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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2023

OR

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

For the transition period from _______ to _______                      

Commission File Number: 001-40498

Century Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

    

84-2040295

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

25 N 38th Street, 11th Floor
Philadelphia, Pennsylvania
(Address of principal executive offices)

19104
(Zip Code)

(267) 817-5790

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class

    

Trading
Symbol(s)

    

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

IPSC

The Nasdaq Global Select Market

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

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

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

Large accelerated filer           

Accelerated filer                  

Non-accelerated filer             

Smaller reporting company

Emerging growth company   

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

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

As of August 1, 2023 the registrant had 59,765,270 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

Table of Contents

 

 

Page

PART I.

FINANCIAL INFORMATION

6

Item 1.

Financial Statements:

6

Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022

6

Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023 and 2022 (unaudited)

7

Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)

8

Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)

9

Notes to Unaudited Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

45

PART II.

OTHER INFORMATION

46

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3.

Defaults Upon Senior Securities

46

Item 4.

Mine Safety Disclosures

46

Item 5.

Other Information

46

Item 6.

Exhibits

47

Signatures

48

2

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q or the documents incorporated by reference herein regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would,” “could,” “should,” “potential,” “seek,” “evaluate,” “pursue,” “continue,” “design,” “impact,” “affect,” “forecast,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

our ability to raise additional capital to fund our operations and continue the development of our current and future product candidates;
the preclinical and early clinical nature of our business and our ability to successfully advance our current and future product candidates through development activities, preclinical studies, and clinical trials;
our ability to generate revenue from future product sales and our ability to achieve and maintain profitability;
the accuracy of our projections and estimates regarding our expenses, capital requirements, cash utilization, and need for additional financing;
our dependence on the success of our lead product candidate, CNTY-101;
the novelty of our approach to immuno-oncology treatment of cancer, utilizing iPSC-derived natural killer cells, or iNK cells, and iPSC-derived T cells, or iT cells, and the challenges we will face due to the novel nature of such technology;
the success of competing therapies that are or become available;
our reliance on the maintenance of our collaborative relationship with FUJIFILM Cellular Dynamics Inc., or FCDI, for access to key differentiation and reprogramming technology for the manufacturing and development of our product candidates;
the initiation, progress, success, cost, and timing of our development activities, preclinical studies and future clinical trials;
the timing of future investigational new drug, or IND, applications and the likelihood of, and our ability to obtain and maintain, regulatory clearance of such IND applications for our product candidates;
the timing, scope and likelihood of regulatory filings and approvals, including final regulatory approval of our product candidates;
our reliance on FCDI to be the exclusive manufacturer of certain product candidates, and our ability to manufacture our own product candidates in the future, and the timing and costs of such manufacturing activities;

3

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our reliance on the maintenance of our collaborative relationship with Bristol-Myers Squibb Company, or Bristol-Myers Squibb, in connection with the furtherance of our collaboration programs;
the performance of third parties in connection with the development of our product candidates, including third parties conducting our current and future clinical trials as well as third-party suppliers and manufacturers;
our ability to attract and retain strategic collaborators with development, regulatory, and commercialization expertise;
the public opinion and scrutiny of cell-based immuno-oncology therapies for treating cancer and its potential impact on public perception of our company and product candidates;
our ability to successfully commercialize our product candidates and develop sales and marketing capabilities, if our product candidates are approved;
the size and growth of the potential markets for our product candidates and our ability to serve those markets;
regulatory developments and approval pathways in the United States and foreign countries for our product candidates;
the potential scope and value of our intellectual property and proprietary rights;
our ability, and the ability of our licensors, to obtain, maintain, defend, and enforce intellectual property and proprietary rights protecting our product candidates, and our ability to develop and commercialize our product candidates without infringing, misappropriating, or otherwise violating the intellectual property or proprietary rights of third parties;
our ability to recruit and retain key members of management and other clinical and scientific personnel;
the volatility of capital markets and other macroeconomic factors, including due to inflationary pressures, banking instability geopolitical tensions or the outbreak of hostilities or war;
the extent to which the COVID-19 pandemic, or any other pandemic or global health crises may impact our business, including development activities, preclinical studies, clinical trials, supply chain and labor force;
developments relating to our competitors and our industry; and
other risks and uncertainties, including those described under the caption “Risk factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

We have based these forward-looking statements largely on our current expectations, estimates, forecasts, and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the section titled “Risk Factors” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be

4

Table of Contents

material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We intend the forward-looking statements contained in this Quarterly Report on Form 10-Q to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

5

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CENTURY THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

June 30, 2023

December 31, 2022

    

(unaudited)

    

Assets

Current assets

Cash and cash equivalents

$

64,439

$

84,265

Short-term investments

 

91,958

 

231,233

Escrow deposits, current

 

 

220

Prepaid expenses and other current assets

 

4,883

 

4,003

Total current assets

 

161,280

 

319,721

Property and equipment, net

 

83,771

 

82,785

Operating lease right-of-use assets

24,993

28,945

Restricted cash

1,979

1,979

Long-term investments

 

144,581

 

51,854

Security deposits and non-current assets

 

555

 

1,260

Total assets

$

417,159

$

486,544

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities

 

 

  

Accounts payable

$

3,625

$

5,454

Accrued expenses and other liabilities

 

7,856

 

9,841

Deposit liability

744

866

Long-term debt, current

6,502

Deferred revenue, current

6,936

7,154

Total current liabilities

 

19,161

 

29,817

Operating lease liability, long term

 

40,833

 

38,698

Deposit liability, non-current

361

718

Deferred revenue, non-current

109,233

110,834

Long-term debt, net

 

 

3,739

Total liabilities

 

169,588

 

183,806

Commitments and contingencies (Note 11)

 

  

 

  

Stockholders' equity:

Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding at June 30, 2023 and December 31, 2022

Common stock, $0.0001 par value, 125,236,190 shares authorized; 59,308,996 and 58,473,660 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

6

6

Additional paid-in capital

 

832,425

 

824,292

Accumulated deficit

(583,652)

(519,098)

Accumulated other comprehensive loss

(1,208)

(2,462)

Total stockholders’ equity

247,571

302,738

Total liabilities and stockholders’ equity

$

417,159

$

486,544

See accompanying notes to the consolidated financial statements.

6

Table of Contents

CENTURY THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share amounts)

Three Months Ended

Three Months Ended

Six Months Ended

Six Months Ended

    

June 30, 2023

    

June 30, 2022

June 30, 2023

June 30, 2022

Collaboration revenue

$

99

$

1,396

$

1,819

$

2,454

Operating expenses

Research and development

22,727

24,494

47,626

45,690

General and administrative

 

8,229

 

8,253

 

17,131

 

15,551

In-process research and development

 

-

 

-

 

-

 

10,000

Impairment of long-lived assets

4,220

-

4,220

Total operating expenses

 

35,176

 

32,747

 

68,977

 

71,241

Loss from operations

 

(35,077)

 

(31,351)

 

(67,158)

 

(68,787)

Interest expense

 

(136)

 

(330)

 

(540)

 

(644)

Interest income

3,058

706

5,681

960

Other income, net

(186)

 

5

 

(380)

 

4

Total other income (expense)

2,736

381

4,761

320

Loss before provision for income taxes

(32,341)

(30,970)

(62,397)

(68,467)

Provision for income taxes

(950)

(18)

(2,158)

(34)

Net loss

$

(33,291)

$

(30,988)

$

(64,555)

$

(68,501)

Net loss per common share
Basic and Diluted

(0.56)

(0.54)

(1.10)

(1.19)

Weighted average common shares outstanding
Basic and Diluted

59,251,363

57,685,006

58,904,726

57,370,022

Other comprehensive loss

Net loss

$

(33,291)

$

(30,988)

$

(64,555)

$

(68,501)

Unrealized gain (loss) on investments

59

(780)

1,255

(2,766)

Foreign currency translation

9

(12)

(18)

Comprehensive loss

$

(33,223)

$

(31,780)

$

(63,300)

$

(71,285)

See accompanying notes to the consolidated financial statements.

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CENTURY THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

  

Shares

  

Amount

  

Capital

  

Deficit

  

Loss

  

Equity

Balance, December 31, 2022

58,473,660

$

6

$

824,292

$

(519,098)

$

(2,462)

$

302,738

Issuance of common stock upon the exercise of stock options

452,102

448

448

Vesting of restricted stock

95,877

Vesting of early exercise stock options

85,145

269

269

Unrealized gain on short-term investments

1,196

1,196

Foreign currency translation

(9)

(9)

Stock based compensation

3,797

3,797

Net loss

(31,264)

(31,264)

Balance, March 31, 2023

59,106,784

6

828,806

(550,362)

(1,275)

277,175

Issuance of common stock upon the exercise of stock options

118,567

125

125

Vesting of restricted stock

Vesting of early exercise stock options

83,645

209

209

Unrealized gain on short-term investments

59

59

Foreign currency translation

9

9

Stock based compensation

3,285

3,285

Net loss

(33,291)

(33,291)

Balance, June 30, 2023

59,308,996

$

6

$

832,425

$

(583,653)

$

(1,207)

 

$

247,571

Accumulated

Additional

 Other 

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

    

Shares

  

Amount

  

Capital

  

Deficit

  

Loss

    

Equity

Balance, December 31, 2021

55,005,523

$

5

$

785,049

$

(388,166)

$

(650)

$

396,238

Issuance of stock to collaboration partner

2,160,760

1

26,812

26,813

Issuance of common stock upon the exercise of stock options

85,396

65

65

Vesting of restricted stock

161,159

 

 

 

 

 

Vesting of early exercise stock options

173,192

673

673

Stock based compensation

2,380

2,380

Unrealized loss on investments

(1,986)

(1,986)

Foreign currency translation

(6)

(6)

Net loss

(37,513)

(37,513)

Balance, March 31, 2022

57,586,030

$

6

$

814,979

$

(425,679)

$

(2,642)

 

$

386,664

Issuance of stock to collaboration partner

31,381

47

47

Vesting of restricted stock

136,425

Vesting of early exercise stock options

104,085

250

250

Stock based compensation

2,771

2,771

Unrealized loss on investments

(780)

(780)

Foreign currency translation

(12)

(12)

Net loss

(30,988)

(30,988)

Balance, June 30, 2022

57,857,921

$

6

$

818,047

$

(456,667)

$

(3,434)

 

$

357,952

See accompanying notes to the consolidated financial statements.

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CENTURY THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

Six Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

    

(unaudited)

    

(unaudited)

Cash flows from operating activities

 

  

 

  

 

Net loss

$

(64,555)

$

(68,501)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Depreciation

 

6,142

 

2,828

Amortization of deferred financing cost

94

152

Non-cash operating lease expense

(1,563)

626

Stock based compensation

 

7,082

 

5,151

Impairment

4,220

Change in operating assets and liabilities:

 

 

Escrow deposit

 

220

 

252

Prepaid expenses and other assets

 

(268)

 

239

Operating lease liability

6,723

2,479

Deferred revenue

(1,819)

120,733

Accounts payable

 

(3,468)

 

(3,861)

Accrued expenses and other liabilities

 

(1,277)

 

1,099

Net cash (used in) provided by operating activities

 

(48,469)

 

61,197

Cash flows from investing activities

 

  

 

  

Acquisition of property and equipment

 

(9,491)

 

(14,524)

Acquisition of fixed maturity securities, available for sale

 

(141,843)

 

(137,281)

Sale of fixed maturity securities, available for sale

 

189,646

 

120,286

Net cash provided by (used in) investing activities

 

38,312

 

(31,519)

Cash flows from financing activities

 

  

 

  

Proceeds from issuance of common stock

572

113

Payments on long term debt

(10,241)

Proceeds from issuance of shares to collaboration partner

26,813

Net cash (used in) provided by financing activities

 

(9,669)

 

26,926

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(19,826)

 

56,604

Cash, cash equivalents and restricted cash, beginning of period

 

86,244

 

58,162

Cash, cash equivalents and restricted cash, end of period

$

66,418

$

114,766

Supplemental disclosure of cash and non-cash operating activities:

Cash paid for interest

$

586

$

492

Cash paid for income tax

$

911

$

Supplemental disclosure of non-cash investing and financing activities:

  

 

  

Purchase of property and equipment, accrued and unpaid

$

1,639

$

313

See accompanying notes to the consolidated financial statements.

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CENTURY THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except share and per share amounts)

Note 1—Organization and description of the business

Century Therapeutics, Inc. (the “Company”) is an innovative biotechnology company developing transformative allogeneic cell therapies to create products for the treatment of both solid tumor and hematological malignancies with significant unmet medical need. Since inception, the Company has devoted substantially all of its time and efforts to performing research and development activities, building infrastructure and raising capital. The Company is incorporated in the state of Delaware.

Century Therapeutics Canada ULC (“Century Canada”) is the Company’s wholly owned subsidiary performing research and development activities in Canada.

Principles of Consolidation

The consolidated financial statements include the consolidated financial position and consolidated results of operations of the Company and Century Canada. All intercompany balances and transactions have been eliminated in consolidation.

Liquidity

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has limited operating history and its prospects are subject to risks, expenses, and uncertainties frequently encountered by companies in the biotechnology and pharmaceutical industries. These risks include, but are not limited to, the uncertainty of availability of additional financing and the uncertainty of achieving future profitability.

Since inception, the Company has incurred net losses. During the three and six months ended June 30, 2023, the Company incurred a net loss of $33,291 and $64,555, respectively. During the six months ended June 30, 2023, the Company used $48,469 of cash in operations. Cash and cash equivalents and investments were $300,978 at June 30, 2023. Management expects to incur additional losses in the future to fund its operations and conduct product research and preclinical and clinical development and recognizes the need to raise additional capital to fully implement its business plan. The Company believes it has adequate cash and financial resources to operate for at least the next 12 months from the date of issuance of these consolidated financial statements.

Reduction in force

In January 2023, the Company's Board of Directors approved, and management implemented a new portfolio prioritization and capital allocation strategy. The resulting changes included pausing investment in CNTY-103 for glioblastoma as well as a discovery program in hematologic malignancies. The Company has shifted focus to CNTY-101 and will accelerate key programs, including one follow-on candidate for lymphoma, CNTY-102, and CNTY-107 for Nectin-4+ solid tumors. In addition, the Company continues its partnered programs with Bristol Myers Squibb. The restructuring plan resulted in a reduction in the Company's workforce of approximately 25%. In connection with the restructuring plan, lab operations in Seattle and Hamilton, Ontario were closed and research activities were consolidated in Philadelphia.

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Note 2—Summary of significant accounting policies and basis of presentation

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the interim period reporting requirements of Form 10-Q and Article 10 of Regulation S-X. The consolidated balance sheet as of June 30, 2023, the consolidated statements of operations and comprehensive loss, and consolidated statements of changes in stockholders’ equity for the three and six months ended June 30, 2023 and 2022, and the consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 are unaudited, but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.  The results for any interim period are not necessarily indicative of results for the year ending December 31, 2023 or for any other subsequent interim period.  The consolidated balance sheet at December 31, 2022 has been derived from the Company’s audited consolidated financial statements.

Certain prior year information has been reclassified to conform to the fiscal year 2023 presentation.

Segment information

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions on how to allocate resources and assess performance. The Company views its operations and manages the business as one operating segment.

Use of estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Estimates and assumptions are primarily made in relation to the valuations supporting stock compensation, the estimation of the incremental borrowing rate for operating leases and standalone selling prices of performance obligations in collaboration agreements. If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

Concentration of credit risk and other risks and uncertainties

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist of cash, cash equivalents, U.S. Treasury bills and bonds, as well as corporate bonds. Cash and cash equivalents, as well as short and long-term investments include a checking account and asset management accounts held by a limited number of financial institutions. At times, such deposits may be in excess of insured limits. As of June 30, 2023 and December 31, 2022, the Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, uncertainty of market acceptance of its products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships, and dependence on key individuals.

Products developed by the Company require clearances from the U.S. Food and Drug Administration (the “FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance the Company’s future products will receive the necessary clearances. If the Company was denied clearance,

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clearance was delayed, or if the Company was unable to maintain clearance, it could have a material adverse impact on the Company.

Fair value of financial instruments

The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1

Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;

Level 2

Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active;

Level 3

Inputs are unobservable in which there is little or no market data available, which require the reporting entity to develop its own assumptions that are unobservable.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

Cash and cash equivalents

Management considers all highly liquid investments with an insignificant interest rate risk and original maturities of three months or less to be cash equivalents.

Restricted cash

As of June 30, 2023 and December 31, 2022, the Company had $1,979 in cash on deposit to secure certain lease commitments. Restricted cash is recorded separately in the Company’s consolidated balance sheets.

The following provides a reconciliation of the Company’s cash, cash equivalents, and restricted cash as reported in the consolidated balance sheets to the amounts reported in the consolidated statements of cash flows:

    

June 30, 2023

    

December 31, 2022

Cash and cash equivalents

$

64,439

$

84,265

Restricted cash

1,979

1,979

Cash, cash equivalents, and restricted cash

$

66,418

$

86,244

Investments

The Company invests in fixed maturity securities including U.S. Treasury bills and bonds as well as corporate bonds. The investments are classified as available-for-sale and reported at fair value. Unrealized gains or losses are determined by comparing the fair market value of the securities with their cost or amortized cost. Realized gains and losses on investments are recorded on the trade date and are included in the statement of operations. Unrealized gains and losses on investments are recorded in other comprehensive income (loss) on the consolidated statements of operations and comprehensive loss. The cost of securities sold is based on the specified identification method. Investment income is recognized as earned and discounts or premiums arising from the purchase of debt securities are recognized in investment income using the interest

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method over the remaining term of the security. Securities with an original maturity date greater than three months that mature within one year of the balance sheet date are classified as short-term, while investments with a maturity date greater than one year are classified as long-term.

Property and equipment, net

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally five years. Leasehold improvements are amortized over the shorter of the asset’s useful life or the remaining term of the lease. Construction in progress includes direct cost related to the construction of leasehold improvements and is stated at original cost. Such costs are not depreciated until the asset is completed and placed into service. Once the asset is placed into service, these capitalized costs will be allocated to leasehold improvements and will be depreciated over the shorter of the asset’s useful life or the remaining term of the lease. Computer software and equipment includes implementation costs for cloud-based software and network equipment.

Expenditures for major additions and improvements are capitalized, while minor replacements, maintenance, and repairs are charged to expense as incurred. When property is retired or otherwise disposed of, the costs and accumulated depreciation are removed from the respective accounts, with any resulting gain or loss recognized concurrently.

Research and development expenses

Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, stock compensation, materials, supplies, rent, depreciation on and maintenance of research equipment with alternative future use, and the cost of services provided by outside contractors. All costs associated with research and development are expensed as incurred.

Clinical trial costs are a component of research and development expenses. The Company expenses costs for its clinical trial activities performed by third parties, including clinical research organizations and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with associated agreements. The Company uses information it receives from internal personnel and outside service providers to estimate the clinical trial costs incurred.

Stock-based compensation

Employees, consultants and members of the board of directors of the Company have received stock options and restricted stock of the Company. The Company recognizes the cost of the stock-based compensation incurred as its employees and board members vest in the awards. The Company accounts for stock-based compensation arrangements in accordance with provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation. ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model (“Black Scholes”) to determine the fair value of options granted. The Company’s stock-based awards are subject to service-based vesting conditions and performance-based vesting conditions. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. For performance-based awards, the Company reassesses at each reporting date whether achievement of the performance condition is probable and accrues compensation expense if and when achievement of the performance condition is probable.

Black-Scholes requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to

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the lack of a public market for the Company’s common stock prior to its initial public offering (“IPO”) and lack of company-specific historical and implied volatility data, the Company based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with expected term assumption. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. Forfeitures are recognized as they occur.

Warrants

The Company has issued warrants that have been recognized as equity, and the fair value is recorded into additional paid-in capital in the accompanying consolidated balance sheets. Warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging—Contracts in Entity’s Own Equity, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. The Company’s warrants issued are in connection with its long-term debt and in connection with services provided by consultants, and are equity classified on the accompanying consolidated balance sheets. Equity classified warrants are accounted for at fair value on the issuance date, using Black Scholes, with no changes in fair value recognized after the issuance date.

Foreign currency translation

The reporting currency of the Company is the U.S. dollar. The functional currency of Century Canada is the Canadian dollar. Assets and liabilities of Century Canada are translated into U.S. dollars based on exchange rates at the end of each reporting period. Expenses are translated at average exchange rates during the reporting period. Gains and losses arising from the translation of assets and liabilities are included as a component of accumulated other comprehensive loss or income on the Company’s consolidated balance sheets. Gains and losses resulting from foreign currency transactions are reflected within the Company’s consolidated statements of operations and comprehensive loss. The Company has not utilized any foreign currency hedging strategies to mitigate the effect of its foreign currency exposure.

Intercompany payables and receivables are considered to be long-term in nature and any change in balance due to foreign currency fluctuation is included as a component of the Company’s consolidated comprehensive loss and accumulated other comprehensive loss within the Company’s consolidated balance sheets.

Basic and diluted net loss per common shares

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the period. The Company computes diluted net loss per common share by dividing the net loss applicable to common shareholders by the sum of the weighted-average number of common shares outstanding during the period plus the potential dilutive effects of its warrants, restricted stock and stock options to purchase common shares, but such items are excluded if their effect is anti-dilutive. Because the impact of these items is anti-dilutive during periods of net loss, there were no differences between the Company’s basic and diluted net loss per common share for the three and six months ended June 30, 2023 and 2022.

Early exercised options

The Company allowed certain of its employees and its consultants to exercise options granted under the 2018 Stock Option and Grant Plan (the “2018 Incentive Plan”) (Note 16) prior to vesting and prior to its IPO. The shares related to early exercised stock options are subject to the Company’s repurchase right upon termination of employment or services at the lesser of the original purchase price or fair market value at the time of repurchase. In order to vest, the holders are required to provide continued service to the Company. The early exercise by an employee or consultant of a stock option is not considered to be a substantive

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exercise for accounting purposes, and therefore, the payment received by the employer for the exercise price is recognized as a liability. For accounting purposes, unvested early exercised shares are not considered issued and outstanding and therefore not reflected as issued and outstanding in the accompanying consolidated balance sheets or the consolidated statements of changes in stockholders’ equity (deficit) until the awards vest. The deposits received are initially recorded in deposit liability. The liabilities are reclassified to common stock and additional paid-in-capital as the repurchase right lapses. At June 30, 2023 and December 31, 2022, there were $1,105 and $1,584, respectively, recorded in deposit liability related to shares held by employees and nonemployees that were subject to repurchase.

All shares that were early exercised by the executives of the Company are considered legally issued, however, for accounting purposes, only vested shares are considered issued. Below is a reconciliation of shares issued and outstanding:

    

June 30, 2023

    

December 31, 2022

Total shares legally outstanding

59,660,423

59,137,491

Less: unvested early exercised shares

(302,011)

(470,800)

Less: unvested restricted stock awards (Note 16)

(49,416)

(193,031)

Total shares issued and outstanding

59,308,996

58,473,660

Income taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations and comprehensive loss. As of June 30, 2023 and December 31, 2022, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.

Collaboration revenue

The Company may enter into collaboration and licensing agreements with strategic partners for research and development, manufacturing, and commercialization of its product candidates. Payments under these arrangements may include non-refundable, upfront fees; reimbursement of certain costs; customer option fees for additional goods or services; payments upon the achievement of development, regulatory, and commercial milestones; sales of product at certain agreed-upon amounts; and royalties on product sales.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC 606. This standard applies to all contracts with customers. When an agreement falls under the scope of other standards, such as ASC Topic 808, Collaborative Arrangements, or ASC 808, the Company will apply the recognition, measurement, presentation, and disclosure guidance in ASC 606 to the

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performance obligations in the agreements if those performance obligations are with a customer. Revenue recognized by analogizing to ASC 606 is recorded as collaboration revenue on the statements of operations.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under a collaboration agreement, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations on a relative stand-alone selling price basis; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

As part of the accounting for these arrangements, the Company must use its judgment to determine the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price. The estimation of the stand-alone selling price may include such estimates as forecasted revenues and costs, development timelines, discount rates, and probabilities of regulatory and commercial success. The Company also applies significant judgment when evaluating whether contractual obligations represent distinct performance obligations, allocating transaction price to performance obligations within a contract, determining when performance obligations have been met, assessing the recognition and future reversal of variable consideration and determining and applying appropriate methods of measuring progress for performance obligations satisfied over time. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, current. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, non-current.

If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights or options to acquire additional goods or services for free or at a discount. If the customer options are not determined to represent a material right, no transaction price is allocated to these options and the Company will account for these options at that time they are exercised. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement.

The obligations under the Company’s collaboration agreements may include research and development services to be performed by the Company for or on behalf of the customer. Amounts allocated to these performance obligations are recognized as the Company performs these obligations, and revenue is measured based on an inputs method of costs incurred to date of budgeted costs. Under certain circumstances, the Company may be reimbursed for certain expenses incurred under the research and development services.

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the statements of operations in the period of adjustment.

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Recent accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses of Financial Instruments (ASC 326). The guidance is effective for the Company beginning January 1, 2023 and it changes how entities account for credit losses on the financial assets and other instruments that are not measured at fair value through net income, including available-for-sale debt securities. The adoption of ASC 326 did not have a material impact on the consolidated financial statements.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment annually, or whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company assesses the recoverability of these assets by comparing the carrying amount of such assets or asset group to the future undiscounted cash flows it expects the assets or asset group to generate. The Company recognizes an impairment loss if the sum of the expected long-term discounted cash flows that the long-lived asset is expected to generate is less than the carrying amount of the long-lived asset being evaluated. The Company analyzed its long-lived assets for impairment and recorded a $4,220 impairment charge related to property and equipment and its right-of-use assets in its condensed consolidated statements of operations for the three and six months ended June 30, 2023.

Note 3—Reduction in force

During the six months ended June 30, 2023, the Company incurred $2,032 of cash-based expenses related to employee severances, benefits and related costs. In addition, the Company recorded non-cash stock-based compensation charge of $581 related to modification of equity awards for employees impacted by the restructuring during the six month ended June 30, 2023. There were no remaining outstanding liabilities related to the reduction in force at June 30, 2023.

Note 4—Asset purchase by Century Therapeutics Canada ULC

On June 9, 2020, Century Canada and the Company entered into an agreement with Empirica Therapeutics, Inc. (“Empirica”), a company focused on the development of adoptive immunotherapies against aggressive and treatment-resistant forms of cancers, including glioblastoma and brain metastasis. Under the terms of the Empirica Agreement, the Company acquired an IPR&D asset. Cash of $4,519 was paid at closing and transaction expenses totaled $203. The Company also deposited $1,506 in escrow (the “Escrow Deposit”). Release of the Escrow Deposit is subject to the terms of a promissory note, which provides for the funds to be released in equal annual installments over a three-year period related to continuing services by certain Empirica shareholders. In July 2021, the first annual installment of $523 was released from the Escrow Deposit. In June 2022, the second annual installment of $517 was released from the Escrow Deposit. In February 2023, the third installment of $494 was released from Escrow Deposit. As of June 30, 2023 and December 31, 2022, accrued compensation expense on the promissory note was $0 and $220, which is presented within escrow deposits on the consolidated balance sheets.

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Note 5—Financial instruments and fair value measurements

The following table sets forth the Company’s assets that were measured at fair value as of June 30, 2023 by level within the fair value hierarchy:

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents

$

56,410

$

56,410

U.S. Treasury

 

43,195

 

 

 

43,195

Corporate bonds

 

 

194,468

 

 

194,468

Total

$

99,605

$

194,468

$

$

294,073

The following table sets forth the Company’s assets that were measured at fair value as of December 31, 2022, by level within the fair value hierarchy:

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents

$

77,736

$

77,736

U.S. Treasury

 

86,475

 

 

 

86,475

Corporate bonds

 

 

196,603

 

 

196,603

Total

$

164,211

$

196,603

$

$

360,814

There were no transfers between levels during the period ended June 30, 2023. The Company uses the services of its investment manager, which uses widely accepted models for assumptions in valuing securities with inputs from major third-party data providers.

The Company classifies all of its investments in fixed maturity debt securities as available-for-sale and, accordingly, are carried at estimated fair value.

The amortized cost, gross unrealized gains and losses, and fair value of investments in fixed maturity securities are as follows as of June 30, 2023:

    

    

Gross 

    

Gross

    

Unrealized

 Unrealized 

Amortized Cost

 Gains

Losses

Fair Value

U.S. Treasury

$

43,318

$

$

(124)

$

43,194

Corporate bonds

 

195,469

 

 

(1,001)

 

194,468

Total

$

238,787

$

$

(1,125)

$

237,662

The amortized cost, gross unrealized gains and losses, and fair value of investments in fixed maturity securities are as follows as of December 31, 2022:

    

Gross 

    

Gross 

    

Unrealized

Unrealized

    

Amortized Cost

 Gains

 Losses

Fair Value

U.S. Treasury

$

87,798

$

$

(1,323)

$

86,475

Corporate bonds

 

197,668

 

2

 

(1,067)

 

196,603

Total

$

285,466

$

2

$

(2,390)

$

283,078

The following table provides the maturities of our fixed maturity available-for-sale securities:

     

June 30, 2023

     

December 31, 2022

Less than one year

$

92,188

$

231,224

One to five years

 

145,474

 

51,854

$

237,663

$

283,078

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The Company has evaluated the unrealized losses on the fixed maturity securities and determined that they are not attributable to credit risk factors. For fixed maturity securities, losses in fair value are viewed as temporary if the fixed maturity security can be held to maturity and it is reasonable to assume that the issuer will be able to service the debt, both as to principal and interest.

At June 30, 2023 and December 31, 2022, the Company had 62 and 42 available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses, respectively. Unrealized losses on corporate debt securities have not been recognized into income because the issuers’ bonds are of high credit quality (rated BBB+ or higher) and the decline in fair value is largely due to market conditions and or changes in interest rates. Management does not intend to sell and it is likely that management will not be required to sell the securities prior to the anticipated recovery of their amortized cost basis. The issuers continue to make timely payments on the bonds. The fair value is expected to recover as the bond approach maturity.

As of June 30, 2023 and December 31, 2022, accrued interest receivable on available-for-sale investment debt securities totaling $1,125 and $0, respectively, is excluded from the estimate of credit losses and is included in prepaid expenses and other current assets.

Note 6—Prepaid expenses and other current assets

The following is a summary of prepaid expenses and other current assets:

     

June 30, 2023

    

December 31, 2022

Research and development

$

327

$

110

Prepaid clinical trial related costs

215

Insurance

 

1,867

 

1,454

Software licenses and other

 

608

 

1,417

Reimbursement receivable

581

780

Warranties

 

160

 

242

Accrued interest receivable

 

1,125

 

Total prepaid expenses and other current assets

$

4,883

$

4,003

Note 7—Property and equipment, net

The following is a summary of property and equipment, net:

     

June 30, 2023

    

December 31, 2022

Lab equipment

$

29,515

$

28,811

Leasehold improvements

 

60,231

 

48,951

Construction in progress

 

8,763

 

13,998

Computer software and equipment

 

3,597

 

3,132

Furniture and fixtures

 

1,470

 

1,548

Total

103,576

96,440

Less: Accumulated depreciation

 

(19,805)

 

(13,655)

Property and equipment, net

$

83,771

$

82,785

Depreciation expense was $3,234 and $1,668 for the three months ended June 30, 2023 and 2022, respectively. The Company recognized $