What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-11 compared with 2024-07-11 · 86 added, 76 removed, 252 unchanged (39% of the section changed)

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Targeted Protein Degradation

Our portfolio of targeted protein degraders of BTK, a B‑cell signaling protein, comprises NX‑5948, an orally bioavailable BTK degrader for the treatment of relapsed or refractory B-cell malignancies and potentially autoimmune diseases, and NX‑2127, an orally bioavailable BTK degrader that also degrades cereblon neosubstrates IKZF1 (Ikaros) and IKZF3 (Aiolos) for the treatment of relapsed or refractory B‑cell malignancies.

Our portfolio of targeted protein degraders of BTK, a B‑cell signaling protein, comprises NX‑5948, an investigational, orally bioavailable degrader of BTK for the treatment of relapsed or refractory B-cell malignancies and potentially autoimmune diseases, and NX‑2127, an investigational orally bioavailable degrader of BTK that also degrades cereblon neosubstrates IKZF1 (Ikaros) and IKZF3 (Aiolos) for the treatment of relapsed or refractory B‑cell malignancies.

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

We also recently initiated a Phase 1 healthy volunteer study to assess food effects and drug-drug interactions in anticipation of the planned initiation of pivotal development in 2025.

In January 2024, the U.S.

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Phase 1a/1b study evaluating NX-2127 in adults with relapsed/refractory B-cell malignancies.

We plan to reinitiate enrollment with the new chirally controlled drug substance in a standard dose escalation study within the current Phase 1a/1b trial.

In August 2024, we reinitiated enrollment with a new chirally controlled drug product, which is being evaluated in a dose escalation study within the Phase 1a/b trial.

Targeted Protein Elevation

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These collaborations allow us to further advance our future pipeline with multiple currently identified targets included in these collaborations.

In aggregate, we have received $430.0 million in non-dilutive financing from our collaborators to date, and as of May 31, 2024, we are eligible to receive up to $7.6 billion in potential future fees and milestone payments, as well as royalties on future product sales.

In aggregate, we have received $435.0 million in non-dilutive financing from our collaborators to date, and as of August 31, 2024, we are eligible to receive up to $7.1 billion in potential future fees and milestone payments, as well as royalties on future product sales.

We retain certain options for co-development, co-commercialization and profit sharing in the United States for multiple drug candidates, pursuant to these collaborations.

Collaborations Agreements

Collaboration Agreements

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

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

In addition, from the signing of the Gilead Agreement to May 31, 2024, we have received payments of $47.0 million for research milestones and additional payments, $20.0 million for a license option exercise payment and $15.0 million in research term extension fees.

As of May 31, 2024, we are eligible to receive up to approximately $1.8 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones.

In addition, from the signing of the Gilead Agreement to August 31, 2024, we have received payments of $47.0 million for research milestones and additional payments, $20.0 million for a license option exercise payment and $15.0 million in research term extension fees.

As of August 31, 2024, we are eligible to receive up to approximately $1.8 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones.

We also are 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 we exercise our 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 our exercise of our option to co-develop and co-promote such licensed product.

If Gilead does not exercise an option to license a drug candidate, then the Gilead Agreement will terminate at the end of the last to expire option period.

We recognized collaboration revenue from the Gilead Agreement of $4.9 million and $9.5 million during the three and six months ended May 31, 2024, respectively, and $5.7 million and $13.1 million during the three and six months ended May 31, 2023, respectively.

As of May 31, 2024 and November 30, 2023, there was $15.5 million and $10.0 million, respectively, of deferred revenue related to payments received by us under the Gilead Agreement.

We recognized collaboration revenue from the Gilead Agreement of $2.4 million and $11.9 million during the three and nine months ended August 31, 2024, respectively, and $11.6 million and $24.7 million during the three and nine months ended August 31, 2023, respectively.

As of August 31, 2024 and November 30, 2023, there was $13.1 million and $10.0 million, respectively, of deferred revenue related to payments received by us under the Gilead Agreement.

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

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

In addition, from the signing of the Sanofi Agreement to May 31, 2024, we received payments of $13.0 million for research milestones.

As of May 31, 2024, we are eligible to receive up to approximately $2.4 billion in total additional payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones.

In addition, from the signing of the Sanofi Agreement to August 31, 2024, we have received payments of $13.0 million for research milestones.

As of August 31, 2024, we are eligible to receive up to approximately $2.0 billion in total additional payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones.

We are also eligible to receive 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 we exercise our 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.

We recognized collaboration revenue from the Sanofi Agreement of $2.0 million and $10.3 million during the three and six months ended May 31, 2024, respectively, and $5.0 million and $10.3 million during the three and six months ended May 31, 2023, respectively.

As of May 31, 2024 and November 30, 2023, there was $20.5 million and $24.9 million, respectively, of deferred revenue related to payments received by us under the Sanofi Agreement.

We recognized collaboration revenue from the Sanofi Agreement of $5.9 million and $16.2 million during the three and nine months ended August 31, 2024, respectively, and $6.8 million and $17.1 million during the three and nine months ended August 31, 2023, respectively.

As of August 31, 2024 and November 30, 2023, there was $14.6 million and $24.9 million, respectively, of deferred revenue related to payments received by us under the Sanofi Agreement.

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

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For the targets nominated by Pfizer under the collaboration, we 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 we exercised our profit-share options, will be at Pfizer’s sole cost and expense.

Development of licensed degraders, with the exception of licensed products for which we exercise our 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 we will be eligible to receive royalty and milestone payments on such optioned products.

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

In addition, we achieved a research milestone in May 2024 and expect to receive a payment of $5.0 million in the third quarter of fiscal year 2024.

In addition, from the signing of the Pfizer Agreement to August 31, 2024, we have received a payment of $5.0 million in connection with the achievement of a research milestone.

We are eligible to receive up to approximately $3.4 billion in contingent payments based on specified research, development, regulatory and commercial milestones across multiple programs.

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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.

We recognized collaboration revenue from the Pfizer Agreement of $5.2 million and $8.9 million during the three and six months ended May 31, 2024, respectively.

As of May 31, 2024 and November 30, 2023, there was $54.4 million and $58.3 million, respectively, of deferred revenue related to payments received by us under the Pfizer Agreement.

We recognized collaboration revenue from the Pfizer Agreement of $4.2 million and $13.1 million during the three and nine months ended August 31, 2024, respectively.

As of August 31, 2024 and November 30, 2023, there was $50.2 million and $58.3 million, respectively, of deferred revenue related to payments received by us under the Pfizer Agreement.

Financial Overview

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

During the six months ended May 31, 2024 and 2023, we incurred net losses of $86.1 million and $65.0 million, respectively.

As of May 31, 2024, we had an accumulated deficit of $631.3 million.

During the nine months ended August 31, 2024 and 2023, we incurred net losses of $135.0 million and $102.0 million, respectively.

As of August 31, 2024, we had an accumulated deficit of $680.2 million.

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

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

As of May 31, 2024, we had $452.5 million in cash, cash equivalents and marketable securities.

As of August 31, 2024, we had $457.5 million in cash, cash equivalents and marketable securities.

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

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Uncertainty in the global business, political and macroeconomic environments present significant risks to our business.

We are subject to continuing risks and uncertainties, 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, 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.

We are subject to continuing risks and uncertainties, including increasing financial market volatility and uncertainty, inflation, interest rate fluctuations, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, 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.

We are closely monitoring the impact of these factors on all aspects of our business, including the impacts on our clinical trial patients, employees, partner, suppliers, and vendors.

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

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

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

Interest and Other Income, Net

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Our critical accounting policies and more significant areas involving management’s judgments and estimates used in preparation of our condensed consolidated financial statements are discussed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended November 30, 2023.

There have been no significant changes to these policies for the three and six months ended May 31, 2024.

There have been no significant changes to these policies for the three and nine months ended August 31, 2024.

Recent Accounting Pronouncements

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Results of Operations

Comparison of the three and six months ended May 31, 2024 and 2023

Our results of operations for the three and six months ended May 31, 2024 and 2023 are summarized as follows (in thousands):

Comparison of the three and nine months ended August 31, 2024 and 2023

Our results of operations for the three and nine months ended August 31, 2024 and 2023 are summarized as follows (in thousands):

Three Months Ended

May 31, Change Six Months Ended

May 31, Change

August 31, Change Nine Months Ended

August 31, Change

2024 2023 2024 2023

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Collaboration Revenue

Our collaboration revenue for the three and six months ended May 31, 2024 and 2023 is summarized as follows (in thousands):

Our collaboration revenue for the three and nine months ended August 31, 2024 and 2023 is summarized as follows (in thousands):

Three Months Ended

May 31, Change Six Months Ended

May 31, Change

August 31, Change Nine Months Ended

August 31, Change

2024 2023 2024 2023

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Total collaboration revenue $ 12,588 $ 18,467 $ (5,879) $ 41,265 $ 41,828 $ (563)

Our collaboration revenue increased by $1.4 million during the three months ended May 31, 2024 compared to the three months ended May 31, 2023 primarily due to the recognition of revenue from our collaboration agreement with Pfizer that was entered into in the fourth quarter of fiscal year 2023.

This increase in collaboration revenue was primarily offset by a decrease in revenue from our collaboration with Sanofi due to the extension of the research period and the associated increase in overall forecasted costs for the collaboration target STAT6 (signal transducer and activator of transcription 6), a key drug target in type 2 inflammation, pursuant to the Sixth Amendment to the Sanofi Agreement that we entered into in March 2024.

The research period extension had a cumulative impact that decreased the revenue recognized in the current period.

There was also a decrease in revenue from our collaboration with Gilead that was primarily due to a decrease in activity as we approach the end of the initial five year research term.

Our collaboration revenue increased by $5.3 million during the six months ended May 31, 2024 compared to the six months ended May 31, 2023 primarily due to the recognition of revenue from our collaboration agreement with Pfizer that we entered into in the fourth quarter of fiscal year 2023.

This increase in collaboration revenue was offset by a decrease in revenue from our collaboration with Gilead that was primarily due to a decrease in activity as we approach the end of the initial five year research term.

Additionally, there was an increase in revenue from our collaboration with Sanofi due to increased effort that resulted in a higher percentage of completion of our performance obligation and the achievement of a research milestone that resulted in the cumulative catch up in revenue for activities satisfied in previous periods, offset by a decrease in revenue due to the extension of the research period for a target pursuant to the Sixth Amendment to the Sanofi Agreement that we entered into in March 2024.

The research period extension had a cumulative impact that decreased the revenue recognized in the current period.

Our collaboration revenue decreased by $5.9 million during the three months ended August 31, 2024, compared to the three months ended August 31, 2023, primarily due to a decrease in revenue from our collaboration with Gilead as we concluded the initial research term for certain drug targets.

There was also a decrease in revenue from our collaboration with Sanofi due to fewer milestone payments being achieved and the extension of the research period for a target, pursuant to the Sixth Amendment to the Sanofi Agreement that we entered into in March 2024, that increased forecasted expenditures.

The decrease in collaboration revenue was offset by the recognition of revenue from our collaboration agreement with Pfizer that we entered into in September 2023.

Our collaboration revenue decreased by $0.6 million during the nine months ended August 31, 2024, compared to the nine months ended August 31, 2023, primarily due to a decrease in revenue from our collaboration with Gilead as we concluded the initial research term for certain drug targets and due to fewer milestone payments being achieved.

The decrease in collaboration revenue was offset by the recognition of revenue from our collaboration agreement with Pfizer that we entered into in September 2023.

License Revenue

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

There was no license revenue for the three and six months ended May 31, 2024.

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

There was no license revenue for the three and nine months ended August 31, 2024.

Research and Development Expenses

Our research and development expenses for the three and six months ended May 31, 2024 and 2023 are summarized as follows (in thousands):

Our research and development expenses for the three and nine months ended August 31, 2024 and 2023 are summarized as follows (in thousands):

Three Months Ended

May 31, Change Six Months Ended

May 31, Change

August 31, Change Nine Months Ended

August 31, Change

2024 2023 2024 2023

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Stock-based compensation 4,631 4,552 79 12,743 14,565 (1,822)

Supplies and contract research 10,705 10,435 270 21,600 19,859 1,741

Supplies, contract research and consulting 12,474 10,895 1,579 34,074 30,754 3,320

Preclinical activities 804 686 118 1,502 1,166 336

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Total research and development expenses $ 55,481 $ 47,856 $ 7,625 $ 154,408 $ 139,435 $ 14,973

Our research and development expenses increased by $3.2 million and $7.3 million during the three and six months ended May 31, 2024 compared to the three and six months ended May 31, 2023, respectively.

For all periods presented, there was an increase in clinical costs and contract manufacturing costs as we continued our clinical trial programs and as a result of ongoing patient enrollment and an increase in supplies to support our collaboration with Pfizer.

There was also an increase in facility and other costs primarily driven by our lease in The Woodlands, Texas.

Our research and development expenses increased by $7.6 million during the three months ended August 31, 2024 compared to the three months ended August 31, 2023.

There was an increase in clinical, contract manufacturing and consulting costs as we continued to accelerate the enrollment of NX-5948 and progress our other clinical trial programs for NX-2127 and NX-1607, and an increase in contract research costs to support our ongoing collaborations.

There was also an increase in facility costs primarily driven by lease expense and equipment costs related to our lease in The Woodlands, Texas, which commenced in September 2023.

Our research and development expenses increased by $15.0 million during the nine months ended August 31, 2024 compared to the nine months ended August 31, 2023.

There was also an increase in facility costs primarily driven by lease expense and equipment costs related to our lease in The Woodlands, Texas, which commenced in September 2023.

There was a decrease in compensation and related personnel costs and non-cash stock-based compensation expense due to a decrease in headcount.

General and Administrative Expenses

Our general and administrative expenses increased by $32,000 during the three months ended May 31, 2024 compared to the three months ended May 31, 2023.

There was an increase in local taxes related to the upfront payment received pursuant to the Pfizer Agreement, offset by a decrease in professional service costs.

Our general and administrative expenses increased by $2.0 million during the six months ended May 31, 2024 compared to the six months ended May 31, 2023.

There was an increase in non-cash stock-based compensation expense primarily driven by the increased issuance of restricted stock units and incentive stock options, an increase in local taxes related to the upfront payment received pursuant to the Pfizer Agreement and an increase in facility and other costs primarily driven by our lease in The Woodlands, Texas.

Our general and administrative expenses increased by $1.1 million during the three months ended August 31, 2024 compared to the three months ended August 31, 2023.

There was an increase in costs related to investor relations and other professional services and in local taxes, offset by a decrease in professional costs related to the Seagen Agreement.

There were also deferred issuance costs charged to expense during the period.

Our general and administrative expenses increased by $3.1 million during the nine months ended August 31, 2024 compared to the nine months ended August 31, 2023.

There was an increase in non-cash stock-based compensation expense primarily driven by the increased issuance of restricted stock units and incentive stock options, an increase in outside consulting and professional service costs and an increase in local taxes.

Liquidity and Capital Resources

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

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

(Piper Sandler) pursuant to which, from time to time, we may offer and sell through Piper Sandler up to $150.0 million of the common stock registered under our shelf registration statement on Form S-3 pursuant to one or more “at the market” offerings.

In August 2021, we filed a shelf registration statement on Form S-3 with the SEC, which was amended in February 2023 (the Shelf Registration Statement) and which expired in August 2024 with respect to additional sales of securities.

The Shelf Registration Statement, which included a base prospectus, allowed us to offer and sell up to $450.0 million of our registered common stock, preferred stock, debt securities, warrants, subscriptions rights and/or units or any combination of securities described in the prospectus in one or more offerings.

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

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

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

We agreed to pay Piper Sandler a commission of 3.0% of the gross sales price of any shares sold pursuant to the Equity Distribution Agreement.

In June 2022, we issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement at a price of $10.00 per share of common stock for net proceeds of approximately $19.3 million after deducting offering commissions and expenses paid by us.

In May 2024, we issued and sold 3,194,809 shares of common stock under the Equity Distribution Agreement at various prices ranging from $15.50 to $16.00 for total net proceeds of $48.5 million, after deducting offering commissions and expenses paid by us (the May 2024 ATM Financing).

As of May 31, 2024, we had $79.8 million of common stock remaining available for sale under the Equity Distribution Agreement.

In June 2024, we filed an automatic shelf registration statement on Form S-3ASR (the Automatic Shelf Registration Statement).

In June 2022, we issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement at a price of $10.00 per share for net proceeds of $19.3 million after deducting offering commissions and expenses paid by us.

In May 2024, we issued and sold 3,194,809 shares of common stock under the Equity Distribution Agreement at various prices ranging from $15.50 to $16.00 per share for total net proceeds of $48.5 million, after deducting offering commissions and expenses paid by us (the May 2024 ATM Financing).

In June 2024, we filed an automatic shelf registration statement on Form S-3 (the Automatic Shelf Registration Statement).

The Automatic Shelf Registration Statement, which includes a base prospectus, allows us at any time to offer and sell our 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.

On July 11, 2024, we entered into an amendment to the Equity Distribution Agreement, pursuant to which, from time to time, we may offer and sell through Piper Sandler up to $150.0 million of common stock registered under the Automatic Shelf Registration Statement pursuant to one or more “at the market” offerings.

As of July 11, 2024, we had $150.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

On July 11, 2024, we entered into an amendment to the Equity Distribution Agreement (as amended, the Amended Equity Distribution Agreement), pursuant to which, from time to time, we may offer and sell through Piper Sandler up to $150.0 million of common stock registered under the Automatic Shelf Registration Statement pursuant to one or more “at the market” offerings.

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

We agreed to pay Piper Sandler a commission of up to 3.0% of the gross sales price of any shares sold pursuant to the Amended Equity Distribution Agreement.

In August 2024, we issued and sold 2,145,000 shares of common stock under the Amended Equity Distribution Agreement at $20.00 per share for total net proceeds of $42.0 million after deducting offering commissions and expenses paid by us (the August 2024 ATM Financing).

As of August 31, 2024, we had $107.1 million of common stock remaining available for sale under the Amended Equity Distribution Agreement.

In October 2024, we issued and sold 3,711,770 shares of common stock under the Amended Equity Distribution Agreement at $21.50 per share for total net proceeds of $78.4 million after deducting offering commissions and expenses paid by us (the October 2024 ATM Financing).

Following the October 2024 ATM Financing, we had $27.3 million of common stock remaining available for sale under the Amended Equity Distribution Agreement.

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

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

As of May 31, 2024, a total of 6,097,560 of the 2022 Pre-Funded Warrants remained available for exercise.

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

As of August 31, 2024, a total of 6,097,560 of the 2022 Pre-Funded Warrants remained available for exercise.

In April 2024, we completed an underwritten public offering (the 2024 Public Offering) and issued (a) 11,916,667 shares of common stock, which included 1,750,000 shares issued upon the exercise in full by our underwriters of their option to purchase additional shares of common stock, at a public offering price of $15.00 per share, and (b) pre-funded warrants to purchase 1,500,100 shares of our common stock (the 2024 Pre-Funded Warrants) at a public offering price of $14.999 per pre-funded warrant, which represents the per share public offering price for the common stock less a $0.001 per share exercise price for each pre-funded warrant.

The net proceeds from this offering were approximately $188.7 million, after deducting underwriting discounts and commissions and offering expenses.

As of May 31, 2024, all of the 2024 Pre-Funded Warrants remained available for exercise.

As of August 31, 2024, all of the 2024 Pre-Funded Warrants remained available for exercise.

Subsequent to August 31, 2024, a holder of the 2024 Pre-Funded Warrants exercised a warrant to purchase 19,751 shares of our common stock, resulting in the issuance of 19,750 shares of our common stock through a cashless exercise.

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

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Funding Requirements

As of May 31, 2024, our operations have primarily been funded through the net proceeds from equity offerings of $887.7 million and proceeds from collaborations of $430.0 million.

As of August 31, 2024, our operations have primarily been funded through the net proceeds from equity offerings of $929.7 million and proceeds from collaborations of $435.0 million.

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

As of May 31, 2024, we had $452.5 million in cash, cash equivalents and marketable securities.

As of August 31, 2024, we had $457.5 million in cash, cash equivalents and marketable securities.

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

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

Our total operating lease commitments as of May 31, 2024, were approximately $39.8 million, of which $8.1 million is expected to be paid within the next 12 months.

Our total operating lease commitments as of August 31, 2024, were approximately $37.6 million, of which $6.7 million is expected to be paid within the next 12 months.

This excludes the minimum rent payable pursuant to lease amendments entered into in September 2024.

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

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

Our cash flows for the six months ended May 31, 2024 and 2023 are summarized as follows (in thousands):

Six Months Ended

Our cash flows for the nine months ended August 31, 2024 and 2023 are summarized as follows (in thousands):

Nine Months Ended

Cash used in operating activities $ (123,833) $ (108,054)

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Operating activities

Net cash used in operating activities was $81.7 million for the six months ended May 31, 2024 and consisted of a net loss of $86.1 million and an increase in net assets of $16.1 million, offset by non-cash adjustments of $20.6 million.

The increase in net assets consisted of a decrease in deferred revenue of $7.7 million, which included an increase in contract assets of $5.0 million related to the achievement of a milestone under the Pfizer Agreement, as we increased effort in our programs and recognized revenue, a decrease in accounts payable of $3.5 million from payments to vendors, a decrease in accrued expenses and other liabilities of $3.2 million primarily due to the payment of compensation and other related personnel costs and a decrease in operating lease liabilities of $3.1 million due to lease payments made during the period, offset by a decrease in prepaid and other assets of $1.3 million primarily due to the recognition of expenses for prepaid services.

Net cash used in operating activities was $123.8 million for the nine months ended August 31, 2024 and consisted of a net loss of $135.0 million and an increase in net assets of $18.9 million, offset by non-cash adjustments of $30.0 million.

The increase in net assets consisted of a decrease in deferred revenue of $15.3 million as we increased effort in our programs and recognized revenue, a decrease in operating lease liabilities of $4.8 million due to lease payments made during the period, a decrease in accounts payable of $2.4 million from payments to vendors, offset by an increase in accrued expenses and other liabilities of $2.8 million primarily due to the accrual of compensation and other related personnel costs and costs related to our clinical trials and a decrease in prepaid and other assets of $0.8 million primarily due to the recognition of expenses for prepaid services.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $25.4 million, depreciation and amortization expenses of $6.8 million and amortization of operating lease right-of-use (ROU) assets of $5.4 million, offset by net accretion of discount on marketable securities of $7.8 million.

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

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

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

Net cash used in operating activities was $108.1 million for the nine months ended August 31, 2023 and consisted of a net loss of $102.0 million and an increase in net assets of $38.7 million, offset by non-cash adjustments of $32.6 million.

The increase in net assets consisted of a decrease in deferred revenue of $31.3 million, which included an increase in contract assets of $6.0 million related to the achievement of a milestone under the Gilead Agreement, as we increased effort in our programs and recognized revenue, a decrease in operating lease liabilities of $4.9 million due to lease payments made during the period, a decrease in accounts payable of $3.0 million from payments to vendors and an increase in accounts receivable of $2.0 million related to the achievement of a milestone under the Sanofi Agreement, offset by decrease in prepaid and other assets of $2.6 million primarily due to the recognition of expenses for prepaid services.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $25.6 million, depreciation and amortization expenses of $5.6 million, amortization of operating lease ROU assets of $4.3 million, offset by net accretion of discount on marketable securities of $3.5 million.

Investing activities

Net cash used in investing activities was $95.6 million for the six months ended May 31, 2024 and primarily consisted of the purchase of marketable securities of $279.9 million, offset by the maturity of marketable securities of $189.2 million.

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

Net cash used in investing activities was $116.9 million for the nine months ended August 31, 2024 and primarily consisted of the purchase of marketable securities of $409.7 million, offset by the maturity of marketable securities of $300.0 million.

Net cash provided by investing activities was $82.7 million for the nine months ended August 31, 2023 and consisted of the maturity of marketable securities of $246.4 million, offset by the purchase of marketable securities of $157.9 million and the purchase of property and equipment of $5.8 million.

Financing activities

Net cash provided by financing activities was $239.4 million for the six months ended May 31, 2024 and consisted primarily of net proceeds from our 2024 Public Offering and the May 2024 ATM Financing.

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

Net cash provided by financing activities was $285.1 million for the nine months ended August 31, 2024 and consisted primarily of net proceeds from our 2024 Public Offering, the May 2024 ATM Financing and the August 2024 ATM Financing.

Net cash provided by financing activities was $3.2 million for the nine months ended August 31, 2023 and consisted primarily of proceeds from the issuance of common stock under our Employee Stock Purchase Plan.

Quantitative and Qualitative Disclosures About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis