Nurix Therapeutics, Inc. 10-Q

Item 1. Financial Statements NURIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (unaudited) August 31, 2022 November 30, 2021 Assets Current assets: Cash and cash equivalents $ 47,556 $ 80,506 Marketable securities, current 296,922 215,214 Accounts receivable — 6,000 Income tax receivable — 204 Prepaid expenses and other current assets 10,393 9,194 Total current assets 354,871 311,118 Marketable securities, non‑current 69,125 137,189 Operating lease right-of-use assets 13,848 14,005 Property and equipment, net 16,501 11,340 Restricted cash 901 286 Other assets 4,092 2,833 Total assets $ 459,338 $ 476,771 Liabilities and stockholdersʼ equity Current liabilities: Accounts payable $ 6,053 $ 6,650 Accrued expenses and other current liabilities 19,609 14,549 Operating lease liabilities, current 5,496 3,847 Deferred revenue, current 36,342 41,212 Total current liabilities 67,500 66,258 Operating lease liabilities, net of current portion 7,745 9,189 Deferred revenue, net of current portion 41,548 59,022 Total liabilities 116,793 134,469 Commitments and contingencies (Note 6) Stockholdersʼ equity: Preferred stock, $ 0.001 par value— 10,000,000 shares authorized as of August 31, 2022 and November 30, 2021; no shares issued and outstanding as of August 31, 2022 and November 30, 2021 — — Common stock, $ 0.001 par value— 500,000,000 shares authorized as of August 31, 2022 and November 30, 2021; 47,147,781 and 44,664,371 shares issued and outstanding as of August 31, 2022 and November 30, 2021, respectively 47 45 Additional paid-in capital 700,775 563,757 Accumulated other comprehensive loss ( 3,742 ) ( 608 ) Accumulated deficit ( 354,535 ) ( 220,892 ) Total stockholdersʼ equity 342,545 342,302 Total liabilities and stockholdersʼ equity $ 459,338 $ 476,771 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 NURIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited) Three Months Ended Nine Months Ended August 31, August 31, 2022 2021 2022 2021 Collaboration revenue $ 10,791 $ 10,252 $ 31,844 $ 22,354 Operating expenses: Research and development 47,761 30,906 138,391 79,903 General and administrative 9,748 8,343 28,630 22,384 Total operating expenses 57,509 39,249 167,021 102,287 Loss from operations ( 46,718 ) ( 28,997 ) ( 135,177 ) ( 79,933 ) Interest and other income, net 1,009 39 1,534 528 Loss before income taxes ( 45,709 ) ( 28,958 ) ( 133,643 ) ( 79,405 ) Provision for (benefit from) income taxes — ( 123 ) — 87 Net loss $ ( 45,709 ) $ ( 28,835 ) $ ( 133,643 ) $ ( 79,492 ) Net loss per share, basic and diluted $ ( 0.90 ) $ ( 0.65 ) $ ( 2.85 ) $ ( 1.88 ) Weighted-average number of shares outstanding, basic and diluted 50,868,542 44,374,389 46,835,776 42,344,420 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 NURIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited) Three Months Ended Nine Months Ended August 31, August 31, 2022 2021 2022 2021 Net loss $ ( 45,709 ) $ ( 28,835 ) $ ( 133,643 ) $ ( 79,492 ) Other comprehensive loss, net of tax: Unrealized loss on available-for-sale securities ( 657 ) ( 89 ) ( 3,134 ) ( 146 ) Total comprehensive loss $ ( 46,366 ) $ ( 28,924 ) $ ( 136,777 ) $ ( 79,638 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 NURIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share amounts) (unaudited) Common stock Additional paid-in Accumulated other comprehensive Accumulated Total stockholders’ Shares Amount capital income (loss) deficit equity Balance as of November 30, 2020 38,864,872 $ 39 $ 393,841 $ 87 $ ( 103,698 ) $ 290,269 Exercise of stock options 190,825 — 394 — — 394 Repurchase of unvested early exercised stock options ( 971 ) — — — — — Vesting of early-exercised stock options — — 40 — — 40 Issuance under employee stock purchase plan 64,589 — 1,043 — — 1,043 Stock-based compensation — — 2,700 — — 2,700 Unrealized loss on available-for-sale securities — — — ( 38 ) — ( 38 ) Net loss — — — — ( 24,275 ) ( 24,275 ) Balance as of February 28, 2021 39,119,315 39 398,018 49 ( 127,973 ) 270,133 Issuance of common stock in connection with equity offering, net of offering costs of $ 643 5,175,000 5 150,152 — — 150,157 Exercise of stock options 109,232 — 241 — — 241 Vesting of early-exercised stock options — — 104 — — 104 Stock-based compensation — — 3,944 — — 3,944 Unrealized loss on available-for-sale securities — — — ( 19 ) — ( 19 ) Net loss — — — — ( 26,382 ) ( 26,382 ) Balance as of May 31, 2021 44,403,547 44 552,459 30 ( 154,355 ) 398,178 Exercise of stock options 114,182 1 583 — — 584 Vesting of early-exercised stock options — — 49 — — 49 Issuance under employee stock purchase plan 38,875 — 1,017 — — 1,017 Stock-based compensation — — 4,313 — — 4,313 Unrealized loss on available-for-sale securities — — — ( 89 ) — ( 89 ) Net loss — — — — ( 28,835 ) ( 28,835 ) Balance as of August 31, 2021 44,556,604 $ 45 $ 558,421 $ ( 59 ) $ ( 183,190 ) $ 375,217 4 Common stock Additional paid-in Accumulated other comprehensive Accumulated Total stockholders’ Shares Amount capital income (loss) deficit equity Balance as of November 30, 2021 44,664,371 $ 45 $ 563,757 $ ( 608 ) $ ( 220,892 ) $ 342,302 Exercise of stock options 117,870 — 424 — — 424 Vesting of early-exercised stock options — — 47 — — 47 Issuance under employee stock purchase plan 71,207 — 1,064 — — 1,064 Stock-based compensation — — 6,071 — — 6,071 Unrealized loss on available-for-sale securities — — — ( 1,458 ) — ( 1,458 ) Net loss — — — — ( 42,533 ) ( 42,533 ) Balance as of February 28, 2022 44,853,448 45 571,363 ( 2,066 ) ( 263,425 ) 305,917 Exercise of stock options 173,155 — 432 — — 432 Vesting of restricted stock units 13,465 — — — — — Vesting of early-exercised stock options — — 35 — — 35 Stock-based compensation — — 6,775 — — 6,775 Unrealized loss on available-for-sale securities — — — ( 1,019 ) — ( 1,019 ) Net loss — — — — ( 45,401 ) ( 45,401 ) Balance as of May 31, 2022 45,040,068 45 578,605 ( 3,085 ) ( 308,826 ) 266,739 Issuance of pre-funded warrants, net of issuance costs of $ 234 — — 94,759 — — 94,759 Issuance of common stock in “at the market” financing, net of issuance costs of $ 672 2,000,000 2 19,326 — — 19,328 Exercise of stock options 24,147 — 174 — — 174 Vesting of restricted stock units 18,469 — — — — — Vesting of early-exercised stock options — — 32 — — 32 Issuance under employee stock purchase plan 65,097 — 891 — — 891 Stock-based compensation — — 6,988 — — 6,988 Unrealized loss on available-for-sale securities — — — ( 657 ) — ( 657 ) Net loss — — — — ( 45,709 ) ( 45,709 ) Balance as of August 31, 2022 47,147,781 $ 47 $ 700,775 $ ( 3,742 ) $ ( 354,535 ) $ 342,545 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 NURIX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended August 31, 2022 2021 Cash flows from operating activities Net loss $ ( 133,643 ) $ ( 79,492 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,730 2,033 Stock-based compensation 19,834 10,957 Net amortization (accretion) of premium (discount) on marketable securities 1,076 1,100 Loss on disposal of property and equipment 9 128 Amortization of operating lease right-of-use assets 4,041 2,439 Other 201 — Changes in operating assets and liabilities: Accounts receivable 6,000 — Income tax receivable — 3,642 Prepaid expenses and other assets ( 2,250 ) ( 6,040 ) Accounts payable 984 727 Deferred revenue ( 22,344 ) 10,647 Operating lease liabilities ( 3,679 ) ( 2,432 ) Accrued expenses and other liabilities 4,189 2,837 Net cash used in operating activities ( 121,852 ) ( 53,454 ) Cash flows from investing activities Purchases of marketable securities ( 212,455 ) ( 257,813 ) Sales of marketable securities — 6,994 Maturities of marketable securities 194,324 183,890 Purchases of property and equipment ( 9,679 ) ( 4,799 ) Net cash used in investing activities ( 27,810 ) ( 71,728 ) Cash flows from financing activities Proceeds from issuances of pre-funded warrants, net of issuance costs 94,942 — Proceeds from issuances of common stock in equity financing, net of issuance costs 19,400 150,157 Proceeds from exercise of stock options 1,030 1,166 Proceeds from issuance under employee stock purchase plan 1,955 2,060 Repurchase of unvested early exercised stock options — ( 1 ) Net cash provided by financing activities 117,327 153,382 Net (decrease) increase in cash, cash equivalents and restricted cash ( 32,335 ) 28,200 Cash, cash equivalents and restricted cash at beginning of period 80,792 119,526 Cash, cash equivalents and restricted cash at end of period $ 48,457 $ 147,726 Supplemental disclosures of non-cash investing and financing activities: Additions to property and equipment included in accounts payable and accrued expenses and other liabilities $ 1,726 $ 839 Vesting of early exercised stock options $ 114 $ 193 Issuance costs related to pre-funded warrants included in accrued expenses and other liabilities $ 183 $ — Deferred issuance costs recognized related to equity financing $ 72 $ — As of August 31, 2022 2021 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 47,556 $ 147,440 Restricted cash 901 286 Total cash, cash equivalents and restricted cash $ 48,457 $ 147,726 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 NURIX THERAPEUTICS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Description of Business Nurix Therapeutics, Inc. (the Company) 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. 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 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. 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. 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 $ 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 Securities and Exchange Commission (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. In June 2022, the Company issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement at a price of $ 10.0001 per share of common stock for net proceeds of approximately $ 19.3 million, after deducting offering commissions and expenses paid by the Company. As of August 31, 2022, the Company had $ 130.0 million of common stock remaining available for sale under the Equity Distribution Agreement. Registered Direct Offerings In July 2022, the Company entered into separate securities purchase agreements with certain purchasers to issue and sell pre‑funded warrants to purchase an aggregate of 6,814,920 shares of the Company’s common stock in registered direct offerings (RDOs) at a price of $ 13.939 per pre-funded warrant. Net proceeds from the RDOs were approximately $ 94.8 million, after deducting offering expenses of $ 0.2 million. Refer to Note 7 for more information regarding the pre-funded warrants issued in the RDOs. 7 Liquidity and Management Plans Since inception, the Company has generally incurred significant losses and negative net cash flows from operations. As of August 31, 2022, the Company had an accumulated deficit of $ 354.5 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 August 31, 2022, the Company had cash, cash equivalents and marketable securities of $ 413.6 million. Management believes that its cash, cash equivalents and marketable securities are sufficient to continue operating activities for at least 12 months following the issuance date of these condensed consolidated financial statements. Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and payments the Company may receive under its collaboration agreements with Sanofi S.A. (Sanofi) and Gilead Sciences, Inc. (Gilead) or future collaboration agreements, if any. There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company if at all. If additional capital is not available, failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives. 2. Summary of Significant Accounting Policies Basis of Presentation The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and applicable rules and regulations of the SEC regarding interim financial reporting. The Company’s condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of and for the three and nine months ended August 31, 2022. The condensed consolidated balance sheet as of November 30, 2021 was derived from the audited annual financial statements as of that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. These interim financial statements and related disclosures have been prepared with the presumption that users of the interim financial statements have read or have access to the audited annual financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited annual financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended November 30, 2021, as filed with the SEC. These interim results are not necessarily indicative of results to be expected for the full fiscal year or any future interim period. 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 The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, including DeCART Therapeutics Inc, which was legally dissolved in July 2022. All intercompany balances and transactions have been eliminated in consolidation. 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. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. The Company’s marketable securities 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 marketable securities. 8 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 Company is subject to risks and uncertainties as a result of the current COVID-19 pandemic and increasing financial market volatility and uncertainty. The COVID-19 pandemic, including the resurgence of cases relating to the spread of new variants, is impacting worldwide economic activity and 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 and increasing financial market volatility and uncertainty 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 and the increasing financial market volatility and uncertainty may directly or indirectly impact the Company’s financial statements is highly uncertain and subject to change. Management considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three and nine months ended August 31, 2022; 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. Leases 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, in 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. 9 Revenue Recognition The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To recognize revenue from a contract with a customer, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract, whether each promised good or service is distinct, and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. The Company enters into collaboration agreements under which it may obtain upfront payments, milestone payments, royalty payments and other fees. Promises under these arrangements may include research licenses, research services, including selection campaign research services for certain replacement targets, the obligation to share information during the research and the participation of alliance managers and in joint research committees, joint patent committees and joint steering committees. The Company assesses these promises within the context of the agreements to determine the performance obligations. Research and collaboration licenses: If a license is determined to be distinct from the other promises identified in the arrangement, the Company recognizes revenue from upfront payments allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront payments. The Company evaluates the measure of proportional performance each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Milestone payments: At the inception of each arrangement that includes research, development, or regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. The Company uses the most likely amount method for research, development and regulatory milestone payments. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. If it is probable that a significant revenue reversal would not occur, the associated milestone amount is included in the transaction price. Sales-based milestones and royalties: For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, the Company recognizes revenue in the period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur. To date, the Company has not recognized any sales-based milestone or royalty revenue resulting from its collaboration arrangements. Customer options: Customer options, such as options granted to allow a licensee to extend a license or research term, to select additional research targets or to choose to research, develop and commercialize licensed compounds are evaluated at contract inception to determine whether those options provide a material right (i.e., an optional good or service offered for free or at a discount) to the customer. If the customer options represent a material right, the material right is treated as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the standalone selling price. As 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 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. 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. 10 Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (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 and eliminate certain exceptions from Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also requires the amount of tax that is based on income to be accounted for under Topic 740 as an income-based tax, with any incremental amount accounted for as a non-income-based tax recognized entirely in the period incurred. The Company adopted ASU 2019-12 as of December 1, 2021 using the modified retrospective method, and recognized an immaterial non-income-based tax within operating expenses in the current period. The adoption had no other impact on the Company’s condensed consolidated financial statements. 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. 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 August 31, 2021 and for the three and nine months ended August 31, 2021 as presented in its August 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 nine months ended August 31, 2021 presented herein differ from the Company’s condensed consolidated financial statements included in its August 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, 2020 (in thousands): As Previously Reported Impact of Topic 842 Adoption As Adjusted Assets Operating lease right-of-use assets $ — $ 13,343 $ 13,343 Liabilities Operating lease liabilities, current — 3,342 3,342 Operating lease liabilities, net of current portion — 10,903 10,903 Accrued and other current liabilities 8,328 ( 52 ) 8,276 Other long-term liabilities $ 850 $ ( 850 ) $ — The following table summarizes the effect of the adoption of Topic 842 on the condensed consolidated statement of cash flows for the nine months ended August 31, 2021 (in thousands): As Previously Reported Impact of Topic 842 Adoption As Adjusted Cash flows from operating activities Adjustments to reconcile net loss to net cash used in operating activities: Amortization of operating lease right-of-use assets $ — $ 2,439 $ 2,439 Changes in operating assets and liabilities: Operating lease liabilities — ( 2,432 ) ( 2,432 ) Accrued expenses and other liabilities $ 2,844 $ ( 7 ) $ 2,837 11 3. Collaboration Agreements Gilead In June 2019, the Company entered into a global strategic collaboration agreement with Gilead, which was amended in August 2019 (the Gilead Agreement), to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with cancer and other challenging diseases using the Company’s DELigase platform to identify novel agents that utilize E3 ligases to induce degradation of five specified drug targets. Under the Gilead Agreement, Gilead has the option to license drug candidates directed to up to five targets resulting from the collaboration and is responsible for the clinical development and commercialization of drug candidates resulting from the collaboration. The Company retains the option to co-develop and co-promote, under a profit share structure, up to two drug candidates in the United States 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. In August 2019 and September 2022, the Company entered into a first amendment and a second amendment, respectively, to the collaboration agreement with Gilead to clarify certain language of the Gilead Agreement. These amendments had no impact on revenue recognition. 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 August 31, 2022, the Company has received payments of $ 32.0 million for research milestones and additional payments. Additionally, the Company recognized a research milestone in August 2022 and anticipates a payment of $ 2.5 million in the fourth fiscal quarter of 2022. As of August 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. 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, $ 34.5 million in variable consideration, which includes $ 2.5 million added during the three months ended August 31, 2022, 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 . For the three and nine months ended August 31, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 7.2 million and $ 19.5 million, respectively, of which $ 5.6 million and $ 14.3 million, respectively, was included in deferred revenue as of November 30, 2021, and $ 0.6 million and $ 4.1 million, respectively, was related to activities satisfied in previous periods. For the three and nine months ended August 31, 2021, the Company recognized collaboration revenue related to the Gilead Agreement of $ 6.1 million and $ 12.5 million, respectively, of which $ 4.0 million and $ 9.6 million, respectively, was included in deferred revenue as of November 30, 2020, and $ 1.2 million and $ 1.9 million, respectively, was related to activities satisfied in previous periods. As of August 31, 2022, deferred revenue related to the Gilead Agreement was $ 29.1 million, of which $ 15.9 million was current and includes $ 2.5 million in contract assets representing the unbilled amount related to the research milestone recognized in August 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. 12 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. In January 2021, the Company and Sanofi entered into a first amendment to the collaboration agreement 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. In December 2021, the Company and Sanofi entered into a second amendment 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, subject to certain conditions and limitations. In July 2022, the Company entered into a third amendment to further extend the substitution deadline on certain targets. The extensions of the substitution deadline had no impact on revenue recognition. Also in July 2022, Sanofi elected to replace certain drug targets, and the substitution extended the research term of those targets by one year to 5.25 years and increased overall forecasted costs, which had an immaterial impact on revenue recognition. In August 2022, the Company entered into a fourth amendment to modify the research plan for a certain target, which had no impact on revenue recognition. 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. In addition, from the signing of the Sanofi Agreement to August 31, 2022, the Company has received payments of $ 3.0 million for research milestones. As of August 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 using the cost-based input method over the research term of 4.25 years, the revised research period that was agreed to in January 2021 in the First Sanofi Amendment for certain targets, and 5.25 years, the revised research period due to the target substitutions in July 2022, for certain other targets. For the three and nine months ended August 31, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 3.6 million and $ 12.4 million, respectively, of which $ 3.6 million and $ 11.8 million, respectively, was included in deferred revenue as of November 30, 2021 and zero and $ 0.4 million, respectively, was related to activities satisfied in previous periods. For the three and nine months ended August 31, 2021, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 4.2 million and $ 9.8 million, respectively, of which $ 4.0 million and $ 9.6 million, respectively, was included in deferred revenue as of November 30, 2020. As of August 31, 2022 and November 30, 2021, deferred revenue related to the Sanofi Agreement was $ 48.8 million, of which $ 20.5 million was current, and $ 59.2 million, of which $ 21.3 million was current, respectively. 13 4. Condensed Consolidated Balance Sheet Components Property and Equipment, Net Property and equipment, net, consisted of the following (in thousands): August 31, November 30, 2022 2021 Laboratory equipment $ 25,352 $ 18,321 Leasehold improvements 3,332 3,083 Computer equipment 786 538 Furniture and fixtures 453 437 Software 4,240 3,349 Software in progress 488 491 Total property and equipment, gross 34,651 26,219 Less: Accumulated depreciation and amortization ( 18,150 ) ( 14,879 ) Total property and equipment, net $ 16,501 $ 11,340 Depreciation and amortization expense was $ 1.5 million and $ 0.7 million for the three months ended August 31, 2022 and 2021, respectively, and $ 3.7 million and $ 2.0 million for the nine months ended August 31, 2022 and 2021, 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): August 31, November 30, 2022 2021 Accrued compensation $ 10,312 $ 8,854 Accrued contract research and lab supplies 6,267 4,158 Accrued professional services 1,335 803 Accrued taxes 41 75 Other 1,654 659 Total accrued expenses and other current liabilities $ 19,609 $ 14,549 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. 14 The following tables present the Company’s investments, which consist of cash equivalents and available-for-sale marketable securities, that are measured at fair value on a recurring basis as of August 31, 2022 and November 30, 2021 (in thousands): August 31, 2022 Level Amortized cost Unrealized gain Unrealized loss Estimated fair value Money market funds Level 1 $ 44,738 $ — $ — $ 44,738 U.S. treasury securities Level 1 90,301 — ( 1,067 ) 89,234 Corporate debt securities Level 2 87,289 — ( 1,081 ) 86,208 U.S. government agency securities Level 2 19,497 — ( 171 ) 19,326 Corporate commercial paper Level 2 85,539 — — 85,539 Foreign government securities Level 2 12,103 — ( 137 ) 11,966 Municipal securities Level 2 4,655 — ( 6 ) 4,649 Long-term marketable securities: U.S. treasury securities Level 1 5,734 — ( 16 ) 5,718 Corporate debt securities Level 2 14,854 — ( 553 ) 14,301 U.S. government agency securities Level 2 49,816 4 ( 714 ) 49,106 Total $ 414,526 $ 4 $ ( 3,745 ) $ 410,785 Included in Cash and cash equivalents $ 44,738 $ — $ — $ 44,738 Included in Short-term marketable securities $ 299,384 $ — $ ( 2,462 ) $ 296,922 Included in Long-term marketable securities $ 70,404 $ 4 $ ( 1,283 ) $ 69,125 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 marketable securities: 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 marketable securities $ 215,280 $ 11 $ ( 77 ) $ 215,214 Included in Long-term marketable securities $ 137,731 $ — $ ( 542 ) $ 137,189 The accrued interest receivable related to the Company’s marketable securities was $ 1.1 million and $ 0.9 million as of August 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. 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 marketable securities in corporate debt securities, U.S. government agency securities, corporate commercial paper, foreign government securities and municipal securities as Level 2 assets within the fair value hierarchy. The fair values of these marketable securities 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 three and nine months ended August 31, 2022 and 2021. 15 As of August 31, 2022 and November 30, 2021, the unrealized losses for available-for-sale securities were non-credit related, and the Company does no t intend to sell the securities that were in an unrealized loss position, nor will it be required to sell those securities before recovery of their amortized cost basis, which may be maturity. As of August 31, 2022 and November 30, 2021, no allowance for credit losses for the Company’s marketable securities was recorded. During the three and nine months ended August 31, 2022 and 2021, the Company did no t recognize any impairment losses related to marketable securities. 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 August 31, 2022, the Company was not a party to any material legal proceedings. Indemnifications In the ordinary course of business, the Company often includes standard indemnification provisions in its arrangements with its partners, suppliers and vendors, among others. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred in connection with its service, breach of representations or covenants, intellectual property infringement or other claims made against such parties. These provisions may limit the time within which an indemnification claim can be made. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. The Company has not incurred any material costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in these condensed consolidated financial statements as management believes such liability is immaterial. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s condensed consolidated financial statements. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not specified in the agreements. However, the Company currently has directors’ and officers’ insurance that reduces its exposure and may enable the Company to recover a portion of any future amounts paid. Operating Leases The Company leases office and laboratory facilities within the same building in San Francisco, California under several lease agreements. The terms 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. 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 Company obtained access to the premise on August 1, 2022, and the lease is expected to commence in fiscal year 2023 when the underlying assets become available for use and will expire on March 1, 2035 , unless terminated earlier. The minimum rent payable by the Company under the lease will be approximately $ 205,000 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 $ 154,000 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. 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 August 31, 2022 and 2021, respectively, and $ 4.4 million and $ 2.6 million for the nine months ended August 31, 2022 and 2021, respectively. Short-term lease expense was not material for all periods presented. 16 Other information related to leases were as follows (in thousands): Nine Months Ended August 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Cash flows from operating leases $ 5,198 $ 2,784 Supplemental disclosures of non-cash investing and financing activities: Right-of-use assets recognized in exchange for lease obligations $ 5,060 $ 2,097 The undiscounted future non-cancellable lease payments under the Company’s lease agreements as of August 31, 2022 were as follows (in thousands): Year ending November 30, Operating Leases 2022 (remaining 3 months) $ 1,376 2023 6,976 2024 7,422 2025 4,330 2026 2,670 2027 2,750 2028 to 2035 22,556 Total undiscounted lease payments 48,080 Less: imputed interest ( 525 ) Less: undiscounted lease payments related to the lease in The Woodlands, Texas ( 34,314 ) Total lease liabilities $ 13,241 Operating lease current liabilities $ 5,496 Operating lease long-term liabilities 7,745 Total lease liabilities $ 13,241 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 August 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 August 31, 2022, no dividends have been declared. In July 2022, the Company issued pre-funded warrants to purchase an aggregate of 6,814,920 shares of the Company’s common stock in RDOs at a price of $ 13.939 per pre-funded warrant. The pre-funded warrants were immediately exercisable, have an exercise price of $ 0.001 and may be exercised at any time after the date of issuance. A holder of pre-funded warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99 % of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise. A holder of the pre-funded warrants may increase or decrease this percentage not in excess of 19.99 % by providing at least 61 days’ prior notice to the Company. As of August 31, 2022 , all of the pre-funded warrants remained available for exercise. The pre-funded warrants were classified as a component of permanent equity in the Company's condensed consolidated balance sheet as they are freestanding financial instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares and permit the holders to receive a fixed number of shares of common stock upon exercise. All of the shares underlying the pre-funded warrants have been included in the weighted-average number of shares of common stock used to calculate net loss per share attributable to common stockholders because the shares may be issued for little or no consideration, are fully vested and are exercisable after the original issuance date of the pre-funded warrants. 17 Common stock reserved for future issuance, on an as-if converted basis, as of August 31, 2022 and November 30, 2021, consists of the following: August 31, November 30, 2022 2021 Options under stock option plan issued and outstanding 8,115,201 5,878,552 Shares available for future stock option grants 1,031,871 2,562,570 Shares available for issuance under employee stock purchase plan 1,325,523 1,015,184 Restricted stock units issued and outstanding 753,518 20,000 Pre-funded warrants issued and outstanding 6,814,920 — Total common stock reserved for future issuance 18,041,033 9,476,306 8. Stock-Based Compensation Equity Incentive Plans The Company’s 2020 Equity Incentive Plan (the 2020 Plan) serves as the successor to the Company’s 2012 Equity Incentive Plan (together with the 2020 Plan, the Stock Plans) and provides for the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock units (RSUs), performance awards and stock bonus awards to employees, directors, consultants, independent contractors and advisors of the Company. Option activity under the Stock Plans is set forth below: Number of options outstanding Weighted- average exercise price Weighted- average contractual life (in years) Aggregate intrinsic value ( 1) (in thousands) Balances as of November 30, 2021 5,878,552 $ 19.42 8.67 $ 65,692 Options granted 3,000,206 18.28 Options exercised ( 315,172 ) 3.27 Options forfeited ( 448,385 ) 20.27 Balances as of August 31, 2022 8,115,201 $ 19.58 8.65 $ 20,921 Options vested and expected to vest as of August 31, 2022 (2) 8,142,625 $ 19.54 8.65 $ 21,159 Options exercisable as of August 31, 2022 3,195,076 $ 14.79 7.72 $ 19,159 (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 August 31, 2022 for all in-the-money stock options. (2) Certain stock options granted by the Company prior to the date of IPO are exercisable at the date of grant, with unvested shares subject to repurchase by the Company in the event of a voluntary or involuntary termination of employment of the stockholder. Such exercises are recorded as a liability in the condensed consolidated balance sheets and reclassified into equity as the options vest. As of August 31, 2022, a total of 27,424 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 August 31, 2022 is recorded in share-based compensation liability. RSU activity under the Stock Plans is set forth below: Number of RSUs Weighted-average grant date fair value Balances as of November 30, 2021 20,000 $ 27.42 RSUs granted 797,282 19.56 RSUs vested ( 31,934 ) 20.73 RSUs forfeited ( 31,830 ) 23.11 Balances as of August 31, 2022 753,518 $ 19.57 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 nine months ended August 31, 2022, the Company issued 136,304 shares pursuant to the ESPP at a weighted-average price of $ 14.34 per share. 18 Stock-Based Compensation Stock-based compensation expense related to the Stock Plans and the ESPP that is included in the Company’s condensed consolidated statements of operations is as follows (in thousands): Three Months Ended, Nine Months Ended, August 31, August 31, 2022 2021 2022 2021 Research and development $ 4,229 $ 2,212 $ 11,766 $ 5,450 General and administrative 2,759 2,101 8,068 5,507 Total stock-based compensation $ 6,988 $ 4,313 $ 19,834 $ 10,957 As of August 31, 2022, the total compensation cost related to stock-based awards not yet recognized was $ 85.9 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.9 years. 9. Defined Contribution Plan The Company sponsors a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the 401(k) Plan), which provides for the Company to make discretionary matching or discretionary annual contributions to the 401(k) Plan, for its employees. Substantially all of the Company’s employees are eligible to participate. Employees may contribute a percentage of their annual compensation to the plan, subject to statutory limitations. The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 0.1 million and $ 0.1 million during the three months ended August 31, 2022 and 2021, respectively, and $ 0.8 million and $ 0.5 million during the nine months ended August 31, 2022 and 2021, respectively. 10. Income Taxes For the three and nine months ended August 31, 2022, the Company did no t record any current income tax expense or provision and for the three and nine months ended August 31, 2021, the Company recorded a current income tax benefit of $ 0.1 million and an expense of $ 0.1 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 August 31, 2022 and 2021 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets. In August 2022, the U.S. Inflation Reduction Act (the Act) was enacted into law. The Act includes various tax provisions, including an excise tax on stock repurchases, expanded tax credits for clean energy incentives and a corporate alternative minimum tax that generally applies to U.S. corporations with adjusted financial statement income in excess of $1.0 billion. The Company does not expect the Act to have a material impact on its financial statements. In January 2019, the California Franchise Tax Board (the FTB) commenced an examination of the Company’s California income tax returns for the tax 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. 19 11. Net Loss Per Share The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders, which excludes shares which are legally outstanding but subject to repurchase by the Company (in thousands, except share and per share data): Three Months Ended Nine Months Ended August 31, August 31, 2022 2021 2022 2021 Numerator: Net loss $ ( 45,709 ) $ ( 28,835 ) $ ( 133,643 ) $ ( 79,492 ) Denominator: Weighted-average number of shares outstanding, basic and diluted ( 1) 50,868,542 44,374,389 46,835,776 42,344,420 Net loss per share, basic and diluted $ ( 0.90 ) $ ( 0.65 ) $ ( 2.85 ) $ ( 1.88 ) (1) The shares underlying the pre-funded warrants to purchase an aggregate of 6,814,920 shares of the Company’s common stock have been included in the calculation of the weighted-average number of shares outstanding, basic and diluted, for the three and nine months ended August 31, 2022. 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: August 31, 2022 2021 Options to purchase common stock 8,115,201 5,593,412 Options early exercised subject to vesting 27,424 76,175 Shares expected to be purchased under employee stock purchase plan 123,194 43,274 Restricted stock 753,518 20,000 Total 9,019,337 5,732,861 12. Related Party Transactions The Company’s Chief Financial Officer is a trustee for the Company’s healthcare plan provider. Expenses related to the healthcare plan premiums were $ 1.0 million and $ 0.7 million for the three months ended August 31, 2022 and 2021, respectively, and $ 2.9 million and $ 1.8 million for the nine months ended August 31, 2022 and 2021, respectively. As of August 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. 20