Note 3 — Revenue

The Company had three revenue-generating contracts with customers in the years ended December 31, 2022 and 2021: a collaboration and license agreement with GSK, a collaboration agreement with Astellas and a strategic collaboration and license agreement with Genentech.

Revenue comprises the following categories (in thousands):

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Deferred revenue decreased by $15,010,000 from $199,422,000 at December 31, 2021 to $184,412,000 at December 31, 2022 primarily due to a $20,601,000 decrease caused by the change in the exchange rate between pounds sterling and the U.S. dollar from £1.00 to $1.35 at December 31, 2021 to £1.00 to $1.21 at December 31, 2022 and due to $17,648,000 of revenue recognized during the period. This was offset by a $20,000,000 additional payment received

under the Genentech Collaboration and License Agreement in December 2022.

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Deferred revenue increased by $147,330,000 from $52,092,000 at January 1, 2021 to $199,422,000 at December 31, 2021 due to a $4,200,000 milestone payment received under the GSK Collaboration and License Agreement in June 2021 and the upfront payment of $150,000,000 received under the Genentech Collaboration and License Agreement in October 2021. This was offset by $1,498,000 of revenue recognized during the period.

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The aggregate amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the agreements as of December 31, 2022, was $340,713,000.

The Genentech Collaboration and License Agreement

On September 3, 2021, the Company entered into a Strategic Collaboration and License Agreement with Genentech, Inc. and F. Hoffman-La Roche Ltd, which became effective on October 19, 2021 upon expiry or termination of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

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Under the Agreement, Genentech and Adaptimmune (each, a “party” and together, the “parties”) will collaborate to develop two types of allogeneic T-cell therapies: (i) “off-the-shelf” αβ T-cell therapies directed to initial collaboration targets, with Genentech having the right to designate additional collaboration targets, up to five collaboration targets in total, and (ii) personalized therapies utilizing αβ T-cell receptors (TCRs) isolated from a patient, with such therapies being administered to the same patient.

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The parties will collaborate to perform a research program, initially during an eight year period (which may be extended for up to two additional two year terms at Genentech’s election upon payment of an extension fee for each two-year term), to develop the cell therapies, following which Genentech will determine whether to further develop and commercialize such therapies. Under the Agreement, Adaptimmune exclusively licenses Genentech certain intellectual property rights it controls to enable Genentech to research, develop, manufacture and commercialize (i) “off-the-shelf” T-cell therapies directed to the collaboration targets and (ii) personalized T-cell therapies developed within the scope of the Agreement, and Genentech is solely responsible for the clinical development and commercialization of any cell therapies arising from the collaboration. Adaptimmune will manufacture and supply cell therapies for Phase 1 trials of “off-the-shelf” T-cell therapies unless Genentech decides to assume responsibility for such manufacturing.

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Under the Agreement, Adaptimmune is also subject to certain restrictions on its ability to further develop and commercialize certain cell therapies. In particular restrictions apply in relation to its ability to develop cell therapy products to nominated targets and to develop competing personalized cell therapies. This restriction does not prevent Adaptimmune from developing cell therapies to other targets or cell therapies containing different types of receptors.

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Under the terms of the Agreement, Adaptimmune will receive $150 million as an upfront payment, which was received in the fourth quarter of 2021. Adaptimmune may also receive:

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In addition, Adaptimmune will receive tiered royalties on net sales in the mid-single to low-double digits. Collaboration target designation fees apply if Genentech exercises its right to designate additional “off-the-shelf” collaboration targets up to a maximum of 5 targets.

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Adaptimmune also has a right to opt-in to receive a profit share and to co-promote “off-the-shelf” T-cell therapies. If Adaptimmune elects to opt in, then Adaptimmune will be eligible to share 50 percent of profits and losses from U.S. sales on such products and to receive up to $800 million in ex-U.S. regulatory and sales-based milestone payments, as well as royalties on ex-U.S. net sales.

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The payments to the Company under the contract are typically due upon achievement of milestones, when rights are exercised by Genentech or on achievement of specific events for the additional payments, and within standard payment terms. The contract does not include a significant financing component.

The parties can terminate the Agreement in the event of material breach or insolvency of the other party. Genentech is entitled to terminate the Agreement in its entirety, on a product-by-product basis or collaboration target by collaboration target basis on provision of 180 days notice. Either party may terminate the Agreement on written notice in the event that the US Federal Trade Commission or US Department of Justice seeks a preliminary injunction under applicable antitrust laws against the parties or where HSR clearance has not occurred within 180 days of the effective date of the Agreement. The Agreement became effective on October 19, 2021 upon expiry of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

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The Company has assessed the agreement under the provisions of ASC 606, Revenue from Contracts with Customers and ASC 808, Collaborative Arrangements. The Company determined that Genentech is a customer and has applied the provisions of ASC 606 to the contract and related performance obligations. The Company identified the following performance obligations under the agreement: (i) research services and rights granted under the licenses for each of the initial ‘off-the-shelf’ collaboration targets, (ii) research services and rights granted under the licenses for the personalized therapies, (iii) material rights relating to the option to designate each of the additional ‘off-the-shelf’ collaboration targets and (iv) material rights relating to the two options to extend the research term. The Company began recognizing revenue for the performance obligations relating to the initial ‘off-the-shelf’ collaboration targets and the personalized therapies in 2021.

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The aggregate transaction price at inception of the agreement was $313.6 million comprising the $150 million upfront payment, $150 million of additional payments and $13.6 million of other consideration. The fees for extension of the research program, additional collaboration target designation fees, and future research, development and commercialization milestones are not considered probable as of December 31, 2022 and have not been included in the transaction price. The Company may also receive sales milestones and royalties for future sales of the therapies. These

amounts have not been included within the transaction price as of December 31, 2022 because they are sales-based and would be recognized when the subsequent sales occur.

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The aggregate transaction price is allocated to the performance obligations depending on the relative standalone selling price of the performance obligations. In determining the best estimate of the relative standalone selling price, the Company considered internal pricing objectives it used in negotiating the contract, together with internal data regarding the cost and margin of providing research services and market data from comparable arrangements.

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The amount of the transaction price allocated to the performance obligation is recognized as or when the Company satisfies the performance obligation. The Company expects to satisfy the performance obligations relating to the initial ‘off-the-shelf’ collaboration targets and the personalized therapies as development progresses and recognizes revenue based on an estimate of the percentage of completion of the project determined based on the costs incurred on the project as a percentage of the total expected costs. The Company considers that this depicts the progress of the project, where the significant inputs would be internal project resources and third-party costs. The Company expects to satisfy the performance obligations relating to the material rights to designate additional ‘off-the-shelf’ collaboration targets from the point that the options are exercised and then as development progresses, in line with the initial ‘off-the-shelf’ collaboration targets, or at the point in time that the rights expire. The Company expects to satisfy the performance obligations relating to the material rights to extend the research term from the point that the options are exercised and then over period of the extension, or at the point in time that the rights expire.

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The amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the agreement as of December 31, 2022 was $283,206,000, of which $174,125,000 is allocated to the research services and rights granted for the initial ‘off-the-shelf’ collaboration targets, $90,169,000 is allocated to the research services and rights granted for the personalized therapies, $12,766,000 is allocated to the material rights to designate the additional ‘off-the-shelf’ collaboration targets, $4,917,000 is allocated to the material right for the first option to extend the research term and $1,229,000 is allocated to the material right for the option to extend the research term a second time.

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The Astellas Collaboration Agreement

On January 13, 2020, the Company entered into the Astellas Collaboration Agreement. The Company received $50,000,000 as a non-refundable upfront payment in January 2020 after entering into the agreement. Under the agreement the parties will agree on up to three targets and will co-develop T-cell therapies directed to those targets pursuant to an agreed research plan. For each target, Astellas will fund co-development up until completion of a Phase 1 trial for products directed to such target.

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Upon successful completion of the Phase 1 trial for a product, Astellas and Adaptimmune will elect whether to progress with co-development and co-commercialization of such product, or to allow the other party to pursue the candidate independently. If the parties progress with co-development and co-commercialization of a product, then each party will grant the other party a co-exclusive license to co-develop and co-commercialize such product in the field of T-cell therapy. If a product is developed solely by one party, then the other party will grant to the continuing party an exclusive license to develop and commercialize such product in the field of T-cell therapy.

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In June 2020, the parties nominated the target for the first collaboration program and the Company commenced development of this target under the agreement and began recognizing revenue for this performance obligation. In July 2021, the parties nominated the target for the second collaboration program and the Company commenced development of this target under the agreement and began recognizing revenue for this performance obligation.

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In addition, Astellas was also granted the right to develop, independently of Adaptimmune, allogeneic T-cell therapy candidates directed to two targets selected by Astellas. Astellas will have sole rights to develop and commercialize products resulting from these two targets.

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Under the terms of the agreement, Adaptimmune could be entitled to receive up to $847,500,000 in further payments, including:

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In addition, Adaptimmune is entitled to receive research funding of up to $7,500,000 per year on a per collaboration target basis, which is payable on a quarterly basis within standard payment terms (typically 30 days), and tiered royalties on net sales in the mid-single to mid-teen digits.

To the extent that Astellas and Adaptimmune co-develop and co-commercialize any product, the parties would share equally all worldwide costs and profits.

Either party can terminate the agreement in the event of material breach or insolvency of the other party. Astellas can terminate the Agreement for convenience in its entirety or partly in relation to any targets and products directed to such targets. Adaptimmune can terminate the Agreement for convenience in relation to any target it is unilaterally developing and to products directed to such target.

The payments to the Company under the contract are typically billed as the development services are performed or are due on achievement of milestones and within standard payment terms (typically 30 days for development services and 20 days for milestone achievement). Management has determined that the contract does not include a significant financing component because (i) the timing of initiation of the programs, the right to obtain the services and the right to terminate the contract resides with Astellas and (ii) a substantial amount of the consideration promised by the customer is variable, and the amount or timing of that consideration varies on the basis of the occurrence or nonoccurrence of a future event that is not substantially within the control of the customer or the Company.

The Company has assessed the agreement under the provisions of ASC 606, Revenue from Contracts with Customers and ASC 808, Collaborative Arrangements. The Company determined that Astellas is a customer and has applied the provisions of ASC 606 to the contract and related performance obligations. The Company identified the following performance obligations under the agreement: (i) research services and rights granted under the co-exclusive license for each of the three co-development targets and (ii) the rights granted for each of the two independent Astellas targets.

The aggregate transaction price at inception of the agreement was the $50,000,000 upfront payment. Future development milestones are not considered probable as of December 31, 2022 and have not been included in the transaction price. Reimbursement of the research funding over the co-development period (up until completion of a Phase 1 trial for products directed to such target) is variable consideration and included in the transaction price as of December 31, 2022 to the extent that a significant reversal of revenue is not probable. The Company may also receive sales milestones upon the achievement of specified levels of annual net sales by Astellas under an independent Astellas program. These amounts have not been included within the transaction price as of December 31, 2022 because they are sales-based and would be recognized when the subsequent sales occur.

The aggregate transaction price is allocated to the performance obligations depending on the relative standalone selling price of the performance obligations. In determining the best estimate of the relative standalone selling price, the Company considered internal pricing objectives it used in negotiating the contract, together with internal data regarding the cost and margin of providing research services and adjusted-market data from comparable arrangements. The variable consideration is allocated to the performance obligation to which it relates.

The amount of the transaction price allocated to the performance obligation is recognized as or when the Company satisfies the performance obligation. The Company expects to satisfy the performance obligations relating to the three co-development targets as development progresses and recognizes revenue based on an estimate of the percentage of completion of the project determined based on the costs incurred on the project as a percentage of the total expected costs. The Company considers that this depicts the progress of the project, where the significant inputs would be internal project resources and third-party costs. The revenue allocated to the research services will be recognized as development of products directed to the target progresses up until completion of a Phase 1 trial.

The Company has determined that the performance obligations relating to the two independent Astellas targets would be recognized at a point-in-time, upon commencement of the licenses in the event of nomination of the target, since they are right-to-use licenses.

The amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the agreement as of December 31, 2022 was $57,509,000, of which $13,474,000 is allocated to the rights granted for each of the two independent Astellas targets, $10,071,000 is allocated to research services and rights granted under the co-exclusive license for the first co-development target, $13,985,000 is allocated to research services and rights granted under the co-exclusive license for the second co-development target and $6,505,000 is allocated to research services and rights under the co-exclusive license for the third co-development targets.

The parties mutually agreed to terminate the agreement as of March 6, 2023, see Note 16 for further information. As the termination was only triggered and effective after December 31, 2022, there was no impact on revenue recognized in relation to the agreement in the year ended December 31, 2022.

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The GSK Collaboration and License Agreement

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The GSK Collaboration and License Agreement consisted of multiple performance obligations, including the transition of the NY-ESO SPEAR T-cell program to GSK, the development of a second and third target, and an exclusive license (the “NY-ESO License”) to research, develop, and commercialize the Company’s NY-ESO SPEAR T-cell therapy program.

In 2017, GSK exercised its option to obtain the NY-ESO License and in July 2018, the IND for the NY-ESO SPEAR T-cell program transferred to GSK.

In 2017, GSK nominated a second target program which was completed in 2018.

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In 2019, GSK nominated its third target under the Collaboration and License Agreement and the Company received $3,200,000 following the nomination of the target. The development of products to the third target is a separate performance obligation. Revenue allocated to this performance obligation is recognized as the development progresses.

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Under the terms of the GSK Collaboration and License Agreement, the Company was also entitled to development milestones. The development and regulatory milestones were per product milestones and were dependent on achievement of certain obligations, the nature of the product being developed, stage of development of product, territory in which an obligation was achieved and type of indication or indications in relation to which the product was being developed. In June 2021 the Company received a $4,200,000 milestone payment following achievement of a development milestone for the third target under the GSK Collaboration and License Agreement.

The Company would have also received commercialization milestones upon the first commercial sale of a product based on the indication and the territory and mid-single to low double-digit royalties on worldwide net sales. No revenue relating to royalties was recognized relating to the GSK Collaboration and License Agreement because they were sales or usage-based royalties promised in exchange for a license of intellectual property, which were to be recognized when the subsequent sale or usage occurs, and no such sales or usage occurred prior to termination.

The payments to the Company under the contract are typically due upon achievement of milestones and within standard payment terms (approximating to 45 days). The contract does not include a significant financing component.

The amount of the transaction price allocated to the performance obligation was recognized as or when the Company satisfied the performance obligation. The Company satisfied the performance obligations relating to the development of each target over time and recognized revenue based on an estimate of the percentage of completion of the project determined based on the costs incurred on the project as a percentage of the total expected costs. The Company considers that this depicted the progress of the project, where the significant inputs are internal project resource and third-party clinical and manufacturing costs.

The collaboration was terminated by GSK in October 2022 and we are in discussions with GSK in relation to the transition of the NY-ESO and PRAME programs under the collaboration agreement to Adaptimmune. A further amendment to the collaboration agreement was entered into on December 19, 2022 for the deletion of certain provisions relating to GSK’s post termination manufacturing and supply obligations and payment of £5,000,000 by GSK to Adaptimmune. The amendment also meant that no further milestone payments or royalties were due from GSK to the Company.

The Company accounted for the termination of the agreement and December 19, 2022 amendment agreement as a single combined contract modification. No performance obligations were identified as a result of the modification as there were no further goods or services to be provided by the Company and the modification resulted in the remaining partially satisfied performance obligation under the collaboration relating to the third target becoming fully satisfied. As discussions were still ongoing, and no formal agreement had been reached, as of December 31, 2022 regarding the potential transfer of the NY-ESO cell therapy program to Adaptimmune this was not accounted for in the year ended December 31, 2022. GSK continues to be responsible for the execution and costs of ongoing clinical trials. This matter will be assessed in future periods if and when an agreement is reached.

The aggregate transaction price of the contract modification was $6,500,000 comprised of the £5,000,000 ($6,100,000) payment and the remaining deferred income under the collaboration that had not been recognized as revenue as of the date of the modification of $400,000. No non-cash consideration was identified and as the contract modification removed the Company’s entitlement to future milestone payments and royalties, no variable consideration was identified.

The contract modification was accounted for on a cumulative catch-up basis. As all performance obligations were considered fully satisfied as a result of the modification and no additional performance obligations were identified, the transaction price of the modification was recognized as revenue in full in the year ended December 31, 2022 and there is no remaining transaction price allocated to performance obligations that are unsatisfied or partially satisfied under the agreement as of December 31, 2022.

The previous performance obligation relating to the NY-ESO License was recognized at a point-in-time, upon commencement of the license in 2018.