Nurix Therapeutics, Inc. 10-Q

Item 1. Financial Statements NURIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (unaudited) May 31, November 30, 2021 2020 Assets Current assets: Cash and cash equivalents $ 188,207 $ 119,356 Short-term investments 197,814 161,792 Accounts receivable 2,537 — Contract assets — 7,500 Income tax receivable 3,142 3,846 Prepaid expenses and other current assets 4,581 5,940 Total current assets 396,281 298,434 Long-term investments 110,440 90,890 Property and equipment, net 8,345 6,672 Restricted cash 170 170 Other assets 2,745 177 Total assets $ 517,981 $ 396,343 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 5,405 $ 3,412 Accrued and other current liabilities 7,678 8,328 Deferred revenue, current 33,761 32,799 Total current liabilities 46,844 44,539 Deferred revenue, net of current portion 72,122 60,685 Other long-term liabilities 837 850 Total liabilities 119,803 106,074 Commitments and contingencies (Note 6) Stockholders’ equity (deficit): Preferred stock, $0.001 par value— 10,000,000 shares authorized as of May 31, 2021 and November 30, 2020; 0 shares issued and outstanding as of May 31, 2021 and November 30, 2020 — — Common stock, $0.001 par value— 500,000,000 shares authorized as of May 31, 2021 and November 30, 2020; 44,403,547 and 38,864,872 shares issued and outstanding as of May 31, 2021 and November 30, 2020, respectively 44 39 Additional paid-in-capital 552,459 393,841 Accumulated other comprehensive income 30 87 Accumulated deficit (154,355 ) (103,698 ) Total stockholders’ equity 398,178 290,269 Total liabilities and stockholders’ equity $ 517,981 $ 396,343 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 N URIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited) Three Months Ended May 31, Six Months Ended May 31, 2021 2020 2021 2020 Collaboration revenue $ 7,091 $ 4,182 $ 12,102 $ 7,046 Operating expenses: Research and development 25,994 14,142 48,997 27,109 General and administrative 7,511 3,270 14,041 5,720 Total operating expenses 33,505 17,412 63,038 32,829 Loss from operations (26,414 ) (13,230 ) (50,936 ) (25,783 ) Interest and other income, net 171 223 489 396 Loss before income taxes (26,243 ) (13,007 ) (50,447 ) (25,387 ) Provision (benefit) for income taxes 139 (20,587 ) 210 (20,576 ) Net income (loss) $ (26,382 ) $ 7,580 $ (50,657 ) $ (4,811 ) Net income (loss) per share attributable to common stockholders, basic $ (0.60 ) $ — $ (1.23 ) $ (1.32 ) Weighted-average number of shares outstanding, basic 43,804,066 3,731,838 41,318,281 3,636,140 Net income (loss) per share attributable to common stockholders, diluted $ (0.60 ) $ — $ (1.23 ) $ (1.32 ) Weighted-average number of shares outstanding, diluted 43,804,066 4,909,829 41,318,281 3,636,140 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 NURIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited) Three Months Ended May 31, Six Months Ended May 31, 2021 2020 2021 2020 Net income (loss) $ (26,382 ) $ 7,580 $ (50,657 ) $ (4,811 ) Other comprehensive income (loss): Unrealized gain (loss) on available-for-sale investments (19 ) 82 (57 ) 141 Total comprehensive income (loss) $ (26,401 ) $ 7,662 $ (50,714 ) $ (4,670 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 NURIX THERAPEUTICS, INC. CONDENSED CONSOLI DATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share amounts) (unaudited) Redeemable convertible preferred stock Common stock Additional paid-in Accumulated other comprehensive Accumulated Total stockholders’ equity Shares Amount Shares Amount capital income (loss) deficit (deficit) Balance as of November 30, 2019 12,813,887 $ 48,195 3,595,334 $ 4 $ 2,740 $ (2 ) $ (60,456 ) $ (57,714 ) Exercise of stock options — — 72,570 — 37 — — 37 Repurchase of unvested early exercised stock options — — (867 ) — — — — — Vesting of early-exercised stock options — — — — 31 — — 31 Stock-based compensation — — — — 176 — — 176 Unrealized gain (loss) on available-for-sale investments — — — — — 59 — 59 Net income (loss) — — — — — — (12,391 ) (12,391 ) Balance as of February 29, 2020 12,813,887 48,195 3,667,037 4 2,984 57 (72,847 ) (69,802 ) Issuance of Series D redeemable convertible preferred stock at $12.75 per share, net of issuance costs of $336 9,431,364 119,914 — — — — — — Exercise of stock options — — 125,708 — 118 — — 118 Vesting of early-exercised stock options — — — — 22 — — 22 Stock-based compensation — — — — 474 — — 474 Unrealized gain (loss) on available-for-sale investments — — — — — 82 — 82 Net income (loss) — — — — — — 7,580 7,580 Balance as of May 31, 2020 22,245,251 $ 168,109 3,792,745 $ 4 $ 3,598 $ 139 $ (65,267 ) $ (61,526 ) 4 Redeemable convertible preferred stock Common stock Additional paid-in Accumulated other comprehensive Accumulated Total stockholders’ equity Shares Amount Shares Amount capital income (loss) deficit (deficit) Balance as of November 30, 2020 — $ — 38,864,872 $ 39 $ 393,841 $ 87 $ (103,698 ) $ 290,269 Exercise of stock options — — 190,825 — 394 — — 394 Repurchase of unvested early exercised stock options — — (971 ) — — — — — Vesting of early-exercised stock options — — — — 40 — — 40 Issuance under Employee Stock Purchase Plan — — 64,589 — 1,043 — — 1,043 Stock-based compensation — — — — 2,700 — — 2,700 Unrealized gain (loss) on available-for-sale investments — — — — — (38 ) — (38 ) Net income (loss) — — — — — — (24,275 ) (24,275 ) Balance as of February 28, 2021 — — 39,119,315 39 398,018 49 (127,973 ) 270,133 Issuance of common stock in connection with equity offering, net of offering costs of $643 — — 5,175,000 5 150,152 — — 150,157 Exercise of stock options — — 109,232 — 241 — — 241 Vesting of early-exercised stock options — — — — 104 — — 104 Stock-based compensation — — — — 3,944 — — 3,944 Unrealized gain (loss) on available-for-sale investments — — — — — (19 ) — (19 ) Net income (loss) — — — — — — (26,382 ) (26,382 ) Balance as of May 31, 2021 — $ — 44,403,547 $ 44 $ 552,459 $ 30 $ (154,355 ) $ 398,178 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 NURIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended May 31, 2021 2020 Cash flows from operating activities Net loss $ (50,657 ) $ (4,811 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 1,288 986 Stock-based compensation 6,644 650 Net amortization (accretion) of premium (discount) on investments 566 50 Changes in operating assets and liabilities: Contract assets 7,500 — Accounts receivable (2,537 ) — Income tax receivable 704 (19,590 ) Prepaid expenses and other assets (837 ) (2,056 ) Accounts payable 2,119 1,745 Deferred revenue 12,399 51,454 Accrued and other liabilities (671 ) (1,885 ) Net cash (used in) provided by operating activities (23,482 ) 26,543 Cash flows from investing activities Purchases of investments (183,238 ) (29,640 ) Sales of investments 6,994 — Maturities of investments 119,681 9,857 Purchases of property and equipment (2,934 ) (1,977 ) Net cash used in investing activities (59,497 ) (21,760 ) Cash flows from financing activities Proceeds from issuance of redeemable convertible preferred stock, net of offering costs — 119,914 Proceeds from issuance of common stock, net of offering costs 150,157 — Proceeds from exercise of stock options 631 177 Repurchase of unvested early exercised stock options (1 ) (1 ) Proceeds from issuance under Employee Stock Purchase Plan 1,043 — Payments of deferred offering costs — (360 ) Net cash provided by financing activities 151,830 119,730 Net increase in cash, cash equivalents and restricted cash 68,851 124,513 Cash, cash equivalents and restricted cash at beginning of period 119,526 34,986 Cash, cash equivalents and restricted cash at end of period $ 188,377 $ 159,499 Supplemental disclosures of non-cash investing and financing activities: Additions to property and equipment included in accounts payable and accrued liabilities $ 607 $ 927 Vesting of early exercised stock options $ 144 $ 53 Deferred offering costs included in accounts payable and accrued liabilities $ — $ 916 As of May 31, 2021 2020 Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows: Cash and cash equivalents $ 188,207 $ 159,329 Restricted cash 170 170 Total cash, cash equivalents and restricted cash $ 188,377 $ 159,499 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 NURIX THERAPEUTICS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Description of Business Nurix Therapeutics, Inc. (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 other challenging diseases. Leveraging the Company’s expertise in E3 ligases together with its proprietary DNA-encoded libraries, the Company has built DELigase, an integrated discovery platform to identify and advance novel drug candidates targeting E3 ligases, a broad class of enzymes that can modulate proteins within the cell. The Company’s drug discovery approach is to either harness or inhibit the natural function of E3 ligases within the ubiquitin-proteasome system to selectively decrease or increase cellular protein levels to treat disease. The Company wholly owns a subsidiary, DeCART Therapeutics Inc. (DeCART), which was incorporated in the state of Delaware on June 22, 2020 and which holds a license to three of the Company’s compounds, including NX-0255, for drug-enhanced isolation of T cells exclusively with respect to three CAR-T therapy targets. Initial Public Offering On July 23, 2020, the Company’s registration statement on Form S-1 (File No. 333-239651) relating to its initial public offering (IPO) of common stock became effective. The IPO closed on July 28, 2020 at which time the Company issued 11,000,000 shares of its common stock at a price to the public of $19.00 per share. In addition, the underwriters exercised their option to purchase an additional 1,550,000 shares of the Company’s common stock on July 31, 2020, and this transaction closed on August 4, 2020. Immediately prior to the closing of the IPO, all outstanding shares of the Company’s redeemable convertible preferred stock automatically converted into 22,245,251 shares of common stock. Net proceeds from the IPO, including the exercise of the underwriters’ option to purchase additional shares, were $218.1 million, after deducting underwriting discounts and commissions of $16.7 million and expenses of $3.6 million. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding. 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. Liquidity 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 six months ended May 31, 2021, the Company incurred a net loss of $50.7 million and had negative net cash flows from operating activities of $23.5 million. The Company had an accumulated deficit of $154.4 million as of May 31, 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 May 31, 2021, the Company had cash, cash equivalents and investments of $496.5 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. Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and payments the Company may receive under its collaboration agreements with Sanofi S.A. (Sanofi) and Gilead Sciences, Inc. (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, 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. 7 2. Summary of Significant Accounting Policies Basis of Presentation The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. 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 and six months ended May 31, 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 The accompanying condensed consolidated financial statements include the accounts of Nurix Therapeutics, Inc. and its wholly owned subsidiaries, including DeCART. All intercompany balances and transactions have been eliminated in consolidation. 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. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to the useful lives of long-lived assets, the measurement of stock-based compensation, accruals for research and development activities, income taxes and revenue recognition. The Company bases its estimates on historical experience and on other relevant assumptions that are reasonable under the circumstances. Actual results could differ materially from those estimates. 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 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 drug candidates, ability to raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain drug substance and finished drug product from the Company’s third-party contract manufacturers necessary for the Company’s drug candidates, including due to the impact of the current coronavirus (COVID-19) pandemic, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights and regulatory clearance and market acceptance for any of the Company’s products candidates for which the Company receives marketing approval. Moreover, the 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 8 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 six months ended May 31, 2021; 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 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: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract, whether each promised good or service is distinct, and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. The Company enters into collaboration agreements under which it may obtain upfront payments, milestone payments, royalty payments and other fees. Promises under these arrangements may include research licenses, research services, including selection campaign research services for certain replacement targets, the obligation to share information during the research and the participation of alliance managers and in joint research committees, joint patent committees and joint steering committees. The Company assesses these promises within the context of the agreements to determine the performance obligations. Research and collaboration licenses : If a license is determined to be distinct from the other promises identified in the arrangement, the Company recognizes revenue from upfront payments allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront payments. The Company evaluates the measure of proportional performance each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Milestone payments : At the inception of each arrangement that includes research, development, or regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. The Company uses the most likely amount method for research, development and regulatory milestone payments. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. If it is probable that a significant revenue reversal would not occur, the associated milestone amount is included in the transaction price. 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 : Customer options, such as options granted to allow a licensee to extend a license or research term, to select additional research targets or to choose to research, develop and commercialize licensed compounds are evaluated at contract inception to determine whether those options provide a material right (i.e., an optional good or service offered for free or at a discount) to the customer. If the customer options represent a material right, the material right is treated as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the standalone selling price. As 9 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 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. 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 The Company is an “emerging growth company” (EGC), as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the JOBS Act). Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. 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. 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 consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02) , which for operating leases requires the lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of lease payments, in its balance sheet. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, including a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for annual periods beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its financial statements and expects to recognize a right-of-use asset and a lease liability on the Company’s consolidated balance sheet, which will increase the Company’s assets and liabilities. In June 2016, the FASB issued ASU No. 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 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. An entity will recognize an allowance for credit losses on available-for-sale debt investments rather than an other-than-temporary impairment that reduces the cost basis of the investment. ASU 2016-13 is effective for annual periods beginning after December 15, 10 2022, including interim periods within those annual periods. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its financial statements. In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18). ASU 2018-18 clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. ASU 2018-18 is effective for annual periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. ASU 2018-18 requires retrospective adoption to the date the Company adopted Topic 606 by recognizing a cumulative-effect adjustment to the opening balance of retained earnings of the earliest annual period presented. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company does not expect the adoption to have a material impact on its financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its financial statements. 3. Collaboration Agreements Gilead 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 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. For drug targets that are subject to the collaboration, the Company is obligated to use commercially reasonable efforts to undertake a research program in accordance with a research plan agreed to by the parties and established on a target-by-target basis. The Company has primary responsibility under the agreement for performing preclinical research activities (including target validation, drug discovery, identification or synthesis) pursuant to a research plan. Each party will bear its own costs in the conduct of research activities. Gilead will be responsible for any development, commercialization and manufacturing activities, unless the Company exercises its co-development and co-promotion option. For those programs that the Company exercises its option to co-develop and co-promote, the Company and Gilead will split U.S. development costs as well as U.S. profits and losses evenly, and the Company will be eligible to receive royalties on net ex-U.S. sales and reduced milestone payments. 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 $13.5 million for research milestones and additional payments, including $2.5 million in the second quarter of 2021. As of May 31, 2021, the Company is eligible to receive up to approximately $2.3 billion in total additional payments, including up to $688.5 million upon the achievement of specified development milestones, up to $1.5 billion upon the achievement of specified sales milestones, subject to reduction for any product for which the Company exercises its option to co-develop and co-promote, and up to $138.8 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. 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 11 the Company’s exercise of its option to co-develop and co-promote such licensed product. If Gilead does not exercise an option to license a drug candidate, then the Gilead Agreement will terminate at the end of the last to expire option period. The Company identified the following promises in the Gilead Agreement: (1) the research licenses, (2) the research services, including selection campaign research services for certain replacement targets and (3) the obligation to share information during the research and to participate in the joint research committee and joint steering committee. The Company determined that the research licenses are not capable of being distinct due to the specialized nature of the research services to be provided by the Company, and, accordingly, this promise was combined with the research services and participation in the joint research committee as one single performance obligation. The Company concluded that, at the inception of the Gilead Agreement, Gilead’s options to obtain an exclusive development, manufacturing and commercialization license for each collaboration target, to extend the five-year research term and to perform selection campaign research services for certain replacement targets do not represent material rights and are not considered performance obligations because they do not contain a significant and incremental discount. The Company concluded that Gilead’s target reservation right is not a performance obligation as it does not require any specific action from the Company and it is rather an exclusivity right and an attribute of other performance obligations in the Gilead Agreement, such as the research licenses. 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 May 31, 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. Subsequently, upon the achievement of research milestones and target reservations, $13.5 million in variable consideration was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased. The transaction price is recognized as collaboration revenue using the cost-based input method over the estimated contract term of five years. The contract term was determined to be the five-year initial research term which represents the estimated timing of completion of the identified deliverables. 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. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. These actual costs consist primarily of internal employee and third party contract costs related to the Gilead Agreement. For the three and six months ended May 31, 2021, the Company recognized collaboration revenue related to the Gilead Agreement of $3.7 million and $6.5 million, respectively, of which $2.9 million and $5.6 million, respectively, were included in deferred revenue as of November 30, 2020, and $0.6 million and $0.6 million, respectively, were related to activities satisfied in previous periods. For the three and six months ended May 31, 2020, the Company recognized revenue related to the Gilead Agreement of $2.4 million and $4.8 million, respectively. As of May 31, 2021, $40.2 million was recorded as deferred revenue, of which $14.7 million was current, on the condensed consolidated balance sheet related to the Gilead Agreement. Sanofi In December 2019, the Company entered into a strategic collaboration with Genzyme Corporation, a subsidiary of Sanofi, which became effective in January 2020 (as subsequently expanded and amended, the Sanofi Agreement), to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with challenging diseases in multiple therapeutic areas using the Company’s DELigase platform to identify small molecules designed to induce degradation of three specified initial drug targets. In January 2021, as part of the existing collaboration agreement, Sanofi paid the Company $22.0 million to exercise its option to expand the number of targets in the collaboration agreement from three to a total of five targets. 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 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. For drug targets that are subject to the collaboration, the Company has primary responsibility for conducting preclinical research 12 activities (including target validation, drug discovery, identification or synthesis) in accordance with the applicable research plan agreed to by the parties and established on a target-by-target basis. The Company is obligated to use commercially reasonable efforts to identify relevant target binders and c himeric t argeting m olecules in order to identify development candidates. Subject to certain exceptions, each party will bear its own costs in the conduct of such research. Sanofi will be responsible for any development and commercialization activities unless the Company exercises its co-development and co-promotion option. For those programs that the Company exercises its option to co-develop, co-promote and co-commercialize, the Company will be responsible for a portion of the U.S. development costs, and the parties will split U.S. profits and losses evenly and the Company will be eligible to receive royalties on ex-U.S. net sales and reduced milestone payments on such optioned products. 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 May 31, 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. The Company identified the following promises in the Sanofi Agreement: (1) the research licenses, (2) the research services, (3) the obligation to share information during the research term and (4) the participation of alliance managers in the joint research committee and joint patent committee. The Company determined that the research licenses are not capable of being distinct due to the specialized nature of the research services to be provided by the Company, and, accordingly, this promise was combined with the research services as one single performance obligation. The Company also determined that Sanofi’s exclusive right to add up to two additional targets constitutes a material right as it represents a significant and incremental discount that Sanofi would not have received without entering into the Sanofi Agreement. 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 May 31, 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. 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, which was subsequently exercised by Sanofi . 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 employee and third party contract costs 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 services to be provided after the contract modification are not distinct from the goods and services already provided and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. The contract modification did not have an effect on the contract transaction price. The effect of the revised research period on the Company’s measure of progress toward complete satisfaction of the performance obligation was recognized as an adjustment to revenue at the date of the contract modification on a cumulative catch-up basis. 13 For the three and six months ended May 31, 2021 , the Company recognized collaboration revenue related to the Sanofi Agreement of $3.3 million and $5.6 million , respectively , all of which was included in deferred revenue as of November 30, 2020. For the three and six months ended May 31, 2020 , the Company recognized revenue related to the Sanofi Agreement of $1.8 million and $2.2 million , respectively . As of May 31, 2021 , $65.7 million was recorded as deferred revenue, of which $19.0 million was current, on the condensed consolidated balance sheet related to the Sanofi Agreement. 4. Condensed Consolidated Balance Sheet Components Property and Equipment, Net Property and equipment, net, consisted of the following (in thousands): May 31, November 30, 2021 2020 Laboratory equipment $ 15,885 $ 14,120 Leasehold improvements 2,821 2,664 Computer equipment 745 745 Furniture and fixtures 506 506 Software 1,820 1,316 Software in progress 1,039 504 Total property and equipment, gross 22,816 19,855 Less: Accumulated depreciation and amortization (14,471 ) (13,183 ) Total property and equipment, net $ 8,345 $ 6,672 Depreciation and amortization expense was $0.6 million and $0.5 million for the three months ended May 31, 2021 and 2020, respectively, and $1.3 million and $1.0 million for the six months ended May 31, 2021 and 2020, respectively. All long-lived assets are maintained in the United States. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following (in thousands): May 31, November 30, 2021 2020 Accrued compensation $ 4,986 $ 5,725 Accrued contract research and lab supplies 1,388 1,238 Accrued professional services 703 591 Accrued taxes — 74 Other 601 700 Total $ 7,678 $ 8,328 5. Fair Value Measurements In accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows: Level 1—Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date; Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and Level 3—Inputs that are unobservable. 14 Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 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 May 31, 2021 and November 30, 2020 (in thousands): May 31, 2021 Level Amortized cost Unrealized gain Unrealized loss Estimated fair value Money market funds Level 1 $ 168,067 $ — $ — $ 168,067 U.S. treasury securities Level 1 16,571 2 (1 ) 16,572 Corporate debt securities Level 2 45,447 8 (7 ) 45,448 U.S. government agency securities Level 2 1,000 — — 1,000 Corporate commercial paper Level 2 129,449 — — 129,449 Municipal securities Level 2 5,338 7 — 5,345 Long-term investments: Corporate debt securities Level 2 49,200 16 (41 ) 49,175 U.S. government agency securities Level 2 52,434 29 — 52,463 Municipal securities Level 2 8,785 17 — 8,802 Total $ 476,291 $ 79 $ (49 ) $ 476,321 Included in Cash and cash equivalents $ 168,067 $ — $ — $ 168,067 Included in Short-term investments $ 197,805 $ 17 $ (8 ) $ 197,814 Included in Long-term investments $ 110,419 $ 62 $ (41 ) $ 110,440 November 30, 2020 Level Amortized cost Unrealized gain Unrealized loss Estimated fair value Money market funds Level 1 $ 114,357 $ — $ — $ 114,357 U.S. treasury securities Level 1 48,002 22 (1 ) 48,023 Corporate debt securities Level 2 23,287 11 (6 ) 23,292 U.S. government agency securities Level 2 9,011 15 — 9,026 Corporate commercial paper Level 2 80,411 — — 80,411 Municipal securities Level 2 6,032 9 (2 ) 6,039 Long-term investments: Corporate debt securities Level 2 11,207 11 (10 ) 11,208 U.S. government agency securities Level 2 70,373 25 (7 ) 70,391 Municipal securities Level 2 9,269 22 — 9,291 Total $ 371,949 $ 115 $ (26 ) $ 372,038 Included in Cash and cash equivalents $ 119,356 $ — $ — $ 119,356 Included in Short-term investments $ 161,744 $ 57 $ (9 ) $ 161,792 Included in Long-term investments $ 90,849 $ 58 $ (17 ) $ 90,890 The Company classifies its money market funds and U.S. treasury securities, which are valued based on quoted market prices in active markets with no valuation adjustment, as Level 1 assets within the fair value hierarchy. The Company classifies its investments in corporate debt securities, U.S. government agency securities, corporate commercial paper, and municipal securities as Level 2 assets within the fair value hierarchy. The fair values of these investments are estimated by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. 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. As of May 31, 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 and six months ended May 31, 2021 and 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. The Company’s long-term investments have maturities of between one and two years from the respective condensed consolidated balance sheet dates. 15 6 . Commitments and Contingencies Legal Proceedings From time to time, the Company may be involved in legal proceedings in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. Legal fees and other costs associated with such actions are expensed as incurred. As of May 31, 2021, the Company had no outstanding, pending or threatened litigation. Indemnifications In the ordinary course of business, the Company often includes standard indemnification provisions in its arrangements with its partners, suppliers and vendors, among others. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred in connection with its service, breach of representations or covenants, intellectual property infringement or other claims made against such parties. These provisions may limit the time within which an indemnification claim can be made. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. The Company has not incurred any material costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in these condensed consolidated financial statements as management believes such liability is immaterial. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s condensed consolidated financial statements. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not specified in the agreements. However, the Company currently has directors’ and officers’ insurance that reduces its exposure and may enable the Company to recover a portion of any future amounts paid. Operating Leases The Company leases office and laboratory facilities in San Francisco, California under a lease agreement. The original lease term was scheduled to end 60 months following the Company’s full occupancy of the leased premises, which occurred in April 2015. In October 2015, the Company entered into a second lease agreement for additional space in the same building as its existing office and laboratory facilities. In November 2017, the Company entered into a second amendment to its original lease agreement that combined the Company’s two leases into a single lease agreement and extended the term of the lease agreement through April 30, 2025. In March 2021, the Company entered into a third amendment to its original lease agreement to add additional office space in the same building. The Company is required to pay base rent plus the tenant’s proportionate share of operating expenses as defined in the lease agreement. Under the terms of the lease agreement, the Company paid the landlord security deposits totaling $91,000 and issued a letter of credit to the landlord in the amount of $70,000, which is collateralized by a restricted deposit of $70,000. 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. Rent expense was $0.9 million and $0.7 million for the three months ended May 31, 2021 and 2020, respectively, and $1.7 million and $1.5 million for the six months ended May 31, 2021 and 2020, respectively. Future minimum lease payments under the Company’s lease agreement as of May 31, 2021 were as follows (in thousands): Year ending November 30, Operating Leases 2021 (remaining 6 months) $ 1,592 2022 3,897 2023 3,986 2024 4,105 2025 1,732 Total minimum lease payments $ 15,312 7. Common Stock 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. The holder of each share of common stock is entitled to one vote. As of May 31, 2021, no dividends have been declared. 16 C ommon stock reserved for future issuance, on an as-if converted basis , as of May 31, 2021 and November 30, 2020 , consists of the following and ha s been adjusted for the 1-for-3 reverse stock split : May 31, November 30, 2021 2020 Issuance of options under stock option plan 5,141,041 4,387,862 Shares available for future stock option grants 3,542,030 3,035,684 Shares available for issuance under employee stock purchase plan 1,054,059 730,000 Total common stock reserved for future issuance 9,737,130 8,153,546 8. Stock-Based Compensation 2020 Equity Incentive Plan In July 2020, the Company’s board of directors approved, and the Company adopted the 2020 Equity Incentive Plan (the 2020 Plan). The 2020 Plan became effective on July 22, 2020. The 2020 Plan provides for the granting of stock options, stock appreciation rights (SARs), restricted stock awards (RSAs), restricted stock units (RSUs), performance awards and stock bonus awards to employees, directors, consultants, independent contractors and advisors of the Company. Under the 2020 Plan, the Company generally grants stock-based awards with service-based vesting conditions only. Options granted typically vest over a four-year period but may be granted with different vesting terms. In the case of an incentive stock option granted to an employee who at the time of grant owns stock representing more than 10% of the total combined voting power of all classes of stock, the exercise price shall be no less than 110% of the fair value per share on the date of grant, and the award shall expire five years from the date of grant. In the case of all other stock options, the per share exercise price shall be no less than 100% of the fair value per share on the date of grant. Following the effectiveness of the 2020 Plan, the Company ceased making grants under the 2012 Equity Incentive Plan (the 2012 Plan). However, the 2012 Plan continues to govern the terms and conditions of the outstanding awards granted under it. 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 May 31, 2021, there were 3,542,030 shares of common stock reserved for future issuance pursuant to the 2020 Plan. 2012 Equity Incentive Plan In April 2012, the Company’s board of directors approved, and the Company adopted the 2012 Plan. The 2012 Plan provides for the granting of stock options, SARs, RSAs, and RSUs to employees, directors, consultants and advisors of the Company. Options granted under the 2012 Plan generally vest over four years. 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 May 31, 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): Number of options outstanding Weighted- average exercise price Weighted- average contractual life (in years) Aggregate intrinsic value (1) Balances as of November 30, 2020 4,387,862 $ 10.43 9.02 $ 141,249 Options granted 1,208,332 37.30 Options exercised (300,057 ) 2.12 9,985 Options forfeited (155,096 ) 16.01 Balances as of May 31, 2021 5,141,041 $ 17.06 8.87 $ 66,785 Options vested and expected to vest as of May 31, 2021 (2) 5,216,165 $ 16.86 8.85 $ 68,670 Options exercisable as of May 31, 2021 2,805,638 $ 7.16 8.36 $ 58,678 (1) 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 May 31, 2021 for all in-the-money stock options. (2) 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. 17 Such exercises are recorded as a liability in the condensed consolidated balance sheets and reclassified into equity as the options vest. As of May 31, 2021 , a total of 95,124 share s 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 $0.4 million as of May 31, 2021 is recorded in share-based compensation liability. 2020 Employee Stock Purchase Plan In July 2020, the Company’s board of directors adopted the 2020 Employee Stock Purchase Plan (the 2020 ESPP) that became effective upon the date of the IPO in order to enable eligible employees to purchase shares of common stock with accumulated payroll deductions. The 2020 ESPP is intended to qualify under Section 423 of the Internal Revenue Code, as amended. Under the 2020 ESPP, eligible employees are offered the option to purchase shares of common stock at a discount over a series of offering periods. Each offering period may consist of one or more purchase periods. 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 May 31, 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 May 31, Six Months Ended May 31, 2021 2020 2021 2020 Research and development $ 2,015 $ 267 $ 3,238 $ 363 General and administrative 1,929 207 3,406 287 Total stock-based compensation $ 3,944 $ 474 $ 6,644 $ 650 As of May 31, 2021, the total compensation cost related to stock-based awards not yet recognized was $48.9 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 3.3 years. 9. Defined Contribution Plan The Company sponsors a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (the 401(k) Plan), which provides for the Company to make discretionary matching or discretionary annual contributions to the 401(k) Plan, for its employees. Substantially all of the Company’s employees are eligible to participate. Employees may contribute a percentage of their annual compensation to the plan, subject to statutory limitations. During the three and six months ended May 31, 2021 and 2020, the Company made contributions to the 401(k) Plan. The Company recorded contribution expense of $0.2 million and $0.2 million during the three months ended May 31, 2021 and 2020, respectively and $0.4 million and $0.3 million during the six months ended May 31, 2021 and 2020, respectively. 10. Income Taxes Income tax expense was $0.1 million and $0.2 million for the three and six months ended May 31, 2021. Income tax benefit was $20.6 million for the three and six months ended May 31, 2020. 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 May 31, 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. The CARES Act, among other things, permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. 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 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 18 of $ 0.6 million. In March 2021, the Company received cash of $ 0.8 million. As of May 31, 2021 , the Company has an income ta x receivable of $3.1 million on the condensed consolidated balance sheet for the remaining tax refund claims , which includes interest accrued of $ 0.1 million . 11. Net Income (Loss) Per Share The Company follows the two-class method when computing net income (loss) per common share when shares are issued that meet the definition of participating securities. The two-class method determines net income (loss) per common share for each class of common stock and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company’s redeemable convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in the Company’s losses. The holders of redeemable convertible preferred stock are entitled to participate in noncumulative dividends on common stock at the rate of 8% of the applicable original issue price per share per annum based on the number of shares of common stock held on an as-converted basis. As of May 31, 2021, no dividends on redeemable convertible preferred stock or common stock were declared or have ever been declared by the Company’s board of directors. However, in accordance with ASC 260, Earnings Per Share , undistributed earnings are hypothetically allocated to holders of redeemable convertible preferred stock and are subtracted from net income in determining net income attributable to common stockholders. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding. For periods in which the Company reports net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders because potentially dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive. The following table sets forth the computation of the Company’s basic and diluted net income (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 May 31, Six Months Ended May 31, 2021 2020 (1) 2021 2020 Numerator: Net income (loss) $ (26,382 ) $ 7,580 $ (50,657 ) $ (4,811 ) Less: noncumulative dividend to preferred stockholders — (7,580 ) — — Net income (loss) attributable to common stockholders, basic and diluted $ (26,382 ) $ — $ (50,657 ) $ (4,811 ) Denominator: Weighted-average number of shares outstanding, basic 43,804,066 3,731,838 41,318,281 3,636,140 Weighted-average dilutive effect of stock options — 1,177,991 — — Weighted-average number of shares outstanding, diluted 43,804,066 4,909,829 41,318,281 3,636,140 Net income (loss) per share attributable to common stockholders, basic $ (0.60 ) $ — $ (1.23 ) $ (1.32 ) Net income (loss) per share attributable to common stockholders, diluted $ (0.60 ) $ — $ (1.23 ) $ (1.32 ) (1) Q2 2020 Revision of Basic and Diluted Net Income (Loss) per Share During the second quarter of 2021, the Company identified an error in the computation and disclosure of the basic and diluted net income per share and the diluted weighted-average number of shares outstanding for the three months ended May 31, 2020 included in the Quarterly Financial Information (unaudited) footnote in its Annual Report on Form 10-K for the fiscal year ended November 31, 2020. The three months ended May 31, 2020 was the first and only time the Company was in a net income position for the fiscal year ended November 30, 2020. The error resulted from the exclusion of a hypothetical 19 noncumulative dividend attributable to participating preferred stockholders from net income and the exclusion of dilutive stock options from diluted weighted-average number of shares outstanding. The Company evaluated the materiality of the error in accordance with SEC Staff Accounting Bulletin No. 99, Materiality and ASC 250, Accounting for Changes and Error Corrections , and concluded the error was not material to the previously issued consolidated financial statements. However, the Company has revised its previously reported diluted weighted-average number of shares outstanding and basic and diluted net income per share, which increases the diluted weighted-average number of shares outstanding from 3,731,838 to 4,909,829 and decreases the basic and diluted net income per share from $ 2.03 to $ 0.00 for the three months ended May 31, 2020 . The following potentially dilutive securities were excluded from the computation of the diluted net income (loss) per share of common stock for the periods presented because their effect would have been anti-dilutive: Three Months Ended May 31, Six Months Ended May 31, 2021 2020 2021 2020 Redeemable convertible preferred stock on an as-converted basis — 22,245,251 — 22,245,251 Options to purchase common stock 5,141,041 1,152,002 5,141,041 2,930,466 Options early exercised subject to vesting 95,124 105,014 95,124 105,014 Shares expected to be purchased under employee stock purchase plan 40,486 — 40,486 — Total 5,276,651 23,502,267 5,276,651 25,280,731 20 12. Subsequent Events On July 8, 2021, the Company entered into a lease agreement for the lease of approximately 19,320 square feet of office space located at 455 Mission Bay Boulevard South, San Francisco, California, for a research and development laboratory and related uses. The commencement date of the lease is expected to be on or about December 1, 2021 and the lease will expire on June 30, 2024, unless terminated earlier. The minimum rent payable by the Company under the lease will be approximately $0.1 million per month, beginning on December 1, 2021, which amount will increase by 3% per year over the term. The Company will also be responsible for the payment of additional rent to cover the Company’s share of the annual operating and tax expenses and utilities costs for the building. 21