EX-99.2 3 achl-ex99_2.htm EX-99.2 EX-99.2

Exhibit 99.2

INDEX TO FINANCIAL STATEMENTS

 

 

Page

Condensed Consolidated Balance Sheets

2

Condensed Consolidated Statements of Operations and Comprehensive Loss

3

Condensed Consolidated Statements of Shareholders’ Equity

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Condensed Consolidated Financial Statements

7

 

 

 

 

 

 


 

ACHILLES THERAPEUTICS PLC

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share amounts)

(expressed in U.S. Dollars, unless otherwise stated)

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

140,138

 

 

$

173,338

 

Prepaid expenses and other current assets

 

 

15,354

 

 

 

23,242

 

Total current assets

 

 

155,492

 

 

 

196,580

 

Non-current assets:

 

 

 

 

 

 

Property and equipment, net

 

 

9,648

 

 

 

12,399

 

Operating lease right of use assets

 

 

7,013

 

 

 

8,081

 

Deferred tax assets

 

 

185

 

 

 

251

 

Restricted cash

 

 

33

 

 

 

33

 

Other assets

 

 

2,967

 

 

 

3,014

 

Total non-current assets

 

 

19,846

 

 

 

23,778

 

TOTAL ASSETS

 

$

175,338

 

 

$

220,358

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,352

 

 

$

5,187

 

Income taxes payable

 

 

 

 

 

326

 

Accrued expenses and other liabilities

 

 

8,209

 

 

 

8,292

 

Operating lease liabilities-current

 

 

4,620

 

 

 

4,188

 

Total current liabilities

 

 

18,181

 

 

 

17,993

 

Non-current liabilities:

 

 

 

 

 

 

Operating lease liabilities-non-current

 

 

2,731

 

 

 

4,388

 

Other long-term liability

 

 

941

 

 

 

933

 

Total non-current liabilities

 

 

3,672

 

 

 

5,321

 

Total liabilities

 

 

21,853

 

 

 

23,314

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Ordinary shares, £0.001 par value; 40,782,948 shares and 40,932,727 shares
  authorized, issued and outstanding at September 30, 2023 and
  December 31, 2022, respectively

 

 

54

 

 

 

54

 

Deferred shares, £92,451.851 par value, one share authorized, issued
  and outstanding at September 30, 2023 and December 31, 2022

 

 

128

 

 

 

128

 

Additional paid in capital

 

 

413,815

 

 

 

408,844

 

Accumulated other comprehensive loss

 

 

(19,190

)

 

 

(21,695

)

Accumulated deficit

 

 

(241,322

)

 

 

(190,287

)

Total shareholders’ equity

 

 

153,485

 

 

 

197,044

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

175,338

 

 

$

220,358

 

 

The accompanying notes are an integral part of these financial statements.

2


 

ACHILLES THERAPEUTICS PLC

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

14,712

 

 

$

10,597

 

 

$

42,354

 

 

$

38,387

 

General and administrative

 

 

4,384

 

 

 

5,437

 

 

 

13,387

 

 

 

17,162

 

Total operating expenses

 

 

19,096

 

 

 

16,034

 

 

 

55,741

 

 

 

55,549

 

Loss from operations

 

 

(19,096

)

 

 

(16,034

)

 

 

(55,741

)

 

 

(55,549

)

OTHER INCOME, NET:

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

2,389

 

 

 

3,599

 

 

 

4,692

 

 

 

8,499

 

Total other income, net

 

 

2,389

 

 

 

3,599

 

 

 

4,692

 

 

 

8,499

 

Loss before provision for income taxes

 

 

(16,707

)

 

 

(12,435

)

 

 

(51,049

)

 

 

(47,050

)

Benefit (Provision) for income taxes

 

 

24

 

 

 

(41

)

 

 

14

 

 

 

(70

)

Net loss

 

 

(16,683

)

 

 

(12,476

)

 

 

(51,035

)

 

 

(47,120

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment

 

 

(5,289

)

 

 

(18,147

)

 

 

2,505

 

 

 

(45,126

)

Comprehensive loss

 

$

(21,972

)

 

$

(30,623

)

 

$

(48,530

)

 

$

(92,246

)

Net loss per share attributable to ordinary shareholders—basic and diluted

 

$

(0.42

)

 

$

(0.32

)

 

$

(1.28

)

 

$

(1.20

)

Weighted average ordinary shares outstanding—basic and diluted

 

 

40,066,922

 

 

 

39,313,764

 

 

 

39,900,910

 

 

 

39,104,866

 

 

The accompanying notes are an integral part of these financial statements.

3


 

ACHILLES THERAPEUTICS PLC

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited)

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Ordinary $0.001
par value

 

 

Deferred shares

 

 

Additional
paid-in

 

 

other
comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

Total

 

Balance at December 31, 2022

 

 

40,932,727

 

 

$

54

 

 

 

1

 

 

$

128

 

 

$

408,844

 

 

$

(21,695

)

 

$

(190,287

)

 

$

197,044

 

Issuance of ordinary shares

 

 

5,726

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,652

 

 

 

 

 

 

 

 

 

1,652

 

Unrealized gain on foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,977

 

 

 

 

 

 

3,977

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,506

)

 

 

(17,506

)

Balance at March 31, 2023

 

 

40,938,453

 

 

$

54

 

 

 

1

 

 

$

128

 

 

$

410,500

 

 

$

(17,718

)

 

$

(207,793

)

 

$

185,171

 

Issuance of ordinary shares

 

 

7,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,701

 

 

 

 

 

 

 

 

 

1,701

 

Unrealized gain on foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,817

 

 

 

 

 

 

3,817

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,846

)

 

 

(16,846

)

Balance at June 30, 2023

 

 

40,946,239

 

 

$

54

 

 

 

1

 

 

$

128

 

 

$

412,201

 

 

$

(13,901

)

 

$

(224,639

)

 

$

173,843

 

Issuance of ordinary shares

 

 

4,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,609

 

 

 

 

 

 

 

 

 

1,609

 

Issuance of shares under employee share purchase plan

 

 

6,484

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Forfeiture of ordinary shares

 

 

(174,595

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,289

)

 

 

 

 

 

(5,289

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,683

)

 

 

(16,683

)

Balance at September 30, 2023

 

 

40,782,948

 

 

$

54

 

 

 

1

 

 

$

128

 

 

$

413,815

 

 

$

(19,190

)

 

$

(241,322

)

 

$

153,485

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Ordinary $0.001
par value

 

Deferred shares

 

Additional
paid-in

 

other
comprehensive

 

Accumulated

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

capital

 

income (loss)

 

deficit

 

Total

Balance at Year Ended December 31, 2021

 

40,603,489

 

$54

 

1

 

$128

 

$401,821

 

$6,636

 

$(119,111)

 

$289,528

Issuance of ordinary shares

 

150,738

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

1,959

 

 

 

1,959

Unrealized loss on foreign currency translation

 

 

 

 

 

 

(7,677)

 

 

(7,677)

Net loss

 

 

 

 

 

 

 

(17,355)

 

(17,355)

Balance at March 31, 2022

 

40,754,227

 

$54

 

1

 

$128

 

$403,780

 

$(1,041)

 

$(136,466)

 

$266,455

Issuance of ordinary shares

 

19,787

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

1,724

 

 

 

1,724

Unrealized loss on foreign currency translation

 

 

 

 

 

 

(19,302)

 

 

(19,302)

Net loss

 

 

 

 

 

 

 

(17,289)

 

(17,289)

Balance at June 30, 2022

 

40,774,014

 

$54

 

1

 

$128

 

$405,504

 

$(20,343)

 

$(153,755)

 

$231,588

Issuance of ordinary shares

 

164,256

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

1,650

 

 

 

1,650

Issuance of shares under employee share purchase plan

 

493

 

 

 

 

1

 

 

 

 

1

Unrealized gain on foreign currency translation

 

 

 

 

 

 

(18,147)

 

 

 

(18,147)

Net loss

 

 

 

 

 

 

 

(12,476)

 

(12,476)

Balance at September 30, 2022

 

40,938,763

 

$54

 

1

 

$128

 

$407,155

 

$(38,490)

 

$(166,231)

 

$202,616

 

The accompanying notes are an integral part of these financial statements.

 

4


 

ACHILLES THERAPEUTICS PLC

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(51,035

)

 

$

(47,120

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

3,565

 

 

 

2,859

 

Loss on impairment

 

 

16

 

 

 

466

 

Changes in right of use assets and operating lease liabilities, net

 

 

(166

)

 

 

(528

)

Loss on disposal of property and equipment

 

 

 

 

 

(11

)

Non-cash loss on foreign currency remeasurement

 

 

(5

)

 

 

32

 

Non-cash share-based compensation

 

 

4,961

 

 

 

5,333

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

8,236

 

 

 

(3,992

)

Accounts payable

 

 

403

 

 

 

4,572

 

Income taxes payable

 

 

(326

)

 

 

59

 

Accrued expenses and other liabilities

 

 

(32

)

 

 

(1,780

)

Other long-term liabilities

 

 

 

 

 

175

 

Deferred tax assets

 

 

65

 

 

 

 

Other assets

 

 

58

 

 

 

(258

)

Net cash used in operating activities

 

 

(34,260

)

 

 

(40,193

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,054

)

 

 

(5,497

)

Net cash used in investing activities

 

 

(1,054

)

 

 

(5,497

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

      Proceeds from the issuance of shares under the employee share purchase plan

 

 

9

 

 

 

1

 

Net cash provided by financing activities

 

 

9

 

 

 

1

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

2,105

 

 

 

(40,740

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(33,200

)

 

 

(86,429

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

173,371

 

 

 

266,352

 

Cash, cash equivalents and restricted cash, end of period

 

$

140,171

 

 

$

179,923

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Right of use assets obtained in exchange for new operating lease liabilities

 

$

2,109

 

 

$

2,124

 

Property and equipment purchases in accounts payable and accrued expenses

 

$

271

 

 

$

1,363

 

 

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of each of the periods, shown above:

 

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

Cash and cash equivalents

 

$

140,138

 

 

$

179,890

 

Restricted cash

 

 

33

 

 

 

33

 

Total cash, cash equivalents and restricted cash

 

$

140,171

 

 

$

179,923

 

 

5


 

The accompanying notes are an integral part of these financial statements.

6


 

ACHILLES THERAPEUTICS PLC

Notes to Condensed Consolidated Financial Statements

1. Nature of the business

Achilles Therapeutics plc (formerly Achilles TX Limited) and subsidiaries, or the Company, is a biopharmaceutical company developing AI-powered precision T cell therapies targeting clonal neoantigens to treat solid tumors. The Company is focused on advancing immuno-oncology therapeutics by exploiting its pioneering work in the field of tumor evolution and clonal neoantigens.

The Company is a public limited company originally incorporated pursuant to the laws of England and Wales in November 2020 as a private limited company named Achilles TX Limited, with nominal assets and liabilities, for the purposes of becoming the ultimate holding company for Achilles Therapeutics UK Limited (formerly Achilles Therapeutics Limited). Achilles Therapeutics UK Limited was incorporated in May 2016 under the laws of England and Wales and its registered office and principal place of business is currently 245 Hammersmith Road, London W6 8PW. Achilles TX Limited and Achilles Therapeutics Holdings Limited (a wholly owned direct subsidiary of Achilles TX Limited formed in November 2020 for the purpose of becoming the direct holding company of Achilles Therapeutics UK Limited and Achilles Therapeutics US, Inc.) have not conducted any operations prior to the corporate reorganization other than activities incidental to their formation.

The Company has devoted its efforts principally to research and development since formation. The Company has not yet completed product development, filed for or obtained regulatory approvals for any products, nor verified the market acceptance and demand for such products. As a result, the Company is subject to risks that are common to emerging companies in the biotech industry, including the uncertainties of the product discovery and development process, dependence on key individuals, development of the same or similar technological innovations by the Company’s competitors, protection of proprietary technology, compliance with government regulations and approval requirements, the Company’s ability to access capital and uncertainty of market acceptance of products.

 

Going concern

The Company has historically been loss making and anticipates that it will continue to incur losses for the foreseeable future and had an accumulated deficit of $241.3 million as of September 30, 2023. The Company has funded these losses principally through the issuance of ordinary and preferred shares. The Company expects to continue to incur operating losses and negative cash outflows until such time as it generates a level of revenue that is sufficient to support its cost structure.

 

The Company continues to assess the impact of the disruption of global financial markets, including as a result of the COVID-19 pandemic, the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, the conflict in Israel and the Gaza Strip and other global macroeconomic factors such as inflation, increases in commodity prices, energy and fuel prices, credit and capital markets instability and supply chain interruptions could reduce our ability to access capital, which could, in the future, negatively affect our business and the value of our common shares.

As of September 30, 2023, the Company had cash and cash equivalents of $140.1 million. The Company's board of directors have reviewed the financial projections of the Company for the 12 months subsequent to the date of issuance of these financial statements including consideration of severe but plausible scenarios that may affect the Company in that period. These show that the Company will be able to pay (or otherwise discharge) its debts as they fall due immediately following the date of signing of this Balance Sheet and for the period considered by the forecast.

Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and settlement of liabilities and commitments as they fall due in the ordinary course of business for at least 12 months from the date of issuance of the financial statements.

 

2. Summary of significant accounting policies

The Company's significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the financial statements for the year ended December 31, 2022 in the Form 20-F filed with the Securities and Exchange

7


 

Commission, or SEC on March 7, 2023. There have been no material changes to the significant accounting policies during the nine months ended September 30, 2023 except as described below.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America or U.S. GAAP.

 

The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended December 31, 2022, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2023, the results of its operations and comprehensive loss for the three and nine months ended September 30, 2023, its statements of shareholders’ equity for the three and nine months ended September 30, 2023 and 2022 and its statements of cash flows for the nine months ended September 30, 2023 and 2022.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. However, these interim financial statements include all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to fairly state the results of the interim period. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ended December 31, 2023, any other interim periods, or any future year or period. The balance sheet information as of December 31, 2022, was derived from the audited financial statements included in the Company's Form 20-F filed with the SEC on March 7, 2023. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included elsewhere in the Company’s Form 20-F filed with the SEC on March 7, 2023.

 

3. Fair value of financial instruments

The following tables show assets measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in thousands):

 

 

 

September 30, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

49,500

 

 

$

 

 

$

 

     Total

 

$

49,500

 

 

$

 

 

$

 

 

 

 

December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

51,901

 

 

$

 

 

$

 

     Total

 

$

51,901

 

 

$

 

 

$

 

 

There were no liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022.

4. Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

U.K. R&D tax credit

 

$

8,988

 

 

$

15,232

 

Prepaid research and development

 

 

1,568

 

 

 

3,473

 

Prepaid insurance

 

 

1,231

 

 

 

1,151

 

VAT recoverable

 

 

610

 

 

 

771

 

Other current assets

 

 

2,957

 

 

 

2,615

 

 

$

15,354

 

 

$

23,242

 

 

8


 

5. Property and equipment, net

Property and equipment, net consisted of the following (in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Lab equipment

 

$

9,306

 

 

$

8,707

 

Leasehold improvements

 

 

8,999

 

 

 

8,929

 

Office equipment and computers

 

 

1,714

 

 

 

1,577

 

Fixtures and fittings

 

 

1,047

 

 

 

1,040

 

 

 

21,066

 

 

 

20,253

 

Less: Accumulated depreciation

 

 

(11,418

)

 

 

(7,854

)

 

$

9,648

 

 

$

12,399

 

 

Depreciation expense was $3.6 million and $2.9 million for the nine months ended September 30, 2023 and 2022, respectively. and was $1.2 million and $0.9 million for the three months ended September 30, 2023 and 2022, respectively. For the year ended December 31, 2022, the Company recognized an impairment loss of $6.7 million in assets under construction primarily related to costs associated with the detailed design of a flexible GMP modular facility in West London. Following a review of manufacturing plans and current market conditions, the Company has mothballed the construction of the facility. See Note 14, "Subsequent Events", for details of the termination of the West London facility lease.

6. Accrued expenses and other liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Compensation and benefits

 

$

2,705

 

 

$

2,972

 

External research and development expenses

 

 

3,555

 

 

 

2,188

 

Facility costs

 

 

662

 

 

 

910

 

Professional services

 

 

322

 

 

 

795

 

Property and equipment

 

 

108

 

 

 

217

 

Other liabilities

 

 

857

 

 

 

1,210

 

 

$

8,209

 

 

$

8,292

 

 

7. Shareholders’ equity

Ordinary shares

As of September 30, 2023 and December 31, 2022, the Company had the following number of ordinary shares with a par value £0.001 (equivalent to $0.001) issued and outstanding:

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Ordinary shares

 

 

39,166,581

 

 

 

39,316,360

 

Class A non-voting ordinary shares

 

 

1,616,367

 

 

 

1,616,367

 

Deferred Shares

 

 

1

 

 

 

1

 

Total ordinary and deferred shares

 

 

40,782,949

 

 

 

40,932,728

 

On the completion of the initial public offering, or "IPO", on April 6, 2021, all the Employee Shares, Convertible Preferred Shares (see below) and B ordinary shares were converted into ordinary shares or Class A non-voting ordinary shares. Class A non-voting ordinary shares have the same rights and privileges as ordinary shares, except for the voting rights.

 

As of September 30, 2023, the Company has not declared any dividends.

9


 

Deferred shares

On April 6, 2021, all the deferred shares were cancelled. In addition, a single deferred share with a nominal value of £92,451.851 in the capital of the Company was created as part of the Company’s reorganization. As of September 30, 2023 and December 31, 2022, the Company had one deferred share which could be repurchased at any time by the Company for nil consideration.

8. Share-based compensation

2020 Share Omnibus Plan

Under the Company’s shareholder and subscription agreements, which were effective until the date of IPO, the Company was authorized to grant equity awards to individuals including a director of and/or a person who is employed by or who directly or indirectly provides consultancy services to the Company, in the form of D, E, F, G, H, I, J, K, L, M and N ordinary shares, collectively referred to as Employee Shares and share options. All Employee Shares converted into ordinary shares in accordance with the reverse share split implemented on IPO. The share options were granted pursuant to the terms of the 2020 Share Omnibus Plan, or the 2020 Plan.

Upon and following closing of the IPO, no further equity awards were granted under the 2020 Plan. To the extent outstanding options granted under the 2020 Plan are cancelled, forfeited or otherwise terminated without being exercised and would otherwise have been returned to the share reserve under the 2020 Plan, the number of shares underlying such awards will be available for future grant under the Company’s 2021 Omnibus Plan (see below). In anticipation of IPO, the holders of Employee Shares and the Company entered into individual vesting agreements, or Vesting Agreements, which apply the same terms to vesting of Employee Shares as applied prior to IPO under the Company’s pre-IPO Articles of Association, except that following the IPO Employee Shares that would pre-IPO have converted to deferred shares, will be transferred back to the Company and cancelled within three years of an employee leaving the Company.

2021 Share Omnibus Plan

In March 2021, the Company’s board of directors, or the Board, adopted, and the Company’s shareholders approved, the 2021 Share Omnibus Plan, or the 2021 Plan, which became effective upon the effectiveness of the Company’s Registration Statement on Form F-1 in connection with the IPO. The 2021 Plan allows the remuneration committee of the Board, or the Remuneration Committee, to make equity-based and cash-based incentive awards to our officers, employees, directors and other key persons (including consultants).

The Remuneration Committee initially reserved 2,572,558 of its ordinary shares for the issuance of awards under the 2021 Plan. The 2021 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2022, by 4% of the outstanding number of ordinary shares on the immediately preceding December 31, or such lesser number of shares as determined by the Remuneration Committee. This number is subject to adjustment in the event of a sub-division, consolidation, share dividend or other change in our capitalization. The total number of ordinary shares that may be issued under the 2021 Plan was 5,834,006 shares as of September 30, 2023, of which 1,087,633 shares remained available for future grant after taking into account options granted and adding back forfeitures in the period.

 

2021 Employee Share Purchase Plan

The Company’s 2021 Employee Share Purchase Plan, or ESPP, was adopted by the Board in March 2021 and approved by shareholders in March 2021 and became effective upon the effectiveness of the Company’s Registration Statement on Form F-1 in connection with the IPO. The ESPP initially reserved and authorized the issuance of up to a total of 467,738 ordinary shares to participating employees. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2022 and each January 1 thereafter through January 1, 2022, by the least of: (i) 1% of the outstanding number of ordinary shares on the immediately preceding December 31; (ii) 467,738 ordinary shares or (iii) such number of shares as determined by the Remuneration Committee. The number of shares reserved under the ESPP is subject to change in the event of a share split, share dividend or other change in our capitalization. The purpose of the ESPP is to: (i) provide U.S. employees the opportunity to purchase ordinary shares or ADSs at 85% of the fair market value of the ADSs on the offering date or the exercise date, whichever is lower, and (ii) provide UK-based employees with ordinary shares or ADSs under the SIP Plan as further discussed below.

The total number of ordinary shares that may be issued under the ESPP was 877,065 shares as of September 30, 2023. The initial purchase period under the ESPP commenced in February 2022. The Company estimated the fair value of the option

10


 

component of the ESPP at the date of grant using a Black-Scholes valuation model. During the three and nine months ended September 30, 2023 and 2022, the compensation expense from ESPP shares was less than $0.1 million.

 

2021 Share Incentive Plan

The Achilles Therapeutics plc Share Incentive Plan, or SIP Plan is a sub plan of the ESPP.  This SIP Plan is an HMRC approved Plan for UK tax-paying employees. Under the SIP Plan, eligible employees can receive "Free Shares" within HMRC guidelines, purchase ordinary shares from the market, or Partnership Shares, as well as receive "Matching Shares" which are issued without any consideration payment in connection with an acquisition of Partnership Shares (collectively referred to as "SIP Shares"). For any award of Matching Shares, the Renumeration Committee must specify the ratio of Matching Shares to Partnership Shares. Under HMRC rules, the ratio determined by the Renumeration Committee must not exceed two Matching Shares for every Partnership Share. 

There is no minimum service condition on the Partnership Shares, and the participants can sell/transfer the shares after their acquisition from the market. There is a minimum service condition for the Free and Matching Shares that requires the participants to provide continuing service for at least 36 months from the date of grant. If the participants are no longer with the Company or its subsidiaries before the completion of 36 months' service (with the relevant date determined as the last day of employment), the Free and Matching Shares generally will be 100% forfeited and available for future issuance.

During the nine months ended September 30, 2023, 73,506 shares were issued under the ESPP, including SIP shares. This reduced the number of shares reserved and available to grant under the ESPP to 522,627 shares available to grant as of September 30, 2023.

 

Employee Shares and SIP Shares

Prior to the IPO, the Company typically granted shares which vested over a four-year service period with 25% of the award vesting on the first anniversary of the vesting commencement date, and the balance vesting periodically over the remaining three years.

 

Post IPO, the Company typically grants SIP Shares under the SIP Plan. SIP Shares effectively vest in full on the third anniversary of the service commencement date.

Unvested Employee Shares are forfeited upon the termination of employment or service relationship in accordance with the process set out in the Articles of the Company prior to IPO, and in accordance with the process set out in the Vesting Agreements post-IPO and 2020 Plan, or in the case of the SIP Plan, SIP shares in accordance with the rules of the SIP Plan. Before IPO, the forfeited shares were converted into deferred shares, with a repurchase right for a nominal amount in favor of the Company. As of December 31, 2020, the Company repurchased 1,509,384 deferred shares for consideration of £0.01 to each holder for all of the deferred shares held by that holder. As part of the Company’s reorganization, 109,058 outstanding deferred shares in existence immediately before the IPO were cancelled upon the IPO, and a single deferred share with a nominal value of £92,451.851 in the capital of the Company was created. As of September 30, 2023, the Company had one deferred share which could be repurchased by the Company at any time for nil consideration. SIP shares forfeited under the rules of the SIP Plan are made available under the ESPP for future issuances. In accordance with the relevant Vesting Agreements, in 2022 and for the nine months ended September 30, 2023, we cancelled 6,036 shares and 174,595 shares, respectively, that were held by employees who left employment with the Company since the IPO.

The Company measures all share-based awards using the fair value on the date of grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company has granted Employee Shares to employees and non-employees with service-based conditions and SIP Shares to employees with service-based conditions, and in both cases records expense for these awards using the straight-line method.

A summary of the changes in the Company’s unvested ordinary shares from December 31, 2022 through September 30, 2023 are as follows:

 

11


 

 

Number of

 

 

Weighted

 

 

unvested

 

 

average

 

 

ordinary

 

 

grant date

 

 

shares

 

 

fair value

 

Unvested ordinary shares as of December 31, 2022

 

 

1,294,803

 

 

$

4.89

 

Granted

 

 

62,374

 

 

 

1.08

 

Vested

 

 

(492,824

)

 

 

6.03

 

Forfeited

 

 

(213,480

)

 

 

5.23

 

Unvested ordinary shares as of September 30, 2023

 

 

650,873

 

 

$

5.59

 

 

As of September 30, 2023, there was $3.0 million of unrecognized compensation cost related to unvested Employee Shares outstanding, which is expected to be recognized over a weighted-average period of 1.3 years.

Share Options

 

The following table summarizes the Company’s share options activity for the nine months ended September 30, 2023:

 

 

 

Number
of Options

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Term (Years)

 

 

Aggregate
Intrinsic
Value (in
thousands)

 

 Outstanding as of December 31, 2022

 

 

2,993,641

 

 

$

6.18

 

 

 

8.51

 

 

$

150

 

 Granted

 

 

2,438,480

 

 

$

1.15

 

 

 

 

 

 

 

 Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 Forfeited

 

 

(321,466

)

 

$

4.49

 

 

 

 

 

 

 

 Outstanding as of September 30, 2023

 

 

5,110,655

 

 

$

3.91

 

 

 

8.52

 

 

$

238

 

 Exercisable as of September 30, 2023

 

 

1,411,068

 

 

$

7.02

 

 

 

7.46

 

 

$

38

 

 Unvested as of September 30, 2023

 

 

3,699,587

 

 

$

2.73

 

 

 

8.93

 

 

$

200

 

 

The weighted average grant-date fair value of share options granted during the three and nine months ended September 30, 2023 was $0.82 and $0.81 per share, respectively.

 

As of September 30, 2023, there was $5.3 million of unrecognized compensation cost related to share options outstanding, which is expected to be recognized over a weighted-average period of 2.4 years.

Share Option Valuation

 

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the share options granted to employees during the three months ended September 30, 2023 and 2022, respectively, were as follows:

 

 

 

Three Months Ended

 

 

September 30,

 

September 30,

 

 

2023

 

2022

Expected term (in years)

 

6.08

 

6.10

Expected volatility

 

72.88%

 

71.43%

Expected dividend yield

 

0.00%

 

0.00%

Risk free interest rate

 

4.23%

 

3.03%

Fair value of underlying ordinary shares

 

$0.99

 

$2.83

 

12


 

 

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the share options granted to employees during the nine months ended September 30, 2023 and 2022, respectively, were as follows:

 

 

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2023

 

2022

Expected term (in years)

 

6.02

 

6.04

Expected volatility

 

72.76%

 

69.72%

Expected dividend yield

 

0.00%

 

0.00%

Risk free interest rate

 

3.52%

 

1.99%

Fair value of underlying ordinary shares

 

$1.19

 

$3.11

Share-based Compensation Expense

 

Share-based compensation expense recorded is as follows (in thousands):

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Research and development

 

$

882

 

 

$

867

 

 

$

2,701

 

 

$

2,824

 

General and administrative