Nurix Therapeutics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 127 Consolidated Balance Sheets 130 Consolidated Statements of Operations 131 Consolidated Statements of Comprehensive Loss 132 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) 133 Consolidated Statements of Cash Flows 135 Notes to Consolidated Financial Statements 137 126 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Nurix Therapeutics, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Nurix Therapeutics, Inc. and its subsidiaries (the “Company”) as of November 30, 2021 and 2020, and the related consolidated statements of operations, of comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended November 30, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of November 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of November 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of November 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial repo rting existed as of that date related to the Company not designing and maintaining effective (a) controls over certain information technology general controls, and (b) segregation of duty controls over the review and approval of account reconciliations and manual journal entries. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases on December 1, 2020. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and 127 disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition - Estimated Costs of Internal Full-Time Employees (FTEs) As described in Note 3 to the consolidated financial statements, the Company’s consolidated revenue was $29.8 million for the year ended November 30, 2021 and was generated from the Company’s collaboration agreements. During the contract term, management uses a cost-based input method to recognize revenue based on the actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation under the contract. Costs consist primarily of internal FTE and third-party contract costs related to the collaboration agreements. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation is recorded in the period in which changes are identified and amounts can be reasonably estimated. Total estimated costs are primarily driven by the number of estimated FTEs, which requires significant management judgment. The principal considerations for our determination that performing procedures relating to revenue recognition - estimated costs of internal FTEs is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in performing procedures relating to the estimated costs of internal FTEs due to the significant judgment by management when determining the estimate and (ii) the significant audit effort in evaluating the significant assumption related to the number of estimated FTEs. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls related to the revenue recognition process, including controls over the determination of the estimated costs 128 of internal FTEs. These procedures also included, among others, evaluating and testing management’s process for determining the estimated costs of internal FTEs, which included evaluating the reasonableness of the significant assumption related to the number of estimated FTEs, by (i) performing a comparison of management’s estimated costs of internal FTEs to the actual internal FTE costs; (ii) testing the completeness and accuracy of the data used by management in the estimate; (iii) evaluating management’s timely identification of changes in estimated costs of internal FTEs; and (iv) evaluating whether the estimate and assumption were consistent with evidence obtained in other areas of the audit. /s/ PricewaterhouseCoopers LLP San Jose, California January 28, 2022 We have served as the Company’s auditor since 2014. 129 NURIX THERAPEUTICS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) November 30, 2021 2020 Assets Current assets: Cash and cash equivalents $ 80,506 $ 119,356 Short-term investments 215,214 161,792 Accounts receivable 6,000 — Contract assets — 7,500 Income tax receivable 204 3,846 Prepaid expenses and other current assets 9,194 5,940 Total current assets 311,118 298,434 Long-term investments 137,189 90,890 Operating lease right-of-use assets 14,005 — Property and equipment, net 11,340 6,672 Restricted cash 286 170 Other assets 2,833 177 Total assets $ 476,771 $ 396,343 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 6,650 $ 3,412 Accrued expenses and other current liabilities 14,549 8,328 Operating lease current liabilities 3,847 — Deferred revenue, current 41,212 32,799 Total current liabilities 66,258 44,539 Operating lease long-term liabilities 9,189 — Deferred revenue, net of current portion 59,022 60,685 Other long-term liabilities — 850 Total liabilities 134,469 106,074 Commitments and contingencies (Note 6) Stockholders’ equity: Preferred stock, $ 0.001 par value— 10,000,000 shares authorized and 0 shares issued and outstanding as of November 30, 2021 and November 30, 2020 — — Common stock, $ 0.001 par value— 500,000,000 shares authorized as of November 30, 2021 and November 30, 2020; 44,664,371 and 38,864,872 shares issued and outstanding as of November 30, 2021 and November 30, 2020, respectively 45 39 Additional paid-in-capital 563,757 393,841 Accumulated other comprehensive income (loss) ( 608 ) 87 Accumulated deficit ( 220,892 ) ( 103,698 ) Total stockholders’ equity 342,302 290,269 Total liabilities and stockholders’ equity $ 476,771 $ 396,343 The accompanying notes are an integral part of these consolidated financial statements. 130 NURIX THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) Year Ended November 30, 2021 2020 2019 Collaboration revenue (1) $ 29,750 $ 17,820 $ 31,115 Operating expenses: Research and development 116,434 66,494 45,025 General and administrative 31,202 16,309 8,326 Total operating expenses 147,636 82,803 53,351 Loss from operations ( 117,886 ) ( 64,983 ) ( 22,236 ) Interest and other income, net 823 1,206 776 Loss before income taxes ( 117,063 ) ( 63,777 ) ( 21,460 ) Provision for (benefit from) income taxes 131 ( 20,535 ) 239 Net loss $ ( 117,194 ) $ ( 43,242 ) $ ( 21,699 ) Net loss per share, basic and diluted $ ( 2.73 ) $ ( 2.76 ) $ ( 6.59 ) Weighted-average number of shares outstanding, basic and diluted 42,895,383 15,673,424 3,292,514 (1) Collaboration revenue for the years ended November 30, 2021, 2020 and 2019 includes related party revenue of $ 0 , $ 0 and $ 28.4 million, respectively. The accompanying notes are an integral part of these consolidated financial statements. 131 NURIX THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Year Ended November 30, 2021 2020 2019 Net loss $ ( 117,194 ) $ ( 43,242 ) $ ( 21,699 ) Other comprehensive income (loss), net of tax: Unrealized gain (loss) on available-for-sale investments ( 695 ) 89 2 Total comprehensive loss $ ( 117,889 ) $ ( 43,153 ) $ ( 21,697 ) The accompanying notes are an integral part of these consolidated financial statements. 132 NURIX THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share amounts) 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, 2018 12,813,887 $ 48,195 3,452,653 $ 4 $ 1,910 $ ( 4 ) $ ( 38,757 ) $ ( 36,847 ) Exercise of stock options — — 158,474 — 104 — — 104 Repurchase of unvested early exercised stock options — — ( 15,793 ) — — — — — Vesting of early- exercised stock options — — — — 216 — — 216 Stock-based compensation — — — — 510 — — 510 Unrealized gain on available-for-sale investments — — — — — 2 — 2 Net loss — — — — — — ( 21,699 ) ( 21,699 ) Balance as of November 30, 2019 12,813,887 48,195 3,595,334 4 2,740 ( 2 ) ( 60,456 ) ( 57,714 ) Issuance of Series D redeemable convertible preferred stock at $ 12.75 per share, net of issuance costs of $ 336 9,431,364 119,914 — — — — — — Conversion of redeemable convertible preferred stock into common stock ( 22,245,251 ) ( 168,109 ) 22,245,251 22 168,087 — — 168,109 Issuance of common stock upon initial public offering, net offering costs of $ 20,304 — — 12,550,000 13 218,134 — — 218,147 Exercise of stock options — — 479,156 — 450 — — 450 Repurchase of unvested early exercised stock options — — ( 4,869 ) — — — — — Vesting of early- exercised stock options — — — — 129 — — 129 Stock-based compensation — — — — 4,301 — — 4,301 Unrealized gain on available-for-sale investments — — — — — 89 — 89 Net loss — — — — — — ( 43,242 ) ( 43,242 ) Balance as of November 30, 2020 — — 38,864,872 39 393,841 87 ( 103,698 ) 290,269 133 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) 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 — — 522,006 1 1,665 — — 1,666 Repurchase of unvested early exercised stock options — — ( 971 ) — — — — — Vesting of early- exercised stock options — — — — 239 — — 239 Issuance under employee stock purchase plan — — 103,464 — 2,060 — — 2,060 Stock-based compensation — — — — 15,800 — — 15,800 Unrealized loss on available-for-sale investments — — — — — ( 695 ) — ( 695 ) Net loss — — — — — — ( 117,194 ) ( 117,194 ) Balance as of November 30, 2021 — $ — 44,664,371 $ 45 $ 563,757 $ ( 608 ) $ ( 220,892 ) $ 342,302 The accompanying notes are an integral part of these consolidated financial statements. 134 NURIX THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended November 30, 2021 2020 2019 Cash flows from operating activities Net loss $ ( 117,194 ) $ ( 43,242 ) $ ( 21,699 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 2,790 2,180 2,354 Stock-based compensation 15,800 4,301 510 Net amortization (accretion) of premium (discount) on investments 1,706 273 ( 109 ) Loss on disposal of property and equipment 128 — — Amortization of operating lease right-of-use assets 3,292 — — Changes in operating assets and liabilities: Contract assets 7,500 ( 7,500 ) — Accounts receivable ( 6,000 ) — — Income tax receivable 3,642 ( 3,846 ) — Prepaid expenses and other assets ( 5,442 ) ( 3,941 ) ( 15 ) Accounts payable 1,589 1,234 302 Deferred revenue 6,750 48,179 16,885 Operating lease liabilities ( 5,144 ) — — Accrued expenses and other liabilities 6,218 2,282 2,373 Net cash (used in) provided by operating activities ( 84,365 ) ( 80 ) 601 Cash flows from investing activities Purchases of investments ( 348,497 ) ( 275,224 ) ( 9,351 ) Sales of investments 6,994 — — Maturities of investments 238,913 25,373 19,500 Purchases of property and equipment ( 5,661 ) ( 4,553 ) ( 1,651 ) Net cash (used in) provided by investing activities ( 108,251 ) ( 254,404 ) 8,498 Cash flows from financing activities Proceeds from issuance of common stock, net of underwriting discounts and commissions and offering costs 150,157 218,147 — Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs — 119,914 — Proceeds from exercise of stock options 1,666 970 142 Proceeds from issuance under employee stock purchase plan 2,060 — — Repurchase of unvested early exercised stock options ( 1 ) ( 7 ) ( 16 ) Net cash provided by financing activities 153,882 339,024 126 Net (decrease) increase in cash, cash equivalents and restricted cash ( 38,734 ) 84,540 9,225 Cash, cash equivalents and restricted cash at beginning of period 119,526 34,986 25,761 Cash, cash equivalents and restricted cash at end of period $ 80,792 $ 119,526 $ 34,986 135 Year Ended November 30, 2021 2020 2019 Supplementary disclosures of cash flow information: Cash paid for income taxes $ 481 $ 1 $ 1 Supplemental disclosures of non-cash investing and financing activities: Right-of-use assets recognized in exchange for lease obligations $ 2,371 $ — $ — Additions to property and equipment included in accounts payable and accrued expenses and other liabilities $ 2,505 $ 580 $ 152 Vesting of early exercised stock options $ 239 $ 129 $ 216 Conversion of redeemable convertible preferred stock into common stock upon closing of initial public offering $ — $ 168,109 $ — As of November 30, 2021 2020 2019 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 80,506 $ 119,356 $ 34,816 Restricted cash 286 170 170 Cash, cash equivalents and restricted cash $ 80,792 $ 119,526 $ 34,986 The accompanying notes are an integral part of these consolidated financial statements. 136 NURIX THERAPEUTICS, INC. NOTES TO 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 clinical stage 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. 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 $ 150.2 million, after deducting underwriting discounts and commissions of $ 9.6 million and expenses of $ 0.6 million. Equity Distribution Agreement In August 2021, the Company filed a shelf registration statement on Form S-3 with the SEC. This shelf registration statement, which includes a base prospectus, allows the Company at any time to offer and sell registered common stock, preferred stock, debt securities, warrants, subscriptions rights and or units or any combination of securities described in the prospectus in one or more offerings. In addition, in August 2021, the Company entered into an Equity Distribution Agreement with Piper Sandler & Co. (Piper Sandler) pursuant to which, from time to time, the Company may offer and sell through Piper Sandler up to $ 150.0 million of the common stock registered under the shelf registration statement pursuant to one or more “at the market” offerings. The Company is no t required to sell any shares at any time during the term of the Equity Distribution Agreement. The Company agreed to pay Piper Sandler a commission of 3 % of the gross sales price of any shares sold pursuant to the Equity Distribution Agreement. As of November 30, 2021, the Company has not sold any shares of common stock pursuant to the Equity Distribution Agreement and $150.0 million in shares remained available under the Equity Distribution Agreement. 137 Liquidity and Management Plans The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. 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 year ended November 30, 2021, the Company incurred a net loss of $ 117.2 million and had negative net cash flows from operating activities of $ 84.4 million. The Company had an accumulated deficit of $ 220.9 million as of November 30, 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 November 30, 2021, the Company had cash, cash equivalents and short-term investments of $ 295.7 million and working capital of $ 244.9 million. Management believes that its cash, cash equivalents and short-term investments are sufficient to continue operating activities for at least 12 months following the issuance date of these consolidated financial statements. Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and payments the Company may receive under its collaboration agreements with Sanofi 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. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, including DeCART Therapeutics Inc., and have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). 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 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 materially differ from those estimates. Refer to Note 3 for more information regarding the estimates related to revenue recognition. 138 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. The Company invests its cash equivalents in highly rated money market funds. During the periods presented, the Company has not experienced any losses on its deposits of cash, cash equivalents or investments. Other Risks and Uncertainties The Company is subject to a number of risks similar to other clinical-stage biopharmaceutical companies, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations: risks related to the successful discovery and development of its drug candidates, ability to raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain drug substance and finished drug product from the Company’s third-party contract manufacturers necessary for the Company’s drug candidates, including due to the impact of the current coronavirus (COVID-19) pandemic, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights and regulatory clearance and market acceptance for any of the Company’s products candidates for which the Company receives marketing approval. Moreover, the 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 consolidated financial statements as of and for the year ended November 30, 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. Segments The Company operates and manages its business as one reportable and operating segment. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and assess performance. The Company’s CODM is the Chief Executive Officer, who reviews consolidated financial information on a company-wide basis for purposes of allocating resources and assessing financial performance. 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 of money market funds, are stated at fair value. 139 Restricted Cash The Company had $ 0.3 million and $ 0.2 million of restricted cash recorded as a non-current asset as of November 30, 2021 and 2020, respectively. Restricted cash as of November 30, 2021 consisted of $ 0.1 million that serves as collateral for a business credit card account and $ 0.2 million for letters of credit required under operating leases. Restricted cash as of November 30, 2020 consisted of $ 0.1 million that serves as collateral for a business credit card account and $ 0.1 million for a letter of credit required under an operating lease. These balances are included within the cash, cash equivalents and restricted cash balance in the accompanying consolidated statements of cash flows. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, including cash equivalents, accounts payable and accrued liabilities included in the Company’s consolidated financial statements approximate their fair value due to the nature of the financial instruments. Refer to Note 5 for more information regarding the fair value of the Company’s investments. Investments The Company adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments , on December 1, 2020. Investments consist of money market funds, U.S. Treasuries, corporate debt securities, U.S. government agency securities, corporate commercial paper and municipal securities. 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 consolidated balance sheet date. Investments with contractual maturities greater than 12 months are considered long-term investments. The Company regularly reviews its investments for declines in estimated fair value below amortized cost. The factors considered in determining whether a credit loss exists include 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. In circumstances when an unrealized loss is determined to be credit-related, or when the Company intends to sell or is more likely than not required to sell a security before it recovers its amortized cost basis, the difference between the fair value and the amortized cost of the security is recognized as interest and other income, net in the consolidated statements of operations, and an allowance for credit loss is recorded on the consolidated balance sheet. In circumstances when the decline in fair value is non-credit related, the difference is reported in accumulated other comprehensive income (loss), net of tax as a separate component of stockholders’ equity (deficit). Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Major improvements are capitalized, while maintenance and repairs are expensed when incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful life of laboratory equipment, computer equipment, furniture and fixtures and software is generally three years . Tenant improvements are depreciated over the shorter of the lease term or the estimated useful life of the improvements. When assets are retired or disposed of, the cost together with related accumulated depreciation is removed from the Company’s accounts and the resulting gain or loss is reflected in the Company’s consolidated statements of operations. Leases The Company adopted ASU No. 2016-02, Leases (Topic 842) on December 1, 2020 using the alternative modified transition method, which applies Topic 842 as of the adoption date and therefore, the Company has not applied the standard to the comparative periods presented in the Company's consolidated financial statements. Prior period amounts continue to be reported in accordance with the historic guidance under ASC 840, Leases . 140 The Company determines if an arrangement contains a lease at inception. Lease right-of-use (ROU) assets, current lease liabilities and long-term lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term at the commencement date. ROU assets also include any initial direct costs incurred and any lease payments made on or before the lease commencement date, less lease incentives received. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate. The incremental borrowing rate , the ROU asset and the lease liability are reevaluated upon a lease modification. The Company determines its incremental borrowing rate based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment . Lease terms may include options to extend or terminate the lease when the Company is reasonably certain that the option will be exercised. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company does not have any finance leases . The Company elected to apply each of the practical expedients described in Topic 842 which allow companies (i) not to reassess prior conclusions on whether any expired or existing contracts are or contain a lease, lease classification, and initial direct costs, (ii) combine lease and non-lease components for all underlying assets groups, and (iii) not recognize ROU assets or lease liabilities for short-term leases. A short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Internal-Use Software Development Costs The Company capitalizes qualifying costs incurred during the application development stage related to software developed for internal-use and amortizes them over the estimated useful life of three years . Amortization of such costs begins when the project is substantially complete and ready for its intended use. Capitalized software development costs are classified as property and equipment, net on the consolidated balance sheet. The Company expenses costs incurred related to the planning and post-implementation phases of development as incurred. Long-Lived Assets Long-lived assets, such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. There were no such impairment losses during the years ended November 30, 2021, 2020 and 2019. 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 in stockholder’s equity 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. As of November 30, 2021, there was $ 0.5 million of deferred offering costs included in other assets on the consolidated balance sheet. There were no deferred offering costs capitalized as of November 30, 2020. 141 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; and • Collectability 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 Company 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 performance 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 nonrefundable 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 year ended November 30, 2019, no milestone payments were received, no milestone revenues were recognized and no milestones were considered substantive. 142 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: (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. 143 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 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. All revenue was derived from customers located in the United States during the years ended November 30, 2021, 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 study costs, clinical trial costs, 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 consolidated balance sheet. 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, restricted stock units (RSUs) and purchase rights under the Employee Stock Purchase Plan (ESPP). The Company estimates the fair value of stock options and purchase rights granted under the ESPP on the date of grant using the Black-Scholes option pricing model, which is impacted by the fair value of the Company’s common stock, as well as changes in assumptions regarding a number of highly complex and subjective variables. The model requires management to make a number of assumptions including expected volatility, expected term, risk-free interest rate and expected dividend yield. Prior to its IPO, the fair value of the Company’s common stock was determined by the Company’s board of directors with assistance from management and an independent third-party valuation firm, using significant judgment and several factors including important developments in the Company’s operations, sales of redeemable convertible preferred stock and the lack of liquidity of the common stock. Subsequent to the IPO, the Company determines the fair value of stock options, RSUs and purchase rights under the ESPP using the market closing price of the Company’s common stock on the date of grant. 144 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 the 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. Income taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when in management’s estimate, it is more likely than not, that the deferred tax assets will not be recovered. Financial statement effects of uncertain tax positions are recognized when it is more likely than not, based on the technical merits of the position, that it will be sustained upon examination. It is the Company’s policy to include penalties and interest expense related to income taxes as a component of the provision for income taxes. Comprehensive loss Comprehensive loss represents the net loss for the period and other comprehensive income (loss). Other comprehensive income (loss) reflects certain gains and losses that are recorded as a component of stockholders’ equity (deficit) and are not reflected in the consolidated statements of operations. The Company’s other comprehensive income (loss) consists of changes in unrealized gains and losses on available-for-sale investments. Net loss per share Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss is calculated by dividing the net loss by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, redeemable convertible preferred stock, stock options, RSUs, common stock subject to repurchase related to unvested restricted stock awards and early exercise of stock options are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the redeemable convertible preferred stock is considered a participating security because it participates in dividends with common stock. The Company also considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of all series of redeemable convertible preferred stock and the holders of early exercised shares subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share for those periods. 145 Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02) , which requires the lessee to recognize a ROU asset and a lease liability for operating leases, initially measured at the present value of lease payments, in its consolidated balance sheet. The Company adopted ASU 2016-02 effective December 1, 2020 using the alternative modified transition method, which applies ASU 2016-02 as of the adoption date and therefore, the Company has not applied the standard to the comparative periods presented in the Company's consolidated financial statements. The Company elected the “package of practical expedients,” which permits the Company to not reassess its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the hindsight practical expedient to determine the lease term, the practical expedient to not separate lease and non-lease components and the policy election to not recognize ROU assets or lease liabilities for short-term leases. As of the adoption date of December 1, 2020, the Company recognized an operating lease ROU asset of $ 13.3 million, operating lease current liabilities of $ 3.3 million and operating lease long-term liabilities of $ 10.9 million. The difference between the operating lease ROU asset and operating lease liabilities primarily represented the existing deferred rent liability balance as of the adoption date of $ 0.9 million. Operating lease ROU assets are presented within other assets, operating lease current liabilities are presented within current liabilities and operating lease long-term liabilities are presented within non-current liabilities on the consolidated balance sheet. See Note 6 “Commitments and Contingencies” for additional details. 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. The Company adopted ASU 2016-13 as of December 1, 2020 . The adoption did not have an impact on the Company’s consolidated 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 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 an impact on the Company’s consolidated 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 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. The Company adopted ASU 2018-18 as of December 1, 2020 . The adoption did not have an impact on the Company’s consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted 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, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements and does not expect the adoption to have a material impact on its consolidated financial statements. 146 3. 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 the Company’s 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 , $ 0 and $ 28.4 million for the years ended November 30, 2021, 2020 and 2019, respectively. As of November 30, 2021, there was no deferred revenue recorded on the consolidated balance sheet. 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. 147 Upon signing the Gilead Agreement, Gilead paid the Company an upfront payment of $ 45.0 million plus $ 3.0 million in additional fees. From the signing of the Gilead Agreement to November 30, 2021, the Company has received payments of $ 18.5 million for research milestones and additional payments, including $ 5.0 million, which was received in the fourth quarter of 2021. Additionally, in November 2021, the Company recognized a research milestone and received a payment of $ 6.0 million in the first quarter of 2022. As of November 30, 2021, the Company is eligible to receive up to approximately $ 2.3 billion in total additional payments, including up to $ 677.5 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 $ 139.8 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 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 November 30, 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 research milestones and fees added related to target reservations, $ 24.5 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. 148 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 under the contract. Costs consist primarily of internal full-time employee (FTE) and third-party contract costs related to the Gilead Agreement. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation is recorded in the period in which changes are identified and amounts can be reasonably estimated. Total estimated costs are primarily driven by the number of estimated FTEs, which requires significant management judgment. For the year ended November 30, 2021, the Company recognized collaboration revenue related to the Gilead Agreement of $ 16.6 million, of which $ 11.1 million was included in deferred revenue as of November 30, 2020, and $ 3.1 million was related to performance obligations satisfied in previous periods. For the year ended November 30, 2020, the Company recognized collaboration revenue related to the Gilead Agreement of $ 12.1 million, of which $ 9.4 million was included in deferred revenue as of November 30, 2019, and $ 0.9 million was related to performance obligations satisfied in previous periods. For the year ended November 30, 2019, the Company recognized revenue related to the Gilead Agreement of $ 2.7 million. As of November 30, 2021, $ 41.1 million was recorded as deferred revenue, of which $ 19.9 million was current, on the consolidated balance sheet related to the Gilead Agreement. Additionally, as of November 30, 2021, $ 6.0 million was included in accounts receivable which represents the billed revenue related to the research milestone recognized in November 2021. 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 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. 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 activities (including target validation, drug discovery, identification or synthesis) in accordance with the applicable research plan agreed to by the parties and established on a target-by-target basis. The Company is obligated to use commercially reasonable efforts to identify relevant target binders and chimeric targeting molecules in order to identify development candidates. 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. 149 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. From the signing of the Sanofi Agreement to November 30, 2021, the Company has received a payment of $ 1.0 million for research milestones. As of November 30, 2021, the Company is eligible to receive up to approximately $ 2.5 billion in total payments, including payments of up to $ 499.0 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 $ 143.8 million in certain additional fees related to target licensing and reservation. In addition, the Company is eligible to receive tiered royalties ranging from mid-single digit to low teen percentages on annual net sales of any commercial products that may result from the collaboration, subject to certain reductions and excluding sales in the United States of any products for which the Company exercises its option to co-develop and co-promote, for which the parties share profits and losses evenly. Subject to earlier expiration in certain circumstances, the Sanofi Agreement expires on a licensed product-by-licensed product or profit-shared licensed product-by-profit-shared licensed product basis and country-by-country basis upon on the later of the expiration of (i) the last-to-expire patent with a valid claim covering the applicable licensed product in the applicable country, (ii) the expiration of any regulatory exclusivity for the applicable licensed product in the applicable country or (iii) ten years after the first commercial sale of the applicable licensed product in the applicable country covered by the Sanofi Agreement. 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 November 30, 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. Subsequently, upon the achievement of research milestones, $ 1.0 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. Revenue is recognized over the research term of 4.25 years, the revised research period that was agreed to in January 2021 in the First Sanofi Amendment, using the cost-based input method. 150 Using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligation to Sanofi, the Company recognizes revenue based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation under the contract. Costs consist primarily of internal FTE and third-party contract costs related to the Sanofi Agreement. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation is recorded in the period in which changes are identified and amounts can be reasonably estimated. T otal estimated costs are primarily driven by the number of estimated FTEs, which requires significant management judgment. 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. For the year ended November 30, 2021, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 13.2 million, of which $ 13.0 million was included in deferred revenue as of November 30, 2020, and $0.1 million was related to performance obligations satisfied in previous periods. For the year ended November 30, 2020, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 5.7 million. As of November 30, 2021, $ 59.2 million was recorded as deferred revenue, of which $ 21.3 million was current, on the consolidated balance sheet related to the Sanofi Agreement. 4. Consolidated Balance Sheet Components Property and Equipment, Net Property and equipment, net, consisted of the following (in thousands): November 30, 2021 2020 Laboratory equipment $ 18,321 $ 14,120 Leasehold improvements 3,083 2,664 Computer equipment 538 745 Furniture and fixtures 437 506 Software 3,349 1,316 Software in progress 491 504 Total property and equipment, gross 26,219 19,855 Less: Accumulated depreciation and amortization ( 14,879 ) ( 13,183 ) Total property and equipment, net $ 11,340 $ 6,672 Depreciation and amortization expense was $ 2.8 million, $ 2.2 million and $ 2.4 million for the years ended November 30, 2021, 2020 and 2019, respectively. All long-lived assets are maintained in the United States. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): November 30, 2021 2020 Accrued compensation 8,854 5,725 Accrued contract research and lab supplies 4,158 1,238 Accrued professional services 803 591 Accrued taxes 75 74 Other 659 700 Total $ 14,549 $ 8,328 151 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. 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 investments, 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 November 30, 2021 and 2020 (in thousands): November 30, 2021 Level Amortized cost Unrealized gain Unrealized loss Estimated fair value Money market funds Level 1 $ 73,438 $ — $ — $ 73,438 U.S. treasury securities Level 1 20,608 — ( 9 ) 20,599 Corporate debt securities Level 2 46,599 1 ( 54 ) 46,546 U.S. government agency securities Level 2 16,496 1 ( 14 ) 16,483 Corporate commercial paper Level 2 121,495 — — 121,495 Municipal securities Level 2 10,082 9 — 10,091 Long-term investments: U.S. treasury securities Level 1 39,932 — ( 85 ) 39,847 Corporate debt securities Level 2 74,334 — ( 365 ) 73,969 U.S. government agency securities Level 2 16,236 — ( 67 ) 16,169 Municipal securities Level 2 7,229 — ( 25 ) 7,204 Total $ 426,449 $ 11 $ ( 619 ) $ 425,841 Included in Cash and cash equivalents $ 73,438 $ — $ — $ 73,438 Included in Short-term investments $ 215,280 $ 11 $ ( 77 ) $ 215,214 Included in Long-term investments $ 137,731 $ — $ ( 542 ) $ 137,189 152 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 As of November 30, 2021 and 2020, the accrued interest receivable related to the Company’s investments was $ 0.9 million and $ 0.4 million, respectively, and was included in prepaid expenses and other current assets on the consolidated balance sheet. 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. There were no transfers of financial instruments between valuation levels during the years ended November 30, 2021 and 2020. As of November 30, 2021, the unrealized losses for available-for-sale investments were non-credit related, and the Company does not intend to sell the investments that were in an unrealized loss position, nor will it be required to sell those investments before recovery of their amortized cost basis, which may be maturity. As of 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. As of November 30, 2021, no allowance for credit losses for the Company’s investments was recorded. During the years ended November 30, 2021, 2020 and 2019, the Company did no t recognize any impairment losses related to investments. 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 November 30, 2021, the Company was not a party to any material legal proceedings. 153 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 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 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 an 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 . The Company has an option to renew this lease for an additional two years which has not been included in the lease term used to calculate the ROU asset and lease liability as it is not reasonably certain that the Company will exercise this option. The Company is required to pay base rent plus the tenant’s proportionate share of operating expenses as defined in the lease agreement. Under the terms of the lease agreement, the Company paid the landlord security deposits totaling $ 91 thousand and issued a letter of credit to the landlord in the amount of $ 70 thousand, which is collateralized by a restricted deposit of $ 70 thousand. 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. In July 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 (Mission Bay Lease). The lease commenced on December 1, 2021 and 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 and increase by 3 % per year for total minimum rent payments of $ 3.8 million over the lease 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. Under the terms of the lease agreement, the Company issued a letter of credit to the landlord in the amount of $ 0.1 million, which is collateralized by a restricted deposit of $ 0.1 million. The Company has not recognized a ROU asset or aggregate lease liability as of November 30, 2021 for the minimum rental payments related to the Mission Bay Lease as the Company did not control the underlying assets at any time in the year ended November 30, 2021. 154 As of November 30, 2021, operating lease ROU assets were $ 14.0 million, operating lease current liabilities were $ 3.8 million and operating lease long-term liabilities were $ 9.2 million. For the year ended November 30, 2021, cash paid for operating lease liabilities was $ 4.0 million. As of November 30, 2021, the weighted average remaining lease term was 3.5 years and the weighted average discount rate was 3.13 %. For the year ended November 30, 2021, total operating lease expense was $ 3.8 million and short-term lease expense was not material. Prior to the adoption of Topic 842 on December 1, 2020, operating lease expense and sublease income was as follows (in thousands): Year Ended November 30, 2020 2019 Operating lease expense $ 3,023 $ 2,927 Operating sublease income — ( 311 ) Net operating lease expense $ 3,023 $ 2,616 The undiscounted future non-cancellable lease payments under the Company’s lease agreement as of November 30, 2021 were as follows (in thousands): Year ending November 30, Operating Leases 2022 $ 5,197 2023 5,563 2024 5,060 2025 1,738 Total undiscounted lease payments 17,558 Less: Undiscounted lease payments related to Mission Bay Lease ( 3,785 ) Less: imputed interest ( 737 ) Total lease liabilities $ 13,036 Operating lease current liabilities 3,847 Operating lease long-term liabilities 9,189 Total lease liabilities $ 13,036 7. Common Stock The Company’s Restated Certificate of Incorporation authorizes the Company to issue up to 500,000,000 shares of common stock, $ 0.001 par value per share, as of November 30, 2021 and 2020. Holders of common stock are entitled to dividends when and if declared by the Company’s board of directors, subject to the prior rights of the preferred stockholders. The holder of each share of common stock is entitled to one vote. As of November 30, 2021, no dividends have been declared. Common stock reserved for future issuance, on an as-if converted basis, as of November 30, 2021 and 2020, consists of the following and has been adjusted for the 1-for-3 reverse stock split: November 30, 2021 2020 Issuance of options under stock option plan 5,878,552 4,387,862 Shares available for future stock option grants 2,562,570 3,035,684 Shares available for issuance under employee stock purchase plan 1,015,184 730,000 Restricted stock units issued and outstanding 20,000 — Total common stock reserved for future issuance 9,476,306 8,153,546 155 8. Redeemable Convertible Preferred Stock The Company’s Restated Certificate of Incorporation authorizes the Company to issue zero shares of redeemable convertible preferred stock as of November 30, 2021 and 2020 and there was no outstanding redeemable convertible preferred stock as of November 30, 2021 and 2020. 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. 9. Stock-Based Compensation Equity Incentive Plans The 2020 Equity Incentive Plan (2020 Plan) serves as the successor to the 2012 Equity Incentive Plan (2021 Plan, and together with the 2020 Plan, the Stock Plans) and 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 Stock Plans, 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. RSUs issued typically vest over a two‑year period, but may be granted with different vesting terms, and expire ten years from the date of grant. Following the effectiveness of the 2020 Plan on July 22, 2020, the Company ceased making grants under 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 will be available for issuance under the 2020 Plan As of November 30, 2021, there were 2,562,570 shares of common stock reserved for future issuance pursuant to the 2020 Plan. 156 Option activity under the Stock Plans 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 2,341,917 32.29 Options exercised ( 522,006 ) 3.19 Options forfeited ( 329,221 ) 16.87 Balances as of November 30, 2021 5,878,552 $ 19.42 8.67 $ 65,692 Options vested and expected to vest as of November 30, 2021 (2) 5,837,346 $ 19.45 8.66 $ 65,155 Options exercisable as of November 30, 2021 2,827,261 $ 9.74 8.04 $ 55,449 (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 November 30, 2021 for all in‑the‑money stock options. The total intrinsic value of stock options exercised during the years ended November 30, 2021, 2020 and 2019, was $ 15.9 million, $ 3.4 million and $ 0.1 million, respectively. (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 the voluntary or involuntary termination of employment of the stockholder. Such exercises are recorded as a liability in the consolidated balance sheet and reclassified into equity as the options vest. As of November 30, 2021, a total of 58,794 shares of common stock were subject to repurchase by the Company at the lower of (i) the fair value of such shares on the date of repurchase, or (ii) the original exercise price of such shares. The corresponding exercise value of $ 0.3 million as of November 30, 2021 is recorded as a stock-based compensation liability. RSU activity was as follows: Number of RSUs Weighted-average grant date fair value Balance as of November 30, 2020 — $ — RSUs granted 20,000 27.42 RSUs vested — — RSUs forfeited — — Balance as of November 30, 2021 20,000 $ 27.42 Employee Stock Purchase Plan Under the 2020 Employee Stock Purchase Plan (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 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. During the year-ended November 30, 2021, the Company issued 103,464 shares pursuant to the ESPP at a weighted-average price of $ 19.92 per share. As of November 30, 2021, there were 1,015,184 shares of common stock reserved for issuance pursuant to the ESPP. 157 Stock-Based Compensation During the years ended November 30, 2021, 2020 and 2019, the weighted-average grant date fair value of options granted was $ 21.15 , $ 9.50 and $ 1.41 per share, respectively, and the total fair value of employee options vested was $ 12.0 million, $ 3.1 million and $ 0.5 million, respectively. The Company estimated the fair value of stock options and purchase rights under ESPP using the Black-Scholes option pricing model. The fair value of these stock awards was estimated using the following assumptions: November 30, 2021 2020 2019 Options ESPP Options ESPP Options Expected term (years) 5.50 - 6.12 0.50 5.41 - 6.98 0.57 5.92 - 6.08 Expected volatility 70% - 79% 60% 73% - 79% 96% 111 - 116% Risk-free interest rate 0.52% - 1.24% 0.05% 0.34% - 1.79% 0.13% 1.42% - 2.55% Dividend yield 0 % 0 % 0 % 0 % 0 % The expected term represents the weighted-average period the stock-based payments are expected to remain outstanding. The expected term assumption for stock options was determined using the simplified method. The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company does not have sufficient trading history for its common stock. The risk-free rate assumption is based on the U.S. Treasury instruments. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The expected dividend yield is 0 % as the Company has not paid and does not anticipate paying dividends on its common stock. The following table sets forth stock-based compensation expense related to stock options, RSUs and ESPP that is included in the Company’s consolidated statements of operations (in thousands): Year Ended November 30, 2021 2020 2019 Research and development $ 8,079 $ 1,726 $ 307 General and administrative 7,721 2,575 203 Total stock-based compensation $ 15,800 $ 4,301 $ 510 As of November 30, 2021, the total compensation cost related to stock-based awards not yet recognized was $ 57.9 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 3.05 years. 10. 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 in the 401(k) plan. Employees may contribute a percentage of their annual compensation to the plan, subject to statutory limitations. The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 0.7 million, $ 0.4 million and $ 0.3 million during the years ended November 30, 2021, 2020 and 2019, respectively. 158 11. Income Taxes The Company recorded a current income tax expense of $ 0.1 million for the year ended November 30, 2021, primarily due to state taxes offset by a federal income tax refund. The Company recorded a current income tax benefit of $ 20.5 million for the year ended November 30, 2020, primarily due to carryback of net operating losses to prior years and changes in reserves for unrecognized tax benefits. The Company recorded a current income tax expense of $ 0.2 million for the year ended November 30, 2019, primarily due to reserves for unrecognized tax benefits, minimum state taxes and a true-up from the prior year. The Company had generated net operating losses (NOLs) since inception and has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. Loss before provision for income taxes includes the following component (in thousands): November 30, 2021 2020 2019 Domestic $ ( 117,063 ) $ ( 63,777 ) $ ( 21,460 ) $ ( 117,063 ) $ ( 63,777 ) $ ( 21,460 ) The provision for (benefit from) income taxes consists of the following (in thousands): November 30, 2021 2020 2019 Current: Federal $ ( 203 ) $ ( 20,577 ) $ 238 State 334 42 1 Total provision for (benefit from) income taxes $ 131 $ ( 20,535 ) $ 239 The effective tax rate differs from the federal statutory rate as follows: November 30, 2021 2020 2019 Federal statutory income tax rate 21.0 % 21.0 % 21.0 % State income tax rate 5.0 6.2 10.2 Research and development tax credits 4.5 4.0 6.6 Unrecognized income tax benefits — 0.6 ( 1.0 ) Federal rate impact due to CARES Act — 13.1 — Stock-based compensation ( 1.2 ) — — Change in valuation allowance ( 29.3 ) ( 10.3 ) ( 37.0 ) Other ( 0.1 ) ( 2.4 ) ( 0.9 ) Total ( 0.1 )% 32.2 % ( 1.1 )% 159 Deferred Tax Assets and Liabilities 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. Significant components of the deferred tax assets for federal and state income taxes are as follows (in thousands): Year ended November 30, 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 41,081 $ 25,145 Research and development tax credits 17,502 9,330 Deferred revenue 21,874 10,536 Stock based compensation 1,054 773 Accrued expenses and other liabilities 1,896 1,624 Operating lease liabilities 3,436 — Gross deferred tax assets 86,843 47,408 Valuation allowance ( 83,517 ) ( 47,408 ) Total deferred tax assets 3,326 — Deferred tax liabilities: Operating lease right-of-use assets ( 3,326 ) — Total deferred tax liabilities ( 3,326 ) — Net deferred tax assets $ — $ — 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 established a valuation allowance to offset deferred tax assets as of November 30, 2021 and 2020 due to the uncertainty of realizing future tax benefits from its net operating loss (NOL) carryforwards and other deferred tax assets. The valuation allowance increased by $ 36.1 million during the year ended November 30, 2021, primarily related to an increase on the deferred tax asset for deferred revenue, research and development (R&D) credits and NOL carryforwards. The valuation allowance increased by $ 7.6 million during the year ended November 30, 2020, primarily due to an increase on the deferred tax asset for deferred revenue. The valuation allowance increased by $ 8.5 million during the year ended November 30, 2019, primarily due to an increase in NOL carryforwards. As of November 30, 2021, the Company had NOL carryforwards available to reduce future taxable income, if any, for federal and state income tax purposes of $ 116.3 million and $ 192.0 million, respectively. Federal NOL carryforwards generated for tax years beginning before December 31, 2017 can be carried forward twenty years and begin expiring in 2029 . Federal NOL carryforwards of $ 112.6 million for tax years beginning after December 31, 2017 can be carried forward indefinitely. State NOL carryforwards begin expiring in 2029 . As of November 30, 2021, the Company had federal and state research credit carryforwards of $ 13.2 million and $ 10.6 million, respectively. If not utilized, the federal credit carryforwards will begin expiring in 2032 and the state credits carry forward indefinitely . Internal Revenue Code Section 382 places a limitation on the utilization of NOL and tax credit carryforwards in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points. The Company has identified two ownership changes that have triggered a limitation on pre-change NOLs under Section 382. A majority of the Company’s pre-change NOLs remain available within the carryforward period provided by the Internal Revenue Code, subject to availability of taxable income. As a result of the ownership changes, the Company has determined that approximately $ 0.4 million of NOLs will expire unutilized, and as such, these NOLs are not reflected in the Company’s deferred tax asset balance. 160 Unrecognized Tax Benefits The Company has recorded a liability related to uncertain tax positions in the financial statements. It is the Company’s policy to include penalties and interest expense related to income taxes as a component for the provision for income taxes. The Company has unrecognized tax benefits of $ 6.3 million as of November 30, 2021, all of which are offset by a full valuation allowance. There are no tax benefits included in the balance of unrecognized tax benefits that, if recognized, would affect the effective tax rate. There are no interest and penalties accrued as of November 30, 2021. A reconciliation of the beginning and ending amounts of unrecognized income tax benefits during the years ended November 30, 2021, 2020 and 2019 is as follows (in thousands): Years ended November 30, 2021 2020 2019 Balance at beginning of period $ 5,361 $ 2,920 $ 2,157 Additions based on tax positions related to prior period 1 2,295 137 Additions based on tax positions related to current period 2,282 1,326 626 Settlements ( 1,313 ) ( 1,180 ) — Balance at end of period $ 6,331 $ 5,361 $ 2,920 The Company files income tax returns in the United States and in various states. In February 2018 the Internal Revenue Service (IRS) commenced an examination of the Company’s U.S. income tax return for the tax years ending in 2016, 2017, 2018, and 2019. All tax issues under examination were effectively settled during the year ended November 30, 2021. As a result, the Company removed the associated unrecognized tax benefit reserves and decreased its R&D credit carryforward by $ 1.3 million. The Company continues to maintain an unrecognized tax benefit related to federal R&D credits generated in years not covered by the examination. Additionally, in January 2019 the California Franchise Tax Board (FTB) initiated an examination of the Company’s California tax return for the years ending in 2015, 2016, 2017, and 2018. During the year ended November 30, 2021, the FTB issued proposed audit assessments related to revenue sourcing and R&D credits. The Company does not agree with the FTB assessments and intends to challenge the assessments. Pursuant to a measurement analysis, the Company has not recorded an unrecognized tax benefit related to the FTB’s sourcing position. The Company maintains an unrecognized tax benefit related to its California R&D credits for all years. All of the Company’s tax years will remain open for examination by the federal and state authorities for three and four years , respectively, from the date of the utilization of any net operating losses. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, allows NOLs incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The fiscal 2020 tax benefit was primarily due to the carryback of NOLs to prior taxable years as allowed under the CARES Act. In fiscal 2020, the Company filed refund claims of $ 19.6 million to carryback NOLs generated in fiscal years ended November 30, 2018 and 2019. These refund claims were approved by Congressional Joint Committee on Taxation during the year ended November 30, 2021. As of November 30, 2021, the Company has received the full amount of these refund claims. 161 12. Net Loss Per Share The following table sets forth the computation of the Company’s basic and diluted net loss per share, which excludes shares which are legally outstanding but subject to repurchase by the Company (in thousands, except share and per share data): Year Ended November 30, 2021 2020 2019 Numerator: Net loss $ ( 117,194 ) $ ( 43,242 ) $ ( 21,699 ) Denominator: Weighted-average number of shares outstanding, basic and diluted 42,895,383 15,673,424 3,292,514 Net loss per share, basic and diluted $ ( 2.73 ) $ ( 2.76 ) $ ( 6.59 ) 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: November 30, 2021 2020 2019 Redeemable convertible preferred stock on an as- converted basis — — 12,813,887 Options to purchase common stock 5,878,552 4,387,862 1,913,792 Options early exercised subject to vesting 58,794 141,512 139,393 Shares expected to be purchased under employee stock purchase plan 50,882 60,512 — Restricted stock 20,000 — — Total 6,008,228 4,589,886 14,867,072 13. Related Party Transactions Following its acquisition of Celgene, BMS owned 1,622,222 shares of the Company’s Series C redeemable convertible preferred stock that automatically converted into shares of the Company’s common stock immediately prior to the closing of the Company’s IPO. In June 2019, the Celgene Agreement was terminated in its entirety with no further payments from Celgene and no remaining deliverables from the Company. Upon the termination, BMS ceased to be a related party of the Company. For the year ended November 30, 2019, the Company recorded collaboration revenue under the Celgene Agreement of $ 28.4 million. The Company’s Chief Financial Officer is a trustee for the multiple employer welfare association that facilitates the acquisition and administration of the Company’s healthcare plans. Expenses related to the healthcare plan premiums were $ 2.6 million, $ 1.6 million and $ 1.4 million for the years ended November 30, 2021, 2020 and 2019, respectively. As of November 30, 2021 and 2020, the amount recorded in accounts payable and accrued expenses and other current liabilities in connection with this healthcare plan provider was not material. 162 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.