What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-07-13 compared with 2023-04-13 · 74 added, 57 removed, 196 unchanged (40% of the section changed)

3 unchanged sentences

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 II, Item 1A of this Quarterly Report on Form 10‑Q.

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.

We are 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 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.

7 unchanged sentences

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 have initiated Phase 1b expansion cohorts for patients with relapsed chronic lymphocytic leukemia, diffuse large B-cell lymphoma and mantle cell lymphoma, 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.

1 unchanged sentence

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 currently enrolling patients in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study of NX-1607 in patients in a range of oncology indications.

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.

Following a review of our portfolio we deprioritized the development of DeTIL-0255.

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

Preclinical Programs

3 unchanged sentences

This bivalent degrader, designated GS-6791, is the first development candidate resulting from the Gilead Agreement.

Pursuant to the Gilead Agreement, we will receive an option exercise payment of $20.0 million and potentially could receive up to an additional $425.0 million in clinical, regulatory, and commercial milestone payments, as well as up to low double-digit tiered royalties on product net sales.

Pursuant to the Gilead Agreement, we received a license option exercise payment of $20.0 million and potentially could receive up to an additional $425.0 million in clinical, regulatory, and commercial milestone payments, as well as up to low double-digit tiered royalties on product net sales.

Financial Overview

3 unchanged sentences

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

During the three months ended February 28, 2023 and 2022, we incurred net losses of $40.7 million and $42.5 million, respectively.

As of February 28, 2023, we had an accumulated deficit of $442.0 million.

During the six months ended May 31, 2023 and 2022, we incurred net losses of $65.0 million and $87.9 million, respectively.

As of May 31, 2023, we had an accumulated deficit of $466.3 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.

11 unchanged sentences

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 February 28, 2023, we had $325.6 million in cash, cash equivalents and marketable securities.

As of May 31, 2023, we had $308.6 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.

3 unchanged sentences

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 macroeconomic events and conditions, including inflation, increasing interest rates, increasing financial market volatility and uncertainty, instability in the global banking system, 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 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.

We are 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 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.

For example, the coronavirus (COVID-19) pandemic impacted worldwide economic activity and posed the risk that we or our employees, contractors, suppliers and other partners would be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that were requested or mandated by governmental authorities.

While the impact of the COVID‑19 pandemic on our operations was minimal, the extent to which a future public health 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.

In addition, we are 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).

6 unchanged sentences

Collaborations and License Agreements

Sanofi Collaboration and License Agreement

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.

9 unchanged sentences

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.

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

As of February 28, 2023, 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 $5.3 million and $3.4 million during the three months ended February 28, 2023 and 2022, respectively.

As of February 28, 2023 and November 30, 2022, there was $42.9 million and $46.2 million, respectively, of deferred revenue related to payments received by us under the Sanofi Agreement.

Gilead Collaboration, Option and License Agreement

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

As of May 31, 2023, 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 $5.0 million and $10.3 million during the three and six months ended May 31, 2023, and $5.3 million and $8.7 million during the three and six months ended May 31, 2022, respectively.

As of May 31, 2023 and November 30, 2022, there was $37.9 million and $46.2 million, respectively, of deferred revenue related to payments received by us under the Sanofi Agreement.

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.

5 unchanged sentences

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

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

Upon signing the Gilead Agreement, Gilead paid us 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, we received payments of $36.0 million for research milestones and additional payments.

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

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

As of May 31, 2023, 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 $7.4 million and $6.2 million during the three months ended February 28, 2023 and 2022, respectively.

As of February 28, 2023 and November 30, 2022, there was $21.5 million and $27.4 million, respectively, of deferred revenue related to payments received by us under the Gilead Agreement.

We recognized collaboration revenue from the Gilead Agreement of $5.7 million and $13.1 million during the three and six months ended May 31, 2023, and $6.1 million and $12.3 million during the three and six months ended May 31, 2022, respectively.

We 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.

As of May 31, 2023 and November 30, 2022, there was $20.8 million and $27.4 million, respectively, of deferred revenue related to payments received by us under the Gilead Agreement.

Components of Results of Operations

9 unchanged sentences

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.

License Revenue

Our license revenue consists of a payment received from the Gilead License Option Exercise.

Research and Development Expenses

35 unchanged sentences

Our critical accounting policies and more significant areas involving management’s judgments and estimates used in preparation of our financial statements are discussed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Form 10-K.

There have been no significant changes to these policies for the three months ended February 28, 2023.

Other than the updated policy on revenue recognition disclosed in Note 2, “Summary of Significant Accounting Policies—Revenue Recognition,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no significant changes to these policies for the three and six months ended May 31, 2023.

Recent Accounting Pronouncements

See Note 2, “Summary of significant accounting policies—Recent accounting pronouncements” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.

See Note 2, “Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.

Results of Operations

Comparison of the three months ended February 28, 2023 and 2022

Our results of operations for the three months ended February 28, 2023 and 2022 are summarized as follows (in thousands):

Comparison of the three and six months ended May 31, 2023 and 2022

Our results of operations for the three and six months ended May 31, 2023 and 2022 are summarized as follows (in thousands):

Three Months Ended

February 28, Change

May 31, Change Six Months Ended

May 31, Change

2023 2022 2023 2022

Collaboration revenue $ 10,676 $ 11,432 $ (756) $ 23,361 $ 21,053 $ 2,308

License revenue 20,000 — 20,000 20,000 — 20,000

Total revenue 30,676 11,432 19,244 43,361 21,053 22,308

Operating expenses:

6 unchanged sentences

Collaboration Revenue

Our collaboration revenue for the three months ended February 28, 2023 and 2022 is summarized as follows (in thousands):

Our collaboration revenue for the three and six months ended May 31, 2023 and 2022 is summarized as follows (in thousands):

Three Months Ended

February 28, Change

May 31, Change Six Months Ended

May 31, Change

2023 2022 2023 2022

Gilead $ 5,708 $ 6,124 $ (416) $ 13,066 $ 12,307 $ 759

1 unchanged sentence

Total collaboration revenue $ 10,676 $ 11,432 $ (756) $ 23,361 $ 21,053 $ 2,308

Our collaboration revenue increased by $3.1 million during the three months ended February 28, 2023 compared to the three months ended February 28, 2022 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 increase was also due to additions to the transaction price from the achievement of research milestones totaling $6.5 million from our collaboration with Gilead and $1.0 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.

Our collaboration revenue decreased by $0.8 million during the three months ended May 31, 2023 compared to the three months ended May 31, 2022 primarily due to increased forecasted expenditure and less milestone payments achieved.

Our collaboration revenue increased by $2.3 million during the six months ended May 31, 2023 compared to the six months ended May 31, 2022, 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.

License Revenue

Our license revenue was $20.0 million for the three and six months ended May 31, 2023 and is related to the Gilead License Option Exercise.

There was no license revenue for the three and six months ended May 31, 2022.

Research and Development Expenses

Our research and development expenses for the three months ended February 28, 2023 and 2022 are summarized as follows (in thousands):

Our research and development expenses for the three and six months ended May 31, 2023 and 2022 are summarized as follows (in thousands):

Three Months Ended

February 28, Change

May 31, Change Six Months Ended

May 31, Change

2023 2022 2023 2022

Compensation and related personnel costs $ 17,626 $ 15,887 $ 1,739 $ 37,800 $ 31,694 $ 6,106

6 unchanged sentences

Total research and development expenses $ 45,763 $ 47,493 $ (1,730) $ 91,579 $ 90,630 $ 949

Our research and development expenses increased by $2.7 million during the three months ended February 28, 2023 compared to the three months ended February 28, 2022.

There was an increase in compensation and related personnel costs and in non-cash stock-based compensation expense 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).

There was also an increase in clinical costs as we continue our clinical trial programs and ongoing patient enrollment, offset by a decrease in research related costs as we conclude certain studies and sponsored research agreements and a decrease in contract manufacturing as we stabilize the supply needed for our clinical trials.

There was also an increase in facility and other costs primarily driven by additional investments in information technology and depreciation from equipment placed into service during the prior fiscal year.

Our research and development expenses decreased by $1.7 million during the three months ended May 31, 2023 compared to the three months ended May 31, 2022.

There was a decrease in research related costs, as we concluded certain studies and sponsored research agreements and a decrease in contract manufacturing as we stabilize the supply needed for our clinical trials, offset by an increase in compensation and related personnel costs and in non-cash stock-based compensation expense that were primarily attributable to higher headcount and the issuance of restricted stock units (RSUs) and incentive stock options.

There was also an increase in facility and other costs primarily driven by additional investments in information technology and expenses related to our leases of office and laboratory space.

Our research and development expenses increased by $0.9 million during the six months ended May 31, 2023 compared to the six months ended May 31, 2022.

There was a increase in compensation and related personnel costs and in non-cash stock-based compensation expense that were primarily attributable to higher headcount and issuance of RSUs and incentive stock options.

There was also an increase in clinical costs as we continued our clinical trial programs and ongoing patient enrollment, offset by a decrease in research related costs as we concluded certain studies and sponsored research agreements and a decrease in contract manufacturing as we stabilized the supply needed for our clinical trials.

There was also an increase in facility and other costs primarily driven by additional investments in information technology, depreciation from equipment placed into service during the prior fiscal year, and expenses related to our leases of office and laboratory space.

General and Administrative Expenses

Our general and administrative expenses increased by $0.6 million during the three months ended February 28, 2023 compared to the three months ended February 28, 2022.

There was an increase in compensation related expenses and non-cash stock-based compensation expense primarily driven by higher headcount and the issuance of RSUs and incentive stock options, offset by a decrease in outside consulting and professional service costs.

Our general and administrative expenses increased by $2.0 million during the three months ended May 31, 2023 compared to the three months ended May 31, 2022.

There was an increase in non-cash stock-based compensation expense resulting from the increased issuance of RSUs and incentive stock options and an increase in outside consulting and professional service costs.

Our general and administrative expenses increased by $2.6 million during the six months ended May 31, 2023 compared to the six months ended May 31, 2022.

There was an increase in compensation related expenses and non-cash stock-based compensation expense primarily driven by higher headcount and the issuance of RSUs and incentive stock options.

Liquidity and Capital Resources

7 unchanged sentences

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

As of May 31, 2023, 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.

3 unchanged sentences

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

As of May 31, 2023, a total of 6,666,423 pre-funded warrants remained available for exercise.

In June 2023, pre-funded warrants to purchase a total of 568,863 shares of our common stock were exercised and as of June 30, 2023, pre-funded warrants to purchase a total of 6,097,560 shares of our common stock remained available for exercise.

Funding Requirements

As of February 28, 2023, our operations have primarily been funded through the net proceeds from equity offerings of $650.5 million and proceeds from collaborations of $316.0 million.

As of May 31, 2023, our operations have primarily been funded through the net proceeds from equity offerings of $650.5 million and proceeds from collaboration agreements of $341.0 million.

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

As of February 28, 2023, we had $325.6 million in cash, cash equivalents and marketable securities.

As of May 31, 2023, we had $308.6 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 and NX‑5948 and the expansion of our intellectual property portfolio and infrastructure, for at least the next 12 months.

17 unchanged sentences

Our contractual obligations mostly consist of our operating lease obligations for facilities in San Francisco, California and The Woodlands, Texas.

Our total operating lease commitments as of February 28, 2023, were approximately $45.3 million, of which $7.5 million is expected to be paid within the next twelve months.

Our total operating lease commitments as of May 31, 2023, were approximately $43.5 million, of which $7.7 million is expected to be paid within the next twelve months.

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.

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 three months ended February 28, 2023 and 2022 are summarized as follows (in thousands):

Three Months Ended

Our cash flows for the six months ended May 31, 2023 and 2022 are summarized as follows (in thousands):

Six Months Ended

Cash used in operating activities $ (66,921) $ (75,544)

3 unchanged sentences

Operating activities

Net cash used in operating activities was $48.5 million for the three months ended February 28, 2023 and consisted of a net loss of $40.7 million and an increase in net assets of $18.6 million, offset by non-cash adjustments of $10.9 million.

The increase in net assets consisted of a decrease in deferred revenue of $9.2 million as we increased effort in our programs and recognized revenue, a decrease in accrued expenses and other liabilities of $6.9 million primarily related to the payment of annual incentive compensation, an increase in prepaid expenses and other assets of $1.6 million primarily related to reimbursement receivables for landlord-owned improvements and a decrease in operating lease liabilities of $1.3 million due to lease payments made during the period.

Net cash used in operating activities was $66.9 million for the six months ended May 31, 2023 and consisted of a net loss of $65.0 million and an increase in net assets of $23.9 million, offset by non-cash adjustments of $22.0 million.

The increase in net assets consisted of a decrease in deferred revenue of $14.9 million as we increased effort in our programs and recognized revenue, a decrease in accrued expenses and other liabilities of $4.6 million primarily related to the payment of annual incentive compensation in the first quarter of fiscal year 2023, a decrease in operating lease liabilities of $3.1 million due to lease payments made during the period and a decrease in accounts payable of $1.8 million from payments to vendors.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $17.2 million, depreciation and amortization expenses of $3.6 million and amortization of operating lease right-of-use assets of $2.9 million.

Net cash used in operating activities was $42.6 million for the three months ended February 28, 2022 and consisted of a net loss of $42.5 million and an increase in net assets of $9.0 million, offset by non-cash adjustments of $8.9 million.

The increase in net assets consisted primarily of a decrease in deferred revenue of $3.6 million, which included an increase in contract assets of $2.0 million related to a milestone recognized pursuant to the Sanofi Agreement, a decrease in accrued expenses and other liabilities of $3.3 million primarily related to the payment of annual incentive compensation and an increase in prepaid expenses and other assets of $1.5 million primarily related to increased prepaid clinical and contract manufacturing costs.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $6.1 million and amortization of operating lease right-of-use assets of $1.3 million.

Net cash used in operating activities was $75.5 million for the six months ended May 31, 2022 and consisted of a net loss of $87.9 million and an increase in net assets of $6.5 million, offset by non-cash adjustments of $18.9 million.

The increase in net assets consisted of a decrease in deferred revenue of $13.1 million as we increased effort in our programs and recognized revenue, a decrease in operating lease liabilities of $2.5 million and an increase in prepaid expenses and other assets of $1.5 million primarily related to increased prepaid clinical and contract manufacturing costs and software license costs, offset by a decrease in accounts receivable of $6.0 million related to payments received under the Gilead Agreement, an increase in accrued expenses and other liabilities of $2.8 million primarily related to equipment purchases and the accrual of incentive compensation and an increase in accounts payable of $1.7 million from payments to vendors.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $12.8 million, amortization of operating lease right-of-use assets of $2.6 million and depreciation and amortization expenses of $2.3 million.

Investing activities

Net cash provided by investing activities was $16.1 million for the three months ended February 28, 2023 and consisted of the maturity of marketable securities of $41.0 million, offset by the purchase of marketable securities of $22.6 million and the purchase of property and equipment of $2.3 million.

Net cash provided by investing activities was $40.0 million for the three months ended February 28, 2022 and consisted of the maturity of investments of $58.7 million, offset by the purchase of investments of $15.2 million and the purchase of property and equipment of $3.5 million.

Net cash provided by investing activities was $59.9 million for the six months ended May 31, 2023 and consisted of the maturity of marketable securities of $146.6 million, offset by the purchase of marketable securities of $83.4 million and the purchase of property and equipment of $3.4 million.

Net cash provided by investing activities was $35.3 million for the six months ended May 31, 2022 and consisted of the maturity of investments of $121.6 million, offset by the purchase of investments of $80.0 million and the purchase of property and equipment of $6.3 million.

Financing activities

Net cash provided by financing activities was $1.5 million for the three months ended February 28, 2023 and consisted primarily of proceeds from the issuance of common stock under our Employee Stock Purchase Plan (ESPP).

Net cash provided by financing activities was $1.5 million for the three months ended February 28, 2022 and consisted primarily of proceeds from the issuance of common stock under our ESPP.

Net cash provided by financing activities was $1.5 million for the six months ended May 31, 2023 and consisted primarily of proceeds from the issuance of common stock under our Employee Stock Purchase Plan (ESPP).

Net cash provided by financing activities was $1.9 million for the six months ended May 31, 2022 and consisted primarily of proceeds from the issuance of common stock under our ESPP.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

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 2. Management’s Discussion and Analysis