What changed in this filing

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Item 1. Financial Statements

2023-07-13 compared with 2023-04-13 · 102 added, 69 removed, 447 unchanged (28% of the section changed)

27 unchanged sentences

Stockholdersʼ equity:

Preferred stock, $ 0.001 par value— 10,000,000 shares authorized as of February 28, 2023 and November 30, 2022;

no shares issued and outstanding as of February 28, 2023 and November 30, 2022

Common stock, $ 0.001 par value— 500,000,000 shares authorized as of February 28, 2023 and November 30, 2022;

47,444,853 and 47,172,299 shares issued and outstanding as of February 28, 2023 and November 30, 2022, respectively

Preferred stock, $ 0.001 par value— 10,000,000 shares authorized as of May 31, 2023 and November 30, 2022;

no shares issued and outstanding as of May 31, 2023 and November 30, 2022

Common stock, $ 0.001 par value— 500,000,000 shares authorized as of May 31, 2023 and November 30, 2022;

47,631,208 and 47,172,299 shares issued and outstanding as of May 31, 2023 and November 30, 2022, respectively

Additional paid-in capital 728,038 709,220

8 unchanged sentences

Three Months Ended

May 31, Six Months Ended

2023 2022 2023 2022

Collaboration revenue $ 10,676 $ 11,432 $ 23,361 $ 21,053

License revenue 20,000 — 20,000 —

Total revenue 30,676 11,432 43,361 21,053

Operating expenses:

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Three Months Ended

May 31, Six Months Ended

2023 2022 2023 2022

Net loss $ ( 24,277 ) $ ( 45,401 ) $ ( 65,010 ) $ ( 87,934 )

21 unchanged sentences

Balance as of February 28, 2022 44,853,448 45 571,363 ( 2,066 ) ( 263,425 ) 305,917

Exercise of stock options 173,155 — 432 — — 432

Vesting of restricted stock units 13,465 — — — — —

Vesting of early exercised stock options — — 35 — — 35

Stock-based compensation — — 6,775 — — 6,775

Unrealized loss on available-for-sale marketable securities — — — ( 1,019 ) — ( 1,019 )

Net loss — — — — ( 45,401 ) ( 45,401 )

Balance as of May 31, 2022 45,040,068 $ 45 $ 578,605 $ ( 3,085 ) $ ( 308,826 ) $ 266,739

Common stock Additional

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Balance as of February 28, 2023 47,444,853 47 719,237 ( 3,247 ) ( 441,985 ) 274,052

Exercise of pre-funded warrants 148,497 1 — — — 1

Exercise of stock options 5,597 — 24 — — 24

Vesting of restricted stock units 32,261 — — — — —

Vesting of early exercised stock options — — 31 — — 31

Stock-based compensation — — 8,746 — — 8,746

Unrealized gain on available-for-sale marketable securities — — — 1,344 — 1,344

Net loss — — — — ( 24,277 ) ( 24,277 )

Balance as of May 31, 2023 47,631,208 $ 48 $ 728,038 $ ( 1,903 ) $ ( 466,262 ) $ 259,921

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

2 unchanged sentences

(in thousands)

Three Months Ended February 28,

Six Months Ended May 31,

Cash flows from operating activities

7 unchanged sentences

Changes in operating assets and liabilities:

Accounts receivable — 6,000

Prepaid expenses and other assets 515 ( 1,515 )

10 unchanged sentences

Cash flows from financing activities

Proceeds from exercise of stock options 28 424

Proceeds from exercise of stock options and pre-funded warrants 53 856

Proceeds from issuance under employee stock purchase plan 1,453 1,064

7 unchanged sentences

Vesting of early exercised stock options $ 62 $ 82

As of February 28,

As of May 31,

Reconciliation of cash, cash equivalents and restricted cash:

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(the Company) was incorporated in the state of Delaware on August 27, 2009, and is headquartered in San Francisco, California.

The Company is 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.

The Company is a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of medicines based on the modulation of cellular protein levels as a novel treatment approach for cancer and other challenging diseases.

Leveraging the Company’s expertise in E3 ligases together with its proprietary DNA-encoded libraries, the Company has 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.

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The Company 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, the Company 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 the Company.

As of February 28, 2023, the Company had $ 130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

In June 2022, the Company 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 $ 19.3 million, after deducting offering commissions and expenses paid by the Company.

As of May 31, 2023, the Company had $ 130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

Registered Direct Offerings

In July 2022, the Company 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 the Company’s 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.

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

Refer to Note 7 for more information regarding the pre-funded warrants issued in the RDOs.

Liquidity and Management Plans

As of February 28, 2023, the Company had cash, cash equivalents and short-term marketable securities of $ 277.1 million and an accumulated deficit of $ 442.0 million.

As of May 31, 2023, the Company had cash, cash equivalents and short-term marketable securities of $ 281.2 million and an accumulated deficit of $ 466.3 million.

The Company’s operations have historically been financed through the issuance of common stock, redeemable convertible preferred stock and pre-funded warrants and proceeds received under the Company’s collaboration and license agreements.

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GAAP) and applicable rules and regulations of the SEC regarding interim financial reporting.

The Company’s condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of and for the three months ended February 28, 2023.

The condensed consolidated balance sheet as of November 30, 2022, was derived from the audited annual financial statements as of that date.

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federal government or state and local governments.

The Company’s exposure to any individual corporate entity is limited by policy.

Deposits may exceed federally insured limits, and the Company is exposed to credit risk on deposits in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (FDIC).

The Company’s exposure to any individual corporate entity is limited by policy, and its ongoing cash management strategy is to maintain diversity in its deposit accounts across financial institutions;

however, the Company is exposed to credit risk on deposits in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (FDIC).

The Company is closely monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, including Silicon Valley Bank (SVB).

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The Company is subject to a number of risks similar to other clinical stage biopharmaceutical companies, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations:

risks related to the successful discovery and development of its drug candidates, ability to raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain drug substance and finished drug product from the Company’s third-party contract manufacturers necessary for the Company’s drug candidates, including due to the impact of the current coronavirus (COVID-19) pandemic, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights and regulatory clearance and market acceptance for any of the Company’s products candidates for which the Company receives marketing approval.

Moreover, the Company is subject to risks and uncertainties as a result of the current COVID-19 pandemic and increasing financial market volatility and uncertainty.

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 the Company or its 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.

The extent to which the COVID-19 pandemic and increasing financial market volatility and uncertainty will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

risks related to the successful discovery and development of its drug candidates, ability to raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain drug substance and finished drug product from the Company’s third-party contract manufacturers necessary for the Company’s drug candidates, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights and regulatory clearance and market acceptance for any of the Company’s products candidates for which the Company receives marketing approval.

Moreover, the Company is subject to risks and uncertainties as a result of macroeconomic events and conditions, including increasing financial market volatility and uncertainty, inflation, increasing interest rates, the federal debt ceiling and budget, instability in the global banking system, the impact of war or military conflict, including the war in Ukraine, and public health pandemics.

The extent to which macroeconomic factors, including increasing financial market volatility and uncertainty, will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The extent to which the COVID-19 pandemic and the increasing financial market volatility and uncertainty may directly or indirectly impact the Company’s financial statements is highly uncertain and subject to change.

Management considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three months ended February 28, 2023;

however, actual results could differ from those estimates and there may be changes to management’s estimates in future periods.

The extent to which the increasing financial market volatility and uncertainty may directly or indirectly impact the Company’s financial statements is highly uncertain and subject to change.

The Company relies on single source manufacturers and suppliers for the supply of its drug candidates.

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The Company assesses these promises within the context of the agreements to determine the performance obligations.

Exclusive license rights:

If a license to the Company’s intellectual property is determined to be distinct from the other promises identified in the arrangement, the Company recognizes revenue from nonrefundable, upfront payments allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license and the underlying intellectual property.

If the license is the predominant promise, and it is determined that the license represents functional intellectual property, revenue is recognized at the point in time when control of the license is transferred.

If it is determined that the license does not represent functional intellectual property, revenue is recognized over time using an appropriate method of measuring progress.

Research and collaboration licenses:

If a license is determined to be distinct from the other promises identified in the arrangement, the Company recognizes revenue from upfront payments allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

For licenses that are bundled with other promises, the Company utilizes 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.

Collaboration agreements may include research licenses and research and development services to be performed by the Company.

For research licenses that are bundled with other promises, the Company utilizes 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.

The Company evaluates the measure of proportional performance each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

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Recently Adopted Accounting Pronouncements

There have been no recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the three months ended February 28, 2023 that are of significance or potential significance to the Company.

There have been no recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the six months ended May 31, 2023 that are of significance or potential significance to the Company.

Collaboration Agreements

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The collaboration excludes the Company’s current internal protein degradation programs for which the Company retains all rights, and also excludes the Company’s future internal programs, provided that the Company has distinguished future programs as excluded from the scope of the collaboration.

In March 2023, Gilead exercised the option to exclusively license one target (Gilead License Option Exercise), the first development candidate resulting from the Gilead Agreement.

Pursuant to the Gilead Agreement, the Company received an option exercise payment of $ 20.0 million in April 2023 for the Gilead License Option Exercise.

In March 2023, Gilead exercised the option, which did not represent a material right at contract inception, since it was not offered for free or at a discount, to exclusively license one target (Gilead License Option Exercise), the first development candidate resulting from the Gilead Agreement.

Pursuant to the Gilead Agreement, the Company received a license option exercise payment of $ 20.0 million in April 2023 for the Gilead License Option Exercise.

The license to the functional intellectual property and all goods and services related to the Gilead License Option Exercise were transferred during the second quarter of fiscal year 2023.

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

In addition, from the signing of the Gilead Agreement to February 28, 2023, the Company has received payments of $ 36.0 million for research milestones and additional payments.

Additionally, the Company received a payment of $ 5.0 million in April 2023 related to a research milestone recognized in February 2023.

As of February 28, 2023, the Company is 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, from the signing of the Gilead Agreement to May 31, 2023, the Company has received payments of $ 41.0 million for research milestones and additional payments.

As of May 31, 2023, the Company is 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, the Company is 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 the Company exercises its option to co-develop and co-promote, for which the Company and Gilead share profits and losses evenly.

1 unchanged sentence

The Company determined that the transaction price at the inception of the Gilead Agreement consisted of the upfront payment of $ 45.0 million and $ 3.0 million in additional fees.

Upon the achievement of research milestones and additional fees related to target reservations, $ 41.0 million in variable consideration, which includes $ 6.5 million from achievements during the three months ended February 28, 2023, was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased.

Upon the achievement of research milestones and additional fees related to target reservations, $ 41.0 million in variable consideration was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased.

The transaction price is recognized as collaboration revenue using the cost-based input method over the estimated contract term of five years .

For the three months ended February 28, 2023, the Company recognized collaboration revenue related to the Gilead Agreement of $ 7.4 million, of which $ 2.8 million was included in deferred revenue as of November 30, 2022, and $ 4.1 million was related to activities satisfied in previous periods.

For the three months ended February 28, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 6.2 million of which $ 3.3 million was included in deferred revenue as of November 30, 2021, and $ 2.5 million was related to activities satisfied in previous periods.

As of February 28, 2023, deferred revenue related to the Gilead Agreement was $ 21.5 million, of which $ 16.3 million was current and includes $ 5.0 million in contract assets representing the unbilled amount related to the research milestone recognized in February 2023.

As of November 30, 2022, deferred revenue related to the Gilead Agreement was $ 27.4 million, of which $ 18.2 million was current.

For the three and six months ended May 31, 2023, the Company recognized collaboration revenue related to the Gilead Agreement of $ 5.7 million and $ 13.1 million, respectively, of which $ 5.7 million and $ 8.5 million, respectively, was included in deferred revenue as of November 30, 2022, and zero and $ 4.1 million, respectively, was related to activities satisfied in previous periods.

The Company also recognized $ 20.0 million in license revenue received pursuant to the Gilead License Option Exercise during the three and six months ended May 31, 2023.

For the three and six months ended May 31, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 6.1 million and $ 12.3 million, respectively, of which $ 5.3 million and $ 8.6 million, respectively, was included in deferred revenue as of November 30, 2021, and $ 0.6 million and $ 3.1 million, respectively, was related to activities satisfied in previous periods.

As of May 31, 2023, deferred revenue related to the Gilead Agreement was $ 20.8 million, of which $ 20.4 million was included as deferred revenue, current.

As of November 30, 2022, deferred revenue related to the Gilead Agreement was $ 27.4 million, of which $ 18.2 million was included as deferred revenue, current.

In December 2019, the Company 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 the Company’s DELigase platform to identify small molecules designed to induce degradation of three specified initial drug targets.

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

In addition, from the signing of the Sanofi Agreement to February 28, 2023, the Company has received payments of $ 5.0 million for research milestones.

As of February 28, 2023, the Company is eligible to receive up to approximately $ 2.5 billion in total additional 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 the Company exercises its option to co-develop and co-promote, for which the parties share profits and losses evenly.

In addition, from the signing of the Sanofi Agreement to May 31, 2023, the Company has received payments of $ 5.0 million for research milestones.

As of May 31, 2023, the Company is eligible to receive up to approximately $ 2.5 billion in total additional 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 the Company exercises its option to co-develop and co-promote, for which the parties share profits and losses evenly.

The Company re-evaluates the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

At the inception of the Sanofi Agreement, the Company determined that the transaction price consisted of the upfront payment of $ 55.0 million for three initial drug targets and $ 22.0 million for two additional targets.

Subsequently, upon the achievement of research milestones, $ 5.0 million in variable consideration, which includes $ 1.0 million from an achievement during the three months ended February 28, 2023, was added to the transaction price and a cumulative effect was recorded as revenue in the period the transaction price increased.

Subsequently, upon the achievement of research milestones, $ 5.0 million in variable consideration was added to the transaction price and a cumulative effect was recorded as revenue in the period the transaction price increased.

Revenue is recognized using the cost-based input method over the research term of 4.25 years, the revised research period that was agreed to in January 2021 in the First Sanofi Amendment for certain targets, and 5.25 years, the revised research period due to the target substitutions in July 2022, for certain other targets.

For the three months ended February 28, 2023, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 5.3 million, of which $ 4.9 million was included in deferred revenue as of November 30, 2022, and $ 0.4 million was related to activities satisfied in previous periods.

For the three months ended February 28, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 3.4 million, of which $ 2.9 million was included in deferred revenue as of November 30, 2021 and $ 0.4 million was related to activities satisfied in previous periods.

As of February 28, 2023, deferred revenue related to the Sanofi Agreement was $ 42.9 million, of which $ 22.0 million was current.

As of November 30, 2022, deferred revenue related to the Sanofi Agreement was $ 46.2 million, of which $ 19.4 million was current and includes $ 1.0 million in contract assets representing the unbilled amount related to the research milestone recognized in November 2022.

For the three and six months ended May 31, 2023, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 5.0 million and $ 10.3 million, respectively, of which $ 5.0 million and $ 9.8 million, respectively, was included in deferred revenue as of November 30, 2022, and zero and $ 0.4 million, respectively, was related to activities satisfied in previous periods.

For the three and six months ended May 31, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 5.3 million and $ 8.7 million, respectively, of which $ 5.3 million and $ 8.2 million, respectively, was included in deferred revenue as of November 30, 2021 and zero and $ 0.5 million, respectively, was related to activities satisfied in previous periods.

As of May 31, 2023, deferred revenue related to the Sanofi Agreement was $ 37.9 million, of which $ 23.7 million was included as deferred revenue, current.

As of November 30, 2022, deferred revenue related to the Sanofi Agreement was $ 46.2 million, of which $ 19.4 million was included as deferred revenue, current, and includes $ 1.0 million in contract assets representing the unbilled amount related to the research milestone recognized in November 2022.

Condensed Consolidated Balance Sheet Components

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The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and considers factors specific to the asset or liability.

The following tables present the Company’s investments, which consist of cash equivalents and available-for-sale marketable securities, that are measured at fair value on a recurring basis as of February 28, 2023 and November 30, 2022 (in thousands):

February 28, 2023 Level Amortized

May 31, 2023 Level Amortized

cost Unrealized

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Corporate commercial paper Level 2 22,888 — — 22,888

Foreign government securities Level 2 7,007 — ( 13 ) 6,994

Long-term marketable securities:

Corporate debt securities Level 2 3,491 — ( 182 ) 3,309

government agency securities Level 2 27,974 — ( 511 ) 27,463

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Included in marketable securities, non-current $ 65,572 $ 1 $ ( 1,694 ) $ 63,879

The accrued interest receivable related to the Company’s marketable securities was $ 1.2 million and $ 1.1 million as of February 28, 2023 and November 30, 2022, respectively, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

The accrued interest receivable related to the Company’s marketable securities was $ 1.0 million and $ 1.1 million as of May 31, 2023 and November 30, 2022, respectively, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

Long-term marketable securities held by the Company generally mature within two years from the balance sheet date.

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These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

There were no transfers of financial instruments between valuation levels during the three months ended February 28, 2023 and 2022.

As of February 28, 2023 and November 30, 2022, the unrealized losses for available-for-sale securities were non-credit related, and the Company does not intend to sell the securities that were in an unrealized loss position, nor will it be required to sell those securities before recovery of their amortized cost basis, which may be maturity.

As of February 28, 2023 and November 30, 2022, no allowance for credit losses for the Company’s marketable securities was recorded.

During the three months ended February 28, 2023 and 2022, the Company did not recognize any impairment losses related to marketable securities.

There were no transfers of financial instruments between valuation levels during the three and six months ended May 31, 2023 and 2022.

As of May 31, 2023 and November 30, 2022, the unrealized losses for available-for-sale securities were non-credit related, and the Company does not intend to sell the securities that were in an unrealized loss position, nor will it be required to sell those securities before recovery of their amortized cost basis, which may be maturity.

As of May 31, 2023 and November 30, 2022, no allowance for credit losses for the Company’s marketable securities was recorded.

During the three and six months ended May 31, 2023 and 2022, the Company did not recognize any impairment losses related to marketable securities.

Commitments and Contingencies

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Legal fees and other costs associated with such actions are expensed as incurred.

As of February 28, 2023, the Company was not a party to any material legal proceedings.

As of May 31, 2023, the Company was not a party to any material legal proceedings.

Indemnifications

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The Company will also be responsible for the payment of the tenant’s proportionate share of the operating expenses as defined in the lease agreement.

Operating lease expenses, excluding additional rent charges for utilities, maintenance and real estate taxes, were $ 1.5 million and $ 1.4 million for the three months ended February 28, 2023 and 2022, respectively.

Operating lease expenses, excluding additional rent charges for utilities, maintenance and real estate taxes, were $ 1.5 million for each of the three months ended May 31, 2023 and 2022, and $ 3.0 million and $ 2.8 million for the six months ended May 31, 2023 and 2022, respectively.

Short-term lease expense was not material for all periods presented.

Other information related to leases were as follows (in thousands):

Three Months Ended February 28,

Six Months Ended May 31,

Cash paid for amounts included in the measurement of lease liabilities:

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Right-of-use assets recognized in exchange for lease obligations $ — $ 4,804

The Company’s Restated Certificate of Incorporation authorizes the Company to issue up to 500,000,000 shares of common stock, $ 0.001 par value per share, as of February 28, 2023 and November 30, 2022.

The Company’s Restated Certificate of Incorporation authorizes the Company to issue up to 500,000,000 shares of common stock, $ 0.001 par value per share, as of May 31, 2023 and November 30, 2022.

Holders of common stock are entitled to dividends when and if declared by the Company’s board of directors, subject to the prior rights of the holders of shares of preferred stock.

The holder of each share of common stock is entitled to one vote.

As of February 28, 2023, no dividends have been declared.

As of May 31, 2023, no dividends have been declared.

In July 2022, the Company issued pre-funded warrants to purchase an aggregate of 6,814,920 shares of the Company’s common stock in RDOs at a price of $ 13.939 per pre-funded warrant.

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

As of February 28, 2023, all of the pre-funded warrants remained available for exercise.

As of May 31, 2023, there were pre-funded warrants to purchase an aggregate of 6,666,423 shares of the Company's common stock that remained available for exercise.

In June 2023, pre-funded warrants to purchase a total of 568,863 shares of the Company’s common stock were exercised.

As of June 30, 2023, pre-funded warrants to purchase a total of 6,097,560 shares of the Company’s common stock remained available for exercise.

The pre-funded warrants were classified as a component of permanent equity in the Company's condensed consolidated balance sheet as they are freestanding financial instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares and permit the holders to receive a fixed number of shares of common stock upon exercise.

All of the shares underlying the pre-funded warrants have been included in the weighted-average number of shares of common stock used to calculate net loss per share attributable to common stockholders because the shares may be issued for little or no consideration, are fully vested and are exercisable after the original issuance date of the pre-funded warrants.

Common stock reserved for future issuance, on an as-if converted basis, as of February 28, 2023 and November 30, 2022, consists of the following:

Common stock reserved for future issuance, on an as-if converted basis, as of May 31, 2023 and November 30, 2022, consists of the following:

2023 November 30,

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Options forfeited ( 1,036,542 ) 20.98

Balances as of February 28, 2023 9,535,402 $ 18.18

Balances as of May 31, 2023 8,949,950 $ 17.58

RSU activity under the Stock Plans is set forth below:

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RSUs forfeited ( 123,453 ) 14.29

Balances as of February 28, 2023 1,595,025 $ 14.27

Balances as of May 31, 2023 1,489,429 $ 14.13

Employee Stock Purchase Plan

Under the Company’s 2020 Employee Stock Purchase Plan (the ESPP), eligible employees are entitled to purchase shares of common stock with accumulated payroll deductions.

During the three months ended February 28, 2023, the Company issued 165,215 shares of common stock pursuant to the ESPP at a weighted-average price of $ 8.80 per share.

During the six months ended May 31, 2023, the Company issued 165,215 shares of common stock pursuant to the ESPP at a weighted-average price of $ 8.80 per share.

Stock-Based Compensation

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Three Months Ended,

May 31, Six Months Ended

2023 2022 2023 2022

Research and development $ 4,859 $ 3,996 $ 10,013 $ 7,537

1 unchanged sentence

Total stock-based compensation $ 8,723 $ 6,775 $ 17,204 $ 12,846

As of February 28, 2023, the total compensation cost related to stock-based awards not yet recognized was $ 90.2 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.7 years.

As of May 31, 2023, the total compensation cost related to stock-based awards not yet recognized was $ 70.9 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.4 years.

Defined Contribution Plan

2 unchanged sentences

Employees may contribute a percentage of their annual compensation to the plan, subject to statutory limitations.

The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 0.6 million and $ 0.5 million during the three months ended February 28, 2023 and 2022, respectively.

For the three months ended February 28, 2023 and 2022, the Company did not record any current income tax expense or provision.

The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 0.2 million during each of the three months ended May 31, 2023 and 2022, and $ 0.8 million and $ 0.7 million during the six months ended May 31, 2023 and 2022, respectively.

For the three and six months ended May 31, 2023 and 2022, the Company did not record any current income tax expense or provision.

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Realization of the deferred tax assets is dependent upon future taxable income, the amount, if any, and timing of which are uncertain.

The Company has generated losses since inception and has established a valuation allowance to offset deferred tax assets as of February 28, 2023 and 2022 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

The Company has generated losses since inception and has established a valuation allowance to offset deferred tax assets as of May 31, 2023 and 2022 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

Under an Organization for Economic Co-operation and Development Inclusive Framework, more than 140 countries agreed to enact a two-pillar solution to address the challenges arising from the digitalization of the world economy (Pillar Two).

Pillar Two introduces a global minimum Effective Tax Rate (ETR) via a system where multinational groups with consolidated revenue over €750M are subject to a minimum ETR of 15% on income arising in low-tax jurisdictions.

Rules under Pillar Two are expected to be enacted beginning January 1, 2024.

The Company will continue to monitor the impact of Pillar Two;

however, the Company has minimal international activity and is not expecting Pillar Two to have an impact on its condensed consolidated financial statements.

In January 2019, the California Franchise Tax Board (FTB) initiated an examination of the Company’s California tax return for the tax years ending in 2015, 2016, 2017 and 2018.

11 unchanged sentences

Three Months Ended

May 31, Six Months Ended

2023 2022 2023 2022

Net loss $ ( 24,277 ) $ ( 45,401 ) $ ( 65,010 ) $ ( 87,934 )

2 unchanged sentences

Net loss per share, basic and diluted $ ( 0.45 ) $ ( 1.01 ) $ ( 1.20 ) $ ( 1.96 )

(1) The shares underlying the pre-funded warrants to purchase an aggregate of 6,814,920 shares of the Company’s common stock have been included in the calculation of the weighted-average number of shares outstanding, basic and diluted, for the three months ended February 28, 2023.

(1) The shares underlying the pre-funded warrants to purchase shares of the Company’s common stock have been included in the calculation of the weighted-average number of shares outstanding, basic and diluted, for the three and six months ended May 31, 2023.

The following potentially dilutive securities were excluded from the computation of the diluted net loss per share of common stock for the periods presented because their effect would have been anti-dilutive:

6 unchanged sentences

The Company’s Chief Financial Officer is a trustee for the multiple employer welfare association that facilitates the acquisition and administration of the Company’s healthcare plans.

Expenses related to the healthcare plan premiums were $ 1.1 million and $ 0.9 million for the three months ended February 28, 2023 and 2022, respectively.

As of February 28, 2023 and November 30, 2022, the amount recorded in accounts payable and accrued expenses and other current liabilities in connection with this healthcare plan provider was not material.

Expenses related to the healthcare plan premiums were $ 1.1 million and $ 0.9 million for the three months ended May 31, 2023 and 2022, respectively, and $ 2.3 million and $ 1.9 million for the six months ended May 31, 2023 and 2022, respectively.

As of May 31, 2023 and November 30, 2022, the amount recorded in accounts payable and accrued expenses and other current liabilities in connection with this healthcare plan provider was not material.

Subsequent Events

Refer to Note 3 for the Gilead License Option Exercise.

Refer to Note 7 for more information on the exercise of pre-funded warrants.

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-Q

Item 1. Financial Statements