What changed in this filing

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Item 1A. Risk Factors

2025-04-08 compared with 2024-10-11 · 184 added, 131 removed, 1404 unchanged (18% of the section changed)

Investing in our common stock involves a high degree of risk.

Before making your decision to invest in shares of our common stock, you should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We cannot assure you that any of the events described below will not occur.

Before making your decision to invest in shares of our common stock, you should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed financial statements and related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We cannot assure you that any of the events described below will not occur.

The risks and uncertainties described below are not the only ones we face.

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We expect to incur losses over at least the next several years and may never achieve or maintain profitability.

Our net loss was $ 143.9 million for the fiscal year ended November 30, 2023, and $135.0 million for the nine months ended August 31, 2024.

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

Our net loss was $ 193.6 million for the fiscal year ended November 30, 2024, and $56.4 million for the three months ended February 28, 2025.

As of February 28, 2025, we had an accumulated deficit of $795.1 million.

To date, we have not generated any revenue from product sales and have financed our operations primarily through our collaborations and sales of our equity interests.

We are in the early stages of development of our drug candidates.

Our lead drug candidates, NX-5948, NX-2127 and NX-1607, are in the early stages of clinical development.

Our lead drug candidates, bexobrutideg (NX-5948), NX-2127 and NX-1607, are in the early stages of clinical development.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We anticipate that our operating expenses and capital expenditure requirements will increase substantially if and as we:

• increase enrollment in and further develop our drug candidates NX-5948, NX-2127 and NX-1607 through Phase 1 clinical trials;

• increase enrollment in and further develop our drug candidates bexobrutideg, NX-2127 and NX-1607 through Phase 1 clinical trials;

• submit investigational new drug applications (INDs) and initiate clinical trials of our other drug candidates;

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

• expand the capabilities of our DELigase platform and apply our DELigase platform to advance additional drug candidates into preclinical and clinical development;

• expand the capabilities of our DEL-AI platform and apply our DEL-AI platform to advance additional drug candidates into preclinical and clinical development;

• conduct process development for manufacturing of our drug candidates;

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We have never generated revenue from product sales and may never be profitable.

We are in the early stages of clinical development of our lead drug candidates NX-5948, NX-2127 and NX-1607.

We are in the early stages of clinical development of our lead drug candidates bexobrutideg (NX-5948), NX-2127 and NX-1607.

We expect that it will be many years, if ever, before we have a drug candidate ready for commercialization.

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If we are unable to raise capital when needed, we may be required to delay, limit, reduce or terminate our research or product development programs or future commercialization efforts.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we conduct our Phase 1 clinical trials of NX-5948, NX-2127 and NX-1607, grow our pipeline of drug candidates, expand the breadth of our DELigase platform, continue research and development and initiate additional clinical trials of and potentially seek marketing approval for our lead programs and other drug candidates.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we conduct our Phase 1 clinical trials of bexobrutideg (NX-5948), NX-2127 and NX-1607 and any future development of our drug candidates, grow our pipeline of drug candidates, expand the breadth of our DEL-AI platform, continue research and development and initiate additional clinical trials of and potentially seek marketing approval for our lead programs and other drug candidates.

In addition, if we obtain marketing approval for any of our drug candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, reimbursement and sales and distribution.

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If we are unable to raise capital when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our research, product development programs or any future commercialization efforts or grant rights to develop and market drug candidates that we otherwise would prefer to develop and market ourselves.

We had cash, cash equivalents and marketable securities of $457.5 million as of August 31, 2024.

We had cash, cash equivalents and marketable securities of $549.7 million as of February 28, 2025.

We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months.

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Our future capital requirements will depend on many factors, including:

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

• the progress, costs and results of our Phase 1 clinical trials for bexobrutideg, NX-2127 and NX-1607 and any future clinical development of such drug candidates;

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

• the number and development requirements of other drug candidates that we pursue;

• the scope of, and costs associated with, future advancements to our DELigase platform;

• the scope of, and costs associated with, future advancements to our DEL-AI platform;

• the success of our collaborations with Gilead Sciences, Inc.

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We are early in our development efforts.

Our lead drug candidates, NX-5948, NX-2127 and NX-1607, are in the early stages of clinical development.

Our lead drug candidates, bexobrutideg (NX-5948), NX-2127 and NX-1607, are in the early stages of clinical development.

If we are unable to advance our drug candidates through clinical development, develop, obtain regulatory approval for and commercialize our drug candidates or experience significant delays in doing so, our business may be materially harmed.

We are early in our development efforts.

Our lead drug candidates, NX-5948, NX-2127 and NX-1607, are in the early stages of clinical development and their risk of failure is high.

We have invested substantially all of our efforts and financial resources in building our DELigase platform, in the identification and preclinical development of our current drug candidates and in the preparation for and initiation of Phase 1 clinical trials for our lead drug candidates.

Our lead drug candidates, bexobrutideg (NX-5948), NX-2127 and NX-1607, are in the early stages of clinical development and their risk of failure is high.

We have invested substantially all of our efforts and financial resources in building our DEL-AI platform, in the identification and preclinical development of our current drug candidates and in the preparation for and initiation of Phase 1 clinical trials for our lead drug candidates, as well as the preparation to advance bexobrutideg into a Phase 2 clinical trial, anticipated in 2025.

Our ability to generate revenue from product sales, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our drug candidates.

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Further, certain patients have shown inherent (primary) resistance to approved BTK inhibitors and other patients have developed acquired (secondary) resistance to these inhibitors.

Both NX-5948 and NX-2127 degrade BTK with mutations that confer resistance to currently marketed BTK inhibitors, and we believe that preliminary data from our ongoing Phase 1 trials of NX-5948 and NX-2127 may provide evidence of clinical benefit to patients with such resistance mutations.

Both bexobrutideg (NX-5948) and NX-2127 degrade BTK with mutations that confer resistance to currently marketed BTK inhibitors, and we believe that preliminary data from our ongoing Phase 1 trials of bexobrutideg and NX-2127 may provide evidence of clinical benefit to patients with such resistance mutations.

However, any inherent primary or acquired secondary resistance to our BTK degraders in patients would prevent or diminish their clinical benefit.

We are in the early stages of clinical development of NX-5948 and NX-2127 and we currently have limited safety data of NX-5948 and NX-2127 in humans.

We are in the early stages of clinical development of bexobrutideg and NX-2127 and we currently have limited safety data of bexobrutideg and NX-2127 in humans.

Although some of our drug candidates have produced observable results in animal studies, these drug candidates may not demonstrate the same chemical and pharmacological properties in humans, and may interact with human biological systems in unforeseen, ineffective or harmful ways.

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Second- and third-line therapies are administered to patients when prior therapy was ineffective.

Our current and planned clinical trials for our drug candidates NX-5948, NX-2127 and NX-1607 are and will be with patients who have received one or more prior treatments.

Our current and planned clinical trials for our drug candidates bexobrutideg, NX-2127 and NX-1607 are and will be with patients who have received one or more prior treatments.

Subsequently, for those drug candidates that prove to be sufficiently beneficial, if any, we may seek approval potentially as a first-line therapy, but any drug candidates we develop, even if approved, may not be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

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It is impossible to predict when or if any drug candidates we may develop will prove safe in humans.

There is a limited safety data set for the effects of NX-5948, NX-2127 and NX-1607 in animals and we only recently have begun to test the safety of our drug candidates in humans.

There is a limited safety data set for the effects of bexobrutideg (NX-5948), NX-2127 and NX-1607 in animals and we only recently have begun to test the safety of our drug candidates in humans.

There can be no assurance that our current drug candidates or any future drug candidate will not cause undesirable side effects.

Unforeseen side effects from our drug candidates could arise at any time during preclinical or clinical development.

A potential risk in any protein modulation product is that healthy proteins or proteins not targeted for modulation will be modulated or that the modulation of the targeted protein in itself could cause adverse events, undesirable side effects or unexpected characteristics.

It is possible that healthy proteins or proteins not targeted for modulation could be modulated by our drug candidates in any of our current or future preclinical studies or clinical trials.

A potential risk in any protein degradation product is that healthy proteins or proteins not targeted for degradation will be degraded or that the degradation of the targeted protein in itself could cause adverse events, undesirable side effects or unexpected characteristics.

It is possible that healthy proteins or proteins not targeted for degradation could be degraded by our drug candidates in any of our current or future preclinical studies or clinical trials.

There also is the potential risk of delayed adverse events following treatment with our drug candidates.

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In particular, the small number of patients in our planned early clinical trials may make the results of these trials less predictive of the outcomes of later clinical trials.

For example, even if successful, the results of our initial clinical trials for NX-5948, NX-2127 and NX-1607 may not be predictive of the results of further clinical trials of these drug candidates or any of our other drug candidates.

For example, even if successful, the results of our initial clinical trials for bexobrutideg (NX-5948), NX-2127 and NX-1607 may not be predictive of the results of further clinical trials of these drug candidates or any of our other drug candidates.

Moreover, preclinical and clinical data often are susceptible to varying interpretations and analyses, and many companies that have believed their drug candidates performed satisfactorily in preclinical studies and clinical trials nonetheless have failed to obtain marketing approval of their products.

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We may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside of the United States.

In particular, we are currently conducting Phase 1 clinical trials for each of our lead drug candidates:

NX-5948, NX-2127 and NX-1607.

In particular, we are currently conducting Phase 1 clinical trials for each of our lead drug candidates, bexobrutideg (NX-5948), NX-2127 and NX-1607, and we expect to initiate a Phase 2 clinical trial of bexobrutideg in 2025.

We cannot predict how difficult it will be to enroll patients for these trials.

Therefore, our ability to identify and enroll eligible patients for our NX-5948, NX-2127 and NX-1607 clinical trials may be limited or may result in slower enrollment than we anticipate.

Therefore, our ability to identify and enroll eligible patients for our bexobrutideg, NX-2127 and NX-1607 clinical trials may be limited or may result in slower enrollment than we anticipate.

In addition, some of our competitors have ongoing clinical trials for drug candidates that treat the same indications as our drug candidates, and patients who otherwise would be eligible for our planned clinical trials instead may enroll in clinical trials of our competitors’ drug candidates.

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We actively engaged in discussions with FDA as part of our efforts to lift the partial clinical hold, and in March 2024, the FDA lifted the partial clinical hold.

There can be no assurance that we can address any issues resulting in any future partial or full clinical hold in a timely manner or at all, and we may incur additional expenses in connection with our efforts to address a partial or full clinical hold or advance our clinical programs.

There can be no assurance that we can address any issues resulting in any partial or full clinical hold in a timely manner or at all, and we may incur additional expenses in connection with our efforts to address a partial or full clinical hold or advance our clinical programs.

We may not be successful in our efforts to identify or discover additional potential drug candidates.

A key element of our strategy is to apply our DELigase platform to address a broad array of targets and new therapeutic areas.

A key element of our strategy is to apply our DEL-AI platform to address a broad array of targets and new therapeutic areas.

The therapeutic discovery activities we are conducting may not be successful in identifying drug candidates that are useful in treating hematologic cancers, immune-mediated diseases or any other diseases.

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If we are unable to identify suitable drug candidates for preclinical and clinical development, we will not be able to obtain revenues from the sale of products in future periods, which likely would result in significant harm to our financial position and adversely impact our stock price.

We may not be successful in our efforts to expand the breadth of our DELigase platform.

A key element of our strategy is to expand the capabilities of our DELigase platform and leverage our platform to discover, develop and potentially commercialize additional drug candidates beyond our current portfolio to target diseases in a wide range of organ systems and tissues and treat various disease states.

We may not be successful in our efforts to expand the breadth of our DEL-AI platform.

A key element of our strategy is to expand the capabilities of our DEL-AI platform and leverage our platform to discover, develop and potentially commercialize additional drug candidates beyond our current portfolio to target diseases in a wide range of organ systems and tissues and treat various disease states.

These enhancements require substantial technical, financial and human resources, and may not result in the discovery or development of additional drug candidates or therapies.

We may pursue what we believe is a promising opportunity to leverage our platform only to discover that certain of our risk or resource allocation decisions were incorrect or insufficient, or that individual products or our science in general has technology or biology risks that were previously unknown or underappreciated.

Our strategy of pursuing the value of our DELigase platform over a long time horizon and across a broad array of human diseases may not be effective.

In the event material decisions in any of these areas turn out to be incorrect or sub-optimal, we may experience a material adverse impact on our business and ability to fund our operations and we may never realize what we believe is the potential of our DELigase platform.

Our strategy of pursuing the value of our DEL-AI platform over a long time horizon and across a broad array of human diseases may not be effective.

We face substantial competition in an environment of rapid technological change, which may result in others discovering, developing or commercializing products before or more successfully than we do.

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Moreover, the biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.

We face and will continue to face competition from third parties that use protein modulation, antibody therapy, adoptive cell therapy, inhibitory nucleic acid, gene editing or gene therapy development platforms and from companies focused on more traditional therapeutic modalities, such as small molecule inhibitors.

We face and will continue to face competition from third parties that use protein degradation, antibody therapy, adoptive cell therapy, inhibitory nucleic acid, gene editing or gene therapy development platforms and from companies focused on more traditional therapeutic modalities, such as small molecule inhibitors.

The competition is likely to come from multiple sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, government agencies and other public and private research institutions that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

We are aware of a number of biotechnology companies focused on developing small molecules that degrade target proteins or inhibit E3 ligases, including, but not limited to, Accutar Biotechnology Inc., Arvinas, Inc., BeiGene, Ltd., BioTheryX, Inc., C4 Therapeutics, Inc., Cullgen Inc., Foghorn Therapeutics Inc., HotSpot Therapeutics, Inc., Kymera Therapeutics, Inc.

and Monte Rosa Therapeutics, all of which currently are in preclinical or clinical development.

In addition, certain large pharmaceutical companies have disclosed investments in this field, including AbbVie Inc., Amgen Inc., AstraZeneca plc, Bayer AG, Bristol-Myers Squibb Company, Genentech, Inc., GlaxoSmithKline plc and Novartis International AG.

Furthermore, we are aware of multiple other BTK degrader programs in clinical development, including programs from AbbVie Inc., Accutar Biotechnology, Inc., BeiGene, Ltd, Haisco Pharmaceutical Group Co., Ltd.

and Ubix Therapeutics, Inc.

We are aware of a number of biotechnology companies focused on developing small molecules that degrade target proteins or inhibit E3 ligases, many of which currently are in preclinical or clinical development.

In addition, certain large pharmaceutical companies have disclosed investments in this field.

Furthermore, we are aware of multiple other BTK degrader programs in clinical development.

Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

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In addition, these inaccuracies or errors may cause us to misallocate capital and other critical business resources, which could harm our business.

The biopharmaceutical industry is subject to extensive regulatory obligations and policies that are subject to change, including due to judicial challenges.

On June 28, 2024, the U.S.

Supreme Court issued an opinion holding that courts reviewing agency action pursuant to the Administrative Procedure Act (APA) “must exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” The decision will have a significant impact on how lower courts evaluate challenges to agency interpretations of law, including those by the FDA and other agencies with significant oversight of the biopharmaceutical industry.

The new framework is likely to increase both the frequency of such challenges and their odds of success by eliminating one way in which the government previously prevailed in such cases.

As a result, significant regulatory policies will be subject to increased litigation and judicial scrutiny.

Any resulting changes in regulation may result in unexpected delays, increased costs, or other negative impacts on our business that are difficult to predict but could have a material adverse effect on our business and financial condition.

For example, certain of these changes could impose additional limitations on the rates we will be able to charge for our future products or the amounts of reimbursement available for our future products from governmental agencies or third-party payors.

Risks Related to Dependence on Third Parties

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We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for completing such trials.

We rely on third-party contract research organizations (CROs) to conduct our Phase 1 clinical trial programs for NX-5948, NX-2127 and NX-1607 and we will rely on third-party CROs to conduct any clinical trials for other drug candidates.

We rely on third-party contract research organizations (CROs) to conduct our Phase 1 clinical trial programs for bexobrutideg (NX-5948), NX-2127 and NX-1607 and we will rely on third-party CROs to conduct any clinical trials for other drug candidates.

Agreements with these CROs might terminate for a variety of reasons, including for such CRO’s failure to perform.

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We obtain certain chemical or biological intermediates in the synthesis of our drug candidates and natural health products (NHPs) for toxicology testing in countries affected by macroeconomic events and conditions, including inflation, interest rate fluctuations, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, increasing financial market volatility and uncertainty, the impact of war or military conflict, including regional conflicts around the world, and public health pandemics.

Supply chain disruptions and delays as a result of any new tariff policies or trade restrictions could also negatively impact our cost of materials and production processes.

For example, during the prior Trump administration, increased tariffs were implemented on goods imported into the United States, particularly from China, Canada, and Mexico.

On February 1, 2025, the United States imposed a 25% tariff on imports from Canada and Mexico, which were subsequently suspended for a period of one month, and a 10% additional tariff on imports from China, and on April 2, 2025, the United States announced a baseline 10% tariff on all foreign goods, with goods imported from specified nations, including China and those in the European Union, taxed at higher rates.

If we are unable to obtain these chemical or biological intermediates or NHPs in sufficient quantity and in a timely manner due to disruptions in the global supply chain caused by macroeconomic events and conditions, the development, testing and clinical trials of that drug candidate may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business.

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To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our drug candidate to other available therapies.

In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

In some non-U.S.

markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

As a result, we might obtain marketing approval for a drug candidate in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues, if any, we are able to generate from the sale of the product in that country.

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Upon the expiration of patents that may issue from our pending patent applications, we will not be able to assert such patent rights against potential competitors and other third parties, which would materially adversely affect our business, financial condition, results of operations and prospects.

We may need to license intellectual property from third parties, such licenses may not be available or may not be available on commercially reasonable terms and we may not be successful in obtaining or maintaining necessary rights to our drug candidates through acquisitions and in-licenses.

We may need to license intellectual property from third parties that may not be available to us or may not be available on commercially reasonable terms, and we may not be successful in obtaining or maintaining necessary rights to our drug candidates through acquisitions and in-licenses.

A third party may hold intellectual property, including patent rights, that are important or necessary to the development of our drug candidates.

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For example, we are aware of a patent owned by a third party with a claim that covers many potential targeted protein degraders.

This patent may be alleged to cover one or more of our targeted protein degrader drug candidates, including our NX-5948 and NX-2127 drug candidates.

This patent may be alleged to cover one or more of our targeted protein degrader drug candidates, including our bexobrutideg (NX-5948) and NX-2127 drug candidates.

While we believe that we have valid defenses against any assertion of such patent against us, such defenses may be unsuccessful.

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Further, we do not know which processes we will use for commercial manufacture of our future products, or which technologies owned or controlled by third parties may prove important or essential to those processes.

Many companies have filed, and continue to file, patent applications related to novel protein modulation therapies that target disease-causing proteins and many companies have filed and continue to file patent applications related to ACT.

Many companies have filed, and continue to file, patent applications related to novel protein degradation therapies that target disease-causing proteins and many companies have filed and continue to file patent applications related to ACT.

Some of these patent applications have already been allowed or issued and others may issue in the future.

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Even if we are successful, litigation could result in substantial cost and reputational loss and distract our management and other employees from their regular responsibilities.

In addition, although it is our policy to require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own.

In addition, although it is our policy to require our employees, consultants and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact conceives or develops intellectual property that we regard as our own.

Moreover, even when we obtain agreements assigning intellectual property to us, such assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

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Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our business, financial condition, results of operations and prospects.

During the course of any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions and other interim proceedings or developments in the litigation.

If securities analysts or investors regard these announcements as negative, the perceived value of our existing drug candidates, approved products, programs or intellectual property could be diminished.

Accordingly, the market price of shares of our common stock may decline.

Such announcements could also harm our reputation or the market for our drug candidates, which could have a material adverse effect on our business.

We may not be able to pursue or guarantee protection of our intellectual property rights in jurisdictions outside the United States.

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This will be a significant change in European patent practice.

As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation.

As the UPC is a new court system, there is very little precedent for the court, increasing the uncertainty of any litigation.

As a single court system can invalidate a European patent, we, where applicable, may opt out of the UPC, and as such, each European patent would need to be challenged in each individual country.

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If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.

Such an outcome could have a material adverse effect on our business.

Such an outcome could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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• the FDA may find deficiencies with or fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;

• the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical data insufficient for approval.

• the approval policies or regulations of the FDA may significantly change, including in a manner rendering our clinical data insufficient for approval or otherwise impacting the FDA’s review process and timing or requirements.

This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain regulatory approval to market any of our drug candidates, which would significantly harm our business, results of operations, financial condition and prospects.

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Any of the foregoing scenarios could materially harm the commercial prospects for our drug candidates.

We have received Fast Track designation for NX-5948 and may seek Fast Track designation for other drug candidates in the future.

We have received Fast Track designation for bexobrutideg (NX-5948) and may seek Fast Track designation for other drug candidates in the future.

Fast Track designation may not lead to faster development or regulatory review or approval process, and it does not increase the likelihood that our drug candidates will receive marketing approval.

In January 2024, the FDA granted Fast Track designation for NX-5948 in the United States for the treatment of adult patients with relapsed or refractory CLL or small lymphocytic lymphoma after at least two lines of therapy, including a BTK inhibitory and a B-cell lymphoma 2 inhibitor.

In January 2024, the FDA granted Fast Track designation for bexobrutideg (NX-5948) in the United States for the treatment of adult patients with relapsed or refractory CLL or small lymphocytic lymphoma after at least two lines of therapy, including a BTK inhibitory and a B-cell lymphoma 2 inhibitor, and in December 2024, the FDA granted Fast Track designation for bexobrutideg in the United States for the treatment of adult patients with relapsed or refractory Waldenström macroglobulinemia after at least two lines of therapy, including a BTK inhibitor.

As part of our business strategy, we may also seek Fast Track designation for other of our drug candidates.

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The receipt of Fast Track designation for a drug candidate may not result in a faster development, regulatory review or approval process compared to drug candidates considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA.

In addition, even if any drug candidate qualifies for FastTrack designation, the FDA may later decide that the drug candidate no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened.

In addition, even if any drug candidate qualifies for Fast Track designation, the FDA may later decide that the drug candidate no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened.

Fast Track designation alone does not guarantee qualification for FDA Priority Review.

Under FDA policies, a drug candidate is eligible for Priority Review, or review within a six-month time frame from the time a complete NDA is accepted for filing, if the drug candidate provides a significant improvement in safety or effectiveness of the treatment, diagnosis or prevention of serious conditions compared to available therapies.

Under FDA policies, a drug candidate is eligible for Priority Review, or review within a six-month time frame from the time a complete NDA is accepted for filing, if the drug candidate provides a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention of serious conditions compared to available therapies.

The FDA determines whether a drug qualifies for Priority Review after an NDA for such drug is submitted to the FDA.

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Typically, clinical benefit is verified when postmarketing clinical trials show that the drug provides a clinically meaningful positive therapeutic effect, that is, an effect on how a patient feels, functions, or survives.

The FDA may require that these studies be underway prior to Accelerated Approval pursuant to the Food and Drug Omnibus Reform Act of 2022.

The FDA may require that these studies be underway prior to Accelerated Approval pursuant to the Food and Drug Omnibus Reform Act of 2022 and under the FDA’s draft guidance on “Accelerated Approval and Considerations for Determining Whether a Confirmatory Trial is Underway” made available in January 2025.

If such confirmatory trials fail to confirm the drug’s clinical profile or risks and benefits, the FDA may withdraw its approval of the drug.

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The FDA may also require postapproval studies to be underway at the time of Accelerated Approval or within a specified time period following Accelerated Approval for such drugs, and must explain any instances where it does not require such studies.

The FDA’s January 2025 draft guidance on “Accelerated Approval and Considerations for Determining Whether a Confirmatory Trial is Underway,” while not finalized, suggests that the FDA generally intends to consider a confirmatory trial to be “underway” prior to accelerated approval if (1) the trial has a target completion date that is consistent with diligent and timely conduct of the trial, considering the nature of the trial’s design and objectives, (2) the sponsor’s progress and plans for postapproval conduct of the trial provide sufficient assurance to expect timely completion of the trial, and (3) enrollment of the confirmatory trial has been initiated.

Any delay in obtaining, or inability to obtain, approval through the Accelerated Approval Program, or any issues in maintaining approval granted under the Accelerated Approval Program, would delay or prevent commercialization of our products, and would materially adversely affect our business, financial condition, results of operations and prospects.

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As a result, companies now need to comply with a separate UK regulatory legal framework in order to commercialize medicinal products in Great Britain (namely, England, Wales and Scotland, as EU law continues to apply in Northern Ireland).

The UK government has attempted to renegotiate fundamental aspects of the NIP so this is an unpredictable area for companies

in the near future.

The UK government has attempted to renegotiate fundamental aspects of the NIP so this is an unpredictable area for companies in the near future.

Failed attempts to renegotiate the NIP have led to media reports of the UK potentially triggering Article 16 of the NIP, a safeguarding measure, that may be engaged unilaterally if the application of the NIP leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade.

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We, any contract manufacturers we may engage in the future, our collaborators and their contract manufacturers also will be subject to other regulatory requirements, including submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements regarding the distribution of samples to clinicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product, such as the requirement to implement a REMS.

If we decide to seek Orphan Drug Designation or other designations from regulators for any of our current or future drug candidates, we may be unsuccessful or may be unable to maintain the benefits associated with these designations, including the potential for supplemental market exclusivity associated with an Orphan Drug Designation.

We may seek Orphan Drug Designation or other designations from regulators for one or more of our current or future drug candidates.

We have received Orphan Drug Designation for bexobrutideg (NX-5948) and may seek Orphan Drug Designation for other drug candidates in the future.

If we decide to seek Orphan Drug Designation or other designations from regulators for any of our other or future drug candidates, we may be unsuccessful or may be unable to maintain the benefits associated with these designations, including the potential for supplemental market exclusivity associated with an Orphan Drug Designation.

In March 2025, the FDA granted Orphan Drug Designation to bexobrutideg (NX-5948) for the treatment of Waldenström macroglobulinemia.

As part of our business strategy, we may also seek Orphan Drug Designation or other designations from regulators for other of our current or future drug candidates.

Regulatory authorities in some jurisdictions, including the United States, EU and European Economic Area (EEA), Switzerland and the UK, may designate drugs or biological products for relatively small patient populations as orphan drugs.

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• the federal civil Monetary Penalties Law, which authorizes the imposition of substantial civil monetary penalties against an entity that engages in activities including, among others (1) knowingly presenting, or causing to be presented, a claim for services not provided as claimed or that is otherwise false or fraudulent in any way;

(2) arranging for or contracting with an individual or entity that is excluded from participation in federal health care programs to provide items or services reimbursable by a federal health care program;

(2) arranging for or contracting with an individual or entity that is excluded from participation in federal healthcare programs to provide items or services reimbursable by a federal healthcare program;

(3) violations of the federal Anti-Kickback Statute;

or (4) failing to report and return a known overpayment;

• federal criminal statutes created by the Health Insurance Portability and Accountability Act (HIPAA), which impose criminal liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, including private insurance plans, or, in any matter involving a healthcare benefit program, for knowingly and willfully making materially false, fictitious or fraudulent statements in connection with the delivery of or payment for health care benefits;

• HIPAA, as amended by the Health Information Technology for Economic Clinical Health Act, and its implementing regulations, which also imposes obligations, including mandatory contractual terms, on certain types of people and entities with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

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Providing benefits or advantages to induce or reward improper performance generally to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is prohibited in the EU and the UK.

The provision of benefits or advantages to induce or reward improper performance is governed by the national anti-bribery laws of EU Member States, and in respect of the UK, the UK Bribery Act 2010 (Bribery Act).

The provision of benefits or advantages to induce or reward improper performance is governed by the national anti-bribery laws of EU Member States, and with respect to the UK, the UK Bribery Act 2010 (Bribery Act).

Infringement of these laws may result in substantial fines and imprisonment.

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Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates.

Disruptions at the FDA may slow the time necessary for new products to be reviewed and/or approved, which would adversely affect our business.

In addition, there is substantial uncertainty regarding new initiatives and how these might impact the FDA, its implementation of laws, regulations, policies and guidance and its personnel.

Similar initiatives may also be directed toward other government agencies.

These initiatives could prevent, limit or delay development and regulatory approval of our product candidates, which would adversely affect our business.

Disruptions at the FDA may slow the time necessary for new products to be reviewed and/or approved, which would adversely affect our business.

Changes in FDA staffing could result in delays in the FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all.

If any legislation, executive orders, or lapses in agency funding impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Similar consequences would also result in the event of another significant shutdown of the federal government.

For example, in 2025, the U.S.

government was on the verge of a shutdown and has previously shut down several times, and certain regulatory agencies, such as the FDA, had to furlough critical employees and stop critical activities.

If a prolonged government shutdown occurs, or if geopolitical or global health concerns prevent the FDA from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Further, future government shutdowns or delays could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

FDA-regulated industries, such as ours, face uncertainty with regard to the regulatory environment we will face as we proceed with research and development, and possibly in future commercialization.

Some of these efforts have manifested to date in the form of FDA reductions in workforce or other personnel measures that could impact the FDA’s ability to hire and retain key personnel, which could result in delays or limitations on our ability to obtain guidance from the FDA on our product candidates in development and obtain the requisite regulatory approvals in the future.

Moreover, additional changes to budget and staffing of other governmental agencies, including but not limited to those within the Department of Health and Human Services, could affect development activities such as enrollment and conduct of clinical trials.

There remains general uncertainty regarding future activities.

New executive orders, regulations, policies or guidance could be issued or promulgated that adversely affect us or create a more challenging or costly environment to pursue the development of new therapeutic products.

Alternatively, state governments may attempt to address or react to changes at the federal level with changes to their own regulatory frameworks in a manner that is adverse to our operations.

If we become negatively impacted by future governmental orders, regulations, policies or guidance, there could be a material adverse effect on us and our business.

Further, in connection with new initiatives, the FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability.

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and, beginning in 2023, penalize drug companies that raise prices for products covered under Medicare Parts B and D faster than inflation, among other reforms.

CMS has recently taken steps to implement the IRA, including:

• On August 29, 2023, releasing the initial list of 10 drugs subject to price negotiations;

• On November 17, 2023, releasing guidance outlining the methodology for identifying certain manufacturers eligible to participate in a phase-in period where discounts on applicable products will be lower than those required by the Medicare Part D Manufacturer Discount Program;

• On March 26, 2024, releasing a list of 41 Medicare Part B products that had adjusted coinsurance rates based on the inflationary rebate provisions of the IRA for the time period of April 1, 2024, to June 30, 2024;

• On April 1, 2024, releasing final program instructions on the redesigned Medicare Part D benefit for 2025;

• On May 3, 2024, issuing guidance on the requirements and parameters of the second round of price negotiations, to take place during 2025, for products subject to the “maximum fair price” provision in 2027.

It is unclear how future regulatory actions to implement the IRA, as well as the outcome of pending litigation against the IRA, may affect our products and future profitability.

On October 14, 2022, President Biden issued an Executive Order on Lowering Prescription Drug Costs for Americans, which instructed the Secretary of the Department of Health and Human Services (HHS) to consider whether to select for testing by the CMS Innovation Center new health care payment and delivery models that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs.

On February 14, 2023, the HHS issued a report in response to the October 14, 2022 Executive Order, which, among other things, selects three potential drug affordability and accessibility models to be tested by the CMS Innovation Center.

Specifically, the report addresses:

(1) a model that would allow Part D Sponsors to establish a “high-value drug list” setting the maximum co-payment amount for certain common generic drugs at $2;

(2) a Medicaid-focused model that would establish a partnership between CMS, manufacturers, and state Medicaid agencies that would result in multi-state outcomes-based agreements or certain cell and gene therapy drugs;

and (3) a model that would adjust Medicare Part B payment amounts for Accelerated Approval Program drugs to advance the developments of novel treatments.

We cannot be sure what impact, if any, the foregoing changes will have on the profitability of any of our drug candidates, if approved for commercial use, in the future.

The CMS has taken a number of steps to implement the IRA, including:

on August 29, 2023, releasing the initial list of ten drugs subject to price negotiations;

on August 15, 2024, releasing the negotiated maximum prices for such drugs that will be effective beginning in 2026;

on October 2, 2024, releasing final guidance outlining the process for the second round of price negotiations for products subject to the “maximum fair price” provision;

and on December 20, 2024, releasing a list of 64 Medicare Part B products that had an adjusted coinsurance rate based on the inflationary rebate provisions of the IRA for the time period of January 1, 2025 to March 31, 2025.

It is unclear how future regulatory actions to implement the IRA, as well as the outcome of pending litigation against the IRA, may affect our products and future profitability, and we cannot predict the likelihood, nature, or extent of other health reform initiatives that may arise from future legislation or administrative actions.

Moreover, the results of the 2024 Presidential and Congressional elections, and potential subsequent developments, increase the uncertainty related to the healthcare regulatory environment.

In addition, on June 28, 2024, the U.S.

Supreme Court issued an opinion holding that courts reviewing agency action pursuant to the APA “must exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” The decision will have a significant impact on how lower courts evaluate challenges to agency interpretations of law, including those by CMS and other agencies with significant oversight of the healthcare industry.

For additional information, see the risk factor above titled “The biopharmaceutical industry is subject to extensive regulatory obligations and policies that are subject to change, including due to judicial challenges.”

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing.

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For example, on January 5, 2024, the FDA approved Florida’s importation plan, which allows pharmacists and wholesalers to import certain products from Canada.

In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.

These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

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In addition, we have limited experience in product development.

We filed our first IND in December 2020 and currently have three drug candidates in ongoing Phase 1 trials.

We filed our first IND in December 2020 and currently have three drug candidates in ongoing Phase 1 trials, and expect to advance our drug candidate bexobrutideg (NX-5948) to a Phase 2 clinical trial in 2025.

As our drug candidates enter and advance through preclinical studies and clinical trials, we will need to expand our development, regulatory and manufacturing capabilities or contract with other organizations to provide these capabilities for us.

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Security breaches, cyber-attacks, loss of data and other disruptions could compromise sensitive information related to our business or other personal information, prevent us from accessing critical information and expose us to liability, which could adversely affect our business, reputation, results of operations, financial condition and prospects.

We collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on information technology systems, infrastructure and data to operate our business.

In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including but not limited to intellectual property, proprietary business information and personal information.

It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such confidential information.

We have established physical, electronic and organizational measures to safeguard and secure our systems which are designed to prevent data compromise, and rely on commercially available systems, software, tools and monitoring to provide security for our information technology systems and the processing, transmission and storage of digital information.

We have also outsourced elements of our information technology infrastructure, resulting in a number of third-party vendors that may or could have access to our confidential information.

Despite the implementation of security measures, our internal information technology systems and infrastructure, and those of our current and any future CROs, collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to breach, breakdown or other damage or interruption from service interruptions, system malfunction, computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet (including harmful attachments to emails, ransomware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information), persons inside our organization, or persons with access to systems inside our organization.

We are increasingly dependent on information technology systems, infrastructure and data to operate our business.

In the ordinary course of our business, we collect, store and transmit large amounts of confidential and sensitive information, including but not limited to intellectual property, proprietary business information and personal information.

It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such information.

We have also outsourced elements of our information technology infrastructure, resulting in a number of third-party vendors that may or could have access to our information.

Despite the implementation of security measures, our internal information technology systems and infrastructure, and those of our current and any future CROs, collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to breach, breakdown or other damage or interruption from service interruptions, system malfunction, computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet (including harmful attachments to emails, ransomware, distributed denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information), persons inside our organization, or persons with access to systems inside our organization.

Any of the foregoing may compromise or lead to data leakage of our system infrastructure, or that of our CROs, third-party vendors and other contractors and consultants.

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For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

Furthermore, significant disruptions of our internal information technology systems or those of our third-party vendors and other contractors and consultants, or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.

If any such event, including a computer security breach, results in the unauthorized access, use or release of personal information, our reputation could be materially damaged.

In addition, such a breach may require notification to governmental agencies, the media or individuals pursuant to various federal and state data privacy and security laws (and other similar non-U.S.

laws), subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information.

Furthermore, significant disruptions of our internal information technology systems or those of our third-party vendors and other contractors and consultants, or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential or sensitive information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.

If any such event, including a security breach, results in the unauthorized access, use or release of personal information, our reputation could be materially damaged.

In addition, such a breach may require notification to governmental agencies, the media or individuals pursuant to various federal and state data privacy and security laws (and other similar international laws), subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information.

For example, data breaches frequently result in regulatory actions and commercial and class action litigation based on a variety of laws and legal duties, such as the California Consumer Privacy Act (CCPA), which provides for a private right of action in the event of certain data security breaches.

Additionally, the SEC also adopted a new cybersecurity rule requiring companies subject to SEC reporting requirements to formally report material cybersecurity incidents, where failure to report may result in regulatory investigations leading to consent orders that may require additional compliance obligations and/or injunctions, fines and other penalties.

Additionally, the SEC adopted a new cybersecurity rule requiring companies subject to SEC reporting requirements to formally report material cybersecurity incidents, where failure to report may result in regulatory investigations leading to consent orders that may require additional compliance obligations and/or injunctions, fines and other penalties.

Such actions could result in significant legal and financial exposure and reputational damages that could have a material adverse effect on our business, financial condition, results of operations and prospects.

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Any of the foregoing could have an adverse effect on our business, reputation, operating results, and financial condition.

We are or may become subject to a variety of stringent privacy and data security laws, regulations, policies and contractual obligations related to data privacy and security, and changes in such laws, regulations, policies and contractual obligations and our failure, or any failure by our third-party vendors, collaborators, contractors or consultants, to comply with them could harm our business and result in enforcement action by regulators and claims from affected individuals.

We are subject to a variety of stringent and changing privacy and data security laws, regulations, policies and contractual obligations related to data privacy and security, and changes in such laws, regulations, policies and contractual obligations and our failure, or any failure by our third-party vendors, collaborators, contractors or consultants, to comply with them could harm our business and result in enforcement action by regulators and claims from affected individuals.

We are subject to global privacy and data protection laws and regulations that apply to the collection, transmission, storage and use of personal information, which among other things, impose certain requirements relating to the privacy, security and transmission of personal information.

Failure by us or our third-party vendors, collaborators, contractors and consultants to comply with any of these laws and regulations could result in enforcement actions by data protection authorities against us, including fines or penalties, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.

Failure by us or our third-party vendors, CROs, contractors and consultants to comply with any of these laws and regulations could result in enforcement actions by data protection authorities against us, including fines or penalties, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.

In the United States, there are numerous federal and state privacy and data security laws and regulations governing the collection, use, disclosure and protection of personal information, including federal and state health information privacy laws, federal and state security breach notification laws, and federal and state consumer protection laws.

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The HHS has enforcement discretion for HIPAA, and any enforcement activity can result in financial liability and reputational harm, and responses to such enforcement activity can consume significant internal resources.

In addition, states have shown an increased interest in protecting the privacy of health data.

On April 22, 2024, OCR issued a Final Rule, the HIPAA Privacy Rule to Support Reproductive Health Care Privacy, which is intended to strengthen the HIPPA Privacy Rule by prohibiting the disclosure of protected health information related to lawful reproductive healthcare in certain circumstances.

In addition, states have shown an increased interest in regulating personal information in general and specifically in the privacy of health data.

Washington state passed the My Health My Data Act, which took effect on March 31, 2024, and is focused on the collection of consumer health data.

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In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems.

Personal data privacy remains an evolving landscape at both the U.S.

Personal information privacy remains an evolving landscape at both the U.S.

state and international level, with new regulations coming into effect.

For example, the CCPA, which came into effect on January 1, 2020, and was amended and expanded by the California Privacy Rights Act (CPRA) as of January 1, 2023, provides California residents expanded privacy rights, including the right to request correction, access, and deletion of their personal information, the right to opt out of certain personal information sharing, and the right to receive detailed information about how their personal information is processed, including by California residents’ employers.

Additionally, the CCPA, as amended, requires companies that process personal information of California residents to make disclosures to consumers about their data collection, use and sharing practices, allow consumers to opt out of certain data sharing with third parties, complete certain audits and assessments when processing higher risk data and provide a private right of action for data breaches, as described above.

Although the CCPA includes limited exceptions—including exceptions for personal health information collected by covered entities or business associates subject to HIPAA among others, the CCPA may regulate or impact our processing of personal information depending on the context.

Failure to comply with the CCPA may result in significant civil penalties, injunctive relief, or statutory or actual damages as determined by the California Privacy Protection Agency, the newly created state agency from the CPRA legislation that is charged with creating new rules and enforcing the CCPA, and the California Attorney General, who also still maintains some CCPA enforcement powers.

Notably, following California’s lead, several other states enacted or proposed privacy laws that contain obligations similar to the CCPA and CPRA that have taken effect or will take effect in coming years.

Additionally, the CCPA, requires companies that process personal information of California residents to make disclosures to consumers about their data collection, use and sharing practices, allow consumers to opt out of certain data sharing with third parties, complete certain audits and assessments when processing higher risk data and provide a private right of action for data breaches, as described above.

Although the CCPA includes limited exceptions—including exceptions for personal health information collected by covered entities or business associates subject to HIPAA, the CCPA may regulate or impact our processing of personal information depending on the context.

Failure to comply with the CCPA may result in significant civil penalties, injunctive relief, or statutory or actual damages as determined by the California Privacy Protection Agency, the state agency that is charged with creating new rules and enforcing the CCPA, and the California Attorney General, who also still maintains some CCPA enforcement powers.

Notably, following California’s lead, over a third of other U.S.

states enacted or proposed privacy laws that contain obligations similar to the CCPA and CPRA that have taken effect or will take effect in coming years.

In addition, a comprehensive federal privacy bill, which includes a private right of action for violations, has been proposed and is under review by the U.S.

House of Representatives.

Compliance with this new privacy legislation adds complexity and may require investment in additional resources for compliance programs, thus potentially result in additional costs and expense of resources to maintain compliance.

While these new laws and proposals generally include exemptions for HIPAA-covered data and clinical trial data, they add layers of complexity to compliance in the U.S.

market and could increase our compliance costs and adversely affect our business.

Compliance with this new and evolving privacy legislation adds complexity and may require investment in additional resources for compliance programs, thus potentially result in additional costs and expense of resources to maintain compliance.

In the EU, the EU GDPR governs the collection, use, disclosure, transfer, or other processing of personal data.

The UK has implemented the EU GDPR as the UK GDPR which sits alongside the UK Data Protection Act 2018 (the UK GDPR, and together with the EU GDPR, the GDPR).

The GDPR imposes compliance obligations on controllers, including (among others) mandating burdensome documentation requirements, granting certain privacy rights to individuals to control how companies collect, use, disclose, retain and otherwise process information about them as well as specific requirements for obtaining valid consent where consent is the legal basis for processing, requirements around accountability and transparency, the obligation to consider data protection when any new products or services are developed, the obligation to appoint data protection officers in certain circumstances, the obligation to notify relevant data supervisory authorities of notifiable personal data breaches without undue delay (and no later than 72 hours) after becoming aware of the personal data breach, and the requirement for more detailed notices for clinical trial subjects and investigators.

In addition, the EU GDPR prohibits the international transfer of personal data from clinical trial sites and other third parties (e.g., CROs) located in the EEA to jurisdictions that the European Commission does not recognize as having ‘adequate’ data protection laws, unless a data transfer mechanism has been put in place or a derogation under the EU GDPR can be relied upon.

After years of uncertainty following the July 16, 2020 decision of the Court of Justice of the European Union invalidating the EU-U.S.

Privacy Shield Framework for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (EU SCCs), including a requirement for companies to carry out a transfer privacy impact assessment (TIA), on July 10, 2023, the European Commission adopted its Final Implementing Decision granting the U.S.

The UK has implemented the EU GDPR as the UK GDPR which sits alongside the UK Data Protection Act 2018 (the UK GDPR together with the EU GDPR, the GDPR).

The GDPR imposes compliance obligations on controllers (and in more limited cases, on processors), including granting certain privacy rights to individuals to control how companies collect, use, disclose, retain and otherwise process their personal data as well as specific requirements for obtaining valid consent where consent is the legal basis for processing, requirements around accountability and transparency, the obligation to consider data protection when any new products or services are developed, the obligation to appoint data protection officers in certain circumstances, the obligation to notify relevant data protection supervisory authorities of notifiable personal data breaches without undue delay (and no later than 72 hours) after becoming aware of the personal data breach, and the requirement to provide more detailed notices for clinical trial subjects and investigators.

In addition, the EU GDPR prohibits the international transfer of personal data originating in the EEA (including, from clinical trial sites and other third parties (e.g., CROs)) to jurisdictions that the European Commission does not recognize as having ‘adequate’ data protection laws, unless a data transfer mechanism has been put in place or a derogation under the EU GDPR can be relied upon.

In certain cases, including when transfers are made in reliance on standard contractual clauses (EU SCCs), including a requirement for companies to carry out a transfer impact assessment (TIA)—which (among other things) assesses laws governing access to personal data in the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under EU SCCs—will need to be implemented to ensure an ‘essentially equivalent’ level of data protection to that afforded in the EEA.

On July 10, 2023, the European Commission adopted its Final Implementing Decision granting the U.S.

adequacy (Adequacy Decision) for EU-U.S.

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However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission reassesses and renews/extends that decision, and remains under review by the European Commission during this period.

The UK GDPR also imposes similar restrictions on transfers of personal data from the UK to jurisdictions that the UK Government does not consider adequate, including the U.S.

The UK’s Information Commissioner’s Office (ICO) published:

(i) its own form of EU SCCs, known as the International Data Transfer Agreement to replace the old Standard Contractual Clauses for transfers to outside the UK;

(ii) a “UK addendum” to the new EU SCCs which amends the relevant provisions of such clauses to work in a UK context;

and (iii) its own version of the TIA and guidance on international transfers (although entities may choose to adopt either the EU or UK-style TIA).

The UK GDPR also imposes similar restrictions on transfers of personal data from the UK to jurisdictions that the UK Government does not consider adequate, including the United States.

The UK’s Information Commissioner’s Office published:

(i) its own form of EU SCCs, known as the International Data Transfer Agreement;

(ii) a “UK addendum” to the EU SCCs which amends the relevant provisions of such clauses to work in a UK context;

and (iii) its own version of the TIA (although entities may choose to adopt either the EU or UK-style TIA).

Further, on September 21, 2023, the UK Secretary of State for Science, Innovation and Technology established a UK-U.S.

data bridge (i.e., a UK equivalent of the Adequacy Decision) and adopted UK regulations to implement the UK-U.S.

data bridge (UK Adequacy Regulations).

Personal data may now be transferred from the UK under the UK-U.S.

data bridge through the UK extension to the DPF to organizations self-certified under the UK extension to the DPF.

The UK extension to the DPF, which covers transfers of personal data from the UK to certified companies in the United States took effect in October 2023.

However, the DPF in both the EU and UK may be subject to further legal challenge which could cause the legal requirements for personal data transfers from the EU and the UK to the United States to become uncertain once again.

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Some countries also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity for conducting preclinical testing and clinical trials or delivering our future products, if any.

Additionally, other countries (e.g., Australia and Japan) have adopted certain legal requirements for cross-border transfers of personal information.

Additionally, other countries (e.g., Australia and Japan) have adopted their own legal requirements for cross-border transfers of personal information.

These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices.

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Any such liability, litigation, investigations and proceedings may or may not be covered by our liability insurance and may subject us to significant penalties and negative publicity, require us to change our business practices, increase our costs, severely disrupt our business, and may result in significant reputational harm and have a material and adverse impact on our business, financial condition, results of operations or prospects.

We use artificial intelligence in our business, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.

We leverage artificial intelligence (AI) into certain aspects of our operations, including through our proprietary DEL-AI platform, which employs machine learning across all aspects of the discovery process.

However, our competitors and other third parties may incorporate AI into their operations and processes more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.

Additionally, if the output that AI applications assist in producing are or are alleged to be inaccurate, deficient, or biased, our business, financial condition, and results of operations may be adversely affected.

Furthermore, the integration of third-party AI models with our operations relies on certain safeguards implemented by the third-party developers of the underlying AI models, including those related to the accuracy, bias, and other variables of the data, and these safeguards may be insufficient.

The use of AI applications has resulted in, and may in the future result in, cybersecurity incidents that implicate the data analyzed within such applications.

Any such cybersecurity incidents related to our use of AI applications to analyze data could adversely affect our reputation and results of operations.

AI also presents emerging ethical issues and if our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability.

Legislation governing the development and use of AI has been passed or is under consideration in the United States at the state and local level, as well as internationally.

As a result, the ability to use artificial intelligence and machine learning may be constrained by current or future laws, regulatory or self-regulatory requirements.

The rapid evolution of AI, including regulation of AI and it various uses, will require significant resources to develop, test and maintain our platforms and AI operations to help us implement AI ethically in order to minimize unintended, harmful impact

federal income tax reform and changes in other tax laws could adversely affect us.

federal, state, local and foreign tax laws, regulations and administrative guidance are subject to change as a result of the legislative process and review and interpretation by the U.S.

Internal Revenue Service, the U.S.

Treasury Department and other taxing authorities.

Changes to tax laws (which changes may have retroactive application), including with respect to net operating losses and research and development tax credits, could adversely affect us or holders of our common stock.

In recent years, many such changes have been made and changes are likely to continue to occur in the future.

In December 2017, U.S.

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Our state NOLs can be carried forward 20 years and begin expiring in 2029.

Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes (such as research tax credits) to offset its post-change income or post-change income tax may be limited.

We have identified two ownership changes since our inception that have triggered a limitation on pre-change NOLs under Section 382.

Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes (such as R&D credit carryovers) to offset its post-change income or post-change income tax may be limited.

We have identified two ownership changes since our inception that have triggered a limitation on pre-change NOLs under Sections 382 and 383.

A majority of our pre-change NOLs remain available within the carryforward period provided by the Code, subject to availability of taxable income.

We may have experienced additional ownership changes that have not yet been identified that could result in the expiration of our NOL and credit carryforwards before utilization and we may experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside our control.

As a result, if we earn net taxable income, our ability to use our pre-change NOLs and tax credit carryovers to offset U.S.

As a result, if we earn net taxable income, our ability to use our pre-change NOLs and R&D credit carryovers to offset U.S.

federal taxable income and tax liability may be subject to limitations that potentially could result in increased future tax liability to us.

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In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

We also are subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United States, UK and authorities in the EU, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, which we collectively refer to as Trade Control Laws.

export controls, including the U.S.

Department of Commerce’s Export Administration Regulations, and U.S.

economic sanctions, trade sanctions regulations administered by the U.S.

Department of the Treasury’s Office of Foreign Assets Controls, including restrictions or prohibitions on the sale or supply of certain products and services to U.S.-embargoed or sanctioned countries, governments, persons and entities, and other applicable export control regulations, customs requirements and currency exchange regulations, which we collectively refer to as Trade Control Laws.

There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA, the Bribery Act, or other legal requirements including Trade Control Laws.

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Similarly, the volatility associated with the COVID-19 pandemic caused significant instability and disruptions in the capital and credit markets and, more recently, the global economy has been impacted by interest rate fluctuations and inflation, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, as well as the possibility of a recession or further economic downturn.

Moreover, there have been recent concerns with respect to the stability of the global banking system.

For example, on March 10, 2023, Silicon Valley Bank (SVB), which was one of our banking partners, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

Similarly, on March 12, 2023, Silvergate Capital Corp.

and Signature Bank were each swept into receivership.

Moreover, there have been concerns in recent years with respect to the stability of the global banking system.

For example, in March 2023, Silicon Valley Bank (SVB), which was one of our banking partners, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver, and in March 2023, Silvergate Capital Corp.

and Signature Bank were similarly swept into receivership.

While we only had a minimal amount of our cash directly at SVB and the FDIC took steps to make depositors of SVB whole such that we regained access to this cash, there is no assurance that similar guarantees will be made in the event of further bank closures and continued instability in the global banking system.

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Furthermore, our stock price may decline due in part to the volatility of the stock market and any general economic downturn.

We may be exposed to foreign exchange risk.

We incur portions of our expenses, and may in the future derive revenues, in a variety of currencies.

As a result, we may be exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates.

If in the future we incur greater portions of our expenses, or derive future revenues, from foreign currencies, fluctuations in currency exchange rates could have an impact on our results as expressed in U.S.

In addition, recent actions taken by the U.S.

government may further impact the value of the U.S.

dollar relative to other currencies, which may have the result of increasing the portions of our expenses which are realized in other currencies.

We currently do not engage in hedging transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the U.S dollar.

We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our business, financial condition, results of operations and prospects.

Our current operations are in the San Francisco Bay Area, and we or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters as to which our business continuity and disaster recovery plans may not be adequate to protect us.

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Our net loss and other results of operations will be affected by numerous factors, including:

• variations in the level of expense related to the ongoing development of our drug candidates, DELigase platform, or future development programs;

• variations in the level of expense related to the ongoing development of our drug candidates, DEL-AI platform, or future development programs;

• results of preclinical studies and clinical trials, or the addition or termination of clinical trials or funding support by us or by existing or future collaborators or licensing partners;

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In addition, we currently have on file with the SEC an automatic shelf registration statement on Form S-3 which allows us to offer and sell our registered common stock, preferred stock, debt securities, warrants, subscriptions rights and or units from time to time pursuant to one or more offerings at prices and terms to be determined at the time of sale.

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

(Piper Sandler), which was amended in July 2024 (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 the common stock registered under the shelf registration statement pursuant to one or more “at the market” offerings.

In June 2022, we issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement;

in May 2024, we issued and sold 3,194,809 shares of our common stock under the Equity Distribution Agreement;

in August 2024, we issued and sold 2,145,000 shares of common stock under the Amended Equity Distribution Agreement;

and in October 2024, we issued and sold 3,711,770 shares of common stock under the Amended Equity Distribution Agreement.

As of the date of this filing, we have $27.3 million of common stock remaining available for sale under the Amended Equity Distribution Agreement.

Sales of our common stock under the Amended Equity Distribution Agreement with Piper Sandler could be subject to business, economic or competitive uncertainties and contingencies, many of which may be beyond our control, and which could cause actual results from the sale of our common stock to differ materially from expectations.

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

(Piper Sandler), which was amended in July 2024 and again in October 2024 (as amended, the Second Amended Equity Distribution Agreement), pursuant to which, from time to time, we may offer and sell through Piper Sandler up to $300.0 million of the common stock registered under the shelf registration statement pursuant to one or more “at the market” offerings.

From time to time, we have issued and sold shares of common stock pursuant to this agreement and as of the date of this filing, we have $204.6 million of common stock remaining available for sale under the Second Amended Equity Distribution Agreement.

Sales of our common stock under the Second Amended Equity Distribution Agreement with Piper Sandler could be subject to business, economic or competitive uncertainties and contingencies, many of which may be beyond our control, and which could cause actual results from the sale of our common stock to differ materially from expectations.

To the extent additional capital is raised through the sale and issuance of shares or other securities convertible into shares, the ownership interest of our stockholders will be diluted.

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however, any exercise would increase the number of shares eligible for future resale in the public market and result in substantial dilution to our stockholders.

As of August 31, 2024, we have issued pre-funded warrants to purchase a total of 8,315,020 shares of our common stock, of which 7,597,660 were outstanding as of August 31, 2024.

As of February 28, 2025, we have issued pre-funded warrants to purchase a total of 8,315,020 shares of our common stock, of which 7,577,909 were outstanding as of February 28, 2025.

Each pre-funded warrant is exercisable for $0.001 per share of common stock underlying such pre-funded warrant, which may be paid by way of a cashless exercise, meaning that the holder may not pay a cash purchase price upon exercise, but instead would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the pre-funded warrant.

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The reporting on our assessment of the effectiveness of our internal control over financial reporting needs to include disclosure of any material weaknesses identified in our internal control over financial reporting.

Moreover, based on the market value of our common stock held by non-affiliates as of May 31, 2024, we will be considered a large accelerated filer under SEC rules effective November 30, 2024, and, as a result, our independent registered public accounting firm will be required to audit the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act (Section 404(b)).

Moreover, based on the market value of our common stock held by non-affiliates as of May 31, 2024, we are considered a large accelerated filer under SEC rules effective November 30, 2024, and, as a result, our independent registered public accounting firm is required to audit the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act (Section 404(b)).

Compliance with Section 404(b) will result in increased costs, expenses, and management resources.

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In addition, if we are not able to continue to meet these requirements, we may not be able to remain listed on Nasdaq.

We will no longer qualify as a “ smaller reporting company ” and, commencing with our quarterly report on Form 10-Q for the fiscal quarter ending February 28, 2025, we may no longer take advantage of reduced disclosure and reporting requirements applicable to smaller reporting companies.

We currently qualify as a “smaller reporting company” as defined by the SEC and have been able to take advantage of reduced disclosure and reporting requirements applicable to smaller reporting companies.

However, based on the market value of our common stock held by our non-affiliates as of May 31, 2024, we will no longer be a smaller reporting company effective November 30, 2024.

Therefore, beginning with our quarterly report on Form 10-Q for the fiscal quarter ending February 28, 2025, we will no longer be eligible to rely on the reduced disclosure and reporting requirements applicable to smaller reporting companies.

We no longer qualify as a “ smaller reporting company ” and we may no longer take advantage of the reduced disclosure and reporting requirements applicable to smaller reporting companies.

Based on the market value of our common stock held by our non-affiliates as of May 31, 2024, we no longer qualify as a “smaller reporting company” as defined by the SEC effective November 30, 2024.

Therefore, beginning with this quarterly report on Form 10-Q for the fiscal quarter ending February 28, 2025, we are no longer be eligible to rely on the reduced disclosure and reporting requirements applicable to smaller reporting companies.

Moreover, we chose not to take advantage of the reduced disclosure and reporting requirements applicable to smaller reporting companies starting with our Annual Report on Form 10-K for the fiscal year ended November 30, 2024.

Any failure to comply with the increased disclosure and reporting requirements could have an adverse effect on our business, financial condition and results of operations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors