Autolus Therapeutics plc

03/20/2025 | Press release | Distributed by Public on 03/20/2025 14:34

Annual Report for Fiscal Year Ending December 31, 2024 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those set forth in the Item 1A. "Risk Factors" section of this Annual Report, our actual results could differ materially from the results described in or implied by these forward-looking statements. Please also see the section titled "Special Note Regarding Forward-Looking Statements."
We maintain our books and records in pounds sterling, our results are subsequently translated to U.S. dollars and we prepare our consolidated financial statements in accordance with U.S. GAAP. All references in this Annual Report to "$" are to U.S. dollars and all references to "£" are to pounds sterling. Our consolidated balance sheets as of December 31, 2024 and 2023 have been translated from pounds sterling into U.S. dollars at the rate of £1.00 to $1.2535 and £1.00 to $1.2730, respectively. Our consolidated statements of operations and comprehensive loss and consolidated statements of cash flows for the years ended December 31, 2024 and 2023 have been translated from pounds sterling to U.S. dollars at the rate of £1.00 to $1.2779, £1.00 to $1.2433, respectively. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as of that or any other date.
Overview
We are an early commercial-stage biopharmaceutical company developing next-generation programmed T cell therapies for the treatment of cancer and autoimmune diseases. Using our broad suite of proprietary and modular T cell programming technologies, we are engineering precisely targeted, controlled and highly active T cell therapies that are designed to better recognize target cells, break down their defense mechanisms and attack and kill these cells. We believe our programmed T cell therapies have the potential to be best-in-class and offer patients substantial benefits over the existing standard of care, including the potential for cure in some patients.
Since our inception, we have incurred significant operating losses. For the years ended December 31, 2024 and 2023, we incurred net losses of $220.7 million and $208.4 million, respectively. As of December 31, 2024, we had an accumulated deficit of $1,099.2 million.
Based on our current commercial and development plans, we believe our existing cash and cash equivalents of $227.4 million and marketable securities of $360.6 million at December 31, 2024, will be sufficient to fund our current and planned operating expenses and capital expenditure requirements through at least the next twelve months from the date of this Annual Report. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our revenues and expenses, which we have based on assumptions that may prove to be wrong and could prove to be significantly higher than we currently anticipate, could vary materially and adversely as a result of a number of factors. Management does not know whether additional financing will be on terms favorable or acceptable to us when needed, if at all. If adequate additional funds are not available when required, or if we are unsuccessful in entering into partnership agreements for further development of our product candidates, management may need to curtail its development efforts and planned operations.
Recent Developments
•AUCATZYL U.S. launch
•AUCATZYL was approved by the FDA for the treatment of adult patients with relapsed and refractory B-cell acute lymphoblastic leukemia on November 8, 2024.
•In December 2024, the National Comprehensive Cancer Network® (NCCN) added AUCATZYL to its Clinical Practice Guidelines in Oncology (NCCN Guidelines®) for the treatment of adult patients with r/r B-ALL.
•The U.S. commercial launch progresses on track, with 33 centers authorized as of March 19, 2025 (versus the Company's initial target of 30 by the end of Q1 2025), covering approximately 60% of the target U.S. patient population
•Autolus continues to expect to complete authorization of 60 treatment centers by the end of 2025, covering approximately 90% of the target patient population
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Obe-cel updates:
Obecabtagene autoleucel (obe-cel) in relapsed / refractory (r/r) adult ALL - FELIX Study
•Obe-cel is under regulatory review in both the EU and the U.K., and the Company expects to receive notification of approval status from the MHRA and EMA in second half of 2025
•Post period, Autolus submitted obe-cel for appraisal by the U.K. National Institute for Health and Care Excellence ("NICE"), and a decision is expected at the time of a potential MHRA approval
•Autolus has presented updated data on obe-cel in adult ALL at the Society of Hematologic Oncology ("SOHO") meeting in August 2024, the Lymphoma, Leukemia & Myeloma Congress in October 2024, the American Society of Hematology ("ASH") Meeting in December 2024, and post-period at TANDEM 2025. The data presented at these conferences builds on previously published obe-cel data, highlighting its tolerability and long-term responses. In addition, a health economic cost model has been presented, directly comparing the cost of serious adverse events across various comparable CAR-T cell therapies.
Obe-cel in B-cell mediated autoimmune diseases
•The Phase 1 dose confirmation study ("CARLYSLE") in refractory SLE patients is ongoing, with all six patients dosed. Autolus will present the initial data from this trial and development plans at its R&D event being held on April 23, 2025, and its are targeting the second half of 2025 for the presentation of full data with longer term follow-up.
Early stage pipeline programs and collaborations:
•Clinical programs AUTO8 and AUTO6NG are progressing, and the Company is planning updates for programs at its R&D event which will be held on April 23, 2025.
•BioNTech's product option for AUTO1/22 was not exercised as a result of BioNTech's pipeline prioritization, and has expired as of February 8, 2025.
Strategic Financing Agreements
BioNTech
On February 6, 2024, we, through our wholly owned subsidiaries, Autolus Limited and Autolus Holdings (UK) Limited entered into a License and Option Agreement (the "License Agreement") with BioNTech SE ("BioNTech") pursuant to which we granted to BioNTech an exclusive, worldwide, sublicensable license (the "License") to certain binders and to exploit products that express in vivo such binders (collectively, the "Binder Licensed Products").
In addition to the License, under the License Agreement we granted to BioNTech several time-limited options (the "Options") to acquire additional rights to specified clinical-stage product candidates, binders and technologies, described in more detail below. In the event that all Options are fully exercised, we would be eligible to receive future maximum aggregate payments of up to $582.0 million pursuant to the License Agreement. This maximum amount includes the potential milestone payments for the Binder Licensed Products described below, all option exercise fees and potential milestone payments for licenses to optioned products and technologies, and additional payments that BioNTech may pay to us for an increased revenue interest with respect to obe-cel as described below.
License and Options
In consideration for the License and the Options, BioNTech has made an initial payment to us of $10.0 million. We are eligible to receive milestone payments of up to $32.0 million in the aggregate upon the achievement of specified clinical development and regulatory milestones for each Binder Licensed Product that achieves such milestones. We are also eligible to receive a low single-digit royalty on net sales of Binder Licensed Products, subject to customary reductions, which reductions are subject to specified limits. The royalty will be increased if BioNTech, its affiliates or sublicensees commercialize a Binder Licensed Product in an indication and country in which we or our affiliates or licensees also commercialize a product containing the same binders. Under the License Agreement, BioNTech is solely responsible for, and has sole decision-making authority with respect to, at its own expense, the exploitation of Binder Licensed Products.
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Under the terms of the License Agreement, we have agreed to grant BioNTech the following time-limited Options:
•an option to obtain exclusive rights to co-fund development costs of our development-stage programs AUTO1/22 and AUTO6NG, in return for agreed upon economic terms, including an option exercise fee, milestone payments and a profit-sharing arrangement for each such product candidate, with additional options to co-promote or co-commercialize such product candidate. The product option for AUTO1/22 was not exercised and has expired as of February 8, 2025;
•an option to obtain an exclusive worldwide license to exploit products that express certain additional binders in vivo or, with respect to certain binders, in an antibody drug conjugate (the "Binder Option");
•an option to obtain a co-exclusive worldwide license to exploit products that express in vivo our modules for activity enhancement, with a non-exclusive right, in certain agreed instances, to exploit products that include our modules for activity enhancement but do not express in vivo such modules (the "Activity Enhancement Option"); and
•an option to obtain a non-exclusive worldwide license to exploit products that contain our safety switches (the "Safety Switch Option" and, together with the Binder Option and the Activity Enhancement Option, the "Technology Options").
The option exercise fee for each Technology Option is a low seven-digit amount. Each of the Activity Enhancement Option and the Safety Switch Option must be exercised with respect to a given biological target or combination of targets. There is a cap on the total option exercise fee if multiple options are exercised with respect to a given target.
There is also a cap on milestone payments across all agreements entered into as the result of BioNTech exercising one or more of the Technology Options and a cap on the royalty rate payable on any given product for which multiple Options are exercised.
Obe-cel Product Revenue Interest
Under the License Agreement, BioNTech has also agreed to financially support the expansion of the clinical development program and planned commercialization of obe-cel. In exchange for our grant of rights to future revenues from the sales of obe-cel products, BioNTech made an upfront payment to us of $40 million. We will pay BioNTech a low single-digit percentage of annual net sales of obe-cel products, including revenues from sales of AUCATZYL, which may be increased up to a mid-single digit percentage in exchange for milestone payments of up to $100 million in the aggregate on achievement of certain regulatory events for specific new indications upon BioNTech's election. We expect to make initial payments of the revenue interest to BioNTech in 2025.
Manufacturing and Commercial Agreement
Under the terms of the License Agreement, we have granted BioNTech the option to negotiate a joint manufacturing and commercial services agreement pursuant to which we and they may access and leverage each other's manufacturing and commercial capabilities, in addition to our commercial site network and infrastructure, with respect to certain of each parties' CAR T products, including BioNTech's product candidate BNT211 (the "Manufacturing and Commercial Agreement").
Securities Purchase Agreement, Registration Rights Agreement and Letter Agreement
Concurrently with the execution of the License Agreement, we and BioNTech entered into a Securities Purchase Agreement (the "Purchase Agreement") pursuant to which we issued and sold 33.3 million ADSs to BioNTech at $6.00 per ADS for aggregate gross proceeds of $200.0 million.
In the event that we and BioNTech enter into the Manufacturing and Commercial Agreement described above within 18 months of the initial closing under the Purchase Agreement, BioNTech will purchase additional ADSs, not to exceed 15.0 million ADSs, for an aggregate purchase price of up to $20.0 million. The total number of ADSs that may be issued to BioNTech is subject to additional limitations and restrictions. BioNTech also has the right to purchase equity securities sold by us in bona fide financing transactions in amounts that are based on BioNTech maintaining specified ownership thresholds following such financing transactions.
Blackstone
Pursuant to the Blackstone Collaboration Agreement, Blackstone agreed to pay the Company up to $150.0 million to support the continued development of obe-cel, as well as next generation product therapies of obe-cel in B-cell malignancies. These payments include (i) an upfront payment of $50.0 million and (ii) up to $100.0 million payable based on the achievement of certain specified clinical, manufacturing and regulatory milestones (each such payment, a "Blackstone Development Payment" and collectively, the "Blackstone Development Payments")
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In November 2021, the upfront payment of $50.0 million was paid by Blackstone upon execution of the Blackstone Collaboration Agreement. In December 2022, two Blackstone Development Payments were paid by Blackstone of $35.0 million each as a result of (i) the joint steering committee's review of Autolus' interim analysis of pivotal FELIX Phase 2 clinical trial of obe-cel in relapsed/refractory ("r/r") adult Acute Lymphoblastic Leukemia ("B-ALL") and (ii) achievement of a pre-agreed manufacturing milestone as a result of completion of planned activities demonstrating the performance and qualification of the Company's obe-cel's manufacturing process. In December 2024, the remaining $30.0 million Blackstone Development Payment was paid to the Company on the approval of AUCATZYL by the FDA. The Company considers the achievement of the specified regulatory milestone as probable when actually achieved (i.e., when the contingency resolves).
Financial Operations Overview
License Revenue
We account for our revenue pursuant to the provisions of ASC Topic 606.We have one product approved for commercial sale but have not generated any revenue from commercial product sales through the period covered by this Annual Report. Rather, our total revenue to date has been generated principally from license agreements. During the year ended December 31, 2024, we entered into various license agreements which included non-refundable upfront license fees, options for future commercial licenses, payments based upon achievement of clinical development and regulatory objectives, payments based upon achievement of certain levels of product sales, and royalties on licensed product sales.
In determining the appropriate amount of revenue to be recognized in relation to each license agreement, we perform the following steps: (i) identify the promised goods or services in the contract; (ii) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measure of the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations based on estimated selling prices; and (v) recognize of revenue when (or as) we satisfy each performance obligation.
License Fees and Multiple Element Arrangements
If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, upfront fees allocated to the license at such time as the license is transferred to the licensee and the licensee is able to use, and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligations to determine whether the combined performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress at each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
Appropriate methods of measuring progress include output methods and input methods. In determining the appropriate method for measuring progress, we consider the nature of service that we promise to transfer to the customer. When we decide on a method of measurement, we will apply that single method of measuring progress for each performance obligation satisfied over time and will apply that method consistently to similar performance obligations and in similar circumstances.
Customer Options
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 that are not determined to be material rights are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. We evaluate 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 determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. We allocate the transaction price to material rights based on the relative standalone selling price, which is determined based on any identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised.
Contingent Research Milestone Payments
ASC Topic 606 constrains the amount of variable consideration included in the transaction price in that either all, or a portion, of an amount of variable consideration should be included in the transaction price. The variable consideration amount should be included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The assessment of whether variable consideration should be constrained is largely a qualitative one that has two elements: the likelihood of a change in estimate, and the magnitude thereof. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized is not significant, for example.
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If the consideration in a contract includes a variable amount, we will estimate the amount of consideration in exchange for transfer of promised goods or services. The consideration also can vary if our entitlement to the consideration is contingent on the occurrence or non-occurrence of a future event. We consider contingent research milestone payments to fall under the scope of variable consideration, which should be estimated for revenue recognition purposes at the inception of the contract and reassessed ongoing at the end of each reporting period.
We assess whether contingent research milestones should be considered variable consideration that should be constrained and thus not part of the transaction price. This includes an assessment of the probability that all or some of the milestone revenue could be reversed when the uncertainty around whether or not the achievement of each milestone is resolved, and the amount of reversal could be significant.
U.S. GAAP provides factors to consider when assessing whether variable consideration should be constrained. All of the factors should be considered, and no factor is determinate. We consider all relevant factors.
Royalty Revenue
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Cost of Sales
Cost of sales represents production costs including raw materials, employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in commercial manufacturing functions, external manufacturing costs including outsourced professional expenses services, allocated facilities costs, depreciation and other expenses, and other costs incurred in bringing inventories to their location and condition prior to sale. Cost of sales may also include costs related to excess or obsolete inventory adjustment charges and amortization expense of intangible assets.
Research and Development Expenses, net
Research and development expenses, net ("R&D") consist of costs incurred in connection with the research and development of our product candidates, which are partially offset by research and development tax credits, including tax credits arising from the U.K. small and medium enterprise ("SME") regime and research and development expenditure credit ("RDEC") regime provided by His Majesty's Revenue and Customs ("HMRC"). We expense research and development costs as incurred. These expenses include:
•expenses incurred under agreements with CROs, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
•manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials;
•employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in research and development functions;
•expenses incurred for outsourced professional scientific development services;
•costs for laboratory materials and supplies used to support our research activities;
•allocated facilities costs, depreciation and other expenses, which include rent and utilities; and
•upfront, milestone and management fees for maintaining licenses under our third-party licensing agreements.
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants and CROs in connection with our preclinical development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under license agreements. We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to oversee research and development as well as for managing our preclinical development, process development, manufacturing and clinical development activities.
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Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next few years as we increase personnel costs, initiate and conduct additional clinical trials and prepare regulatory filings related to our product candidates. We also expect to incur additional expenses related to milestone, royalty payments and maintenance fees payable to third parties with whom we have entered into license agreements to acquire the rights related to our product candidates.
After consultation, we have been advised by HMRC that any sale of our obe-cel CAR T therapy to U.K. customers in the future will be considered an exempt supply from a U.K. VAT perspective. Consequently, we have assessed and restricted the amount of U.K. VAT we have historically reclaimed and will continue to do so in the future. The restriction will be based on the estimated U.K. market turnover as a percentage of global turnover. We currently expect revenue from U.K. customers to only represent a small proportion of our overall activity. If the proportion of revenue from U.K. customers increases this would further restrict the amount of U.K. input VAT recovered. Included in research and development expenses is historical irrecoverable input VAT previously claimed on research and development expenses and subsequently reversed.
The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from sales of any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with development and commercialization activities, including the uncertainty of:
•the scope, progress, outcome and costs of our clinical trials and other research and development activities, including establishing an appropriate safety profile with IND-directed studies;
•successful patient enrollment in, and the initiation and completion of, clinical trials;
•the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
•establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
•development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial manufacturing;
•obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
•significant and changing government regulation;
•launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;
•maintaining a continued acceptable safety profile of the product candidates following approval; and
•significant competition and rapidly changing technologies within the biopharmaceutical industry.
We may never succeed in achieving regulatory approval for any of our product candidates other than AUCATZYL. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. Any changes in the outcome of any of these variables with respect to the development of our product candidates in clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the European Medicines Agency ("EMA"), the FDA,or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. Commercialization of our product candidates will take several years and millions of dollars in development costs.
U.K. Research and Development Tax Credits
Research and development expenditure is presented net of reimbursements from reimbursable tax and expenditure credits from the U.K. government. As a company that carries out extensive research and development activities, we benefit from the SME regime and, to the extent that our projects are grant funded, the RDECregime.
The benefits from U.K. research and development tax credits are recognized in the statements of operations and comprehensive loss as a reduction of research and development expenses and represents the sum of the research and development tax credits recoverable in the U.K.
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The SME program has been particularly beneficial to us, as under such program the trading losses that arise from our qualifying R&D activities can be surrendered for a cash rebate of up to 33.35% of qualifying expenditure incurred prior to April 1, 2023 and decreasing to 18.6% after April 1, 2023. The U.K. Government also enacted further changes to the SME regime effective from April 1, 2023 (with some amendments effective for accounting periods commencing after April 1, 2024) which included the introduction of a new rate for R&D intensive companies of 27%. Qualifying expenditures largely comprise employment costs for research staff, consumables, outsourced contract research organization costs and utilities costs incurred as part of research projects for which we do not receive income. A large proportion of costs in relation to our pipeline research, clinical trials management and manufacturing development activities, all of which are being carried out by our subsidiary Autolus Limited, are eligible for inclusion within these tax credit cash rebate claims.
Under the RDEC program, tax credits for qualifying R&D expenditure incurred prior to April 1, 2023 are granted at a headline rate of 13% and can generate cash rebates of up to 10.5% of qualifying R&D expenditure. The headline rate of RDEC increased to 20% on April 1, 2023 and can generate cash rebates of up to 15% on qualifying R&D expenditure incurred from this date.
Amendments to the current SME and RDEC programs contained in the Finance Act 2024 (unless limited exceptions apply) introduce restrictions on the tax relief that can be claimed for expenditure incurred on sub-contracted R&D activities or externally provided workers, where such sub-contracted activities are not carried out in the U.K. or such workers are not subject to U.K. payroll taxes, and (ii) merge the SME and RDEC programs into a single scheme which would generate net cash benefit of up to 15% of the qualifying expenditure for profit making companies and up to 16.2% for loss making companies. These changes take effect from periods commencing after April 1, 2024.
In the accounting period ended December 31, 2024, we met the conditions of the SME regime, but we could also make claims under the RDEC regime to the extent that our projects are grant funded. In addition, based on the relevant tax legislation, we may meet the conditions of the R&D intensive scheme. From January 2025, we will not qualify as a small or medium-sized enterprise under the SME program, based on size criteria concerning employee headcount, turnover and gross assets. However, we may make a claim under the merged RDEC regime for periods ending December 31, 2025. It should be noted, however, that the types of qualifying expenditure in respect of which we may make claims under the RDEC regime are more restricted than under the SME regime (for example, it may be the case that certain subcontracted costs in respect of which claims may be made under the SME regime do not qualify for relief under the RDEC regime).
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, related benefits, travel and share-based compensation expense for personnel in executive, finance, legal and other administrative functions. Selling, general and administrative expenses also include allocated facility-related costs, patent filing and prosecution costs and professional fees for marketing, insurance, legal, consulting, accounting and audit services. Included in general and administrative expenses is historical irrecoverable input VAT previously claimed on general and administrative expenses and subsequently reversed.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the planned development of our product candidates. We anticipate an increase in salaries and related benefits as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of AUCATZYL and our other product candidates.
We have experienced, and expect to continue to experience, increased expense with being a public company, including increased accounting, audit, legal, regulatory and compliance costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer insurance premiums, as well as higher investor and public relations costs. Additionally, should we fail to maintain our status as a foreign private issuer, we would expect to incur increased expenses to remain compliant with applicable SEC and Nasdaq requirements.
Loss on disposal of property and equipment
Loss on disposal of property and equipment primarily consists of losses arising from the disposal of all categories of property and equipment.
Impairment of operating lease right-of-use assets and related property and equipment
Impairment of operating lease right-of-use assets and related property and equipmentconsists primarily of impairment losses arising from the impairment of leased properties and leasehold improvements that are currently not be utilized by us.
Other Income, net
Other income (expense), net consists primarily of sublease income and gains or losses arising from the termination of leases.
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Foreign exchange (losses) gains, net
Foreign exchange (losses) gains, net consist of foreign currency transaction gains and losses arising from transactions denominated in foreign currencies.
Interest Income
Interest income primarily relates to interest on cash, cash equivalents and available-for-sale debt securities and is presented net of amortization or accretion of the premium or discount on purchase and sales of the debt securities.
Interest Expense, Net
Interest expense, net consists primarily of interest expense arising from amortization of the liabilities related to future royalties and milestones, pursuant to our collaboration agreements with Blackstone and BioNTech, using the effective interest rate method. On a quarterly basis, we assess the expected present value of the future Blackstone and BioNTech payments under the Blackstone Collaboration Agreement and BioNTech Agreements which may be received by us and future royalties and sales milestone payments to Blackstone and BioNTech which may be paid by us. To the extent the amount or timing of such receipts or payments is materially different than our previous estimates we record a cumulative catch-up adjustment to the liabilities related to future royalties and milestones. The adjustment to the carrying amount is recognized as an adjustment to interest expense in the period in which the change in estimate occurred.
Income Tax (Expense) Benefit
We are subject to corporate taxation in the U.K., U.S., Germany and Switzerland. Due to the nature of our business, we have generated losses since inception. Our income tax (expense) benefit recognized represents the sum of income tax payable or receivable in the U.K. and in the U.S.
Un-surrendered U.K. losses may be carried forward indefinitely to be offset against future taxable profits, subject to numerous utilization criteria and restrictions. The amount that can be offset each year is limited to £5.0 million plus an incremental 50% of United Kingdom taxable profits. After accounting for tax credits receivable, we had accumulated tax losses for carry forward in the U.K. of $545.6 million at December 31, 2024 and $418.1 million at December 31, 2023. No deferred tax assets are recognized on our U.K. losses and tax credit carryforwards because there is currently no indication that we will make sufficient taxable profits to utilize these tax losses and tax credit carryforwards. We carry a $3.2 million deferred tax asset balance related to the U.S. entity at December 31, 2024. We have recorded a valuation allowance against the net deferred tax asset where the recoverability due to future taxable profits is unknown. On April 1, 2023 the main rate of the U.K. corporation tax was increased to 25% for companies with profits in excess of £250,000, or the small profits rate of 19% for companies with profits of £50,000 or less (with marginal relief from the main rate available to companies with profits between £50,000 and £250,000).
In the event we generate profits in the future, we may benefit from the U.K. "patent box" regime that allows profits attributable to revenues from patents or patented products to be taxed at an effective rate of 10%.
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Results of Operations
Comparison of Years Ended December 31, 2024and 2023
The following table summarizes our results of operations for the years ended December 31, 2024and 2023(in thousands):
Year Ended December 31,
Change (in thousands)
Change (in percentage)
2024 2023
Product revenue, net
$ - $ - $ - - %
License revenue 10,120 1,698 8,422 496 %
Total revenue, net
10,120 1,698 8,422 496 %
Cost and operating expenses:
Cost of sales
(11,387) - (11,387) 100 %
Research and development expenses, net (138,436) (130,481) (7,955) 6 %
Selling, general and administrative expenses (101,086) (46,745) (54,341) 116 %
Loss on disposal of leasehold improvements (223) (3,791) 3,568 (94) %
Impairment of operating lease right-of-use assets and related property and equipment
(414) (382) (32) 8 %
Loss from operations
(241,426) (179,701) (61,725) 34 %
Other income, net
220 222 (2) (1) %
Foreign exchange (losses) gains, net
(989) 2,639 (3,628) (137) %
Interest income 32,355 13,505 18,850 140 %
Interest expense, net
(9,294) (45,067) 35,773 (79) %
Total other income (expense), net
22,292 (28,701) 50,993 (178) %
Net loss before income tax (219,134) (208,402) (10,732) 5 %
Income tax (expense) benefit
(1,528) 19 (1,547) (8142) %
Net loss
$ (220,662) $ (208,383) $ (12,279) 6 %
License Revenue
License revenue amounting to $10.1 million for the year ended December 31, 2024 related to license revenue recognized pursuant to the License and Option Agreement with BioNTech. License revenue of $1.7 million for the year ended December 31, 2023 primarily related to the execution of the Cabaletta Bio Inc. ("Cabaletta") Option and License Agreement, which included recognition of a non-refundable license fee and license revenue from an investee of Syncona Portfolio Limited, which is a holder of more than 10% of our share capital.
Cost of Sales
Cost of sales amounting to $11.4 million was recognized from November 8, 2024, the date of the FDA approval of AUCATZYL, to December 31, 2024, consisting primarily of salaries and other employment related costs, including share-based compensation expense, for employees engaged in manufacturing activities related to AUCATZYL, as well as outsourced professional services. It also consisted of direct production costs relating to commercial product manufactured, and allocated facility costs including maintenance, depreciation, utilities and rent.
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Research and Development Expenses
The following tables provide additional detail on our R&D expenses (in thousands):
Year Ended December 31,
Change (in thousands)
Change (in percentage)
2024 2023
Direct research and development expenses
B cell malignancies (Obe-cel, AUTO1/22 & AUTO3)
$ 24,370 $ 22,855 $ 1,515 7 %
Other projects (AUTO4, AUTO5, AUTO6, AUTO7 & AUTO8)
2,003 3,098 (1,095) (35) %
Total direct research and development expense
26,373 25,953 420 2 %
Research and development expense and unallocated costs:
Personnel related (including share-based compensation)
74,329 63,542 10,787 17 %
Indirect research and development expense*
37,734 40,986 (3,252) (8) %
Total research and development expenses
$ 138,436 $ 130,481 $ 7,955 6 %
* Indirect research and development expense includes U.K. research and development tax credits
Research and development expenses increased by $7.9 million to $138.4 million for the year ended December 31, 2024 from $130.5 million for the year ended December 31, 2023 primarily due to:
•an increase of $12.0 million in salaries and other employment related costs including share-based compensation expense, which was mainly driven by an increase in the number of employees engaged in research and development activities;
•an increase of $3.6 million in clinical trial costs, manufacturing costs and material transportation costs relating to research and development activities;
•a decrease of $5.2 million in legal fees and professional consulting fees in relation to our research and development activities;
•a decrease of $2.2 million related to our information technology infrastructure and support for information systems related to our research and development activities and facilities offset by an increase in depreciation and amortization related to property and equipment; and
•an increase of $0.3 million in U.K. R&D tax credits (decrease in R&D expense) due primarily to an increase in qualifying research and development expenditures related to the SME scheme.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $54.3 million to $101.0 million for the year ended December 31, 2024 from $46.7 million for the year ended December 31, 2023 primarily due to:
•an increase of $29.1 million in salaries and other employment related costs including share-based compensation expenses, which was mainly driven by an increase in the number of employees engaged in general and administrative activities;
•an increase of $22.1 million in commercial readiness costs including legal and professional fees due to increased commercial readiness activities being undertaken; and
•an increase of $3.1 million in information technology infrastructure and support for information systems and facility costs relating related to the conduct of corporate and commercial operations and the increase in space utilized for general and administrative activities and related to general office expenses.
Loss on Disposal of Property and Equipment
For the year ended December 31, 2024, a loss on disposal of $0.2 million was recognized related to a manufacturing facility in Stevenage, U.K that we exited. For the year ended December 31, 2023, we recognized a loss on disposal of property and equipment of $3.8 million related to fixed assets no longer being utilized in the manufacturing facility exited in Stevenage, United Kingdom.
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Foreign Exchange (Losses) Gains, Net
Foreign exchange (losses) gains, net decreased to a loss of $1.0 million for the year ended December 31, 2024 from a gain of $2.6 million for the year ended December 31, 2023. The (loss)/gain arises on a variety of items, including on U.S. dollar monetary assets and liabilities held by our main operating subsidiary in the U.K., including our cash and cash equivalents and liabilities related to future royalties and milestones.
Interest Income
Interest income increased to $32.4 million for the year ended December 31, 2024, as compared to $13.5 million for the year ended December 31, 2023. The increase in interest income of $18.9 million primarily relates to higher account balances associated with our cash, cash equivalents and marketable securities during the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Interest Expense, Net
Interest expense, net decreased to $9.3 million for the year ended December 31, 2024 as compared to $45.1 million for the year ended December 31, 2023. Interest expense, net decreased by $35.8 million primarily due to changes in the assumptions used in the valuation of the Collaboration Agreement with Blackstone and the BioNTech License and Option Agreement for the year ended December 31, 2024 compared to the year ended December 31. 2023.
Liquidity and Capital Resources
Since our inception, we have not generated any commercial product revenue and have incurred operating losses and negative cash flows from our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we market AUCATZYL and advance our other product candidates through preclinical and clinical development and seek regulatory approval and pursue commercialization of any additional approved products. As a result, we will need significant additional capital to fund our operations until such time as we can generate significant revenue from sales of AUCATZYL or other products.
As of November 8, 2024, we have one product approved for commercial sale in the United States, AUCATZYL, of which the first commercial sale of AUCATZYL in the United States was made during January 2025. We have funded our operations to date primarily with proceeds from government grants, sales of our equity securities, through public offerings and pursuant to our at-the-equity market facility, through U.K. research and development tax credits and receipts from the SME and RDEC schemes, out-licensing arrangements and strategic collaboration and financing agreements. From our inception in 2014 through December 31, 2024, we have raised an aggregate of $1.7 billion from these capital sources.
As of December 31, 2024, we had cash and cash equivalents on hand of $227.4 million and available-for-sale debt securities of $360.6 million.
Cash Flows
The following table summarizes our cash flows for each of the periods presented (in thousands):
Year Ended December 31,
2024 2023
Net cash used in operating activities $ (206,271) $ (145,587)
Net cash used in investing activities (394,552) (10,986)
Net cash provided by (used in) financing activities
589,554 (883)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (261) 15,030
Net decrease in cash, cash equivalents and restricted cash
$ (11,530) $ (142,426)
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Net Cash Used in Operating Activities
During the year ended December 31, 2024, operating activities used $206.3 million of cash, resulting from our net loss of $220.7 million, and net cash used resulting from changes in our operating assets and liabilities of $23.6 million, partially offset by non-cash charges of $38.0 million. The non-cash charges related to interest expense accrued and cumulative catch-up adjustment of $8.9 million, share-based compensation of $15.5 million, depreciation and amortization of $7.6 million, non-cash operating lease expense of $4.7 million, foreign exchange differences of $1.9 million, impairment of operating lease right-of-use assets and related property and equipment of $0.4 million, loss on disposal of leasehold improvements of $0.2 million, and loss on termination of operating lease of $0.2 million which is partially offset by accretion of available-for-sale securities of $1.2 million and a deferred income tax movement of $0.2 million. Net cash used in operating activities resulting from changes in our operating assets and liabilities for the year ended December 31, 2024 consisted primarily of an increase in accrued expenses and other liabilities of $11.9 million, an increase in accounts payable of $1.6 million, offset by a $32.5 million increase in prepaid expenses and other current and non-current assets, an increase in inventories of $4.2 million, and a decrease in a $0.4 million in operating lease liabilities.
During the year ended December 31, 2023, operating activities used $145.6 million of cash, resulting from our net loss of $208.4 million, partially offset by net cash used resulting from changes in our operating assets and liabilities of $0.3 million and non-cash charges of $62.5 million. The non-cash charges related to interest expense accrued and cumulative catch-up adjustment of $45.0 million, share-based compensation of $11.2 million, depreciation and amortization of $6.6 million, non-cash operating lease expense of $4.1 million, loss on disposal of leasehold improvements of $3.8 million, impairment of operating lease right-of-use assets and related property and equipment of $0.4 million and loss on termination of operating lease of $0.1 million which is partially offset by foreign exchange differences of $7.6 million and a deferred income tax movement of $1.0 million. Net cash used in operating activities resulting from changes in our operating assets and liabilities for the year ended December 31, 2023 consisted primarily of a decrease in a $13.6 million in operating lease liabilities and a decrease in accounts payable of $0.5 million, offset by a $12.4 million decrease in prepaid expenses and other current and non-current assets, a decrease in long-term deposits of $0.9 million and an increase in accrued expenses and other liabilities of $1.0 million.
Net Cash Used In Investing Activities
During the year ended December 31, 2024, we used $394.5 millionof cash in investing activities, including purchases of marketable securities of $359.7 million, purchases of property and equipment of $22.1 million, and acquisition of intangible assets of $12.7 million.
During the year ended December 31, 2023, we used $11.0 million of cash in investing activities which consisted primarily of purchases of property and equipment.
Net Cash Provided By (Used In) Financing Activities
During the year ended December 31, 2024, net cash provided financing activities was $589.6 million related to net aggregate proceeds raised from the BioNTech Agreements, our underwritten offering of ADSs and a Blackstone Development Payment paid by Blackstone to us upon the FDA approval of AUCATZYL.
During the year ended December 31, 2023, net cash used in financing activities was $0.9 millionwhich pertains primarily to payments of equity issuance costs relating to a prior equity financing transaction..
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we begin to market and sell AUCATZYL, operate our new commercial manufacturing facility and advance the preclinical activities and clinical trials of our other product candidates. Our expenses will increase as we:
•establish and expand our sales, marketing and distribution infrastructure in connection with commercializing AUCATZYL and other product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly;
•seek regulatory approvals for any other product candidates that successfully complete preclinical and clinical trials;
•hire additional manufacturing, clinical, medical and development personnel;
•expand our infrastructure and facilities to accommodate our growing employee base; and
•maintain, expand and protect our intellectual property portfolio.
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Our primary uses of capital are compensation and related expenses, clinical costs, external research and development services, laboratory and related supplies, legal and other regulatory expenses, and administrative and overhead costs. Our future funding requirements will be heavily determined by the resources needed to support the development of our product candidates and commercialization of AUCATZYL. We also expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. We may also require additional capital to pursue in-licenses or acquisitions of other product candidates.
Based on our current clinical development and commercialization plans, we believe our existing cash and cash equivalents of $227.4 million and available-for-sale debt securities of $360.6 million at December 31, 2024, will enable us to fund our current and planned operating expenses and capital expenditure requirements for at least twelve months from the issuance of this Annual Report. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If we receive regulatory approval for our other product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. We may also require additional capital to pursue in-licenses or acquisitions of other product candidates.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:
•our ability to continue to execute our commercialization strategies for AUCATZYL and, if approved, our other product candidates;
•the scope, progress, outcome and costs of our clinical trials and other research and development activities;
•the costs, timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
•the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for AUCATZYL or any of our product candidates for which we receive marketing approval;
•the revenue, if any, received from commercial sale of AUCATZYL or our other product candidates, should any receive marketing approval;
•the costs and timing of hiring new employees to support our continued growth;
•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and
•the extent to which we in-license or acquire additional product candidates or technologies.
Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity offerings, reimbursable U.K. research and development tax credits and receipts from the SME and RDEC schemes, out-licensing agreements, or strategic collaboration agreements. To the extent that we raise additional capital through the sale of equity, the ownership interest of existing shareholders will be diluted. If we raise additional funds through other third-party funding, collaborations agreements, strategic alliances, out-licensing agreements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
Operating Lease, Purchase, and Other Obligations
Operating leases
As of December 31, 2024, we had operating lease obligations of $52.6 million under non-cancellable leases for laboratory and office property in the United Kingdom and the United States. Further details of our operating leases are provided in Note 19 to our consolidated financial statements included in this Annual Report as well as Part I, Item 2 of this Annual Report.
Capital expenditures and purchase obligations
We enter into contracts in the normal course of business with CROs and other third parties for clinical trials and preclinical research studies and testing. These contracts are generally cancellable by us upon prior notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancellable obligations of our service providers, up to the date of cancellation.
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As of December 31, 2024, our unconditional purchase obligations for capital expenditures totaled $17.5 million and included signed orders for capital equipment and capital expenditure for construction and related expenditure relating to our properties in the U.K. and the United States. We expect to incur the full amount of these obligations within one year.
As of December 31, 2024, our unconditional purchase obligations for reagents and disposables totaled $0.6 million, which we expect to incur within one year.
Financing obligations
Blackstone CollaborationAgreement
Pursuant to the Blackstone Collaboration Agreement, entered into on November 6, 2021, Blackstone agreed to pay us up to $150 million to support the continued development of our CD19 CAR T cell investigational therapy product candidate, obecabtagene autoleucel (obe-cel), as well as next generation product therapies of obe-cel in B-cell malignancies. These payments include (i) an upfront payment of $50 million and (ii) up to $100 million payable based on the achievement of certain specified clinical, manufacturing and regulatory milestones (each such payment, a "Blackstone Development Payment" and collectively, the "Blackstone Development Payments"). In exchange for the Blackstone Development Payments, we agreed to make payments to Blackstone (the "Revenue Share Payments") equal to a mid-single digit royalty, subject to the Aggregate Cap (as defined in the Blackstone Collaboration Agreement) on payments under the Blackstone Collaboration Agreement, based on net sales anywhere in the world of (i) Collaboration Products in B-cell malignancies, (ii) subject to certain conditions set forth in the Blackstone Collaboration Agreement, its CD19 and CD22 CAR T cell investigational therapy product candidate known as AUTO3 in B-cell malignancies, and (iii) certain Collaboration Products to the extent developed or commercialized in indications other than a B-cell malignancy ("Obe-cel Franchise Products"). We are also obligated to make payments (the "Sales Milestone Payments"), subject to the Aggregate Cap, if certain cumulative net sales levels are achieved.
In November 2021, the upfront payment of $50 million was paid by Blackstone upon execution of the Blackstone Collaboration Agreement. In December 2022, two Blackstone Development Payments were paid by Blackstone of $35 million each as a result of (i) the joint steering committee's review of Autolus' interim analysis of pivotal FELIX Phase 2 clinical trial of obe-cel in relapsed/refractory ("r/r") adult Acute Lymphoblastic Leukemia ("B-ALL") and (ii) achievement of a pre-agreed manufacturing milestone as a result of completion of planned activities demonstrating the performance and qualification of the Company's obe-cel's manufacturing process. In December 2024, the remaining $30 million Blackstone Development Payment was paid to the Company on the approval of AUCATZYL by the FDA. The Company considers the achievement of the specified regulatory milestone as probable when actually achieved (i.e., when the contingency resolves). Further details of the Blackstone Collaboration Agreement are provided in Note 11 to our consolidated financial statements included in this Annual Report.
BioNTech CollaborationAgreement
Obe-cel Revenue Interest
Under the BioNTech License Agreement, BioNTech has also agreed to financially support the expansion of the clinical development program and planned commercialization of obe-cel. In exchange for our grant of rights to future revenues from the sales of obe-cel, BioNTech made an upfront payment to us of $40 million. In addition, BioNTech made an upfront payment of $10 million in consideration for licenses and options granted under the agreement. We will pay BioNTech a low single-digit percentage of annual net sales of obe-cel, which may be increased up to a mid-single digit percentage in exchange for milestone payments of up to $100 million in the aggregate on achievement of certain regulatory events for specific new indications upon BioNTech's election.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
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Allocation of transaction price using the relative standalone selling price
Upfront payments are allocated between performance obligations using our best estimate of the relative standalone selling price of the performance obligation. The relative standalone selling price is estimated by determining the market values of development and license obligations. As these inputs are not directly observable, the estimate is determined considering all reasonably available information including internal pricing objectives used in negotiating the contract, taking into account the different stage of development of each development program and consideration of adjusted-market data from comparable arrangements. Where performance obligations have been identified relating to material rights, the determination of the relative standalone selling price of these performance obligations also includes an assessment of the likelihood that the options will be exercised and any payments by the customer that are triggered upon exercising the right. This assessment involves significant judgment and could have a significant impact on the amount and timing of revenue recognition.
An assessment of the allocation of transaction price using the relative standalone selling price was required for the year ended December 31, 2024and 2023 for the BioNTech License and Option Agreement, the Research, Option and License Agreement with Cabaletta and Research, Option and License Agreement with an investee of Syncona Portfolio Limited, respectively.
Liabilities related to future royalties and milestones, net and cumulative catch-up adjustments
We accounted for the Blackstone Collaboration Agreement ("Blackstone Collaboration Agreement Liability") and the BioNTech Obe-cel Product Revenue Interest, ("BioNTech Liability") as liabilities measured at amortized cost based on an effective interest rate determined at the outset of the arrangement. The Blackstone Collaboration Agreement Liability is measured based on our current estimates of the timing and amount of expected future royalty and milestone payments to be paid and the Blackstone Development Payments expected to be received over the estimated term of the agreement. Similarly, the BioNTech Liability is measured based on our current estimates of the timing and amount of expected future royalty expected to be paid over the estimated term of the agreement. Milestone payments ("BioNTech Milestone Payments") pursuant to the BioNTech License and Option Agreement are payable upon BioNTech's election, and therefore have not been included in the determination of the effective interest rate or in the measurement of the liability.
The liabilities are amortized using the effective interest rate, resulting in recognition of interest expense over the estimated term of the agreement. Each reporting period we assess the estimated probability, timing and amount of the future expected royalty, milestone payments, the Blackstone Development Payment over the estimated term. If there are changes to the estimates, we recognize the impact to the liability's amortization schedule and the related interest expense using the catch-up method.
Our estimate of the probability, timing and amount of expected future royalties and milestones to be paid by us and the expected Blackstone Development Payment to be paid to us, considers significant unobservable inputs. These inputs include regulatory approval, the estimated patient population, estimated selling price, estimated sales, estimated peak sales and sales ramp, timing of the expected launch and its impact on the royalties as well as the overall probability of a success. Additionally, the transaction costs associated with the liability will be amortized to interest expense over the estimated term of the agreements.
The carrying amount of the Blackstone Collaboration Agreement Liability and BioNTech Liability is based on our estimate of the future royalties, milestones to be paid to Blackstone by us and the expected Blackstone Development Payment to be received over the life of the arrangement as discounted using the initial effective interest rate. The excess or deficit of estimated present value of future royalty, milestone payments and the future Blackstone Development Payment received over the carrying amount is recognized as a cumulative catch-up adjustment within interest expense, net using the effective interest rate.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, "Summary of Significant Accounting Policies," to our consolidated financial statements included in in this Annual Report.