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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-09 · 195 added, 215 removed, 668 unchanged (38% of the section changed)

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INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Fir m (PCAOB ID 238 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets

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Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, the Company will require substantial additional funding to support its continuing operations and pursue its long-term business plan.

As discussed in Note 1 to the consolidated financial statements, the Company will need substantial additional funding to support its continuing operations and pursue its long-term business plan.

Management’s plans in regard to this matter are described in Note 1.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimated Costs of Internal Full-Time Employees (FTEs)

As described in Note 3 to the consolidated financial statements, the Company’s consolidated revenue was $38.6 million for the year ended November 30, 2022 and was generated from the Company’s collaboration agreements.

During the contract term, management uses a cost-based input method to recognize revenue based on the actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation under the contract.

Costs consist primarily of internal FTE and third-party contract costs related to the collaboration agreements.

Revenue Recognition - Estimated Costs of Internal Full-Time Employees (FTEs) - Sanofi

As described in Note 3 to the consolidated financial statements, the Company’s consolidated revenue was $76.9 million for the year ended November 30, 2023 of which there was revenue of $25.4 million generated from the Company’s collaboration agreement with Sanofi.

During the contract term, management uses a cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligation to Sanofi, to recognize revenue based on the actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation under the contract.

Costs consist primarily of internal FTE and third-party contract costs related to the Sanofi agreement.

The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation is recorded in the period in which changes are identified and amounts can be reasonably estimated.

Total estimated costs are primarily driven by the number of estimated FTEs, which requires significant management judgment.

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The principal considerations for our determination that performing procedures relating to revenue recognition - estimated costs of internal FTEs is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in performing procedures relating to the estimated costs of internal FTEs due to the significant judgment by management when determining the estimate and (ii) the significant audit effort in evaluating the significant assumption related to the number of estimated FTEs.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, evaluating and testing management’s process for determining the estimated costs of internal FTEs, which included evaluating the reasonableness of the significant assumption related to the number of estimated FTEs, by (i) performing a comparison of management’s estimated costs of internal FTEs to the actual internal FTE costs;

(ii) testing the completeness and accuracy of the data used by management in the estimate;

(iii) evaluating management’s timely identification of changes in estimated costs of internal FTEs;

(iii) evaluating management’s timely identification of changes in estimated costs of internal FTEs driven by the number of estimated FTEs;

and (iv) evaluating whether the estimate and assumption were consistent with evidence obtained in other areas of the audit.

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We have served as the Company’s auditor since 2014.

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NURIX THERAPEUTICS, INC.

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Marketable securities, current 233,281 244,667

Accounts receivable — 6,000

Income tax receivable — 204

Prepaid expenses and other current assets 7,595 9,308

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

0 shares issued and outstanding as of November 30, 2022 and 2021

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

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

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

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NURIX THERAPEUTICS, INC.

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Collaboration revenue $ 56,987 $ 38,627

License revenue 20,000 —

Total revenue 76,987 38,627

Operating expenses:

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Interest and other income, net 11,115 3,507

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

Provision for income taxes — 131

Net loss $ ( 143,948 ) $ ( 180,360 )

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

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NURIX THERAPEUTICS, INC.

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Other comprehensive loss, net of tax:

Unrealized loss on available-for-sale marketable securities ( 3,711 ) ( 695 )

Unrealized gain (loss) on available-for-sale marketable securities 3,664 ( 3,711 )

Total comprehensive loss $ ( 140,284 ) $ ( 184,071 )

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

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NURIX THERAPEUTICS, INC.

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Balance as of November 30, 2021 44,664,371 $ 45 $ 563,757 $ ( 608 ) $ ( 220,892 ) $ 342,302

Issuance of common stock in connection with equity offering, net of offering costs of $ 643

Issuance of pre-funded warrants, net of issuance costs of $ 234

— — 94,759 — — 94,759

Issuance of common stock in "at the market" financing, net of issuance costs of $ 672

2,000,000 2 19,326 — — 19,328

Exercise of stock options 325,596 — 1,078 — — 1,078

Repurchase of unvested early exercised stock options ( 971 ) — — — — —

Vesting of restricted stock units 46,028 — — — — —

Vesting of early exercised stock options — — 145 — — 145

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Balance as of November 30, 2022 47,172,299 47 709,220 ( 4,319 ) ( 401,252 ) 303,696

Issuance of pre-funded warrants, net of issuance costs of $ 234

— — 94,759 — — 94,759

Issuance of common stock in "at the market" financing, net of issuance costs of $ 672

2,000,000 2 19,326 — — 19,328

Exercise of pre-funded warrants 717,360 2 — — — 2

Exercise of stock options 120,826 — 986 — — 986

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Stock-based compensation — — 33,747 — — 33,747

Unrealized loss on available-for-sale marketable securities — — — ( 3,711 ) — ( 3,711 )

Unrealized gain on available-for-sale marketable securities — — — 3,664 — 3,664

Net loss — — — — ( 143,948 ) ( 143,948 )

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

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NURIX THERAPEUTICS, INC.

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Stock-based compensation 33,673 28,131

Net amortization of premium on marketable securities 426 1,706

Net amortization (accretion) of premium (discount) on marketable securities ( 5,421 ) 426

Loss on disposal of property and equipment 556 9

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Accounts receivable — 6,000

Income tax receivable — 3,642

Prepaid expenses and other assets 2,139 ( 1,094 )

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Purchases of marketable securities ( 246,334 ) ( 239,366 )

Sales of marketable securities — 6,994

Maturities of marketable securities 323,036 278,808

Purchases of property and equipment ( 8,401 ) ( 12,244 )

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

Net cash provided by investing activities 68,301 27,198

Cash flows from financing activities

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Proceeds from issuances of common stock in equity financing, net of issuance costs — 19,400

Proceeds from exercise of stock options 1,078 1,666

Proceeds from exercise of stock options and pre-funded warrants 988 1,078

Proceeds from issuance under employee stock purchase plan 2,229 1,955

Repurchase of unvested early exercised stock options — ( 1 )

Net cash provided by financing activities 3,217 117,192

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Cash, cash equivalents and restricted cash at end of period $ 55,528 $ 65,375

Supplementary disclosures of cash flow information:

Cash paid for income taxes $ — $ 481

Supplemental disclosures of non-cash investing and financing activities:

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Capitalized stock-based compensation related to internal-use software development

Right-of-use assets recognized in exchange for lease obligations $ 23,995 $ 5,068

Vesting of early exercised stock options $ 117 $ 145

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

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NURIX THERAPEUTICS, INC.

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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 innovative small molecules and antibody therapies based on the modulation of cellular protein levels as a novel treatment approach for cancer, inflammatory conditions 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’s wholly owned, clinical stage pipeline includes targeted protein degraders of Bruton’s tyrosine kinase, a B-cell signaling protein, and inhibitors of Casitas B-lineage lymphoma proto-oncogene B, an E3 ligase that regulates activation of multiple immune cell types including T cells and NK cells.

The Company’s partnered drug discovery pipeline consists of ten programs under collaboration agreements with Sanofi S.A.

(Sanofi) and Gilead Sciences, Inc.

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

Initial Public Offering

On July 23, 2020, the Company’s registration statement on Form S-1 (File No.

333-239651) relating to its initial public offering (IPO) of common stock became effective.

The IPO closed on July 28, 2020, at which time the Company issued 11,000,000 shares of its 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 the Company’s common stock on July 31, 2020, and this transaction closed on August 4, 2020.

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

Follow-on Offering

In March 2021, the Company completed a follow-on offering and issued 5,175,000 shares of 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.

The Company’s partnered drug discovery pipeline consists of multiple programs under collaboration agreements with Gilead Sciences, Inc.

(Gilead), Sanofi S.A.

(Sanofi) and Seagen Inc.

(now a part of Pfizer Inc.

(Pfizer)), within which the Company retains certain options for co-development, co-commercialization and profit sharing in the United States for multiple drug candidates.

Equity Distribution Agreement

In August 2021, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC) which was amended in February 2023.

In August 2021, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission, which was amended in February 2023.

This shelf registration statement, which includes a base prospectus, allows the Company at any time to offer and sell up to $ 450.0 million of the Company’s 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.

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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.

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 November 30, 2023, the Company had $ 130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

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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.

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Liquidity and Management Plans

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As of November 30, 2023, the Company had cash, cash equivalents and short-term marketable securities of $ 287.9 million, working capital of $ 208.5 million and an accumulated deficit of $ 545.2 million.

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The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its drug candidates currently in development.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

Management believes that its cash, cash equivalents and short-term marketable securities are sufficient to continue operating activities for at least 12 months following the issuance date of these consolidated financial statements.

Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and payments the Company may receive under its collaboration agreements with Sanofi and Gilead or future collaboration agreements, if any.

Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and payments the Company may receive under its collaboration agreements with Sanofi, Gilead and Pfizer or future collaboration agreements, if any.

There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company if at all.

If additional capital is not available, failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

Management considered whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern and evaluated the funds necessary to maintain operations.

If the Company is unable to obtain additional funding, management will be required to implement plans that are within the Company’s control, which may include the delay or scaling back of certain research and development programs, to maintain liquidity and operations.

Based on the Company’s current forecast of future operating results and management’s plans to improve liquidity, the Company has concluded that its cash, cash equivalents and short-term marketable securities are sufficient to continue operating activities for at least 12 months following the issuance date of these consolidated financial statements.

Summary of Significant Accounting Policies

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All intercompany balances and transactions have been eliminated in consolidation.

Certain prior year amounts have been reclassified for consistency with the current year cash flow presentation.

The reclassification did not impact total cash flow from operating, investing or financing activities.

Use of Estimates

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On an ongoing basis, management evaluates its estimates, including those related to the useful lives of long-lived assets, the measurement of stock-based compensation, accruals for research and development activities, income taxes and revenue recognition.

The Company also makes certain commencement date estimates for its leases, including the incremental borrowing rate, the expected lease term and the fair value of the leased asset.

The Company bases its estimates on historical experience and on other relevant assumptions that are reasonable under the circumstances.

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During the periods presented, the Company has not experienced any losses on its deposits of cash, cash equivalents or marketable securities.

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Other Risks and Uncertainties

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 global business, political and macroeconomic events and conditions, including increasing financial market volatility and uncertainty, inflation, increasing interest rates, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, potential instability in the global banking system, cybersecurity events, the impact of war or military conflict, including regional conflicts around the world, and public health pandemics.

The extent to which business, political and 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 consolidated financial statements as of and for the year ended November 30, 2022;

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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Restricted Cash

The Company had $ 0.9 million and $ 0.3 million of restricted cash recorded as a non-current asset as of November 30, 2022 and 2021, respectively.

Restricted cash as of November 30, 2022 consisted of $ 0.1 million that serves as collateral for a business credit card account and $ 0.8 million for letters of credit required under operating leases.

Restricted cash as of November 30, 2021 consisted of $ 0.1 million that serves as collateral for a business credit card account and $ 0.2 million for a letter of credit required under an operating lease.

The Company had $ 0.9 million of restricted cash recorded as a non-current asset as of each of November 30, 2023 and 2022.

Restricted cash as of each of November 30, 2023 and 2022 consisted of $ 0.1 million that serves as collateral for a business credit card account and $ 0.8 million for letters of credit required under operating leases.

These balances are included within the cash, cash equivalents and restricted cash balance in the accompanying consolidated statements of cash flows.

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Refer to Note 5 for more information regarding the fair value of the Company’s marketable securities.

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Marketable Securities

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Treasuries, corporate debt securities, U.S.

government agency securities, corporate commercial paper, foreign government securities and municipal securities.

government agency securities, corporate commercial paper and foreign government securities.

The Company’s marketable securities are classified as available-for-sale and carried at estimated fair values and reported in cash equivalents, short-term marketable securities or long-term marketable securities.

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In circumstances when the decline in fair value is non-credit related, the difference is reported in accumulated other comprehensive income (loss), net of tax as a separate component of stockholders’ equity.

The Company excludes accrued interest from both the fair value and the amortized cost basis of marketable securities for the purposes of identifying and measuring an impairment.

The Company writes off accrued interest receivables that have become more than 90 days delinquent by reversing interest income.

To date, the Company has not written off any accrued interest receivables associated with its marketable securities.

Property and Equipment

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When assets are retired or disposed of, the cost together with related accumulated depreciation is removed from the Company’s accounts and the resulting gain or loss is reflected in the Company’s consolidated statements of operations.

The Company determines if an arrangement contains a lease at inception.

Lease right-of-use (ROU) assets, current lease liabilities and long-term lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term at the commencement date.

ROU assets also include any initial direct costs incurred and any lease payments made on or before the lease commencement date, less lease incentives received.

The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate.

The incremental borrowing rate, the ROU asset and the lease liability are reevaluated upon a lease modification.

The Company determines its incremental borrowing rate based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.

Lease terms may include options to extend or terminate the lease when the Company is reasonably certain that the option will be exercised.

The Company determines if an arrangement contains a lease and the classification of the lease at inception.

An arrangement contains a lease if there is an identified asset and if the Company controls the use of the identified asset throughout the period of use.The evaluation of whether the lease is an operating or a finance lease requires judgments in determining the fair value of the leased asset.

Lease right-of-use (ROU) assets and lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term at the commencement date.

ROU assets also include any initial direct costs incurred and any lease payments made on or before the lease commencement date, less any lease incentives received.

The Company uses its incremental borrowing rate, if an implicit rate is not readily available, and the information available at the date of lease commencement in determining its lease liabilities.

The Company’s incremental borrowing rate is based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment, and the determination of the rate requires the Company to make certain assumptions and judgements, including on its synthetic credit rating.

Leases may include options to extend or early terminate the lease term.

If the Company, using judgement, is reasonably certain that an option will be exercised, then the option will be included in the calculation of the lease term.

The Company elected to combine lease and non-lease components for all underlying assets groups, and not recognize ROU assets or lease liabilities for short-term leases.

A short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company does not have any finance leases.

The Company elected to apply each of the practical expedients described in Topic 842 which allow companies (i) not to reassess prior conclusions on whether any expired or existing contracts are or contain a lease, lease classification, and initial direct costs, (ii) combine lease and non-lease components for all underlying assets groups, and (iii) not recognize ROU assets or lease liabilities for short-term leases.

Internal-Use Software Development Costs

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The Company expenses costs incurred related to the planning and post-implementation phases of development as incurred.

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Long-Lived Assets

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Deferred Offering Costs

The Company capitalizes within other assets certain legal, accounting and other third-party fees that are directly related to the Company’s in-process equity financings, including the IPO, until such financings are consummated.

The Company capitalizes within other assets certain legal, accounting and other third-party fees that are directly related to the Company’s in-process equity financings until such financings are consummated.

After consummation of an equity financing, these costs are recorded in stockholder’s equity as a reduction of additional paid-in capital generated as a result of the offering.

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

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Sales-based milestones and royalties :

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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 the Company for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met.

Deferred revenue, which is a contract liability, represents net amounts received by the Company 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.

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The model requires management to make a number of assumptions including expected volatility, expected term, risk-free interest rate and expected dividend yield.

Prior to its IPO, the fair value of the Company’s common stock was determined by the Company’s board of directors with assistance from management and an independent third-party valuation firm, using significant judgment and several factors including important developments in the Company’s operations, sales of redeemable convertible preferred stock and the lack of liquidity of the common stock.

Subsequent to the IPO, the Company determines the fair value of stock options, RSUs and purchase rights under the ESPP using the market closing price of the Company’s common stock on the date of grant.

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The Company determines the fair value of stock options, RSUs and purchase rights under the ESPP using the market closing price of the Company’s common stock on the date of grant.

For stock-based payments with service conditions only, the Company uses the straight-line method to allocate compensation cost to reporting periods over the requisite service period, which is generally the vesting period.

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It is the Company’s policy to include penalties and interest expense related to income taxes as a component of the provision for income taxes.

Non-income-based taxes are expensed as incurred within operating expenses on the Company’s consolidated statements of operations.

Comprehensive loss

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Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No.

2019‑12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify accounting for income taxes and eliminate certain exceptions from Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also requires the amount of tax that is based on income to be accounted for under Topic 740 as an income-based tax, with any incremental amount accounted for as a non-income-based tax recognized entirely in the period incurred.

The Company adopted ASU 2019-12 as of December 1, 2021 using the modified retrospective method, and recognized an immaterial non-income-based tax within operating expenses in the current period.

The adoption had no other impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No.

2023‑07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (ASU 2023-07), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 should be applied on a retrospective basis.

ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is in the process of evaluating the impact of this new guidance on its disclosures.

In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU 2023-09), which is intended to enhance the transparency and decision usefulness of income tax disclosures, primarily by amending disclosure requirements for the effective tax rate reconciliation and income taxes paid.

ASU 2023-09 should be applied on a prospective basis, and retrospective application is permitted.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

The Company is in the process of evaluating the impact of this new guidance on its disclosures.

Collaboration Agreements

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These amendments had no impact on revenue recognition.

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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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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, 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.

Over time, Gilead may elect to replace the initial drug targets with other drug targets.

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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 November 30, 2022, the Company has received payments of $ 34.5 million for research milestones and additional payments.

As of November 30, 2022, the Company is eligible to receive up to approximately $ 2.3 billion in total additional payments, including up to $ 667.5 million upon the achievement of specified development milestones, up to $ 1.5 billion upon the achievement of specified sales milestones, subject to reduction for any product for which the Company exercises its option to co-develop and co-promote, and up to $ 136.8 million in certain additional fees related to target licensing, reservation and selection and research term extensions.

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.

In addition, from the signing of the Gilead Agreement to November 30, 2023, the Company has received payments of $ 47.0 million for research milestones and additional payments and $ 20.0 million for a license option exercise payment.

As of November 30, 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.

The Company also is eligible to receive mid-single digit to low tens percentage tiered royalties 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 parties share profits and losses evenly.

Subject to earlier expiration in certain circumstances, the Gilead Agreement expires on a licensed product-by-licensed product and country-by-country basis upon the later of (1) the expiration of the last to expire patent with a valid claim covering the applicable licensed product in the applicable country, (2) the expiration of any regulatory exclusivity for the applicable licensed product in the applicable country or (3) ten years after the first commercial sale of the applicable licensed product in the applicable country covered by the Gilead Agreement, provided that the term for any profit-shared licensed product in the United States will expire upon the expiration or termination of the applicable profit-share term as set forth in an applicable profit-share agreement to be negotiated upon the Company’s exercise of its option to co-develop and co-promote such licensed product.

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The Company identified the following promises in the Gilead Agreement:

(1) the research licenses, (2) the research services, including selection campaign research services for certain replacement targets and (3) the obligation to share information during the research term and to participate in the joint research committee and joint steering committee.

The Company determined that the research licenses are not capable of being distinct due to the specialized nature of the research services to be provided by the Company, and, accordingly, this promise was combined with the research services and participation in the joint research committee as one single performance obligation.

The Company concluded that, at the inception of the Gilead Agreement, Gilead’s options to obtain an exclusive development, manufacturing and commercialization license for each collaboration target, to extend the five-year research term and to perform selection campaign research services for certain replacement targets do not represent material rights and are not considered performance obligations because they do not contain a significant and incremental discount.

(1) the research licenses, (2) the research services, including selection campaign research services for certain replacement targets, (3) the obligation to share information during the research term and (4) the participation in the joint research committee and joint steering committee.

The Company determined that the research licenses, the obligation to share information and the participation in joint committees are not capable of being distinct from the research services due to the specialized nature of the research services to be provided by the Company, and, accordingly, the promises identified were combined as one single performance obligation.

The Company also concluded that, at the inception of the Gilead Agreement, Gilead’s options to obtain an exclusive development, manufacturing and commercialization license for each collaboration target, to extend the five-year research term and to perform selection campaign research services for certain replacement targets do not represent material rights and are not considered performance obligations because they do not contain a significant and incremental discount.

The Company concluded that Gilead’s target reservation right is not a performance obligation as it does not require any specific action from the Company and it is rather an exclusivity right and an attribute of other performance obligations in the Gilead Agreement, such as the research licenses.

Table of Content

In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Certain milestones and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of November 30, 2022.

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

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

Upon the achievement of research milestones and fees added related to target reservations, $ 34.5 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 .

Certain milestone payments and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of November 30, 2023.

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

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, $ 47.0 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 research term of five years .

The contract term was determined to be the five-year initial research term which represents the estimated timing of completion of the identified deliverables.

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For the year ended November 30, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 23.7 million, of which $ 18.4 million was included in deferred revenue as of November 30, 2021, and $ 4.0 million was related to performance obligations satisfied in previous periods.

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

As of November 30, 2023, deferred revenue related to the Gilead Agreement was $ 10.0 million, all of which was current.

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

Additionally, as of November 30, 2021, $ 6.0 million was included in accounts receivable which represents the billed revenue related to the research milestone recognized in November 2021.

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.

In January 2021, as part of the existing collaboration agreement, Sanofi paid the Company $ 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, the Company and Sanofi entered into the First Amendment to the Sanofi Agreement to modify the research term on all targets (the First Sanofi Amendment).

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

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

In January 2021, as part of the existing Sanofi Agreement, Sanofi paid the Company $ 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.

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

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

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

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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, the Company 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.

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 the Company retains the option to co-develop, co-promote and co-commercialize up to two targets, one of which must be selected from a list of targets designated at the execution of the Sanofi Agreement and one of which must be selected from targets identified by Sanofi in the future.

In August 2022 and November 2023, the Company entered into the Fourth Amendment and Fifth Amendment, respectively, to the Sanofi Agreement to modify the research plan for certain targets, which had no impact on revenue recognition.

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 the Company retains the option to co-develop, co-promote and co-commercialize all drug candidates in the United States directed to up to two targets, one of which must be selected from a list of targets designated at the execution of the Sanofi Agreement or any replacement of such targets, and one of which must be selected from targets identified by Sanofi as part of their January 2021 expansion.

The Company’s right to exercise its option to co-develop, co-promote and co-commercialize a given target is dependent on its ability to demonstrate, within a given timeframe, that it has sufficient cash resources and personnel to commercialize the product.

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

Table of Content

For drug targets that are subject to the collaboration, the Company has 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.

The Company is obligated to use commercially reasonable efforts to identify relevant target binders and chimeric targeting molecules in order to identify development candidates.

The Company is 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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In addition, from the signing of the Sanofi Agreement to November 30, 2023, the Company has received payments of $ 7.0 million for research milestones.

As of November 30, 2022, the Company is eligible to receive up to approximately $ 2.5 billion in total payments, including payments of up to $ 496.0 million upon the achievement of specified development milestones, up to $ 625.0 million upon the achievement of specified regulatory milestones and up to $ 1.3 billion upon the achievement of certain sales milestones, as well as up to $ 126.5 million in certain additional fees related to target licensing and reservation.

In addition, the Company is eligible to receive 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.

Subject to earlier expiration in certain circumstances, the Sanofi Agreement expires on a licensed product-by-licensed product or profit-shared licensed product-by-profit-shared licensed product basis and country-by-country basis upon on the later of the expiration of (i) the last-to-expire patent with a valid claim covering the applicable licensed product in the applicable country, (ii) the expiration of any regulatory exclusivity for the applicable licensed product in the applicable country or (iii) ten years after the first commercial sale of the applicable licensed product in the applicable country covered by the Sanofi Agreement.

Additionally, the Company achieved two research milestones in November 2023 and received payments totaling $ 4.0 million in January 2024 as a result.

As of November 30, 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 mid-single digit to low teen percentage tiered royalties 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.

Subject to earlier expiration in certain circumstances, the Sanofi Agreement expires on a licensed product-by-licensed product or profit-shared licensed product-by-profit-shared licensed product basis and country-by-country basis upon on the later of (1) the expiration of the last-to-expire patent with a valid claim covering the applicable licensed product in the applicable country, (2) the expiration of any regulatory exclusivity for the applicable licensed product in the applicable country or (3) ten years after the first commercial sale of the applicable licensed product in the applicable country covered by the Sanofi Agreement.

The Company identified the following promises in the Sanofi Agreement:

(1) the research licenses, (2) the research services, (3) the obligation to share information during the research term and (4) the participation of alliance managers in the joint research committee and joint patent committee.

The Company determined that the research licenses, the obligation to share information and the participation in the joint committees are not capable of being distinct from the research services due to the specialized nature of the research services to be provided by the Company, and, accordingly, the promises identified were combined as one single performance obligation.

The Company also determined that Sanofi’s exclusive right to add up to two additional targets constitutes a material right as it represents a significant and incremental discount that Sanofi would not have received without entering into the Sanofi Agreement.

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In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Milestone and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of November 30, 2022.

The Company will re-evaluate 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 consists of the upfront payment of $ 55.0 million.

To account for the material right related to the two additional targets, instead of determining the standalone selling price for the option directly, the Company applied the practical alternative to allocating the transaction price by determining the consideration that it expects to receive in exchange for the research activities that it expects to provide on the two additional targets for a total of five targets.

The practical alternative can be applied as the research activities for the two additional targets are similar to the research activities for the initial three targets.

Consequently, for the purpose of applying the practical alternative to estimating the standalone selling price of the material right, an expected consideration of $ 77.0 million was used for revenue recognition allocation, which represents the $ 55.0 million paid upfront for the three initial drug targets, and the $ 22.0 million for the additional consideration related to two additional targets which was included as part of applying the practical alternative, and for which Sanofi subsequently exercised its option to expand the collaboration to include.

Certain milestone payments and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of November 30, 2023.

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, $ 11.0 million in variable consideration was added to the transaction price, which includes $ 4.0 million added during the three months ended November 30, 2023, 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.

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The Company accounted for the First Sanofi Amendment as if it were part of the existing contract with Sanofi as the remaining goods and services to be provided after the contract modification are not distinct from the goods and services already provided and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification.

The contract modification did not have an effect on the contract transaction price.

The effect of the revised research period on the Company’s measure of progress toward complete satisfaction of the performance obligation was recognized as an adjustment to revenue at the date of the contract modification on a cumulative catch-up basis.

Using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligation to Sanofi, the Company recognizes revenue based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation under the contract.

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For the year ended November 30, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 15.0 million, of which $ 14.0 million was included in deferred revenue as of November 30, 2021, and $ 0.6 million was related to performance obligations satisfied in previous periods.

As of November 30, 2023, deferred revenue related to the Sanofi Agreement was $ 24.9 million, of which $ 20.3 million was current and includes $ 4.0 million in contract assets representing the unbilled amount related to the research milestones recognized in November 2023.

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.

As of November 30, 2021, deferred revenue related to the Sanofi Agreement was $ 59.2 million, of which $ 21.3 million was current .

In September 2023, the Company entered into a strategic collaboration with Seagen Inc.

(now a part of Pfizer Inc.) (the Pfizer Agreement) to develop a suite of targeted protein degraders against multiple targets nominated by Pfizer that are suitable for antibody conjugation.

Pfizer will be responsible for conjugating these degraders to antibodies to make Degrader-Antibody Conjugates (DACs), a new class of medicines for use in cancer treatment, and advancing these DAC drug candidates through preclinical and clinical development and commercialization.

Under the Pfizer Agreement, Pfizer has the option to obtain exclusive licenses to develop and commercialize certain degraders, while the Company retains an option for U.S.

profit sharing and co-promotion on two products arising from the collaboration.

For the targets nominated by Pfizer under the collaboration, the Company shall use commercially reasonable efforts to identify, synthesize, characterize and deliver targeted protein degraders that selectively bind to and degrade such targets.

Development of licensed degraders, with the exception of licensed products for which the Company exercises its profit-share options, will be at Pfizer’s sole cost and expense.

For the profit-share products, the parties will share net profits and net losses and global development costs, and the Company will be eligible to receive royalty and milestone payments on such optioned products.

Under the terms of the Pfizer Agreement, the Company received an upfront payment of $ 60.0 million.

The Company is eligible to receive up to approximately $ 3.4 billion in contingent payments based on specified research, development, regulatory and commercial milestones across multiple programs, and is eligible for mid-single to low double digit percentage tiered royalties on future sales.

Subject to the exceptions described in the Pfizer Agreement, the Pfizer Agreement expires upon the first to occur of (1) the expiration of the last-to-expire option exercise period under the Pfizer Agreement if no such option has been exercised prior to such expiration and (2) the expiration of the last-to-expire royalty term under the Pfizer Agreement.

The Company identified the following promises in the Pfizer Agreement:

(1) the research licenses, (2) the research services, (3) the participation of a gatekeeper and an alliance managers and the participation in various joint committees, and (4) the obligation to share information during the research term.

The Company determined that the research licenses, the participation in the joint committees and the obligation to share information are not capable of being distinct from the research services, and, accordingly, the identified promises were combined as one single performance obligation.

The Company also determined that, at the inception of the Pfizer Agreement, Pfizer’s options to obtain an exclusive development, manufacturing and commercialization license for each collaboration target and to extend the four-year research term do not represent material rights and are not considered performance obligations because they do not contain a significant and incremental discount.

Additionally, Pfizer’s target reservation right is not a performance obligation as it is an exclusivity right and an attribute of other performance obligations in the Pfizer Agreement, such as the research licenses, and does not require any specific actions from the Company.

In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Milestone payments and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of November 30, 2023.

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

The Company determined that the transaction price at the inception of the Pfizer Agreement consisted of the upfront payment of $ 60.0 million.

The Company has not yet achieved any research milestones and no variable consideration has been added to the transaction price.

The transaction price is recognized as collaboration revenue using the cost-based input method over the estimated research term of four years , which represents the estimated period to complete the identified deliverables.

Additionally, the Company considered the impact of Pfizer terminating the Pfizer Agreement prior to the completion of the research services during the initial four-year research term and determined that there were significant economic costs to Pfizer for doing so, and as such, did not adjust the contract term.

Using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligation to Pfizer, the Company recognizes revenue based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation under the contract.

Costs consist primarily of internal FTE and third-party contract costs related to the Pfizer Agreement.

Total estimated costs are primarily driven by the number of estimated FTEs, which requires significant management judgment.

For the year ended November 30, 2023, the Company recognized collaboration revenue related to the Pfizer Agreement of $ 1.7 million.

As of November 30, 2023, deferred revenue related to the Pfizer Agreement was $ 58.3 million, of which $ 17.9 million was current.

Consolidated Balance Sheet Components

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Total property and equipment, net $ 16,808 $ 17,163

For the years ended November 30, 2022 and 2021, depreciation and amortization expense was $ 5.3 million and $ 2.8 million, respectively, which includes amortization expense related to capitalized internal-use software of $ 1.2 million and $ 0.8 million, respectively.

For the years ended November 30, 2023 and 2022, depreciation and amortization expense was $ 7.5 million and $ 5.3 million, respectively, which includes amortization expense related to capitalized software of $ 1.4 million and $ 1.2 million, respectively.

All long-lived assets are maintained in the United States.

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Total accrued expenses and other current liabilities $ 24,970 $ 22,428

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Fair Value Measurements

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government agency securities Level 2 69,389 5 ( 567 ) 68,827

Corporate commercial paper Level 2 74,896 — — 74,896

Foreign government securities Level 2 7,051 — ( 92 ) 6,959

Long-term marketable securities:

treasury securities Level 1 5,779 — ( 98 ) 5,681

Corporate debt securities Level 2 3,492 — ( 217 ) 3,275

government agency securities Level 2 7,490 — ( 69 ) 7,421

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Included in marketable securities, non-current $ 7,490 $ — $ ( 69 ) $ 7,421

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November 30, 2022 Level Amortized

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Corporate commercial paper Level 2 74,896 — — 74,896

Municipal securities Level 2 10,082 9 — 10,091

Foreign government securities Level 2 7,051 — ( 92 ) 6,959

Long-term marketable securities:

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government agency securities Level 2 56,301 1 ( 1,379 ) 54,923

Municipal securities Level 2 7,229 — ( 25 ) 7,204

Total $ 372,317 $ 1 $ ( 4,320 ) $ 367,998

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

As of November 30, 2022 and 2021, the accrued interest receivable related to the Company’s marketable securities was $ 1.1 million and $ 0.9 million, respectively, and was included in prepaid expenses and other current assets on the consolidated balance sheet.

The following table summarizes the available-for-sale marketable securities in an unrealized loss position for which an allowance for credit losses has not been recorded as of November 30, 2023 and 2022, aggregated by investment category and length of time in a continuous unrealized loss position (in thousands):

Less than 12 months Greater than 12 months Total

November 30, 2023 Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss

treasury securities $ 46,694 $ ( 4 ) $ 5,936 $ ( 25 ) $ 52,630 $ ( 29 )

Corporate debt securities — — 3,431 ( 56 ) 3,431 ( 56 )

government agency securities 23,599 ( 108 ) 48,805 ( 528 ) 72,404 ( 636 )

Total $ 70,293 $ ( 112 ) $ 58,172 $ ( 609 ) $ 128,465 $ ( 721 )

Less than 12 months Greater than 12 months Total

November 30, 2022 Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss

treasury securities $ 40,747 $ ( 377 ) $ 39,136 $ ( 841 ) $ 79,883 $ ( 1,218 )

Corporate debt securities 14,257 ( 152 ) 68,765 ( 1,344 ) 83,022 ( 1,496 )

government agency securities 45,395 ( 663 ) 15,391 ( 851 ) 60,786 ( 1,514 )

Foreign government securities — — 6,959 ( 92 ) 6,959 ( 92 )

Total $ 100,399 $ ( 1,192 ) $ 130,251 $ ( 3,128 ) $ 230,650 $ ( 4,320 )

The accrued interest receivable related to the Company’s marketable securities was $ 0.8 million and $ 1.1 million as of November 30, 2023 and 2022, respectively, and was included in prepaid expenses and other current assets on the 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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The Company classifies its marketable securities in corporate debt securities, U.S.

government agency securities, corporate commercial paper, foreign government securities and municipal securities as Level 2 assets within the fair value hierarchy.

government agency securities, corporate commercial paper and foreign government securities as Level 2 assets within the fair value hierarchy.

The fair values of these marketable securities are estimated by taking into consideration valuations obtained from third-party pricing services.

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As of November 30, 2023, the Company was not a party to any material legal proceedings.

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Indemnifications

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The Company leases office and laboratory facilities totaling approximately 57,902 square feet within the same building in San Francisco, California under several lease agreements.

The terms of these lease agreements expire on April 30, 2025.

The Company has an option to renew these leases for an additional two years , which has not been included in the lease term used to calculate the right-of-use asset and lease liability as it is not reasonably certain that the Company will exercise this option.

The Company is required to pay base rent plus the tenant’s proportionate share of operating expenses as defined in the lease agreement.

The terms of these lease agreements expire in April 2025.

The Company has an option to renew these leases for an additional two years , and the renewal term has not been included in the lease term used to calculate the right-of-use asset and lease liability as it is not reasonably certain that the Company will exercise the option.

In July 2021, the Company entered into a lease agreement for the lease of approximately 19,320 square feet of office space in a different building in San Francisco, California.

The lease commenced on December 1, 2021 and will expire on June 30, 2024, unless terminated earlier.

The Company is required to pay base rent plus the tenant’s proportionate share of operating expenses as defined in the lease agreement.

The leased premises were subject to additional variable lease payments related to landlord-owned improvements which were not estimable at lease inception.

The right-of-use assets recognized in exchange for lease obligations for these additional variable lease payments were $ 1.2 million and $ 0.3 million for the years ended November 30, 2022 and 2021, respectively.

In March 2022, the Company entered into a lease agreement for the lease of approximately 46,434 square feet of office space in The Woodlands, Texas, for a research and development laboratory and related uses.

The Company obtained access to the premise on August 1, 2022 to commence construction of landlord-owned improvements, and the lease is expected to commence in fiscal year 2023 when the underlying assets become available for use and will expire on March 1, 2035, unless terminated earlier.

The Company has an option to renew for two additional terms of five years each, and it is not reasonably certain that the Company will exercise this option.

The minimum rent payable by the Company under the lease will be approximately $ 205,000 per month, beginning on March 1, 2023, which amount will increase by 3 % per year over the term of the lease;

provided that, for the period between March 1, 2023 and February 29, 2024, the minimum rent payable by the Company under the lease will be approximately $ 154,000 per month.

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

Operating lease expenses, excluding additional rent charges for utilities, maintenance and real estate taxes, were $ 5.9 million and $ 3.8 million for the years ended November 30, 2022 and 2021, respectively.

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

The lease commenced in December 2021 and will expire in June 2024, unless terminated earlier.

In March 2022, the Company entered into a lease agreement for the lease of approximately 46,434 square feet of office space in The Woodlands, Texas.

In August 2023, the lease agreement was amended to increase the square footage of the leased premise to 50,094 square feet.

The amendment had no impact on the accounting for the lease.

The Company has an option to renew for two additional terms of five years each, and the renewal terms have not been included in the lease term used to calculate the right-of-use asset and lease liability as it is not reasonably certain that the Company will exercise the option.

The lease commenced in September 2023 when the underlying assets became available for use and will expire in March 2035.

The Company is required to pay base rent plus its proportionate share of operating expenses, as defined in the applicable lease agreement on all of its leases.

Variable lease payments related to operating expenses including utilities, maintenance costs and real estate taxes were $ 6.2 million and $ 4.4 million for the years ended November 30, 2023 and 2022, respectively.

Additionally, for the year ended November 30, 2022, certain leased premises were subject to additional variable lease payments related to landlord-owned improvements which were not estimable at lease inception.

The right-of-use asset recognized in exchange for lease obligations for these additional variable lease payments was $ 1.2 million for the year ended November 30, 2022.

Operating lease expenses, excluding variable lease payments, were $ 6.8 million and $ 5.9 million for the years ended November 30, 2023 and 2022, respectively.

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

As of November 30, 2023, the weighted average remaining lease term was 9.1 years and the weighted average discount rate was 6.45 %.

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

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Cash flows from operating leases $ 6,973 $ 6,578

Supplemental disclosures of non-cash investing and financing activities:

Right-of-use assets recognized in exchange for lease obligations $ 5,068 $ 2,371

The undiscounted future non-cancellable lease payments under the Company’s lease agreement as of November 30, 2022 were as follows (in thousands):

The undiscounted future non-cancellable lease payments under the Company’s lease agreements as of November 30, 2023 were as follows (in thousands):

Year ending November 30, Operating

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imputed interest ( 11,832 )

undiscounted lease payments related to the lease in The Woodlands, Texas ( 34,314 )

Total operating lease liabilities $ 30,614

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

As of November 30, 2023, there were pre-funded warrants to purchase an aggregate of 6,097,560 shares of the Company’s common stock that remained available for exercise.

The pre-funded warrants were classified as a component of permanent equity in the Company's 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.

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

Options to purchase common stock issued and outstanding 8,340,968 8,256,957

Shares available for future stock option grants 834,291 2,562,570

Shares available for future equity grants 1,614,035 834,291

Shares available for issuance under employee stock purchase plan 1,530,281 1,325,523

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Equity Incentive Plans

The Company’s 2020 Equity Incentive Plan (the 2020 Plan) serves as the successor to the Company’s 2012 Equity Incentive Plan (together with the 2020 Plan, the Stock Plans) and provides for the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock units (RSUs), performance awards and stock bonus awards to employees, directors, consultants, independent contractors and advisors of the Company.

The Company’s 2020 Equity Incentive Plan (the 2020 Plan) serves as the successor to the Company’s 2012 Equity Incentive Plan (together with the 2020 Plan, the Stock Plans) and provides for the granting of stock options, stock appreciation rights, restricted stock awards, RSUs, performance awards and stock bonus awards to employees, directors, consultants, independent contractors and advisors of the Company.

Under the Stock Plans, the Company generally grants stock-based awards with service-based vesting conditions only.

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As of November 30, 2023, there were 1,614,035 shares of common stock reserved for future issuance pursuant to the 2020 Plan.

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Stock options

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The total intrinsic value of stock options exercised during the years ended November 30, 2023 and 2022 was $ 0.2 million and $ 4.5 million, respectively.

Certain stock options granted by the Company prior to the date of IPO are exercisable at the date of grant, with unvested shares subject to repurchase by the Company in the event of the voluntary or involuntary termination of employment of the stockholder.

Such exercises are recorded as a liability in the consolidated balance sheet and reclassified into equity as the options vest.

As of November 30, 2022, a total of 22,246 shares of common stock were subject to repurchase by the Company at the lower of (i) the fair value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of $ 0.2 million as of November 30, 2022 is recorded as a stock-based compensation liability.

As of November 30, 2023, a total of 4,909 shares of common stock were early exercised and subject to repurchase by the Company at the lower of (i) the fair value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value was immaterial and recorded as a stock-based compensation liability.

The fair value of options granted during the years ended November 30, 2023 and 2022 was estimated using the Black-Scholes option pricing model on the grant date using the following assumptions:

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During the years ended November 30, 2023 and 2022, the weighted-average grant date fair value of options granted was $ 7.22 and $ 11.80 per share, respectively.

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Restricted stock units

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Balances as of November 30, 2023 1,246,031 $ 12.58

During the years ended November 30, 2022 and 2021, the weighted-average grant date fair value of RSUs granted was $ 19.11 and $ 27.42 per share, respectively, and the total fair value of RSUs vested was $ 0.9 million and zero , respectively.

During the years ended November 30, 2023 and 2022, the weighted-average grant date fair value of RSUs granted was $ 10.53 and $ 19.11 per share, respectively, and the total fair value of RSUs vested was $ 7.9 million and $ 0.9 million, respectively.

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 at a discount with accumulated payroll deductions.

Under the Company’s ESPP, eligible employees are entitled to purchase shares of common stock at a discount with accumulated payroll deductions.

The purchase price for shares of common stock purchased under the ESPP will be 85 % of the lesser of the fair market value of the Company’s common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of each purchase period in the applicable offering period.

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Total stock-based compensation $ 33,673 $ 28,131

During the years ended November 30, 2022 and 2021, capitalized stock-based compensation related to internal-use software development was $ 69,000 and zero , respectively.

During the years ended November 30, 2023 and 2022, capitalized stock-based compensation related to internal-use software development was $ 74,000 and $ 69,000 , respectively.

As of November 30, 2023, the total compensation cost related to stock-based awards not yet recognized was $ 53.1 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.09 years.

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Defined Contribution Plan

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The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 1.0 million and $ 0.9 million during the years ended November 30, 2023 and 2022, respectively.

For the year ended November 30, 2022, the Company did not record any current income tax benefit or provision, and for the year ended November 30, 2021, the Company recorded a current income tax provision of $ 0.1 million primarily due to state taxes offset by a federal income tax refund.

The Company had generated net operating losses (NOLs) since inception and has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

For the years ended November 30, 2023 and 2022, the Company did not record any current income tax benefit or provision.

The Company has generated net operating losses (NOLs) since inception and has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

Loss before provision for income taxes includes the following component (in thousands):

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$ ( 143,948 ) $ ( 180,360 )

The provision for income taxes consists of the following (in thousands):

Federal $ — $ ( 203 )

Total provision for income taxes $ — $ 131

The effective tax rate differs from the federal statutory rate as follows:

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Total — % — %

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Deferred Tax Assets and Liabilities

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Operating lease liabilities 8,789 3,199

Capitalized research and experimental expenses 44,348 —

Gross deferred tax assets 202,658 141,663

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The Company has established a valuation allowance to offset deferred tax assets as of November 30, 2023 and 2022 due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets.

The valuation allowance increased by $ 54.8 million during the year ended November 30, 2022, primarily related to an increase on the deferred tax asset for research and development (R&D) credits and NOL carryforwards.

The valuation allowance increased by $ 36.1 million during the year ended November 30, 2021, primarily due to an increase on the deferred tax asset for deferred revenue, R&D credits and NOL carryforwards.

The valuation allowance increased by $ 55.4 million to $ 193.7 million during the year ended November 30, 2023, primarily related to an increase on the deferred tax asset for research and development (R&D) credits, NOL carryforwards and Section 174 research and development capitalization.

The valuation allowance increased by $ 54.8 million to $ 138.4 million during the year ended November 30, 2022, primarily related to an increase on the deferred tax asset for R&D credits and NOL carryforwards.

As of November 30, 2023, the Company had NOL carryforwards available to reduce future taxable income, if any, for federal and state income tax purposes of $ 269.3 million and $ 410.9 million, respectively.

Federal NOL carryforwards generated for tax years beginning before December 31, 2017 can be carried forward 20 years and begin expiring in 2029 .

Federal NOL carryforwards of $ 272.9 million for tax years beginning after December 31, 2017 can be carried forward indefinitely.

All outstanding federal NOL carryforwards were generated for tax years beginning after December 31, 2017, and carry forward indefinitely.

State NOL carryforwards begin expiring in 2029 .

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If not utilized, the federal credit carryforwards will begin expiring in 2032 and the state credits carry forward indefinitely .

Internal Revenue Code of 1986, as amended (IRC), Section 382 places a limitation on the utilization of NOL and tax credit carryforwards in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points.

Section 382 of the Internal Revenue Code of 1986, as amended (IRC) places a limitation on the utilization of NOL and tax credit carryforwards in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points.

The Company has identified two ownership changes that have triggered a limitation on pre-change NOLs under Section 382.

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As a result of the ownership changes, the Company has determined that approximately $ 0.4 million of NOLs will expire unutilized, and as such, these NOLs are not reflected in the Company’s deferred tax asset balance.

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Unrecognized Tax Benefits

The Company has recorded a liability related to uncertain tax positions in the financial statements.

It is the Company’s policy to include penalties and interest expense related to income taxes as a component for the provision for income taxes.

The Company has unrecognized tax benefits of $ 15.5 million as of November 30, 2023, all of which are offset by a full valuation allowance.

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Balance at beginning of period $ 10,261 $ 6,331

Additions based on tax positions related to prior period — 1

Additions based on tax positions related to current period 5,247 3,930

Settlements — ( 1,313 )

Balance at end of period $ 15,508 $ 10,261

The Company files income tax returns in the United States and in various states.

In February 2018 the Internal Revenue Service (IRS) commenced an examination of the Company’s U.S.

income tax return for the tax years ending in 2016, 2017, 2018 and 2019.

All tax issues under examination were effectively settled during the year ended November 30, 2021.

As a result, the Company removed the associated unrecognized tax benefit reserves and decreased its R&D credit carryforward by $ 1.3 million.

The Company continues to maintain an unrecognized tax benefit related to federal R&D credits generated in years not covered by the examination.

Additionally, 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.

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

During the year ended November 30, 2021, the FTB issued proposed audit assessments related to revenue sourcing and R&D credits.

The Company does not agree with the FTB assessments and intends to challenge the assessments.

The Company did not agree with the FTB’s assessments and challenged the assessments.

Pursuant to a measurement analysis, the Company has not recorded an unrecognized tax benefit related to the FTB’s sourcing position.

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All of the Company’s tax years will remain open for examination by the federal and state authorities for three and four years , respectively, from the date of the utilization of any NOLs.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, allows NOLs incurred in taxable years 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The fiscal 2020 tax benefit was primarily due to the carryback of NOLs to prior taxable years as allowed under the CARES Act.

In fiscal 2020, the Company filed refund claims of $ 19.6 million to carryback NOLs generated in fiscal years ended November 30, 2018 and 2019.

These refund claims were approved by Congressional Joint Committee on Taxation during the year ended November 30, 2021.

As of November 30, 2021, the Company had received the full amount of these refund claims.

In August 2022, the U.S.

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The Company does not expect the Act to have a material impact on its financial statements.

In December 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law, significantly reforming the Internal Revenue Code of 1986, as amended (IRC).

The TCJA contained certain provisions that went into effect on January 1, 2022, including a provision impacting Section 174 of the IRC whereby for tax years beginning on or after January 1, 2022, taxpayers are required to capitalize and amortize, rather than deduct, research and experimental (R&E) expenses.

The R&E expenses under Section 174 must be amortized over five years for research performed in the U.S.

and 15 years for research performed outside the U.S.

The provisions of Section 174 are not applicable to the financial statements as of and for the year ended November 30, 2022.

The Company is closely monitoring these provisions and is in the process of analyzing the potential impact to its income taxes and financial position in future years.

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In December 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law, significantly reforming the IRC.

The TCJA contains a provision impacting Section 174 of the IRC whereby for tax years beginning on or after January 1, 2022, taxpayers are required to capitalize and amortize, rather than deduct, research and experimental (R&E) expenses.

The R&E expenses under Section 174 must be amortized over five years for research performed in the United States and 15 years for research performed outside the United States.

This rule became effective for the Company during the year ended November 30, 2023.

For the year ended November 30, 2023, the Company recorded a deferred tax asset of $ 44.3 million pursuant to the provisions of Section 174 of the IRC.

Net Loss Per Share

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Net loss per share, basic and diluted $ ( 2.65 ) $ ( 3.71 )

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 year ended November 30, 2022.

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 years ended November 30, 2023 and 2022.

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:

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

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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data