What changed in this filing

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Item 1. Financial Statements

2022-07-07 compared with 2022-04-08 · 103 added, 150 removed, 427 unchanged (37% of the section changed)

7 unchanged sentences

Accounts receivable

Contract assets

Income tax receivable

18 unchanged sentences

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

authorized as of February 28, 2022 and November 30, 2021;

authorized as of May 31, 2022 and November 30, 2021;

no shares issued and outstanding

as of February 28, 2022 and November 30, 2021

as of May 31, 2022 and November 30, 2021

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

as of February 28, 2022 and November 30, 2021;

as of May 31, 2022 and November 30, 2021;

45,040,068 and 44,664,371 shares issued and outstanding

as of February 28, 2022 and November 30, 2021, respectively

as of May 31, 2022 and November 30, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Accumulated deficit

6 unchanged sentences

Three Months Ended

Six Months Ended

Collaboration revenue

14 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive loss, net of tax:

16 unchanged sentences

Balance as of February 28, 2021

Issuance of common stock in connection with equity

offering, net of offering costs of $ 643

Exercise of stock options

Vesting of early-exercised stock options

Stock-based compensation

Unrealized loss on available-for-sale investments

Balance as of May 31, 2021

comprehensive

8 unchanged sentences

Balance as of February 28, 2022

Exercise of stock options

Vesting of restricted stock units

Vesting of early-exercised stock options

Stock-based compensation

Unrealized loss on available-for-sale investments

Balance as of May 31, 2022

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

2 unchanged sentences

(in thousands)

Three Months Ended February 28,

Six Months Ended May 31,

Cash flows from operating activities

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

1 unchanged sentence

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

Loss on disposal of property and equipment

Amortization of operating lease right-of-use assets

Changes in operating assets and liabilities:

Contract assets

Accounts receivable

Income tax receivable

4 unchanged sentences

Accrued expenses and other liabilities

Net cash (used in) provided by operating activities

Net cash used in operating activities

Cash flows from investing activities

Purchases of investments

Sales of investments

Maturities of investments

2 unchanged sentences

Cash flows from financing activities

Proceeds from issuance of common stock, net of underwriting discounts and commissions and offering costs

Proceeds from exercise of stock options

8 unchanged sentences

Vesting of early exercised stock options

Deferred offering costs included in accounts payable and accrued liabilities

As of February 28,

As of May 31,

Reconciliation of cash, cash equivalents and restricted cash:

7 unchanged sentences

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) 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 and cell therapies based on the modulation of 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.

Targeted Protein Modulation, our drug discovery approach, either harnesses or inhibits 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

3 unchanged sentences

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 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

7 unchanged sentences

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 February 28, 2022, 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.

As of May 31, 2022, the Company had 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.

In June 2022, the Company issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement for net proceeds of approximately $ 19.3 million, after deducting offering commissions and expenses paid by the Company (the June 2022 ATM Offering).

As of the closing of the June 2022 ATM Offering, the Company had $ 130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

Liquidity and Management Plans

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 three months ended February 28, 2022, the Company incurred a net loss of $ 42.5 million and had negative net cash flows from operating activities of $ 42.6 million.

The Company had an accumulated deficit of $ 263.4 million as of February 28, 2022 and will require substantial additional capital for research and development activities.

As of May 31, 2022, the Company had an accumulated deficit of $ 308.8 million and will require substantial additional capital for research and development activities.

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

As of February 28, 2022, the Company had cash, cash equivalents and investments of $ 385.7 million.

As of May 31, 2022, the Company had cash, cash equivalents and investments of $ 348.8 million.

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

9 unchanged sentences

GAAP) and applicable rules and regulations of the SEC regarding interim financial reporting.

The Company’s condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of and for the three months ended February 28, 2022.

The condensed consolidated balance sheet as of November 30, 2021 was derived from the audited annual financial statements as of that date.

4 unchanged sentences

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

Certain prior year amounts have been reclassified for consistency with the current year cash flow presentation.

The reclassification did not impact total cashflow from operating, investing or financing activities.

Principles of Consolidation

23 unchanged sentences

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

Management considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three months ended February 28, 2022;

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

43 unchanged sentences

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.

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

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

9 unchanged sentences

On November 30, 2021, the Company adopted ASU 2016-02 using the alternative modified transition method effective as of December 1, 2020.

As a result, the Company has retrospectively changed its previously issued condensed consolidated financial statements as of February 28, 2021 and for the three months ended February 28, 2021 as presented in its February 28, 2021 Quarterly Report on Form 10-Q to reflect the adoption of Topic 842 on December 1, 2020 .

The condensed consolidated financial statements for the three months ended February 28, 2021 presented herein differ from the Company’s condensed consolidated financial statements included in its February 28, 2021 Quarterly Report on Form 10-Q, as those financial statements were prepared using the former accounting standard referred to as ASC Topic 840, Leases .

As a result, the Company has retrospectively changed its previously issued condensed consolidated financial statements as of May 31, 2021 and for the three and six months ended May 31, 2021 as presented in its May 31, 2021 Quarterly Report on Form 10-Q to reflect the adoption of Topic 842 on December 1, 2020 .

The condensed consolidated financial statements for the three and six months ended May 31, 2021 presented herein differ from the Company’s condensed consolidated financial statements included in its May 31, 2021 Quarterly Report on Form 10-Q, as those financial statements were prepared using the former accounting standard referred to as ASC Topic 840, Leases .

The following table summarizes the effect of the adoption of Topic 842 on the condensed consolidated balance sheet as of December 1, 202 0 (in thousands):

6 unchanged sentences

Other long-term liabilities

The following table summarizes the effect of the adoption of Topic 842 on the condensed consolidated statement of cash flows for the three months ended February 28, 2021 (in thousands):

The following table summarizes the effect of the adoption of Topic 842 on the condensed consolidated statement of cash flows for the six months ended May 31, 2021 (in thousands):

As Previously Reported

1 unchanged sentence

Cash flows from operating activities

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

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of operating lease right-of-use assets

5 unchanged sentences

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 Company retains the option to co-develop and co-promote, under a profit share structure, up to two drug candidates in the United States under certain conditions and subject to certain limitations.

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

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

For drug targets that are subject to the collaboration, the Company is obligated to use commercially reasonable efforts to undertake a research program in accordance with a research plan agreed to by the parties and established on a target-by-target basis.

The Company has primary responsibility under the agreement for performing preclinical research activities (including target validation, drug discovery, identification or synthesis) pursuant to a research plan.

Each party will bear its own costs in the conduct of research activities.

Gilead will be responsible for any development, commercialization and manufacturing activities, unless the Company exercises its co-development and co-promotion option.

For those programs that the Company exercises its option to co-develop and co-promote, the Company and Gilead will split U.S.

development costs as well as U.S.

profits and losses evenly, and the Company will be eligible to receive royalties on net ex-U.S.

sales and reduced milestone payments.

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

In addition, from the signing of the Gilead Agreement to February 28, 2022, the Company has received payments of $ 24.5 million for research milestones and additional payments.

Additionally, the Company recognized a research milestone in February 2022 and received a payment of $ 6.0 million in the second fiscal quarter of 2022.

The Company is eligible to receive up to approximately $ 2.3 billion in total additional payments, including up to $ 671.5 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, from the signing of the Gilead Agreement to May 31, 2022, the Company has received payments of $ 30.5 million for research milestones and additional payments.

Additionally, the Company recognized a research milestone in May 2022 and anticipates a payment of $ 1.5 million in the third fiscal quarter of 2022.

As of May 31, 2022, the Company is eligible to receive up to approximately $ 2.3 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones.

In addition, 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 February 28, 2022.

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.

The Company re-evaluates 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 consisted of the upfront payment of $ 45.0 million and $ 3.0 million in additional fees.

Upon the achievement of research milestones and additional fees related to target reservations, $ 32.0 million in variable consideration was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased.

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

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

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

Using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligation to Gilead, the Company recognizes revenue based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation 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 three months ended February 28, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 6.2 million, of which $ 3.3 million was included in deferred revenue as of November 30, 2021, and $ 2.5 million was related to activities satisfied in previous periods.

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

Deferred revenue related to the Gilead Agreement was $ 40.9 million, of which $ 19.8 million was current, as of February 28, 2022, and $ 41.1 million, of which $ 19.9 million was current, as of November 30, 2021.

Additionally, as of both February 28, 2022 and November 30, 2021, $ 6.0 million was recorded in accounts receivable representing the billed amount related to the research milestones recognized in February 2022 and November 2021.

For the three and six months ended May 31, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 6.1 million and $ 12.3 million, respectively, of which $ 5.3 million and $ 8.6 million, respectively, was included in deferred revenue as of November 30, 2021, and $ 0.6 million and $ 3.1 million, respectively, was related to activities satisfied in previous periods.

For the three and six months ended May 31, 2021, the Company recognized collaboration revenue related to the Gilead Agreement of $ 3.7 million and $ 6.5 million, respectively, of which $ 2.9 million and $ 5.6 million, respectively, was included in deferred revenue as of November 30, 2020, and $ 0.6 million and $ 0.6 million, respectively, was related to activities satisfied in previous periods.

As of May 31, 2022, deferred revenue related to the Gilead Agreement was $ 34.8 million, of which $ 17.0 million was current and includes $ 1.5 million in contract assets representing the unbilled amount related to the research milestone recognized in May 2022.

As of November 30, 2021, deferred revenue related to the Gilead Agreement was $ 41.1 million, of which $ 19.9 million was current.

Additionally, as of November 30, 2021, $ 6.0 million was recorded in accounts receivable representing the billed amount related to the research milestones recognized in November 2021.

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.

3 unchanged sentences

In December 2021, the Company and Sanofi entered into a second amendment to the collaboration agreement to extend the substitution deadline on certain 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.

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, subject to certain conditions and limitations.

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 February 28, 2022, the Company has received a payment of $ 1.0 million for a research milestone.

Additionally, the Company recognized another research milestone in February 2022 and anticipates a payment of $ 2.0 million in the second fiscal quarter of 2022.

The Company is eligible to receive up to approximately $ 2.5 billion in total additional payments, including payments of up to $ 497.0 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 $ 131.8 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 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 February 28, 2022.

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.

In addition, from the signing of the Sanofi Agreement to May 31, 2022, the Company has received payments of $ 3.0 million for research milestones.

As of May 31, 2022, the Company is eligible to receive up to approximately $ 2.5 billion in total additional payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones, as well as tiered royalties ranging from mid-single digit to low teen percentages on annual net sales of any commercial products that may result from the collaboration, subject to certain reductions and excluding sales in the United States of any products for which the Company exercises its option to co-develop and co-promote, for which the parties share profits and losses evenly.

The Company re-evaluates 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 consisted of the upfront payment of $ 55.0 million for three initial drug targets and $ 22.0 million for two additional targets.

Subsequently, upon the achievement of research milestones, $ 3.0 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.

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.

Total 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 three months ended February 28, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 3.4 million, of which $ 2.9 million was included in deferred revenue as of November 30, 2021 and $ 0.4 million was related to activities satisfied in previous periods.

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

Deferred revenue related to the Sanofi Agreement was $ 57.7 million, of which $ 23.4 million was current, as of February 28, 2022, and $ 59.2 million, of which $ 21.3 million was current, as of November 30, 2021.

Additionally, as of February 28, 2022, $ 2.0 million was recorded as contract assets representing the unbilled amount related to the research milestone recognized in February 2022.

For the three and six months ended May 31, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 5.3 million and $ 8.7 million, respectively, of which $ 5.3 million and $ 8.2 million, respectively, was included in deferred revenue as of November 30, 2021 and zero and $ 0.5 million, respectively, was related to activities satisfied in previous periods.

For the three and six months ended May 31, 2021, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 3.3 million and $ 5.6 million, respectively, all of which was included in deferred revenue as of November 30, 2020.

As of May 31, 2022 and November 30, 2021, deferred revenue related to the Sanofi Agreement was $ 52.4 million, of which $ 24.3 million was current, and $ 59.2 million, of which $ 21.3 million was current, respectively.

Condensed Consolidated Balance Sheet Components

9 unchanged sentences

Total property and equipment, net

Depreciation and amortization expense was $ 1.0 million and $ 0.6 million for the three months ended February 28, 2022 and 2021, respectively.

Depreciation and amortization expense was $ 1.3 million and $ 0.6 million for the three months ended May 31, 2022 and 2021, respectively, and $ 2.3 million and $ 1.3 million for the six months ended May 31, 2022 and 2021, respectively.

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

16 unchanged sentences

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 present 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 February 28, 2022 and November 30, 2021 (in thousands):

February 28, 2022

Money market funds

3 unchanged sentences

Corporate commercial paper

Foreign government securities

Municipal securities

3 unchanged sentences

government agency securities

Municipal securities

Included in Cash and cash equivalents

16 unchanged sentences

Included in Long-term investments

The accrued interest receivable related to the Company’s investments was $ 0.9 million as of each of February 28, 2022 and November 30, 2021, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

The accrued interest receivable related to the Company’s investments was $ 0.7 million and $ 0.9 million as of May 31, 2022 and November 30, 2021, respectively, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

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

5 unchanged sentences

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

There were no transfers of financial instruments between valuation levels during the three months ended February 28, 2022 and 2021.

As of February 28, 2022 and November 30, 2021, the unrealized losses for available-for-sale investments were non-credit related, and the Company does no t 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 February 28, 2022 and November 30, 2021, no allowance for credit losses for the Company’s investments was recorded.

During the three months ended February 28, 2022 and 2021, the Company did no t recognize any impairment losses related to investments.

There were no transfers of financial instruments between valuation levels during the three and six months ended May 31, 2022 and 2021.

As of May 31, 2022 and November 30, 2021, the unrealized losses for available-for-sale investments were non-credit related, and the Company does no t 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 May 31, 2022 and November 30, 2021, no allowance for credit losses for the Company’s investments was recorded.

During the three and six months ended May 31, 2022 and 2021, the Company did no t recognize any impairment losses related to investments.

Commitments and Contingencies

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

As of February 28, 2022, the Company was not a party to any material legal proceedings.

As of May 31, 2022, the Company was not a party to any material legal proceedings.

Indemnifications

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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 $ 91,000 and issued a letter of credit to the landlord in the amount of $70,000, which is collateralized by a restricted deposit of $ 70,000 .

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

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 Company leases office and laboratory facilities within the same building in San Francisco, California under several lease agreements.

The term of these lease agreements expire on April 30, 2025 .

In July 2021, the Company entered into a lease agreement for the lease of approximately 19,320 square feet of office space in San Francisco, California, for a research and development laboratory and related uses.

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.

In March 2022, the Company entered into a lease agreement for the lease of approximately 46,434 square feet of office space in The Woodlands, Texas, for a research and development laboratory and related uses.

The lease is expected to commence on or about August 1, 2022 , and will expire on March 1, 2035 , unless terminated earlier.

The minimum rent payable by the Company under the lease will be approximately $ 205,084 per month, beginning on March 1, 2023, which amount will increase by 3 % per year over the term of the lease;

provided that, for the period between March 1, 2023 and February 29, 2024, the minimum rent payable by the Company under the lease will be approximately $ 153,813 per month.

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.

Operating lease expenses were $ 1.4 million and $ 0.8 million for the three months ended February 28, 2022 and 2021, respectively.

Operating lease expenses, excluding additional rent charges for utilities, maintenance and real estate taxes, were $ 1.5 million and $ 0.9 million for the three months ended May 31, 2022 and 2021, respectively, and $ 2.8 million and $ 1.7 million for the six months ended May 31, 2022 and 2021, respectively.

Short-term lease expense was not material for all periods presented.

Other information related to leases were as follows (in thousands):

Three Months Ended February 28,

Six Months Ended May 31,

Cash paid for amounts included in the measurement of lease liabilities:

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Right-of-use assets recognized in exchange for lease obligations

The undiscounted future non-cancellable lease payments under the Company’s lease agreements as of February 28, 2022 were as follows (in thousands):

The undiscounted future non-cancellable lease payments under the Company’s lease agreements as of May 31, 2022 were as follows (in thousands):

Year ending November 30,

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imputed interest

undiscounted lease payments related to the lease in The Woodlands, Texas

Total lease liabilities

2 unchanged sentences

Total lease liabilities

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 February 28, 2022 and November 30, 2021.

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 May 31, 2022 and November 30, 2021.

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 holders of shares of preferred stock.

The holder of each share of common stock is entitled to one vote.

As of February 28, 2022, no dividends have been declared.

Common stock reserved for future issuance, on an as-if converted basis, as of February 28, 2022 and November 30, 2021, consists of the following:

As of May 31, 2022, no dividends have been declared.

Common stock reserved for future issuance, on an as-if converted basis, as of May 31, 2022 and November 30, 2021, consists of the following:

Issuance of options under stock option plan

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Options forfeited

Balances as of February 28, 2022

Options vested and expected to vest as of February 28, 2022 (2)

Options exercisable as of February 28, 2022

The aggregate intrinsic values were calculated as the pre-tax difference between the exercise price of stock options and the quoted market price of the Company’s common stock on February 28, 2022 for all in-the-money stock options.

Balances as of May 31, 2022

Options vested and expected to vest as of May 31, 2022 (2)

Options exercisable as of May 31, 2022

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

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

As of February 28, 2022, a total of 41,522 shares of common stock were subject to repurchase by the Company at the lower of (i) the fair market value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of $ 0.3 million as of February 28, 2022 is recorded in share-based compensation liability.

As of May 31, 2022, a total of 33,300 shares of common stock were subject to repurchase by the Company at the lower of (i) the fair market value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of $ 0.2 million as of May 31, 2022 is recorded in share-based compensation liability.

RSU activity under the Stock Plans is set forth below:

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RSUs forfeited

Balances as of February 28, 2022

Balances as of May 31, 2022

Employee Stock Purchase Plan

Under the Company’s 2020 Employee Stock Purchase Plan (the ESPP), eligible employees are entitled to purchase shares of common stock with accumulated payroll deductions.

During the three months ended February 28, 2022, the Company issued 71,207 shares pursuant to the ESPP at a weighted-average price of $ 14.94 per share.

During the six months ended May 31, 2022, the Company issued 71,207 shares pursuant to the ESPP at a weighted-average price of $ 14.94 per share.

Stock-Based Compensation

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Three Months Ended,

Six Months Ended,

Research and development

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Total stock-based compensation

As of February 28, 2022, the total compensation cost related to stock-based awards not yet recognized was $ 75.2 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 3.0 years.

As of May 31, 2022, the total compensation cost related to stock-based awards not yet recognized was $ 68.2 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.8 years.

Defined Contribution Plan

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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 $ 0.5 million and $ 0.2 million during the three months ended February 28, 2022 and 2021, respectively.

For the three months ended February 28, 2022, the Company did no t record any current income tax expense or provision and for the three months ended February 28, 2021, the Company recorded a current income tax expense of $ 71,000 .

The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 0.2 million and $ 0.2 million during the three months ended May 31, 2022 and 2021, respectively, and $ 0.7 million and $ 0.4 million during the six months ended May 31, 2022 and 2021, respectively.

For the three month and six months ended May 31, 2022, the Company did no t record any current income tax expense or provision and for the three month and six months ended May 31, 2021, the Company recorded a current income tax expense of $ 0.1 million and $ 0.2 million, respectively.

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

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

The Company has generated losses since inception and has established a valuation allowance to offset deferred tax assets as of February 28, 2022 and November 30, 2021 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

The Company has generated losses since inception and has established a valuation allowance to offset deferred tax assets as of May 31, 2022 and November 30, 2021 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

In January 2019, the California Franchise Tax Board (FTB) commenced an examination of the Company’s California income tax returns for the tax years ending in 2015, 2016, 2017 and 2018.

6 unchanged sentences

Three Months Ended

Six Months Ended

Weighted-average number of shares outstanding, basic and diluted

7 unchanged sentences

The Company’s Chief Financial Officer is a trustee for the Company’s healthcare plan provider.

Expenses related to the healthcare plan premiums were $ 0.9 million and $ 0.5 million for the three months ended February 28, 2022 and 2021, respectively.

As of February 28, 2022 and November 30, 2021, the amount recorded in accrued liabilities and accounts payable in connection with this healthcare plan provider was not material.

Expenses related to the healthcare plan premiums were $ 0.9 million and $ 0.6 million for the three months ended May 31, 2022 and 2021, respectively, and $ 1.9 million and $ 1.1 million for the six months ended May 31, 2022 and 2021, respectively.

As of May 31, 2022 and November 30, 2021, the amount recorded in accrued liabilities and accounts payable in connection with this healthcare plan provider was not material.

Subsequent Events

On March 1, 2022, the Company entered into a lease agreement (the 8800 Technology Forest Pl Lease) with 8800 Technology Forest Pl, LLC, effective as of March 1, 2022, for the lease of approximately 46,434 square feet of office space located at 8800 Technology Forest Place, The Woodlands, Texas, for a research and development laboratory and related uses.

The commencement date of the 8800 Technology Forest Pl Lease is expected to be on or about August 1, 2022 , and the lease will expire on March 1, 2035 , unless terminated earlier.

The minimum rent payable by the Company under the 8800 Technology Forest Pl Lease will be approximately $ 205,084 per month, beginning on March 1, 2023, which amount will increase by 3 % per year over the term of the lease;

provided that, for the period between March 1, 2023 and February 29, 2024, the minimum rent payable by the Company under the lease will be approximately $ 153,813 per month.

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.

Refer to Note 6 for more information regarding leases.

Refer to Note 1 for more information regarding the June 2022 ATM Offering.

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

What changed 10-Q

Item 1. Financial Statements