Prime Medicine, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. Management’s Annual Report on Internal Controls Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external 122 purposes in accordance with United States GAAP. Our internal control over financial reporting includes those policies and procedures that: • pertain to the maintenance of records that, in reasonable detail, accurately, and fairly reflect our transactions and dispositions of our assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with United States GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its 2013 Internal Control – Integrated Framework. Based on our assessment, our management has concluded that, as of December 31, 2024, our internal control over financial reporting is effective based on those criteria. Attestation Report of the Registered Public Accounting Firm This Annual Report does not include an attestation report of out registered public accounting firm regarding our internal control over financial reporting due to an exemption provided by the JOBS Act for “emerging growth companies.” Changes in Internal Control over Financial Reporting We continuously seek to improve the efficiency and effectiveness of our internal controls, which may result in changes to our systems and refinements to our processes. However, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information From time to time, our officers (as defined in Rule 16a–1(f)) and directors may enter into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as each such term is defined in Item 408 of Regulation S-K). During the three months ended December 31, 2024, none of the Company’s directors or officers adopted , modified or terminated a plan or other arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K). Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 123 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2024. Item 11. Executive Compensation The information required under this item (excluding the information under the subheading “Pay Versus Performance”) is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2024. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2024. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2024. Item 14. Principal Accountant Fees and Services The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2024. 124 PART IV Item 15. Exhibits and Financial Statement Schedules (1) Financial Statements For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference. (2) Financial Statement Schedules Schedules have been omitted since they are either not required or not applicable or the information is otherwise included herein. (3) Exhibits Exhibit number Description of exhibit 3.1 Third Amended and Restated Certificate of Incorporation of Prime Medicine, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 24, 2022) 3.2 Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of Prime Medicine, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on June 12, 2024). 3.3 Second Amended and Restated Bylaws of Prime Medicine, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 21, 2024). 4.1 Amended and Restated Investors’ Rights Agreement among the Registrant and certain of its stockholders, dated April 20, 2021 (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 4.3 Description of Securities (incorporated by reference to Exhibit 4.3 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 9, 2023) 4.4 Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on February 16, 2024) 10.1# 2019 Stock Option and Grant Plan, as amended, and forms of award agreements thereunder (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.2# 2022 Stock Option and Incentive Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.3# 2022 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.4# Senior Executive Cash Incentive Bonus Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.5# Amended and Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10. 1 of the Registrant’s Q uarterly Report on Form 10-Q, filed with the SEC on A u gust 8, 2024) 10.6# Form of Officer Indemnification Agreement (incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.7# Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 125 Exhibit number Description of exhibit 10.8# Amended and Restated Employment Agreement, dated July 7, 2022, between the Registrant and Keith Gottesdiener (incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.9# Amended and Restated Employment Agreement, dated July 20, 2022, between the Registrant and Jeremy Duffield (incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.10# Amended and Restated Employment Agreement, dated July 11, 2022, between the Registrant and Ann Lee (incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.11# Amended and Restated Employment Agreement, dated July 7, 2022, between the Registrant and Carman Alenson (incorporated by reference to Exhibit 10.11 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579), filed with the SEC on October 17, 2022 10.12# Amended and Restated Employment Agreement, dated July 7, 2022, between the Registrant and Meredith Goldwasser (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579), filed with the SEC on October 17, 2022) 10.13# Employment Agreement, effective as of January 17, 2024, between the Registrant and Allan Reine (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on January 5, 2024) 10.14† Collaboration and License Agreement, dated September 26, 2019, between Beam Therapeutics Inc. and the Registrant (incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.15† License Agreement, dated September 26, 2019, between The Broad Institute, Inc. and the Registrant, as amended (incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.16† Amendment No. 1 to License Agreement, dated May 5, 2020, between The Broad Institute, Inc. and the Registrant (incorporated by reference to Exhibit 10.15 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.17† Amendment No. 2 to License Agreement, dated February 18, 2021, between The Broad Institute, Inc. and the Registrant (incorporated by reference to Exhibit 10.16 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.18† Amendment No. 3 to License Agreement, dated December 22, 2022, between The Broad Institute, Inc. and the Registrant (incorporated by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 9, 2023) 10.19†* Amendment No. 4 to License Agreement, dated September 27, 2024, between The Broad Institute, Inc. and the Registrant (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2024) 10.20† License Agreement, dated December 22, 2022, between The Broad Institute, Inc. and the Registrant (incorporated by reference to Exhibit 10.1 8 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 9, 2023) 10.21 Pledge from Prime Medicine, amended and restated August 2022, between The Broad Institute, Inc. and the Registrant (incorporated by reference to Exhibit 10.17 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022) 10.22+ Andrew Anzalone Offer Letter, dated December 20, 2019 (incorporated by reference to Exhibit 10.21 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed on October 17, 2022) 10.23 Andrew Anzalone Confidentiality, Assignment and Nonsolicitation Agreement, dated October 16, 2020 (incorporated by reference to Exhibit 10.22 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed on October 17, 2022) 10.24# Form of Executive Employment Agreement (incorporated by reference to Exhibit 10.23 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-267579) filed with the SEC on October 17, 2022 10.25# Amendment No. 1 to Amended and Restated Employment Agreement, dated July 6, 2023, between Registrant and Keith Gottesdiener (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 3, 2023). 126 Exhibit number Description of exhibit 10.26 Lease Agreement, dated as of November 22, 2021, between NW Cambridge Property Owner, LLC and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2023) 10.27+† Securities Purchase Agreement, dated September 28, 2024, by and between Juno Therapeutics, Inc. and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on November 12, 2024) 10.28+† Research Collaboration and License Agreement, dated September 28, 2024, by and between Juno Therapeutics, Inc. and the Registrant (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2024) 19.1*† P rime Medicine, Inc . Amended and Restated Insider Trading Policy 21.1* Subsidiaries of the Registrant 23.1* Consent of PricewaterhouseCoopers, LLP, Independent Registered Public Accounting Firm 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1 Prime Medicine, Inc. Compensation Recovery Policy, dated September 15, 2023 (incorporated by reference to Exhibit 97.1 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 1, 2024) 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (embedded within the Inline XBRL document) __________________ * Filed herewith. ** The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. # Indicates a management contract or any compensatory plan, contract or arrangement. † Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Item 601(b)(10) of Regulation S-K. + Certain exhibits and schedules to these agreements have been omitted pursuant to Item 601(a)(5) and (6) of Regulation S-K. The registrant will furnish copies of any of the exhibits and schedules to the Securities and Exchange Commission upon request. Item 16. Form 10-K Summary None. 127 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Prime Medicine, Inc. February 28, 2025 By: /s/ Keith Gottesdiener Keith Gottesdiener President and Chief Executive Officer POWER OF ATTORNEY AND SIGNATURES Each person whose individual signature appears below hereby authorizes and appoints Keith Gottesdiener, Allan Reine, and Carman Alenson, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Keith Gottesdiener President, Chief Executive Officer and Director (Principal Executive Officer) February 28, 2025 Keith Gottesdiener /s/ Allan Reine Chief Financial Officer (Principal Financial Officer) February 28, 2025 Allan Reine /s/ Carman Alenson Chief Accounting Officer (Principal Accounting Officer) February 28, 2025 Carman Alenson /s/ Thomas Cahill Director February 28, 2025 Thomas Cahill /s/ Wendy Chung Director February 28, 2025 Wendy Chung /s/ Kaye Foster Director February 28, 2025 Kaye Foster /s/ Michael Kelly Director February 28, 2025 Michael Kelly /s/ Jeff Marrazzo Director February 28, 2025 Jeff Marrazzo /s/ Robert Nelsen Director February 28, 2025 Robert Nelsen /s/ David Schenkein Director February 28, 2025 David Schenkein 128 PRIME MEDICINE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 238 ) F- 2 Consolidated Balance Sheets F- 3 Consolidated Statements of Operations and Comprehensive Loss F- 4 Consolidated Statements of Stockholders’ Equity F- 5 Consolidated Statements of Cash Flows F- 6 Notes to Consolidated Financial Statements F- 8 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Prime Medicine, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Prime Medicine, Inc. and its subsidiary (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, stockholders' equity and of cash flows for the years then ended, including the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt About the Company's Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring losses from operations, has an accumulated deficit, and needs to raise additional capital to fund future operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements 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 consolidated 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. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 28, 2025 We have served as the Company's auditor since 2021. F-2 PRIME MEDICINE, INC. CONSOLIDATED BALANCE SHEETS December 31, (in thousands, except share and per share amounts) 2024 2023 Assets Current assets: Cash and cash equivalents $ 182,476 $ 41,574 Short-term investments 2,998 74,639 Short-term investment — related party 4,968 5,452 Prepaid expenses 6,777 19,057 Other current assets 14,667 2,254 Total current assets 211,886 142,976 Property and equipment, net 24,404 22,659 Operating lease right-of-use assets 47,156 13,941 Restricted cash 14,062 13,496 Other assets — 779 Total assets $ 297,508 $ 193,851 Liabilities and Stockholders’ Deficit Current liabilities: Accounts payable $ 11,351 $ 19,537 Accrued expenses and other current liabilities 15,904 14,110 Accrued settlement payment — related party — 13,500 Deferred revenue — related party 7,092 — Operating lease liability 3,614 9,276 Total current liabilities 37,961 56,423 Deferred revenue, net of current — related party 63,218 — Operating lease liability, net of current 37,180 4,357 Research and development funding liability 6,000 — Total liabilities 144,359 60,780 Commitments and contingencies (Note 12) Stockholders’ equity Common stock, par value of $ 0.00001 per share; 775,000,000 shares authorized; 131,160,842 and 97,377,121 shares issued and outstanding as of December 31, 2024 and 2023, respectively 2 2 Additional paid-in capital 840,358 624,414 Accumulated other comprehensive loss 1 ( 15 ) Accumulated deficit ( 687,212 ) ( 491,330 ) Total stockholders’ equity 153,149 133,071 Total liabilities and stockholders’ equity $ 297,508 $ 193,851 The accompanying notes are an integral part of these consolidated financial statements. F-3 PRIME MEDICINE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Year Ended December 31, (in thousands, except share and per share amounts) 2024 2023 Revenue: Collaboration revenue — related party $ 1,609 $ — Collaboration revenue 1,374 — Total revenue 2,983 — Operating expenses: Research and development (1) 155,289 147,905 Settlement payment — related party — 13,500 General and administrative 50,161 43,387 Total operating expenses 205,450 204,792 Loss from operations ( 202,467 ) ( 204,792 ) Other income: Interest income 3,522 2,811 Accretion (amortization) of investments 3,507 5,677 Change in fair value of short-term investment — related party ( 485 ) ( 2,382 ) Other income, net 41 274 Total other income, net 6,585 6,380 Net loss before income taxes ( 195,882 ) ( 198,412 ) Benefit from income taxes — 279 Net loss attributable to common stockholders $ ( 195,882 ) $ ( 198,133 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 1.65 ) $ ( 2.18 ) Weighted-average common shares outstanding, basic and diluted 118,600,381 90,969,327 Comprehensive loss: Net loss $ ( 195,882 ) $ ( 198,133 ) Change in unrealized loss on investments, net of tax 16 369 Comprehensive loss $ ( 195,866 ) $ ( 197,764 ) __________________ (1) Includes related party amounts of $ — million and $ 0.6 million for the years ended December 31, 2024 and 2023, respectively. The accompanying notes are an integral part of these consolidated financial statements. F-4 PRIME MEDICINE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity (in thousands, except share amounts) Shares Amount Balances at December 31, 2022 97,209,213 $ 2 $ 609,849 $ ( 384 ) $ ( 293,197 ) $ 316,270 Issuance of common stock upon exercise of stock options 167,908 — 655 — — 655 Stock-based compensation expense — — 13,910 — — 13,910 Change in unrealized loss on investments, net of tax — — — 369 — 369 Net loss — — — — ( 198,133 ) ( 198,133 ) Balances at December 31, 2023 97,377,121 $ 2 $ 624,414 $ ( 15 ) $ ( 491,330 ) $ 133,071 Issuance of common stock from public offering, net of issuance costs of $ 8.9 million 22,560,001 — 132,055 — — 132,055 Issuance of pre-funded warrants, net of issuance costs of $ 1.2 million — — 18,800 — — 18,800 Issuance of common stock under the Securities Purchase Agreement to BMS — related party (Note 9) 11,006,163 — 38,081 — — 38,081 Issuances of common stock under the employee stock purchase plan 189,509 — 837 — — 837 Issuances of common stock upon exercise of stock options 28,048 — 103 — — 103 Stock-based compensation expense — — 26,068 — — 26,068 Change in unrealized loss on investments, net of tax — — — 16 — 16 Net loss — — — — ( 195,882 ) ( 195,882 ) Balances at December 31, 2024 131,160,842 $ 2 $ 840,358 $ 1 $ ( 687,212 ) $ 153,149 The accompanying notes are an integral part of these consolidated financial statements. F-5 PRIME MEDICINE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in thousands) 2024 2023 Cash flows used in operating activities: Net loss $ ( 195,882 ) $ ( 198,133 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 26,068 13,910 Non cash lease expense 12,355 12,788 Depreciation expense 6,128 4,653 Change in fair value of short-term investment — related party 484 2,382 Loss on disposal of property and equipment — 28 Amortization of premiums and discount on short-term investments ( 3,094 ) ( 3,408 ) Deferred income taxes — ( 279 ) Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 15,859 ) ( 9,455 ) Accounts payable ( 5,257 ) 9,140 Accrued expenses and other current liabilities 1,843 1,758 Accrued settlement payment — related party ( 13,500 ) 13,500 Deferred revenue — related party 70,310 — Lease liability ( 6,461 ) ( 12,296 ) Net cash used in operating activities ( 122,865 ) ( 165,412 ) Cash flows provided by investing activities: Maturities of investments 204,200 132,556 Purchases of investments ( 129,449 ) ( 104,951 ) Purchases of property and equipment ( 7,294 ) ( 8,724 ) Return (payment) of security deposit 1,000 ( 170 ) Net cash provided by investing activities 68,457 18,711 Cash flows provided by financing activities: Proceeds from follow-on offering, net of issuance costs 132,055 — Proceeds from issuance of pre-funded warrants, net of issuance costs 18,800 — Proceeds from issuance of common stock under the BMS Securities Purchase Agreement — related party 38,081 — Proceeds from research and development funding liability 6,000 — Proceeds from ESPP offerings 837 — Net proceeds from stock option exercises 103 655 Net cash provided by financing activities 195,876 655 Net change in cash, cash equivalents, and restricted cash 141,468 ( 146,046 ) Cash, cash equivalents, and restricted cash at beginning of period 55,070 201,116 Cash, cash equivalents, and restricted cash at end of period $ 196,538 $ 55,070 The accompanying notes are an integral part of these consolidated financial statements. F-6 PRIME MEDICINE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in thousands) 2024 2023 Reconciliation of cash, cash equivalents and restricted cash: Cash, cash equivalents, and restricted cash at end of period $ 196,538 $ 55,070 Less: restricted cash 14,062 13,496 Total cash, and cash equivalents $ 182,476 $ 41,574 Supplemental cash flow information: Right-of-use assets obtained in exchange for new operating lease liabilities $ 44,935 $ 3,265 Decrease in right-of-use assets due to lease termination $ — $ 6,081 Supplemental disclosure of non-cash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued expenses $ 1,154 $ 575 The accompanying notes are an integral part of these consolidated financial statements. F-7 PRIME MEDICINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of the Business and Basis of Presentation Prime Medicine, Inc., together with its consolidated subsidiary (the “Company”) is a biotechnology company committed to delivering a new class of differentiated one-time curative treatments. The Company is deploying Prime Editing technology, which it believes is a versatile, precise, and efficient gene editing technology. The Company was incorporated in the State of Delaware in September 2019. Its principal offices are in Cambridge, Massachusetts. Liquidity and Capital Resources Since its inception, the Company has devoted substantially all of its resources to building its Prime editing platform and advancing development of its portfolio of programs, establishing and protecting its intellectual property, conducting research and development activities, organizing and staffing the company, business planning, raising capital and providing general and administrative support for these operations. To date, the Company has funded its operations primarily with proceeds from sales of preferred stock and from public offerings of its common stock. In February 2024, the Company issued and sold 22,560,001 shares of its common stock, including 3,360,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares, at a price to the public of $ 6.25 per share. Further, in lieu of common stock to certain investors, the Company sold pre-funded warrants to purchase 3,200,005 shares of common stock at a public offering price of $ 6.24999 per pre-funded warrant, which represents the per share public offering price of each share of common stock less the $ 0.00001 per share exercise price for each pre-funded warrant. As a result of the offering, the Company received approximately $ 150.9 million in net proceeds, after deducting underwriting discounts, commissions and offering costs of $ 10.1 million. On September 28, 2024 (the “Effective Date”), the Company entered into a Research Collaboration and License Agreement (the “BMS Collaboration Agreement”) with Juno Therapeutics, Inc., a wholly-owned subsidiary of the Bristol-Myers Squibb Company (“BMS”). Additionally, on the Effective Date, the Company entered into a Securities Purchase Agreement (the “BMS Purchase Agreement”) with BMS, pursuant to which the Company agreed to sell and issue shares of its common stock to BMS. The BMS Collaboration Agreement and the BMS Purchase Agreement are discussed in greater detail in Note 9, License and Collaboration Agreements . Under the BMS Collaboration Agreement, the Company received a $ 55.0 million equity investment and a $ 55.0 million upfront payment. Since its inception, the Company has incurred substantial losses. As of December 31, 2024, the Company had an accumulated deficit of $ 687.2 million and expects to generate operating losses and negative operating cash flows for the foreseeable future. As of December 31, 2024, the Company maintains cash, cash equivalents, short-term investments, and related party short-term investments of $ 190.4 million. Going Concern In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern , ("ASC 205-40") the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date on which this Annual Report on Form 10-K is filed. Based on the Company's cash, cash equivalents, short-term investments, and related party short-term investments as of December 31, 2024, the Company's current and forecasted level of operations, and its forecasted cash flows, the Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management plans to provide for the Company’s capital requirements through financing or other transactions, and selling shares under the Company's “at the market offering” program. There can be no assurance that the Company will be able to raise additional capital to fund operations with terms acceptable to the Company, or at all. Because certain elements of management’s plans to mitigate the conditions that raised substantial doubt about the Company’s ability to continue as a going concern are outside of the Company’s control, including the ability to raise capital through an equity or other financing, those elements cannot be considered F-8 probable according to ASC 205-40, and therefore cannot be considered in the evaluation of mitigating factors. As a result, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for 12 months from the date these consolidated financial statements are issued. The consolidated financial statements as of December 31, 2024 have been prepared under the assumption that the Company will continue as a going concern for the next 12 months and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company’s ability to continue as a going concern is dependent upon its uncertain ability to obtain additional capital, reduce expenditures and/or execute on its business plan. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Risks and Uncertainties The Company is subject to risks and uncertainties common to early stage companies in the biotechnology industry, including, but not limited to, completing preclinical studies and clinical trials, obtaining regulatory approval for product candidates, market acceptance of products, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, reliance on third-party organizations, protection of proprietary technology, compliance with government regulations, and the ability to raise additional capital to fund operations. The Company’s product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. The Company will need to raise additional capital to support its continuing operations and to pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may be unable to raise additional capital or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so. Basis of Presentation The accompanying consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiary. Intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). Principles of Consolidation The Company’s consolidated financial statements include the accounts of Prime Medicine, Inc. and its wholly owned subsidiary Prime Medicine Securities Corp., a Massachusetts securities corporation. All significant intercompany balances and transactions have been eliminated in consolidation. Change in Presentation For the year ended December 31, 2024, “Other income, net” as presented on the consolidated statements of operations and comprehensive loss was disaggregated into “Accretion (amortization) of investments,” “Interest income,” and “Other income, net”. In addition, the Company updated its presentation of accrued expenses footnote to better represent the nature of the accrued expense. As a result, a portion of “Accrued professional fees” was disaggregated into “Facility related” and the remaining amounts were included as “Other”. These presentations have been conformed for all previous periods presented and had no impact on previously reported results. F-9 2. Summary of Significant Accounting Policies Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected within these consolidated financial statements include, but are not limited to, the valuation of the Company’s stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Actual results may differ materially from those estimates or assumptions. Concentrations of Credit Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and restricted cash. Under its investment policy, the Company invests in U.S. Treasury, government securities, and corporate debt and maintains its cash and cash equivalents at high-quality and accredited financial institutions in amounts that could exceed federally insured limits. Cash equivalents are invested in money market funds. However, the Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to be cash equivalents. Restricted Cash Restricted cash consists of letters of credit that are required to be maintained in connection with the Company’s lease arrangements. Short-term Investments and Related Party Short-Term Investment The Company’s short-term investments consist of investments in securities with remaining maturities beyond three months at the date of purchase and one year or less from the balance sheet date. The Company classifies its investments as available-for-sale and carries them at fair market value. The unrealized losses on the Company’s available-for-sale debt securities are recorded in other comprehensive loss in the consolidated statements of operations and comprehensive loss. Short-term debt securities 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. Once a decline in fair value is determined to be other-than-temporary, an impairment charge will be recorded to other income (expense), net, in the consolidated statements of operations and comprehensive loss. The Company’s short-term investment — related party was obtained from the collaboration agreement with Beam, which is a public company trading on the Nasdaq Exchange. At each reporting date, the Company recognizes the fair value of the short-term investment — related party on the consolidated balance sheets. Unrealized and realized gains and losses on the Company’s equity investment is included as a component of other income (expense) in the consolidated statements of operations and comprehensive loss. The costs of debt and equity securities for purposes of computing realized and unrealized gains and losses is based on the specific identification method. F-10 Fair Value Measurements Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The Company’s cash equivalents and short-term investments are carried at fair value, determined according to the fair value hierarchy described above. The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the estimated useful life of each asset as follows: Asset Class Estimated Useful Life Laboratory equipment 5 years Furniture and fixtures 5 years Computer hardware and software 3 years Leasehold improvements Shorter of remaining lease term or useful life Costs for capital assets not yet placed into service are capitalized and are depreciated once placed into service. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance that do not improve or extend the life of the respective assets are charged to expense as incurred. Leases The Company accounts for leases in accordance with ASC 842, Leases . In accordance with ASC 842, the Company determines if an arrangement is or contains a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company classifies leases at the lease commencement date as operating or finance leases and records a right-of-use asset and a lease liability on the consolidated balance sheet for all leases with an initial lease term of greater than 12 months. Leases with an initial term of 12 months or less are not recorded in the balance sheet, but payments are recognized as expense on a straight-line basis over the lease term. The Company has elected not to recognize leases with terms of 12 months or less. A lease qualifies as a finance lease if any of the following criteria are met at the inception of the lease: (i) there is a transfer of ownership of the leased asset to the Company by the end of the lease term, (ii) the Company holds an option to purchase the leased asset that it is reasonably certain to exercise, (iii) the lease term is for a major part of the remaining economic life of the leased asset, (iv) the present value of the sum of lease payments equals or exceeds substantially all of the fair value of the leased asset, or (v) the nature of the leased asset is specialized to the F-11 point that it is expected to provide the lessor no alternative use at the end of the lease term. All other leases are recorded as operating leases. The Company enters into contracts that contain both lease and non-lease components. Non-lease components may include maintenance, utilities, and other operating costs. The Company combines the lease and non-lease components of fixed costs in its lease arrangements as a single lease component. Variable costs, such as utilities or maintenance costs, are not included in the measurement of right-of-use assets and lease liabilities, but rather are expensed when the event determining the amount of variable consideration to be paid occurs. Finance and operating lease assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term using the discount rate implicit in the lease. If the rate implicit is not readily determinable, the Company utilizes an estimate of its incremental borrowing rate based upon the available information at the lease commencement date. Operating lease assets are further adjusted for prepaid or accrued lease payments. Operating lease payments are expensed using the straight-line method as an operating expense over the lease term. Certain of the Company’s leases include options to extend or terminate the lease. The amounts determined for the Company’s right-of-use assets and lease liabilities generally do not assume that renewal options or early-termination provisions, if any, are exercised, unless it is reasonably certain that the Company will exercise such options. If initially determined that it is not reasonably certain but subsequently the Company determines that it is reasonably certain to exercise its renewal options or early-termination provisions, the Company would reassess the lease classification, remeasure the lease liability, and adjust the right-of-use asset. In addition to evaluating arrangement that are leases, the Company examines other contracts with suppliers, vendors and outside parties to identify whether such contracts contain an embedded lease and, as applicable, records such embedded leases in accordance with ASC 842. Impairment of Long-Lived Assets Long-lived assets consist primarily of property and equipment, and operating lease right-of-use assets. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized in loss from operations when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. If such asset group is considered to be impaired, the impairment loss to be recognized is measured based on the excess of the carrying value of the impaired asset group over its fair value. Revenue recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers , (“ASC 606”). This standard applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Company enters into collaboration and licensing agreements with partners under which it may exclusively license rights to research, develop, manufacture, and commercialize product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: (1) non-refundable, upfront fees; (2) equity investment; (3) reimbursement of certain costs; (4) customer option fees for additional goods or services; (5) milestone payments; and (6) royalties on net sales of licensed products. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including F-12 whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must use its judgment to determine: (a) the number of performance obligations based on the determination under step (ii) above; (b) the transaction price under step (iii) above; (c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above; and (d) the contract term and pattern of satisfaction of the performance obligations under step (v) above. The Company also uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below. The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Amounts due to the Company for satisfying the revenue recognition criteria or that are contractually due based upon the terms of the collaboration agreements are recorded as collaboration receivable in the Company’s consolidated balance sheet. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated balance sheets. Deferred revenue expected to be recognized as revenue within 12 months following the balance sheet date are classified as current deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current. Milestone payments At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates 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. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Research and Development Expenses Research and development expenses are expensed as incurred. Research and development expenses may consist of costs incurred in connection with acquired in-process research and development and performing research and development activities, including amounts incurred under agreements with external vendors and consultants engaged to perform preclinical studies and to manufacture research and development materials for use in such studies, salaries and related personnel costs, stock-based compensation, consultant fees, and third-party license fees. Upfront payments payable by the Company under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed over the maintenance period. Milestone payments payable by the Company under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable. Nonrefundable advance payments made by the Company for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. F-13 Acquired In-Process Research and Development The Company measures and recognizes asset acquisitions or licenses to intellectual property that are not deemed to be business combinations based on the cost to acquire or license the asset or group of assets, which includes transaction costs. Goodwill is not recognized in asset acquisitions or transaction to license intellectual property. In an asset acquisition or license to intellectual property, the cost allocated to acquire in-process research and development (“IPR&D”) with no alternative future use is recognized as research and development expense on the acquisition date. Upfront and milestone payments made are accrued for and expensed when the achievement of the milestone is probable up to the point of regulatory approval. Milestone payments made upon regulatory approval are capitalized and amortized over the remaining useful life of the related product. Patent Costs The Company expenses all patent-related costs incurred in connection with filing and prosecuting patent applications in the period incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses in the statements of operations and comprehensive loss. Contingencies The Company is subject to contingent liabilities, such as legal proceedings and claims, that arise in the ordinary course of business activities. The Company accrues for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability on the consolidated balance sheets. The Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable; however, it discloses the range of reasonably possible losses. Stock-Based Compensation The Company measures stock-based awards granted to employees, directors and non-employees based on the fair value of the awards on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option pricing model estimates the fair value of the equity award using the expected term, expected volatility, risk-free interest rate, dividend rate, and the fair value of the common stock underlying the stock-based award. The Company estimates the expected life stock options using the “simplified” method, whereby, the expected life equals the arithmetic average of the vesting term and the original contractual term of the option. Due to the lack of sufficient company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The risk-free interest rates for periods within the expected life of the option were based on the U.S. Treasury yield curve in effect during the period the options were granted. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The Company recognizes forfeitures as they occur. The fair value of the common stock underlying shared based awards is the quoted market price of the Company’s common stock on the date of the grant. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the awards for service-based awards, which is generally the vesting period. Stock-based compensation expense is classified in the consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. Warrants Management assesses warrants under ASC 480, Distinguishing Liabilities from Equity , to determine whether they should be classified as equity or liability. If the classification is determined to be equity, proceeds received for the warrants are recorded as an increase to additional paid-in capital in the consolidated balance sheets. If classified as a F-14 liability, the Company records the warrant as a liability on its consolidated balance sheet and remeasures this liability to fair value at each reporting date and recognizes changes in the fair value of the warrant liability as a component of other expense in the consolidated statements of operations and comprehensive loss. Comprehensive Loss Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive loss is unrealized gains and losses on marketable securities. Net Loss per Share Attributable to Common Stockholders The Company applies the two-class method when computing net loss per share attributable to common stockholders as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires loss available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the undistributed earnings as if all loss for the period had been distributed. There is no allocation required under the two-class method during periods of loss since the participating securities do not have a contractual obligation to share in the losses of the Company. The Company has no participating securities outstanding. Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, excluding potentially dilutive common shares and of unvested restricted common stock. Diluted net loss per share attributable to common stockholders is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares. 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 anti-dilutive. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more likely than not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. F-15 Segment Information Under ASC 280, Segment Reporting , operating segment is a component of a public entity that 1) engages in business activities from which it may recognize revenues and incur expenses, 2) its operating results are regularly reviewed by the entity’s chief operating decision maker, or CODM, to make decisions about resource allocation or performance assessment, and 3) its discrete financial information is available. The Company operates and manages its business as a single segment for the purposes of assessing performance and making operating decisions. Our chief executive officer, who is the CODM, manages and allocates resources to the operations of our company on a total company basis by assessing the overall level of resources available and how to best deploy these resources across functions and research and development projects that are in line with our long-term company-wide strategic goals. In making these decisions, the CODM uses consolidated financial information for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets. The CODM performs this assessment based on the Company’s consolidated net loss. Through this analysis, the CODM assesses performance by comparing actual net loss verses the budget, and then decides how to allocate resources to invest in the Company’s research and development programs. The measure of segment assets is reported on the consolidated balance sheets as total assets. The following table contains additional information on our consolidated net loss, including significant segment expenses: Year Ended December 31, (in thousands) 2024 2023 Total revenue $ 2,983 $ — Operating expenses: Research and development expenses Personnel expenses 59,988 51,095 Research costs 41,678 59,609 Facility related 35,509 24,221 General and administrative expenses: Personnel expenses 26,569 17,076 Other segment items (1) 41,706 52,791 Total operating expenses 205,450 204,792 Total other income, net 6,585 6,380 Benefit from income taxes — 279 Net loss $ ( 195,882 ) $ ( 198,133 ) (1) Other segment items consist of professional and consultant fees, license and intellectual property fees, general and administrative facility costs, and settlement costs. Recently Issued Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires enhanced income tax disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on its related disclosures. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses , and in January 2025, issued ASU 2025-01, Clarifying the Effective Date , which requires more detailed information about specified categories of expenses included in certain expense captions presented on the face of the income statement. This ASU is effective for the first annual reporting period beginning after December 15, 2026, and for interim reporting F-16 periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact this ASU will have on its disclosures. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption. 3. Fair Value Measurements The following tables present the Company’s fair value hierarchy for its assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair value: December 31, 2024 (in thousands) Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ — $ 178,212 $ — $ 178,212 Corporate debt securities — 3,793 — 3,793 Short-term investments: U.S. Treasury and government securities — 2,998 — 2,998 Related party short-term investment: Beam equity securities 4,968 — — 4,968 Total cash equivalents and investments $ 4,968 $ 185,003 $ — $ 189,971 December 31, 2023 (in thousands) Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ — $ 24,209 $ — $ 24,209 Short-term investment: U.S. Treasury and government securities — 74,639 — 74,639 Related party short-term investment: Beam equity securities 5,452 — — 5,452 Total cash equivalents and investments $ 5,452 $ 98,848 $ — $ 104,300 The Company classifies its investments as short-term based on each instrument’s underlying contractual maturity date. The fair value of investments classified as Level 2 are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Investments in Debt Securities Unrealized gains and losses of investments in debt securities consisted of the following: December 31, 2024 (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Short-term investments in debt securities: U.S. Treasury and government securities $ 2,997 $ 1 $ — $ 2,998 F-17 December 31, 2023 (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Short-term investments in debt securities: U.S. Treasury and government securities $ 74,654 $ 7 $ ( 22 ) $ 74,639 The contractual maturities of the Company’s investments in debt securities held were as follows: (in thousands) December 31, 2024 December 31, 2023 Due within one year $ 2,998 $ 74,639 There were no marketable securities in unrealized loss positions as of December 31, 2024. Based on factors such as historical experience, market data, issuer-specific factors, and current economic conditions, the Company did not record an allowance for credit losses as of December 31, 2024 related to these investments. Further, given the lack of significant change in the credit risk, the Company does not consider these investments to be impaired. 4. Property and Equipment, Net Property and equipment, net consisted of the following: December 31, (in thousands) 2024 2023 Property and equipment: Laboratory equipment $ 27,343 $ 23,873 Leasehold improvement 5,136 579 Furniture and fixture 1,075 278 Computer hardware and software 869 11 Construction in progress 3,578 5,402 Total property and equipment 38,001 30,143 Less: Accumulated depreciation ( 13,597 ) ( 7,484 ) Total property and equipment, net $ 24,404 $ 22,659 Depreciation expense related to property and equipment is as follows: Year ended December 31, (in thousands) 2024 2023 Depreciation expense $ 6,128 $ 4,653 F-18 5. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: December 31, (in thousands) 2024 2023 Accrued expenses and other current liabilities Employee compensation and benefits $ 8,976 $ 8,270 Facility related 2,811 1,239 License fee 1,938 — Research and clinical costs 907 1,962 Other 1,272 2,639 Total accrued expenses and other current liabilities $ 15,904 $ 14,110 6. Leases 21 Erie Street, Cambridge, Massachusetts Lease In March 2020, the Company entered into an operating lease to sublease office and laboratory space located at 21 Erie Street, Cambridge, Massachusetts. This lease was subject to various amendments and the amended lease agreement provided for escalating monthly rental payments with fixed costs for expenses and property taxes included in each payment. In November 2023, the Company exercised its option to terminate this lease with a seven-month notice. 38 Sidney Street, Cambridge, Massachusetts Lease In July 2021, the Company entered into a non-cancelable operating lease to sublease office space in Cambridge, Massachusetts. The lease commenced in August 2021 and contained escalating monthly rental payments. The lease expired in December 2024 and the Company did not exercise its right to extend the lease for one additional six-month period. 64 Sidney Street, Cambridge, Massachusetts Lease In July 2021, the Company entered into a non-cancelable operating lease to sublease office space located at 64 Sidney Street, Cambridge, Massachusetts . The lease commenced in April 2022 and contained escalating monthly rental payments. The lease term expires in April 2025. The Company has a right to extend the lease for one additional six-month period at a market rate, which is not probable of being exercised by the Company. The lease requires the Company to share in prorated expenses and property taxes based on actual amounts incurred . 60 First Street, Cambridge, Massachusetts Lease In November 2021, the Company entered into a lease for three floors of office and laboratory space at 60 First Street, Cambridge, Massachusetts, with rent commencing in March 2024, subject to any credits pursuant to the terms of the lease (the “60 First Street Lease”). Subsequent to the initial non-cancelable term of the lease of ten years , the Company has an option to extend the lease for an additional period of ten years with the rent during the extension term being the then fair market rent. The Company secured the lease with a $ 13.1 million security deposit, which was recorded as restricted cash on the consolidated balance sheets as of December 31, 2024 and December 31, 2023. Accounting Considerations The Company determined that the lease contained three separate lease components, each of which represents a right of use that the Company can benefit from on its own and are neither highly dependent nor highly related to each other. The Company allocated the consideration among the three lease components based on their relative fair market values. F-19 In accordance with ASC 842, Leases , the lease commenced for one of the lease components in March 2024 and the Company recorded a right-of-use asset of $ 44.9 million, and a corresponding lease liability of $ 33.6 million on the lease commencement date; this includes a reclass of $ 11.3 million from prepaid expenses to right-of-use asset related to build out costs which were determined to be owned by the lessor. As the exercise of the option to extend the lease term is not reasonably certain, the Company will recognize lease expense for this lease component through February 2034. The lease commencement for the other two lease components is expected to occur in the first half of 2025. Any consideration paid to lease components for which the lease has not commenced are recorded as prepaid expense on the consolidated balance sheets. In June, 2024, the Company filed a complaint in Massachusetts Superior Court against NW Cambridge Property Owner, LLC (“NWC”), the Company’s landlord at 60 First Street, alleging that NWC had breached the 60 First Street Lease by, among other reasons, refusing to provide the Company with certain rental credits for the late delivery of the leased space. While this lawsuit is pending, the Company has and is expecting to continue to make certain disputed payments under the 60 First Street Lease under protest. As the Company expects this lawsuit to be resolved in its favor and for the payments made under protest to be refunded to the Company, these payments are recorded within other current assets on the Company’s consolidated balance sheets. As of December 31, 2024, total payments made under dispute was $ 10.8 million. Arsenal Street, Watertown, Massachusetts Lease In August 2024, the Company entered into the third amendment to its existing lease for approximately 16,000 square feet of combined laboratory and office space at 480 Arsenal Street, Watertown Massachusetts (the “480 Arsenal Amendment”). In September 2024, the Company entered into a new lease for approximately 48,500 square feet of combined laboratory and office space at 500 Arsenal Street, Watertown, Massachusetts (the “500 Arsenal Lease”). The landlords of the spaces at 480 Arsenal Street and 500 Arsenal Street are affiliates. The 480 Arsenal Amendment provides the Company with an additional 9,400 square feet of combined laboratory and office space (the “Expansion Space”) at no additional cost and also provides an early termination date for the existing space and the Expansion Space as the later of: 1) the date occurring 150 days after the lease commencement of 500 Arsenal Lease, or 2) 30 days after substantial completion of tenant improvements at 500 Arsenal Street. The 500 Arsenal Lease term commenced in December 2024 with a base term of 11 months. Subsequent to the base term, the Company has an option to extend the lease through August 2028. The Company secured the lease with a $ 0.6 million security deposit, which was recorded as restricted cash on the consolidated balance sheets as of December 31, 2024. The 500 Arsenal Lease also provides a tenant improvement allowance of $ 2.4 million and an additional tenant improvement allowance of $ 1.2 million, which the Company would be obligated to repay to the landlord. Accounting Considerations As the 480 Arsenal Amendment and the 500 Arsenal Lease meet the criteria for combining contracts under ASC 842, the Company determined that both 480 Arsenal Amendment and the 500 Arsenal Lease are modifications to its existing lease at 480 Arsenal Street. Within the combined contract the Company identified two separate lease components, each of which represents a right of use that the Company can benefit from on its own and which are neither highly dependent nor highly related to the other. The Company allocated the consideration under the combined contract among the two lease components based on their relative fair market value. In calculating the allocable consideration and the fair market value of each lease component, the Company determined it is probable that it will exercise the option to extend the lease term provided under the 500 Arsenal Lease. In accordance with ASC 842, the Company possessed the ability to control and derive the economic benefit for its leased space at 480 Arsenal on the effective date of the modification. Therefore, on the effective date, the Company recorded a right-of-use asset and a corresponding lease liability, which were not materially different from the existing right-of-use asset and lease liability as of the modification date. F-20 For accounting purposes, the lease commencement for 500 Arsenal is expected to occur in the first quarter of 2025. Consideration paid for this lease component is recorded as prepaid expense on the consolidated balance sheets and is not recognized until lease commences. Summary of lease costs recognized The following tables contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the years ended December 31, 2024 and December 31, 2023 . The components of lease cost were as follows: Year Ended December 31, (in thousands) 2024 2023 Lease cost: Operating lease cost $ 15,175 $ 13,664 Variable lease cost 5,716 2,145 Short-term lease cost 3,512 2,816 Sublease income ( 168 ) ( 168 ) Total lease cost $ 24,235 $ 18,457 The weighted-average remaining lease term and discount rate were as follows: December 31, 2024 2023 Weighted average remaining lease term (in years) 8.4 years 1.9 years Weighted average discount rate 12.83 % 6.92 % Future annual lease payments under non-cancelable operating leases as of December 31, 2024 w ere as follows: (in thousands) Undiscounted Amounts Undiscounted lease payments: 2025 $ 19,773 2026 23,387 2027 22,921 2028 22,294 2029 21,478 Thereafter 96,601 Total undiscounted lease payments 206,454 Less: payments related to leases not commenced ( 136,637 ) Less: imputed interest ( 29,023 ) Total operating lease liability $ 40,794 7. Stockholder’s Equity Common Stock Under the Third Amended and Restated of Certificate of Incorporation, the Company’s common stock had a par value of $ 0.0001 and each share of common stock entitles the holder to one vote on all matters submitted to the stockholders for a vote. The holders of common stock are entitled to receive dividends, if any, as declared by the Company’s board of directors. F-21 As previously discussed, in February 2024, the Company issued and sold 22,560,001 shares of its common stock, including 3,360,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares, at a price to the public of $ 6.25 per share. In September 2024, the Company entered into the BMS Purchase Agreement pursuant to which the Company issued, and BMS purchased, in an unregistered offering (the “Offering”), 11,006,163 shares (the “Shares”) of the Company’s common stock for an aggregate purchase price of $ 55.0 million pursuant to the terms and conditions thereof. The BMS Purchase Agreement includes lock-up restrictions with respect to the Shares. Pursuant to the terms of the BMS Purchase Agreement, BMS has agreed not to, directly or indirectly, sell or transfer any of the Shares until September 30, 2027 subject to specified conditions and exceptions. In December 2024, the Company filed a registration statement with the Securities and Exchange Commission (the “SEC”) covering the resale of the Shares. Please refer to Note 9, License and Collaboration Agreements , for additional discussion of the BMS Collaboration Agreement. Pre-funded Warrants As discussed in Note 1, Nature of the Business and Basis of Presentation , in February 2024, the Company sold pre-funded warrants to purchase 3,200,005 shares of common stock at a public offering price of $ 6.24999 per pre-funded warrant, which represents the per share public offering price of each share of common stock less the $ 0.00001 per share exercise price for each pre-funded warrant. Subject to certain requirements, the pre-funded warrants can be exercised by the holder at any time. As of December 31, 2024, there have not been any exercises of the pre-funded warrants. The pre-funded warrants meet the definition of an equity instrument under ASC 815-40 and funds received were recorded as an increase in additional paid-in capital in the consolidated balance sheets. Funds received upon exercise of warrants will be recorded as common stock in the consolidated balance sheets as the exercise price represents the par value of the underlying common stock. At-The-Market Equity Program In November 2023, the Company entered into Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, acting as the Company’s agent and/or principal (the “Sales Agent”), with respect to an “at the market offering” program under which the Company may, from time to time, at its sole discretion, issue and sell shares of its common stock having an aggregate offering price of up to $ 300.0 million through the Sales Agent. As of December 31, 2024, there have been no sales of common stock pursuant to the Sales Agreement. 8. Stock-Based Compensation 2019 Equity Incentive Plan The Company’s 2019 Stock Option and Grant Plan (the “2019 Plan”) provides for the Company to grant incentive stock options, non-qualified stock options, unrestricted stock awards, restricted stock awards and other stock-based awards to the officers, employees, consultants and other key persons of the Company. The 2019 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated. In October 2022, the Company completed its IPO, and in connection with the closing, the board of directors determined that no further awards would be granted under the 2019 Plan. 2022 Stock Option and Incentive Plan In February 2022, the Company’s board of directors adopted, and in October 2022 its stockholders approved, the 2022 Plan, which became effective immediately preceding the date on which the registration statement for the Company’s IPO was declared effective by the SEC. The 2022 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors, and consultants. The 2022 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted common stock F-22 awards, restricted stock units and other stock-based awards. Stock options awarded under the 2022 Plan expire 10 years after the grant date and typically vest over four years . The shares of common stock underlying any awards under the 2022 Plan and the 2019 Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire, or are otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2022 Plan. The number of shares reserved and available for issuance under the 2022 Plan will increase on January 1 of each year, by five percent of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Compensation Committee. On January 1, 2025, the annual increase for the 2022 Plan resulted in an additional 6,558,042 shares authorized for issuance being added to the 2022 Plan. As of December 31, 2024, the Company had 21,522,110 shares reserved under the 2022 Plan and the 2019 Plan, and 9,049,689 shares available for issuance under the 2022 Plan. 2022 Employee Stock Purchase Plan In February 2022, the Company’s board of directors adopted, and in October 2022 its stockholders approved, the 2022 Employee Stock Purchase Plan (the “2022 ESPP”). The 2022 ESPP provides for an annual increase on January 1 each year through January 1, 2032, by the least of (i) 971,350 shares of common stock, (ii) one percent of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such number of shares of common stock as determined by the administrator of the 2022 ESPP. There was no annual increase for the 2022 ESPP on January 1, 2025. As of December 31, 2024, the Company had 1,753,191 shares available for issuance under the 2022 ESPP. Under the 2022 ESPP, the Company issued 189,509 shares of the Company’s common stock during the year ended December 31, 2024. No shares of the Company’s common stock were issued during the year ended December 31, 2023 under the 2022 ESPP. Stock Option Valuation The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock options granted: Year ended December 31, 2024 2023 Risk-free interest rate 4.2 % 3.7 % Expected term (in years) 5.8 6.0 Expected volatility 78.4 % 80.0 % Expected dividend yield — % — % F-23 Time-Based Stock Options The following table summarizes the Company’s time-based stock option activity for the year ended December 31, 2024: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2023 7,641,863 $ 9.79 8.68 $ 12,014 Granted 4,476,710 7.99 Exercised ( 28,048 ) 3.69 Forfeited ( 679,834 ) 10.16 Outstanding at December 31, 2024 11,410,691 $ 9.08 8.10 $ — Vested and exercisable at December 31, 2024 4,888,933 $ 8.72 7.34 $ — Vested and expected to vest at December 31, 2024 11,410,691 $ 9.08 8.10 $ — Other information related to the time-based stock option activity of the Company was as follows: Year ended December 31, 2024 2023 Weighted-average fair value of options granted $ 5.60 $ 8.96 Intrinsic value of options exercised (in thousands) $ 70 $ 1,368 As of December 31, 2024 there was $ 39.3 million of total unrecognized compensation cost related to time-based unvested stock options, and the Company expects to recognize such amount over a remaining weighted-average period of 2.2 years. Performance-Based Stock Options The Company has granted stock options to certain employees to purchase shares of common stock that contain performance-based vesting criteria related to corporate milestones. The fair value of each option grant under the performance share option plan was estimated on the date of grant. Recognition of stock-based compensation expense associated with these performance-based stock options commences when the performance condition is considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones. The following table summarizes the Company’s performance-based stock option activity for the year ended December 31, 2024: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2023 411,730 $ 6.65 8.15 $ 1,362 Granted 650,000 7.74 Exercised — — Forfeited — — Outstanding at December 31, 2024 1,061,730 $ 7.31 8.35 $ — Vested and exercisable at December 31, 2024 490,230 $ 6.81 7.87 $ — F-24 Other information related to the performance-based stock option activity of the Company was as follows: Year ended December 31, 2024 2023 Weighted-average fair value of options granted $ 5.27 $ — As of December 31, 2024 there was $ 3.0 million of total unrecognized compensation cost related to performance-based stock options. Restricted Common Stock Awards The Company awarded restricted common stock to employees and non-employees under its 2019 Plan and may continue to award restricted common stock to employees and non-employees under the 2022 Plan. The fair value of each share of restricted common stock is based on the market price of the Company's common stock on the date of grant. The vesting of these restricted stock awards are time-based or performance-based. For a period of up to six months from a grantee’s termination, the Company has the right and option to repurchase unvested restricted common stock at the lower of (i) the original purchase price per share or (ii) the fair market value per share as of the date of the Company elects to exercise its repurchase right. Time-Based Restricted Common Stocks Awards Restricted common stock that have time-based vesting conditions vest over a four-year period, subject to the employee’s continued employment with, or service to, the Company on such vesting date. Compensation expense is recognized on a straight-line basis over the vesting period. The following table summarizes the Company’s time-based restricted common stock award activity for the year ended December 31, 2024: Number of Shares Weighted-Average Grant-Date Fair Value Unvested restricted common stock at December 31, 2023 903,227 $ 0.17 Issued — — Vested ( 873,873 ) 0.16 Repurchased ( 4,423 ) 0.34 Unvested restricted common stock at December 31, 2024 24,931 $ 0.16 Performance-Based Restricted Common Stock Awards Performance‑based restricted common stock awards vest upon the achievement of performance‑based milestones related to corporate milestones. Stock-based compensation expense associated with the performance-based restricted common stock is recognized if the performance condition is considered probable of achievement using the Company’s best estimates of the time to vesting for the achievement of the performance‑based milestones. Each reporting period, the Company updates its assessment of the probability that the performance-based milestones will be achieved. The fair value of the restricted common stock was based on the fair market value of the Company’s common stock on the date of grant. F-25 The following table summarizes the Company’s performance-based restricted common stock award activity for the year ended December 31, 2024: Number of Shares Weighted-Average Grant-Date Fair Value Unvested restricted common stock at December 31, 2023 3,832,769 $ 0.07 Issued — — Vested ( 360,226 ) 0.18 Repurchased — — Unvested restricted common stock at December 31, 2024 3,472,543 $ 0.06 Stock-Based Compensation The following table below summarizes the classification of the Company’s stock-based compensation expense related to stock options and restricted common stock awards in the consolidated statements of operations and comprehensive loss: Year ended December 31, (in thousands) 2024 2023 Stock-based compensation expense: Research and development $ 12,704 $ 7,950 General and administrative 13,364 5,960 Total stock-based compensation expense $ 26,068 $ 13,910 9. License and Collaboration Agreements License Agreements with Broad Institute 2019 License Agreement with Broad Institute In September 2019, the Company entered into a license agreement with Broad Institute, Inc. (“Broad Institute”) for certain patents related to the field of prevention or treatment of human disease by editing or targeting DNA (the “Broad License Agreement”). In subsequent periods, the Broad License Agreement has been subject to amendments. Under the Broad License Agreement, Broad Institute granted the Company (i) an exclusive, worldwide license under the licensed patent rights solely to offer for sale, sell, have sold and import products covered by such licensed patent rights, or licensed products, solely for use within the Prime Broad Field (subject to certain specified limitations and exclusions with respect to certain applications), (ii) a non-exclusive, worldwide license under the licensed patent rights solely to make, have made, offer for sale, sell, have sold, and import licensed products solely for use in the Prime Broad Field, (iii) a non-exclusive, worldwide license under the licensed patent rights solely to make, have made, offer for sale, sell, have sold and import other products that are enabled by (a) the licensed patent rights or (b) the use of certain materials transferred to the Company by Broad Institute, solely for the prevention or treatment of human diseases and (iv) a non-exclusive, worldwide license solely for internal research. Further, with respect to DNA delivery or targeting applications covered by the licensed patent rights, the exclusive license granted to the Company by Broad Institute is limited only to “prime editor” products and specifically excludes applications relating to the production or processing of small or large molecules, including for the prevention or treatment of human disease. Under the Broad License Agreement, the Company also has the right to grant sublicenses to its affiliates and third parties, subject to certain requirements. As partial consideration for the license, the Company made a upfront payment of $ 0.5 million to Broad Institute. Under the Broad License Agreement, the Company is obligated to pay Broad Institute an annual license maintenance fee of low six-figures dollar amount beginning in 2022. Broad Institute is also entitled to receive clinical and regulatory milestone payments up to a total of $ 20.0 million and sales-based milestone payments up to a total of $ 54.0 million per licensed product. Further, the Broad Institute is entitled to receive mid-single digit F-26 percentage royalties, subject to customary offsets and reductions, on net sales of licensed products, and low single-digit percentage royalties of enabled products. Unless earlier terminated, the Broad License Agreement will remain in effect until the later of (i) the last to expire valid claim of an issued patent or pending patent application within the licensed patent rights covering the Company’s licensed products or (ii) the expiration of the last royalty term for a licensed product in a country. The Company can terminate the Broad License Agreement for convenience after a certain period of time following prior written notice to Broad Institute. Each party may terminate the Broad License Agreement for the other party’s uncured material breach within a specified time period following notice of such breach. Broad Institute may also immediately terminate the Broad License Agreement (i) to the extent the Company (or its affiliates or sublicensees) challenges a licensed patent right, (ii) upon the Company’s bankruptcy or insolvency or (iii) if the Company fails to procure and maintain insurance. 2022 License Agreement with Broad Institute In December 2022, the Company entered into a second license agreement with Broad Institute, (the “2022 Broad License Agreement”). Under the 2022 Broad License Agreement, Broad Institute grants to us certain rights and licenses under the patent rights it owns or controls related to MMR inhibition and prime editing improvements and specifically, (i) an exclusive, worldwide license under the licensed patent rights solely to offer for sale, sell, have sold and import products covered by such licensed patent rights, or licensed products, solely for use within the Prime Broad Field (subject to certain specified limitations and exclusions with respect to certain applications), (ii) a non-exclusive, worldwide license under the licensed patent rights solely to make, have made, offer for sale, sell, have sold, and import licensed products solely for use in the Prime Broad Field, (iii) a non-exclusive, worldwide license under the licensed patent rights solely to make, have made, offer for sale, sell, have sold and import other products that are enabled by (a) the licensed patent rights or (b) the use of certain materials transferred to us by Broad Institute, solely for the prevention or treatment of human diseases and (iv) a non-exclusive, worldwide license solely for internal research. Further, with respect to DNA delivery or targeting applications covered by the licensed patent rights, the exclusive license granted to us by Broad Institute is limited only to “prime editor” products and specifically excludes applications relating to the production or processing of small or large molecules, including for the prevention or treatment of human disease. Under the Broad License Agreement, the Company also has the right to grant sublicenses to its affiliates and third parties, subject to certain requirements. The Company is also obligated to pay Broad Institute an annual license maintenance fee of mid five-figures for the term of the Agreement. Broad Institute is also entitled to receive clinical and regulatory milestone payments for a limited category of royalty-bearing products, up to a total of $ 2.0 million and sales-based milestone payments up to a total of $ 3.0 million. Further, Broad Institute is entitled to receive royalties of less than 0.2 % on net sales of royalty bearing products. Unless earlier terminated, the 2022 Broad License Agreement will remain in effect until the later of (i) the last to expire valid claim of an issued patent or pending patent application within the licensed patent rights covering our licensed products or (ii) the expiration of the last royalty term for a royalty bearing product in a country. The Company can terminate the 2022 Broad License Agreement for convenience following prior written notice to Broad Institute. Each party may terminate the 2022 Broad License Agreement for the other party’s uncured material breach. Broad Institute may also immediately terminate the 2022 Broad License Agreement (i) to the extent we (or our affiliates or sublicensees) challenge a licensed patent right, (ii) upon our bankruptcy or insolvency or (iii) if we fail to procure and maintain insurance. Amendment No. 4 to The Broad Institute License Agreement In connection with the BMS Collaboration Agreement, discussed below, the Company entered into a Letter Agreement (the “2024 Broad Amendment”) with Broad Institute in September 2024, which amends the Broad License Agreement to modify certain obligations of Company and rights of Broad Institute in relation to the BMS Collaboration Agreement as a sublicense under the Broad License Agreement. The 2024 Broad Amendment, among other things, modifies the royalty and certain commercial milestones that the Company is obligated to pay to Broad Institute on net sales of products under the BMS Collaboration Agreement. Except as expressly stated in the 2024 Broad Amendment, all other terms and provisions of the Broad License Agreement remain in full force and effect. F-27 Amounts due to Broad Institute as a result of the BMS Collaboration Agreement are recorded as accrued expenses on the consolidated balance sheet as of December 31, 2024. Broad Pledge In February 2021, the Company committed to donate $ 5.0 million to Broad Institute and Harvard University annually for 14 years, commencing in 2022 (the “Pledge”). The Pledge is intended to be used for research and development related to new genome editing technologies, for example Prime Editing, improve on existing genome-editing technologies, identify delivery mechanisms for these technologies and apply these technologies to the understanding and treatment of rare genetic diseases. The Company can terminate the Pledge at its discretion, subject to providing one year of funding from the date of termination. In August 2022, the Company amended and restated the Pledge to clarify that the funds may be used by the laboratory of David Liu, who is a member of Broad Institute and a faculty member at Harvard. The Company accounts for this Pledge as research and development expenses as it has access to certain data generated as a result of the Pledge. For both the years ended December 31, 2024 and 2023, the Company recognized $ 5.0 million of research and development expense in connection with the Pledge. Beam Collaboration Agreement — Related Party In September 2019, the Company entered into a collaboration agreement with Beam (the “Beam Collaboration Agreement”) to collaborate on the research, development, manufacture and commercialization of certain Prime Editing products within a specified field and provide each other with access and licenses to certain proprietary technology to advance the other’s progress. Under the Beam Collaboration Agreement, the Company granted Beam an exclusive (even as to the Company and its affiliates), worldwide license under (i) certain Prime Editing technology, know-how and patent rights that the Company controls during the initial term, and improvements thereto that the Company controls for a specified number of years following the initial term, and (ii) the Company’s interest in certain jointly-owned collaboration technology, in each case, solely to develop, make, have made, use, offer for sale, sell, import and commercialize licensed products only in the Beam field. Beam granted to the Company certain non-exclusive, worldwide licenses under certain technology, know-how and patent rights, including under certain CRISPR or delivery-related technology, know-how and patent rights, that it controls during the initial term, and improvements thereto that Beam controls for a specified number of years following the initial term, solely to develop, make, have made, use, offer for sale, sell, import and commercialize products only in the Company’s field. Subject to certain provisions, on a licensed product-by-licensed product basis, we have the right to elect to share equally with Beam in the profits and losses in the United States for Beam’s licensed products. We may exercise such right for each licensed product within a specified period of time. Any such licensed product for which we exercise such right we refer to as a collaboration product. Before and within 30 days after the filing of an IND for a development candidate being developed under the Beam Collaboration Agreement, Beam has the option to designate up to a mid-single digit number of licensed products for which the Company is not permitted to exercise the profit share right (the “Beam Option”). Under the Beam Collaboration Agreement, a licensed product for which the Company has not exercised its profit share option or for which Beam has exercised the Beam Option is collectively referred to as “protected product.” Unless the Company exercises its profit sharing option for a licensed product, Beam is solely responsible for the development and commercialization of licensed products in the Beam field under the Beam Collaboration Agreement. If Beam exercises its option for a protected product, Beam will owe Prime a payment of $ 5.0 million if the product is developed for non-sickle cell disease or $ 10.0 million if the product is developed for sickle cell disease. F-28 Under the terms of the Beam Collaboration Agreement, the Company is entitled to following milestones: Development milestones Protected product Up to $ 35.5 million Collaboration product Up to $ 17.8 million Sales milestones Protected product Up to $ 84.5 million Collaboration product Up to $ 42.3 million For eligible products, Beam is obligated to pay the Company tiered royalties, subject to customary offsets and reductions, ranging from a high-single digit percentage to a low double-digit percentage, but less than teens on net sales of protected products worldwide and net sales of collaboration products outside of the United States. In addition, Beam must reimburse the Company for certain payments the Company is required to make to its third-party licensors attributable to Beam’s exercise of any sublicense the Company grants to Beam, including payments it makes to Broad Institute under the Broad License Agreement. If the Company develops a product that is covered by the technology, know-how or patent rights that Beam licenses to the Company under the Beam Collaboration Agreement, which it refers to as a Prime product, the Company is obligated to pay to Beam a low single digit royalty on its worldwide net sales of such any product on a Prime product-by-Prime product and country-by-country basis, subject to certain customary reductions, to a floor. Unless earlier terminated in accordance with its terms, the Beam Collaboration Agreement will expire on the later of (a) expiration of the last royalty term for a product on which a party is obligated to pay royalties to the other party or (b) with respect to any collaboration product, the date on which neither party is developing or commercializing any such collaboration product in the United States. After expiration of the initial term, Beam can terminate the Beam Collaboration Agreement for convenience in its entirety, or on a licensed product-by-licensed product or subfield-by-subfield basis, with prior written notice to the Company. Each party may terminate the Beam Collaboration Agreement for (a) the other party’s uncured material breach, (b) upon the insolvency or bankruptcy of the other party or (c) immediately to the extent the other party (or its affiliates or sublicensees) challenges a patent right licensed to such party. On the first anniversary of the Beam Collaboration Agreement, the Company received 200,307 shares of Beam common stock, with a fair value of $ 5.5 million and, in return, the Company issued to Beam 1,608,337 shares of the Company’s common stock, with a fair value of $ 0.2 million. Accounting Considerations The Company concluded that the Beam Collaboration Agreement and the Beam Mutual Subscription Agreement should be combined and treated as a single arrangement for accounting purposes as the agreements were entered into contemporaneously and in contemplation of one another. The Company determined that the combined agreements are accounted for under ASC 606, Revenue Recognition. The Company identified the following performance obligations: (i) exclusive, worldwide license to certain Prime patents, (ii) non-exclusive, worldwide licenses to CRISPR technology and (iii) joint research committee participation. The Company also evaluated whether the Beam Option and the Company’s right to elect collaboration products in the Beam Collaboration Agreement represented material rights that would give rise to a performance obligation and concluded that neither the Beam Option nor the Company’s right to elect collaboration products convey a material right to Beam and therefore are not considered separate performance obligations within the Beam Collaboration Agreement. There have been no protected product or collaboration products to date. Under the Beam Collaboration Agreement, the Company is eligible to receive certain milestones and royalties regardless of whether any options are exercised, which are considered variable consideration. At each reporting period, the Company evaluates whether milestones are considered probable of being reached and, to the extent that a significant reversal would not occur in future periods, estimates the amount to be included in the transaction price. During the years ended December 31, 2024 and 2023 the Company did not receive any milestone payments and all variable consideration related to the F-29 Beam Collaboration Agreement remained fully constrained. The Company assessed the above promises and determined that the exclusive license for certain Prime products and non-exclusive licenses to CRISPR technology represent performance obligations within the scope of Topic 606. The exclusive license for certain Prime products and non-exclusive licenses to CRISPR technology are considered functional intellectual property and distinct from other promises under the contract. The exclusive license for certain Prime products and non-exclusive licenses to CRISPR technology are considered functional licenses that are distinct in the context of the Beam Collaboration Agreement as Beam can benefit from the licenses on its own or together with other readily available resources. As the exclusive license for certain Prime products and non-exclusive licenses to CRISPR technology are delivered at the same time, they are considered one performance obligation at contract inception. The joint research committee performance promise is immaterial in the context of the contract. The Company determined the transaction price under ASC 606 at the inception of the Beam Collaboration Agreement to be $ 5.2 million, consisting of the value of the Beam equity investment under the Beam Mutual Subscription Agreement, when measured at fair value, less the value of the Prime shares issued to Beam of $ 0.2 million. The shares Prime issued to Beam represents a payment to a customer and is therefore a reduction of the transaction price. The Company recognizes revenue for the license performance obligations at a point in time, as control of these licenses are transferred upon issuance and Beam could begin to use and benefit from the licenses. There was no revenue recognized under the Beam Collaboration Agreement during the years ended December 31, 2024 or 2023. The change fair value of the related party short-term investment consisting of Beam shares are recognized as unrealized gain (loss) i n the consolidated statements of operations and comprehensive loss. Bristol-Myers Squibb — Related Party In September 2024, the Company entered into the BMS Collaboration Agreement with Juno Therapeutics, Inc., a wholly-owned subsidiary of BMS. Under the terms of the BMS Collaboration Agreement, the Company granted to BMS an exclusive worldwide license to certain Prime Editing technology for developing, manufacturing and commercializing ex vivo T-cell therapeutic products directed to select targets. Additionally, on the Effective Date, the Company entered into the BMS Purchase Agreement with BMS, pursuant which the Company agreed to sell and issue shares of its common stock to BMS. Research Collaboration and License Agreement Pursuant to the BMS Collaboration Agreement, the Company will design Prime Editing reagents to be used by BMS to develop, manufacture and commercialize ex vivo T-cell therapeutic products directed to specific targets selected by BMS. Under the BMS Collaboration Agreement, the Company received a $ 55.0 million upfront payment and received a $ 55.0 million equity investment from BMS (as described below). The Company is also eligible to receive more than $ 3.5 billion in milestones, including up to $ 185 million in preclinical milestones, up to $ 1.2 billion in development milestones, and up to $ 2.1 billion in commercialization milestones, along with royalties on net sales. Unless earlier terminated, the term of the BMS Collaboration Agreement continues until expiration of the last royalty term for the applicable product in the applicable country. The BMS Collaboration Agreement is subject to customary termination provisions, including termination by a party for the other party’s uncured, material breach. Stock Purchase Agreement On the Effective Date, the Company entered into the BMS Purchase Agreement with BMS, pursuant to which the Company agreed to issue and sell, and BMS agreed to purchase, in the Offering, 11,006,163 Shares of the Company’s Common Stock for an aggregate purchase price of $ 55.0 million pursuant to the terms and conditions thereof. Pursuant to the terms of the BMS Purchase Agreement, BMS has agreed not to, directly or indirectly, sell or transfer any of the Shares until September 30, 2027 subject to specified conditions and exceptions. The BMS Collaboration Agreement and Stock Purchase Agreement were accounted for as a combined contract. The Common Stock were recorded at their fair value as permanent equity. F-30 Accounting Considerations The Company assessed the BMS Collaboration Agreement and concluded that BMS is a customer. The Company identified the following promises under the contract: (i) a license to develop, manufacture and commercialize the ex vivo T-cell therapeutic products to select targets, (ii) obligation to perform research services, (iii) participation in various committees, (iv) technology transfer services, and (v) regulatory support services. The Company assessed the promised goods and services to determine if they are distinct. Based on this assessment, the Company determined that BMS cannot benefit from the promised goods and services separately from the others as they are highly interrelated and interdependent and therefore not distinct. Accordingly, the promised goods and services represent one combined performance obligation and the entire transaction price will be allocated to that single combined performance obligation. At contract inception, the transaction price was determined to be $ 72.0 million, which represents the aggregate of the upfront nonrefundable payment for the BMS Collaboration Agreement and the premium paid by BMS on its equity investment in the Company. Development milestones were fully constrained. The Company recognizes the portion of the transaction price as the single performance obligation is satisfied, using an input method, in proportion to costs incurred to date as compared to total costs incurred and expected to be incurred in the future to satisfy the underlying obligation. The transfer of control occurs over this period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation. Cost to perform the Company’s obligations under the BMS Collaboration Agreement will be recognized as research and development expenses in the period incurred. Revenue recognized from the BMS Collaboration Agreement was as follows: Year Ended December 31, (in thousands) 2024 2023 Collaboration revenue — related party $ 1,609 $ — Supplemental information related to the BMS Collaboration Agreement consisted of the following: December 31, (in thousands) 2024 2023 Deferred revenue — related party $ 7,092 $ — Deferred revenue, net of current — related party 63,218 — 10. Net Loss per Share As described in Note 2, Summary of Significant Accounting Policies , for periods in which the Company reports a net loss, potentially dilutive securities have been excluded from the computation of diluted net loss per share as their effects would be anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares presented based on amounts outstanding at period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect: Year Ended December 31, 2024 2023 Anti-dilutive common stock equivalents: Stock options to purchase common stock 11,900,921 7,763,023 Unvested restricted common stock awards 3,497,474 4,735,996 Total anti-dilutive common stock equivalents 15,398,395 12,499,019 F-31 Basic and diluted loss per share is computed by dividing net loss by the weighted-average common shares outstanding: Year Ended December 31, (in thousands, except share and per share data) 2024 2023 Numerator: Net loss attributable to common stockholders $ ( 195,882 ) $ ( 198,133 ) Denominator: Weighted-average common shares outstanding, basic and diluted 118,600,381 90,969,327 Net loss per share attributable to common stockholders, basic and diluted $ ( 1.65 ) $ ( 2.18 ) The weighted-average number of common shares outstanding used in the basic and diluted net loss per share calculations includes the weighted-average effect of pre-funded warrants sold by the Company to purchase 3,200,005 shares of the Company's common stock. The shares of common stock underlying the pre-funded warrants are considered outstanding for the purposes of computing earnings per share, because the shares may be issued for little or no consideration, they are fully vested, and the pre-funded warrants are immediately exercisable upon their issuance date. 11. Income Taxes Income tax (benefit) expense consists of the following: Year Ended December 31, (in thousands) 2024 2023 Deferred income tax benefit: Federal $ — $ ( 279 ) State — — Total deferred income tax benefit — ( 279 ) Total provision (benefit) from income taxes $ — $ ( 279 ) A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows: Year Ended December 31, 2024 2023 Federal income tax expense at statutory rate 21.0 % 21.0 % State income taxes, net of federal benefit 7.4 % 7.3 % Tax credits 2.6 % 2.0 % Permanent differences ( 0.9 ) % ( 0.9 ) % Other 0.8 % ( 0.4 ) % Change in valuation allowance ( 30.8 ) % ( 28.9 ) % Effective income tax rate — % 0.1 % F-32 Net deferred tax assets (liabilities) consisted of the following: December 31, (in thousands) 2024 2023 Deferred tax assets: Capitalized research and development costs $ 74,605 $ 49,990 U.S. and state net operating loss carryforwards 61,501 35,977 Depreciation and amortization 12,829 13,204 Tax credits 22,986 12,863 Accrual 2,334 5,817 Lease Liability 12,228 3,711 Stock Compensation 6,005 1,473 Other 141 9 Total deferred tax assets 192,629 123,044 Deferred tax liabilities: Right of Use Asset ( 12,852 ) ( 3,794 ) Total deferred tax liabilities ( 12,852 ) ( 3,794 ) Valuation allowance ( 179,777 ) ( 119,250 ) Net deferred tax assets (liabilities) $ — $ — The following is a summary of the Company’s net operating loss and tax credit carryforwards, both of which may be available to reduce future tax liabilities: December 31, (in thousands) 2024 2023 U.S. federal net operating loss - do not expire $ 226,904 $ 131,608 State net operating loss - expire at various dates beginning in 2039 219,351 132,009 Federal research and development tax credits - expire at various dates beginning in 2040 15,082 8,085 State research and development tax credits - expire at various dates beginning in 2036 10,005 6,047 Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to certain ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income and tax liabilities. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before their utilization. Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position. The Tax Cuts and Jobs Act requires taxpayers to capitalize and amortize research and development expenditures under section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company for the year ended December 31, 2022. For the years ended December 31, 2024 and 2023, the Company capitalized F-33 R&D costs of $ 141.1 million and $ 137.2 million, respectively. The Company will amortize these costs for tax purposes over five years if the R&D was performed in the U.S. and over 15 years if the R&D was performed outside the U.S. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception, expectation of future losses and lack of other positive evidence. For the years ended December 31, 2024 and 2023, the Company was in a net deferred tax asset position and therefore recorded a valuation allowance against the portion of its deferred tax assets that cannot be fully supported by the future reversal of existing deferred tax liabilities. The Company reevaluates the positive and negative evidence at each reporting period. For the year ended December 31, 2024, the valuation allowance increased primarily due to the increases in net operating loss carryforwards, capitalized research and development costs, and research and development tax credit carryforwards. The changes in the valuation allowance were as follows: Year Ended December 31, (in thousands) 2024 2023 Valuation allowance at beginning of year $ 119,250 $ 62,132 Increases (decreases) recorded to income tax provision 60,527 57,118 Valuation allowance at end of year $ 179,777 $ 119,250 The Company assesses the uncertainty in its income tax positions to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more-likely-than-not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50 percent likelihood of being realized upon the ultimate settlement with the relevant taxing authority. As of December 31, 2024, the Company had not recorded any reserves for uncertain tax positions or related interest and penalties. The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all years in which a loss carryforward is available. As of December 31, 2024, there were no pending tax examinations. The Company is open to future tax examination under statute from 2019 to the present. 12. Commitments and Contingencies Leases The Company’s commitments under its operating leases are described in Note 6, Leases . License and Collaboration Agreements The Company entered into various license and collaboration agreements under which it is obligated to make fixed and contingent payments as described in Note 9, License and Collaboration Agreements . Legal Proceedings From time to time, the Company may become involved in legal proceedings or other litigation relating to claims arising in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and estimated exposure amount. Legal fees and other costs associated with such proceedings are expensed as incurred. Except as described in Note 6, Leases , as it relates to our facility at 60 First Street, Cambridge, we do not have any ongoing legal proceedings that, based on our estimates, could have a material effect on our consolidated financial statements. F-34 13. Related Party Transactions Founder Consulting Services For the years ended December 31, 2024, and 2023 the Company made payments of $ 0.1 million and $ 0.2 million, respectively, to one of the co-founder shareholders for scientific consulting and other expenses. As of December 31, 2024 and 2023 , there were no amounts included within accounts payable. Myeloid Therapeutics In December 2021, the Company and Myeloid entered into the Myeloid Collaboration Agreement and Myeloid Subscription Agreement during which time the Company and Myeloid had one common board member, who is also an affiliate of Newpath, one of the Company’s holders of common stock. In 2023, the Company terminated the Myeloid Collaboration Agreement. In January 2024, the Company and Myeloid entered into a settlement agreement resolving two arbitration proceedings. Under the terms of the settlement agreement, the parties agreed to resolve and settle all disputes between the parties and release all claims between them relating to the License Agreement and the arbitrations in exchange for the Company's payment to Myeloid of $ 13.5 million, certain mutual covenants, and other consideration. The settlement was accrued on the Company’s consolidated balance sheet as of December 31, 2023 and paid during the year ended December 31, 2024. As of December 31, 2024, there were no amounts included within accounts payable or accrued expenses. Advisory Services Agreement with Jeffrey Marrazzo In February 2024, the Company entered into an advisory services agreement (“Marrazzo Agreement”) with Jeffrey Marrazzo, a member of the Board of Directors. Under the Marrazzo Agreement, Mr. Marrazzo agreed to provide certain professional services to the Company separate from and in addition to his service as a Board member. For his services, the Company agreed to pay Mr. Marrazzo an annual fee of $ 50,000 per year in addition to the grant of an option to purchase 250,000 shares of the Company’s common stock, which has a grant date fair value of $ 1.5 million. The term of the Marrazzo Agreement runs through February 2025 and may be terminated or extended by mutual written agreement. If the Company terminates the Marrazzo Agreement without “Cause,” the administrator of the 2022 Plan will accelerate the vesting of the option such that the pro rata portion of the option will vest and be immediately exercisable. Bristol-Myers Squibb In September 2024, the Company and BMS, a related party, entered into the BMS Collaboration Agreement and the BMS Purchase Agreement. BMS is a related party due to its share of ownership of the Company. For amounts recognized under the BMS Collaboration Agreement, refer to Note 9, Licenses and Collaboration Agreements . F-35