What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-02-23 compared with 2022-02-24 · 205 added, 190 removed, 1186 unchanged (25% of the section changed)

27 unchanged sentences

You should review the section titled “Risk Factors”

in Part I, Item 1A of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

in Part I, Item 1A of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

We are a biopharmaceutical company focused on discovering and developing novel small molecule therapeutics that selectively degrade disease-causing proteins by harnessing the body’s own natural protein degradation system.

6 unchanged sentences

Our programs exemplify our focus on addressing high impact targets that have been elusive to conventional modalities and that drive the pathogenesis of multiple serious diseases with significant unmet medical needs.

In February 2021, we initiated the single ascending dose, or SAD, portion of our Phase 1 trial of KT-474 in adult healthy volunteers.

In July 2021, we initiated the multiple ascending dose, or MAD, portion of the Phase 1 trial of KT-474 in healthy volunteers.

We completed dose escalation in the SAD and MAD portions of this Phase 1 trial in December 2021.

A subsequent patient cohort is expected to include hidradenitis suppurativa, or HS, and atopic dermatitis, or AD, patients.

With respect to our IRAK4 program, we are collaborating with Sanofi S.A, or Sanofi, on the development of drug candidates targeting IRAK4 outside the oncology and immuno-oncology fields.

In November 2021, we announced that we received FDA clearance of our IND to evaluate our STAT3 degrader, KT-333, in a Phase 1 clinical trial in patients with relapsed/refractory liquid and solid tumors, including aggressive lymphomas.

We initiated our KT-333 Phase 1 clinical study in January 2022.

In November 2021, we also announced that we received FDA clearance of our investigational new drug application, or IND, to evaluate our IRAKIMiD degrader, KT-413, in a Phase 1 clinical trial in patients with relapsed/refractory B cell lymphomas, including MYD88 mutant diffuse large B cell lymphomas (DLBCL).

We initiated our KT-413 Phase 1 clinical study in February 2022.

Our next program, currently in IND-enabling activities, is a degrader against the E3 ligase MDM2.

Our MDM2 degrader has been developed to stabilize the tumor suppressor p53 and address a wide variety of p53 wild type tumor types in both solid tumors and hematologic malignancies.

We have completed our Phase 1 trial of KT-474, which included a single ascending dose, or SAD, portion, a multiple ascending dose, or MAD, portion and a single dose, food-effect cohort to establish the dose for the patient cohort, or Part C, in patients with HS and AD.

In December 2022, Sanofi notified us of its intent to advance KT-474 into Phase 2 clinical trials.

Phase 2 clinical trials of KT-474 will initially investigate its potential in HS and AD, with the clinical trial for the first indication initiating in 2023.

With respect to our oncology programs, we are evaluating KT-333, a STAT3 degrader, in a Phase 1 clinical trial in patients with relapsed/refractory liquid and solid tumors, including aggressive lymphomas.

Patient enrollment and dosing are ongoing in the Phase 1a portion of the trial, and we expect to provide additional clinical data in 2023.

We are also evaluating KT-413, our IRAKIMiD degrader, in a Phase 1 clinical trial in patients with relapsed/refractory B cell lymphomas, including MYD88 mutant diffuse large B cell lymphomas (DLBCL).

Patient enrollment and dosing are ongoing in the Phase 1a portion of the trial, and we expect to provide additional clinical data in 2023.

In December 2022, we received FDA clearance for our investigational new drug, or IND, application to evaluate our MDM2 degrader, KT-253, in a Phase 1 clinical trial.

KT-253 has been developed to stabilize the tumor suppressor p53 and address a wide variety of p53 wild type tumor types in both solid tumors and hematologic malignancies.

We plan to initiate our Phase 1 clinical trial of KT-253 in early 2023.

Since our inception in 2015, we have devoted substantially all of our efforts to organizing and staffing our company, research and development activities, business planning, raising capital, building our intellectual property portfolio and providing general and administrative support for these operations.

To date, we have received gross proceeds of $877.1 million from sales of our convertible preferred stock, the sale of common stock including our August 2020 initial public offering, or IPO, and concurrent private placement, and our July 2021 follow-on offering and concurrent private placement, and through our collaborations with Vertex Pharmaceuticals Incorporated, or Vertex, and Sanofi.

To date, we have received gross proceeds of $1.03 billion from sales of our convertible preferred stock, the sale of common stock including our August 2020 initial public offering, or IPO, and concurrent private placement, our July 2021 follow-on offering and concurrent private placement, our August 2022 private investment in public equity, or PIPE offering, and through our collaborations with Vertex Pharmaceuticals Incorporated, or Vertex, and Sanofi.

We have incurred significant operating losses since inception.

5 unchanged sentences

prepare and submit Investigational New Drug applications, or INDs, with the U.S.

Food and Drug Administration, or FDA, for KT-253 and future product candidates;

Food and Drug Administration, or FDA, for current and future product candidates;

initiate and continue research and development activities to support our pre-clinical product candidate pipeline;

manufacture our drug products, drug substances, delivery vehicles, and product candidates for use in preclinical studies, clinical trials and on a larger scale for commercialization, if approved;

continue to develop and expand our Pegasus TM platform to identify additional product candidates;

18 unchanged sentences

As of December 31, 2022, we had cash, cash equivalents and marketable securities of $559.5 million.

We believe the existing cash, cash equivalents and marketable securities on hand, will enable us to fund our operating expenses and capital expenditure requirements into 2025.

We believe the existing cash, cash equivalents and marketable securities on hand, will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2025 which is expected to take us past the proof-of-concept Phase 2 data for KT-474, as well as early proof-of-concept data for KT-413, KT-333 and KT-253 .

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

4 unchanged sentences

economy and in financial markets.

We expect that COVID-19 precautions will directly or indirectly impact the timeline for some of our planned clinical trials and are continuing to assess the potential impact of the COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system.

We expect that COVID-19 precautions will directly or indirectly impact the timeline for some of our

planned clinical trials and are continuing to assess the potential impact of the COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system.

As a result of the pandemic, many companies have experienced disruptions in their operations and in markets served.

To date, we have instated some and may take additional temporary precautionary measures intended to help ensure our employees’

To date, we have initiated some and may take additional temporary precautionary measures intended to help ensure our employees’

well-being and minimize business disruption.

These measures include devising contingency plans and securing additional resources from third-party service providers.

For the safety of our employees and their families, we have temporarily reduced the presence of our scientists in our labs and continue to rely on third parties to conduct many of the experiments and studies

for our research programs.

Certain of our third-party service providers have also experienced shutdowns or other business disruptions.

18 unchanged sentences

Such license is exercisable on a collaboration target-by-collaboration target basis only after a specified milestone.

For compounds directed against IRAK4, the field of use includes diagnosis, treatment, cure, mitigation or prevention of any diseases, disorders or conditions, excluding oncology and immune-oncology.

For compounds directed against IRAK4, the field of use includes diagnosis, treatment, cure, mitigation or prevention of any diseases, disorders or conditions, excluding oncology and immuno-oncology.

We are responsible for discovery and preclinical research and conducting a phase 1 clinical trial for at least one degrader directed against IRAK4 plus up to three backup degraders.

1 unchanged sentence

We have an exclusive option, or Opt-In Right, exercisable on a collaboration target-by-collaboration target basis that will include the right to (i) to fund 50% of the United States development costs for collaboration products directed against such target in the applicable field of use and (ii) share equally in the net profits and net losses of commercializing collaboration products directed against such target in the applicable field of use in the United States.

In addition, if we exercise the Opt-In Right, Sanofi will grant to us an exclusive option, applicable to each collaboration target, which upon exercise will allow us to conduct certain co-promotion activities in the field in the United States.

In addition, if we exercise the Opt-In Right, Sanofi will grant us an exclusive option, applicable to each collaboration target, which upon exercise will allow us to conduct certain co-promotion activities in the field in the United States.

The Sanofi Agreement, unless earlier terminated, will expire on a product-by-product basis on the date of expiration of all payment obligations under the Sanofi Agreement with respect to such product.

5 unchanged sentences

We will be eligible to receive tiered royalties for each program on net sales ranging from the high single digits to high teens, subject to low-single digits upward adjustments in certain circumstances.

On November 15, 2022, we entered into an Amended and Restated Collaboration and License Agreement with Sanofi, or the Amended Sanofi Agreement, which amended the Original Sanofi Agreement to revise certain research terms and responsibilities set forth under the Original Sanofi Agreement.

The Amended Sanofi Agreement also specifies details around the timing and number of Phase 2 trials required under the terms of the collaboration.

The Amended Sanofi Agreement became effective on December 5, 2022.

Additionally with respect to Sanofi, on December 2, 2022, Sanofi provided the Company with written notice of its intention to advance the collaboration target 1 candidate, KT-474, into Phase 2 clinical trials.

The Company is entitled to receive milestone payments upon the dosing of the first Phase 2 patient(s) per indication up to a specified number of indications as further set forth in the Amended Sanofi Agreement.

Phase 2 clinical trials of KT-474 will initially investigate its potential in HS and AD with the clinical trial for the first indication expected to be initiated in 2023.

Operating expenses

53 unchanged sentences

General and administrative expenses

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, corporate and business development, and administrative functions.

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, legal, corporate and business development, and administrative functions.

General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax and administrative consulting services, insurance costs, administrative travel expenses, marketing expenses and other operating costs.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support development of our product candidates and our continued research activities.

We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as legal, investor and public relations expenses associated with being a public company.

Other Income (Expense)

Interest and other income and expense, net

Interest income consists of interest earned on our invested cash balances and interest on our financing leases.

Interest and other income and expense consists of interest earned on our invested cash balances and interest on our financing leases.

Results of Operations

15 unchanged sentences

Research and development expenses

The following table summarizes our research and development expenses for each period presented:

The following table summarizes our research and development expenses for each period presented (program expenses are not disclosed prior to formal development cadidate nomination):

Year ended December 31,

4 unchanged sentences

Research and development expenses were $164.2 million for the year ended December 31, 2022, compared to $137.0 million for the year ended December 31, 2021.

The increase of $74.9 million was primarily due to higher direct expenses related to IND-enabling studies and clinical activities for IRAK4, IRAKIMiD, and STAT3 programs of $21.5 million, as well

as increased expenses related to the investment in our platform, exploratory programs, and Vertex collaboration of $23.3 million.

We also had a $30.1 million increase in personnel, stock-based compensation, occupancy and related costs due to increases in employee headcount in the research and development functions.

The increase of $27.2 million was primarily due to an increase of $22.4 million related to IND-enabling studies for our MDM2 program and increased investment in our other pipeline programs and platform, as well an additional $22.0 million increase in personnel, stock-based compensation and occupancy costs due to increases in employee headcount in the research and development functions.

These increases were primarily offset by a $17.2 million reduction in direct expenses related to our activities for our IRAK4, IRAKIMiD and STAT3 programs due to changes in the stage of development of these respective programs.

General and administrative expenses

General and administrative expenses were $43.8 million for the year ended December 31, 2022, compared to $36.3 million for the year ended December 31, 2021.

The $18.1 million increase was primarily due to an increase in legal and professional service fees and an increase in personnel, facility, occupancy and other expenses stemming from an increase in headcount to support our growth as a public company as well as increased stock-based compensation expense also attributable to our headcount.

The $7.5 million increase was primarily due to a $6.5 million increase in G&A employee compensation due to an increase in employee headcount, and a $1.0M increase in legal and professional services expenses to support our growth as a public compamy.

Other Income, Net

Other income, net was $6.4 million for the year ended December 31, 2022, compared to $0.3 million for the year ended December 31, 2021.

The $0.4 million decrease was primarily due to the prevailing interest rates in the respective periods.

The $6.1 million increase was primarily due to the prevailing interest rates in the respective periods.

Results of Operations

13 unchanged sentences

Collaboration revenues were $72.8 million for the year ended December 31, 2021, of which $18.5 million and $54.3 million were attributable to our collaboration agreements with Vertex and Sanofi, respectively.

Collaboration revenue was $2.9 million for the year ended December 31, 2019, all of which was attributable to our collaboration with Vertex.

Collaboration revenues were $34.0 million for the year ended December 31, 2020, of which $15.2 million and $18.8 million were attributable to our collaboration agreements with Vertex and Sanofi, respectively.

Research and development expenses

The following table summarizes our research and development expenses for each period presented:

The following table summarizes our research and development expenses for each period presented (program expenses are not disclosed prior to formal development cadidate nomination):

Year ended December 31,

1 unchanged sentence

External research and development costs:

IRAK4 and IRAKIMiD

Internal research and development costs

1 unchanged sentence

Research and development expenses were $137.0 million for the year ended December 31, 2021, compared to $62.1 million for the year ended December 31, 2020.

The increase of $25.0 million was primarily due to higher direct expenses related lead optimization activities for our IRAK programs of $6.7 million and STAT3 programs of $4.2 million, as well as increased investment in our platform, exploratory programs, and Vertex collaboration of $3.8 million.

We also had a $10.2 million increase in personnel, occupancy and related costs due to increases in employee headcount in the research and development functions.

The increase of $74.9 million was primarily due to higher direct expenses related to IND-enabling studies and clinical activities for our IRAK4, IRAKIMiD, and STAT3 programs of $21.5 million, as well as increased expenses related to the investment in our platform, exploratory programs, and Vertex collaboration of $23.3 million.

We also had a $30.1 million increase in personnel, stock-based compensation, occupancy costs due to increases in employee headcount in the research and development functions.

General and administrative expenses

General and administrative expenses were $36.3 million for the year ended December 31, 2021, compared to $18.2 million for the year ended December 31, 2020.

The increase was primarily due to an increase in legal and professional service fees and an increase in personnel, facility, occupancy and other expenses stemming from an increase in headcount to support our growth as a public company.

Other Income, Net

4 unchanged sentences

We have not yet commercialized any products and we do not expect to generate revenue from sales of products for several years, if at all.

To date, we have received gross proceeds of $877.1 million from sales of our convertible preferred stock, the sale of common stock including our August 2020 IPO and concurrent private placement, and our July 2021 follow-on offering and concurrent private placement, and through our collaborations with Vertex and Sanofi.

To date, we have received gross proceeds of $1.03 billion from sales of our convertible preferred stock, the sale of common stock including our August 2020 IPO and concurrent private placement, our July 2021 follow-on offering and concurrent private placement, our August 2022 PIPE offering, and through our collaborations with Vertex and Sanofi.

As of December 31, 2022 we had cash and cash equivalents and marketable securities of $559.5 million.

6 unchanged sentences

Cash (used in) provided by operating activities

Cash used in investing activities

Cash provided by (used in) investing activities

Cash provided by financing activities

3 unchanged sentences

These were offset by adjustments for non-cash items of $39.3 million (primarily consisting of stock-based compensation, depreciation and amortization and premiums and discounts on available sale-securities) and a $0.2 million net increase in operating assets and liabilities primarily driven by changes in accounts payable and accrued expenses partially offset by changes in prepaid expenses and other operating assets and liabilities.

During the year ended December 31, 2021, operating activities used $128.9 million of cash, primarily resulting from our net loss of $100.2 million during the period and a $69.4 million decrease in deferred revenue under our Sanofi and Vertex collaboration agreements.

These were offset by adjustments for non-cash items of $33.2 million (primarily consisting of stock-based compensation, depreciation and amortization and premiums and discounts on available sale-securities) and a $7.5 million net increase in operating assets and liabilities primarily driven by changes in accounts payable and accrued expenses partially offset by changes in prepaid expenses and other operating assets and liabilities.

During the year ended December 31, 2020, operating activities provided $88.1 million of cash, primarily resulting from $150.0 million of proceeds received under our collaboration agreement with Sanofi executed in July 2020.

Cash provided by operating activities also includes an increase of accounts payable and accruals of $6.7 million, an increase in net operating assets and liabilities of $0.7 million, offset by our net loss of $45.6 million adjusted for net non-cash items of $8.9 million (primarily stock-based compensation, depreciation expense and amortization of premiums and discounts on securities).

During the year ended December 31, 2019, operating activities provided $17.9 million of cash, resulting from the $55.9 million in aggregate payments received in connection with the Vertex Agreement, including the premium paid on the Series B-1 convertible preferred stock purchase.

Cash provided by operating activities also includes an increase of accounts payable and accruals of $3.2 million, an increase of net operating lease right-of-use assets and liabilities of $1.0 million offset by a net decrease of operating assets and liabilities of $1.0 million and our net loss of $41.2 million.

Cash Flow used in Investing Activities

Cash provided by operating activities also included an increase of accounts payable and accruals of $6.7 million, an increase in net operating assets and liabilities of $0.7 million, offset by our net loss of $45.6 million adjusted for net non-cash items of $8.9 million (primarily stock-based compensation, depreciation expense and amortization of premiums and discounts on securities).

Cash Flow provided by (used in) Investing Activities

During the year ended December 31, 2022, cash provided by investing activities was $20.5 million comprised of maturities of marketable securities of $469.3 million partially offset by purchases of marketable securities of $446.0 million and purchases of property and equipment of $2.8 million.

During the year ended December 31, 2021, cash used in investing activities was $99.8 million comprised of purchases of marketable securities of $456.4 million and purchases of property and equipment of $1.6 million offset by maturities of marketable securities of $358.2 million.

During the year ended December 31, 2020, cash used in investing activities was $422.6 million comprised of purchases of marketable securities of $529.4 million and purchases of property and equipment of $9.1 million offset by maturities of marketable securities of $115.9 million.

During the year ended December 31, 2019, investing activities used $16.5 million of cash, primarily due to $16.0 million in purchases of marketable securities and $0.5 million in purchases of property and equipment.

Cash Flow from Financing Activities

During the year ended December 31, 2022, net cash provided by financing activities was $153.0 million, primarily consisting of $149.8 million of net proceeds received in our August 2022 PIPE offering, $3.2 million in proceeds from the exercise of employee stock options, $1.1 million in proceeds from the issuance of shares under our employee stock purchase partially offset by finance lease payments of $1.1 million.

During the year ended December 31, 2021, net cash provided by financing activities was $250.3 million, primarily consisting of $240.8 million of net proceeds received in our July 2021 follow on offering, $2.3 million from our July 2021 concurrent private placement, $7.6 million in proceeds from the exercise of employee stock options, $0.8 million in proceeds from the issuance of shares under our employee stock purchase plan offset by the payment of $0.4 million in offering costs related to our August 2020 IPO and finance lease payments of $0.8 million.

During the year ended December 31, 2020, net cash provided by financing activities was $289.3 million, primarily consisting of $183.1 million of net proceeds received in our August 2020 IPO, $13.5 million from our August 2020 concurrent private placement, $88.2 million of proceeds from our issuances of Series C convertible preferred stock in March 2020, net of issuance costs, and $4.8 million of proceeds from the second closing of our Series B convertible preferred stock financing in January 2020, net of issuance costs.

During the year ended December 31, 2019, net cash provided by financing activities was $34.9 million, which consisted of $14.0 million of proceeds from our issuances of Series B-1 convertible preferred stock in May 2019, net of issuance costs, and $21.2 million of proceeds from the second closing of our Series B convertible preferred stock financing in December 2019, net of issuance costs.

Future funding requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the later-stage clinical development of our product candidates.

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

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

Because of the numerous risks and uncertainties associated with the development of our product candidates and programs and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

11 unchanged sentences

our need to implement additional internal systems and infrastructure, including financial and reporting systems.

We believe the existing cash, cash equivalents and marketable securities of $567.6 million as of December 31, 2021, will enable us to fund our operating expenses and capital expenditure requirements into 2025.

We believe the existing cash, cash equivalents and marketable securities of $559.5 million as of December 31, 2022, will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2025.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

13 unchanged sentences

Contractual Obligations and Other Commitments

Excluding the 2021 Lease executed in December 2021 for 100,624 square feet of office and lab space in Watertown, Massachusetts, which the Company anticipates occupying in November 2023, during the year ended December 31, 2021, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business.

The following table summarizes our outstanding contractual obligations as of payment due date for the 2021 Lease at December 31, 2021 (in thousands):

Payments Due by Period

Less Than 1 Year

More than 5 Years

December 31, 2021

Operating lease obligation

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods.

Such arrangements primarily include those related to our lease commitments.

Lease Commitments

Our lease commitments reflect payments due for our two lease agreements for laboratory and office space in Watertown, Massachusetts that expire in March, 2030 and December, 2034, respectively.

As of December 31, 2022, our contractual commitments for our leases were $137.1 million, which will be paid over the term of such leases.

The amount of lease commitments reflects payments due for one of our leases that had not commenced under Accounting Standards Codification (ASC) Topic 842, Leases (ASC 842), as of December 31, 2022, and as a result, these leases are not reflected within the consolidated balance sheets.

We expect this lease to commence in 2023.

For additional information on our leases and timing of future payments, please read Note 7, Leases, to the consolidated financial statements included in this Form 10-K.

Other Obligations

We enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies, and testing, manufacturing, and other services and products for operating purposes.

These contracts provide for termination upon notice.

Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.

These payments have not been included separately within these contractual and other obligations disclosures.

Critical Accounting Policies and Estimates

21 unchanged sentences

For contracts that include sales-based royalties for licensed compounds, we recognize revenue at the date when the related sales occur.

Finally, we determine whether the contract contains a significant

financing component by analyzing the promised consideration relative to the standalone selling price of the promised goods and services and the timing of payment relative to the transfer of the promised goods and services.

Finally, we determine whether the contract contains a significant financing component by analyzing the promised consideration relative to the standalone selling price of the promised goods and services and the timing of payment relative to the transfer of the promised goods and services.

At each reporting date, we reassess the transaction price and probability of achievement of the performance obligations and the associated constraints on transaction price.

43 unchanged sentences

The expected dividend yield is assumed to be zero as we have no current plans to pay any dividends on common stock.

JOBS Act Accounting Election

As of June 30, 2021, the market value of our common stock held by non-affiliates exceeded $700 million, and as a result, as of January 1, 2022, we no longer qualified as an “emerging growth company,”

as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

As a large accelerated filer, we are subject to certain disclosure requirements that are applicable to other public companies that were not applicable to us as an emerging growth company, including compliance with the auditor attestation requirements in the assessment of our internal control over financial reporting imposed by the Sarbanes-Oxley Act of 2002, compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements and full disclosure obligations regarding executive compensation.

Additionally, we are no longer able to take advantage of transition periods for complying with new or revised accounting standards that are available to emerging growth companies .

Quantitative and Qualitat ive Disclosures About Market Risk.

10 unchanged sentences

Inflation generally affects us by increasing our cost of labor and clinical trial costs.

We do not believe that inflation had a material effect on our business, financial condition or results of operations during the year ended December 31, 2021.

The global macroeconomic environment has experienced, and continues to experience, extraordinary challenges, including the highest rates of inflation in 40 years.

These macroeconomic factors have contributed, and we expect will continue to contribute, to increased costs, among other concerns.

We cannot predict how long these inflationary pressures will continue, or how they may change over time, but we expect to see continued impacts on the global economy, our industry and our company.

During 2022, we experienced increases in interest income and costs across our business.

If inflationary pressures continue to persist, they may continue to have an adverse impact on our consolidated financial position, results of operations and/or cash flows.

Financial Statement s and Supplementary Data.

4 unchanged sentences

Consolidated Statements of Convertible Preferred Stock and Stockholders’

Equity (Deficit) for the Years ended December 31, 2021, 2020 and 2019

Equity for the Years ended

December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the Years ended December 31, 2022, 2021 and 2020

Notes to Consolidated Financial Statements

Report of Independen t R egistered Public Accounting Firm

Report of Independent Registered Public Accounting F irm

To the Stockholders and the Board of Directors of Kymera Therapeutics, Inc.

45 unchanged sentences

Marketable securities (Note 4)

Accounts receivable—due from related party

Contract assets—due from related party

23 unchanged sentences

Stockholders’

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized as of December 31, 2021

0 shares issued and outstanding as of December 31, 2021 and 2020

Common stock, $ 0.0001 par value;

26 unchanged sentences

Other comprehensive loss:

Unrealized (loss) gain on marketable securities

Unrealized loss on marketable securities

Total comprehensive loss

8 unchanged sentences

Consolidated Statements of Convertible Preferred Stock and Stockholders’

Equity (Deficit)

For the years ended December 31 2022, 2021 and 2020

11 unchanged sentences

arrangement (Note 5)

Issuance of Series B Convertible Preferred

Stock, net of issuance costs of $ 17

Issuance of Series B Preferred Stock,

net of issuance costs of $ 0

Exercise of Stock Options

Vesting Restricted Stock

Stock-based compensation expense

Unrealized gain on marketable securities

Balance at December 31, 2019

The accompanying notes are an integral part of these consolidated financial statements.

KYMERA THERAPEUTICS, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’

Equity (Deficit)

For the years ended December 31 2021, 2020 and 2019

(In thousands, except share and per share amounts)

Preferred Stock

Comprehensive

Stockholders'

Balance at December 31, 2019

Vesting of Series A Preferred Stock

in connection with collaboration

arrangement (Note 5)

Issuance of Series B Preferred Stock,

net of issuance costs of $ 0

Issuance of Series C Preferred Stock,

19 unchanged sentences

Consolidated Statements of Convertible Preferred Stock and Stockholders’

Equity (Deficit)

For the years ended December 31 2022, 2021 and 2020

23 unchanged sentences

KYMERA THERAPEUTICS, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’

For the years ended December 31 2022, 2021 and 2020

(In thousands, except share and per share amounts)

Preferred Stock

Comprehensive

Stockholders'

Balance at December 31, 2021

Issuance of Common Stock and accompanying Pre-Funded Warrants at Private Placement, net of issuance cost of $ 174

Exercise of stock options

Vesting restricted stock

Issuance of shares under ESPP

Stock-based compensation

Unrealized loss on marketable

Balance at December 31, 2022

The accompanying notes are an integral part of these consolidated financial statements.

KYMERA THERAPEUTICS, INC.

Consolidated Statem ents of Cash Flows

12 unchanged sentences

Contract asset—due from related party

Other receivables—due from related party

Accounts payable

10 unchanged sentences

Maturities of marketable securities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Financing activities

Proceeds from the issuance of Series B Convertible Preferred Stock, net of

issuance costs

Proceeds from issuance of common stock and accompanying

pre-funded warrants from private placement, net of issuance costs

Proceeds from the issuance of Series B-1 Convertible Preferred Stock, net of

23 unchanged sentences

Supplemental disclosure of noncash operating activities

Right-of-use assets obtained in exchange for operating lease liabilities

Tenant improvement receivable included in other assets

Reduction of right-of-use asset and liability due to lease modification

13 unchanged sentences

Principal among these risks are the uncertainties of the product discovery and development process, dependence on key individuals, development of the same or similar technological innovations by the Company’s competitors, protection of proprietary technology, compliance with government regulations and approval requirements, the Company’s ability to access capital and uncertainty of market acceptance of products.

The Company has histori cal net losses and anticipates that it will continue to incur losses for the foreseeable future and had an accumulated deficit of $ 229.0 million as of December 31, 2021.

The Company has funded these losses principally through issuance of preferred stock, convertible notes, common stock, including its initial public offering and concurrent private placement completed in August 2020 (“IPO”), follow-on offering and concurrent private placement completed in July 2021 ("Follow-on Offering"), and from cash proceeds received in connection with the Company’s collaboration agreements with Vertex Pharmaceuticals Incorporated (“Vertex”) and Genzyme Corporation (“Sanofi”) (see Note 5).

The Company has hi storical net losses and anticipates that it will continue to incur losses for the foreseeable future and had an accumulated deficit of $ 383.8 million as o f December 31, 2022.

The Company has funded these losses principally through issuance of preferred stock, convertible notes, common stock, including its initial public offering and concurrent private placement completed in August 2020 (“IPO”), follow-on offering and concurrent private placement completed in July 2021 ("Follow-on Offering"), August 2022 Private Investment in Public Equity ("PIPE") offering, and from cash proceeds received in connection with the Company’s collaboration agreements with Vertex Pharmaceuticals Incorporated (“Vertex”) and Genzyme Corporation (“Sanofi”) (see Note 5).

The Company expects to continue to incur operating losses and negative cash flows until such time as it generates a level of revenue that is sufficient to support its cost structure.

As of December 31, 2021, the Company had cash, cash equivalents and marketable securities of $ 567.6 million.

The Company believes these cash, cash equivalents and marketable securities will be sufficient to fund its operations and cap ital expenditure requirements through at least twelve months from the issuance of these consolidated financial statements.

As of December 31, 2022, the Company had cash, cash equivalents and marketable securit ies of $ 559.5 million.

The Company believes these cash, cash equivalents and marketable securities will be sufficient to fund its operations and capital expenditure requirements through at least twelve months from the issuance of these consolidated financial statements.

The Company expects to finance the future research and development costs of its product portfolio with its existing cash, cash equivalents and marketable securities, or through strategic financing opportunities that could include, but are not limited to future offerings of its equity, collaboration agreements, or the incurrence of debt.

11 unchanged sentences

On July 6, 2021, the Company completed a follow-on offering of its common stock and issued and sold 5,468,250 shares of common stock, including full exercise of the underwriters’

over-allotment option to purchase an additional 713,250 shares,

at a public offering price of $ 47.00 per share.

over-allotment option to purchase an additional 713,250 shares, at a public offering price of $ 47.00 per share.

The aggregate gross proceeds before deducting underwriting discounts and commissions, and other estimated offering expenses payable by the Company were approximately $ 257.0 million.

Concurrent with the follow-on offering, the Company issued and sold 49,928 shares of common stock at $ 47.00 per share in a private placement to Vertex and the aggregate proceeds were $ 2.3 million.

Private Investment in Public Equity "PIPE" offering

On August 18, 2022, the Company and certain accredited investors entered into a securities purchase agreement pursuant to which the Company agreed to sell and issue to such investors in a private placement (i) an aggregate of 2,769,228 shares of the Company’s common stock at a purchase price of $ 26.00 per share, and (ii) 3,000,000 Pre-Funded Warrants to purchase common stock, at a purchase price of $ 25.9999 per pre-funded warrant, (the “Pre-Funded Warrants”) .

The Pre-Funded Warrants will have an exercise price of $ 0.0001 per share of common stock.

The offering closed on August 22, 2022, resulting in net proceeds of $ 149.8 million after offering expenses.

As the Pre-Funded Warrants are indexed to the Company’s common stock (and otherwise meet the requirements to be classified in equity), the Company recorded the consideration received from the issuance of the Pre-Funded Warrants as additional paid-in capital on the Company’s consolidated balance sheets.

The Pre-Funded Warrants are exercisable at any time.

The holders of Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 4.99 % of the number of shares of the Common Stock outstanding immediately after giving effect to such exercise.

The holders of Pre-Funded Warrants may increase or decrease such percentages not in excess of 19.99 % by providing at least 61 days’

prior notice to the Company.

During the twelve months ended December 31, 2022, no Pre-Funded Warrants were exercised.

As of December 31, 2022, there were 3,000,000 pre-funded warrants outstanding.

Summary of Significant Accounting Policies

12 unchanged sentences

In recording transactions and balances resulting from business operations, management makes estimates based on the best information available at the time the estimate is made.

Significant estimates relied upon in preparing these financial statements include revenue recognized under our collaboration agreement with Sanofi and Vertex, accrual for research and development expenses, equity-based compensation expense, and the valuation of equity.

As better information becomes available or actual amounts are determinable, the recorded estimates are revised.

21 unchanged sentences

Realized gains and losses are determined using the specific identification method and are included in other (expense) income, net.

The Company reviews its portfolio of available-for-sale debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below cost have resulted from a credit-related loss or other factors.

If the decline in fair value is due to credit-related factors, a loss is recognized in net income, whereas if the decline in fair value is not due to credit-related factors, the loss is recorded in other comprehensive income (loss).

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses.

Impairment is assessed at the individual security level.

Factors considered in determining whether a loss resulted from a credit loss or other factors include the Company’s intent and ability to hold the investment until the recovery of its amortized cost basis, the extent to which the fair value is less than the amortized cost basis, the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, any adverse legal or regulatory events affecting the issuer or issuer’s industry, and any significant deterioration in economic conditions.

Fair Value Measurements

10 unchanged sentences

The carrying values of the Company’s cash equivalents, prepaid expenses, accounts payable, and certain accruals approximate their fair value due to their short-term nature.

The Company adopted ASC Topic 842, Leases (“ASC 842”) on January 1, 2019.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

13 unchanged sentences

Major additions and betterments are capitalized;

maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to operations

maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to operations as incurred.

Depreciation expense is recorded using the straight-line method over the estimated useful life of the related asset as follows:

1 unchanged sentence

Lab equipment

Furnitures and fixtures

Furniture and fixtures

Office equipment

6 unchanged sentences

Impairment of Long-Lived Assets

Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

Long-lived assets (including right-of-use assets) to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets.

6 unchanged sentences

Equity due to terms that allow for redemption of the shares in cash upon certain change in control events that are outside of the Company’s control, including the sale or transfer of the Company as holders of the convertible preferred stock which could trigger redemption of the shares.

The Company did not accrete the value of the convertible preferred stock to the redemption values since a liquidation event was not considered probable as of December 31, 2019.

Subsequent adjustments of the carrying values to the ultimate redemption values will be made only when it becomes probable that such liquidation events will occur.

The Company did not accrete the value of the convertible preferred stock to the redemption values since a liquidation event was not considered probable prior to the conversion date.

In connection with the Company’s initial public offering on August 25, 2020, all outstanding shares of convertible preferred stock converted to common stock.

The Company determines the accounting classification of warrants that are issued, as either liability or equity, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity , and then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock .

Under ASC 480-10, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the issuer to settle the warrants or the underlying shares by paying cash or other assets, or must or may require settlement by issuing variable number of shares.

If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature.

If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable U.S.

After all relevant assessments are made, the Company concludes whether the warrants are classified as liability or equity.

Liability classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair value after the issuance date recorded in the statements of operations as a gain or loss.

Equity classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.

Research and Development Costs

9 unchanged sentences

If a planned financing is abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss.

There was no deferred offering costs on the Company’s consolidated balance sheet at December 31, 2021.

There was $ 0.4 million of deferred financing costs included in accounts payable on the Company’s consolidated balance sheet as of December 31, 2020.

There was no deferred offering costs on the Company’s consolidated balance sheet at December 31, 2022 and December 31, 2021.

Revenue Recognition

The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2017.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

Under ASC 606, Topic 606, Revenue from Contracts with Customers (“ASC 606”) , the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps:

53 unchanged sentences

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

Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those

approvals are received.

Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment.

29 unchanged sentences

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes options-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company’s expected dividend yield.

Prior to the IPO, as there was no active market for the Company’s common stock, the Company

estimated the fair value of common stock on the date of grant based on the then current facts and circumstances.

Prior to the IPO, as there was no active market for the Company’s common stock, the Company estimated the fair value of common stock on the date of grant based on the then current facts and circumstances.

Upon becoming a public company, the fair value of the underlying common shares equals the closing price of the Company’s stock on the date of grant.

The Company historically has been a private company and lacks company-specific historical and implied volatility information.

As the Company’s IPO was in 2020, the Company lacks a sufficient period of company-specific historical and implied volatility information.

Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of guideline companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

7 unchanged sentences

Compensation expense for discounted purchases under the employee stock purchase plan is measured using the Black-Scholes model to compute the fair value of the lookback provision plus the purchase discount and is recognized as compensation expense over the offering period.

Income taxes for Kymera Therapeutics, Inc.

are recorded in accordance with FASB Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach.

The Company records income taxes in accordance with FASB Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach.

Under this method, deferred income tax assets and liabilities are recognized based on future income tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities, and their respective income tax basis.

23 unchanged sentences

The two-class method requires income (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all income (loss) for the period had been distributed.

The Company’s convertible preferred

stock participates in any dividends declared by the Company and are therefore considered to be participating securities.

The Company’s convertible preferred stock participates in any dividends declared by the Company and are therefore considered to be participating securities.

The participating securities are not required to participate in the losses of the Company, and therefore during periods of loss there is no allocation required under the two-class method.

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) per share attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

4 unchanged sentences

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Statements.

The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses.

It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases.

Under this ASU 2016-13, the standard is effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For all other entities, the standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

As of December 31, 2021, the Company no longer qualified as a smaller reporting company for filing purposes, and therefore adopted ASU 2016-13 effective January 1, 2021 .

The adoption did not have a material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

The new standard was effective beginning January 1, 2021 .

The Company adopted this standard as of January 1, 2021 and it did not have a material impact on its financial position and results of operations.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments.

ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity.

ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

The Company adopted ASU 2020-06 effective as of January 1, 2022.

The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.

Fair Value Measurements

17 unchanged sentences

Money market fund

Corporate bonds

Marketable securities, current

US treasuries

US government agencies

Corporate bonds

1 unchanged sentence

US treasuries

US government agencies

Corporate bonds

Restricted cash

During the years ended December 31, 2021 and 2020, there were no tr an sf ers between Level 1, Level 2 and Level 3.

During the years ended December 31, 2022 and 2021, there were no tr ansfers in or out of Level 3.

Marketable Securities

6 unchanged sentences

treasury securities

US government agency securities

Corporate securities

1 unchanged sentence

As of December 31, 2021, the Company held 113 securities that had been in an unrealized loss position for less than 12 months with an aggregate fair value of $ 515.4 million.

As of December 31, 2022, the Company held 36 securities that had been in an unrealized loss position for greater than 12 months with an aggregate fair value of $ 115.0 million.

As of December 31, 2021, the Company did not hold any securities that had been in an unrealized loss position for greater than 12 months.

As of December 31, 2022 the Company had 118 securities with a fair value of $ 338.8 million with a contractual maturity of less than 12 months and 81 securities with a fair value of $ 152.3 million with a contractual maturity of greater than 12 months.

As of December 31, 2021, the Company had 79 securities with a fair value of $ 394.4 million with a contractual maturity of less than 12 months and 37 securities with a fair value of $ 125.2 million with a contractual maturity of greater than 12 months.

During the year ending December 31, 2020, the Company sold one security prior to maturity which resulted in an immaterial realized gain on the sale.

The Company evaluates securities for other-than-temporary impairments based on quantitative and qualitative factors, and considered the decline in market value for the 185 securities in an unrealized loss position as of December 31, 2022, to be primarily attributable to the then current economic and market conditions.

The Company neither intends to sell these investments nor concludes that it is more-likely-than-not that the Company will have to sell them before recovery of their carrying values.

The Company also believe that it will be able to collect both principal and interest amounts due to it at maturity.

The Company also believe that it will be able to collect both principal and interest amounts due at maturity.

Collaborations

4 unchanged sentences

Such license is exercisable on a collaboration target-by-collaboration target basis only after specified milestones.

For compounds directed against IRAK4, the field of use includes diagnosis, treatment, cure, mitigation or prevention of any diseases, disorders or conditions, excluding oncology and immune-oncology.

For compounds directed against IRAK4, the field of use includes diagnosis, treatment, cure, mitigation or prevention of any diseases, disorders or conditions, excluding oncology and immuno-oncology.

Pursuant to the Sanofi Agreement, the Company is responsible for discovery and preclinical research and conducting a Phase 1 clinical trial for at least one degrader directed against IRAK4 plus up to three backup degraders.

4 unchanged sentences

The Company or Sanofi may terminate the agreement upon the other party’s material breach or insolvency or for certain patent challenges.

In addition, Sanofi may terminate the agreement for convenience or for a material safety event upon advance prior written notice, and the Company may terminate the agreement with respect to any collaboration candidate if, following Sanofi’s assumption of responsibility for the development, commercialization or manufacturing of collaboration candidates with respect to a particular target, Sanofi ceases to exploit any collaboration candidates directed to such target for a specified period.

In addition, Sanofi may terminate the Sanofi Agreement for convenience or for a material safety event upon advance prior written notice, and the

Company may terminate the Sanofi Agreement with respect to any collaboration candidate if, following Sanofi’s assumption of responsibility for the development, commercialization or manufacturing of collaboration candidates with respect to a particular target, Sanofi ceases to exploit any collaboration candidates directed to such target for a specified period.

In consideration for the exclusive licenses granted to Sanofi under the Sanofi Agreement, Sanofi paid to the Company an upfront payment of $ 150.0 million.

The Company will also be reimbursed for certain research activities for a certain backup degrader under the IRAK4 program, unless certain criteria are not met for an initial IRAK4 degrader.

The Company will also be reimbursed for certain research activities for a certain backup degrader under the IRAK4 program as well as contract manufacturing costs for the lead 474 program, unless certain criteria are not met for an initial IRAK4 degrader.

In addition to the upfront payment and the reimbursements, the Company is eligible to receive certain development milestone payments of up to $ 1.48 billion in the aggregate, of which more than $ 1.0 billion relates to the IRAK4 program, upon the achievement of certain developmental or regulatory events.

1 unchanged sentence

The Company will be eligible to receive tiered royalties for each program on net sales ranging from the high single digits to high teens, subject to low-single digits upward adjustments in certain circumstances.

The Amended Sanofi Agreement also specifies details around the timing and number of Phase 2 trials required under the terms of the collaboration.

The Amended Sanofi Agreement became effective on December 5, 2022.

Accounting Treatment

13 unchanged sentences

The Company determined the total transaction price to be $ 150.0 million, which consists solely of the upfront payment.

All milestones payments and option payments are constrained as the achievement of such milestones are contingent upon the success of the underlying research and development activities and are generally outside the control of the Company.

All milestone payments and option payments are constrained as the achievement of such milestones are contingent upon the success of the underlying research and development activities and are generally outside the control of the Company.

The reimbursement of costs for the IRAK4 backup degrader is also treated as constrained variable consideration as the criteria for reimbursement may not always be met, under which circumstances the Company would be responsible for the costs related to the backup degrader.

10 unchanged sentences

Reimbursement consideration added to the transaction price will be recognized as revenue on the same pattern as Collaboration Target 1, with a cumulative catch-up upon becoming unconstrained.

The performance obligation has not been fully satisfied as of December 31, 2021.

Pursuant to the November 15, 2022 amendment to the Sanofi Agreement, the Company reevaluated its rights and obligations under the Agreement as amended.

As part of this reevaluation, the Company reassessed its accounting pursuant to the arrangement concluding that the amendment had no impact on the performance obligations nor revenue recognized in the periods presented .

The performance obligations have not been fully satisfied as of December 31, 2022.

During the year ended December 31, 2022, the Company recognized $ 36.0 million in revenue under the Sanofi Agreement, of which $ 19.4 million was associated with Collaboration Target 1 and $ 16.6 million was associated with Collaboration Target 2.

Of the $ 36.0 million of revenue recognized in the year ended December 31, 2022, $ 30.5 million was recognized from amounts that were recorded in deferred revenue as of December 31, 2021.

The aggregate amount of the transaction price allocated to the Company’s unsatisfied performance obligations and recorded in deferred revenue at December 31, 2022 is $ 54.9 million.

1 unchanged sentence

The aggregate amount of the transaction price allocated to the Company’s unsatisfied performance obligations and recorded in deferred revenue at December 31, 2021 is $ 81.8 million.

During the year ended December 31, 2021, the Company received $ 4.8 million in cost reimbursement payments under the Sanofi Agreement.

As of December 31, 2021, the Company recorded $ 0.1 million of unbilled accounts receivable related to reimbursable research and development costs under the Sanofi Agreement.

As of December 31, 2020, the Company recorded $ 0.9 million of unbilled accounts receivable and $ 0.6 million in billed accounts receivable for amounts related to reimbursable research and development costs under the Sanofi Agreement.

The Company will recognize the deferred revenue related to the performance obligations based on a cost input method, as described, over the remaining research term, which is a maximum of approximately 2.3 years as of December 31, 2021.

During the year ended December 31, 2020, the Company recognized $ 18.8 million in revenue under the Sanofi Agreement, of which $ 16.7 million was associated with Collaboration Target 1 and $ 2.1 million was associated with Collaboration Target 2.

During the years ended December 31, 2022 and 2021, the Company received $ 6.7 million and $ 4.8 million, respectively, in in cost reimbursement payments under the Sanofi Agreement.

The Company recorded $ 2.5 million and $ 0.1 million of unbilled accounts receivable related to reimbursable research and development costs under the Sanofi Agreement as of December 31, 2022 and December 31, 2021, respectively.

The Company will recognize the deferred revenue related to the performance obligations based on a cost input method, as described, over the remaining research term, which as a result of the amended agreement, is a maximum of approximately 3.0 years as of December 31, 2022.

Any consideration related to performance-based milestones will be recognized when the risk of probable reversal is resolved, at which point the Company shall adjust the transaction price determined for the agreement accordingly and recognize revenue on a cumulative-catch up basis, reallocating the revised arrangement consideration to the performance obligations.

1 unchanged sentence

As part of its evaluation of constraining the milestones, the Company considered numerous factors, including the fact that the achievement of the research and development milestones are contingent upon the results of the underlying research and development activities and are thus outside of the control of the Company.

Sanofi participated in the Company’s Series B Convertible Preferred Stock offering and as a result of this, was considered a related party during the year ended December 31, 2020 but no longer are considered a related party as of December 31, 2021.

Vertex Agreement

17 unchanged sentences

(1) the non-exclusive, royalty-free research license;

and (2) the research and development services to be performed on up to six targets;

(2) the research and development services to be performed on up to six targets;

and (3) the option to license each of the targets for development, manufacturing, and commercialization efforts.

3 unchanged sentences

As part of its evaluation of constraining the research and development milestones, the Company considered numerous factors, including the fact that the achievement of the research and development milestones are contingent upon the results of the underlying research and development activities and are thus outside of the control of the Company.

At the commencement of the arrangement, two units of accounting were identified, the issuance of 3,059,695 shares of the Company’s Series B-1 Convertible Preferred Stock and the research activities the Company will perform over the Research Term.

At the commencement of the arrangement, two units of accounting were identified, the issuance of 3,059,695 shares of the Company’s Series B-1 and the research activities the Company will perform over the Research Term.

The Company determined the total transaction price to be $ 55.9 million, which consists of $ 5.9 million attributed to the premium from the Series B-1 shares sold to Vertex and the $ 50.0 million upfront payment.

1 unchanged sentence

The Company recognizes revenue associated with the performance obligation as the research and development services are provided using an input method, according to the costs incurred as related to the research and development activities on each program and the costs expected to be incurred in the future to satisfy the performance obligation.

The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.

The transfer of control

occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.

The amounts received that have not yet been recognized as revenue are deferred as a contract liability on the Company’s consolidated balance sheet and will be recognized over the remaining research and development period until the performance obligation is satisfied.

The performance obligation has not been fully satisfied as of December 31, 2022.

During the years ended December 31, 2021, 2020 and 2019, the Company recognized $ 18.5 million, $ 15.2 million and $ 2.9 million, respectively, in revenue under the Vertex Agreement.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 10.8 million, $ 18.5 million, $ 15.2 million, respectively, in revenue under the Vertex Agreement.

All $ 10.8 million revenue recognized during the year ended December 31, 2022 was recognized from amounts that were recorded in deferred revenue as of December 31, 2021.

11 unchanged sentences

The Company recorded expense over the vesting period based on the fair value of the shares under the Collaboration.

The Company recorded $ 0.3 million and $ 0.4 million to research and development expense related to the vesting of 166,183 and 221,579 shares of Series A Preferred Stock during the years ended December 31, 2020 and 2019, respectively.

The Company recorded $ 0.3 million to research and development expense related to the vesting of 166,183 shares of Series A Preferred Stock during the year ended December 31, 2020.

As of December 31, 2020, all shares under the Collaboration were fully vested and all expense had been recognized.

2 unchanged sentences

As such, the Company records the expense related to the vesting of shares as research and development expense in the Company’s consolidated statements of operations and comprehensive loss.

The Collaboration can be terminated by either party for convenience with 60-days written notice and may also be terminated in the event of a material breach.

The Collaboration was terminated by the parties effective April 27, 2022 .

The following table presents the changes in accounts receivable, contract assets and liabilities for the year ended December 31, 2022 (in thousands)

10 unchanged sentences

Property and equipment

Property and equipment consist of the following as of December 31, 2021 and 2020 (in thousands):

Property and equipment consists of the following as of December 31, 2022 and 2021 (in thousands):

December 31, 2022

December 31, 2021

Lab and office equipment under and financing

28 unchanged sentences

Base rent is subject to a 3 % annual increase over the lease term of approximately 134 months following the commencement date.

The Company also has two consecutive options to extend the term of the lease for five years each at then-market rates.

The Company also has two consecutive options

to extend the term of the lease for five years each at then-market rates.

The 2021 Lease also includes a tenant improvement allowance of approximately $ 20.1 million.

11 unchanged sentences

Total lease costs

Supplemental cash flow information relating to the Company’s leases for the years ended December 31, 2021 and 2020 was as follows (in thousands):

Supplemental cash flow information relating to the Company’s leases for the years ended December 31, 2022 and 2021 were as follows (in thousands):

Year ended December 31,

1 unchanged sentence

of lease liabilities:

Operating cash flows used in (provided by)

operating leases

Operating cash flows used in operating leases

Operating cash flows used in finance leases

12 unchanged sentences

Present value of lease liabilities

Excluded from the table above are all future payments related to the 2021 Lease.

Accrued Expenses

6 unchanged sentences

Other Commitments and Contingencies

Legal Proceedings

In the ordinary course of business, the Company may be subject to legal proceedings, claims and litigation as the Company operates in an industry susceptible to patent legal claims.

19 unchanged sentences

This resulted in a total issuance of 15,527,943 shares of Series C Preferred Stock.

The fair value of the shares of Series C Preferred Stock issued exceeded the carrying value of the shares of Series A Preferred Stock exchanged by $ 9.1 million, which was recognized as a deemed dividend through a reduction of $ 2.3 million to additional paid-in capital and an increase of $ 6.7 million to the accumulated deficit.

The fair value of the shares of Series C Preferred Stock issued exceeded the carrying value of the shares of Series A Preferred Stock exchanged by $ 9.1 million, which was

recognized as a deemed dividend through a reduction of $ 2.3 million to additional paid-in capital and an increase of $ 6.7 million to the accumulated deficit.

The $ 9.1 million deemed dividend increased the net loss for the year ending December 31, 2020 to arrive at net loss attributable to common stockholders in the calculation of earnings per share.

In connection with the Company’s August 25, 2020 IPO all issued and outstanding Convertible Preferred Stock of 50,439,595 were converted to 31,625,534 shares of the Company’s common stock and are no longer issued or outstanding as of December 31, 2020.

In connection with the Company’s August 25, 2020 IPO all issued and outstanding Convertible Preferred Stock of 50,439,595 were converted to 31,625,534 shares of the Company’s common stock and were no longer issued or outstanding as of December 31, 2020.

Equity-Based Compensation

2018 Stock Option and Grant Plan

In November 2018, the Company adopted, and its stockholders approved, the 2018 Stock Option and Grant Plan (the “2018 Plan”), which provides for the granting of stock options and other equity-based awards at the discretion of the Board of Directors or any subcommittee of the Board of Directors to its employees, officers, directors, and independent contractors.

In November 2018, the Company adopted, and its stockholders approved, the 2018 Stock Option and Grant Plan (the “2018 Plan”), which provides for the granting of stock options and other equity-based awards at the discretion of the Board of Directors or any subcommittee of the Board of Directors to the Company's employees, officers, directors, and independent contractors.

No further grants will be made under the 2018 Plan.

5 unchanged sentences

The 2020 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors and consultants.

The Company has initially reserved 4,457,370 shares of its common stock for the issuance of awards under the 2020 Plan,

which includes the shares of common stock remaining available for issuance under its 2018 Plan as of the business day immediately prior to the effective date of the registration statement.

The Company has initially reserved 4,457,370 shares of its common stock for the issuance of awards under the 2020 Plan, which includes the shares of common stock remaining available for issuance under its 2018 Plan as of the business day immediately prior to the effective date of the registration statement.

The 2020 Plan provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2021 and each January 1 thereafter, by 4 % of the Company’s outstanding number of shares of common stock on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s compensation committee.

These limits are subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization.

As of December 31, 2021, there were an aggregate of 3,082,121 shares remaining available for future grants.

As of December 31, 2022, there were an aggrega te of 3,744,415 shares remaining available for future grants.

2020 Employee Stock Purchase Plan

1 unchanged sentence

The 2020 ESPP initially reserves and authorizes the issuance of up to a total of 445,653 shares of common stock to participating employees.

The 2020 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2021 and each January 1 thereafter through January 1, 2030, by the least of (i) 438,898 shares of common stock, (ii) 1 % of the Company’s outstanding number of shares of common stock on the immediately preceding December 31 or (iii) such lesser number of shares of common stock as determined by the administrator of the 2020 ESPP.

The 2020 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2021 and each January 1 thereafter through January 1, 2030, by the lessor of (i) 438,898 shares of common stock, (ii) 1 % of the Company’s outstanding number of shares of common stock on the immediately preceding December 31 or (iii) such lesser number of shares of common stock as determined by the administrator of the 2020 ESPP.

The number of shares reserved under the 2020 ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization.

1 unchanged sentence

Stock Options

A summary of stock option activity under the 2020 Stock Option and Grant Plan during the year ended December 31, 2021 is as follows (in thousands except share and per share data):

A summary of stock option activity under the 2020 Plan during the year ended December 31, 2022 is as follows (in thousands except share and per share data):

Outstanding at December 31, 2021

1 unchanged sentence

Exercisable at December 31, 2022

The i ntrinsic value of stock options exercised during the years ended December 31, 2021, 2020 and 2019 was $ 67.6 million, $ 1.6 million and $ 0.1 million, respectively.

The intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 wa s $ 15.8 million, $ 67.6 million and $ 1.6 million, respectively.

The weighted-average fair value of options granted during the years ended December 31, 2022, 2021 and 2020 was $ 20.18 , $ 29.95 and $ 8.35 per share, respectively.

5 unchanged sentences

Total equity-based compensation

The weighted-average assumptions that the Company used in Black-Scholes option pricing model to determine the grant date fair value of stock options granted to employees and non-employees for the years ended December 31, 2021, 2020 and 2019:

The weighted-average assumptions that the Company used in the Black-Scholes option pricing model to determine the grant date fair value of stock options granted to employees and non-employees for the years ended December 31, 2022, 2021 and 2020:

Year ending December 31,

7 unchanged sentences

Unvested at December 31, 2022

During the year ended December 31, 2021, the Company granted 12,500 shares of restricted common stock to consultants which were fully vested at the time of grant.

There were no grants of restricted stock during the years ended December 31, 2020 and 2019.

As of December 31, 2021, the total unrecognized stock-based compensation expense for unvested restricted stock was $ 0.1 million, which is expected to be recognized over 1.0 years.

The Company granted 295,892 and 12,500 shares of restricted stock during the years ended December 31, 2022 and December 31, 2021, respectively.

There were no grants of restricted stock for the year ended December 31, 2020.

The Company did no t grant any restricted stock to consultants for the year ended December 31, 2022 and granted 12,500 shares of restricted common stock to consultants which were fully vested at the time of grant during the year ended December 31, 2021.

As of December 31, 2022, the total unrecognized stock-based compensation expense for unvested restricted stock was $ 5.3 million, which is expected to be recognized ov er 2.5 years.

During the years ended December 31, 2022, 2021 and 2020 , the Company recorded stock-based compensation expense for restricted stock of $ 1.4 million, $ 0.9 million and $ 0.2 million, respectively.

During the years ended December 31, 2022, 2021 and 2020 , the Company recorded stock-based compensation expense of $ 1.1 million, $ 0.3 million and $ 0.2 million, respectively, within research and development.

During the years ended December 31, 2021, 2020 and 2019, the Company recorded stock-based compensation expense of $0.6 million, an immaterial amount and $0.2 million, respectively, within general and administrative.

During the years ended December 31, 2022, 2021 and 2020 , the Company recorded stock-based compensation expense of $ 0.3 million, $ 0.6 million, and an immaterial amount, respectively, within general and administrative.

Equity-Based Compensation Expense

6 unchanged sentences

In addition to the collaboration discussed in Note 5, the Company had the following related party transactions for the periods presented in the accompanying consolidated financial statements, which has not otherwise been discussed in these notes to the consolidated financial statement.

The Company made payments of $ 0.8 million and $ 1.0 million to an investor for

rent expenses for the years ended December 31, 2020 and 2019, respectively.

No payments were made to related parties during the year ended December 31, 2021.

The Company made payments of $ 0.8 million to an investor for rent expenses for the year ended December 31, 2020.

No payments were made to related parties during the years ended December 31, 2022 and 2021.

The Company records income tax expense related to profits realized by its U.S.

17 unchanged sentences

Accruals and reserves, stock and other

Capitalized Research and Development

Total deferred tax assets

7 unchanged sentences

During 2022, the valuation allowance increased by $ 42.1 million primarily due to the increase in the Company’s NOL during the period.

Beginning in 2022, Tax Cuts and Jobs Act (TCJA) amended Section 174 and now requires U.S.-based and non-U.S-based research and experimental (R&E) expenditures to be capitalized and amortized over a period of five or 15 years, respectively, for amounts paid in tax years starting after December 31, 2021.

Prior to the TCJA amendment, Section 174 allowed taxpayers to immediately deduct R&E expenditures in the year paid or incurred.

The Company has applied this required change in accounting method beginning in 2022 and the computation may be adjusted pending future IRS guidance.

The Company has incurred NOLs from inception.

3 unchanged sentences

Utilization of net operating loss and research and development credit carryforwards may generally be subject to limitation under Sections 382 and 383 of the Internal Revenue Code due to ownership changes that have occurred previously, or that could occur in the future.

These ownership changes may limit the amount of net operating loss and research and development

credit carryforwards that can be utilized annually to offset any post-ownership change taxable income and tax, respectively.

These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset any post-ownership change taxable income and tax, respectively.

The latest Section 382 study was performed through December 31, 2022, noting that historic ownership changes have likely occurred.

19 unchanged sentences

Net Loss per Share

Basic and diluted loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding (in thousands, except for share and per share data):

Basic and diluted loss per share is computed by dividing net loss by the weighted-average common shares outstanding for the period, including the pre-funded warrants given their nominal exercise price (in thousands, except for share and per share data):

Deemed dividend from exchange of convertible

6 unchanged sentences

The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders at December 31, 2022, 2021 and 2020 because including them would have had an anti-dilutive effect:

Convertible Preferred Stock

Unvested Restricted Stock

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity