What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-22 · 72 added, 95 removed, 145 unchanged (54% of the section changed)

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Intellia Therapeutics, Inc.

(“we,” “us,” “our,” “Intellia,” or the “Company”) is a leading clinical-stage gene 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”).

(“we,” “us,” “our,” “Intellia,” or the “Company”) is a leading clinical-stage gene editing company focused on revolutionizing medicine with CRISPR-based therapies.

CRISPR is a gene editing technology which is also sometimes referred to as CRISPR/Cas or CRISPR/Cas9 when referring to the use of CRISPR technology with the Cas9 enzyme.

Since its inception, Intellia has focused on leveraging gene editing technology to develop novel, first-in-class medicines that address important unmet medical needs and advance the treatment paradigm for patients.

Intellia’s deep scientific, technical and clinical development experience, along with its people, are helping set the standard for a new class of medicine.

To harness the full potential of gene editing, Intellia continues to expand the capabilities of its CRISPR-based platform with novel editing and delivery technologies.

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

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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 materials shipped, research funding and milestone payments earned under our collaboration and license agreements.

Research and Development

Research and development costs consist of expenses incurred in performing research and development activities, such as compensation and benefits, which includes stock-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 expenses consist of expenses incurred in performing research and development activities, such as compensation and benefits, which includes stock-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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Other Income (Expense), Net

Other income (expense) 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.

During the year ended December 31, 2024, other income (expense), net consists of interest income earned on our cash, cash equivalents, restricted cash equivalents and marketable securities and change in the fair value of our investments.

During the year ended December 31, 2023, other income (expense), net consisted of interest income earned on our cash, cash equivalents, restricted cash equivalents and marketable securities, loss from our equity method investment and change in fair value of contingent consideration.

Results of Operations

The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the related footnotes thereto.

Comparison of Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):

Comparison of Year Ended December 31, 2024 and 2023

The following table summarizes our results of operations:

Year Ended December 31,

Period Change

(In thousands)

Collaboration revenue

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Interest income

Change in fair value of investments, net

Loss from equity method investment

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Collaboration Revenue

Collaboration revenue decreased by $15.8 million to $36.3 million during the year ended December 31, 2023, as compared to $52.1 million during the year ended December 31, 2022.

This decrease was primarily driven by a $10.3 million cumulative adjustment related to a contract modification resulting from Regeneron exercising a one-time option to extend the term of our technology collaboration for an additional two years.

Collaboration revenue increased by $21.6 million to $57.9 million during the year ended December 31, 2024, as compared to $36.3 million during the year ended December 31, 2023.

The increase in collaboration revenue during the year ended December 31, 2024 is primarily due to the recognition of $21.0 million of previously eliminated intra-entity profit under our license and collaboration agreement with AvenCell Therapeutics, Inc.

(the “AvenCell LCA”) and a $12.8 million increase in revenue related to Regeneron Pharmaceuticals, Inc.

(“Regeneron”), offset by a $12.3 million decrease in revenue related to the AvenCell LCA.

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 and development expenses increased by $31.2 million to $466.3 million during the year ended December 31, 2024, as compared to $435.1 million during the year ended December 31, 2023.

The following table summarizes our research and development expenses for the years ended December 31, 2023 and 2022, together with the changes in those items in dollars (in thousands) and the respective percentages of change.

The following table summarizes our research and development expenses, together with the changes in those items in dollars and the respective percentages of change:

Year Ended December 31,

Period Change

(In thousands)

External development expenses by program:

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Research materials and contracted services

In-process research and development

Research milestone

Rewrite research milestone

Facility-related expenses

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The increase in research and development expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily attributable to:

• a $16.6 million increase in external costs related to the development of NTLA-2001, our lead product candidate, primarily due to an increase in spend on drug components and contracted services;

• a $12.9 million increase in external costs related to the development of NTLA-2002, primarily due to an increase in spend on drug components, contracted services and consulting services;

• a $5.8 million increase in external costs related to NTLA-3001, primarily related to an increase in spend on drug components and consulting and professional services, offset in part by a decrease in spend on contracted services;

• a $17.8 million decrease in external costs related to the development of NTLA-5001, as we discontinued this program as part of our pivot to an allogeneic pipeline;

• a $23.7 million increase in employee-related expenses, primarily driven by the increase in personnel growth to support our lead programs;

• a $14.1 million decrease in research materials and contracted services primarily driven by a decrease in drug component expenses and contracted services related to early stage programs;

• a $56.0 million decrease in in-process research and development expense related to the acquisition of Rewrite Therapeutics, Inc.

in the first half of 2022;

• a $15.5 million increase in facility-related expenses primarily related to rent, depreciation, maintenance and services, and technology expense allocated to research and development;

• a $25.9 million increase in stock-based compensation driven by increases in employee headcount in 2023 compared to 2022.

During 2024, we expect research and development expenses to increase as we advance our global pivotal trials for NTLA-2001 and NTLA-2002, progress our NTLA-3001 program and nominate new development candidates.

• a $15.3 million increase in external costs related to the development of nexiguran ziclumeran (“nex-z”, also referred to as NTLA-2001), one of our lead product candidates, primarily due to an increase in spend on contracted services and consulting fees, offset in part by a decrease in drug components;

• a $17.6 million increase in external costs related to the development of NTLA-2002, primarily due to an increase in spend on drug components, contracted services and consulting fees;

• an $8.6 million decrease in external costs related to NTLA-3001, primarily related to initial manufacturing activities in 2023, offset in part by an increase in spend on contracted services;

• a $9.2 million decrease in employee-related expenses, primarily driven by a workforce reduction in January 2024;

• a $6.3 million increase in facility-related expenses primarily related to depreciation, facility maintenance costs, technology expense allocated to research and development, and rent;

• a $12.0 million increase in stock-based compensation.

General and Administrative

General and administrative expenses increased by $9.3 million to $125.8 million during the year ended December 31, 2024, compared to $116.5 million during the year ended December 31, 2023.

This increase was primarily related to an increase in employee-related expenses, including stock-based compensation of $16.7 million.

This increase was primarily related to an increase in stock-based compensation of $8.2 million.

Other Income (Expense), Net

The increase in other income (expense), net of $50.1 million is primarily related to a $41.3 million increase in interest income, driven by an increase in market rates, and a $13.4 million decrease in other expense related to the change in fair value of contingent consideration, offset in part by a $4.6 million increase in the loss from our equity method investment.

The decrease in other income (expense), net of $18.9 million is primarily related to $32.6 million in expense due to the change in fair value of our investments in Kyverna Therapeutics, Inc.

(“Kyverna”) and AvenCell and a $2.0 million decrease in interest income, offset in part by a $15.6 million change related to our equity method loss recorded in the year ended December 31, 2023.

Liquidity and Capital Resources

Since our inception through December 31, 2023, we have raised an aggregate of $2,534.1 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.

Since our inception through December 31, 2024, we have funded our operations through our initial public offering and concurrent private placements, follow-on public offerings, our collaboration agreements, at-the-market offerings and the sale of convertible preferred stock.

As of December 31, 2024, we had $861.7 million in cash, cash equivalents and marketable securities.

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2022 Sale Agreement

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 cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2019 Sale Agreement.

Under the 2019 Sale Agreement, we issued 3,778,889 shares of our common stock.

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 and legal, accounting and other fees in connection with the sales.

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

2022 Sale Agreement

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 cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2022 Sale Agreement.

Through December 31, 2023 we have issued 7,518,163 shares of our common stock under the 2022 Sale Agreement.

During the year ended December 31, 2023, we issued 4,122,824 shares of our common stock, in a series of sales, at an average price of $30.57 per share, in accordance with the 2022 Sale Agreement for aggregate net proceeds of $121.9 million, after payment of cash commissions and legal, accounting and other fees in connection with the sales.

As of December 31, 2023, $2.1 million of these proceeds are included in “Prepaid expenses and other current assets” on our consolidated balance sheet, representing offerings with trade dates in December 2023 that were settled in January 2024.

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 and legal, accounting and other fees in connection with the sales.

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 legal, accounting and other fees in connection with the sales.

In 2022, we entered into an Open Market Sale Agreement (the “2022 Sale Agreement”) with Jefferies LLC (“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.

In February 2024, we entered into an amendment to the 2022 Sale Agreement (the “2022 Sale Agreement, as amended”) to increase the size of the at-the-market offering program from $400.0 million to $750.0 million.

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

To date through December 31, 2024 we have issued 14,522,533 shares of our common stock under the 2022 Sale Agreement, as amended.

During the year ended December 31, 2024, we issued 7,004,370 shares of our common stock, in a series of sales, at an average price of $25.68 per share, in accordance with the 2022 Sale Agreement, as amended, for aggregate net proceeds of $174.8 million, after payment of cash commissions and approximately $0.3 million related to legal, accounting and other fees in connection with the sales.

As of December 31, 2024, $249.1 million in shares of common stock remain eligible for sale under the 2022 Sale Agreement, as amended.

Funding Requirements

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 2024, we expect our expenses to increase compared to prior periods in connection with our ongoing activities as we continue to develop our clinical programs and advance additional programs into clinical development.

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 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 Therapeutics, Inc.

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.

During 2025, we expect our expenses to decrease compared to prior periods as a result of our recently announced strategic reorganization in January 2025, as we focus resources on high value programs within our pipeline, such as NTLA-2002 and nex-z, to ensure efficient execution, achieve near-term clinical milestones, and prepare for commercial launch.

Because our lead programs are in the 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.

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We receive cost reimbursements from Regeneron related to our collaboration agreements with them.

Additionally, we are eligible to earn milestone payments and royalties, in each case, on a per-product basis under our collaborations with 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.

Additionally, we are eligible to earn milestone payments and royalties, in each case, on a per-product basis under our collaborations with SparingVision SAS (“SparingVision”), ONK Therapeutics, Ltd.

(“ONK”) and ReCode Therapeutics, Inc.

(“ReCode”), 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, 2023, 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 into mid-2026, 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, 2024, 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 into the first half of 2027, 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.

In January 2024, following an internal strategic review, we announced an effort to streamline company-wide operations to further focus resources on key strategic priorities and programs.

These changes resulted in a pause of select exploratory research-stage programs and a workforce reduction of approximately 15%.

Our ability to generate revenue and achieve profitability depends significantly on our success in many areas, including:

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negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;

maintaining good relationships with our collaborators and licensors;

maintaining good relationships with our

collaborators and licensors;

maintaining, protecting, and expanding our portfolio of IP rights, including patents, trade secrets, and know-how;

and attracting, hiring, and retaining qualified personnel.

The following is a summary of cash flows for the years ended December 31, 2023 and 2022:

The following is a summary of cash flows:

Year Ended December 31,

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Net cash used in operating activities

Net cash (used in) provided by 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 $348.9 million during the year ended December 31, 2024 primarily consists of a net loss of $519.0 million, further reduced by the non-cash recognition of $21.0 million of previously eliminated intra-entity profit recorded within “collaboration revenue” and accretion of investment discounts and premiums of $17.8 million.

These decreases are offset in part by stock-based compensation of $154.3 million, $32.6 million in net adjustments to the fair value of our investments in Kyverna and AvenCell, net changes in operating assets and liabilities of $11.9 million and depreciation of $10.3 million.

Net cash used in operating activities of $394.1 million during the year ended December 31, 2023 primarily consists of a net loss of $481.2 million, further reduced by changes in operating assets and liabilities of $52.5 million, including the receipt of $18.7 million in payments from our collaboration partners during that period and offset in part by non-cash charges of stock-based compensation of $134.1 million, loss on equity method investment of $22.3 million and depreciation of $9.0 million.

Net cash used in operating activities of $333.3 million during the year ended December 31, 2022 primarily consists of a net loss of $474.2 million, further reduced by changes in operating assets and liabilities of $53.9 million, including the receipt of $10.7 million in payments from our collaboration partners during that period and offset in part by non-cash charges of stock-based compensation of $91.4 million, in-process research and development expense of $56.0 million, losses on equity method investment of $22.5 million and depreciation of $7.6 million.

Net cash (used in) provided by investing activities

During the year ended December 31, 2023, our investing activities used cash of $31.3 million primarily due to $904.5 million of marketable securities purchased and $14.0 million in cash for the purchase of property and equipment, offset in part by $887.1 million in marketable securities maturing.

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.

Net cash provided by (used in) investing activities

During the year ended December 31, 2024, we added $125.6 million of net cash through investing activities.

The increase in the year ended December 31, 2024 is primarily due to $131.3 million in marketable securities that matured (net of purchases), offset in part by $5.8 million in cash used for the purchase of property and equipment.

During the year ended December 31, 2023 we used cash of $31.3 million in investing activities.

The decrease in the year ended December 31, 2023 is primarily due to $17.4 million in marketable securities purchased (net of maturities) and $14.0 million in cash used for the purchase of property and equipment.

Net cash provided by financing activities

Net cash provided by financing activities of $130.3 million during the year ended December 31, 2023 is primarily due to the receipt of $119.8 million in net proceeds from at-the-market offerings, $6.6 million in cash received from the exercise of stock options and $3.9 million in cash received from the issuance of shares through our employee stock purchase plan.

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.

Contractual and Other Obligations

Net cash provided by financing activities of $185.7 million during the year ended December 31, 2024 includes $176.9 million in net proceeds from at-the-market offerings, $5.9 million in cash received from the exercise of stock options and $3.0 million in cash received from the issuance of shares through our employee stock purchase plan.

Net cash provided by financing activities of $130.3 million during the year ended December 31, 2023 includes $119.8 million in net proceeds from at-the-market offerings, $6.6 million in cash received from the exercise of stock options and $3.9 million in cash received from the issuance of shares through our employee stock purchase plan.

Contractual Obligations

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods.

Property Leases - Commenced

As of December 31, 2023, our contractual commitments for leases were $146.5 million, which will be paid over the term of such leases.

Property Leases

As of December 31, 2024, our total undiscounted future minimum lease payments for our property leases that have commenced were $294.8 million, which will be paid over the term of such leases.

For additional information on our leases and timing of future payments refer to Note 11 of the consolidated financial statements included in this Annual Report on Form 10-K.

Property Leases – Not Yet Commenced

In February 2022, we entered into a lease agreement for office, general laboratory and planned 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 the second half of 2024.

Other Obligations

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These contracts are generally cancelable at any time by us upon prior written notice.

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 due to the uncertainty of the occurrence of the events requiring payment under those agreements.

(“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 of the consolidated financial statements included in this Annual Report on Form 10-K ).

In January 2023, a research milestone related to Rewrite was achieved and settled.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S.

Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S.

The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheets and the reported amounts of collaboration revenue and expenses during the reporting periods.

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Revenue Recognition

We recognize revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and its related amendments (collectively known as Accounting Standard Codification (“ASC”) 606 (“ASC 606”).

We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and its related amendments (collectively known as Accounting Standard Codification (“ASC”) 606 (“ASC 606”).

At inception, we determine whether contracts are within the scope of ASC 606 or other topics.

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(ii) identify the performance obligations in the contract;

(iii) determine the

transaction price;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

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Examples of estimated accrued research and development expenses include fees paid to vendors in connection with clinical research organizations (“CROs”) in connection with clinical studies, vendors in connection with preclinical development activities and vendors related to development, manufacturing and distribution of clinical trial materials.

We base our expenses related to preclinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical studies on our behalf.

We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical studies on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

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Stock-Based Compensation

We measure employee stock-based compensation based on the grant date fair value of the equity awards using the Black-Scholes option pricing model.

Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the awards and is adjusted for pre-vesting forfeitures in the period in which the forfeitures occur.

Our share-based compensation programs grant awards that have included stock options and restricted stock units.

Grants are awarded to employees and non-employees, including directors.

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period.

We measure employee stock-based compensation for stock options based on the grant date fair value of the equity awards using the Black-Scholes option pricing model.

For awards with service conditions only, we recognize stock-based compensation expense on a straight-line basis over the requisite service period.

For equity awards that have a performance or market condition, we recognize stock-based compensation expense using the accelerated attribution method.

Estimates of stock-based compensation expense for an award with a performance condition are based on our assessment of the probability that the performance condition will be achieved.

Estimates of stock-based compensation expense for an award with a performance condition are based on our assessment of the probability that the performance condition will be achieved, which requires significant judgment.

Our stock price is a key input that will drive the grant date fair value of the equity awards.

Significant judgments made with respect to stock-based compensation relate to certain assumptions made when selecting model inputs used in the Black-Scholes option pricing model, in particular the volatility and expected life assumptions.

Volatility assumptions are calculated based on historical volatility of the Company’s stock.

We estimate the expected term of options using the simplified method.

In addition, an expected dividend yield of zero is used in the option valuation model because we do not pay cash dividends and do not expect to pay any cash dividends in the foreseeable future.

The fair value of market-based restricted stock units is determined using a Monte Carlo simulation model, which uses multiple input variables to determine the probability of satisfying the market condition requirements.

Stock-based compensation expense for an award with performance conditions also include significant judgment with respect to the probability that the performance condition will be achieved, as the amount of expense recorded is based on the probable outcome of the performance conditions.

Forfeitures are recorded as they occur.

The fair value of market-based restricted stock units and performance-based restricted stock units with a Total Shareholder Return (“TSR”) multiplier are determined using a Monte Carlo simulation model, which uses multiple input variables to determine the probability of satisfying the market condition requirements.

We classify stock-based compensation expense in our consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified.

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Refer to Note 2 to our consolidated financial statements included in Part IV, Item 15, “Notes to Consolidated Financial Statements,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business.

Quantitative and Qualitati ve Disclosures about Market Risk

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, 2023, we had cash equivalents, restricted cash equivalents and marketable securities of $921.6 million consisting of interest-bearing money market accounts, 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.

interest rates, particularly because our investments are primarily in marketable securities.

Due to the short-term duration of our investment portfolios and the low risk profile of our investments, we do not believe an immediate change of 100 basis points, or one percentage point, would have a material effect on the fair market value of our investment portfolio.

Declines in interest rates, however, would reduce future investment income.

We do not have any foreign currency or derivative financial instruments.

Inflation generally affects us by increasing our cost of labor, preclinical and clinical trial costs.

We do not believe that inflation had a material effect on our results of operations during the year ended December 31, 2023.

Financial Statement s and Supplementary Data

The information required by this item is presented at the end of this report beginning on page F-1.

Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure

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 7. Management’s Discussion and Analysis