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March 24, 2022, 7:33 a.m. EDT


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The following discussion of our financial condition, changes in financial condition, plan of operations and results of operations should be read in conjunction with (i) our audited consolidated financial statements as at December 31, 2021 and December 31, 2020 and (ii) the section entitled "Business" included in this annual report. The discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.

Company Overview

We are an advanced cell therapy company committed to cures for blood cancers and serious hematologic diseases. We harness our cell expansion platform to create therapies with the potential to redefine standards of care in areas of serious medical need. While cell therapies have the potential to address a variety of diseases, they are limited by availability of donor cells, matching a donor to the patient, and the decline in donor cell functionality when expanding the cells to achieve a therapeutic dose. We have leveraged our NAM platform, or nicotinamide cell expansion technology platform to develop a pipeline of product candidates designed to address the limitations of other cell therapies. Our proprietary technology allows for the proliferation and enhancement of donor cells, which allows for maintaining the cells' functional therapeutic characteristics, providing a treatment alternative for patients.

Omidubicel, our lead product candidate, is designed to address the limitations of hematopoietic stem cell transplantation. Omidubicel consists of NAM-expanded and enhanced hematopoietic stem cells and differentiated immune cells, including T cells. The final cell therapy product is cryopreserved until the patient is ready to begin the transplant, when it is thawed and infused. Omidubicel has the potential to be a universal stem cell graft in two broad patient groups: (i) patients with high-risk leukemias and lymphomas who require HSCT but who lack access to an appropriate matched related donor? and (ii) patients with severe hematologic disorders such as severe aplastic anemia.

In October 2021, the complete results from our pivotal Phase 3 clinical study of omidubicel in 125 patients with various hematologic malignancies were published in the peer-reviewed medical journal Blood. The trial achieved its primary endpoint of time to neutrophil engraftment as well as all three of the prespecified secondary endpoints. These secondary endpoints were the proportion of patients who achieved platelet engraftment by day 42, the proportion of patients with grade 2 or grade 3 bacterial or invasive fungal infections in the first 100 days following transplant, and the number of days alive and out of the hospital in the first 100 days following transplant. All three secondary endpoints demonstrated statistical significance in an intent-to-treat analysis.

In December 2021, we also reported data from an analysis of a subset of 37 patients from the Phase 3 randomized trial of omidubicel at Annual Meeting of the American Society of Hematology, or ASH. The analysis was aimed at investigating the reduced infection rates observed in the study and showed that the omidubicel-treated patients had more rapid recovery of a wide variety of immune cells including CD4+ T cells, B cells, NK cells and dendritic cell subtypes. The robust recovery of the immune system provides rationale for fewer severe bacterial, fungal and viral infections in patients treated with omidubicel. Additional analyses are ongoing to further characterize the immune recovery following omidubicel transplantation. In early 2022, the FDA agreed that the initiation of our rolling BLA submission for omidubicel was appropriate and we initiated the rolling submission process. We plan to submit the full BLA for omidubicel to the FDA in the first half of 2022.

In addition, we have applied our NAM cell expansion technology to natural killer, or NK, cells, to develop our initial NK product candidate, GDA-201, an investigational, NK cell-based immunotherapy for the treatment of hematologic and solid tumors in combination with standard of care antibody therapies. GDA-201 is currently being evaluated in a Phase 1/2 investigator-sponsored trial for the treatment of relapsed or refractory non-Hodgkin lymphoma, or NHL, and multiple myeloma, or MM. Data from the trial demonstrate that GDA-201 was well-tolerated and no dose-limiting toxicities were observed in 19 patients with NHL and 16 patients with MM. The data show that therapy using GDA-201 with monoclonal antibodies demonstrated significant clinical activity in heavily pretreated patients with advanced NHL. Of the 19 patients with NHL, 13 complete responses and one partial response were observed, with an overall response rate of 74% and a complete response rate of 68%. At the December 2021 Annual Meeting of ASH, we reported two-year follow-up data from this clinical trial and reported on two-year outcomes and cytokine biomarkers associated with survival. The data demonstrated a median duration of response of 16 months (range 5-36 months), an overall survival at two years of 78% (95% CI, 51%-91%) and a safety profile similar to that reported previously.

In September 2021, we submitted an investigational new drug application, or IND, for a Phase 1/2 clinical trial of GDA-201 in patients with follicular and diffuse large B-cell lymphomas. The FDA placed this IND on clinical hold prior to the initiation of patient dosing. The FDA has requested modifications in donor eligibility procedures and sterility assay qualification. We are in active communication with the FDA with the objective to promptly address these requests to enable the requirements for IND acceptance and study initiation. We expect to initiate our Phase 1/2 study of GDA-201 in patients with follicular and diffuse large B-cell lymphomas in 2022.

We have incurred significant net losses since our formation in 1998. Our net losses were $89.8 million and $61.6 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, our accumulated deficit was $337.5 million. We expect to continue to incur losses for the foreseeable future, and our losses may fluctuate significantly from year to year. We expect that our expenses will increase substantially in connection with our ongoing activities as we:

? submit our BLA on a rolling basis to seek regulatory approval for omidubicel?

? establish a sales, marketing and distribution infrastructure, if we do not pursue a strategic partnership for commercialization, and scale up manufacturing capabilities to commercialize omidubicel upon obtaining regulatory approval?

? initiate our planned Phase 1/2 clinical trial of GDA-201 in patients with NHL?

? continue the preclinical development of our other product candidates?

? maintain, expand and protect our intellectual property portfolio?

? add equipment and physical infrastructure to support our research and development and commercialization efforts?

? hire additional clinical development, regulatory, commercial, quality control and manufacturing personnel? and

? add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization.

Although we completed two equity financing transactions in 2020 and a convertible debt financing in 2021, we will need substantial additional funding to support our operating activities as we advance our product candidates through clinical development, seek regulatory approval and prepare for and, if any of our product candidates are approved, proceed to commercialization. Adequate funding may not be available to us on acceptable terms, or at all.

To continue to fund our operations, we expect to continue to raise capital. We may obtain additional financing in the future through the issuance of our ordinary shares, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan. Although it is difficult to predict future liquidity requirements, we believe that our current total existing funds will be sufficient to fund our operations into mid-2023. However, our ability to successfully transition to profitability will be dependent upon achieving a level of revenue adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Components of Results of Operations


We do not currently have any products approved for sale and, to date, we have not recognized any revenue. In the future, we may generate revenue from a combination of product sales, reimbursements, up-front payments and future collaborations. If we fail to achieve clinical success or obtain regulatory approval of any of our product candidates in a timely manner, our ability to generate future revenue will be impaired.

Research and development expenses, net

The largest component of our total operating expenses has historically been, and we expect will continue to be, research and development. Our research and development expenses, net of IIA grants, consist primarily of:

? salaries and related costs, including share-based compensation expense, for our personnel in research and development functions;

? expenses incurred under agreements with third parties, including CROs, subcontractors, suppliers and consultants, for the conduct of our preclinical studies and clinical trials;

? expenses incurred to acquire, develop and manufacture preclinical study and clinical trial materials; and

? facility and equipment costs, including depreciation expense, maintenance and allocated direct and indirect overhead costs.

Research and development expenses (net of grants) are recognized in the consolidated statements of operations when incurred.

Through December 31, 2021, we have received an aggregate of approximately $37.3 million in grants from the Israeli Innovation Authority, or the IIA, including from the Bereshit Consortium sponsored by the IIA, of which $34.7 million is royalty-bearing grants, and $2.6 million is non-royalty-bearing grants, and all of which was awarded for research and development funding. Pursuant to the terms of the royalty-bearing grants, we are obligated to pay the IIA royalties at the rate of between 3% to 3.5% on all our revenue, up to a limit of 100% of the amounts of the U.S. dollar-linked grants received, plus annual interest calculated at a rate based on the 12-month LIBOR. We have not paid any royalties to the IIA to date. The Bereshit Consortium program does not require payments of royalties to the IIA, but all other restrictions under the Innovation Law, such as local manufacturing obligations and know-how transfer limitations, as further detailed hereunder, are applicable to the know how developed by us with the funding received in such consortium program.

The United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate, or LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit rates for LIBOR after 2021. The grants received from the IIA bear an annual interest rate based on the 12-month LIBOR. Accordingly, there is considerable uncertainty regarding the publication of LIBOR beyond the end of 2021. While it is not currently possible to determine precisely whether, or to what extent, the withdrawal and replacement of LIBOR would affect us, the implementation of alternative benchmark rates to LIBOR may increase our financial liabilities to the IIA.

In addition to paying any royalties due, we must abide by other restrictions associated with receiving such grants under the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984, which will also continue to apply to us following the repayment in full of the amounts due to the IIA. The Innovation Law restricts our ability to manufacture products and transfer technologies outside of Israel, and may impair our ability to enter into agreements that involve IIA-funded products or know-how without the approval of the IIA. Any approval, if given, will generally be subject to additional financial obligations by us. Failure to comply with the requirements under the Innovation Law may subject us to mandatory repayment of grants received by us, together with interest and penalties, as well as expose us to criminal proceedings.

In June 2017, new rules, or the Licensing Rules, were published by the IIA allowing a grant recipient to enter into licensing arrangements or grant other rights in know-how developed under IIA programs outside of Israel, subject to the prior consent of the IIA and payment of license fees, calculated in accordance with the Licensing Rules. The amount of the license fees is based on various factors, including the consideration received by the licensor in connection with the license, and shall not exceed six times the amount of the grants received by the grant recipient (plus accrued interest) for the applicable know-how being licensed. In certain cases, such as when the license consideration includes nonmonetary compensation or when a "special relationship" exists between the licensor and licensee (e.g. when a party controls the other party or is the other party's exclusive distributor), or when the agreed upon consideration does not reflect, in the IIA's opinion, the market value of the license, the IIA may base the value of the transaction on an economic assessment that it obtains for such purpose.

We are currently focused on advancing our product candidates, and our future research and development expenses will depend on their clinical success. Research and development expenses will continue to be significant and will increase over at least the next several years as we continue to develop our product candidates and conduct preclinical studies and clinical trials of our product candidates. Government grants received from the IIA are recognized as a reduction of the related research and development expenses.

We do not believe that it is possible at this time to accurately project total expenses required for us to reach commercialization of omidubicel or any of our other product candidates. However, with the objective of extending our cash runway into mid-2023, consistent with the anticipated timeline for potential U.S. approval of omidubicel, we are reducing operating expenses primarily by implementing a workforce reduction of approximately 10% and delaying other hiring and planned spending in 2022. A majority of the anticipated savings is in research and development expenses.

Commercial expenses

Commercial expenses consist primarily of personnel costs, including share-based compensation, related to executive and commercial functions, and external consulting service fees.

General and administrative expenses

General and administrative expenses consist primarily of personnel costs, including share-based compensation, related to directors, executive, finance, and administrative functions, facility costs and external professional service costs, including legal, accounting and audit services and other consulting fees.

We anticipate that we will incur increased expenses related to audit, legal, regulatory and tax-related services associated with additional reporting requirements as a result of losing our status as a foreign private issuer at the end of the 2021 fiscal year, and maintaining compliance with the Nasdaq and SEC requirements, director and officer insurance premiums, executive compensation, and other customary costs associated with being a public company subject to US domestic issuer listing requirements.

Financial expenses, net

Financial expenses, net, is our financing expenses from convertible senior notes after deducting financing income from deposits and marketable securities.

Income taxes

We have yet to generate taxable income in Israel, as we have historically incurred operating losses resulting in carry forward tax losses totaling approximately $237.4 million (including capital losses of $0.5 million) as of December 31, 2021. In addition, the US subsidiary has net operating losses carryforward of $33.1 million for federal tax purposes as of December 31, 2021. We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses. We provided a full valuation allowance, to reduce deferred tax assets to their estimated realizable value, since it is more likely than not that all of the deferred tax assets will not be realized.

        Analysis of Results of Operations
        Comparison of the years ended December 31, 2021 and 2020
        The following table summarizes our results of operations for the years ended
        December 31, 2021 and 2020:
                                                         Year ended
                                                        December 31,
                                                      2021         2020
                                                       (in thousands)
        Operating Expenses
        Research and development expenses, net(1)   $ 50,177       38,873
        Commercial expenses(1)                        20,013        8,894
        General and administrative expenses(1)        16,977       13,158
        Operating loss                                87,167       60,925
        Financial expenses, net                        2,626          648
        Net loss                                      89,793       61,573

(1) Includes share-based compensation expense as follows:

                                                     Year ended
                                                    December 31,
                                                  2021        2020
                                                   (in thousands)
        Research and development expenses, net   $ 1,384       1,099
        Commercial expenses                          947         376
        General and administrative expenses        1,902       1,893
        Total share-based compensation           $ 4,233       3,368

Research and development expenses, net

Research and development expenses, net, increased by approximately $11.3 million to $50.2 million in the year ended December 31, 2021 from $38.9 million in the year ended December 31, 2020. The increase was attributable mainly to a $5.4 million increase in clinical activities relating to the conclusion of our Phase 3 clinical trial and advancing our GDA 201 clinical program and an increase of $5.9 million in salaries and benefits, consisting primarily of additional headcount focused on clinical development.

Commercial expenses

Our commercial expenses increased by approximately $11.1 million to $20.0 million in the year ended December 31, 2021 from $8.9 million in the year ended December 31, 2020. The increase was attributable mainly to an approximate $6.5 million increase in professional services and a $4.6 million increase in salaries and benefits resulting from increased headcount within our commercial organization.

General and administrative expenses

General and administrative expenses increased by approximately $3.8 million to $17.0 million in the year ended December 31, 2021, up from $13.2 million in the year ended December 31, 2020. The increase was attributable to a $2.6 million increase in professional services expenses related to general company growth and of $1.2 million increase in salaries and benefits resulting from increased headcount.

Financial expenses, net

Financial expenses, net, increased by approximately $2.0 million to $2.6 million in the year ended December 31, 2021, compared to $0.6 million in the year ended December 31, 2020. The increase was primarily due to $4.4 million in financing expenses from our convertible senior notes, which was offset by $1.7 million in non-cash capitalization of finance costs, non-cash expenses related to leasing liability of $0.4 million and a $0.3 million increase in interest income from cash management.

Critical Accounting Policies and Estimates

This discussion and analysis of our consolidated financial statements has been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, as set forth in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC.

Prior to 2021, we prepared our financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, as permitted in the United States, based on our status as a foreign private issuer. At the end of the 2021 fiscal year, we lost our status as a foreign private issuer, and became subject to the U.S. domestic filer requirements, one of which requires us to prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP.

We are devoting substantially all of our efforts toward research and development activities. In the course of such activities, we have sustained operating losses and we expect such losses to continue in the foreseeable future. Our accumulated deficit as of December 31, 2021 was $337.5 million and negative cash flows from operating activities during the year ended December 31, 2021 was $81.8 million. We are planning to finance our operations from our existing and potential future working capital resources and we continue to evaluate additional sources of capital and financing. However, there is no assurance that additional capital and/or financing will be available to us, and even if available, whether it will be on acceptable terms or in the amounts required. Based on our assessment of our financial position at the date of issuance of our consolidated financial statements for the year ended December 31, 2021, we believe that our existing capital resources will be adequate to satisfy our expected liquidity requirements for at least twelve months from the issuance of the consolidated financial statements.

While our significant accounting policies are more fully described in the notes to our consolidated financial statements appearing elsewhere in this annual report on Form 10-K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management's estimates and assumptions. We consider an accounting estimate to be critical if: (i) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (ii) changes in the estimate could have a material impact on our financial condition or results of operations.

Convertible senior notes

On February 15, 2021, we entered into a Note Purchase Agreement, pursuant to which Gamida Cell Ltd.'s wholly owned U.S. subsidiary, Gamida Cell Inc., issued convertible senior notes with an aggregate original principal amount of $75.0 million in a private placement. The notes are guaranteed by Gamida Cell Ltd. pursuant to an Indenture, dated February 16, 2021, between Gamida Cell Inc., Gamida Cell Ltd., and Wilmington Savings Fund Society, FSB, which is filed as exhibit to this annual report on Form 10-K.

The notes were issued on a senior unsecured basis, have a maturity date of February 15, 2026, bear 5.875% interest, and may be exchanged, at the election of the holder, for ordinary shares of Gamida Cell Ltd. at an initial per share price of $17.76, subject to adjustments. The net proceeds from the private placement were approximately $70.8 million after deducting placement agent fees, escrowed amounts and other expenses, and the transaction closed on February 16, 2021.

We account for our convertible senior notes in accordance with ASC 470-20 "Debt with Conversion and Other Options." We early adopted ASU 2020-06 using the modified retrospective approach. The convertible senior notes are accounted for as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives according to ASC 815-40.

Our convertible senior notes are included in the calculation of diluted earnings per share, or EPS, if the assumed conversion into ordinary shares is dilutive, using the "if-converted" method. This involves adding back the periodic interest expense net of taxes associated with the convertible senior notes to the numerator and by adding the shares that would be issued in an assumed conversion (regardless of whether the conversion option is in or out of the money) to the denominator for the purposes of calculating diluted EPS. Since the effect of the convertible senior notes on the diluted EPS was antidilutive, we did not include them in our calculation of the diluted EPS.

Share-based compensation

We account for share-based compensation in accordance with ASC No. 718 "Compensation - Stock Compensation," or ASC No. 718, which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the award is recognized as an expense over the requisite service periods, which is the vesting period of the respective award, on a straight-line basis when the only condition to vesting is continued service. We selected the binominal option-pricing model as the most appropriate fair value method for our option awards. The fair value of restricted shares, is based on the closing market value of the underlying shares at the date of grant. Since our initial public offering, the fair value of our ordinary shares has been determined based on the closing price of our ordinary shares on the Nasdaq Global Market. We recognize forfeitures of equity-based awards as they occur.

Recent Accounting Pronouncements

See note 2 of the accompanying audited consolidated financial statements for the year ended December 31, 2021.

Internal Control over Financial Reporting

Failure to achieve and maintain effective internal controls in accordance with

Liquidity and Capital Resources.

Sources of Liquidity

Since our inception, we have incurred losses and negative cash flows from our operations. For the years ended December 31, 2021 and December 31, 2020, we incurred a net loss of $89.8 million and $61.6 million, respectively, and net cash of $81.8 million and $50.2 million, respectively, was used in our operating activities. As of December 31, 2021 and December 31, 2020 we had working capital of $73.2 million and $108.8 million, respectively, and an accumulated deficit of $337.5 million and $247.7 million, respectively. Our principal sources of . . .

Mar 24, 2022


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