Kymera Therapeutics, Inc. 10-Q

Item 1. Financial Statements. KYMERA THERAPEUTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share amounts) (Unaudited) June 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 84,903 $ 31,004 Marketable securities (Note 4) 274,204 265,198 Accounts receivable—due from related parties — 577 Contract assets—due from related parties 904 856 Prepaid expenses and other current assets 4,795 4,704 Total current assets $ 364,806 $ 302,339 Marketable securities, non-current (Note 4) 45,305 162,531 Property and equipment, net (Note 6) 12,118 10,841 Right-of-use assets, operating leases 9,648 9,845 Other non-current assets 920 30 Restricted cash 1,589 1,589 Total assets $ 434,386 $ 487,175 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 8,177 $ 4,368 Accrued expenses (Note 8) 14,668 10,330 Deferred revenue 82,263 92,552 Operating lease liabilities 2,425 2,572 Finance lease liabilities 1,038 689 Other current liabilities 114 106 Total current liabilities $ 108,685 $ 110,617 Non-current liabilities Deferred revenue, net of current portion 52,672 77,838 Operating lease liabilities, net of current portion 13,696 14,128 Finance lease liabilities, net of current portion 1,145 604 Other non-current liabilities 84 100 Total liabilities $ 176,282 $ 203,287 Stockholders’ equity: Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 0 shares issued or outstanding as of June 30, 2021 and December 31, 2020 — — Common stock, $ 0.0001 par value; 150,000,000 shares authorized at June 30, 2021 and December 31, 2020, 45,401,203 and 44,592,288 shares issued at June 30, 2021 and December 31, 2020, respectively; 45,327,681 and 44,482,186 shares outstanding at June 30, 2021 and December 31, 2020, respectively 5 4 Additional paid-in capital 424,599 412,777 Accumulated deficit ( 166,500 ) ( 128,765 ) Accumulated other comprehensive loss — ( 128 ) Total stockholders’ equity 258,104 283,888 Total liabilities and stockholders’ equity $ 434,386 $ 487,175 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 KYMERA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Three and Six Months Ended June 30, 2021 and 2020 (In thousands, except for share and per share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Collaboration Revenue—from related parties $ 18,519 $ 3,288 $ 37,221 $ 6,716 Operating expenses: Research and development $ 35,220 $ 13,819 $ 61,181 $ 25,935 General and administrative 8,029 3,661 13,939 6,220 Total operating expenses 43,249 17,480 75,120 32,155 Loss from operations ( 24,730 ) ( 14,192 ) ( 37,899 ) ( 25,439 ) Other income (expense): Interest Income 98 228 217 577 Interest Expense ( 28 ) ( 25 ) ( 53 ) ( 59 ) Total other income: 70 203 164 518 Net loss $ ( 24,660 ) $ ( 13,989 ) $ ( 37,735 ) $ ( 24,921 ) Other comprehensive loss: Unrealized gain (loss) on marketable securities 14 ( 189 ) 128 25 Total comprehensive loss $ ( 24,646 ) $ ( 14,178 ) $ ( 37,607 ) $ ( 24,896 ) Reconciliation of net loss to net loss attributable to common stockholders: Net Loss $ ( 24,660 ) $ ( 13,989 ) $ ( 37,735 ) $ ( 24,921 ) Deemed dividend from exchange of convertible preferred stock — — — ( 9,050 ) Net loss attributable to common stockholders $ ( 24,660 ) $ ( 13,989 ) $ ( 37,735 ) $ ( 33,971 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.55 ) $ ( 6.98 ) $ ( 0.84 ) $ ( 17.18 ) Weighted average common stock outstanding, basic and diluted 45,094,238 2,002,825 44,873,083 1,977,720 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 KYMERA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) For the three months ended June 30, 2020 and 2021 (In thousands, except for share amounts) (Unaudited) Series Seed Convertible Preferred Stock Series A Convertible Preferred Stock Series B Convertible Preferred Stock Series B-1 Convertible Preferred Stock Series C Convertible Preferred Stock Common Stock Additional Paid in Accumulated Accumulated Other Comprehensive 'Total Stockholders’ Shares Value Shares Value Shares Value Shares Value Shares Value Shares Value Capital Deficit Loss Equity Balance at March 31, 2020 3,000,000 $ 5,900 12,786,718 $ 25,398 16,009,845 $ 64,718 3,059,695 $ 14,025 15,527,943 $ 101,180 1,975,813 $ — $ 82 $ ( 94,105 ) $ 220 $ ( 93,803 ) Vesting of Series A Preferred Stock in connection with collaboration arrangement (Note 5) — — 55,394 111 — — — — — — — — — — — — Issuance of Series B Preferred Stock, net of issuance costs of $ 0 — — — — — — — — — — — — — — — — Issuance of Series C Preferred Stock, net of issuance costs of $ 320 — — — — — — — — — — — — — — — — Exchange of Series A Convertible Preferred Stock for Series C Preferred Convertible Preferred Stock — — — — — — — — — — — — — — — — Exercise of stock options — — — — — — — — — — 16,106 — 28 — — 28 Vesting restricted stock — — — — — — — — — — 44,037 — — — — — Stock-based compensation expense — — — — — — — — — — — — 664 — — 664 Unrealized gain on marketable securities — — — — — — — — — — — — — — ( 189 ) ( 189 ) Net Loss — — — — — — — — — — — — — ( 13,989 ) — ( 13,989 ) Balance as of June 30, 2020 3,000,000 $ 5,900 12,842,112 $ 25,509 16,009,845 $ 64,718 3,059,695 $ 14,025 15,527,943 $ 101,180 2,035,956 $ — $ 774 $ ( 108,094 ) $ 31 $ ( 107,289 ) Balance at March 31, 2021 — $ — — $ — — $ — — $ — — $ — 44,879,376 $ 4 417,096 $ ( 141,840 ) $ ( 13 ) $ 275,247 Exercise of stock options — — — — — — — — — — 422,471 1 1,470 — — 1,471 Vesting restricted stock — — — — — — — — — — 18,154 — — — — — Issuance of shares under employee stock purchase plan — — — — — — — — — — 7,680 — 307 — — 307 Stock-based compensation expense — — — — — — — — — — — — 5,726 — — 5,726 Unrealized gain on marketable securities — — — — — — — — — — — — — — 13 13 Net Loss — — — — — — — — — — — — — ( 24,660 ) — ( 24,660 ) Balance at June 30, 2021 — $ — — $ — — $ — — $ — — $ — 45,327,681 $ 5 $ 424,599 $ ( 166,500 ) $ — $ 258,104 3 KYMERA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (continued) For the six months ended June 30, 2020 and 2021 (In thousands, except for share amounts) (Unaudited) Series Seed Convertible Preferred Stock Series A Convertible Preferred Stock Series B Convertible Preferred Stock Series B-1 Convertible Preferred Stock Series C Convertible Preferred Stock Common Stock Additional Paid in Accumulated Accumulated Other Comprehensive Total Stockholders' Equity Shares Value Shares Value Shares Value Shares Value Shares Value Shares Value Capital Deficit Income (Deficit) Balance at December 31, 2019 3,000,000 $ 5,900 14,720,126 $ 29,237 14,827,580 $ 59,918 3,059,695 $ 14,025 — $ — 1,929,516 $ — $ 2,044 $ ( 76,456 ) $ 6 $ ( 74,406 ) Vesting of Series A Preferred Stock in connection with collaboration arrangement (Note 5) — — 110,788 222 — — — — — — — — — — — — Issuance of Series B Preferred Stock, net of issuance costs of $ 0 — — — — 1,182,265 4,800 — — — — — — — — — Issuance of Series C Preferred Stock, net of issuance costs of $ 320 — — — — — — — — 13,539,141 88,180 — — — — — — Exchange of Series A Convertible Preferred Stock for Series C Preferred Convertible Preferred Stock — — ( 1,988,802 ) ( 3,950 ) — — — — 1,988,802 13,000 — — ( 2,333 ) ( 6,717 ) — ( 9,050 ) Exercise of stock options — — — — — — — — — — 16,106 — 28 — — 28 Vesting restricted stock — — — — — — — — — — 90,334 — — — — — Stock-based compensation expense — — — — — — — — — — — — 1,035 — — 1,035 Unrealized loss on marketable securities — — — — — — — — — — — — — — 25 25 Net Loss — — — — — — — — — — — — — ( 24,921 ) — ( 24,921 ) Balance at June 30, 2020 3,000,000 $ 5,900 12,842,112 $ 25,509 16,009,845 $ 64,718 3,059,695 $ 14,025 15,527,943 $ 101,180 2,035,956 $ — $ 774 $ ( 108,094 ) $ 31 $ ( 107,289 ) Balance at December 31, 2020 — $ — — $ — — $ — — $ — — $ — 44,482,186 4 412,777 ( 128,765 ) ( 128 ) 283,888 Exercise of stock options — — — — — — — — — — 801,233 1 2,617 — — 2,618 Vesting restricted stock — — — — — — — — — — 36,582 — — — — — Issuance of shares under employee stock purchase plan — — — — — — 7,680 — 307 — — 307 Stock-based compensation expense — — — — — — — — — — — — 8,898 — — 8,898 Unrealized gain on marketable securities — — — — — — — — — — — — — — 128 128 Net Loss — — — — — — — — — — — — — ( 37,735 ) — ( 37,735 ) Balance at June 30, 2021 — $ — — $ — — $ — — $ — — $ — 45,327,681 $ 5 $ 424,599 $ ( 166,500 ) $ — $ 258,104 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 KYMERA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the six months ended June 30, 2021 and 2020 (In thousands) (Unaudited) Six Months Ended June 30, 2021 2020 Operating activities Net loss $ ( 37,735 ) $ ( 24,921 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 8,898 1,035 Depreciation and amortization 1,037 776 Premiums and discounts on available-for-sale marketable securities 2,511 — Non-cash research and development expense — 222 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 91 ) ( 2,182 ) Receivables—due from related parties ( 327 ) — Contract asset—due from related parties 856 — Accounts payable 4,005 ( 372 ) Accrued expenses and other current liabilities 4,092 3,136 Deferred revenue ( 35,455 ) ( 6,716 ) Operating lease right-of-use assets 197 7,349 Operating lease liabilities ( 579 ) ( 1,796 ) Other assets and liabilities ( 743 ) — Net cash used in operating activities $ ( 53,334 ) $ ( 23,469 ) Investing activities Purchase of property and equipment, net ( 790 ) ( 5,250 ) Purchases of investments ( 46,164 ) ( 110,527 ) Maturities of investments 152,000 31,500 Net cash provided by (used in) investing activities $ 105,046 $ ( 84,277 ) Financing activities Proceeds from the issuance of Series B Convertible Preferred Stock, net of issuance costs — 4,800 Proceeds from the issuance of Series C Convertible Preferred Stock, net of issuance costs — 88,181 Proceeds from stock option exercises 2,618 29 Proceeds from employee stock purchase plan 307 Payments of offering costs in connection with initial public offering ( 397 ) — Payments on finance leases ( 341 ) ( 293 ) Net cash provided by financing activities $ 2,187 $ 92,717 Net increase in cash, cash equivalents and restricted cash 53,899 ( 15,029 ) Cash, cash equivalents and restricted cash at beginning of period 32,593 77,789 Cash, cash equivalents and restricted cash at end of period $ 86,492 $ 62,760 Supplemental disclosure of cash flow activities Cash paid for interest $ 54 $ 65 Supplemental disclosure of noncash investing and financing activities Property and equipment purchases included in accounts payable and accrued expenses $ 320 $ 1,076 Purchase of property and equipment through finance lease $ 1,231 $ — Offering costs included in accrued expenses $ 154 $ — Supplemental disclosure of noncash operating activities Tenant improvements included in other assets $ — $ 833 Reduction of right-of-use asset and liability due to lease modification $ — $ 2,161 5 The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the periods shown above: June 30, 2021 2020 Cash and cash equivalents $ 84,903 $ 60,971 Restricted cash 1,589 1,789 Total cash, cash equivalents, and restricted cash $ 86,492 $ 62,760 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 KYMERA THERAPEUTICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Nature of Business Kymera Therapeutics, Inc., together with its subsidiary Kymera Securities Corporation, is referred to on a consolidated basis as the “Company”. The Company is a biopharmaceutical company focused on discovering and developing small molecule therapeutics that selectively degrade disease-causing proteins by harnessing the body’s own natural cellular process, a method known as targeted protein degradation. The Company has devoted its efforts principally to research and development since formation. The Company has not yet completed product development, filed for or obtained regulatory approvals for any products, nor verified the market acceptance and demand for such products. As a result, the Company is subject to a number of risks common to emerging companies in the biotech industry. 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 historical net losses and anticipates that it will continue to incur losses for the foreseeable future and had an accumulated deficit of $ 166.5 million as of June 30, 2021. The Company has funded these losses principally through issuance of common stock, including its follow-on offering and concurrent private placement completed in July 2021, initial public offering (“IPO”), which was completed in August 2020, preferred stock, convertible notes 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 June 30, 2021, the Company had cash, cash equivalents and marketable securities of $ 404.4 million. The Company believes these cash, cash equivalents and marketable securities together with the net proceeds from the sale of its common stock in a public offering on July 6, 2021 of $ 243.1 million will be sufficient to fund its operations and capital expenditure requirements through at least twelve months from the issuance of these condensed 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. However, there is no guarantee that any of these strategic or financing opportunities will be executed or realized on favorable terms, if at all, and some could be dilutive to existing stockholders. If the Company fails to obtain additional future capital, it may be unable to complete its planned preclinical studies and clinical trials. Reverse Stock Split On August 20, 2020, the Board approved a 1-for- 1.5949 reverse stock split of the Company’s issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each of the Company’s outstanding series of preferred stock. All share and per share amounts in the accompanying condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital. Initial Public Offering On August 20, 2020, the Company’s registration statement on Form S-1 relating to its initial public offering of its common stock was declared effective by the Securities and Exchange Commission (“SEC”). In the IPO, which closed on August 25, 2020, the Company issued and sold 9,987,520 shares of common stock, including full exercise of the underwriters’ over-allotment option to purchase an additional 1,302,720 shares, at a public offering price of $ 20.00 per share and the aggregate gross proceeds before deducting underwriting discounts and commissions, and other estimated offering expenses payable by the Company, were approximately $ 199.8 million. Concurrent with the IPO, the Company issued and sold 676,354 shares of common stock at $ 20.00 per share in a private placement to Vertex and the aggregate proceeds were $ 13.5 million. 2. Summary of Significant Accounting Policies The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note, and elsewhere in the accompanying condensed consolidated financial statements and notes. 7 Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Kymera Securities Corporation. All intercompany transactions and balances have been eliminated in consolidation. Basis of Presentation The unaudited interim condensed consolidated financial statements of the Company included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) as found in the Accounting Standards Codification (“ASC”), Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 11, 2021. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2020, and, in the opinion of management, reflect all adjustments necessary, all of which were normal and recurring, for the fair statement of the Company’s financial position as of June 30, 2021, the results of operations for the three and six months ended June 30, 2021 and 2020, and cash flows for the six months ended June 30, 2021 and 2020. The results for the six months ended June 30, 2021 are not necessarily indicative of the results for the year ended December 31, 2021 or for any future period. Significant Accounting Policies The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2021 are consistent with those discussed in Note 2 to the consolidated financial statements in the 2020 Annual Report on Form 10-K. Recent Accounting Pronouncements Recently Adopted Accounting Standards 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 or results of operation . Recently Issued Accounting Standards Not Yet Adopted 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. As an emerging growth company, the Company expects to delay adoption until January 1, 2023 and is evaluating the impact that the adoption of ASU 2016-13 will have on its condensed consolidated financial statements. 8 3. Fair Value Measurements The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of June 30, 2021 and December 31, 2020 (in thousands): Fair Value Measurements at June 30, 2021: Level 1 Level 2 Level 3 Total Assets: Cash equivalents Money market fund $ 46,209 $ — $ — $ 46,209 Marketable securities, current US treasuries 205,976 — — 205,976 Corporate bonds — 68,228 — 68,228 Marketable securities, non-current US treasuries 22,167 — — 22,167 Corporate bonds — 23,138 — 23,138 Restricted cash 1,589 — — 1,589 Total $ 275,941 $ 91,366 $ — $ 367,307 Fair Value Measurements at December 31, 2020: Level 1 Level 2 Level 3 Total Assets: Cash equivalents Money market fund $ 19,943 $ — $ — $ 19,943 Corporate bonds — 10,499 — 10,499 Marketable securities, current US treasuries 192,275 — — 192,275 Corporate bonds — 72,923 — 72,923 Marketable securities, non-current US treasuries 132,589 — — 132,589 Corporate bonds — 29,942 — 29,942 Restricted cash 1,589 — — 1,589 Total $ 346,396 $ 113,364 $ — $ 459,760 During the six months ended June 30, 2021 and the year ended December 31, 2020, there were no transfers between Level 1, Level 2 and Level 3. 4. Marketable Securities The following table summarizes the available-for-sale debt securities held at June 30, 2021 and December 31, 2020 and (in thousands): Description Amortized Cost Unrealized Gains Unrealized Losses Fair Value June 30, 2021 U.S. treasury securities $ 228,130 $ 18 $ ( 5 ) $ 228,143 Corporate securities 91,379 2 ( 15 ) 91,366 Total $ 319,509 $ 20 $ ( 20 ) $ 319,509 9 Description Amortized Cost Unrealized Gains Unrealized Losses Fair Value December 31, 2020 U.S. treasury securities $ 324,917 $ — $ ( 53 ) $ 324,864 Corporate securities 102,946 — ( 81 ) 102,865 Total $ 427,863 $ — $ ( 134 ) $ 427,729 As of June 30, 2021, the Company held 28 securities that had been in an unrealized loss position for less than 12 months with an aggregate fair value of $ 91.0 million. As of December 31, 2020, the Company held 65 securities that had been in an unrealized loss position for less than 12 months with an aggregate fair value of $ 392.2 million. As of June 30, 2021, the Company had 43 securities with a fair value of $ 274.2 million with a contractual maturity of less than 12 months and 12 securities with a fair value of $ 45.3 million with a contractual maturity of greater than 12 months. As of December 31, 2020, the Company had 48 securities with a fair value of $ 295.6 million with a contractual maturity of less than 12 months and 25 securities with a fair value of $ 162.5 million with a contractual maturity of greater than 12 months. There were no sales of marketable securities during the three and six months ending June 30, 2021 and 2020. The Company evaluates securities for other-than-temporary impairments based on quantitative and qualitative factors, and considered the decline in market value for the 28 securities in an unrealized loss position as of June 30, 2021 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 believes that it will be able to collect both principal and interest amounts due to it at maturity . 5. Collaborations Sanofi Collaboration Arrangement Agreement Terms On July 7, 2020, the Company entered into a collaboration agreement, or the Sanofi Agreement, with Sanofi, to co-develop drug candidates directed to two biological targets. Under the Sanofi Agreement, the Company granted to Sanofi a worldwide exclusive license to develop, manufacture and commercialize certain lead compounds generated during the collaboration directed against IRAK4, or Collaboration Target 1, and one additional undisclosed target in an undisclosed field of use, or Collaboration Target 2. 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. 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. With respect to both targets, Sanofi is responsible for development, manufacturing, and commercialization of product candidates after a specified development milestone occurs with respect to each collaboration candidate. In addition, pursuant to the Sanofi Agreement, Sanofi will grant to the Company 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 the Company exercises the Opt-In Right, Sanofi will grant to the Company an exclusive option, applicable to each collaboration target, which upon exercise will allow the Company 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. 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 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 10 IRAK4 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. The Company will be eligible to receive certain commercial milestone payments up to $ 700.0 million in the aggregate, of which $ 400.0 million relate to the IRAK4 program, which are payable upon the achievement of certain net sales thresholds. 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. Accounting Treatment The Company analyzed the discovery and pre-clinical research activities as well as the exclusive license grants under the Sanofi Agreement and concluded that the arrangement was indicative of a vendor-customer relationship and would be accounted for under ASC 606. The Company identified the following material promises under the arrangement: (1) research services for Collaboration Target 1, (2) research license for Collaboration Target 1, (3) exclusive license for Collaboration Target 1, (4) research services for Collaboration Target 2, (5) research license for Collaboration Target 2, (6) exclusive license for Collaboration Target 2, (7) option to extend the research term, and (8) optional research services during the development period. The Company determined that Collaboration Targets 1 and 2 are distinct from each other. The research associated with degraders directed to each target is at different stages and the licensed field, should development activities be successful, are different from each other. As such, all promises associated with each target are considered distinct from promises associated with the other target. The research and development services for each collaboration target were determined not to be distinct from the research license and the exclusive license and have been combined into a single performance obligation for each collaboration target. That is, two performance obligations were identified, the combined research services, research license and exclusive license for Collaboration Target 1 and the combined research services, research license and exclusive license for Collaboration Target 2. The exclusive license for each target is not distinct from the pre-clinical and clinical research and development services under the Sanofi Agreement, primarily due to the highly specialized nature of the research and novel technology involved with developing protein degraders – the pre-clinical activities and studies and first phase 1 clinical trial could not be conducted by another party in the manner required. The option to extend the research term and optional research services during the development period were evaluated as material rights. The fees associated with each option are at or above the standalone selling price. As such, the underlying options are not performance obligations and fees associated with each option are excluded from the transaction price until the underlying option is exercised. The Company determined the total transaction price to be $ 150.0 million, which consists solely of the upfront payment. 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. Upon becoming unconstrained, the reimbursement consideration will be added to the transaction price and allocated to Collaboration Target 1. The Company allocated the upfront payment to each performance obligation based on the relative standalone selling price, as follows: • Collaboration Target 1: $ 120.0 million • Collaboration Target 2: $ 30.0 million The Company determined the allocation of the $ 150.0 million transaction price between Collaboration Target 1 and Collaboration Target 2 based on the value of the research and development for the programs from projected research and development costs for each collaboration target plus a developer’s profit and the total potential milestones for each collaboration target. 11 The Company recognizes revenue associated with each performance obligation as the research and development services are provided using an input method, according to costs incurred as related to the research and development activities for each individual program and the costs expected to be incurred in the future to satisfy that individual performance obligation. The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying each 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. 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 June 30, 2021. In the three months ended June 30, 2021, the Company recognized $ 14.4 million in revenue under the Sanofi Agreement, of which $ 12.0 million was associated with Collaboration Target 1 and $ 2.4 million was associated with Collaboration Target 2. In the six months ended June 30, 2021, the Company recognized $ 26.0 million in revenue under the Sanofi Agreement, of which $ 21.5 million was associated with Collaboration Target 1 and $ 4.5 million was associated with Collaboration Target 2. The aggregate amount of the transaction price allocated to the Company’s unsatisfied performance obligations and recorded in deferred revenue at June 30, 2021 and December 31, 2020 is $ 108.4 million and $ 132.6 million, respectively. During the six months ended June 30, 2021, the Company received $ 1.7 million in cost reimbursement payments. No milestone or royalty payments have been received under the Sanofi Agreement. As of June 30, 2021, the Company recorded unbilled accounts receivable of $ 0.9 million related to reimbursable research and development costs under the Sanofi Agreement for activities performed during the second quarter of 2021. As of June 30, 2021, the Company did no t have any research and development costs under the Sanofi Agreement for activities performed during the second quarter of 2021 in accounts receivable. The Company will recognize the deferred revenue related to the research and development services based on a cost input method, as described, over the remaining research term, which is a maximum of 2.7 years as of June 30, 2021. 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. Any consideration related to sales milestone payments and royalties will be recognized when the related milestone events or sales occur and therefore are recognized at the later of when the related sales occur or the relevant performance obligation is satisfied. 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, is considered a related party. Vertex Agreement On May 9, 2019 (the “Effective Date”), the Company entered into a collaboration agreement (the “Vertex Agreement”) with Vertex to advance small molecule protein degraders against up to six targets. Under the Vertex Agreement, Vertex has the exclusive option to license the rights to the product candidates developed for the designated targets at which point Vertex will control development and commercialization. Pursuant to the Vertex Agreement, the Company is only responsible for discovery and preclinical research on the targets, and Vertex is responsible for development, manufacturing, and commercialization of the product candidates after it exercises its option to license. The initial research term of the collaboration is four (4) years, extendable for an additional one (1) year period upon mutual agreement by the parties and payment by Vertex of certain per-target fees. Vertex provided the Company with a non-refundable upfront payment of $ 50.0 million and purchased 3,059,695 shares of the Company’s Series B-1 Convertible Preferred Stock (the “Series B-1 Preferred Stock”) at $ 6.54 a share, pursuant to a separate, but simultaneously executed Share Purchase Agreement. The shares were purchased at a premium of $ 5.9 million, which was included in the transaction price and will be recognized as revenue over the period of performance. As a result of this purchase, Vertex is considered a related party. The Company is eligible to receive up to $ 170.0 million in payments per target, including development, regulatory and commercial milestones as well as option exercise payments. In addition, Vertex is obligated to pay the Company tiered royalties on future net sales on any products that may result from the Vertex Agreement. None of the payments under the Vertex Agreement are refundable. The Company may also perform follow-on research for an optioned target upon Vertex’s request and at Vertex’s expense. The term of the Vertex Agreement began on the Effective Date and expires upon the expiration of all payment obligations from Vertex to Company under the Vertex Agreement or, if Vertex does not exercise any of its options, the lapse of all Vertex’s option rights under the Vertex Agreement. Vertex also has the ability to terminate for convenience with prior written notice to the Company, and either party may terminate for an uncured material breach. 12 Accounting Treatment The Company analyzed the joint research activities required under the Vertex Agreement and concluded that the arrangement was indicative of a vendor-customer relationship and would be accounted for under ASC 606. The Company identified the following material promises under the arrangement: (1) the non-exclusive, royalty-free research license; (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. The research and development services were determined not to be distinct from the research and development license and have been combined into a single performance obligation. The Company determined that the option to license the targets in the future was not priced at a discount, and that the option exercise fee for each target is at or above the standalone selling price for research at this stage of development; as such, the options and the underlying licenses are excluded from the performance obligation and the option exercise fees are excluded from the transaction price until the underlying option is exercised. 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 is contingent upon the results of the underlying research and development activities and is 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 Series B-1 Preferred Stock 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 shares of Series B-1 Preferred Stock sold to Vertex and the $ 50.0 million upfront payment. To determine the fair value of the Series B-1 Preferred Stock issued to Vertex, the Company performed a valuation of the shares of the Company’s common and preferred stock, which took into consideration recent financings, and the Company’s recent development and future exit strategies, as well as a discount for lack of marketability. 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 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 June 30, 2021. During the three months ended June 30, 2021 and 2020, the Company recognized $ 4.1 million and $ 3.3 million, respectively, under the Vertex Agreement. During the six months ended June 30, 2021 and 2020, the Company recognized $ 11.2 million and $ 6.7 million respectively, in revenue under the Vertex Agreement. All $ 11.2 million revenue recognized in the six months ended June 30, 2021 was recognized from amounts that were recorded in deferred revenue as of December 31, 2020. The aggregate amount of the transaction price allocated to the Company’s unsatisfied performance obligation and recorded in deferred revenue at June 30, 2021 and December 31, 2020 is $ 26.5 million and $ 37.7 million, respectively. The Company will recognize the deferred revenue related to the research and development services based on a cost input method, over the remaining research term, which is a maximum of 1.3 years as June 30, 2021. Any consideration related to sales milestone payments (including royalties) will be recognized when the related milestone events or sales occur and therefore is recognized at the later of when the related sales occur or the relevant performance obligation is satisfied. Compound Collaboration In October 2017, the Company entered into a collaboration agreement (the “Collaboration”) with a pharmaceutical company to jointly identify, research and conduct preclinical development of collaboration compounds against specified collaboration targets to identify drug candidates. Under the terms of the Collaboration, both parties provided one another with a non-exclusive, royalty-free, sub-licensable research and development license to each party’s intellectual property to develop five agreed-upon collaboration targets, as well as an exclusive, royalty-bearing development and commercialization license to sell any licensed products that stem from such research. The parties also have the ability to nominate additional collaboration targets if agreed-upon, as long as there are no more than five targets at any given time. In exchange for the non-exclusive license rights, the Company provided the pharmaceutical company with an equity grant and is required to make tiered royalty payments based on net sales of all products licensed under the agreement in the low single-digit percentages. In conjunction with the Collaboration, the Company initially issued 886,305 Series A Preferred Units (“Series A Preferred Units”) to the pharmaceutical company. On November 1, 2018, these Series A Preferred Units were exchanged on a one-for-one basis for shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”). These shares vested in equal installments over three years and the Company recorded expense over the vesting period based on the fair value of the shares under the Collaboration. The Company recorded $ 0.2 million to research and development expense related to the vesting of 110,788 shares of Series A Preferred Stock for the six months ended June 30, 2020. As of December 31, 2020, all shares under the Collaboration were fully vested and all expenses had been recognized. 13 The royalty payments are contingent and as such are not being recorded until incurred. The Company determined that the license is representative of an in-process research and development asset, with no future alternative use. As such, the Company recorded the expense related to the vesting of shares of Series A Preferred Stock as research and development expense in the Company’s condensed 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 following table presents the changes in accounts receivable, contract assets and liabilities for the six months ended June 30, 2021 (in thousands): Balance at December 31, 2020 Additions Deductions Balance at June 30, 2021 Accounts receivable and contract assets: Billed receivables - Sanofi $ 577 $ 1,718 $ ( 2,295 ) $ — Unbilled receivables - Sanofi 856 1,766 ( 1,718 ) 904 Total accounts receivable and contract assets $ 1,433 $ 3,484 $ ( 4,013 ) $ 904 Contract liabilities: Deferred revenue - Vertex $ 37,748 $ — $ ( 11,226 ) $ 26,522 Deferred revenue - Sanofi 132,642 1,766 ( 25,995 ) 108,413 Total contract liabilities $ 170,390 $ 1,766 $ ( 37,221 ) $ 134,935 6. Property and Equipment Property and equipment consists of the following as of June 30, 2021 and December 31, 2020 (in thousands): June 30, 2021 December 31, 2020 Lab and office equipment under finance right-of-use asset $ 4,003 $ 2,771 Lab equipment 2,373 1,636 Computer equipment 266 89 Furniture & fixtures 921 861 Leasehold improvements 7,731 7,599 Assets not yet in service — 32 Total property and equipment 15,294 12,988 Less accumulated depreciation ( 3,176 ) ( 2,147 ) Property and equipment, net $ 12,118 $ 10,841 Depreciation expense for the three months ended June 30, 2021 and 2020 was $ 0.6 million and $ 0.4 million, respectively. Depreciation expense for the six months ended June 30, 2021 and 2020 was $ 1.0 million and $ 0.8 million, respectively Included in property and equipment is lab and office equipment right-of-use assets under finance leases with a cost basis of $ 4.0 million and $ 2.8 million as of June 30, 2021 and December 31, 2020, respectively and accumulated amortization expense of $ 1.5 million and $ 1.2 million, respectively. Amortization expense related to right-of-use assets during both the three months ended June 30, 2021 and 2020 was $ 0.2 million. Amortization expense related to right-of-use assets during both the six months ended June 30, 2021 and 2020 was $ 0.4 million. 14 7. Leases In February 2018, the Company entered into a noncancelable facility lease agreement (the “Lease”) for 9,836 square feet of research and development and office space in Cambridge, Massachusetts. In March 2020, the Company signed a termination agreement for this lease which was determined to be a lease modification that resulted in a reduction of the right-of-use asset and liability of $ 2.2 million. The lease termination was effective July 31, 2020 at which point the Company no longer had any obligations under the Lease. In accordance with the Lease, the Company was required to maintain a security deposit and provided a letter of credit to the landlord for $ 0.2 million, which was subsequently collected in October 2020 following the Company’s release from the security deposit and letter of credit. In April 2019, the Company entered into a facility sublease agreement (the “Sublease”) for 1,471 square feet of office space in Cambridge, Massachusetts. The term of the Sublease began on June 24, 2019 and terminated on June 30, 2020, and following termination, the Company had no further obligations under the Sublease. The Sublease required the Company to share in prorated operating expenses and property taxes based upon actual amounts incurred; those amounts were considered variable lease costs and, therefore, are not included in the measurement of the lease and are instead recognized to expense as incurred. In October 2019, the Company entered into a noncancelable facility lease agreement (the “New Lease”) for 34,522 square feet of research and development and office space in Watertown, Massachusetts. The term of the New Lease is 120 months and expires on March 31, 2030 . The New Lease has an option to be extended for an additional five years . The New Lease is not reasonably certain to be extended and as such the additional term is not included in the measurement of the lease. The New Lease includes a rent escalation clause, and rent expense is being recorded on a straight-line basis. The Company was eligible for and received a tenant incentive allowance of $ 5.5 million in 2020 as the tenant improvements were completed. The full allowance amount had been collected from the landlord as of December 31, 2020. In accordance with the New Lease, the Company is required to maintain a security deposit and provided a letter of credit to the landlord for $ 1.6 million, which is classified as restricted cash on the condensed consolidated balance sheets as of June 30, 2021. The Company’s finance lease obligations consist of certain property and equipment financed through capital leases. The components of the lease costs for the three and six months ended June 30, 2021 and 2020, were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Operating lease costs $ 524 $ 673 $ 1,047 $ 1,562 Finance lease costs: Amortization of right-to-use assets, finance leases 193 195 371 356 Interest expense for finance lease liabilities 21 31 37 65 Variable lease costs 153 94 385 201 Total lease costs $ 891 $ 993 $ 1,840 $ 2,184 Supplemental cash flow information relating to the Company’s leases for the six months ended June 30, 2021 and 2020 was as follows (in thousands): Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used in (provided by) operating leases $ 1,428 $ ( 3,905 ) Operating cash flows used in finance leases $ 350 $ 309 Financing cash flows used in finance leases $ 37 $ 65 15 Weighted average remaining lease terms and discount rates as of June 30, 2021 and 2020 were as follows: Six Months Ended June 30, 2021 2020 Remaining lease term: Operating lease 8.84 years 9.80 years Finance lease 2.68 years 3.30 years Discount Rate: Operating lease 10.50 % 10.50 % Finance lease 8.51 % 7.9 % The undiscounted future lease payments for operating and finance leases as of June 30, 2021, were as follows (in thousands): Fiscal Year Operating Leases Finance Leases 2021 (excluding the first and second quarter) $ 1,262 $ 588 2022 2,581 924 2023 2,659 710 2024 2,732 194 2025 2,814 — Thereafter 12,925 — Total minimum lease payments 24,973 2,416 Less amounts representing interest or imputed interest ( 8,852 ) ( 233 ) Present value of lease liabilities $ 16,121 $ 2,183 8. Accrued Expenses Accrued expenses consist of the following as of June 30, 2021 and December 31, 2020 (in thousands): June 30, 2021 December 31, 2020 Research and development expenses $ 10,504 $ 5,821 Payroll and payroll-related 2,319 2,918 Professional fees 1,590 1,585 Other 255 6 Accrued expenses $ 14,668 $ 10,330 9. 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. The Company accounts for estimated losses with respect to legal proceedings and claims when such losses are probable and estimable. Legal costs associated with these matters are expensed when incurred. The Company is not currently a party to any legal proceedings. Indemnification Arrangements As permitted under Delaware law, the Company has agreements whereby it indemnifies its investors, employees, officers, and directors (collectively, the “Indemnified Parties”) for certain events or occurrences while the Indemnified Parties are, or were serving, at its request in such capacity. The term of the indemnification period is for the Indemnified Parties’ lifetime. The Company believes the estimated fair value of these indemnification agreements is minimal. The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The maximum potential amount of future payments the Company could be required to make under these 16 indemnification agreements is unlimited. The Company is not aware of any claims under indemnification arrangements, and it has no t accrued any liabilities related to such obligations as of June 3 0 , 2021 or December 31, 20 20 . 10. Convertible Preferred Stock In January 2020, the Company issued 1,182,265 shares of Series B Preferred Stock at $ 4.06 per share to complete the second closing of the Series B Preferred Stock issuance for total proceeds of $ 4.8 million. The issuance costs related to the second tranche were insignificant. In March 2020, the Company executed a Series C Preferred Stock Purchase Agreement (the “Series C SPA”) to issue 13,539,141 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) at a purchase price of $ 6.5366 per share for a total consideration of $ 88.2 million, net of issuance costs of $ 0.3 million. In conjunction with the Series C SPA, the Company exchanged 1,988,802 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”) for an equal number of shares of Series C Preferred Stock related to a transaction amongst investors. 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 $ 9.1 million deemed dividend increased the net loss for the six months ended June 30, 2020 to arrive at net loss attributable to common stockholders in the calculation of earnings per share. Immediately prior to the IPO, the Company’s Articles of Association (the “Articles”), as further amended and restated (the “2018 Amended Articles”), authorized a total of 52,483,788 shares of convertible preferred stock with a par value of $ 0.0001 per share, of which 3,000,000 shares have been designated as Series Seed Convertible Preferred Stock, 14,886,305 shares have been designated as Series A Preferred Stock, 16,009,845 shares have been designated as Series B Preferred Stock (the “Series B Preferred Stock”), 3,059,695 shares have been designated as Series B-1 Preferred Stock and 15,527,943 shares have been designated as Series C Preferred Stock. The Series A, Series B, Series B-1 and Series C Preferred Stock are collectively referred to as the Convertible Preferred Stock. In connection with the Company’s August 21, 2020 IPO all issued and outstanding 50,439,595 shares of Convertible Preferred Stock were converted into 31,625,534 shares of the Company’s common stock and are no longer issued or outstanding following the completion of the offering. 11. 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 the Company’s employees, officers, directors, and independent contractors. No further grants will be made under the 2018 Plan. However, the 2018 Plan will continue to govern outstanding equity awards granted thereunder. To the extent outstanding options granted under the 2018 Plan are cancelled, forfeited or otherwise terminated without being exercised and would otherwise have been returned to the share reserve under the 2018 Plan, the number of shares underlying such awards will be available for future grant under the 2020 Stock Option and Incentive Plan. 2020 Stock Option and Incentive Plan In August 2020, the Company and its stockholders approved the 2020 Stock Option and Incentive Plan (the “2020 Plan”), which became effective on August 20, 2020. The 2020 Plan replaced the 2018 Plan as the Company’s Board of Directors has determined not to make additional awards under the 2018 Plan following the closing of the Company’s IPO. 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 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 June 30, 2021, there were an aggregate of 3,150,858 shares remaining available for future grants. 17 2020 Employee Stock Purchase Plan In August 2020, the Company and its stockholders approved the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective August 20, 2020. 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 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. Stock Options A summary of stock option activity under the 2020 Plan during the six months ended June 30, 2021 is as follows (in thousands except share and per share data): Number of Options Outstanding Weighted Average Strike Price per Option Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at December 31, 2020 5,832,712 $ 8.17 9.08 $ 314,001 Granted 1,871,037 49.07 Exercised ( 801,233 ) 3.27 Forfeited ( 89,527 ) 13.85 Outstanding at June 30. 2021 6,812,989 $ 19.90 8.93 $ 197,003 Exercisable at June 30, 2021 1,596,721 $ 7.48 8.49 $ 65,526 The i ntrinsic value of stock options exercised during the three months ended June 30, 2021 and 2020 was $ 17.1 million and $ 0.0 million, respectively. The i ntrinsic value of stock options exercised during the six months ended June 30, 2021 and 2020 was $ 37.1 million and $ 0.1 million, respectively. The weighted-average fair value of options granted during the three months ended June 30, 2021 and 2020 was $ 26.99 and $ 3.32 , respectively. The weighted-average fair value of options granted during the six months ended June 30, 2021 and 2020 was $ 28.66 and $ 3.62 , respectively. As of June 30, 2021, the total unrecognized stock-based compensation expense for unvested stock options was $ 69.7 million, which is expected to be recognized over 2.8 years. The following table outlines our equity-based compensation expense for stock options for the three and six months ended June 30, 2021 and 2020: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Research and development $ 2,821 $ 371 $ 4,458 $ 553 General and administrative 2,792 235 4,226 363 Total equity-based compensation $ 5,613 $ 606 $ 8,684 $ 916 18 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 three and six months ended June 30, 2021 and 2020 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Expected term (in years) 5.87 6.27 5.83 6.22 Volatility 65 % 70 % 66 % 78 % Risk-free interest rate 1.05 % 0.41 % 0.90 % 0.65 % Dividend yield 0.00 % 0.00 % 0.00 % 0.00 % Restricted Common Stock The Company has granted shares of restricted common stock with service-based and performance-based vesting conditions. A summary of restricted stock activity under the 2018 Plan during the six months ended June 30, 2021 is as follows: Number of Units Outstanding Grant Date Fair Value per Share Unvested at December 31, 2020 110,104 $ 1.60 Vested ( 36,582 ) 1.60 Unvested at June 30, 2021 73,522 $ 1.60 No restricted stock awards were granted during the three or six months ended June 30, 2021 and 2020. As of June 30, 2021, the total unrecognized stock-based compensation expense for unvested restricted stock was $ 0.2 million, which is expected to be recognized over one year . During the three months ended June 30, 2021 and 2020, the Company recognized an immaterial amount of equity-based compensation expense for restricted stock. During both the six months ended June 30, 2021 and 2020, the Company recognized approximately $ 0.1 million for restricted stock of which approximately $ 0.1 million and an immaterial amount were included in research and development and general and administrative expense, respectively. Equity-Based Compensation Expense Total equity-based compensation expense recorded as research and development and general and administrative expenses for employees, directors, and non-employees during the three and six months ended June 30, 2021 and 2020 is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Research and development $ 2,917 $ 423 $ 4,642 $ 662 General and administrative 2,809 241 4,256 373 Total equity-based compensation $ 5,726 $ 664 $ 8,898 $ 1,035 12. Related-Party Transactions In addition to the collaborations discussed in Note 5, the Company had the following related party transactions for the period presented in the accompanying condensed consolidated financial statements, which have not otherwise been discussed in these notes to the condensed consolidated financial statements. The Company made payments of $ 0.4 million to an investor for rent expenses during the six months ended June 30, 2020. No such payments were made during the three or six months ended June 30, 2021. 13. Income Taxes Income taxes for the three and six months ended June 30, 2021 and 2020 have been calculated based on an estimated annual effective tax rate and certain discrete items. For the three and six months ended June 30, 2021 and 2020, no income tax was recorded. 19 On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. Among other things, the CARES Act permits corporate taxpayers to carryback net operating losses (“NOLs”) originating in 2018 through 2020 to each of the five preceding tax years. Further, the CARES Act removed the 80 % taxable income limitation on utilization of those NOLs allowing corporate taxpayers to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Such changes may result in the generation of refunds of previously paid income taxes which are expected to be received over the next eighteen months . The Company has never been examined by the Internal Revenue Service or any other jurisdiction for any tax years and, as such, all years within the applicable statutes of limitations are potentially subject to audit. 14. Net Loss per Share 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): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Numerator: Net loss $ ( 24,660 ) $ ( 13,989 ) $ ( 37,735 ) $ ( 24,921 ) Deemed dividend from exchange of convertible preferred stock — — — ( 9,050 ) Net loss attributable to common stockholders $ ( 24,660 ) $ ( 13,989 ) $ ( 37,735 ) $ ( 33,971 ) Denominator: Weighted average common shares outstanding, basic and diluted 45,094,238 2,002,825 44,873,083 1,977,720 Net loss per share, basic and diluted $ ( 0.55 ) $ ( 6.98 ) $ ( 0.84 ) $ ( 17.18 ) The Company’s potentially dilutive securities, which include convertible preferred stock, restricted stock, and stock options, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders at June 30, 2021 and 2020 because including them would have had an anti-dilutive effect: Six Months Ended June 30, 2021 2020 Convertible preferred stock — 31,625,534 Unvested restricted stock 73,522 157,692 Options to purchase common stock 6,812,989 4,343,062 Total 6,886,511 36,126,288 15. Subsequent Events In July 2021, the Company completed a follow-on offering 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. 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. 20