What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-02-23 compared with 2022-02-24 · 71 added, 87 removed, 196 unchanged (45% of the section changed)

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Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

[R e served].

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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“Intellia,”

or the “Company”) is a leading clinical-stage genome editing company, focused on developing novel, potentially curative CRISPR/Cas9-based therapeutics.

or the “Company”) is a leading clinical-stage genome editing company, focused on developing potentially curative therapeutics using CRISPR/Cas9-based technologies.

CRISPR/Cas9, an acronym for C lustered, R egularly I nterspaced S hort P alindromic R epeats (“CRISPR”)/ C RISPR a ssociated 9 (“Cas9”), is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”).

To realize the transformative potential of CRISPR/Cas9-based technologies, we are building a full-spectrum genome editing company, by leveraging our modular platform, to advance in vivo a nd ex vivo therapies for diseases with high unmet need.

For our in vivo programs to address genetic diseases, we use intravenously administered CRISPR as the therapy, in which our proprietary delivery technology enables highly precise editing of disease-causing genes directly within specific target tissues.

For our ex vivo programs to address immuno-oncology and autoimmune diseases, we use CRISPR to create the therapy by engineering cells outside of the body.

Our deep scientific, technical and clinical development experience, along with our robust intellectual property (“IP”) portfolio, enables us to unlock broad therapeutic applications of CRISPR/Cas9 and related technologies to create new classes of genetic medicine.

To fully realize the transformative potential of CRISPR/Cas9-based technologies, we are building a full-spectrum genome editing company, by leveraging our modular platform, to advance in vivo a nd ex vivo therapies for diseases with high unmet need by pursuing two primary approaches.

For in vivo applications to address genetic diseases, we deploy CRISPR/Cas9 as the therapy that targets cells within the body.

In parallel, we are developing ex vivo applications to address immuno-oncology and autoimmune diseases, where we use CRISPR/Cas9 as the tool to create the engineered cell therapy.

Our deep scientific, technical and clinical development experience, along with our robust intellectual property (“IP”) portfolio, have enabled us to unlock broad therapeutic applications of CRISPR/Cas9 and related technologies to create new classes of genetic medicine.

For more information regarding our business, mission and pipeline, see above sections in Part I entitled “

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Collaboration Revenue

Our revenue consists of collaboration revenue, including amounts recognized related to upfront technology access payments for licenses, technology access fees, research funding and milestone payments earned under our collaboration and license agreements with Regeneron Pharmaceuticals, Inc.

(“Regeneron”), Novartis Institutes for BioMedical Research, Inc.

(“Novartis”) and AvenCell Therapeutics, Inc.

(“AvenCell”), a new universal CAR-T cell therapy joint venture and privately held company that was formed by us, Cellex Cell Professionals GmbH (“Cellex”) and funds managed by Blackstone Life Sciences Advisors L.L.C.

(“BXLS”) .

Our revenue consists of collaboration revenue, including amounts recognized related to upfront technology access payments for licenses, technology access fees, research materials shipped, research funding and milestone payments earned under our collaboration and license agreements.

Research and Development

Research and development expenses consist of expenses incurred in performing research and development activities, such as compensation and benefits, which includes equity-based compensation, for full-time research and development employees, allocated facility-related expenses, overhead expenses, license and milestone fees, contract research, development and manufacturing services, clinical trial costs and other related costs.

Research and development costs consist of expenses incurred in performing research and development activities, such as compensation and benefits, which includes equity-based compensation, for full-time research and development employees, allocated facility-related expenses, overhead expenses, license and milestone fees, contract research, development and manufacturing services, clinical trial costs and other related costs.

General and Administrative

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Also included in general and administrative expenses are allocated facility-related costs not otherwise included in research and development expenses, travel expenses and professional fees for auditing, tax and legal services, including IP-related legal services, and other consulting fees and expenses.

Interest Income

Interest income is income earned on our cash, cash equivalents, restricted cash equivalents and marketable securities.

Other (Expense) Income, Net

Other (expense) income consists of interest income earned on our cash, cash equivalents, restricted cash equivalents and marketable securities, loss from equity method investment and change in fair value of contingent consideration.

Results of Operations

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Other (expense) income, net:

Loss from equity method investment

Interest income

Loss from equity method investment

Change in fair value of contingent consideration

Total other (expense) income, net

Collaboration Revenue

Collaboration revenue decreased by $24.9 million to $33.1 million during the year ended December 31, 2021, as compared to $58.0 million during the year ended December 31, 2020.

The decrease in collaboration revenue during the year ended December 31, 2021 is primarily due to our recording $15.3 million related to the transfer of control of the license to develop the Factor VIII target for hemophilia A, an $8.4 million one-time cumulative catch-up adjustment related to the modification of our agreement with Regeneron, and a $5.0 million milestone payment earned from Novartis for the Investigational New Drug ( “

) application submission of OTQ923, all of which were recorded in 2020.

These decreases are offset in part by $6.1 million in revenue recorded in 2021 from our joint venture with AvenCell.

Collaboration revenue increased by $19.1 million to $52.1 million during the year ended December 31, 2022, as compared to $33.1 million during the year ended December 31, 2021.

The increase in collaboration revenue during the year ended December 31, 2022 is primarily due to revenue from our joint venture with AvenCell Therapeutics, Inc.

(“AvenCell”) and revenue from our license and collaboration agreement with Kyverna Therapeutics, Inc.

(“Kyverna”).

Refer to Note 9 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further details.

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Research materials and contracted services

In-process research and development

Facility-related expenses

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The increase in research and development expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily attributable to:

a $2.1 million increase in external costs related to the development of NTLA-2001, our lead product candidate, primarily due to an increase in contracted services, offset in part by decreases in consulting and manufactured components incurred as compared to the prior period;

a $1.5 million increase in external costs related to the development of NTLA-2002, primarily due to increases in component costs and contracted services as we prepared to enroll patients;

a $7.7 million increase in external costs related to the development of NTLA-5001, primarily due to an increase in contracted services as we prepared to enter into the clinic;

a $28.6 million increase in employee-related expenses driven by the expansion of our development organization;

a $15.5 million increase in research materials and contracted services primarily due to an increase in drug components and research and development contracted services;

a $13.5 million increase in external costs related to the development of NTLA-2001, our lead product candidate for the treatment of transthyretin (“ATTR”) amyloidosis, primarily due to an increase in spend on contracted services and drug components;

a $4.2 million increase in external costs related to the development of NTLA-2002, our lead product candidate for the treatment of hereditary angioedema (“HAE”), primarily due to an increase in spend on contracted services;

a $4.3 million decrease in external costs related to the development of NTLA-5001, our former product candidate for acute myeloid leukemia (“AML”), primarily due to a decrease in contracted services as we continued to wind down the program during the fourth quarter of 2022;

a $42.2 million increase in employee-related expenses, primarily driven by the increase in personnel growth to support our lead programs;

a $36.5 million increase in research materials and contracted services primarily driven by an increase in drug component expenses and consumables to support our pipelines;

$56.0 million of acquired in-process research and development expense in the first half of 2022 related to the acquisition of Rewrite Therapeutics, Inc.

(“Rewrite”);

a $10.7 million increase in facility-related expenses primarily related to rent, depreciation and technology expense allocated to research and development;

a $16.5 million increase in stock-based compensation driven by our larger workforce as well as our increased stock price as compared to the prior year.

During 2022, we expect research and development expenses to increase as we continue to grow our development team, execute clinical trials for NTLA-2001 and NTLA-2002, progress our NTLA-5001 program and nominate new development candidates to enter the clinic.

a $29.6 million increase in stock-based compensation driven by our larger workforce.

During 2023, we expect research and development expenses to increase as we continue to grow our development team, initiate global pivotal trials for NTLA-2001 and NTLA-2002, progress our NTLA-3001 and NTLA-2003 programs and nominate new development candidates.

General and Administrative

General and administrative expenses increased by approximately $26.9 million to $71.1 million during the year ended December 31, 2021, compared to $44.2 million during the year ended December 31, 2020.

This increase was primarily related to an increase in employee-related expenses, including stock-based compensation of $10.6 million, driven by our larger workforce as well as our increased stock price as compared to the prior year.

Loss from Equity Method Investment

Loss from equity method investment represents our share of two months of AvenCell's losses generated in the third quarter of 2021, amounting to $1.3 million, as we are recording our share of their losses on a one-quarter lag.

Refer to Note 9 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further details.

Interest Income

Interest income decreased by approximately $1.1 million to $1.3 million during the year ended December 31, 2021 as compared to $2.4 million during the year ended December 31, 2020.

This decrease was due to a decline in investment income due to overall market conditions.

General and administrative expenses increased by $19.2 million to $90.3 million during the year ended December 31, 2022, compared to $71.1 million during the year ended December 31, 2021.

This increase was primarily related to an increase in employee-related expenses, including stock-based compensation of $14.8 million.

Other (Expense) Income, Net

The increase in other (expense) income of $16.0 million is primarily related to an increase in the fair value of our contingent consideration liability of $13.5 million and an increase in our share of AvenCell's losses of $9.8 million, offset in part by a $7.3 million increase in interest income.

Liquidity and Capital Resources

Since our inception through December 31, 2021, we have raised an aggregate of $1,817.9 million to fund our operations through our initial public offering (“IPO”) and concurrent private placements, follow-on public offerings, at-the-market offerings and the sale of convertible preferred stock, as well as through our collaboration agreements.

Since our inception through December 31, 2022, we have raised an aggregate of $2,395.2 million to fund our operations through our collaboration agreements, our initial public offering and concurrent private placements, follow-on public offerings, at-the-market offerings and the sale of convertible preferred stock.

As of December 31, 2022, we had $1,262.0 million in cash, cash equivalents and marketable securities.

We are eligible to earn a significant amount of milestone payments and royalties, in each case, on a per-product basis under our collaborations with Novartis and SparingVision SAS (“SparingVision”), on a per-target basis under our collaboration with Regeneron and upon achievement of certain events under our collaboration with Kyverna Therapeutics, Inc.

(“Kyverna”).

We are eligible to earn a significant amount of milestone payments and royalties, in each case, on a per-product basis under our collaborations with Novartis Institutes for BioMedical Research, Inc.

(“Novartis”), SparingVision SAS (“SparingVision”) and ONK Therapeutics, Ltd.

(“ONK”), on a per-target basis under our collaboration with Regeneron Pharmaceuticals, Inc.

(“Regeneron”) and upon achievement of certain events under our collaboration with Kyverna.

Our ability to earn these milestone payments and the timing of achieving these milestones is dependent upon the outcome of our research and development activities and is uncertain at this time.

Our rights to payments under our collaboration agreements are our only committed external source of funds.

Follow-on Offerings

On June 1, 2020, we entered into an underwriting agreement related to a public offering of 6,301,370 shares of our common stock, par value $0.0001 per share, including the exercise in full by the underwriters of their option to purchase an additional 821,917 shares, at the public offering price of $18.25 per share.

The offering closed on June 5, 2020 and we received net proceeds of $107.7 million, after deducting the underwriting discount, commissions and offering expenses.

On December 1, 2020, we entered into an underwriting agreement related to a public offering of 5,513,699 shares of our common stock, par value $0.0001 per share, including the exercise in full by the underwriters of their option to purchase an additional 719,178 shares, at the public offering price of $36.50 per share.

The offering closed on December 4, 2020 and we received net proceeds of $188.9 million, after deducting the underwriting discount, commissions and offering expenses.

In July 2021, we closed an underwritten public offering of 4,758,620 shares of common stock, including the exercise in full of the underwriters’

option to purchase an additional 620,689 shares of common stock, at the public offering price of $145.00 per share, for aggregate net proceeds of $648.3 million, after deducting approximately $41.7 million in underwriting discounts and offering costs.

Follow-on Offering

In December 2022, we closed an underwritten public offering of 7,532,751 shares of common stock, including the exercise in full of the underwriters’

option to purchase an additional 982,532 shares of common stock, at the public offering price of $45.80 per share, for aggregate net proceeds of $337.9 million, after deducting the underwriting discount, commissions and approximately $0.3 million related to legal, accounting and other fees in connection with the sales.

At-the-Market Offering Programs

In August 2019, we entered into an Open Market Sale Agreement (the “2019 Sale Agreement”) with Jefferies LLC (“Jefferies”), under which Jefferies is able to offer and sell, from time to time in “at-the-market”

In August 2019, we entered into an Open Market Sale Agreement (the “2019 Sale Agreement”) with Jefferies LLC (“Jefferies”), under which Jefferies was able to offer and sell, from time to time in “at-the-market”

offerings, shares of our common stock having aggregate gross proceeds of up to $150.0 million.

We agreed to pay to Jefferies cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2019 Sale Agreement.

During the year ended December 31, 2019, we issued 287,231 shares of our common stock, in a series of sales, at an average price of $16.48 per share, in accordance with the 2019 Sale Agreement for aggregate net proceeds of $4.4 million, after payment of cash commissions to Jefferies and approximately $0.2 million related to legal, accounting and other fees in connection with the sales.

During the year ended December 31, 2020, we issued 2,270,161 shares of our common stock in a series of sales at an average price of $22.53 per share in accordance with the 2019 Sale Agreement, for aggregate net proceeds of $49.5 million after payment of cash commissions to Jefferies and approximately $0.2 million related to legal, accounting and other fees in connection with the sales.

During the first quarter of 2022, we issued 579,788 shares of our common stock in a series of sales at an average price of $69.43 per share in accordance with the 2019 Sale Agreement, for aggregate net proceeds of $38.9 million after payment of cash commissions to Jefferies and approximately $0.2 million related to legal, accounting and other fees in connection with the sales.

The 2019 Sale Agreement expired in the third quarter of 2022.

In March 2022, we entered into an Open Market Sale Agreement (the “2022 Sale Agreement”) with Jefferies, under which Jefferies is able to offer and sell, from time to time in “at-the-market”

offerings, shares of our common stock having aggregate gross proceeds of up to $400.0 million.

We agreed to pay to Jefferies cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2022 Sale Agreement.

During the year ended December 31, 2022, we issued 3,395,339 shares of our common stock in a series of sales at an average price of $57.43 per share in accordance with the 2022 Sale Agreement, for aggregate net proceeds of $189.0 million after payment of cash commissions to Jefferies and approximately $0.1 million related to legal, accounting and other fees in connection with the sales.

As of December 31, 2022, $205.0 million in shares of common stock remain eligible for sale under the 2022 Sale Agreement.

Shares Issued in Private Placement to Regeneron

As described in Note 9 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, in May 2020 we entered into the 2020 Regeneron Amendment.

Simultaneously with the 2020 Regeneron Amendment, we and Regeneron entered into the 2020 Stock Purchase Agreement , under which we sold to Regeneron 925,218 shares of our common stock, par value $0.0001 per share, for aggregate cash consideration of $30.0 million, or $32.42 per share, representing a 100% premium over the volume-weighted average trading price of our common stock during the 30-day period prior to the closing.

Under the 2020 Stock Purchase Agreement, Regeneron will not dispose of any shares of common stock it beneficially owns in Intellia until the termination of the Technology Collaboration Term (see Note 9).

After applying equity accounting guidance to measure the issuance of the shares, $12.6 million was recorded as fair value in the consolidated statement of stockholders’

equity for the shares.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, research and development contracted services, clinical trial costs, compensation and related expenses, laboratory and office facilities, research supplies, legal and regulatory expenses, patent prosecution filing and maintenance costs for our licensed IP, milestone and royalty payments and general overhead costs.

During 2022, we expect our expenses to increase compared to prior periods in connection with our ongoing activities as we continue to grow our research and development team and clinical development in NTLA-2001, NTLA-2002 and NTLA-5001 and advance additional programs into clinical development.

Our primary uses of capital are, and we expect will continue to be, research and development research materials and contracted services, clinical trial costs, compensation and related expenses, laboratory and office facilities, research supplies, legal and regulatory expenses, patent prosecution filing and maintenance costs for our licensed IP, milestone and royalty payments and general overhead costs.

During 2023, we expect our expenses to increase compared to prior periods in connection with our ongoing activities as we continue to grow our research and development team, develop our clinical programs and advance additional programs into clinical development.

Because our lead programs are still in the early clinical stage and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of any future product candidates or whether, or when, we may achieve profitability.

Until such time as we can generate substantial product revenues, if ever, we expect to finance our ongoing cash needs through equity financings and collaboration arrangements.

We receive cost reimbursements from Regeneron for the transthyretin (“ATTR”) amyloidosis and hemophilia programs.

Additionally, we are eligible to earn milestone payments and royalties, in each case, on a per-product basis under our collaborations with Novartis and SparingVision, on a per-target basis under our collaboration with Regeneron, and upon achievement of certain events with Kyverna, subject to the provisions of our agreements with each of them.

We receive cost reimbursements from Regeneron for the ATTR and hemophilia programs.

Additionally, we are eligible to earn milestone payments and royalties, in each case, on a per-product basis under our collaborations with Novartis, SparingVision and ONK, on a per-target basis under our collaboration with Regeneron, and upon achievement of certain events with Kyverna, subject to the provisions of our agreements with each of them.

Except for these sources of funding, we will not have any committed external source of liquidity.

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If we are unable to raise additional funds through equity financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Based on our research and development plans and our expectations related to the progress of our programs, we expect that our cash, cash equivalents and marketable securities as of December 31, 2021, as well as research and cost reimbursement funding from Regeneron, AvenCell and SparingVision, will enable us to fund our ongoing operating expenses and capital expenditure requirements beyond the next 24 months, excluding any potential milestone payments or extension fees that could be earned and distributed under our collaboration agreements or any strategic use of capital not currently in the base case planning assumptions.

Based on our research and development plans and our expectations related to the progress of our programs, we expect that our cash, cash equivalents and marketable securities as of December 31, 2022, as well as research and cost reimbursement funding from our collaboration agreements will enable us to fund our ongoing operating expenses and capital expenditure requirements beyond the next 24 months, excluding any potential milestone payments or extension fees that could be earned and distributed under our collaboration agreements or any strategic use of capital not currently in the base case planning assumptions.

We have based this estimate on current assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.

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completing research and preclinical and clinical development of selected product candidates;

obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical

obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical trials;

developing a sustainable and scalable manufacturing process for product candidates;

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Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net cash used in operating activities

Net cash used in operating activities of $333.3 million during the year ended December 31, 2022 primarily reflects the increased spend in our research and development activities, offset by the receipt of $10.7 million in payments from our collaboration partners during that period.

Net cash used in operating activities of $225.0 million during the year ended December 31, 2021 primarily reflects increased spend in our research and development activities offset by the receipt of $6.7 million in payments from our collaboration partners during that period.

Net cash used in operating activities of $49.9 million during the year ended December 31, 2020 primarily reflects increased spend in our research and development activities, offset in part by the receipt of a $70.0 million up-front payment and $12.2 million in additional payments under our collaboration with Regeneron and $6.0 million in payments from Novartis.

Net cash used in investing activities

Net cash provided by (used in) investing activities

During the year ended December 31, 2022, our investing activities provided net cash of $160.3 million primarily due to $647.6 million in marketable securities maturing, offset in part by $429.0 million of marketable securities purchased, $44.8 million in net cash for the acquisition of Rewrite, and $13.6 million in cash for the purchase of property and equipment.

During the year ended December 31, 2021, our investing activities used net cash of $550.8 million.

The increase in the year ended December 31, 2021 is primarily due to marketable securities activity during the period, as $1,020.6 million in marketable securities were purchased and $485.6 million in marketable securities matured, as well as the use of $12.8 million in cash for the purchase of property and equipment and $3.0 million for an investment in Kyverna.

During the year ended December 31, 2020, our investing activities used net cash of $214.5 million.

The decrease in the year ended December 31, 2020 is primarily related to a decrease of $210.9 million from marketable securities activity during the period, as $473.7 million in marketable securities were purchased and $262.8 million in marketable securities matured, as well as the use of $3.6 million in cash for the purchase of property and equipment.

Net cash provided by financing activities

Net cash provided by financing activities of $583.0 million during the year ended December 31, 2022 is primarily due to the receipt of $337.9 million in net proceeds from a follow-on offering of our common stock, $227.9 million in net proceeds from at-the-market offerings, $14.5 million in cash received from the exercise of stock options and $2.6 million in cash received from the issuance of shares through our employee stock purchase plan.

Net cash provided by financing activities of $371.8 million during the year ended December 31, 2020 includes $296.6 million in proceeds from follow-on offerings, $49.5 million in net proceeds from at-the-market offerings, $12.6 million in proceeds from the issuance of common stock to Regeneron in a private placement, $11.6 million in cash received from the exercise of stock options and $1.6 million in cash received from the issuance of shares through our employee stock purchase plan.

Net cash provided by financing activities of $736.7 million during the year ended December 31, 2021 is primarily due to the receipt of $648.3 million in net proceeds from a follow-on offering of our common stock, $45.3 million in net proceeds from at-the-market offerings, $41.1 million in cash received from the exercise of stock options and $2.0 million in cash received from the issuance of shares through our employee stock purchase plan.

Contractual and Other Obligations

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Not Yet Commenced

In January 2022, we entered into a lease agreement for office and laboratory space at 730 Main Street in Cambridge, Massachusetts, which is described in further detail in Note 17 of the consolidated financial statements included in this Annual Report on Form 10-K.

In connection therewith, we have committed to making at least $56.1 million in rental payments over a lease term of 120 months.

In February 2022, we entered into a lease agreement for good manufacturing practice (“GMP”) manufacturing space at 840 Winter Street in Waltham, Massachusetts, which is described in further detail in Note 17 of the consolidated financial statements included in this Annual Report on Form 10-K.

In February 2022, we entered into a lease agreement for office, general laboratory and good manufacturing practice (“GMP”) manufacturing space at 840 Winter Street in Waltham, Massachusetts, which is described in further detail in Note 12 of the consolidated financial statements included in this Annual Report on Form 10-K.

In connection therewith, we have committed to making at least $146.0 million in rental payments over a lease term of 144 months estimated to begin in 2024.

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As of December 31, 2022, we have $8.0 million of commitments that are legally enforceable and due within one year.

We do not include any potential future pass-through milestone payments or royalty payments we may be required to make under our existing license agreements or the merger agreement related to our acquisition of Rewrite Therapeutics, Inc.

(“Rewrite”) due to the uncertainty of the occurrence of the events requiring payment under those agreements.

These payments are not reflected in the disclosures above.

In January 2023, a research milestone related to Rewrite was achieved and settled (see Note 11).

Critical Accounting Policies and Use of Estimates

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For contracts that are determined to be within the scope of ASC 606, revenue is recognized when a customer obtains control of promised goods or services.

The amount of revenue recognized reflects the consideration to which we expect to be entitled to

receive in exchange for these goods and services.

The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods and services.

To achieve this core principle, we apply the following five steps:

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For arrangements within the scope of ASC 808, the terms of these arrangements typically include payments received or made under the cost sharing provisions which are recognized as a component of collaboration revenues in the consolidated statements of operations and comprehensive loss.

In determining the accounting for each contract, the significant areas of management judgement or estimation include determining the transaction price, identifying the distinct performance obligations within a contract, determining the standalone selling prices for distinct performance obligations when more than one distinct performance obligation is identified within a contract and determining the revenue recognition pattern for each performance obligation that best reflects the timing of when we transfer control of goods and services to the customer.

In determining the accounting for each contract, the significant areas of management judgment or estimation include determining the transaction price, identifying the distinct performance obligations within a contract, determining the standalone selling prices for distinct performance obligations when more than one distinct performance obligation is

identified within a contract and determining the revenue recognition pattern for each performance obligation that best reflects the timing of when we transfer control of goods and services to the customer.

If the consideration received in exchange for entering into a contract is in the form of noncash consideration, we are required to estimate the fair value of the noncash consideration received.

If our estimates of the noncash consideration received are not appropriate it could impact the total amount of revenue recognized for the contract.

Furthermore, many of our performance obligations, whether distinct or combined, do not have readily available standalone selling prices and therefore we are required to make judgements and estimates regarding the standalone selling prices when relevant.

Furthermore, many of our performance obligations, whether distinct or combined, do not have readily available standalone selling prices and therefore we are required to make judgments and estimates regarding the standalone selling prices when relevant.

To the extent the estimates are not appropriate in the circumstances, it could impact the timing of our revenue recognition.

We evaluate the measure of progress each reporting period and if estimates related to the measure of progress change, related revenue recognition is adjusted accordingly.

Investment Valuation

As discussed in Notes 9 and 10 to our consolidated financial statements of this Annual Report on Form 10-K, during the year ended December 31, 2021, we entered into agreements with AvenCell, SparingVision and Kyverna, which resulted in us applying judgment in determining the accounting for the agreements, and in particular, measuring the fair value of the non-cash consideration we received in exchange for our licenses granted and related research and development services, which includes equity in private companies in which the fair value is not readily available.

The fair value of these investments represents the transaction price of the arrangement and will drive the amount of revenue we recognize in future periods.

We engaged an independent valuation specialist to determine the fair value of the equity interest received related to the AvenCell and SparingVision investments;

see Note 10 to our consolidated financial statements for specifics related to the valuation model and inputs utilized.

One of the key inputs in the AvenCell model is the anticipated holding period to an exit and liquidity event.

An increase in this input by 1 year would increase the value of the AvenCell investment by $5.7 million.

A decrease in this input by 1 year would decrease the value of the AvenCell investment by $6.3 million.

In the SparingVision model, the key input is the internal rate of return.

A 10% increase in this input would increase the value of the SparingVision investment by $0.8 million.

A 10% decrease in this assumption would decrease the value of the SparingVision investment by $0.9 million.

Accrued Research and Development Expenses

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There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense.

Contingent Consideration Liability

As discussed in Notes 2, 4 and 11 to our consolidated financial statements of this Annual Report on Form 10-K, during the year ended December 31, 2022, we entered into the Rewrite Merger Agreement.

Under the Rewrite Merger Agreement, the Rewrite Holders are eligible to receive a $25.0 million research milestone payment, payable in a combination of cash and our common stock.

We account for contingent consideration identified in an asset acquisition that is settled in shares of common stock under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), which results in us applying judgment in estimating the fair value of the liability at the end of each reporting period.

We engaged an independent valuation specialist to determine the fair value of the contingent consideration liability (see Note 4 to our consolidated financial statements for specifics related to the valuation model and inputs utilized).

The estimated probability of achievement is a highly sensitive input into the model.

A 10% decrease in the probability of achievement, keeping all other variables the same, yields a 10% decrease in the earnout liability.

Equity-Based Compensation

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The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates.

As of December 31, 2021, we had cash equivalents, restricted cash equivalents and marketable securities of $1,087.3 million consisting of interest-bearing money market accounts, commercial paper, corporate and financial institution debt securities, U.S.

Treasury securities and asset-backed securities.

As of December 31, 2022, we had cash equivalents, restricted cash equivalents and marketable securities of $1,273.0 million consisting of interest-bearing money market accounts, reverse repurchase agreements, corporate and financial institution debt securities, U.S.

Treasury and other government securities and asset-backed securities.

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S.

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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-K

Item 5. Market for Registrant’s Common Equity