What changed in this filing

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Item 1. Financial Statements

2021-04-13 compared with 2020-10-14 · 207 added, 370 removed, 363 unchanged (61% of the section changed)

1 unchanged sentence

NURIX THERAPEUTICS, INC.

Condensed c onsolidated balance sheets

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

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Short-term investments

Contract assets

Income tax receivable

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Restricted cash

Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)

Liabilities and stockholders' equity

Current liabilities:

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Commitments and contingencies (Note 6)

Redeemable convertible preferred stock, $0.001 par value—0 and 48,441,667 shares

authorized as of August 31, 2020 and November 30, 2019, respectively;

12,813,887 shares issued and outstanding (liquidation value—$0 and $48,383)

as of August 31, 2020 and November 30, 2019, respectively

Stockholders’ equity (deficit):

Preferred stock, $0.001 par value—10,000,000 and 0 shares authorized as of

August 31, 2020 and November 30, 2019, respectively;

0 shares issued and

outstanding as of August 31, 2020 and November 30, 2019, respectively

Common stock, $0.001 par value—500,000,000 and 65,000,000 shares

authorized as of August 31, 2020 and November 30, 2019, respectively;

38,845,196 and 3,595,334 shares issued and outstanding as of August 31, 2020

and November 30, 2019, respectively

Preferred stock, $0.001 par value— 10,000,000 shares

authorized as of February 28, 2021 and

November 30, 2020;

0 shares issued and outstanding

as of February 28, 2021 and November 30, 2020

Common stock, $0.001 par value— 500,000,000 shares

authorized as of February 28, 2021 and

November 30, 2020;

39,119,315 and 38,864,872 shares

issued and outstanding as of February 28, 2021 and

November 30, 2020, respectively

Additional paid-in-capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities, redeemable convertible preferred stock and stockholders’

equity (deficit)

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

Nurix Therapeutics, Inc.

Condensed c onsolidated statements of operations

N URIX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

Three Months Ended

Nine Months Ended

Collaboration revenue

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Interest and other income, net

Loss before provision (benefit) for income taxes

Provision (benefit) for income taxes

Net loss per share attributable to common stockholders, basic and

Loss before income taxes

Provision for income taxes

Net loss per share attributable to common stockholders, basic and diluted

Weighted-average number of shares outstanding, basic and diluted

Collaboration revenue for the three months ended August 31, 2020 and 2019 includes related party revenue of $0 and $9.7 million, respectively.

Collaboration revenue for the nine months ended August 31, 2020 and 2019 includes related party revenue of $0 and $28.4 million, respectively.

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

NURIX THERAPEUTICS, INC.

Condensed consolidated s tatements of comprehensive loss

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

Three Months Ended

Nine Months Ended

Other comprehensive income (loss):

Unrealized (loss) gain on available-for-sale investments

Unrealized gain (loss) on available-for-sale investments

Total comprehensive loss

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NURIX THERAPEUTICS, INC.

Condensed consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit)

CONDENSED CONSOLI DATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

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Exercise of stock options

Repurchase of unvested early exercised

Repurchase of unvested early

exercised stock options

Vesting of early-exercised

stock options

Vesting of early-exercised stock options

Stock-based compensation

Unrealized gain on available-for-sale

Unrealized gain (loss) on

available-for-sale

Balance as of February 29, 2020

Issuance of Series D redeemable

convertible preferred stock at $12.75 per

share, net of issuance costs of $336

Exercise of stock options

Vesting of early-exercised stock options

Stock-based compensation

Unrealized gain on available-for-sale

Balance as of May 31, 2020

Conversion of redeemable convertible

preferred stock into common stock

Issuance of common stock upon initial

public offering, net of offering cost of

Exercise of stock options

Repurchase of unvested early exercised

stock options

Vesting of early-exercised stock options

Stock-based compensation

Unrealized loss on available-for-sale

Balance as of August 31, 2020

Redeemable convertible

preferred stock

comprehensive

stockholders’

income (loss)

Balance as of November 30, 2020

Exercise of stock options

Vesting of early-exercised stock options

Stock-based compensation

Unrealized gain on available-for-sale

Balance as of February 28, 2019

Exercise of stock options

Repurchase of unvested early exercised

stock options

Vesting of early-exercised stock options

Stock-based compensation

Balance as of May 31, 2019

Exercise of stock options

Repurchase of unvested early exercised

Repurchase of unvested early

exercised stock options

Vesting of early-exercised

stock options

Vesting of early-exercised stock options

Issuance under Employee Stock Purchase Plan

Stock-based compensation

Unrealized loss on available-for-sale

Balance as of August 31, 2019

Unrealized gain (loss) on

available-for-sale

Balance as of February 28, 2021

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

NURIX THERAPEUTICS, INC.

Condensed c onsolidated statements of cash flows

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended

Three Months Ended

Cash flows from operating activities

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by

operating activities:

Depreciation and amortization

Stock-based compensation

Net amortization (accretion) of premium (discount)

Net amortization (accretion) of premium (discount) on investments

Changes in operating assets and liabilities:

Contract assets

Income tax receivable

Prepaid expenses and other current assets

Prepaid expenses and other assets

Accounts payable

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Purchases of property and equipment

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issuance of common stock upon initial public offering, net of offering costs

Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs

Proceeds from exercise of stock options

Repurchase of unvested early exercised stock options

Proceeds from issuance under Employee Stock Purchase Plan

Net cash provided by financing activities

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Cash, cash equivalents and restricted cash at end of period

Supplemental disclosures of noncash investing and financing activities:

Additions to property and equipment included in accounts payable and accrued liabilities

Supplemental disclosures of non-cash investing and financing activities:

Additions to property and equipment included in accounts payable

and accrued liabilities

Vesting of early exercised stock options

Offering costs included in accounts payable and accrued liabilities

Conversion of redeemable convertible preferred stock into common stock upon closing of

initial public offering

Redeemable convertible preferred stock issuance costs included in

accrued liabilities

Deferred offering costs included in accounts payable and accrued liabilities

As of February 28,

As of February 29,

Reconciliation of cash, cash equivalents, and restricted cash as shown

in the statements of cash flows:

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

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

NURIX THERAPEUTICS, INC.

Notes to unaudited condensed c onsolidated financial statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Description of Business

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

The Company is a biopharmaceutical company focused on the discovery, development and commercialization of small molecule therapies designed to modulate cellular protein levels as a novel treatment approach for cancer and immune disorders.

Leveraging the Company’s expertise in E3 ligases together with its proprietary DNA-encoded libraries, the Company has built DELigase, an integrated discovery platform to identify and advance novel drug candidates targeting E3 ligases, a broad class of enzymes that can modulate proteins within the cell.

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(DeCART), which was incorporated in the state of Delaware on June 22, 2020 and holds a license to three of the Company’s compounds, including NX-0255, for drug-enhanced isolation of T cells nonexclusively with respect to one chimeric antigen receptor T cell (CAR-T) therapy target and exclusively with respect to three novel CAR-T therapy targets.

Reverse stock split

On July 17, 2020, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse split of shares of the Company’s common stock and redeemable convertible preferred stock, each on a 1-for-3 basis (reverse stock split).

The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split.

All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the condensed consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.

Initial Public Offering

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In connection with the closing of the IPO, the Company restated its Restated Certificate of Incorporation to change the authorized capital stock to 500,000,000 shares designated as common stock, and 10,000,000 shares designated as preferred stock, all with a par value of $0.001 per share.

Follow-on Offering

In March 2021, the Company completed a follow-on offering and issued 5,175,000 shares of common stock (including the exercise by the underwriters of their option to purchase an additional 675,000 shares of common stock) at a price to the public of $31.00 per share for net proceeds of approximately $150.1 million, after deducting underwriting discounts and commissions of $9.6 million and expenses of $0.7 million.

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

Since inception, the Company has generally incurred significant losses and negative net cash flows from operations.

During the nine months ended August 31, 2020, the Company incurred a net loss of $23.3 million and had positive net cash flows from operating activities of $20.4 million.

The Company had an accumulated deficit as of August 31, 2020 of $83.8 million and will require substantial additional capital for research and development activities.

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

During the three months ended February 28, 2021, the Company incurred a net loss of $24.3 million and had positive net cash flows from operating activities of $8.1 million.

The Company had an accumulated deficit of $128.0 million as of February 28, 2021 and will require substantial additional capital for research and development activities.

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

As of February 28, 2021, the Company had cash, cash equivalents and investments of $380.3 million.

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

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(Gilead) or future collaboration agreements, if any.

There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms

acceptable to the Company if at all.

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

Other risks and uncertainties

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

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

Moreover, the current COVID-19 pandemic, which is impacting worldwide economic activity, poses the risk that the Company or its employees, contractors, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

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

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

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

Management considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three and nine months ended August 31, 2020;

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

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

Disruption from these manufacturers or suppliers would have a negative impact on the Company’s business, financial position and results of operations.

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

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

Summary of Significant Accounting Policies

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GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting.

The Company’s condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of and for the three months ended February 28, 2021.

The condensed consolidated balance sheet as of November 30, 2020 was derived from the audited annual financial statements as of that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted from these interim financial statements.

These interim financial statements and related disclosures have been prepared with the presumption that users of the interim financial statements have read or have access to the audited annual financial statements for the preceding fiscal year.

Accordingly, these financial statements should be read in conjunction with the audited annual financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended November 30, 2020, as filed with the SEC.

These interim results are not necessarily indicative of results to be expected for the full fiscal year or any future interim period.

Principles of Consolidation

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All intercompany balances and transactions have been eliminated in consolidation.

Unaudited interim condensed consolidated financial statements

The condensed consolidated balance sheet as of August 31, 2020 and the condensed consolidated statements of operations, comprehensive loss, cash flows, and redeemable convertible preferred stock and stockholders’ equity (deficit) for the three and nine months ended August 31, 2020 and 2019 are unaudited.

Except for the adoption of Topic 606, Revenue from Contracts with Customers , as described in the revenue recognition policy within this same note, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of August 31, 2020 and its results for the three and nine months ended August 31, 2020 and 2019.

The financial data and the other financial information disclosed in these notes related to the three and nine months ended August 31, 2020 and 2019 are also unaudited.

The condensed consolidated balance sheet as of November 30, 2019, included herein was derived from the audited financial statements as of that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted from these interim condensed consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements

and the notes thereto, which are included in the Company’s prospectus for the IPO dated July 23, 2020 and filed with the SEC on July 24, 2020 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended .

The results of operations for the three and nine months ended August 31, 2020 are not necessarily indicative of the results to be expected for the year ending Novembe r 30, 2020 , or for any other future annual or interim period.

The Company operates and manages its business as one reportable and operating segment.

The Company’s chief executive officer, who is the chief operating decision maker, reviews consolidated financial information on a company-wide basis for purposes of allocating resources and assessing financial performance.

Reverse Stock Split

The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split.

Use of Estimates

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Actual results could materially differ from those estimates.

Deferred offering costs

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

After consummation of an equity financing, these costs are recorded as a reduction of the carrying value of redeemable convertible preferred stock or, for issuances of common stock, in stockholder’s equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.

Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are immediately written off to operating expenses.

There were no deferred offering costs capitalized as of August 31, 2020 and November 30, 2019.

Upon the closing of the IPO on July 28, 2020, the offering costs of $20.3 million were recorded in stockholder’s equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and investments.

The Company’s investments consist of debt securities issued by highly rated corporate entities, the U.S.

federal government or state and local governments.

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

Deposits may, at times, exceed federally insured limits, but minimal credit risk exists.

The Company invests its cash equivalents in highly rated money market funds.

The Company has not experienced any credit losses on its deposits of cash and cash equivalents.

Other Risks and Uncertainties

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

The extent to which the

COVID-19 pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

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

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

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

Disruption from these manufacturers or suppliers would have a negative impact on the Company’s business, financial position and results of operations.

Revenue Recognition

Prior to December 1, 2019, the Company recognized revenue in accordance with the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 605, Revenue Recognition .

Accordingly, revenue is recognized for each unit of accounting when all of the following criteria are met:

Persuasive evidence of an arrangement exists;

Delivery has occurred or services have been rendered;

The seller’s price to the buyer is fixed or determinable;

Collectibility is reasonably assured.

The Company evaluates multiple element arrangements to determine if each deliverable represents a separate unit of accounting based on the following criteria:

Delivered item or items have value to the customer on a standalone basis, and

If the arrangement includes a general right of return relative to the delivered item or items, delivery or performance of the undelivered item or items is considered probable and substantially in control of the Company.

The arrangement’s consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price methodology in accordance with the selling price hierarchy, which includes vendor-specific objective evidence (VSOE) of selling price, if available, or third-party evidence of selling price if VSOE is not available, or the best estimate of selling price, if neither VSOE nor third-party evidence is available.

The provisions of ASC 605 are then applied to each unit of accounting to determine the appropriate revenue recognition.

In the event that a deliverable of a multiple element arrangement does not represent a separate unit of accounting, primarily because a deliverable does not provide value on a standalone basis, the Company recognizes revenue from the combined unit of accounting using the input/proportional performance approach as research is delivered or on a straight-line basis over the estimated period of performance when there is no discernable pattern of performance.

The Company evaluates potential milestone payments associated with research and development arrangements in accordance with ASC 605-28, Milestone Method.

Under the milestone method, the Compan y may recognize revenue contingent upon the achievement of a milestone in its entirety in the period in which the milestone is achieved, only if the milestone meets all the criteria within the guidance to be considered a substantive milestone .

The Company evaluates each contingent payment on an individual basis to determine whether they are considered substantive milestones, specifically reviewing factors such as the degree of certainty in achieving the milestone, the research and development risk and other risks that must be overcome to achieve the milestone, as well as the level of effort and investment required and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement.

This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s per formance to achieve the milestone, (b) the consideration relates solely to past performance and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.

Revenues from milestones, if they are nonrefun dable and deemed substantive, are recognized upon achievement of the milestones.

To the extent that non-substantive milestones are achieved, and the Company has remaining deliverables, milestone payments are deferred and recognized as revenue over the estimated remaining performance period using the appropriate measure of progress as determined for each agreement.

The Company recognizes revenue associated with the non-substantive milestones upon achievement of the milestone if the Company has no remaining deliverables.

During the nine months ended November 30, 2019, no milestone payments were received, no milestone revenues were recognized and no milestones were considered substantive.

Effective December 1, 2019, the Company adopted Topic 606, Revenue from Contracts with Customers using the modified retrospective method, which was only applied to contracts that were not completed as of the adoption date.

As of the adoption date, the Company had only one contract, a collaboration agreement with Gilead, not completed.

Under Topic 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps:

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services.

To recognize revenue from a contract with a customer, the Company performs the following five steps:

identify the contract(s) with a customer;

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

S ales-based milestones and royalties :

For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate t o, the Company recognizes revenue in the period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur.

To date, the Company has not recognized any sales-based milestone or royalty revenue resu lting from its collaboration arrangements.

Sales-based milestones and royalties :

For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, the Company recognizes revenue in the period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur.

To date, the Company has not recognized any sales-based milestone or royalty revenue resulting from its collaboration arrangements.

Customer options :

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The Company allocates the transaction price to material rights based on the standalone selling price.

As a practical alternative to estimating the standalone selling price of a material right when the underlying goods or services are both (i) similar to the original goods or services in the contract and (ii) provided in accordance with the terms of the original contract, the Company allocates the total amount of consideration expected to be received from the customer to the total goods or services expected to be provided to the customer.

a practical alternative to estimating the standalone selling price of a material right when the underlying goods or services are both (i) similar to the original goods or services in the contract and (ii) provided in accordance with the terms of the original contract, the Company allocates the total amount of consideration expected to be received from the customer to the total goods or services expected to be provided to the customer.

Amounts allocated to any material right are recognized as revenue when or as the related future goods or services are transferred or when the option expires.

Deferred revenue, which is a contract liability, represents amounts received by the Company for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met.

The current portion of deferred revenue represents the amount to be recognized within one year from the condensed consolidated balance sheet date based on the estimated performance period of the underlying performance obligation.

The current portion of deferred revenue represents the amount to be recognized within one year from the consolidated balance sheet date based on the estimated performance period of the underlying performance obligation.

The noncurrent portion of deferred revenue represents amounts to be recognized after one year through the end of the performance period of the performance obligation.

All revenue was derived from customers located in the United States during the three and nine months ended August 31, 2020 and 2019.

Research and development expenses

The Company expenses all research and development costs as incurred.

Research and development costs include, but are not limited to, payroll and personnel expenses, laboratory supplies, preclinical studies, compound manufacturing costs, consulting costs and allocated overhead, including rent, equipment, depreciation and utilities.

The Company records accrued expenses for estimated costs of research and development activities conducted by third-party service providers, which include preclinical studies and clinical trials and contract manufacturing activities.

The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

The Company estimates the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services.

The Company makes significant judgments and estimates in determining the accrued balance in each reporting period.

As actual costs become known, the Company adjusts its accrued estimates.

The Company’s accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from clinical research organizations and other third-party service providers.

The Company records advance payments to service providers as prepaid assets, which are expensed as the contracted services are performed.

Stock-based compensation

The Company accounts for stock-based compensation using a fair value-based method, which requires the recognition of compensation expense for costs related to all stock-based payments including stock options and purchase rights under the employee stock purchase plan.

The Company estimates the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model.

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

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

Subsequent to the IPO, the Company determines the fair value using the market closing price of the Company’s common stock on the date of grant.

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

Subsequent to the adoption of ASU 2018-07, Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting as of December 1, 2019,

stock-based compensation expense for non-employee stock-based awards is also measured based on the grant date fair value with the estimated fair value expensed over the period for which th e non-employee is required to provide service in exchange for the award.

For stock-based payments with performance conditions, the Company evaluates the probability of achieving performance conditions at each reporting date.

The Company begins to recognize compensation cost using an accelerated attribution method when it is deemed probable that the performance condition will be met.

The Company accounts for forfeitures as they occur.

Restricted cash

The Company had $170,000 of restricted cash recorded as a non-current asset as of August 31, 2020 and November 30, 2019.

Restricted cash consisted of $100,000 that serves as collateral for a business credit card account and $70,000 for a letter of credit required under a facility operating lease executed in 2014.

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

Concentration of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and investments.

The Company’s investments consist of debt securities issued by highly rated corporate entities, the U.S.

federal government or state and local governments.

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

Deposits may, at times, exceed federally insured limits, but minimal credit risk exists.

The Company invests its cash equivalents in highly rated money market funds.

The Company has not experienced any credit losses on its deposits of cash and cash equivalents.

Cash and cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Cash equivalents, which consist primarily of money market funds, are stated at fair value.

Cash, cash equivalents and restricted cash as reported within the condensed consolidated statements of cash flows as of August 31, 2020 and 2019 and November 30, 2019 and 2018 consisted of the following (in thousands):

Cash and cash equivalents

Restricted cash

Cash, cash equivalents and restricted cash

Investments consist of money market funds, U.S.

Treasuries, corporate debt securities, U.S.

government agency securities, corporate commercial paper and municipal securities.

All of the Company’s investments are classified as available-for-sale and carried at estimated fair values and reported in cash equivalents, short-term investments or long-term investments.

Management determines the appropriate classification of the investments at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date.

Investments with contractual maturities greater than 12 months are considered long-term investments.

Unrealized gains and losses on available-for-sale investments are reported in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity (deficit).

Investments are regularly reviewed for other-than-temporary declines in fair value.

The review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of investments in an unrealized loss position, the severity and duration of the unrealized losses, and whether it is more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis.

The cost of investments sold is based on the specific identification method.

Fair value of financial instruments

The carrying amounts of the Company’s financial instruments, including cash equivalents, investments, accounts payable and accrued liabilities included in the Company’s condensed consolidated financial statements approximate their fair value due to short maturities or the nature of the financial instruments.

Contracts may be amended to account for changes in contract specifications and requirements.

Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations.

When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for goods and services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is considered to be a separate contract and revenue is recognized prospectively.

If a contract modification is not accounted for as a separate contract, the Company accounts for the promised goods or services not yet transferred at the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification.

The Company accounts for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification.

In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).

Recent Accounting Pronouncements

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As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of the public company effective dates.

Adopted recent accounting pronouncements

In May 2014, the FASB issued Accounting Standards Update No.

2014-09, Revenue from Contracts with Customers (Topic 606) and has subsequently issued a number of amendments to Topic 606.

As amended, Topic 606 provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance.

The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.

Topic 606 also requires entities to disclose both qualitative and quantitative information that enables users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including disclosure of significant judgments affecting the recognition of revenue.

The Company adopted Topic 606 as of December 1, 2019 using the modified retrospective method, which was only applied to contracts that were not completed as of the adoption date.

As of the adoption date, the Company had only one contract, the collaboration agreement with Gilead, not completed.

The Company did not elect to use any of the practical expedients permitted related to adoption.

The adoption of Topic 606 did not result in a cumulative adjustment to the accumulated deficit as it did not change the timing and pattern of revenue recognition for the collaboration agreement with Gilead.

For the nine months ended August 31, 2020, there would have been no difference between the revenue recognized under Topic 606 and the revenue recognized under ASC 605 for the collaboration agreement with Gilead.

The adoption of Topic 606 did not have a material impact on the Company’s condensed consolidated financial statements.

In June 2018, the FASB issued ASU No.

2018-07, Compensation – Stock Compensation (Topic 718):

Improvements to Non-employee Share-Based Payment Accounting (ASU 2018-07), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees.

An entity should apply the requirements of Topic 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period).

ASU 2018-07 is effective for annual periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020.

Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurements (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which modifies the disclosure requirements on fair value measurements by removing the requirement to disclose amounts of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for Level 3 fair value measurements, among other modifications to fair value measurement disclosure requirements.

The Company adopted ASU 2018-13 as of December 1, 2020.

The adoption did not have a material impact on the Company’s condensed consolidated financial statements.

The adoption did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

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2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires that financial assets measured at amortized cost be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectibility.

The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability .

ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt investments and instead focuses on determining whether any impairment is a result of a credit loss or other factors.

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

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurements (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which modifies the disclosure requirements on fair

value measurements by removing the requirement to discl ose amounts of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for Level 3 fair value measurements, among other modifications to fair value meas urement disclosure requirements.

ASU 2018-13 is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2019.

Early adoption is permitted.

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

In November 2018, the FASB issued ASU No.

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Collaboration Agreements

Celgene (a related party)

In September 2015, the Company entered into a collaboration agreement with Celgene Corporation (the Celgene Agreement and Celgene, respectively), which was later acquired by Bristol-Myers Squibb Company (BMS) in November 2019, with an initial research term of four years for the discovery, development and commercialization of novel small molecule therapeutics in oncology, inflammation and immunology.

Under the terms of the Celgene Agreement, the Company received an upfront payment of $150.0 million in September 2015.

In addition, in September 2015, Celgene purchased 1,622,222 shares of Series C redeemable convertible preferred stock at a price of $10.50 per share, resulting in net proceeds of $17.0 million.

As of November 30, 2019, BMS held approximately 10% of total shares outstanding on an as-converted basis.

In January 2019, Celgene and BMS entered into a definitive merger agreement pursuant to which Celgene agreed to be acquired by BMS.

Based on the Company’s request for notification of the future disposition of the agreement, in June 2019, Celgene notified the Company that it was terminating the Celgene Agreement.

Upon termination of the Celgene Agreement in June 2019, any rights that Celgene had under the agreement reverted to the Company and no termination payments were due or payable.

The Company determined it had no remaining deliverables to be performed under the Celgene Agreement and as a result recognized all remaining deferred revenue in June 2019.

Collaboration revenue related to the Celgene Agreement was $0 and $9.7 million for the three months ended August 31, 2020 and 2019, respectively, and $0 and $28.4 million for the nine months ended August 31, 2020 and 2019, respectively.

As of August 31, 2020 and November 30, 2019, deferred revenue of $0 was recorded on the condensed consolidated balance sheet.

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

Under the Gilead Agreement, Gilead has the option to license drug candidat es directed to up to five targets resulting from the collaboration and is responsible for the clinical development and commercialization of product candidates resulting from the collaboration.

The Company retains the option to co-develop and co-promote, un der a profit share structure, up to two product candidates in the United States, provided that the Company may only exercise such option once per licensed product and Gilead retains the right to veto the Company’s option selection for any one product candi date of its choice.

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

Under the Gilead Agreement, Gilead has the option to license drug candidates directed to up to five targets resulting from the collaboration and is responsible for the clinical development and commercialization of drug candidates resulting from the collaboration.

The Company retains the option to co-develop and co-promote, under a profit share structure, up to two drug candidates in the United States, provided that the Company may only exercise such option once per licensed product and Gilead retains the right to veto the Company’s option selection for any one drug candidate of its choice.

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

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

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sales and reduced milestone payments.

Upon signing the Gilead Agreement, Gilead agreed to pay the Company an upfront payment of $45.0 million plus $3.0 million in additional fees, and the Company is eligible to receive up to approximately $2.3 billion in total additional payments, including up to $700.0 million upon the achievement of specified development milestones, up to $1.5 billion upon the achievement of specified sales milestones, subject to reduction for any product for which the Company exercises its option to co-develop and co-promote, and up to $145.8 million in certain additional fees related to target licensing, reservation and selection and research term extensions.

In addition, the Company is eligible to receive tiered royalties from mid-single digit to low tens percentages on annual net sales from any commercial products directed to the optioned collaboration targets, subject to certain reductions and excluding sales in the United States of any products for which the Company exercises its option to co-develop and co-promote, for which the Company and Gilead share profits and losses evenly.

In June 2019, the Company received the $45.0 million upfront payment and $3.0 million in additional fees.

In February 2020, the Company achieved a research milestone, resulting in a $2.5 million additional payment, which was received by the Company in April 2020.

In May 2020, the Company recorded $1.0 million in additional fees related to certain target reservation, which was received in June 2020.

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

Subsequently, the Company received payments of $11.0 million for research milestones and additional payments.

As of February 28, 2021, the Company is eligible to receive up to approximately $2.3 billion in total additional payments, including up to $690.0 million upon the achievement of specified development milestones, up to $1.5 billion upon the achievement of specified sales milestones, subject to reduction for any product for which the Company exercises its option to co-develop and co-promote, and up to $139.8 million in certain additional fees related to target licensing, reservation and selection and research term extensions.

share profits and losses evenly.

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

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

Certain milestones and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of August 31, 2020.

Certain milestones and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of February 28, 2021.

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

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

Upon the achievement of a research milestone in February 2020 and additional fees related to a target reservation in

May 2020, $3.5 million in variable consideration was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased .

Subsequently, upon the achievement of research milestones and target reservations, $11.0 million in variable consideration was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased.

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

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

Additio nally, the Company considered the impact of Gilead terminating the agreement prior to the completion of the research services during the initial five-year research term and determined that there were significant economic costs to Gilead for doing so, and a s such, did not adjust the contract term.

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

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

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These actual costs consist primarily of internal FTE efforts and third party contract costs related to the Gilead Agreement.

For the three and nine months ended August 31, 2020, the Company recognized collaboration revenue related to the Gilead Agreement of $2.1 million and $6.9 million, respectively, of which $1.9 million and $6.0 million, respectively, were included in deferred revenue as of November 30, 2019, and $0.2 million and $0.7 million, respectively, were related to performance obligation satisfied in previous periods.

For the three and nine months ended August 31, 2019, the Company recognized revenue related to the Gilead Agreement of $0.8 million and $0.8 million, respectively.

As of August 31, 2020, $41.9 million was recorded as deferred revenue, of which $12.5 million was current, on the condensed consolidated balance sheet related to the Gilead Agreement.

In December 2019, the Company entered into a strategic collaboration with Sanofi, which became effective in January 2020 (the Sanofi Agreement), to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with challenging diseases in multiple therapeutic areas using the Company’s DELigase platform to identify small molecules designed to induce degradation of three specified initial drug targets, with an option by Sanofi to expand to a total of five targets.

For the three months ended February 28, 2021, the Company recognized collaboration revenue related to the Gilead Agreement of $2.7 million, all of which was included in deferred revenue as of November 30, 2020, and $0.5 million was related to performance obligation satisfied in previous periods.

For the three months ended February 29, 2020, the Company recognized revenue related to the Gilead Agreement of $2.4 million.

As of February 28, 2021, $41.4 million was recorded as deferred revenue, of which $14.4 million was current, on the condensed consolidated balance sheet related to the Gilead Agreement.

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

In January 2021, as part of the existing collaboration agreement, Sanofi paid the Company $22 million to exercise its option to expand the number of targets in the collaboration agreement from three to a total of five targets.

The Company and Sanofi also entered into a first amendment to the collaboration agreement in January 2021 to modify the research term on all targets (the First Sanofi Amendment) .

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

Under the Sanofi Agreement, Sanofi has exclusive rights and is responsible for the clinical development, commercialization and manufacture of product candidates resulting from the collaboration while the Company retains the option to co-develop, co-promote and co-commercialize up to two targets, one of which must be selected from a list of targets designated at the execution of the Sanofi Agreement and one of which must be selected from targets identified by Sanofi in the future.

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

Under the Sanofi Agreement, Sanofi has exclusive rights and is responsible for the clinical development, commercialization and manufacture of drug candidates resulting from the collaboration while the Company retains the option to co-develop, co-promote and co-commercialize up to two targets, one of which must be selected from a list of targets designated at the execution of the Sanofi Agreement and one of which must be selected from targets identified by Sanofi as part of their recent expansion.

The Company’s right

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

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

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net sales and reduced milestone payments on such optioned products.

Upon signing the Sanofi Agreement, Sanofi agreed to pay an upfront payment of $55.0 million, which was received in January 2020, and the Company is eligible to receive additional payments if Sanofi exercises its option to expand the number of targets beyond the initial targets included in the collaboration or exercises an option to extend the license term with respect to a particular target.

In addition, the Company is eligible to receive up to approximately $2.5 billion in total payments, including payments of up to $500.0 million upon the achievement of specified development milestones, up to $625.0 million upon the achievement of specified regulatory milestones and up to $1.3 billion upon the achievement of certain sales milestones, as well as up to $170.1 million in certain additional fees related to target licensing and reservation.

Upon signing the Sanofi Agreement, Sanofi paid the Company an upfront payment of $55.0 million.

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

The Company is eligible to receive additional payments if Sanofi exercises an option to extend the license term with respect to a particular target.

As of February 28, 2021, the Company is eligible to receive up to approximately $2.5 billion in total payments, including payments of up to $500.0 million upon the achievement of specified development milestones, up to $625.0 million upon the achievement of specified regulatory milestones and up to $1.3 billion upon the achievement of certain sales milestones, as well as up to $163.1 million in certain additional fees related to target licensing and reservation.

In addition, the Company is eligible to receive tiered royalties ranging from mid-single digit to low teen percentages on annual net sales of any commercial products that may result from the collaboration, subject to certain reductions and excluding sales in the United States of any products for which the Company exercises its option to co-develop and co-promote, for which the parties share profits and losses evenly.

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

The option to extend the license term does not r epresent a material right because it does not contain a significant and incremental discount .

The option to extend the license term does not represent a material right because it does not contain a significant and incremental discount.

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

Milestone and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of August 31, 2020.

Milestone and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of February 28, 2021.

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

The Company determined that the transaction price consists of the upfront payment of $55.0 million at the inception of the Sanofi Agreement and as of August 31, 2020.

At the inception of the Sanofi Agreement, the Company determined that the transaction price consists of the upfront payment of $55.0 million.

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

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

Consequently, for the purpose of applying the practical alternative to estimating the standalone selling price of the material right, an expected consideration of $77.0 million was used for revenue recognition allocation, which represents the $55.0 million paid upfront for the three initial drug targets, and the $22.0 million for the additional consideration related to two additional targets which was included as part of applying the practical alternative, but for which the option has not been exercised.

Revenue is recognized over the research term of four years, the contractual initial research period, using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligations to Sanofi, based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligations.

Revenue is recognized over the research term of 4.25 years, the revised research period which was agreed to in January 2021, using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligations to Sanofi, based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligations.

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

These actual costs consist primarily of internal FTE efforts and third party contract costs related to the Sanofi Agreement.

For the three and nine months ended August 31, 2020, the Company recognized collaboration revenue related to the Sanofi Agreement of $2.0 million and $4.2 million, respectively.

As of August 31, 2020, $50.8 million was recorded as deferred revenue, of which $17.8 million was current, on the condensed consolidated balance sheet related to the Sanofi Agreement.

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

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

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

For the three months ended February 28, 2021, the Company recognized collaboration revenue related to the Sanofi Agreement of $2.3 million, all of which was included in deferred revenue as of November 30, 2020.

For the three months ended February 29, 2020, the Company recognized revenue related to the Sanofi Agreement of $0.4 million.

As of February 28, 2021, $69.0 million was recorded as deferred revenue, of which $18.4 million was current, on the condensed consolidated balance sheet related to the Sanofi Agreement.

Condensed Consolidated Balance Sheet Components

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Furniture and fixtures

Internal-use software

Software in progress

Total property and equipment, gross

Accumulated depreciation and amortization

Depreciation and amortization expense was $0.6 million and $0.6 million for the three months ended August 31, 2020 and 2019, respectively, and $1.5 million and $1.8 million for the nine months ended August 31, 2020 and 2019, respectively.

Total property and equipment, net

Depreciation and amortization expense was $0.6 million and $0.5 million for the three months ended February 28, 2021 and February 29, 2020, respectively.

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

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

The following tables presents the Company’s financial assets, which consist of cash equivalents and investments classified as available-for-sale investments, that are measured at fair value on a recurring basis as of August 31, 2020 and November 30, 2019 (in thousands):

August 31, 2020

The following tables presents the Company’s financial assets, which consist of cash equivalents and investments classified as available-for-sale investments, that are measured at fair value on a recurring basis as of February 28, 2021 and November 30, 2020 (in thousands):

February 28, 2021

Money market funds

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Municipal securities

Included in Cash and cash equivalents

Included in Short-term investments

Included in Long-term investments

November 30, 2020

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government agency securities

Corporate commercial paper

Municipal securities

Long-term investments:

Corporate debt securities

government agency securities

Municipal securities

Included in Cash and cash equivalents

Included in Short-term investments

Included in Long-term investments

The Company classifies its money market funds and U.S.

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

There were no transfers of financial instruments between valuation levels during the three and nine months ended August 31, 2020 and 2019.

As of August 31, 2020 and November 30, 2019, none of the Company’s available-for-sale investments that were in an unrealized loss position had been in an unrealized loss position for more than 12 months.

During the three and nine months ended August 31, 2020 and 2019, the Company did not recognize any other-than-temporary impairment losses.

As of February 28, 2021 and November 30, 2020, none of the Company’s available-for-sale investments that were in an unrealized loss position had been in an unrealized loss position for more than 12 months.

During the three months ended February 28, 2021 and February 29, 2020, the Company did not recognize any other-than-temporary impairment losses.

The Company’s short-term investments have maturities of less than one year from the respective condensed consolidated balance sheet dates.

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

As of August 31, 2020, the Company had no outstanding, pending or threatened litigation.

As of February 28, 2021, the Company had no outstanding, pending or threatened litigation.

Indemnifications

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In June 2020, the Company entered into a new lease agreement for additional space in the same building as the Company’s existing office for a 14-month term ending on July 31, 2021.

In December 2015, the Company entered into its first sublease agreement under which a portion of the Company’s leased space is subleased to another tenant.

The term of the sublease, which was originally scheduled to end on December 31, 2017, was extended through December 31, 2018 as the result of an amendment executed in November 2017.

The sublessee defaulted on this sublease agreement in August 2018, upon which a new creditor negotiated a second amendment to sublease dated October 2018 and the sublease agreement became a month to month agreement that ended in February 2019.

The Company entered into its second sublease agreement with a different tenant in November 2018, which was subsequently amended in March 2019 to increase the size of the space.

The term of the second sublease ended in August 2019.

Rent expense and sublease income was as follows (in thousands):

Three Months Ended August 31,

Nine Months Ended August 31,

Rent expense under operating leases

Sublease income

Net rent expense

Future minimum lease payments under the Company’s lease agreement as of August 31, 2020 were as follows (in thousands):

Rent expense was $0.8 million and $0.7 million for the three months ended February 28, 2021 and February 29, 2020, respectively.

Future minimum lease payments under the Company’s lease agreement as of February 28, 2021 were as follows (in thousands) :

Year ending November 30,

Operating Leases

2021 (remaining 9 months)

Total minimum lease payments

The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue up to 500,000,000 and 65,000,000 shares of $0.001 par value common stock as of August 31, 2020 and November 30, 2019, respectively.

The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue up to 500,000,000 shares of $0.001 par value common stock.

Common stockholders are entitled to dividends when and if declared by the Company’s board of directors, subject to the prior rights of the preferred stockholders.

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The common stockholders voting as a class are entitled to elect one member to the Company’s board of directors.

As of August 31, 2020, no dividends have been declared.

C ommon stock reserved for future issuance, on an as-if converted basis , as of August 31, 2020 and November 30, 2019 , consists of the following and ha s been adjusted for the 1-for-3 reverse stock split :

Conversion of redeemable convertible preferred stock

As of February 28, 2021, no dividends have been declared.

Common stock reserved for future issuance, on an as-if converted basis, as of February 28, 2021 and November 30, 2020, consists of the following and has been adjusted for the 1-for-3 reverse stock split:

Issuance of options under stock option plan

Shares available for future stock option grants

Shares available for issuance under employee stock

purchase plan

Shares available for issuance under employee stock purchase plan

Total common stock reserved for future issuance

Redeemable convertible preferred stock

The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue zero and 48,441,667 shares of redeemable convertible preferred stock as of August 31, 2020 and November 30, 2019, respectively, with a par value of $0.001 per share.

Designated and outstanding redeemable convertible preferred stock and its principal terms were as follows at November 30, 2019 (in thousands, except share amounts):

In March 2020, the Company issued 9,431,364 shares of Series D redeemable convertible preferred stock at an issuance price of $12.75 per share, resulting in net proceeds of $119.9 million.

The Series D redeemable convertible preferred stock had a liquidation price per share equal to the original issue price per share.

Immediately prior to the closing of the IPO in July 2020, all shares of redeemable convertible preferred stock then outstanding, including 9,431,364 shares of Series D redeemable convertible preferred stock, converted into 22,245,251 shares of common stock.

There were no shares of redeemable convertible preferred stock outstanding as of August 31, 2020.

The redeemable convertible preferred stock was recorded in mezzanine equity because while it was not mandatorily redeemable, it would have become redeemable at the option of the preferred stockholders upon the occurrence of a deemed liquidation event that was considered not solely within the Company’s control.

Stock-Based Compensation

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Shares of common stock subject to awards granted under the 2012 Plan that cease to be subject to such awards by forfeiture or otherwise after the termination of the 2012 Plan will be available for issuance under the 2020 Plan.

As of August 31, 2020 , there were 3, 982 , 545 shares of common stock reserved for future issuance pu rsuant to the 2020 Plan.

As of February 28, 2021, there were 3,696,307 shares of common stock reserved for future issuance pursuant to the 2020 Plan.

2012 Equity Incentive Plan

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Options granted under the 2012 Plan may, but need not, be exercisable immediately, with any shares issued on exercise being subject to the Company’s right of repurchase.

As of August 31, 2020, there were no shares of common stock reserved for issuance pursuant to the 2012 Plan.

As of February 28, 2021, there were no shares of common stock reserved for issuance pursuant to the 2012 Plan.

Activity under the 2020 Plan and 2012 Plan is set forth below and has been adjusted for the 1-for-3 reverse stock split (in thousands, except per share data) :

life (in years)

Balances as of November 30, 2020

Additional shares authorized

Options granted

1 unchanged sentence

Options forfeited

Shares repurchased

Balances as of August 31, 2020

Options vested and expected to vest as of August 31,

Options exercisable as of August 31, 2020

The aggregate intrinsic values were calculated as the pre-tax difference between the exercise price of stock options and the quoted market price of the Company’s common stock on August 31, 2020 for all in-the-money stock options.

Balances as of February 28, 2021

Options vested and expected to vest as of February 28, 2021 (2)

Options exercisable as of February 28, 2021

The aggregate intrinsic values were calculated as the pre-tax difference between the exercise price of stock options and the quoted market price of the Company’s common stock on February 28, 2021 for all in-the-money stock options.

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

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

As of August 31, 2020, a total of 164,892 share of common stock were subject to repurchase by the Company at the lower of (i) the fair market value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of $0.6 million as of August 31, 2020 is recorded in share-based compensation liability.

As of February 28, 2021, a total of 121,134 share of common stock were subject to repurchase by the Company at the lower of (i) the fair market value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of $0.5 million as of February 28, 2021 is recorded in share-based compensation liability.

2020 Employee Stock Purchase Plan

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The purchase price for shares of common stock purchased under the 2020 ESPP will be 85% of the lesser of the fair market value of the Company’s common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of each purchase period in the applicable offering period.

As of August 31, 2020, there were 730,000 shares of common stock reserved for issuance pursuant to the 2020 ESPP.

The first offering period commenced as of July 23, 2020, the date on which the Company’s registration statement on Form S-1 relating to its IPO of common stock became effective, and it will end on February 15, 2021.

The first purchase period will be the same as the first offering period and the first purchase date will be the last trading day of the purchase period, which is February 12, 2021.

As of February 28, 2021, there were 1,054,059 shares of common stock reserved for issuance pursuant to the 2020 ESPP.

The first offering period commenced as of July 23, 2020, the date on which the Company’s registration statement on Form S-1 relating to its IPO of common stock became effective and ended on February 15, 2021.

The first purchase period was the same as the first offering period and the first purchase date was the last trading day of the purchase period, which was February 12, 2021.

Stock-Based Compensation

The following table sets forth stock-based compensation expense related to stock options and ESPP that is included in the Company’s condensed consolidated statements of operations (in thousands):

Three Months Ended August 31,

Nine Months Ended August 31,

Three Months Ended

Research and development

1 unchanged sentence

Total stock-based compensation

As of August 31, 2020, the total compensation cost related to stock-based awards not yet recognized was $12.5 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 3.48 years.

As of February 28, 2021, the total compensation cost related to stock-based awards not yet recognized was $49.7 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 3.5 years.

Defined Contribution Plan

2 unchanged sentences

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

The Company made contributions to the 401(k) Plan during the three and nine months ended August 31, 2020 and 2019.

The Company recorded contribution expense of $57,000 and $39,000 during the three months ended August 31, 2020 and 2019, respectively, and $0.3 million and $0.3 million during the nine months ended August 31, 2020 and 2019, respectively.

During the three months ended February 28, 2021 and February 29, 2020, the Company made contributions to the 401(k) Plan during and recorded contribution expense of $0.2 million and $0.1 million, respectively.

For the three months ended February 28, 2021 and February 29, 2020, the Company recorded a current income tax expense of $71,000 and $11,000, respectively.

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

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

The Company has generated losses since inception and has established a valuation allowance to offset deferred tax assets as of February 28, 2021 and November 30, 2020 due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted in response to the COVID-19 pandemic.

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Any tax benefit as a result of the CARES Act is primarily due to the carryback of NOLs to prior taxable years and increased interest expense deductions.

In the second fiscal quarter of 2020, the Company filed a refund claim of $15.7 million to carryback its NOLs generated in the fiscal year ended November 30, 2018, and the Company intends to file an additional refund claim to carryback its NOLs generated in the fiscal year ended November 30, 2019 to recover an additional $3.9 million of income tax.

Additionally, as a result of the CARES Act, the Company anticipates its NOL carryback claims will displace certain research and development credits that were originally used to offset previous tax expense.

As a result, the Company recorded a discrete income tax benefit of $20.6 million, which consist of the carryback claims and the reversal of the uncertain tax liabilities, in the condensed statement of operations for the nine months ended August 31, 2020.

During the third fiscal quarter of 2020, the Company received cash for the first refund claim of $16.3 million including an interest income of $567,000, leaving the remaining income tax receivable of $3.9 million for the anticipated tax refund claims on the condensed consolidated balance sheet as of August 31, 2020.

For the three months ended August 31, 2020 and 2019, the Company recorded a current income tax expense of $0 and $10,000, respectively.

For the nine months ended August 31, 2020 and 2019, the Company recorded an income tax benefit of $20.6 million and a current income tax expense of $29,000, respectively.

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

The Company had generated losses since inception and has established a valuation allowance to offset deferred tax assets as of August 31, 2020 and November 30, 2019 due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets.

The Company files income tax returns in the United States and in the states of California and New Jersey.

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

income tax return for the years ended December 31, 2016 and November 30, 2017 that is anticipated to be completed in 2021.

In 2019, the IRS gave the Company a proposed adjustment denying a portion of the Company’s research and development (R&D) credits.

The Company did not agree with the IRS’s position.

However, pursuant to a measurement analysis the Company recorded an unrecognized tax benefit related to the 2016 and 2017 R&D credits.

In September 2020, the Company and the IRS reached a settlement on the R&D credit issue.

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

See Note 14, “Subsequent events” for details.

Additionally, the California Franchise Tax Board (the FTB) initiated an examination of the Company’s California tax return for the years ended December 31, 2015 and 2016.

As of the issuance date of these condensed consolidated financial statements, the FTB has

not yet issued any assessments.

T he Company’s tax years will remain open for ex amination by the federal and state authorities for three and four years, respectively, from the date of utilization of any NOL or credits.

In the second fiscal quarter of 2020, the Company reclassified its liability for uncertain tax positions on the condensed consolidated balance sheet against its deferred tax asset balance, with an adjustment to the valuation allowance for deferred taxes for the same amount, as a result of the impact of the CARES Act upon the Company’s NOL carryback claims.

Due to the Company’s NOL carryback claims, any federal audit settlements are recorded as adjustments to the Company’s R&D credit carryforwards and NOL balances instead of a cash tax payment.

As of August 31, 2020 and November 30, 2019, there are no tax benefits included in the balance of unrecognized tax benefits that, if recognized, would affect the effective tax rate.

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

In fiscal 2020, the Company received cash of $16.3 million including interest income of $567,000.

As of February 28, 2021, the Company has an income tax receivable of $4.0 million on the condensed consolidated balance sheet for the remaining tax refund claims, which includes interest accrued of $0.1 million.

Net Loss Per Share

The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders, which excludes shares which are legally outstanding but subject to repurchase by the Company (in thousands, except share and per share data):

Three Months Ended August 31,

Nine Months Ended August 31,

Weighted-average number of shares outstanding, basic

Net loss per share attributable to common stockholders,

basic and diluted

Three Months Ended

Weighted-average number of shares outstanding, basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

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

Three and Nine Months Ended August 31,

Three Months Ended

Redeemable convertible preferred stock on an as-converted basis

2 unchanged sentences

Shares expected to be purchased under employee stock purchase plan

Related party transactions

As of August 31, 2020 and November 30, 2019, post-acquisition of Celgene, BMS owned 1,622,222 shares of the Company’s common stock and 1,622,222 shares of the Company’s Series C redeemable convertible preferred stock, respectively.

For the three months ended August 31, 2020 and 2019, the Company recorded collaboration revenue of $0 and $9.7 million, respectively, and for the nine months ended August 31, 2020 and 2019, the Company recorded collaboration revenue of $0 and $28.4 million, respectively.

As of August 31, 2020 and November 30, 2019, deferred revenue related to the Celgene agreement was $0.

In June 2019, the Celgene Agreement was terminated in its entirety with no further payments from Celgene and no remaining deliverables from the Company.

See Note 3, “Collaboration agreements—Celgene (a related party)” for a discussion of the Celgene Agreement.

Subsequent Events

In 2019, the IRS gave the Company a proposed adjustment denying a portion of the Company’s R&D credits.

The amount of a proposed adjustment was $0.8 million and $0.9 million for 2016 and 2017, respectively.

On September 21, 2020, the Company participated in a Fast Track settlement, a voluntary mediation program offered by the IRS, and agreed to accept a reduction of $0.6 million and $0.5 million for the 2016 and 2017 R&D credits, respectively.

Accordingly, the Company has decreased the amount of its R&D credit carryforward by $1.1 million and recorded a decrease to the associated unrecognized tax benefit with an offset to the valuation allowance for deferred taxes.

The settlement did not result in adjustments to the provision for income taxes.

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

What changed 10-Q

Item 1. Financial Statements