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Item 7. Management’s Discussion and Analysis

2023-02-09 compared with 2022-01-28 · 165 added, 195 removed, 156 unchanged (70% of the section changed)

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Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

We are a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of small molecule therapies designed to modulate cellular protein levels as a novel treatment approach for cancer and other challenging diseases.

We are a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of small molecule and cell therapies based on the modulation of cellular protein levels as a novel treatment approach for cancer and other challenging diseases.

Leveraging our extensive expertise in E3 ligases together with our proprietary DNA-encoded libraries, we have built DELigase, an integrated discovery platform to identify and advance novel drug candidates targeting E3 ligases, a broad class of enzymes that can modulate proteins within the cell.

Our drug discovery approach is to either harness or inhibit the natural function of E3 ligases within the ubiquitin-proteasome system to selectively decrease or increase cellular protein levels.

Our wholly owned pipeline comprises four clinical stage drug candidates including targeted protein degraders of Bruton’s tyrosine kinase (BTK), a B-cell signaling protein, and inhibitors of Casitas B-lineage lymphoma proto-oncogene B (CBL-B), an E3 ligase that regulates T-cell activation.

Our lead drug candidate from our protein degradation portfolio, NX-2127, is an orally bioavailable BTK degrader for the treatment of relapsed or refractory B-cell malignancies.

Our wholly owned, clinical stage pipeline includes targeted protein degraders of Bruton’s tyrosine kinase (BTK), a B-cell signaling protein, and inhibitors of Casitas B-lineage lymphoma proto-oncogene B (CBL-B), an E3 ligase that regulates activation of multiple immune cell types including T cells and NK cells.

Our partnered drug discovery pipeline consists of ten programs under collaboration agreements with Sanofi S.A.

(Sanofi) and Gilead Sciences, Inc.

(Gilead), within which we retain options for co-development and co-commercialization rights in the United States for up to four drug candidates.

Targeted Protein Degradation

Our portfolio of targeted protein degraders of BTK, a B‑cell signaling protein, comprises NX‑2127, an orally bioavailable BTK degrader for the treatment of relapsed or refractory B‑cell malignancies, and NX‑5948, an orally bioavailable BTK degrader for the treatment of relapsed or refractory B-cell malignancies and potentially autoimmune diseases.

We are currently enrolling patients in a Phase 1 trial for patients with relapsed or refractory B-cell malignancies which comprises a Phase 1a dose-escalation study and a Phase 1b cohort expansion study.

We have initiated the first of several potential Phase 1b expansion cohorts for patients with relapsed chronic lymphocytic leukemia, and enrollment continues in the Phase 1a dose-escalation portion of the trial for patients with several types of non-Hodgkin lymphoma.

We are currently enrolling patients in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study in patients with relapsed or refractory B-cell malignancies.

Our second drug candidate from our protein degradation portfolio, NX-5948, is also an orally bioavailable BTK degrader for the treatment of relapsed or refractory B-cell malignancies and potentially autoimmune diseases.

We anticipate enrolling our first patient in the first half of 2022 in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study in patients with relapsed or refractory B-cell malignancies.

Our lead drug candidate from our E3 ligase inhibitor portfolio, NX-1607, is an orally bioavailable CBL-B inhibitor for immuno-oncology indications.

Targeted Protein Elevation

Our portfolio of inhibitors of CBL-B, an E3 ligase that regulates the activation of multiple immune cell types including T cells and NK cells, comprises NX-1607, an orally bioavailable CBL-B inhibitor for immuno-oncology indications and NX-0255, for ex vivo use to enhance adoptive T-cell therapy including our drug-enhanced tumor infiltrating lymphocyte (TIL) therapy, DeTIL-0255.

We are currently enrolling patients in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study in patients with solid tumors and lymphomas.

We are also advancing the development of a CBL-B inhibitor, NX-0255, for ex vivo use to enhance adoptive T-cell therapy.

We are currently recruiting patients in a Phase 1 clinical trial for our first cell therapy candidate, DeTIL‑0255, in patients with gynecologic cancers including ovarian, endometrial, and cervical cancer.

Beyond these clinical candidates, we are advancing additional wholly owned, preclinical programs that may expand our therapeutic areas beyond oncology and autoimmune disease to viral diseases, including COVID-19.

Our therapeutic areas may be further expanded through our established strategic collaborations with Sanofi and Gilead.

NX-1607 was awarded an Innovative Passport from the UK Medicines and Healthcare products Regulatory Agency to accelerate time to market and facilitate patient access to novel drugs to treat serious and life-threatening diseases.

We completed the safety run-in portion of a Phase 1 trial in patients with advanced gynecologic malignancies, which included three patients with advanced epithelial ovarian cancer who have been dosed with DeTIL-0255 and have cleared the initial safety evaluation.

The timing of the expansion of the DeTIL-0255 Phase 1 trial will be established following a determination regarding the potential inclusion of NX-1607 in future cohorts.

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Preclinical programs

Beyond our clinical candidates, we are advancing additional wholly owned and partnered preclinical programs within our core therapeutic focus in cancer and selectively in non-oncology therapeutic areas.

Our pipeline includes highly validated and classically undruggable targets across our proprietary efforts, academic collaborations and our established strategic collaborations with Sanofi and Gilead.

Collaboration and License Agreements

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In December 2019, we entered into a strategic collaboration with Genzyme Corporation, a subsidiary of Sanofi, which became effective in January 2020 (as subsequently expanded and amended, the Sanofi Agreement), to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with challenging diseases in multiple therapeutic areas using our DELigase platform to identify small molecules designed to induce degradation of three specified initial drug targets.

In January 2021, as part of the existing collaboration, Sanofi paid us $22.0 million to exercise its option to expand the number of targets in the collaboration agreement from three to a total of five targets.

In January 2021, as part of the existing Sanofi Agreement, Sanofi paid us $22.0 million to exercise its option to expand the number of targets in the Sanofi Agreement from three to a total of five targets.

Over time and subject to certain limitations, Sanofi may elect to replace the drug targets with other reserved targets.

We also entered into the First Sanofi Amendment to the collaboration agreement with Sanofi in January 2021 to modify the research term on all targets.

Under the Sanofi Agreement, Sanofi has exclusive rights and is responsible for the clinical development, commercialization and manufacture of drug candidates resulting from the collaboration, while we retain the option to co-develop, co-promote and co-commercialize all drug candidates in the United States directed to up to two targets under certain conditions.

In January 2021, we entered into the First Amendment to the Sanofi Agreement to modify the research term on all targets.

In December 2021, we entered into the Second Amendment to the Sanofi Agreement to extend the substitution deadline on certain targets.

In July 2022, we entered into the Third Amendment to the Sanofi Agreement to further extend the substitution deadline on certain targets.

The extensions of the substitution deadline had no impact on revenue recognition.

Also in July 2022, Sanofi elected to replace certain drug targets, and the substitution extended the research term of those targets by one year to 5.25 years and increased overall forecasted costs, which had an immaterial impact on revenue recognition.

In August 2022, we entered into the Fourth Amendment to the Sanofi Agreement to modify the research plan for a certain target, which had no impact on revenue recognition.

The collaboration excludes our current internal protein degradation programs for which we retain all rights, and also excludes our future internal programs, provided that we have distinguished future programs as excluded from the scope of the collaboration.

For drug targets that are subject to the collaboration, we have primary responsibility for conducting preclinical research activities (including target validation, drug discovery, identification or synthesis) in accordance with the applicable research plan agreed to by the parties and established on a target-by-target basis.

We are obligated to use commercially reasonable efforts to identify relevant target binders and chimeric targeting molecules (CTMs) in order to identify development candidates.

We are obligated to use commercially reasonable efforts to identify relevant target binders and targeted protein degraders in order to identify development candidates.

Subject to certain exceptions, each party will bear its own costs in the conduct of such research.

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Subsequently in January 2021, Sanofi paid us an additional $22.0 million to exercise its option to expand the number of targets beyond the initial targets included in the collaboration.

From the signing of the Sanofi Agreement to November 30, 2021, we received a payment of $1.0 million for research milestones.

In addition, from the signing of the Sanofi Agreement to November 30, 2022, we received payments of $3.0 million for research milestones.

As of November 30, 2022, we are eligible to receive up to approximately $2.5 billion in total payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones, as well as tiered royalties ranging from mid-single digit to low teen percentages on annual net sales of any commercial products that may result from the collaboration, subject to certain reductions and excluding sales in the United States of any products for which we exercise our option to co-develop and co-promote, for which we share profits and losses evenly.

We recognized collaboration revenue from the Sanofi Agreement of $13.2 million and $5.7 million during the year ended November 30, 2021 and 2020.

We recognized no collaboration revenue from the Sanofi Agreement during the year ended November 30, 2019.

As of November 30, 2021, there was $59.2 million of deferred revenue related to payments received by us under the Sanofi Agreement.

We recognized collaboration revenue from the Sanofi Agreement of $15.0 million and $13.2 million during the years ended November 30, 2022 and 2021, respectively.

As of November 30, 2022 and 2021, there was $46.2 million and $59.2 million, respectively, of deferred revenue related to payments received by us under the Sanofi Agreement.

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Gilead Collaboration, Option and License Agreement

In June 2019, we entered into a global strategic collaboration agreement with Gilead, which was amended in August 2019 (the Gilead Agreement), to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with cancer and other challenging diseases using our DELigase platform to identify novel agents that utilize E3 ligases to induce degradation of five specified drug targets.

In June 2019, we entered into a global strategic collaboration agreement with Gilead (as subsequently amended, the Gilead Agreement) to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with cancer and other challenging diseases using our DELigase platform to identify novel agents that utilize E3 ligases to induce degradation of five specified drug targets.

In August 2019 and September 2022, we entered into the First and Second Amendment, respectively, to the Gilead Agreement to clarify certain language of the Gilead Agreement.

These amendments had no impact on revenue recognition.

Under the Gilead Agreement, Gilead has the option to license drug candidates directed to up to five targets resulting from the collaboration and is responsible for the clinical development and commercialization of drug candidates resulting from the collaboration.

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For drug targets that are subject to the collaboration, we are obligated to use commercially reasonable efforts to undertake a research program in accordance with a research plan agreed to by the parties and established on a target-by-target basis.

We have primary responsibility under the agreement for performing preclinical research activities (including target validation, drug discovery, identification or synthesis) pursuant to a research plan.

We have primary responsibility under the Gilead Agreement for performing preclinical research activities (including target validation, drug discovery, identification or synthesis) pursuant to a research plan.

Each party will bear its own costs in the conduct of research activities.

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Upon signing the Gilead Agreement, Gilead paid us an upfront payment of $45.0 million, plus $3.0 million in additional fees.

From the signing of the Gilead Agreement to November 30, 2021 , we received payments of $18.5 million for research milestones and additional payments, including $5.0 million , which was received in the fourth quarter of 2021.

Additionally, in November 2021, we recognized a research milestone and received a payment of $6.0 million in the first quarter of 2022.

In addition, from the signing of the Gilead Agreement to November 30, 2022, we received payments of $34.5 million for research milestones and additional payments.

As of November 30, 2022, we are eligible to receive up to approximately $2.3 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones.

In addition, we are eligible to receive tiered royalties from mid-single digit to low tens percentages on annual net sales from any commercial products directed to the optioned collaboration targets, subject to certain reductions and excluding sales in the United States of any products for which we exercise our option to co-develop and co-promote, for which we share profits and losses evenly.

We recognized collaboration revenue from the Gilead Agreement of $16.6 million, $12.1 million and $2.7 million during the years ended November 30, 2021, 2020 and 2019, respectively.

As of November 30, 2021, there was $41.1 million of deferred revenue related to payments received by us under the Gilead Agreement.

Celgene Research and Collaboration Agreement

In September 2015, we entered into a strategic collaboration with Celgene Corporation (the Celgene Agreement and Celgene, respectively), with an initial research term of four years pursuant to which we received an upfront payment of $150.0 million.

In addition, in September 2015, Celgene purchased 1,622,222 shares of our Series C redeemable convertible preferred stock at a price of $10.50 per share, resulting in net proceeds of $17.0 million.

In January 2019, Celgene and Bristol-Myers Squibb Company (BMS) entered into a definitive merger agreement pursuant to which Celgene agreed to be acquired by BMS.

Based on our request for notification of the future disposition of our agreement, in June 2019, Celgene notified us that it was terminating the Celgene Agreement.

Upon termination of the Celgene Agreement in June 2019, any rights that Celgene had under the agreement reverted to us and no termination payments were due or payable.

We recognized no collaboration revenue from the Celgene Agreement during the years ended November 30, 2021 and 2020.

During the year ended November 30, 2019, we recognized $28.4 million in collaboration revenue under the Celgene Agreement.

As of November 30, 2021, there was no deferred revenue related to payments received by us under the Celgene Agreement.

We recognized collaboration revenue from the Gilead Agreement of $23.7 million and $16.6 million during the years ended November 30, 2022 and 2021, respectively.

As of November 30, 2022 and 2021, there was $27.4 million and $41.1 million of deferred revenue related to payments received by us under the Gilead Agreement.

Financial Overview

Since the commencement of our operations, we have devoted substantially all of our resources to conducting research and development activities, establishing and maintaining our intellectual property portfolio, establishing our corporate infrastructure, raising capital and providing general and administrative support for these operations.

We have funded our operations to date primarily from proceeds received under collaboration and license agreements with Sanofi, Gilead, and Celgene and the issuance and sale of common and redeemable convertible preferred stock.

We have funded our operations to date primarily from proceeds received under collaboration and license agreements with Sanofi, Gilead and Celgene Corporation and the issuance and sale of common stock and redeemable convertible preferred stock and of pre-funded warrants.

We do not expect to generate product revenue unless and until we successfully develop and obtain approval for the commercialization of a drug candidate, and we cannot assure you that we will ever generate significant revenue or profits.

Since inception, we have generally incurred significant losses and negative cash flows from operations.

We incurred net losses of $117.2 million, $43.2 million and $21.7 million during the years ended November 30, 2021, 2020 and 2019, respectively.

During the years ended November 30, 2022 and 2021, we incurred net losses of $180.4 million and $117.2 million, respectively.

As of November 30, 2022, we had an accumulated deficit of $401.3 million.

These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations.

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our drug candidate s, which we expect will take a number of years.

We expect our expenses will increase substantially as we advance our drug candidate s through preclinical and into clinical development;

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We expect our expenses will increase substantially as we advance our drug candidates through preclinical and clinical development;

enter advanced clinical development and scale up external manufacturing capabilities to supply clinical trials;

apply our DELigase platform to advance additional drug candidate s and expand the capabilities of our platform;

seek marketing approvals for any drug candidate s that successfully complete clinical trials;

apply our DELigase platform to advance additional drug candidates and expand the capabilities of our platform;

seek marketing approvals for any drug candidates that successfully complete clinical trials;

ultimately establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any products for which we may obtain marketing approval;

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and hire additional clinical, regulatory, manufacturing, quality assurance and scientific personnel.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other administrative and professional services expenses.

Furthermore, we expect to continue incurring costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other administrative and professional services expenses.

Our net losses and cash flows may fluctuate significantly from period to period, depending on, among other things, variations in the level of expense related to the ongoing development of our drug candidates, our DELigase platform or future development programs;

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and the execution of any additional collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under such arrangements.

As of November 30, 2021, we had $432.9 million in cash, cash equivalents and investments.

In July 2020, we closed our initial public offering (IPO), and issued 12,550,000 shares of our common stock (including the exercise by the underwriters of their option to purchase an additional 1,550,000 shares of common stock in August 2020) at a price to the public of $19.00 per share for net proceeds of approximately $218.1 million, after deducting underwriting discounts and commissions of $16.7 million and expenses of $3.6 million.

In March 2021, we completed a follow-on offering and issued 5,175,000 shares of our common stock (including the exercise by the underwriters of their option to purchase an additional 675,000 shares of common stock) at a price to the public of $31.00 per share for net proceeds of approximately $150.2 million, after deducting underwriting discounts and commissions of $9.6 million and expenses of $0.6 million.

We expect that our existing cash, cash equivalents and investments are sufficient to fund our operations for at least the next 12 months.

As of November 30, 2022, we had $373.0 million in cash, cash equivalents and marketable securities.

We expect that our existing cash, cash equivalents and marketable securities are sufficient to fund our operations for at least the next 12 months.

See the section titled “—Liquidity and Capital Resources” for more information.

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In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

We are subject to risks and uncertainties as a result of the current COVID-19 pandemic.

The COVID-19 pandemic, including the resurgence of cases relating to the spread of the Delta and Omicron variants, is impacting worldwide economic activity and poses the risk that we or our employees, contractors, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

While the impact of the COVID-19 pandemic to our current operations has been minimal as we have only recently commenced clinical development of our four lead drug candidates, the extent to which the COVID-19 pandemic will impact our business, financial condition, liquidity and results of operations in the future will depend on future developments that are highly uncertain and cannot be predicted at this time.

Components of Operating Results

We are also subject to risks and uncertainties as a result of macroeconomic events and conditions, including inflation, increasing interest rates, increasing financial market volatility and uncertainty, the impact of war or military conflict, including the war in Ukraine, and public health pandemics.

In particular, the COVID-19 pandemic, including the resurgence of cases relating to the spread of new variants, continues to impact worldwide economic activity and poses the risk that we or our employees, contractors, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

While the impact of the COVID‑19 pandemic on our current operations has been minimal during the early stages of clinical development of our four lead drug candidates, the extent to which the COVID-19 pandemic and other macroeconomic factors, including increasing financial market volatility and uncertainty, will impact our business, financial condition, liquidity, access to capital, and results of operations in the future will depend on future developments that are highly uncertain and cannot be predicted at this time.

Components of Results of Operations

Collaboration Revenue

We have no products approved for commercial sale and to date have not generated any revenue and do not expect to generate any revenue from the sale of products in the near future.

We have no products approved for commercial sale and to date have not generated any revenue from the sale of products and do not expect to generate any revenue from the sale of products in the near future.

Our revenue to date has been generated from payments received pursuant to collaboration and license arrangements with strategic partners.

Collaboration revenue consists of revenue received from upfront, milestone and contingent payments received from our collaborators.

Prior to December 1, 2019, we recognized revenue from upfront payments over the term of our estimated period of performance using either a straight-line or input/proportional performance approach, depending on the agreement, in accordance with Accounting Standards Codification (ASC) 605, Revenue Recognition .

Revenue related to the upfront payment received pursuant to the Celgene Agreement was recognized using a straight-line basis.

Effective December 1, 2019, we began recognizing revenue from upfront payments over the contract term using a cost-based input method under Topic 606, Revenue from Contracts with Customers .

Revenue related to the upfront payments received pursuant to the Gilead Agreement was recognized using the input/proportional performance approach prior to December 1, 2019 and the cost-based input method beginning December 1, 2019.

There would have been no difference between the revenue recognized under Topic 606 and the revenue recognized under ASC 605 for the Gilead Agreement.

Revenue related to the upfront payment received pursuant to the Sanofi Agreement was recognized using the cost-based input method.

We recognize revenue from upfront payments over the contract term using the cost-based input method.

The material right to the two additional targets under the Sanofi Agreement was accounted for using the practical alternative and the expected consideration to be received on the options was included for revenue allocation.

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We expect that any collaboration revenue we generate from our current collaboration and license agreements, and from any future collaboration partners, will fluctuate in the future as a result of the timing and amount of upfront, milestones and other collaboration agreement payments and other factors.

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Research and Development Expenses

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External research and development expenses consist primarily of costs incurred for the development of our drug candidates and may include:

fees paid to third parties such as consultants, contractors and contract research organizations to conduct our discovery programs, preclinical studies and clinical trials;

costs to acquire, develop and manufacture supplies for preclinical studies and clinical trials, including fees paid to third parties such as CMOs;

• fees paid to third parties such as consultants, contractors and contract research organizations to conduct our clinical trials, discovery programs and preclinical studies;

• costs to acquire, develop and manufacture supplies for clinical trials and preclinical studies, including fees paid to third parties such as contract manufacturing organizations;

• expenses related to laboratory supplies and services.

We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities to advance our drug candidates into and through our preclinical studies and clinical trials, pursue regulatory approval of our drug candidates and expand our drug candidate pipeline.

We expect our research and development expenses to increase substantially for the foreseeable future as we conduct clinical trials for our drug candidates, continue to invest in research and development activities for discovery programs and preclinical studies, pursue regulatory approval of our drug candidates and expand our drug candidate pipeline.

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming.

To the extent that our drug candidates advance and continue to advance into clinical trials, our expenses will increase substantially and may become more variable.

To the extent that our drug candidates advance to and continue to advance through clinical trials, our expenses will continue increasing substantially and may become more variable.

The actual probability of success for our drug candidates may be affected by a variety of factors, including the safety and efficacy of our drug candidates, investment in our clinical programs, the ability of collaborators to successfully develop our licensed drug candidates, manufacturing capability, competition with other products and commercial viability.

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General and administrative expenses consist primarily of payroll and personnel expenses, including benefits and stock-based compensation, facilities-related expenses and professional fees for legal, consulting and audit and tax services.

We expect our general and administrative expenses to increase substantially for the foreseeable future as we continue to build our infrastructure, increase our headcount and operate as a public company.

This may include expenses related to compliance with the rules and regulations of the SEC and listing standards applicable to companies listed on a national securities exchange, additional insurance, investor relations activities and other administrative and professional services.

We expect our general and administrative expenses to increase for the foreseeable future as we continue to improve our infrastructure and operate as a public company.

This may include expenses related to compliance with the rules and regulations of the Securities and Exchange Commission (SEC) and listing standards applicable to companies listed on a national securities exchange, additional insurance, investor relations activities and other administrative and professional services.

We also expect our intellectual property expenses to increase as we expand our intellectual property portfolio.

Interest and Other Income, Net

Interest and other income, net primarily consists of interest earned on our cash, cash equivalents and investments.

We expect interest income to vary each reporting period depending on our average bank deposit, money market fund, and investment balances during the period and market interest rates.

Provision for (benefit from) income taxes

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

We expect interest income to vary each reporting period depending on our average bank deposit, money market fund and marketable securities balances during the period and market interest rates.

Provision for Income Taxes

The provision for income taxes primarily consists of reserves for unrecognized tax benefits and state taxes.

The benefit for income taxes consists of a discrete tax benefit from an adjustment to the net operating loss (NOL) deferred tax asset and valuation allowance.

We have generated NOLs since inception and have established a full valuation allowance against our deferred tax assets due to the uncertainty surrounding the realization of such assets.

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Critical Accounting Policies and Estimates

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As disclosed in Note 2, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

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

We evaluate our estimates and assumptions on an ongoing basis.

Actual results could differ significantly from those estimates.

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Revenue Recognition

Prior to December 1, 2019, we recognized revenue in accordance with the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 605, Revenue Recognition .

Accordingly, revenue is recognized for each unit of accounting when all of the following criteria are met:

Persuasive evidence of an arrangement exists;

Delivery has occurred or services have been rendered;

The seller’s price to the buyer is fixed or determinable;

Collectability is reasonably assured.

We evaluate multiple element arrangements to determine if each deliverable represents a separate unit of accounting based on the following criteria:

Delivered item or items have value to the customer on a standalone basis, and

If the arrangement includes a general right of return relative to the delivered item or items, delivery or performance of the undelivered item or items is considered probable and substantially in our control.

The arrangement’s consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price methodology in accordance with the selling price hierarchy, which includes vendor-specific objective evidence (VSOE) of selling price, if available, or third-party evidence of selling price if VSOE is not available, or the best estimate of selling price, if neither VSOE nor third-party evidence is available.

The provisions of ASC 605 are then applied to each unit of accounting to determine the appropriate revenue recognition.

In the event that a deliverable of a multiple element arrangement does not represent a separate unit of accounting, primarily because a deliverable does not provide value on a standalone basis, we recognize revenue from the combined unit of accounting using the input/proportional performance approach as research is delivered or on a straight-line basis over the estimated period of performance when there is no discernable pattern of performance.

We evaluate potential milestone payments associated with research and development arrangements in accordance with ASC 605-28, Milestone Method.

Under the milestone method, we may recognize revenue contingent upon the achievement of a milestone in its entirety in the period in which the milestone is achieved, only if the milestone meets all the criteria within the guidance to be considered a substantive milestone.

We evaluate each contingent payment on an individual basis to determine whether they are considered substantive milestones, specifically reviewing factors such as the degree of certainty in achieving the milestone, the research and development risk and other risks that must be overcome to achieve the milestone, as well as the level of effort and investment required and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement.

This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.

Revenues from milestones, if they are nonrefundable and deemed substantive, are recognized upon achievement of the milestones.

To the extent that non-substantive milestones are achieved, and we have remaining deliverables, milestone payments are deferred and recognized as revenue over the estimated remaining performance period using the appropriate measure of progress as determined for each agreement.

We recognize revenue associated with the non-substantive milestones upon achievement of the milestone if we have no remaining deliverables.

During the year ended November 30, 2019, no milestone payments were received, no milestone revenues were recognized and no milestones were considered substantive.

Effective December 1, 2019, we adopted Topic 606, Revenue from Contracts with Customers using the modified retrospective method, which was only applied to contracts that were not completed as of the adoption date.

As of the adoption date, we had only one contract, a collaboration agreement with Gilead, not completed.

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

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

identify the contract(s) with a customer;

identify the performance obligations in the contract;

determine the transaction price;

allocate the transaction price to the performance obligations in the contract;

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

At contract inception, we assess the goods or services promised within each contract, whether each promised good or service is distinct, and determines those that are performance obligations.

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

To recognize revenue from a contract with a customer, we perform the following five steps:

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

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

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

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

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

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

We enter into collaboration agreements under which we may obtain upfront payments, milestone payments, royalty payments and other fees.

Promises under these arrangements may include research licenses, research services, including selection campaign research services for certain replacement targets, the obligation to share information during the research and the participation of alliance managers and in joint research committees, joint patent committees and joint steering committees.

We enter into research and collaboration agreements under which we may obtain upfront payments, milestone payments, royalty payments and other fees.

Promises under these arrangements may include research licenses, research services, including selection campaign research services for certain replacement targets, the obligation to share information during the research term and the participation of alliance managers and in joint research committees, joint patent committees and joint steering committees.

We assess these promises within the context of the agreements to determine the performance obligations.

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

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

To measure the proportional performance, we are required to make our best estimates of forecasted expenditures and development timelines, which are subject to uncertainties associated with pharmaceutical product development.

Forecasted total expenditures are driven primarily by the number of full-time employees, and the number may change based on the progress of our product development and requires significant management judgement.

Milestone payments :

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

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

We use the most likely amount method for research, development and regulatory milestone payments.

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

Sales-based milestones and royalties :

For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, we recognize revenue in the period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur.

To date, we have not recognized any sales-based milestone or royalty revenue resulting from our collaboration arrangements.

Customer options :

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Amounts allocated to any material right are recognized as revenue when or as the related future goods or services are transferred or when the option expires.

Deferred revenue, which is a contract liability, represents amounts received by us for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met.

The current portion of deferred revenue represents the amount to be recognized within one year from the consolidated balance sheet date based on the estimated performance period of the underlying performance obligation.

The noncurrent portion of deferred revenue represents amounts to be recognized after one year through the end of the performance period of the performance obligation.

All revenue was derived from customers located in the United States during the years ended November 30, 2021, 2020 and 2019.

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For performance obligations satisfied over time, we recognize revenue using the cost-based input method and evaluate the measure of proportional performance each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Forecasted total expenditures are driven primarily by the number of full-time employees, and the assumptions over the number of full-time employees require significant management judgement.

The number of full-time employees may change based on the progress and timing of our product development, and may be influenced by resource allocation decisions on internal programs and overall constraint on resources.

The model is highly sensitive to changes in resources assigned over the research term.

Forecasted total expenditures also include other direct costs related to product development, including third-party contract costs, and may also require management’s estimate of costs and market conditions that may impact costs.

Results of Operations

Comparison of the years ended November 30, 2022 and 2021

Our results of operations for the years ended November 30, 2022 and 2021 are summarized as follows (in thousands):

Year ended November 30,

(in thousands)

2022 2021 Change

Collaboration revenue $ 38,627 $ 29,750 $ 8,877

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Loss from operations (183,867) (117,886) (65,981)

Interest income and other income

Interest and other income, net 3,507 823 2,684

Loss before income taxes (180,360) (117,063) (63,297)

Provision for (benefit from) income taxes

Collaboration revenue for the years ended November 30, 2021, 2020 and 2019 includes related party revenue of $0, $0 and $28.4 million, respectively.

Provision for income taxes — 131 (131)

Net loss $ (180,360) $ (117,194) $ (63,166)

Collaboration Revenue

Our collaboration revenue for the years ended November 30, 2021, 2020 and 2019 is summarized as follows:

Our collaboration revenue for the years ended November 30, 2022 and 2021 is summarized as follows (in thousands):

Year ended November 30,

(in thousands)

2022 2021 Change

Gilead $ 23,674 $ 16,578 $ 7,096

Sanofi 14,953 13,172 1,781

Total collaboration revenue $ 38,627 $ 29,750 $ 8,877

Our collaboration revenue increased by $11.9 million for the year ended November 30, 2021 compared with the year ended November 30, 2020.

The increase was primarily due to the continued scale up of internal resources and external spending for our collaborations with Sanofi and Gilead as compared to the prior year, resulting in a higher percentage of completion in the current year.

The increase was also due to partial revenue recognized during the year ended November 30, 2021 for the achievement of certain preclinical milestones under our collaborations with Gilead and Sanofi.

Our collaboration revenue decreased by $13.3 million for the year ended November 30, 2020 compared with the year ended November 30, 2019.

The decrease in collaboration revenue was primarily attributable to the termination of the Celgene Agreement in June 2019, offset by an increase in revenue recognized related to the Gilead Agreement and the revenue related to the Sanofi Agreement.

Our collaboration revenue increased by $8.9 million during the year ended November 30, 2022 compared to the year ended November 30, 2021 primarily due to increased effort resulting in a higher percentage of completion of performance obligations under our collaborations with Gilead and Sanofi in the current period.

The increases were also due to additions to the transaction price from the achievement of research milestones totaling $10.0 million from our collaboration with Gilead and $3.0 million from our collaboration with Sanofi that resulted in higher revenue recognized in each period and impacted the cumulative catch up in revenue for activities satisfied in previous periods.

The increases were partially offset by increased overall forecasted costs for our collaboration with Sanofi primarily due to the target substitution in July 2022.

The substitutions increased the overall forecasted costs and extended the research term of those targets, which offset the increases in revenue due to increased effort and resulted in less revenue recognized in the current period.

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Research and Development Expenses

Our research and development expenses for the years ended November 30, 2021, 2020 and 2019 are summarized as follows:

Our research and development expenses for the years ended November 30, 2022 and 2021 are summarized as follows (in thousands):

Year ended November 30,

(in thousands)

Compensation and related

personnel costs

2022 2021 Change

Compensation and related personnel costs $ 65,336 $ 39,540 $ 25,796

Stock-based compensation 16,878 8,079 8,799

Supplies and contract research 47,814 37,676 10,138

Preclinical activities and

Preclinical activities 5,912 2,757 3,155

Contract manufacturing 13,562 10,214 3,348

Stock-based compensation

Clinical costs 13,887 6,236 7,651

Facility and other costs 21,108 11,932 9,176

Total research and development

Our research and development expense increased by $49.9 million, or 75.1%, during the year ended November 30, 2021 compared with the year ended November 30, 2020.

The increase was primarily related to an increase of $17.3 million in compensation and related personnel costs attributable to an increase in headcount.

There was an increase of $11.9 million in supplies and contract research and $5.9 million in preclinical activities and contract manufacturing attributable to an increase in our preclinical development activities and drug discovery research and preparation for upcoming clinical programs for our lead drug candidates.

There was an increase of $5.4 million in clinical costs due to ongoing clinical trial startup and patient enrollment.

There was also an increase of $6.4 million in non-cash stock-based compensation expense and an increase of $3.1 million in facility and other costs primarily due to expansion of leased premises and investments in information technology.

Our research and development expenses increased by $21.5 million, or 47.7%, during the year ended November 30, 2020, compared to the year ended November 30, 2019.

The increase was primarily related to an increase of $7.8 million in supplies and contract research attributable to increases in our preclinical development activities and drug discovery research.

There was also an increase of $5.8 million in compensation and related personnel costs attributable to an increase in headcount and an increase of $1.4 million in non-cash stock-based compensation expense.

Preclinical activities and contract manufacturing costs increased by $4.4 million primarily due to preparation for upcoming clinical programs for our lead drug candidates.

Total research and development expenses $ 184,497 $ 116,434 $ 68,063

Our research and development expense increased by $68.1 million during the year ended November 30, 2022 compared to the year ended November 30, 2021.

There was an increase in compensation and related personnel costs and in non-cash stock-based compensation expense of $25.8 million and $8.8 million, respectively, that were primarily attributable to higher headcount.

The increase in non-cash stock-based compensation expense was also attributable to the issuance of restricted stock units (RSUs) and incentive stock options.

There was also an increase in contract manufacturing and clinical costs of $11.0 million primarily due to the ramping up of our clinical trial programs and ongoing patient enrollment, an increase in supplies and contract research costs of $10.1 million to support our programs and an increase in preclinical activities of $3.2 million.

There was also an increase in facility and other costs of $9.2 million primarily due to the expansion of leased premises and additional investments in information technology.

General and Administrative Expenses

Our general and administrative expenses increased by $14.9 million, or 91.3%, during the year ended November 30, 2021, compared to the year ended November 30, 2020.

The increase was primarily related to an increase of $5.1 million in non-cash stock-based compensation expense and an increase of $4.6 million in compensation related expenses attributable to higher headcount.

There was also an increase of $3.7 million in consultant and other professional services primarily related to becoming a public company.

Our general and administrative expenses increased by $8.0 million, or 95.9%, during the year ended November 30, 2020, compared to the year ended November 30, 2019.

The increase was primarily related to an increase of $2.4 million in non-cash stock-based compensation expense and an increase of $1.7 million in compensation related expenses attributable to a higher headcount.

We also had an increase of $1.8 million in legal and accounting expenses mainly related to external audit and legal fees and an increase of $1.9 million in consultant, insurance and other professional service expenses primarily related to becoming a public company.

Our general and administrative expenses increased by $6.8 million during the year ended November 30, 2022, compared to the year ended November 30, 2021.

There was an increase of $1.1 million in compensation related expenses and an increase of $3.6 million in non-cash stock-based compensation expense, both of which were primarily attributable to higher headcount.

The increase in non-cash stock-based compensation expense was also attributable to the issuance of RSUs and incentive stock options.

There was also an increase of $1.4 million primarily attributable to higher public relations, legal and software costs, offset by a decrease in accounting costs, and an increase of $0.7 million in facility and other costs.

Interest and Other Income, Net

Interest and other income, net was $0.8 million, $1.2 million and $0.8 million for the years ended November 30, 2021, 2020 and 2019, respectively.

The decrease during the year ended November 30, 2021, compared to the year ended November 30, 2020, and the increase during the year ended November 30, 2020, compared to the year ended November 30, 2019, was primarily related to interest received in fiscal 2020 related to the tax refund for a carryback claim that we filed in April 2020 in connection with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Other than the interest earned on tax refund, interest and other income, net in all periods is mainly related to interest earned on our deposits, money market funds and investments.

Provision for (benefit from) income taxes

The provision for income taxes was an expense of $0.1 million, a benefit of $20.5 million and an expense of $0.2 million during the years ended November 30, 2021, 2020 and 2019, respectively.

The increase during the year ended November 30, 2021, compared to the year ended November 30, 2020, and the decrease during the year ended November 30, 2020, compared to the year ended November 30, 2019, was primarily related to a discrete tax benefit in fiscal 2020, which consists of carryback claims and the reversal of the uncertain tax liability related to research and development tax credits as a result of the CARES Act that was enacted on March 27, 2020 in response to the COVID-19 pandemic.

Our interest and other income, net increased by $2.7 million during the year ended November 30, 2022, compared to the year ended November 30, 2021, primarily attributable to higher interest rates earning higher interest income on our deposits, money market funds and marketable securities.

Provision for Income Taxes

Our provision for income taxes decreased by $0.1 million during the year ended November 30, 2022, compared to the year ended November 30, 2021.

There was no provision for income taxes for the year ended November 30, 2022.

The provision for income taxes for the year ended November 30, 2021 was due to state taxes offset by a federal income tax refund.

Liquidity and Capital Resources

Source of liquidity

On July 23, 2020, our registration statement on Form S-1 (File No.

333-239651) relating to our IPO of common stock became effective.

The IPO closed on July 28, 2020 at which time we issued 11,000,000 shares of our common stock at a price to the public of $19.00 per share.

In addition, the underwriters exercised their option to purchase an additional 1,550,000 shares of our common stock on July 31, 2020, and this transaction closed on August 4, 2020.

Net proceeds from the IPO and the transaction with the underwriters were approximately $218.1 million, after deducting underwriting discounts and commissions of $16.7 million and expenses of $3.6 million.

To date, our operations have primarily been funded through the net proceeds from equity offerings of $536.4 million and proceeds from collaborations of $300.5 million.

We do not have any products approved for sale, and we have not generated any revenue from product sales.

As of November 30, 2021, we had $432.9 million in cash, cash equivalents and investments.

Sources of Liquidity

In July 2020, we closed our initial public offering (IPO) and issued 12,550,000 shares of our common stock (including the exercise by the underwriters of their option to purchase an additional 1,550,000 shares of common stock in August 2020) at a price to the public of $19.00 per share for net proceeds of $218.1 million, after deducting underwriting discounts and commissions of $16.7 million and expenses of $3.6 million.

In March 2021, we completed a follow-on offering and issued 5,175,000 shares of our common stock (including the exercise by the underwriters of their option to purchase an additional 675,000 shares of common stock) at a price to the public of $31.00 per share for net proceeds of $150.2 million, after deducting underwriting discounts and commissions of $9.6 million and expenses of $0.6 million.

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In August 2021, we entered into an Equity Distribution Agreement with Piper Sandler & Co.

(Piper Sandler) pursuant to which, from time to time, we may offer and sell through Piper Sandler up to $150.0 million of the common stock registered under the shelf registration statement pursuant to one or more “at the market” offerings.

We are not required to sell any shares at any time during the term of the Equity Distribution Agreement.

We agreed to pay Piper Sandler a commission of 3% of the gross sales price of any shares sold pursuant to the Equity Distribution Agreement.

In June 2022, we issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement at a price of $10.0001 per share of common stock for net proceeds of approximately $19.3 million after deducting offering commissions and expenses paid by us (the June 2022 ATM Offering).

As of November 30, 2022, we had $130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

In July 2022, we entered into separate securities purchase agreements with certain purchasers to issue and sell pre‑funded warrants to purchase an aggregate of 6,814,920 shares of our common stock in registered direct offerings (RDOs) at a price of $13.939 per pre-funded warrant.

Net proceeds from the RDOs were approximately $94.8 million, after deducting offering expenses of $0.2 million.

The pre-funded warrants were immediately exercisable, have an exercise price of $0.001 and may be exercised at any time after the date of issuance.

A holder of the pre-funded warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of our common stock outstanding immediately after giving effect to such exercise.

A holder of the pre-funded warrants may increase or decrease this percentage not in excess of 19.99% by providing us at least 61 days’ prior notice.

As of November 30, 2022, all of the pre-funded warrants remained available for exercise.

Funding Requirements

We expect that our existing cash, cash equivalents and investments are sufficient to meet our cash requirements and continue operating activities, including the clinical trials of our drug candidates NX‑2127, NX‑1607, NX‑5948 and DeTIL‑0255 and the expansion of our intellectual property portfolio and infrastructure for at least the next 12 months.

As of November 30, 2022, our operations have primarily been funded through the net proceeds from equity offerings of $650.5 million and proceeds from collaborations of $312.5 million.

We do not have any products approved for sale, and we have not generated any revenue from product sales.

As of November 30, 2022, we had $373.0 million in cash, cash equivalents and marketable securities.

We expect that our existing cash, cash equivalents and marketable securities are sufficient to meet our cash requirements and continue operating activities, including the clinical trials of our drug candidates NX‑2127, NX‑1607, NX‑5948 and DeTIL‑0255 and the expansion of our intellectual property portfolio and infrastructure, for at least the next 12 months.

We will need substantial additional funding to support our continuing operations and pursue our long-term business plan.

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Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated pre-clinical studies and clinical trials.

We have a shelf registration statement on Form S-3 on file with the SEC.

This shelf registration statement, which includes a base prospectus, allows us at any time to offer and sell registered common stock, preferred stock, debt securities, warrants, subscriptions rights and or units or any combination of securities described in the prospectus in one or more offerings.

In addition, in August 2021, we entered into an Equity Distribution Agreement with Piper Sandler & Co.

We are not required to sell any shares at any time during the term of the Equity Distribution Agreement.

We agreed to pay Piper Sandler a commission of 3% of the gross sales price of any shares sold pursuant to the Equity Distribution Agreement.

As of November 30 , 2021, we have not sold any shares of common stock pursuant to the Equity Distribution Agreement and $150.0 million in shares remained available under the Equity Distribution Agreement.

Unless otherwise specified in a prospectus supplement accompanying the base prospectus, we intend to use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes, which may include funding research, clinical and process development, increasing our working capital, reducing indebtedness, acquisitions or investments in businesses, products or technologies that are complementary to our own and capital expenditures.

Pending such uses, we may invest the net proceeds in marketable securities that may include investment-grade interest-bearing securities, money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S.

Our future funding requirements will depend on many factors, including the following:

the progress, costs and results of our planned and ongoing Phase 1 clinical trials for our lead drug candidates NX-2127, NX-1607, NX-5948 and DeTIL-0255, and any future clinical development of such drug candidates;

In the long term, our ability to support our working capital and capital expenditure requirements will depend on many factors, including the following:

• the progress, costs and results of our ongoing Phase 1 clinical trials for our lead drug candidates NX-2127, NX-1607, NX‑5948 and DeTIL-0255, and any future clinical development of such drug candidates;

• the scope, progress, costs and results of preclinical and clinical development for our other drug candidates and development programs;

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• our ability to establish additional collaboration arrangements with other biotechnology or pharmaceutical companies on favorable terms, if at all, for the development or commercialization of our drug candidates.

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If adequate funds are not available at favorable terms, we may be required to reduce operating expenses, delay or reduce the scope of our product development and commercial expansion programs, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, or cease operations.

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If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

The following table summarizes our cash flows during the periods indicated:

As of November 30, 2022, our material cash requirements include the following contractual and other obligations (in thousands):

Payments due by period

1 year 1 to 3 years 3 to 5 years More than

5 years Total

Operating lease obligations $ 6,979 $ 11,753 $ 5,420 $ 22,556 $ 46,708

Total contractual obligations $ 6,979 $ 11,753 $ 5,420 $ 22,556 $ 46,708

In addition, in the normal course of business we enter into agreements with contract research organizations for clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are generally cancelable upon written notice.

These payments are not included in the table above.

We did not have during the periods presented, and we do not currently have, any commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

Our cash flows for the years ended November 30, 2022 and 2021 are summarized as follows (in thousands):

Year ended November 30,

(in thousands)

Cash (used in) provided by operating activities

Cash used in operating activities $ (159,807) $ (84,365)

Cash (used in) provided by investing activities 27,198 (108,251)

Cash provided by financing activities 117,192 153,882

Net (decrease) increase in cash, cash equivalents

and restricted cash

Net decrease in cash, cash equivalents and restricted cash $ (15,417) $ (38,734)

Operating activities

Net cash used in operating activities was $159.8 million for the year ended November 30, 2022 and consisted of our net loss of $180.4 million and an increase in net assets of $19.0 million, offset by non-cash adjustments of $39.6 million.

The increase in net assets consisted primarily of a decrease in deferred revenue of $26.6 million as we increased effort in our programs and recognized revenue, a decrease in operating lease liabilities of $4.9 million due to payments made on operating leases and an increase in prepaid expenses and other assets of $1.1 million primarily related to increased prepaid clinical and contract manufacturing costs and software license costs, offset by an increase in accrued expenses and other liabilities of $7.5 million primarily related to the accrual of contract research, laboratory supplies and annual incentive compensation and a decrease in accounts receivable of $6.0 million related to payments received under the Gilead Agreement.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $28.1 million, amortization of operating lease right-of-use assets of $5.5 million and depreciation and amortization expenses of $5.3 million.

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Net cash used in operating activities was $84.4 million for the year ended November 30, 2021 and consisted of a decrease in net assets of $9.1 million and non-cash adjustments of $23.7 million, offset by our net loss of $117.2 million.

The decrease in net assets consisted primarily of a decrease in contract assets of $7.5 million related to proceeds received for Gilead milestones, an increase in deferred revenue of $6.8 million primarily related to proceeds received pursuant to the Sanofi agreement, an increase in accrued expenses and other liabilities of $6.2 million primarily related to an increase in accrued compensation from higher incentive compensation and an increase in accrued contract research and lab supplies due to the growth in clinical development for our lead drug candidates and a decrease in income tax receivable of $3.6 million related to the collection of the NOL carryback claims as a result of the CARES Act.

The decrease in net assets consisted primarily of an increase in deferred revenue of $14.3 million primarily related to proceeds received pursuant to the Sanofi Agreement and the Gilead Agreement, an increase in accrued expenses and other liabilities of $6.2 million primarily related to an increase in accrued compensation from higher incentive compensation and an increase in accrued contract research and lab supplies due to the growth in clinical development for our lead drug candidates and a decrease in income tax receivable of $3.6 million related to the collection of the NOL carryback claims as a result of the CARES Act.

The decrease in net assets was offset by an increase in accounts receivable of $6.0 million related to a Gilead research milestone, an increase in prepaid expenses and other assets of $5.4 million primarily related to an increase in prepaid clinical costs and a decrease in operating lease liabilities of $5.1 million due to payments made on operating leases.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $15.8 million, amortization of operating lease right-of-use assets of $3.3 million and depreciation and amortization expenses of $2.8 million.

Net cash used in operating activities was $0.1 million for the year ended November 30, 2020 and consisted of a decrease in net assets of $36.4 million and non-cash adjustments of $6.8 million, offset by our net loss of $43.2 million.

The decrease in net assets consisted primarily of an increase in deferred revenue of $48.2 million related to proceeds received pursuant to the Sanofi Agreement and offset by revenue recognized pursuant to the Sanofi Agreement and the Gilead Agreement.

The decrease in net assets was offset by an increase in contract assets of $7.5 million related to unbilled revenue for Gilead milestones and an increase in income tax receivables of $3.9 million related to NOL carryback claims as a result of the CARES Act.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $4.3 million and depreciation and amortization expenses of $2.2 million.

Net cash provided by operating activities was $0.6 million for the year ended November 30, 2019 and consisted of a decrease in net assets of $19.5 million and non-cash adjustments of $2.8 million, offset by our net loss of $21.7 million.

The decrease in net assets consisted primarily of an increase in deferred revenue of $16.9 million related to $48.0 million in proceeds received pursuant to the Gilead Agreement and offset by $31.1 million in revenue recognized pursuant to the Celgene Agreement and the Gilead Agreement and an increase in accrued expenses and other liabilities of $2.4 million primarily related to an increase in accrued compensation from higher incentive compensation.

Non-cash adjustments primarily consisted of depreciation and amortization expenses of $2.4 million.

Investing activities

Net cash provided by investing activities was $27.2 million for the year ended November 30, 2022 and consisted of the maturity of marketable securities of $278.8 million, offset by the purchase of marketable securities of $239.4 million and purchases of property and equipment of $12.2 million.

Net cash used in investing activities was $108.3 million for the year ended November 30, 2021 and consisted of the purchase of investments of $348.5 million and purchases of property and equipment of $5.7 million, offset by the maturity of investments of $238.9 million and the sale of investments of $7.0 million.

Net cash used in investing activities was $254.4 million for the year ended November 30, 2020 and consisted of the purchase of investments of $275.2 million and purchases of property and equipment of $4.6 million, offset by the maturity of investments of $25.4 million.

Net cash provided by investing activities was $8.5 million for the year ended November 30, 2019 and consisted primarily of maturities of investments of $19.5 million, offset by the purchase of investments of $9.4 million.

Financing activities

Net cash provided by financing activities was $117.2 million for the year ended November 30, 2022 and consisted primarily of net proceeds from the issuance of pre-funded warrants in the RDOs of $94.8 million and from the issuance of common stock in the June 2022 ATM Offering of $19.4 million.

Net cash provided by financing activities was $153.9 million for the year ended November 30, 2021 and consisted primarily of proceeds from the issuance of common stock from the follow-on offering in March 2021.

Net cash provided by financing activities was $339.0 million for the year ended November 30, 2020 and consisted primarily of net proceeds from issuance of common stock in July and August 2020 related to our IPO and the sale of our Series D redeemable convertible preferred stock in March 2020.

Net cash provided by financing activities was $0.1 million for the year ended November 30, 2019 and consisted primarily of proceeds from the exercise of stock options.

Contractual Obligations and Other Commitments

The following table summarizes our contractual obligations as of November 30, 2021:

Payments due by period

(in thousands)

Operating lease obligations

Total contractual obligations

In addition, we enter into agreements in the normal course of business with contract research organizations for clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are generally cancelable upon written notice.

These payments are not included in the table above.

Information About Segments

We currently operate in a single business segment.

See additional information in our financial statements contained in Part II, Item 8 of this Annual Report.

See additional information in our financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide this information.

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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 7. Management’s Discussion and Analysis