What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-16 compared with 2021-03-24 · 26 added, 619 removed, 10 unchanged (98% of the section changed)

1 unchanged sentence

Market Information

stock has been listed on The Nasdaq Global Select Market under the symbol SANA since February 4, 2021.

Our common stock has been listed on The Nasdaq Global Select Market under the symbol “SANA” since February 4, 2021.

Prior to that date, there was no public trading market for our common stock.

As of March 1, 2021, there

were approximately 156 holders of record of our common stock.

This number does not include shareholders whose shares are held by nominees in street name.

As of March 11, 2022, there were approximately 108 holders of record of our common stock.

The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Dividend Policy

We have not declared or

paid cash dividends on our capital stock since our inception.

We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends to holders of common stock in the

foreseeable future.

We have not declared or paid cash dividends on our capital stock since our inception.

We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends to holders of common stock in the foreseeable future.

Stock Performance Graph

The following performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, nor shall such information be incorporated by reference into any future filing under the Exchange Act or Securities Act of 1933, as amended, or the Securities Act, except to the extent that we specifically incorporate it by reference into such filing.

The graph set forth below compares the cumulative total stockholder return on our shares of common stock between February 5, 2021 (the date of our initial public offering) and December 31, 2021, with the cumulative total return of (a) the Nasdaq Biotechnology Index and (b) the Nasdaq Composite Index, over the same period.

This graph assumes the investment of $100 on February 5, 2021 in our common stock, the Nasdaq Biotechnology Index and the Nasdaq Composite Index and assumes the reinvestment of dividends, if any.

The graph uses the closing sales price of our common stock of $39.12 per share on February 5, 2021 as the initial value of our common stock and not the initial offering price to the public of $25.00 per share.

The comparisons shown in the graph below are based upon historical data.

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

*$100 invested on 2/5/21 in stock or index, including reinvestment of dividends.

Fiscal year ending December 31.

Securities Authorized for Issuance Under Equity Compensation Plans

See Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, located elsewhere in this Annual

Report on Form 10-K for information about our equity compensation plans.

Recent Sales of Unregistered

The following list sets forth information regarding unregistered securities sold by us since January 1, 2020, for

which share numbers have been adjusted, as appropriate, to reflect the 1-for-4 reverse stock split which became effective on January 27, 2021:

In June 2020, we issued 27,223,170 shares of Series B convertible preferred stock at $16.00 per share for gross

proceeds of $435.6 million.

In connection with the completion of our IPO, all 27,223,170 shares of Series B convertible preferred stock automatically converted into an equivalent number of shares of our common stock.

In June and December 2020, we issued 100,000 shares of our common stock in connection with intellectual

property license arrangements.

We granted stock options to employees, directors, officers, and consultants which awards consist of 12,458,440

options to purchase an aggregate of 12,458,440 shares of common stock at exercise prices ranging from $1.48 to $10.12.

We issued an aggregate of 176,628 shares of common stock upon the exercise of options for aggregate proceeds of

approximately $0.3 million.

Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.

Recent Sales of Unregistered Securities

Use of Proceeds from our Initial Public Offering of Common Stock

On February 8, 2021, we closed an initial public offering (IPO) and issued and sold 27,025,000 shares of our common stock, including

3,525,000 shares of common stock sold pursuant to the underwriters full exercise of their option to purchase additional shares, at a public offering price of $25.00 per share, for aggregate gross proceeds of $675.6 million.

shares issued and sold in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No.

333-252061), which was

declared effective by the SEC on February 3, 2021, and a Registration Statement on Form S-1 MEF (File No.

333-252706) filed pursuant to Rule 462(b) of the

Securities Act.

On February 8, 2021, we closed an initial public offering (IPO) and issued and sold 27,025,000 shares of our common stock, including 3,525,000 shares of common stock sold pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a public offering price of $25.00 per share, for aggregate gross proceeds of $675.6 million.

All of the shares issued and sold in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No.

333-252061), which was declared effective by the SEC on February 3, 2021, and a Registration Statement on Form S-1 MEF (File No.

333-252706) filed pursuant to Rule 462(b) of the Securities Act.

Morgan Stanley & Co.

2 unchanged sentences

acted as joint bookrunning managers of the IPO and as representatives of the underwriters.

expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities or to any other affiliates.

We are holding a significant portion of the balance

Index to Financial Statements

of the net proceeds from the offering in money market funds and short-term investments.

There has been no material change in the planned use of proceeds from the IPO from that described in the

prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on February 3, 2021.

Selected Financial Data.

The selected statement of operations data for the years ended December 31, 2020 and 2019, and the period

from July 13, 2018 (inception) to December 31, 2018 are derived from our audited consolidated financial statements located elsewhere in this Annual Report on Form 10-K.

Our historical results are not

necessarily indicative of the results that may be expected in the future.

You should read the following consolidated financial data together with our audited consolidated financial statements and related notes located elsewhere in this Annual Report

on Form 10-K and the information in the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations.

Year Ended December 31,

Period from July 13,

2018 (Inception) to

December 31, 2018

(in thousands, except per share data)

Consolidated Statements of Operations Data:

Operating expenses:

development (1)

General and administrative

Total operating expenses

Loss from operations

Interest income, net

Other income (expense), net

Loss before income taxes

Benefit from income taxes

Net loss per share, basic and diluted

Weighted-average shares outstanding, basic and diluted (2)

Research and development expense for the years ended December 31, 2020 and 2019 included non-cash expense of $72.1 million and $1.9 million related to the change in the estimated fair value of the success payment liabilities, respectively, and $52.8 million and $17.9 million related

to the change in the estimated fair value of contingent consideration, respectively.

Research and development expense for the years ended December 31, 2020 and 2019 included non-cash expense of

$0.7 million and $11.9 million, respectively, in connection with license agreements.

See Note 3, Acquisitions, Note 5, License and collaboration agreements, and Note 7, Fair value measurements to our consolidated financial statements

included elsewhere in this Annual Report on Form 10-K, and the subsection titled Managements Discussion and Analysis of Financial Condition and Results of Operations for more detail on the

success payment liabilities and contingent consideration.

See Note 15, Net loss per share, to our consolidated financial statements included elsewhere in this Annual

Report on Form 10-K for an explanation of the calculations of our basic and diluted net loss per share, and the weighted-average number of shares outstanding.

(in thousands)

Consolidated Balance Sheet Data:

Cash, cash equivalents, and marketable securities

Convertible preferred stock

Accumulated deficit

Total stockholders deficit

Index to Financial Statements

We define working capital as current assets less current liabilities.

See our consolidated financial statements

and the related notes included elsewhere in this Annual Report on Form 10-K for further details regarding our current assets and current liabilities.

Managements Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with the section titled

Selected Financial Data, and our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

This discussion and analysis and other parts

of this Annual Report on Form 10-K contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks,

uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business.

Our actual results and the timing of selected events could differ materially from those described in or implied by these

forward-looking statements as a result of several factors, including those set forth in the section titled Risk Factors. See also the section titled Special Note Regarding Forward-Looking Statements.

We were founded on the belief

that engineered cells will be one of the most important transformations in medicine over the next several decades.

The burden of diseases that can be addressed at their root cause through engineered cells is significant.

We view engineered cells as

having the potential to be as therapeutically disruptive as biologics to clinical practice.

Our long-term aspirations are to be able to control or modify any gene in the body, to replace any cell that is damaged or missing, and to markedly improve

access to cellular and gene-based medicines.

We have brought together an experienced group of scientists, engineers, and company builders and combined them with the necessary technologies to move this vision forward.

We are developing in vivo

and ex vivo cell engineering platforms to revolutionize treatment across a broad array of therapeutic areas with unmet treatment needs, including oncology, diabetes, central nervous system (CNS) disorders, cardiovascular diseases, and genetic

disorders, among others.

While our current product candidates are all in preclinical development, our goal is to file multiple investigational new drug applications (INDs) both in 2022 and 2023.

The process of repairing and controlling genes in the body, referred to as gene therapy or in vivo cell engineering, requires in vivo

delivery of a therapeutic payload and modification of the genome.

Of these, we believe delivery of a therapeutic payload represents the greatest unmet need and is thus at the core of our strategic focus, with our ultimate goal being the delivery of

any payload to any cell in a specific and repeatable way.

Our initial effort is on cell-specific delivery and increasing the diversity and size of payloads.

Using our fusogen technology, we have shown in preclinical studies that we can specifically

target numerous cell surface receptors that, when combined with delivery vehicles to form fusosomes, allow cell-specific delivery across multiple different cell types.

We have initially chosen to focus this technology on delivering payloads to

T cells, hepatocytes, and hematopoietic stem cells.

Frequently in disease, cells are damaged or missing entirely, and an effective

therapy needs to replace the entire cell, an approach referred to as cell therapy or ex vivo cell engineering.

A successful therapeutic requires an ability to manufacture cells at scale that engraft, function, and have the necessary

persistence in the body.

Of these, long-term persistence related to overcoming immunologic rejection of another persons cells has been the most challenging, which has led many to focus on autologous, or a patients own, cells as the

therapeutic source.

However, autologous therapies require a complex process of harvesting cells from the patients, manipulating them outside the body, and returning them to the patient.

Products utilizing this approach have had to manage significant

challenges such as scalability, product variability, product quality, cost, patient accessibility, and a limited number of cell types being amenable to this approach.

Given these limitations, rather than utilizing autologous cells to overcome immune

rejection, we have invested in creating hypoimmune cells that can hide from the patients immune system.

We are striving to make therapies utilizing pluripotent stem cells with our hypoimmune genetic modifications as the starting

material, which we then differentiate into a specific cell type, such as a pancreatic beta cell, before treating the patient.

Additionally, for cell types for which effective differentiation protocols from a stem cell have not yet been developed,

such as T cells, instead of starting from a pluripotent stem cell, we can utilize an allogeneic cell, differentiated cells sourced from a donor, as the starting material to which we then apply our hypoimmune genetic modifications.

Index to Financial Statements

We believe the time is right to develop engineered cell therapies across a broad range of

therapeutic areas.

Substantial progress in the understanding of genetics, gene editing, gene control, protein engineering, stem cell biology, immunology, process analytics, and computational biology have converged to create an opportunity to

markedly increase the breadth and depth of the potential impact of genetic and cellular medicines.

We are focused on creating transformative in vivo and ex vivo engineered cell therapies across a range of therapeutic areas.

the early stages of development across a broad pipeline of product candidates, all of which are currently in the preclinical stage of development and are summarized below:

Our ex vivo and in vivo technology represents an aggregation of years of innovation and

technology from multiple academic institutions and companies, including our fusogen technology acquired from Cobalt Biomedicines Inc.

(Cobalt), our ex vivo cell engineering programs focused on replacing damaged cells in the heart and certain

brain disorders acquired from Cytocardia Inc.

(Cytocardia) and Oscine Corp.

(Oscine), respectively, and hypoimmune technology licensed from the President and Fellows of Harvard College (Harvard) and The Regents of the University of California

(UCSF), amongst others.

See the subsections titled BusinessKey Intellectual Property Agreements and Note 3, Acquisitions and Note 5, License and collaboration agreements to our consolidated financial statements included elsewhere

in this Annual Report on Form 10-K.

We were incorporated in July 2018 and commenced operations

Our operations to date have included developing our in vivo and ex vivo cell engineering platforms, identifying and developing potential product candidates, executing preclinical studies, acquiring technology, organizing

and staffing the company, business planning, establishing our intellectual property portfolio, raising capital, and providing general and administrative support for these operations.

All of our programs are currently in the development stage, and we

do not have any products approved for sale.

Since our inception, we have incurred net losses each year.

Our net losses were $285.3 million and $130.8 million for the years ended December 31, 2020 and 2019, respectively.

December 31, 2020, we had an accumulated deficit of $429.4 million.

Our net losses resulted primarily from our research and development programs and, to a lesser extent, general and administrative costs associated with our operations.

In February 2021, we completed our initial public offering (IPO) and issued 27.0 million shares of our common stock, including

3.5 million shares pursuant to the full exercise of the underwriters option to purchase additional shares, at a price of $25.00 per share and received net proceeds of $626.6 million.

Prior to the IPO, we funded our operations from

the issuance and sale of our convertible preferred stock raising an aggregate of $705.5 million in gross proceeds.

As of December 31, 2020, we had cash, cash equivalents, and marketable securities of $412.0 million.

current operating plan, we believe that our existing cash, cash equivalents, and marketable securities, together with the proceeds from the IPO, will be sufficient to meet our working capital and capital expenditure needs for at least the next 36

Index to Financial Statements

We anticipate that our expenses and operating losses will increase substantially over the

foreseeable future.

The expected increase in expenses will be driven in large part by our ongoing activities, if and as we:

continue to advance our in vivo and ex vivo cell engineering platforms;

continue preclinical development of our current and future product candidates and initiate additional preclinical

commence clinical studies of our current and future product candidates;

establish our manufacturing capability, including developing our contract development and manufacturing

relationships, and building our internal manufacturing facilities;

acquire and license technologies aligned with our in vivo and ex vivo cell engineering platforms;

seek regulatory approval of our current and future product candidates;

expand our operational, financial, and management systems and increase personnel, including personnel to support

our preclinical and clinical development, manufacturing, and commercialization efforts;

continue to develop, grow, perfect, and defend our intellectual property portfolio;

incur additional legal, accounting, or other expenses in operating our business, including the additional costs

associated with operating as a public company.

We are also investing early in building world class capabilities in key

areas of manufacturing sciences and operations, including development of our in vivo and ex vivo cell engineering platforms, product characterization, and process analytics from the time candidates are in early research phases.

investments also include scaled research solutions, scaled infrastructure, and novel technologies to improve efficiency, characterization, and scalability of manufacturing.

The global COVID-19 pandemic continues to evolve rapidly, and we will continue to monitor it closely.

The extent of the impact of the COVID-19 pandemic on our business, operations, and clinical development timelines and plans remains uncertain and will depend on certain developments, including the duration and

spread of the outbreak and its impact on our clinical trial enrollment, trial sites, contract research organizations (CROs), contract manufacturing organizations, and other third parties with whom we do business, as well as its impact on regulatory

authorities and our key scientific and management personnel.

We have experienced modest delays in our discovery and development activities as a result of the COVID-19 pandemic, primarily due to temporary and

partial shutdowns at certain of our CROs and academic institutions that have since resumed operations, and due to the Washington, California and Massachusetts

stay-at-home orders where our operations are located.

However, to the extent possible, we are conducting business as usual, with necessary or advisable modifications to

employee travel and most of our non-laboratory employees working remotely.

We will continue to actively monitor the situation related to COVID-19 and may take further

actions that alter our operations, including those that may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

We anticipate that we will need to raise additional financing in the future to fund our operations, including the commercialization of any

approved product candidates.

Until such time, if ever, as we can generate significant product revenue, we expect to finance our operations with our existing cash, cash equivalents, and marketable securities, the net proceeds from the IPO, any future

equity or debt financings, and upfront, milestone, and royalty payments, if any, received under future license or collaboration agreements.

We may not be able to raise additional capital on terms acceptable to us or at all.

If we are unable to raise

additional capital when desired, our business, results of operations, and financial condition would be adversely affected.

We have completed various acquisitions since inception.

For details regarding our acquisitions, see the subsection titled

BusinessKey Intellectual Property Agreements and Note 3, Acquisitions, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Index to Financial Statements

License and collaboration agreements

We have entered into license and collaboration arrangements with various third parties.

For details regarding these agreements, see the

subsections titled Business Key Intellectual Property Agreements and Note 5, License and collaboration agreements, to our consolidated financial statements included elsewhere in this Annual Report on

Success payments and contingent consideration

Cobalt success payment and contingent consideration

Pursuant to the terms of the Cobalt acquisition agreement, we may be required to pay contingent consideration of up to an aggregate of

$500.0 million upon the achievement of certain pre-specified development milestones (Cobalt Contingent Consideration), and a success payment of up to $500.0 million payable in cash or stock, at our

discretion (the Cobalt Success Payment).

Prior to the IPO in February 2021, the Cobalt Success Payment was payable, if at pre-determined valuation measurement dates, our value was equal to or exceeded three

times our value implied by the per share value of the Companys Series B convertible preferred stock at issuance, or any security into which such stock has been converted or exchanged, and we had a program based on the fusogen technology in a

clinical trial pursuant to an IND, or have filed for, or received approval for, a biologics license application (BLA) or new drug application (NDA).

Subsequent to the IPO, the threshold to determine if a payment is due will be based on whether our

market capitalization equals or exceeds $8.1 billion, and we have a program based on the fusogen technology in a clinical trial pursuant to an IND, or have filed for, or received approval for, a BLA or NDA.

The valuation measurement dates for

the Cobalt Success Payment are an IPO, which occurred in February 2021, and periodically thereafter.

A Cobalt Success Payment was not triggered upon the IPO.

In addition to an IPO, a valuation measurement date is triggered upon a change of control

when at least one of our programs based on the fusogen technology is the subject of an active research program.

If there is a change of control and our market capitalization falls below certain thresholds on the change of control date, the amount of

the potential Cobalt Success Payment will decrease, and the amount of potential Cobalt Contingent Consideration will increase.

See Note 3, Acquisitions to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details on the different market capitalizations and impact to the amount of the potential Cobalt Success Payment and potential Cobalt Contingent Consideration if there is a change of control.

As of December 31, 2020 and 2019, the estimated fair value of the Cobalt Success Payment liability was $64.7 million and

$2.4 million, respectively, and the estimated fair value of the Cobalt Contingent Consideration was $121.9 million and $69.1 million, respectively.

For the years ended December 31, 2020 and 2019 the Company recognized

$62.3 million and an immaterial amount in research and development expense in connection with the change in fair value of the Cobalt Success Payment, respectively, and $52.8 million and $17.9 million in research and development

expense in connection with the change in fair value of the Cobalt Contingent Consideration, respectively.

See the subsections below titled Success payments and Contingent consideration for more information on

the accounting treatment.

Harvard success payments

Pursuant to the terms of the Harvard Agreement, we may be required to make success payments (the Harvard Success Payments) up to an aggregate

of $175.0 million, payable in cash, based on increases in the per share fair market value of our Series A convertible preferred stock.

Concurrent with the closing of the IPO in February 2021, our Series A convertible preferred stock was

converted into common stock, and as a result, going forward the per share fair market value of our common stock will determine whether a success payment is owed to Harvard.

The potential Harvard Success Payments are based on multiples of increased

value ranging from 5x to 40x based on a comparison of the per share fair market value of our common stock relative to the original issuance price of $4.00 per share at pre-determined valuation measurement

The Harvard Success Payments can be achieved over a maximum of 12 years from the effective date of the agreement.

See Note 5, License and collaboration agreements to our consolidated financial statements included elsewhere in this Annual

Report on Form 10-K for more details on the various per share common stock values that trigger a Harvard Success Payment.

We anticipate the first valuation measurement date to occur in February 2022, the one-year anniversary

of our IPO, with valuation dates occurring periodically after this date.

Additional valuation measurement dates are triggered by events which include:

a merger, an asset sale, the sale of the majority of the shares held by Series A convertible

preferred stockholders, and the last day of the term of the success payments.

If a higher success payment tier is met at the same time

Index to Financial Statements

a lower tier is met, both tiers will be owed.

Any previous success payments made under the Harvard Agreement are credited against the success payment owed as of any valuation measurement date, so

that Harvard does not receive multiple success payments in connection with the same threshold.

The estimated fair value of the Harvard

Success Payment liability was $11.8 million and $1.9 million as of December 31, 2020 and 2019, and we recorded research and development expense of $9.9 million and $1.9 million for the years ended December 31, 2020 and

2019, respectively.

See the subsection below titled Success payments for more information on the accounting treatment of the Harvard Success Payments.

Components of operating results

Operating expenses

Research and development

To date, research and development expenses have related primarily to discovery and development of our platform technology and product

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are recorded as prepaid expenses until the goods or services are received.

Research and development expenses consist of personnel-related costs, including salaries, benefits, and

non-cash stock-based compensation, external research and development expenses incurred under arrangements with third parties, laboratory supplies, costs to acquire and license technologies aligned with our

goal of translating engineered cells to medicines, facility and other allocated expenses, including rent, depreciation, and allocated overhead costs, and other research and development expenses.

Research and development expenses also include the change in the estimated fair value of our success payment liabilities and contingent

consideration.

Research and development expense related to our success payment liabilities and contingent consideration is unpredictable and may vary significantly from quarter to quarter and year to year due to changes in the assumptions used in

the calculation.

In addition, we may incur research and development expense to acquire and license technologies in the future, and the timing and amount of those expenses cannot be estimated with reliability and may also fluctuate from quarter to

quarter and year to year.

We deploy our employee and infrastructure resources across multiple research and development programs for

developing our in vivo and ex vivo cell engineering platforms, identifying and developing product candidates, and establishing manufacturing capabilities.

Due to our early stage of development, number of ongoing projects, and our

ability to use resources across several projects, the vast majority of our research and development costs are not recorded on a program-specific basis.

These include costs for personnel, laboratory, and other indirect facility and operating costs.

Research and development activities account for a significant portion of our operating expenses.

Excluding amounts attributable to

changes in the estimated fair value of our success payment liabilities and contingent consideration, we anticipate that our research and development expenses will increase over the foreseeable future as we expand our research and development efforts

including expanding the capabilities of our cell engineering platforms, identifying product candidates, completing preclinical studies and commencing clinical trials, seeking regulatory approval of our product candidates, and incurring costs to

acquire and license technologies aligned with our goal of translating engineered cells to medicines.

A change in the outcome of any of these factors could result in a significant change in the costs and timing associated with the development of our

product candidates.

General and administrative

General and administrative expenses consist of personnel-related costs, including salaries, benefits, and

non-cash stock-based compensation for our employees in finance, human resources, legal, information technology, executive, and other administrative functions, legal and consulting fees, recruiting costs, and

facility costs not otherwise included in research and development expenses.

Legal fees include those related to corporate and patent matters.

We anticipate that our general and administrative expenses will increase over the foreseeable future to support our continued research and

development activities, grow our business, and support future possible business development

Index to Financial Statements

opportunities.

We also anticipate incurring additional expenses related to audit and legal services associated with operating as a public company, maintaining compliance with the rules and

regulations of the Securities and Exchange Commission (SEC) and standards applicable to companies listed on a national securities exchange, investor relations activities, and other administrative and professional services.

Interest income, net

Interest income, net consists of interest earned on our cash, cash equivalents, and marketable securities.

Benefit from income taxes

Benefit from income taxes consists of the release of the valuation allowance on net deferred tax assets triggered by the deferred tax

liabilities recorded as a result of the acquisition of Cobalt in 2019.

The results of operations, liquidity, capital resources, and

capital requirements sections below include a comparison of the years ended December 31, 2020 and 2019.

For a comparison of the year ended December 31, 2019 and the period from July 13, 2018 (inception) refer to our prospectus for our

IPO filed with the SEC on February 5, 2021.

Results of operations

Comparison of the years ended December 31, 2020 and 2019

The following table summarizes our results of operations for the periods presented:

Year Ended December 31,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Interest income, net

Other income (expense), net

Loss before income taxes

Benefit from income taxes

Research and Development Expenses

The following table summarizes the components of our research and development expenses for the periods presented:

Year Ended December 31,

(in thousands)

Success payments

Contingent consideration

Research and laboratory

Facility and other allocated costs

Acquisition and licensing of technology

Total research and development expense

Index to Financial Statements

Research and development expenses were $257.9 million and $119.4 million for the

years ended December 31, 2020 and 2019, respectively.

The increase of $138.5 million was primarily due to:

an increase of $70.2 million for the change in the estimated fair value of our Cobalt and Harvard Success

Payment liabilities in aggregate;

an increase of $34.9 million for the change in the estimated fair value of the Cobalt Contingent

Consideration;

increased personnel-related expenses of $19.1 million, including

non-cash stock-based compensation of $4.9 million, which was primarily attributable to an increase in headcount to expand our research and development capabilities.

an increase of $18.6 million in research and laboratory costs, including laboratory supplies, preclinical

studies, and other external research expenses;

an increase of $12.0 million of facility and other allocated costs, including rent, depreciation, and

allocated overhead costs.

These increases were partially offset by a decline in costs to acquire and license technology

of $15.8 million due to costs incurred under the Harvard and UCSF Agreements, and the upfront fee for the acquisition of Cytocardia 2019, partially offset by the upfront fee for the acquisition of Oscine in 2020.

General and administrative Expenses

General and administrative expense were $28.3 million and $21.8 million for the years ended December 31, 2020 and 2019,

respectively.

The increase of $6.5 million was primarily due to increased personnel-related expenses of $3.2 million primarily attributable to an increase in headcount to build our infrastructure, increased information technology and

facility costs including rent of $1.4 million, increased business taxes and insurance of $0.8 million, and increased consulting and legal fees of $0.5 million.

Interest income, net

Interest income, net was $0.7 million and $2.9 million for the years ended December 31, 2020 and 2019, respectively.

decrease of $2.2 million was due to lower interest rates on cash and marketable securities balances.

Benefit from income taxes

The benefit from income taxes of $7.5 million for the year ended December 31, 2019, was due to a release of valuation

allowance associated with the deferred tax liability of $7.5 million recorded in connection with the intangible asset from the Cobalt acquisition.

There was no benefit from income taxes for the year ended December 31, 2020.

Liquidity, capital resources, and capital requirements

Sources of liquidity

December 31, 2020, we had $412.0 million in cash, cash equivalents, and marketable securities and an accumulated deficit of $429.4 million.

From July 13, 2018 (inception) through December 31, 2020, we raised an aggregate of

$705.5 million in gross proceeds from the sale of our convertible preferred stock.

In February 2021, we completed our IPO and issued 27.0 million shares of our common stock, including 3.5 million shares pursuant to the full exercise

of the underwriters option to purchase additional shares, at a price of $25.00 per share and received net proceeds of $626.6 million.

Since our inception, we have not generated any revenue from product sales or any other sources, and we

have incurred significant operating losses.

We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for a number of years, if ever.

Future funding requirements

expect to incur additional losses in the foreseeable future as we conduct and expand our research and development efforts, including conducting preclinical studies and clinical trials, developing new product candidates, establishing internal and

external manufacturing capabilities, and funding our operations generally.

Index to Financial Statements

Based on our current operating plan, we believe that our existing cash, cash equivalents,

and marketable securities, together with the net proceeds from the IPO, will be sufficient to meet our working capital and capital expenditure needs for at least the next 36 months.

However, we anticipate that we will need to raise additional

financing in the future to fund our operations, including the commercialization of any approved product candidates.

We are subject to the risks typically related to the development of new products, and we may encounter unforeseen expenses,

difficulties, complications, delays, and other unknown factors that may adversely affect our business.

Our future capital requirements

will depend on many factors, including:

the scope, timing, progress, costs, and results of discovery, preclinical development, and clinical trials for

our current and future product candidates;

the number of clinical trials required for regulatory approval of our current and future product candidates;

the costs, timing, and outcome of regulatory review of any of our current and future product candidates;

the cost of manufacturing clinical and commercial supplies of our current and future product candidates;

the costs and timing of future commercialization activities, including manufacturing, marketing, sales, and

distribution, for any of our product candidates for which we receive marketing approval;

the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our

intellectual property rights, and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights;

our ability to maintain existing, and establish new, strategic collaborations, licensing, or other arrangements

and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty, or other payments due under any such agreement;

the revenue, if any, received from commercial sales of our product candidates for which we receive marketing

expenses to attract, hire and retain, skilled personnel;

the costs of operating as a public company;

our ability to establish a commercially viable pricing structure and obtain approval for coverage and adequate

reimbursement from third-party and government payers;

addressing any potential interruptions or delays resulting from factors related to the COVID-19 pandemic;

the effect of competing technological and market developments;

the extent to which we acquire or invest in businesses, products, and technologies.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations from the sale of

additional equity or debt financings, or other capital which may come in the form of strategic collaborations, licensing, or other arrangements.

In the event that additional financing is required, we may not be able to raise it on terms acceptable

to us, or at all.

If we raise additional funds through the issuance of equity or convertible debt securities, it may result in dilution to our existing stockholders.

Debt financing, if available, may result in increased fixed payment obligations,

and the existence of securities with rights that may be senior to those of our common stock.

If we incur indebtedness, we could become subject to covenants that would restrict our operations.

If we raise funds through strategic collaborations,

licensing or other arrangements, we may relinquish significant rights or grant licenses on terms that are not favorable to us.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the

recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic and otherwise.

If we are unable to raise additional

capital when desired, our business, results of operations, and financial condition would be adversely affected.

Index to Financial Statements

The following table summarizes our cash flows for the periods indicated:

Year Ended December 31,

(in thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net increase in cash, cash equivalents, and restricted cash

Operating activities

During the year ended December 31, 2020, net cash used in operating activities was $138.0 million, consisting primarily of our net

loss of $285.3 million partially offset by non-cash charges of $141.2 million and an increase in our net operating assets of $6.2 million.

charges of $141.2 million consisted of $72.1 million for revaluation of our success payment liabilities, $52.8 million for revaluation of contingent consideration, depreciation expense of $5.9 million, non-cash stock-based compensation expense of $5.8 million, right-of-use assets lease expense of $4.3 million, and other non-cash charges of $0.3 million.

During the year ended December 31, 2019, net cash used in

operating activities was $85.5 million, consisting primarily of our net loss of $130.8 million and a tax benefit of $7.5 million recorded in connection with the Cobalt acquisition, partially offset by

non-cash charges of $42.3 million and an increase in our net operating assets of $10.5 million.

The non-cash charges of $42.3 million consisted of

$17.9 million for revaluation of contingent consideration, $11.9 million for the issuance of stock in connection with license agreements, $6.5 million for revaluation of success payment and contingent liabilities, depreciation expense

of $1.8 million, and other non-cash charges of $4.2 million.

Investing activities

During the years ended December 31, 2020 and 2019, cash used in investing activities was $252.6 million and

$87.9 million, respectively.

This consisted primarily of net purchases, sales, and maturities of marketable securities of $228.7 million and $58.5 million, respectively, and purchases of property and equipment of $23.9 million

and $26.2 million, for the years ended December 31, 2020 and 2019, respectively.

For the year ended December 31, 2019, net cash used investing activities included $3.2 million for the Cobalt acquisition.

Financing activities

During the years ended December 31, 2020 and 2019, cash provided by financing activities was $435.7 million and $223.7 million,

respectively, consisting primarily of net proceeds from the sale of our convertible preferred stock.

Contractual obligations and commitments

The following table summarizes our significant contractual obligations and commitments as of December 31, 2020:

Payments Due by Period

Less than 1 Year

More than 5 Years

Operating leases

Other than as disclosed in the table above, the payment obligations under our license, collaboration, and

acquisition agreements as of December 31, 2020 are contingent upon future events such as our achievement of pre-specified development, regulatory, and commercial milestones, or royalties on net product

See the section titled Business

Index to Financial Statements

Key Intellectual Property Agreements for more information about these payment obligations.

We are also obligated to make a success payments to Cobalt of up to $500.0 million, payable

in cash or stock at our discretion, pursuant to the terms and conditions in the Cobalt acquisition agreement, and success payments to Harvard up to an aggregate of $175.0 million, payable in cash.

See the subsection below titled

Critical accounting policies and significant judgments and estimatesSuccess payments and Note 3, Acquisitions, and Note 5, License and collaboration agreements to our consolidated financial statements located elsewhere in

this Annual Report on Form 10-K for more information on the success payments.

As of December 31, 2020, the timing and likelihood of achieving the milestones and success payments and generating future

product sales are uncertain and therefore, any related payments are not included in the table above.

We also enter into agreements in the

normal course of business for sponsored research, preclinical studies, contract manufacturing, and other services and products for operating purposes, which are generally cancelable upon written notice.

These obligations and commitments are not

included in the table above.

Off-balance sheet arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements as defined

under the rules and regulations of the SEC.

JOBS Act accounting election

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act).

We will cease to

be an emerging growth company until the earliest of (1) December 31, 2026, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we

are deemed to be a large accelerated filer as defined in Rule 12b-2 under the Exchange Act, which would occur if the fair market value of our common stock held by

non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company

reporting requirements, including not being required to have our internal control over financial reporting by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations

regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have elected to use

the extended transition period for any new or revised accounting standards during the period in which we remain an emerging growth company;

however, we may adopt certain new or revised accounting standards early if the standard allows early

Critical accounting policies and significant judgments and estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States.

preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Our estimates are based on our historical experience and on

various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in more detail in the notes to our consolidated financial statements and related notes included elsewhere in this

Annual Report on Form 10-K.

We believe the following accounting policies relate to the significant areas involving managements judgments and estimates and are critical to understanding our historical and

future performance.

Research and development expenses

We record research and development costs in the periods in which they are incurred.

We accrue for research and development costs based on the

estimated services performed, but not yet invoiced, pursuant to contracts with research institutions or other service providers that conduct and manage preclinical studies and other research services on our

Index to Financial Statements

behalf and record these costs in accrued and other current liabilities.

We make judgments and estimates in determining the accrued liabilities balance at each reporting period.

Payments made

prior to the receipt of goods or services to be used in research and development are recorded as prepaid expenses until the goods or services are received.

Research and development costs also include the estimated fair value of contingent consideration and success payment liabilities.

subsections below titled Contingent consideration and Success payments for more information.

we have not experienced any material differences between accrued costs and actual costs incurred.

However, the status and timing of actual services performed may vary from our estimates, resulting in adjustments to expense in future periods.

in these estimates that result in material changes to our accruals could materially affect our results of operations.

We account for business combinations using the acquisition method of accounting, which requires the assets acquired, including in-process research and development (IPR&D), and liabilities assumed, be recorded at their fair values as of the acquisition date.

Any excess of the purchase price over the fair value of net assets acquired is

recorded as goodwill.

The determination of the estimated fair value of these items requires us to make significant estimates and assumptions.

If we determine the acquisition does not meet the definition of a business combination under the acquisition method of accounting, the

transaction is accounted for as an asset acquisition and no goodwill or contingent consideration are recognized at the acquisition date.

In an asset acquisition, up-front payments allocated to IPR&D are

recorded in research and development expense if it is determined that there is no alternative future use, and subsequent milestone payments are recorded in research and development expense when achieved.

Intangible assets and goodwill

Accounting for business combinations requires us to make significant estimates and assumptions with respect to tangible and intangible assets

acquired and liabilities assumed.

We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired

intangible assets.

Intangible assets are reviewed for impairment annually and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment.

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable assets acquired and liabilities assumed

in a business combination.

We evaluate goodwill for impairment annually and upon the occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment.

Our evaluation includes assessing qualitative

factors or performing a quantitative analysis to determine whether it is more-likely-than-not that the fair value of net assets are below the carrying amounts.

Contingent consideration

acquisition date of a business combination contingent consideration obligations are estimated at fair value and at each subsequent balance sheet date with changes recorded in research and development expense.

The fair value of contingent

consideration is determined by calculating the probability-weighted estimated value of the milestone payments based on the assessment of the likelihood and estimated timing that the milestones would be achieved and applying the relevant discount

We utilize significant estimates and assumptions in determining the estimated contingent consideration and associated expense or gain at each balance sheet date.

The valuation of contingent consideration uses assumptions we believe would be

made by a market participant.

In evaluating the fair value of contingent consideration, a significant amount of judgment is required to estimate the likelihood and timing that the milestones would be achieved.

We assess these estimates on an on-going basis as additional data impacting the assumptions become available.

Contingent consideration may change significantly as development progresses and additional data is obtained, impacting our assumptions

regarding probabilities of successful achievement of the related milestones used to estimate the fair value

Index to Financial Statements

of the liability and the timing in which they are expected to be achieved.

Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially

different fair value estimates.

Success payments

The Cobalt and Harvard Success Payments are accounted for under Accounting Standards Codification 815, Derivatives and Hedging.

Success Payment was recorded as a liability on the consolidated balance sheets at fair value on the acquisition date and is remeasured at each subsequent reporting period with changes in fair value recognized in research and development expense.

the Harvard Success Payments, both the initial value and subsequent changes in fair value are recorded in research and development expense.

To determine the estimated fair value of the success payment liabilities we use a Monte Carlo simulation

methodology which models the estimated fair value of the liability based on several key assumptions, including the estimated number and timing of valuation measurement dates on the basis of which payments may be triggered, term of the success

payments, the risk-free interest rate, and expected volatility, which is estimated using peer company stocks for a period of time commensurate with the expected term assumption.

Prior to the IPO, the calculation of the Harvard Success Payment

liability incorporated the estimated fair value of our Series A convertible preferred stock and the Cobalt Success Payment liability incorporated our estimated future value implied by the per share value of the Series B convertible preferred stock

at issuance, or any security into which such stock has been converted or exchanged.

Concurrent with the closing of our IPO in February 2021, the Series A and Series B convertible preferred stock converted into common stock.

Subsequent to the IPO,

the computation of the estimated fair value of the Harvard Success Payments will incorporate the per share fair market value of our common stock at the end of each reporting period and the computation of the estimated fair value of the Cobalt

Success Payment will incorporate our market capitalization.

The assumptions used to calculate the fair value of the success payments are subject to a significant amount of judgment and a small change in the assumptions may have a relatively large

change in the estimated liability and resulting expense or gain.

Stock-based compensation

We recognize compensation costs related to restricted stock awards, restricted stock units, and stock options granted to employees and

nonemployees based on the estimated fair value of the awards on the date of grant, and we recognize forfeitures as they occur.

For restricted stock awards, the fair value of our common stock is used to determine the resulting stock-based

compensation expense.

For stock options we estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option pricing model.

The fair value of the stock-based awards is recognized as an expense on

a straight-line basis over the requisite service period, which is generally the vesting period.

The Black-Scholes option pricing model

requires the use of highly subjective assumptions to determine the fair value of stock-based awards.

These assumptions include:

Fair Value of Common StockSee the subsection below titled Common Stock Valuations.

Expected TermThe expected term represents the period that the stock-based awards are expected to be

We use the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the options.

Expected VolatilityAs of December 31, 2020 we were not a public company and did not have any trading

history for our common stock.

As a result, the expected volatility is estimated based on the average historical volatilities of common stock of comparable publicly traded entities over a time period equal to the expected term of the stock option

The comparable companies are chosen based on their size, stage in the product development cycle, and area of specialty.

Subsequent to our IPO in February 2021, we will continue to apply this process until sufficient historical information

regarding the volatility of our own per share stock price becomes available.

Risk-Free Interest RateThe risk-free interest rate is based on the U.S.

Treasury yield in effect at the

time of grant for zero-coupon U.S.

Treasury notes with maturities approximately equal to the expected term of the awards.

Expected DividendWe have never paid dividends on our common stock and have no plans to pay dividends on our

common stock.

Therefore, we used an expected dividend yield of zero.

Index to Financial Statements

See Note 13, Stock-based compensation to our consolidated financial statements included

elsewhere in this Annual Report on Form 10-K for information concerning certain of specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our

stock options granted in the years ended December 31, 2020 and 2019.

Such assumptions involve inherent uncertainties and the application of significant judgment.

As a result, if factors or expected outcomes change and we use significantly

different assumptions or estimates, our stock-based compensation could be materially different.

Common stock valuations

For all periods prior to the IPO there was no active public market for our common stock.

Therefore, our board of directors, with the assistance

and upon the recommendation of management, had for financial reporting purposes periodically determined the estimated per share fair value of our common stock on the date of grant in part using contemporaneous independent third-party valuations

consistent with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation (Practice Aid) as well as a range of factors and assumptions including, but not limited

our most recently available valuations of our common stock performed by an independent third-party valuation

the prices of shares of our convertible preferred stock sold to investors in arms length transactions, and

the rights, preferences and privileges of our convertible preferred stock relative to our common stock;

committed future rounds of funding;

our stage of development and material risks related to our business;

our results of operations and financial position, including our levels of available capital resources;

progress of our research and development activities;

the lack of marketability of our common stock as a private company;

the hiring of key personnel and the experience of management;

the likelihood of achieving a liquidity event for our securityholders, such as an initial public offering or a

sale of our company, given prevailing market conditions;

the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently

completed mergers and acquisitions of peer companies;

the status of strategic transactions, including the acquisition of intellectual property and technology;

trends and developments in our industry;

external market conditions affecting the life sciences and biotechnology industry sectors.

Our board of directors exercised significant judgment in estimating the fair value of our common stock.

Such estimates involve inherent

uncertainties and the application of significant judgment.

As a result, if factors or expected outcomes changed and we used significantly different assumptions or estimates, our equity-based compensation could have been materially different.

in judgments could have a material impact on our results of operations.

For our valuations performed prior to September 30, 2020, in

accordance with the Practice Aid, we determined the option pricing model (OPM) backsolve method was the most appropriate method for determining the fair value of our common stock based on our stage of development and other relevant factors.

OPM framework, the backsolve method for inferring the equity value implied by a recent financing transaction involves making assumptions for the expected time to liquidity, volatility, discount for lack of marketability, and risk-free rate and then

solving for the value of equity such that value for the most recent financing equals the amount paid.

This method was selected as management concluded that the contemporaneous financing transactions were arms length transactions.

For our valuations performed from September 30, 2020 to December 31, 2020, in accordance with the Practice Aid, we determined the

hybrid method of the OPM and the Probability-Weighted Expected Return Method (PWERM) was the

Index to Financial Statements

most appropriate method for determining the fair value of our common stock based on our stage of development and other relevant factors.

The PWERM considers various potential liquidity outcomes.

Our approach included assumptions for different timing of initial public offering scenarios, the sale of our company, and dissolution.

Under the hybrid OPM and PWERM method, the per share value calculated under the OPM and PWERM are weighted based

on expected exit outcomes and the quality of the information specific to each allocation methodology to arrive at a final estimated fair value per share value of the common stock before a discount for lack of marketability is applied.

Following the closing of the IPO, our board of directors will determine the fair market value of our common stock based on its closing price

as reported on the Nasdaq Global Select Market on the date of grant.

Recently adopted and recent accounting pronouncements

See Note 2, Summary of significant accounting policies to our consolidated financial statements included elsewhere in this Annual Report on

Form 10-K for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition or

results of operations.

No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities or to any other affiliates.

We are holding a significant portion of the balance of the net proceeds from the offering in money market funds and short-term investments.

There has been no material change in the planned use of proceeds from the IPO from that described in the prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act, which was declared effective on February 3, 2021.

We invested the funds received in cash equivalents and other marketable securities in accordance with our investment policy.

Issuer Purchases of Equity Securities

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity