What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-16 · 392 added, 414 removed, 461 unchanged (64% of the section changed)

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We have audited the accompanying balance sheets of Pliant Therapeutics, Inc.

(the "Company") as of December 31, 2020 and 2019 and the related statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

(the "Company") as of December 31, 2021 and 2020, the related statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases effective January 1, 2021 due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) Topic 842, Leases (“ASC 842”), using the modified retrospective approach.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte and Touche LLP

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Liabilities and Prepaid Expenses and Other Current Assets – Accrued and Prepaid Research and Development Expenses — Refer to Notes 2, 5 and 6 to the financial statements

Critical Audit Matter Description

The Company records accrued expenses for costs of research and development activities which include the conduct of clinical studies and preclinical studies by third-party service providers, based upon the estimated amount of services provided but not yet invoiced.

Any payments made in advance of services provided are recorded as prepaid assets, which are expensed as the contracted services are performed.

The Company estimates the amount of work completed through review of detailed budgets and timelines included in its contracts and agreements, and updates these estimates with

information obtained from third-party service providers and internal personnel on a quarterly basis.

As of December 31, 2021, accrued research and development expenses were $5.9 million and prepaid research and development expenses were $2.8 million.

Given the significant judgments made by management in estimating the progress or stage of completion of the services, auditing the Company’s accrued and prepaid research and development expenses was especially challenging.

Specifically, because the amount of accrued and prepaid research and development expenses is dependent on management’s receipt of timely and accurate reporting from third-party service providers, management’s estimates of work completed as of the balance sheet date, and management’s estimates of the period over which this work will be performed, auditing accrued and prepaid research and development expenses required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s accrued and prepaid research and development expenses included the following, among others:

• We tested the design and operating effectiveness of internal controls related to the estimation of accrued and prepaid research and development expenses.

• For a sample of agreements and contracts, we read the related statement of work, purchase order, and inspected information the Company received from its third-party service providers.

We tested the accuracy and completeness of the underlying information used in the estimates and evaluated the significant assumptions that are used by management to estimate the recorded amounts by performing the following procedures:

◦ Performed corroborating inquiries with the Company’s research and development personnel that oversee the preclinical and clinical studies to obtain information regarding the nature and extent of progress of preclinical and clinical studies.

◦ Obtained external written confirmations from the Company’s third-party service providers regarding the accuracy and completeness of contracted amounts and percentage of completion.

◦ Evaluated management’s judgments using the evidence obtained.

• For a sample of agreements and contracts, we obtained the corresponding invoices and evidence of payment to test the Company’s disbursements made to third-party service providers as of December 31, 2021.

• We compared invoices received by the Company subsequent to December 31, 2021 to the accrued research and development expenses recognized by the Company as of that date.

/s/ Deloitte & Touche LLP (PCAOB ID No.

San Francisco, California

March 16, 2021

February 28, 2022

We have served as the Company's auditor since 2018.

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(In thousands, except number of shares and per share amounts)

2021 December 31,

Current assets

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Tax credit receivable 83 83

Prepaid expenses and other current assets

Prepaid expenses and other current assets (Note 5) 6,764 4,498

Total current assets 209,441 290,754

Property and equipment, net 4,606 4,321

Operating lease right-of-use assets 6,330 —

Other non-current assets 838 451

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Total assets $ 221,215 $ 295,526

Liabilities and stockholders’ equity

Current liabilities

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Accrued liabilities (Note 6) 11,991 9,576

Lease liabilities, current 1,869 —

Total current liabilities 16,831 11,599

Lease liabilities, non-current 5,325 —

Other long-term liabilities (Note 6) — 866

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Commitments and contingencies (Note 14)

Series A redeemable convertible preferred stock, $0.0001 par value;

56,000,000 shares authorized at December 31, 2020 and 2019, respectively;

0 and 56,000,000 shares issued and outstanding at December 31, 2020 and 2019,

respectively;

aggregate liquidation preference of $0 and $62,468 at December 31,

2020 and 2019, respectively;

Series B redeemable convertible preferred stock, $0.0001 par value;

49,501,221 shares authorized at December 31, 2020 and 2019, respectively;

0 shares and 49,501,221 shares issued and outstanding at December 31, 2020

and 2019, respectively;

aggregate liquidation preference of $0 and $75,860 at

December 31, 2020 and 2019, respectively;

Series C redeemable convertible preferred stock, $0.0001 par value;

44,000,000 shares authorized at December 31, 2020 and 2019, respectively;

0 shares and 26,360,745 shares issued and outstanding at December 31, 2020 and

2019, respectively;

aggregate liquidation preference of $0 and $47,947 at

December 31, 2020 and 2019, respectively;

Stockholders’ equity (deficit)

Preferred stock, $0.0001 par value;

10,000,000 shares and 0 shares authorized at

December 31, 2020 and 2019, respectively;

0 shares issued and outstanding at

December 31, 2020 and 2019;

Common stock, $ 0.0001 par value;

300,000,000 and 181,000,000 shares authorized

at December 31, 2020 and 2019;

and 35,552,795 and 1,846,024 shares issued and

outstanding at December 31, 2020 and 2019, respectively;

300,000,000 shares authorized at December 31, 2021 and 2020;

and 36,083,301 and 35,552,795 shares issued and outstanding at December 31, 2021 and 2020, respectively;

Additional paid-in capital 414,348 400,918

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Accumulated other comprehensive loss ( 201 ) ( 32 )

Total stockholders’ equity (deficit)

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

Total stockholders’ equity 199,059 283,061

Total liabilities and stockholders’ equity $ 221,215 $ 295,526

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

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Year Ended December 31,

Revenue — related party

2021 2020 2019

Revenue $ 7,572 $ 41,817 $ 57,052

Operating expenses:

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Loss from operations ( 97,535 ) ( 41,645 ) ( 1,231 )

Interest income

Other expense, net

Interest and other income (expense), net 272 112 600

Net loss $ ( 97,263 ) $ ( 41,533 ) $ ( 631 )

Accretion to redemption value and dividends on redeemable convertible

preferred stock

— — ( 6,225 )

Net loss attributable to common stockholders $ ( 97,263 ) $ ( 41,533 ) $ ( 6,856 )

Net loss per share, attributable to common stockholders:

Shares used in computing net loss per share attributable to common stockholders:

Basic $ ( 2.71 ) $ ( 1.95 ) $ ( 4.22 )

Diluted $ ( 2.71 ) $ ( 1.95 ) $ ( 4.22 )

Shares used in computing net loss per share attributable to common

stockholders:

Basic 35,846,421 21,344,236 1,623,358

Diluted 35,846,421 21,344,236 1,623,358

Comprehensive loss:

Net loss $ ( 97,263 ) $ ( 41,533 ) $ ( 631 )

Other comprehensive loss:

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Comprehensive loss $ ( 97,432 ) $ ( 41,564 ) $ ( 632 )

__________________

Tax effect is nil for all periods presented.

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

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(In thousands, except number of shares and per share amounts)

Redeemable Convertible Preferred Stock

Redeemable Convertible Preferred Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total

Stockholders'

Series A Series B Series C Common Stock

Shares Amount Shares Amount Shares Amount Shares Amount

Balance at December 31, 2020 — $ — — $ — — $ — 35,552,795 $ 3 $ 400,918 $ ( 32 ) $ ( 117,828 ) $ 283,061

Vesting of restricted stock awards

— — — — — — 103,164 — 9 — — 9

Option exercises

— — — — — — 427,342 — 2,984 — — 2,984

Stock-based compensation expense

— — — — — — — — 10,437 — — 10,437

Net unrealized loss on short-term investments

— — — — — — — — — ( 169 ) — ( 169 )

— — — — — — — — — — ( 97,263 ) ( 97,263 )

Balance at December 31, 2021 — $ — — $ — — $ — 36,083,301 $ 3 $ 414,348 $ ( 201 ) $ ( 215,091 ) $ 199,059

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

Pliant Therapeutics, Inc.

Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except number of shares and per share amounts)

Redeemable Convertible Preferred Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total

Stockholders'

Series A Series B Series C Common Stock

Shares Amount Shares Amount Shares Amount Shares Amount

Balance at December 31, 2019 56,000,000 $ 62,468 49,501,221 $ 75,860 26,360,745 $ 47,947 1,846,024 $ 1 $ — $ ( 1 ) $ ( 76,295 ) $ ( 76,295 )

Issuance of Series C redeemable

preferred stock, net of issuance

Issuance of common stock upon

initial public offering, net of

issuance costs

Issuance of common stock upon

private placement

Issuance of Series C redeemable preferred stock, net of issuance costs

— — — — 28,527,313 52,019 — — — — — —

Issuance of common stock

upon initial public offering,

net of issuance costs — — — — — — 10,350,000 1 148,277 — — 148,278

Issuance of common stock

upon private placement — — — — — — 625,000 — 10,000 — — 10,000

Conversion of Series A, B, C

convertible preferred stock to

Vesting of restricted stock awards

convertible preferred stock

to common stock ( 56,000,000 ) ( 62,468 ) ( 49,501,221 ) ( 75,860 ) ( 54,888,058 ) ( 99,966 ) 22,432,029 1 238,293 — — 238,294

Vesting of founders’ common stock and restricted stock awards

— — — — — — 163,544 — 11 — — 11

Option exercises

— — — — — — 136,198 — 442 — — 442

Stock-based compensation expense

Net unrealized loss on

short-term investments

— — — — — — — — 3,895 — — 3,895

Net unrealized loss on short- term investments

— — — — — — — — — ( 31 ) — ( 31 )

Net loss — — — — — — — — — — ( 41,533 ) ( 41,533 )

Balance at December 31, 2020 — $ — — $ — — $ — 35,552,795 $ 3 $ 400,918 $ ( 32 ) $ ( 117,828 ) $ 283,061

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(In thousands, except number of shares and per share amounts)

Redeemable Convertible Preferred Stock

Total Stockholders'

Redeemable Convertible Preferred Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total

Stockholders'

Series A Series B Series C Common Stock

Shares Amount Shares Amount Shares Amount Shares Amount

Balance at December 31, 2018 56,000,000 $ 61,516 49,501,221 $ 70,587 — $ — 1,363,000 $ 1 $ — $ — $ ( 71,470 ) $ ( 71,469 )

Issuance of Series C redeemable

preferred stock, net of issuance

Vesting of founders’ common

stock and restricted stock awards

Issuance of Series C redeemable preferred stock, net of issuance costs — — — — 26,360,745 47,947 — — — — — —

Vesting of founders’ common stock and restricted stock awards — — — — — — 440,964 — 28 — — 28

Option exercises — — — — — — 42,060 — 174 — — 174

Accretion to redemption value

and cumulative dividends on

redeemable convertible

preferred stock

Accretion to redemption value and cumulative dividends on redeemable convertible stock — 952 — 5,273 — — — — ( 2,031 ) — ( 4,194 ) ( 6,225 )

Stock-based compensation expense — — — — — — — — 1,829 — — 1,829

Net unrealized loss on short-

term investments

Net unrealized loss on short-term investments — — — — — — — — — ( 1 ) — ( 1 )

Net loss — — — — — — — — — — ( 631 ) ( 631 )

Balance at December 31, 2019 56,000,000 $ 62,468 49,501,221 $ 75,860 26,360,745 $ 47,947 1,846,024 $ 1 $ — $ ( 1 ) $ ( 76,295 ) $ ( 76,295 )

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Year Ended December 31,

2021 2020 2019

Cash flows from operating activities:

Net loss $ ( 97,263 ) $ ( 41,533 ) $ ( 631 )

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

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Stock-based compensation expense 10,437 3,895 1,829

Noncash lease expense 1,669 — —

Other 1,262 266 —

Changes in operating assets and liabilities:

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Accrued liabilities 2,695 2,689 4,255

Operating lease liabilities ( 1,754 ) — —

Deferred rent and other long-term liabilities — ( 17 ) 50

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Cash flows from financing activities:

Proceeds from issuance of common stock upon initial public offering, net of

issuance costs

Proceeds from issuance of common stock upon initial public offering, net of issuance costs

Proceeds from issuance of common stock upon completion of private placement — 10,000 —

Proceeds from issuance of Series C preferred stock, net of issuance costs — 52,019 47,947

Proceeds from exercise of stock options

Proceeds from issuances of common stock 2,984 442 174

Payment of deferred offering costs ( 457 ) — ( 2,582 )

Net cash provided by financing activities 2,527 213,212 45,539

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents 783 ( 34,925 ) 24,858

Cash and cash equivalents at beginning of period 50,882 85,807 60,949

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Purchase of property and equipment in accounts payable and accrued liabilities

Reclassification of restricted stock awards from liabilities to common stock upon

Accretion to redemption value and dividends on redeemable convertible

preferred stock

$ 57 $ 188 $ 159

Reclassification of restricted stock awards from liabilities to common stock upon vesting $ 9 $ 11 $ 30

Accretion to redemption value and dividends on redeemable convertible preferred stock $ — — $ 6,225

Deferred offering costs in accounts payable and accrued liabilities $ — — $ 230

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Notes to Financial Statements

Description of Business

Organization and Description of Business

Pliant Therapeutics, Inc.

(the “Company”) is a clinical stage biopharmaceutical company focused on discovering and developing novel therapies for the treatment of fibrosis with an initial focus on treating fibrosis by inhibiting integrin-mediated activation of TGF-ß.

(the “Company” or "Pliant" or “we” or “our” or “us”) is a clinical stage biopharmaceutical company focused on discovering and developing novel therapies for the treatment of fibrosis with an initial focus on treating fibrosis by inhibiting integrin-mediated activation of TGF-β.

Fibrosis refers to the abnormal thickening and scarring of connective tissue due to the production and deposition of excess collagen in the extra-cellular matrix.

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Reverse Stock Split

In May 2020, the Company implemented a 1-for-7.15 reverse stock split of the Company’s common stock.

On May 22, 2020, the Company implemented a 1-for-7.15 reverse stock split of the Company’s common stock.

Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares.

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Shares of common stock reserved for issuance upon the conversion of the Company’s convertible preferred stock were proportionately reduced and the respective conversion prices were proportionately increased.

As of June 3, 2020, all outstanding preferred stock have been converted into common stock.

As of June 3, 2020, all outstanding preferred stock had been converted into common stock.

Initial Public Offering

In June 2020, the Company completed its initial public offering (“IPO”), in which the Company issued and sold an aggregate of 10,350,000 shares of common stock, which included 9,000,000 shares of common stock and 1,350,000 shares of common stock sold pursuant to the underwriters’ exercise of their option to purchase additional shares, at a public offering price of $16.00 per share.

The aggregate net proceeds received by the Company from the offering were $148.3 million, net of underwriting discounts, commissions and offering expenses of $5.7 million, of which $2.6 million were paid in 2019 and $3.1 million paid in the current year.

In June 2020, the Company completed its initial public offering (the “IPO”), in which the Company issued and sold an aggregate of 10,350,000 shares of common stock, which consisted of 9,000,000 shares of common stock and 1,350,000 shares of common stock sold pursuant to the underwriters’ exercise of their option to purchase additional shares, at a public offering price of $ 16.00 per share.

The aggregate net proceeds received by the Company from the offering were $ 148.3 million, net of underwriting discounts, commissions and offering expenses of $ 5.7 million.

Upon the closing of the IPO, 160,389,279 shares of the Company’s outstanding convertible preferred stock were automatically converted to common stock on a 7.15 :1 basis and the related carrying amount of $ 238.3 million was reclassified to common stock and additional paid-in capital within stockholders’ equity (deficit).

Concurrent with the completion of the IPO, the Company also issued 625,000 shares of its common stock to Novartis (“Novartis”), a strategic partner and existing stockholder of the Company, in a private placement at a price of $16.00 per share for proceeds of $10.0 million, which resulted in Novartis owning approximately 6.1% of the Company’s outstanding shares of common stock (Note 6).

Concurrent with the completion of the IPO, the Company also issued 625,000 shares of its common stock to Novartis Institutes for Biomedical Research, Inc.

(“Novartis”), a strategic partner and existing stockholder of the Company, in a private placement at a price of $ 16.00 per share for proceeds of $ 10.0 million, which resulted in Novartis owning approximately 6.1 % of the Company’s outstanding shares of common stock immediately after the IPO.

Summary of Significant Accounting Policies

Policies Basis of Presentation

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

Certain prior year reported amounts have been reclassified to conform with the current period presentation.

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, liabilities, and expenses as well as the disclosure of contingent assets and liabilities as of and during the reporting period.

The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances.

Significant estimates and assumptions reflected in these financial statements include, but are not limited to, useful lives assigned to property and equipment, the fair values of common and redeemable convertible preferred stock, stock-based compensation expense, accruals for research and development costs, income taxes and uncertain tax positions.

The Company assesses estimates on an ongoing basis;

however, actual results could materially differ from those estimates.

On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, accruals for research and development costs, fair value of assets and liabilities, stock-based compensation, income taxes and uncertain tax positions.

Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances, however, actual results may differ from those estimates.

Revenue Recognition

Effective January 1, 2018 the Company adopted the provision of Accounting Standards Update or ASU, ASU 2014-09, Topic 606 Revenue from Contracts with Customers (“Topic 606”) using the full retrospective transition method.

ASU 2014-09 provides a single, comprehensive revenue recognition model for all contracts with customers.

This standard contains principles for the determination of the measurement of revenue and the timing of when such revenue is recognized.

Revenue recognition will reflect the

transfer of goods or services to customers at an amount that is expected to be earned in exchange for those goods or services.

Subsequently, the FASB has issued the following guidance to amend ASU 2014-09:

ASU 2015-14, Revenue from Contracts with Customers (Topic 606):

Deferral of the Effective Date ;

ASU 2016-08, Revenue from Contracts with Customers (Topic 606):

Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ;

ASU 2016-10, Revenue from Contracts with Customers (Topic 606):

Identifying Performance Obligations and Licensing ;

ASU 2016-12, Revenue from Contracts with Customers (Topic 606):

Narrow-Scope Improvements and Practical Expedients ;

and ASU 2016-20, Technical Corrections and Improvements to Topic 606 , which clarifies narrow aspects of Topic 606 or corrects unintended application of the guidance.

The Company must adopt ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20 with ASU 2014-09, which are referred to collectively as the “Topic 606”.

The FASB issued ASU 2018-18, “Collaborative Arrangements (Topic 808)” issued in November 2018.

The Company assessed and concluded that they are not under Topic 808 and as the Novartis Agreement is not considered a collaboration under its provisions.

The Company’s revenue is generated solely from the Collaboration and License Agreement with Novartis (the “Novartis Agreement”).

The Company’s licensing agreement includes upfront signing fees, cost reimbursements, research and development services, milestone payments and royalties on future licensee’s product sales.

The Company has both fixed and variable consideration.

Non-refundable upfront fees are considered fixed, while funding of research and development activities and milestone payments are identified as variable consideration.

A contract liability is an obligation to transfer goods or services for which the Company has received consideration, or for which an amount of consideration is due from the customer.

A contract asset is a right to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional on something other than the passage of time.

The Company accounts for revenues in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ( Topic 606).

To determine revenue recognition for arrangements that fall within the scope of ASC 606, we perform 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) we satisfy a performance obligation.

We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

At contract inception, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

To date, our revenues have been generated solely from the Collaboration and License Agreement with Novartis (the “Novartis Agreement”).

The Novartis Agreement includes licenses of intellectual property, cost reimbursements, research and development services, upfront signing fees, milestone payments and royalties on future licensee’s product sales.

As part of accounting for this arrangement, we must apply judgment to determine whether the performance obligations are distinct, and develop assumptions in determining the stand-alone selling price for each distinct performance obligation identified in the contract.

To determine the stand-alone selling price, we rely on assumptions which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

Licenses of Intellectual Property

If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

For licenses that are bundled with other promises, we utilize 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 progress for purposes of recognizing revenues.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Milestone Payments

At the inception of an arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.

At the end of each reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint and, if necessary, adjust our estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration and license revenue in the period of adjustment.

Research and development services

Amounts related to research and development services are recognized as the related services or activities are performed, in accordance with the contract terms.

The cost associated with full-time equivalent researchers is estimated each period and billable to Novartis based at specified full-time equivalent rates.

The sales-based royalties, including milestone payments based on the level of sales, are considered to be predominately related to the license included in the arrangement, and we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

To date, we have not recognized any royalty revenue from the Novartis Agreement.

We recognize contract assets when we have a right to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional on something other than the passage of time.

A receivable will be recorded on the balance sheet when the Company has unconditional rights to consideration (i.e., only the passage of time is required before payment becomes due).

Receivables cannot be netted against contract liabilities and are presented separately from contract assets.

Contract assets and contract liabilities are netted at the contract level and are then aggregated and presented separately each reporting period.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under its agreements, the Company performs the following steps:

(i) identification of the contract with a customer;

(ii) identification of the performance obligations in the contract;

(iii) determination of the transaction price;

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

and (v) recognition of revenue when (or as) we satisfy each performance obligation.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

The Company’s performance obligations include providing the worldwide license rights to compound PLN-1474, provide research and development services for PLN-1474 through Phase 1 of its development, achieving certain development or regulatory milestones and provide research and development services on initial candidate targets, which services are combined with a non-exclusive license to the initial candidate targets.

The Company concluded that the worldwide license was distinct because the customer can benefit from the license on its own or together with other resources that are readily available, and the research and development services are not transformative in nature.

The Company concluded the research and development services on initial candidate targets were not distinct from a non-exclusive license for the initial candidate targets, primarily as a result of (i) Pliant being unable to benefit on its own or together with other resources that are readily available as the license and (ii) the research and development services, including manufacturing in support of such services, were expected to significantly modify the initial license.

Therefore, the promised goods and services were considered a single performance obligation.

Significant management judgment is required in the identification of performance obligations and to determine the level of effort required under an arrangement and the period over which the Company expects to complete our performance obligations under the arrangement.

If the Company cannot reasonably estimate when the performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates.

The Company estimates the transaction price and records revenue in the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur.

At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.

The estimated period of performance and project costs are reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of our deliverables.

As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract.

The Company has never sold the performance obligations separately;

therefore, an observable stand-alone selling price does not exist.

Accordingly, the Company estimates a stand-alone selling price through maximizing the use of observable inputs such as market data, project cost estimates, and targeted margins.

The Company determined that each of the performance obligations is priced and delivered at the stand-alone selling price.

Therefore, no reallocations are needed since there is no material right and the license and services are provided at the stand-alone selling price.

During the years ended December 31, 2020 and 2019, the entirety of the Company’s revenue—related party is related to the Collaboration and License Agreement with Novartis.

The Company did not have any prior revenue agreements and did not recognize

revenue prior to 2019 .

Receivables from collaborations are typically unsecured and are concentrated in the biopharmaceutical industry.

Accordingly, the Company may be exposed to credit risk generally associated with biopharmaceutical companies or specific to the Novartis Agreement.

An allowance on the receivables will be recorded if circumstances indicate collection is doubtful for a particular receivables balance.

To date, the Company has not experienced any losses related to these receivables.

A contract liability is an obligation to transfer goods or services for which the Company has received consideration, or for which an amount of consideration is due from the customer.

Receivables cannot be netted against contract liabilities and would be presented separately from contract assets.

Contract assets and contract liabilities are netted at the contract level.

Fair Value Measurements

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The Company performs credit evaluations of its customer, and the risk with respect to accounts receivable is further mitigated by the short duration of customer payment terms, generally within 60 days, and the pedigree of the customer base.

During the year ended December 31, 2020, Novartis accounted for 100% of the Company’s revenue—related party and accounts receivable.

During the years ended December 31, 2021, 2020 and 2019, Novartis accounted for 100 % of the Company’s revenue and accounts receivable.

The Company’s future results of operations involve several other risks and uncertainties.

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The Company has classified and accounted for its short-term investments as available-for-sale securities as the Company may sell these securities at any time even prior to maturity and such investments represent cash available for current operations.

As a result, short-term investments may include securities with maturities beyond twelve months that are classified within current assets in the Balance Sheets.

As of December 31, 2020 and 2019, all of the Company’s short-term investments were classified as available-for-sale and were carried at fair market value with unrealized losses or income recorded in other comprehensive loss in the statements of operations and comprehensive loss.

As a result, short-term investments may include securities with maturities beyond twelve months that are classified within

current assets in the Balance Sheets.

As of December 31, 2021 and 2020, all of the Company’s short-term investments were classified as available-for-sale and were carried at fair market value with unrealized losses recorded in other comprehensive loss in the statements of operations and comprehensive loss.

See Note 3 for further details.

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As of December 31, 2021, the Company had not recorded any impairment related to other-than-temporary declines in the fair value of short-term investments.

The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) as of January 1, 2021, which did not have a significant impact on its financial statements.

For available-for-sale debt securities in unrealized loss positions, ASU 2016-13 requires the Company to record an allowance for credit losses using an expected loss model, which replaces the incurred loss model required under the previous guidance.

A credit loss is limited to the amount by which the amortized cost of an investment exceeds its fair value.

A previously recognized credit loss may be decreased in subsequent periods if the Company’s estimate of fair value for the investment increases.

To determine whether to record a credit loss, the Company considers issuer specific credit ratings and historical losses as well as current economic conditions and its expectations for future economic conditions.

Property and Equipment, Net

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The useful lives of property and equipment are as follows:

Laboratory equipment

Computer equipment and software

Leasehold improvements

Shorter of remaining lease term or estimated useful life

Laboratory equipment 5 years

Computer equipment and software 3 years

Leasehold improvements Shorter of remaining lease term or estimated useful life

Upon retirement or sale of the assets, the cost and related accumulated depreciation and amortization are removed from the balance sheets and the resulting gain or loss is recorded to the statements of operations and comprehensive loss.

Repairs and maintenance are expensed as incurred.

Upon adoption of Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), the Company determines if an arrangement contains a lease at the inception of the contract and a records right-of-use (“ROU”) asset and lease liability on the balance sheet at lease commencement based on the present value of remaining lease payments over the lease term.

The Company only considers payments that are fixed and determinable at the time of commencement.

For leases with an initial term greater than 12 months, lease liabilities are recognized based on the present value of the future minimum lease payments discounted by the Company’s estimated incremental borrowing rate.

The Company measures ROU assets based on the corresponding lease liability adjusted for (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs incurred and (iii) tenant incentives under the lease.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company calculates the present value of future minimum lease payments using its estimated incremental borrowing rate when the discount rate implicit in the lease is not known.

The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

In determining its incremental borrowing rate, the Company gives consideration to its credit risk, term of the lease, total lease payments and an analysis of peer companies with profiles similar to its own.

The Company has elected the short-term lease practical expedient to exclude leases with a term less than 12 months from its ROU assets and lease liabilities.

The Company records rent expense for short-term leases in its statements

of operations on a straight-line basis over the lease term and records variable lease payments as incurred.

The Company has also elected to not separate lease and non-lease components and, as a result, accounts for any lease and non-lease components as a single lease component.

Impairment of Long-Lived Assets

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Research and development costs are expensed as incurred.

Research and development expenses consist primarily of personnel costs for the Company’s research and product development employees.

Research and development expenses consist primarily of personnel costs for the Company’s research and development employees.

Also included are non-personnel costs such as fees paid to consultants and third parties for preclinical and clinical studies, research and development services, laboratory supplies and equipment maintenance costs, license costs, contract manufacturing costs and allocations of facility related costs.

The Company estimates preclinical and clinical studies and research expenses based on the services performed, pursuant to contracts with research institutions that conduct and manage preclinical and clinical studies and research services on its behalf.

The Company estimates these expenses based on discussions with internal management personnel and external service providers as to the progress or stage of completion of services and the contracted fees to be paid for such services.

We estimate the amount of work completed through review of detailed budgets and timelines included in our contracts and agreements, and update these estimates with information obtained from third-party service providers and internal personnel on a quarterly basis.

If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly.

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Payments associated with licensing agreements to acquire exclusive licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternate commercial use are expensed as incurred.

Tax Credit Receivable

The Company was eligible for federal and California research and development credits for its research and development activities performed within the United States and California, respectively.

The Company was eligible to apply up to $250,000 of the federal R&D credits to offset the Federal Insurance Contribution Act (“FICA”) portion of its payroll taxes each year prior to fiscal year 2019.

Starting in the fourth quarter of 2019, the Company was no longer eligible to apply its federal R&D credits to offset its FICA taxes as it generated revenue in excess of $5 million of gross receipts during that year.

The Company, however, is still eligible for future federal and California research and development credits for its research and development activities performed within the United States and California.

Stock-Based Compensation

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• Expected term —The expected term represents the period that the stock-based awards are expected to be outstanding.

The expected term for the Company’s stock options was calculated based on the weighted-average vesting term of the awards and the contract period, or simplified method.

The expected term for the Company’s stock options was calculated utilizing the simplified method, which represents the average of the weighted-average vesting term and the contract period of the awards.

The expected term for the ESPP is the offering period.

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The comparable companies were chosen based on their size, stage in the life cycle or area of specialty.

As the Company went public in June 2020, we will continue to apply this process for stock options and ESPP awards until enough historical information regarding the volatility of its stock price becomes available.

As the Company went public in June 2020, the Company will continue to apply this process for stock options and ESPP awards until enough historical information regarding the volatility of its stock price becomes available.

• Risk-free interest rate —The risk-free interest rate is based on the U.S.

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This determination included an evaluation of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and the grant date.

Following our IPO, we use our stock price traded on NASDAQ to determine its fair value.

Deferred Offering Costs

Deferred offering costs, consisting of direct legal, accounting, filing and other fees directly related to the Company’s IPO were capitalized and reclassified to additional paid in capital upon completion of the IPO in June 2020.

As of December 31, 2019, $2.8 million in deferred offering costs were recorded as other non-current assets in the Balance Sheets.

Leases and Rent Expense

The Company records rent expense on a straight-line basis over the life of the lease.

In cases where there is a free rent period or future fixed rent escalations, the Company records a deferred rent liability.

Additionally, the receipt of any lease incentives is recorded as a deferred rent liability which is amortized over the lease term as a reduction of rent expense.

Building improvements made with the lease incentives or tenant allowances are capitalized as leasehold improvements and included in property and equipment, net in the balance sheets.

Following our IPO, the Company uses our stock price traded on NASDAQ to determine its fair value.

The Company provides for income taxes under the asset and liability method.

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Comprehensive loss includes net loss as well as other changes in stockholders' equity (deficit) that result from transactions and economic events other than those with stockholders.

The Company's comprehensive loss represents unrealized losses on short-term investments.

Net Loss Per Share

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In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is generally the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is antidilutive.

The Company reported a net loss attributable to common stockholders for the years ended December 31, 2020 and 2019.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, Leases (“Topic 842” ), which requires an entity to recognize assets and liabilities arising from a lease for both finance and operating leases.

For public entities, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018.

The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing,

and uncertainty of cash flows arising from leases.

As a result of the Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, ASU 2016-02 is effective for the Company in the fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-02 on the Company’s financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The new standard amends guidance on measuring and reporting credit losses for financial assets held at amortized cost basis, including accounts receivable and investments classified as available for sale, such as our debt securities.

This ASU requires a new forward-looking model based on expected credit losses rather than the current one based on incurred losses.

In November 2019, the FASB issued ASU 2019-10, which deferred the effective date for certain ASUs including ASU 2016-13.

This standard is effective for the Company’s fiscal year beginning after December 15, 2022.

Early adoption is permitted for all entities.

The Company does not expect the adoption of ASU 2016-13 to have a material impact on the Company’s financial statements.

In December 2019, the FASB issued Accounting Standards Update 2019-12 (“ASU 2019-12”), Income Taxes (topic 740):

Simplifying the Accounting for Income Taxes .

The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

ASU 2019-12 removes the exception for intraperiod tax allocations when there is a loss from continuing operations and income or a gain from other items (other comprehensive income).

ASU 2019-12 is effective for fiscal years beginning after December 15, 2021.

Early adoption of the amendments is permitted.

The Company has early adopted the new standard effective January 1, 2020, and its adoption did not have a material impact on our condensed financial statements.

The Company reported a net loss attributable to common stockholders during the years ended December 31, 2021, 2020 and 2019.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2016-2, Leases (“Topic 842”), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases.

Subsequent to this, the FASB issued various amendments to ASC 842, which affected certain aspects of the previously issued guidance.

One of the amendments included an additional transition option that allowed entities to apply the new standard on the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings.

These updates were effective for public companies for annual periods beginning after December 15, 2018, including interim periods therein.

Because the Company lost its EGC status on December 31, 2021, the standard became effective for the Company for its annual period beginning January 1, 2021.

Amounts prior to January 1, 2021 were not adjusted and continue to be reported in accordance with previous lease guidance, ASC Topic 840, Leases .

The Company adopted ASC 842 and all related amendments effective January 1, 2021 using the modified retrospective transition approach.

The Company elected the package of practical expedients upon adoption, which permitted the Company to not reassess under the new standard the Company's prior conclusions about lease identification, lease classification and initial direct costs.

In addition, the Company elected the short-term lease exception policy, permitting it to exclude the recognition requirements of this standard from leases with initial terms of 12 months or less.

The adoption of ASC 842 effective January 1, 2021 resulted in the recognition of operating lease ROU assets of $ 8.0 million and operating lease liabilities of $ 8.9 million in the Company’s balance sheet.

In connection with the adoption, pre-existing liabilities for deferred rent and lease incentives totaling $ 0.9 million were reclassified as an offset to the operating lease ROU assets.

The Company’s financial position and operating results for reporting periods prior to January 1, 2021 have not been adjusted and continue to be presented in accordance with the accounting standard in effect at that time.

The adoption of ASC 842 did not have a material impact on the 2021 quarterly or annual results of operations or cash flows and had no impact on retained earnings.

In 2016, the FASB issued ASU 2016-13, which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred.

For available-for-sale debt securities in unrealized loss positions, ASU 2016-13 requires

allowances to be recorded instead of reducing the amortized cost of the investment.

ASU 2016-13 became effective on January 1, 2021.

The adoption of ASU 2016-13 did not have an impact on the Company’s financial statements.

Financial Instruments

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Treasury securities, U.S.

Government agency securities and corporate debt securities with remaining maturities beyond three months at the date of purchase.

Government agency securities and highly rated, investment-grade corporate debt securities with original maturities beyond three months at the date of purchase.

As a result, short-term investments may include securities with maturities beyond twelve months that are classified within current assets in the Balance Sheets.

The Company’s short-term investments classified as available-for-sale are carried at fair market value with unrealized losses or income recognized in other comprehensive income (loss).

The Company’s short-term investments classified as available-for-sale are carried at fair market value with unrealized losses or income recognized in other comprehensive loss.

Assets and liabilities recorded at fair value on a recurring basis in the Balance Sheets and assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values.

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The Company performs its analysis with the assistance of investment advisors.

The following tables show the Company’s cash equivalents Money Market Funds and short-term investments by significant investment category (in thousands):

There were no Level 3 assets or liabilities as of December 31, 2021 and 2020.

The following tables show the Company’s cash and cash equivalents, Money Market Funds and short-term investments by significant investment category as of December 31, 2021 and 2020 (in thousands):

As of December 31, 2021

Cost Unrealized

Gains Unrealized

Losses Market

Money Market Funds $ 15,329 $ — $ — $ 15,329

Treasury securities included in cash and cash equivalents and short-term investments

government agency securities included in

short-term investments

Corporate debt securities included in cash and

cash equivalents and short-term investments

government agency securities included in short-term investments

5,003 — — 5,003

Corporate debt securities included in cash and cash equivalents and short-term investments

163,626 1 ( 202 ) 163,425

Total financial assets $ 183,958 $ 1 $ ( 202 ) $ 183,757

As of December 31, 2020

Cost Unrealized

Gains Unrealized

Losses Market

Money Market Funds $ 27,686 $ — $ — $ 27,686

Treasury securities included in short-term investments

government agency securities included in

short-term investments

63,101 4 ( 1 ) 63,104

government agency securities included in short-term investments

54,183 10 — 54,193

Corporate debt securities included in cash and cash

equivalents and short-term investments 118,759 1 ( 46 ) 118,714

Total financial assets $ 263,729 $ 15 $ ( 47 ) $ 263,697

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Mature in 1 to 2 years 35,054 34,956

Total $ 149,130 $ 148,930

There were no liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020.

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As of December 31, 2021, the Company had not recorded any impairment related to other-than-temporary declines in the fair value of short-term investments.

Short-term investments are considered impaired when a decline in fair value is judged to be other-than-temporary.

The Company consults with its investment managers and considers available quantitative and qualitative evidence in evaluating potential impairment of its short-term investments on a quarterly basis.

If the cost of an individual investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost and its intent and ability to hold the investment.

The Company records interest income and accretion income earned on Money Market Funds and U.S.

Treasury, U.S.

government agency and corporate debt securities to interest income in its statement of operations and comprehensive loss.

government agency and corporate debt securities to interest and other income (expense), net in its statement of operations and comprehensive loss.

Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

Computer equipment and software

Laboratory equipment $ 7,947 $ 6,540

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Construction-in-progress 38 300

Total property and equipment, gross

Computer equipment and software 22 22

Total property and equipment 9,625 7,809

Accumulated depreciation ( 5,019 ) ( 3,488 )

Total property and equipment, net $ 4,606 $ 4,321

Depreciation expense for the years ended December 31, 2020 and 2019 was $1.3 million and $1.1 million, respectively.

Depreciation expense during the years ended December 31, 2021, 2020 and 2019 was $ 1.5 million, $ 1.3 million, $ 1.1 million, respectively.

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following (in thousands):

Prepaid research and development $ 2,819 $ 1,898

Prepaid insurance 2,585 1,459

Prepaid licenses 819 665

Interest receivable 385 386

Total prepaid expenses and other current assets $ 6,764 $ 4,498

Accrued Liabilities and Other Long-Term Liabilities

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Accrued liabilities consisted of the following (in thousands):

Accrued compensation and benefits

Accrued research and development expenses $ 5,868 $ 3,274

Accrued compensation and benefits 5,216 4,542

Other accrued liabilities 907 1,675

Deferred rent/leasehold incentive obligation-current

Deferred rent — 85

Total accrued liabilities $ 11,991 $ 9,576

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Total other long-term liabilities $ — $ 866

Novartis Agreement

In October 2019, the Company entered into a Collaboration and License Agreement with Novartis (the “Novartis Agreement”), for the development and commercialization of our preclinical product candidate, PLN-1474 and up to three additional integrin research targets.

Novartis Collaboration and License Agreement (the "Novartis Agreement")

In 2019, we entered into the Novartis Agreement, for the development and commercialization of our preclinical product candidate, PLN-1474 and up to three additional integrin research targets.

PLN-1474 is an internally discovered small molecule selective inhibitor of integrin αvβ1, currently being developed for the treatment of liver fibrosis associated with nonalcoholic steatohepatitis (“NASH”).

In accordance with the Novartis Agreement, on December 7, 2019, Novartis paid to Pliant an upfront non-refundable license fee of $50.0 million for the worldwide exclusive license to PLN-1474.

Novartis will fund the Company’s research and development services for PLN-1474 through Phase 1 after which Novartis will assume responsibility for all future development, manufacturing and commercialization costs of PLN-1474.

Novartis will also fund the research and development services associated with integrin research targets as outlined in the Novartis Agreement.

The Company is scheduled to receive up to $19.6 million in funding for PLN-1474 development services through Phase 1 and up to $13.4 million for optional research and development services on the integrin research targets.

The Company is initially obligated to perform research and development services on the integrin research targets for sixty days.

Novartis has the option to continue the research and

development services through 2022, with the option to terminate the services with 60 days’ notice.

If any of the targets achieves target validation and are deemed a research target, Novartis holds the rights to exercise its license options to obtain an exclusive license for those deemed research targets on a research target-by-research target basis by paying an option exercise fee for each target (up to three in total), including all license compounds that are the subject of the applicable research program.

Novartis will also pay the Company a certain specified target validation fee of $ 4.0 million for each candidate target that achieves target validation and is deemed a research target, for up to three candidate targets.

Upon exercise of an option, Novartis will be responsible for global clinical development and commercialization of each licensed research target.

Under the Novartis Agreement, the Company is eligible for developmental, regulatory and commercial milestone payments related to PLN-1474 and the integrin research targets of up to $416.0 million if defined development and commercialization milestones are achieved and tiered royalties ranging from the mid-single digits to low teens on product sales upon commercialization.

Upon execution of the Novartis Agreement, Pliant also entered into a Financing Side Letter with Novartis (the “Financing Side Letter”), whereby Novartis committed to provide up to $30.0 million in equity financing of which $20.0 million was satisfied by the issuance of 10,928,962 shares of Series C Redeemable Convertible Preferred Stock on December 19, 2019 and the remaining $10.0 million was satisfied by the issuance of shares of common stock through a concurrent private placement with the Company’s IPO.

The Company determined that the Novartis Agreement and the Financing Side Letter are separate agreements and should not be combined as they were not entered into for a single commercial objective and the consideration in each agreement are tied to separate and different types of obligations.

The Series C Redeemable Preferred Stock was issued to Novartis at fair value of $1.83 per share in conjunction with its issuance to other investors at the same price.

In addition, the contingent issuance of shares upon an Initial Public Offering would also be at fair value.

Further, Novartis became a related party to the Company following its purchase of 10.9 million shares of our Series C Redeemable Convertible Stock on December 19, 2019, representing holdings of 6.1% and 7.4% of our outstanding shares of common stock on a fully diluted basis as of December 31, 2020 and December 31, 2019, respectively.

See Notes 9 and 14 to these financial statements for additional information.

The Company evaluated the Novartis Agreement under the revenue standard Topic 606 and concluded that Novartis is a customer.

The Company identified the following performance obligations at the inception of the contract.

Provide Novartis worldwide license rights to PLN-1474.

Provide research and development services for PLN-1474 through Phase 1 of its development.

Provide non-exclusive license rights to integrin research targets and research and development services on integrin research targets, together as a single performance obligation.

The Company determined the transaction price at inception of the Novartis Agreement is the $69.6 million consisting of the license fee of $50.0 million and research and development funding of $19.6 million payment to be allocated to the various performance obligations.

The Novartis Agreement includes variable consideration for the funding of research and development services and potential future milestones and royalties that were contingent on future success factors for development programs.

The Company used the “most likely” method to determine the variable consideration.

None of the regulatory or development milestones were included in the transaction price.

The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur.

The Company considered the license to PLN-1474 as functional intellectual property, as when control of the license was transferred to Novartis at the inception of the Novartis Agreement, Novartis had the right to access its technology and it was functional.

The Company determined the $50.0 million was the standalone selling price PLN-1474 license and was recognized as revenue when control of the license transferred to Novartis, which was at or near inception of the Novartis Agreement.

The Company estimated the standalone selling price of each research program based on internal and external costs to perform the research plus a reasonable profit margin.

The total estimated cost of the research and development services reflects the nature of the services to be performed and the Company’s best estimate of the length of time required to perform the services.

The Company selected an input method of costs incurred to measure progress toward complete satisfaction of its performance obligation to provide research and development services as such method faithfully depicts the Company’s performance in transferring control of the research and development service to Novartis.

Changes in estimates of total internal and external costs expected to be incurred are recognized in the period of change as a cumulative catch-up adjustment.

There have been no changes to the Company’s estimates to date.

During the years ended December 31, 2020, the Company recognized revenue—related party of $41.8 million, which consists of $25.0 million of revenue from the achievement of the first patient dosing milestone of the Novartis agreement in the first quarter of 2020 and $16.8 million of revenue generated from research and development services performed during the year ended December 31,

During the year ended December 31, 2019, Company recognized revenue - related party of $ 50.0 million related to the license fee and revenue - related party of $ 7.1 million generated from research and development services performed during 2019.

Pursuant to the agreement, we received an upfront, non-refundable license fee of $ 50.0 million and were eligible to receive additional payments of $ 416.0 million contingent upon achievement of specified research, development, regulatory and commercial events and royalties on world-wide net sales thereafter.

Additionally, Novartis agreed to fund up to $ 19.6 million associated with research and development services for PLN-1474 and up to $ 13.4 million for research and development services on the integrin research targets.

We assessed the Novartis Agreement in accordance with ASC 606 and determined that Novartis is a customer and identified the following performance obligations:

(1) to provide worldwide license rights to PLN-1474, (2) to provide research and development services for PLN-1474, (3) to provide non-exclusive license rights to integrin research targets, and (4) to provide research and development services on integrin research targets.

We determined that the license to PLN-1474 was functional intellectual property and distinct as Novartis is capable to benefit from the license on its own or together with other resources that are readily available, and the research and development services we promise to deliver are not transformative in nature.

Additionally, we concluded that the non-exclusive license rights to integrin research targets were not distinct in the context of the arrangement as the promised research and development services on integrin research targets were expected to significantly modify the license and Novartis could not benefit from the non-exclusive license without such services.

Therefore, the non-exclusive license rights and research and development services on integrin research targets were considered a single performance obligation.

We determined the transaction price of the PLN-1474 research and development services and integrin target research and development services was $ 20.0 million and $ 13.4 million, respectively, as of December 31, 2021, and the performance obligations associated with the aggregate unrecognized transaction price of $ 2.0 million would be satisfied in 2022.

As of December 31, 2021, variable consideration associated with specified research and development milestones totaling $ 391 million have been constrained from the transaction prices but remain eligible for achievement.

We are utilizing a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize.

We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counterparty.

In applying the cost-based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the performance obligation.

These costs consist primarily of third-party contract costs and internal full-time equivalent effort.

A cost-based input method of revenue recognition requires management to make estimates of costs to complete the performance obligations.

The cumulative effect of revisions to estimated costs to complete the performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

During the year ended December 31, 2021, we recognized revenue of $ 7.6 million which consisted of revenue generated from research and development services.

During the year ended December 31, 2020, we recognized revenue of $ 41.8 million, which consisted of $ 25.0 million from the achievement of the first patient dosing milestone of the Novartis agreement in the first quarter of 2020 and $ 16.8 million of revenue generated from research and development services performed during the year.

During the year ended December 31, 2019, Company recognized revenue of $ 50.0 million related to the license fee and $ 7.1 million from research and development services.

As of December 31, 2021 and 2020, there was a receivable of $ 2.0 million and $ 9.3 million, respectively, related to the Novartis Agreement.

There were no contract assets or contract liabilities as of December 31, 2021 and 2020.

License Agreements

In August 2015, the Company entered into an exclusive, worldwide license agreement (the “UC Agreement”) with the Regents of the University of California (the “UC Regents”) relating to the use of certain patents and technology relating to αvß1 compound in fibrosis indications.

Pursuant to the UC Agreement, the Company is obligated to (i) make a non-refundable upfront license fee payment of $0.4 million and annual license maintenance fee payments of $10,000 per year beginning on the first anniversary of the UC Agreement escalating to $25,000 per year thereafter (ii) make royalty payments to the UC Regents of 3% of net sales of a therapeutic licensed product or 1% of net sales of a method of use licensed product, subject to an annual minimum of $1.0 million, (iii) make milestone payments up to an aggregate of $18.2 million to the UC Regents upon the occurrence of certain events, (iv) make a milestone payment based on the number of outstanding shares and a price per share as defined in the UC Agreement within 30 days of the closing of an IPO or change of control, and (v) reimburse the UC Regents for prosecution and maintenance expenses of the licensed patents without limitation.

As a result of the IPO in June 2020, the Company made a $2.4 million milestone payment to the UC Regents.

The Company will expense any payments for milestones to research and development expenses prior to receiving FDA approval for any of its product candidates.

The UC Agreement can be terminated at any time upon the material breach of contract terms by either party to the agreement.

The Company has the right to terminate the agreement at any time upon providing written notice to the UC Regents.

Unless terminated early, the UC Agreement will remain in effect from the effective date until the later of (i) the expiration or abandonment of the patent rights licensed under the UC Agreement, or (ii) ten years from the date of the first commercial sale of the first licensed product under the agreement.

In November 2020, the technology licensed through the agreement was deemed to no longer be relevant to the Company’s product candidates and, therefore, the Company exercised its rights to terminate the UC Agreement with the termination taking effect in January 2021, which complied with the 60-day notice period specified under the agreement.

Research Agreement

Adimab Development and Option Agreement

In October 2018, the Company and Adimab LLC (“Adimab”) entered into a development and option agreement (the “Adimab Agreement”) for the discovery and optimization of proprietary antibodies as potential therapeutic product candidates.

Under the Adimab Agreement, the Company will select biological targets against which Adimab will use its proprietary platform technology to research and develop antibody proteins using a mutually agreed upon research plan.

Upon the Company’s selection of a target, the Company and Adimab will initiate a research plan and the discovery term begins.

During the discovery term, Adimab will grant the Company a non-exclusive, non-sublicensable license under its technology with respect to the target, to research, design and preclinically develop and use antibodies that were modified or derived using Adimab technology, solely to evaluate such antibodies, perform the Company’s responsibilities under the research plan and use such antibodies for certain diagnostic purposes.

The Company will also grant to Adimab a non-exclusive, non-sublicensable and non-transferable license with respect to the target under the Company’s technology that covers or relates to such target, solely to perform its responsibilities under the research plan during the discovery period.

The Company is required to pay Adimab at an agreed upon rate for its full-time employees during the discovery period while Adimab performs research on each target under the applicable research plan.

Adimab granted the Company an exclusive option to obtain a worldwide, royalty-bearing, sublicensable license under Adimab platform patents and other Adimab technology to research, develop and commercialize up to twenty-four antibodies selected by the Company (the “Program Antibodies”) against specific biological targets (the “Commercialization Option”).

Upon the exercise of a Commercialization Option, and payment of the applicable option fee to Adimab, Adimab will assign the patents that cover the Program Antibodies to Company.

The Company will be required to use commercially reasonable efforts to develop, seek market approval of, and commercialize at least one antibody against the target covered by the Commercialization Option in specified markets upon the exercise of a Commercialization Option.

Pursuant to the Adimab Agreement, the Company is obligated to (i) make a nonrefundable upfront license fee payment for access to Adimab’s technology;

(ii) pay Adimab at an agreed upon rate for each full-time employee (“FTE”) during the research period;

(iii) make additional payments upon the Company making other research related elections;

(iv) pay up to a dollar amount in the low double digit millions for the achievement of certain research and development milestones for each research target program which can vary by target type;

(v) make royalty payments to Adimab on Company net sales of its products covered under the Adimab Agreement, subject to varying royalty payments on certain product types.

Currently, no product types have been selected by the Company.

During the years ended December 31, 2020, the Company recognized research and development expenses under the Adimab Agreement of $0.2 million related to FTE costs.

During the years ended December 31, 2019, the Company recognized research and development expense under the Adimab Agreement of $0.1 million related to antibody discovery fees and $0.2 million related to the FTE costs.

Regents of the University of California License Agreement (the “UC Agreement”)

In 2015, we entered into the UC Agreement to obtain an exclusive, worldwide license relating to the use of certain patents and technology relating to αvß1 compound in fibrosis indications.

Pursuant to the UC Agreement, we made a $ 2.4 million milestone payment upon the close of our IPO in June 2020.

Subsequently, we determined the licensed technology was no longer relevant to the development of our product candidates and, therefore, we exercised our right to terminate the UC Agreement which became effective in the first quarter of 2021.

No further obligations or financial commitments survive the termination.

Adimab Development and Option Agreement (the "Adimab Agreement")

In 2018, we entered into a development and option agreement with Adimab, LLC (“Adimab”) for the discovery and optimization of proprietary antibodies as potential therapeutic product candidates.

Under the Adimab Agreement, we will select biological targets against which Adimab will use its proprietary platform technology to research and develop antibody proteins using a mutually agreed upon research plan.

We are required to pay Adimab an agreed upon rate for its full-time employees during the discovery period while Adimab performs research on each target under the applicable research plan.

We have an exclusive option to obtain a worldwide, royalty-bearing, sublicensable license under Adimab platform patents and other Adimab technology to research, develop and commercialize up to 24 antibodies of our selection.

During the years ended December 31, 2021, 2020 and 2019, we recognized research and development expenses associated with full-time employee costs of $ 28,000 , $ 0.2 million and $ 0.2 million, respectively.

Redeemable Convertible Preferred Stock

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The preferred stock may be issued in series, and the Company’s Board of Directors is authorized to determine the rights, preferences, and terms of each series.

Upon the closing of the Company’s IPO in June 2020, all outstanding convertible preferred stock was converted into common shares of the Company, as a result there was no authorized or outstanding redeemable convertible preferred stock as of December 31, 2020.

The following is a summary of the Company’s redeemable convertible preferred stock as of December 31, 2019 (in thousands except share amounts):

Series A Preferred

In August 2015, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Series A Purchase Agreement”) in which the Company agreed to sell up to $45.0 million of Series A Redeemable Convertible Preferred Stock (“Series A Preferred”) in three anticipated tranches.

In March 2018, the Series A Purchase Agreement was amended to allow the Company to sell an additional $11.0 million of Series A Preferred.

Under the Series A Purchase Agreements, the Company issued a total of 56.0 million shares of Series A Preferred for cash proceeds of approximately $56.0 million.

Series B Preferred

In July 2018, the Company entered into a Series B Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”) in which the Company agreed to sell up to $70.0 million of Series B Redeemable Convertible Preferred Stock (“Series B Preferred”).

Under the Series B Purchase Agreements, the Company issued a total of 49.5 million shares of Series B Preferred for cash proceeds of approximately $68.1 million.

Series C Preferred

In December 2019, the Company entered into a Series C Preferred Stock Purchase Agreement (the “Series C Purchase Agreement”) in which the Company agreed to sell up to $80.5 million of Series C Redeemable Convertible Preferred Stock (“Series C Preferred”).

Under the Series C Purchase Agreements, the Company issued 26.4 million shares of Series C Preferred for cash proceeds of approximately $48.2 million.

Novartis purchased 10.9 million shares of this allotment of Series C Preferred for cash proceeds of $20.0 million.

Novartis became a related party following its purchase of our Series C Preferred.

Novartis holdings represent of 6.1%

and 7.4 % of our outstanding shares of common stock on a fully diluted basis as of December 31, 2020 and December 31, 2019, respectively.

In February 2020, the Company issued an additional 28.5 million additional shares of Series C Preferred at $1.83 per share in exchange for gross cash proceeds of $52.2 million and incurred $0.2 million of issuance costs.

The Series A Preferred, Series B Preferred and Series C Preferred (collectively, the “Preferred Stock”) had the following rights and privileges prior to the Preferred Stock being converted to common stock:

Each holder of shares of Preferred Stock was entitled to the number of votes equal to the number of shares of common stock into which such shares could have been converted and had voting rights and powers equal to the voting rights and powers of the common stock, and except as provided by law or by other provisions of the Company’s Certificate of Incorporation, as amended, could have voted together with the common stock as a single class on an as-converted basis on all matters as to which holders of common stock have the right to vote.

Shares of the Preferred Stock were convertible at any time at the option of the holder into such number of shares as is determined by dividing the original issuance price by the conversion price in effect at the time.

The conversion price was the original issuance price for each series of Preferred Stock, as adjusted for the 1-for-7.15 reverse stock split of the Common Stock.

Following such adjustment, the per-share conversion price was $7.15 for Series A Preferred, $9.843405 for Series B Preferred and $13.0845 for Series C Preferred, subject to certain adjustments.

All outstanding shares of Preferred Stock converted to shares of common stock upon the completion of the Company’s IPO.

The holders of Series A Preferred were originally entitled to receive cumulative dividends from their respective dates of issuance at the rate of 8.0% on their original issue price.

In July 2018, in conjunction with the execution of the Series B Purchase Agreement, the Series A Preferred accreted dividends were cancelled.

Under the Series B Purchase Agreement, the holders of both shares of Series A and Series B Preferred were entitled to receive cumulative dividends commencing on July 10, 2018, the issuance date of Series B Preferred, at an annual rate of 8.0% on their original issuance price.

The Series A Preferred and Series B Preferred dividends accrue from day-to-day, whether declared or not, and were payable only when and if declared by the Company’s board of directors.

As such, the Company recorded accretion charges to adjust the carrying values of the Series A Preferred and Series B Preferred to their redemption values up until the date the Series C Purchase Agreement was executed.

In December 2019, in conjunction with the execution of the Series C Purchase agreement, the Series A preferred and Series B preferred accreted dividends were cancelled.

Under the Series C Purchase Agreement, the holders of Series A, Series B and Series C Preferred were entitled to receive non-cumulative dividends commencing on December 19, 2019 at an annual rate of 8.0% on their original issuance price.

The Series A, Series B and Series C Preferred dividends accrue from day-to-day, whether declared or not, and were payable only when and if declared by the Company’s board of directors.

The holders of all shares of preferred stock were entitled to receive dividends prior and in preference to any declaration or payment of any dividend on the common stock.

Since inception, the Company has never declared or paid any dividends.

Liquidation Preferences

Upon liquidation, dissolution, or winding up of the Company or a deemed liquidation event as defined in the Company’s Certificate of Incorporation, the holders of shares of Series C and Series B Preferred Stock were entitled to receive, on a pari passu basis, a per share amount equal to the Series C purchase price of $1.83 (plus any declared but unpaid dividends) and equal to the original Series B purchase of $1.3767 (plus any declared but unpaid dividends), collectively (the “Series C and Series B Liquidation Preference”) or such amount per share as would have been payable had all shares of Series C and Series B been converted into common stock immediately prior to such liquidation event.

The payment of Series C and Series B Liquidation Preference was to be made before any payment made to the holders of Series A Preferred Stock and Common Stock.

Thereafter, the Series A Preferred holders were entitled to receive their liquidation preference before any distributions were made to common stockholders, a per share amount equal to $1.00 (plus any declared but unpaid dividends) (the “Series A Liquidation Preference”) or such amount per share as would have been payable had all shares of Series A had been converted into common stock immediately prior to such liquidation event.

After payments of the full liquidation preferences of the Series C and Series B Liquidation Preference and the Series A

Liquidation Preference described above, any remaining assets of the Company would have been distributed to the holders of the common stock in proportion to the number of shares of common stock that they held.

In December 2019, in conjunction with the execution of the Series C Preferred Purchase Agreement, the Series A Preferred and Series B Preferred redemption provisions were modified as follows:

All outstanding shares of Preferred Stock shall be redeemed by the Company at a price equal to the original issuance price per share, plus any dividends declared but unpaid, in three annual installments commencing not more than sixty (60) days after receipt by the Company at any time on or after five years from the Series C Preferred original issuance date, December 19, 2019, a written notice from the holders of a majority of the shares of Preferred Stock.

The Company accounted for the changes in Series A Preferred redemption and Series B Preferred redemption provisions as a modification as there was no significant difference in Series A Preferred and Series B Preferred fair values before and after the modification.

The voting, dividend, and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers, and preferences of the holders of the Preferred Stock.

As of December 31, 2020 and 2019, the Company had 300,000,000 and 181,000,000 authorized shares of common stock, respectively, at a par value of $0.0001 per share.

These rights preferences and terms could include dividend rights, conversion rights, voting rights, terms of redemptions, liquidation preferences and sinking fund terms.

As a result of the IPO in June 2020, all then outstanding convertible preferred stock was converted into shares of common stock.

There are no outstanding shares of preferred stock as of December 31, 2021.

As of December 31, 2021 and 2020, the Company had 300,000,000 authorized shares of common stock, at a par value of $ 0.0001 per share.

The common stock has the following rights and privileges:

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Shares reserved for future issuance

Conversion of redeemable convertible preferred stock

Exercises of outstanding stock option awards

Shares of common stock available for future grants under the 2015 Equity Incentive

Plan, as amended

Shares of common stock available for future grants under the 2020 Equity Incentive

Shares of common stock available for future issuance under the 2020 ESPP

Outstanding stock option awards 3,620,180 2,993,855

Shares of common stock available for future grants under the 2020 Stock Option and Incentive Plan 4,234,213 3,644,459

Shares of common stock available for future issuance under the 2020 Employee Stock Purchase Plan 613,098 700,000

Total shares reserved for future issuance 8,467,491 7,338,314

Founders’ Common Stock Awards

During 2015, the Company’s board of directors granted common stock awards to the Company’s founders in exchange for services provided to the Company.

The purchase price of the common stock awards was the estimated fair value at the issuance date.

The shares vest from one to four years and vesting could be accelerated upon a change in control.

The vesting of certain performance-

based grants of restricted stock awards were contingent upon the filing of an Investigational New Drug Application by the Company with the FDA.

If the holder of founders’ common stock award terminates their relationship with the Company during the vesting period, the Company may repurchase any unvested restricted common stock held by these individuals at their original purchase price.

During the vesting term, holders of founders’ common stock awards are deemed to be common stockholders and have dividend and voting rights.

The Company issued 745,244 shares of founders’ common stock during 2015.

No founders’ common stock awards were granted in subsequent years.

Total compensation expense was $25,000 for these founders’ common stock awards, which are recorded to operating expenses in the statements of operations over their respective vesting period.

As of December 31, 2019, all shares of founders’ common stock awards were fully vested.

Equity Incentive Plans and Stock-Based Compensation

In August 2015, the board of directors adopted the 2015 Equity Incentive Plan, as amended (the “2015 Plan”), which provides for the grant of incentive stock options, nonqualified stock options or other awards including stock appreciation rights and restricted stock awards to the Company’s employees, officers, directors, advisors, and consultants for the purchase of up to 1.5 million shares of the Company’s common stock.

In July 2018 and January 2019, the 2015 Plan was amended to increase the number of shares reserved thereunder by 1.0 million and 0.4 million shares, respectively.

In March 2020, the Company’s board of directors and stockholders voted to increase the number of shares reserved for issuance under the 2015 Plan by 1.4 million shares.

In May 2020, the board of directors adopted the 2020 Stock Options and Incentive Plan (the “2020 Plan”).

The 2015 plan was suspended and no further grants may be issued under the 2015 Plan.

The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options or other awards including stock appreciation rights, restricted stock awards and restricted stock units to the Company’s employees, officers, directors, advisors, and consultants for the purchase of up to 4.2 million shares of the Company’s common stock.

In addition, to the extent that awards outstanding under the 2020 Plan or the 2015 Plan are cancelled, forfeited or held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the registrant prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) subsequent to May 2020, the shares of common stock reserved for issuance pursuant to such awards will become available for issuance as shares of common stock under the 2020 Plan.

The 2020 Plan provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2020 Plan on January 1 of each year beginning January 1, 2021.

Stock-Based Compensation

Equity Incentive Plans

In 2015, the Company's Board of Directors adopted the 2015 Equity Incentive Plan, as amended in 2018, 2019 and 2020 (the “2015 Plan”), which provided for the grant of incentive stock options, nonqualified stock options or other awards including stock appreciation rights and restricted stock awards to the Company’s employees, officers, directors, advisors, and consultants.

In May 2020, the Board of Directors adopted the 2020 Stock Option and Incentive Plan (the “2020 Plan”) and suspended the 2015 Plan.

Awards outstanding under either the 2015 Plan or 2020 Plan that are cancelled, expire or otherwise terminated subsequent to May 2020 will become available for issuance as common stock under the 2020 Plan.

Additionally, the 2020 Plan is subject to automatic increases on January 1 of each year beginning January 1, 2021.

The number of shares added each January 1 will be equal to the lesser of:

(i) 5% of the outstanding shares on the immediately preceding December 31 or (ii) such amount as determined by the administrator of the 2020 Plan, which is the compensation committee of the board of directors.

As of December 31, 2020, 3.6 million shares remained available for issuance under the 2020 Plan.

Prior to the adoption of the 2020 Plan, options under the 2015 Plan could be granted for periods of up to 10 years and at prices no less than 100% of the estimated fair value of the shares on the date of grant as determined by the board of directors, provided, however, that the exercise price of an incentive stock option granted to a 10.0% shareholder could not be less than 110.0% of the estimated fair value of the shares on the date of grant and the option was not exercisable after the expiration of five years from the date of grant.

(i) 5 % of the outstanding shares on the immediately preceding December 31 or (ii) such amount as determined by the administrator of the 2020 Plan, which is the compensation committee of the Board of Directors of the Company.

As of December 31, 2021, the 2020 Plan had 4,234,213 shares of common stock available for future issuance.

Options under the 2020 Plan may be granted for periods of up to 10 years and at prices no less than the market price of the Company’s common stock on the date of grant, provided, however, that the exercise price of an incentive stock option granted to a 10 % shareholder shall not be less than 110 % of the estimated fair value of the shares on the date of grant and the option is not exercisable after the expiration of five years from the date of grant.

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The Company granted restricted stock awards under the 2015 Plan.

The purchase price of the restricted common stock awards was the estimated fair value as determined by the board of directors at the issuance date.

The purchase price of the restricted common stock awards was the estimated fair value as determined by the Company's Board of Directors at the issuance date.

The shares vest from one to four years and vesting could be accelerated upon a change in control.

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The repurchase price for unvested shares of common stock will be the lower of (i) the fair market value on the date of repurchase or (ii) their original purchase price.

During the vesting term, holders of restricted stock awards are deemed to be a common stock shareholder and have dividends and voting rights.

During the vesting term, holders of restricted stock awards are deemed to be common stock shareholders and have dividends and voting rights.

The Company accounted for restricted stock awards as early exercised options and recognized a liability in other liabilities when cash was received for the purchase of shares of restricted stock.

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As of December 31, 2021 and 2020, the Company recorded a liability included in accrued expenses and other liabilities of $ 2,000 and $ 10,000 , respectively.

There have been no restricted stock awards granted during the years ended December 31, 2020 and 2019.

There were no grants of restricted stock awards during the years ended December 31, 2021 and 2020.

The following table summarizes restricted stock activity during the year ended December 31, 2021:

of Shares Weighted-

Outstanding and unvested, as of December 31, 2020 126,522 $ 1.85

Vested ( 103,164 ) $ 1.78

Repurchases ( 1,517 ) $ 2.12

Outstanding and unvested, as of December 31, 2021 21,841 $ 2.16

Restricted stock awards of 4,195 shares with a weighted-average grant date fair value of $0.08 per share, were not purchased by the award holders as of December 31, 2020.

As these shares of the restricted common stock awards were not issued, they are not included in the table above.

The aggregate fair value of restricted stock awards vested during the years ended December 31, 2020 and 2019 was $0.2 million and $0.4 million, respectively.

The aggregate fair value of restricted stock awards vested during the years ended December 31, 2021 and 2020 was $ 0.2 million each year.

Total intrinsic value of outstanding unvested restricted stock awards as of December 31, 2021 and 2020 was $ 0.3 million and $ 2.9 million, respectively.

Incentive Stock Options and Nonqualified Stock Options

Stock options issued under either the 2015 Plan or the 2020 Plan generally vest over a four-year period and expire ten years from the date of grant.

Stock options issued under either the 2015 Plan or the 2020 Plan generally vest over four years and expire ten years from the date of grant.

Certain options provide for accelerated vesting if there is a change in control, as defined in the respective plans.

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Year Ended December 31,

Expected volatility

2021 2020 2019

74.80% - 82.53%

Expected volatility 74.83 % - 76.31 % 72.10 % - 77.50 % 74.80 % - 82.53 %

Risk-free interest rate 0.61 % - 1.39 % 0.27 % - 0.82 % 1.43 % - 2.59 %

0.27% - 0.82%

1.43% - 2.59%

Expected dividend — — —

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A summary of option activity under the 2015 Plan and the 2020 Plan is as follows:

Options Weighted-

Average Exercise

Price per Share

Term (in Years)

Price per Share Weighted-

Term (in Years) Aggregate

Outstanding as of December 31, 2020 2,993,855 $ 8.18 8.84 $ 43,890

Granted 1,520,391 $ 26.03

Exercised ( 336,340 ) $ 5.21

Forfeited ( 557,726 ) $ 16.4

Outstanding as of December 31, 2021 3,620,180 $ 14.56 8.25 $ 16,735

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The weighted-average grant date fair value of options granted during years ended December 31, 2021 and 2020 was $ 16.94 per share and $ 7.27 per share, respectively.

As of December 31, 2020, there was $0.2 million of unrecognized compensation costs that is expected to be recognized over the weighted-average periods of 1.22 years related to restricted stock awards.

As of December 31, 2020, there was $14.3 million of unrecognized compensation costs that is expected to be recognized over the weighted-average periods of 2.72 years related to stock options.

2020 Employee Stock Purchase Plan

In June 2020, the Company adopted the 2020 ESPP.

In June 2020, the Company adopted the Company's 2020 Employee Stock Purchase Plan (the "2020 ESPP").

The Company reserved 700,000 shares of common stock for future issuance under the plan.

The 2020 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1 of each calendar year, beginning January 1, 2021, by the least of (i) 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (ii) 700,000 shares or (iii) such lesser amount as determined by the administrator of the 2020 ESPP, which is the compensation committee of the board of directors.

The 2020 ESPP provides that the

number of shares reserved and available for issuance will automatically increase on January 1 of each calendar year, beginning January 1, 2021, by the least of (i) 1.0 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (ii) 700,000 shares or (iii) such lesser amount as determined by the administrator of the 2020 ESPP, which is the compensation committee of the Board of Directors of the Company.

Under the 2020 ESPP, eligible employees may purchase shares of our common stock through payroll deductions that cannot exceed 15 % of each employee’s salary.

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At the end of the purchase period, eligible employees are permitted to purchase shares of common stock at the lower of 85 % of the fair market value at the beginning of the offering period or 85 % of the fair market value at the end of the purchase period, subject to tax limitations on the total value of the purchase.

The 2020 ESPP is considered a compensatory plan, and the Company recorded $0.5 million in stock-based compensation expense for year ended December 31, 2020.

There was no stock-based compensation expense attributed to the 2020 ESPP for the year ended December 31, 2019 as the 2020 ESPP was adopted in 2020.

As of December 31, 2020, no shares of common stock were issued under the 2020 ESPP.

The 2020 ESPP is considered a compensatory plan, and the Company recorded $ 0.5 million, $ 0.5 million and nil in stock-based compensation expense for year ended December 31, 2021, 2020 and 2019.

As of December 31, 2021, 86,902 shares of common stock were issued under the 2020 ESPP.

The Company used Black-Scholes option pricing model to estimate stock-based compensation expense for the 2020 ESPP with the following assumptions:

Year Ended December 31,

2021 2020 2019

Risk-free interest rate 0.06 % - 0.07 %

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Stock-Based Compensation Expense

The following table presents the classification of stock-based compensation expense for the years ended December 31, 2020 and 2019 (in thousands):

The following table presents the classification of stock-based compensation expense during the years ended December 31, 2021 and 2020 (in thousands):

Year Ended December 31,

2021 2020 2019

Research and development expenses $ 3,928 $ 1,719 $ 584

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Total stock-based compensation expense $ 10,437 $ 3,895 $ 1,829

As of December 31, 2021, there was $ 37,000 of unrecognized compensation costs that is expected to be recognized over the weighted-average periods of 0.38 years related to restricted stock awards.

As of December 31, 2021, there was $ 24.2 million of unrecognized compensation costs that is expected to be recognized over the weighted-average periods of 2.5 years related to stock options.

The Company had a pre-tax U.S.

book loss of $41.5 million and $0.6 million for the years ended December 31, 2020 and 2019, respectively.

For the years ended December 31, 2020 and 2019, the Company did not record an income tax provision.

book loss of $ 97.3 million, $ 41.5 million, and $ 0.6 million for the years ended December 31, 2021, 2020 and 2019 respectively.

During the years ended December 31, 2021, 2020 and 2019, the Company did not record an income tax provision.

The Company will continue to maintain a 100 % valuation allowance on total deferred tax assets.

The Company believes it is more likely than not that the related deferred tax asset will not be realized.

The Company believes it is more likely than not that the related deferred tax assets will not be realized.

A reconciliation of the U.S.

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Year Ended December 31,

2021 2020 2019

Income tax computed at federal statutory rate 21.0 % 21.0 % 21.0 %

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Accrued expenses 292 291

Other 775 474

Deferred rent — 266

Lease liability 2,000 —

Stock based compensation 1,816 428

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Deferred tax liabilities:

Fixed asset basis $ ( 61 ) $ ( 124 )

Prepaid expenses ( 921 ) ( 558 )

Right of use asset ( 1,760 ) —

Total deferred tax liabilities ( 2,742 ) ( 682 )

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Net operating losses and tax credit carryforwards were as follows (in thousands):

Expiration Year

Net operating losses, federal (starting from January 1, 2018)

Does not expire

December 31, 2021 Expiration Year

Net operating losses, federal (starting from January 1, 2018) $ 155,231 Does not expire

Net operating losses, federal (before January 1, 2018) $ 29,486 2035 - 2037

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Tax credits, federal $ 14,094 2036 - 2041

Tax credits, state

Does not expire

Tax credits, state $ 4,069 Does not expire

Utilization of the net operating loss carryforwards and research credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code (“IRC”) and similar state provisions.

Annual limitations may result in the expiration of the net operating losses and tax credit carryforwards before they are utilized.

The Company performed a IRC Section 382 analysis through December 31, 2020 and does not expect any previous ownership changes to result in a limitation that will reduce the total amount of net operating loss and tax credit carryforwards disclosed that can be utilized.

The Company performed a IRC Section 382 analysis through December 31, 2021 and does not expect any previous ownership changes to result in a limitation that will reduce the total amount of net operating loss and

tax credit carryforwards disclosed that can be utilized.

Subsequent ownership changes may affect the limitation in future years.

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The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized.

The Company has elected to include interest and penalties as a component of tax expense.

The Company's accounting policy is to include interest and penalties as a component of tax expense.

During the years ended December 31, 2021, 2020 and 2019, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits.

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Year Ended December 31,

2021 2020 2019

January 1 $ 2,007 $ 1,355 $ 855

Additions based on tax positions related to current year 1,081 513 570

Additions (reductions) for tax positions of prior year 417 139 ( 70 )

December 31 $ 3,505 $ 2,007 $ 1,355

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "Cares Act") was enacted.

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The Company has contractual arrangements with research and development organizations and suppliers;

however, these contracts are generally cancelable on 30 days’ notice and the obligations under these contracts are largely based on services performed.

however, these contracts are generally cancellable on 30 days’ notice and the obligations under these contracts are largely based on services performed.

License and Collaboration Agreements

Potential payments related to the Company’s license and research agreements, including milestone and royalty payments, are detailed in Notes 6 and 7.

In February 2018, the Company entered into a non-cancelable lease agreement (the “Lease”) for premises consisting of approximately 32,974 square feet located in South San Francisco, California (the “Premises”).

The Company moved into the Premises in July 2018.

The Premises is being used for the Company’s corporate headquarters and principal operating facility.

The term of the Lease is eighty-four months, which commenced on July 1, 2018.

Base rent was abated for the first two months of the lease term and thereafter is $0.2 million per month during the first year of the lease term, with specified annual increases thereafter.

The Company paid a refundable security deposit of approximately $0.4 million, which is included in other non-current assets in the Balance Sheets at December 31, 2020 and 2019.

The Company has the right to extend the lease term by seven years upon written notice not more than twelve months nor less than nine months prior to the expiration of the original lease term, with monthly payments equal to the “fair rental value” as defined in the Lease.

R ent expense, including common area maintenance expense, was $ 2.5 million for each of the year ended December 31, 2020 and 2019 .

Future minimum lease payments under the Lease as of December 31, 2020 were as follows (in thousands):

Year ending December 31:

Operating Lease

Legal Proceedings

From time to time, we may become involved in legal proceedings arising from the ordinary course of business.

We record a liability for such matters when it is probable that future losses will be incurred and that such losses can be reasonably estimated.

From time to time, the Company may become involved in legal proceedings arising from the ordinary course of business.

The Company record a liability for such matters when it is probable that future losses will be incurred and that such losses can be reasonably estimated.

Significant judgment by us is required to determine both probability and the estimated amount.

9 unchanged sentences

The Company currently has directors’ and officers’ insurance.

On January 1, 2021, the Company adopted ASC 842 and the following disclosures as of and for the year ended December 31, 2021 are presented under ASC 842.

The Company moved into the Premises in July 2018.

The Premises is being used for the Company’s corporate headquarters and principal operating facility.

The term of the Lease is eighty-four months , which commenced on July 1, 2018.

Base rent was abated for the first two months of the lease term and thereafter is $ 0.2 million per month during the first year of the lease term, with specified annual increases thereafter.

The Company paid a refundable security deposit of approximately $ 0.4 million, which is included in other non-current assets in the Balance Sheets at December 31, 2021 and 2020.

The exercise of lease renewal options is at the sole discretion of the Company and is not included in the ROU asset and lease liability as it is not reasonably certain of exercise.

This lease does not contain material variable rent payments, residual value guarantees, covenants, or other restrictions.

For the year ended December 31, 2021, the Company recognized expenses associated with the operating leases of $ 2.3 million.

Additionally, the Company incurred variable lease costs of $ 0.9 million which is comprised primarily of the Company's proportionate share of operating expenses, property taxes, and insurance.

Short-term lease expense and variable lease payments recorded in operating expenses were immaterial for the year ended December 31, 2021.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 2.4 million.

Maturities of the Company's operating lease liability as of December 31, 2021 were as follows:

Year ending December 31:

Operating Lease

Total lease payments $ 8,222

Present value discount 1,028

Total operating lease liabilities $ 7,194

The weighted-average remaining lease terms and discount rates related to the Company's operating leases were as follows:

As of December 31, 2021

Weighted-average remaining lease term (in years) 3.40

Weighted-average discount rate 7.90 %

Total rent expense under ASC 840 was $ 2.5 million during each of the years ending December 31, 2020 and 2019.

Future minimum lease payments under the Lease as of December 31, 2021 were as follows (in thousands):

Year ending December 31:

Operating Lease

Total lease payments $ 7,660

Related Party Transactions

1 unchanged sentence

Commencing January 2020, Third Rock Ventures ceased providing management consulting services to the Company.

The Company recorded no consulting expenses for consulting services provided by Third Rock Ventures during the year ended December 31, 2020.

The Company recorded Third Rock Ventures consulting expenses to general and administrative expense of $36,000 for the year ended December 31, 2019.

The Company recorded no consulting expenses for consulting services provided by Third Rock Ventures during the years ended December 31, 2021 and 2020.

The Company recorded Third Rock Ventures consulting expenses to general and administrative expense of $ 36,000 during the year ended December 31, 2019.

In June 2021, the Company granted 26,572 stock options with a grant date fair value of $ 0.5 million to partners of Third Rock Ventures who are also serving as non-employee directors on the Company's Board of Directors.

The shares of common stock subject to these options ve st 25 % on the first day of each calendar quarter for three quarters with the final vest date being the earlier of (i) the one-year anniversary of the grant date or (ii) the next Annual Meeting of Stockholders.

In March 2020, the Company granted 26,573 stock options with a grant date fair value of $ 0.1 million to a partner at Third Rock Ventures, who is also serving as a non-employee director on the Company’s Board of Directors.

2 unchanged sentences

The stock-based compensation expense related to these options was immaterial during the years ended December 31, 2021.

From time to time, the Company makes charitable contributions to the University of California, San Francisco Foundation (the “UCSF Foundation”), which are directed to support research performed in the laboratories of three of the Company’s scientific founders.

The Company made charitable contributions to the UCSF Foundation in the amount of $0.7 million and $0.4 million during the years ended December 31, 2020 and 2019, respectively.

The Company paid its scientific founders, who are members of the Company’s scientific advisory board, $0.2 million during the years ended December 31, 2020 and 2019.

In October 2019, the Company entered into the Novartis Agreement with Novartis covering the development and commercialization of Pliant’s preclinical product candidate, PLN-1474 and up to three additional targets.

Upon execution of the Agreement, Pliant also entered into a financing side letter with Novartis, whereby Novartis committed to provide up to $30.0 million in equity financing of which $20.0 million was provided for preferred shares as a part of a Series C equity offering and the remaining $10.0 million was completed in a private placement for common shares upon the Company’s IPO.

As of December 31, 2020 and

2019, Novartis owned approximately 6.1 % and 7.4 %, respectively, of our outstanding shares of common stock on a fully diluted basis.

See Notes 6 and Note 9 for additional information .

Defined Contribution Plan

1 unchanged sentence

Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax regulations.

The Company made contributions to the plan of $0.4 million and $0.2 million for the years ended December 31, 2020 and 2019, respectively.

The Company made contributions to the plan of $ 0.6 million, $ 0.4 million and $ 0.2 million during the years ended December 31, 2021, 2020 and 2019, respectively.

Net Loss Per Share Attributable to Common Stockholders

1 unchanged sentence

Year Ended December 31,

2021 2020 2019

Redeemable convertible preferred stock (on an as-converted basis) — — 18,442,233

2 unchanged sentences

Unvested restricted shares 21,841 126,522 302,211

Total 3,642,021 3,124,572 20,086,140

A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net loss per share attributable to common stockholders is as follows (in thousands, except share and per share amounts):

Year Ended December 31,

2021 2020 2019

Net loss per share:

accretion to redemption value and dividends on redeemable

convertible preferred shares

Net loss $ ( 97,263 ) $ ( 41,533 ) $ ( 631 )

accretion to redemption value and dividends on redeemable convertible preferred shares

— — ( 6,225 )

Net loss attributable to common stockholders $ ( 97,263 ) $ ( 41,533 ) $ ( 6,856 )

Weighted-average common shares outstanding used to calculate net loss per

share attributable to common stockholders:

Weighted-average common shares outstanding used to calculate net loss per share attributable to common stockholders:

Basic 35,846,421 21,344,236 1,623,358

Diluted 35,846,421 21,344,236 1,623,358

Net loss per share attributable to common stockholders:

Basic $ ( 2.71 ) $ ( 1.95 ) $ ( 4.22 )

Diluted $ ( 2.71 ) $ ( 1.95 ) $ ( 4.22 )

Changes in and Disagreements With Accountants 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 8. Financial Statements and Supplementary Data