for a growing population.

Cancer is the second-leading cause of death in the United States and accounts for approximately 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, as well as 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:

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Although some autologous approaches to CAR T-cell have recently 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 almost 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 developing product candidates internally and through strategic alliances with Allogene Therapeutics, Inc. (“Allogene”) and Les Laboratoires Servier (“Servier”). We believe that our alliances with Allogene and Servier have validated our technology platform, our strong expertise in the allogeneic CAR T-cells field and the strength of our intellectual property portfolio. Our strategic alliances include potential milestone payments to us of up to $3.9 billion and royalties on future sales.

Under the Allogene License Agreement (see below), Allogene has exclusive rights to pursue development and commercialization of products for a total of fifteen targets of their choice, which have been selected, including BCMA (ALLO-715), FLT3 (ALLO-819), CD70, and DLL3.

In 2016, Servier commenced two Phase I clinical studies for UCART19, one in adult Acute Lymphoblastic Leukemia (ALL), the CALM study, and one in pediatric ALL, the PALL study. The CALM study is commenced in the United Kingdom, the United States, and France, and the PALL study is commenced in the United Kingdom, Belgium and France. We refer in this Annual Report to the CALM and the PALL studies, collectively, as the UCART19 Clinical Studies. In November 2015, when we exclusively licensed the rights to UCART19 to Servier, Servier also announced that it had granted Pfizer (subsequently transferred to Allogene) the exclusive rights for the development and the commercialization of UCART19 in the United States. Consequently, Servier’s CALM study in the United States is conducted in collaboration with Allogene. In December 2018, Servier presented pooled intermediate results from the UCART19 Clinical Studies during the American Society for Hematology (ASH) annual conference. After UCART19 infusion, 82% (14/17) of patients who received a lymphodepletion regimen (consisting of fludarabine, cyclophosphamide and alemtuzumab, an anti-CD52 monoclonal antibody) achieved a complete remission, or “CR”, or complete remission with incomplete blood cell recovery (or “Cri”) by day 28 or day 42 after infusion. Within responder patients, 71% (10/14) of them were ‘minimum residual disease’ (MRD) negative (MRD- stands for less than 1 leukemic cell among 10E4 normal cells) assessed by flow or qPCR. When considering all treated patients, 67% (14/21) of them did achieve CR/CRi. Regarding safety considerations, there was no serious adverse events (grade ³ 3) for graft versus host disease (GvHD) and neurological events. Grade 3-4 toxicities did only regard events of cytokine release syndrome (14%, 3/21), prolonged cytopenia (29%, 6/21) and viral infections (24%, 5/21). In January 2019, Allogene announced, in collaboration with Servier, that the Food and Drug Administration (FDA) approved the Investigational New Drug (IND) for Phase 1 clinical study for ALLO-501, corresponding to UCART19 which we exclusively licensed to Servier and which was sublicensed to Allogene by Servier in US, in relapsed/refractory Non-Hodgkin Lymphoma (NHL, the “ALPHA Study”).

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With respect to UCART123, we obtained the unanimous approval of the National Institute of Health’s Recombinant DNA Advisory Committee (RAC) on December 14, 2016 to start two proposed studies in the United States. In December 2016, we submitted an IND application for UCART123 with respect to two proposed Phase I studies to be conducted, one in Acute Myeloid Leukemia (AML) and one in Blastic Plasmacytoid Dendritic Cell Neoplasm (BPDCN). In February 2017, the FDA approved the IND and the first patients were enrolled during 2017. Due to a death in the BPDCN study, the FDA placed a clinical hold on both trials in September 2017 which was lifted by the FDA in November 2017, based on revised protocols. The Phase I clinical study in AML is performed by Weill Cornell and MD Anderson Cancer Center, and the Phase I clinical study in BPDCN is performed by MD Anderson Cancer Center. We refer in this Annual Report to the AML and the BPDCN studies, collectively, as the UCART123 Clinical Studies.

With respect to UCART22, in April 2018, we submitted an IND application with respect to a proposed Phase I study to be conducted in ALL. In May 2018, the FDA approved the IND, and we expect to enroll the first patient in this study in 2019. We refer in this Annual Report to this study as the UCART22 Clinical Study.

With respect to UCARTCS1, on December 28, 2018, we submitted an IND application with respect to a proposed Phase I study to be conducted in Multiple Myeloma (MM). On January 25, 2019, the FDA approved the IND, and the trial is expected to start in 2019. We refer in this Annual Report to this study as the UCARTCS1 Clinical Study.

Additionally, we are pursuing proprietary pre-clinical programs (for other UCART product candidates, including in solid tumors). Our objective is to file, directly or indirectly, one IND application (or foreign equivalent) per year from our maturing product candidate portfolio.

Until July 2017, we fully owned Calyxt, Inc. Calyxt is focused on using TALEN gene editing technology to provide healthier food ingredients to consumers. As of December 31, 2018, Cellectis owns approximately 69.5% of Calyxt’s common stock. In connection with Calyxt’s initial public offering, we and Calyxt entered into certain agreements that related to our relationship with Calyxt prior to the IPO or that provide a framework for our ongoing relationship with Calyxt.

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 for any patient with a particular cancer type. 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, NHL, MM and other types of cancers.

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In December 2016, we filed an IND for our lead product candidate, UCART123 in AML and in BPDCN, and in February 2017, we received FDA approval to initiate UCART123 clinical studies. With respect to UCART22, in April 2018, we submitted an IND application with respect to a proposed Phase I study to be conducted in ALL, and in May 2018, the FDA approved the IND. Although we have not yet commenced the UCART22 clinical study, the trial is expected to start in 2019. On December 28, 2018, we submitted an IND application with respect to a proposed Phase I study to be conducted for UCARTCS1 in MM. On January 25, 2019, the FDA approved the IND, and the trial is expected to start in 2019. All of our other product candidates are currently in the pre-clinical phase, and the following chart highlights our key product candidates:

Targeted Indications

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 1.7 per 100000 individuals per year, with approximately 5960 new cases and 1,470 deaths estimated in 2018. The median age at diagnosis for ALL is 15 years with 55.4% of patients diagnosed at younger than 20 years of age. In contrast, 28% of cases are diagnosed at 45 years or older and only 12.3% 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.

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

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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 4.3 per 100000 individuals per year, with approximately 19,520 new cases and 10,670 deaths estimated in 2018. 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 16.2% 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. 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.

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 6.7 per 100000, resulting in over 30770 new patients in the United States in 2018. The median age at onset is 69 years, and only 3.3% 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.

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 2018, there were 74680 estimated new cases with 19910 estimated deaths. In 2015, there were an estimated 686042 people living with NHL in the United States. 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).

Blastic Plasmacytoid Dendritic Cell Neoplasm (BPDCN)

BPDCN is a rare and aggressive hematological neoplasm classified among AML in the 2008 World Health Organization (WHO) classification of hematologic malignancies, and reclassified under myeloid neoplasms, acute leukemia in the 2016 WHO classification. BPDCN is a rare myeloid disease characterized by the clonal proliferation of precursors of plasmacytoid dendritic cells. There are no formal studies on the incidence of BPDCN in the general population. The few available data reported indicate that its overall incidence is extremely low, accounting for 0.44% of all hematologic malignancies and 0.7% of cutaneous lymphomas. Moreover, the leukemic form of disease is a rare phenomenon, representing fewer than 1% of cases of acute leukemia. The disease may occur at any age, but most patients are elderly men who present with skin lesions and/or involved lymph nodes, spleen, and bone marrow. Given its rarity and only recent recognition as a distinct clinico-pathological entity, no standardized therapeutic approach has been established for BPDCN and the optimal therapy remains to be defined. Although transient responses are seen to combination chemotherapy regimens used to treat acute leukemia or lymphoma, most patients relapse with drug-resistant disease with a median OS rate of 9 to 13 months, irrespective of the initial presentation of the disease.

UCART19 for ALL

UCART19 is an allogeneic, off-the-shelf product candidate designed to exhibit high efficacy in fighting hematological malignancies bearing the B-lymphocyte antigen CD19. In November 2015, Servier acquired the exclusive rights to UCART19 from Cellectis. Servier and Allogene collaborate on a joint clinical development program for UCART19, and Allogene has the exclusive rights from Servier to develop and commercialize UCART19 in the United States.

Product Features

UCART19 is an allogeneic T-cell product intended for the treatment of CD19-expressing hematologic malignancies such as ALL.

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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.

UCART19 cells bear a CAR targeting the CD19 antigen that drives their capacity to kill CD19-bearing cells. Moreover, as 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.

UCART19 activation could potentially lead to eradication of CD19-expressing cancer cells through T-cell mediated killing of such cancer cells and potentially pro-inflammatory immune system production as well as CAR T-cell amplification.

Clinical Findings

In December 2018, Servier presented pooled intermediate results from the UCART19 Clinical Studies during the ASH annual conference. After UCART19 infusion, 82% (14/17) of patients who received a lymphodepletion regimen (consisting of fludarabine, cyclophosphamide and alemtuzumab, an anti-CD52 monoclonal antibody) achieved a complete remission (CR) or complete remission with incomplete blood cell recovery (CRi) by day 28 or day 42. Within responder patients, 71% (10/14) of them were ‘minimum residual disease’ (MRD) negative (MRD- stands for less than 1 leukemic cell among 10E4 normal cells) assessed by flow or qPCR. When considering all treated patients (lymphodepleted or not), 67% (14/21) of them did achieve CR/CRi. Regarding safety considerations, there was no serious adverse events (grade ³ 3) for graft versus host disease (GvHD) and neurological events. Grade 3-4 toxicities did only regard events of cytokine release syndrome (14%, 3/21), prolonged cytopenia (29%, 6/21) and viral infections (24%, 5/21). We are encouraged by these promising preliminary results reported for the UCART19 Clinical Studies.

Development Status

In 2016, Servier commenced the UCART19 Clinical Studies—a Phase I clinical study in pediatric ALL, the PALL study, and a Phase I clinical study in adult patients with ALL, the CALM study, each of which was approved by the MHRA.

The PALL Study is commenced in the United Kingdom at UCL Great Ormond Hospital (London), in Belgium at Het Kinderziekenhuis Prinses Elisabeth (Gent), in France at Hôpital Robert-Debré (Paris) and in United States at the Children’s Hospital of Philadelphia (Pennsylvania).

The CALM Study is commenced in the United Kingdom at King’s College Hospital NHS Foundation Trust (London), in United States at the Hospital of the University of Pennsylvania (Philadelphia, Pennsylvania), at University of Texas MD Anderson Cancer Center (Houston, Texas) and at the Massachusetts General Hospital (Boston, Massachusetts), in France at Hôpital Saint-Antoine (Paris) and Hopital Saint-Louis.

UCART19, or ALLO-501, for NHL

ALLO-501 (or UCART19 corresponding to the product candidate which we exclusively licensed to Servier and which was 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. ALLO-501 is a product candidate under the license agreement between Servier and Cellectis.

Development Status

On January 28, 2019, Allogene announced, in collaboration with Servier, that the FDA approved the IND for Phase 1 clinical study for ALLO-501 in relapsed/refractory NHL (the “ALPHA Study”).

UCART123 for AML and BPDCN

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 and BPDCN.

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Product Features

UCART123 is an allogeneic T-cell product candidate intended for the treatment of CD123-expressing hematologic malignancies.

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. New versions of UCART123 produced during the fourth quarter of 2018 have, in addition of the suppression of the TCR µ gene, the suppression of the CD52 gene in order to eventually induce resistance to alemtuzumab preconditioning. This product might get into the clinic during the year 2019.

Pre-clinical Findings

UCART123 has been evaluated both in vitro and in animal studies, with promising results.

In vitro studies demonstrated efficient killing of human CD123-bearing cell lines by UCART123. In addition, UCART123 has also demonstrated efficient killing of human CD123-expressing cells derived from AML and BPDCN patients. Animal studies were conducted in mice injected both with UCART123 and human CD123-bearing tumor cells, and have shown anti-tumor activity in an immunodeficient mouse model. In addition, in another animal model, limited toxicity against normal, healthy cells, has been observed.

UCART123 was also tested for its potential to induce GvHD. Mice receiving unmodified T-cells from a human donor showed GvHD, while mice receiving the UCART123 cells that lack the TCR showed no sign of GvHD. Pre-clinical and translational activities on UCART123 in AML and BPDCN were performed in collaboration with Weill Cornell and MD Anderson Cancer Center, respectively.

Development Status

On December 14, 2016, Cellectis received unanimous approval from the RAC for two proposed Phase I protocols for UCART123. In February 2017, the FDA granted Cellectis an IND approval to conduct a Phase I clinical study with UCART123 in AML and BPDCN. The initial patients were enrolled during 2017, at Weill Cornell Medical College for AML and at MD Anderson Cancer Center for BPDCN. Due to a death in the BPDCN study, both trials were put on hold in September 2017 but then cleared to resume by the FDA, in November 2017, based on revised protocols.

On September 14, 2018, Cellectis received approval from the MHRA in the United Kingdom for a proposed Phase I protocol for UCART123 in first-line adverse genetic risk AML.

UCART22 for ALL

UCART22 is an allogeneic engineered T-cell product candidate designed for the treatment of 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, some UCART22 cells lack CD52, a protein expressed on the cell surface that makes T-cells sensitive to alemtuzumab, a drug often used to treat CLL patients. This feature should allow for improved engraftment of the cells in conjunction with a potential alemtuzumab treatment.

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.

Pre-clinical findings

UCART22 has been evaluated both in vitro and in animal studies, with promising results.

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In vitro studies demonstrated efficient killing of human CD22-bearing cell lines by UCART22. In addition, UCART22 has also demonstrated efficient killing of human CD22-expressing cells derived from ALL patients. Animal studies were conducted in mice injected both with UCART22 and human CD22-bearing tumor cells, and have shown anti-tumor activity in an immunodeficient mouse model. Further in vitro and in vivo studies are ongoing to further investigate the safety and the activity of UCART22.

Pre-clinical and translational activities on UCART22 in ALL are performed in collaboration with MD Anderson Cancer Center.

Development Status

In April 2018, we filed an IND and in May 2018, the FDA granted Cellectis an IND approval to conduct a Phase I clinical study with UCART22 in ALL. Manufacturing of clinical-grade UCART22 at large scale in accordance with GMP is still ongoing and should be completed in 2019.

UCARTCS1 for MM

UCARTCS1 is an allogeneic engineered T-cell product candidate designed for the treatment of CS1-expressing hematologic malignancies which is being developed in MM.

Product Features

UCARTCS1 is an allogeneic T-cell drug candidate intended for the treatment of CS1 (also known as SLAMF7)-expressing hematologic malignancies, in particular MM. UCARTCS1 is designed to become active, proliferate, secrete cytokines and kill CS1 expressing cells. As CS1 is strongly expressed on the cell surface of CD8 T-cells but also mildly expressed on CD4 cells, B cells, NK cells and macrophages, CS1 will be inactivated in UCART cells prior to transduction with a viral vector encoding an anti-CS1 CAR. The inactivation of the CS1 gene may improve the production and activity of UCARTCS1 by preserving the balance between CD8 and CD4 T-cell population. In addition, as with all UCART products, UCARTCS1 lacks the TCR and is intended to be used in an allogeneic context. We believe that UCARTCS1 might have a potential lymphodepleting activity by attacking the immune cells of the patient expressing CS1.

As compared to other targets frequently addressed by CAR-T candidates in MM, such as BCMA, CS1 expression has been observed to be higher and more uniform. In certain mouse models, CS1 CAR-T therapy is showing deeper response than what is seen with BCMA CAR-T therapy.

Pre-clinical Findings

In vitro studies demonstrated efficient killing of human CS1-bearing cell lines by UCARTCS1. In addition, UCARTCS1 has also demonstrated efficient killing of human CS1-expressing cells derived from MM patients. Furthermore, while non-gene-edited T-cells expressing an anti-CS1 CAR display limited cytolytic activity in vitro against MM cell lines and result in a progressive loss of CD8 T-cells, CS1-gene-edited CAR cells (UCARTCS1) display significantly increased cytotoxic activity, with the percentage of CD8 T-cells remaining unaffected. Experiments in an orthotopic MM mouse model showed that UCARTCS1 was able to mediate an in vivo anti-tumoral activity. Further in vitro and in vivo studies are ongoing to further investigate the safety and the activity of UCARTCS1.

Pre-clinical and translational activities for UCARTCS1 in MM are performed in collaboration with the MD Anderson Cancer Center.

Development Status

During the second half of 2018, a first set of batches of the manufacturing campaign of UCARTCS1 have been manufactured at CELLforCURE, our third-party manufacturing contractor.

On December 28, 2018, Cellectis filed an IND, which was approved by the FDA on January 25, 2019 by the FDA, in order to conduct a Phase I clinical study with UCARTCS1 in MM.

UCARTCLL1 for AML

UCARTCLL1 is an allogeneic engineered T-cell product candidate designed for the treatment of AML.

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Product Features

UCARTCLL1 is an allogeneic T-cell drug candidate intended for the treatment of CLL1 (also known as CLEC12A)-expressing hematologic malignancies, in particular AML. UCARTCLL1 is designed to become active, proliferate, secrete cytokines and kill CLL1 expressing cells. In addition, as with all UCART products, UCARTCLL1 lacks the TCR and is intended to be used in an allogeneic context. In our UCARTCLL1 product, the ß2-microglobulin (ß2M) gene will also be inactivated, which is expected to result in better CAR-T persistence (see section on “Next-generation products” above). Furthermore, while we are using lentiviral (LV) vectors to express the CAR in all our current UCART products, UCARTCLL1 will benefit from targeted insertion of the CAR at the TCR locus through an adeno-associated viral (AAV) vector. This is expected to result in targeted integration of our CAR gene in the T-cell and more predictable expression profile of the CAR gene, which will be under endogenous regulatory elements.

UCART programs for solid tumors

We are currently applying our UCART platform to develop CAR-T candidates targeting solid tumors, currently in preclinical phase.

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 academics centers. We aim to enter the clinic with one or more gene editing programs beyond UCARTs in the near future.

Our Strategic Alliances

In addition to the development of our own portfolio of product candidates targeting tumor-associated antigens, we have pursued a strategy of forging strong pharmaceutical alliances.

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 Pfizer’s €25.8 million equity investment in our company. On April 3, 2018, Pfizer and Allogene Therapeutics, Inc. (“Allogene”), a new company started by former Kite Pharma executives Dr. Arie Belldegrun and Dr. David Chang, 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”). 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.

During the ASH annual conference in December 2018, Allogene presented data related to ALLO-715 and ALLO-819, which are product candidates directed at two of the fifteen targets (BCMA and FLT3 respectively) that are exclusively licensed to Allogene from Cellectis. ALLO-715 is an allogeneic BCMA CAR-T therapy for the treatment of Multiple Myeloma and ALLO-819 is an allogeneic FLT3 CAR-T therapy for the treatment of AML. Each of ALLO-715 and ALLO-819 is designed to possess an off-switch for safety. Allogene holds the exclusive development and commercial rights for these product candidates.

On March 7, 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 products directed at certain 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

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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 of up to $185.0 million, with aggregate potential development and sales milestone payments totaling up to $2.8 billion. Allogene expects to pay us $5.0 million upon the dosing of the first patient in its Phase 1 clinical trial of ALLO-715. 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, until 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. At any time after the first anniversary of the effective date of the agreement, Allogene will have 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 (as amended, 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 I clinical trial of candidate products directed against five targets, including the UCART19 product candidate. Pursuant to the Prior Servier Agreement, we granted Servier options to obtain exclusive, worldwide licenses, each on a product candidate-by-product candidate basis, with respect to each product candidate selected by Servier and developed under the Prior Servier Agreement.

On March 6, 2019, we and Servier entered into a License, Development and Commercialization Agreement (the “Servier License Agreement”). The Servier License Agreement supersedes the Prior Servier Agreement to establish the terms of our continuing collaboration and to reflect the status of products in development. Among other things, the Servier License Agreement updates the targets covered by the Prior Servier Agreement. Servier exercised such option with respect to the UCART19 and continues to have an exclusive license to this product candidate.

Pursuant to the Servier License Agreement, upon Servier’s exercise of each license option, Servier will pay us a lump sum license fee, and we will grant Servier an exclusive, worldwide, royalty-bearing license, with right to sublicense, under certain of our patents and know-how covering the relevant product candidate. This license will cover the development, manufacture and commercialization of such product in the field of anti-tumor adoptive immunotherapy. At such time, Servier will assume responsibility for the further clinical development, manufacture and commercialization of such product.

The Servier License Agreement restricts us from researching, developing, or commercializing any product directed against a target that is used for the same purpose as it is used with a product candidate developed under the agreement.

We are eligible to receive aggregate payments from Servier of up to $1,064 million pursuant to the Servier License Agreement, comprising payments upon the exercise of options granted to Servier under the agreement and payments upon the occurrence of certain specified milestones (development and commercial in nature), as well as reimbursement for development costs.

We are also eligible to receive tiered royalties ranging in the high single-digit percentages based on annual net sales of commercialized products.

The agreement will expire upon the expiration of the last sale of products licensed pursuant to the agreement. The parties also may terminate the agreement at any time by mutual consent. 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. 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.

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In the event that Servier does not exercise its option to license a product candidate, we may independently pursue all activities related to such product candidate and/or license such product candidate and the associated intellectual property to a third party. For such purpose, Servier granted us a non-exclusive license, with right to sublicense, under any such Servier-controlled intellectual property for which we will pay tiered royalties on annual net revenues at rates ranging in the low single-digit percentages.

Collaboration with research and clinical centers

Alliance with The University of Texas M.D. Anderson Cancer Center

On September 1, 2015, Cellectis and the University of Texas MD Anderson Cancer Center (the MD Anderson Cancer Center) entered into a research and development alliance (the Strategic Alliance Agreement) aimed at bringing novel cellular immunotherapies to patients suffering from different types of liquid tumors, particularly MM, ALL, T-cell ALL (T-ALL) and BPDCN. Under this strategic alliance, the MD Anderson Cancer Center and Cellectis have agreed to collaboratively conduct several pre-clinical studies on candidate products: UCART123 in BPDCN, UCARTCS1 for multiple myeloma, UCART38 for T-ALL and UCART22 for ALL. Cellectis has agreed to provide funding and other support for these studies. The objective of the studies is to build on complementary expertise from the MD Anderson Cancer Center and Cellectis for the development of the product candidates. The MD Anderson Cancer Center and Cellectis will work together to develop and implement improvements to the research plan for the programs under joint direction of the MD Anderson Cancer Center and Cellectis’ investigators. The objective of the studies is to demonstrate the functionalities and specificity of the UCART candidate products listed above, define the pre-clinical package required for clinical trial applications, prepare a clinical trial protocol and the regulatory documents required for interactions with FDA and the clinical trial applications. Pursuant to the alliance, Cellectis is responsible for generation and manufacturing of the UCART candidate products and some of the in vitro and in vivo pre-clinical work. The MD Anderson Cancer Center is responsible for evaluation of the candidate products against primary patient samples and for some activities to be performed in animal models. The alliance also includes the possibility for Cellectis and the MD Anderson Cancer Center to collaborate on one or more early phase clinical studies on the same product candidates.

Pursuant to the Strategic Alliance Agreement, we entered in March 2017 into a study order with MD Anderson Cancer Center, according to which MD Anderson Cancer Center performs the UCART123 clinical study for BPDCN.

In January 2018, we entered into a new study order with MD Anderson Cancer Center in order to expand the performance of the UCART123 clinical study in AML to MD Anderson Cancer Center.

In May 2018, we entered into a new study order with MD Anderson Cancer Center according to which MD Anderson Cancer Center performs the UCART22 clinical study for ALL.

Research Collaboration Agreement with Cornell University, for and on behalf of its Joan & Standford I. Weill Medical College

On February 20, 2019, Cellectis and Cornell University, for and on behalf of its Joan & Standford I. Weill Medical College, entered into a Research Collaboration agreement. Under this Research Collaboration Agreement, Cornell University performs pre-clinical evaluation regarding certain of our product candidates in pre-clinical development.

Clinical collaborations with Weill Cornell, Dana Farber Cancer Institute and H. Lee Moffitt Cancer Center

In April 2017, we entered into a clinical trial agreement with Cornell University acting for and on behalf of its Joan and Sanford I. Weill Medical College and The New York Presbyterian Hospital (collectively referred to as Weill Cornell) under which Weill Cornell performs the UCART123 clinical study for AML.

In August 2018, we entered into a new clinical study agreement with Dana Farber Cancer Institute and H. Lee Moffitt Cancer Center in order to expand the performance of the UCART123 clinical study in AML to Dana Farber Cancer Institute and H. Lee Moffitt Cancer Center.

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 lead 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

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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. Abnormal or foreign proteins (viruses, for example) can attach to HLAs and be presented at the cell’s surface and 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. 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

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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. In particular, two autologous CAR-T cell therapies targeting the antigen CD19 have been approved in 2017:

Based on these and other advancements, immuno-oncology has become a new frontier for treatment, and we believe it is one of the most promising areas of development within oncology.

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

The most fundamental challenge of genome engineering is the need to specifically and efficiently target a precise DNA sequence within a complex genome. Our founder, Chairman 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.

We are currently developing an allogeneic CAR T-cell therapy approach based on our technology platform that combines CARs, TALEN and PulseAgile, our electroporation technology, to address the opportunities for improvement discussed above. Our approach aims to deliver an off-the-shelf product with the following benefits:

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 (repeat variable di-residues or RVDs) that each individually recognize a single base pair, and that are assembled to collectively recognize a DNA sequence. The specificity of this RVD single base pair recognition is mediated by two of the amino-acids in the RVD (NN, NI, NG, or HD), the RVDs that directly interact with the base of the DNA.

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We believe the key benefits of TALEN technology are:

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 its target DNA sequence, the DNA cleaving-domain of the TALEN induces 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

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discovered a new class of nuclease that we named BurrH nucleases, also based on arrays of single DNA-base recognizing modular domains. Recently, we announced the issuance of two US CRISPR (clustered regularly interspaced short palindromic repeats) patents, covering certain uses of RNA-guided endonucleases, such as Cas9 or Cpf1, for the genetic engineering of T-cells.

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 it is 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:

Step 1: Gene Editing to add Genes, such as a CAR

In the first round, 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. In particular, we use targeted integration. 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 add suicide 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.

Step 2: Gene Editing to Inactivate Genes, such as the TCR µ and CD52

In the second round, 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 to attack them. For this reason, all of our UCART product candidates undergo the inactivation of a gene coding for TCR µ , a key component of the natural antigen receptor of T-cells, to suppress their alloreactivity. 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 TCR µ 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.

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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 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, 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 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:

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

The allogenic 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. As evidenced above, the inactivation of the TRAC gene reduces the risk of graft vs. host disease, and the lymphodepletion regimen of the patients aims at supporting early engraftment of the candidate product.

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

We developed several ß2M-specific TALEN allowing high efficiency of gene inactivation in combination with TRAC TALEN (up to 88% double knock-out). We have shown on human cells and on mouse cells that ß2M inactivation improves allogenic cell survival in the presence of alloreactive T-cells, and we are pursuing the ß2M inactivation approach for our preclinical candidate UCARTCLL1.

Our engineered T-cell could also be made insensitive to inhibition signals, which diminishes 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-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 complete remission in previously untreatable diseases such relapse/refractory ALL, not all patients respond, and even among those that respond, a fraction end up relapsing. There is therefore a need to investigate strategies to make CAR T-cells even more effective, such as boosting their activity by 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 in vitro antitumor activity.

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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.

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.

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.

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On October 28, 2015, we announced that we completed a series of three production runs of UCART19 confirming the transfer of Cellectis’ manufacturing process into clinical grade, GMP conditions. This important milestone showed that UCARTs can be manufactured in GMP conditions and demonstrated the industrial production of UCART19, as well as the capacity of Cellectis’ pipeline of UCART product candidates to be manufactured for clinical investigations. On November 15, 2016, we announced that we completed a series of production runs of UCART123 at CELLforCURE, our CMO, to support the UCART123 Clinical Trials for which we filed an IND, the FDA approval of which was announced on February 6, 2017. In November 2017, we started a series of production runs of UCART22 at CELLforCURE, to support the UCART22 Clinical Trial. In November 2018, we started a series of production runs of UCARTCS1 at CELLforCURE to support the UCARTCS1 Clinical Trial, and started a new campaign of UCART123 in November 2018 at CELLforCURE

On July 27, 2017, we announced the signature of a capacity production agreement with MolMed, a biopharmaceutical company based in Milan, Italy that has Contract Manufacturing Operations facilities for the production of GMP grade CAR T-cells. At the end of 2018, we completed the technology transfer to MolMed for the production of UCART123, and it is our intention to start production of UCART products at MolMed in 2019.

In June 2018, CELLforCURE informed us that GMP grade batches of dimethyl-sulfoxide (DMSO) and Dulbecco’s phosphate-buffered saline (dPBS) used during manufacturing of UCART123 and UCART22 contained particles, and that some batches of final product had been produced using this DMSO and dPBS batches. We informed the FDA and voluntarily decided not to use the batches that could potentially contain particles until receiving clearance from the FDA. Subsequently, CELLforCURE informed us that the water for injection (WFI) they had used during manufacturing contained glass particles and that some batches of UCART123 and UCART22 had been manufactured with this WFI. We informed the FDA and voluntarily decided not to use the batches that could potentially contain glass particles until receiving clearance from the FDA. We have been, since then, working with the FDA to assess the risk-benefit profile of vials produced during these campaigns. The batches of UCARTCS1 and UCART123 that were made during the fourth quarter of 2018 did not use these DMSO, dPBS and WFI batches and were successfully manufactured.

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

Towards manufacturing autonomy: building two state-of-the-art plants

In order to achieve manufacturing autonomy, we have started the construction of two manufacturing facilities, dedicated to starting materials for clinical supply and clinical & commercial UCART products, respectively.

SMART (Starting MAterial Realization for CAR-T products) will be a ~14,000 sq. ft. in-house manufacturing in Paris, France. SMART will be dedicated to the production of certain raw material for clinical supply, with the potential to supply commercial starting material. We expect this manufacturing facility to be operational in 2020.

IMPACT (Innovative Manufacturing Plant for Allogeneic Cellular Therapies) will be a ~80,000 sq. ft. facility located in the U.S. East Coast. IMPACT will be dedicated to the production of clinical and commercial UCART products. We expect this manufacturing facility to be operational in 2021.

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 raw and starting materials through service agreements and do not systematically have long-term supply contracts in place. However, we believe that

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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 SMART facility project, we expect to become independent for the supply of the most critical raw and starting materials.

Applications of Our Technology in Agriculture

Calyxt was incorporated in the State of Delaware in the United States in 2010. Calyxt is a healthy food ingredient company.

Before its initial public offering, which closed on July 25, 2017, Calyxt was a wholly-owned subsidiary of ours. As of December 31, 2018, we owned approximately 69.5% of Calyxt’s outstanding common stock. Calyxt’s common stock is listed on the Nasdaq market under the ticker symbol “CLXT”.

Calyxt leverages proprietary intellectual property, technical expertise and an end-to-end supply chain toward its mission of “Making the Food You Love a Healthier Choice ^TM ”. Calyxt’s first product is a High Oleic Soybean designed to produce a healthier oil that has increased heat stability with zero trans fats per serving. Calyxt received its first order for its High Oleic Soybean Oil in the first quarter of 2019. Among its other product candidates are other soybean products and a high fiber wheat.

Using Calyxt’s proprietary technologies and expertise, including TALEN gene-editing technology exclusively licensed to Calyxt in the field of agriculture, Calyxt precise cuts to DNA in a single plant cell using the plant’s natural repair machinery. This allows Calyxt to make our desired genome edit and regenerate the single cell into a full plant that includes this gene edit.

Market and Industry Overview

Consumers have developed an increasingly heightened awareness of the role that dietary habits play in long-term wellness. This trend is especially prevalent in wealthier, developed nations where consumers have greater access to information that is helping to shift their consumption habits. In the United States and other developed nations buying habits have been creating dynamic shifts in the grocery aisle. Consumers now view food as a key to good health. More food products are being launched that go beyond basic nutrition to support health, digestive health, and higher energy levels. Locally sourced foods with a direct-to-consumer model are becoming more attractive and the demand for transparency in food sourcing, production and labeling is gaining traction. Calyxt believes that as consumers continue the shift from a traditional production-driven food culture to a modern demand-driven food culture, they will continue to demand more information and accountability about how ingredients are sourced and processed, how “real” their food products are, and how responsive they are to consumers’ desire for choice and customization.

Regulatory agencies are also playing a larger role in monitoring which food ingredients reach consumers. Beginning in 2018, the FDA banned certain uses of partially hydrogenated oils, the primary artificial source of trans fat in processed foods. Following the passage of the Healthy, Hunger-Free Kids Act of 2010, the USDA gained significant oversight of the federal school lunch program and holds the authority to set new, healthier standards for food sold in U.S. schools. These healthier food mandates include minimum serving requirements for fiber, fruits and vegetables and maximum allowable content standards for fat, sugar and sodium. Consumers’ rising demand for healthier food presents an opportunity for us to provide our innovative solutions for customers and consumers and the food industry.

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TALEN Technology in Agricultural Biotechnology

Calyxt’s gene-editing platform relies on Calyxt’s capacity to custom design DNA-sequence specific cutting enzymes, or nucleases, for any chosen gene it intends to edit and its capability to introduce such custom-made nucleases into the living plant cells it wants to edit. Calyxt’s platform also 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.

Calyxt’s proprietary technologies and intellectual property portfolio enable Calyxt to edit the plant genome by knocking out genes or making precise gene edits. Calyxt takes advantage of its knowledge about plant gene function to produce novel genetic variation that results in traits of value. A key difference between Calyxt’s gene-edited products and products created through genetic modification (GMO) is that GMOs insert foreign DNA into crops and Calyxt’s gene-editing does not. For each of Calyxt’s product candidates that it submitted to the U.S. Department of Agriculture (USDA), the USDA confirmed that the product candidates are not regulated articles. This determination decreased Calyxt’s costs and increased speed to market.

Using Calyxt’s proprietary technologies and expertise, including TALEN gene-editing technology exclusively licensed to Calyxt in the field of agriculture, Calyxt develops food crops with targeted traits quickly and more cost effectively than traditional methods. We believe that Calyxt is able to identify a consumer need and develop a product from “concept to fork” in cycles as short as six years by utilizing these proprietary technologies.

Calyxt Agricultural Biotechnology Products

Calyxt’s product pipeline includes a variety of traits for soybeans, wheat, and alfalfa, and Calyxt intends to conduct further development programs to build upon our current pipeline. In the future, Calyxt may expand our product pipeline to include other food crops. Calyxt’s initial focus is on its High Oleic Soybean and High Fiber Wheat product candidates. Calyxt received its first order for its High Oleic Soybean product candidate in the first quarter of 2019.

High Oleic Soybean

Soybean oil has historically been partially hydrogenated to enhance its oxidative stability in order to increase shelf life and improve frying characteristics. This process, however, creates trans-unsaturated fatty acids, or trans fats, which have been demonstrated to raise low-density lipoprotein (LDL) cholesterol levels and lower high-density lipoprotein (HDL) cholesterol levels. High LDL and low HDL have been tied to increased risk for cardiovascular disease. The discovery that dietary trans fats increase the risk of several adverse health issues led the FDA to rule in 2003 that manufacturers be required to include trans-fat content information on the “Nutrition Facts” label of foods. In 2015, the FDA took a further step and banned the use of partially hydrogenated oils, the primary dietary source of artificial trans-fat in processed foods, by all food manufacturers beginning in 2018.

Monounsaturated fats, such as oleic acid, have been linked to reducing LDL cholesterol and triglycerides and raising HDL cholesterols. Diets rich in monounsaturated acids are associated with lower fat mass and decreased blood pressure. High levels of oleic acids can be found in olive, canola, sunflower and safflower oils.

Calyxt developed a soybean trait that has produced oils with a fatty acid profile that contains 80% oleic acid, 20% less saturated fatty acids compared to commodity soybean oil and zero grams of trans fats per serving.

Oil produced from Calyxt’s High Oleic Soybean has multiple desirable characteristics as an ingredient for the food industry. The high level of oleic acid in Calyxt’s soybean oil enhances oxidative stability more than fivefold when compared to commodity oil. This eliminates the need for partial hydrogenation, and thus little to no trans fats are produced during oil production. Furthermore, Calyxt’s High Oleic Soybean Oil offers additional potential benefits, including reduced saturated fats, a threefold increase in fry-life, and reduced polymerization upon frying at high temperatures. Soybean oil is also neutral in flavor, odorless and colorless, and is therefore desired as a food ingredient because it has limited impact on the sensory characteristics of the final food product.

Calyxt’s High Oleic Soybean was developed using TALEN gene-editing technology. Calyxt designed a TALEN to specifically target two fatty acid desaturase genes (designated FAD2-1A and FAD2-1B). These genes convert oleic acid (a mono-unsaturated fatty acid) to linolenic acid (a polyunsaturated fat). By specifically inactivating both the FAD2-1A and FAD2-1B genes, oleic acid accumulates in the seed—increasing from about 20% to 80%. By key measures, including yield, Calyxt’s High Oleic Soybean variety performs comparably to its unedited conventional (non-GMO) counterpart.

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In mid-2015, Calyxt received a letter from the USDA indicating that Calyxt’s High Oleic Soybean Oil is not a regulated article under the Plant Protection Act. In November 2015, Calyxt announced the completion of the second year of multi-location field trials in Minnesota and South Dakota. The agronomic and yield performance of Calyxt’s High Oleic Soybean is on par with the non-GMO variety used to develop this product.

Soybeans are a crop that is photoperiod sensitive, meaning the crop is sensitive to the length of the day. Plant breeders have developed soybean varieties that are adapted to distinct latitudes and agroclimatic conditions—which are referred to as maturity groups. Different growing regions in the United States require different maturity groups. For example, the northern United States requires soybeans in the 1.5- 2.2 maturity group ranges, with farmers typically planting a few varieties within this range to diversify their risk.

Calyxt has in-licensed over thirty non-genetically modified soybean varieties with commercial rights. Calyxt initially introduced Calyxt’s High Oleic Soybean in the northern United States on one variety within a particular maturity group range. Over time, Calyxt intends to expand to additional varieties for farmers in the same region to provide farmers with the ability to diversify their risk. Calyxt expects to continue this expansion over time by adding regions in other maturity groups and varieties. Over the next five to ten years Calyxt envisions expanding its germplasm portfolio to early, middle and late maturity groups. Calyxt believes this strategy will enable it to expand its supply chain through additional crushing plants within target growing regions and at the same time lower potential premiums and production costs as it introduces into the supply chain additional varieties that meet the diversity of seed variety that farmers need to mitigate their risk.

Calyxt plans to focus its efforts on farmers in the upper Midwest. Calyxt currently has growers in South Dakota and Minnesota and will be launching new soybean varieties in 2020 and 2021 that will enable it to expand to other growing locations. The High Oleic Soybean seed is sold either directly or through distributors to farmers. Calyxt believes that it can generate a successful supply chain by contracting with fewer than 2,000 farmers.

In 2018 Calyxt contracted more than 17,000 acres with nearly 80 growers in South Dakota and Minnesota to grow this High Oleic Soybean. The harvest of these High Oleic Soybean acres has been completed and Calyxt has taken delivery of a portion of the harvested crop. Calyxt has contracted with third parties to crush and refine Calyxt’s High Oleic Soybean on a commercial scale, enabling sales of High Oleic Soybean Oil and High Oleic Soybean Meal to customers. Calyxt has commercialized its High Oleic Soybean product candidate in the first quarter of 2019.

High Fiber Wheat

Fiber is the indigestible portion of food that is essential for healthy digestion. Research has shown that fiber may play a large role in maintaining bowel health, lowering cholesterol, stabilizing blood glucose levels and controlling weight gain. A high fiber diet has the potential to lower the rate of glucose entry into circulation, thus decreasing the risk of food-related chronic diseases, such as coronary artery disease and diabetes. The average American adult consumes approximately 15-18 grams of fiber daily, only half of the amount recommended by the U.S. Department of Health’s dietary guidelines based on the average caloric intake. In recent years, the awareness of the health benefits of high fiber diets has increased. This has translated to a strong growth in demand for high fiber food products, with approximately 35% of grocery shoppers now seeking high fiber foods.

Calyxt is developing its High Fiber Wheat product candidate that could be used to produce white flour with up to three times more dietary fiber than standard white flour while maintaining the same flavor and convenience of use. By altering the proportion of certain slower digested carbohydrates in the wheat grain, Calyxt has developed a product candidate that it believes will exhibit increased dietary fiber. This would allow consumers to reach their daily value of fiber without changing their existing food preferences.

Calyxt believes its High Fiber Wheat flour will be able to be incorporated into many food products—from pasta to bread. Whereas a single serving of whole wheat flour can provide 49% of an individual’s daily fiber needs, a single serving of Calyxt’s High Fiber Wheat flour may provide up to 100% of the recommended daily requirement thereby allowing food manufacturers to make high fiber products sought after by many consumers.

This product candidate is currently in Phase II of Calyxt’s development process and is expected to be commercialized as early as 2022. In March 2018 Calyxt received confirmation from USDA that its High Fiber Wheat is deemed non-regulated pursuant to APHIS’s regulatory procedures. In October 2018 Calyxt successfully harvested High Fiber Wheat in field trials. In the next year, Calyxt intends to further confirm the product concept in field conditions and to complete food application studies.

In addition to Calyxt’s High Fiber Wheat product candidate, the company is also developing other consumer traits in our wheat pipeline, including a reduced gluten product candidate.

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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.

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.

Since 2002, we have filed a large number of patent applications, many now 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 six 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 60 new patent applications 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 (for example, compact TALEN, methylation TALEN) and alternatives to the TALEN structure (BurrH, CRISPR-Cas9). On December 2018, an anonymous third-party filed an opposition to two European patents of the patent family entitled “A Method for producing precise DNA cleavage using CAS9 – Double nickase”.

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 gene RQR8, and uses thereof.

Current Intellectual Property Portfolio

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

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The most relevant issued patents in our portfolio consist of approximately 33 Cellectis-owned and 18 in-licensed U.S. patents, 32 Cellectis-owned and 4 in-licensed European patents, and 47 Cellectis-owned and 13 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 88 Cellectis-owned and 4 in-licensed U.S. patent applications, 68 Cellectis-owned and 2 in-licensed European patent applications, 412 Cellectis-owned and 28 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 146 owned and in-licensed granted patents, and 596 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:

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

Similarly, our most advanced agricultural product candidates each rely upon one or more patent rights relating to:

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 2019 to 2035. If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2023 to 2035. 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.