Exhibit 99.3

Juno Therapeutics, Inc.

Index to Consolidated Financial Statements

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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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See accompanying notes.

3

See accompanying notes.

4

See accompanying notes.

5

See accompanying notes.

6

See accompanying notes.

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Juno Therapeutics, Inc.

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.

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.

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.

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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 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

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. Changes in fair values reflect changes to the Company’s assumptions regarding probabilities of successful achievement of related milestones, the timing in which the milestones are expected to be achieved, and the discount rate used to estimate the fair value of the obligation, as well as the foreign currency impact of the contingent consideration for the Stage Cell Therapeutics GmbH (“Stage”) acquisition as potential future payments are denominated in Euro.

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.

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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 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.

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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 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

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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

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 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;

·                   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

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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.

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.

In January 2017, the FASB issued ASU No. 2017-04,  Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairmen t (“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

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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.

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

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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):

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):

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 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

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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):

(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):

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 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

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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):

(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.

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):

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 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.

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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):

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):

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):

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

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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 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

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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.

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

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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 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%.

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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 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.

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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 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:

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

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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:

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.

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.

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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:

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 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

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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:

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

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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 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.

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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.

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

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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.

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.

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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):