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Item 7. Management’s Discussion and Analysis

2021-03-23 compared with 2020-03-24 · 281 added, 231 removed, 105 unchanged (83% of the section changed)

Management’s Discussion and Analy sis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Financial Data” and our financial statements and the related notes included elsewhere in this report.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this report.

This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections.

Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this report.

We are an oncology-focused precision medicine company committed to the discovery and development of targeted therapeutics for patient populations selected using molecular diagnostics.

We are a synthetic lethality-focused precision medicine oncology company committed to the discovery and development of targeted therapeutics for patient populations selected using molecular diagnostics.

Our approach integrates small molecule drug discovery with extensive capabilities in identifying and validating translational biomarkers to develop targeted therapies for select patient populations most likely to benefit.

We are applying these capabilities across multiple classes of precision medicine, including direct targeting of oncogenic pathways and synthetic lethality – which represents an emerging class of precision medicine targets.

IDE196 Clinical Development

Our most advanced product candidate is IDE196, a protein kinase C, or PKC, inhibitor for genetically-defined cancers having GNAQ or GNA11 gene mutations, which we in-licensed from Novartis.

We initiated a Phase 1/2 clinical trial IDE196-001 in June 2019 to evaluate IDE196 in solid tumors harboring GNAQ or GNA11 hotspot mutations in a basket trial design, including in metastatic uveal melanoma, or MUM, and other solid tumor indications such as cutaneous melanoma or colorectal cancer.

We have completed enrollment of patients in the Phase 1 dose escalation portion of the Phase 1/2 clinical trial at sites in the U.S.

and Australia, including patients in MUM and patients having other solid tumors with GNAQ or GNA11 hotspot mutations using a powder-in-capsule, or PIC, formulation.

We are continuing to enroll MUM patients in a Phase 1 tablet formulation sub-study evaluating pharmacokinetics and food effect.

We have initiated the Phase 2 expansion portion of the clinical trial for patients having tumors with GNAQ or GNA11 hotspot mutations for indications other than metastatic uveal melanoma, such as in cutaneous melanoma or colorectal cancer.

The thirty-eight MUM patients in the Phase 1 dose escalation arm of the clinical trial were dosed at 300 mg BID or 400 mg BID.

The 400 mg BID dosing regimen consisted of a 200mg BID run-in for the first seven days of dosing, followed by 400 mg BID dosing thereafter for the duration of treatment.

IDE196 has been generally well tolerated at each dose level, with 1 reported Grade 3 fatigue attributed to IDE196 on the 400 mg BID regimen and otherwise no reported drug-related adverse events, or AEs at or above Grade 3 in any patients.

We generally observed higher average steady state exposure of free IDE196 and higher trough concentration of IDE196 at the higher 400 mg BID dose relative to the 300 mg BID dose, based on pharmacokinetic, or PK, analysis.

We anticipate providing an update with interim clinical data from our Phase 1/2 clinical trial in MUM in the second half of 2020.

In January 2020, we initiated a Phase 1 sub-study within the Phase 1/2 clinical trial to evaluate an immediate release tablet formulation of IDE196 in MUM patients, comparing the pharmacokinetic profile of the tablet formulation to the powder-in-capsule form of IDE196 used in the dose escalation portion of the Phase 1/2 clinical trial.

In this sub-study, the data to date shows that the pharmacokinetic profile of the tablet form of IDE196, including C max and AUC total , is comparable to the pharmacokinetic profile of the PIC form of IDE196.

This Phase 1 sub-study is continuing to enroll additional MUM patients to evaluate steady state pharmacokinetic properties of the tablet and explore food effect properties of IDE196 using the tablet formulation.

Once testing of the tablet formulation of IDE196 is completed, the tablet, dosed at 400 mg BID, will be used at the recommended Phase 2 dose, or RP2D, for the expansion portion of the clinical trial into which we are continuing to enroll patients having tumors with GNAQ or GNA11 hotspot mutations for indications other than metastatic uveal melanoma.

We will evaluate whether to also expand into the Phase 2 portion of the clinical trial in MUM patients as data from our Phase 1 dose escalation portion of the clinical trial continues to mature in the second half of 2020.

Our ongoing clinical translational research includes molecular characterization of patient tissue samples, including tumor samples, with a goal of evaluating whether certain molecular characteristics correlate with patient outcomes.

Analytical screening in support of our tissue-type agnostic strategy is ongoing, including comprehensive genomic profiling and advanced genomic analyses of patient tumor samples from the ongoing Phase 1/2 clinical trial.

We have established and continue to pursue our Genomics Profiling Initiative, or GPI.

GPI is our initiative leveraging various Next Generation Sequencing (NGS) platforms in partnership with other companies to identify patients having tumors with specific mutations, such as tumors with activating GNAQ/11 hotspot mutations in solid tumors outside of uveal melanoma, or non-MUM tumors.

These patient diagnostic screening efforts have identified patients having non-MUM tumors with activating GNAQ/11 hotspot mutations, and we are evaluating these patients for potential enrollment into the ongoing non-MUM Phase 2 portion of our Phase 1/2 basket trial.

We recently entered into a clinical trial collaboration and supply agreement with Pfizer Inc., pursuant to which Pfizer will supply us with their MEK inhibitor, binimetinib, to evaluate the combination in patients with tumors harboring activating GNAQ or GNA11 hotspot mutations.

We are planning to evaluate the safety and efficacy of IDE196 in combination with binimetinib in patients with metastatic uveal melanoma in the ongoing Phase 1/2 clinical trial, which we are targeting to initiate in mid-2020.

Following our evaluation of tolerability and preliminary efficacy from the IDE196 / binimetinib combination clinical trial in MUM, we may also evaluate IDE196 / binimetinib combination therapy in patients having solid tumors with activating GNAQ/11 hotspot mutations outside of uveal melanoma.

We may also evaluate IDE196 in combination with one or more additional anti-cancer agent(s) in metastatic uveal melanoma patients and in patients having solid tumors with activating GNAQ/11 hotspot mutations outside of uveal melanoma.

We are applying these capabilities to develop a robust pipeline in precision medicine oncology, with a research and development focus in synthetic lethality—which represents an emerging class of precision medicine targets.

IDE397 – MAT2A Inhibitor Development Candidate

Our most advanced synthetic lethality research program targets methionine adenosyltransferase 2a, or MAT2A, for solid tumors with methylthioadenosine phosphorylase, or MTAP, deletions, a patient population estimated to represent approximately 15% of solid tumors.

Our MAT2A inhibitor development candidate is designated as IDE397.

We submitted an IND, to the FDA for IDE397, which is now effective.

We are initiating a Phase 1 clinical trial for evaluation of IDE397 as monotherapy, and are targeting First-Patient-In in the Phase 1 clinical trial in the first quarter of 2021.

Initial clinical development plans to evaluate IDE397 include a dose escalation portion of the Phase 1 clinical trial in which we plan to enroll patients having solid tumors with MTAP deletion identified by commercial or institutional next generation sequencing, or NGS, panels, and in some cases also confirmed by an MTAP immunohistochemistry, or IHC, assay.

Following and subject to satisfactory completion of the dose escalation portion of the Phase 1 clinical trial, we plan to enroll patients having solid tumors with MTAP deletion into one or more expansion arms focused on selected solid tumor indications.

We plan to obtain patient biopsies from the dose escalation and expansion portions of the clinical trial for translational research, including evaluation of certain pharmacodynamic, or PD, biomarkers, such as peripheral S-adenosyl methionine, or SAM, and tumor SAM as determined by liquid chromatography / mass spectroscopy, or LCMS, assays, and tumor symmetrical dimethyl arginine, or SDMA, as determined by enzyme linked immunosorbent assay, or ELISA, IHC assay and/or LCMS assay.

We have a program objective to obtain preliminary clinical PD data from the dose-escalation portion of the IDE397 monotherapy Phase 1 clinical trial in the second half of 2021.

We are continuing to advance certain preclinical activities to support IDE397 as a clinical candidate.

We are evaluating the efficacy of monotherapy IDE397 in over forty solid tumor patient derived xenograft, or PDX, models with homozygous MTAP deletions across a range of solid tumor types.

Preliminary results of this IDE397 MTAP-deletion PDX Panel Study show in vivo efficacy in multiple MTAP-null xenograft models, demonstrating tumor growth inhibition when MAT2A is pharmacologically inhibited with IDE397 as monotherapy, including in non-small cell lung cancer.

In this study, we observed > 75% Tumor Growth Inhibition, or TGI, in ~ 50% of models and across major solid tumor types.

We also observed tumor regressions, with > 100% TGI, in multiple PDX models and across multiple solid tumor types.

We are planning to present data summarizing the results of the IDE397 MTAP-deletion PDX Panel Study at the 2021 Annual Meeting of the American Association for Cancer Research, or AACR in April 2021.

We also plan to present preclinical data at AACR in April 2021 evaluating the effects of pharmacological inhibition of MAT2A, including analyses of genomic and metabolic effects in an isogenic cell pair and of proliferation effects in a panel of MTAP wild type and MTAP-deleted cell lines.

We have completed the good laboratory practice, or GLP, compliant toxicology studies with IDE397 in multiple species.

Preclinical combination tolerability and efficacy studies are ongoing to evaluate IDE397 in combination with GSK oncology assets , as well as other potential oncology agents, including taxanes .

We plan to lead research and development of IDE397 through early clinical development, in collaboration with GlaxoSmithKline pursuant to the Collaboration, Option and License Agreement, or the GSK Collaboration Agreement, with an affiliate of GlaxoSmithKline, GLAXOSMITHKLINE INTELLECTUAL PROPERTY (NO.

4), Limited, or GSK.

We are advancing our preclinical research for an inhibitor of poly (ADP-ribose) glycohydrolase, or PARG, for patients having tumors with a defined biomarker based on genetic mutations and/or molecular signatures.

One of our PARG inhibitor compounds, designated as IDB-PARG, has demonstrated dose-dependent in vivo efficacy as monotherapy with tumor regression or stasis in multiple PDX models and in multiple cell-derived xenograft, or CDX, models.

We observed tumor regressions (> 100% TGI) in multiple breast cancer PDX models with defined genetic and subtyping profiles.

We also observed tumor regressions and enhanced TGI relative to niraparib in multiple CDX models, including in vivo efficacy in a niraparib-resistant resistant CDX model.

We plan to present data at AACR in April 2021 summarizing the results of our preclinical studies evaluating the effects of pharmacological inhibition of PARG in a panel of homologous recombination deficient cell lines and in CDX and PDX models.

We are continuing to evaluate the efficacy of IDB-PARG as monotherapy across a panel of additional solid tumor PDX models with specific genetic alterations.

We entered into a strategic collaboration with the Broad Institute of MIT and Harvard, or Broad Institute, focused on synthetic lethality target and biomarker discovery.

Under our collaboration with the Broad Institute, we are evaluating pharmacological inhibition across a panel of cell lines using the Broad Institute’s PRISM platform to inform patient selection for potential clinical development of a PARG inhibitor.

PRISM is a high-throughput, multiplexed screening platform which we are using to evaluate our proprietary small molecule PARG inhibitor for activity against a curated panel of more than 750 genomically-characterized human cancer cell lines representing > 45 lineages.

We are also collaborating with the Broad Institute to evaluate paralogous CRISPR knockdown in selected cell lines in conjunction with pharmacological inhibition of PARG to inform patient selection and combination strategies in ovarian and breast cancer.

We have extended the option period during which IDEAYA has rights to exercise an option to certain license rights under the Evaluation, Option and License Agreement with Cancer Research UK and University of Manchester, or CRUK-UMann Agreement to September 2022.

The eighteen month extension of the option period was effected pursuant to the terms of the March 2020 amendment to the CRUK-UMann Agreement.

Subject to further preclinical studies, we are targeting to identify a PARG inhibitor development candidate in 2021.

Werner Helicase

We are also continuing to advance our preclinical research in collaboration with GSK for an inhibitor targeting Werner Helicase, or WRN, for patients having tumors with high microsatellite instability, or MSI.

We have observed dose-dependent cellular viability effect and a dose-dependent cellular pharmacodynamic, or PD, response in multiple endogenous MSI high cell lines.

We have also demonstrated preliminary in vivo efficacy and PD response in a relevant MSI high model.

For this program, we plan to continue further development in collaboration with GSK pursuant to the GSK Collaboration Agreement.

We are progressing our program targeting DNA Polymerase Theta, or Pol Theta or POLQ, in collaboration with GSK for patients having solid tumors with BRCA or other homologous recombination deficiency, or HRD, mutations.

We have shown combination activity with multiple PARP inhibitors, including niraparib.

We have demonstrated synergistic in vivo

efficacy of a Pol Theta inhibitor with niraparib:

the combination of our Pol Theta inhibitor with niraparib enhanced the activity of niraparib in the DLD1 BRCA2-/- xenograft model.

Tumor regressions were observed for all animals in the study which were administered the combination, which was well tolerated.

We plan to continue further development of our POLQ program, including both protein degraders and small molecule inhibitors in collaboration with GSK pursuant to the GSK Collaboration Agreement, and are targeting selecting a development candidate for a Pol Theta small molecule inhibitor in 2021.

DNA Damage Target

We have initiated early preclinical research programs to identify small molecule inhibitors for multiple distinct DNA Damage Targets, or DDTs, for patients with solid tumors characterized by a proprietary biomarker or a gene signature.

Synthetic Lethality Target and Biomarker Discovery Platform

Synthetic lethality continues to be our core research focus.

We have invested significantly and continue to invest in capabilities for identification and validation of new synthetic lethality targets.

For targets of interest, we advance our research to discover therapeutic drugs and relevant biomarkers.

IDE196 - PKC Inhibitor Clinical Candidate

We continue to execute on our ongoing Phase 1/2 clinical trial and preclinical research activities for our clinical candidate IDE196, a protein kinase C, or PKC, inhibitor for genetically-defined cancers having activating GNAQ or GNA11 hotspot mutations, including in metastatic uveal melanoma, or MUM, skin melanoma and other solid tumors.

Our clinical trial strategy is to pursue IDE196 combination therapies in MUM, including with binimetinib, a MEK inhibitor, and independently with crizotinib, a cMET inhibitor, each pursuant to our Clinical Trial Collaboration and Supply Agreement, or Pfizer Agreement, with Pfizer.

We have formed a joint development committee with Pfizer responsible for coordinating all regulatory and other activities under the Pfizer Agreement, including for both the IDE196/binimetinib combination arm of the clinical trial and the IDE196/crizotinib combination arm of the clinical trial.

If the clinical data from either or both of these combination studies is positive, we plan to enter into good faith negotiations with Pfizer to determine a regulatory submission strategy.

We are continuing to evaluate IDE196 as monotherapy in non-MUM cancers, including in skin melanoma, where we have met the clinical protocol criteria for an expansion cohort, based on observing one confirmed partial response in an initial four evaluable patients.

Based on preliminary IDE196 monotherapy clinical data and its mechanism of action, we anticipate IDE196 clinical activity independent of Human Leukocyte Antigen (HLA) status in GNAQ/11-mutation cancers.

IDE196 / Binimetinib Combination Therapy

In June 2020, we initiated a combination arm of our Phase 1/2 clinical trial to evaluate IDE196 in combination with binimetinib in patients having tumors harboring activating GNAQ or GNA11 hotspot mutations.

An initial dose escalation portion of this arm of the clinical trial is evaluating the safety and efficacy of IDE196 in combination with binimetinib at various dose combinations, initially in patients with metastatic uveal melanoma, or MUM.

Following our evaluation of tolerability and preliminary efficacy from the IDE196 / binimetinib combination arm of the clinical trial in MUM, we may also evaluate IDE196 / binimetinib combination therapy in patients having other solid tumors with activating GNAQ/11 hotspot mutations outside of uveal melanoma, such as skin melanoma.

We are continuing patient enrollment into the IDE196 / binimetinib combination arm under the clinical trial collaboration and supply agreement with Pfizer.

We initiated dose expansion in the IDE196 / binimetinib Phase 1/2 study in MUM, based on an observation of early clinical activity of the combination in MUM.

We are targeting to enroll a total of approximately 40 patients in the IDE196 / binimetinib combination arm in MUM.

We anticipate interim data from the IDE196 / binimetinib combination therapy arm of the Phase 1/2 clinical trial in MUM patients in 2021.

IDE196 / Crizotinib Combination Therapy

In September, 2020, we expanded the scope of our Pfizer Agreement to evaluate IDE196 and crizotinib as a combination therapy in patients having tumors harboring activating GNAQ or GNA11 hotspot mutations.

In December 2020, we initiated a combination arm of our Phase 1/2 clinical trial to evaluate IDE196 in combination with crizotinib in patients having tumors harboring activating GNAQ or GNA11 hotspot mutations.

An initial dose escalation portion of this arm of the clinical trial will be evaluating the safety and efficacy of IDE196 in combination with crizotinib at various dose combinations, initially in patients with metastatic uveal melanoma, or MUM.

Following our evaluation of tolerability and preliminary efficacy from the IDE196 / crizotinib combination arm of the clinical trial in MUM, we may also evaluate IDE196 / crizotinib combination therapy in patients having other solid tumors with activating GNAQ/11 hotspot mutations outside of uveal melanoma, such as skin melanoma.

We are continuing patient enrollment into the IDE196 / crizotinib combination arm under the clinical trial collaboration and supply agreement with Pfizer.

We identified cMET as a potential biomarker and a cMET inhibitor as potential combination agent though our translational research studies, or IDE196 cMET Translational Studies.

In these studies, we observed preclinical synergies between IDE196 and crizotinib in relevant cellular models under conditions simulating a tumor microenvironment in the liver, the site of approximately 90% of uveal melanoma metastases.

Additionally, we conducted a retrospective analysis of human clinical samples from the Novartis IDE196 Phase 1 clinical trial, which also independently supported cMET expression / activation as potential biomarker / combination agent.

We are planning to present data summarizing the results of the IDE196 cMET Translational Studies at AACR in April 2021.

IDE196 Monotherapy

Our ongoing monotherapy arm of the Phase 1/2 clinical trial was initiated in June 2019 to evaluate IDE196 in solid tumors harboring GNAQ or GNA11 hotspot mutations in a basket trial design.

We have completed enrollment in the monotherapy arm of the Phase 1/2 clinical trial in MUM.

We are continuing enrollment of patients having other, non-MUM solid tumors harboring GNAQ or GNA11 hotspot mutations, such as skin melanoma.

Our development strategy in the monotherapy non-MUM GNAQ/11 arm of the clinical trial is focused on skin melanoma.

In the Phase 2 basket arm evaluating IDE196 as monotherapy in non-MUM solid tumors harboring GNAQ or GNA11 hotspot mutations (GNAQ/11), the clinical protocol criteria have been met for cohort expansion in cutaneous melanoma, or skin melanoma.

We are actively enrolling for this Phase 2 cohort expansion in skin melanoma.

Of 4 evaluable skin melanoma patients harboring GNAQ/11 hotspot mutations (excluding 1 non-evaluable) as of August 1, 2020, a 100% Disease Control Rate was observed, and one confirmed partial response (cPR) was determined by RESIST, or Response Evaluation Criteria in Solid Tumors, 1.1 guidelines, satisfying the protocol requirement of at least one RECIST response in the first Stage 1 cohort (n=9) in order to expand into a second Stage 2 cohort (n=15).

Following satisfaction of the clinical protocol criteria, we can enroll an additional 15 skin melanoma patients harboring GNAQ/11 mutations into the Stage 2 cohort expansion, for a total planned enrollment of 24 patients in the skin melanoma cohort.

As of March 15, 2020, we have enrolled a total of nine patients with solid tumors other than MUM, including seven patients with skin melanoma, into the Phase 2 monotherapy basket arm.

We have added and are continuing to access potential additional clinical trial sites to supplement enrollment into the Phase 2 basket arm of the IDE196 clinical trial.

We have established a relationship with Tempus and with CARIS, in each case through which we are accessing their network of clinical trial sites into which we can enroll qualifying patients having tumors harboring GNAQ/11 hotspot mutations.

We anticipate disclosing interim data from the monotherapy arm of our ongoing IDE196-001 Phase 1/2 basket trial in 2021, including in MUM and in GNAQ/11-mutation skin melanoma.

Preliminary clinical data from IDE196 monotherapy arm shows that IDE196 activity is independent of HLA status.

IDE196 Tolerability

IDE196 has been generally well tolerated in the Phase 1/2 clinical trial.

We plan to update further on tolerability in connection with an interim data updates for IDE196 / binimetinib combination therapy in MUM and for IDE196 monotherapy in MUM and in GNAQ/11 mutant skin melanoma.

IDE196 was initially developed by Novartis, and we obtained an exclusive, worldwide license to IDE196 from Novartis in September 2018.

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Phase 1 monotherapy data from Novartis was presented at the American Association for Cancer Research, or AACR, in April 2019.

A confirmed Complete Response at the 200 mg BID dose level was observed at month 31 in one of four patients previously reported with confirmed partial response out of 30 total (28 evaluable) BID patients in the monotherapy arm of the Novartis clinical trial.

As of March 20, 2020, this patient with a confirmed Complete Response in the monotherapy arm of this clinical trial remains on treatment with IDE196.

In an end of Phase 1 meeting with the FDA in the fourth quarter of 2019, the FDA indicated that our proposed single-arm Phase 2 portion of the IDE196‑001 Phase 1/2 clinical trial may be adequate to support a new drug application, or NDA, seeking Accelerated Approval for IDE196 monotherapy in MUM.

The FDA indicated that such a single-arm, potentially registration‑enabling part of the Phase 1/2 clinical trial could target enrollment of 60 evaluable MUM patients with the primary endpoint of overall response rate, or ORR, as determined by blinded independent central review, or BICR, supported by BICR‑determined duration of response, or DOR, as a secondary endpoint.

We initiated 13-week good laboratory practice-, or GLP-, compliant toxicology studies in two species in November 2019, and have completed the in-life portion of these studies in support of an FDA requirement that results of these studies be submitted prior to enrollment of more than approximately 50 patients in the potentially registrational arm that will support a marketing application.

We will evaluate clinical tolerability and efficacy data from each of the ongoing IDE196 monotherapy Phase 1 dose escalation portion of the clinical trial in MUM patients and the planned IDE196 / binimetinib combination therapy Phase 1/2 portion of the clinical trial in MUM patients, prior to initiation of a potentially registrational clinical trial in MUM.

We will provide updated guidance on timing for a potential NDA submission for IDE196 in MUM after making such decision on a potential registrational pathway in MUM.

Preclinical Evaluation of IDE196 in other Potential Patient Populations or Indications

We have advanced our preclinical evaluation of IDE196 for potential use in other oncology patient populations.

We have suspended plans for evaluation of IDE196 as a potential therapeutic for patients with solid tumors having PKC fusions, based on preclinical validation studies which to date do not support clinical development for such patients.

Likewise, our preclinical assessment to date of the potential use of IDE196 for treatment of patients with epidermal growth factor receptor-, or EGFR-, mutant non-small cell lung cancer, or NSCLC, tumors which are TKI-resistant does not currently support clinical development activities for treating such patients with IDE196 alone, or in combination with an EGFR.

We have also suspended plans for evaluation of IDE196 in patients with solid tumors outside of metastatic uveal melanoma, where the tumors have GNAQ or GNA11 “non-hotspot” mutations in loci different from the loci of activating mutations in uveal melanoma.

Current preclinical data and results do not currently support clinical development for patients with such non-hotspot mutations.

Accordingly, our ongoing Phase 1/2 basket trial will continue to focus on patients having tumors with activating GNAQ or GNA11 hotspot mutations.

Other Potential Indications

We are continuing our preclinical evaluation of IDE196 in Sturge-Weber Syndrome, or SWS, a rare neurocutaneous disorder characterized by capillary malformations and associated with mutations in GNAQ.

Our preclinical evaluation will include potential feasibility for pediatric use.

Synthetic Lethality Programs

We believe synthetic lethality, as an emerging class of precision medicine, represents one of the most exciting, potentially impactful new areas of development in oncology, and we are investing a significant portion of our resources to be a leader in this emerging field.

Our synthetic lethality pipeline includes four potential first-in-class programs.

Our lead synthetic lethality program targets MAT2A for patients having solid tumors with MTAP deletions – a patient population estimated to represent approximately 15% of solid tumors.

We anticipate submitting an IND to the FDA for this program in the fourth quarter of 2020.

We have a synthetic lethality program targeting Pol-theta for solid tumors with homologous recombination deficiency, or HRD, including BRCA mutations, for which we expect to designate a development candidate in the second half of 2020.

We are pursuing a synthetic lethality program targeting Werner helicase, or WRN, in tumors with high microsatellite instability, or MSI, and have observed a dose-dependent cellular viability effect and a dose-dependent cellular pharmacodynamic, or PD, response in multiple endogenous MSI high cell lines.

We also have a program targeting PARG for patients having tumors with BRCA2 mutations, impaired base excision repair, or BER and potentially other genetic and/or molecular signatures such as replication stress signatures.

We are advancing each program in our synthetic lethality portfolio.

We are applying our fully integrated research and translational capabilities to each of our synthetic lethality research programs.

We have solved the crystal structures for each of our four programs, generally enabling structure-based drug design, and we are conducting preclinical in vivo efficacy studies in three of our synthetic lethality programs.

Our lead synthetic lethality research program targets MAT2A for solid tumors with MTAP deletions.

We have selected a lead compound MAT2A inhibitor as a potential drug candidate.

We are also continuing our preclinical evaluation of other compounds in our lead series, and have satisfactorily completed preliminary toxicological evaluation of several compounds in our lead series.

Preclinically, we have shown a dose-dependent cellular viability effect and pharmacodynamic engagement of MAT2A with our small molecule inhibitors.

We have solved the crystal structure of MAT2A, enabling ongoing structure-based drug design.

We have demonstrated single agent in vivo efficacy of our small MAT2A inhibitors in MTAP-null models.

We have shown tumor growth inhibition with our selected lead compound and other compounds in our lead series in an HCT116 MTAP -/- engineered model.

We have also shown anti-tumor activity, including tumor growth inhibition or tumor regression, with our selected lead compound and other compounds in our lead series in multiple MTAP -/- endogenous models.

We have scaled our lead compound for evaluation in non-GLP toxicology studies in two species to support selection of early development candidate in the second quarter of 2020.

Subject to selection of a development candidate and satisfactory completion of GLP toxicology studies with such development candidate, we anticipate submitting an IND to the FDA for the selected development candidate inhibitor of MAT2A in the fourth quarter of 2020.

Agios Pharmaceuticals presented initial data from its Phase 1 clinical trial evaluating a small molecule MAT2A inhibitor designated as AG270 in patients having tumors with MTAP deletion at the AACR/NCI/EORTC conference in October 2019.

We believe that our MAT2A inhibitor compounds are differentiated from an Agios compound, AGI-25696, which we believe to be representative of a series of Agios compounds including AG270, with distinct properties across multiple parameters, including in vivo activity, physiochemical properties, and off-target toxicity profile, including in particular, no evidence of acute liver injury or increased bilirubin in preclinical studies across multiple compounds in our lead series.

We believe synthetic lethality, as an emerging class of precision medicine targets, represents one of the most exciting, potentially impactful new areas of development in oncology, and we are investing a significant portion of our resources to be come a leader in this emerging field.

In addition to our MAT2A program, we continue to progress other synthetic lethality programs in our pipeline, including Pol - theta for patients having tumors with BRCA or other homologous recombination deficiency , or HRD, mutations Werner , or WRN, for patients having tumors with high microsatellite instability , or MSI, and PARG for patients having tumors with BRCA2 mutations , impaired base excision repair, or BER, and potentially other genetic and/or molecular signatures, including replication stress signature .

We entered into a Second Amendment, or the Lease Amendment, to the Company’s lease, or the South San Francisco Lease, with ARE-SAN FRANCISCO NO.

17, LLC, or the Lessor, relating to space leased by the Company at its corporate headquarters located at 7000 Shoreline Court, Suite 350, South San Francisco, California 94080.

The Lease Amendment expands the square footage leased by the Company pursuant to the South San Francisco Lease by an additional approximately 5,500 square feet, or the Expansion Premises, subject to the Company’s right to terminate the lease of approximately 4,500 square feet of the Expansion Premises prior to February 1, 2020 concurrent with the payment of an early termination fee, on the terms and subject to the conditions set forth therein.

Concurrent with the execution of the Lease Amendment, and in consideration of the Company’s relocation of certain of its target identification and validation operations from San Diego to its facilities in South San Francisco, the Company entered into a termination agreement with ARE-SD-Region No.

35, LLC, an affiliate of the Lessor, with respect to the Company’s existing lease at 3033 Science Park Road, San Diego, California 92121, pursuant to which the such lease was terminated on September 30, 2019.

We amended the Evaluation, Option and License Agreement between IDEAYA and Cancer Research Technologies, or CRT, also known as Cancer Research UK, or Cancer Research UK, and the University of Manchester, or University of Manchester, in March 2020 to expand our research collaboration with Cancer Research UK / U Manchester.

The expanded collaborative research will include evaluation of an IDEAYA proprietary small molecule PARG inhibitor in multiple in vitro and in vivo cancer xenograft models.

This research will also evaluate replication stress signature as a potential patient selection biomarker.

In the March 2020 amendment to the Evaluation, Option and License Agreement with Cancer Research UK and University of Manchester, the parties reduced the license fee due at exercise of our option, extended the research period for one year from the date of the March 2020 amendment, and also extended the option period, during which IDEAYA has rights to exercise an option to certain license rights, for up to four years, including an initial one year period from the date of this March 2020 amendment, an additional eighteen month extension contingent upon our certification of ongoing research activities, and up to three additional six month extensions contingent upon both our certification of ongoing research activities and payment of certain extension fees, which together with the reduced license fee would equal the original license fee.

We plan to continue to use third-party service providers, including clinical research organizations, or CROs, and clinical manufacturing organizations, or CMOs, to carry out our preclinical and clinical development and manufacture and supply of our preclinical and clinical materials to be used during the development of our product candidates.

We do not have any products approved for sale and have not generated any revenue since inception.

Prior to the completion of our IPO in May 2019, we had funded our operations primarily with an aggregate of $140.1 million in gross cash proceeds from the sale and issuance of redeemable convertible preferred stock and convertible promissory notes.

In May 2019, we sold and issued 5,750,000 shares of common stock, including 750,000 shares as a result of the full exercise of the over-allotment option by the underwriters, at $10.00 per share for gross proceeds of $57.5 million.

The aggregated net proceeds from our IPO, inclusive of the full over-allotment option exercise, were approximately $50.2 million after deducting underwriting discounts and commissions and other offering costs.

Upon the closing of our IPO, all redeemable convertible preferred shares then outstanding automatically converted into 13,139,794 shares of common stock.

Since our inception in June 2015, we have devoted substantially all of our resources to discovering and developing our product candidates.

We have incurred significant operating losses to date and expect that our operating expenses will increase significantly as we advance our product candidates through preclinical and clinical development, seek regulatory approval, and prepare for, and, if approved, proceed to commercialization;

acquire, discover, validate and develop additional product candidates;

obtain, maintain, protect and enforce our intellectual property portfolio;

and hire additional personnel.

In addition, we expect to incur additional costs associated with operating as a public company.

Our net losses were $42.0 million and $34.3 million for the years ended December 31, 2019 and December 31, 2018, respectively.

As of December 31, 2019, we had an accumulated deficit of $92.5 million.

Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, including potential collaborations with other companies or other strategic transactions.

Adequate funding may not be available to us on acceptable terms, or at all.

If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.

As of December 31, 2019, we had cash, cash equivalents and marketable securities of $100.5 million.

We believe that our cash, cash equivalents and marketable securities will be sufficient to fund our planned operations for at least 12 months from the date of the issuance of these financial statements.

Clinical Trial Collaboration and Supply Agreement for IDE196 Program

On March 11, 2020, we entered into the Pfizer Agreement with Pfizer Inc., pursuant to which Pfizer will supply us with their MEK inhibitor, binimetinib, to evaluate the combination in patients with tumors harboring activating GNAQ or GNA11 hotspot mutations.

On September 23, 2020, we expanded the scope of our clinical trial collaboration and supply agreement with Pfizer, pursuant to which Pfizer will supply us with their cMET inhibitor, crizotinib to evaluate IDE196 and crizotinib as a combination therapy in patients having tumors harboring activating GNAQ or GNA11 hotspot mutations.

For each of the IDE196/binimetinib and IDE196/crizotinib combination arms of the clinical trial, we have established a joint development committee, and there will be joint decision making and data sharing of the clinical trial results between the parties.

We will sponsor the clinical studies and Pfizer will provide the binimetinib and crizotinib drug supply.

If there is clinical data from the collaboration studies that could be used to obtain regulatory approvals or label changes, we will enter into good faith negotiations with Pfizer to determine a regulatory submission strategy.

Public Offering and Sale of IDEAYA Common Stock

On June 22, 2020, we closed on an underwritten public offering, or the Offering, of 6,666,667 shares of our common stock at an offering price of $15.00 per share, pursuant to which we received gross proceeds of $100.0 million, before deducting underwriting discounts and commissions and other offering expenses.

On July 22, 2020, as part of the Offering, the Company sold and issued an additional 500,000 shares of common stock upon the exercise of the overallotment option by the underwriters for gross proceeds of $7.5 million before deducting underwriting discounts and commissions and other offering.

We realized aggregate gross proceeds of $107.5 million from the Offering, including gross proceeds from the sale of shares in the base Offering and the sale of shares from exercise of the overallotment option, and before deducting underwriting discounts and commissions and other offering expenses payable by us.

Private Placement of IDEAYA Common Stock with GSK

On June 17, 2020, we entered into a stock purchase agreement with Glaxo Group Limited, or GGL, an affiliate of GlaxoSmithKline, pursuant to which GGL agreed to purchase in a private placement, subject to certain conditions, 1,333,333 shares of our common stock at a price per share of $15.00, which is equal to the public offering price per share in the Offering.

The common stock sold pursuant thereto was not registered under the Securities Act of 1933, as amended, or the Securities Act.

The closing of this private placement occurred on August 3, 2020, following HSR Clearance of the associated GSK Collaboration Agreement, described below, and satisfaction of other certain customary closing conditions, pursuant to which we received proceeds of $20.0 million.

On August 3, 2020, following HSR Clearance of the associated GSK Collaboration Agreement, we closed on the private placement of 1,333,333 shares of our common stock to Glaxo Group Limited, or GGL, an affiliate of GlaxoSmithKline, at a price per share of $15.00, which is equal to the public offering price per share in the Offering.

The common stock sold pursuant thereto was not registered under the Securities Act of 1933, as amended, or the Securities Act.

We received proceeds of $20.0 million from the sale of these shares in this private placement .

Prospectus Supplement - At-the-Market Facility

On August 12, 2020, we filed a prospectus supplement to the prospectus dated June 10, 2020, activating our at-the-market, or ATM, facility by entering into an Open Market Sale Agreement, or August 2020 Sales Agreement, with Jefferies LLC, or Jefferies, relating to shares of our common stock offered by the prospectus supplement and the accompanying prospectus.

Pursuant to the terms of the August 2020 Sales Agreement, we may offer and sell shares of our common stock, $0.0001 par value per share, having an aggregate offering price of up to $50,000,000 from time to time through Jefferies acting as agent.

Pursuant to the August 2020 Sales Agreement, Jefferies, as sales agent, receives a commission of 3.0% of the aggregate gross proceeds that the Company receives from each sale of its shares of common stock sold under the August 2020 Sales Agreement .

During the three months ended December 31, 2020, we sold 410,896 shares of our common stock for aggregate net proceeds of $6.6 million after deducting sales commission and other expenses at a weighted average sales price of approximately $16.92 per share under an at-the-market offering pursuant to the August 2020 Sales Agreement with Jefferies as sales agent.

On January 20, 2021, we entered into a new Open Market Sale Agreement, or January 2021 Sale Agreement, with Jefferies, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having aggregate gross proceeds of up to $90.0 million through Jefferies as its sales agent.

Under the January 2021 Sale Agreement, we will pay Jefferies a commission equal to three percent (3.0%) of the aggregate gross proceeds from each sale of shares sold through Jefferies under the January 2021 Sale Agreement.

Subsequent to December 31, 2020, from January 2021 through March 22, 2021, we sold an additional 2,709,385 shares of our common stock for aggregate gross proceeds of $43.3 million at a weighted average sales price of approximately $15.97 per share under an at-the-market offering pursuant to the August 2020 and January 2021 Sales Agreements with Jefferies as sales agent.

Management / Leadership Team

We continue to enhance our leadership team with the addition of Matthew Maurer, M.D.

as Vice President, Head of Clinical Oncology and Medical Affairs in January 2021.

Maurer was previously with Bristol Myers Squibb, and was earlier an oncologist and Assistant Professor of Medicine at Columbia University College of Physicians and Surgeons.

Board of Directors

has joined as a member of our board of directors effective February 12, 2021, serving as a Class III director, with an initial term expiring at our 2022 annual meeting of stockholders.

Kelley has over 25 years of experience in oncology drug research and development, including most recently as Chief Medical Officer of the Multiple Myeloma Research Consortium (MMRC), and previously at Bayer Healthcare Pharmaceuticals and Bayer-Schering Pharma, and at Bristol-Myers Squibb.

Components of Operating Results

Collaboration Revenues

To date, we have not generated any revenue from product sales, and we do not expect to generate any revenue from product sales for the foreseeable future.

Our revenue exclusively consists of collaboration revenue under the GSK Collaboration Agreement, including amounts that are recognized related to upfront payments and amounts due to us for research and development services.

In the future, revenue may include additional milestone payments, option exercise payments, profit sharing, and royalties on any net product sales under our collaborations.

We expect that any revenue we generate will fluctuate from period to period as a result of the timing and amount of license, research and development services, and milestone and other payments.

Operating Expenses

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Substantially all of our research and development expenses consist of expenses incurred in connection with discovery and development of our product candidates.

These expenses include certain payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expenses for our research and product development employees, fees paid to third parties to conduct certain research and development activities on our behalf including fees paid to CMOs and CROs in support of manufacturing and clinical activity for IDE 196, consulting costs, costs for laboratory supplies, costs for product licenses and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.

These expenses include certain payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expenses for our research and product development employees, fees to third parties to conduct certain research and development activities on our behalf including fees to CMOs and CROs in support of manufacturing and clinical activity for IDE196, consulting costs, costs for laboratory supplies, costs for product licenses and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.

We expense both internal and external research and development expenses as they are incurred.

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The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.

We do not allocate our costs by product candidate, as a significant amount of research and development expenses include internal costs, such as payroll and other personnel expenses, laboratory supplies and allocated overhead;

and external costs, such as fees paid to third parties to conduct research and development activities on our behalf, none of which are tracked by product candidate.

In particular, with respect to internal costs, several of our departments support multiple product candidate research and development programs, and therefore the costs cannot be allocated to a particular product candidate or development program.

We do not allocate our internal costs by product candidate, including internal costs, such as payroll and other personnel expenses, laboratory supplies and allocated overhead.

With respect to internal costs, several of our departments support multiple product candidate research and development programs, and therefore the costs cannot be allocated to a particular product candidate or development program.

The following table summarizes our external clinical development expenses by program:

Year Ended December 31,

External clinical development expenses (1) :

Personnel related and stock-based compensation

Other research and development expenses

Total research and development expenses

External clinical development expenses include manufacturing and clinical trial costs.

These expenses are primarily for services provided by external consultants, CMOs and CROs.

We are focusing substantially all of our resources on the development of our product candidates.

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General and administrative expenses consist primarily of payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expense, professional fees for legal, patent, consulting, accounting and tax services, allocated overhead, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase, as a result of increased personnel costs, including salaries, benefits and stock-based compensation expense, patent costs for our product candidates, expanded infrastructure and higher consulting, legal and accounting services associated with maintaining compliance with our NASDAQ stock exchange listing and requirements of the Securities and Exchange Commission, or the SEC, investor relations costs and director and officer insurance premiums associated with being a public company.

Interest Income

Interest income consists primarily of interest income earned on our cash, cash equivalents and marketable securities.

Other Income (Expense), Net

Other income (expense), net primarily consists of changes in the fair value of our redeemable convertible preferred stock liability and realized gains and losses on the sale of available-for-sale securities.

Other Income (Expense)

Interest Income and Other Income (Expense), Net

Interest income and other income (expense), net consists primarily of interest income earned on our cash, cash equivalents and marketable securities.

Results of Operations

A discussion regarding our financial condition and results of operations for fiscal year 2020 compared to fiscal year 2019 is presented below.

A discussion regarding our financial condition and results of operations for fiscal year 2018 compared to fiscal year 2018 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on May 24, 2019, which is available free of charge on the SEC’s website at http://www.sec.gov and at our investor relations website, https://ir.ideayabio.com/ .

A discussion regarding our financial condition and results of operations for fiscal year 2019 compared to fiscal year 2018 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 24, 2020, which is available free of charge on the SEC’s website at http://www.sec.gov and at our investor relations website, https://ir.ideayabio.com/ .

Comparison of the Years Ended December 31, 2020 and December 31, 2019

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Years Ended December 31,

Collaboration revenue

Operating expenses:

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Loss from operations

Interest income

Other income (expense), net

Interest income and other income (expense), net

Collaboration Revenue

Collaboration revenue increased by $19.5 million in the year ended December 31, 2020.

In July 2020, the GSK Collaboration Agreement became effective, and we started recognizing collaboration revenue, which consists of revenue from preclinical and Phase 1 monotherapy clinical research and development services under the MAT2A program as well as preclinical research services and the related license under the Pol Theta and WRN programs.

Collaboration revenue recognized in the year ended December 31, 2020 also included $3.0 million of revenue from the exercise by GSK of the material right associated with the option to license IDEAYA-owned technology under the MAT2A program to the extent necessary for preclinical activities.

Research and Development Expenses

Research and development expenses increased by $5.4 million, or 16%, from the year ended December 31, 2019 to the year ended December 31, 2020.

The increase in research and development expenses was primarily due to an increase in fees paid to CROs and CMOs of $4.2 million related primarily to our Phase 1/2 clinical trial to evaluate IDE196 in solid tumors and the advancement of our lead product candidates through preclinical studies;

an increase in payroll and personnel-related expenses, including salaries, benefits and stock-based compensation expense, of $3.3 million related to increased average headcount to support our growth;

an increase in clinical and research consulting costs of $1.0 million;

and an increase in allocated overhead, including rent, equipment, depreciation, information technology costs and utilities of $0.5 million.

These increases were partially offset by a decrease in license fees of $6.3 million related to our license agreement with Novartis, which was comprised of a one-time cash payment of $2.5 million and issuance of 263,615 shares of Series B redeemable convertible preferred stock with a fair value of $3.8 million to an affiliate of Novartis in the year ended December 31, 2018.

The increase in research and development expenses was primarily due to an increase in external clinical development expenses for IDE397 of $2.2 million related to manufacturing and clinical startup activities, an increase in external clinical development expenses for IDE196 of $0.1 million related to increased patient enrollment in our Phase 1/2 clinical trial to evaluate IDE196 in solid tumors, an increase in fees paid to CROs, CMOs and consultants of $5.2 million related to the advancement of our lead product candidates through preclinical studies, and an increase in software licenses, subscriptions and depreciation expense of $0.3 million.

The increase was partially offset by a decrease in costs for laboratory supplies used in support of our research programs of $1.5 million due to decreased laboratory operations as a result of COVID-19 restrictions, and a decrease in payroll expenses, including salaries, benefits and stock-based compensation expense of $1.1 million due to a decrease in our average research and development headcount for the year.

General and Administrative Expenses

General and administrative expenses increased by $5.2 million, or 53%, from the year ended December 31, 2019 to the year ended December 31, 2020.

an increase in professional fees for legal, consulting, accounting, tax and other services as a public company of $1.6 million;

an increase in directors’ and officers’ liability insurance premiums of $1.2 million as a public company;

an increase in facility related costs related to the amendment to our lease agreement in South San Francisco for additional space, which commenced on June 1, 2018, of $0.3 million;

and an increase in fees for software licenses and subscriptions of $0.4 million related to upgrades to our IT infrastructure .

Interest Income

Interest income increased by $0.3 million, or 15%, from the year ended December 31, 2018 to the year ended December 31, 2019, primarily due to an increase in interest income on our cash, cash equivalents and marketable securities balances, which increased during the year ended December 31, 2019 compared to the year ended December 31, 2018 as a result of the net proceeds from our IPO in May 2019.

Other Income (Expense), Net

Other income (expense), net decreased by $0.1 million, or 90%, from the year ended December 31, 2018 to the year ended December 31, 2019, primarily due to the change in the fair value of the redeemable convertible preferred stock liability, which was settled during the first quarter of 2018 .

The increase in general and administrative expenses was primarily due to an increase in payroll and personnel-related expenses, including salaries, benefits and stock-based compensation expense, of $2.8 million related to increased general and administrative headcount to support our growth, an increase in directors’ and officers’ liability insurance premiums of $1.0 million, an increase in legal patent expense of $0.4 million due to increased patent filings, an increase in consulting fees of $0.3 million related to human resources and information technology support, an increase in costs associated with the filing of a shelf registration statement on Form S-3 of $0.2 million, and an increase in software licenses of $0.2 million .

Interest Income and Other Income (Expense), Net

Interest income decreased by $1.4 million, or 63%, from the year ended December 31, 2019 to the year ended December 31, 2020, primarily due to a decrease in interest income on our cash, cash equivalents and marketable securities balances, as a result of the lower interest yields.

Liquidity and Capital Resources;

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Sources of Liquidity

The aggregate net proceeds from our IPO, inclusive of the full over-allotment option exercise, were approximately $50.2 million after deducting underwriting discounts and commissions and other offering costs.

As of December 31, 2019, we had cash, cash equivalents and marketable securities of $100.5 million.

Future Funding Requirements

We have funded our operations primarily through the sale and issuance of common stock, redeemable convertible preferred stock, and convertible promissory notes, as well as the up-front payment received from GSK.

As of December 31, 2020, we had cash, cash equivalents and marketable securities of $283.6 million, consisting primarily of money market funds, U.S.

government securities, commercial paper, and corporate bonds.

Material Cash Requirements

We have incurred net losses since our inception.

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As of December 31, 2020, we had an accumulated deficit of $127.0 million.

Based on our current business plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations for at least 12 months from the date of the issuance of these financial statements.

To date, we have not generated any revenue.

We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates or enter into collaborative agreements with third parties, and we do not know when, or if, either will occur.

Based on our current business plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into 2024.

To date, we have not generated any product revenue.

We do not expect to generate any meaningful product revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, it will occur.

We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products.

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We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future.

We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing.

We may seek to raise capital through private or public equity or debt financings, collaborati on or other arrangements with corporate sources, or through other sources of financing.

Adequate additional funding may not be available to us on acceptable terms or at all.

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the cost, timing and outcome of regulatory review of our product candidates;

potential delays in our ongoing clinical programs as a result of the COVID-19 pandemic;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

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We may also be required to sell or license to others rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

We lease our laboratory and office facilities in South San Francisco, California under non-cancelable operating leases with expiration dates in July 2024.

In May 2018, we amended our South San Francisco facility lease agreement to expand the size of the original premises by adding approximately 7,340 rentable square feet of additional space.

In September 2019, we further amended our South San Francisco facility lease agreement to expand the size of the premises by adding 5,588 rentable square feet of additional space.

As of December 31, 2020, we expect to make the total lease payments of $7.6 million through July 2024.

We enter into contracts in the normal course of business with third-party contract organizations for preclinical and clinical studies and testing, manufacture and supply of our preclinical and clinical materials and providing other services and products for operating purposes.

These contracts generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

Pursuant to the GSK Collaboration Agreement, subject to GSK’s exercise of the Option, we will be responsible for 20% of further development costs for the MAT2A program thereafter.

The cost-sharing percentages will be adjusted based on the actual ratio of U.S.

to global profits for MAT2A products, as measured three and six years after global commercial launch thereof.

Also, we will be responsible for 20% of global research and development costs for the WRN program.

The cost-sharing percentages will be adjusted based on the actual ratio of U.S.

to global profits for WRN products, as measured three and six years after global commercial launch thereof.

We may opt out of 50% U.S.

net profit share and corresponding development cost share for the MAT2A program and/or WRN program.

In September 2018, we entered into a license agreement with Novartis International Pharmaceuticals Ltd ., or Novartis, to develop and commercialize Novartis’ LXS196 ( also known as IDE196), a PKC inhibitor for the treatment of cancers having GNAQ and GNA11 mutations.

In consideration of license and rights granted under the license agreement, we made a one-time cash payment of $2.5 million to Novartis and issued 263,615 shares of Series B redeemable convertible preferred stock to an affiliate of Novartis.

Under the license agreement, we agreed to make contingent development and sales milestone payments of up to $29.0 million and mid to high single digit royalty payments of the net sales of licensed products.

Such milestones and royalties are dependent on future activity or product sales and are not provided for in the table above as the timing and amounts, if any, are not estimable.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements.

Adequate additional funding may not be available to us on acceptable terms or at all.

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Cash Flows from Operating Activities

Net cash provided by operating activities was $55.5 million for the year ended December 31, 2020.

Cash provided by operating activities was primarily due to an increase in contract liability of $83.8 million as a result of the up-front payment received from GSK, stock-based compensation expense of $3.6 million, an increase of accrued and other liabilities of $3.0 million due to fees to CROs in support of research and manufacturing activities and an increase in accrued payroll expenses due to increased headcounts, and depreciation and amortization expense of $1.4 million , partially offset by the use of funds in our operations to develop our product candidates resulting in a net loss of $34.5 million and an increase in accounts receivable of $1.9 million due to the estimated program costs for the fourth quarter of 2020 reimbursable by GSK under the GSK Collaboration Agreement.

Net cash used in operating activities was $39.3 million for the year ended December 31, 2019.

Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $42.0 million, adjusted for the net amortization of premiums and discounts on marketable securities of $0.5 million and an increase in prepaid expenses and other assets of $2.0 million mainly due to advance payments for director’s and officers’ liability insurance premiums and fees for CROs, partially offset by depreciation and amortization expense of $1.2 million and stock-based compensation expense of $2.2 million, and an increase in accrued and other liabilities of $2.0 million mainly due to fees to CMOs and CROs in support of manufacturing and clinical activity for IDE196 and personnel-related expenses.

Net cash used in operating activities was $27.6 million for the year ended December 31, 2018.

Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $34.3 million, adjusted for the net amortization of premiums and discounts on marketable securities of $0.8 million and increase in prepaid expenses and other assets of $0.2 million, partially offset by the issuance of Series B redeemable convertible preferred stock pursuant to the Novartis license agreement of $3.8 million, depreciation and amortization expense of $0.9 million, stock-based compensation expense of $1.0 million, an increase in accrued and other liabilities of $1.7 million primarily due to an increase in accrued research and development and accrued compensation expenses and an increase in accounts payable of $0.3 million mainly due to the timing of payments to our service providers.

Cash Flows from Investing Activities

Net cash used in investing activities was $146.2 million for the year ended December 31, 2020, which consisted primarily of $242.3 million used to purchase marketable securities and $0.5 million used to purchase property and equipment, partially offset by $96.6 million provided by maturities of marketable securities.

Net cash provided by investing activities was $2.3 million for the year ended December 31, 2019, which consisted primarily of $73.5 million provided by maturities of marketable securities and $18.1 million from sales of marketable securities , partially offset by $88.0 million used to purchase marketable securities and $1.4 million used to purchase property and equipment.

Net cash used in investing activities was $63.2 million for the year ended December 31, 2018, which consisted primarily of $133.3 million used to purchase marketable securities and $1.7 million used to purchase property and equipment, partially offset by $65.8 million provided by maturities of marketable securities and $6.0 million provided by sales of marketable securities.

Cash Flows from Financing Activities

Net cash provided by financing activities was $128.8 million for the year ended December 31, 2020, which consisted primarily of $100.7 million of net proceeds from our follow-on offering, $20.0 million of net proceeds from our private placement of common stock, $6.6 million of proceeds from ATM offering, $1.2 million of proceeds from exercise of common stock options, and $0.3 million of proceeds from ESPP purchase .

Net cash provided by financing activities was $50.6 million for the year ended December 31, 2019, which consisted primarily of $50.3 million of net proceeds from our IPO.

Net cash provided by financing activities was $105.4 million for the year ended December 31, 2018, which consisted primarily of $105.4 million of net proceeds from the issuance of Series A and Series B redeemable convertible preferred stock.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2019 (in thousands):

Payments Due by Period

Operating lease obligations (1)

We lease our laboratory and office facilities in South San Francisco, California under non-cancelable operating leases with expiration dates in July 2024.

In May 2018, we amended our South San Francisco facility lease agreement to expand the size of the original premises by adding approximately 7,340 rentable square feet of additional space.

The lease payments above do not include any related common area maintenance charges or real estate taxes.

In September 2019, we further amended our South San Francisco facility lease agreement to expand the size of the premises by adding 5,588 rentable square feet of additional space, which we have not taken possession of as of December 31, 2019.

The lease payments above do not include the lease payments for the 5,588 square feet of additional space, as the related right-of-use asset and lease liability have not been recognized in the balance sheet as of December 31, 2019.

These contracts generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

In September 2018, we entered into a license agreement with Novartis International Pharmaceuticals Ltd., or Novartis, to develop and commercialize Novartis’ LXS196 (also known as IDE196), a PKC inhibitor for the treatment of cancers having GNAQ and GNA11 mutations.

Such milestones and royalties are dependent on future activity or product sales and are not provided for in the table above as the timing and amounts, if any, are not estimable.

Critical Accounting Policies, Significant Judgments and Use of Estimates

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with U.S.

generally accepted accounting principles, or GAAP.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

For more detail on our critical accounting policies, refer to Note 2 to the financial statements appearing elsewhere in this prospectus.

Accrued Research and Development

We have entered into various agreements with CMOs and CROs.

Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs.

The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet.

If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly.

Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

Stock-Based Compensation

We use a fair value-based method to account for all stock-based compensation arrangements with employees including stock options and stock awards.

Our determination of the fair value of stock options on the date of grant utilizes the Black-Scholes option pricing model.

The fair value of the option granted is recognized on a straight-line basis over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period, which usually is the vesting period.

We account for forfeitures as they occur.

Prior to January 1, 2019, we accounted for stock options issued to non-employees based on the fair value of the stock options, using the Black-Scholes option pricing model, at the measurement date and is subject to periodic adjustments as the stock options vest and at the end of each reporting period and the resulting change in value, if any, is recognized in our statements of operations and comprehensive loss during the period the related services are rendered.

Upon adoption of ASU 2018-07, Compensation–Stock Compensation (Topic 718):

Improvements to Non-employee Share–Based Payment Accounting , starting January 1, 2019, we account for stock options issued non-employees based on the fair value of the stock options in the same manner as stock options granted to employees, as described in the preceding paragraphs.

Estimates of the fair value of equity awards as of the grant date using valuation models such as the Black-Scholes option pricing model are affected by assumptions with a number of complex variables.

Changes in the assumptions can materially affect the fair value and ultimately the amount of stock-based compensation expense recognized.

These inputs are subjective and generally require significant analysis and judgment to develop.

Changes in the following assumptions can materially affect the estimate of the fair value of stock-based compensation:

Expected Term – The expected term of stock options represents the weighted-average period the stock options are expected to remain outstanding and is based on the options ’ vesting terms, contractual terms, and industry peers, as we did not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

Expected Volatility – For all stock options granted to date, the volatility data was estimated based on a study of publicly traded industry peer companies as we did not have sufficient trading history for our common stock.

For purposes of identifying these peer companies, we considered the industry, stage of development, size and financial leverage of potential comparable companies.

For each grant, we measured historical volatility over a period equivalent to the expected term.

Expected Dividend – The Black-Scholes valuation model calls for a single expected dividend yield as an input.

We currently have no history or expectation of paying cash dividends on our common stock.

Accordingly, we have estimated the dividend yield to be zero.

Risk-Free Interest Rate – The risk-free interest rate is based on the yield available on U.S.

Treasury instruments whose term is similar in duration to the expected term of the respective stock option.

Common Stock Valuations

Prior to our IPO, the estimated fair value of the common stock underlying our stock options and stock awards was determined at each grant date by our board of directors, with assistance from management and external appraisers.

All options to purchase shares of our common stock were intended to be exercisable at a price per share not less than the per-share fair value of our common stock underlying those options on the date of grant.

The approach to estimate the fair value of the Company’s common stock was consistent with the methods outlined in the American Institute of Certified Public Accountants’ Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation , or Practice Aid.

Subsequent to the Company’s IPO, the fair value of the Company’s common stock is determined based on its closing market price as reported on The NASDAQ Global Select Market.

We provide for income taxes under the asset and liability method.

Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year.

Deferred income tax assets and liabilities arise due to differences between when assets or liabilities are recognized for tax purposes and when they are recognized for financial reporting purposes.

Net operating losses and credit carryforwards are also deferred tax assets.

Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse.

Deferred income tax assets are reduced, as necessary, by a valuation allowance when management determines it is more likely than not that some or all of the tax benefits will not be realized.

We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities.

Assessing an uncertain tax position begins with the initial determination that the position meets the more-likely-than-not threshold and is measured at the largest amount of benefit that is likely of being realized upon ultimate settlement.

As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether (1) the factors underlying the more-likely-than-not threshold assertion have changed and (2) the amount of the recognized tax benefit is still appropriate.

The recognition and measurement of tax benefits requires significant judgment.

Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of interest expense and other expense, respectively.

To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

Net operating loss carryforwards, or NOLs, and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service, or IRS, and may become subject to an annual limitation in the event of ownership changes as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (generally, cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points) , which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The amount of the annual limitation is determined based on our value immediately prior to such an ownership change.

Subsequent ownership changes may further affect the limitation in future years.

We do not expect any previous ownership changes ( as defined under Section s 382 and 383 of the Internal Revenue Code of 1986, as amended ) to result in a limitation that will materially reduce the total amount of net operating loss carryforwards and credits that can be utilized .

As of December 31, 2019 and December 31, 2018, we had unrecognized tax benefits, all of which would affect income tax expense if recognized, before consideration of our valuation allowance.

We do not expect that our uncertain tax positions will materially change in the next 12 months.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation through the Tax Cuts and Jobs Act, or Tax Act.

The Tax Act significantly revises the future ongoing U.S.

corporate income tax by, among other things, lowering the U.S.

corporate income tax rates and implementing a modified territorial tax system.

The corporate tax rate was reduced from 34% to 21% for tax years beginning after December 31, 2017.

Changes in tax law are accounted for in the period of enactment.

As such, our financial statements as of December 31, 2017 reflect the impact of this Tax Act, which primarily consisted of remeasuring our deferred tax assets, deferred tax liabilities and valuation allowance using the newly enacted U.S.

corporate tax rate.

This rate change resulted in a $2.3 million reduction in our net deferred tax assets from the prior year with a corresponding offset to the valuation allowance.

Under the Tax Act, net operating losses arising after December 31, 2017 do not expire and cannot be carried back.

However, the Tax Act limits the amount of net operating losses that can be used annually to 80% of taxable income for net operating losses arising in periods beginning after December 31, 2017.

Existing net operating losses arising in years ending on or before December 31, 2017 are not affected by these provisions.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

For more detail on our critical accounting policies, refer to Note 2 to the financial statements appearing elsewhere in this Annual Report on Form 10-K.

Revenue Recognition

We follow Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) we satisfy a performance obligation.

We apply the five-step model to contracts when (1) parties have approved the contract and are committed to performing respective obligations, (2) we can identify each party’s rights regarding the goods or services to be transferred, (3) we can identify the payment terms for the goods or services to be transferred, (4) the contract has commercial substance, and (5) it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

At contract inception, we assess the goods or services promised within each contract and determine the performance obligations by assessing whether each promised good or service is distinct.

Goods or services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligations when (or as) the performance obligations are satisfied.

We constrain our estimate of the transaction price up to the amount (the “variable consideration constraint”) that a significant reversal of recognized revenue is not probable.

Licenses of intellectual property:

If a license to our intellectual property is determined to be distinct from the other promised goods or services identified in an arrangement, we recognize revenue from non-refundable, upfront fees allocated to the license at the point in time when the license is transferred to the customer and the customer is able to use and benefit from the license.

For licenses that are bundled with other goods or services, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress toward satisfying the performance obligation for purposes of recognizing revenue from non-refundable, upfront fees.

We evaluate the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition.

Customer options for additional goods or services:

If a contract contains customer options that allow the customer to acquire additional goods or services, including a license to our intellectual property, the goods and services underlying the customer options are evaluated to determine whether they are deemed to represent a material right.

In determining whether the customer option has a material right, we assess whether there is an option to acquire additional goods or services at a discount.

If the customer option is determined not to represent a material right, the option is not considered to be a performance obligation.

If the customer option is determined to represent a material right, the material right is recognized as a separate performance obligation.

We allocate the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option.

Amounts allocated to a material right are not recognized as revenue until the option is exercised.

Milestone payments:

At the inception of each arrangement or amendment that includes development, regulatory or commercial milestone payments, we evaluate whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price.

ASC 606 prescribes two methods to use when estimating the amount of variable consideration:

the expected value method and the most likely amount method.

Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts.

Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts.

Whichever method is used, it should be consistently applied throughout the life of the contract;

however, it is not necessary for us to use the same approach for all contracts.

If it is probable that a significant revenue reversal would not occur when the uncertainty associated with the milestone is resolved, the associated milestone value is included in the transaction price.

Milestone payments that are highly susceptible to factors outside our influence, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

If there is more than one performance obligation, the transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis.

We recognize revenue as or when the performance obligations under the contract are satisfied.

At the end of each subsequent reporting period, we re-evaluate the probability or achievement of each milestone and any related constraint, and if necessary, adjusts our estimates of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Upfront payments and fees are recorded as contract liabilities upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements.

Amounts payable to us are recorded as accounts receivable when our right to consideration is unconditional.

We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Contractual cost sharing payments received from a customer or collaboration partner are accounted for as variable consideration.

We include an expected value in the transaction price.

Contractual cost sharing payments made to a customer or collaboration partner are accounted for as a reduction to the transaction price if such payments are not related to distinct goods or services received from the customer or collaboration partner.

Contracts may be amended to account for changes in contract specifications and requirements.

Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations.

When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for goods and services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is accounted for as a separate contract.

If a contract modification is not accounted for as a separate contract, we account for the promised goods or services not yet transferred at the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification.

We account for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification.

In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).

Upfront payment contract liabilities resulting from our license and collaboration agreements do not represent a financing component as the payment is not financing the transfer of goods and services, and the technology underlying the licenses granted reflects research and development expenses already incurred by us.

As such, we do not adjust our revenues for the effects of a significant financing component.

Determination of the estimate of standalone selling price (“SSP”)

Prior to entering into the GSK Collaboration Agreement, we have never entered into a similar collaboration agreement nor have ever recognized any revenue, and the SSP of performance obligations identified in the GSK Collaboration Agreement is not directly observable.

Accordingly, we developed an estimate of the SSP of each performance obligation based on the information known to us on the Effective Date and on input from an independent third-party valuation firm.

We applied the income approach as a primary methodology to determine the SSP of each performance obligation.

Specifically, based on our early stage of development and other relevant factors, we determined to use the following methodologies:

Preclinical and Phase 1 Monotherapy clinical research and development services under the MAT2A program (“MAT2A R&D Services”) – the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;

Preclinical research services and the related license to IDEAYA-owned technology under the Pol Theta program (“Pol Theta R&D Services”) – a combination of risk-adjusted net present value analysis and the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;

Preclinical research services and the related license to IDEAYA-owned technology under the WRN program (“WRN R&D Services”) – a combination of risk-adjusted net present value analysis and the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;

The Option – risk-adjusted net present value analysis;

Material right associated with the option to license to IDEAYA-owned technology under the MAT2A program to the extent necessary for preclinical activities in preparation for the MAT2A Combination Trial (“Preclinical MAT2A License”) – the expected costs of satisfying the performance obligation;

Material right associated with the supply of MAT2A product for the MAT2A Combination Trial (“MAT2A Supply”) – the expected costs of satisfying the performance obligation.

The assumptions used to determine the SSP of each performance obligation are based on numerous objective and subjective factors, combined with management judgment, including:

projected preclinical and clinical research and development expenses;

the probability of technical success for the development, regulatory approval and commercialization of our product candidates;

projected cash flow during development and commercialization periods;

discount rates based on cost of capital;

the probability of exercise of the Option;

the projected manufacturing cost and overhead expense for IDE 397.

We considered reasonably available data points, market conditions and entity-specific factors in estimating the SSP of performance obligations.

However, some of these assumptions are specific to us and are not directly observable.

We also applied our own judgment as management in determining these assumptions.

Accordingly, these assumptions are subject to uncertainty, and changing methodology and/or assumption could materially impact the estimate of the SSP of performance obligations, and as a result, an amount of subsequent revenue recognition and/or its timing.

Determination of the timing of satisfaction of performance obligations

We recognize revenue from the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services over time, as GSK simultaneously receives and consumes the benefits provided by our performance as we perform.

We measure our progress toward complete satisfaction of the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services based on the costs incurred as a percentage of the estimated total costs to be incurred to complete the performance obligations.

The estimated total costs to be incurred to complete the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services may evolve and be updated throughout the performance period with the consultation with GSK through the joint development committee.

Also, the expected timing of completing the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services may be updated.

The change in the estimated total costs and/or the timing of completion may materially impact an amount of subsequent revenue recognition and/or its timing.

Indemnification Agreements

We enter into standard indemnification arrangements in the ordinary course of business with vendors and other parties.

We enter into standard indemnification arrangements in the ordinary course of business with vendors, clinical trial sites and other parties.

Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party.

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We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

As a result, we believe the fair value of these agreements is minimal.

As a result, we believe the fair value of these agreements is not material.

JOBS Act Accounting Election

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Recent Accounting Pronouncements

See the section titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our financial statements included elsewhere in this prospectus for additional information.

Quantitative and Qualita tive Disclosures About Market Risk.

Interest Rate Sensitivity

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates or exchange rates.

As of December 31, 2019, we had cash equivalents and marketable securities of $100.4 million, consisting of interest-bearing money market funds, investments in U.S.

government securities, commercial paper, and corporate bonds, for which the fair value would be affected by changes in the general level of U.S.

interest rates.

However, due to the low-risk profile of our cash equivalents and marketable securities, an immediate 10% change in interest rates would not have a material effect on the fair value of our cash equivalents and marketable securities.

We do not believe that inflation, interest rate changes or exchange rate fluctuations have had a significant impact on our results of operations for any periods presented herein.

See the section titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

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What changed 10-K

Item 7. Management’s Discussion and Analysis