Juno Therapeutics, Inc. - FORM 10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



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

For the fiscal year ended December 31, 2017



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

For the transition period from to _

Commission File Number: 001-36781

Juno Therapeutics, Inc.

(Exact name of registrant as specified in its charter)



Delaware		46-3656275
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
400 Dexter Avenue North, Suite 1200 Seattle, WA		98109
(Address of principal executive offices)		(Zip Code)

(206) 582-1600

(Registrant’s telephone number, including area code)

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



Title of each class		Name of each exchange on which registered
Common stock, par value $0.0001 per share		The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act. Yes ¨ No ý

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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



Large accelerated filer	ý		Accelerated filer	¨
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨
Emerging growth company	¨

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

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

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The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates as of June 30, 2017 was $1,392,784,210.

The number of shares outstanding of the registrant’s common stock as of February 21, 2018 was 116,105,371.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s Proxy Statement for the registrant’s 2018 Annual Meeting of Stockholders will be filed with the Commission within 120 days after the close of the registrant’s 2017 fiscal year and are incorporated by reference in Part III.

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Juno Therapeutics, Inc.

Annual Report on Form 10-K

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		Page
	PART I
Item 1.	Business	3
Item 1A.	Risk Factors	49
Item 1B.	Unresolved Staff Comments	97
Item 2.	Properties	97
Item 3.	Legal Proceedings	97
Item 4.	Mine Safety Disclosures	98

	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	99
Item 6.	Selected Financial and Other Data	101
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	102
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	116
Item 8.	Financial Statements and Supplementary Data	118
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	162
Item 9A.	Controls and Procedures	162
Item 9B.	Other Information	164

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	166
Item 11.	Executive Compensation	166
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	166
Item 13.	Certain Relationships and Related Transactions and Director Independence	166
Item 14.	Principal Accountant Fees and Services	166

	PART IV
Item 15.	Exhibits and Financial Statement Schedules	167
Item 16.	Form 10-K Summary	173
	Signatures	174

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PART I

Forward-Looking Statements and Market Data

This Annual Report on Form 10-K contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this report are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: "may," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "aim," "potential," "continue," "ongoing," "goal," "work to," or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.

These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this report include, but are not limited to, statements about:


•	the anticipated timing and completion of the tender offer by Blue Magpie Corporation, a subsidiary of Celgene Corporation ("Celgene Corp.");


•	the success, cost and timing of our product development activities and clinical trials;


•	our ability and the potential to successfully advance our technology platform to improve the safety and effectiveness of our existing product candidates;


•	the potential for our identified research priorities to advance our chimeric antigen receptor ("CAR") and T cell receptor ("TCR") technologies;


•	the potential of our collaboration with Celgene Corp. and a subsidiary of Celgene Corp. (collectively, "Celgene") and the ability and willingness of Celgene to be our commercialization partner outside of North America;


•	the ability and willingness of our third-party research institution collaborators to continue research and development activities relating to our product candidates;


•	the potential of our other research and development and strategic collaborations, including our collaborations with Editas Medicine, Inc. ("Editas"), Fate Therapeutics, Inc. ("Fate"), and MedImmune Limited ("MedImmune");


•	our ability to obtain orphan drug designation or breakthrough status for our CD19 product candidates and any other product candidates, or to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;


•	the ability to license additional intellectual property relating to our product candidates;


•	our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;


•	our ability to commercialize our products in light of the intellectual property rights of others;


•	our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;


•	our plans to research, develop and commercialize our product candidates;


•	the potential of the technologies we have acquired through strategic transactions, such as the acquisition of Stage Cell Therapeutics GmbH ("Stage"), X-Body, Inc. ("X-Body"), AbVitro Inc. ("AbVitro"), and RedoxTherapies, Inc. ("RedoxTherapies");


•	the size and growth potential of the markets for our product candidates, our ability to serve those markets, and the speed of uptake of our products in the marketplace;


•	regulatory developments in the United States and foreign countries;


•	our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

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•	our plans to use our manufacturing facility in Bothell, Washington for supply of product candidate for our clinical trials and for commercial production, if approved;


•	the success of competing therapies that are or may become available;


•	our ability to attract and retain key scientific, commercial, quality, manufacturing, or management personnel;


•	the accuracy of our estimates regarding expenses, success payments, future revenue, capital requirements, profitability, and needs for additional financing;


•	fluctuations in the trading price of our common stock;


•	the anticipated benefits of our litigation settlement with the Trustees of the University of Pennsylvania and Novartis;


•	the anticipated impact of recently enacted H.R. 1 (formerly called the "Tax Cuts and Jobs Act"), referred to herein as the “U.S. Tax Act”;


•	our plans for expanding manufacturing capacity; and


•	our use of the proceeds from our initial public offering and proceeds received from Celgene.

In addition, you should refer to Part I—Item 1A—"Risk Factors" in this report for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This report also contains estimates, projections and other information concerning our industry, our business, and the markets for our products and product candidates, including data regarding the estimated size of those markets, their projected growth rates, the perceptions and preferences of patients and physicians regarding certain therapies and other prescription, prescriber and patient data, as well as data regarding market research, estimates and forecasts prepared by our management. We obtained the industry, market and other data throughout this report from our own internal estimates and research, as well as from industry publications and research, surveys and studies conducted by third parties.

Unless the context requires otherwise, in this report the terms "Juno," the "Company" "we," "us" and "our" refer to Juno Therapeutics, Inc. and its wholly-owned subsidiaries on a consolidated basis.

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ITEM 1.	BUSINESS

Merger Agreement

On January 21, 2018, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Celgene Corp. and Blue Magpie Corporation, a Delaware corporation and a wholly-owned subsidiary of Celgene Corp. ("Purchaser"). Pursuant to the terms of the Merger Agreement, Purchaser has commenced a tender offer (the "Offer") for all of the outstanding shares of our common stock at a purchase price of $87.00 per share, net to the seller in cash, subject to reduction for any applicable withholding taxes (the "Offer Price"). Following the completion of the Offer and subject to the terms and conditions of the Merger Agreement, Purchaser will merge with and into Juno, with Juno surviving as a wholly-owned subsidiary of Celgene Corp., pursuant to the procedures provided for under Section 251(h) of the Delaware General Corporation Law (the "DGCL") without any stockholder approvals (the "Merger"). At the effective time of the Merger (the "Effective Time"), each outstanding share of our common stock, other than any shares owned by (i) Juno (or held in its treasury), (ii) Celgene Corp., Purchaser, or any other direct or indirect wholly-owned subsidiary of Celgene Corp., or (iii) any stockholders who are entitled to and who properly exercise and perfect appraisal rights under Delaware law (and have neither withdrawn nor lost their rights), will be automatically converted into the right to receive an amount in cash equal to the Offer Price, without interest. The Juno board of directors (the "Board") has, by unanimous vote of those directors present, approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

The Merger Agreement contains representations, warranties and covenants of the parties customary for transactions of this type, including, among others, covenants obligating Juno to continue to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the closing.

The Merger Agreement also includes covenants requiring Juno, subject in each case to certain exceptions, not to solicit, or engage in discussions with third parties relating to, alternative acquisition proposals during the period between the execution of the Merger Agreement and the closing, or to withdraw or withhold (or modify or qualify in a manner adverse to Celgene Corp.) the recommendation of the Board that Juno stockholders tender their shares of our common stock to Purchaser pursuant to the Offer.

The Merger Agreement contains certain termination rights, including the right of either party to terminate the Merger Agreement if the Offer is not consummated on or before July 23, 2018 (subject to extension in certain circumstances), the right of Juno to terminate the Merger Agreement to accept a superior proposal for an alternative acquisition transaction (so long as Juno complies with certain notice and other requirements under the Merger Agreement) and the right of Celgene Corp. to terminate due to a change of recommendation by the Board. Upon termination of the Merger Agreement by Juno or Celgene Corp. upon certain conditions, a termination fee of $300 million may be payable by Juno to Celgene Corp. Upon termination of the Merger Agreement by Juno or Celgene Corp. under certain other conditions, a termination fee of $600 million may be payable by Celgene Corp. to Juno where the conditions to the Offer related to approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), have not been satisfied.

Additional information about the Merger is set forth in our filings with the U.S. Securities and Exchange Commission (the "SEC").

Overview

We are building a fully-integrated biopharmaceutical company focused on developing innovative cellular immunotherapies for the treatment of cancer. Founded on the vision that the use of human cells as therapeutic entities will drive one of the next important phases in medicine, we are developing cell-based cancer immunotherapies based on our CAR and TCR technologies to genetically engineer T cells to recognize and kill cancer cells. Our most advanced product candidate, lisocabtagene maraleucel ("liso-cel"), also known as JCAR017, is in a potential registration trial for the treatment of relapsed or refractory ("r/r") diffuse large b cell lymphoma ("DLBCL"), and we began a Phase I/II trial with JCAR017 in r/r chronic lymphocytic leukemia ("CLL") in 2017. We have shown compelling clinical responses in clinical trials using multiple cell-based product candidates to address refractory B cell lymphomas and leukemias, and we also have a number of ongoing trials exploring our platform in multiple myeloma and solid-organ cancers and in combination with various strategies to overcome the immune-suppressive effects of cancer. In aggregate, we currently have product candidates in clinical trials targeting eight different protein targets in various cancers. Longer term, we aim to improve and leverage our cell-based platform to develop additional product candidates to address a broad range of cancers and human diseases, including moving forward our preclinical product candidates that target additional hematologic and solid-organ cancers.

Cancer is a leading cause of death in developed countries. Cancer is characterized by the uncontrolled proliferation of abnormal cells. Cancer cells contain mutated proteins and may overexpress other proteins normally found in the body at low levels. The

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immune system typically recognizes abnormal protein expression and eliminates these cells in a highly efficient process known as immune surveillance. Cancer cells’ ability to evade immune surveillance is a key factor in their growth, spread, and persistence. In the last five years, there has been substantial scientific progress in countering these evasion mechanisms using immunotherapies, or therapies that activate the immune system. Immunotherapies are increasingly recognized as an important part of today’s frontier in the treatment of cancer. The most promising data for CAR-T cell therapies have been in DLBCL, CLL, acute lymphoblastic leukemia ("ALL"), and multiple myeloma. Together, these indications represent a significant unmet medical need, with a total of more than 158,000 patients diagnosed with these diseases annually in the United States and the European Union.

A central player in cancer immunotherapy is a type of white blood cell known as the T cell. In healthy individuals, T cells identify and kill infected or abnormal cells, including cancer cells. We leverage two technologies-CARs and TCRs-to activate a patient’s own T cells so that they attack cancer cells. Through genetic engineering, we insert a gene for a particular CAR or TCR construct into the T cell that enables it to recognize cancer cells. Our CAR technology directs T cells to recognize cancer cells based on the expression of specific proteins located on the cell surface, whereas our TCR technology provides the T cells with a specific T cell receptor to recognize protein fragments derived from either the surface or inside the cell.

We are investing substantially in manufacturing processes that we believe will be commercially scalable for both CARs and TCRs, and have established a Juno owned and operated manufacturing facility in Bothell, Washington. This facility is manufacturing clinical trial material for certain of our clinical trials, and we intend to use it for commercial manufacturing upon our first product approval. We are also investing to expand our manufacturing capacity. We harvest blood cells from a cancer patient, separate the appropriate T cells, activate the cell, insert the gene sequence for the CAR or TCR construct into the cell’s DNA, and grow these modified T cells to the desired dose level. The modified T cells are stored for later infusion into the patient. Once infused, the T cells are designed to multiply, in a process known as cell expansion, when they encounter the targeted proteins and to kill the targeted cancer cells. We are also investing in technologies that we believe have the potential to meaningfully lower our manufacturing costs, decrease the time it takes to make a product candidate, improve patient outcomes, and increase the efficiency of our manufacturing space.

Our scientific founders and their institutions include world leaders in oncology, immunology, and cell therapy, and they actively contribute towards developing our product candidates and technologies. Collectively, these stakeholders share our commitment to bringing our product candidates to market and our vision of revolutionizing medicine through developing a broadly applicable cell-based platform. We have also entered into a number of strategic collaborations with commercial companies that we believe will help us manufacture and commercialize our product candidates around the world or develop additional or improved product candidates, including Celgene, Editas, Fate, and MedImmune.

Product Candidates in B Cell Malignancies

Our product candidates that are furthest advanced in the clinic are designed to treat B cell malignancies, with a particular focus on r/r B cell aggressive non-Hodgkin lymphoma ("NHL"), r/r CLL, and r/r B cell ALL. Relapse describes when cancer returns after initially responding to prior treatment, and refractory describes cancer that does not sufficiently respond to prior treatment. Our product candidate JCAR017 and an early stage product candidate incorporating a fully human binding domain leverage CAR technology to target CD19, a protein expressed on the surface of almost all B cell leukemias and lymphomas. Our CAR product candidate JCAR018 targets CD22, a different protein commonly expressed on the surface of B cell leukemias and lymphomas. Despite significant advances over the past two decades, lymphoma and leukemia are estimated to account for approximately 46,000 annual deaths in the United States.

•

NHL Progress and Strategy. JCAR017, in data presented at the American Society of Hematology meeting in December 2017 ("ASH 2017") from an ongoing trial in patients with r/r NHL, achieved a complete response at three months in 13 of 19 patients, or 68%, at dose level 2 ("DL2") in the "core" analysis group as of a data cutoff date of October 9, 2017. For this core analysis group, seven of 14, or 50%, achieved a complete response at six months. The core analysis group consists of patients with DLBCL (not otherwise specified and transformed from follicular lymphoma) who are ECOG Performance Status 0-1. These patients represent a high-risk patient population, with approximately 90% of treated patients having one or more predictors of poor survival, including double or triple hit lymphoma, being chemorefractory to front-line or subsequent therapies, never reaching a complete remission with prior treatments, or never having undergone an autologous transplant. DL2 is 100 million cells. Enrollment of the pivotal cohort is ongoing with the core analysis group at DL2. No severe cytokine release syndrome ("sCRS") was observed and Common Terminology Criteria for Adverse Events ("CTCAE") Grade 3 to 4 neurotoxicity was observed in two of 29 patients, or 7%. These 29 patients all received lymphodepletion with fludarabine and cyclophosphamide ("flu/cy") followed by JCAR017 at DL2. The trial began as a Phase I trial in 2015 and we have now completed enrollment of the pivotal cohort that we believe can support accelerated U.S. regulatory approval and a 2019 commercial launch. Juno also began a Phase Ib trial to explore the use of JCAR017 in combination with

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MedImmune's investigational programmed cell death ligand 1 ("PD-L1") immune checkpoint inhibitor, durvalumab, and other immunomodulatory drugs.

•

CLL Progress and Strategy. Encouraged by JCAR014 data presented at the American Society of Hematology meeting in December 2016 ("ASH 2016"), we have begun a Phase I/II trial using JCAR017 for the treatment of r/r CLL. We believe that if the results of the trial are successful, they may support U.S. regulatory approval as early as 2019 or 2020. Based upon our preclinical and clinical experience to date, we believe that JCAR017 has the potential to deliver comparable or better results when compared to JCAR014.


•	ALL Developments and Strategy. We also intend to develop JCAR017 or a next generation product candidate in both pediatric r/r ALL and adult r/r ALL.

At ASH 2017, we reported interim data from a Phase I trial exploring JCAR018, our CD22-directed CAR product candidate, in pediatric and young adult patients with r/r ALL. In this dose escalation trial, we have seen early signs of activity, with 17 out of 22 r/r ALL patients, or 78%, achieving a complete molecular remission ("CRm") at dose level 2 (1x10⁶ cells/kg) as measured by flow cytometry as of a data cutoff date in October 2017, with the longest durable remission being beyond 2 years. This trial continues to enroll patients. Combining a CD19-directed therapy and a CD22-directed therapy may increase the selection pressure on the cancer and significantly reduce the overall risk of relapse, particularly in patients with ALL. As a result, we are currently investigating preclinical constructs to better understand the optimal way to target these two targets in the same product.

In addition, we have two ongoing Phase I trials exploring the potential of combining a CD19-directed CAR T cell with durvalumab in patients with r/r NHL, one with JCAR017 and one with JCAR014. We are also exploring other combination approaches. For example, in 2017, we began Phase I testing of JCAR014 in patients with r/r CLL in combination with with ibrutinib, which is a small molecule Bruton's tyrosine kinase inhibitor currently approved for use in the treatment of r/r CLL, and we plan to explore JCAR017 in combination with several different drugs in 2018 and 2019.

Our goal is to bring best-in-class therapies to market across a range of B cell malignancies, focusing on improving efficacy, safety, and patient experience.

Product Candidates in Multiple Myeloma

Another key area of focus for us is the treatment of multiple myeloma. Multiple myeloma is the second most common hematologic malignancy, making up approximately 2% of all cancers. Despite many recent therapeutic advances in the treatment of this disease, multiple myeloma is still largely fatal and an area of high unmet medical need, with greater than 12,500 deaths estimated to have occurred in 2016.

Targeting B-cell maturation antigen ("BCMA") is an area with significant promise in the treatment of multiple myeloma, and we have begun a Phase I clinical trial with JCARH125 in r/r multiple myeloma. JCARH125 is a CAR T cell product candidate that incorporates several important elements that we believe are important for maximizing patient benefit, including a next-generation manufacturing process, a fully-human binding domain, and a 4-1BB costimulatory domain. We expect early results from this study as we move through 2018. If the results are compelling, we intend to move JCARH125 into a registration study.

We also have two other CAR T cell product candidates, MCARH171 and FCARH143, that target BCMA being studied in Phase I clinical trials, one at each of Memorial Sloan Kettering Cancer Center ("MSK") and the Fred Hutchinson Cancer Research Center (“FHCRC”), respectively. These trials use manufacturing processes from these academic partners. We intend to use these trials to better understand safety and obtain other translational insights to help us to accelerate our JCARH125 program and our multiple myeloma program more generally.

We have also licensed rights to binding domains against two multiple myeloma targets other than BCMA that we may also advance to the clinic. In addition, in late 2017, we announced three license agreements to advance our program in multiple myeloma using gamma secretase inhibitors ("GSIs") in combination with BCMA-directed CAR T cells. Gamma secretase is an enzyme that cleaves a set of transmembrane proteins, including BCMA. Multiple publications have shown that treatment with GSIs can increase surface expression of BCMA on tumors, particularly multiple myeloma. Increased cell surface BCMA may increase potency of a BCMA-directed CAR T therapy. In 2018, we plan to begin clinical trials combining a GSI with one of our BCMA CAR T cell product candidates.

Additional Product Candidates

We are conducting Phase I trials for four additional product candidates using our CAR technology, directed against L1CAM, Lewis Y, MUC-16, and ROR-1. We are also conducting two Phase I/II clinical trials for a fifth product candidate, using our

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TCR technology, directed against WT-1. L1CAM, Lewis Y, MUC-16, ROR-1, and WT-1 are proteins that are overexpressed or aberrantly expressed on certain cancer cells. These trials explore the use of our engineered T cell technologies in cancer patients beyond the blood cancer setting, including patients with common solid tumors. Our MUC-16 directed product candidate is an "armored" CAR that secretes the cytokine interleukin 12 ("IL-12"), a stimulatory signal which we believe may help overcome the inhibitory effects that the tumor microenvironment can have on T cell activity. We expect to have preliminary data from some of these product candidates over the next six to 18 months. We are also planning a trial in 2018, subject to completion of certain preclinical studies, using a CAR product candidate targeting a cytokine receptor, interleukin 13 receptor alpha 2 ("IL13rα2"), for the treatment of glioblastoma, an aggressive form of brain cancer.

Another active area of research for Juno is the possibility of treating cancers that are caused by viruses, such as the human papillomavirus ("HPV"), a cause of certain cervical cancers and head and neck malignancies. We are planning preclinical studies to begin in 2018 to enable us to file an Investigational New Drug application ("IND") with the U.S. Food & Drug Administration ("FDA") for a TCR product candidate targeting the HPV e6/e7 oncoproteins, which are proteins that are expressed in many HPV-associated cancers.

The following tables summarize our product candidate pipeline and our active and planned clinical trials:

Research Strategy

We believe there are a number of areas for ongoing research that may significantly impact our long-term success with CARs and TCRs, including:

•

Cell Selection and Composition. We believe that a defined cell composition has the potential to improve the consistency, potency, cell persistence, and tolerability of CAR and TCR based treatments. Achieving greater product composition consistency through defined cell composition may also facilitate regulatory approval. We are exploring defined cell composition with several of our product candidates, including JCAR017, which includes a defined ratio of T cells known as CD8+ and CD4+ T cells and uses a manufacturing process designed to influence the T cells toward a consistent phenotype and metabolic state. We are continuing to focus on improving our understanding of the different types of T cells in an effort to identify the subsets of T cells that optimize efficacy and safety. We intend to leverage our experience with these product candidates as we advance our pipeline. Our acquisition of Stage Cell Therapeutics GmbH ("Stage") in 2015 gives us access to potential best-in-class cell selection technologies.

•

Cell Persistence. We believe the persistence of our engineered T cells, meaning the duration of time CARs or TCRs have anti-tumor activity in the body, has a meaningful impact on clinical outcomes. We are continuing to invest in technologies to optimize the cell persistence of our genetically-engineered T cells, including technologies related to the manufacturing process, cell composition, cell signaling, single chain variable fragments ("scFvs") that are non-

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immunogenic and fully human, and modulation of a patient’s immune system. We are building internal capabilities through hiring, acquisitions such as X-Body and AbVitro, and collaborations with companies such as Editas and Fate.

•

Target Protein Selection. We are using bioinformatics, in vitro analyses, animal data, and clinical experience to identify additional target tumor proteins. Our CAR and TCR technologies enable us to explore target proteins located inside cells ("intracellular proteins") and proteins located on the cell surface ("extracellular proteins"), giving us the potential to treat a wide array of cancers. We are also investing in technologies that have the potential to accelerate our generation of TCRs and CARs to new targets. For instance, our acquisition of AbVitro in early 2016 gave us access to a leading next-generation single cell sequencing platform that allows for the identification of full-length, natively paired antibodies and T cell receptors across millions of single cells simultaneously from patient tumor or blood samples.

•

Cell Signaling. Researchers have used CAR T cells for more than two decades in the treatment of cancer. A key insight over the past decade was the addition of a costimulatory domain to the genetically engineered CAR construct. The costimulatory domain amplifies intracellular signaling after the binding domain interacts with a target protein, magnifying the activation of the T cell. We are advancing two next-generation CAR technologies, which we refer to as bispecific CARs and "armored" CARs. Bispecific CARs incorporate a second binding domain on the CAR T cell designed to either amplify or inhibit signaling, a feature that may increase the CAR T cells’ ability to distinguish between cancer cells and normal cells. "Armored" CARs deliver cytokines or other stimulatory signals to modify the tumor microenvironment as well as the CAR T cell. We believe these technologies may be important for the treatment of solid tumors.

•

Combinations. In an attempt to evade the cytotoxic, or cell killing, effects of the immune system, many cancers develop an immunosuppressive tumor microenvironment, which may negatively impact the potency or viability of our engineered T cells in patients. We are exploring various strategies that can positively impact the interaction of our engineered T cells and the tumor microenvironment, with goal of improving the efficacy and tolerability of our product candidates. For instance, certain combinations may help our engineered T cells that persist in a patient's body to remain active over time to increase the durability of the clinical response. We are exploring both approved therapies and drugs that are in development. An example of the output of this research is our ongoing trial combining durvalumab and JCAR017.

Our Strategy

Our current focus is to create best-in-class cancer therapies using human T cells. We believe that genetically-engineered T cells have the potential to meaningfully improve survival and quality of life for cancer patients. Key elements of our strategy include:

Expedite clinical development, regulatory approval, and commercialization of our CD19 product candidates. We began a trial in adult r/r NHL in 2015 with JCAR017, which was initially a Phase I trial, and we have now completed enrollment of the pivotal cohort that we believe can support registration. We recently began a Phase I/II trial with JCAR017 in r/r CLL. We believe data from these trials, if positive, may lead to U.S. regulatory approval for the treatment of adult r/r DLBCL to support a commercial launch in 2019 and U.S. regulatory approval in r/r CLL as early as 2019 or 2020. If approved in r/r NHL, we plan to commercialize this CD19 product candidate in the U.S. using our own commercial organization, to consist of marketing, commercial analytics, and payer/access capabilities and a specialty sales force. We also plan to leverage these commercial capabilities across other indications, such as CLL, ALL, and multiple myeloma, if approved. We expect that data from our U.S. registration trials for our CD19 product candidates will also serve as part of our European Union ("EU") regulatory package. In 2016, Celgene opted in to our CD19 program and therefore is responsible for leading clinical and commercial development of our CD19 product candidates outside of North America and China. Celgene intends to treat patients in the EU in 2018, with a first regulatory approval potentially as early as 2019. In certain types of r/r NHL, we have obtained breakthrough therapy designation for JCAR017 in the United States and access to the PRIority MEdicines ("PRIME") scheme for JCAR017 in the EU, regulatory designations aimed at streamlining the development of promising new therapies.

Develop process development and manufacturing capabilities to be a competitive advantage. We are investing significant resources to optimize process development and manufacturing. We believe these efforts will lead to better product characterization, a more efficient production cycle, and greater flexibility in implementing manufacturing enhancements. In turn, these improvements may lead to a lower cost of manufacturing, streamlined regulatory reviews, greater convenience for patients and physicians, and better patient outcomes. Additionally, this investment in characterizing and controlling our process has the potential to allow us to better exploit future biologic insights into what cell types improve patient outcomes. We have used contract manufacturing organizations ("CMOs") to provide speed, flexibility and limit upfront capital investment, and successfully brought a CMO on-line to manufacture a product candidate. We have also established a Juno owned and operated

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manufacturing facility in Bothell, Washington, which manufactures JCAR017 for the ongoing registration trial of JCAR017 in r/r NHL. We expect this manufacturing facility to continue to supply our Juno-sponsored clinical trials, including JCARH125, and commercial launch of JCAR017. We are investing to expand our commercial manufacturing capacity and may also use CMOs for product candidate manufacture again in the future. In addition, in 2015 we acquired Stage, a company with potential best-in-class cell selection and cell activation technologies as well as automation technologies. We are working to integrate these technologies into our manufacturing platform. Our overall goal in process development and manufacturing is to maximize patient benefit and carefully manage our cost structure.

Invest in our platform to maximize the beneficial outcomes for cancer patients. Because our CAR and TCR technologies are designed to target both proteins on the cell surface and inside the cell, we believe we have the potential to treat a wide array of cancers, including solid tumors. We believe there are multiple ways to continue to improve efficacy and tolerability of each of these technologies. We are conducting Phase I trials for additional product candidates targeting seven different cancer-associated proteins beyond CD19. We began Phase I testing of our first CD19-directed "armored" CAR in B cell malignancies in 2017. As data emerge from these studies, we may advance one or more of these product candidates beyond proof of concept trials. We, together with our collaborators, intend to advance multiple additional product candidates into clinical testing over the next five years, with an increasing focus on addressing solid tumors, which cause the vast majority of cancer-related deaths in the developed world. Additionally, we believe that there may be multiple opportunities to improve the efficacy or safety of our product candidates by manipulating the genome, RNA, cell signaling pathways within a cell, or cell surface proteins. To that end, we have made substantial internal investments in these capabilities and entered into collaborations with companies such as Editas, Fate, and Celgene. We expect to continue to build our internal capabilities and to look to access best-in-class technologies outside the company with the goal of making better products for patients.

Leverage our relationships with our founding institutions, scientific founders and other scientific advisors. Our world-renowned scientific founders and founding institutions, have a history of seminal discoveries and significant experience in oncology, immunology, and cell therapy. We intend to be a science-driven company in all our strategic decision-making and to continue to use our scientific founders’ insights, discoveries, and know-how as we develop our pipeline and technologies.

Background on the Immune System and T Cells

The immune system recognizes danger signals and responds to threats at a cellular level. It is often described as having two arms. The first arm is known as the innate immune system, which recognizes non-specific signals of infection or abnormalities as a first line of defense. The innate immune system is the initial response to an infection, and the response is the same every time regardless of prior exposure to the infectious agent. The second arm is known as the adaptive immune system, which is composed of highly specific, targeted cells and provides long-term recognition and protection from infectious agents and abnormal processes such as cancer. The adaptive immune response is further subdivided into humoral, or antibody-based, and cellular, which includes T cell-based immune responses.

The most significant components of the cellular aspect of the adaptive immune response are T cells, so called because they generally mature in the thymus. T cells are involved in both sensing and killing infected or abnormal cells, as well as coordinating the activation of other cells in an immune response. These cells can be classified into two major subsets, CD4+ T cells and CD8+ T cells, based on cell surface expression of CD4 or CD8 glycoprotein. Both subsets of T cells have specific functions in mounting an immune response capable of clearing an infection or eliminating cancerous cells. CD4+ T cells, or helper T cells, are generally involved in coordinating the immune response by enhancing the activation, expansion, migration, and effector functions of other types of immune cells. CD8+ T cells, or cytotoxic T cells, can directly attack and kill cells they recognize as infected or otherwise abnormal, and are aided by CD4+ T cells. Both types of T cells are activated when their T cell receptor recognizes and binds to a specific protein structure expressed on the surface of another cell. This protein structure is composed of the major histocompatibility complex ("MHC") and a small protein fragment, or peptide, derived from either proteins inside the cell or on the cell surface. Circulating CD4+ and CD8+ T cells survey the body differentiating between MHC/peptide structures containing "foreign" peptides and those containing "self" peptides. A foreign peptide may signal the presence of an immune threat, such as an infection or cancer, causing the T cell to activate, recruit other immune cells, and eliminate the targeted cell.

Although the immune system is designed to identify foreign or abnormal proteins expressed on tumor cells, this process is often defective in cancer patients. The defective process sometimes occurs when the cancer cells closely resemble healthy cells and go unnoticed or if tumors lose their protein expression. Additionally, cancer cells employ a number of mechanisms to escape immune detection to suppress the effect of the immune response. Some tumors also encourage the production of regulatory T cells that block cytotoxic T cells that would normally attack the cancer.

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Our CAR and TCR Technologies

Our CAR and TCR technologies alter T cells ex vivo, or outside the body, so that the T cells can recognize specific proteins on the surface or inside cancer cells or other diseased cells in order to kill those diseased cells. As depicted below, with both our CAR and TCR technologies, we (1) harvest a patient’s white blood cells in a process called leukapheresis, and while ex vivo we (2) select and activate certain T cells of interest. (3) Gene sequences for the CAR or TCR construct are transferred into the T cell DNA using a viral vector, such as a lentivirus or a gamma retrovirus. The number of cells is (4) expanded until it reaches the desired dose. These genetically engineered cells are (5) infused back into the patient.

When the engineered T cell engages the target protein on the cancer cell, it triggers further multiplication of the cells in the body and activation of a cytotoxic, or cell-killing, response against the cancer cell. These T cells have an "auto-regulatory" capability that stimulates their multiplication in the presence of the target protein and a reduction in the number of such cells as the target protein declines.

In most of our trials, including our trials with JCAR017 and JCARH125, after a patient goes through leukapheresis, the patient is administered chemotherapeutic agents before infusion of the engineered T cells in order to provide an environment for the engineered T cells to thrive. We refer to this process as conditioning chemotherapy or lymphodepletion. It is an active area of research to determine the optimal lymphodepletion regimen to use in conjunction with engineered T cell therapy, in terms of dose, duration, and type or combinations of chemotherapeutic agents, such as cyclophosphamide or fludarabine.

The genetically-engineered CARs and TCRs are designed to help a patient’s immune system overcome survival mechanisms employed by cancer cells. CAR technology directs T cells to recognize cancer cells based on expression of specific cell surface proteins, whereas high-affinity TCR technology provides the T cells with a specific T cell receptor that recognizes protein fragments derived from either intracellular or extracellular proteins. The differences in these two technologies may enable us to develop immunotherapies targeting a broad array of cancer-associated proteins, including those expressed by solid organ cancers.

For both the CAR and TCR technologies, we believe that the T cell subsets used in treatment may have a significant impact on cell persistence, efficacy, and/or tolerability. We are investing significant resources in understanding the optimal cells and cell conditions for treatment. Animal data have shown that using a defined composition of CD8+ cells and CD4+ cells can improve the frequency, robustness, and duration of an anti-tumor response. Animal data have also shown that certain CD8+ T cells, when introduced, are more likely to persist as part of the T cell memory pool with the capability of self-renewal, which may lead to a longer duration of the therapeutic effect in patients.

We believe our focus on optimizing certain cell characteristics and cellular conditions increases our probability of generating best-in-class therapeutics. Moreover, we believe that the enhanced product characterization that results from a defined cell population may provide greater consistency across patients and give us an improved process development and a potential advantage with clinicians, patients, and regulators.

Differences between CARs and TCRs

There are three main differences between CARs and TCRs:


•	Site of Protein Recognition. CARs recognize proteins expressed on the cell’s surface, whereas TCRs recognize peptide fragments from proteins expressed either inside the cell or on the cell’s surface. TCRs are capable of targeting a broader range of proteins and may be able to more selectively target cancer cells or target a broader array of tumor types.

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MHC Restriction. TCRs recognize proteins that are presented to the immune system as a peptide bound to an MHC, and are therefore restricted to a certain MHC type. MHC types vary across the human population. It is estimated that approximately 80% of the U.S. population has one of the four most common MHC types. Due to this variability, multiple different TCR product candidates will be needed to address any given target protein for a broad population. In contrast, CARs are capable of recognizing the target protein regardless of MHC type. Additionally, most of the TCR product candidates developed in the field to date have been designed to recognize peptides in the context of Class I MHC, which activates CD8+ cells and not CD4+ cells. The implications of the preferential CD8+ activation are not clear, but given the importance of CD8+ and CD4+ cells in a typical immune response, activation of a CD4+ cellular response is likely important in generating maximum efficacy. During 2017, our research team made significant progress in supporting activation and persistence of both CD8+ and CD4+ T cells using the same eTCR construct.

•

Maturity of the Technology. The life sciences industry has been developing antibodies for several decades and we believe scientific advances made with this technology can be leveraged to rapidly and predictably generate scFvs to incorporate into a CAR construct and enable it to target a specific protein. Industrial production of TCRs is relatively new, and we are investing in improving our understanding of important variables such as the optimal binding efficiency and structure.

CARs

There are several key components to our CAR technology, each of which may have a significant impact on its utility in cancer immunotherapy:

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Targeting Element. Our CAR construct typically uses an scFv, also referred to as a binding domain, to recognize a protein of interest. The scFv is derived from the portion of an antibody that specifically recognizes a target protein, and when it is expressed on the surface of a CAR T cell and subsequently binds to a target protein on a cancer cell, it is able to maintain the CAR T cell in proximity to the cancer cell and trigger the activation of the T cell. For example, our most clinically-advanced CAR T cell programs use an scFv from a mouse-derived antibody to target a cell surface protein called CD19. Through our 2015 acquisition of X-Body, we have access to a library of fully human scFvs and our AbVitro acquisition enables us to identify naturally occurring antibodies. We plan to use both of these technologies in the development of future product candidates.

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Spacer and Transmembrane Domain. The spacer connects the extracellular scFv targeting element to the transmembrane domain, which transverses the cell membrane and connects to the intracellular signaling domain. Data from our scientific founders suggest that the spacer may need to be varied to optimize the potency of the CAR T cell toward the cancer cell due to factors such as the size of the target protein, the region of the target protein where the scFv binds, and the size and affinity of the scFv. Through our collaborations, we have access to a library of spacer constructs.

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Costimulatory Domains. Upon recognition and binding of the scFv of the CAR T cell to the cancer cell, there is a conformational change that leads to an activation signal to the CAR T cell through CD3-zeta, an intracellular signaling protein. Our current CAR constructs also include either a 4-1BB or CD28 costimulatory signaling domain to mimic a "second signal" that amplifies the activation of the CAR T cells, leading to a more robust signal to the T cell to multiply and kill the cancer cell. While head-to-head clinical comparisons have not been conducted, in some disease settings there is some preclinical and early clinical evidence that suggests that 4-1BB has some advantages over CD28 as a costimulatory domain, including increased persistence and a metabolic profile supporting gradual expansion, as opposed to rapid expansion. Our early clinical data with CD19-directed CAR T cells support this view. We incorporate the 4-1BB costimulatory domain in JCAR017, JCARH125, JCAR014, JCAR018, JCAR023, JCAR024, and our CD19 product candidate with a fully human binding domain. Additionally, we are exploring the use of a "third signal" in improving the efficacy of our CAR T technology. In 2017, we began human testing of an "armored CAR" that includes both a CD28 co-stimulatory domain and another signal through 4-1BB ligand.

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Next-Generation CAR Technology

We are investing significant resources and are developing deep expertise on how each element of the CAR construct affects the potency and durability of the T cell response that ensues, as we believe these will be the key determinants for the long-term ability to create novel CAR T cell products with improved patient benefit.

As we build on the specificity of our technologies and our understanding of mechanisms of immune evasion used by cancer cells, we are advancing two next-generation CAR technologies, "armored" CARs and bispecific CARs, that incorporate mechanisms to either dampen or amplify T cell activation signals present on the cancer cells or in the tumor microenvironment. Our "armored" CAR technology can incorporate the production or expression of locally acting signaling proteins to amplify the immune response within the tumor microenvironment with the goal of minimizing systemic side effects. An example of such a signaling protein is IL-12, which can stimulate T cell activation and recruitment. We believe "armored" CAR technology will be especially useful in solid tumor indications, in which microenvironment and potent immunosuppressive mechanisms have the potential to make the establishment of a robust anti-tumor response more challenging.

Our bispecific CAR technology includes a second binding domain on the CAR T cell designed to either amplify or inhibit signaling, a feature that may increase our CAR T cells’ ability to distinguish between cancer cells and normal cells. For example, a CAR T cell can be engineered such that it would be triggered in the presence of one target protein, but if a second protein is present it would be inhibited. Alternatively, it could also be engineered such that two target proteins would be required for maximal activation. These approaches may increase the specificity of the CAR for tumor relative to normal tissue.

We are also exploring a number of technologies that modulate T cell biology and their biologic properties in patients. For example, we have partnered with Editas, a leader in applying genome editing such as CRISPR/Cas9 and Talon technologies to create human therapeutics, and Fate, a leader in using pharmacologic modulators such as small molecules to alter the properties of cells while they are ex vivo. With Editas, we are exploring the biologic implication on our engineered T cell technologies of knocking-out or altering the function of a number of human genes. With Fate, we are exploring the potential for these modulators to alter intracellular signaling pathways, with the potential to alter the subtype of T cell or the state of the T cell. The goal of these modifications is to improve efficacy and safety of our products.

TCRs

Much like our CAR technology, our high-affinity TCR technology is designed to activate a potent immune response against cancer through the introduction of engineered T cells. The gene sequence we introduce with our TCR technology is designed to enable the engineered cell to assemble a TCR that recognizes a specific MHC/peptide structure. Modified T cells expressing a TCR construct have the potential advantage of recognizing peptides from cancer-associated proteins expressed either on the surface of or inside the tumor cell, which may allow us to target a broad range of tumors. Beyond the fact that TCRs can recognize peptides derived from intracellular proteins, another advantage of TCRs is that they are fully human and therefore may be less likely to elicit an immune response against the infused TCR cells.

The engagement of a TCR is restricted to a certain MHC type. Due to the variability of MHC types across the human population, different TCRs will be required for various segments of the population. Our TCR constructs are selected by

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screening healthy donors for naturally-occurring high-affinity TCRs against a MHC/ peptide combination of interest. Depending on the binding affinity of the selected TCR construct, it is either used directly or modified by mutating a specific region, the hypervariable domain, of the TCR binding pocket to create a higher affinity construct. Based on the limited number of patients who have received any TCR treatment to date, these TCR cells appear to behave like endogenous T cells after re-infusion back into the patient. They undergo a process similar to an endogenous T cell of cell expansion and cytotoxic activation upon recognition of their defined cancer-associated proteins.

Important areas of investment for us going forward will be industrializing the creation and manufacturing of TCRs, improving screening processes to better ensure that TCR constructs do not cross-react with normally expressed or other proteins, and finding costimulatory signals to enhance the potency of the genetically engineered cells.

Our primary method of identifying novel TCRs is utilizing our next-generation, high throughput, single cell sequencing technology, which allows us to interrogate millions of cells per experiment. An important application for this technology is to find high affinity, naturally occurring, matched chain TCRs from the normal human immune repertoire, which we believe have a lower risk of unexpected off-target binding than TCRs that have manipulated or mutagenized during development. This technology significantly improves the speed at which we find these TCRs, allowing us to optimize binding affinity and develop TCRs for a larger percentage of the population.

Product Pipeline

Product Candidates in B Cell Malignancies

Our product candidates that are the furthest advanced in the clinic are designed to treat B cell malignancies, with a particular focus on r/r NHL, r/r CLL, and r/r ALL.

B Cell Non-Hodgkin Lymphomas

NHL is the most common cancer of the lymphatic system. NHL is not a single disease, but rather a group of several closely related cancers. Although the various types of NHL have some things in common, they differ in their appearance under the microscope, their molecular features, their growth patterns, their impact on the body, and treatment. Over 72,000 cases of NHL are diagnosed annually in the United States, and 85% derive from B cell lineages, which express CD19. B cell NHLs are a large group of cancers that are typically divided into aggressive (fast-growing) and indolent (slow-growing) types.

Aggressive NHL also represents a collection of lymphoma subtypes. The most common histologic type of aggressive lymphoma is DLBCL, which is also the most common subtype of all NHLs, and represents approximately 40% of new cases annually. Unlike indolent lymphomas, which have a median survival time as long as 20 years, DLBCL, if left untreated, may have survival measured in weeks or months. Patients often present with a rapidly enlarging mass in a lymphatic region. Extranodal involvement or associated constitutional symptoms are uncommon, although the presence of these symptoms indicates a more aggressive phenotype. The typical approach to treatment of r/r DLBCL involves induction chemotherapy to get a patient into remission, followed by an autologous hematopoietic stem cell transplant ("HSCT"). Autologous HSCT is a treatment that involves the collection of a patient's own hematopoietic stem cells once the patient is in remission, followed by further chemotherapy and/or radiation to deplete the patient's immune system and existing hematopoietic stem cells, then the infusion of the previously collected hematopoietic stem cells back into the patient. However, not all r/r DLBCL patients are able to undergo autologous HSCT due to failure to respond adequately to the induction chemotherapy, risk of complication, or

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other reasons. We estimate that only approximately 17% of first salvage patients, or patients who relapsed or were refractory after one round of prior treatment, undergo autologous HSCT. For patients who are unable or otherwise do not receive autologous HSCT, the prognosis is grim. In a study conducted by GSK, HOVON (Hemato-Oncologie voor Volwassenen Nederland), and other groups, in patients with r/r DLBCL who relapsed or were refractory after one round of prior treatment, patients that did not undergo autologous HSCT in the second-line setting and were treated solely with chemotherapy had a two year overall survival rate of 22–27%, compared to a two year overall survival rate of 68–76% for patients that underwent autologous HSCT. In a separate study conducted by the Lymphoma Academic Research Organization in patients with r/r DLBCL who relapsed or were refractory after two rounds of prior treatment and who had not received prior HSCT, the patients that were unable to or otherwise did not then undergo HSCT in the third-line setting and were treated solely with chemotherapy had a median overall survival of 3.3 months and a one year overall survival rate of 16%, as compared to a median overall survival of 11.5 months and a one year overall survival rate of 43% for those who then underwent autologous HSCT.

The indolent lymphomas represent a wide group of tumors that often have a long natural history characterized by frequent relapses; together, the indolent lymphomas account for approximately 36% of NHL incidence in the United States. Although these malignancies are treated routinely with a combination of chemotherapy and antibodies, there is no standard of care for relapsed indolent NHL. The typical treatment approaches include multiple rounds of induction chemotherapy or more aggressive salvage therapies, including autologous HSCT. Unfortunately, these treatments are generally not curative. Patients with recurrent or progressive indolent lymphoma may be candidates for allogeneic HSCT, involving the infusion of a matched donor's hematopoietic stem cells instead of the patient's own cells, which can provide long-term disease free survival to some.

Chronic Lymphocytic Leukemia

CLL is the most common type of leukemia, and it occurs most frequently in older individuals, with diagnoses in persons under 30 years of age occurring only rarely. Each year, approximately 20,000 patients are diagnosed with CLL in the United States. Nearly all CLL develops from B cells that express CD19. Approximately 75–80% of individuals with CLL have standard risk disease at diagnosis, and for them the level of disease burden determines both prognosis and the need for immediate treatment or "watchful waiting" before the initiation of any therapy. Over time, CLL develops poor risk features, including expression of CD38, ZAP70, unmutated immunoglobulin heavy chain sequences, or cytogenetic abnormalities or gene mutations. Approximately 20–25% of CLL patients can initially present with poor risk disease. Median progression-free survival in these high risk groups is often under 12 to 18 months after frontline therapy, and less than 12 months in relapsed/refractory disease.

The goal of therapy in CLL for individuals with both treatment naïve and relapsed/refractory disease is a clinical complete response. Strong correlations have been demonstrated between depth of response, specifically to levels in the bone marrow below detectable MRD by flow cytometry, and survival. An array of therapies have been evaluated and approved for use in treatment naive and relapsed/refractory CLL, including combination chemotherapy, chemoimmunotherapy, ibrutinib, idelalisib, alemtuzumab, and ofatumumab, and several others continue in development. However, the long-term benefit for these agents has generally been tempered by the low likelihood of complete responses, challenging toxicities, and limited duration of disease responses. For instance, patients treated with ibrutinib whose disease progresses early after treatment have poor clinical outcomes with a median survival of approximately three months. Individuals with CLL are generally not considered candidates for allogeneic or autologous HSCT due in part to the median age of 71 years at diagnosis. Therefore, significant opportunity exists for novel therapies to address this unmet need with agents that are tolerated in this patient population.

B Cell Acute Lymphoblastic Leukemia

ALL is an uncontrolled proliferation of lymphoblasts, which are immature white blood cells. The lymphoblasts, which are produced in the bone marrow, cause damage and death by inhibiting the production of normal cells. Approximately 6,000 patients are diagnosed with ALL in the United States each year, and although just under half of the new diagnoses are in adult patients, the vast majority of the approximately 1,400 deaths per year occur in adults. There are two main types of ALL, B cell ALL and T cell ALL. Approximately 80% of cases of ALL are B cell ALL, which we aim to address with our CD19 product candidates.

Treatment outcomes for ALL patients can be distinguished between CR and CRm rates. CR occurs when there is no clinical evidence of the disease based on less than 5% blast cells in the marrow, blood cell counts within normal limits, and no signs or symptoms of the disease. CRm occurs when a patient has all of the above outcomes and there is no evidence of ALL cells in the marrow when using sensitive tests such as polymerase chain reaction ("PCR") and/or flow cytometry. CR rates are the typical regulatory standard, but recent evidence suggests that achieving a CRm is a better predictor of long-term survival.

Until 2017, the standard-of-care treatment for both adults and children involved multi-drug chemotherapeutic regimens, and in some cases HSCT. Frontline chemotherapy in adults with ALL still delivers complete remission in approximately 80% of patients with their initial course. However, approximately 60% of these patients who achieve a complete remission with their initial course of chemotherapy will relapse. Most patients that relapse after the first course of chemotherapy will die in under a

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year, and patients that have failed at least two salvage therapies have a median survival that is typically around three months. Allogeneic HSCT offers the potential for disease eradication in some individuals, however, the option is available only to approximately a third of patients due to the lack of compatible stem cell source, general health, or the high risk of complications. Even in patients who undergo allogeneic HSCT, approximately 20-30% of patients die of treatment-related complications and the median disease-free survival is less than six months.

In 2017, two antibody-based products, Amgen's blinatumomab (Blincyto) and Pfizer's inotuzumab-ozogamicin (Besponsa), obtained FDA approval for the treatment of r/r ALL. In clinical trial data, both of these products showed improved response rates and median overall survival as compared to chemotherapy. However, similar to chemotherapy, these products showed deterioration of response and duration of response with successive lines of salvage treatment. Median overall survival was under 12 months in all salvage settings and overall survival in the second salvage setting was approximately 5 months for blinatumomab and approximately 6 months for inotuzumab-ozogamicin.

Thus, despite the introduction of these novel treatment options, adult r/r ALL remains a significant unmet medical need. In particular, in second salvage and beyond, the currently available therapies for adult r/r ALL provide poor long-term outcomes and are associated with severe and life-threatening toxicities that may limit their use in certain populations or require early discontinuation of therapy.

CD19 Overview

Our lead candidate, JCAR017 uses CAR T cell technology to target CD19. Other of our CD19-directed product candidates include JCAR014 and a product candidate with a fully human binding domain that entered Phase I testing in 2017. These product candidates differ in several respects as described below. We believe our access to and clinical experience with multiple CD19 CARs in patients with B cell malignancies gives us the opportunity to bring best-in-class therapies to market across a range of different blood cancers. We have treated nearly 600 patients with anti-CD19 CAR T cells.

We believe CD19 presents an attractive immunotherapeutic target for our technology for a number of reasons:


•	CD19 is expressed by most B cell malignancies including NHL, ALL, and CLL. Within these CD19 positive malignancies, it is generally expressed on all of a patient’s cancer cells.


•	CD19 is expressed on all stages of B lineage cells, and it is present in the vast majority of precursor B cell ALL cases.

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CD19 is not known to be expressed on any healthy tissue other than B cells. Although treatment with a CD19-directed therapy has the potential to deplete B cells, experience with Rituxan has shown that humans can live with B cell depletion for a prolonged period. Further, CD19 is not expressed on hematopoietic stem cells, and therefore B cells should return when the CAR T cell is no longer present.

JCAR017

Overview. JCAR017 is the backbone of our CD19 program. It uses the 4-1BB costimulatory domain, a murine scFv binding domain, a defined cell composition made up of a 1:1 ratio of CD4+ T cells and CD8+ T cells, and a manufacturing process designed to influence the phenotypic and metabolic state of the T cells toward more naive and quiescent cells, which we believe improves patient outcomes. The defined cell composition is attained by using separate CD4+ and CD8+ selection and processing and then controlling for the number of each cell subtype in the final product. The process provides a consistent dose of CD4+ and CD8+ cells and decreases the variability of other phenotypic and metabolic conditions of the T cell. JCAR017 was originally developed at Seattle Children’s Research Institute ("SCRI").

JCAR017 is currently in development for adults with r/r aggressive NHL. We began a trial in r/r aggressive NHL began in 2015 to explore this product candidate’s efficacy in this setting and to explore multiple-dose schedules. Although it began as a Phase I trial, we have now completed enrollment in the trial of the pivotal cohort that we believe can support accelerated U.S. regulatory approval in r/r DLBCL. We have also begun a Phase I/II trial using JCAR017 for the treatment of r/r CLL. We believe that if the results of this trial are successful, they may support U.S. regulatory approval in r/r CLL as early as 2019 or 2020. We expect to initiate clinical trials with JCAR017, or a similar drug product designed specifically for the target patient population, in other B cell malignancies over the next 12 to 24 months.

The FDA has granted breakthrough therapy designation to JCAR017 for the treatment of patients with r/r aggressive large B cell NHL, including DLBCL, not otherwise specified (de novo or transformed from indolent lymphoma), primary mediastinal B-cell lymphoma ("PMBCL"), or follicular lymphoma grade 3B. The FDA has also granted orphan drug designation for JCAR017 in DLBCL, CLL, and ALL. In addition, the European Medicines Agency ("EMA") Committee for Medicinal Products for Human Use ("CHMP") and Committee for Advanced Therapies ("CAT") have granted JCAR017 access to the Priority Medicines ("PRIME") scheme for r/r DLBCL.

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Clinical Experience. We began a multicenter trial in 2015 of JCAR017 in adults with r/r aggressive NHL under a Juno-sponsored Investigational New Drug ("IND") application. We refer to this trial as the TRANSCEND trial. Initially the trial was a Phase I dose-escalation trial and the primary endpoints were to evaluate preliminary toxicity, safety, and cell expansion and cell persistence of JCAR017. The secondary endpoints of the trial were to assess efficacy, durability of responses, progression-free survival, and overall survival. All patients on the trial receive lymphodepletion with flu/cy, and there is no prophylactic use of safety medications called for by the protocol. The trial also explored a one dose versus two dose dosing schedule.

In 2016 and 2017, the protocol for TRANSCEND was amended to include measures of efficacy as primary endpoints of the trial, and we have now completed enrollment of the pivotal cohort that we believe can support U.S. regulatory approval in r/r DLBCL, with the potential for a commercial launch of JCAR017 in 2019. After analyzing results in the ongoing trial and in discussion with FDA, we narrowed the eligibility criteria for the registration portion of the trial. This group of patients is known as the “core” group, while we label all patients in the trial as the “full” group. The core group includes patients with DLBCL (de novo and transformed from follicular lymphoma) that are ECOG Performance Status 0-1. The full analysis group includes all r/r patients in the DLBCL cohort, including 11 patients with poor performance status or niche subtypes of aggressive NHL. When analyzing efficacy, we believe the core group is more representative of the results we expect to see in the analysis of the registration portion of the trial.

The ECOG performance status is a scale used to measure how a disease affects daily living abilities of a patient. Grade 0 represents that a patient is fully active and able to carry on all pre-disease performance without restriction. Grade 1 represents that a patient is restricted in physically strenuous activity but ambulatory and able to carry out work of a light or sedentary nature, such as light house work or office work. ECOG Performance Status 2 represents that a patient is ambulatory and capable of self-care, but unable to carry out any work activities, and is up and about more than 50% of waking hours.

We presented interim data from the TRANSCEND trial at ASH 2017. As of a data cutoff date of October 9, 2017, results for the core group at DL2 were as follows:



Summary of Clinical Data JCAR017 TRANSCEND - r/r DLBCL Core Group
Dose Level & Dose Schedule	Dose Level 2 (1*10⁸ cells) Single Dose⁽¹⁾
Best Overall Response Rate: Complete Responses + Partial Responses	22/27 (81%)
Overall Response Rate at Three Months	14/19 (74%)
Complete Response Ongoing at Three Months	13/19 (68%)
Complete Response Ongoing at Six Months	7/14 (50%)
sCRS⁽²⁾	0/29 (0%)
Severe Neurotoxicity⁽³⁾	2/29 (7%)
(1) Two patients were evaluable for safety but not yet evaluable for efficacy. (2) For this trial, sCRS is defined based on Lee et al. 2014 criteria, according with which sCRS is generally identified by certain side effects, including hypotension, or low blood pressure, requiring treatment with a high dose of a single vasopressor or with multiple vasopressors, or respiratory distress, or breathing difficulties, requiring significant supplemental oxygen and in some cases mechanical ventilation and medical management in the intensive care unit. (3) CTCAE Grade 3 and above neurotoxicity. Characteristic symptoms of neurotoxicity include encephalopathy, headache, seizure, tremor, confusion, and aphasia.

Other treatment-emergent adverse events (TEAE), whether or not treatment related, occurring in at least 25% of core patients included neutropenia, fatigue, anemia, CRS of any grade, and thrombocytopenia. For tolerability across doses in full group, the most common TEAE other than CRS and NT that occurred at ≥ 25% included neutropenia (50%), fatigue (38%), anemia (39%), thrombocytopenia (28%), diarrhea (25%), and nausea (26%). The most common TEAEs were similar between core and full groups.

The TRANSCEND trial continues, enrolling more patients at DL2 using a single dose. During 2018, given the results to date, we may explore a third, higher dose as well.

Encouraged by JCAR014 data in r/r CLL presented in 2016, we have also begun a Phase I/II trial using JCAR017 for the treatment of r/r CLL. We believe that if the results of the planned trial are successful, they may support U.S. regulatory approval in r/r CLL as early as 2019 or 2020.

JCAR014

Overview. JCAR014 also targets CD19. JCAR014, like JCAR017, uses the 4-1BB costimulatory domain and is composed of CD8+ T cells and CD4+ T cells in a defined ratio. A different manufacturing process from JCAR017 leads to different

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phenotypic and metabolic profiles for these T cells. At this time, we do not intend to develop JCAR014 commercially, but we do believe that its clinical development provides insights that we can apply across our CD19 portfolio and to our CAR T cell technology more broadly. JCAR014 was originally developed at FHCRC.

Clinical Experience. JCAR014 is being evaluated at FHCRC in a Phase I/II trial as a treatment for adults with any of several B cell malignancies, including ALL, NHL, and CLL, in patients relapsed or refractory to standard therapies, under a FHCRC IND. The trial was initiated in May 2013. The Phase I/II trial is designed to evaluate three dose levels: 2x10⁵ cells/kg, 2x10⁶ cells/kg, and 2x10⁷ cells/kg. Dose level 3 (2x10⁷ cells/kg) has been discontinued as it exceeded the maximum tolerated dose as defined by the study. The primary endpoint of the trial is to evaluate the feasibility and preliminary safety of using JCAR014 to treat CD19-positive advanced B cell malignancies. The secondary endpoints of the trial include assessing the duration of persistence of the modified T cells, determining whether the modified T cells traffic in the bone marrow and function in vivo, determining if the modified T cells have antitumor activity in patients with measurable tumor burden prior to T cell transfer, and determining if the treatment is associated with tumor lysis syndrome. In 2017, we amended the protocol for this trial to explore the combination of JCAR014 with ibrutinib in r/r CLL patients.

We are also conducting trials with JCAR014 in combination with other agents, including an ongoing Phase Ib trial with the MedImmune checkpoint inhibitor durvalumab in which we are enrolling adult r/r NHL patients and Phase I testing with ibrutinib in r/r CLL patients. We believe that these and other combination trials will provide key insights on the next set of development trials in lymphoma and CLL. These trials may also potentially inform strategies for solid organ tumor settings and next generation CAR constructs.

JCAR015

In early 2017 we determined to cease development of JCAR015 and to redirect associated resources to the development of a defined cell product candidate in the adult r/r ALL setting.

CD22-directed Product Candidate: JCAR018

We also have another product candidate in clinical trials, JCAR018, that also designed for the treatment of B cell malignancies, but uses technology to target a different cell surface protein on B cells, CD22. Like CD19, CD22 is widely expressed on B lymphocytes. It is expressed by most B cell malignancies, including NHL, ALL, and CLL, although its expression is not as common as CD19 in some of these diseases. Within these CD22 positive malignancies, it is generally expressed on all of a patient’s cancer cells. Additionally, treatment with CD19-directed therapies has led to the emergence in some patients of CD19-negative cancer cells. To date, these patients’ cancer cells have retained CD22 expression, potentially making a CD22-directed CAR T cell product candidate an important potential treatment for these patients, alone or in combination with CD19-directed therapy. Similar to CD19, CD22 is not known to be expressed on any healthy tissue other than B cells. It is also not expressed on hematopoietic stem cells, and therefore B cells should return when the CAR T cell is no longer present.

JCAR018 is the CD22-directed CAR product candidate with respect to which we have licensed technology from Opus Bio. JCAR018 has a fully human binding domain and a 4-1BB costimulatory domain. This product candidate was originally developed at the NCI.

JCAR018 is being tested in a Phase I trial at the NCI in pediatric and young adult patients that have CD22-positive r/r ALL or r/r NHL, under an NCI IND. The trial is open to patients who have either CD19-negative or CD19-positive disease and who have or have not received previous CAR T cell treatment.

Based on investigator-reported data presented at ASH 2017 as of a data cutoff date in October 2017, in r/r ALL patients who received dose level 2 (1x10⁶ cells/kg) of JCAR018 and flu/cy lymphodepletion, 17 of 22, or 78%, achieved a CRm as measured by flow cytometry, with the longest durable remission beyond two years. The product candidate had generally manageable adverse events in the 31 r/r ALL patients and one r/r NHL patient treated. The primary adverse event was CTCAE Grade 1 to 2 CRS, with no severe or irreversible neurotoxicity. There were two deaths due to sepsis in a patient after resolution of CRS. Other treatment-emergent adverse events, whether or not treatment related, occurring in at least 25% of patients included hypoalbuminemia, anemia, aspartate aminotransferase increased, hypocalcemia, lymphocyte count decreased, neutrophil count decreased, fever, hypokalemia, hyponatremia, platelet count decreased, white blood cell decreased, activated partial thromboplastin time prolonged, alanine aminotransferase increased, febrile neutropenia, hypophosphatemia, alkaline phosphatase increased, hypotension, diarrhea, headache, nausea, pain, sinus tachycardia, anorexia, edema limbs, hypomagnesemia, vomiting, fatigue, abdominal pain, creatinine phosphokinase increased, chills, blood bilirubin increased, hypercalcemia, hypertension, and hypertriglyceridemia. All of the treated r/r ALL patients had been previously treated with anti-CD19 CAR T cell therapy and had previously undergone at least one allogeneic stem cell transplant.

This trial continues and we plan to present additional data on this trial in 2018.

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Combining CD19-directed therapy and CD22-directed therapy may increase the selection pressure on the cancer and significantly reduce the overall risk of relapse. We are currently testing preclinical constructs to better understand the optimal way to target both CD22 and CD19 in the same product, with the aim of increasing the rate of durable remissions.

B Cell Malignancies Strategy and Development Plans

With respect to r/r NHL, we initiated our multi-center trial for JCAR017 in adults in 2015 and announced promising interim data from the trial at ASH 2017. Although the trial began as a dose-escalation Phase I trial, we have now completed enrollment in the trial of the pivotal cohort that we believe can support registration, with a goal of enabling a commercial launch of JCAR017 in r/r DLBCL in 2019.

With respect to r/r CLL, we began a Phase I/II trial using JCAR017 for the treatment of r/r CLL. We believe that if the results of the trial are successful, they may support U.S. regulatory approval in r/r CLL as early as 2019 or 2020.

With respect to pediatric and adult r/r ALL, we intend to outline the specifics of our strategy later in 2018.

Not every patient achieves a complete remission or CR, and of those that do, many patients have seen their cancer relapse. Several key hypotheses have emerged for improving patient long-term outcomes. In particular, we believe that improving the predictability of early cell expansion, improving CAR T cell persistence, overcoming the immunosuppressive effects of the tumor microenvironment, and addressing cancer cells losing expression of the epitope to which the CAR T binds are important areas to explore for potential clinical benefit. We expect several generations of product improvements for CD19 over the coming years, as we work to optimize patient outcomes for patients with lymphoma or leukemia.

Improved Predictability of Cell Expansion

We began a Phase I trial through our collaborator MSK of a CD19/4-1BBL "armored" CAR in 2017. "Armored" CAR product candidates are designed to explore the potential for synergistic effects of a CAR T cell and the production or expression of locally acting signaling proteins by the CAR T cell, such as 4-1BBL. In preclinical models, these "armored" CARs have greater cell expansion than our other CAR T product candidates. We may in the future study additional "armored" CARs directed to CD19 beyond the CD19/4-1BBL "armored" CAR that is currently being studied at MSK.

Improving CAR T Cell Persistence

We began a Phase I clinical trial in 2017 at FHCRC of our CD19-directed CAR product candidate with a fully human binding domain, in advanced B cell malignancies, including r/r NHL. We believe that the use of a human binding domain may lead to decreased risk of an immune response by a patient’s own immune system against the CAR T cell and increased persistence of the CAR T cells in the body. Our clinical experience to date suggests that increased CAR T cell persistence can potentially increase the duration of clinical response.

Overcoming the Tumor Microenvironment

We initiated a multi-center, global trial, referred to as the PLATFORM trial, in collaboration with Celgene in 2017 to explore JCAR017 in combination with durvalumab in patients with r/r NHL. We expect to open additional arms of this trial in 2018 and 2019 to explore combinations of JCAR017 with other immunomodulatory agents. We are also conducting Phase Ib trials, under FHCRC INDs, using JCAR014 in combination with durvalumab in patients with r/r NHL and in combination with ibrutinib in patients with r/r CLL. We believe that these and other combination trials will provide key insights on the next set of development trials in leukemia, lymphoma, and solid tumor settings, and also potentially inform next generation CAR constructs.

Overcoming CD19 Epitope Loss

As noted, we have an ongoing development program targeting CD22. Combining CD19-directed therapy and CD22-directed therapy may increase the selection pressure on the cancer and significantly reduce the overall risk of relapse. We are currently testing preclinical constructs to better understand the optimal way to target both CD22 and CD19 in the same CAR T product, with the aim of increasing the rate of durable remissions.

EU Development

As described in more detail under the caption "Licenses and Third-Party Collaborations" below, Celgene has opted in to our CD19 program and thereby has obtained an exclusive license to our CD19 product candidates for development and commercialization outside of North America and China. Celgene now is responsible for development and commercialization of our CD19 product candidates in its territories and is actively planning one or more trials of our CD19 product candidates in the

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EU. Celgene intends to treat patients in the EU in 2018, with a first regulatory approval in r/r DLBCL potentially as early as 2019.

Product Candidates in Multiple Myeloma

Another key area of focus for us is the treatment of multiple myeloma, which is a cancer of the plasma cells. Plasma cells are B cells that have matured to specialize in the production of antibodies. As plasma cells are primarily found in the bone marrow, cancerous plasma cells usually generate tumors in bone, and infrequently appear elsewhere. Multiple myeloma is a condition in which these plasma cells become malignant, with a single clone growing at an uncontrolled pace. These myeloma cells secrete large quantities of the same antibody, and patient symptoms can develop from the myeloma cells crowding out other plasma and bone marrow cells, leading to increased risk of infection, risk of bone destruction, and kidney disease. Multiple myeloma is the second most common hematologic malignancy making up approximately 2% of all cancers. Despite many recent advances in therapy, this form of cancer is still largely fatal and an area of high unmet medical need, with greater than 12,500 deaths estimated to have occurred in 2016.

Multiple myeloma shares some common attributes with B cell malignancies that make it an attractive target for CAR T cell therapy:


•	There are certain cell surface proteins that appear on many multiple myeloma cancer cells with consistency.


•	There are identifiable proteins whose expression is limited to the B cell lineage, decreasing the likelihood of off-target toxicity.


•	Multiple targets have been identified for potential use in CAR T therapy.

Targeting BCMA is an area with significant promise in the treatment of multiple myeloma, and we have begun a Phase I clinical trial with JCARH125 in r/r multiple myeloma. JCARH125 is a CAR T cell product candidate that incorporates several important elements that we believe are important for maximizing patient benefit, including a next-generation manufacturing process, a fully-human binding domain, and a 4-1BB costimulatory domain. We expect early results from this study as we move through 2018. If the results are compelling, we intend to move JCARH125 into a registration study.

We also have two other CAR T cell product candidates, MCARH171 and FCARH143, that target BCMA being studied in Phase I clinical trials, one at each of MSK and FHCRC, respectively. These trials use manufacturing processes from these academic partners. We intend to use these trials to better understand safety and obtain other translational insights to help us to accelerate our JCARH125 program and our multiple myeloma program more generally.

We have also licensed rights to binding domains against two multiple myeloma targets other than BCMA that we may also advance to the clinic. In addition, in late 2017, we announced three license agreements to advance our program in multiple myeloma using GSIs in combination with BCMA-directed CAR T cells. Gamma secretase is an enzyme that cleaves a set of transmembrane proteins, including BCMA. Multiple publications have shown that treatment with GSIs can increase surface expression of BCMA on tumors, particularly multiple myeloma. Increased cell surface BCMA may increase potency of a BCMA-directed CAR T therapy. In 2018, we plan to begin clinical trials combining a GSI with one of our BCMA CAR T cell product candidates.

Additional Product Candidates

We are exploring the potential of our CAR and TCR technologies against targets that have the potential to treat cancers beyond B cell malignancies and multiple myeloma—in particular, difficult-to-treat solid organ tumors such as certain breast, lung, and pancreatic cancers. We and our collaborators are working on a number of product candidates in early clinical or late-stage preclinical development that target different cancer proteins associated with solid organ tumors. We have five such candidates in clinical testing against five different targets, with additional product candidates in the preclinical pipeline.

Glycoprotein Targets: L1CAM (CD171) and Lewis Y

We have two CAR product candidates in the clinic that target glycoproteins, which are proteins that have carbohydrates attached to them, on the cell surface. The first of the targets is L1CAM, also known as CD171, a cell-surface adhesion molecule that plays an important role in the development of a normal nervous system. It is overexpressed in neuroblastoma, and there is increasing evidence of aberrant expression in a variety of solid organ tumors, including glioblastoma and lung, pancreatic, and ovarian cancers. The second of the targets is Lewis Y, which has an aberrant glycosylation when Lewis Y is expressed in multiple types of cancer, such as lung, leukemia, breast, and ovarian cancers.

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JCAR023 is our L1CAM directed CAR T cell product candidate, which was originally developed at SCRI. It has a defined cell composition. Preliminary data from a non-human primate study has shown no evidence of reactivity of JCAR023 to normal tissues at cell doses 10-100 fold higher than the anticipated target dose in humans. SCRI is conducting a Phase I trial of JCAR023 in in patients with refractory or recurrent pediatric neuroblastoma, under a SCRI IND.

Our Lewis Y-directed CAR T cell product candidate was originally developed by the Peter MacCallum Cancer Centre. The Lewis Y-directed product candidate is currently being tested in lung cancer patients in a Phase I trial in Australia at the Peter MacCallum Cancer Centre.

JCAR020: MUC-16 / IL-12

MUC-16 is a protein overexpressed in the majority of ovarian cancers, but not on the surface of normal ovary cells. CA-125 is a protein found in the blood of ovarian cancer patients that results from the cleavage of MUC-16. CA-125 levels in the blood are a common test for ovarian cancer progression because they correlate with cancer progression. Our MUC-16/IL-12 product candidate, JCAR020, which was originally developed at MSK, has a binding domain that recognizes an extracellular domain of MUC-16 that remains following cleavage of CA-125.

JCAR020 is our first development candidate that uses our "armored CAR" technology. IL-12 is a cytokine that can help overcome the inhibitory effects that the tumor micro-environment can have on T cell activity. Systemic delivery of IL-12 has been limited to date by severe side effects, which have included severe hematological toxicity, severe hepatic dysfunction, and immune reactive events such as colitis, some of which resulted in deaths and trial stoppage. However, we believe local delivery to the tumor may provide efficacy while avoiding these side effects. JCAR020 secretes IL-12. Because CAR T cells aggregate at the target protein, IL-12 delivery is likely to concentrate in areas with significant MUC-16 protein expression, in this case, MUC-16 expressing cancers. We believe the armored CAR utilizing IL-12 has the potential to enhance T cell potency and persistence. MSK is conducting a Phase I trial of JCAR020 in ovarian cancer, under an MSK IND. The Phase I trial for JCAR020 opened for enrollment in late 2015, and the trial will continue to enroll patients at ascending doses in 2018. In addition to assessing safety and preliminary efficacy, the trial is designed to provide potential biomarker and translational insights.

JCAR024: ROR-1

ROR-1 is a protein expressed in the formation of embryos, but in normal adult cells its surface expression is predominantly found at low levels on adipocytes, or fat cells, and briefly on precursors to B cells, or pre-B cells, during normal B cell maturation. ROR-1 is overexpressed on a wide variety of cancers including a subset of non-small cell lung cancer, triple negative breast cancer, pancreatic cancer, and prostate cancer. It is highly expressed on B cell chronic lymphocytic leukemia and mantle cell lymphoma.

JCAR024 is our ROR-1-directed CAR T cell product candidate, which was originally developed at FHCRC. It has a defined cell composition. Preliminary data in non-human primates has shown no evidence of acute clinically relevant side effects at cell doses exceeding the anticipated target dose in humans. We began a Phase I trial in early 2016 of JCAR024 in patients with ROR-1 expressing cancers, under a FHCRC-sponsored IND. We are also developing a next generation ROR-1-directed CAR T cell product candidate using a fully human binder.

JTCR016: WT-1

Our lead high-affinity TCR T cell product candidate, JTCR016, targets WT-1, an intracellular protein that is overexpressed in a number of cancers, including adult myeloid leukemia ("AML") and non-small cell lung, breast, pancreatic, ovarian, and colorectal cancers. This product candidate was originally developed at FHCRC.

The first trial to test WT-1 was a Phase I/II trial that began in 2002, under a FHCRC IND, for the treatment of patients who have relapsed or are at a high risk of relapse after having received an allogeneic HSCT for AML, myelodysplasic syndrome, and chronic myeloid leukemia. In preliminary investigator-reported clinical data presented at ASH 2016 from the Phase I dose-escalation portion of the trial, 12 patients who had relapsed and 12 patients with no measurable disease but at high risk of relapse of AML had been treated as of the data cutoff date of November 1, 2016. In these patients, JTCR016 was relatively well-tolerated with prolonged persistence of the engineered T cells and no relapses as of the data cutoff date in the 12 patients at high risk of relapse. In the portion of the trial in which the 12 relapsed patients were treated, there was some early evidence of a direct anti-leukemic effect of JTCR016. Across all patients treated on the trial, treatment-emergent adverse events of Grade 3 and above, whether or not treatment related, occurring in at least 10% of patients included platelet count decreased, lymphocyte count decreased, anemia, neutrophil count decreased, white blood cell count decreased, hyponatremia, and hypotension. FHCRC only collects adverse event data of Grade 3 and above for this trial. There were no observed events of sCRS or severe neurotoxicity in any patients treated with JTCR016 in the trial.

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In 2015, FHCRC began a second Phase I/II trial of JTCR016, in patients with advanced NSCLC or mesothelioma, under a FHCRC IND. In early clinical data presented at the American Association for Cancer Research Annual Meeting 2016 ("AACR 2016") in April 2016 from the Phase I portion of the trial, out of three patients treated as of the data cutoff date of April 1, 2016, one mesothelioma patient had an ongoing partial response and one mesothelioma patient had stable disease after receiving JTCR016. JTCR016 was generally well-tolerated in these three patients, with no evidence of sCRS or severe neurotoxicity. This trial continues to enroll patients.

We have begun a third Phase I/II trial of JTCR016 at FHCRC, in patients with newly diagnosed or relapsed high risk AML, under a FHCRC IND.

We expect additional data to be presented from one or more JTCR016 trials in 2018.

HPV e6/e7 Oncoproteins

Another active area of research for Juno is the possibility of treating cancers that are caused by viruses, such as HPV. Subject to completion of certain preclinical studies, we are planning a Phase I trial to begin in 2019 under a Juno IND with a TCR product candidate targeting the HPV e6/e7 oncoproteins, which are proteins that are expressed in many HPV-associated cancers, including certain cervical cancers and head and neck malignancies.

IL13rα2

We are developing a CAR product candidate that targets a cytokine receptor, IL13rα2, which is overexpressed on glioblastoma. The New England Journal of Medicine recently published a case study showing a patient who received a non-Juno CAR product candidate directed toward IL13rα2. This case study offers a proof of concept that CAR T cell therapy directed toward IL13rα2 may be efficacious in the treatment of glioblastoma.

We are planning to initiate a Phase I trial in glioblastoma in 2018, subject to completion of certain preclinical studies, using a CAR product candidate directed at IL13rα2.

Process Development and Manufacturing

We are devoting significant resources to process development and manufacturing in order to optimize the safety and efficacy of our product candidates, as well as to reduce our per unit manufacturing costs. The manufacture of our product candidates involves complex processes, including the separation of the appropriate T cells from blood product collected from the patient, the activation of the T cells, the insertion of the gene sequence for the CAR or TCR construct into the cell’s DNA, and the growth in the number of these modified T cells to the desired dose level. We have established a semi-automated, closed platform for this process, and we are investing further resources in improving and further automating the process so as to reduce the cost of manufacturing.

We continue to leverage our relationships with our academic partner institutions for manufacturing for some of our Phase I/II clinical trials. Doing so has significantly accelerated our ability to advance clinical trials, gain insights into the multiple manufacturing processes, and establish an infrastructure for future Phase I and II trials.

Our manufacturing strategy is designed to meet the demand needs of clinical supply and commercial launch, while also pursuing the goal of carefully managing our cost structure, maximizing optionality, and driving long-term cost of goods as low as possible. We have established a Juno owned and operated manufacturing facility in Bothell, Washington, that is manufacturing JCAR017 for the TRANSCEND trial and JCARH125 for the Phase I multiple myeloma trial. . We also have plans to expand our manufacturing capacity in 2018 and 2019. We may also use CMOs for drug product manufacturing in the future if needs require. We believe that operating our own manufacturing facility will provide us with enhanced control of material supply for both clinical trials and the commercial market, will enable the more rapid implementation of process changes, and will allow for better long-term margins. We believe this approach will position us to support multicenter clinical trials and commercialization.

Our manufacturing strategy is currently structured to support our U.S. development plans. Although we believe the general manufacturing strategy developed for the United States will be applicable in other geographies, specific strategies for other geographies will be developed as part of our clinical and commercial plans for such other geographies. As such, we are currently working with Celgene on our strategy for those geographies, such as the EU, where Celgene will be leading the development and commercialization of our CD19 product candidates, and we are working with JW Cayman (defined below) on developing a strategy for manufacturing in China.

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Commercialization Plan

We currently have limited sales, marketing or commercial product distribution capabilities and as a company we have no experience in commercializing products. We are in the process of building our U.S. commercial infrastructure and intend to build our own global commercialization capabilities over time as well as to leverage Celgene’s global capabilities in certain geographies for CD19 product candidates and any other programs that Celgene opts into.

According to Decision Resources Group’s projections, the combined global market for ALL, DLBCL, and CLL combined is expected to be approximately $20 billion by 2025. In the United States alone, there are approximately 6,000 patients diagnosed with ALL, 72,000 patients diagnosed with NHL and another 20,000 diagnosed with CLL each year. If any of our CD19 product candidates are approved, we expect to commercialize those products in the United States with an experienced sales, marketing, payer access and distribution organization including a national specialty hematology sales force.

Outside the United States, we have not yet defined our regulatory and commercial strategy. Under our license agreement with Celgene for the CD19 program, Celgene leads development and commercialization activities outside of North America and China. We expect to further outline our global plan for further development and commercialization of our CD19 product candidates in partnership with Celgene in 2018. With respect to product candidates arising out of other programs that Celgene opts in to, we would expect to leverage Celgene’s global development and commercial capabilities in those territories where Celgene receives development and commercialization rights. With respect to product candidates arising from programs for which Celgene chooses not to exercise its option, we would expect to build global commercial capacity internally or identify strategic partners for ongoing global commercialization of such product candidates, which may include biopharmaceutical partners, distributors, and contract sales and marketing organizations. We plan to further evaluate these alternatives as we approach approval for one of our product candidates.

As additional product candidates advance through our pipeline, our commercial plans will evolve as we consider elements such as the market potential, the unmet clinical need, the competitive landscape, development costs, etc., in order to efficiently and successfully commercialize our assets.

Intellectual Property

We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to our business, including seeking, maintaining, and defending patent rights, whether developed internally or licensed from our collaborators or other third parties. Our policy is to seek to protect our proprietary position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, and product candidates that are important to the development and implementation of our business. We also rely on trade secrets and know-how relating to our proprietary technology and product candidates, continuing innovation, and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the field of immunotherapy. We additionally rely on data exclusivity, market exclusivity, and patent term extensions when available, and plan to seek and rely on regulatory protection afforded through orphan drug designations. Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions, and improvements; to preserve the confidentiality of our trade secrets; to maintain our licenses to use intellectual property owned by third parties; to defend and enforce our proprietary rights, including our patents; and to operate without infringing on the valid and enforceable patents and other proprietary rights of third parties.

We have developed and in-licensed numerous patents and patent applications and possess substantial know-how and trade secrets relating to the development and commercialization of immunotherapy product candidates, including related manufacturing processes and technology. Many of these in-licensed patents and patent applications claim the inventions of investigators at MSK, FHCRC, SCRI, NIH, City of Hope, and St. Jude, as described in more detail below under the caption "Licenses and Third-Party Collaborations." As of December 31, 2017, our owned and licensed patent portfolio includes approximately 38 licensed U.S. issued patents, approximately 39 licensed U.S. pending patent applications, approximately 52 owned U.S. issued patents, and approximately 65 owned U.S. pending patent applications covering certain of our proprietary technology, inventions, and improvements, and our most advanced product candidates, as well as approximately 20 owned patents issued in jurisdictions outside the United States, approximately 188 licensed patents issued in jurisdictions outside of the United States, approximately 387 licensed patent applications pending in jurisdictions outside of the United States (including 10 licensed pending Patent Cooperation Treaty applications), and approximately 259 owned patent applications pending in jurisdictions outside of the United States (including 35 owned pending Patent Cooperation Treaty applications) that, in many cases, are counterparts to the foregoing U.S. patents and patent applications. For example, these patents and patent applications include claims directed to:


•	proprietary CARs, T cell receptors and antibodies;

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•	proprietary CAR constructs, including those with customized spacer domains for improved tumor recognition;


•	engineered transgenes for T cell selection, identification, and in vivo ablation;


•	proprietary gene transfer vectors;


•	reversible reagents for cell selection, expansion and engineering;


•	systems, assays, and processes for generating, evaluating, and manufacturing cells and compositions for adoptive immunotherapy;


•	adoptive immunotherapy using defined T cell compositions;


•	multispecific cellular therapy approaches, including bispecific CARs, cells and compositions;


•	formulations, dosages, combinations, and treatment methods for adoptive immunotherapy, including those for predicting risk of and reducing toxicity associated with adoptive immunotherapy;


•	approaches for improving exposure to therapeutic cell product and promoting resistance to factors of tumor microenvironments;


•	diagnostic and prognostic methods and compositions;


•	libraries and high throughput methods for the discovery of antigen-binding molecules and targets;


•	compositions, combinations, and treatment methods related to the modulation of adenosine and/or adenosine receptors; and


•	compositions, combinations, and treatment methods related to the modulation of gamma secretase and/or Notch.

As for the immunotherapy products and processes we develop and commercialize, in the normal course of business, we intend to pursue, when possible, composition, method of use, dosing and formulation patent protection. We may also pursue patent protection with respect to manufacturing and drug development processes and technology.

Individual patents extend for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance, and the legal term of patents in the countries in which they are obtained. Generally, patents issued for applications filed in the United States are effective for 20 years from the earliest effective filing date. In addition, in certain instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period. The restoration period cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval. The duration of patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. Our patents issued as of December 31, 2017, will expire on dates ranging from 2019 to 2035. If patents are issued on our patent applications pending as of December 31, 2017, the resulting patents are projected to expire on dates ranging from 2021 to 2038. However, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country, and the validity and enforceability of the patent.

The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. No consistent policy regarding the scope of claims allowable in patents in the field of immunotherapy has emerged in the United States. The patent situation outside of the United States is even more uncertain. Changes in either the patent laws or their interpretation in the United States and other countries may diminish our ability to protect our inventions and enforce our intellectual property rights, and more generally could affect the value of our intellectual property. In particular, our ability to stop third parties from making, using, selling, offering to sell, or importing products that infringe our intellectual property will depend in part on our success in obtaining and enforcing patent claims that cover our technology, inventions, and improvements. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our products and the methods used to manufacture those products. Moreover, even our issued patents do not guarantee us the right to practice our technology in relation to the commercialization of our products. The area of patent and other intellectual property rights in biotechnology is an evolving one with many risks and uncertainties, and third parties may have blocking patents that could be used to prevent us from commercializing our patented product candidates and practicing our proprietary technology. Our issued patents and those that may issue in the future may be challenged, invalidated,

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or circumvented, which could limit our ability to stop competitors from marketing related products or limit the length of the term of patent protection that we may have for our product candidates. For example, in 2015, Kite Pharma, Inc. ("Kite") filed a petition with the USPTO for inter partes review of U.S. Patent No. 7,446,190, a patent that we have exclusively licensed from MSK. Although the USPTO upheld all the claims of this patent in December 2016, Kite has appealed this decision. If Kite is successful in its appeal, one or more of the patent's claims could be narrowed or invalidated. In addition, the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our product candidates. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any particular product candidate can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.

Patent disputes are sometimes interwoven into other business disputes. For example, we were a party in a lawsuit captioned Trustees of the University of Pennsylvania v. St. Jude Children’s Research Hospital, Civil Action No. 2:13-cv-01502-SD (E.D. Penn.), which concerned both a contractual dispute between St. Jude Children’s Research Hospital ("St. Jude") and the Trustees of the University of Pennsylvania ("Penn"), and a dispute about U.S. Patent No. 8,399,645 (the "’645 Patent"), which St. Jude has exclusively licensed to us. This lawsuit settled in April 2015.

As of December 31, 2017, our registered trademark portfolio currently contains 61 registered trademarks and pending trademark applications, consisting of 4 trademark registrations and 5 pending trademark applications in the United States, and 28 registered trademarks and 24 pending trademark applications in the following countries through both national filings and under the Madrid Protocol: Argentina, Australia, Canada, China, the European Union (including Germany), India, Japan, Republic of Korea, Singapore, and Switzerland. We may also rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our technology and product candidates, in part, by entering into confidentiality agreements with those who have access to our confidential information, including our employees, contractors, consultants, collaborators, and advisors. We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems. Although we have confidence in these individuals, organizations, and systems, agreements or security measures may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or may be independently discovered by competitors. To the extent that our employees, contractors, consultants, collaborators, and advisors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. For this and more comprehensive risks related to our proprietary technology, inventions, improvements and products, please see the section captioned "Risks Related to Intellectual Property" in Part I—Item 1A—"Risk Factors" of this report.

Licenses and Third-Party Collaborations

Celgene Corporation

Collaboration Agreement

In June 2015, we entered into a master research and collaboration agreement (the "Celgene Collaboration Agreement") with Celgene pursuant to which Juno and Celgene will research, develop and commercialize novel cellular therapy product candidates and other immuno-oncology and immunology therapeutics, including, in particular, CAR and TCR product candidates. The Celgene Collaboration Agreement became effective on July 31, 2015 and was amended and restated in August 2015 to clarify certain procedural aspects relating to a party’s exercise of an option for a given program, and to provide additional detail regarding a party’s entry into the applicable development and commercialization agreement thereafter. Pursuant to the collaboration, each of Celgene and Juno will conduct independent programs to research, develop, and commercialize such product candidates (including, in the case of Juno, our CD19 and CD22 programs). As detailed below, each party has certain options to obtain either an exclusive license to develop and commercialize specified product candidates arising from specified types of programs conducted by the other party within the scope of the collaboration, or the right to participate in the co-development and co-commercialization of specified product candidates arising from such programs. BCMA-directed product candidates are excluded from the collaboration.

The parties may exercise their options with respect to specified product candidates arising under programs within the scope of the collaboration until July 31, 2025, which is the tenth anniversary of the effective date of the Celgene Collaboration Agreement (the "Research Collaboration Term"), subject to a tail period applicable to certain programs, for which options have not yet been exercised as of the expiration of the Research Collaboration Term. For therapeutic product candidates that are directed to the target of a program for which an option is exercised, but for which the party exercising its option has not elected to obtain rights upon option exercise, each party is obligated during the remainder of the Research Collaboration Term to

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continue to offer the other party the right to exercise an additional option to obtain rights to develop and commercialize such other product candidates in such program until commencement of a pivotal clinical trial, upon terms set forth in the Celgene Collaboration Agreement. If a party does not exercise its option with respect to a program that is subject to the other party’s exclusive right to exercise an option prior to the expiration of all applicable option exercise periods for such product candidates in such program, the option with respect to such product candidates and such program will expire and the party required to offer such product candidates and program to the other party is free to develop and commercialize such product candidates independently.

Pursuant to the Celgene Collaboration Agreement, each party is solely responsible for research and development activities conducted under its programs prior to the other party’s exercise of an option. Following a party’s exercise of its option for a program, the parties will enter into an agreed form of license agreement or co-development and co-commercialization agreement for such program, as applicable, which agreement will set forth the allocation of rights and responsibilities as between the parties for development and commercialization activities for product candidates arising out of such program in the Celgene Territory and the Juno Territory, as applicable (as each is defined below).

Options under Celgene Collaboration Agreement

First, we granted Celgene options to obtain an exclusive license with respect to Juno’s internally conducted programs, to develop and commercialize specified types of immuno-oncology and immunology therapeutics that are selected by Celgene at the time it exercises such options and are directed to the molecular targets that are the subject of the relevant Juno programs. Juno will retain the right to develop and commercialize product candidates arising from such programs in the United States, Canada and Mexico, and for cellular therapy product candidates, China (such countries, the "Juno Territory" and all other countries, the "Celgene Territory"). Celgene may exercise the foregoing options on a program-by-program basis at various time points through completion of certain clinical trials with respect to product candidates in each program. Upon Celgene’s exercise of such option for specified product candidates for a program, the parties are obligated to enter into either a license agreement or a co-development and co-commercialization agreement as specified below.

If Celgene exercises an option with respect to our internally developed programs within the scope of the collaboration, as it has for our CD19 program, Juno and Celgene will enter into an agreed form of a license agreement pursuant to which Celgene receives an exclusive, royalty-bearing license to develop and commercialize, at Celgene’s cost, specified therapeutic product candidates directed to the targets of such Juno programs in the Celgene Territory, and Juno retains all rights to develop further and commercialize, at Juno’s cost, such therapeutic product candidates in the Juno Territory, subject to Celgene’s right to exercise an option for a specified number of such programs, excluding the CD19 program and the CD22 program, to co-promote such product candidates in the Juno Territory (in which case the parties would execute a co-development and co-commercialization agreement as specified below). Under all such license agreements, Juno has the right to participate in specified commercialization activities arising from such programs in certain major European markets.

For internally developed Juno programs for which Celgene exercises one of its specified number of rights to co-develop and co-commercialize product candidates arising in such program, as described above, the parties shall enter into an agreed form of co-development and co-commercialization agreement, pursuant to which Celgene shall have the right to co-develop and co-commercialize such product candidates, with the parties each entitled to bear and receive an equal share of the profits and losses arising out of such programs following the exercise of such co-promote right. In general, under such agreements, Juno will be the lead party for development and commercialization activities for such product candidates in the Juno Territory, and Celgene will be the lead party for development and commercialization activities for such product candidates in the Celgene Territory. Under such agreements, Celgene has the right to elect to participate in up to a specified percentage of specified commercialization activities for such product candidates in the Juno Territory, and Juno has the right to elect to participate in up to a specified percentage of specified commercialization activities for such product candidates in certain major European markets.

If Juno exercises its option with respect to specified product candidates arising in internally developed Celgene programs within the scope of the collaboration, the parties are obligated to enter into a co-development and co-commercialization agreement pursuant to which Juno bears thirty percent (30%) and Celgene bears seventy percent (70%) of global profits and losses. Under such co-development and co-commercialization agreements, Celgene is the lead party for all development and commercialization activities for such product candidates worldwide, subject to Juno’s right to participate in up to a specified percentage of specified commercialization activities in North America under certain circumstances and in certain major European countries.

Furthermore, each party will have the exclusive right to exercise options to co-develop and co-commercialize product candidates arising out of programs for which the other party in-licenses or acquires rights that are within the scope of their collaboration, where such rights are available to be granted, with the parties each bearing an equal share of the profits and

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losses arising out of such programs following the exercise of such option. In general, for such programs where the rights are in-licensed or acquired by Juno and for which Celgene exercises its options, Juno will be the lead party for development and commercialization of product candidates arising from such programs in the Juno Territory, subject to Celgene’s right to elect to participate in certain commercialization activities for such product candidates in the Juno Territory, and Celgene will be the lead party for development and commercialization of product candidates arising in such programs in the Celgene Territory, subject to Juno’s right to elect to participate in certain commercialization activities for such product candidates in certain major European markets. Conversely, for such programs where the rights are in-licensed or acquired by Celgene and for which Juno exercises its options, Celgene will be the lead party for development and commercialization activities for product candidates arising from such programs on a worldwide basis, subject to Juno’s right to elect to participate in certain commercialization activities for such product candidates in the Juno Territory and in certain major European markets. The party exercising an option for these in-licensed or acquired programs is required to pay to the other party an upfront payment equal to one half of the costs incurred by other party in connection with the acquisition of rights to such programs.

In addition to an upfront cash payment of approximately $150.2 million under the Celgene Collaboration Agreement made by Celgene upon its effectiveness, Celgene is required to pay to Juno an additional upfront fee if Celgene exercises its option for each of the CD19 Program and the CD22 Program, totaling, if the options are exercised for both programs during the initial opt-in window, $100.0 million. In April 2016, Celgene paid us $50.0 million upon its exercise of its option for the CD19 Program. Upon a party’s exercise of the option for any other program (other than certain in-licensed or acquired programs where a party exercises its option at the time such program is acquired), the party exercising the option is required to pay to the other party an upfront payment at the time of exercise of its option, calculated as a multiple of the costs incurred by the other party in relation to the development activities for such program prior to the exercise of the option, with such multiple based on the point in development of such product at which such party exercises such option. For programs for which the parties have entered into a license agreement, Juno will also receive royalties from Celgene, for product candidates arising from the CD19 and CD22 programs, at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory, and for product candidates arising from other Juno programs that are subject to a license agreement, tiered royalties on net sales of such product candidates in the Celgene Territory, at percentages ranging from the high single digits to the mid-teens, calculated based on the stage of development at which Celgene exercises its option for such program.

In addition to each party’s rights with respect to development and commercialization of product candidates arising from programs in the collaboration as set forth above, the parties have agreed to enter into a manufacturing and supply agreement that will govern the terms of manufacture and supply of cellular therapy product candidates and other product candidates included within collaboration programs following the exercise of an option for each such program. Under this agreement, Juno would manufacture and supply cellular therapy product candidates for the Juno Territory, and provide certain support for the manufacture and supply of cellular therapy product candidates for the Celgene Territory. Celgene would be responsible for the supply of other types of product candidates for which options are exercised.

The Celgene Collaboration Agreement will terminate upon the later of the last-to-expire of all option exercise periods, or, if an option is exercised by a party for one or more programs in the collaboration, upon the termination or expiration of the last-to-exist license agreement or co-development and co-commercialization agreement, as applicable, for any such program. The Celgene Collaboration Agreement may be terminated by either party for the insolvency of, or for an uncured material breach of the Celgene Collaboration Agreement by, the other party. Celgene may terminate the Celgene Collaboration Agreement in its entirety for any reason by providing Juno with prior written notice if there are no active development and commercialization agreements in place. Juno may terminate the Celgene Collaboration Agreement if Juno exercises its termination rights under the Voting and Standstill Agreement (as defined below) between the Parties for Celgene’s breach of certain covenants therein, or if either party terminates the 2015 Celgene SPA (as defined below) other than as a result of a failure by Juno to meet specified closing conditions under such agreement. Either party also has the right to terminate the Celgene Collaboration Agreement on a program-by-program basis if the other party or any of its affiliates challenges the validity, scope or enforceability of or otherwise opposes, any patent included within the intellectual property rights licensed to the other party under the Celgene Collaboration Agreement.

On a program-by-program basis and prior to the exercise of an option, either party may terminate the Celgene Collaboration Agreement either in its entirety or with respect to one or more programs on prior written notice to the other party in the case of an uncured material breach by the other party that frustrates the fundamental purpose of the Celgene Collaboration Agreement,. On a program-by-program basis following the exercise of an option for a program, either Party may also terminate any license agreement, or co-development and co-commercialization agreement for such program upon prior notice for an uncured material breach by the other party with respect to such program that frustrates the fundamental purpose of such agreement. Either party may terminate a license agreement or co-development and co-commercialization agreement upon the bankruptcy or insolvency of the other party. Either party also has the right to terminate the license agreement or the co-development and co-commercialization agreement if the other party or any of its affiliates challenges the validity, scope or enforceability of or otherwise opposes, any patent included within the intellectual property rights licensed to the other party under such agreement.

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CD19 License Agreement

In April 2016, Celgene exercised its opt-in right to develop and commercialize product candidates from our CD19 program in the Celgene Territory. As a result, we entered into a license agreement with Celgene (the "Celgene CD19 License") pursuant to which Celgene received an exclusive, royalty-bearing license to develop and commercialize therapeutic CAR product candidates from our CD19 program in the Celgene Territory. Juno retains all rights to develop further and commercialize such product candidates in the Juno Territory, except that Juno has authorized Celgene to conduct certain clinical trials in the United States with respect to certain CD19 combination therapies. Juno and Celgene will generally share worldwide research and development costs for certain CD19 product candidates, although either party may opt out of funding specific studies led by the other. Juno will be responsible for commercialization costs in the Juno Territory and Celgene will be responsible for commercialization costs in the Celgene Territory. Juno has the right to participate in specified commercialization activities for licensed products arising from the CD19 program in certain major European markets. Celgene has the right to participate in specified commercialization activities in North America for licensed products for certain indications under the CD19 program. We received a $50.0 million option exercise fee from Celgene upon the exercise of Celgene’s option for the CD19 program. We will also receive royalties from Celgene for CAR product candidates arising from the CD19 program at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory.

The term of the Celgene CD19 License will expire on the last to expire royalty payment obligation of Celgene under that agreement. Such royalty payment obligation will expire, on a licensed product-by-licensed product and a country-by-country basis, after sales of such licensed product decline to specified levels following the latest of (i) the expiration of the last to expire Juno patent licensed to Celgene covering such licensed product in such country, (ii) the expiration of regulatory exclusivity for such licensed product in such country, and (iii) a specified anniversary of the first commercial sale of such licensed product in such country.

Celgene may terminate the Celgene CD19 License in its entirety upon prior written notice. Celgene also has the right to terminate the Celgene CD19 License, on a product candidate-by-product candidate basis, immediately upon written notice to Juno upon the occurrence of certain safety events. Either Juno or Celgene may terminate the Celgene CD19 License upon prior written notice for an uncured material breach by the other party that frustrates the fundamental purpose of the Celgene CD19 License. Either Juno or Celgene may terminate the Celgene CD19 License upon the bankruptcy or insolvency of the other party, or if the other party or any of its affiliates challenges the validity, scope or enforceability of or otherwise opposes, any patent included within the intellectual property rights licensed to the other party under the Celgene CD19 License. Juno may also terminate the Celgene CD19 License immediately for certain breaches by Celgene of the voting and standstill agreement between Celgene and Juno.

Equity Placement

In June 2015, we also entered into a share purchase agreement (the "2015 Celgene SPA") with Celgene. Pursuant to the 2015 Celgene SPA, we agreed to sell 9,137,672 shares of our common stock to Celgene at an aggregate cash price of approximately $849.8 million, or $93.00 per share of common stock, at an initial closing. The initial closing occurred on August 4, 2015.

First Period Top-Up Rights

Starting in 2016 and until June 29, 2020, Celgene has the annual right, following the filing of each Annual Report on Form 10-K filed by Juno (including this report), to purchase additional shares from Juno at a market average price, allowing it to "top up" to an ownership interest equal to 10% of the then-outstanding shares (after giving effect to such purchase), subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any given year, then the percentage of ownership targeted for a top-up stock purchase for the next year will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise).

In March 2016, Celgene exercised its annual top-up right to purchase 1,137,593 shares at a price of $41.32 per share, for an aggregate cash purchase price of $47.0 million. As Celgene in March 2016 did not exercise the top-up right in full to reach 10% ownership that would have been permitted by the top-up right, the top-up right that was triggered by the filing of the 2016 Annual Report on Form 10-K permitted Celgene to top-up its ownership stake in the Company to 9.76%.

In March 2017, Celgene exercised its annual top-up right to purchase 75,568 shares at a price of $22.39 per share, for an aggregate cash purchase price of $1.7 million. The top-up right that will be triggered by the filing of the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2017 will only permit Celgene to top-up its ownership stake of the Company’s common stock to 9.76%.

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Based on the number of shares of common stock outstanding as of February 21, 2018 as set forth on the cover of this report, we estimate that Celgene will have the right to acquire approximately 241,000 shares of our common stock if it exercises the "top up" right triggered by the filing of this report.

First Acquisition Right

During the period beginning on June 29, 2019 and ending on June 28, 2020, subject to Celgene opting in to a certain number of Juno programs under the Celgene Collaboration Agreement, Celgene will have the right (the "First Acquisition Right") to purchase up to 19.99% of the then-outstanding shares of Juno’s common stock (after giving effect to such purchase) at the closing price of the common stock on the principal trading market (currently The Nasdaq Global Select Market) on the date of exercise (the "FAR Base Price"), plus a premium on all shares in excess of the number of shares for which Celgene would then be able to purchase if it then had a top-up right as described in the preceding paragraph.

Second Period Top-Up Rights

After the closing of the purchase of shares upon the exercise of the First Acquisition Right until the SAR Termination Date (as defined below), in the event that Celgene has been diluted after exercising the First Acquisition Right, Juno may elect annually, upon the filing of each Annual Report on Form 10-K filed by Juno, to offer Celgene the right to purchase additional shares from Juno at 105% of market average price, allowing Celgene to "top up" to an ownership interest (after giving effect to such purchase) equal to the percentage ownership of shares that Celgene obtained upon exercise of the First Acquisition Right, subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any year in which it is offered such right by Juno, then the percentage of ownership targeted for a top-up stock purchase for the next year it is offered such top-up right will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise). The "SAR Termination Date" is the later of (a) June 29, 2025, and (b) the earlier of (x) the date that is 6 months following the date that the conditions to the exercise of the Second Acquisition Right (as defined herein) are satisfied and (y) December 29, 2025.

Second Acquisition Right

During the period beginning on June 29, 2024 and ending on the SAR Termination Date, subject to each of Celgene and Juno opting into a certain number of programs under the Celgene Collaboration Agreement, and provided that Celgene exercised the First Acquisition Right so as to obtain a percentage ownership of 17% of Juno, Celgene will have the right (the "Second Acquisition Right") to purchase up to 30% of the then-outstanding shares of Juno’s common stock (after giving effect to such purchase) at the closing price of the common stock on the principal trading market on the date of exercise (the "SAR Base Price"), plus a premium on all shares in excess of the number of shares for which Celgene would then be able to purchase if it then had a top-up right as described in the preceding paragraph.

Final Top-Up Rights

Following the closing of the purchase of shares upon the exercise of the Second Acquisition Right and until the Celgene Collaboration Agreement expires or is terminated, Celgene would have the annual right, in the event that Celgene has been diluted after exercising the Second Acquisition Right, following the filing of each Annual Report on Form 10-K filed by Juno, to purchase additional shares from Juno at a price equal to 105% of market average price, allowing it to "top up" to the percentage ownership it had attained upon exercising the Second Acquisition Right, less 250 basis points, subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any given year, then the percentage of ownership targeted for a top-up stock purchase for the next year will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise).

These rights and the other described top-up rights, as well as the First Acquisition Right and Second Acquisition Right, may be limited or eliminated in certain circumstances when and if Celgene disposes of any of its shares.

Conditions to Closing; Termination; Stockholder Approval

Closings of top-up rights, the First Acquisition Right, and the Second Acquisition Right, are subject to customary closing conditions, including termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. We have the ability to terminate Celgene’s future purchase rights under the 2015 Celgene SPA in the event that Celgene breaches certain of its obligations under the Voting and Standstill Agreement (described below), Celgene undergoes a change in control, or the Celgene Collaboration Agreement terminates or expires.

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Voting and Standstill Agreement

In connection with the 2015 Celgene SPA, we entered into a voting and standstill agreement (the "Voting and Standstill Agreement") with Celgene in June 2015. Pursuant to the Voting and Standstill Agreement, until the later of the fifth anniversary of the date of the Voting and Standstill Agreement and the expiration or earlier termination of the Celgene Collaboration Agreement, Celgene will be bound by certain "standstill" provisions which generally will prevent it from purchasing outstanding shares of Juno common stock or common stock equivalents, making a tender offer or encouraging or supporting a third party tender offer, calling a meeting of Juno’s stockholders, nominating a director whose nomination has not been approved by the Board, soliciting proxies in opposition to the recommendation of the Board, depositing shares of common stock in a voting trust, assisting a third party in taking such actions, entering into discussions with a third party as to such actions, or requesting or proposing in writing to the Board or any member thereof that Juno amend or waive any of these limitations. However, the Voting and Standstill Agreement contains an exception to the foregoing standstill restrictions on Celgene's actions in the event that any such action is approved by Juno, as is the case for the Offer, which is part of a negotiated transaction that was approved by the Board. In addition, as part of the negotiated transaction with Celgene, Juno agreed to a customary “fall away” provision that would cause the standstill provisions by which Celgene is bound to be suspended upon the occurrence of certain events, including the entry into a definitive acquisition agreement with a third party other than Celgene or a tender offer or exchange offer initiated by any person other than Celgene or its affiliates in which Juno recommends acceptance of such tender offer or exchange offer.

Further, under the Voting and Standstill Agreement, Celgene has also agreed not to dispose of any shares of common stock beneficially owned by it during certain specified lock-up periods, other than under certain exceptions. Following the expiration of such lock-up periods, Celgene may sell shares subject to certain manner of sale and volume limitations, as well as restrictions on sales to persons defined as "competitors." Celgene has agreed generally to vote its shares in accordance with the recommendations of the majority of Juno’s Board.

We have agreed to give Celgene certain Board designation rights until at least June 29, 2020, and thereafter for as long as Celgene and its affiliates beneficially own at least 7.5% of the voting power of Juno’s outstanding shares. Dr. Thomas O. Daniel was Celgene’s original designee on the Board. On April 13, 2017, Celgene designated, and our Board appointed, Rupert Vessey, M.A., B.M. B.ch., FRCP, D. Phil., as Celgene's new designee on the Board. Juno has agreed to nominate Dr. Vessey for election and reelection as a director on the Board, provided in each case that Dr. Vessey is reasonably acceptable to the nominating and governance committee of the Board. Celgene may designate another nominee to replace Dr. Vessey upon Dr. Vessey's departure from the Board or as a replacement nominee for election at a meeting of stockholders at which such position is up for election. Any subsequent designee may not be an employee or officer of Celgene, must be independent under Nasdaq rules, and must be reasonably acceptable to the nominating and governance committee of the Board.

The rights and restrictions applicable to Celgene under the Voting and Standstill Agreement are subject to termination upon the occurrence of certain events, including certain events involving a change of control, or potential change of control, of Juno.

Registration Rights Agreement

In connection with the 2015 Celgene SPA, we also entered into a registration rights agreement (the "Celgene Registration Rights Agreement") with Celgene in June 2015. Pursuant to the Celgene Registration Rights Agreement, if and as Celgene is permitted to sell shares under the Voting and Standstill Agreement, Juno has agreed to, upon the written request of Celgene, prepare and file with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-3 for purposes of registering the resale of the shares specified in Celgene’s written request or, if Juno is not at such time eligible for the use of Form S-3, use its commercially reasonable efforts to prepare and file a registration statement on a Form S-1 or alternative form that permits the resale of the shares. Juno has also agreed, among other things, to indemnify Celgene under the registration statement from certain liabilities and to pay all fees and expenses (excluding any legal fees of the selling holder(s) above $10,000 per registration statement, and any underwriting discounts and selling commissions) incident to the Juno’s obligations under the Celgene Registration Rights Agreement.

September 2017 Private Placement

On September 21, 2017, we entered into a share purchase agreement and omnibus amendment (the "2017 Celgene SPA") with Celgene pursuant to which we agreed to sell and Celgene agreed to buy 758,327 shares of Juno’s common stock in a private placement exempt from the registration requirements of the Securities Act of 1933, at a sale price equal to the price to the public in a concurrent public offering, $41.00 per share, for an aggregate purchase price of $31.1 million. The number of shares sold to Celgene constituted approximately 9.76% of the aggregate number of the shares sold in the public offering and the private placement to Celgene. The 2017 Celgene SPA also amended the terms of the Voting and Standstill Agreement and the Celgene Registration Rights Agreement in order to subject the shares purchased in the 2017 Celgene SPA to the same terms and conditions under such agreements as if the shares had been purchased pursuant to the 2015 Celgene SPA.

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Merger Agreement

On January 21, 2018, we entered into the Merger Agreement with Celgene Corp. and Purchaser, as described above under the caption "Merger Agreement." If the proposed acquisition is consummated, Juno would become a wholly-owned subsidiary of Celgene Corp.

Fred Hutchinson Cancer Research Center License and Collaboration Agreement

In October 2013, we entered into a license agreement with FHCRC that grants us an exclusive, worldwide, sublicensable license under certain patent rights, and a non-exclusive, worldwide, sublicensable license under certain technology, to research, develop, manufacture, improve, and commercialize products and processes covered by such patent rights or incorporating such technology for all therapeutic uses for the treatment of human cancer. This agreement was amended and restated in November 2014, and further amended in October 2015 and March 2016 to add additional patent assets and associated payment obligations to the agreement. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including target specific constructs and customized spacer regions, TCR constructs, and their use for immunotherapy. Pursuant to this license agreement, as of December 31, 2017, we have rights to one issued U.S. patent, five pending U.S. patent applications, four issued patents in jurisdictions outside the United States, and a number of other patent applications in jurisdictions outside the United States. We paid to FHCRC an upfront payment of $250,000 upon entering into this agreement. We are required to pay to FHCRC an annual maintenance fee of $50,000 for the first four years of the agreement’s term and thereafter minimum annual royalties of $100,000 per year, with such payments reduced by the amount of running royalties paid to FHCRC in the applicable prior year. With respect to technology licensed under the license agreement that is applicable to JCAR014 and JCAR017, we may be obligated to pay to FHCRC up to a maximum of $6.75 million per licensed product upon our achievement of certain specified clinical and regulatory milestones. In addition, the license agreement provides that we are required to pay to FHCRC low single-digit royalties based on annual net sales of the licensed products by us and by our sublicensees. We are also required to pay to FHCRC a portion of the payments that we receive from sublicensees of the rights licensed to us by FHCRC, on a tiered basis, up to a cap. In addition, we have agreed to use a set amount of these sublicensee payments to support the research and development of licensed products, and if, by the fifth anniversary of the license agreement, we have received at least such amount in sublicensee payments but have spent less than such amount on such research and development activities, we must pay to FHCRC the difference between such set amount and the actual amounts we have spent on such activities.

The license agreement will expire on the later of the expiration of the last to expire of the licensed patents rights covering a licensed product, on a country-by-country basis, or 15 years following the regulatory approval of the first licensed product. We may terminate the agreement at will upon 90 days’ notice, in its entirety, on a country-by-country basis, or with respect to any aspect of any licensed patent. FHCRC has the right to terminate the agreement upon 90 days’ notice in the event of our uncured breach, but upon 45 days’ notice if such breach is of a payment or reporting obligation, and upon written notice if we are more than three days late with any payment obligation on any two occasions within a 12-month period. FHCRC may also terminate the agreement upon 30 days’ written notice if we challenge, or notify FHCRC that we intend to challenge, the validity or enforceability of any of the licensed patent rights, and the agreement will terminate automatically in the event of our bankruptcy or insolvency. Upon termination, but not expiration, of the agreement, we are required, upon FHCRC’s request, to timely enter into good faith negotiations with FHCRC’s future licensees for the purpose of granting licensing rights to our modifications to or improvements upon the licensed patents or technologies.

Also in October 2013, we entered into a collaboration agreement with FHCRC relating to the research and development of cellular immunotherapy products. The research is conducted under project orders containing plans and budgets approved by the parties. We have an exclusive option to obtain a royalty-bearing license to intellectual property owned by FHCRC that is developed in connection with the work conducted under the collaboration agreement, such license to be exclusive with respect to patents and patent applications and non- exclusive with respect to any other intellectual property. In addition, FHCRC granted us an exclusive, perpetual, royalty-free, sublicensable license to any such intellectual property that constitutes an improvement to any process used to manufacture any human cellular and tissue-based collaboration study product, for the development and/or commercialization of cellular immunotherapy products.

The term of the collaboration agreement shall continue for six years from the effective date, unless earlier terminated. Either party may terminate the collaboration agreement, in its entirety or with respect to a particular collaboration project, upon 30 days’ prior written notice in the case of the other party’s uncured material breach. Either we or FHCRC may also terminate upon written notice in the event of the other party’s bankruptcy or insolvency.

In connection with the collaboration agreement in October 2013, we entered into a letter agreement with FHCRC pursuant to which we issued to FHCRC 3,274,998 shares of our common stock and also agreed to make success payments to FHCRC, payable in cash or publicly-traded equity at our discretion. In December 2015, we amended this letter agreement to make

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certain clarifying amendments thereto. These success payments are based on increases in the per share fair market value of our common stock during the term of the success payment agreement, which is a period of time that begins on the date of our collaboration agreement with FHCRC and ends on the later of: (1) the eighth anniversary of that date and (2) the earlier of (a) the eleventh anniversary of that date and (b) the third anniversary of the first date on which the FDA issues formal written approval for us to market a pharmaceutical or biologic product developed at least in part by our company. Success payments are owed (if applicable) after measurement of the value of our common stock in connection with the following valuation measurement dates during the term of the success payment agreement: (1) December 19, 2014 (the date our common stock first became publicly traded upon our initial public offering); (2) the date on which we sell, lease, transfer, or exclusively license all or substantially all of our assets to another company; (3) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); (4) any date on which ARCH Venture Fund VII, L.P. or C.L. Alaska L.P. transfers a majority of its shares of company capital stock held by it on such date to a third party; (5) every second anniversary of any event described in the preceding clauses (1), (2), (3) or (4), but only upon a request by FHCRC made within 20 calendar days after receiving written notice from us of such event; and (6) the last day of the term of the success payment agreement. Any success payment will generally be made within 90 days after the applicable valuation measurement date, except that (1) in the case of an initial public offering, the payment was required on December 21, 2015, which was the first business day following the first anniversary of the date our common stock first became publicly traded upon our initial public offering, and (2) in the case of a merger or sale of all of our company’s assets, the success payment will be made on the earlier of the 90th day following the transaction or the first date that transaction proceeds are paid to any of our stockholders. In the case of an initial public offering, the value of our common stock for determining whether a success payment was owed was determined by the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding December 19, 2015, which was the first anniversary of the date our common stock first became publicly traded following our initial public offering. In the case of a valuation measurement date triggered by each second anniversary of our stock first becoming publicly traded, the value of our common stock for determining whether a success payment is owed will be determined by the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding such anniversary date, so long as our common stock is publicly tradable during such 90 calendar day period. On all other valuation measurement dates (if any), the value will be determined either, in the case of a merger or stock sale, by the consideration paid in the transaction for each share of our stock or, in all other cases, by a baseball arbitration process. The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending from $20.00 per share to $160.00 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. Each threshold is associated with a success payment, ascending from $10.0 million at $20.00 per share to $375.0 million at $160.00 per share, payable if such threshold is reached. Any previous success payments made to FHCRC are credited against the success payment owed as of any valuation measurement date, so that FHCRC does not receive multiple success payments in connection with the same threshold. The success payments paid to FHCRC will not exceed, in aggregate, $375.0 million, which would be owed only when the value of the common stock reaches $160.00 per share. In June 2014, we entered into an agreement with FHCRC to provide that certain indirect costs related to the collaboration projects conducted by FHCRC are creditable against any success payments, and we amended this agreement in December 2015. If we elect to make a success payment in shares of our common stock, the number of shares to be issued is computed by dividing the dollar amount of the success payment by the volume weighted average trading price of a share of our common stock on the trading day preceding the date on which the success payment is made.

In December 2015, success payments to FHCRC were triggered in the aggregate amount of $75.0 million, less indirect cost offsets of $3.3 million. We elected to make the payment in shares of our common stock, and thereby issued 1,601,085 shares of our common stock to FHCRC in December 2015.

The completion of the Offer would trigger a success payment valuation measurement date, and success payments of $100 million, less indirect cost offsets, would be owed to FHCRC.

Memorial Sloan Kettering License and Research Agreement

In November 2013, we entered into a license agreement with MSK that grants us a worldwide, sublicensable license to certain patent rights and intellectual property rights related to certain know-how to develop, make, and commercialize licensed products and to perform services for all therapeutic and diagnostic uses, which license is exclusive with respect to such patent rights and tangible materials within such know-how, and nonexclusive with respect to such know-how and related intellectual property rights. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including bispecific and armored CARs, and their use for immunotherapy. Pursuant to this license agreement, as of December 31, 2017, we have rights to three issued U.S. patents, six pending U.S. patent applications, and a number of other patents and patent applications in jurisdictions outside the United States. Upon entering the agreement, we paid MSK an upfront payment of $6.9 million, and we are required to pay to MSK annual minimum royalties of $100,000 commencing on

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the fifth anniversary of the license agreement, with such payments creditable against royalties. The license agreement requires us to pay to MSK mid-to-high single-digit royalties based on annual net sales of licensed products or the performance of licensed services by us and our affiliates and sublicensees, which royalty will be reduced in the case of licensed products or services that are not covered by a valid patent in the country in which such products or services are manufactured or commercialized. In addition, if the first product we commercialize contains a chimeric antigen receptor T cell that is not a licensed product under the terms of the agreement, we are required to pay to MSK a below-single-digit royalty on net sales of such product for ten years after the first commercial sale of such product. We may also be obligated to pay to MSK up to a maximum of $6.75 million in clinical and regulatory milestone payments for each licensed product, which includes JCAR015.

The license agreement will expire, on a country-by-country and licensed-product-by-licensed-product and/or licensed-service-by-licensed-service basis, until the later of the expiration of the last to expire of the patents and patent applications covering such licensed product or service, the expiration of any market exclusivity period granted by a regulatory authority for such licensed product or service in such country, ten years from the first commercial sale of such licensed product or service in such country, or ten years from the first commercial sale of such licensed product or service in such country, where such product or service was never covered by a valid patent or patent application in such country. Upon the expiration of the agreement in any country for a particular licensed product, we will retain a nonexclusive, royalty-free license in such country to the licensed know-how useful to manufacture or commercialize such product. MSK may terminate the license agreement upon 90 days’ notice in the event of our uncured material breach, or upon 30 days’ notice if such breach is of a payment obligation. MSK may also terminate the agreement upon written notice in the event of our bankruptcy or insolvency or our conviction of a felony relating to the licensed products, or if we challenge the validity or enforceability of any licensed patent right. In addition, we have the right to terminate the agreement in its entirety at will upon 30 days’ notice to MSK, but if we have commenced the commercialization of licensed products we can only terminate at will if we cease all development and commercialization of licensed products.

Also in November 2013, we entered into a master sponsored research agreement, which we refer to as the MSRA, with MSK focused on research and development relating to chimeric antigen receptor T cell technology. The research is conducted under project orders containing plans and budgets approved by the parties. We have an exclusive option to obtain an exclusive, worldwide, royalty-bearing, sublicensable license to intellectual property owned by MSK developed in connection with the work conducted under the MSRA, and an exclusive option to obtain an exclusive, worldwide, sublicensable license to MSK’s interest in any improvements to the intellectual property licensed by us to MSK for conducting a research project. If the exclusive license agreement with MSK described above is still in effect, any such intellectual property licensed by us pursuant to our exercise of either such option shall be included within the rights licensed to us under the exclusive license agreement, although we may agree to additional diligence and other obligations. The term of the MSRA shall continue until the activities set forth in each statement of work entered into under the MSRA are completed. The MSRA may be terminated by either party upon 90 days’ notice in the event of the other party’s uncured material breach. MSK may terminate the MSRA upon 30 days’ notice in the event of our uncured failure to make a payment.

Also in November 2013, we entered into a master clinical study agreement, which we refer to as the MCSA, for clinical studies to be conducted at MSK on our behalf. Each such clinical study will be conducted in accordance with a written plan and budget and protocol approved by the parties. We have an exclusive option to obtain an exclusive, worldwide, royalty-bearing, sublicensable license to intellectual property owned by MSK developed in connection with the work conducted under the MCSA, and an exclusive option to obtain an exclusive, worldwide, sublicensable license to MSK’s interest in any improvements to the intellectual property licensed by us to MSK to conduct any clinical study under the MCSA. If the exclusive license agreement with MSK described above is still in effect, any such intellectual property licensed by us pursuant to our exercise of either such option shall be automatically included within the rights licensed to us under the exclusive license agreement. The MCSA has a term of five years and may be terminated by either party upon 30 days’ notice in the event of the other party’s uncured material breach, or upon written notice in the event of the other party’s bankruptcy or insolvency.

In connection with these arrangements, in November 2013 we entered into a letter agreement with MSK pursuant to which we issued to MSK 500,000 shares of our common stock and agreed to make success payments to MSK, payable in cash or publicly-traded equity at our discretion. In December 2015, we amended this letter agreement to make certain clarifying amendments thereto. These success payments are based on increases in the per share fair market value of our common stock during the term of the success payment agreement, which is a period of time that begins on the date of our research agreement with MSK and ends on the later of (1) the eighth anniversary of that date and (2) the earlier of (a) the 11th anniversary of that date and (b) the third anniversary of the first date on which the FDA issues formal written approval for us to market a pharmaceutical or biologic product developed at least in part by our company. Success payments will be owed (if applicable) after measurement of the value of our common stock in connection with the following valuation measurement dates during the term of the success payment agreement: (1) December 19, 2014 (the date our common stock first became publicly traded upon our initial public offering); (2) the date on which we sell, lease, transfer, or exclusively license all or substantially all of our assets to another company; (3) the date on which we merge or consolidate with or into another entity (other than a merger in

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which our pre-merger stockholders own a majority of the shares of the surviving entity); (4) any date on which ARCH Venture Fund VII, L.P. or C.L. Alaska L.P. transfers a majority of its shares of company capital stock held by it on such date to a third party; (5) every second anniversary of any event described in the preceding clauses (1), (2), (3) or (4); and (6) the last day of the term of the success payment agreement. Any success payment will generally be made within 90 days after the applicable valuation measurement date, except that (1) in the case of an initial public offering, the payment will be made on March 19, 2016, which the date that is 90 days after the first anniversary of the date our common stock first became publicly traded upon our initial public offering, and (2) in the case of a merger or sale of all of our company’s assets, the success payment will be made on the earlier of the 90th day following the transaction or the first date that transaction proceeds are paid to any of our stockholders. In the case of an initial public offering, the value of our common stock for determining whether a success payment was owed was determined by the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding December 19, 2015, which was the first anniversary of the date our common stock first became publicly traded following our initial public offering. In the case of a valuation measurement date triggered by each second anniversary of our stock first becoming publicly traded, the value of our common stock for determining whether a success payment is owed will be determined by the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding such anniversary date, so long as our common stock is publicly tradable during such 90 calendar day period. On all other valuation measurement dates (if any), the value will be determined either, in the case of a merger or stock sale, by the consideration paid in the transaction for each share of our stock or, in all other cases, by a baseball arbitration process. The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending from $40.00 per share to $120.00 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. Each threshold is associated with a success payment, ascending from $10.0 million at $40.00 per share to $150.0 million at $120.00 per share, payable if such threshold is reached. Any previous success payments made to MSK are credited against the success payment owed as of any valuation measurement date, so that MSK does not receive multiple success payments in connection with the same threshold. The success payments paid to MSK will not exceed, in aggregate, $150.0 million, which would be owed only when the value of the common stock reaches $120.00 per share. In October 2015, we entered into an agreement with MSK to provide that certain indirect costs related to certain clinical studies and research projects are creditable against any success payments, and we amended this agreement in December 2015. If we elect to make a success payment in shares of our common stock, the number of shares to be issued is computed by dividing the dollar amount of the success payment by the volume weighted average trading price of a share of our common stock on the trading day preceding the date on which the success payment is made.

In December 2015, a success payment to MSK was triggered in the amount of $10.0 million, which we elected to pay, less indirect cost offsets of $1.0 million, in the form of 240,381 shares of our common stock in March 2016. In April 2016, we agreed to repurchase the 240,381 shares of common stock issued to MSK at a repurchase price of $41.90 per share.

The completion of the Offer would trigger a success payment valuation measurement date, and a success payment of $70 million, less indirect cost offsets, would be owed to MSK.

Seattle Children’s Research Institute License and Collaboration Agreement

In February 2014, we entered into a license agreement with SCRI that grants to us an exclusive, worldwide, royalty-bearing sublicensable license to certain patent rights to develop, make, and commercialize licensed products and to perform licensed services for all therapeutic, prophylactic, and diagnostic uses. The patents and patent applications covered by this agreement are directed, in part, to regulated transgene expression and CAR constructs, including bispecific CARs and customized spacer regions, and their use for immunotherapy. Pursuant to this license agreement, as of December 31, 2017, we have rights to one issued U.S. patent, eight pending U.S. patent applications, and a number of other pending patent applications in jurisdictions outside the United States. Under the terms of the agreement, we paid SCRI an upfront payment of $200,000 and are required to pay to SCRI annual license maintenance fees, creditable against royalties and milestone payments due to SCH, of $50,000 per year for the first five years and $200,000 per year thereafter. Pursuant to the license agreement, we are obligated to pay to SCRI low single-digit royalties based on annual net sales of licensed products and licensed services by us and our affiliates and sublicensees. Based on the progress we make in the advancement of licensed products, including JCAR014 and JCAR017, we may be required to make clinical and regulatory milestone payments totaling up to $13.3 million in the aggregate per licensed product and up to $3.0 million in commercial milestone payments. In addition, we are required to pay to SCRI a percentage of the payments that we receive from sublicensees of certain rights licensed to us by SCRI, up to an aggregate of $15.0 million, which percentage will be based upon the date we receive such payments and the achievement of certain clinical and regulatory milestones. The term of the license agreement will continue until the expiration or abandonment of all licensed patents and patent applications. We have the right to terminate the agreement at will upon 60 days’ written notice to SCRI. SCRI may terminate the agreement upon 90 days’ notice in the event of our uncured material breach, or upon 30 days’ notice if such breach is of a payment obligation. SCRI may terminate the agreement immediately if we challenge the enforceability, validity,

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or scope of any licensed patent right or assist a third party to do so. The agreement will terminate immediately in the event of our bankruptcy or insolvency.

Also in February 2014, we entered into a sponsored research agreement with SCRI. The research is conducted under project orders containing plans and budgets approved by the parties. We have an exclusive option to obtain an exclusive license to certain improvements, inventions, and other intellectual property rights owned by SCRI developed in connection with the work conducted under the sponsored research agreement. In some circumstances, we may be required to pay an option exercise fee to SCRI of up to $100,000 per improvement. When improvements provide substantial new functionality or commercial benefit and can be practiced without a license to any of the patents already licensed under the license agreement, we may agree to additional royalties, development milestones, and diligence obligations. The initial term of the sponsored research agreement was five years, and has since been extended through April 2020. SCRI may terminate the agreement for any reason upon 180 days’ notice, or immediately if the principal investigator is unable to continue performing the research and there is no successor acceptable to both parties. Either party may terminate the agreement upon 30 days’ notice in the event of the other party’s uncured material breach.

City of Hope License Agreement

In November 2009, ZetaRx LLC ("ZetaRx") entered into a license agreement with City of Hope ("COH") pursuant to which ZetaRx was granted an exclusive, worldwide, royalty-bearing license under certain patent rights to manufacture and commercialize products involving genetically engineered white blood cells for the treatment or prevention of disease in humans. The agreement was amended in May 2016 to update the patent exhibits to the agreement. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including bispecific CARs and T cell ablation technologies, and their use for immunotherapy. Pursuant to this license agreement, as of December 31, 2017, we have rights to 13 issued U.S. patents, three pending U.S. patent applications, and a number of other patents and patent applications in jurisdictions outside the United States. The license is sublicensable with consent, and our sublicensees cannot grant further sublicenses. This license agreement was assumed by us in connection with our acquisition of certain of ZetaRx’s assets in October 2013. Under the terms of the license agreement, we are required to pay COH an annual license maintenance fee of $25,000, which payment is creditable against any other royalties due for the applicable year. In addition, the license agreement requires us to pay COH low single-digit royalties on annual net sales by us and our sublicensees. In addition, we are required to pay COH a fixed percentage of certain payments we receive from sublicensees of the technology licensed to us by COH.

The license agreement shall expire, on a country-by-country basis, upon the expiration of the last to expire of the patent rights licensed to us in such country. The agreement may be terminated by either party upon 30 days’ prior written notice in the event of the other party’s uncured material breach. In addition, COH may terminate the agreement immediately upon written notice in the event of bankruptcy or insolvency of our company, or if we do not reach certain clinical milestones by certain dates.

We and COH are involved in litigation regarding this license agreement. See Note 15 to our consolidated financial statements included in this report.

St. Jude Children’s Research Hospital Agreement; Sublicense to Penn and Novartis

In December 2013, we entered into an agreement with St. Jude (the "St. Jude License Agreement") pursuant to which we (1) obtained control over, and are obliged to pursue and defend, St. Jude’s causes of action in a pending litigation in the Eastern District of Pennsylvania, Trustees of the University of Pennsylvania v. St. Jude Children’s Research Hospital, Civil Action No. 2:13-cv-01502-SD (the "Penn litigation"), in which we and St. Jude were each adverse to Penn and Novartis, and (2) acquired an exclusive, worldwide, royalty-bearing license under certain patent rights owned by St. Jude, including the ’645 Patent, to develop, make, and commercialize licensed products and services for all therapeutic, diagnostic, preventative, and palliative uses. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs capable of signaling both a primary and a co-stimulatory pathway. Pursuant to the St. Jude License Agreement, as of December 31, 2017, we have rights to three issued U.S. patents and three pending U.S. patent applications. The Penn litigation concerned both the ’645 Patent and a contractual dispute between St. Jude and Penn. We also obtained settlement authority in the Penn litigation, subject to certain conditions.

Upon entering into this the St. Jude License Agreement, we made an initial payment to St. Jude of $25.0 million. In addition, the agreement requires us to pay St. Jude low single-digit royalties on net sales of licensed products and services. We are also obligated to pay a $100,000 minimum annual royalty for the first two years of the agreement, and a $500,000 minimum royalty thereafter through the term of the agreement. In addition, we are required to make milestone payments of up to an aggregate of $62.5 million upon the achievement of specified clinical, regulatory, and commercialization milestones for licensed products, which includes JCAR014 and JCAR017. In addition, we are required to pay St. Jude a percentage of certain payments we

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receive from sublicensees of the rights licensed to us by St. Jude or in settlement of litigation with respect to such rights. We were also required to pay a percentage of St. Jude’s reasonable legal fees incurred in connection with the Penn litigation.

The term of the St. Jude License Agreement will expire, on a country-by-country basis, upon the expiration of the last to expire of the licensed patents and patent applications in such country. The agreement may be terminated by either party in the event of the other party’s bankruptcy or insolvency, or upon advance written notice in the event of the other party’s uncured breach. We may terminate the agreement at will, in its entirety or with respect to any particular licensed patent or patent application, upon advance written notice to St. Jude.

In April 2015, St. Jude and we agreed to settle the litigation with Penn and Novartis. In connection with such settlement, we entered into a sublicense agreement (the "Penn/Novartis Sublicense Agreement") with Penn and an affiliate of Novartis pursuant to which Juno granted to Novartis a non-exclusive, royalty-bearing sublicense under certain patent rights, including the ‘645 Patent, to develop, make and commercialize licensed products and licensed services for all therapeutic, diagnostic, preventative and palliative uses. This sublicense is not sublicensable without our prior written consent, although Novartis may authorize third parties to act on its behalf with respect to the manufacture, development or commercialization of Novartis’ licensed products and licensed services. Pursuant to the Penn/Novartis Sublicense Agreement, Novartis paid Juno $12.3 million upon the effectiveness of such agreement, which amount was first applied to cover certain predetermined litigation expenses incurred by St. Jude, with the remainder divided between Juno and St. Jude at a fixed ratio. In addition, Novartis is also required to pay mid-single digit royalties on the U.S. net sales of products and services related to the disputed contract and patent claims (the "Novartis Royalty Payments"), a low double digit percentage of the royalties Novartis pays to Penn for global net sales of those products (the "Penn Royalty Payments"), and milestone payments upon the achievement of specified clinical, regulatory and commercialization milestones for licensed products (the "Novartis Milestone Payments"). If Juno achieves any of the milestones prior to Novartis, the related Novartis Milestone Payment will be reduced by 50%. In addition, if Juno achieves any milestone after Novartis, Juno will reimburse Novartis 50% of any Novartis Milestone Payment previously paid by Novartis to Juno in respect of such milestone. These milestones largely overlap with the milestones for which Juno may owe a payment to St. Jude under the St. Jude License Agreement and the Novartis Milestone Payments would in effect serve to partially offset Juno’s obligations to St. Jude with respect to such milestones.

The term of the Penn/Novartis Sublicense Agreement will expire when there are no remaining payment obligations due under the agreement. The Penn/Novartis Sublicense Agreement may be terminated by either party in the event of the other party’s bankruptcy or insolvency or upon the occurrence of certain specified breaches, or upon advance written notice in the event of the other party’s uncured material breach. Novartis may terminate the Penn/Novartis Sublicense Agreement at will upon advance written notice to Juno.

In connection with the settlement, Juno also amended the St. Jude License Agreement to provide the terms by which the Penn/Novartis Sublicense Agreement would be treated under the St. Jude License Agreement. The net effect of the Penn/Novartis Sublicense Agreement and amendment to the St. Jude License Agreement is that (1) Juno will pass through a percentage of the Novartis Royalty Payments to St. Jude, and (2) Juno will pass through a portion of the Penn Royalty Payments and Novartis Milestone Payments to St. Jude.

In 2016, Novartis paid us an aggregate of $14.3 million upon the achievement of two clinical milestones by Novartis, $12.5 million of which we were required to pass on to St. Jude. We separately achieved the same clinical milestones in September 2017, as a result of which we were required to reimburse Novartis $7.1 million.

In August 2017, a regulatory milestone was met under both the Penn/Novartis Sublicense Agreement and the St. Jude License Agreement, pursuant to which the Company recognized milestone revenue of $25.0 million from Novartis, and a corresponding research and development expense to St. Jude of $6.8 million. In the event we separately achieve the same clinical milestone in the future, we will be required to reimburse Novartis $12.5 million.

License Agreements with Fred Hutchinson Cancer Research Center assumed from ZetaRx

We assumed two license agreements with FHCRC in connection with our acquisition of certain of ZetaRx’s assets in October 2013. ZetaRx entered into these license agreements with FHCRC in 2009 (the "2009 FHCRC Agreement") and 2012 (the "2012 FHCRC Agreement"). These agreements were amended and restated in November 2014, and the 2012 FHCRC Agreement was further amended in October 2015 to add additional patent assets to the scope of the license. Under each of these license agreements, we received an exclusive, worldwide, sublicensable license under patent and technology rights to make, manufacture, use, and commercialize products (and, under the 2009 FHCRC Agreement only, services) for all fields of use. The patents and patent applications covered by these agreements are directed, in part, to defined T cell compositions and their use for immunotherapy. Pursuant to these license agreements, as of December 31, 2017, we have rights to one issued U.S. patent, four pending U.S. patent applications, approximately eight issued patents in jurisdictions outside the United States, and a

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number of other patent applications in jurisdictions outside the United States. Pursuant to each of the agreements, we are required to pay FHCRC a low single-digit running royalty based on annual net sales of licensed products (and, under the 2009 FHCRC Agreement only, licensed services) by us and by our affiliates and sublicensees. In addition, under each agreement, we are required to pay to FHCRC a minimum annual royalty of $5,000 until we receive FDA approval of a licensed product, and a minimum annual royalty of $20,000 thereafter for the remainder of the applicable agreement term, which payments will be creditable against any running royalties due to FHCRC under the respective license agreements. Under the 2012 FHCRC Agreement, we are required to pay to FHCRC up to an aggregate of $1.4 million upon our achievement of certain clinical and regulatory milestones relating to the licensed products, which includes JCAR014 and JCAR017. In addition, under each of the license agreements, we are required to pay FHCRC a fixed percentage of certain payments that we receive from sublicensees of the rights licensed to us by FHCRC, up to a cap.

Unless earlier terminated, each of these license agreements will expire upon the expiration of the last to expire of the patent rights licensed to us under the respective agreements. Each agreement may be terminated by FHCRC upon 90 days’ written notice if we fail to provide satisfactory written evidence that we have submitted an IND application to the FDA, by June 2015 in the case of the 2009 FHCRC Agreement, and by January 2017 in the case of the 2012 FHCRC Agreement. We have the right to terminate each of the agreements at will, in part or in their entirety, upon 60 days’ written notice to FHCRC. Each of the license agreements may also be terminated by FHCRC in the event of our bankruptcy or insolvency, upon 90 days’ written notice in the event of our uncured material breach, and upon 30 days’ written notice in the event of our uncured breach of a payment or reporting obligation. Upon termination, but not expiration, of either of these license agreements, we must grant to FHCRC a royalty-bearing, non-exclusive, non-sublicensable license with respect to any improvements we make based on the patents or technology licensed to us under the respective agreements.

Royalty and Milestone Obligations for JCAR017

Under our existing license agreements, our overall royalty burden for net sales of JCAR017 in the United States is approximately 10%. As of the date of this report, based on our planned manufacturing process for JCAR017, the aggregate maximum amount of future milestone payments we could be required to make under our existing license and collaboration agreements is approximately $95 million for JCAR017. Certain milestones would be paid in euros, which have been estimated in U.S. dollars for the foregoing figures based on the exchange rate as of December 31, 2017.

Opus Bio License Agreement

In December 2014, we entered into a license agreement with Opus Bio pursuant to which we were granted an exclusive, worldwide, sublicensable license under certain patent rights and data to research, develop, make, have made, use, have used, sell, have sold, offer to sell, import and otherwise exploit products that incorporate or use engineered T cells directed against CD22 and that are covered by such patent rights or use or incorporate such data. Certain of the licensed patent rights are in-licensed by Opus Bio from the National Institutes of Health ("NIH"). The patents and patent applications covered by this agreement are directed, in part, to various human monoclonal antibodies specific for CD22 and their use in immunotherapy. Pursuant to this license agreement, as of December 31, 2017, we have rights to six issued U.S. patents, three pending U.S. patent applications, and a number of other patents and patent applications in jurisdictions outside the United States. The licensed data was generated under an agreement between Opus Bio and the National Cancer Institute ("NCI") and Opus Bio’s rights to the licensed data are not exclusive. Our rights to such data are therefore exclusive only as between us and Opus, and non-exclusive as between us and third parties, who may license such data from the NCI. Our license from Opus Bio is limited to the field of treating B cell malignancies that express CD22 on their cell surface using CARs containing certain specified antibody binding fragments. Under the agreement, we will be required to use commercially reasonable efforts to research, develop, and commercialize licensed products. Such development must be in accordance with the timelines provided in the license agreement for achievement of certain clinical, regulatory, and commercial benchmarks, and with the development plans set forth in Opus Bio’s agreements with the NIH. In November 2015, the license agreement was amended to adjust certain of these timelines.

Upon the effectiveness of this license in December 2014, we made an upfront payment to Opus Bio of $20.0 million in cash and issued to Opus Bio 1,602,564 shares of our common stock. Upon our achievement of certain clinical, regulatory, and commercial milestones set forth in the license agreement, we will be obligated to pay Opus Bio additional consideration. The consideration due upon achievement of the first three clinical milestones would consist of additional shares of our common stock in an amount equal to the dollar value specified for the applicable milestone, divided by the greater of $10.92 and the arithmetic average of the daily volume-weighted average price of our common stock on The Nasdaq Global Select Market over the 30 trading days preceding the achievement of the milestone, up to a maximum of 4,807,692 shares in the aggregate (this minimum per share value and maximum number of shares subject, in each case, to adjustment for any stock dividend, stock split, combination of shares, or other similar events). Two of these milestones were achieved in the first quarter of 2016, for which we issued a total of 603,364 shares of our common stock as payment. After giving effect to the achievement of these

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milestones, as of December 31, 2016, one milestone required to be paid in equity in the amount of $25.0 million remains to be achieved, along with up to $215.0 million in milestones payable in cash. The license agreement further provides that we are required to pay to Opus Bio tiered royalties based on annual net sales of licensed products by us and by our sublicensees, at rates ranging from the low-single to mid-single digits. We will also be required to make certain pass-through payments owed by Opus Bio to NIH under its NIH license agreements, including certain patent costs, development and commercial milestones of up to $2.8 million in the aggregate, and low single-digit royalties based on annual net sales.

Our obligations to pay royalties to Opus Bio will expire, on a country-by-country and licensed-product- by-licensed-product basis, upon the later of the expiration of the last-to-expire patent covering such product in such country and the expiration of the period of data protection or market exclusivity or similar protection granted by the regulatory authority in such country for such product. The license agreement will expire on the expiration of our payment obligations to Opus Bio and to the NIH. We may terminate the agreement at will upon 30 days’ prior written notice. Opus Bio has the right to terminate the agreement immediately in the event of our material breach, including our failure to meet certain regulatory, clinical, and commercial deadlines, that remains uncured after a period of notice from Opus Bio, and immediately upon notice in the event of our bankruptcy or insolvency. If we terminate for convenience, or if Opus Bio terminates due to our material breach, then we will be subject to obligations allowing Opus Bio to continue to develop licensed products, including transfer of certain materials and products, transfer of ownership of certain regulatory documents and any approved trademarks or brand names, the assignment of third-party agreements solely related to the licensed products and necessary for the research, development, or commercialization of the licensed products, our continued manufacture of the licensed products, and the grant of certain non-exclusive licenses under certain technology controlled by us. If we terminate the license agreement for convenience and Opus elects to continue to develop the licensed products, then we have the option to resume our rights under the license agreement in exchange for additional payment obligations to Opus.

Other Licenses and Third-Party Collaboration Agreements

We have entered into a number of other license agreements and collaboration agreements with third parties, including additional license agreements with MSK, FHCRC, and SCRI, in connection with our preclinical and clinical research and development activities. These include, among others:


•	A collaboration and license agreement with Fate to identify and utilize small molecules to modulate our genetically-engineered T cell product candidates to improve their therapeutic potential for cancer patients.


•	A collaboration and license agreement with Editas to pursue research programs utilizing Editas’ genome editing technologies with Juno’s CAR and TCR technologies.


•	A clinical study collaboration agreement with MedImmune to conduct combination clinical trials in immuno-oncology with one of our investigational CD19-directed CAR product candidates and MedImmune’s investigational PD-L1 immune checkpoint inhibitor, durvalumab.

•

We and WuXi AppTec formed a company, JW (Cayman) Therapeutics Co., Ltd ("JW Cayman"), to leverage Juno’s CAR and TCR technologies and WuXi AppTec’s research and development and manufacturing platform and local expertise to develop novel cell-based immunotherapies for patients in China with hematologic and solid organ cancers. In December 2017, Juno entered into a license and strategic alliance agreement with JW Cayman and its affiliates (the "JW License and Strategic Alliance Agreement"). Under the agreement, JW Cayman received an exclusive, royalty-bearing license to develop and commercialize a therapeutic product candidate in China, as well as the right of first negotiation to license Juno's future pipeline candidates for further development in China.


•	A license agreement with MSK and Eureka Therapeutics, Inc. pursuant to which we obtained an exclusive license pertaining to a fully-human binding domain targeting BCMA, as well as binding domains against two additional undisclosed multiple myeloma targets to be used for the potential development and commercialization of CAR cell therapies for patients with multiple myeloma.

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License agreements with Eli Lilly and Company, OncoTracker, Inc., and FHCRC, to advance Juno's program in multiple myeloma using GSIs in combination with BCMA-directed CAR T cells. Gamma secretase is an enzyme that cleaves a set of transmembrane proteins, including BCMA. Multiple publications have shown that treatment with GSIs can increase surface expression of BCMA on tumors, particularly multiple myeloma. Increased cell surface BCMA may increase potency of a BCMA-directed CAR T therapy.

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Acquisitions

During 2015 and 2016, we completed four business acquisitions to augment our research and development capabilities, to obtain access to a compound that could potentially be used in combination trials, and to improve our supply chain and long-term cost of goods.

Stage Cell Therapeutics

In May 2015, we acquired Stage, a company focused on developing technology platforms, including novel reagents and automation technologies, that enable the development and production of cell therapeutics. The acquisition of Stage is intended to provide us access to transformative cell selection and activation capabilities, next generation manufacturing automation technologies, enhanced control of our supply chain, and lower expected long-term cost of goods.

As consideration for the Stage acquisition, we paid €52.5 million in cash and issued an aggregate of 486,279 shares of common stock to the selling shareholders. We also agreed to pay additional amounts of up to an aggregate of €135.0 million in cash based on the achievement of certain technical, clinical, regulatory, and commercial milestones related to novel reagents (€40.0 million), advanced automation technology (€65.0 million), and Stage’s existing clinical pipeline (€30.0 million). As of December 31, 2017, we have triggered and paid €6.0 million in such milestone payments.

X-Body

In June 2015, we acquired X-Body, a company focused on the discovery of human monoclonal antibodies and discovery of TCR binding domains.

As consideration for the X-Body acquisition, we paid $21.3 million in cash and issued an aggregate of 366,434 shares of common stock to the former X-Body stockholders. We also agreed to pay additional amounts in cash upon the realization of specified milestones substantially as follows, with respect to products generated using the X-Body technology: $5.0 million per target upon the achievement, during a specified period, of a certain regulatory milestone for products that utilize a certain type of binding mechanism; up to $30.0 million upon the achievement, during a specified period, of regulatory and clinical milestones for the first product using another type of binding mechanism (any product using such type of binding mechanism, a "Type X Product"); $5.0 million per product upon the achievement, during a specified period, of a certain regulatory milestone for a certain number of subsequent Type X Products; $50.0 million upon the achievement, during a specified period, of a clinical milestone related to the first product with certain specified binding properties (a "Type Y Product"); and $20.0 million upon the achievement, during a specified period, of a clinical milestone related to the first product with certain other specified binding properties. If a Type X Product or a Type Y Product is commercialized, we can choose either to make a commercialization milestone payment for such a product or to pay a low single-digit royalty on net sales of such a product.

AbVitro

In January 2016, we acquired AbVitro, a company with a leading next-generation single cell sequencing platform. The AbVitro acquisition is intended to augment our capabilities to create best-in-class engineered T cells against a broad array of cancer targets. We will initially use this technology in our translation research assays, to find and generate fully-human TCRs and antibodies, and to find novel targets.

As consideration for the AbVitro acquisition, we paid $74.7 million in cash and issued 1,289,188 shares of our common stock. There are no milestone payment obligations under the terms of the AbVitro acquisition.

We and Celgene have agreed in principle to enter into an agreement to license Celgene a subset of the acquired AbVitro technology and to grant Celgene options to certain related potential product rights emanating from the acquired technology.

RedoxTherapies

In July 2016, we acquired RedoxTherapies. The acquisition provides us with an exclusive license to vipadenant, a small molecule A2a receptor antagonist that has the potential to disrupt important immunosuppressive pathways in the tumor microenvironment in certain cancers. As consideration for the acquisition, we paid $10.0 million in cash and agreed to deliver additional consideration upon achievement of specified clinical, regulatory, and commercial milestones.

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Competition

The biotechnology and pharmaceutical industries, including the gene therapy field, are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. We face substantial competition from many different sources, including large biopharmaceutical companies, midsize/smaller public and privately-held biotechnology firms, academic research institutions, governmental agencies, and public and private research institutions.

In addition to the current standard of care treatments for patients, a large number of commercial and academic clinical trials are being pursued by variety of parties in the field of immunotherapy. Early positive clinical results from these trials have fueled continued interest in the field of immunotherapy. In the CAR and TCR space, our competitors include, but are not limited to, Novartis / Penn, Kite / Gilead Sciences, Inc. ("Gilead") / Amgen / NCI, Cellectis / Pfizer / Servier, Johnson & Johnson / Transposagen Biopharmaceuticals / Legend Biotech, Poseida, bluebird bio, Bellicum, Celyad, NantKwest, Intrexon / ZIOPHARM / MD Anderson Cancer Center, Unum Therapeutics, Adaptimmune / GlaxoSmithKline, ImmunoCellular Therapeutics, Adicet Bio, Autolus, and Mustang Bio, Inc. In August 2017, Novartis received approval from the FDA for Kymriah (tisagenlecleucel), formerly known as CTL019, for the treatment of pediatric and young adult r/r ALL. Additionally, in October 2017, Kite received approval from the FDA for Yescarta (axicabtagene ciloleucel), formerly known as KTE-C19, for treatment of patients with r/r NHL. Kite has been acquired by Gilead.

We also face competition from non-cell based treatments offered by companies such as Amgen, Pfizer, Abbvie, AstraZeneca, Bristol-Myers, Incyte, Merck, Roche, Regeneron, Corvus, MacroGenics, and Johnson & Johnson.

Many of our larger current or potential competitors, either alone or with their collaboration partners, have greater financial resources and deeper expertise in manufacturing, preclinical testing, clinical trial execution, regulatory matters and commercializing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and gene therapy industries may result in even more resources being concentrated among a smaller number of very capable competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining experienced scientific and management personnel, patient enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs’ success.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that alone or in combination have better efficacy, less toxicity, more convenience, or are less expensive than the products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we do, which may also include broader labels, which could result in our competitors establishing a strong market position before we are able to enter the market. The key competitive factors affecting the success of all of our programs are likely to be their efficacy, safety, and convenience, along with our ability to simply operationalize the use of our products.

Government Regulation

The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biologics such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.

The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following:


•	completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices ("GLP") regulation;


•	submission to the FDA of an IND which must become effective before clinical trials may begin and must be updated annually or when significant changes are made;


•	approval by an independent Institutional Review Board ("IRB") or ethics committee at each clinical site before the trial is commenced;

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•	performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose;


•	preparation of and submission to the FDA of a BLA after completion of all pivotal clinical trials;


•	satisfactory completion of an FDA Advisory Committee review, if applicable;


•	a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;

•

satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigations to assess compliance with Good Clinical Practices ("GCP"); and


•	FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States.

The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all. Prior to beginning the first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

In addition to the IND submission process, sponsors of certain clinical studies of cells containing recombinant or synthetic nucleic acid molecules, including human gene transfer studies, must comply with the National Institutes of Health’s ("NIH") Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules ("NIH Guidelines"). The NIH Guidelines set forth the principles and requirements for NIH and institutional oversight of research with recombinant or synthetic nucleic acid molecules, including the standards for investigators and institutions to follow to ensure the safe handling and containment of such molecules. In April 2016, modifications to the NIH Guidelines went into effect, pursuant to which only a subset of human gene transfer protocols are subject to review by the NIH Recombinant DNA Advisory Committee ("RAC"), a federal advisory committee that provides recommendations regarding research involving recombinant or synthetic nucleic acid molecules. Specifically, under the modified NIH Guidelines, RAC review of the protocol will be required only in exceptional cases where (1) an oversight body such as an Institutional Biosafety Committee ("IBC"), which provides local review and oversight of research utilizing recombinant or synthetic nucleic acid molecules, or an IRB determines that the protocol would significantly benefit from RAC review, and (2) the protocol (a) uses a new vector, genetic material, or delivery methodology that represents a first-in-human experience and thus presents an unknown risk, and/or (b) relies on preclinical safety data that were obtained using a new preclinical model system of unknown and unconfirmed value, and/or (c) involves a proposed vector, gene construct, or method of delivery associated with possible toxicities that are not widely known and that may render it difficult for oversight bodies to evaluate the protocol rigorously. The RAC review proceedings are public, and reports are posted publicly to the website for the NIH’s Office of Biotechnology Activities. Although compliance with the NIH Guidelines is mandatory for research conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Independent of RAC review, the NIH Guidelines also require all human gene transfer protocols subject to the NIH Guidelines to be registered with NIH, with limited exemptions. A study subject to the NIH Guidelines may not begin until the IBC approves the protocol, and the IBC cannot approve the protocol until confirmation from the NIH that such registration is complete. In the event that RAC review is warranted, the protocol registration process cannot be completed until RAC review has taken place.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial

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must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.


•	Phase I—The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

•

Phase II—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase II clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase III clinical trials.

•

Phase III—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.


•	Phase IV—In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so- called Phase IV studies may be made a condition to approval of the BLA.

Phase I, Phase II and Phase III testing may not be completed successfully within a specified period, if at all, and there can be no assurance that the data collected will support FDA approval or licensure of the product. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

BLA Submission and Review by the FDA

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators. The submission of a BLA requires payment of a substantial User Fee to FDA, and the sponsor of an approved BLA is also subject to annual product and establishment user fees. These fees are typically increased annually. A waiver of user fees may be obtained under certain limited circumstances.

Once a BLA has been submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. Priority Review designation will direct overall attention and resources to the evaluation of applications for products that, if approved, would be significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions when compared to standard applications. In both standard and priority reviews, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may convene an

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advisory committee to provide clinical insight on application review questions. Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response Letter will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete Response Letter without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. In issuing the Complete Response Letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy ("REMS") to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase IV post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs. For example, in December 2016, the 21st Century Cures Act was signed into law. The Act is intended, among other things, to modernize the regulation of drugs and biologics and to spur innovation.

A sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s review and approval of new drugs and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. For a fast track product, the FDA may consider sections of the BLA for review on a rolling basis before the complete application is submitted if relevant criteria are met. A fast track designated product candidate may also qualify for priority review, under which the FDA sets the target date for FDA action on the BLA at six months after the FDA accepts the application for filing. Priority review is granted when there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious disease or condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months after FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.

Under the accelerated approval program, the FDA may approve a BLA on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the biologic’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, the Food and Drug Administration Safety and Innovation Act ("FDASIA"), which was enacted and signed into law in 2012, established the breakthrough therapy designation. A sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Sponsors may request that FDA designate a product candidate as a breakthrough

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therapy at the time of or any time after the submission of an IND, but ideally before an end-of-phase II meeting with FDA. If the FDA designates a breakthrough therapy, it may take actions appropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout the development of the therapy; providing timely advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure that the development program to gather the nonclinical and clinical data necessary for approval is as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor; and considering alternative clinical trial designs when scientifically appropriate, which may result in smaller trials or more efficient trials that require less time to complete and may minimize the number of patients exposed to a potentially less efficacious treatment. Breakthrough therapy designation comes with all of the benefits of fast track designation, which means that the sponsor may file sections of the BLA for review on a rolling basis if certain conditions are satisfied, including an agreement with FDA on the proposed schedule for submission of portions of the application and the payment of applicable user fees before the FDA may initiate a review. We plan to seek designation as a breakthrough therapy for some or all of our CD19 product candidates, as qualification permits. We have obtained breakthrough therapy designation for JCAR017 for the treatment of patients with r/r aggressive large B cell NHL, including DLBCL, not otherwise specified (de novo or transformed from indolent lymphoma), primary mediastinal B-cell lymphoma (PMBCL), or follicular lymphoma grade 3B.

Fast Track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process.

Orphan Drugs

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.

A designated orphan drug many not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if the second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. We plan to seek orphan drug designation for some or all of our CD19 product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products. We have obtained orphan drug designation for JCAR017 in DLBCL, CLL, ALL, and follicular lymphoma, and for JCARH125 for the treatment of multiple myeloma.

Post-Approval Requirements

Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and

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documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may, among other things, halt our clinical trials, require us to recall a product from distribution, or withdraw approval of the BLA.

We rely, and expect to continue to rely, on third parties for the production of clinical quantities of our product candidates, and expect to rely in the future on third parties for the production of commercial quantities. Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved BLA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:


•	restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;


•	fines, warning letters or holds on post-approval clinical studies;


•	refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;


•	product seizure or detention, or refusal to permit the import or export of products; or


•	injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

Biosimilars and Exclusivity

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the "Affordable Care Act"), signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 ("BPCIA"), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. To date, only a handful of biosimilars have been licensed under the BPCIA, although numerous biosimilars have been approved in Europe. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars.

Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or

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switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant's own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed "interchangeable" by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued "Written Request" for such a study.

The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.

Other Healthcare Laws and Compliance Requirements

Our sales, promotion, medical education and other activities following product approval will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to FDA, including potentially the Federal Trade Commission, the Department of Justice, the Centers for Medicare and Medicaid Services, other divisions of the Department of Health and Human Services and state and local governments. Our promotional and scientific/educational programs must comply with the federal Anti-Kickback Statute, the Foreign Corrupt Practices Act, the False Claims Act, the Veterans Health Care Act, physician payment transparency laws, privacy laws, security laws, and additional state laws similar to the foregoing.

The federal Anti-Kickback Statute prohibits, among other things, the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price items and services. The government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies based on sham research or consulting and other financial arrangements with physicians. Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Many states have similar laws that apply to their state health care programs as well as private payors.

The False Claims Act ("FCA"), imposes liability on persons who, among other things, present or cause to be presented false or fraudulent claims for payment by a federal health care program. The FCA has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. Actions under the FCA may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the FCA can result in significant monetary penalties and treble damages. The federal government is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the country, for example, in connection with the promotion of products for unapproved uses and other sales and marketing practices. The government has obtained multi-million and multibillion dollar settlements under the FCA in addition to individual criminal convictions under applicable criminal statutes. In addition, companies have been forced to implement extensive corrective action plans, and have often become subject to consent decrees or corporate integrity agreements, restricting the manner in which they conduct their business. The federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") also created federal criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Given the significant size of actual and potential settlements, it is expected that the government will

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continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The Affordable Care Act, among other things, imposed new reporting requirements on drug manufacturers for payments or other transfers of value made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in civil monetary penalties for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Drug manufacturers must submit reports by the 90th day of each calendar year. Certain states also mandate implementation of commercial compliance programs, impose restrictions on drug manufacturer marketing practices, require reporting of marketing expenditures and pricing information and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and other healthcare professionals.

We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act ("HITECH"), and their respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA's privacy and security standards directly applicable to "business associates," defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect.

If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

Also, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. We cannot assure you that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, future distributors, partners, collaborators or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.

Coverage and Reimbursement

Sales of pharmaceutical products depend significantly on the availability of third-party coverage and reimbursement. Third-party payors include government health administrative authorities, managed care providers, private health insurers, integrated delivery networks, and other organizations. Although we currently believe that third-party payors will provide coverage and reimbursement for our product candidates, if approved, these third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. We may need to conduct expensive clinical studies to demonstrate the comparative cost-effectiveness of our products. The product candidates that we develop may not be considered cost-effective. It is time consuming and expensive for us to seek coverage and reimbursement from third-party payors. Moreover, a payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Reimbursement may not be available or sufficient to allow us to sell our products on a competitive and profitable basis.

Healthcare Reform

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

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By way of example, the Affordable Care Act signed into law in 2010 was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Among the provisions of the Affordable Care Act of importance to our potential drug candidates are:


•	an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;


•	an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;


•	a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;


•	a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;


•	extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;


•	expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;


•	expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and


•	a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act. We expect that the current presidential administration and U.S. Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Affordable Care Act. Most recently, the Tax Cuts and Jobs Act was enacted, which, among other things, removes penalties for not complying with the Affordable Care Act’s individual mandate to carry health insurance. The impact that President Trump’s administration and the U.S. Congress may have, if any, is uncertain, and any changes will likely take time to unfold, and could have an impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the Affordable Care Act.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and, due to subsequent legislative amendments, will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Recently, there has been heightened governmental scrutiny over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, the 21^st Century Cures Act changes the reimbursement methodology for infusion drugs and biologics furnished through durable medical equipment in an attempt to remedy over- and underpayment of certain drugs. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved, and, accordingly, our financial operations.

We expect that the Affordable Care Act, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, new payment methodologies, and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments

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from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.

Foreign Regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products to the extent we choose to develop or sell any products outside of the United States. The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

In the EU, member states require both regulatory clearances by the national competent authority and a favorable ethics committee opinion prior to the commencement of a clinical trial.

Under the EU regulatory systems, authorization to market a product in the member states of the European Union proceeds under one of four procedures: a centralized authorization procedure, a mutual recognition procedure, a decentralized procedure, or a national procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all EU member states plus Norway, Iceland, and Liechtenstein. It is compulsory for medicines that contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions; viral disease; for advanced therapy medicinal products; for products officially designated orphan medicines and; for medicines produced by certain biotechnological processes (i.e., recombinant DNA technology, controlled expression of genes coding for biologically active proteins in prokaryotes and eukaryotes including transformed mammalian cells, and hybridoma and monoclonal antibody methods). Because our products are produced by one of those biotechnological processes, we would be subject to the centralized process.

Under the centralized authorization procedure, the EMA's Committee for Human Medicinal Products ("CHMP") serves as the scientific committee that renders opinions about the safety, efficacy and quality of medicinal products for human use on behalf of the EMA. The CHMP is composed of experts nominated by each member state's national authority for medicinal products, one of whom is appointed to act as Rapporteur for the co-ordination of the evaluation with the possible assistance of another member of the Committee acting as a Co-Rapporteur. After approval, the Rapporteur(s) continue to monitor the product throughout its life cycle. The CHMP has 210 days to adopt an opinion as to whether a marketing authorization should be granted. The process usually takes longer in case additional information is requested, which triggers clock-stops in the procedural timelines. The process is complex and involves extensive consultation with the regulatory authorities of member states and a number of experts. Once the procedure is completed, a European Public Assessment Report ("EPAR") is produced. If the opinion is negative, information is given as to the grounds on which this conclusion was reached. After the adoption of the CHMP opinion, a decision on the marketing authorization application must be adopted by the European Commission, after consulting the EU Member States, which in total can take more than 60 days.

For our CD19 product candidates, Celgene is responsible for development and commercialization activities outside of North America and China, and therefore will lead regulatory dialogues and processes in those geographies, including the EU.

Employees

As of December 31, 2017, we had 663 employees globally. None of our employees are represented by a labor union or covered under a collective bargaining agreement. We consider our employee relations to be good.

Research and Development

Our research and development costs were $451.5 million, $264.3 million, and $205.2 million for the years ended December 31, 2017, 2016, and 2015, respectively. See Part II—Item 7—"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this report for additional detail regarding our research and development activities.

Geographic Information

Revenues generated outside of the United States and long-lived assets located outside of the United States were not material for the years ended December 31, 2017, 2016, and 2015, respectively.

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Financial Information about Segments

We operate in one business segment. See Note 2 to our audited consolidated financial statements included in this report. For financial information regarding our business, see Part II—Item 7—"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this report and our audited consolidated financial statements and related notes included elsewhere in this report.

Corporate Information

Juno was incorporated in Delaware on August 5, 2013. Our principal executive offices are located at 400 Dexter Avenue North, Suite 1200, Seattle, Washington 98109. Our telephone number is (206) 582-1600. Our website address is www.junotherapeutics.com. Information contained on the website is not incorporated by reference into this report, and should not be considered to be part of this report.

We use Juno Therapeutics®, the Juno Therapeutics logo, and other marks as trademarks in the United States and other countries. This report contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

Available Information

We file electronically with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We make available on our website at www.junotherapeutics.com, free of charge, copies of these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The public may read or copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is www.sec.gov. The information in or accessible through the SEC and our website are not incorporated into, and are not considered part of, this filing. Further, our references to the URLs for these websites are intended to be inactive textual references only.

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ITEM 1A.	RISK FACTORS

The following section includes the most significant factors that may adversely affect our business and operations. You should carefully consider the risks and uncertainties described below and all information contained in this report, including our consolidated financial statements and the related notes and Part II—Item 7—"Management’s Discussion and Analysis of Financial Condition and Results of Operations," before deciding to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to the Merger Agreement

The conditions under the Merger Agreement to Purchaser’s consummation of the Offer and our subsequent Merger with Purchaser may not be satisfied at all or in the anticipated timeframe.

Under the terms of the Merger Agreement, the consummation of Purchaser’s pending Offer and subsequent Merger is subject to customary conditions. Satisfaction of certain of the conditions is not within our control, and difficulties in otherwise satisfying the conditions may prevent, delay, or otherwise materially adversely affect the consummation of the pending Offer and subsequent Merger. These conditions include, among other things, there being validly tendered and not validly withdrawn, subject to certain conditions, a number of shares of our common stock that, together with the shares of our common stock then owned by Celgene Corp. and its affiliates, represent one more share than 50% of the total number of Juno shares outstanding at the time of the expiration of the Offer. It also is possible that an event, state of facts, condition, development, occurrence, circumstance, change, or effect occurs subsequent to the date of the Merger Agreement that, individually or in the aggregate, may have or reasonably be expected to have, a material adverse effect (as defined in the Merger Agreement) on Juno, the non-occurrence of which is a condition to the consummation of the Offer. We cannot predict with certainty whether and when any of the required conditions will be satisfied. If the acquisition does not receive, or timely receive, the required regulatory approvals and clearances, or if another event occurs delaying or preventing the acquisition, such delay or failure to complete acquisition may create uncertainty or otherwise have negative consequences that may materially and adversely affect our financial condition and results of operations, as well as the price per share for our common stock.

While Purchaser’s Offer and the proposed Merger are pending, we are subject to business uncertainties and contractual restrictions that could disrupt our business.

Whether or not the pending Offer and subsequent Merger is consummated, the proposed acquisition may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. The pendency of the pending Offer and subsequent Merger may also divert management's attention and our resources from ongoing business and operations, and our employees and other key personnel may have uncertainties about the effect of the pending Offer and subsequent Merger, and the uncertainties may impact our ability to retain, recruit, and hire key personnel while the acquisition is pending or if it fails to close.

The preparations for integration between Juno and Celgene Corp. have placed and we expect will continue to place a significant burden on many of our employees and on our internal resources. If, despite our efforts, key personnel depart because of these uncertainties and burdens, or because they do not wish to remain with the combined company, our business and results of operations may be adversely affected. In addition, whether or not the Merger is consummated, while it is pending we will continue to incur costs, fees, expenses, and charges related to the proposed Merger, which may materially and adversely affect our financial condition and results of operations.

Furthermore, we cannot predict how our business partners will view or react to the pending Offer and subsequent Merger upon consummation. If we are unable to reassure our business partners to continue transacting business with us, our financial condition and results of operations may be adversely affected.

In addition, the Merger Agreement generally requires Juno to operate its business in the ordinary course of business consistent with past practice pending consummation of the Merger and also restricts us from taking certain actions with respect to our business and financial affairs without Celgene Corp.’s prior written consent during the interim period between the execution of the Merger Agreement and the Effective Time of the Merger (or the date on which the Merger Agreement is earlier terminated). For these and other reasons, the pendency of the proposed acquisition could adversely affect our business and results of operations.

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Our executive officers and directors may have interests that are different from, or in addition to, those of our stockholders generally.

Our executive officers and directors may have interests in the Merger that are different from, or are in addition to, those of our stockholders generally. These interests include direct or indirect ownership of our common stock, stock options, restricted stock units, and restricted stock awards, and for executive officers, our change of control and severance plan, performance-based restricted stock units and restricted stock awards, offer letters, participation in a retention bonus pool, and employee benefits following the completion of the Merger. In addition, certain of our directors have current or prior business or personal relationships with Celgene Corp. and its representatives.

Litigation against us and the members of our board of directors arising out of our acquisition by Celgene Corporation may delay or prevent the proposed transaction.

Two putative stockholder class action complaints have been filed against us and our board of directors in connection with the transactions contemplated by the Merger Agreement. Although the plaintiffs in those actions have dismissed their claims with prejudice as disclosed in the Third Amendment to Schedule 14D-9 filed by Juno on February 21, 2018, additional lawsuits could be filed that could delay or prevent our acquisition by Celgene Corp., divert the attention of our management and employees from our day-to-day business and otherwise adversely affect us financially.

In the event that our proposed merger with Purchaser is not consummated, the trading price of our common stock and our future business and results of operations may be negatively affected.

The conditions to the consummation of the pending Offer and subsequent Merger may not be satisfied, as noted above. If the proposed acquisition is not consummated, we would remain liable for significant transaction costs, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the proposed acquisition. For these and other reasons, not consummating the proposed acquisition could adversely affect our business and results of operations.

Furthermore, if we do not consummate the pending Offer and subsequent Merger, the price of our common stock may decline significantly from the current market price, which we believe reflects a market assumption that the proposed acquisition will be consummated. Certain costs associated with the proposed acquisition have already been incurred or may be payable even if the proposed acquisition is not consummated. Further, a failure of the proposed acquisition may result in negative publicity and a negative impression of us in the investment community, and have a negative impact on our ability to raise additional financing in the future. Finally, any disruptions to our business resulting from the announcement and pendency of the proposed acquisition, including any adverse changes in our relationships with our business partners and employees or recruiting and retention efforts, could continue or accelerate in the event of a failed transaction.

If the Merger Agreement is terminated, we may, under certain circumstances, be obligated to pay a termination fee to Celgene Corp. These costs could require us to use available cash that would have otherwise been available for other uses.

If the proposed Merger is not completed, in certain circumstances, we could be required to pay a termination fee of $300 million to Celgene Corp. If the Merger Agreement is terminated, the termination fee we may be required to pay, if any, under the Merger Agreement may require us to use available cash that would have otherwise been available for general corporate purposes or other uses. For these and other reasons, termination of the Merger Agreement could materially and adversely affect our business, results of operations or financial condition, which in turn would materially and adversely affect the price per share of our common stock.

The following risk factors assume that we remain a stand-alone company except as otherwise noted.

Risks Related to Our Business and Industry

We are a clinical-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.

We are a clinical-stage biopharmaceutical company that was formed in August 2013. We have no cell-therapy products approved for commercial sale and as of December 31, 2017, had not generated any revenue from such products. We are focused on developing products that use human cells as therapeutic entities and, although there have been significant advances in cell-based immunotherapy, our T cell technologies are new and largely unproven. Our limited operating history, particularly in light of the rapidly evolving cancer immunotherapy field, may make it difficult to evaluate our current business and predict our future performance. Our short history as an operating company makes any assessment of our future success or viability subject

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to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving fields. If we do not address these risks successfully, our business will suffer.

We have incurred net losses in each period since our inception and anticipate that we will continue to incur net losses in the future.

We are not profitable and have incurred losses in each period since our inception. For the years ended December 31, 2017, 2016, and 2015, we reported a net loss of $437.1 million, $245.6 million, and $239.4 million, respectively. As of December 31, 2017, we had an accumulated deficit of $1.27 billion, which includes $51.1 million related to non-cash deemed dividends, $184.7 million in upfront fees to acquire technology, of which $110.8 million was paid in cash and $73.9 million was paid through the issuance of common stock, non-cash expense of $172.7 million associated with the change in the estimated fair value and elapsed service period for our potential and actual success payment liability to FHCRC and MSK, expense of $23.2 million associated with non-cash milestones, non-cash gain of $5.6 million associated with the change in the estimated value of our contingent consideration liabilities, and $10.7 million of expense associated with our convertible preferred stock options. We expect these losses to increase as we continue to incur significant research and development and other expenses related to our ongoing operations, seek regulatory approvals for our product candidates, scale-up manufacturing capabilities and hire additional personnel to support the development of our product candidates and to enhance our operational, financial and information management systems.

A critical aspect of our strategy is to invest significantly in our technology platform to improve the efficacy and safety of our product candidates. Even if we succeed in commercializing one or more of these product candidates, we will continue to incur losses for the foreseeable future relating to our substantial research and development expenditures to develop our technologies. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Further, the net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period to period comparison of our results of operations may not be a good indication of our future performance.

We expect to continue to incur significant losses for the foreseeable future. We expect these losses and our cash utilization to increase in the near term as we continue to conduct clinical trials, file additional IND filings for additional product candidates, and conduct research and development of our other product candidates.

We are collaborating with Celgene pursuant to the Celgene Collaboration Agreement, under which we and Celgene will research, develop, and commercialize novel cellular therapy product candidates and other immuno-oncology and immunology therapeutics, including, in particular, CAR and TCR product candidates. Contingent upon the payment of certain upfront payments, Celgene may exercise options to acquire exclusive licenses in territories outside North America and China to certain therapeutics we develop and each party may exercise certain options to co-develop and co-commercialize product candidates developed, or acquired or in-licensed, by the other party. If Celgene does not exercise its options, or if Celgene exercises an option for a program (as it has for our CD19 program) but later the license agreement with Celgene for such program is terminated, we will be responsible for the full costs of funding further worldwide development of the relevant product candidates, which would cause our expenses to increase, unless we choose not to pursue further development of such product candidates or we enter into another collaboration for such product candidates, which may not be possible within an acceptable timeframe or on suitable terms. Additionally, either we or Celgene may opt not to fund a study led by the other under an active license agreement, such as the Celgene CD19 License, and if Celgene opts not to fund a Juno-led study, then we would be responsible for the full cost of that study until such time, if ever, that Celgene determines to opt back in to the study at a premium to obtain the right to use data from that study in Celgene's territories. Similarly, our expenses would increase if we exercise an option to co-develop and co-commercialize any product candidate developed, or in-licensed or acquired, by Celgene.

We have never generated any revenue from sales of cell-therapy products and our ability to generate revenue from cell-therapy product sales and become profitable depends significantly on our success in a number of factors.

We have no cell-therapy products approved for commercial sale, have not generated any revenue from cell-therapy product sales, and do not anticipate generating any revenue from cell-therapy product sales until sometime after we have received regulatory approval for the commercial sale of a product candidate. Our ability to generate revenue and achieve profitability depends significantly on our success in many factors, including:


•	completing research regarding, and nonclinical and clinical development of, our product candidates;

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•	obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical studies;


•	developing a sustainable and scalable manufacturing process for our product candidates, including establishing and maintaining commercially viable supply relationships with third parties and establishing our own manufacturing capabilities and infrastructure;


•	launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor;


•	obtaining market acceptance of our product candidates as viable treatment options, and obtaining adequate coverage, reimbursement, and pricing by third-party payors, integrated delivery networks, and government authorities;


•	addressing any competing technological and market developments;


•	Celgene’s efforts in its territories to further develop and commercialize the product candidates for which Celgene exercises an option under the Celgene Collaboration Agreement, such as the product candidates in our CD19 program;


•	Celgene exercising any other of its options under our Celgene Collaboration Agreement;


•	JW Cayman’s ability to develop and commercialize product candidates in China;


•	identifying, assessing, acquiring and/or developing new product candidates;


•	negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;


•	maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and


•	attracting, hiring, and retaining qualified personnel.

Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types of studies in addition to those that we currently anticipate. If we are successful in obtaining regulatory approvals to market one or more of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, and whether we own the commercial rights for that territory. If the number of our addressable disease patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. If we are not able to generate revenue from the sale of any approved products, we may never become profitable.

Our technology platform, including our CAR and high-affinity TCR technologies are new approaches to cancer treatment that present significant challenges.

We have concentrated our research and development efforts on T cell immunotherapy technology, and our future success is highly dependent on the successful development of T cell immunotherapies in general and our CAR and TCR technologies and product candidates in particular. Our approach to cancer treatment aims to alter T cells ex vivo through genetic modification using certain viruses designed to reengineer the T cells to recognize specific proteins on the surface or inside cancer cells. Because this is a new approach to cancer immunotherapy and cancer treatment generally, developing and commercializing our product candidates subjects us to a number of challenges, including:


•	obtaining regulatory approval from the FDA and other regulatory authorities that have very limited experience with the commercial development of genetically modified T cell therapies for cancer;


•	developing and deploying consistent and reliable processes for engineering a patient’s T cells ex vivo and infusing the engineered T cells back into the patient;


•	conditioning patients with chemotherapy or other non-Juno product treatments in conjunction with delivering each of our products, which may increase the risk of adverse side effects;

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•	educating medical personnel regarding the potential side effect profile of each of our products, such as the potential adverse side effects related to cytokine release or neurotoxicity;


•	developing processes for the safe administration of these products, including long-term follow-up for all patients who receive our product candidates;


•	sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our product candidates;


•	developing a manufacturing process and distribution network with a cost of goods that allows for an attractive return on investment;


•	establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance, and obtaining adequate coverage, reimbursement, and pricing by third-party payors and government authorities; and


•	developing therapies for types of cancers beyond those addressed by our current product candidates.

We cannot be sure that our T cell immunotherapy technologies will yield satisfactory products that are safe and effective, scalable, or profitable.

Additionally, because our technology involves the genetic modification of patient cells ex vivo using a virus, we are subject to many of the challenges and risks that gene therapies face, including:


•	Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. To date, only a few products that involve the genetic modification of patient cells have been approved in the United States or the European Union ("EU").


•	Genetically modified products in the event of improper insertion of a gene sequence into a patient’s chromosome could lead to lymphoma, leukemia or other cancers, or other aberrantly functioning cells.


•	Although our viral vectors are not able to replicate, there is a risk with the use of retroviral or lentiviral vectors that they could lead to new or reactivated pathogenic strains of virus or other infectious diseases.


•	The FDA recommends a 15 year follow-up observation period for all patients who receive treatment using gene therapies, and we may need to adopt such an observation period for our product candidates.

•

Clinical trials using genetically modified cells conducted at institutions that receive funding for recombinant DNA research from the NIH, may be subject to review by the Recombinant DNA Advisory Committee ("RAC"). Although the FDA decides whether individual protocols may proceed, the RAC review process can impede the initiation of a clinical trial, even if the FDA has reviewed the study and approved its initiation.

Moreover, public perception of therapy safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to the novel treatment mechanics. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment practices that require additional upfront costs and training. Physicians may not be willing to undergo training to adopt this novel and personalized therapy, may decide the therapy is too complex to adopt without appropriate training and may choose not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of this new therapy do not or will not outweigh its costs.

Our near term ability to generate product revenue is dependent on the success of one or more of our CD19 product candidates, each of which are in clinical development and will require significant additional clinical testing before we can seek regulatory approval and begin commercial sales.

Our near-term ability to generate product revenue is highly dependent on our ability to obtain regulatory approval of and successfully commercialize one or more of our CD19 product candidates. Our lead product candidate, JCAR017, is in clinical development, has been tested in a relatively small number of patients, and will require additional clinical and nonclinical development, regulatory review and approval in each jurisdiction in which we intend to market the product, substantial investment, access to sufficient commercial manufacturing capacity, and significant marketing efforts before we can generate any revenue from product sales. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety, purity, and potency of the product candidates in humans. We cannot be certain that any of our product candidates will be successful in clinical studies and they may not receive regulatory approval even if they are successful in clinical studies.

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In addition, because our product candidates are based on similar technology, if any of our product candidates encounter safety or efficacy problems, developmental delays, regulatory issues, reagent supply issues, or other problems, our development plans for the affected product candidate and some or all of our other product candidates could be significantly harmed, which would have a material adverse effect on our business. Because JCAR017 is the backbone of our development strategy, a setback for JCAR017 could have a relatively large impact on our plans and business. Further, competitors who are developing products with similar technology may experience problems with their products that could identify problems that would potentially harm our business.

Prior to the Juno-sponsored Phase I trial of JCAR017 and Phase II clinical trial of JCAR015 that began in 2015, third parties had sponsored and conducted all clinical trials of our CD19 product candidates and other product candidates, and our ability to influence the design and conduct of such trials has been limited. We now control clinical and regulatory development of JCAR017 and JCARH125, and may do so in the future for additional product candidates, which will entail additional expenses and may be subject to delay. Any failure by a third party to meet its obligations with respect to the clinical and regulatory development of our product candidates may delay or impair our ability to obtain regulatory approval for our products and result in liability for our company.

Prior to the Juno-sponsored Phase I clinical trial of JCAR017 and the Phase II clinical trial of JCAR015, both of which began in 2015, we had not sponsored any clinical trials relating to our CD19 product candidates or other product candidates. Instead, faculty members at our third-party research institution collaborators, or those institutions themselves, sponsored all clinical trials relating to these product candidates, in each case under their own INDs. We now control the U.S. clinical and regulatory development of JCAR017 and global clinical and regulatory development of JCARH125. We may assume control over the clinical and regulatory development of other product candidates in the future, in which case we will need to obtain sponsorship of the INDs or file new Juno-sponsored INDs. Failure to obtain, or delays in obtaining, sponsorship of INDs or in filing new Juno-sponsored INDs for these or any other product candidates we determine to advance could negatively affect the timing of our potential future clinical trials. Any such impacts on timing could increase research and development costs and could delay or prevent obtaining regulatory approval for our product candidates, either of which could have a material adverse effect on our business.

Further, even in the event that the IND sponsorship is or has been obtained for existing and new INDs, we did not control the design or conduct of the previous trials. It is possible that the FDA will not accept these previous trials as providing adequate support for future clinical trials, whether controlled by us or third parties, for any of one or more reasons, including the safety, purity, and potency of the product candidate, the degree of product characterization, elements of the design or execution of the previous trials or safety concerns, or other trial results. We may also be subject to liabilities arising from any treatment-related injuries or adverse effects in patients enrolled in these previous trials. As a result, we may be subject to unforeseen third-party claims and delays in our potential future clinical trials. We may also be required to repeat in whole or in part clinical trials previously conducted by our third-party research institution collaborators, which will be expensive and delay the submission and licensure or other regulatory approvals with respect to any of our product candidates. Any such delay or liability could have a material adverse effect on our business.

We expect to be dependent on our contractual arrangements with collaborators for ongoing and planned trials for our product candidates other than JCAR017 and JCARH125 until we determine to assume control of the clinical and regulatory development of those candidates. Such arrangements provide us certain information rights with respect to certain previous, planned, or ongoing trials of our product candidates, including access to and the ability to use and reference the data, including for our own regulatory filings, resulting from such trials. Even after we assume control of the overall clinical and regulatory development of a product candidate, we will still remain dependent on such contractual data rights for use in our clinical and regulatory development activities. If these obligations are breached by our collaborators, or if the data, or our data rights, prove to be inadequate compared to the first-hand knowledge we might have gained had the completed trials been Juno-sponsored trials, then our ability to design and conduct our Juno-sponsored clinical trials may be adversely affected. Additionally, the FDA may disagree with the sufficiency of the preclinical, manufacturing, or clinical data generated by these prior collaborator-sponsored trials, or our interpretation of preclinical, manufacturing, or clinical data from these clinical trials. If so, the FDA may require us to obtain and submit additional preclinical, manufacturing, or clinical data before we may begin our planned trials and/or may not accept such additional data as adequate to begin our planned trials.

Additionally, we may remain dependent on our third-party research institution collaborators for other support services in connection with our Juno-sponsored clinical trials.

We may encounter substantial delays in our clinical trials, or may not be able to conduct our trials on the timelines we expect.

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Clinical testing is expensive, time consuming, and subject to uncertainty. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. We expect that the early clinical work performed by our third-party research institution collaborators will help support the filing with the FDA of multiple INDs for our product candidates in the next five years. However, we cannot be sure that we will be able to submit INDs at this rate, and we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin. Moreover, even if these trials begin, issues may arise that could suspend or terminate such clinical trials. A failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful. Events that may prevent successful or timely completion of clinical development include:


•	inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical studies;


•	delays in sufficiently developing, characterizing, or controlling a manufacturing process suitable for advanced clinical trials;


•	delays in developing suitable assays for screening patients for eligibility for trials with respect to certain product candidates;


•	delays in reaching a consensus with regulatory agencies on study design;


•	the FDA may not allow us to use the clinical trial data from a research institution to support an IND if we cannot demonstrate the comparability of our product candidates with the product candidate used by the relevant research institution in its clinical studies;


•	delays in reaching agreement on acceptable terms with prospective CROs and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites;


•	delays in obtaining required institutional review board ("IRB") approval at each clinical study site;

•

imposition of a temporary or permanent clinical hold by regulatory agencies for a number of reasons, including after review of an IND application or amendment, or equivalent application or amendment; as a result of a new safety finding that presents unreasonable risk to clinical trial participants; a negative finding from an inspection of our clinical study operations or study sites; developments on trials conducted by competitors for related technology that raises FDA concerns about risk to patients of the technology broadly; or if FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;


•	delays in recruiting suitable patients to participate in our clinical studies;


•	difficulty collaborating with patient groups and investigators;


•	failure by our CROs, other third parties, or us to adhere to clinical study requirements;


•	failure to perform in accordance with the FDA’s good clinical practice ("GCP") requirements, or applicable regulatory guidelines in other countries;


•	transfer of manufacturing processes to Celgene or any other commercialization partner for the manufacture of product candidates in trials outside of the United States;


•	delays in having patients complete participation in a study or return for post-treatment follow-up;


•	patients dropping out of a study;


•	occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;


•	changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;


•	changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;


•	the cost of clinical studies of our product candidates being greater than we anticipate;


•	clinical studies of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical studies or abandon product development programs;

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•	transfer of manufacturing processes from our academic collaborators to larger-scale facilities operated by either a CMO or by us, and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process;


•	delays or failure to secure supply agreements with suitable reagent suppliers, or any failures by suppliers to meet our quantity or quality requirements for necessary reagents; and


•	delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical studies or the inability to do any of the foregoing.

Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to or we may elect to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical study delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

We have entered into collaborations, including our Celgene collaboration, and strategic alliances, and may enter into additional arrangements like these in the future, and we may not realize the anticipated benefits of such collaborations or alliances.

Research and development collaborations, including those we have entered into with Celgene, Fate, Editas, and MedImmune, are subject to numerous risks, which may include the following:


•	collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration, and may not commit sufficient efforts and resources, or may misapply those efforts and resources;


•	collaborators may not pursue development and commercialization of collaboration product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results or changes in their strategic focus;


•	collaborators may delay, provide insufficient resources to, or modify or stop clinical trials for collaboration product candidates;


•	collaborators could develop or acquire products outside of the collaboration that compete directly or indirectly with our products or product candidates (for instance, Celgene and bluebird bio are collaborating on an anti-BCMA CAR T product candidate);


•	collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;


•	disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;


•	collaborations may be terminated and, if terminated, may result in a need for additional capital and personnel to pursue further development or commercialization of the applicable product candidates; and


•	collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property.

In particular, for product candidates in our CD19 program and product candidates from any other programs for which Celgene opts to exercise its options under the Celgene Collaboration Agreement, we may have limited influence or control over their approaches to development and commercialization in the territories in which they lead development and commercialization, including the choice of which product candidates Celgene determines to advance in those territories. Although we will still lead development and commercialization activities in North America and China for our product candidates arising from our CD19 program and any other program for which Celgene exercises an option, Celgene’s development and commercialization activities in the territories where it is the lead party may adversely impact our own efforts in North America and China and lead to changes to clinical and regulatory development strategy for associated product candidates that may impact development timelines. Celgene may also assist us with conducting some of our clinical trials in North America, which will cause us to be dependent in part on Celgene's efforts for our development activities in North America. Celgene will also require some level of

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assistance from us with respect to product candidates from the CD19 program and product candidates from any other programs it opts into, and this assistance could be burdensome on our organization and resources and disrupt our own development and commercialization activities. Celgene will also be subject to many of the same risks that are set forth in this "Risk Factors" section pertaining to operations and government regulation, which may adversely affect Celgene’s ability to develop and commercialize collaboration products.

We and WuXi AppTec formed a company, JW Cayman, to develop and commercialize cell-based immunotherapies for patients with hematologic and solid organ cancers in China, and in December 2017 we entered into the JW License and Strategic Alliance Agreement with JW Cayman and its affiliated companies. We have limited control over JW Cayman and its affiliated companies and so we will be subject to many of the same risks set forth above with respect to collaborations. JW Cayman and its affiliated companies will also be subject to many of the same risks that are set forth in this "Risk Factors" section pertaining to operations, government regulation, and intellectual property, which may adversely affect JW Cayman and its affiliated companies' ability to develop and commercialize products.

We may form or seek further strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. Such alliances will be subject to many of the risks set forth above. Moreover, any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex.

As a result of these risks, we may not be able to realize the benefit of our existing collaborations or any future collaborations or licensing agreements we may enter into. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies, which could harm our business prospects, financial condition, and results of operations.

The FDA or comparable foreign regulatory authorities may disagree with our regulatory plans, including our plans to seek accelerated approval, and we may fail to obtain regulatory approval of our product candidates.

We are conducting a trial in adult r/r NHL with JCAR017, which we refer to as the TRANSCEND trial, that began as a Phase I trial in 2015 but we have now completed enrollment in the trial of the pivotal cohort that we believe can support registration. We plan to conduct additional clinical trials in other B cell malignancies, including r/r CLL, adult r/r ALL, and pediatric r/r ALL, using this product candidate or a next generation product candidate. If the results of these trials are sufficiently compelling, we intend to discuss with the FDA the potential for filing biologics license applications ("BLAs") for accelerated approval of the associated product candidates as treatments for patients who are refractory to currently approved treatments in these indications.

The FDA generally requires a BLA to be supported by two adequate and well-controlled Phase III studies or one large and robust, well-controlled Phase III study in the patient population being studied that provides substantial evidence that a biologic is safe, pure and potent. Phase III clinical studies typically involve hundreds of patients, have significant costs and take years to complete. However, product candidates studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA may require a sponsor of a drug or biologic receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint, and the drug or biologic may be subject to withdrawal procedures by the FDA that are more accelerated than those available for regular approvals. We believe our accelerated approval strategy is warranted given the currently limited alternative therapies for patients with r/r NHL, r/r CLL, r/r ALL, and r/r multiple myeloma but the FDA may not agree or competing or alternative therapies may enter the market that cause the FDA to determine that the accelerated approval framework is no longer appropriate in those indications. The FDA may ultimately require one or multiple Phase III clinical trials prior to approval, particularly because our product candidates are novel and personalized treatments.

As part of its marketing authorization process, the European Medicines Agency ("EMA") may grant marketing authorizations on the basis of less complete data than is normally required, when, for certain categories of medicinal products, doing so may meet unmet medical needs of patients and serve the interest of public health. In such cases, it is possible for the Committee for Medicinal Products for Human Use ("CHMP") to recommend the granting of a marketing authorization, subject to certain

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specific obligations to be reviewed annually, which is referred to as a conditional marketing authorization. This may apply to medicinal products for human use that fall under the jurisdiction of the EMA, including those that aim at the treatment, the prevention, or the medical diagnosis of seriously debilitating diseases or life-threatening diseases and those designated as orphan medicinal products.

A conditional marketing authorization may be granted when the CHMP finds that, although comprehensive clinical data referring to the safety and efficacy of the medicinal product have not been supplied, all the following requirements are met:


•	the risk-benefit balance of the medicinal product is positive;


•	it is likely that the applicant will be in a position to provide the comprehensive clinical data;


•	unmet medical needs will be fulfilled; and


•	the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required.

The granting of a conditional marketing authorization is restricted to situations in which only the clinical part of the application is not yet fully complete. Incomplete nonclinical or quality data may only be accepted if duly justified and only in the case of a product intended to be used in emergency situations in response to public-health threats.

Conditional marketing authorizations are valid for one year, on a renewable basis. The holder will be required to complete ongoing studies or to conduct new studies with a view to confirming that the benefit-risk balance is positive. In addition, specific obligations may be imposed in relation to the collection of pharmacovigilance data.

The granting of a conditional marketing authorization will allow medicines to reach patients with unmet medical needs earlier than might otherwise be the case and will ensure that additional data on a product are generated, submitted, assessed and acted upon. Although we may seek a conditional marketing authorization for one or more of our product candidates by the EMA, the EMA or CHMP may ultimately not agree that the requirements for such conditional marketing authorization have been satisfied. Even if conditional marketing authorization is granted, we cannot guarantee that the EMA or CHMP will renew the authorization annually. Celgene may seek conditional marketing approval in the EU for our CD19 product candidates.

Our clinical trial results may also not support approval, whether accelerated approval, conditional marketing authorizations, or standard approval procedures. The results of preclinical and clinical studies may not be predictive of the results of later-stage clinical trials, and product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through preclinical studies and initial clinical trials. In addition, our product candidates could fail to receive regulatory approval for many reasons, including the following:


•	the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;


•	the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;


•	we may be unable to demonstrate that our product candidates’ risk-benefit ratios for their proposed indications are acceptable;


•	the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;


•	we may be unable to demonstrate that the clinical and other benefits of our product candidates outweigh their safety risks;


•	the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;


•	the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of a BLA or other comparable submission in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere;


•	the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes, our own manufacturing facilities, or a third-party manufacturer’s facilities with which we contract for clinical and commercial supplies; and

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•	the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

Further, failure to obtain approval for any of the above reasons may be made more likely by the fact that the FDA and other regulatory authorities have very limited experience with commercial development of genetically engineered T cell therapies for cancer. Failure to obtain regulatory approval to market any of our product candidates would significantly harm our business, results of operations, and prospects.

Our clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which would prevent or delay regulatory approval and commercialization.

The clinical trials and manufacturing of our product candidates are, and the manufacturing and marketing of our products will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and market our product candidates. Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication. In particular, because our product candidates are subject to regulation as biological drug products, we will need to demonstrate that they are safe, pure, and potent for use in their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. The risk/benefit profile required for product licensure will vary depending on these factors and may include not only the ability to show tumor shrinkage, but also adequate duration of response, a delay in the progression of the disease, and/or an improvement in survival, and an acceptable safety profile. For example, response rates from the use of our product candidates may not be sufficient to obtain regulatory approval unless we can also show an adequate duration of response. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Similarly, the final results from a clinical trial may not be as good as interim results reported earlier in the same clinical trial. Additionally, the results of studies in one set of patients or line of treatment may not be predictive of those obtained in another. We expect there may be greater variability in results for products processed and administered on a patient-by-patient basis, as anticipated for our product candidates, than for "off-the-shelf" products, like many other drugs. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.

Data from studies conducted by the third-party research institutions that are our collaboration partners, such as FHCRC, MSK, SCRI, and the NCI, should not be relied upon as evidence that later or larger-scale clinical trials will succeed. Some future trials may have different patient populations than current studies and will test our product candidates in different indications, among other differences. In addition, our manufacturing processes for our CD19 product candidates include what we believe to be process improvements that are not part of the production processes that have been used in the clinical trials conducted by the research institutions. Accordingly, our results with our CD19 product candidates may not be consistent with the results of the clinical trials conducted by our research institute collaborators.

In addition, even if such trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.

Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences.

As with most biological drug products, use of our product candidates could be associated with side effects or adverse events which can vary in severity from minor reactions to death and in frequency from infrequent to prevalent. It is not uncommon for there to be treatment-related deaths in clinical trials in advanced cancer patients, and even some standard of care treatments, such as HSCT, are associated with a level of treatment-related mortality. Undesirable side effects or unacceptable toxicities caused by our product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical trials. As of a data cutoff date of August 11, 2017 for JCAR015 and October 8, 2017 for JCAR017, treatment-emergent adverse events, whether or not treatment related, occurring in at least 25% of patients across trials conducted under a Juno-sponsored IND include CRS,

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nausea, diarrhea, vomiting, decreased appetite, fatigue, headache, hypokalemia, neutropenia, anemia, thrombocytopenia, and events of neurotoxicity, including confusional state, aphasia, encephalopathy, tremor, muscular weakness, and somnolence. Similar adverse events have been observed in trials conducted by our collaborators. Characteristic symptoms of CRS include fever, low blood pressure, nausea, difficulty breathing, and oxygen deficiency. Some of these treatment-emergent adverse events from our or our collaborators' clinical trials have required admission to the intensive care unit and, in some severe cases, have resulted in death. Fatal events of cerebral edema have also been observed.

Undesirable side effects or deaths in clinical trials with our product candidates may cause the FDA or comparable foreign regulatory authorities to place a clinical hold on the associated clinical trials, to require additional studies, or otherwise to delay or deny approval of our product candidates for any or all targeted indications. For instance, in July 2016, the FDA placed our JCAR015 Phase II trial in r/r ALL on clinical hold after we observed an increased incidence of severe neurotoxicity, including two patients who died in late June 2016 from cerebral edema. After a protocol amendment, the clinical hold was removed a few days later and the trial resumed. However, in November 2016, the FDA again placed our trial on clinical hold after the occurrence of two more deaths from cerebral edema in the trial. Following the November 2016 events, we conducted an investigation into the toxicity and identified multiple factors that may have contributed to this increased risk, including patient specific factors, the conditioning chemotherapy patients received, and factors related to the product, but we cannot know that we have identified the root causes of the toxicity to sufficiently prevent its occurrence in the future. We subsequently determined to discontinue Juno development of JCAR015. We cannot provide any assurances that there will not be further treatment-related severe adverse events or deaths with other product candidates, from cerebral edema or otherwise, that the trials for those other product candidates will not be placed on clinical hold in the future, or that patient recruitment for trials with our other product candidates will not be adversely impacted by the events with JCAR015, any of which could materially and adversely affect our business and prospects.

Negative side effects could also result in a more restrictive label, or a boxed warning on the label, for any product that is approved. We may also be required by the FDA to create a risk evaluation and mitigation strategy ("REMS") plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements to assure safe use, such as restricted distribution methods and patient registries.

Treatment-related side effects or clinical holds could also affect patient recruitment or the ability of enrolled subjects to complete the trial, or could result in potential product liability claims. In addition, these side effects may not be appropriately or timely recognized or managed by the treating medical staff, particularly outside of the research institutions that collaborate with us, as toxicities resulting from personalized T cell therapy are not normally encountered in the general patient population and by medical personnel. We expect to have to train medical personnel using our product candidates to understand their side effect profiles, both for our planned clinical trials and upon any commercialization of any product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in adverse effects to patients, including death. Any of these occurrences may materially and adversely harm our business, financial condition and prospects.

Undesirable side effects or deaths in clinical trials conducted by others in the engineered T cell therapy field may also adversely impact our own prospects with the FDA or comparable foreign regulatory authorities and may adversely impact our own patient recruitment activities if enthusiasm for the prospects of engineered T cell therapy generally is diminished.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, including during any long-term follow-up observation period recommended or required for patients who receive treatment using our products, a number of potentially significant negative consequences could result, including:


•	regulatory authorities may withdraw approvals of such product or we may voluntarily halt the sale of such product;


•	regulatory authorities may require additional warnings on the label;


•	we may be required by the FDA to create a new REMS plan;


•	we could be sued and held liable for harm caused to patients; and


•	our reputation may suffer.

Any of the foregoing could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations, and prospects.

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If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including:


•	the size and nature of the patient population;


•	the patient eligibility criteria defined in the protocol;


•	the size of the study population required for analysis of the trial’s primary endpoints;


•	the proximity of patients to trial sites;


•	the design of the trial;


•	our ability to recruit clinical trial investigators with the appropriate competencies and experience;


•	competing clinical trials for similar therapies or other new therapeutics not involving T cell based immunotherapy;


•	clinicians' and patients' perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating;


•	our ability to obtain and maintain patient consents; and


•	the risk that patients enrolled in clinical trials will not complete a clinical trial.

In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Moreover, because our product candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and hematopoietic cell transplantation, rather than enroll patients in any future clinical trial.

Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.

Clinical trials are expensive, time-consuming and difficult to design and implement, and our clinical trial costs may be higher than for more conventional therapeutic technologies or drug products.

Clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Because our product candidates are based on new technologies and manufactured on a patient-by-patient basis, we expect that they will require extensive research and development and have substantial manufacturing costs. In addition, costs to treat patients with r/r cancer and to treat potential side effects that may result from our product candidates can be significant. Some clinical trial sites may not bill, or obtain coverage from, Medicare, Medicaid, or other third-party payors for some or all of these costs for patients enrolled in our clinical trials, and we may be required by those trial sites to pay such costs. Accordingly, our clinical trial costs are likely to be significantly higher per patient than those of more conventional therapeutic technologies or drug products. In addition, our proposed personalized product candidates involve several complex and costly manufacturing and processing steps, the costs of which will be borne by us. Depending on the number of patients we ultimately enroll in our trials, and the number of trials we may need to conduct, our overall clinical trial costs may be higher than for more conventional treatments.

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Research and development of biopharmaceutical products is inherently risky. We may not be successful in our efforts to use and enhance our technology platform and CAR and TCR technologies to create a pipeline of product candidates and develop commercially successful products, or we may expend our limited resources on programs that do not yield a successful product candidate and fail to capitalize on product candidates or diseases that may be more profitable or for which there is a greater likelihood of success. If we fail to develop additional product candidates, our commercial opportunity will be limited.

We and our collaborators are simultaneously pursuing clinical development of multiple product candidates developed employing our CAR and TCR technologies. We are at an early stage of development and our technology platform has not yet led, and may never lead, to approved or commercially successful products.

Even if we are successful in continuing to build our pipeline, obtaining regulatory approvals and commercializing additional product candidates may require substantial additional funding and are prone to the risks of failure inherent in medical product development.

Investment in biopharmaceutical product development involves significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide you any assurance that we will be able to successfully advance any of these additional product candidates through the development process. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development or commercialization for many reasons, including the following:


•	our platform may not be successful in identifying additional product candidates;


•	we may not be able or willing to assemble sufficient resources to acquire or discover additional product candidates;


•	our product candidates may not succeed in preclinical or clinical testing;


•	a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;


•	competitors may develop alternatives that render our product candidates obsolete or less attractive;


•	product candidates we develop may nevertheless be covered by third parties' patents or other exclusive rights;


•	the market for a product candidate may change during our program so that the continued development of that product candidate is no longer reasonable;


•	a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and


•	a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors, if applicable.

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, discover, develop, or commercialize additional product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations.

Even if we receive FDA approval to market our product candidates, whether for the treatment of cancers or other diseases, we cannot assure you that any such product candidates will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives. Further, because of our limited financial and managerial resources, we are required to focus our research programs on certain product candidates and on specific diseases. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forgo or delay pursuit of opportunities with other product candidates or other diseases that may later prove to have greater commercial potential, or relinquish valuable rights to such product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights. For additional information regarding the factors that will affect our ability to achieve revenue from product sales, see the risk factor above "—We have never generated any revenue from sales of cell-therapy products and our ability to generate revenue from cell-therapy product sales and become profitable depends significantly on our success in a number of factors."

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Our product candidates are biologics and the manufacture of our product candidates is complex and we may encounter difficulties in production, particularly with respect to process development or scaling-out of our manufacturing capabilities. If we, Celgene, or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

Our product candidates are biologics and the process of manufacturing our products is complex, highly-regulated and subject to multiple risks. The manufacture of our product candidates involves complex processes, including harvesting T cells from patients, genetically modifying the T cells ex vivo, multiplying the T cells to obtain the desired dose, and ultimately infusing the T cells back into a patient’s body. As a result of the complexities, the cost to manufacture biologics in general, and our genetically modified cell product candidates in particular, is generally higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and is more difficult to reproduce. Our manufacturing process will be susceptible to product loss or failure, or product variation that may adversely impact patient outcomes, due to logistical issues associated with the collection of white blood cells, or starting material, from the patient, shipping such material to the manufacturing site, shipping the final product back to the patient, and infusing the patient with the product, manufacturing issues or different product characteristics resulting from the differences in patient starting materials, variations between reagent lots, interruptions in the manufacturing process, contamination, equipment or reagent failure, improper installation or operation of equipment, vendor or operator error, inconsistency in cell growth, and variability in product characteristics. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If for any reason we lose a patient’s starting material or later-developed product at any point in the process, the manufacturing process for that patient will need to be restarted and the resulting delay may adversely affect that patient’s outcome. If microbial, viral, or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Because our product candidates are manufactured for each particular patient, we will be required to maintain a chain of identity with respect to materials as they move from the patient to the manufacturing facility, through the manufacturing process, and back to the patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse patient outcomes, loss of product, or regulatory action including withdrawal of our products from the market, if licensed.

Historically, our product candidates have been manufactured using unoptimized processes by our third-party research institution collaborators that we do not intend to use for more advanced clinical trials or commercialization. Although we are working to develop commercially viable processes, including for JCAR017, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including, among others, cost overruns, potential problems with process scale-out, process reproducibility, stability issues, lot consistency, timely availability of reagents or raw materials, and the timing of bringing facilities online or otherwise expanding capacity. We will also need to build out and implement electronic systems to support scale and reduce human error, which may be difficult to do in a timely manner. As a result of these challenges, we may experience delays in our clinical development and/or commercialization plans. We may ultimately be unable to reduce the cost of goods for our product candidates to levels that will allow for an attractive return on investment if and when those product candidates are commercialized.

We also may make changes to our manufacturing process at various points during development, and even after commercialization, for various reasons, such as controlling costs, achieving scale, decreasing processing time, increasing manufacturing success rate, or other reasons. During the course of the TRANSCEND trial, we have made changes to the JCAR017 manufacturing process to support commercialization, and we may make changes to our JCARH125 manufacturing process during the course of our Phase I trial in r/r multiple myeloma. Changes to our manufacturing process carry the risk that they will not achieve their intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of our ongoing clinical trials, future clinical trials, or the performance of the product once commercialized. In some circumstances, changes in the manufacturing process may require us to perform ex vivo comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials. For instance, changes in our process during the course of clinical development may require us to show the comparability of the product used in earlier clinical phases or at earlier portions of a trial to the product used in later clinical phases or later portions of the trial. We may also make further changes to our manufacturing process before or after commercialization, and such changes may require us to show the comparability of the resulting product to the product used in the clinical trials using earlier processes. We may be required to collect additional clinical data from any modified process prior to obtaining marketing approval for the product candidate produced with such modified process. If clinical data are not ultimately comparable to that seen in the earlier trials or earlier in the same trial in terms of safety or efficacy, we may be required to make further changes to our process and/or undertake additional clinical testing, either of which could significantly delay the clinical development or commercialization of the associated product candidate.

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We expect our manufacturing strategy will involve the use of our manufacturing facility in Bothell, Washington, and at least one or two additional Juno-operated manufacturing facilities to manufacture our product candidates. We also may use one or more CMOs to manufacture product candidates in the future. We also plan to manufacture certain of the reagents used for making our product candidates ourselves. We expect that development of our own manufacturing capabilities, as well as manufacturing some of our own reagents, will provide us with enhanced control of material supply for both clinical trials and the commercial market, enable the more rapid implementation of process changes, and allow for better long-term margins. However, we have limited experience as a company manufacturing product candidates for use in the clinic and no experience as a company manufacturing product candidates for commercial supply, and we have only limited experience (through our German subsidiary) in manufacturing reagents. We may never be successful in manufacturing product candidates or reagents in sufficient quantities or with sufficient quality for clinical or commercial use. We may establish multiple manufacturing facilities as we expand our commercial footprint to multiple geographies, which may lead to regulatory delays or prove costly.

Even if we are successful in developing our manufacturing capabilities sufficient for clinical and commercial supply, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, operator error, natural disasters, availability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

Furthermore, if contaminants are discovered in our supply of our product candidates or in our manufacturing facilities or those of our CMOs, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our product candidates will not occur in the future. Additionally, we and our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If we or our CMOs were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

In addition, the manufacturing process for any products that we may develop is subject to FDA and foreign regulatory authority approval process, and we will need to meet, and our CMOs will need to meet, all applicable FDA and foreign regulatory authority requirements on an ongoing basis. If we or our CMOs are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations and growth prospects.

We also will need to assist Celgene with the transfer of our manufacturing processes for our CD19 product candidates, and product candidates for any other programs for which they exercise an option, to geographies outside of North America and China. The transfer of process to Celgene, or to CMOs selected by Celgene, and the actual manufacture of our product candidates by Celgene or its selected CMOs, will be subject to the same types of risk as set forth above and may not ultimately be successful or may take longer to succeed than expected, which could delay or impair development and commercialization activities in those geographies, which would have an adverse effect on our business. Such transfer activities will also require a significant amount of attention from our personnel, which may disrupt our other development and commercialization activities, which in turn may have an adverse effect on our business. Additionally, in the interim we expect we will need to manufacture product candidates out of our existing facilities for use in clinical trials in the Celgene territories, which may disrupt our own clinical activities and, to the extent we are not able to produce product candidate in the volumes required by Celgene or experience difficulties coordinating manufacturing in the United States with patient material collection and treatment centers in the Celgene territories, may also lead to delays in development plans in such Celgene territories. To the extent product candidates need to be shipped across international borders for use in clinical trials in the Celgene territories, there may be shipping, customs, or other import/export related delays that could lead to a loss of a patient’s manufactured product, which could prevent patients from being treated or require a new batch to be manufactured from the patient’s starting material. Losses of this sort could cause delays in the associated clinical trials, which could delay or prevent the clinical development and commercialization of our product candidates in the Celgene territories.

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We rely on third parties for certain aspects of the manufacture of our clinical product supplies, and we intend to rely on third parties for at least a portion of the manufacturing process of our product candidates, if approved. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.

We currently rely on outside vendors for certain aspects of the manufacturing process for our product candidates. We have not yet caused our product candidates to be manufactured or processed on a commercial scale and may not be able to do so for any of our product candidates. Although our manufacturing and processing approach originates with the approach undertaken by our third-party research institution collaborators, we have limited experience in managing the T cell engineering process, and our process may be more difficult or expensive than the approaches in use by others. We have made and will continue to make changes as we work to optimize the manufacturing process, and we cannot be sure that even minor changes in the process will not result in significantly different T cells that may not be as safe and effective as any T cell therapy deployed by our third-party research institution collaborators.

Although we have brought a Juno-operated manufacturing facility online for clinical manufacturing, we also intend to continue to use third parties as part of our manufacturing process, including for the manufacturing of critical reagents and materials, such as viral vector. Our anticipated reliance on a limited number of third-party manufacturers exposes us to the following risks:

•

We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and applicable health authorities must approve any manufacturers. This approval would require new testing and good manufacturing practices compliance inspections by health authorities. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of the reagents and materials used in the manufacturing of our products.


•	Our manufacturers may have little or no experience with autologous cell products, which are products made from a patient’s own cells, and therefore may require a significant amount of support from us in order to implement and maintain the infrastructure and processes required to manufacture our product candidates.


•	Our third-party manufacturers might be unable to timely manufacture reagents and materials used in the manufacture of our product candidates, or produce the quantity and quality required to meet our clinical and commercial needs, if any.


•	Our contract manufacturers may not perform as agreed, may not devote sufficient resources us, or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store, and distribute the materials or reagents used in the manufacture of our product candidates.


•	Manufacturers are subject to ongoing periodic unannounced inspection by the FDA and other health authorities to ensure strict compliance with current good manufacturing practices ("cGMPs") and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards.


•	We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our products, or in the manufacture of the custom materials or reagents used in the manufacture thereof.


•	Our third-party manufacturers could breach or terminate their agreement with us.


•	Raw materials, reagents, and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects, or may introduce variability into our final products.


•	Our contract manufacturers and critical reagent suppliers may be subject to inclement weather, as well as natural or man-made disasters.

Celgene may similarly rely on third parties for manufacturing activities in the territories where Celgene leads development and commercialization of product candidates from programs for which it has exercised an option, and therefore Celgene’s activities may be subject to the same risks. Each of these risks could delay or prevent the completion of clinical trials or the approval of any of our product candidates by the FDA or comparable regulatory authorities outside of the United States, result in higher costs, or adversely impact commercialization of our product candidates. In addition, we will rely on third parties to perform certain specification tests on our product candidates prior to delivery to patients. If these tests are not appropriately done and test data are not reliable, patients could be put at risk of serious harm and the FDA or comparable regulatory authorities outside

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of the United States could require additional clinical trials or place significant restrictions on our company until deficiencies are remedied.

Cell-based therapies rely on the availability of reagents, specialized equipment, and other specialty materials, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials, we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products.

Manufacturing our product candidates requires many reagents, which are substances used in our manufacturing processes to bring about chemical or biological reactions, and other specialty materials and equipment, some of which are manufactured or supplied by small companies with limited resources and experience to support commercial biologics production. We currently depend on a limited number of vendors for certain materials and equipment used in the manufacture of our product candidates. Some of these suppliers may not have the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms or may otherwise be ill-equipped to support our needs. Reagents and other key materials from these suppliers may have inconsistent attributes and introduce variability into our manufactured product candidates, which may contribute to variable patient outcomes and possible adverse events. We also do not have supply contracts with many of these suppliers and may not be able to obtain supply contracts with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key materials and equipment to support clinical or commercial manufacturing.

For some of these reagents, equipment, and materials, we rely and may in the future rely on sole source vendors or a limited number of vendors. An inability to continue to source product from any of these suppliers, which could be due to regulatory actions or requirements affecting the supplier, adverse financial or other strategic developments experienced by a supplier, labor disputes or shortages, unexpected demands, or quality issues, could adversely affect our ability to satisfy demand for our product candidates, which could adversely and materially affect our product sales and operating results or our ability to conduct clinical trials, either of which could significantly harm our business.

As we continue to develop and scale our manufacturing process, we expect that we will need to obtain rights to and supplies of certain materials and equipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially reasonable terms, or at all, and if we are unable to alter our process in a commercially viable manner to avoid the use of such materials or find a suitable substitute, it would have a material adverse effect on our business. Even if we are able to alter our process so as to use other materials or equipment, such a change may lead to a delay in our clinical development and/or commercialization plans. If such a change occurs for product candidate that is already in clinical testing, the change may require us to perform both ex vivo comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials.

We do and will continue to rely in significant part on outside scientists and their third-party research institutions for research and development and early clinical testing of our product candidates. These scientists and institutions may have other commitments or conflicts of interest, which could limit our access to their expertise and harm our ability to leverage our technology platform.

We rely to a significant extent at present on our third-party research institution collaborators for research and development capabilities. Currently, SCRI is conducting a Phase I trial using JCAR023 to address refractory or recurrent pediatric neuroblastoma; FHCRC is conducting a Phase I/II clinical trial using JCAR014 to address r/r ALL, NHL, and CLL, including in combination with ibrutinib in CLL and durvalumab in NHL, a Phase Ib trial using JCAR014 in combination with durvalumab to address r/r NHL, a Phase I trial using a CD19-directed product candidate incorporating a fully human binding domain to address certain r/r B cell malignancies, a Phase I trial using JCAR024 to address advanced stage ROR-1 expressing cancers, a Phase I/II trial using JTCR016 to address newly diagnosed or relapsed high risk adult myeloid leukemia, a Phase I/II trial using JTCR016 to address advanced NSCLC and mesothelioma, and a Phase I clinical trial using FCARH143 to address r/r multiple myeloma; MSK is conducting Phase I clinical trial using MCARH171 to address r/r multiple myeloma, a Phase I trial with JCAR020 to address advanced stage ovarian cancer, and a Phase I trial with a CD19/4-1BBL "armored" CAR to address r/r CLL; Peter MacCallum Cancer Centre is conducting a Phase I clinical trial using a Lewis Y-directed CAR T cell product candidate to address advanced stage lung cancer and other Lewis Y-expressing advanced stage tumors; and the NCI is conducting a clinical trial of JCAR018 for the treatment of pediatric and young adult r/r ALL and r/r NHL. SCRI is also conducting the Phase II portion of a Phase I/II trial with a CD19-directed CAR in pediatric patients with r/r ALL. SCRI has used a manufacturing process for many patients in the trial’s Phase II portion that is different than the process SCRI used in the Phase I portion of the trial and the process we use in the TRANSCEND trial to manufacture JCAR017. Differences in manufacturing process may contribute to meaningful product differences that could affect patient outcomes or our ability to rely on the data from these studies in support of regulatory submission for our product candidates that are manufactured differently than those evaluated in these studies.

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Each of these clinical trials addresses a limited number of patients. We expect to use the results of these trials, if favorable, to help support the filing with the FDA of Juno-sponsored INDs to conduct more advanced clinical trials with the corresponding product candidates. We are conducting the TRANSCEND trial under a Juno-sponsored IND.

We also fund research and development under agreements with FHCRC, MSK, and SCRI, among other institutions. However, the research we are funding constitutes only a small portion of the overall research of each research institution. Other research being conducted by these institutions may at times receive higher priority than research on the programs we are funding. We typically have less control of the research, clinical trial protocols, and patient enrollment than we might with activity led by Juno employees.

The outside scientists who conduct the clinical testing of our current product candidates, and who conduct the research and development upon which our product candidate pipeline depends, are not our employees; rather they serve as either independent contractors or the primary investigators under research collaboration agreements that we have with their sponsoring academic or research institution. Such scientists and collaborators may have other commitments that would limit their availability to us. Although our scientific advisors generally agree not to do competing work, if an actual or potential conflict of interest between their work for us and their work for another entity arises, we may lose their services. These factors could adversely affect the timing of the clinical trials, the timing of receipt and reporting of clinical data, the timing of Juno-sponsored IND filings, and our ability to conduct future planned clinical trials. It is also possible that some of our valuable proprietary knowledge may become publicly known through these scientific advisors if they breach their confidentiality agreements with us, which would cause competitive harm to, and have a material adverse effect on, our business.

Our existing agreements with our collaboration partners may be subject to termination by the counterparty upon the occurrence of certain circumstances as described in more detail under the caption "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" of this report. If any of our collaboration partners terminates their collaboration agreement, the research and development of the relevant product candidate would be suspended, and we may be unable to research, develop, and license future product candidates. We may be required to devote additional resources to the development of our product candidates or seek a new collaboration partner, and the terms of any additional collaborations or other arrangements that we establish may not be favorable to us. In addition, there is a natural transition period when a new third party begins work. In addition, switching or adding third parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines.

We will be highly dependent on the NCI for early clinical testing of JCAR018.

In December 2014, we entered into an exclusive license agreement with Opus Bio pursuant to which Opus Bio has granted us an exclusive, worldwide, sublicensable license under certain patent rights related to a CD22-directed CAR product candidate, JCAR018. In connection therewith, the NCI agreed to separate the activities that are exclusively related to CD22 under its agreement with Opus Bio and to enter into a separate agreement with us (the "Juno CRADA"), on the same terms as such agreement and incorporate such activities into its agreement with us.

The NCI has commenced a Phase I clinical trial of JCAR018 for the treatment of pediatric and young adult r/r ALL and r/r NHL. If the results of this trial are compelling, we expect to conduct a clinical trial of a related CD22-directed product candidate. However, we will have limited control over the nature or timing of the NCI's clinical trial and limited visibility into their day-to-day activities, including manufacturing activities. For example, the clinical trial will constitute only a small portion of the NCI's overall research and the research of the principal investigators. Other research being conducted by the principal investigators may at times receive higher priority than research on JCAR018. We will also be dependent on the NCI to provide us with data, include batch records, to support the filing of our IND. These factors could adversely affect the timing of our IND filing. Additionally, the NCI manufactures drug product and we do not control the process or facility. While JCAR018 was not impacted, certain non-Juno product candidates’ development was delayed in 2016 due to contamination issues at another NCI cell manufacturing facility.

The NCI may unilaterally terminate our rights under the Juno CRADA at any time for any reason or for no reason upon at least 60 days prior written notice. If the NCI unilaterally terminates the Juno CRADA, the research and development under the Juno CRADA would be suspended and we may lose certain of our data rights, which may impair our ability to obtain regulatory approval of JCAR018.

Our results of operations and financial position could be negatively impacted if our tax positions are challenged by tax authorities or if there are adverse changes in tax laws and regulations.

We are a U.S.-based multinational company subject to tax in certain U.S. and foreign tax jurisdictions. United States federal, state and local, as well as international tax laws and regulations are extremely complex and subject to varying interpretations.

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Although we believe that our tax estimates and tax positions are reasonable, there can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge. If we are unsuccessful in such a challenge, the relevant tax authorities may assess additional taxes, which could result in adjustments to, or impact the timing or amount of, taxable income, deductions or other tax allocations, which may adversely affect our results of operations and financial position.

We could also be adversely affected in the future by changes in applicable tax laws, regulations, or administrative interpretations thereof. On December 22, 2017, President Trump signed into law H.R. 1, "An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018" (this legislation was formerly called the "Tax Cuts and Jobs Act" and is referred to herein as the "U.S. Tax Act"). The U.S. Tax Act provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. The U.S. Tax Act contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. This change to the U.S. tax system, as well as a change to the tax system in a jurisdiction where we have significant operations, or a change in tax law in other jurisdictions where we do business, could have a material and adverse effect on our business and on the results of our operations. The ultimate impact of the U.S. Tax Act on our reported results in 2018 and beyond may differ from the estimates provided herein, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the U.S. Tax Act different from that presently contemplated.

If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our product candidates.

Our operations have required substantial amounts of cash since inception. We expect to continue to spend substantial amounts to continue the clinical development of our product candidates, including our ongoing and planned clinical trials for our CD19 and BCMA product candidates. If approved, we will require significant additional amounts in order to launch and commercialize our product candidates.

As of December 31, 2017, we had $973.9 million in cash, cash equivalents, and marketable securities. We believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months. However, changing circumstances or business opportunities, within or beyond our control, may lead us to use our capital faster than we currently anticipate. We may ultimately need to raise additional funds for the further development and commercialization of our product candidates or to pursue strategic transactions and other business opportunities that arise.

We cannot be certain that additional funding will be available on acceptable terms, or at all. We have no committed source of additional capital and if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidates or other research and development initiatives. Our license and collaboration agreements may also be terminated if we are unable to meet the payment obligations under the agreements. We could be required to seek additional collaborators for our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.

If Celgene declines to exercise its option with respect to one or more product candidates covered by our Celgene Collaboration Agreement, or if a license agreement with Celgene for a program for which has exercised an option is terminated, we will need to secure funding to advance worldwide development of those programs on our own or secure relationships with collaborators that have the necessary capital and expertise. In addition, we may need additional funding to advance product candidates prior to Celgene’s decisions regarding option exercise with respect to such product candidate if development of that program is not discontinued. Even after Celgene exercises an option for a program, we will still be responsible for a portion of worldwide development expenses for the associated product candidates and will be responsible for all commercialization expenses in the territories in which Juno leads development and commercialization activities. Additionally, either we or Celgene may opt not to fund a study led by the other under an active license agreement, and if Celgene opts not to fund a Juno-led study, then we would be responsible for the full cost of that study until such time, if ever, that Celgene determines to opt back in to the study at a premium to obtain the right to use data from that study in Celgene's territories. In addition, if we exercise our option to any of Celgene’s in-licensed programs to co-develop and co-commercialize products, then we may need to secure additional funding to support our obligations to pay one-half of the acquisition costs of any such in-licensed program.

If we are unable to obtain sufficient financing when needed, it could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.

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Any future revenue from the license agreement with Penn and Novartis is highly dependent upon milestone and contingent royalty payments generated from the efforts of Penn and Novartis, over which we have no control, and we may not realize the intended benefits of this agreement.

On April 4, 2015, the parties to Trustees of the University of Pennsylvania v. St. Jude Children’s Research Hospital, Civil Action No. 2:13-cv-01502-SD (E.D. Penn.), agreed to settle the case, which was dismissed on April 7, 2015. In connection with this settlement we entered into a sublicense agreement with Penn and an affiliate of Novartis pursuant to which we granted Novartis a non-exclusive, royalty-bearing sublicense under certain patent rights, including U.S. Patent No. 8,399,645, to develop, make and commercialize licensed products and licensed services for all therapeutic, diagnostic, preventative and palliative uses. In exchange for this sublicense, Novartis is obligated to pay us mid-single digit royalties on the U.S. net sales of products and services related to the disputed contract and patent claims, a low double digit percentage of the royalties Novartis pays to Penn for global net sales of those products, and milestone payments upon the achievement of specified clinical, regulatory and commercialization milestones for licensed products. The sublicense agreement with Novartis and Penn is terminable by Novartis at will without notice to us and without our consent.

Our receipt of royalty and milestone payments from Novartis is subject to many risks and uncertainties. In particular, these payments are dependent upon Novartis’ ability to make U.S. and global sales of its products and services, and its ability to achieve clinical, regulatory and commercialization milestones for the licensed products. We will have no control over the nature or timing of Novartis’ efforts towards making these sales or achieving these milestones. Furthermore, in the course of developing and commercializing its products, Novartis and Penn will likely be subject to many risks and uncertainties similar to those faced by our company and our product candidates as described in this section, and may be subject to other risks specific to Novartis and Penn. Additionally, if Novartis or Penn breaches our sublicense agreement, we may determine to terminate the agreement, or may be required to do so by St. Jude pursuant to the terms of our license agreement with St. Jude. To the extent Novartis fails, for any of the reasons outlined above or any other reason, to remit royalty payments or milestone payments under our sublicense agreement, or fails to remit these payments in the amount anticipated, or to the extent that our sublicense agreement with Novartis and Penn is terminated, we may not realize the potential benefits of the sublicense agreement with Penn and Novartis.

We may never formalize our agreement in principle with Celgene to license Celgene a subset of the acquired AbVitro technology or the final terms of the agreement may not be as favorable to us as expected.

We and Celgene agreed in principle in 2016 to enter into an agreement to license Celgene a subset of the technology acquired from AbVitro and to grant Celgene options to certain related potential product rights emanating from the acquired technology. During the pendency of our proposed merger with Purchaser, we do not expect to advance discussions about this agreement. In the event the proposed merger with Purchaser does not occur, we may never come to agreement with Celgene on the formal terms of such an agreement, in which case we will not receive the financial benefits of such an agreement. Even if we do come to agreement with Celgene, it may not be on terms that are favorable to us as expected.

We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval of or commercialize our product candidates.

We depend and expect to continue depending upon independent investigators and other third parties to conduct our clinical trials under agreements with universities, medical institutions, CROs, strategic partners, and others. For certain of our clinical trials, including our TRANSCEND trial, we contract directly with all of our trial sites, and therefore have to negotiate budgets and contracts with each trial site, which may result in delays to our development timelines and increased costs. For certain other of our clinical trials, we use a CRO to manage the conduct of our clinical trials, and for these trials will have to negotiate budgets and contracts with such CRO, which may similarly lead to delays and increased costs.

We rely and expect to continue relying heavily on third parties over the course of our clinical trials, and as a result will have limited control over the clinical investigators and limited visibility into their day-to-day activities, including with respect to how they are providing and administering T cell therapy. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory, and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with GCPs, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators, and trial sites. If we or any of these third parties fail to comply with applicable GCP regulations, some or all of the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional nonclinical or clinical trials or to enroll additional patients before approving our marketing applications. We cannot be certain that, upon inspection, such regulatory authorities will determine that any of

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our clinical trials complies with the GCP regulations. In addition, our clinical trials must be conducted with biologic product produced under cGMP regulations and will require a large number of test patients. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.

Any third parties conducting our clinical trials are not and will not be our employees and, except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our ongoing preclinical, clinical, and nonclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to complete development of, obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed. We have disclosed in this report and various corporate presentations certain investigator-reported interim data from some of our trials, including interim data for which we have not yet independently reviewed the source data. We also sometimes rely on such investigator-reported interim data in making business decisions. Independent review of the data by us or by an independent review board could fail to confirm the investigator- reported interim data, which may lead to revisions in disclosed clinical trial results in the future. Any such revisions that reveal more negative data than previously disclosed investigator-reported interim data could have an adverse impact on our business prospects and the trading price of our common stock. Such revisions could also reduce investor confidence in investigator-reported interim data that we disclose in the future.

If any of our relationships with trial sites or our relationship to our CRO terminates, we may not be able to enter into arrangements with alternative trial sites or CROs or do so on commercially reasonable terms. Switching or adding additional trial sites or CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO begins work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines and such delays could have a material adverse impact on our business, financial condition, and prospects.

The market opportunities for our product candidates may be limited to those patients who are ineligible for or have failed prior treatments and may be small.

Cancer therapies are sometimes characterized as first line, second line, or third line, and the FDA often approves new therapies initially only for third line use. When cancer is detected early enough, first line therapy is sometimes adequate to cure the cancer or prolong life without a cure. Whenever first line therapy, usually chemotherapy, hormone therapy, surgery, or a combination of these, proves unsuccessful, second line therapy may be administered. Second line therapies often consist of more chemotherapy, radiation, antibody drugs, tumor targeted small molecules, or a combination of these. Third line therapies can include bone marrow transplantation, antibody and small molecule targeted therapies, more invasive forms of surgery, and new technologies. We expect to initially seek approval of our product candidates as a third line therapy for patients who have failed other approved treatments.

Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval as a second line therapy and potentially as a first line therapy, but there is no guarantee that our product candidates, even if approved, would be approved for second line or first line therapy. In addition, we may have to conduct additional clinical trials prior to gaining approval for second line or first line therapy.

Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers in a position to receive third line therapy and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research and may prove to be incorrect. Regulatory authorities also may establish narrower definitions around when a patient is ineligible for other treatments than we have used in our projections, and that would reduce the size of the patient population eligible for our product candidates. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates. For instance, with our CD19 product candidates we expect to initially target a small patient population that suffers from certain types of aggressive NHL, r/r CLL, and r/r ALL. Even if we obtain significant market share for our product candidates, because the potential target populations are small, we may never

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achieve profitability without obtaining regulatory approval for additional indications, including use as a first or second line therapy.

Our market opportunities may also be limited by competitor treatments that may enter the market. See the risk factor below "—We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively."

We plan to seek orphan drug designation for some or all of our product candidates across various indications, but we may be unable to obtain such designations or to maintain the benefits associated with orphan drug designation, including market exclusivity, which may cause our revenue, if any, to be reduced.

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. In order to obtain orphan drug designation, the request must be made before submitting a BLA. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval of that particular product for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a BLA, to market the same biologic (meaning, a product with the same principal molecular structural features) for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority to the product with orphan drug exclusivity or if FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. As a result, even if one of our product candidates receives orphan exclusivity, the FDA can still approve other biologics that do not have the same principal molecular structural features for use in treating the same indication or disease or the same biologic for a different indication or disease during the exclusivity period. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient supply of our product or if a subsequent applicant demonstrates clinical superiority over our product.

We plan to seek orphan drug designation for some or all of our product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products. We have obtained orphan drug designation for JCAR017 for the treatment of each of DLBCL, CLL, ALL and follicular lymphoma, and for JCARH125 for the treatment of multiple myeloma. Even when we obtain orphan drug designation, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition, or if a subsequent applicant demonstrates clinical superiority over our products, if approved. In addition, although we intend to seek orphan drug designation for other product candidates, we may never receive such designations.

We plan to seek but may fail to obtain breakthrough therapy designation and Regenerative Medicine Advanced Therapy designation, and Celgene may seek but may fail to obtain access to PRIME, for some or all of our CD19 product candidates across various indications.

In 2012, the FDA established a breakthrough therapy designation which is intended to expedite the development and review of product candidates that treat serious or life-threatening diseases when "preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development." The designation of a product candidate as a breakthrough therapy provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate and ensure collection of appropriate data needed to support approval; more frequent written correspondence from FDA about such things as the design of the proposed clinical trials and use of biomarkers; intensive guidance on an efficient drug development program, beginning as early as Phase I; organizational commitment involving senior managers; and eligibility for rolling review and priority review. Similarly, the EMA has established the PRIME scheme to expedite the development and review of product candidates that show a potential to address to a significant extent an unmet medical need, based on early clinical data.

In 2017, the FDA established a Regenerative Medicine Advanced Therapy ("RMAT") designation as part of its implementation of the 21st Century Cures Act. The RMAT designation program is intended to fulfill the 21st Century Cures Act requirement

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that the FDA facilitate an efficient development program for, and expedite review of, any drug that meets the following criteria: (1) it qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (2) it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (3) preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such a disease or condition. Like breakthrough therapy designation, RMAT designation provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate, and eligibility for rolling review and priority review. Products granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. RMAT-designated products that receive accelerated approval may, as appropriate, fulfill their post-approval requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of real world evidence (such as electronic health records); through the collection of larger confirmatory data sets; or via post-approval monitoring of all patients treated with such therapy prior to approval of the therapy.

We have obtained breakthrough therapy designation and RMAT designation for JCAR017 for the treatment of r/r aggressive large B cell NHL, including DLBCL, not otherwise specified (de novo or transformed from indolent lymphoma), primary mediastinal B-cell lymphoma, or follicular lymphoma grade 3B. Celgene has obtained access to PRIME for JCAR017 for the treatment of r/r DLBCL. We intend to seek breakthrough therapy designation and RMAT designation, and Celgene may seek access to PRIME, for some or all of our other product candidates that may qualify. There is no assurance that we will obtain breakthrough therapy designation or RMAT designation, or that Celgene will obtain access to PRIME, for any of our other product candidates.

Breakthrough therapy designation, RMAT designation, and PRIME eligibility do not change the standards for product approval, and there is no assurance that such designation or eligibility will result in expedited review or approval or that the approved indication will not be narrower than the indication covered by the breakthrough therapy designation, RMAT designation, or PRIME eligibility. Additionally, breakthrough therapy designation, RMAT designation, and access to PRIME can each be revoked if the criteria for eligibility cease to be met as clinical data emerges.

We currently have a limited marketing and sales organization and have no experience as a company in marketing products. If we are unable to establish marketing and sales capabilities on our own or through our collaboration with Celgene or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.

Although we have begun to assemble a marketing and sales organization, the team is still limited and we have no commercial product distribution capabilities and have no experience as a company in marketing products. We intend to develop an in-house marketing organization and sales force, which will require significant capital expenditures, management resources, and time. We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train, and retain marketing and sales personnel.

Under our collaboration with Celgene, for Juno-developed programs that Celgene opts into, as it has for our CD19 program, Celgene will lead development and commercialization activities outside of North America and China, but we will still be responsible for leading such activities in North America and China. If Celgene does not opt into a program for one of our product candidates that we move to commercialization, we will alone be responsible for commercialization activities worldwide, unless we find another collaborator to assist with the sales and marketing of our products.

If we are unable or decide not to establish internal sales, marketing and commercial distribution capabilities for any or all products we develop, we will likely pursue further collaborative arrangements regarding the sales and marketing of our products. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.

There can be no assurance that we will be able to develop in-house sales and commercial distribution capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any product in the United States or other territories, and as a result, we may not be able to generate product revenue.

A variety of risks associated with operating our business internationally could materially adversely affect our business.

As a result of the acquisition of Stage Cell Therapeutics GmbH, we acquired a German subsidiary with employees in Germany. We also plan to seek regulatory approval of our product candidates outside of the United States. Accordingly, we expect that

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we, Celgene, JW Cayman, and any other potential collaborators that have operations in foreign jurisdictions, will be subject to additional risks related to operating in foreign countries, including:


•	differing regulatory requirements in foreign countries;


•	unexpected changes in tariffs, trade barriers, taxes, price and exchange controls, or price and currency fluctuations;


•	weak economic conditions, labor unrest, political instability, war, or terror;


•	compliance with applicable tax, employment, immigration, data privacy, and labor laws for employees living or traveling abroad;


•	difficulties staffing operations and managing foreign employees;


•	potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign laws;


•	challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; and


•	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad.

These and other risks associated with our planned international operations may materially adversely affect our ability to attain or maintain profitable operations.

We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

The biopharmaceutical industry, and the rapidly evolving market for developing genetically engineered T cells in particular, is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations as well as established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized, or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products.

Specifically, genetically engineering T cells faces significant competition in both the CAR and TCR technology space from multiple companies and their collaborators, such as Novartis/Penn, Kite / Gilead / Amgen / NCI, Cellectis / Pfizer / Servier, Johnson & Johnson / Transposagen Biopharmaceuticals / Legend Biotech, Poseida, bluebird bio, Bellicum, Celyad, NantKwest, Intrexon / Ziopharm / MD Anderson Cancer Center, Unum Therapeutics, Adaptimmune / GlaxoSmithKline, ImmunoCellular Therapeutics, Adicet Bio, Autolus, and Mustang Bio, Inc. We also face competition from non-cell based treatments offered by companies such as Amgen, Pfizer, Abbvie, AstraZeneca, Bristol-Myers, Incyte, Merck, Roche, Regeneron, Corvus, Macrogenics, and Johnson & Johnson. In particular, in August 2017 Novartis received approval from the FDA for Kymriah (tisagenlecleucel), formerly known as CTL019, for the treatment of pediatric and young adult r/r ALL. Additionally, in October 2017, Kite received approval from the FDA for Yescarta (axicabtagene ciloleucel), formerly known as KTE-C19, for treatment of patients with r/r NHL. Kite has been acquired by Gilead.

Even if we obtain regulatory approval of our product candidates, we may not be the first to market and that may affect the price or demand for our product candidates. Additionally, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances. Additionally, a competitor could obtain orphan product exclusivity from the FDA with respect to such competitor’s product. If such competitor product is determined to be the same product as one of our product candidates, that may prevent us from obtaining approval from the FDA for such product candidate for the same indication for seven years, except in limited circumstances.

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For additional information regarding our competition, see the section captioned "Competition" in Part I—Item 1—"Business" located elsewhere in this report.

We are highly dependent on our key personnel, and if we are not successful in attracting, motivating, training, and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries and to scale our operations depends upon our ability to attract, motivate, train, and retain highly qualified managerial, scientific, medical, commercial, manufacturing, and quality control/assurance personnel. We are highly dependent on our management, particularly our chief executive officer, Hans Bishop, and our scientific, medical, commercial, manufacturing, and quality control/assurance personnel. The loss of the services of any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements or to recruit a sufficient number of qualified personnel to scale our operations, could result in delays in product development or commercialization activities and harm our business.

We conduct most of our operations at our facilities in Seattle and Bothell, Washington, in a region that is headquarters to many other biopharmaceutical companies and many academic and research institutions. We also have operations in Massachusetts, California, and Germany and currently have employees in all three geographies. Competition for skilled personnel is intense in all of these geographies and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. We expect that we will need to recruit talent from outside of the regions in which we currently operate, and doing so may be costly and difficult. Further expansion into additional states or countries could also increase our regulatory and legal risks.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided restricted stock and stock option grants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain "key man" insurance policies on the lives of all of these individuals or the lives of any of our other employees.

We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

As of December 31, 2017, we had 663 employees worldwide, most of whom are full time. As our development and commercialization plans and strategies develop, we must add a significant number of additional research and development, managerial, operational, sales, marketing, financial, and other personnel. Future growth will impose significant added responsibilities on members of management, including:


•	identifying, recruiting, integrating, maintaining, and motivating additional employees;


•	administering office locations in multiple geographies;


•	managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and


•	improving our operational, financial and management controls, reporting systems, and procedures.

Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.

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If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development, and commercialization goals.

We have engaged in and may in the future engage in acquisitions or strategic partnerships, which could divert management’s attention, increase our capital requirements, dilute our stockholders, be difficult to integrate, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We have made or entered into several acquisitions or strategic partnerships, such as our acquisitions of AbVitro and RedoxTherapies, Inc. in 2016, and we may continue to evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses.

Any acquisition or strategic partnership may entail numerous risks, including:


•	increased operating expenses and cash requirements;


•	the assumption of additional indebtedness or contingent liabilities, including any earn-out milestones;


•	the issuance of our equity securities;


•	assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;


•	the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;


•	retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;


•	expense or diversion of efforts related to the development of acquired technology under any diligence obligation required of us with respect to earn out milestones for an acquisition transaction, where we may not undertake such expense or efforts absent such diligence obligations;


•	risk that the other party or parties to an acquisition transaction may claim that we have not satisfied any earn out diligence obligation and seek damages or other legal or equitable relief;


•	risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and


•	our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

In addition, if we undertake additional acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

Our success payment obligations to FHCRC and MSK may result in dilution to our stockholders, may be a drain on our cash resources, or may cause us to incur debt obligations to satisfy the payment obligations.

We have agreed to make success payments to each of FHCRC and MSK pursuant to the terms of our agreements with each of those entities. These success payments will be based on increases in the estimated fair value of our common stock, payable in cash or publicly-traded equity at our discretion. The term of these obligations may last up to 11 years. Success payments will be owed (if applicable) after measurement of the value of our common stock in connection with the following valuation measurement dates during the term of the success payment agreement: (1) December 19, 2014, which was the date our common stock first became publicly traded; (2) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company; (3) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); (4) any date on which ARCH Venture Fund VII, L.P. or C.L. Alaska L.P. transfers a majority of its shares of company capital stock held by it on such date to a third party; (5) every second anniversary of any event described in the preceding clauses (1), (2), (3) or (4), but, in the case of FHCRC, only upon a request by FHCRC made within 20 calendar days after receiving written notice from us of such event; and (6) the last day of the 11 year period. The amount of a success payment is determined based on whether the

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value of our common stock meets or exceeds certain specified threshold values ascending, in the case of FHCRC, from $20.00 per share to $160.00 per share and, in the case of MSK, from $40.00 per share to $120.00 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. Each threshold is associated with a success payment, ascending, in the case of FHCRC, from $10.0 million at $20.00 per share to $375.0 million at $160.00 per share and, in the case of MSK, from $10.0 million at $40.00 per share to $150.0 million at $120.00 per share, payable if such threshold is reached. The maximum aggregate amount of success payments to FHCRC is $375.0 million and to MSK is $150.0 million, in each case subject to cost offsets related to our cash payments for collaboration activities. In December 2015, success payments to FHCRC were triggered in the aggregate amount of $75.0 million, less indirect cost offsets of $3.3 million, and a success payment to MSK was triggered in the amount of $10.0 million, less indirect cost offsets of $1.0 million. We elected to make the payment to FHCRC and MSK in shares of our common stock, and thereby issued 1,601,085 and 240,381 shares of our common stock to FHCRC in December 2015 and to MSK in March 2016, respectively. In April 2016, we agreed to repurchase the shares issued to MSK at a price per share equal to $41.90. See the section captioned "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" in this report for further discussion of these success payments.

If the proposed merger with Purchaser does not occur, then the next anticipated valuation measurement date at which success payments may be triggered is December 19, 2018. Success payments will only be triggered on that date to the extent the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding December 19, 2018 meets or exceeds $60.00, subject to adjustment for any stock dividend, stock split, combination of shares, and other similar events. In order to satisfy our obligations to make these success payments, if and when they are triggered, we may issue equity securities that may cause dilution to our stockholders, or we may use our existing cash or incur debt obligations to satisfy the success payment obligation in cash, which may adversely affect our financial position.

The success payment obligations to FHCRC and MSK may cause GAAP operating results to fluctuate significantly from quarter to quarter, which may reduce the usefulness of our GAAP financial statements.

Our success payment obligations to FHCRC and MSK are recorded as a liability on our balance sheet. Under GAAP, we are required to estimate the fair value of this liability as of each quarter end and changes in estimated fair value are amortized using the accelerated attribution method over the remaining term of the corresponding collaboration agreement. Factors that may lead to increases or decreases in the estimated fair value of this liability include, among others, changes in the value of the common stock, change in volatility, changes in the applicable term of the success payments, changes in the risk free rate, and changes in the estimated indirect costs that are creditable against FHCRC and MSK success payments. A small change in the inputs and related assumptions may have a relatively large change in the estimated valuation and associated liability and resulting expense or gain. For instance, see Note 7 to our audited consolidated financial statements included in this report for a sensitivity analysis showing the impact that a hypothetical change in the value of our common stock would have had on our results for the year ended December 31, 2017. As a result, our operating results and financial condition as reported by GAAP may fluctuate significantly from quarter to quarter and from year to year and may reduce the usefulness of our GAAP financial statements.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships, and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.

If we, our CROs or our CMOs use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.

Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological materials, by us or third parties, such as CROs and CMOs. We and such third parties are subject to federal, state, and local laws and regulations in the United States governing the use, manufacture, storage, handling, and disposal of medical and hazardous materials. Although we believe that our and such third parties’ procedures for using, handling, storing, and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state, or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an

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accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance for liabilities arising from medical or hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition, or results of operations.

Our internal computer systems, or those used by our third-party research institution collaborators, CROs or other contractors or consultants, may fail or suffer security breaches.

Despite the implementation of security measures, our internal computer systems and those of our future CROs and other contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. Although to our knowledge we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on our third-party research institution collaborators for research and development of our product candidates and other third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information or patient information, we could incur liability and the further development and commercialization of our product candidates could be delayed.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations, and those of our third-party research institution collaborators, CROs, CMOs, suppliers, and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. Our headquarters, our Juno-owned manufacturing facility, and our planned second Juno-owned manufacturing facility are located less than 25 miles apart, and therefore could be similarly affected by the same event. In addition, we rely on our third-party research institution collaborators for conducting research and development of our product candidates, and they may be affected by government shutdowns or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers in part to produce and process our product candidates or to supply us with certain reagents or specialized equipment or materials used our manufacturing process. Our ability to obtain clinical or commercial supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. Damage or extended periods of interruption to our corporate, development, research, or manufacturing facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our product candidates. Although we maintain property damage and business interruption insurance coverage, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:


•	decreased demand for our products;


•	injury to our reputation;


•	withdrawal of clinical trial participants and inability to continue clinical trials;


•	initiation of investigations by regulators;


•	costs to defend the related litigation;

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•	a diversion of management’s time and our resources;


•	substantial monetary awards to trial participants or patients;


•	product recalls, withdrawals or labeling, marketing or promotional restrictions;


•	loss of revenue;


•	exhaustion of any available insurance and our capital resources;


•	the inability to commercialize any product candidate; and


•	a decline in our share price.

Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators. Although we currently carry $10.0 million of clinical trial insurance, the amount of such insurance coverage may not be adequate, we may be unable to maintain such insurance, or we may not be able to obtain additional or replacement insurance at a reasonable cost, if at all. Our insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2017, we had U.S. federal net operating loss carryforwards of approximately $476.6 million, which will begin to expire in 2033. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change" (generally defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. As a result of our transactions that have occurred since our incorporation in August 2013, including our initial public offering, we have experienced such "ownership changes," but we have determined that our use of pre-change net operating loss carryforwards and other pre-change tax attributes is not subject to a material annual limitation. However, we may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which changes are outside our control. As a result, our ability to use our pre-change net operating loss carryforwards and other pre-change tax attributes to offset post-change taxable income or taxes may be subject to further limitation.

Risks Related to Government Regulation

The FDA regulatory approval process is lengthy, time-consuming, and inherently unpredictable, and we may experience significant delays in the clinical development and regulatory approval, if any, of our product candidates.

The research, testing, manufacturing, labeling, approval, selling, import, export, marketing, and distribution of drug products, including biologics, are subject to extensive regulation by the FDA and other regulatory authorities in the United States. We are not permitted to market any biological drug product in the United States until we receive approval of a BLA from the FDA. We have not previously submitted a BLA to the FDA, or similar approval filings to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish that the product candidate is safe, pure, and potent for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing, and controls for the product, and the manufacturing facilities must complete a successful pre-license inspection. We expect the novel nature of our product candidates to create further challenges in obtaining regulatory approval. For example, the FDA has limited experience with commercial development of genetically modified T cell therapies for cancer. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support licensure. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain licensure of the product candidates based on the completed clinical trials. Accordingly, the regulatory approval pathway for our product candidates may be uncertain, complex, expensive, and lengthy, and approval may not be obtained. In addition, clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:


•	obtaining regulatory approval to begin a trial, if applicable;


•	the availability of financial resources to begin and complete the trials;

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•	reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;


•	obtaining approval at each clinical trial site by an independent IRB;


•	recruiting suitable patients to participate in a trial in a timely manner;


•	having patients complete a trial or return for post-treatment follow-up;


•	clinical trial sites deviating from trial protocol, not complying with GCPs, or dropping out of a trial;


•	addressing any patient safety concerns that arise during the course of a trial;


•	addressing any conflicts with new or existing laws or regulations;


•	adding new clinical trial sites; or


•	manufacturing qualified materials under cGMPs for use in clinical trials.

Patient enrollment is a significant factor in the timing of clinical trials and is affected by many factors. See the risk factor above "—If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected" for additional information on risks related to patient enrollment.

Further, a clinical trial may be suspended or terminated by us, the IRBs for the institutions in which such trials are being conducted, or the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate adequate benefit from using a product candidate, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial. Some studies, including our TRANSCEND trial for JCAR017, include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides a recommendation for whether or not a study should move forward at designated check points based on access to certain data from the study and may recommend the suspension of the clinical trial if it determines that there is an unacceptable safety risk for subjects or on other grounds, such as no demonstration of efficacy, insufficient pace of enrollment, or lack of adherence to protocol. The recommendations of the data safety monitoring board are then considered by us, the trial site IRBs, and the FDA or other regulatory agencies, and may impact our or their decisions regarding the continuation, suspension, or termination of a clinical trial.

If we experience termination of, or delays in the completion of, any clinical trial of our product candidates, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenue will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenue.

Our third-party research institution collaborators may also experience similar difficulties in completing ongoing clinical trials and conducting future clinical trials of product candidates. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

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Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

If our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, and comparable foreign regulatory authority, requirements, including ensuring that quality control and manufacturing procedures conform to cGMP, and in certain cases Good Tissue Practices regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any BLA, other marketing application, and previous responses to inspectional observations. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials and surveillance to monitor the safety and efficacy of the product candidate. In addition, if the FDA or a comparable foreign regulatory authority approves our product candidates, we will have to comply with requirements including submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval.

The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:


•	restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market, or voluntary or mandatory product recalls;


•	fines, warning letters, or holds on clinical trials;


•	refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;


•	product seizure or detention, or refusal to permit the import or export of our product candidates; and


•	injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. The policies of the FDA and of other regulatory authorities may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these orders will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose restrictions on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted. In addition, if we are slow or unable to adapt to changes in existing

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requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

In addition, if we were able to obtain accelerated approval of any of our CD19 product candidates or any of our other product candidates, the FDA would require us to conduct a confirmatory study to verify the predicted clinical benefit and additional safety studies. The results from the confirmatory study may not support the clinical benefit, which would result in the approval being withdrawn. While operating under accelerated approval, we will be subject to certain restrictions that we would not be subject to upon receiving regular approval.

Our product candidates are regulated as biologic products, which may face competition from biosimilars, potentially sooner than anticipated.

The Affordable Care Act, signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 ("BPCIA"), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. This pathway may allow competitors to reference data from innovative biological products 12 years after the time of approval of the innovative biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. This data exclusivity does not prevent another company from developing a product that is highly similar to the innovative product, generating its own data, and seeking approval. Data exclusivity only assures that another company cannot rely upon the data within the innovator’s application to support the biosimilar product’s approval. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

In Europe, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In Europe, a competitor may reference data supporting approval of an innovative biological product, but will not be able to get it on the market until 10 years after the time of approval of the innovative product. This 10-year marketing exclusivity period will be extended to 11 years if, during the first eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition, companies may be developing biosimilars in other countries that could compete with our products.

If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.

Even if we obtain regulatory approval of our product candidates, the products may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers, and others in the medical community.

The use of engineered T cells as a potential cancer treatment is a recent development and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers, and others in the medical community. We expect physicians in the large bone marrow transplant centers to be particularly influential, and we may not be able to convince them to use our product candidates for many reasons. For example, certain of the product candidates that we will be developing target a cell surface marker that may be present on cancer cells as well as non-cancerous cells. It is possible that our product candidates may kill these non-cancerous cells, which may result in unacceptable side effects, including death. Additional factors will influence whether our product candidates are accepted in the market, including:


•	the clinical indications for which our product candidates are approved;


•	physicians, hospitals, cancer treatment centers, and patients considering our product candidates, or CAR or TCR product candidates generally, as a safe and effective treatment;

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•	the potential and perceived advantages of our product candidates over alternative treatments;


•	the prevalence and severity of any side effects;


•	product labeling or product insert requirements of the FDA or other regulatory authorities;


•	limitations or warnings contained in the labeling approved by the FDA;


•	the timing of market introduction of our product candidates as well as competitive products;


•	the cost of treatment in relation to alternative treatments;


•	the amount of upfront costs or training required for physicians to administer our product candidates;


•	the availability of adequate coverage, reimbursement, and pricing by third-party payors and government authorities;


•	the willingness of patients to pay out-of-pocket in the absence of coverage and reimbursement by third-party payors and government authorities;


•	relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and


•	the effectiveness of our sales and marketing efforts and distribution support.

In addition, although we are not utilizing embryonic stem cells or replication competent vectors, adverse publicity due to the ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects from any clinical trials using these technologies or the failure of such trials to demonstrate that these therapies are safe and effective may limit market acceptance our product candidates. If our product candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical community, we will not be able to generate significant revenue.

Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.

Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

Successful sales of our product candidates, if approved, depend on the availability of adequate coverage and reimbursement from third-party payors. In addition, because our product candidates represent new approaches to the treatment of cancer, we cannot accurately estimate the potential revenue from our product candidates.

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, commercial payors, and integrated delivery networks are critical to new product acceptance.

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, and integrated delivery networks decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:


•	a covered benefit under its health plan;


•	safe, effective and medically necessary;


•	appropriate for the specific patient;


•	cost-effective; and


•	neither experimental nor investigational.

In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. As a result, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-

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effectiveness data for the use of our products on a payor-by-payor basis, with no assurance that coverage will be obtained or that payors will permit open access to our products. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our genetically modified products. Patients are unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates. Because our product candidates have a higher cost of goods than conventional therapies, and may require long-term follow up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to achieve profitability may be greater.

We intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the EU, the pricing of biologics is subject to governmental control and other market regulations which could put pressure on the pricing and usage of our product candidates. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition, market acceptance and sales of our product candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our product candidates and may be affected by existing and future health care reform measures.

Healthcare legislative reform measures, or public focus on product pricing, may have a material adverse effect on our business and results of operations.

Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, in 2010, the Affordable Care Act was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future, particularly in light of the current presidential administration and Congress. In addition, Congress will likely continue to seek to modify, repeal, or otherwise invalidate all of, or certain provisions of, the Affordable Care Act. Most recently, the Tax Cuts and Jobs Act was enacted, which, among other things, removes penalties for not complying with the Affordable Care Act’s individual mandate to carry health insurance. At this time, the full effect that the Affordable Care Act and any subsequent legislation or executive action would have on our business remains unclear.

In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and, due to subsequent legislative amendments, will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. More recently, the 21^st Century Cures Act changed the reimbursement methodology for infusion drugs and biologics furnished through durable medical equipment in an attempt to remedy over- and underpayment of certain drugs.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. For instance, there have recently been public hearings in the Congress concerning pharmaceutical product pricing and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products. Additionally, at the state-level, individual states in the U.S. have increasingly been active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We cannot predict the initiatives that may be adopted in the future. The

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continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:


•	the demand for our product candidates, if we obtain regulatory approval;


•	our ability to set a price that we believe is fair for our products;


•	our ability to generate revenue and achieve or maintain profitability;


•	the level of taxes that we are required to pay; and


•	the availability of capital.

Any denial in coverage or reduction in reimbursement from Medicare or other government programs may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.

There has also been, and may in the future be, public attention on product pricing, and that may result in political, interest group, or media criticism of companies whose pricing or potential pricing is perceived by the public as high. If we were to become subject to such criticism, it could harm our reputation, create adverse publicity, and impact our relationships with our suppliers, collaborators, medical providers, and patients, each which could adversely affect our business and results of operations.

Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud, misconduct or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with the laws of the FDA and other similar foreign regulatory bodies; provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies; comply with manufacturing standards we have established; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Additionally, we are subject to the risk that a person or government agency could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, physician payment transparency laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations may be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations. These laws may impact, among other things, our current activities with clinical study investigators and research subjects, as well as proposed sales, marketing, and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

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•

the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

•

federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which impose criminal and civil penalties, including through civil "qui tam" or "whistleblower" actions, against individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation;

•

the federal Health Insurance Portability and Accountability Act of 1996, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

•

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization;

•

the federal Physician Payment Sunshine Act, created under the Affordable Care Act, and its implementing regulations, which require manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services under the Open Payments Program, information related to payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;


•	federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and

•

analogous state and foreign laws and regulations, such as (1) state and foreign anti-kickback, false claims, consumer protection and unfair competition laws which may apply to pharmaceutical business practices, including but not limited to, research, distribution, sales and marketing arrangements as well as submitting claims involving healthcare items or services reimbursed by any third-party payer, including commercial insurers, (2) state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers and other potential referral sources, (3) state laws that require drug manufacturers to file reports with states regarding pricing and marketing information, such as the tracking and reporting of gifts, compensations and other remuneration and items of value provided to healthcare professionals and entities, and (4) state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions

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could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Risks Related to Intellectual Property

We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

We are dependent on patents, know-how, and proprietary technology, both our own and licensed from others. Any termination of these licenses could result in the loss of significant rights and could harm our ability to commercialize our product candidates. See the section captioned "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" of this report for additional information regarding our license agreements.

Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including those relating to:


•	the scope of rights granted under the license agreement and other interpretation-related issues;


•	whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement;


•	our right to sublicense patent and other rights to third parties under collaborative development relationships;


•	whether we are complying with our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates;


•	the amount and timing of payments owed under license agreements; and


•	the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and by us and our partners.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. We are generally also subject to all of the same risks with respect to protection of intellectual property that we license as we are for intellectual property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize our products could suffer. For an example of the risks relating to such disputes, see the risk factor below "—We are involved in litigation that may be expensive and time consuming, and if resolved adversely, could harm our business, financial condition, or results of operations."

We depend, in part, on our licensors to file, prosecute, maintain, defend, and enforce patents and patent applications that are material to our business.

Patents relating to our product candidates are controlled by certain of our licensors. Each of our licensors generally has rights to file, prosecute, maintain, and defend the patents we have licensed from such licensor. We generally have the first right to enforce our patent rights, although our ability to settle such claims often requires the consent of the licensor. If our licensors or any future licensees having rights to file, prosecute, maintain, and defend our patent rights fail to conduct these activities for patents or patent applications covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using, or selling competing products. We cannot be certain that such activities by our licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights. Pursuant to the terms of the license agreements with some of our licensors, the licensors may have the right to control enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents and, even if we are permitted to pursue such enforcement or defense, we cannot ensure the cooperation of our licensors. We cannot be certain that our licensors will allocate sufficient resources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in the licensed patents. Even if we are not a party to these legal actions, an adverse outcome could harm our business because it might prevent us from continuing to license intellectual property that we may need to operate our business. In addition, even when we have the right to control patent prosecution of licensed patents and patent applications, enforcement of licensed patents, or

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defense of claims asserting the invalidity of those patents, we may still be adversely affected or prejudiced by actions or inactions of our licensors and their counsel that took place prior to or after our assuming control.

We may not be successful in obtaining or maintaining necessary rights to product components and processes for our product development pipeline.

We own or license from third parties certain intellectual property rights necessary to develop our product candidates. The growth of our business will likely depend in part on our ability to acquire or in-license additional proprietary rights. For example, our programs may involve additional product candidates that may require the use of additional proprietary rights held by third parties. Our product candidates may also require specific formulations to work effectively and efficiently. These formulations may be covered by intellectual property rights held by others. We may be unable to acquire or in-license any relevant third-party intellectual property rights that we identify as necessary or important to our business operations. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, which would harm our business. We may need to cease use of the compositions or methods covered by such third-party intellectual property rights, and may need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license under such intellectual property rights, any such license may be non-exclusive, which may allow our competitors’ access to the same technologies licensed to us.

Additionally, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our business and financial condition could suffer.

The licensing and acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization capabilities. There can be no assurance that we will be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual property surrounding the additional product candidates that we may seek to acquire.

We are dependent on intellectual property sublicensed to us by Opus Bio from the NIH for development of JCAR018. Failure to meet our own obligations to Opus Bio and the NIH may result in the loss of our rights to such intellectual property, which could harm our business.

Under our license agreement with Opus Bio, we are obligated to make certain pass-through payments to the NIH as well as to meet certain development benchmarks within certain time periods. We may be unable to make these payments or meet these benchmarks or may breach our other obligations under this license agreement, which could lead to the termination of the license agreement.

In addition, the NIH has the right to require us to grant mandatory sublicenses to the intellectual property licensed from the NIH under certain specified circumstances, including if it is necessary to meet health and safety needs that we are not reasonably satisfying or if it is necessary to meet requirements for public use specified by federal regulations. Any required sublicense of these licenses could result in the loss of significant rights and could harm our ability to commercialize licensed products.

We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our products or product candidates.

We anticipate that we will file additional patent applications both in the United States and in other countries, as appropriate. However, we cannot predict:


•	if and when any patents will issue;


•	the degree and range of protection any issued patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents;

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•	whether others will apply for or obtain patents claiming aspects similar to those covered by our patents and patent applications; or


•	whether we will need to initiate litigation or administrative proceedings to defend our patent rights, which may be costly whether we win or lose.

Composition of matter patents for biological and pharmaceutical products such as CAR or TCR product candidates are generally considered to be the strongest form of intellectual property protection for those types of products, as such patents provide protection without regard to any method of use. We cannot be certain, however, that the claims in our pending patent applications covering the composition of matter of our product candidates will be considered patentable by the USPTO, or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid and enforceable by courts in the United States or foreign countries. Method of use patents protect the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products "off-label" for those uses that are covered by our method of use patents. Although off-label prescriptions may infringe or contribute to the infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute.

The strength of patents in the biotechnology and pharmaceutical field can be uncertain, and evaluating the scope of such patents involves complex legal and scientific analyses. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries. Even if the patents do successfully issue, third parties may challenge the validity, enforceability, or scope thereof, which may result in such patents being narrowed, invalidated, or held unenforceable. For example, in 2015, Kite filed a petition with the USPTO for inter partes review of U.S. Patent No. 7,446,190, a patent that we have exclusively licensed from MSK. Although the USPTO upheld all the claims of this patent in December 2016, Kite has appealed this decision. If Kite is successful in its appeal, one or more of the patent's claims could be narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing their products to avoid being covered by our claims. If the breadth or strength of protection provided by the patent applications we hold with respect to our product candidates is threatened, this could dissuade companies from collaborating with us to develop, and could threaten our ability to commercialize, our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced. Because patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates. Furthermore, for U.S. applications in which all claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For U.S. applications containing a claim not entitled to priority before March 16, 2013, there is a greater level of uncertainty in the patent law in view of the passage of the America Invents Act, which brought into effect significant changes to the U.S. patent laws, including new procedures for challenging pending patent applications and issued patents.

Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.

In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and any other elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. Trade secrets, however, may be difficult to protect. We seek to protect our proprietary processes, in part, by entering into confidentiality agreements with our employees, consultants, outside scientific advisors, contractors, and collaborators. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, outside scientific advisors, contractors, and collaborators might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results, and financial condition.

Third-party claims of intellectual property infringement against us or our collaborators may prevent or delay our product discovery and development efforts.

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Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. Recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and post-grant review have been implemented. As stated above, this reform adds uncertainty to the possibility of challenge to our patents in the future.

Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others. Third parties may assert that we infringe their patents, or that we are otherwise employing their proprietary technology without authorization, and may sue us. For instance, Novartis has asserted in writing its belief that we infringe the following patents controlled by Novartis: U.S. Patent Nos. 7,408,053, 7,205,101, 7,527,925, and 7,442,525. In addition, Novartis identified in writing the following patent family controlled by Novartis that it believes may be of interest to us, especially with respect our JCAR014 and JCAR017 programs, and has offered to engage in discussions with us regarding a license or other appropriate business arrangements: the patent family containing Patent Cooperation Treaty Publication No. WO2012079000, including but not limited to U.S. Patent Nos. 9,464,140, 9,518,123, and 9,540,445. There may be third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture, or methods of use or treatment that cover our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies or the manufacture, use, or sale of our product candidates infringes upon these patents. If any such third-party patents were held by a court of competent jurisdiction to cover our technologies or product candidates, the holders of any such patents may be able to block our ability to commercialize the applicable product candidate unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business.

Third parties asserting their patent rights against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and may impact our reputation. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties, or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. In that event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly.

We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world.

We have limited intellectual property rights outside the United States, and, in particular, some of our patents directed to CAR constructs do not extend outside of the United States. Filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can have a different scope and strength than do those in the United States. In addition, the laws of some foreign countries, such as China, Brazil, Russia, and India, do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement rights are not as strong as those in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or adequate to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, such as China, Brazil, Russia, and India, do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to biopharmaceutical products, which could make it difficult in those jurisdictions for us to stop the infringement or misappropriation of our patents or other intellectual property rights, or the marketing of competing products in violation of our proprietary rights. Proceedings to enforce our patent and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention

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from other aspects of our business. Furthermore such proceedings could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims of infringement or misappropriation against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming, and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To cease such infringement or unauthorized use, we may be required to file patent infringement claims, which can be expensive and time-consuming. For instance, in October 2017, we filed a complaint against Kite in the federal district court for the Central District of California for infringement and declaratory judgment of infringement of U.S. Patent No. 7,446,190. In addition, in an infringement proceeding or a declaratory judgment action, a court may decide that one or more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

Interference or derivation proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to, or the correct inventorship of, our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation, interference, or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or before the USPTO or comparable foreign authority.

If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post-grant review, and equivalent proceedings in foreign jurisdictions, such as opposition or derivation proceedings. Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our business.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves, both technological and legal complexity, and is therefore costly, time-consuming, and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created

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uncertainty with respect to the value of patents once obtained. Depending on decisions by Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to naturally-occurring substances are not patentable. Although we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, we cannot predict how future decisions by Congress, the federal courts or the USPTO may impact the value of our patents.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.

We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. Although an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

The lives of our patents may not be sufficient to effectively protect our products and business.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first non-provisional effective filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from biosimilar or generic medications. Our patents issued as of December 31, 2017 will expire on dates ranging from 2019 to 2035, subject to any patent extensions that may be available for such patents. If patents are issued on our patent applications pending as of December 31, 2017, the resulting patents are projected to expire on dates ranging from 2021 to 2038. In addition, although upon issuance in the United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. If we do not have sufficient patent life to protect our products, our business and results of operations will be adversely affected.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

Although we are not currently experiencing any claims challenging the inventorship of our patents or ownership of our intellectual property, we may in the future be subject to claims that former employees, collaborators, or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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Risks Related to Our Common Stock

We expect that our stock price will fluctuate significantly.

The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this report, these factors include:


•	changes in the likelihood or timing of the proposed merger with Purchaser being consummated;


•	adverse results, clinical holds, or delays in the clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;


•	any disruption in our ability to manufacture drug product that impacts our clinical trial enrollment, regulatory approval timelines, or commercial supply;


•	any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a "refusal to file" letter or a request for additional information;


•	regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products, including clinical trial requirements for approvals;


•	our inability to obtain or delays in obtaining adequate product supply for any approved product or inability to do so at acceptable prices;


•	any failure to commercialize our product candidates or if the size and growth of the markets we intend to target fail to meet expectations;


•	additions or departures of key scientific or management personnel;


•	unanticipated serious safety concerns related to cancer immunology or the use of our product candidates;


•	introductions or announcements of new products offered by us or significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our collaborators or our competitors and the timing of such introductions or announcements;


•	announcements relating to future collaborations or our existing collaboration with Celgene, including decisions regarding the exercise by Celgene or us of any of our or their options thereunder, or any exercise or non-exercise by Celgene of a right to purchase shares of our common stock;


•	our ability to effectively manage our growth;


•	our ability to successfully treat additional types of cancers or at different stages;


•	changes in the structure of healthcare payment systems;


•	our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;


•	publication of research reports about us or our industry, or immunotherapy in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;


•	market conditions in the pharmaceutical and biotechnology sectors or the economy generally;


•	our ability or inability to raise additional capital through the issuance of equity or debt or collaboration arrangements and the terms on which we raise it;


•	trading volume of our common stock;


•	disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

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•	rumors and market speculation involving us or other companies in our industry, regardless of the accuracy of such rumors or speculation;


•	clinical trial, regulatory, or commercial setbacks to other companies in our field, which may impact perceptions of value or risk to our business; and


•	significant lawsuits, including patent or stockholder litigation.

The stock market in general, and market prices for the securities of biopharmaceutical companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. In several recent situations when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. The defense and disposition of any such lawsuits could be costly and divert the time and attention of our management and harm our operating results, regardless of the merits of such a claim.

We are involved in litigation that may be expensive and time consuming, and if resolved adversely, could harm our business, financial condition, or results of operations.

As described in Part I—Item 3—"Legal Proceedings," Juno is involved a variety of litigation, including a consolidated securities class action that is pending against Juno and two of our executive officers, a consolidated purported derivative action and a separate purported derivative action that are pending on behalf of Juno against two of our executive officers and certain members of our board of directors, and a lawsuit filed by City of Hope against Juno alleging breach of contract. Defending against these lawsuits will be costly and may significantly divert management’s time and attention from our business. There can be no assurance that a favorable outcome will be obtained. A negative outcome, whether by final judgment or an unfavorable settlement, could result in payments of significant monetary damages or fines and, in the case of the City of Hope litigation could potentially lead to the termination of the City of Hope license, and could adversely affect our business, financial condition, or results of operations.

An active trading market for our common stock may not be sustained.

Although our common stock is listed on The Nasdaq Global Select Market, the market for our shares has demonstrated varying levels of trading activity. Furthermore, an active trading market may not be sustained in the future. The lack of an active market may impair investors’ ability to sell their shares at the time they wish to sell them or at a price that they consider reasonable, may reduce the market value of their shares and may impair our ability to raise capital.

If securities or industry analysts do not continue to publish research reports about our business, or if they issue an adverse opinion about our business, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us issues an adverse opinion about our company, our stock price would likely decline. If one or more of these analysts ceases research coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Future sales of our common stock in the public market could cause our stock price to fall.

Our stock price could decline as a result of sales of a large number of shares of our common stock or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

As of December 31, 2017, we had 114,836,382 shares of common stock outstanding, including 523,862 shares of restricted stock that remained subject to vesting requirements. All 11,109,160 shares acquired by Celgene from us to date under the 2015 Celgene SPA and the 2017 Celgene SPA are subject to a market standoff agreement through September 25, 2018, which is 364 days from the date of Celgene’s most recent acquisition of stock from us. Any subsequent acquisitions of shares of our common stock by Celgene will commence another 364 day market standoff period for all Juno shares held by Celgene, subject to certain exceptions.

We have also registered the offer and sale of all shares of common stock that we may issue under our equity compensation plans, including upon the exercise of stock options. These shares can be freely sold in the public market upon issuance.

As of December 31, 2017, the holders of as many as 10.6 million shares, or 9.2% of our common stock outstanding, will have rights, subject to some conditions, under the investor rights agreement with such holders to require us to file registration

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statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Additionally, any shares of common stock issued in the future upon payment of success payments with FHCRC and MSK or upon achievement of the remaining milestone payable in equity under the license with Opus Bio will also be entitled to registration rights under the investor rights agreement. Once we register the offer and sale of shares for the holders of registration rights, they can be freely sold in the public market. In connection with the 2015 Celgene SPA, we have also entered into a registration rights agreement with Celgene, pursuant to which upon the written request of Celgene at certain times and subject to the satisfaction of certain conditions, we have agreed to prepare and file with the SEC a registration statement on Form S-3 for purposes of registering the resale of the shares specified in Celgene’s written request or, if we are not at such time eligible for the use of Form S-3, use commercially reasonable efforts to prepare and file a registration statement on a Form S-1 or alternative form that permits the resale of the shares.

In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise, including up to 30% of shares of our outstanding common stock to Celgene. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

Additionally, sales of our common stock by our executive officers or directors, even when done during an open trading window under Juno's policies with respect to insider sales or done under a trading plan adopted in accordance with the guidelines set forth by Rule 10b5-1, may adversely impact the trading price of our common stock. Although we do not expect that the relatively small volume of such sales will itself significantly impact the trading price of our common stock, the market could react negatively to the announcement of such sales, which could in turn affect the trading price of our common stock.

Our principal stockholders and management own a significant percentage of our stock and are able to exercise significant influence over matters subject to stockholder approval.

Our executive officers, directors and our 10% or greater stockholders, together with their respective affiliates, beneficially owned approximately 22.8% of our capital stock as of December 31, 2017, excluding shares underlying outstanding options and restricted stock units. Accordingly, such persons and entities, if they acted together, may be able to significantly influence the composition of the board of directors and the outcome of the vote on many matters requiring stockholder approval, including mergers and other business combinations, and continue to have significant influence over our operations. In addition, other than in connection with a change of control, in any vote or action by written consent of our stockholders, including, without limitation, with respect to the election of directors, Celgene has agreed to vote or execute a written consent with respect to all of our voting securities held by Celgene in accordance with the recommendation of our board of directors, limiting the ability of Celgene to vote contrary to our board of directors that you otherwise may believe is in your best interest as our stockholder. This concentration of ownership amongst our significant holders, including Celgene, could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us that you may believe are in your best interests as one of our stockholders. This in turn could have a material adverse effect on our stock price and may prevent attempts by our stockholders to replace or remove the board of directors or management.

Celgene has acquired an aggregate of 11,109,160 shares of our common stock to date under the 2015 Celgene SPA and the 2017 Celgene SPA and, subject to certain conditions, may purchase additional shares annually to obtain and maintain a 9.76% ownership percentage through June 29, 2020. Furthermore, between June 29, 2019 and June 29, 2025 and between June 29, 2024 and the expiration of the Celgene Collaboration Agreement, subject to certain conditions, Celgene has the option to acquire and maintain an ownership of up to 19.99% and up to 30%, respectively, of our then outstanding shares of common stock. We have also entered into a voting and standstill agreement with Celgene, pursuant to which we have agreed to give Celgene certain board designation rights until at least June 29, 2020, and thereafter for as long as Celgene and its affiliates beneficially own at least 7.5% of the voting power of our outstanding shares. As a result of the concentration of ownership, Celgene could have the ability to delay or prevent a change in our control other than the proposed merger with Purchaser or otherwise discourage a potential alternative acquirer from attempting to obtain control of us that you may believe are in your best interests as our stockholder.

Anti-takeover provisions in our charter documents and under Delaware or Washington law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management and adversely affect our stock price.

Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other things, the certificate of incorporation and bylaws will:

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•	permit the board of directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate;


•	provide that the authorized number of directors may be changed only by resolution of the board of directors;


•	provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;


•	divide the board of directors into three classes;


•	provide that a director may only be removed from the board of directors by the stockholders for cause;


•	require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and may not be taken by written consent;


•	provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and meet specific requirements as to the form and content of a stockholder’s notice;


•	prevent cumulative voting rights (therefore allowing the holders of a plurality of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);


•	require that, to the fullest extent permitted by law, a stockholder reimburse us for all fees, costs and expenses incurred by us in connection with a proceeding initiated by such stockholder in which such stockholder does not obtain a judgment on the merits that substantially achieves the full remedy sought;


•	provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officer (or president, in the absence of a chief executive officer) or by the board of directors; and


•	provide that stockholders will be permitted to amend the bylaws only upon receiving at least two- thirds of the total votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class.

Furthermore, pursuant to the voting and standstill agreement with Celgene, until the later of the fifth anniversary of the date of such agreement and the expiration or earlier termination of our Celgene Collaboration Agreement, it will be bound by certain "standstill" provisions which generally will prevent it from purchasing outstanding shares of our common stock, making a tender offer or encouraging or supporting a third party tender offer, nominating a director whose nomination has not been approved by our board of directors, soliciting proxies in opposition to the recommendation of our board of directors or assisting a third party in taking such actions, entering into discussions with a third party as to such actions, or requesting or proposing in writing to our board of directors or any member thereof that we amend or waive any of these limitations. As a result, the ability of Celgene to act contrary to our board of directors is severely limited and any attempts by Celgene to acquire us or encourage a third party to acquire us are prohibited by this voting and standstill agreement. However, the voting and standstill agreement contains an exception to the foregoing standstill restrictions on Celgene's actions in the event that any such action is approved by Juno, as is the case for the Offer, which is part of a negotiated transaction that was approved by our board of directors. Further, as part of the negotiated transaction with Celgene, Juno agreed to a customary “fall away” provision that would cause the standstill provisions by which Celgene is bound to be suspended upon the occurrence of certain events, including the entry into a definitive acquisition agreement with a third party other than Celgene or a tender offer or exchange offer initiated by any person other than Celgene or its affiliates in which Juno recommends acceptance of such tender offer or exchange offer. In addition, subject to certain exceptions—including a vote in connection with a change in control of our company—Celgene has agreed to vote or execute a written consent with respect to all of our voting securities held by Celgene in accordance with the recommendation of our board of directors, limiting the ability of Celgene to contrary to our board of directors that you otherwise may believe is in your best interest as our stockholder.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder. Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain circumstances now or in the future. These provisions prohibit a "target corporation" from engaging in any of a broad range of business combinations with any stockholder constituting an "acquiring person" for a period of five years following the date on which the stockholder became an "acquiring person."

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Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws, any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

Complying with the laws and regulations affecting public companies has increased and will increase our costs and the demands on management and could harm our operating results.

As a public company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also anticipate that we will incur costs associated with relatively recently adopted corporate governance requirements, including requirements of the SEC and Nasdaq. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

For example, the Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. Section 404 of the Sarbanes-Oxley Act ("Section 404") requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. Our compliance with applicable provisions of Section 404, including the requirement that our independent registered public accounting firm undertake an assessment of our internal control over financial reporting, will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal control over financial reporting from our independent registered public accounting firm.

Our management team has broad discretion to use the net proceeds from the September 2017 follow-on offering, the initial payments to us under our Celgene Collaboration Agreement, and the sale of our shares to Celgene, and our investment of these proceeds may not yield a favorable return. We may invest the proceeds of the September 2017 follow-on offering or the Celgene transactions in ways with which investors disagree.

Our management has broad discretion over the use of proceeds from the September 2017 follow-on offering, the initial payments to us under our Celgene Collaboration Agreement, and the sale of our shares to Celgene, and we could spend the proceeds from these transactions in ways our stockholders may not agree with or that do not yield a favorable return, if at all. In addition, until the proceeds are used, they may be placed in investments that do not produce significant income or that may lose value. If we do not invest or apply the proceeds in ways that improve our operating results, we may fail to achieve expected financial results, which could cause our stock price to decline.

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ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.


ITEM 2.	PROPERTIES

The following table summarizes the facilities we own or lease as of December 31, 2017, including the location and size of the facilities, and their designated use.



Location	Own or Lease	Approximate Square Feet	Operation	Lease Expiration Dates
Seattle, Washington	Lease	298,700	Administrative, Clinical, Commercial, Process Development, Quality, Regulatory, Research	February 2019 – May 2024
Bothell, Washington	Own	67,800	Manufacturing	N/A
Waltham, Massachusetts	Lease	20,100	Research	July 2026
Brisbane, California	Lease	20,100	Clinical, Regulatory	March 2024
Munich, Germany	Lease	25,500	Administrative, Manufacturing, Process Development, Research	September 2020 – September 2025

We believe that our existing facilities are adequate for our near-term needs, but expect to need additional space as we grow and expand our operations. We believe that suitable additional or alternative office, laboratory, and manufacturing space would be available as required in the future on commercially reasonable terms.


ITEM 3.	LEGAL PROCEEDINGS

From time to time, we may become involved in litigation relating to claims arising from the ordinary course of business.

USPTO Proceedings

In August 2015, Kite Pharma, Inc. ("Kite") filed a petition with the U.S. Patent & Trademark Office (the "USPTO") for inter partes review of U.S. Patent No. 7,446,190 (the "'190 Patent"), a patent that we have exclusively licensed from MSK. In February 2016, the USPTO determined to initiate the inter partes review proceedings, in Kite Pharma, Inc. v. Sloan Kettering Institute for Cancer Research, Case IPR2015-01719. As the exclusive licensor, we opted to exercise our right to control the defense of the patent in the proceedings. A hearing was held before the USPTO Patent Trial and Appeal Board on October 20, 2016. On December 16, 2016, the USPTO Patent Trial and Appeal Board issued a final written decision upholding all the claims of this patent. On February 16, 2017, Kite appealed the USPTO Patent Trial and Appeal Board’s final written decision to the U.S. Court of Appeals for the Federal Circuit. Kite filed its opening brief on June 29, 2017. Our opening brief was filed on October 10, 2017, and Kite filed its Reply Brief on December 15, 2017. We will incur expenses associated with the appeal, which expenses may be substantial. If we are unsuccessful in the appeal and the USPTO's decision is reversed, one or more of the patent's claims could be narrowed or invalidated, but we do not expect that this would have a material adverse effect on our business.

Intellectual Property Litigation

On December 19, 2016, we filed a complaint for declaratory judgment of infringement of U.S. Patent No. 7,446,190 against Kite. The lawsuit was filed in federal district court in Delaware. The complaint alleges that Kite's axicabtagene ciloleucel (KTE-C19) product does or will infringe claims 1-3, 5, 7-9, and 11 of the '190 Patent. We sought, among other things, a declaratory judgment that axicabtagene ciloleucel does or will infringe these claims of the '190 Patent. On February 23, 2017, Kite filed a motion to dismiss the complaint. On March 23, 2017, we filed an opposition to Kite's motion to dismiss. On April 6, 2017, Kite filed a reply in support of its motion to dismiss. The district court granted Kite’s motion to dismiss on June 13, 2017, reasoning that the court lacked subject matter jurisdiction due to the "speculative" nature of FDA approval for Kite’s axicabtagene ciloleucel product.

On September 1, 2017, we filed a complaint against Kite in the federal district court for the Central District of California for infringement and declaratory judgment of infringement of U.S. Patent No. 7,446,190. The complaint alleges that KTE-C19 infringes claims 1-3, 5, 7-9, and 11 of the '190 Patent, based in part on Kite’s manufacturing and stockpiling of KTE-C19 retroviral vector intended for commercial use. We are seeking, among other things, both a judgment that Kite has infringed

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these claims of the '190 Patent, and a declaratory judgment that Kite does or will infringe the '190 Patent. On November 22, 2017, we filed a Notice of Voluntary Dismissal, and the case was dismissed without prejudice on November 27, 2017.

On October 18, 2017, the same day the FDA approved Kite’s Yescarta KTE-C19 product, we filed a second complaint against Kite in the federal district court for the Central District of California. The complaint alleges that Yescarta infringes claims 1-3, 5, 7-9, and 11 of the '190 Patent. We are seeking, among other things, a judgment that Kite has infringed these claims of the '190 Patent based on its commercialization of Yescarta. Kite answered the complaint on November 28, 2017, and also filed counterclaims of non-infringement and invalidity. We filed a motion to dismiss Kite’s counterclaims and to strike certain affirmative defenses on December 19, 2017. Kite filed an answering brief to the motion on January 8, 2018 and we filed a reply on January 12, 2018.

On December 22, 2017, Kite filed a motion to stay the litigation pending the resolution of the Federal Circuit appeal of the Final Written Decision in the inter partes review of the ’190 Patent, and pending the Supreme Court’s decision in Oil States Energy Services, LLC v. Green’s Energy Group, LLC, No. 16-712, regarding the constitutionality of inter partes review proceedings. We filed an answering brief on January 8, 2018, and Kite filed a reply on January 12, 2018. Both our motion to dismiss and strike and Kite’s motion to stay are pending in the district court.

Contract Litigation

See Note 15 to our consolidated financial statements included in this report for a description of our contract litigation with City of Hope.

Securities and Derivative Litigation

See Note 15 to our consolidated financial statements included in this report for a description of a putative class action and purported derivative actions involving Juno.


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.

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PART II


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock has been listed on The Nasdaq Global Select Market under the symbol "JUNO" since December 19, 2014. Prior to that date, there was no public trading market for our common stock. The following table sets forth the high and low intraday sales price per share of our common stock as reported on The Nasdaq Global Select Market for the period indicated:



	High		Low
Year Ended December 31, 2017
First Quarter	$	25.50	$	18.90
Second Quarter	$	31.97	$	21.02
Third Quarter	$	47.03	$	26.40
Fourth Quarter	$	63.45	$	42.14
Year Ended December 31, 2016
First Quarter	$	45.76	$	22.37
Second Quarter	$	49.72	$	35.92
Third Quarter	$	40.86	$	27.15
Fourth Quarter	$	33.00	$	17.52

Holders of Common Stock

As of February 21, 2018, there were 62 holders of record of our common stock.

Dividend Policy

We have never declared or paid any cash dividends on our common stock or any other securities. We anticipate that we will retain all available funds and any future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the foreseeable future. Additionally, the Merger Agreement generally restricts, subject to certain limited exceptions, including, without limitation, Celgene Corp.'s prior written consent, our ability to pay any dividend on our common stock during the interim period between the execution of the Merger Agreement and the effective time of the Merger (or the date on which the Merger Agreement is earlier terminated). In addition, future debt instruments may materially restrict our ability to pay dividends on our common stock. Payment of future cash dividends, if any, will be at the discretion of the board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of current or then-existing debt instruments and other factors the board of directors deems relevant.

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Performance Graph

This graph is not "soliciting material," is not deemed "filed" with the SEC and is not to be incorporated by reference into any filing of Juno Therapeutics, Inc. under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

The following graph shows the total stockholder return of an investment of $100 in cash at market close on December 19, 2014 (the first day of trading of our common stock) through December 31, 2017 for (1) our common stock, (2) the Nasdaq Composite Index (U.S.) and (3) the Nasdaq Biotechnology Index. Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends, however no dividends have been declared on our common stock to date. The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns.



	12/19/2014		12/31/2014		12/31/2015		12/31/2016		12/31/2017
Juno Therapeutics, Inc.	$	100.00	$	149.20	$	125.63	$	53.86	$	130.60
Nasdaq Composite	$	100.00	$	98.70	$	105.55	$	113.99	$	147.55
Nasdaq Biotechnology	$	100.00	$	99.24	$	105.26	$	84.00	$	98.36

Recent Sales of Unregistered Securities

We did not sell any unregistered securities during the year ended December 31, 2017 other than those sales that have previously been disclosed in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

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Use of Proceeds from Registered Securities

In the September 2017 follow-on public offering, we sold an aggregate of 7,015,000 shares of common stock at a price to the public of $41.00 per share. The shares sold in the follow-on public offering were registered under the Securities Act pursuant to a registration statement on Form S-3 (File No. 333-220537), which became effective immediately upon filing with the SEC on September 20, 2017 (the "Registration Statement"), and a registration statement on Form S-3 (File No. 333-220560), which became effective immediately upon filing with the SEC on September 22, 2017.

There has been no material change in the planned use of proceeds from our September 2017 follow-on public offering as described in the Registration Statement. We invested the funds in short-term, interest-bearing investment-grade securities and government securities. As of December 31, 2017, we have used approximately $91.3 million of the net proceeds from the September 2017 follow-on public offering. None of the offering proceeds were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities or to any other affiliates.

Issuer Purchases of Equity Securities

We did not repurchase any shares of our common stock during the fiscal quarter ended December 31, 2017.


ITEM 6.	SELECTED FINANCIAL DATA.

The selected consolidated statements of operations and cash flows and consolidated balance sheet data presented below are derived from our audited consolidated financial statements included elsewhere in this report and our previously audited financial statements that are not included herein. Our historical results are not necessarily indicative of the results that may be expected in the future. Refer to the selected historical financial data below in conjunction with Part II—Item 7—"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this report and the audited consolidated financial statements and related notes included elsewhere in this report.



	Year Ended December 31,												Period from Aug. 5, 2013 to Dec. 31, 2013
	2017			2016			2015			2014			Period from Aug. 5, 2013 to Dec. 31, 2013

	(in thousands, except per share amounts)
Consolidated Statements of Operations:
Revenue	$	111,871		$	79,356		$	18,215		$	—		$	—
Loss from operations (1)	$	(447,774	)	$	(255,604	)	$	(244,100	)	$	(232,758	)	$	(51,678	)
Net loss attributable to common stockholders (2)	$	(437,106	)	$	(245,580	)	$	(239,376	)	$	(310,871	)	$	(51,820	)
Net loss per share attributable to common stockholders, basic and diluted	$	(4.10	)	$	(2.42	)	$	(2.72	)	$	(36.82	)	$	(14.16	)
Consolidated Statements of Cash Flows:
Net cash (used in) provided by operating activities	$	(225,033	)	$	(189,809	)	$	7,325		$	(82,545	)	$	(30,510	)

(1)

Loss from operations for the year ended December 31, 2017 includes costs of $10.3 million to acquire technology, expense of $68.7 million associated with the change in the estimated fair value and elapsed service period for our potential success payment liabilities to FHCRC and MSK, a non-cash expense of $4.0 million related to the change in estimated fair value of our contingent consideration liabilities, and non-cash expense of $7.3 million associated with amortization of the intangible asset recorded in connection with the AbVitro acquisition.

Loss from operations for the year ended December 31, 2016 includes non-cash milestone payments of $23.2 million equal to the fair value of 603,364 shares of common stock issued to Opus Bio based on the closing stock price on the days the associated milestones were achieved, costs of $15.0 million to acquire technology, a non-cash gain of $32.5 million related to the change in the estimated fair value of our success payment obligations to FHCRC and MSK, and a non-cash gain of $9.7 million related to the change in estimated fair value of our contingent consideration liabilities.

Loss from operations for the year ended December 31, 2015 includes costs of $30.8 million to acquire new technology, and non-cash expense of $51.6 million related to the change in the estimated fair value and elapsed service period of the actual and potential success payment obligations to FHCRC and MSK.

Loss from operations for the year ended December 31, 2014 includes non-cash expense of $84.9 million associated with the change in the estimated fair value and elapsed service period for our potential success payment liabilities to FHCRC and MSK, $64.1 million for the non-cash portion of the upfront fee to acquire technology related to JCAR018, and $20.0 million for the cash portion of the upfront fee to acquire technology related to JCAR018.

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(2)	Net loss attributable to common stockholders for the year ended December 31, 2014 includes non-cash deemed dividends of $67.5 million recorded upon issuance of our convertible preferred stock and $10.7 million recorded in connection with changes in the fair value of our Series A and Series A-2 convertible preferred stock option.



	December 31,
	2017			2016			2015			2014			2013
							(in thousands)
Consolidated Balance Sheets:
Cash, cash equivalents, and marketable securities	$	973,860		$	922,281		$	1,216,299		$	474,051		$	35,966
Working capital	$	544,602		$	657,440		$	832,111		$	338,642		$	25,007
Total assets	$	1,434,836		$	1,349,464		$	1,445,128		$	489,163		$	40,094
Long-term debt, including current portion	$	10,698		$	—		$	—		$	—		$	—
Total liabilities	$	387,854		$	271,763		$	303,595		$	100,631		$	11,193
Common stock and additional paid-in capital	$	2,311,904		$	1,911,780		$	1,733,273		$	734,903		$	8,138
Accumulated deficit (1)	$	(1,268,343	)	$	(831,237	)	$	(585,657	)	$	(346,281	)	$	(51,820	)
Total stockholders’ equity (deficit)	$	1,046,982		$	1,077,701		$	1,141,533		$	388,532		$	(43,682	)

(1)

Accumulated deficit as of December 31, 2017 includes $51.1 million related to non-cash deemed dividends, $184.7 million in upfront fees to acquire technology, of which $110.8 million was paid in cash and $73.9 million was paid through the issuance of common stock, non-cash expense of $172.7 million associated with the change in the estimated fair value and elapsed service period for our potential and actual success payment liability to FHCRC and MSK, expense of $23.2 million associated with non-cash milestones, a non-cash gain of $5.6 million associated with the change in the estimated fair value of our contingent consideration liabilities, and $10.7 million of expense associated with our convertible preferred stock options.


ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties, as described in the section of this report captioned "Forward-Looking Statements and Market Data." As a result of many factors, such as those set forth in Part I—Item 1A—"Risk Factors" of this report and elsewhere in this report, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are building a fully-integrated biopharmaceutical company focused on developing innovative cellular immunotherapies for the treatment of cancer. Founded on the vision that the use of human cells as therapeutic entities will drive one of the next important phases in medicine, we are developing cell-based cancer immunotherapies based on our CAR and high-affinity TCR technologies to genetically engineer T cells to recognize and kill cancer cells. We have shown compelling clinical responses in clinical trials using multiple cell-based product candidates to address refractory B cell lymphomas and leukemias, and we also have a number of ongoing trials exploring our platform in multiple myeloma and solid-organ cancers and in combination with various strategies to overcome the immune-suppressive effects of cancer. In aggregate, we currently have product candidates in clinical trials targeting eight different protein targets in various cancers. Over time, we aim to improve and leverage our cell-based platform to develop additional product candidates to address a broad range of cancers and human diseases, including moving forward our preclinical product candidates that target additional hematologic and solid-organ cancers.

We are conducting a trial with JCAR017 in adult r/r aggressive NHL, including r/r DLBCL, which commenced as a Phase I trial in 2015, and we have now completed enrollment in the trial of the pivotal cohort that we believe can support registration. We began a Phase I/II trial with JCAR017 in r/r CLL in the fourth quarter of 2017. If the results of these trials are favorable, we believe we may obtain U.S. regulatory approval in r/r DLBCL to support a commercial launch in 2019 and obtain U.S. regulatory approval in r/r CLL as early as 2019 or 2020. Key variables impacting the timing of approval will be the time it takes to complete enrollment of our pivotal cohort, the timing of our FDA submission, which we expect to be completed for JCAR017 in r/r DLBCL in the second half of 2018, and the duration of FDA review. Additionally, we have begun a Phase Ib clinical trial of JCAR017 in combination with durvalumab in adult r/r aggressive NHL and intend to broaden the study to include JCAR017 in combination with other immunomodulatory agents in 2018 and 2019. We also intend to develop JCAR017 or a next generation product candidate in both pediatric r/r ALL and adult r/r ALL. We have a number of other trials ongoing with our academic collaborators using product candidates directed at CD19.

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Beyond CD19, we are conducting Phase I trials for additional product candidates that target seven different cancer-associated proteins in hematological and solid organ cancers. In particular, we have begun a Phase I trial in patients with r/r multiple myeloma using JCARH125, a CAR T cell product candidate targeting BCMA that we may advance to a registration study if clinical results are compelling. We have a number of other preclinical programs against other targets that we expect to move into human testing over the next several years.

We have assembled a talented group of scientists, engineers, clinicians, directors, and other advisors who develop and consolidate technologies and intellectual property from some of the world’s leading research institutions, including FHCRC, MSK, SCRI, the University of California, San Francisco, and the NCI. We have also entered into a number of strategic collaborations with commercial companies that we believe will help us manufacture and commercialize our product candidates around the world or develop additional or improved product candidates, including Celgene, Editas, Fate, and MedImmune.

We have established a Juno-owned and operated manufacturing facility in Bothell, Washington. We began manufacturing clinical trial material from this facility beginning in the first quarter of 2016, and plan to manufacture commercial products, subject to the required regulatory approvals, beginning with the commercial launch of JCAR017. We are also planning to expand our manufacturing capacity in 2018 and 2019.

In June 2015 we entered into a ten-year, global collaboration agreement with Celgene Corporation for the development and commercialization of immunotherapies. In connection with this collaboration agreement, Celgene paid us a $150.2 million upfront payment, and under the 2015 Celgene SPA, we sold Celgene 9,137,672 shares of our common stock for an aggregate cash price of $849.8 million, or $93.00 per share. In April 2016, Celgene opted in to the CD19 program under the collaboration and paid us a $50.0 million opt-in fee. As a result, we expect the development activities around the CD19 program to continue to grow as Celgene leads development of our CD19 product candidates in the Celgene Territory. Under the license agreement, we and Celgene will generally share worldwide development expenses for certain CD19 product candidates, although either party may opt out of funding specific studies being led by the other. We will also receive royalties from Celgene for CAR product candidates arising from the CD19 program at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory.

As described in the section captioned "Acquisitions" in Part I—Item 1—"Business" of this report, we completed four business acquisitions in 2015 and 2016 in order to augment our research and development capabilities, acquire exclusive rights to a compound for use in potential combination studies, and potentially improve our supply chain and long-term cost of goods.

For the year ended December 31, 2017, we generated revenue of $111.9 million, including $86.1 million from the Celgene Collaboration Agreement and the Celgene CD19 License, and $25.1 million in connection with the Penn/Novartis Sublicense Agreement, compared to revenue of $79.4 million for the year ended December 31, 2016, which included revenues of $64.6 million from the Celgene Collaboration Agreement and the Celgene CD19 License, and $14.3 million from the Penn/Novartis Sublicense Agreement. In the future, we may generate revenue from the Celgene collaboration, strategic alliances, licensing arrangements, litigation judgments or settlements, product sales, and royalties, or a combination of these. We expect that any revenue we generate will fluctuate from quarter to quarter and year to year as a result of the timing and amount of opt-in payments from Celgene, license fees, milestones, reimbursement of costs incurred, litigation judgments or settlements, other payments, and product sales, to the extent any product candidates are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

We have agreed to make success payments to each of FHCRC and MSK pursuant to the terms of our collaboration agreements with each of those entities. In December 2015, success payment obligations to FHCRC and MSK were triggered in the amount of $75.0 million and $10.0 million, respectively, less indirect cost offsets of $3.3 million and $1.0 million, respectively. We elected to make the payments in shares of our common stock and thereby issued 1,601,085 shares to FHCRC in December 2015 and 240,381 shares to MSK in March 2016. For additional information regarding these success payments, see the section captioned "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" located elsewhere in this report. In April 2016, we repurchased the 240,381 shares of our common stock issued to MSK at a repurchase price of $41.90 per share.

As of December 31, 2017, we had cash, cash equivalents, and marketable securities of $973.9 million compared to $922.3 million as of December 31, 2016. Cash used in operations for the year ended December 31, 2017 was $225.0 million and is net of cash inflows of $37.7 million received in connection with a tenant allowance for our new headquarters facility and $40.1 million from the partial reimbursement by Celgene of research and development costs incurred by us in the fourth quarter of 2016 and the nine months ended September 30, 2017. Cash used in investing activities in 2017 was $68.2 million which is net of a cash outflow of $60.9 million for the purchase of property and equipment, the majority of which related to the build-out of our new headquarters facility. Cash provided by financing activities in 2017 was $338.2 million and includes net cash proceeds from the September 2017 follow-on public offering of $272.5 million, cash proceeds from Celgene of $32.8 million, $31.1

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million of which related to the 2017 Celgene SPA and the remaining $1.7 million was for the purchase of 75,568 shares of our common stock in the first quarter of 2017 under the 2015 Celgene SPA, as well as $10.8 million in net cash related to a long-term debt agreement entered into in April 2017.

Merger Agreement

On January 21, 2018, we entered into the Merger Agreement with Celgene Corp. and Purchaser. Pursuant to the terms of the Merger Agreement, Purchaser has commenced the Offer for all of the outstanding shares of our common stock at a purchase price of $87.00 per share, net to the seller in cash, subject to reduction for any applicable withholding taxes (the “Offer Price”). Following the completion of the Offer and subject to the terms and conditions of the Merger Agreement, Purchaser will merge with and into Juno, with Juno surviving as a wholly-owned subsidiary of Celgene Corp., pursuant to the procedures provided for under Section 251(h) of the DGCL without any stockholder approvals (the “Merger”). At the effective time of the Merger, each outstanding share of our common stock, other than any shares owned by (i) Juno (or held in its treasury), (ii) Celgene Corp., Purchaser, or any other direct or indirect wholly-owned subsidiary of Celgene Corp., or (iii) any stockholders who are entitled to and who properly exercise and perfect appraisal rights under Delaware law (and have neither withdrawn nor lost their rights), will be automatically converted into the right to receive an amount in cash equal to the Offer Price, without interest. The Board has, by unanimous vote of those directors present, approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

The Merger Agreement contains certain termination rights, including the right of either party to terminate the Merger Agreement if the Offer is not consummated on or before July 23, 2018 (subject to extension in certain circumstances), the right of Juno to terminate the Merger Agreement to accept a superior proposal for an alternative acquisition transaction (so long as Juno complies with certain notice and other requirements under the Merger Agreement) and the right of Celgene Corp. to terminate due to a change of recommendation by the Board. Upon termination of the Merger Agreement by Juno or Celgene Corp. upon certain conditions, a termination fee of $300 million may be payable by Juno to Celgene Corp.. Upon termination of the Merger Agreement by Juno or Celgene Corp. under certain other conditions, a termination fee of $600 million may be payable by Celgene Corp. to Juno where the conditions to the Offer related to approvals under the HSR Act, have not been satisfied.

Additional information about the Merger is set forth in our filings with the SEC.

Components of Operating Results

Revenue

Our revenues have been primarily derived from collaboration and license agreements.

Ongoing collaboration revenue is primarily generated from our collaboration with Celgene. The terms of this arrangement contain multiple deliverables, which include (1) access to certain of our technology through a non-exclusive, worldwide, royalty-free right and license to conduct certain activities under the collaboration and (2) participation on various collaboration committees. In 2015, under the terms of the Celgene Collaboration Agreement, we received an upfront cash payment of $150.2 million. We recognize revenue from the $150.2 million upfront payment ratably over the term of our estimated period of performance under the arrangement, which we estimate to be through June 2025. In addition to receiving upfront payments, we may also be entitled to option exercise fees. In April 2016, Celgene exercised its right to opt-in to our CD19 program, and as a result, we entered into the Celgene CD19 License and received an option exercise fee of $50.0 million. The license agreement contains the following deliverables: (1) an exclusive license with respect to intellectual property, (2) transfer of certain clinical and manufacturing knowledge and related support, and (3) participation on various collaboration committees during the technology transfer period. The $50.0 million option exercise fee was recorded in deferred revenue and is being recognized ratably over the period we expect to fulfill these performance obligations, which we estimate to be approximately two years.

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Additionally, we and Celgene will generally share worldwide research and development costs for certain CD19 product candidates. To the extent our research and development costs for certain product candidates in the CD19 program exceed Celgene’s research and development costs for the CD19 program for a given quarter, Celgene is required to provide us partial reimbursement for such costs. Either party may opt out from the cost sharing arrangement for specific studies being led by the other party, with the possibility to opt back in to the study in the future at a premium in exchange for the right to use data from that study in such party's territory. We recognize the reimbursement by Celgene as revenue in the period the services are performed. To the extent Celgene’s research and development costs for the CD19 program exceed our research and development costs for certain CD19 product candidates for a given quarter, we are required to provide Celgene partial reimbursement for such costs. We recognize the reimbursement to Celgene as additional research and development expense in the period the services are provided. As a result, our revenues and research and development expenses may fluctuate depending on which party in the collaboration is incurring the majority of the development costs in any particular quarterly period, and as a result of the timing and amount of option exercise fees and other payments from our collaboration and license agreements. For the years ended December 31, 2017 and 2016 we recognized cost-sharing revenue of $44.7 million and $30.5 million, respectively.

We have also recognized upfront, milestone, and royalty revenue under our sublicense agreement with Novartis. For the years ended December 31, 2017 and 2016 we recognized revenue of $25.1 million and $14.3 million, respectively. In the future we may recognize revenue upon the achievement of specified clinical, regulatory, and commercialization milestones for licensed products under the Novartis agreement. Each of these milestones will be reduced by 50% if we achieve the milestone before Novartis achieves the same milestone. Additionally, we are obligated to repay Novartis 50% of a milestone payment amount where Novartis achieves a milestone and we subsequently achieve the same milestone. In addition, Novartis is also required to pay us royalties on the U.S. net sales of licensed products.

Research and Development Expenses

Research and development expenses represent costs incurred by us for the discovery, development, and manufacture of our product candidates and include costs to acquire technology complimentary to our own, external research and development expenses incurred under arrangements with third parties, such as contract research organizations, CMOs, collaboration partners, academic and non-profit institutions and consultants, salaries and personnel-related costs, including non-cash stock-based compensation, changes in the estimated fair value of our success payments to FHCRC and MSK, changes in the estimated fair value of our contingent consideration liabilities, intangible asset amortization, milestones, and other expenses, which include direct and allocated expenses for laboratory, facilities, overhead, and other costs.

We use our employee and infrastructure resources across multiple research and development programs directed toward developing our cell-based platform and for identifying and developing product candidates. We manage certain activities such as contract research, clinical trial operations, and manufacture of product candidates through our partner institutions or other third-party vendors. We track our significant external costs by product candidate. Although we began in the second quarter of 2016 to calculate, at a high level, our internal personnel costs by project, we do not have such data for all of 2016 or for any of 2015, so we are not at this time disclosing the allocation of internal personnel costs by product candidate. Due to the number of ongoing projects and our ability to use resources across several projects, we do not record or maintain information regarding the other indirect operating costs incurred for our research and development programs on a program-specific basis.

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Our research and development expenses by project for the years ended December 31, 2017, 2016, and 2015 were as follows (in thousands):



	Year Ended December 31,
	2017		2016			2015
Project-specific external costs:
JCAR017 (1)	$	52,152	$	13,643		$	4,485
CD19 general (2)	9,866		17,832			1,799
JCARH125	8,994		—			—
JCAR014	5,962		6,333			5,343
JCAR015	3,276		21,069			11,271
JCAR018 (3)	—		23,481			—
Early development	26,564		28,293			19,043
Success payment expense (gain) related to FHCRC and MSK collaboration agreements	68,739		(32,475		)	51,558
Change in estimated fair value of contingent consideration	3,998		(9,724		)	78
Upfront fees to acquire technology	10,308		15,000			30,810
Intangible asset amortization	7,254		—			—
Unallocated internal and external research and development costs (4)	254,405		180,833			80,773
Total research and development expenses	$	451,518	$	264,285		$	205,160


(1)	JCAR017 expenses for the year ended December 31, 2017 include milestone expense of $9.3 million.


(2)	CD19 general expenses for the years ended December 31, 2017 and 2016 include milestone expense of $6.8 million and $12.5 million, respectively.


(3)	JCAR018 expenses for the year ended December 31, 2016 include milestone expense of $23.2 million.

(4)

Unallocated internal and external research and development costs include salaries and personnel-related costs, including non-cash stock-based compensation, for our personnel in research, clinical development, process development and manufacturing, regulatory and other research and development functions, allocated facilities and other overhead costs, lab and manufacturing supplies, depreciation, and other research and development costs not specific to a project.

Research and development activities account for a significant portion of our operating expenses. Excluding amounts attributable to changes in the estimated fair value of the success payment and contingent consideration liabilities and upfront fees to acquire technology, we expect our research and development expenses to increase over the next several years as we implement our business strategy which includes conducting existing and new clinical trials, manufacturing clinical trial and preclinical study materials, expanding our research and development and process development efforts, seeking regulatory approval for product candidates that successfully complete clinical trials, and hiring additional personnel to support our research and development efforts. As a result of our decision to cease development of JCAR015 in early 2017, our expense associated with JCAR015 significantly decreased in 2017 and we expect it to decrease further in future years, but these decreases will be offset in whole or in part by increased expenses for the development of other CD19 product candidates. Research and development expense related to our success payments is unpredictable and may vary significantly from quarter to quarter and year to year due to changes in our stock price or other assumptions used in the calculation. A significant decline in the estimated value of the success payment liability may result in a gain and possibly net income during the period. Amounts associated with the change in the estimated fair value of the contingent consideration liabilities also may vary significantly from quarter to quarter and year to year due to changes in our assumptions used in the calculation. In addition, we may incur research and development expense for acquisition of technology in the future, but the timing and amount of those expenses cannot be estimated with reliability and may also fluctuate from quarter to quarter and year to year.

General and Administrative Expenses

General and administrative expenses consist of salaries and personnel-related costs, including non-cash stock-based compensation, for our personnel in executive, legal, finance and accounting, commercial, and other administrative functions, legal costs, transaction costs associated with acquisitions and collaboration and licensing agreements, as well as fees paid for accounting and tax services, consulting fees, including costs to support commercial readiness, and facilities costs not otherwise

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included in research and development expenses. Legal costs include general corporate legal fees, patent costs, litigation costs, and legal expense associated with inter partes review proceedings at the USPTO.

We anticipate that our general and administrative expenses will increase in the future to support potential commercialization of our product candidates, our continued research and development activities, our litigation activities, and future business development opportunities. These increases will likely include costs related to outside consultants, attorneys, and accountants, among other expenses.

Results of Operations

Comparison of the Years Ended December 31, 2017 and 2016

The following table summarizes our results of operations for the years ended December 31, 2017 and 2016 (in thousands):



	Year Ended December 31,
	2017			2016
Revenue	$	111,871		$	79,356
Operating expenses:
Research and development	451,518			264,285
General and administrative	108,127			70,675
Total operating expenses	559,645			334,960
Loss from operations	(447,774		)	(255,604		)
Other-than-temporary impairment loss	—			(5,490		)
Interest income, net	8,367			5,869
Other expenses, net	(3,700		)	(1,012		)
Loss before income taxes	(443,107		)	(256,237		)
Benefit for income taxes	6,001			10,657
Net loss	$	(437,106	)	$	(245,580	)

Revenue

The following table summarizes our revenue for the years ended December 31, 2017 and 2016, the majority of which is related to the amortization of upfront and option exercise fees, milestone payments, and reimbursement of certain research and development expenses under our Celgene Collaboration Agreement (in thousands):



	Year Ended December 31,
	2017		2016
Celgene:
Recognition of upfront and option exercise fees	$	41,360	$	34,115
Reimbursement revenue	44,730		30,515
Celgene total	86,090		64,630
Novartis milestone and royalty revenue	25,131		14,250
Other	650		476
Total revenue	$	111,871	$	79,356

Revenue was $111.9 million and $79.4 million for the years ended December 31, 2017 and 2016, respectively. The increase of $32.5 million was primarily due to revenue recognized under our Celgene Collaboration Agreement and Celgene CD19 License for the upfront CD19 opt-in fees, as well as the partial reimbursement by Celgene of research and development costs incurred by us, and an increase in milestone revenue recognized in connection with the Novartis sublicense agreement.

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Operating Expenses

Research and Development Expenses. Research and development expenses were $451.5 million and $264.3 million for the years ended December 31, 2017 and 2016, respectively. Excluding expenses and gains related to our success payment liability, research and development expenses were $382.8 million and $296.8 million for the years ended December 31, 2017 and 2016, respectively. The increase of $86.0 million was primarily due to:


•	a $77.0 million increase in costs to manufacture our product candidates, execute our clinical development strategy, and expand our overall research and development capabilities,


•	a $13.7 million increase in expense related to changes in the estimated fair value of our contingent consideration obligations,


•	a $7.3 million expense for the amortization of the intangible asset recorded in connection with the AbVitro acquisition, and


•	a $6.4 million increase in stock-based compensation expense.

These increases were partially offset by a decrease in milestone expense of $18.4 million.

For the year ended December 31, 2017 we recorded expense of $68.7 million related to our success payment liability, compared to a gain of $32.5 million for the year ended December 31, 2016. The increase in the value of the success payment liability was primarily due to the increase in our stock price at December 31, 2017 compared to December 31, 2016.

General and Administrative Expenses. General and administrative expenses were $108.1 million and $70.7 million for the years ended December 31, 2017 and 2016, respectively. The increase of $37.4 million was primarily due to:


•	a $12.6 million increase in personnel expenses related to increased headcount to support the business,


•	a $11.3 million increase in consulting and other expenses to support the growing organization including costs related to commercial readiness,


•	a $6.8 million increase in stock-based compensation expense, and


•	a $6.7 million increase in legal fees.

Other-Than-Temporary Impairment Loss. The other-than-temporary impairment loss incurred in the year ended December 31, 2016 was related to the decline in value of our investment in Fate.

Interest Income, Net. Interest income, net was $8.4 million and $5.9 million for the years ended December 31, 2017 and 2016, respectively. Interest income, net primarily consists of interest income earned on our marketable securities.

Benefit for Income Taxes. We recorded an income tax benefit of $6.0 million and $10.7 million for the years ended December 31, 2017 and 2016, respectively. The tax benefit recognized in 2017 primarily relates to the net loss incurred by our German subsidiary. Of the tax benefit recognized in 2016, $6.7 million relates to the release of valuation allowance on the U.S. deferred tax assets as a result of the acquisition of AbVitro and $3.6 million relates to the net loss incurred by our German subsidiary.

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Comparison of the Years Ended December 31, 2016 and 2015

The following table summarizes our results of operations for the years ended December 31, 2016 and 2015 (in thousands):



	Year Ended December 31,
	2016			2015
Revenue	$	79,356		$	18,215
Operating expenses:
Research and development	264,285			205,160
General and administrative	70,675			57,155
Total operating expenses	334,960			262,315
Loss from operations	(255,604		)	(244,100		)
Other-than-temporary impairment loss	(5,490		)	—
Interest income, net	5,869			1,730
Other (expenses) income, net	(1,012		)	234
Loss before income taxes	(256,237		)	(242,136		)
Benefit for income taxes	10,657			2,760
Net loss	$	(245,580	)	$	(239,376	)

Revenue

The following table summarizes our revenue for the years ended December 31, 2016 and 2015, the majority of which is related to the amortization of upfront and option exercise fees, milestone payments, and reimbursement of certain research and development expenses under our Celgene Collaboration Agreement (in thousands):



	Year Ended December 31,
	2016		2015
Celgene:
Recognition of upfront and option exercise fees	$	34,115	$	5,091
Reimbursement revenue	30,515		—
Celgene total	64,630		5,091
Novartis:
Recognition of upfront sublicense fee	—		12,250
Milestone revenue	14,250		—
Novartis total	14,250		12,250
Other	476		874
Total revenue	$	79,356	$	18,215

Revenue was $79.4 million and $18.2 million for the years ended December 31, 2016 and 2015, respectively. The increase of $61.2 million was primarily due to revenue recognized under our Celgene Collaboration Agreement and Celgene CD19 License for the upfront CD19 opt-in fees, as well as the partial reimbursement by Celgene of research and development costs incurred by us beginning April 2016.

Operating Expenses

Research and Development Expenses. Research and development expenses were $264.3 million and $205.2 million for the years ended December 31, 2016 and 2015, respectively. Excluding expense related to our success payment liability, research and development expenses were $296.8 million and $153.6 million for the years ended December 31, 2016 and 2015, respectively. The increase of $143.2 million was primarily due to:


•	a $112.3 million increase in costs to execute on our clinical development strategy, manufacture our product candidates, and expand our overall research and development capabilities,


•	a $36.1 million increase in milestones achieved related primarily to our Opus Bio and St. Jude collaborations, and


•	a $21.3 million increase in stock-based compensation expense.

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These increases were partially offset by lower costs to acquire technology of $16.9 million, and a gain of $9.7 million for the change in the estimated fair value of our contingent consideration liabilities for the year ended December 31, 2016 compared to an expense of $0.1 million for the year ended December 31, 2015. In 2016 we incurred upfront fees of $15.0 million in connection with technology acquired from the RedoxTherapies and other transactions, and in 2015 we incurred license fees of $30.8 million in connection with the Editas and Fate transactions.

For the year ended December 31, 2016 we recorded a gain of $32.5 million related to our success payment liability, compared to an expense of $51.6 million for the year ended December 31, 2015. The decrease in value of the success payment liability was primarily due to a decrease in our stock price at December 31, 2016 compared to December 31, 2015.

General and Administrative Expenses. General and administrative expenses were $70.7 million and $57.2 million for the years ended December 31, 2016 and 2015, respectively. The increase of $13.5 million was primarily due to:


•	a $7.0 million increase in consulting expenses primarily related to commercial readiness,


•	a $6.1 million increase in stock-based compensation expense,


•	a $4.4 million increase in personnel expenses primarily related to increased headcount, and


•	a $2.7 million increase in facility and other costs to support the overall growth of the business.

These increases were partially offset by a decrease in business development costs of $6.7 million and an overall decrease in legal expenses of $1.0 million.

Other-Than-Temporary Impairment Loss. The other-than-temporary impairment loss incurred in the year ended December 31, 2016 was related to the decline in value of our investment in Fate.

Interest Income, Net. Interest income, net was $5.9 million and $1.7 million for the years ended December 31, 2016 and 2015, respectively. The increase of $4.2 million was due to our increased marketable securities balance and the associated interest earned, offset by interest expense associated with the accounting for the build-to-suit lease of our manufacturing facility.

Benefit for Income Taxes. We recorded an income tax benefit of $10.7 million and $2.8 million for the years ended December 31, 2016 and 2015, respectively. The increase is primarily due to the benefit associated with the net loss incurred by our German subsidiary in the year ended December 31, 2016 and the release of valuation allowance on the U.S. deferred tax assets as a result of the deferred tax liabilities established for intangible assets from the acquisition of AbVitro.

Liquidity and Capital Resources

Sources and Uses of Liquidity

As of December 31, 2017 we had $973.9 million in cash, cash equivalents, and marketable securities compared to $922.3 million and $1.2 billion as of December 31, 2016 and 2015, respectively. Prior to our entry into the Celgene collaboration, we raised an aggregate of approximately $618.0 million in gross proceeds through our IPO and private placements of our convertible preferred stock which we have used to fund our operations. As a result of our entry into the collaboration with Celgene and our initial sale of stock to Celgene, we received $1.0 billion in cash from Celgene in August 2015. We also may receive funding from Celgene in the form of option exercise fees or reimbursements for qualified expenses related to the development and commercialization of product candidates in programs that Celgene opts into under the Celgene Collaboration Agreement. We received $1.7 million and $47.0 million for the years ended December 31, 2017 and 2016, respectively, in connection with the sale of our stock pursuant to the partial exercise by Celgene of its annual top-up right under the 2015 Celgene SPA. In April 2016 we received an opt-in payment of $50.0 million from Celgene upon Celgene’s election to opt-in to our CD19 program, and since that time we have received an aggregate of $59.5 million in reimbursements from Celgene for CD19 program expenses. In September 2017, we received $272.5 million in net proceeds from the September 2017 follow-on public offering and $31.1 million in proceeds from Celgene from the concurrent private placement. We also may receive funding from Celgene in the form of option exercise fees or reimbursements for qualified expenses related to the development and commercialization of product candidates in programs that Celgene opts into in the future under the Celgene Collaboration Agreement. See the section captioned "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" of this report for more information.

The funding from Celgene and the September 2017 follow-on public offering decreases our need for additional near-term funding, although we may still need to raise additional capital in the future. We believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months.

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We expect to continue to incur substantial additional losses in the future as we expand our research and development activities and build our commercial infrastructure. Until such time, if ever, as we can generate substantial product revenue, and if funding from Celgene is not sufficient for our operations, we may be required to finance our cash needs through a combination of equity or debt financings.

Cash Flows



	December 31,
Selected Consolidated Cash Flow data (in thousands):	2017			2016			2015
Net cash provided by (used in):
Operating activities	$	(225,033	)	$	(189,809	)	$	7,325
Investing activities	(68,210		)	88,555			(962,066		)
Financing activities	338,165			36,782			851,238

Operating Activities

Cash used in operating activities was $225.0 million and $189.8 million for the years ending December 31, 2017 and 2016, respectively. The increase in cash used in operating activities of $35.2 million was primarily due to increased costs incurred to manufacture our product candidates, execute our clinical development strategy, and expand our overall research and development capabilities. For the year ended December 31, 2017, we received cash of $40.1 million in connection with the Celgene Collaboration Agreement for the partial reimbursement by Celgene of research and development costs incurred by us, $37.7 million related to a tenant improvement allowance for our new headquarters facility, and $25.0 million in milestone payments from Novartis. For the year ended December 31, 2016, we received a $50.0 million upfront payment in connection with the CD19 opt-in, $19.4 million in connection with the Celgene Collaboration Agreement for the partial reimbursement by Celgene of research and development costs incurred by us, and $14.3 million in milestone payments from Novartis.

Cash provided by operating activities was $7.3 million for the year ended December 31, 2015. The increase in cash used in operating activities of $197.1 million in 2016 compared to 2015 was primarily due to cash payments made in connection with the overall growth of our business, which included executing our clinical development strategy, manufacturing to support our clinical trials, expanding our workforce, research collaboration agreements, costs to acquire technology, and other costs to expand our overall research and development capabilities and the decrease in cash received from Celgene for operating activities as compared to 2015. Cash received from Celgene for operating activities was $69.4 million in 2016 compared to $150.2 million in 2015.

Investing Activities

Cash used in investing activities was $68.2 million for the year ended December 31, 2017 and cash provided by investing activities was $88.6 million for the year ended December 31, 2016. The increase in cash used in investing activities of $156.8 million was primarily due to an increase in net purchases of marketable securities offset by a decline in cash outflows for acquisitions. Included in investing activities for the year ended December 31, 2016 was net cash paid to acquire AbVitro of $74.6 million.

Cash used in investing activities was $962.1 million for the year ended December 31, 2015. The increase in cash provided by investing activities in 2016 compared to 2015 of $1.05 billion was primarily due to an increase in maturities and sales of marketable securities offset by an increase in property and equipment purchases, including the purchase of our manufacturing facility and build out of our new headquarters.

Financing Activities

Cash provided by financing activities was $338.2 million and $36.8 million for the years ended December 31, 2017 and 2016, respectively. The increase of $301.4 million was primarily due to net proceeds of $272.5 million received from the September 2017 follow-on public offering and proceeds of $31.1 million received from the concurrent private placement with Celgene. The increase was offset by lower proceeds received from Celgene's exercise of its annual right to purchase shares of our common stock to "top-up" its ownership in Juno. We received proceeds of $1.7 million in 2017 compared to $47.0 million in 2016 from Celgene for the exercise of its annual right to purchase shares of our common stock.

Cash provided by financing activities for the year ended December 31, 2015 was $851.2 million. The decrease in cash provided by financing activities in 2016 compared to 2015 of $814.4 million was primarily due to a decrease in sales of our common stock to Celgene in 2016 compared to 2015 resulting in reduced proceeds of $802.8 million. In 2016, we sold 1,137,593 shares of our common stock to Celgene resulting in proceeds of $47.0 million, compared to the sale of 9,137,672 shares of our

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common stock to Celgene in 2015 resulting in proceeds of $849.8 million. Additionally, in 2016 we repurchased shares previously issued to MSK as a success payment for $10.1 million.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue

We recognize revenue for each unit of accounting when all of the following criteria are met:


•	persuasive evidence of an arrangement exists;


•	delivery has occurred or services have been rendered;


•	the seller’s price to the buyer is fixed or determinable; and


•	collectability is reasonably assured.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue in current liabilities. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, less current portion.

We analyze agreements with more than one element, or deliverable, based on the guidance in Accounting Standards Codification ("ASC 605-25"). We identify the deliverables within the agreement and evaluate which deliverables represent separate units of accounting. Analyzing the agreement to identify deliverables requires the use of judgment. A deliverable is considered a separate unit of accounting when the deliverable has value to the collaborator or licensee on a standalone basis based on the consideration of the relevant facts and circumstances for each agreement. In assessing whether an item has standalone value, we consider factors such as the research, manufacturing, and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, we consider whether the other deliverable(s) can be used for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s) and whether there are other vendors that can provide the undelivered element(s).

Consideration received is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, we use our best estimate of the selling price for the deliverable. Management may be required to exercise considerable judgment in estimating the selling prices of identified units of accounting under its agreements.

Options for future deliverables are considered substantive if, at the inception of the arrangement, we are at risk as to whether the collaboration partner will choose to exercise the option. Factors that we consider in evaluating whether an option is substantive include the overall objective of the arrangement, the benefit the collaborator might obtain from the arrangement without exercising the option, the cost to exercise the option and the likelihood that the option will be exercised. For arrangements under which an option is considered substantive, we do not consider the item underlying the option to be a deliverable at the inception of the arrangement and the associated option fees are not included in the initial consideration, assuming the option is not priced at a significant and incremental discount. Conversely, for arrangements under which an option is not considered substantive or if an option is priced at a significant and incremental discount, we would consider the item underlying the option to be a deliverable at the inception of the arrangement and a corresponding amount would be included in the initial consideration.

The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. We recognize the revenue allocated to each unit of accounting over the period of

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performance. Revenue is recognized using either a proportional performance or straight-line method, depending on whether we can reasonably estimate the level of effort required to complete our performance obligations under an arrangement.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination. We evaluate goodwill for impairment annually during the fourth quarter and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment. Our evaluation involves assessing qualitative factors or performing a quantitative analysis to determine whether it is more-likely-than-not that the fair value of net assets are below the carrying amounts. There was no impairment of goodwill for the years ended December 31, 2017, 2016, and 2015.

Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Intangible assets related to in-process research and development ("IPR&D") are treated as indefinite-lived intangible assets and not amortized until they become finite-lived assets. At that time, we will determine the useful life of the asset and begin amortization. Intangible assets are reviewed for impairment at least annually or if indicators of potential impairment exist. There were no impairments of intangible assets for the years ended December 31, 2017, 2016, and 2015.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development services. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. This process involves reviewing open contracts and purchase orders and communicating with our applicable internal personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. In addition, we periodically confirm the accuracy of our estimates with selected service providers and make adjustments, if necessary.

Examples of estimated research and development expenses that we accrue include:


•	clinical trial costs;


•	external research and development expenses incurred under arrangements with third parties, such as CROs, CMOs, collaborative partners, academic and non-profit institutions and consultants; and


•	costs incurred in connection with preclinical development activities.

We base our expense accruals related to clinical trials on patient enrollment and our estimates of the services received and efforts expended pursuant to contracts with research institutions that conduct and manage clinical trials on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on several factors, such as the successful enrollment of patients, the manufacturing of the associated product candidates, and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur, or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. For service contracts entered into that include a nonrefundable prepayment for service the upfront payment is deferred and recognized in the statement of operations as the services are rendered.

To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

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Stock-Based Compensation

Under ASC 718, Compensation—Stock Compensation, the Company measures and recognizes expense for restricted stock awards, restricted stock units ("RSUs"), performance-based restricted stock awards ("PSAs"), performance-based restricted stock units ("PSUs"), and stock options based on their fair value on the date of grant. Stock-based compensation costs for restricted stock, RSUs, and stock options is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. Stock-based compensation costs for PSAs and PSUs is recognized over the implicit service period if it is probable that the performance goals will be achieved. If it is subsequently determined that the performance goals are not probable of achievement, the expense related to the PSAs or PSUs is reversed.

The fair value of stock options is estimated at the date of grant using the Black-Scholes option pricing model that requires management to apply judgment and make estimates, including:


•	the expected term of the option, which is calculated using the simplified method, as permitted by the SEC Staff Accounting Bulletin ("SAB") No. 110, Share-Based Payment, as the Company has insufficient historical information regarding its stock options to provide a basis for an estimate;


•	the expected volatility of the underlying common stock, which the Company estimates based on the historical volatility of a representative group of publicly traded biopharmaceutical companies with similar characteristics, and the Company’s own historical and implied future volatility;


•	the risk-free interest rate, which is based on the yield curve of U.S. Treasury securities with periods commensurate with the expected term of the options being valued;


•	the expected dividend yield, which the Company estimates to be zero based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends; and


•	the fair value of the Company’s common stock on the date of grant.

In 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718), which outlines new provisions intended to simplify various aspects related to accounting for share-based payments and their presentation in the financial statements. The guidance required the Company to make a policy election to either estimate share-based payment forfeitures or recognize forfeitures as they occur, and apply the change from the policy election on a modified retrospective basis as a cumulative-effect adjustment to accumulated deficit as of the date of adoption. The Company adopted this standard on January 1, 2017, and elected to recognize forfeitures as they occur. Prior to this adoption, the Company was required to estimate a forfeiture rate based on actual forfeitures, analysis of employee turnover, and expectations of future option exercise behavior. Based on those factors, and the Company's limited historical data, the Company's estimated forfeiture rate had been immaterial since inception. As such, there was no impact to accumulated deficit upon adoption of the new guidance.

The fair value of restricted stock, RSUs, PSAs and PSUs are measured as the fair value of the Company's common stock on the date of grant.

The Company also grants stock-based awards to certain service providers who are not employees, scientific founders, or directors. Stock-based awards issued to such persons, or to directors for non-board related services, are measured based on the fair value of the award on the date on which the related services are completed or of the equity instruments issued, whichever is more reliably measured. The fair value of such awards is subject to remeasurement at each reporting period until services required under the arrangement are completed, which is the vesting date. We recorded stock-based compensation expense of $72.6 million, $59.4 million, and $31.9 million for the years ended December 31, 2017, 2016, and 2015, respectively.

As of December 31, 2017, there was $260.5 million of unrecognized stock-based compensation expense, of which $38.2 million was related to restricted stock grants and RSUs and $147.6 million was related to stock options. We expect to recognize these costs over a remaining weighted average period of 2.58 and 2.63 years, respectively. As of December 31, 2017, we had approximately $74.8 million of unrecognized compensation cost related to PSAs and PSUs. The estimated compensation expense is adjusted for actual performance experience and is recognized ratably during the service period, or remaining service period, if and when it becomes probable that the performance conditions will be satisfied.

In future periods, we expect stock-based compensation expense related to employees, scientific founders, and director grants to increase, due in part to our existing unrecognized stock-based compensation expense, and as we grant additional stock-based awards to continue to attract and retain our employees and directors. We expect stock-based compensation expense related to grants to non-employee service providers to fluctuate, sometimes significantly, based on the fair value of our common stock at each reporting period.

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Success Payments

We have agreed to make success payments to each of FHCRC and MSK pursuant to the terms of our agreements with each of those entities. These success payments are based on increases in the estimated fair value of our common stock, with such payments determined upon, and payable following, certain events (valuation measurement dates) during the term of the success payment agreement, in each case as described in more detail in the section captioned "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" of this report. The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending, in the case of FHCRC, from $20.00 per share to $160.00 per share and, in the case of MSK, from $40.00 per share to $120.00 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. Each threshold is associated with a success payment, ascending, in the case of FHCRC, from $10.0 million at $20.00 per share to $375.0 million at $160.00 per share and, in the case of MSK, from $10.0 million at $40.00 per share to $150.0 million at $120.00 per share, payable if such threshold is reached. The maximum aggregate amount of success payments to FHCRC is $375.0 million and to MSK is $150.0 million, in each case subject to cost offsets related to our cash payments for collaboration activities. In December 2015, success payment obligations to FHCRC and MSK were triggered in the amount of $75.0 million and $10.0 million, respectively, less indirect cost offsets of $3.3 million and $1.0 million, respectively. We elected to make the payments in shares of our common stock and thereby issued 1,601,085 shares to FHCRC in December 2015 and 240,381 shares to MSK in March 2016. In April 2016, we agreed to repurchase the shares issued to MSK at a price per share equal to $41.90.

As of December 31, 2017 and 2016, the estimated fair value of the success payment obligations, after giving effect to the success payments achieved by FHCRC and MSK, was approximately $113.5 million and $37.0 million, respectively. With respect to the success payment obligation, the Company recognized expense of $68.7 million for the year ended December 31, 2017, a gain of $32.5 million for the year ended December 31, 2016, and expense of $51.6 million for the year ended December 31, 2015. This gain or expense is recorded in research and development expense in the consolidated statements of operations.

The completion of the Offer would trigger success payments of $100.0 million and $70.0 million, less indirect cost offsets, to FHCRC and MSK, respectively.

We utilize significant estimates and assumptions in determining the estimated success payment liability and associated expense or gain at each balance sheet date. The assumptions used to calculate the fair value of the success payments are subject to a significant amount of judgment including the expected volatility, estimated term, and estimated number and timing of valuation measurement dates. A small change in the assumptions may have a relatively large change in the estimated valuation and associated liability and resulting expense or gain.

Contingent Consideration from Business Combinations

At and subsequent to the acquisition date of a business combination, contingent consideration obligations are remeasured to fair value at each balance sheet date with changes in fair value recognized in research and development expense in the consolidated statements of operations. We utilize significant estimates and assumptions in determining the estimated contingent consideration and associated expense or gain at each balance sheet date including assumptions regarding technical, clinical, regulatory, and commercialization milestones. The valuation of contingent consideration uses assumptions we believe would be made by a market participant. In evaluating the fair value information, judgment is required to interpret the market data used to develop the estimates. We assess these estimates on an on-going basis as additional data impacting the assumptions is obtained. Contingent consideration may change significantly as development progresses and additional data are obtained, impacting our assumptions regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates. As of December 31, 2017 and 2016, the estimated fair value of the contingent consideration, after giving effect to the €6.0 million milestone achieved in 2016, was $24.9 million and $20.9 million, respectively. We recognized expense of $4.0 million, a gain of $9.7 million and expense of $0.1 million related to the change in fair value of the contingent consideration, for the years ended December 31, 2017, 2016, and 2015, respectively. This gain or expense is recorded in research and development expense in the consolidated statements of operations.

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Off-Balance Sheet Arrangements

As of December 31, 2017, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. We are a minority shareholder in JW Cayman, a company formed to develop novel cell-based immunotherapies for patients in China with hematologic and solid organ cancers. We account for our investment in JW Cayman as an equity method investment, and record income or losses proportionate to our equity ownership in the entity.

Contractual Obligations

Our contractual obligations as of December 31, 2017 were as follows:



	Total		Less Than 1 Year		1-3 Years		4-5 Years		More Than 5 Years
Operating lease obligations (1)	$	105,688	$	13,615	$	32,781	$	33,019	$	26,273
Collaboration funding (2)	18,342		12,684		5,658		—		—
Long-term debt obligations (3)	14,838		772		1,544		1,544		10,978
Total contractual obligations	$	138,868	$	27,071	$	39,983	$	34,563	$	37,251


(1)	Represents future minimum lease payments under our operating leases as of December 31, 2017. The minimum lease payments above do not include any related common area maintenance charges or real estate taxes.


(2)	Represents non-cancellable fees due in connection with our collaboration agreements as of December 31, 2017.


(3)	Amounts include long-term debt principal and scheduled interest payments.

Other than as disclosed in the table above, the payment obligations under our license and collaboration agreements as of December 31, 2017 are contingent upon future events such as our achievement of specified development, regulatory, and commercial milestones, or royalties on net product sales. See the section captioned "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" of this report for more information about these payment obligations. As described above under the caption "Critical Accounting Policies and Significant Judgments and Estimates—Success Payments," we are also obligated to make up to $300.0 million in remaining success payments to FHCRC and up to $140.0 million in remaining success payments to MSK based on increases in the fair value of our common stock. Both of these obligations are payable in cash or stock, at our election. As of December 31, 2017, the timing and likelihood of achieving the milestones and success payments and generating future product sales are uncertain and therefore, any related payments are not included in the table above.

Recent Accounting Pronouncements

See Note 2 to our audited consolidated financial statements included in this report.


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business, primarily related to interest rate sensitivities and the volatility of our stock price.

Interest Rate Sensitivity

As of December 31, 2017, we had $741.1 million in marketable securities, largely composed of investment grade short- to intermediate-term fixed income securities. The primary objective of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of investments in a variety of securities of high credit quality.

Our marketable securities are subject to interest rate risk and could fall in value if market interest rates increase. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

Stock Price Sensitivity

We agreed to make success payments to FHCRC and MSK based on increases in the per share fair market value of our common stock during the term of the agreements payable in cash or publicly-traded equity at our discretion.

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As of December 31, 2017, the estimated fair value of the success payment obligations was approximately $113.5 million. The Company recognized expense of $68.7 million in the year ended December 31, 2017, with respect to the estimated fair value of success payment obligations. The success payment liabilities on the consolidated balance sheet as of December 31, 2017 were $91.5 million.

Changes in the fair value of our common stock as of each balance date may have a relatively large change in the estimated valuation of the success payment obligations and associated liability and resulting expense or gain. See Note 7 to our audited consolidated financial statements included in this report for a sensitivity analysis showing the impact that a hypothetical change in the value of our common stock would have had on our results for the year ended December 31, 2017.

Foreign Currency Sensitivity

The majority of our transactions occur in U.S. dollars. However, we do have certain transactions and future potential milestones, including potential contingent consideration payments pursuant to the terms of our Stage acquisition, that are denominated in currencies other than the U.S. dollar, primarily the Euro, and we therefore are subject to foreign exchange risk. Additionally, our German subsidiary operates with the Euro as its functional currency. The fluctuation in the value of the U.S. dollar against the Euro affects the reported amounts of revenues, expenses, assets and liabilities. As we expand our international operations, our exposure to exchange rate fluctuations will increase. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

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ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Juno Therapeutics, Inc.

Index to Consolidated Financial Statements



Report of Independent Registered Public Accounting Firm	119
Financial Statements
Consolidated Balance Sheets	120
Consolidated Statements of Operations	121
Consolidated Statements of Comprehensive Loss	122
Consolidated Statements of Cash Flows	123
Consolidated Statements of Stockholders’ Equity	124
Notes to Consolidated Financial Statements	125

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Juno Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Juno Therapeutics, Inc. (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2014.

Seattle Washington

March 1, 2018

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Juno Therapeutics, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)



	December 31,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	232,781		$	187,891
Marketable securities	493,344			544,684
Accounts receivable	13,912			13,286
Prepaid expenses and other current assets	13,317			26,471
Total current assets	753,354			772,332
Property and equipment, net	133,110			81,734
Long-term marketable securities	247,735			189,706
Goodwill	221,306			221,306
Intangible assets, net	75,257			77,986
Other assets	4,074			6,400
Total assets	$	1,434,836		$	1,349,464
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,416		$	4,415
Accrued liabilities and other current liabilities	81,244			36,822
Success payment liabilities	91,525			22,786
Contingent consideration	2,238			7,605
Deferred revenue	21,329			43,264
Total current liabilities	208,752			114,892
Long-term debt, less current portion	9,945			—
Contingent consideration, less current portion	22,656			13,291
Deferred revenue, less current portion	100,132			120,054
Tenant improvement allowance, deferred rent, and other long-term liabilities	46,369			23,526
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized; 0 shares issued and outstanding	—			—
Common stock, $0.0001 par value, 495,000 shares authorized at December 31, 2017 and 2016; 114,313 and 103,403 shares issued and outstanding at December 31, 2017 and 2016, respectively	12			11
Additional paid-in-capital	2,311,892			1,911,769
Accumulated other comprehensive income (loss)	3,421			(2,842		)
Accumulated deficit	(1,268,343		)	(831,237		)
Total stockholders’ equity	1,046,982			1,077,701
Total liabilities and stockholders’ equity	$	1,434,836		$	1,349,464

See accompanying notes.

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Juno Therapeutics, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)



	Year Ended December 31,
	2017			2016			2015
Revenue	$	111,871		$	79,356		$	18,215
Operating expenses:
Research and development	451,518			264,285			205,160
General and administrative	108,127			70,675			57,155
Total operating expenses	559,645			334,960			262,315
Loss from operations	(447,774		)	(255,604		)	(244,100		)
Other-than-temporary impairment loss	—			(5,490		)	—
Interest income, net	8,367			5,869			1,730
Other (expenses) income, net	(3,700		)	(1,012		)	234
Loss before income taxes	(443,107		)	(256,237		)	(242,136		)
Benefit for income taxes	6,001			10,657			2,760
Net loss	$	(437,106	)	$	(245,580	)	$	(239,376	)
Net loss per share, basic and diluted	$	(4.10	)	$	(2.42	)	$	(2.72	)
Weighted average common shares outstanding, basic and diluted	106,683			101,476			88,145

See accompanying notes.

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Juno Therapeutics, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)



	Year Ended December 31,
	2017			2016			2015
Net loss	$	(437,106	)	$	(245,580	)	$	(239,376	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	4,274			(1,186		)	(605		)
Net unrealized gain (loss) on marketable securities	1,989			(1,063		)	(5,388		)
Reclassification adjustment for loss included in net loss	—			5,490			—
Total other comprehensive income (loss)	6,263			3,241			(5,993		)
Comprehensive loss	$	(430,843	)	$	(242,339	)	$	(245,369	)

See accompanying notes.

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Juno Therapeutics, Inc.

Consolidated Statements of Cash Flows

(In thousands)



	Year Ended December 31,
	2017			2016			2015
OPERATING ACTIVITIES
Net loss	$	(437,106	)	$	(245,580	)	$	(239,376	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	23,632			14,186			6,041
Non-cash stock-based compensation	72,602			57,172			31,941
Non-cash expense in connection with equity issuance	—			23,227			—
Deferred income taxes	(6,016		)	(10,617		)	(2,760		)
Change in fair value of success payment liabilities	68,739			(32,474		)	51,557
Change in fair value of contingent consideration	3,998			(9,724		)	78
Other-than-temporary impairment on marketable securities	—			5,490			—
Other	3,886			1,089			(227		)
Changes in operating assets and liabilities:
Accounts receivable	(623		)	(12,968		)	33
Prepaid expenses and other assets	12,399			(17,587		)	(6,888		)
Accounts payable, accrued liabilities and other liabilities	46,900			2,238			21,783
Deferred revenue	(41,886		)	18,122			144,782
Tenant improvement allowance and deferred rent	28,442			17,617			361
Net cash (used in) provided by operating activities	(225,033		)	(189,809		)	7,325
INVESTING ACTIVITIES
Purchases of marketable securities and other investments	(710,745		)	(750,344		)	(1,315,597		)
Sales and maturities of marketable securities	703,459			969,720			459,381
Acquisitions, net of cash acquired	—			(74,575		)	(77,666		)
Purchase of property and equipment	(60,924		)	(56,246		)	(28,184		)
Net cash (used in) provided by investing activities	(68,210		)	88,555			(962,066		)
FINANCING ACTIVITIES
Proceeds from public offering of common stock, net of offering costs	272,465			—			(1,683		)
Proceeds from issuance of common stock to strategic partner	32,783			47,000			849,804
Proceeds from employee stock purchase plan and exercise of stock options, net of tax withholdings	22,274			4,786			3,366
Proceeds from long-term borrowings, net of financing costs	10,804			—			—
Payments of long-term debt and build-to-suit lease obligation	(161		)	(369		)	(249		)
Repurchases of common stock	—			(10,073		)	—
Payments of contingent consideration related to acquisition	—			(4,562		)	—
Net cash provided by financing activities	338,165			36,782			851,238
Effect of exchange rate changes on cash and cash equivalents	(32		)	(35		)	(67		)
Net increase (decrease) in cash and cash equivalents	44,890			(64,507		)	(103,570		)
Cash and cash equivalents at beginning of period	187,891			252,398			355,968
Cash and cash equivalents at end of period	$	232,781		$	187,891		$	252,398
SUPPLEMENTAL CASH FLOW INFORMATION
Purchases of property and equipment included in accounts payable and accrued liabilities	$	5,124		$	1,841		$	1,900
Issuance of common stock for acquisitions	$	—		$	46,914		$	41,611
Issuance of common stock for success payments	$	—		$	9,481		$	71,648
Amounts capitalized under build-to-suit leases	$	—		$	—		$	9,910

See accompanying notes.

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Juno Therapeutics, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)



	Common Stock				Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Stockholders’ Equity
Balance as of December 31, 2014	82,074		$	8	$	734,895		$	(90	)	$	(346,281	)	$	388,532
Issuance of common stock for acquisition, non-cash	853		—		41,611			—			—			41,611
Issuance of common stock to strategic partner	9,137		1		849,803			—			—			849,804
Issuance of common stock for success payments	1,601		—		71,648			—			—			71,648
Issuance of common stock in connection with the Company’s equity award programs	3,582		1		3,365			—			—			3,366
Stock-based compensation expense	—		—		31,941			—			—			31,941
Other comprehensive loss, net	—		—		—			(5,993		)	—			(5,993		)
Net loss	—		—		—			—			(239,376		)	(239,376		)
Balance as of December 31, 2015	97,247		10		1,733,263			(6,083		)	(585,657		)	1,141,533
Issuance of common stock for acquisition, non-cash	1,181		—		46,914			—			—			46,914
Issuance of common stock to strategic partner	1,741		—		70,227			—			—			70,227
Issuance of common stock for success payments	240		—		9,481			—			—			9,481
Repurchase of common stock	(240	)	—		(10,073		)	—			—			(10,073		)
Issuance of common stock in connection with the Company’s equity award programs, net of tax withholdings	3,234		1		4,785			—			—			4,786
Stock-based compensation expense	—		—		57,172			—			—			57,172
Other comprehensive income, net	—		—		—			3,241			—			3,241
Net loss	—		—		—			—			(245,580		)	(245,580		)
Balance as of December 31, 2016	103,403		11		1,911,769			(2,842		)	(831,237		)	1,077,701
Issuance of common stock in follow-on public offering, net of $15.1 million in offering costs	7,015		1		272,464			—			—			272,465
Issuance of common stock in private placement	758		—		31,091			—			—			31,091
Issuance of common stock to strategic partner	76		—		1,692			—			—			1,692
Issuance of common stock in connection with the Company’s equity award programs, net of tax withholdings	3,061		—		22,274			—			—			22,274
Stock-based compensation expense	—		—		72,602			—			—			72,602
Other comprehensive income, net	—		—		—			6,263			—			6,263
Net loss	—		—		—			—			(437,106		)	(437,106		)
Balance as of December 31, 2017	114,313		$	12	$	2,311,892		$	3,421		$	(1,268,343	)	$	1,046,982

See accompanying notes.

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Juno Therapeutics, Inc.

Notes to Consolidated Financial Statements

1. Organization

Juno Therapeutics, Inc. (the "Company") was incorporated in Delaware on August 5, 2013 as FC Therapeutics, Inc., and changed its name to Juno Therapeutics, Inc. on October 23, 2013. The Company is building a fully-integrated biopharmaceutical company focused on developing innovative cellular immunotherapies for the treatment of cancer. Founded on the vision that the use of human cells as therapeutic entities will drive one of the next important phases in medicine, the Company is developing cell-based cancer immunotherapies based on its chimeric antigen receptor ("CAR") and high-affinity T cell receptor ("TCR") technologies to genetically engineer T cells to recognize and kill cancer cells.

On January 21, 2018, the Company entered into an Agreement and Plan of Merger ("Merger Agreement") with Celgene Corporation, a Delaware corporation ("Celgene Corp."), and Blue Magpie Corporation, a Delaware corporation and a wholly-owned subsidiary of Celgene ("Purchaser"), pursuant to which, among other things, subject to the terms and subject to the conditions of the Merger Agreement, Purchaser has commenced a tender offer ("Offer") to acquire all of the Company's outstanding shares of common stock. For additional information regarding the Merger Agreement refer to Note 19, Subsequent Events.

In September 2017, the Company completed a follow-on public offering (the "September 2017 follow-on public offering") whereby the Company sold 7,015,000 shares of common stock (inclusive of 915,000 shares of common stock sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares) at a price to the public of $41.00 per share. The Company received aggregate net proceeds from the September 2017 follow-on public offering of $272.5 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Concurrent with the closing of the September 2017 follow-on public offering, the Company closed a private placement of 758,327 shares of its common stock, at price of $41.00 per share, to a subsidiary of Celgene Corporation. The Company received aggregate proceeds from the concurrent private placement of $31.1 million.

The Company is subject to a number of risks similar to other biopharmaceutical companies in the early stage, including, but not limited to, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s products, protection of proprietary technology, and the need to obtain adequate additional funding. If the Company, or any commercialization partner for the Company’s product candidates, does not successfully commercialize any of the Company’s product candidates, the Company will not be able to generate product revenue or achieve profitability. As of December 31, 2017, the Company had an accumulated deficit of $1.3 billion.

2. Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and include the accounts of Juno Therapeutics, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from such estimates.

The Company utilizes significant estimates and assumptions in determining the estimated success payment and contingent consideration liabilities and associated expense or gain at each balance sheet date. A small change in the Company’s stock price may have a relatively large change in the estimated fair value of the success payment liability and associated expense or gain. Changes in the probabilities and estimated timing of milestones used in the calculation of the contingent consideration liability may have a relatively large impact on the resulting liability and associated expense or gain.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less at acquisition. Cash equivalents, which consist primarily of money market funds and government and agency securities, are stated at fair value.

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Marketable Securities

The Company generally invests its excess cash in investment grade short- to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, marketable securities, or long-term marketable securities on the consolidated balance sheets, classified as available-for-sale, and reported at fair value with unrealized gains and losses included in accumulated other comprehensive income or loss. Realized gains and losses on the sale of these securities are recognized in net income or loss. The cost of marketable securities sold is based on the specific identification method.

The Company periodically evaluates whether declines in fair values of its investments below their book value are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as the Company’s ability and intent to hold the investment until a forecasted recovery occurs. Additionally, the Company assesses whether it has plans to sell the security or it is more likely than not it will be required to sell any investment before recovery of its amortized cost basis. Factors considered include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, other publicly available information that may affect the value of the investments, duration and severity of the decline in value, and our strategy and intentions for holding the investment.

Accounts Receivable

Accounts receivable primarily relates to cost reimbursements due from Celgene and other collaboration partners. Accounts receivable are generally due within 30 days. The Company considers accounts outstanding longer than the contractual terms past due. Given the nature and historical collectability of the Company's accounts receivables, an allowance for doubtful accounts is not deemed necessary as of December 31, 2017 and 2016.

Property and Equipment, Net

Property and equipment primarily consists of land, building and building improvements, laboratory equipment, computer equipment and software, and leasehold improvements. Property and equipment is stated at cost, and depreciated using the straight-line method over the estimated useful lives of the respective assets.



Computer equipment and software	3 years
Laboratory equipment	5 years
Building	30 years
Building improvements	15 years
Land	Not depreciable
Leasehold improvements	Shorter of asset’s useful life or remaining term of lease

Impairment of Long-Lived Assets

The Company regularly reviews the carrying value and estimated lives of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the asset to the Company’s business objectives. Should an impairment exist, the impairment loss would be measured based on the excess of the asset’s carrying amount over its fair value. The Company has not recognized any impairment losses on long-lived assets for the years ended December 31, 2017, 2016, and 2015.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination. The Company evaluates goodwill for impairment annually during the fourth quarter and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment. The Company evaluates goodwill for impairment by assessing qualitative factors or performing a quantitative analysis to determine whether it is more-likely-than-not that the fair value of net assets is below the carrying amount.

Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date (which is regarded as their cost). The fair value of acquired in-process research and development ("IPR&D") has been estimated using the replacement cost method. Under this method, the Company estimated the cost to recreate the technology and derived an estimated value to develop the technology. IPR&D assets are required to be

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classified as indefinite-lived assets and are not amortized until they become finite-lived assets, upon the successful completion of the associated research and development effort. At that time, the Company will determine the useful life of the asset and begin amortization. If the associated research and development effort is abandoned, the related IPR&D assets will be written-off and an impairment charge recorded. Intangible assets are reviewed for impairment at least annually or if indicators of potential impairment exist.

Contingent Consideration from Business Combinations

Leases

The Company has entered into various non-cancelable lease agreements for its office, laboratory, and manufacturing spaces. The Company recognizes rent expense under such arrangements on a straight-line basis over the effective term of each lease. Under the terms of certain of our lease agreements, we received, or will receive, tenant allowances and record these amounts as a liability, which is amortized as a reduction to rent expense over the term of the lease.

Fair Value of Financial Instruments

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

Level 1—Quoted prices in active markets for identical assets or liabilities

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3—Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability

The Company’s financial instruments, in addition to those presented in Note 7, Fair Value Measurements and Note 10, Debt, include cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the short-term nature of these instruments.

Success Payments

The Company granted rights to share-based success payments to the Fred Hutchinson Cancer Research Center ("FHCRC") and the Memorial Sloan Kettering Cancer Center ("MSK") pursuant to the terms of its collaboration agreements with each of those entities. Pursuant to the terms of these arrangements, the Company may be required to make success payments based on increases in the per share fair market value of the Company’s common stock, payable in cash or publicly-traded equity at the Company’s discretion. See Note 5, Collaboration and License Agreements. The success payments are accounted for under ASC 505-50, Equity-Based Payments to Non-Employees. Once the service period is complete, the instruments will be accounted for under ASC 815, Derivatives and Hedging, and continue to be marked to market with all changes in value recognized in other income or expense.

Success payment liabilities are estimated at fair value at inception and at each subsequent balance sheet date and the expense is amortized using the accelerated attribution method over the remaining term (service period) of the related collaboration agreement or related possible payment due date (whichever is sooner). To determine the estimated fair value of the success payments the Company uses a Monte Carlo simulation methodology which models the future movement of stock prices based on several key variables. The following variables were incorporated in the estimated fair value of the success payment liability: estimated term of the success payments, fair value of common stock, expected volatility, risk-free interest rate, estimated number and timing of valuation measurement dates on the basis of which payments may be triggered, and certain estimated

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indirect costs creditable against the success payments are also included in the calculation. The computation of expected volatility was estimated using a combination of available information about the historical volatility of stocks of similar publicly-traded companies for a period matching the expected term assumption and its historical and projected volatility. There are several valuation measurement dates subsequent to the December 2014 initial public offering ("IPO"), on the basis of which payments may be triggered.

Concentrations of Credit Risk and Off-Balance Sheet Risk

The Company maintains its cash, cash equivalents, and marketable securities with high quality, accredited financial institutions. These amounts at times may exceed federally insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to significant risk on these funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Claims and Contingencies

From time to time, the Company may become involved in litigation and proceedings relating to claims arising from the ordinary course of business. The Company accrues a liability if the likelihood of an adverse outcome is probable and the amount is estimable. If the likelihood of an adverse outcome is only reasonably possible (as opposed to probable), or if an estimate is not determinable, the Company provides disclosure of a material claim or contingency.

Revenue

The Company recognizes revenue for each unit of accounting when all of the following criteria are met:


•	persuasive evidence of an arrangement exists;


•	delivery has occurred or services have been rendered;


•	the seller’s price to the buyer is fixed or determinable; and


•	collectability is reasonably assured.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue in current liabilities. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, less current portion.

The Company analyzes agreements with more than one element, or deliverable, based on the guidance in ASC 605-25, Revenue Recognition-Multiple-Element Arrangements. The Company identifies the deliverables within the agreement and evaluates which deliverables represent separate units of accounting. Analyzing the agreement to identify deliverables requires the use of judgment. A deliverable is considered a separate unit of accounting when the deliverable has value to the collaborator or licensee on a standalone basis based on the consideration of the relevant facts and circumstances for each agreement.

In assessing whether an item has standalone value, the Company considers factors such as the research, manufacturing, and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the other deliverable(s) can be used for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s) and whether there are other vendors that can provide the undelivered element(s).

Consideration received is allocated at the inception of the agreement to all identified units of accounting based on the relative selling prices. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, the Company uses its best estimate of the selling price for the deliverable. Management may be required to exercise considerable judgment in estimating the selling prices of identified units of accounting under its agreements.

Options for future deliverables are considered substantive if, at the inception of the arrangement, the Company is at risk as to whether the collaboration partner will choose to exercise the option. Factors that the Company considers in evaluating whether an option is substantive include the overall objective of the arrangement, the benefit the collaborator might obtain from the arrangement without exercising the option, the cost to exercise the option and the likelihood that the option will be exercised. For arrangements under which an option is considered substantive, the Company does not consider the item underlying the option to be a deliverable at the inception of the arrangement and the associated option fees are not included in the initial consideration, assuming the option is not priced at a significant and incremental discount. Conversely, for arrangements under

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which an option is not considered substantive or if an option is priced at a significant and incremental discount, the Company would consider the item underlying the option to be a deliverable at the inception of the arrangement and a corresponding amount would be included in the initial consideration.

The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. The Company recognizes the revenue allocated to each unit of accounting over the period of performance. Revenue is recognized using either a proportional performance or straight-line method, depending on whether the Company can reasonably estimate the level of effort required to complete its performance obligations under an arrangement.

Research and Development Expense

The Company records expense for research and development costs to operations as incurred. For service contracts entered into that include a nonrefundable prepayment for service, the upfront payment is deferred and recognized in the statement of operations as the services are rendered. Research and development expenses consist of costs incurred by the Company for the discovery and development of the Company’s product candidates and include costs to acquire technology complimentary to our own, external research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations ("CMOs"), collaboration partners, academic and non-profit institutions and consultants, salaries and personnel-related costs, including non-cash stock-based compensation, changes in the estimated fair value of our success payments to FHCRC and MSK, changes in the estimated fair value of our contingent consideration liabilities, intangible asset amortization, milestones, and other expenses, which include direct and allocated expenses for laboratory, facilities, overhead, and other costs.

General and Administrative Expense

General and administrative costs are expensed as incurred and include personnel-related expenses, including non-cash stock-based compensation expense, for our personnel in executive, legal, finance and accounting, commercial, and other administrative functions, legal costs, transaction costs related to acquisitions and collaboration and licensing agreements, as well as fees paid for accounting and tax services, consulting fees, including costs to support commercial readiness, and facilities costs not otherwise included in research and development expenses. Legal costs include general corporate legal fees, patent costs, litigation costs, and legal expense associated with inter partes review proceedings at the U.S. Patent & Trademark Office ("USPTO").

The costs related to acquiring patents and prosecuting and maintaining intellectual property rights are expensed as incurred to general and administrative expense due to the uncertainty surrounding the drug development process and the uncertainty of future benefits.

Stock-Based Compensation

The fair value of stock options is estimated at the date of grant using the Black-Scholes option pricing model that requires management to apply judgment and make estimates, including:


•	the expected term of the option, which is calculated using the simplified method, as permitted by the Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 110, Share-Based Payment, as the Company has insufficient historical information regarding its stock options to provide a basis for an estimate;


•	the expected volatility of the underlying common stock, which the Company estimates based on the historical volatility of a representative group of publicly traded biopharmaceutical companies with similar characteristics, and the Company’s own historical and implied future volatility;


•	the risk-free interest rate, which is based on the yield curve of U.S. Treasury securities with periods commensurate with the expected term of the options being valued;

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•	the expected dividend yield, which the Company estimates to be zero based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends; and


•	the fair value of the Company’s common stock on the date of grant.

The fair value of restricted stock, RSUs, PSAs and PSUs are measured as the fair value of the Company's common stock on the date of grant.

Income Taxes

The Company determines its deferred tax assets and liabilities based on the differences between the financial reporting and tax basis of assets and liabilities. The deferred tax assets and liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered. The Company applies judgment in the determination of the consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes any material interest and penalties related to unrecognized tax benefits in income tax expense.

Foreign Currency Translation

Assets and liabilities denominated in foreign currencies were translated into U.S. dollars, the reporting currency, at the exchange rate prevailing at the balance sheet date. Revenue and expenses denominated in foreign currencies were translated into U.S. dollars at the monthly average exchange rate for the period and the translation adjustments are reported as an element of accumulated other comprehensive income or loss on the consolidated balance sheets.

Segments

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment and one reportable segment.

Recent Accounting Pronouncements

In February 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets ("ASU 2017-05"). ASU 2017-05 clarifies the scope of the derecognition of nonfinancial assets, defines in substance financial assets, adds guidance for partial sales of nonfinancial assets and clarifies the recognition of gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. This guidance will become effective for the Company beginning in the first quarter of 2018 and may be adopted using either a full retrospective or a modified retrospective approach. Early adoption is permitted. The Company is required to adopt the amendments in this standard at the same time that amendments in ASU 2014-09 are adopted. The Company plans to adopt this standard on January 1, 2018, using the modified retrospective method. The Company does not expect to record any adjustments in the first quarter of 2018 as a result of adopting this guidance.

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In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplifies the goodwill impairment test. Under the new guidance, goodwill impairment will be measured by the amount by which the carrying value of a reporting unit exceeds its fair value, without exceeding the carrying amount of goodwill allocated to that reporting unit. This guidance is effective for reporting periods beginning first quarter of 2020 and is required to be adopted on a prospective basis, with early adoption permitted. The Company does not plan to early adopt, and the adoption of this guidance is not expected to have a material impact its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718) ("ASU 2016-09"). The guidance was effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company adopted this standard on January 1, 2017. The guidance required the Company to recognize all excess tax benefits previously unrecognized, along with any valuation allowance, on a modified retrospective basis as a cumulative-effect adjustment to accumulated deficit as of the date of adoption. As of January 1, 2017, the Company's deferred tax asset for net operating losses increased by $7.1 million but was offset by a full valuation allowance, so there was no impact to accumulated deficit on the condensed consolidated balance sheets. Additionally, the guidance required the Company to make a policy election to either estimate share-based payment forfeitures or recognize them as they occur, and apply the change from the policy election on a modified retrospective basis as a cumulative-effect adjustment to accumulated deficit as of the date of adoption. The Company elected to recognize forfeitures as they occur. Prior to the adoption of this guidance, the estimate for forfeitures was immaterial and as such there was no material impact to accumulated deficit on the condensed consolidated balance sheets upon adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new guidance requires lessees to recognize the assets and liabilities arising from leases on the balance sheet and additional qualitative and quantitative disclosures will be required. The amendment is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this standard on January 1, 2019. Although the Company is in the process of evaluating the impact the adoption of the new accounting guidance will have on its consolidated financial statements, the Company currently believes the most significant changes will be related to the recognition of new right-of-use assets and lease liabilities on the consolidated balance sheets.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This guidance is effective for annual and interim periods beginning after December 15, 2017, and with early adoption permitted for certain provisions of the guidance. The Company will adopt this standard on January 1, 2018 and will record a cumulative-effect adjustment of a $3.4 million gain, net of tax, to accumulated other comprehensive income (loss) and beginning accumulated deficit to reflect the unrealized gain for the Company's available-for-sale equity securities.

In May 2014, the FASB issued ASU No. 2014-09, Revenue From Contracts With Customers (Topic 606), amended by ASU No. 2015-14. This new standard will become effective for the Company beginning on January 1, 2018. The standard replaces all current GAAP guidance on this topic and establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. This guidance can be applied either retrospectively to each period presented, or on a modified retrospective basis as a cumulative-effect adjustment as of the date of adoption. The Company will adopt this standard using the modified retrospective method. As of December 31, 2017, the majority of the Company's revenue is generated from upfront license payments and reimbursement revenue under its collaboration arrangement with Celgene Corp. and its wholly-owned subsidiary Celgene Switzerland LLC (together, "Celgene"), and license and milestone payments associated with the Novartis sublicense agreement. Upon the adoption of this standard on January 1, 2018, the Company will record an adjustment to beginning accumulated deficit and deferred revenue to reflect the deferral of $12.5 million of revenue for a portion of a milestone payment associated with the Novartis sublicense.

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3. Acquisitions

Acquisition of Technology from RedoxTherapies

In July 2016, the Company acquired RedoxTherapies, Inc. ("RedoxTherapies"), for a $10.0 million upfront cash payment. The Company also agreed to deliver additional consideration upon achievement of specified clinical, regulatory, and commercial milestones. The acquisition provides the Company with an exclusive license to vipadenant, a small molecule A2a receptor antagonist that has the potential to disrupt important immunosuppressive pathways in the tumor microenvironment in certain cancers. The Company concluded that the assets acquired did not meet the accounting definition of a business as inputs, but no processes or outputs, were acquired, and the licensed technology had not achieved technological feasibility. As such, the Company treated the acquisition as an asset purchase, recording the purchase price as $10.0 million in research and development expense in the accompanying consolidated statements of operations. Additionally, the Company made a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986 ("IRC"), which treats the transaction as an asset purchase for tax purposes.

In addition to cash paid, the acquisition agreement stipulates that the Company is required to make milestone payments to the founder of RedoxTherapies upon the achievement of specified clinical, regulatory, and commercial milestones. Triggering of these milestone payments was not considered probable as of the date of the acquisition, and no expense has been recorded for these milestones as of December 31, 2017. As a result of the acquisition, the Company obtained access to two license agreements to which RedoxTherapies is party, which require the payment of royalties to the licensors based on annual net sales of licensed products or processes by RedoxTherapies and its sublicensees, as well as certain payments upon the achievement of specified clinical and regulatory milestones. Triggering of these milestone payments was not considered probable as of the date of the acquisition, and no expense has been recorded for these milestones as of December 31, 2017.

Acquisition of AbVitro

In January 2016, the Company completed the acquisition of 100% of the outstanding equity in AbVitro, Inc. ("AbVitro"). The Company paid $74.7 million in cash and issued an aggregate of 1,289,188 shares of the Company’s common stock valued at $46.9 million based on the closing stock price on January 8, 2016 of $36.39 per share. An additional $2.2 million was recorded as post-combination research and development expense in the year ended December 31, 2016 in connection with the accelerated vesting of employee stock options. Additionally, 24,446 RSUs were granted to former AbVitro employees, which shares are subject to monthly vesting over three years following the closing of the transaction, contingent on such employees continuing to provide services to the Company through such vesting dates. These are accounted for as post-acquisition compensation expenses. There are no milestone payment obligations under the terms of the AbVitro acquisition.

The elements of the purchase consideration are as follows (in thousands):



Cash paid	$	74,729
Common stock issued	46,914
Total consideration	$	121,643

The allocation of the purchase price is based on estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date. The components of the purchase price allocation are as follows (in thousands):



Net working capital	$	67
Deferred tax liabilities, net of tax attributes	(6,655		)
Acquired in-process research and development	29,017
Goodwill	99,214
Total consideration	$	121,643

IPR&D assets are required to be classified as indefinite-lived assets until they become finite-lived assets upon the successful completion or the abandonment of the associated research and development effort. Beginning in the second quarter of 2017, the intangible asset recognized in connection with the AbVitro acquisition completed development and reached technological feasibility, and the Company began amortizing the asset over an estimated life of three years.

The factors contributing to the recognition of the amount of goodwill in the AbVitro acquisition include the ability to accelerate the generation of binders that recognize known targets and discover novel cancer antigen targets. The acquisition also provides the Company with the ability to utilize translational assays to provide a better understanding of the natural immune response to

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cancer as well as to interrogate and monitor the immune system of patients during treatment. None of the goodwill is expected to be deductible for income tax purposes.

Acquisition of Stage Cell Therapeutics GmbH

In May 2015, the Company completed the acquisition of all the outstanding ownership interests in Stage not already held by it. Prior to the acquisition, the Company held a 4.76% equity interest in Stage. The Company paid €52.5 million, or $58.5 million, in cash and issued an aggregate of 486,279 shares of common stock, valued at $22.2 million based on the closing stock price on May 11, 2015 of $45.58 per share.

The Company also agreed to pay additional amounts of up to an aggregate of €135.0 million in cash based on the achievement of certain technical, clinical, regulatory, and commercial milestones related to novel reagents (€40.0 million), advanced automation technology (€65.0 million), and Stage’s existing clinical pipeline (€30.0 million). The fair value of this contingent consideration was estimated to be $28.2 million at the date of acquisition. Payments could vary based on milestones that are reached.

The elements of the purchase consideration are as follows (in thousands):



Cash paid (1)	$	58,496
Common stock issued	22,165
Fair value of contingent consideration (2)	28,244
Total consideration for 95.24% equity	108,905
Fair value of 4.76% initial investment in Stage (3)	3,682
Implied purchase price consideration for 100% equity	$	112,587


(1)	The cash consideration represents the consideration paid in cash amounting to €52.5 million which is translated based on an exchange rate on May 11, 2015.

(2)

The fair value of the contingent consideration was determined by calculating the probability-weighted milestone payments based on the assessment of the likelihood and estimated timing that certain milestones would be achieved. The fair value of the contingent consideration was estimated using a discount rate of 14.6%. The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due.


(3)	The fair value of the initial investment is calculated as the implied per share fair value of the stock based upon the acquisition purchase price reduced by a lack of control discount associated with the 4.76% holding.

The allocation of the purchase price is based on estimates of the fair value of assets acquired and liabilities assumed as of the date of acquisition. The components of the purchase price allocation are as follows (in thousands):



Net working capital	$	1,863
Property and equipment	651
Net assets acquired	2,514
Deferred tax liabilities	(10,801		)
Acquired in-process research and development	34,457
Goodwill	86,417
Total consideration	$	112,587

IPR&D assets are required to be classified as indefinite-lived assets until they become finite-lived assets upon the successful completion or the abandonment of the associated research and development effort. Accordingly, during the development period after the date of acquisition, these assets will not be amortized until the acquired reagents or automation technology is accepted by the FDA as part of an IND, subject to management judgment.

The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the Stage acquisition. The acquisition of Stage is intended to provide the Company access to transformative cell selection and activation capabilities, next generation manufacturing automation technologies, enhanced control of its supply chain, and lower expected long-term cost of goods. None of the goodwill is expected to be deductible for income tax purposes. The Company made a Section 338(g) election under the Internal Revenue Code with respect to this acquisition, resulting in the acquired entity being treated for U.S. tax purposes as a newly incorporated company. Under such

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election, the U.S. tax basis of the assets and liabilities of Stage were stepped up to fair value as of the closing date of the acquisition to reflect the consequences of the Section 338(g) election.

Acquisition of X-Body, Inc.

In June 2015, the Company completed the acquisition of 100% of the outstanding equity in X-Body, Inc. ("X-Body"). The Company paid $21.3 million in cash and issued an aggregate of 366,434 shares of common stock, valued at $19.4 million based on the closing stock price on June 1, 2015 of $53.07 per share. Further, an additional 72,831 shares of common stock were issued to two former X-Body stockholders in the transaction, which shares are subject to monthly vesting over the three years following the closing of the transaction. These will be accounted for as post-acquisition compensation expenses.

The Company also agreed to pay additional amounts in cash upon the realization of specified milestones substantially as follows, with respect to products generated using the X-Body technology: $5.0 million per target upon the achievement, during a specified period, of a certain regulatory milestone for products that utilize a certain type of binding mechanism; up to $30.0 million upon the achievement, during a specified period, of regulatory and clinical milestones for the first product using another type of binding mechanism (any product using such type of binding mechanism, a "Type X Product"); $5.0 million per product upon the achievement, during a specified period, of a certain regulatory milestone for a certain number of subsequent Type X Products; $50.0 million upon the achievement, during a specified period, of a clinical milestone related to the first product with certain specified binding properties (a "Type Y Product"); and $20.0 million upon the achievement, during a specified period, of a clinical milestone related to the first product with certain other specified binding properties. If a Type X Product or a Type Y Product is commercialized, Juno can choose either to make a commercialization milestone payment for such a product or to pay a low single-digit royalty on net sales of such a product. The fair value of this contingent consideration was estimated to be $8.9 million at the date of acquisition. Payments could vary based on milestones that are reached.

The elements of the purchase consideration are as follows (in thousands):



Cash paid	$	21,331
Common stock issued	19,447
Fair value of contingent consideration (1)	8,944
Settlement of preexisting obligation (2)	1,123
Total consideration	$	50,845

(1)

The fair value of the contingent consideration was determined by calculating the probability-weighted milestone based on the assessment of the likelihood and estimated timing that certain milestones would be achieved. The fair value of the contingent consideration was estimated using a discount rate of 15.2%. The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due.


(2)	The settlement of preexisting obligation reflects the effective settlement of the Company’s preexisting prepaid contract research agreement with X-Body. No gain or loss was recognized by the Company on the effective settlement of this prepaid expense as of the acquisition date.



Net liabilities assumed	$	(181	)
Deferred tax liabilities	(1,099		)
Acquired in-process research and development	16,450
Goodwill	35,675
Total consideration	$	50,845

IPR&D assets are required to be classified as indefinite-lived assets until they become finite-lived assets upon the successful completion or the abandonment of the associated research and development effort. Accordingly, during the development period after the date of acquisition, these assets will not be amortized until regulatory approval is obtained in a major market, typically either the United States or the EU, subject to management judgment.

The goodwill recognized as a result of the X-Body acquisition is primarily attributable to the fact that the acquisition furthers the Company’s strategy of investing in technologies that augment the Company’s capabilities to create best-in-class engineered T cells against a broad array of cancer targets. The acquisition brings in-house to the Company an innovative discovery

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platform that interrogates the human antibody repertoire, rapidly selecting fully human antibodies with desired characteristics, even against difficult targets. None of the goodwill is expected to be deductible for income tax purposes.

Post-Acquisition and Pro Forma Consolidated Financial Information

The business acquisitions did not have a material impact on the Company’s consolidated statements of operations, and therefore actual and pro forma disclosures have not been presented. The intangible assets acquired in the business acquisitions are in-process research and development assets, and as such, there would be no pro forma adjustment needed for the amortization of intangible assets.

Transaction Costs

The Company incurred approximately $0.4 million and $4.5 million of direct transaction costs related to the business acquisitions for the years ended December 31, 2016 and 2015, respectively. These costs are included in general and administrative expenses in the consolidated statements of operations.

4. Goodwill and Intangible Assets

The following table summarizes the changes in the carrying amount of goodwill (in thousands):



Balance as of December 31, 2015	$	122,092
Goodwill acquired during the year ended December 31, 2016	99,214
Balance as of December 31, 2017 and 2016	$	221,306

There was no impairment of goodwill for the years ended December 31, 2017, 2016, and 2015.

Intangible assets consist of developed technology and IPR&D obtained from the 2016 AbVitro acquisition and the 2015 Stage and X-Body acquisitions. IPR&D assets are required to be classified as indefinite-lived assets until they become finite-lived assets upon the successful completion of the associated research and development effort.

Beginning in the second quarter of 2017, the intangible asset recognized in connection with the AbVitro acquisition completed development and reached technological feasibility, and the Company began amortizing the asset over an estimated life of three years.

Identifiable intangible assets consisted of the following (in thousands):



	December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net
Finite-lived intangible assets:
Developed technology	$	29,017	$	(7,254	)	$	21,763
Indefinite-lived intangible assets:
In-process research and development	53,494		—			53,494
Total identifiable intangible assets	$	82,511	$	(7,254	)	$	75,257



	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net
Indefinite-lived intangible assets:
In-process research and development	$	77,986	$	—	$	77,986
Total identifiable intangible assets	$	77,986	$	—	$	77,986

Amortization expense recognized related to intangible assets was $7.3 million for the year ended December 31, 2017. There was no amortization expense recognized related to intangible assets for the years ended December 31, 2016 and 2015 as all intangibles were deemed to be indefinite-lived at that time.

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Estimated future amortization expense related to finite-lived intangible assets as of December 31, 2017 is as follows (in thousands):



Year ending December 31:
2018	$	9,672
2019	9,672
2020	2,419
Total future amortization expense	$	21,763

There was no impairment of intangible assets for the years ended December 31, 2017, 2016, and 2015.

5. Collaboration and License Agreements

Celgene

Celgene Collaboration Agreement

In June 2015, the Company entered into a Master Research and Collaboration Agreement ("Celgene Collaboration Agreement") with Celgene pursuant to which the Company and Celgene agreed to collaborate on researching, developing, and commercializing novel cellular therapy product candidates and other immuno-oncology and immunology therapeutics, including, in particular, CAR and TCR product candidates. The Celgene Collaboration Agreement became effective in July 2015 and was amended and restated in August 2015.

Pursuant to the collaboration, prior to the exercise of an option for a program, each of the Company and Celgene will conduct independent programs to research, develop, and commercialize such product candidates (including, in the case of the Company, its CD19 and CD22 programs). Each party has certain options to obtain either an exclusive license to develop and commercialize specified product candidates arising from specified types of programs conducted by the other party within the scope of the collaboration, or the right to participate in the co-development and co-commercialization of specified product candidates arising from such programs, in each case in specified territories. Further, following the exercise by Celgene of an option to license product candidates from certain Company developed programs, excluding the CD19 program and the CD22 program, Celgene has the right to exercise an option for a specified number of such programs to co-develop and co-commercialize products arising out of such programs in certain countries, and each of Celgene and Company has the right to elect to participate in certain commercialization activities for products in such programs in territories where it is not leading commercialization of such product. The parties may exercise their options with respect to specified product candidates arising under programs within the scope of the collaboration until the tenth anniversary of the effective date of the Celgene Collaboration Agreement (the "Research Collaboration Term"), subject to a tail period applicable to certain programs, for which options have not yet been exercised as of the expiration of the Research Collaboration Term. BCMA-directed product candidates are excluded from the collaboration.

For Company-originated programs (which includes the CD19 program and may include the CD22 program) under the collaboration for which Celgene exercises its option to obtain an exclusive license:

•

The Company would be responsible for research and development in the United States, Canada, and Mexico, and, for cellular therapy product candidates, China, and would retain commercialization rights and would lead commercialization activities and book sales of products in those countries (the "Juno Territory"), subject to Celgene’s option, for a specified number of programs (excluding the CD19 program and the CD22 program), to elect to co-develop and co-commercialize product candidates arising from such programs, or for other programs, to elect to participate in certain commercialization activities in the Juno Territory, as further described below. Under all such license agreements, the Company has the right to participate in specified commercialization activities arising from such programs in certain major European markets;

•

On a program-by-program basis, Celgene would receive an exclusive license, and pursuant to such license would be responsible for, development and commercialization outside of the Juno Territory (the "Celgene Territory"), including by leading commercialization activities and booking sales of products in the Celgene Territory. Celgene would be required to pay the Company a royalty on sales of products arising from such program in the Celgene Territory as further described below; and


•	For Company-originated programs, excluding CD19 and CD22, Celgene would have the right to exercise an option for a specified number of such programs, to obtain the right to co-develop and co-commercialize products arising from

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such program worldwide, except for China. For each such program, following Celgene’s exercise of such option, the parties would enter into an agreed form of co-development and co-commercialization agreement, pursuant to which:


•	Celgene would have the right to co-develop and co-commercialize product candidates arising from such programs, with the parties each entitled to bear and receive an equal share of the profits and losses arising from development and commercialization activities in such programs worldwide (other than China); and

•

The Company would remain the lead party for development and commercialization activities for such product candidates in the Juno Territory, and Celgene would remain the lead party for development and commercialization activities for such product candidates in the Celgene Territory, subject to the Company’s right to participate in certain commercialization activities in certain major European countries, and Celgene’s right to elect to participate in a specified percentage of commercialization activities in the Juno Territory.

For other Company originated programs for which Celgene does not exercise such a co-development and co-commercialization right, Celgene would also have the right to elect to participate in up to a specified percentage of certain commercialization activities for product candidates in such program in the Juno Territory, and the Company would have the right to elect to participate in up to a specified percentage of certain commercialization activities for such product candidates in certain major European markets.

For Celgene-originated programs under the collaboration for which the Company exercises its option to obtain an exclusive license, the parties will enter into a co-development and co-commercialization agreement and:


•	The parties will share global profits and losses from development and commercialization activities with 70% allocated to Celgene and 30% allocated to the Company; and


•	Celgene will lead global development and commercialization activities, subject to the Company’s right to elect to participate in up to a specified percentage of certain commercialization activities in the Juno Territory under certain circumstances and in certain major European countries.

Furthermore, each of Celgene and the Company will have the exclusive right to exercise options to co-develop and co-commercialize product candidates arising out of programs for which the other party in-licenses or acquires rights that are within the scope of their collaboration, where such rights are available to be granted, with the parties each bearing an equal share of the profits and losses arising out of such programs following the exercise of such option. In general, for such programs where the rights are in-licensed or acquired by the Company and for which Celgene exercises its options, the Company will be the lead party for development and commercialization of product candidates arising from such programs in the Juno Territory, subject to Celgene’s right to elect to participate in certain commercialization activities for such product candidates in the Juno Territory, and Celgene will be the lead party for development and commercialization of product candidates arising in such programs in the Celgene Territory, subject to the Company’s right to elect to participate in certain commercialization activities for such product candidates in certain major European markets. Conversely, for such programs where the rights are in-licensed or acquired by Celgene and for which the Company exercises its options, Celgene will be the lead party for development and commercialization activities for product candidates arising from such programs on a worldwide basis, subject to the Company’s right to elect to participate in certain commercialization activities for such product candidates in the Juno Territory and in certain major European markets. The party exercising an option for these in-licensed or acquired programs is generally required to pay to the other party an upfront payment equal to one half of the costs incurred by other party in connection with the acquisition of rights to such programs.

Under the terms of the Celgene Collaboration Agreement, the Company received an upfront cash payment of $150.2 million. In addition to the upfront payment, Celgene is required to pay to the Company an additional fee if it exercises its option for each of the CD19 program and the CD22 program, totaling, if the options are exercised for both programs during the initial opt-in window, $100.0 million. As described below, in April 2016, Celgene exercised its option for the CD19 program and paid the Company $50.0 million as an option exercise fee. Upon a party’s exercise of the option for any other program (other than certain in-licensed or acquired programs where a party exercises its option at the time such program is acquired), the party exercising the option is required to pay to the other party a payment at the time of exercise of its option, calculated as a multiple of the costs incurred by the other party in relation to the development activities for such program prior to the exercise of the option, with such multiple based on the point in development of such product at which such party exercises such option. For programs for which the parties have entered into a license agreement, the Company will also receive royalties from Celgene, for product candidates arising from the CD19 and CD22 programs, at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory, and for product candidates arising from other Company programs that are subject to a license agreement, tiered royalties on net sales of such product candidates in the Celgene Territory, at percentages ranging from the high single digits to the mid-teens, calculated based on the stage of development at which Celgene exercises its option for such program.

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Celgene CD19 License

In April 2016, Celgene exercised its opt-in right to develop and commercialize product candidates from the Company’s CD19 program in the Celgene Territory. As a result, the Company and Celgene entered into a license agreement (the "Celgene CD19 License") pursuant to which Celgene received an exclusive, royalty-bearing license to develop and commercialize therapeutic CAR product candidates from the Company’s CD19 program in the Celgene Territory. The Company retains all rights to develop further and commercialize such product candidates in the Juno Territory. The Company and Celgene will generally share worldwide research and development costs for certain CD19 product candidates, although either party may opt out of funding specific studies led by the other. The Company will be responsible for commercialization costs in the Juno Territory and Celgene will be responsible for commercialization costs in the Celgene Territory. The Company has the right to participate in specified commercialization activities for licensed products arising from the CD19 program in certain major European markets. Celgene has the right to participate in specified commercialization activities in North America for licensed products for certain indications under the CD19 program. The Company received a $50.0 million option exercise fee from Celgene upon the exercise of Celgene’s option for the CD19 program. The Company will also receive royalties from Celgene for CAR product candidates arising from the CD19 program at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory.

2015 Celgene Share Purchase Agreement

In June 2015, the Company also entered into a Share Purchase Agreement (the "2015 Celgene SPA") with Celgene. Pursuant to the 2015 Celgene SPA, the Company sold 9,137,672 shares of the Company’s common stock to Celgene at an aggregate cash price of approximately $849.8 million, or $93.00 per share of common stock, on August 4, 2015. The 2015 Celgene SPA also provides for additional sales of shares by the Company to Celgene as follows:

•

First Period Top-Up Rights. Until June 29, 2020, Celgene has the annual right, following the filing of each Annual Report on Form 10-K filed by the Company, to purchase additional shares from the Company at a market average price, allowing it to "top up" to an ownership interest equal to 10% of the then-outstanding shares (after giving effect to such purchase), subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any given year, then the percentage of ownership targeted for a top-up stock purchase for the next year will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise).

•

First Acquisition Right. During the period beginning on June 29, 2019 and ending on June 28, 2020, subject to Celgene opting in to a certain number of Company programs under the Celgene Collaboration Agreement, Celgene will have the right (the "First Acquisition Right") to purchase up to such number of shares that will allow Celgene to have ownership of 19.99% of the then-outstanding shares of the Company’s common stock (after giving effect to such purchase) at the closing price of the common stock on the principal trading market (currently The Nasdaq Global Select Market) on the date of exercise (the "FAR Base Price"), plus a premium on all shares in excess of the number of shares for which Celgene would then be able to purchase if it then had a top-up right as described in the preceding paragraph.

•

Second Period Top-Up Rights. After the closing of the purchase of shares upon the exercise of the First Acquisition Right until the SAR Termination Date (as defined below), in the event that Celgene has been diluted after exercising the First Acquisition Right, the Company may elect annually, upon the filing of each Annual Report on Form 10-K filed by the Company, to offer Celgene the right to purchase additional shares from the Company at 105% of market average price, allowing Celgene to "top up" to an ownership interest (after giving effect to such purchase) equal to the percentage ownership of shares that Celgene obtained upon exercise of the First Acquisition Right, subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any year in which it is offered such right by the Company, then the percentage of ownership targeted for a top-up stock purchase for the next year it is offered such top-up right will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise). The "SAR Termination Date" is the later of (a) June 29, 2025, and (b) the earlier of (x) the date that is 6 months following the date that the conditions to the exercise of the Second Acquisition Right (as defined herein) are satisfied and (y) December 29, 2025.

•

Second Acquisition Right. During the period beginning on June 29, 2024 and ending on the SAR Termination Date, subject to each of Celgene and the Company opting into a certain number of programs under the Celgene Collaboration Agreement, and provided that Celgene exercised the First Acquisition Right so as to obtain an aggregate percentage ownership of at least 17% of the Company, Celgene will have the right (the "Second Acquisition Right") to purchase up to such number of shares that will allow Celgene to have ownership of 30% of the then-outstanding

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shares of the Company’s common stock (after giving effect to such purchase) at the closing price of the common stock on the principal trading market on the date of exercise (the "SAR Base Price"), plus a premium on all shares in excess of the number of shares for which Celgene would then be able to purchase if it then had a top-up right as described in the preceding paragraph.

•

Final Top-Up Rights. Following the closing of the purchase of shares upon the exercise of the Second Acquisition Right and until the Celgene Collaboration Agreement expires or is terminated, Celgene would have the annual right, in the event that Celgene has been diluted after exercising the Second Acquisition Right, following the filing of each Annual Report on Form 10-K filed by the Company, to purchase additional shares from the Company at a price equal to 105% of market average price, allowing it to "top up" to the percentage ownership it had attained upon exercising the Second Acquisition Right, less 250 basis points, subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any given year, then the percentage of ownership targeted for a top-up stock purchase for the next year will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise). These rights and the other described top-up rights, as well as the First Acquisition Right and Second Acquisition Right, may be limited or eliminated in certain circumstances when and if Celgene disposes of any of its shares.

The First Period Top-Up Rights, Second Period Top-Up Rights and Third Period Top-Up Rights are collectively referred to herein as the "Top-Up Rights". The First Acquisition Right and Second Acquisition Right are collectively referred to herein as the "Acquisition Rights."

Each closing of the sale of shares to Celgene is subject to customary closing conditions, including termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

The First Period Top-Up Right that was triggered by the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 permitted Celgene to top-up its ownership stake in the Company to 10%. Celgene exercised its right in part and purchased 1,137,593 shares at a price of $41.32 per share, for an aggregate cash purchase price of $47.0 million, to bring its ownership stake in the Company to 9.76%. As Celgene did not exercise this First Period Top-Up Right in full to reach 10% ownership, future First Period Top-Up Rights have been limited to permit Celgene to top-up its ownership stake in the Company to only 9.76%.

In March 2017, Celgene exercised its First Period Top-Up Right triggered by the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and purchased 75,568 shares at a price of $22.39 per share, for an aggregate cash purchase price of $1.7 million, to top-up its ownership stake of the Company's common stock to the permitted amount of 9.76%. The First Period Top-Up Right that will be triggered by the filing of the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2017 will again permit Celgene to top-up its ownership stake of the Company’s common stock to 9.76%.

In September 2017, concurrent with the closing of the September 2017 follow-on public offering, the Company closed a private placement of 758,327 shares of its common stock, at a price of $41.00 per share, with Celgene for an aggregate purchase price of $31.1 million.

Accounting Analysis

The Celgene Collaboration Agreement contains the following deliverables: (1) access to certain of the Company’s technology through a non-exclusive, worldwide, royalty-free right and license to conduct certain activities under the collaboration, and (2) participation on various collaboration committees. The Company considered the provisions of the multiple-element arrangement guidance in determining how to recognize the revenue associated with the two deliverables. The Company has accounted for access to certain of the Company’s technology and participation on various collaboration committees as a single unit of accounting because the two deliverables do not have standalone value and both obligations will be delivered throughout the estimated period of performance.

The Company has identified the initial consideration for the Celgene Collaboration Agreement, which is the best estimated selling price, as the $150.2 million upfront payment. The Company determined that each of the identified deliverables have the same period of performance (the ten years research collaboration term) and have the same pattern of revenue recognition, ratably over the period of performance. As a result, the $150.2 million in arrangement consideration was recorded in deferred revenue and is being recognized over the ten year research collaboration term.

The Company also evaluated its own options pertaining to Celgene’s programs. If the Company exercises any of its options, it is required to make a payment equal to a percentage of the costs incurred by Celgene prior to the exercise of the option in connection with the research and development activities and regulatory activities for such development candidate. The

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percentage of costs to be paid varies based on the point in development of such product at the time the Company exercises its option. The Company will account for the payments as research and development expense upon the exercise of the related option. The Company determined that payments related to licenses that will be used in future research and development activities with no proven alternative future use at the time of acquisition by the Company should be expensed when incurred in accordance with the Company’s accounting policy.

In addition, Celgene purchased 9,137,672 shares of the Company’s common stock at a price of $93.00 per share, resulting in gross proceeds of $849.8 million. The Company determined that this initial purchase of common stock combined with the embedded future stock purchase rights had a fair value of $849.8 million and this amount was recorded in equity.

The Company evaluated and determined that the Top-Up Rights and Acquisition Rights granted to Celgene under the 2015 Celgene SPA are not freestanding instruments as these rights are not legally detachable and separately exercisable from the Company’s common stock. In addition, the Company has further assessed whether the Top-Up Rights and Acquisition Rights should be accounted for as derivative instruments and determined that derivative accounting does not apply. The Company determined that the Top-Up Rights and Acquisition Rights are embedded and inseparable from the initial stock purchase and no subsequent remeasurement is necessary.

The Celgene CD19 License agreement contains the following deliverables: (1) an exclusive license with respect to intellectual property, (2) transfer of certain clinical and manufacturing knowledge and related support, and (3) participation on various collaboration committees during the technology transfer period. The Company has accounted for these deliverables as a single unit of accounting because they do not have standalone value and the obligations will be delivered throughout the estimated period of performance. The $50.0 million option exercise fee was recorded in deferred revenue and is being recognized ratably over the period in which the Company expects to fulfill these performance obligations, which was initially determined to be approximately two years.

To the extent the Company’s research and development costs for certain CD19 product candidates exceed Celgene’s research and development costs for the CD19 program for a given quarter, Celgene is required to provide partial reimbursement to the Company for such costs. Either party may opt out from the cost sharing arrangement for specific studies being led by the other party, with the possibility to opt back in to the study in the future at a premium in exchange for the right to use data from that study in such party's territory. The Company recognizes the reimbursement by Celgene as revenue in the period the services are performed. To the extent Celgene’s research and development costs for the CD19 program exceed the Company’s research and development costs for certain CD19 product candidates for a given quarter, the Company is required to provide Celgene partial reimbursement for such costs. The Company recognizes the reimbursement to Celgene as additional research and development expense in the period the services are provided.

For the year ended December 31, 2017, the Company recognized revenue of $86.1 million in connection with the Celgene Collaboration Agreement and the Celgene CD19 License, comprised of $41.4 million in upfront and opt-in fees recognized, and $44.7 million of cost-sharing revenue. For the year ended December 31, 2016, the Company recognized revenue of $64.6 million in connection with the Celgene Collaboration Agreement and the Celgene CD19 License, comprised of $34.1 million in upfront and opt-in fees recognized, and $30.5 million of cost-sharing revenue. The Company recognized revenue of $5.1 million in connection with the Celgene Collaboration Agreement for the year ended December 31, 2015 related to upfront fees recognized. As of December 31, 2017 and 2016, there was $13.8 million and $11.2 million due from Celgene included in accounts receivable on the consolidated balance sheets.

Fred Hutchinson Cancer Research Center

In October 2013, the Company entered into a collaboration agreement with FHCRC, focused on research and development of cancer immunotherapy products. The agreement has a six year term and can be extended if mutually agreed upon. The research is conducted under project orders containing plans and budgets approved by the parties. In December 2015, the Company entered into an agreement with FHCRC to support the establishment of a clinical immunotherapy trial unit.

Excluding the expense or gain related to success payment obligations, the Company recognized $15.8 million, $16.1 million, and $10.3 million of research and development expenses in connection with its collaboration and funding agreements with FHCRC for the years ended December 31, 2017, 2016, and 2015, respectively.

In October 2013, the Company granted FHCRC rights to certain share-based success payments. Under the terms of this arrangement, the Company may be required to make success payments to FHCRC based on increases in the estimated fair value of the Company’s common stock. The potential payments are based on multiples of increasing value based on a comparison of the fair value of the common stock relative to its original $4.00 issuance price. The payments are based on whether the value of the Company’s common stock meets or exceeds certain specified threshold values per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. The aggregate success

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payments to FHCRC are not to exceed $375.0 million which would only occur at a stock valuation of $160.00 per share. In June 2014, the Company entered into an agreement with FHCRC in which it can offset certain indirect costs related to the collaboration projects conducted by FHCRC against any success payments. The term of the success payment agreement ranges from eight to eleven years depending upon when or if the company receives FDA approval of certain of its product candidates as specified in the agreement.

The following table summarizes all possible remaining FHCRC success payments, payable in cash or publicly-traded equity at the Company’s discretion:



Multiple of Initial Equity Value at issuance	15.0x		20.0x		25.0x		30.0x		35.0x		40.0x
Per share common stock price required for payment	$	60.00	$	80.00	$	100.00	$	120.00	$	140.00	$	160.00
Success payment(s) (in millions)	$	50	$	50	$	50	$	50	$	50	$	50

The success payments will be owed if the value of the Company’s common stock on the contractually specified valuation measurement dates during the term of the success payment agreement equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by events which include an initial public offering of the Company’s stock, a merger, an asset sale, or the sale of the majority of the shares held by certain of the Company’s stockholders or the last day of the term of the success payment agreement. If a higher success payment tier is first met at the same time a lower tier is first met, both tiers will be owed. Any previous success payments made to FHCRC are credited against the success payment owed as of any valuation measurement date, so that FHCRC does not receive multiple success payments in connection with the same threshold. A payment may be triggered on the first anniversary of the closing of the IPO (or the date that is 90 days following such anniversary, at the Company’s option, if the Company is contemplating a capital market transaction during such 90 day period). The value of any such success payment will be determined by the average trading price of a share of the Company’s common stock over the consecutive 90-day period preceding such determination date. The value of any success payment payable upon a merger or an asset sale will be equal to the cash or value of securities received for each share of the Company's common stock.

In December 2015, success payments to FHCRC were triggered in the aggregate amount of $75.0 million, less indirect cost offsets of $3.3 million. The Company elected to make the payment in shares of its common stock, and thereby issued 1,601,085 shares of its common stock to FHCRC in December 2015.

The estimated fair value of the total success payment obligation to FHCRC, after giving effect to the success payments achieved in December 2015, was approximately $70.3 million and $22.9 million as of December 31, 2017 and 2016, respectively. With respect to the FHCRC success payment obligations, the Company recognized expense of $41.4 million for the year ended December 31, 2017, a gain of $20.5 million for the year ended December 31, 2016, and expense of $44.3 million for the year ended December 31, 2015. The gain and expense are recorded within research and development expense in the consolidated statements of operations and represent the change in the FHCRC success payment liability during such periods and twelve months of accrued expense. The FHCRC success payment liability on the consolidated balance sheets as of December 31, 2017 and 2016 was $54.6 million and $13.3 million, respectively.

The Company’s liability for share-based success payments under the FHCRC collaboration is carried at fair value and recognized as expense over the term of the six year collaboration agreement. To determine the estimated fair value of the success payment liability the Company uses a Monte Carlo simulation methodology which models the future movement of stock prices based on several key variables. The following variables were incorporated in the calculation of the estimated fair value of the success payment liability as of the following balance sheet dates:



	December 31,
Assumptions	2017			2016
Fair value of common stock	$	45.71		$	18.85
Risk free interest rate	2.07% - 2.32%			1.88% - 2.30%
Expected volatility	75		%	75		%
Expected term (years)	3.79 - 6.79			4.79 - 7.79

The computation of expected volatility was estimated using a combination of available information about the historical volatility of stocks of similar publicly-traded companies for a period matching the expected term assumption and our historical and implied future volatility. The risk free interest rate and expected term assumptions depend on the estimated timing of FDA approval. In addition, the Company incorporated the estimated number and timing of valuation measurement dates in the calculation of the success payment liability.

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In October 2013, the Company entered into a license agreement with FHCRC, pursuant to which the Company acquired an exclusive, worldwide, sublicensable license under certain patent rights, and a non-exclusive, worldwide, sublicensable license under certain technology, to research, develop, manufacture, improve, and commercialize products and processes covered by such patent rights or incorporating such technology for all therapeutic uses for the treatment of human cancer. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including target specific constructs and customized spacer regions, TCR constructs, and their use for immunotherapy. The Company classifies on the consolidated statements of operations payments accrued or made under its licensing arrangements based on the underlying nature of the expense. Expenses related to the reimbursement of legal and patent costs are classified as general and administrative because the nature of the expense is not related to the research or development of the technologies the Company is licensing.

The Company also agreed to pay FHCRC annual maintenance fees, milestone payments, and royalties as a percentage of net sales of licensed products.

Milestone payments to FHCRC of up to an aggregate of $6.8 million per licensed product, including JCAR014 and JCAR017, are triggered upon the achievement of specified clinical and regulatory milestones and are not creditable against royalties. The Company may terminate the license agreement at any time with advance written notice.

Memorial Sloan Kettering Cancer Center

In November 2013, the Company entered into a sponsored research agreement with MSK, focused on research and development relating to chimeric antigen receptor T cell technology. The research is conducted under project orders containing plans and budgets approved by the parties. The Company also entered into a master clinical study agreement with MSK for clinical studies to be conducted at MSK on the Company’s behalf. Each such study will be conducted in accordance with a written plan and budget and protocol, or separate clinical trial agreement, approved by the parties. The Company is also party to separate clinical study agreements with MSK.

Excluding the expense or gain related to success payment obligations, the Company recognized $6.8 million, $2.8 million, and $4.7 million of research and development expenses in connection with its research and clinical agreements with MSK for the years ended December 31, 2017, 2016, and 2015, respectively.

The Company granted MSK rights to certain share-based success payments. Under the terms of this arrangement, the Company may be required to make success payments to MSK based on the increases in the estimated fair value of the Company’s common stock. The potential payments are based on multiples of increasing value based on a comparison of the fair value of the common stock relative to its original $4.00 issuance price. The payments are based on whether the value of the Company’s common stock meets or exceeds certain specified threshold values per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. The aggregate success payments to MSK are not to exceed $150.0 million, which would only occur at a stock valuation of $120.00 per share. In October 2015, the Company entered into an agreement with MSK in which certain indirect costs related to certain clinical studies and research projects conducted by MSK are creditable against any success payments. This agreement was amended by the Company in December 2015. The term of the success payment agreement ranges from eight to eleven years depending upon when or if the company receives FDA approval of certain of its product candidates as specified in the agreement.

The following table summarizes all possible remaining MSK success payments, payable in cash or publicly-traded equity at the Company’s discretion:



Multiple of Initial Equity Value at issuance	15.0x		30.0x
Per share common stock price required for payment	$	60.00	$	120.00
Success payment(s) (in millions)	$	70	$	70

The success payments will be owed, if the value of the Company’s common stock on contractually specified valuation measurement dates equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by events which include an initial public offering of the Company’s stock, a merger, an asset sale, or the sale of the majority of the shares held by certain of the Company’s stockholders or the last day of the term of the success payment agreement. If a higher success payment tier is met at the same time a lower tier is met, both tiers will be owed. Any previous success payments made to MSK are credited against the success payment owed as of any valuation measurement date, so that MSK does not receive multiple success payments in connection with the same threshold. A payment may be triggered on the first anniversary of the closing of the IPO (or the date that is 90 days following such anniversary, at the Company’s option, if the Company is contemplating a capital market transaction during such 90 day period). The value of any such success payment will be determined by the average trading price of a share of the Company’s common stock over the consecutive 90-day period preceding such

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determination date. The value of any success payment payable upon a merger or an asset sale will be equal to the cash or value of securities received for each share of the Company's common stock.

In December 2015, a success payment to MSK was triggered in the amount of $10.0 million, less indirect cost offsets of $1.0 million. The Company elected to make the payment in shares of its common stock, and thereby issued 240,381 shares of its common stock to MSK in March 2016. In April 2016, the Company repurchased the shares issued to MSK at a price per share equal to $41.90.

The estimated fair value of the total success payment obligation to MSK, after giving effect to the success payment achieved in December 2015 and paid in March 2016, was approximately $43.2 million and $14.1 million as of December 31, 2017 and 2016, respectively. With respect to the MSK success payment obligations, the Company recognized expense of $27.3 million for the year ended December 31, 2017, a gain of $12.0 million for the year ended December 31, 2016, and expense of $7.3 million for the year ended December 31, 2015. The gain and expense are recorded within research and development expense in the consolidated statements of operations and represent the change in the MSK success payment liability during such periods and twelve months of accrued expense. The MSK success payment liability on the consolidated balance sheets as of December 31, 2017 and 2016 was $36.9 million and $9.5 million, respectively.

The Company’s liability for share-based success payments under the MSK collaboration is carried at fair value and recognized as expense over the term of the five year collaboration agreement. To determine the estimated fair value of the success payment liability, the Company uses a Monte Carlo simulation methodology which models the future movement of stock prices based on several key variables. The following variables were incorporated in the calculation of the estimated fair value of the success payment liability as of the following balance sheet dates:



	December 31,
Assumptions	2017			2016
Fair value of common stock	$	45.71		$	18.85
Risk free interest rate	2.08% – 2.32%			1.90% – 2.31%
Expected volatility	75		%	75		%
Expected term (years)	3.89 - 6.89			4.89 – 7.89

The computation of expected volatility was estimated using a combination of available information about the historical volatility of stocks of similar publicly-traded companies for a period matching the expected term assumption and the Company's historical and implied volatility. The risk free interest rate and expected term assumptions depend on the estimated timing of FDA approval. In addition, the Company incorporated the estimated number and timing of valuation measurement dates in the calculation of the success payment liability.

In November 2013, the Company entered into a license agreement with MSK, pursuant to which the Company acquired a worldwide, sublicensable license to specified patent rights and intellectual property rights related to certain know-how to develop, make, and commercialize licensed products and to perform services for all therapeutic and diagnostic uses, which license is exclusive with respect to such patent rights and tangible materials within such know-how, and non-exclusive with respect to such know-how and related intellectual property rights. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including bispecific and armored CARs, and their use for immunotherapy.

The Company agreed to pay MSK milestone payments and royalties as a percentage of net sales of licensed products and services by us or our affiliates and sublicensees.

Milestone payments to MSK of up to an aggregate of $6.8 million per licensed product, including JCAR015, are triggered upon the achievement of specified clinical and regulatory milestones and are not creditable against royalties. The Company may terminate the license agreement at any time with advance written notice, but if the Company has commenced the commercialization of licensed products, the Company can only terminate at will if it ceases all development and commercialization of licensed products.

St. Jude Children’s Research Hospital/Novartis

In December 2013, the Company entered into a license agreement with St. Jude ("St. Jude License Agreement"), pursuant to which the Company (1) obtained control over, and the obligation to pursue and defend, St. Jude’s causes of action in Trustees of the University of Pennsylvania v. St. Jude Children’s Research Hospital, Civil Action No. 2:13-cv-1502-SD (E.D. Penn.), which concerned both U.S. Patent No. 8,399,645 (the "’645 Patent") and a contractual dispute between St. Jude and the Trustees of the University of Pennsylvania ("Penn") and (2) acquired an exclusive, worldwide, royalty-bearing license under certain patent rights owned by St. Jude, including the ’645 Patent, to develop, make, and commercialize licensed products and

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services for all therapeutic, diagnostic, preventative, and palliative uses. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs capable of signaling both a primary and a costimulatory pathway. Together with St. Jude, the Company was a party in, and was adverse to Penn and Novartis Pharmaceutical Corporation ("Novartis") in, that litigation (the "Penn litigation"), which was settled by the parties in April 2015.

The Company agreed to pay to St. Jude milestone payments and royalties as a percentage of net sales of licensed products and services, and a percentage of St. Jude’s reasonable legal fees incurred in connection with the Penn litigation. Included in general and administrative expense for the year ended December 31, 2015 was $5.5 million for legal reimbursements.

Milestone payments to St. Jude of up to an aggregate of $62.5 million are triggered upon the achievement of specified clinical, regulatory, and commercialization milestones for licensed products, including JCAR014 or JCAR017, and are not creditable against royalties. The Company can terminate the agreement for any reason upon advance written notice.

In April 2015, the Company and St. Jude agreed to settle the Penn litigation with Penn and Novartis. In connection with such settlement, in April 2015, the Company entered into a sublicense agreement (the "Penn/Novartis Sublicense Agreement") with Penn and an affiliate of Novartis pursuant to which the Company granted to Novartis a non-exclusive, royalty-bearing sublicense under certain patent rights, including the ‘645 Patent. This sublicense is not sublicensable without the Company’s prior written consent, although Novartis may authorize third parties to act on its behalf with respect to the manufacture, development, or commercialization of Novartis’ licensed products and licensed services. Under the Penn/Novartis Sublicense Agreement, Novartis paid the Company an initial license fee of $12.3 million, which was recorded as revenue for the year ended December 31, 2015. In addition, Novartis is also required to pay mid-single digit royalties on the U.S. net sales of products and services related to the disputed contract and patent claims (the "Royalty Payments"), a low double digit percentage of the royalties Novartis pays to Penn for global net sales of those products (the "Penn Royalty Payments"), and milestone payments upon the achievement of specified clinical, regulatory, and commercialization milestones for licensed products (the "Milestone Payments"). If the Company achieves any of the milestones with respect to its own products leveraging the same patents, prior to Novartis, the related Milestone Payment will be reduced by 50%. In addition, if the Company achieves any milestone after Novartis, the Company will reimburse Novartis 50% of any Milestone Payment previously paid by Novartis to the Company in respect of such milestone. These milestones largely overlap with the milestones for which the Company may owe a payment to St. Jude under the St. Jude License Agreement and the Milestone Payments would in effect serve to partially offset the Company’s obligations to St. Jude with respect to such milestones. Novartis may terminate the Penn/Novartis Sublicense Agreement at will upon advance written notice to the Company.

In August 2017, a regulatory milestone was met under both the Penn/Novartis Sublicense Agreement and the St. Jude License Agreement, pursuant to which the Company recognized milestone revenue of $25.0 million from Novartis, and a corresponding research and development expense to St. Jude of $6.8 million. Additionally, in September 2017, the Company achieved two clinical milestones previously achieved by Novartis, and were obligated to reimburse Novartis 50% of the milestone payments previously paid. The Company recorded research and development expense of $7.1 million associated with the milestone repayment to Novartis.

In 2016, two clinical milestones were met under both the Penn/Novartis Sublicense Agreement and the St. Jude License Agreement, pursuant to which the Company recognized milestone revenue from Novartis of $14.3 million. The Company made corresponding payments to St. Jude of $12.5 million.

Seattle Children’s Research Institute

In February 2014, the Company entered into a sponsored research agreement with Seattle Children’s Research Institute ("SCRI"). The research is conducted under project orders containing plans and budgets approved by the parties. The Company has also entered into clinical support and manufacturing services agreements with SCRI related to the Company’s JCAR017 trials.

In February 2014, the Company entered into a license agreement with SCRI that grants the Company an exclusive, worldwide, royalty-bearing sublicensable license to certain patent rights to develop, make and commercialize licensed products and to perform licensed services for all therapeutic, prophylactic, and diagnostic uses. Effective June 2015, the license agreement was amended to include additional patent rights.

The Company is required to pay to SCRI annual license maintenance fees, creditable against royalties and milestone payments.

The Company also agreed to pay SCRI milestone payments and royalties as a percentage of net sales of licensed products and licensed services. Milestone payments to SCRI related to licensed products, including JCAR014 and JCAR017, are triggered upon the achievement of specified clinical, regulatory, and commercialization milestones and are not creditable against future royalties. The Company may terminate the license agreement for any reason with advance written notice.

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Opus Bio

In December 2014, the Company entered into a license agreement with Opus Bio, Inc. ("Opus Bio") pursuant to which the Company was granted an exclusive, worldwide, sublicensable license under certain patent rights and data to research, develop, make, have made, use, have used, sell, have sold, offer to sell, import and otherwise exploit products that incorporate or use engineered T cells directed against CD22 and that are covered by such patent rights or use or incorporate such data. Certain of the licensed patent rights are in-licensed by Opus Bio from the National Institutes of Health ("NIH"). Under the agreement, the Company is required to use commercially reasonable efforts to research, develop, and commercialize licensed products. Such development must be in accordance with the timelines provided in the license agreement for achievement of certain clinical, regulatory, and commercial benchmarks, and with the development plans set forth in Opus Bio’s agreements with the NIH.

Upon achievement of certain clinical, regulatory, and commercial milestones set forth in the license agreement, the Company will be obligated to pay Opus Bio additional consideration. The consideration due upon achievement of the first three clinical milestones would consist of additional shares of our common stock in an amount equal to the dollar value specified for the applicable milestone, divided by the greater of $10.92 and the arithmetic average of the daily volume-weighted average price of our common stock on The Nasdaq Global Select Market over the 30 trading days preceding the achievement of the milestone, up to a maximum of 4,807,692 shares in the aggregate (this minimum per share value and maximum number of shares subject, in each case, to adjustment for any stock dividend, stock split, combination of shares, or other similar events). Two of these milestones were achieved in 2016, for which the Company issued a total of 603,364 shares of its common stock as payment and recorded research and development expense of $23.2 million based on the fair value of the common stock on the date the milestones were achieved. After giving effect to the achievement of these milestones, as of December 31, 2017 one milestone required to be paid in equity in the amount of $25.0 million remains to be achieved, along with up to $215.0 million in milestones payable in cash.

The license agreement further provides that the Company is required to pay to Opus Bio tiered royalties based on annual net sales of licensed products. The Company will also be required to make certain pass-through payments owed by Opus Bio to NIH under its NIH license agreements, including certain patent costs, development and commercial milestones of up to $2.8 million in the aggregate, royalties based on annual net sales of licensed products. The Company may terminate the agreement at will upon advance written notice.

Fate Therapeutics

In May 2015, the Company entered into a collaboration and license agreement with Fate Therapeutics, Inc. ("Fate"), to identify and utilize small molecules to modulate the Company’s genetically-engineered T cell product candidates to improve their therapeutic potential for cancer patients. The Company paid an upfront fee of $5.0 million in cash and purchased 1,000,000 shares in Fate common stock at a purchase price of $8.00 per share, representing an approximately 5% ownership interest in Fate. The upfront fee and the premium paid for the common stock of $0.8 million were recorded as research and development expense for the year ended December 31, 2015. The investment in Fate is classified as available-for-sale, and reported at fair value with unrealized gains and losses included in accumulated other comprehensive income or loss. Under the collaboration and license agreement, for each product developed by the Company that incorporates modulators identified through the collaboration, the Company will also be required to pay Fate target selection fees and milestone payments upon achievement of clinical, regulatory, and commercial milestones, as well as low single-digit royalties on net sales of licensed products. The Company can terminate the agreement at will upon advance written notice.

Editas Medicine

In May 2015, the Company entered into a collaboration and license agreement with Editas Medicine, Inc. ("Editas"), to pursue research programs utilizing Editas’ genome editing technologies with Juno’s CAR and TCR technologies. The Company paid an upfront fee of $25.0 million in cash, which was recorded as research and development expense for the year ended December 31, 2015. Editas is also eligible to receive future research, regulatory, and commercial sales milestones for each program. Following the approval of any products resulting from the alliance, Editas is also eligible to receive tiered royalties on net sales of licensed products. The Company can terminate the agreement at will upon advance written notice.

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JW Cayman

The Company is a minority shareholder in JW (Cayman) Therapeutics Co., Ltd ("JW Cayman"), a company formed to develop novel cell-based immunotherapies for patients in China with hematologic and solid organ cancers. The Company accounts for its investment in JW Cayman as an equity method investment, and record income or losses proportionate to its equity ownership in the entity.

In December 2017, the Company entered into a license and strategic alliance agreement with JW Cayman and its affiliates. Under the agreement, JW Cayman received an exclusive, royalty-bearing license to develop and commercialize a therapeutic product candidate in China, as well as the right of first negotiation to license the Company’s future pipeline candidates for further development in China. In exchange, the Company will receive consideration from JW Cayman in the form of (i) $8.0 million of equity issued at a 10% discount upon the closing of the first tranche of JW Cayman's Series A financing from outside investors; (ii) an equity ownership top up to 35% upon the closing of the second tranche of JW Cayman's Series A financing from outside investors; (iii) a $5.0 million one-time milestone upon JW Cayman’s achievement of certain clinical or regulatory outcomes; and (iv) royalties on net sales of licensed products. All consideration under the license and strategic alliance agreement is contingent upon future events which have not occurred as of December 31, 2017. Consideration under this agreement was determined not to be fixed or determinable, and no revenue was recognized in connection with this license for the year ended December 31, 2017.

6. Cash Equivalents and Marketable Securities

The following tables summarize the estimated fair value of cash equivalents and marketable securities and gross unrealized holding gains and losses (in thousands):



	December 31, 2017
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
Cash equivalents:
Money market funds	$	164,160	$	—	$	—		$	164,160
U.S. government and agency securities	49,899		—		(1		)	49,898
Corporate debt securities	4,796		—		(1		)	4,795
Total cash equivalents	$	218,855	$	—	$	(2	)	$	218,853
Marketable securities:
U.S. government and agency securities	$	353,116	$	—	$	(686	)	$	352,430
Corporate debt securities	141,082		1		(169		)	140,914
Total marketable securities	$	494,198	$	1	$	(855	)	$	493,344
Long-term marketable securities:
U.S. government and agency securities	$	202,254	$	—	$	(1,006	)	$	201,248
Corporate debt securities	40,621		—		(244		)	40,377
Equity securities	1,700		4,410		—			6,110
Total long-term marketable securities	$	244,575	$	4,410	$	(1,250	)	$	247,735

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	December 31, 2016
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
Cash equivalents:
Money market funds	$	173,746	$	—	$	—		$	173,746
U.S. government and agency securities	4,712		—		—			4,712
Corporate debt securities	6,334		—		(6		)	6,328
Total cash equivalents	$	184,792	$	—	$	(6	)	$	184,786
Marketable securities:
Commercial paper	$	64,260	$	—	$	—		$	64,260
U.S. government and agency securities	320,224		51		(68		)	320,207
Corporate debt securities	160,379		18		(180		)	160,217
Total marketable securities	$	544,863	$	69	$	(248	)	$	544,684
Long-term marketable securities:
U.S. government and agency securities	$	132,622	$	4	$	(364	)	$	132,262
Corporate debt securities	55,920		1		(177		)	55,744
Equity securities	1,700		—		—			1,700
Total long-term marketable securities	$	190,242	$	5	$	(541	)	$	189,706

The following tables summarize the gross unrealized holding losses and fair value for investments in an unrealized loss position, and the length of time that individual securities have been in a continuous loss position (in thousands):



	December 31, 2017
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Marketable securities:
U.S. government and agency securities	$	230,977	$	(418	)	$	114,072	$	(268	)	$	345,049	$	(686	)
Corporate debt securities	93,733		(111		)	41,089		(58		)	134,822		(169		)
Total marketable securities	$	324,710	$	(529	)	$	155,161	$	(326	)	$	479,871	$	(855	)
Long-term marketable securities:
U.S. government and agency securities	$	201,247	$	(1,006	)	$	—	$	—		$	201,247	$	(1,006	)
Corporate debt securities	38,374		(244		)	—		—			38,374		(244		)
Total long-term marketable securities	$	239,621	$	(1,250	)	$	—	$	—		$	239,621	$	(1,250	)



	December 31, 2016
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Marketable securities:
U.S. government and agency securities	$	143,480	$	(56	)	$	9,988	$	(12	)	$	153,468	$	(68	)
Corporate debt securities	128,013		(180		)	—		—			128,013		(180		)
Total marketable securities	$	271,493	$	(236	)	$	9,988	$	(12	)	$	281,481	$	(248	)
Long-term marketable securities:
U.S. government and agency securities	$	129,163	$	(364	)	$	—	$	—		$	129,163	$	(364	)
Corporate debt securities	53,643		(177		)	—		—			53,643		(177		)
Total long-term marketable securities	$	182,806	$	(541	)	$	—	$	—		$	182,806	$	(541	)

The Company evaluated its securities for other-than-temporary impairment and considers the decline in market value for the securities to be primarily attributable to current economic and market conditions. For the debt securities, it is not more-likely-

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than-not that the Company will be required to sell the securities, and the Company does not intend to do so prior to the recovery of the amortized cost basis.

In 2016, the Company evaluated the near-term prospects of the Fate Therapeutics investment in relation to the severity and duration of the impairment. Based on that evaluation, the Company determined that the equity security was other-than-temporarily impaired ("OTTI"), and a loss of $5.5 million was recognized at that time. The OTTI loss is included in net loss on the consolidated statements of operations for the year ended December 31, 2016.

All of our marketable securities have an effective maturity date of three years or less and are available for use and therefore classified as available-for-sale.

7. Fair Value Measurements

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):



	December 31, 2017
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	164,160	$	—	$	—	$	164,160
U.S. government and agency securities	—		603,576		—		603,576
Corporate debt securities	—		186,086		—		186,086
Equity securities	6,110		—		—		6,110
Total financial assets	$	170,270	$	789,662	$	—	$	959,932
Financial liabilities:
Success payment liabilities	$	—	$	—	$	91,525	$	91,525
Contingent consideration	—		—		24,894		24,894
Total financial liabilities	$	—	$	—	$	116,419	$	116,419



	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	173,746	$	—	$	—	$	173,746
Commercial paper	—		64,260		—		64,260
U.S. government and agency securities	—		457,181		—		457,181
Corporate debt securities	—		222,289		—		222,289
Equity securities	1,700		—		—		1,700
Total financial assets	$	175,446	$	743,730	$	—	$	919,176
Financial liabilities:
Success payment liabilities	$	—	$	—	$	22,786	$	22,786
Contingent consideration	—		—		20,896		20,896
Total financial liabilities	$	—	$	—	$	43,682	$	43,682

The Company measures the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities. The Level 2 marketable securities include U.S. government and agency securities, corporate debt securities, and commercial paper and are valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

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The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands):



	Success Payment Liabilities			Contingent Consideration			Total
Balance at December 31, 2015	$	64,829		$	37,266		$	102,095
Payments	(9,569		)	(6,646		)	(16,215		)
Changes in fair value (1)	(32,474		)	(9,724		)	(42,198		)
Balance as of December 31, 2016	22,786			20,896			43,682
Changes in fair value (1)	68,739			3,998			72,737
Balance as of December 31, 2017	$	91,525		$	24,894		$	116,419

(1) The amount of success payments and contingent consideration milestones achieved and changes in fair value for success payment liabilities and contingent consideration are recorded in research and development expense in the consolidated statements of operations.

As of December 31, 2017 and 2016, the estimated fair value of the success payment obligations, after giving effect to the success payments achieved by FHCRC and MSK, was approximately $113.5 million and $37.0 million, respectively. With respect to the success payment obligations, the Company recognized expense of $68.7 million for the year ended December 31, 2017, a gain of $32.5 million for the year ended December 31, 2016, and expense of $51.6 million for the year ended December 31, 2015.

The Company utilizes significant estimates and assumptions in determining the estimated success payment liability and associated expense at each balance sheet date. The assumptions used to calculate the fair value of the success payments are subject to a significant amount of judgment including the expected volatility, estimated term, and estimated number and timing of valuation measurement dates. A small change in the assumptions and other inputs, such as the fair value of the Company's common stock, may have a relatively large change in the estimated valuation and associated liability and expense.

For example, keeping all other variables constant, a hypothetical 10% increase in the stock price at December 31, 2017 from $45.71 per share to $50.28 per share would have increased the expense recorded in 2017 associated with the success payment liability by $12.6 million. A hypothetical 10% decrease in the stock price from $45.71 per share to $41.14 per share would have decreased the expense recorded in 2017 associated with the success payment liability by $12.5 million. Further, keeping all other variables constant, a hypothetical 35% increase in the stock price at December 31, 2017 from $45.71 per share to $61.71 per share would have increased the expense recorded in 2017 associated with the success payment liability by $43.9 million. A hypothetical 35% decrease in the stock price from $45.71 per share to $29.71 per share would have decreased the expense recorded in 2017 associated with the success payment liability by $42.2 million.

In connection with the acquisitions of Stage and X-Body, the Company also agreed to pay additional amounts based on the achievement of certain technical, clinical, regulatory, and commercialization milestones. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant. The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained. Contingent consideration may change significantly as development progresses and additional data are obtained, impacting the Company’s assumptions regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved. In evaluating the fair value information, judgment is required to interpret the market data used to develop the estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates.

The significant unobservable inputs used in the measurement of fair value of the Company’s contingent consideration are probabilities of successful achievement of the milestones, the period in which these milestones are expected to be achieved ranging from 2018 to 2043, and a discount rate of 16%. Significant increases or decreases in any of the probabilities of success and other inputs would result in a significantly higher or lower fair value measurement, respectively.

In 2016 a milestone requiring payment by the Company of €6.0 million to the former stockholders of Stage was achieved and paid. As of December 31, 2017, the estimated fair values of the contingent consideration associated with the Stage and X-Body acquisitions, after giving effect to the milestone achieved, were $21.1 million and $3.8 million, respectively. As of December 31, 2016, the estimated fair values of the contingent consideration associated with the Stage and X-Body acquisitions were $16.6 million and $4.3 million, respectively. The Company recognized expense of $4.0 million, a gain of $9.7 million, and expense of $0.1 million related to the change in fair value of the contingent consideration for the years ended

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December 31, 2017, 2016, and 2015, respectively. This expense or gain is recorded in research and development expense in the consolidated statements of operations.

8. Property and Equipment, Net

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



	December 31,
	2017			2016
Leasehold improvements	$	66,221		$	5,079
Laboratory and manufacturing equipment	34,198			24,746
Building and building improvements	27,104			26,959
Construction in progress	10,902			22,083
Computer equipment, software and other	7,795			3,199
Land	6,250			6,250
Property and equipment, at cost	152,470			88,316
Less: Accumulated depreciation	(19,360		)	(6,582		)
Property and equipment, net	$	133,110		$	81,734

Depreciation expense related to property and equipment was $12.7 million, $7.4 million, and $1.6 million for the years ended December 31, 2017, 2016, and 2015, respectively.

9. Accrued Liabilities and Other Current Liabilities

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



	December 31,
	2017		2016
Accrued research and development expenses	$	21,812	$	9,220
Accrued bonus expense	19,883		8,844
Accrued clinical expenses	12,280		6,716
Accrued employee expenses	10,259		5,179
Other	17,010		6,863
Total accrued liabilities and other current liabilities	$	81,244	$	36,822

10. Long-term Debt

In April 2017, the Company entered into a debt agreement for a principal amount of $11.0 million which was used to fund the purchase of the Juno-owned and -operated manufacturing facility in Bothell, Washington. The terms of the agreement include a 4.55% annual fixed interest rate and provide for 120 monthly payments beginning June 1, 2017, with the final payment of all outstanding interest and principal due May 1, 2027.

The following table summarizes future principal payments on long-term debt as of December 31, 2017 (in thousands):



Year ending December 31:
2018	$	286
2019	299
2020	313
2021	328
2022	343
Thereafter	9,270
Total future principal payments	$	10,839

As of December 31, 2017, the fair value of the Company's long-term debt approximates carrying value based on the borrowing rates currently available to the Company for loans with similar terms using Level 2 inputs.

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11. Stock-Based Compensation

Equity Incentive Plans

Until the IPO, the Company maintained and granted restricted stock awards and option awards under the 2013 Stock Incentive Plan (the "2013 Plan") for employees, directors, consultants, and advisors to the Company. The 2013 Plan terminated as of the IPO as to future awards, but will continue to govern restricted stock awards and option awards previously granted thereunder.

In December 2014, the Company’s board of directors adopted the 2014 Equity Incentive Plan (the "2014 Plan"). The 2014 Plan became effective the day prior to the effective date of the registration statement for the Company’s IPO, and enables the grant of incentive and non-qualified stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, and other stock-based awards to employees, directors, consultants, and advisors to the Company. Terms of the awards, including vesting requirements, are determined by the Company’s board of directors or by a committee appointed by the board of directors.

The 2014 Plan provides for an annual increase in the shares available for issuance thereunder, to be added on the first day of each fiscal year, beginning with the year ending December 31, 2015 and continuing until the expiration of the 2014 Plan, equal to the lesser of (i) four percent (4%) of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year or (ii) such number of shares determined by the board of director or an authorized committee of the board of directors; provided, however, that such determination under clause (ii) will be made no later than the last day of the immediately preceding fiscal year. As of December 31, 2017, the total number of shares available for issuance pursuant to future awards under the 2014 Plan was 5,079,693. As a result of the operation of this provision, on January 1, 2018, an additional 4,593,012 shares became available for issuance under the 2014 Plan.

Generally, awards granted by the Company under the 2013 Plan and 2014 Plan vest over four years.

Employee Stock Purchase Plan

In December 2014, the Company’s board of directors adopted the 2014 Employee Stock Purchase Plan (the "ESPP"). The ESPP is administered by the Company’s board of directors or by a committee appointed by the board of directors. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The ESPP provides for consecutive six-month offering periods beginning on the first trading day on or after November 15 and May 15 of each year, and at the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. The number of shares issued under the ESPP was 159,548, 86,354 and 67,664 for the years ended December 31, 2017, 2016, and 2015, respectively.

The ESPP also provides for an annual share increase, to be added on the first day of each fiscal year, beginning with the year ending December 31, 2015 and continuing until the expiration of the ESPP, equal to the lesser of (i) one and a half percent (1.5%) of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year or (ii) such number of shares determined by the board of directors or authorized committee of the board of directors. As of December 31, 2017, the total number of shares available for future issuance pursuant to the ESPP was 5,668,909. As a result of the operation of this provision, on January 1, 2018, an additional 1,722,380 shares became available for issuance under the ESPP.

Stock-Based Compensation

Stock-based compensation expense is recognized in the consolidated statements of operations as follows (in thousands):



	Year Ended December 31,
	2017		2016		2015
Research and development (1)	$	44,866	$	38,432	$	17,089
General and administrative	27,736		20,953		14,852
Total stock-based compensation expense (2)	$	72,602	$	59,385	$	31,941


(1)	Included in research and development stock-based compensation expense for the year ended December 31, 2016 was $2.2 million related to the payout of employee stock options in connection with the AbVitro acquisition.


(2)	Included in stock-based compensation expense for the years ended December 31, 2017, 2016, and 2015 is $5.4 million, $7.3 million, and $8.1 million, respectively, related to service providers other than our employees, scientific founders,

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and directors, including $3.0 million, $3.9 million, and $6.2 million, respectively, for a former co-founding director who became a consultant upon his departure from the board of directors.

Total stock-based compensation cost related to unvested awards not yet recognized and the weighted average periods over which the awards are expected to be recognized as of December 31, 2017 for all employees are as follows:



	Stock Options		Restricted Stock and RSUs
Unrecognized stock-based compensation cost (in thousands)	$	147,555	$	38,188
Expected weighted average period compensation costs to be recognized (years)	2.63		2.58

In addition, as of December 31, 2017, we had approximately $74.8 million of unrecognized compensation cost related to PSAs and PSUs. The estimated compensation expense is adjusted for actual performance experience and is recognized ratably during the service period, or remaining service period, if and when it becomes probable that the performance conditions will be satisfied. As of December 31, 2017, there has been no stock-based compensation expense recognized related to PSAs and PSUs.

PSAs and PSUs

A summary of the Company’s PSA and PSU activity is as follows (in thousands, except per share data):



	PSAs and PSUs		Weighted Average Fair Value at Date of Grant per Share
Unvested shares as of December 31, 2016	—		$	—
Granted	1,632		45.81
Forfeited	(6	)	45.13
Unvested shares as of December 31, 2017	1,626		$	46.15

Vesting for the PSUs is contingent upon our achievement of prospective company performance goals. Actual performance may result in the ultimate award of 50 to 100 percent of the initial number of PSAs or PSUs granted, with the potential for no award if company performance goals are not achieved during the performance period.

PSAs and PSUs in the preceding table represent aggregate initial target awards, and do not reflect potential decreases resulting from the performance factor determined after the end of the performance period.

Restricted Stock and RSUs

A summary of the Company’s restricted stock and RSU activity is as follows (in thousands, except per share data):



	Restricted Stock and RSUs		Weighted Average Fair Value at Date of Grant per Share
Unvested shares as of December 31, 2015	5,477		$	3.72
Granted	382		29.96
Vested	(2,752	)	3.52
Forfeited	(52	)	10.04
Unvested shares as of December 31, 2016	3,055		7.10
Granted	1,516		24.78
Vested	(2,094	)	4.05
Forfeited	(583	)	7.05
Unvested shares as of December 31, 2017	1,894		$	24.59

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The following table summarizes additional information related to restricted stock and RSU activity (in thousands):



	Year Ended December 31,
	2017		2016		2015
Fair value of vested restricted stock and RSUs	$	62,764	$	90,464	$	158,541

Stock Options

A summary of the Company’s stock option activity is as follows (in thousands, except per share and contractual life data):



	Stock Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2015	5,219		$	30.25
Granted	4,091		29.09
Exercised	(412	)	7.11
Forfeited/Cancelled	(377	)	38.62
Outstanding as of December 31, 2016	8,521		30.28
Granted	4,869		30.68
Exercised	(822	)	23.35
Forfeited/Cancelled	(981	)	35.00
Outstanding as of December 31, 2017	11,587		$	30.54	8.33	$	191,489
Exercisable as of December 31, 2017	4,049		$	29.02	7.50	$	73,088

The fair value of each stock option granted has been determined using the Black-Scholes option pricing model. The material factors incorporated in the Black-Scholes model in estimating the fair value of the options granted to employees, directors, and consultants included the following:



	December 31,
Assumptions	2017		2016		2015
Risk free interest rate	1.62% – 2.40%		1.13% – 2.45%		1.53% – 2.35%
Expected volatility	75	%	70% – 75%		70% - 80%
Expected life (years)	3.22 - 9.96		5.27 - 9.97		6.02 - 10.00
Expected dividend yield	—	%	—	%	—	%

For employees, scientific founders, and directors, the expected life was calculated based on the simplified method as permitted by the SEC Staff Accounting Bulletin No. 110, Share-Based Payment. For other service providers, the expected life was calculated using the contractual term of the award. Management’s estimate of expected volatility was based on available information about the historical volatility of stocks of similar publicly-traded companies for a period matching the expected term assumption and its own historical and implied future volatility. The risk-free interest rate is based on a U.S. Treasury instrument whose term is consistent with the expected life of the stock options.

The following table summarizes additional information related to stock option activity:



	Year Ended December 31,
	2017		2016		2015
Aggregate intrinsic value of stock options exercised (in thousands)	$	18,431	$	12,177	10,925
Weighted average grant date fair value per share for options granted	$	15.79	$	18.30	$	32.51

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12. Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) and the adjustments to other comprehensive income (loss) are as follows (in thousands):



	Foreign Currency Translation Adjustments			Net Unrealized Gain (Loss) on Marketable Securities			Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2015	$	(605	)	$	(5,478	)	$	(6,083	)
Other comprehensive income (loss), net	(1,186		)	4,427			3,241
Balance as of December 31, 2016	(1,791		)	(1,051		)	(2,842		)
Other comprehensive income, net	4,274			1,989			6,263
Balance as of December 31, 2017	$	2,483		$	938		$	3,421

The details of the components of other comprehensive income (loss) are as follows (in thousands):



	Year Ended December 31,
	2017		2016			2015
Other comprehensive income:
Foreign currency translation adjustments (1)	$	4,274	$	(1,186	)	$	(605	)
Net change in unrealized gain (loss) on marketable securities:
Unrealized gain (loss) on marketable securities (2)	1,989		(1,063		)	(5,388		)
Reclassification adjustment for loss included in net loss (3)	—		5,490			—
Total other comprehensive income (loss)	$	6,263	$	3,241		$	(5,993	)


(1)	Foreign currency translation adjustments are not adjusted for income taxes as they relate to permanent investments in the Company's international subsidiary.


(2)	Unrealized gain (loss) on marketable securities is net of income taxes of $1.0 million and $0.3 million for the years ended December 31, 2017 and 2016, respectively. There was no income tax effect recorded on unrealized gain (loss) for the year ended December 31, 2015.


(3)	Amounts reclassified from accumulated other comprehensive income or loss are included in other-than-temporary impairment loss on the consolidated statements of operations. There was no income tax effect on this reclassification adjustment for the year ended December 31, 2016 as it does not create taxable income in future years.

13. Income Taxes

The Company recorded an income tax benefit of $6.0 million on a pre-tax loss of $443.1 million for the year ended December 31, 2017. The tax benefit recognized for the year ended December 31, 2017 primarily relates to the net loss incurred by the Company's German subsidiary.

In connection with the Celgene Collaboration Agreement and 2015 Celgene SPA, the Company does not expect that the $849.8 million in consideration allocable to the sale of the Company’s shares and future rights to purchase shares of common stock of the Company under the 2015 Celgene SPA will result in gain or loss in accordance with the IRC. The Company determined that the $150.2 million consideration allocable to the upfront payment for the Celgene Collaboration Agreement is fully taxable, partially in 2015, with the remainder in 2016. In connection with the Celgene CD19 License, the Company determined that the $50.0 million option exercise fee is fully taxable, partially in 2016, with the remainder in 2017.

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Loss before income taxes is attributable to the following tax jurisdictions (in thousands):



	Year Ended December 31,
	2017		2016		2015
United States	$	426,738	$	245,156	$	236,028
Foreign	16,369		11,081		6,108
Loss before income taxes	$	443,107	$	256,237	$	242,136

The components of the benefit for income taxes are as follows (in thousands):



	Year Ended December 31,
	2017			2016		2015
Current:
United States	$	(15	)	$	40	$	—
Total current	(15		)	40		—
Deferred:
United States	$	1,036		$	6,985	$	1,100
Foreign	4,980			3,632		1,660
Total deferred	6,016			10,617		2,760
Benefit for income taxes	$	6,001		$	10,657	$	2,760

The Tax Cuts and Jobs Act ("U.S. Tax Act") was enacted on December 22, 2017. In accordance with SEC SAB No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118") the Company's accounting for the impact of the U.S. Tax Act represents reasonable estimates based on its analysis to date and is considered to be provisional and subject to revision as further regulatory guidance related to the U.S. Tax Act is expected to be issued in 2018, which may result in changes to the Company's current estimate. Any revisions to the estimate impacts of the U.S. Tax Act will be recorded no later than the fourth quarter of 2018.

The U.S. Tax Act reduces the U.S. federal corporate tax rate from 35% to 21% beginning in 2018. The impact of the U.S. Tax Act for the Company is a $146.5 million reduction in the Company's net deferred tax asset to reflect the new statutory rate. The rate adjustment to the deferred tax assets, a discrete item for the quarter, is fully offset by a decrease in the valuation allowance so there is no rate impact to the Company.

Starting in 2018, companies may be subject to global intangible low tax income ("GILTI") which is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations as well as the base erosion anti-abuse tax ("BEAT") under the U.S. Tax Act. GILTI will be effectively taxed at a tax rate of 10.5%. Due to the complexity of the GILTI tax rules, companies are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred or (2) factoring such amounts into a company’s measurement of its deferred taxes under SAB 118. The Company has not yet made an election with respect to GILTI. The Company will continue to review the GILTI and BEAT rules to determine their applicability to the Company as the rules become effective.

As of December 31, 2017 and 2016, the Company had U.S. federal net operating loss ("NOL") carryforwards of approximately $476.6 million and $249.4 million, respectively, which are available to reduce future taxable income. The Company also had U.S. federal and state tax credits of $85.5 million and $34.2 million as of December 31, 2017 and 2016, respectively, which may be used to offset future tax liabilities. The NOL and tax credit carryforwards will begin to expire in 2033. The NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The Company undertook a formal IRC Section 382 study in 2016. Based on this study, the Company concluded that it has experienced such "ownership changes" but its ability to use its U.S. NOLs and tax credit carryforwards is not subject to a material annual limitation. However, subsequent ownership changes may further affect the limitation in future years. The Company also has German NOL carryforwards of $30.2 million and $13.4 million as of December 31, 2017 and 2016, respectively, which have an indefinite carryforward period.

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A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:



	Year Ended December 31,
	2017		2016		2015
Federal statutory tax	35.0	%	35.0	%	35.0	%
Foreign tax rate differential	(0.1	)	(0.1	)	(0.1	)
Valuation allowance	(6.3	)	(35.1	)	(36.2	)
Tax credits	7.5		5.5		3.8
Impact of U.S. Tax Act	(33.1	)	—		—
Other	(1.6	)	(1.1	)	(1.4	)
Total	1.4	%	4.2	%	1.1	%

The principal components of the Company’s net deferred tax liabilities are as follows (in thousands):



	December 31,
	2017			2016
Deferred tax assets:
Net operating loss carryforwards	$	110,403		$	85,154
Tax credit carryforwards	85,480			34,243
Acquired technology	44,795			61,866
Success payments	34,457			34,804
Stock compensation	14,362			12,803
Deferred revenue	25,683			45,770
Other	9,723			7,649
Gross deferred tax assets	324,903			282,289
Valuation allowance	(306,545		)	(271,635		)
Deferred tax assets, net of valuation allowance	18,358			10,654
Deferred tax liabilities:
Acquired technology	(11,679		)	(10,218		)
Other	(7,282		)	(5,588		)
Deferred tax liabilities	(18,961		)	(15,806		)
Net deferred tax liabilities	$	(603	)	$	(5,152	)

The Company adopted ASU 2016-09 in 2017. As a result, the net operating loss deferred tax asset increased by $7.1 million as a result of the inclusion of the net operating losses related to excess tax benefits. The increase in the deferred tax asset was offset by a full valuation allowance.

The valuation allowance relates primarily to net U.S. deferred tax assets from operating losses, research and development tax credit carryforwards, amounts paid and accrued to enter into various agreements for which the tax treatment requires capitalization and amortization, success-based payments that are accrued but not yet paid for tax purposes, and deferred revenue associated with the Celgene Collaboration Agreement. The Company’s deferred tax liability relates primarily to acquired technology.

The Company maintains a full valuation allowance on its net U.S. deferred tax assets. The assessment regarding whether a valuation allowance is required considers both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets are recoverable. In making this assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative loss in recent years and its forecasted losses in the near-term as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, Accounting for Income Taxes, the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its U.S. net deferred tax assets will be maintained. The Company will continue to assess the realizability of its deferred tax assets going forward and will adjust the valuation allowance as needed. Increases in the valuation allowance were $34.9 million and $88.0 million for the years ended December 31, 2017 and 2016, respectively. The Company has determined that it is more-likely-than-not that it will realize the benefit of the losses for its German subsidiary and has not recorded a valuation allowance against the German deferred tax assets.

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The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more-likely-than-not to be sustained upon examination by the relevant income tax authorities. The Company is generally subject to examination by the U.S. federal and local income tax authorities for all tax years in which a loss carryforward is available and is subject to examination in Germany for four years. The examination by the U.S. federal and local income tax authorities of the Company's German subsidiary for the years ended December 31, 2013 through December 31, 2015 closed with no material adjustments.

The Company applies judgment in the determination of the consolidated financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. As of December 31, 2017 and 2016, the Company's uncertain tax positions were immaterial.

14. Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include unvested PSAs, unvested PSUs, unvested restricted stock, unvested RSUs, options to purchase common stock, and potential shares issued for success payments, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The amounts in the table below were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated due to their anti-dilutive effect (in thousands):



	Year Ended December 31,
	2017	2016	2015
Unvested PSAs and PSUs	1,626	—	—
Unvested restricted stock and RSUs	1,894	3,055	5,477
Options to purchase common stock	11,587	8,521	5,219
Estimated number of shares issuable for success payments (1)	—	—	204
Total	15,107	11,576	10,900


(1)	Represents the number of shares that would have been issued if the success payment valuation date had been December 31 of each year presented. The number of shares issued, for purposes of this presentation, is calculated by dividing the success payment by the stock price per share on the valuation date.

As of December 31, 2017 and 2016, the Company's stock price was below the threshold that would require additional payments to FHCRC or MSK, therefore no shares are included.

In December 2015, success payments to FHCRC were triggered in the amount of $75.0 million, less indirect cost offsets of $3.3 million and a success payment to MSK was triggered in the amount of $10.0 million, less indirect cost offsets of $1.0 million. The Company elected to make the payments in shares of its common stock and thereby issued 1,601,085 shares to FHCRC in December 2015 and 240,381 shares to MSK in March 2016. For purposes of this presentation, the number of shares to be issued as of December 31, 2015 was calculated by dividing the success payment achieved by the price of the Company’s common stock on December 31, 2015.

15. Commitments and Contingencies

Leases

The Company has entered into various non-cancelable lease agreements for its office, laboratory, and manufacturing spaces with original lease periods expiring between 2019 and 2026. The Company has a lease for office and laboratory space in a building located in Seattle, Washington, which serves as its corporate headquarters. The lease is for approximately 266,800 square feet of space, with an initial term expiring in May 2024.

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The following table summarizes the Company’s future minimum lease commitments as of December 31, 2017 (in thousands):



Year ending December 31:
2018	$	13,615
2019	15,967
2020	16,814
2021	16,321
2022	16,698
Thereafter	26,273
Total minimum lease payments	$	105,688

Rent expense for the years ended December 31, 2017, 2016, and 2015 was $10.5 million, $5.6 million, and $2.3 million, respectively.

Litigation

From time to time, the Company may become involved in litigation or proceedings relating to claims arising from the ordinary course of business.

Beginning on July 12, 2016, three putative securities class action complaints were filed against the Company and several of its officers. On October 7, 2016, these complaints were consolidated into a single action titled "In re Juno Therapeutics, Inc." On October 19, 2016, the Court appointed a lead plaintiff. On December 12, 2016, the lead plaintiff filed an amended complaint.

The putative class in the amended complaint is composed of all purchasers of the Company’s securities between May 9, 2016 and November 22, 2016, inclusive. The amended complaint names as defendants the Company, its chief executive officer, its chief financial officer, and its chief medical officer and generally alleges material misrepresentations and omissions in public statements regarding patient deaths in the Company’s Phase II clinical trial of JCAR015 and the safety of JCAR015, violations by all named defendants of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, as well as violations of Section 20(a) of the Exchange Act by the individual defendants. The amended complaint seeks compensatory damages of an undisclosed amount. On February 2, 2017, the Company and the individual defendants filed a motion to dismiss the complaint. On June 14, 2017, the defendants’ motion to dismiss was denied. On September 15, 2017, plaintiffs filed a motion to certify the proposed class. On October 20, 2017, the Company and the individual defendants filed a non-opposition to the motion for class certification. On October 24, 2017, the Court issued an order granting the lead plaintiff’s motion for class certification. On October 24, 2017, the Court also entered a scheduling order providing deadlines, including that discovery must be completed by March 18, 2019; all dispositive motions must be filed by April 16, 2019; and mediation, if requested by the parties, must be held by May 31, 2019. The Court scheduled a 2-3 week trial to commence on July 15, 2019.

In addition, on September 8, 2017, a stockholder filed a purported derivative action on behalf of the Company against two of the Company's executive officers and certain members of our board of directors in the federal district court for the Western District of Washington. The complaint alleges claims for breaches of fiduciary duties arising out of the same issues that are the subject of the securities class action, as well as claims for breaches of fiduciary duties and under the federal securities laws related to the Company's compensation for non-employee directors. A similar action was also filed in the Western District of Washington on November 6, 2017. The second action also included claims for alleged insider trading and violations of Section 10(b) of the Securities Exchange Act. On December 5, 2017, the Court consolidated the two purported derivative actions by stipulated motion. On December 19, 2017, Defendants moved to transfer the consolidated action to the District of Delaware, but pursuant to a stipulated motion, on January 31, 2018, the Court stayed all proceedings in the consolidated action pending the results of the tender offer by Purchaser for all of the Company's common stock.

On January 4, 2018, another purported derivative suit was filed in the District of Delaware. This action is similar to the earlier derivative suits but also includes claims for waste of corporate assets and unjust enrichment. On February 27, 2018, the parties submitted a stipulation and proposed order staying all proceedings in the consolidated action pending the results of the tender offer by Purchaser for all of the Company's common stock.

On August 22, 2017, City of Hope filed a lawsuit against the Company, City of Hope v. Juno Therapeutics, Inc., Case No. 2:17-cv-06201-RGK, in the federal district court for the Central District of California. The complaint alleges that the Company has materially breached its exclusive license agreement with City of Hope by failing to seek consent for an alleged sublicense of the Company's rights under such license to Celgene, and by failing to pay fees owed in connection with that alleged sublicense. The City of Hope license requires the Company to pay City of Hope 15% of sublicense revenues, defined as "all consideration received by [the Company] in return for the grant of rights to manufacture, use, offer for sell, or sell a Licensed Product, other

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than consideration in the form of: (i) running royalties calculated as a function of Net Sales and payment, (ii) payment or reimbursement to [the Company] of costs actually incurred by [the Company] in conducting clinical trials of a Licensed Product, and (iii) reimbursement for actual Patent Expenses due pursuant to this Agreement." In its request for relief, City of Hope seeks compensatory damages in an amount "no less than 15% of all consideration received by [the Company] pursuant to the [Celgene] Collaboration Agreement, [Celgene] Share Purchase Agreement, and Celgene Option Exercise," i.e., the Celgene CD19 License. The complaint also seeks a declaratory judgment that the Company materially breached the City of Hope license. On August 31, 2017, the Company filed an answer and counterclaim in the lawsuit, denying City of Hope’s allegations of breach of contract, asserting several affirmative defenses, and bringing various counterclaims, including claims for breach of contract and breach of the covenant of good faith and fair dealing, and seeking, among other things, a declaratory judgment that City of Hope has no grounds to terminate the City of Hope license. City of Hope filed an amended complaint on September 21, 2017, seeking a further declaration that the City of Hope license has terminated, which Juno answered on October 5, 2017. On January 10, 2018, the Company moved to amend its counterclaims, seeking to file an additional counterclaim against City of Hope for breach of contract and a counterclaim against a third-party, Mustang Bio, Inc., for tortious interference with contract. That motion is currently pending.

The Company has not recorded any liability as of December 31, 2017 since any potential loss is not probable or reasonably estimable given the preliminary nature of the proceedings.

16. Related-Party Transactions

The Company is party to the Celgene Collaboration Agreement, the 2015 Celgene SPA, a voting agreement, and a registration rights agreement with Celgene, who is a holder of more than 5% of the Company’s common stock. See Note 5, Collaboration and License Agreements. Additionally, on January 21, 2018, the Company entered into a Merger Agreement with Celgene, pursuant to which, among other things, subject to the terms and subject to the conditions of the Merger Agreement, Celgene will commence a tender offer to acquire all of the Company's outstanding shares of common stock. For additional information regarding the Merger Agreement refer to Note 19, Subsequent Events.

The Company is also party to a license and strategic alliance agreement with JW Cayman and its affiliates, and is a holder of more than 5% of JW Cayman's outstanding equity. See Note 5, Collaboration and License Agreements.

17. Employee Benefit Plan

In January 2014, the Company adopted a 401(k) retirement and savings plan (the "401(k) Plan") covering all employees. The 401(k) Plan allows employees to make pre- and post-tax contributions up to the maximum allowable amount set by the IRS. The Company's contributions to the 401(k) Plan are discretionary and are based on specified percentages of employee contributions.

18. Selected Quarterly Financial Data (Unaudited)

The following table contains quarterly financial information for the years ended December 31, 2017 and 2016 (in thousands, except per share data). The unaudited quarterly information has been prepared on a basis consistent with the audited consolidated financial statements and includes all adjustments that the Company considers necessary for a fair presentation of the information shown. The operating results for any fiscal quarter are not necessarily indicative of the operating results for a full fiscal year or for any future period and there can be no assurances that any trend reflected in such results will continue in the future.



Year Ended December 31, 2017	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenue	$	19,327		$	21,268		$	44,816		$	26,460
Loss from operations (1)	$	(84,323	)	$	(103,440	)	$	(121,803	)	$	(138,208	)
Net loss	$	(82,197	)	$	(100,740	)	$	(118,133	)	$	(136,036	)
Net loss per share, basic and diluted	$	(0.79	)	$	(0.96	)	$	(1.12	)	$	(1.19	)

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Year Ended December 31, 2016	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenue	$	9,775		$	27,602		$	20,826		$	21,153
Loss from operations (2)	$	(79,901	)	$	(61,524	)	$	(58,469	)	$	(55,710	)
Net loss	$	(71,138	)	$	(64,767	)	$	(56,897	)	$	(52,778	)
Net loss per share, basic and diluted	$	(0.72	)	$	(0.64	)	$	(0.56	)	$	(0.51	)


(1)	Included in loss from operations in the year ended December 31, 2017 are the following (in thousands):



Year Ended December 31, 2017	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Non-cash success payment expense	$	7,399	$	17,169	$	37,250	$	6,921
Non-cash contingent consideration expense (gain)	$	452	$	2,747	$	806	$	(7	)
Amortization of intangible asset	$	—	$	2,418	$	2,418	$	2,418
Upfront payments related to the acquisition of technology	$	—	$	—	$	—	$	10,308


(2)	Included in loss from operations in the year ended December 31, 2016 are the following (in thousands):



Year Ended December 31, 2016	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Non-cash success payment expense (gain)	$	(6,583	)	$	3,465		$	(17,640	)	$	(11,716	)
Non-cash contingent consideration expense (gain)	$	(1,012	)	$	(4,499	)	$	336		$	(4,549	)
Non-cash expense related to milestones paid to Opus Bio	$	23,227		$	—		$	—		$	—
Upfront payments related to the acquisition of technology	$	—		$	—		$	15,000		$	—

19. Subsequent Events

Merger Agreement

On January 21, 2018, the Company entered into the Merger Agreement with Celgene and Purchaser, pursuant to which, among other things, subject to the terms and subject to the conditions of the Merger Agreement, Purchaser has commenced the Offer to acquire all of the Company's outstanding shares of common stock at a purchase price of $87.00 per share, net to the seller in cash, subject to reduction for any applicable withholding taxes (the "Offer Price"). Following the completion of the Offer and subject to the terms and conditions of the Merger Agreement, Purchaser will merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of Celgene Corp., pursuant to the procedures provided for under Section 251(h) of the Delaware General Corporation Law without any stockholder approvals (the "Merger"). At the effective time of the Merger (the "Effective Time"), each outstanding share of the Company's common stock, other than any shares owned by (i) Juno (or held in its treasury), (ii) Celgene Corp., Purchaser, or any other direct or indirect wholly-owned subsidiary of Celgene Corp., or (iii) any stockholders who are entitled to and who properly exercise and perfect appraisal rights under Delaware law (and have neither withdrawn nor lost their rights), will be automatically converted into the right to receive an amount in cash equal to the Offer Price, without interest. The Company's board of directors has, by unanimous vote of those directors present, approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

Pursuant to the terms of the Merger Agreement, each outstanding unvested Company stock option ("Option"), each outstanding award of Company time-based RSUs, and each outstanding award of Company time-based restricted stock awards ("RSAs"), (i) if granted twelve (12) months or more prior to the Effective Time, will become vested pursuant to their respective terms or, if greater, with respect to 25% of the total number of shares of the Company's common stock subject to such award, (ii) if granted following the date of the Merger Agreement but prior to the Effective Time, will become vested pursuant to their respective terms or, if greater, with respect to 25% of the total number of shares of the Company's common stock subject to such award (the "Pre-Closing Non-Performance Awards"), or (iii) if granted less than twelve (12) months prior to the Effective Time (other than the Pre-Closing Non-Performance Awards), will become vested pursuant to their respective terms or, if greater, with respect to that number of shares of the Company's common stock subject thereto, such that, following such vesting, the award will be unvested with respect to that number of shares of the Company's common stock which would have become vested and resulted in the award being 100% vested had the holder of the award remained continuously employed for an additional twenty-four months following the Effective Time; provided, that, with respect to any awards referred to in subsections (i) and (iii) above, if, as of the 24-months anniversary of the Effective Time, any portion of such awards remains

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unvested, such unvested portion will become immediately vested on such 24-months anniversary date, provided that the employee has remained employed through such 24-months anniversary date. All such awards that become vested or that are otherwise vested as of immediately prior to the Offer Acceptance Time (as defined in the Merger Agreement) will be cancelled and converted into the right to receive an amount in cash equal to the product of (i) the number of shares of the Company's common stock subject to such vested award and (ii) the Offer Price (reduced by the applicable exercise price in the case of Company Options).

The Merger Agreement provides that Options, RSUs and RSAs that are outstanding immediately prior to the Offer Acceptance Time but unvested after giving effect to the vesting acceleration described above will be assumed by Celgene Corp. and will be subject to the same terms and conditions (except with respect to the vesting schedule), as applied to each such equity-based award immediately prior to the Effective Time, provided that the number of shares subject to such equity-based awards (and the exercise price in the case of the Options) will be adjusted based on the "Exchange Ratio". The "Exchange Ratio" means an amount equal to the quotient obtained by dividing (i) the Offer Price, by (ii) the volume weighted average price per share of Celgene Corp.’s common stock on The Nasdaq Global Select Market for the fifteen consecutive trading days ending on the complete trading day immediately prior to the Offer Acceptance Time.

The Merger Agreement also provides that all Company PSUs and all Company PSAs will vest as to 50% of the total number of PSUs or PSAs (as applicable) subject to such awards, and such vested portion will be cancelled and converted into the right to receive an amount in cash equal to the product of (i) such 50% vested portion of the award, and (ii) the Offer Price. The remaining 50% of the PSUs and PSAs will be assumed by Celgene Corp. and will be subject to the same terms and conditions as were applicable to such awards immediately prior to the Offer Acceptance Time, provided that the number of shares subject to such equity-based awards (and the exercise price in the case of the Options) will be adjusted based on the Exchange Ratio, except that (i) 60% of such remaining award will vest on the one-year anniversary of the Effective Time and (ii) 40% of such remaining award will vest on the earlier of (A) the second anniversary of the Effective Time and (B) the first approval by the FDA of JCAR017.

The completion of the Offer would trigger a success payment valuation measurement date, and success payments of $100.0 million and $70.0 million, less indirect cost offsets, would be owed to FHCRC and MSK, respectively. For additional information regarding success payments, refer to Note 5, Collaboration and License Agreements.

JW Cayman

In February 2018, JW Cayman closed the first tranche of its Series A financing from outside investors. For additional information, refer to Note 5, Collaboration and License Agreements.

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of December 31, 2017, management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017, the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. Management’s assessment was based on criteria described in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2017, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management reviewed the results of this assessment with our audit committee.

The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by Ernst & Young LLP, our independent registered public accounting firm, as stated in its report, which is included below.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Juno Therapeutics, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Juno Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Juno Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and our report dated March 1, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Seattle, Washington

March 1, 2018

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ITEM 9B.	OTHER INFORMATION

Amended and Restated Change in Control and Severance Plan

On February 27, 2018, in connection with the contemplated Merger, the Board approved an amended and restated change in control and severance plan and summary plan description (the “Severance Plan”) to provide certain severance and change in control benefits to all Juno employees, including our executive officers (each, a “Plan Participant”).

The Severance Plan will replace the change in control and severance plan previously adopted by the Board on November 4, 2015, which covered only those Juno employees with a job rank of vice president or a more senior job rank (the “Prior Plan”).

The Severance Plan will become effective as of the date immediately prior to the closing date of the Merger, and subject to the occurrence of the Merger. Under the Severance Plan, for the period commencing from the closing date and continuing until 18 months following the closing date (the “Change in Control Period”) if any Plan Participant is terminated for any reason other than “Cause” (as defined in the Severance Plan) and other than a Plan Participant's death or “Disability” (as defined in the Severance Plan), or a Plan Participant voluntarily resigns for “Good Reason” (as defined below and together with a termination other than for Cause and other than death or Disability, a “Qualifying Termination”), the Plan Participant would be entitled to receive severance benefits. Under the Severance Plan, “Good Reason” means (i) a material reduction in the Plan Participant’s annual base salary, (ii) solely with respect to the 12-month period after the closing date and solely with respect to Juno employees with a Juno job level of vice president or a more senior job level, a material diminution of the Plan Participant’s authority, duties, or responsibilities, (iii) a change in employment location of more than 50 miles or (iv) Juno's material breach of the terms of any material written agreement or covenant with the Plan Participant related to his or her provision of services to Juno.

Upon a Qualifying Termination during the Change in Control Period, each Plan Participant is entitled to receive the severance benefits set forth in the table below, unless the Plan Participant would be entitled to receive more favorable benefits under his or her employment contract with Juno:



Class of Participant	Salary Severance(1)	Bonus Severance	Continued Benefits(2)
CEO	24 months	Greater of (i) 100% of pro-rated annual target bonus or (ii) actual achievement as of date of termination	24 months
Executive Vice Presidents	12 months	Greater of (i) 100% of pro-rated annual target bonus or (ii) actual achievement as of date of termination	12 months
Senior Vice Presidents and Vice Presidents	9 months	Greater of (i) 100% of pro-rated annual target bonus or (ii) actual achievement as of date of termination	9 months
Senior Directors and Directors (Juno job levels 10 and 9)	9 months	Greater of (i) 75% of pro-rated annual target bonus or (ii) actual achievement as of date of termination	9 months
All Other Plan Participants (Juno job levels 1 through 8)	6 months	Greater of (i) 50% of pro-rated annual target bonus or (ii) actual achievement as of date of termination	6 months


(1)	Salary severance will be equal to the number of months of the Plan Participant’s base salary as set forth in the table above.


(2)	Continued benefits will consist of Juno's reimbursement of the Plan Participant’s premium payments to continue health coverage under COBRA, or a taxable lump sum payment in lieu of reimbursement, as applicable, for a period of time with a maximum duration equal to the number of months set forth in the table above.

Additionally, if at any time following the closing date of the Merger, a Plan Participant experiences a Qualifying Termination, then the Plan Participant will receive accelerated vesting as to 100% of any of the Plan Participant’s equity awards that were outstanding as of the closing date of the Merger and that remain outstanding and unvested as of the date of such termination of employment.

Further, under the Severance Plan, if outside the Change in Control Period, with respect to those participants who were participating in the Prior Plan on the closing date of the Merger (“Prior Plan Participants”), if a Prior Plan Participant experiences a Qualifying Termination, the Plan Participant would be entitled to receive the severance benefits set forth in the

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table below, unless the Plan Participant would be entitled to receive more favorable benefits under his or her employment contract with Juno:



Class of Participant	Salary Severance(1)	Bonus Severance	Continued Benefits(2)
CEO	12 months	Greater of (i) 100% of pro-rated annual target bonus or (ii) actual achievement as of date of termination	12 months
Executive Vice Presidents	12 months	Greater of (i) 100% of pro-rated annual target bonus or (ii) actual achievement as of date of termination	12 months
Vice Presidents and Senior Vice Presidents	9 months	Greater of (i) 100% of pro-rated annual target bonus or (ii) actual achievement as of date of termination	9 months


(1)	Salary severance will be equal to the number of months of the Plan Participant’s base salary as set forth in the table above.


(2)	Continued benefits will consist of Juno's reimbursement of the Plan Participant’s premium payments to continue health coverage under COBRA, or a taxable lump sum payment in lieu of reimbursement, as applicable, for a period of time with a maximum duration equal to the number of months set forth in the table above.

All payments and other benefits under the Severance Plan are subject to applicable withholding obligations. In addition, in order to receive the severance benefits, each Plan Participant must (i) comply with certain confidentiality, non-solicitation, non-competition, and non-disparagement requirements for a period equal to the length of time the Plan Participant receives severance benefits, and (ii) execute and not revoke a release of claims in Juno's favor within the timeframe set forth in the Severance Plan or applicable release.

The Severance Plan also provides that except as specifically provided in an agreement between Juno and a Plan Participant, in the event that any payment or benefit payable to a Plan Participant under the Severance Plan would result in the imposition of excise taxes under the “golden parachute” provisions of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) then such payments and benefits will either be made and/or provided in full or shall be reduced such that the excise tax under Section 280G of the Code is not applicable, whichever is least economically disadvantageous to the Plan Participant.

The Severance Plan may not be amended in a manner that materially diminishes the rights of a Plan Participant under the Severance Plan without the Plan Participant’s written consent.

The foregoing description of the Severance Plan is qualified by reference to the full text of the Severance Plan, which is filed as Exhibit 10.30(B) to this Annual Report on Form 10-K and incorporated herein by reference.

Bonus Pool

In connection with Juno's entry into the Merger Agreement and pursuant to its terms, Juno established a focus bonus pool of $20 million in the aggregate (the “Bonus Pool”), from which awards would be allocated to employees, including executive officers, of Juno. Our Chief Executive Officer, Hans Bishop, and our Chief Financial Officer, Steven D. Harr, M.D., are not eligible to receive awards under the Bonus Pool. Awards made under the Bonus Pool will be paid on the earlier of (i) the closing of the Merger and (ii) November 30, 2018.

On February 27, 2018, awards were granted under the Bonus Pool to the following named executive officers in the following amounts: Robert Azelby: $189,788; Bernard Cassidy: $320,000; and Hyam Levitsky: $127,308.

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PART III


ITEM 10.	DIRECTORS, EXECUTIVES OFFICERS AND CORPORATE GOVERANCE

Information required by this item will be contained in our definitive proxy statement to be filed with the SEC on Schedule 14A in connection with our 2018 Annual Meeting (the "Proxy Statement"), which is expected to be filed not later than 120 days after December 31, 2017, under the headings "Executive Officers," "Election of Directors," "Corporate Governance," and "Section 16(a) Beneficial Ownership Reporting Compliance," and is incorporated herein by reference.

We have adopted a Code of Business Conduct and Ethics that applies to our officers, directors, and employees which is available on the Investor Relations section of our website at www.junotherapeutics.com. The Code of Business Conduct and Ethics is intended to qualify as a "code of ethics" within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K. In addition, we intend to promptly disclose (1) the nature of any amendment to our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future.


ITEM 11.	EXECUTIVE COMPENSATION

Information required by this item will be contained in the Proxy Statement under the headings "Compensation Discussion & Analysis" and "Director Compensation," and is incorporated herein by reference.


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by this item will be contained in the Proxy Statement under the headings "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information," and is incorporated herein by reference.


ITEM 13.	CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information required by this item will be contained in the Proxy Statement under the headings "Certain Relationships and Related Party Transactions" and "Corporate Governance," and is incorporated herein by reference.


ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

Information required by this item will be contained in the Proxy Statement under the heading "Principal Accountant Fees and Services," and is incorporated herein by reference.

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PART IV


ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

1. Consolidated Financial Statements

See Index to Consolidated Financial Statements at Item 8 herein.

2. Consolidated Financial Statement Schedules

All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

3. Exhibits

See the Exhibit Index immediately following below.

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EXHIBIT INDEX



Exhibit Number	Exhibit Description	Incorporated by Reference			Filed Herewith
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
2.1†‡#	Share Purchase Agreement, dated May 11, 2015, by and among Dr. Herbert Stadler, Dr. Lothar Germeroth, Prof. Dr. Dirk Busch, and the registrant	8-K	5/11/2015	2.1
2.2†‡#	Agreement and Plan of Merger, dated June 1, 2015, by and among X Acquisition Corporation, XBody, Inc., Brant Binder as stockholder representative, certain principal stockholders of X-Body, Inc., and the registrant	8-K	6/5/2015	2.1
2.3(A)†‡#	Agreement and Plan of Reorganization, dated January 11, 2016, by and among registrant, P. Acquisition Corporation, P Acquisition LLC, AbVitro, Inc., Fortis Advisors LLC, as securityholders’ representative, and those AbVitro stockholders made party thereto by joinder	8-K	1/11/2016	2.1
2.3(B)	Amendment, dated May 23, 2016, to Agreement and Plan of Reorganization, dated January 11, 2016, by and among registrant, P. Acquisition Corporation, P Acquisition LLC, AbVitro, Inc., Fortis Advisors LLC, as securityholders’ representative, and those AbVitro stockholders made party thereto by joinder	10-Q	8/5/2016	2.3(B)
2.4	Agreement and Plan of Merger, dated as of January 21, 2018, by and among registrant, Celgene Corporation and Blue Magpie Corporation	8-K	1/22/2018	2.1
3.1	Amended and Restated Certificate of Incorporation	8-K	12/29/2014	3.1
3.2	Amended and Restated Bylaws, as amended	8-K	4/1/2016	3.1
4.1	Fourth Amended and Restated Investors’ Rights Agreement, dated December 5, 2014, by and among the registrant and the investors named therein	S-1/A	12/9/2014	4.1
4.2	Amendment and Waiver of Fourth Amended and Restated Investors’ Rights Agreement, dated July 27, 2015	10-Q	8/14/2015	4.2
4.3	Second Amendment to Fourth Amended and Restated Investors’ Rights Agreement, dated January 29, 2016	10-K	2/29/2016	4.3
4.4	Amendment No. 3 and Waiver of Fourth Amended and Restated Investors’ Rights Agreement, dated September 21, 2017	10-Q	11/1/2017	4.4
4.5	Form of Common Stock Certificate	S-1/A	12/9/2014	4.2
10.1(A)#	Exclusive License Agreement, dated November 1, 2009, by and between City of Hope and ZetaRx, LLC, predecessor to the registrant	S-1	11/17/2014	10.1
10.1(B)#	Amendment No. 1, dated May 19, 2016, to Exclusive License Agreement, dated November 1, 2009, by and between the City of Hope and ZetaRx BioSciences, Inc., predecessor to the registrant	10-Q	8/5/2016	10.3
10.2#	Amended and Restated Patent and Technology License Agreement, effective November 1, 2009, by and between Fred Hutchinson Cancer Research Center and ZetaRx, LLC, predecessor to the registrant	S-1/A	11/24/2014	10.2
10.3(A)#	Amended and Restated Patent and Technology License Agreement, effective January 2, 2012, by and between Fred Hutchinson Cancer Research Center and ZetaRx BioSciences, Inc., predecessor to the registrant	S-1/A	11/24/2014	10.3

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Exhibit Number	Exhibit Description	Incorporated by Reference			Filed Herewith
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.3(B)#	Amendment No. 1, dated October 22, 2015, to Amended and Restated Patent and Technology License Agreement dated January 2, 2012, by and between Fred Hutchinson Cancer Research Center and the registrant	10-Q	5/10/2016	10.1
10.4(A)#	Collaboration Agreement, dated October 16, 2013, by and between Fred Hutchinson Cancer Research Center and the registrant	S-1/A	11/24/2014	10.4(A)
10.4(B)#	Amendment No. 1 to Collaboration Agreement, dated November 19, 2014, by and between Fred Hutchinson Cancer Research Center and the registrant	S-1/A	11/24/2014	10.4(B)
10.4(C)	Amendment No. 2 to Collaboration Agreement, dated February 17, 2016, by and between Fred Hutchinson Cancer Research Center and the registrant	10-K	2/29/2016	10.4(C)
10.5(A)	Letter Agreement, dated October 16, 2013, by and between Fred Hutchinson Cancer Research Center and the registrant	S-1	11/17/2014	10.5
10.5(B)#	Amendment to Letter Agreement, dated December 21, 2015, by and between Fred Hutchinson Cancer Research Center and the registrant	10-K	2/29/2016	10.5(B)
10.6(A)#	Amended and Restated Patent and Technology License Agreement, effective October 16, 2013, by and between Fred Hutchinson Cancer Research Center and the registrant	S-1/A	11/24/2014	10.6
10.6(B)#	Amendment No. 1, dated October 22, 2015, to Amended and Restated Patent and Technology License Agreement dated October 16, 2013, by and between Fred Hutchinson Cancer Research Center and the registrant	10-Q	5/10/2016	10.2(A)
10.6(C)#	Amendment No. 2, dated March 25, 2016, to Amended and Restated Patent and Technology License Agreement dated October 16, 2013, by and between Fred Hutchinson Cancer Research Center and the registrant	10-Q	5/10/2016	10.2(B)
10.7(A)#	Exclusive License Agreement, dated November 21, 2013, by and between Memorial Sloan Kettering Cancer Center and the registrant	S-1	11/17/2014	10.7(A)
10.7(B)#	Amendment No. 1 to Exclusive License Agreement, dated September 8, 2014, by and between Memorial Sloan Kettering Cancer Center and the registrant	S-1	11/17/2014	10.7(B)
10.8#	Master Sponsored Research Agreement, dated November 21, 2013, by and between Memorial Sloan Kettering Cancer Center and the registrant	S-1	11/17/2014	10.8
10.9#	Master Clinical Study Agreement, dated November 21, 2013, by and between Memorial Sloan Kettering Cancer Center and the registrant	S-1/A	12/16/2014	10.9
10.10(A)#	Letter Agreement, dated November 21, 2013, by and between Memorial Sloan Kettering Cancer Center and the registrant	S-1	11/17/2014	10.10
10.10(B)#	Amendment to Letter Agreement, dated December 14, 2015, by and between Memorial Sloan Kettering Cancer Center and the registrant	10-K	2/29/2016	10.10(B)
10.11(A)#	Exclusive License Agreement, dated December 3, 2013, by and between St. Jude Children’s Research Hospital, Inc. and the registrant	S-1	11/17/2014	10.11
10.11(B)#	Amendment #2 to License Agreement, dated April 4, 2015, by and between St. Jude Children’s Research Hospital, Inc. and the registrant	10-Q	8/14/2015	10.1

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Exhibit Number	Exhibit Description	Incorporated by Reference			Filed Herewith
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.12(A)#	Exclusive License Agreement, dated February 13, 2014, by and between Seattle Children’s Hospital d/b/a Seattle Children’s Research Institute and the registrant	S-1	11/17/2014	10.12(A)
10.12(B)#	Amendment No. 1 to Exclusive License Agreement, dated August 4, 2014, by and between Seattle Children’s Hospital d/b/a Seattle Children’s Research Institute and the registrant	S-1	11/17/2014	10.12(B)
10.12(C)#	Amendment No. 2 to Exclusive License Agreement, dated June 15, 2015, by and between Seattle Children’s Hospital d/b/a Seattle Children’s Research Institute and the registrant	10-Q/A	11/23/2015	10.7
10.13(A)#	Sponsored Research Agreement, dated February 13, 2014, by and between Seattle Children’s Hospital d/b/a Seattle Children’s Research Institute and the registrant	S-1	11/17/2014	10.13
10.13(B)	Amendment No. 1 to Sponsored Research Agreement, effective April 1, 2015, by and between Seattle Children’s Hospital d/b/a Seattle Children’s Research Institute and the registrant	10-Q	5/12/2015	10.4
10.13(C)#	Amendment No. 2 to Sponsored Research Agreement, effective March 31, 2017, by and between Seattle Children’s Hospital d/b/a Seattle Children’s Research Institute and the registrant	10-Q	8/3/2017	10.1(A)
10.13(D)#	Amendment No. 3 to Sponsored Research Agreement, effective May 2, 2017, by and between Seattle Children’s Hospital d/b/a Seattle Children’s Research Institute and the registrant	10-Q	8/3/2017	10.1(B)
10.14¥	Offer Letter Agreement, dated September 5, 2013, by and between Hans E. Bishop and the registrant, as amended by the Side Letter Agreement dated September 16, 2013	S-1	11/17/2014	10.14
10.15¥	Offer Letter Agreement, dated January 1, 2014, by and between Bernard J. Cassidy and the registrant	S-1	11/17/2014	10.15
10.16(A)¥	Offer Letter with Hyam Levitsky, dated May 27, 2015	10-Q	8/14/2015	10.8
10.16(B)¥	Amendment, dated May 27, 2016, to Offer Letter with Hyam Levitsky, dated May 27, 2015	10-Q	8/5/2016	10.4
10.17¥	Offer Letter Agreement, dated March 20, 2014, by and between Steven D. Harr, M.D. and the registrant	S-1	11/17/2014	10.17
10.18¥	Form of Director and Executive Officer Indemnification Agreement	S-1	11/17/2014	10.18
10.19¥	2013 Equity Incentive Plan, as amended	S-1	11/17/2014	10.19
10.20¥	Form of Restricted Stock Purchase Agreement under the 2013 Equity Incentive Plan	S-1	11/17/2014	10.20
10.21¥	Form of Stock Option Grant Notice and Option Agreement under the 2013 Equity Incentive Plan	S-1	11/17/2014	10.21
10.22¥	2014 Equity Incentive Plan	S-1/A	12/9/2014	10.22
10.23(A)¥	Form of Restricted Stock Unit Agreement under the 2014 Equity Incentive Plan	S-1	12/9/2014	10.23
10.23(B)¥	Form of Restricted Stock Unit Agreement under the 2014 Equity Incentive Plan (with accelerated vesting)	10-K	2/29/2016	10.23(B)
10.23(C)¥	Form of Restricted Stock Unit Agreement under the 2014 Equity Incentive Plan (director election to take cash fees in equity - RSU deferral)	10-Q	5/10/2016	10.3
10.23(D)¥	Form of Stock Grant Award Agreement under the 2014 Equity Incentive Plan (director election to take cash fees in equity - no deferral)	10-Q	5/10/2016	10.4

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Exhibit Number	Exhibit Description	Incorporated by Reference			Filed Herewith
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.23(E)¥	Form of Restricted Stock Unit Agreement under the 2014 Equity Incentive Plan (with accelerated vesting and automatic sell-to-cover provision)	10-K	3/1/2017	10.23(E)
10.23(F)¥	Form of Performance Restricted Stock Agreement under the 2014 Equity Incentive Plan	8-K	10/20/2017	10.1
10.23(G)¥	Form of Performance Restricted Stock Unit Award Agreement under the 2014 Equity Incentive Plan				X
10.24(A)¥	Form of Stock Option Grant Notice and Option Agreement under the 2014 Equity Incentive Plan	S-1	12/9/2014	10.24
10.24(B)¥	Form of Stock Option Grant Notice and Option Agreement under the 2014 Equity Incentive Plan (with accelerated vesting)	10-K	2/29/2016	10.24(B)
10.25¥	2014 Employee Stock Purchase Plan	S-1	12/9/2014	10.25
10.26¥	Offer Letter with Robert Azelby, dated September 28, 2015	10-Q	11/12/2015	10.2
10.27¥	Offer Letter Agreement, dated April 13, 2017, by and between Sunil Agarwal, M.D. and the registrant	10-Q	8/3/2017	10.2
10.28¥	Executive Incentive Compensation Plan	S-1/A	12/9/2014	10.28
10.29¥	Offer Letter Agreement, dated November 8, 2017, by and between Ann Lee and the registrant				X
10.30(A)¥	Change in Control and Severance Plan	10-K	2/29/2016	10.40
10.30(B)¥	Amended and Restated Change in Control and Severance Plan	SC 14D9/A	2/28/2018	(e)(37)
10.31(A)	Lease Agreement, dated as of April 6, 2015, by and between ARE-Seattle No. 16, LLC and the registrant	8-K	4/7/2015	10.1
10.31(B)	First Amendment to Lease Agreement, dated May 21, 2015, by and between ARE-Seattle No. 16, LLC and the registrant	10-Q	8/14/2015	10.4
10.31(C)	Second Amendment to Lease Agreement, effective September 30, 2015, by and between ARE-Seattle No. 16, LLC and the registrant	10-Q	11/12/2015	10.1
10.31(D)	Third Amendment to Lease Agreement, effective November 17, 2016, by and between ARE-Seattle No. 16, LLC and the registrant	10-K	3/1/2017	10.31(D)
10.31(E)	Fourth Amendment to Lease Agreement, effective November 29, 2017, by and between ARE-Seattle No. 16, LLC and the registrant				X
10.31(F)	Fifth Amendment to Lease Agreement, effective November 29, 2017, by and between ARE-Seattle No. 16, LLC and the registrant				X
10.32¥	Non-Employee Director Compensation Policy, adopted December 7, 2015 and Restricted Stock Unit Election Form thereunder	10-K	2/29/2016	10.32(B)
10.33#	Non-Exclusive Sublicense Agreement, effective April 7, 2015, by and among Novartis Institutes for Biomedical Research, Inc., The Trustees of the University of Pennsylvania, and the registrant	10-Q	8/14/2015	10.2

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Exhibit Number	Exhibit Description	Incorporated by Reference			Filed Herewith
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
10.34(A)#	Amended and Restated Master Research and Collaboration Agreement, dated August 13, 2015, by and among Celgene Corporation, Celgene RIVOT Ltd., and the registrant	10-Q	8/14/2015	10.12
10.34(B)#	Letter Agreement, dated April 6, 2016, by and between Celgene Corporation and the registrant	10-Q	8/5/2016	10.1
10.34(C)#	License Agreement, dated April 22, 2016, by and among Celgene Corporation, Celgene Switzerland LLC, and the registrant	10-Q	8/5/2016	10.2
10.34(E)+	Letter Agreement, dated October 6, 2017, by and among Celgene Corporation, Celgene Switzerland LLC and the registrant				X
10.35#	Share Purchase Agreement, dated June 29, 2015, by and among Celgene Corporation, Celgene RIVOT Ltd., and the registrant	8-K	6/29/2015	10.1
10.36	Voting and Standstill Agreement, dated June 29, 2015, by and among Celgene Corporation, Celgene RIVOT Ltd., and the registrant	8-K	6/29/2015	10.2
10.37	Registration Rights Agreement, dated June 29, 2015, by and among Celgene Corporation, Celgene RIVOT Ltd., and the registrant	8-K	6/29/2015	10.3
10.38	Share Purchase Agreement and Omnibus Amendment, dated September 21, 2017, by and among registrant, Celgene Corporation and certain of its affiliates	8-K	9/22/2017	10.1
10.39¥	Consulting Agreement, dated January 1, 2016, by and between Richard Klausner and the registrant	10-K	3/1/2017	10.39
10.40¥	Form of Tax Reimbursement Agreement	8-K	2/1/2018	10.1
21	Subsidiaries of the registrant				X
23.1	Consent of independent registered public accounting firm				X
24.1	Power of Attorney (included on signature page to this Annual Report on Form 10-K)				X
31.1	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended				X
31.2	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended				X
32.1*	Certification of Principal Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350				X
32.2*	Certification of Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350				X
101	The following materials from the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Loss, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit), and (v) Notes to the Consolidated Financial Statements.				X

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#	Confidential treatment has been granted for certain information contained in this exhibit. Such information has been omitted and filed separately with the Securities and Exchange Commission.
+	Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and this exhibit has been filed separately with the Securities and Exchange Commission.
¥	Indicates management contract or compensatory plan.
†	The representations and warranties contained in this agreement were made only for purposes of the transactions contemplated by the agreement as of specific dates and may have been qualified by certain disclosures between the parties and a contractual standard of materiality different from those generally applicable under securities laws, among other limitations. The representations and warranties were made for purposes of allocating contractual risk between the parties to the agreement and should not be relied upon as a disclosure of factual information about the registrant or the transactions contemplated thereby.
‡	The exhibits and schedules to this agreement have been omitted in reliance on Item 601(b)(2) of Regulation S-K promulgated by the Securities and Exchange Commission, and a copy thereof will be furnished supplementally to the Securities and Exchange Commission upon its request.
*	The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Juno Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing.


ITEM 16.	FORM 10-K SUMMARY

We have chosen not to include the summary permitted by this Item 16.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	JUNO THERAPEUTICS, INC.

	By:		/s/ Hans E. Bishop
			Hans E. Bishop
			President and Chief Executive Officer

	Date: March 1, 2018

POWER OF ATTORNEY

Each person whose individual signature appears below hereby authorizes and appoints Hans E. Bishop, Steven D. Harr, and Bernard J. Cassidy, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/s/ Hans E. Bishop	President, Chief Executive Officer and Director (Principal Executive Officer)	March 1, 2018
Hans E. Bishop		March 1, 2018

/s/ Steven D. Harr	Chief Financial Officer and Head of Corporate Development (Principal Accounting and Financial Officer)	March 1, 2018
Steven D. Harr		March 1, 2018

/s/ Howard H. Pien	Chairman of the Board	March 1, 2018
Howard H. Pien	Chairman of the Board	March 1, 2018

/s/ Hal V. Barron	Director	March 1, 2018
Hal V. Barron	Director	March 1, 2018

/s/ Thomas O. Daniel	Director	March 1, 2018
Thomas O. Daniel	Director	March 1, 2018

/s/ Anthony B. Evnin	Director	March 1, 2018
Anthony B. Evnin	Director	March 1, 2018

/s/ Jay T. Flatley	Director	March 1, 2018
Jay T. Flatley	Director	March 1, 2018

/s/ Richard Klausner	Director	March 1, 2018
Richard Klausner	Director	March 1, 2018

/s/ Robert T. Nelsen	Director	March 1, 2018
Robert T. Nelsen	Director	March 1, 2018

/s/ Rupert Vessey	Director	March 1, 2018
Rupert Vessey	Director	March 1, 2018

/s/ Mary Agnes Wilderotter	Director	March 1, 2018
Mary Agnes Wilderotter	Director	March 1, 2018

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Juno Therapeutics, Inc. - FORM 10-K - March 1, 2018

Attached files

Juno Therapeutics, Inc. Reports