Nurix Therapeutics(NRIX) - 2020 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, changes in equity, and cash flows, along with detailed notes explaining the company's business, significant accounting policies, collaboration agreements, and other financial components Condensed Consolidated Balance Sheets (Unaudited) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | Metric | August 31, 2020 (in thousands) | November 30, 2019 (in thousands) | | :--------------------------------- | :------------------------------- | :------------------------------- | | Cash and cash equivalents | $265,527 | $34,816 | | Short-term investments | $88,716 | $2,904 | | Total current assets | $364,089 | $39,354 | | Total assets | $411,874 | $44,048 | | Total current liabilities | $41,012 | $16,137 | | Total liabilities | $104,254 | $53,567 | | Total stockholders' equity (deficit)| $307,620 | $(57,714) | Condensed Consolidated Statements of Operations (Unaudited) This section outlines the company's revenues, expenses, and net loss over specified periods | Metric | Three Months Ended Aug 31, 2020 (in thousands) | Three Months Ended Aug 31, 2019 (in thousands) | Nine Months Ended Aug 31, 2020 (in thousands) | Nine Months Ended Aug 31, 2019 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Collaboration revenue | $4,085 | $10,580 | $11,131 | $29,253 | | Research and development | $18,939 | $11,008 | $46,049 | $32,201 | | General and administrative | $4,338 | $2,184 | $10,057 | $5,724 | | Total operating expenses | $23,277 | $13,192 | $56,106 | $37,925 | | Loss from operations | $(19,192) | $(2,612) | $(44,975) | $(8,672) | | Net loss | $(18,517) | $(2,427) | $(23,328) | $(8,180) | | Net loss per share (basic and diluted) | $(0.59) | $(0.66) | $(0.84) | $(2.38) | - Collaboration revenue for the three and nine months ended August 31, 2020, did not include related party revenue, whereas the same periods in 2019 included $9.7 million and $28.4 million, respectively[15] Condensed Consolidated Statements of Comprehensive Loss (Unaudited) This section presents the net loss and other comprehensive income/loss components, reflecting total comprehensive loss | Metric | Three Months Ended Aug 31, 2020 (in thousands) | Three Months Ended Aug 31, 2019 (in thousands) | Nine Months Ended Aug 31, 2020 (in thousands) | Nine Months Ended Aug 31, 2019 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss | $(18,517) | $(2,427) | $(23,328) | $(8,180) | | Unrealized (loss) gain on available-for-sale investments | $(1) | $(1) | $140 | $4 | | Total comprehensive loss | $(18,518) | $(2,428) | $(23,188) | $(8,176) | Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited) This section details changes in the company's equity, including preferred stock conversions and capital raises - As of August 31, 2020, the company had no redeemable convertible preferred stock outstanding, following the conversion of all outstanding shares into 22,245,251 shares of common stock immediately prior to the IPO in July 2020[21][120] - Total stockholders' equity significantly increased from a deficit of $(57,714) thousand as of November 30, 2019, to $307,620 thousand as of August 31, 2020, primarily due to the IPO and Series D preferred stock issuance[21] Condensed Consolidated Statements of Cash Flows (Unaudited) This section summarizes cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Nine Months Ended Aug 31, 2020 (in thousands) | Nine Months Ended Aug 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $20,402 | $13,349 | | Net cash provided by (used in) investing activities | $(129,841) | $12,863 | | Net cash provided by financing activities | $340,150 | $46 | | Net increase in cash, cash equivalents and restricted cash | $230,711 | $26,258 | | Cash, cash equivalents and restricted cash at end of period | $265,697 | $52,019 | - Significant increase in cash from financing activities in 2020 due to $219.3 million from IPO and $119.9 million from Series D preferred stock issuance[25] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. The Company This note describes the company's business, recent corporate events, financial outlook, and the impact of COVID-19 - Nurix Therapeutics, Inc. is a biopharmaceutical company focused on small molecule therapies for cancer and immune disorders, leveraging its DELigase platform[28] - The company completed a 1-for-3 reverse stock split on July 17, 2020, and an Initial Public Offering (IPO) on July 28, 2020, raising approximately $218.1 million net proceeds[30][31] - Management believes existing cash, cash equivalents, and investments are sufficient for at least 12 months of operating activities, despite historical significant losses and an accumulated deficit of $83.8 million as of August 31, 2020[33][34] - The COVID-19 pandemic poses risks to business activities, but as of August 31, 2020, it did not have a material impact on the company's condensed consolidated financial statements[37][38] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The company adopted Topic 606, Revenue from Contracts with Customers, effective December 1, 2019, using the modified retrospective method, which did not result in a material impact on financial statements[50][72] - Research and development costs are expensed as incurred, including payroll, supplies, preclinical studies, and contract manufacturing[59] - Stock-based compensation is accounted for using a fair value-based method, with fair value estimated using the Black-Scholes model[62] Cash, Cash Equivalents and Restricted Cash (in thousands) | Cash, Cash Equivalents and Restricted Cash (in thousands) | August 31, 2020 | August 31, 2019 | November 30, 2019 | November 30, 2018 | | :-------------------------------------------------------- | :-------------- | :-------------- | :---------------- | :---------------- | | Cash and cash equivalents | $265,527 | $51,849 | $34,816 | $25,591 | | Restricted cash | $170 | $170 | $170 | $170 | | Total | $265,697 | $52,019 | $34,986 | $25,761 | Note 3. Collaboration Agreements This note details the terms and financial impact of the company's strategic collaboration agreements - The Celgene Agreement was terminated in June 2019, resulting in no collaboration revenue from Celgene for the three and nine months ended August 31, 2020, compared to $9.7 million and $28.4 million in 2019, respectively[82][83] - Under the Gilead Agreement, the company received an upfront payment of $45.0 million plus $3.0 million in additional fees, and is eligible for up to $2.3 billion in additional payments (milestones, royalties)[87] - Collaboration revenue from Gilead was $2.1 million and $6.9 million for the three and nine months ended August 31, 2020, respectively. Deferred revenue related to Gilead was $41.9 million as of August 31, 2020[93] - Under the Sanofi Agreement, the company received an upfront payment of $55.0 million and is eligible for up to $2.5 billion in additional payments (milestones, royalties)[97] - Collaboration revenue from Sanofi was $2.0 million and $4.2 million for the three and nine months ended August 31, 2020, respectively. Deferred revenue related to Sanofi was $50.8 million as of August 31, 2020[100] Note 4. Condensed Consolidated Balance Sheet Components This note provides a breakdown of specific asset and liability accounts on the balance sheet Property and Equipment, Net (in thousands) | Property and Equipment, Net (in thousands) | August 31, 2020 | November 30, 2019 | | :----------------------------------------- | :-------------- | :---------------- | | Laboratory equipment | $13,274 | $10,821 | | Leasehold improvements | $2,658 | $2,483 | | Computer equipment | $745 | $654 | | Furniture and fixtures | $506 | $478 | | Software | $1,057 | $282 | | Internal-use software | $831 | $156 | | Less: Accumulated depreciation and amortization | $(12,539) | $(11,003) | | Total | $6,532 | $3,871 | Accrued and Other Current Liabilities (in thousands) | Accrued and Other Current Liabilities (in thousands) | August 31, 2020 | November 30, 2019 | | :--------------------------------------------------- | :-------------- | :---------------- | | Accrued compensation | $3,761 | $3,751 | | Accrued contract research and lab supplies | $1,909 | $322 | | Accrued professional services | $440 | $512 | | Accrued taxes | $34 | $33 | | Other | $958 | $309 | | Total | $7,102 | $4,927 | Note 5. Fair Value Measurements This note describes the valuation methods and hierarchy used for financial assets and liabilities - The company classifies financial assets (cash equivalents and available-for-sale investments) using a three-level fair value hierarchy[103] - Money market funds and U.S. treasury securities are classified as Level 1, while corporate debt securities, U.S. government agency securities, corporate commercial paper, and municipal securities are classified as Level 2[105][106][107] Financial Assets at Fair Value (in thousands) | Financial Assets at Fair Value (in thousands) | August 31, 2020 | November 30, 2019 | | :-------------------------------------------- | :-------------- | :---------------- | | Money market funds (Level 1) | $265,527 | $23,834 | | U.S. treasury securities (Level 1) | $31,038 | $10,982 | | Corporate debt securities (Level 2) | $10,149 | $1,502 | | U.S. government agency securities (Level 2) | $9,045 | $1,402 | | Corporate commercial paper (Level 2) | $35,448 | — | | Municipal securities (Level 2) | $3,036 | — | | Long-term investments (Level 2) | $40,898 | $506 | | Total | $395,141 | $38,226 | Note 6. Commitments and Contingencies This note discloses the company's contractual obligations and potential legal liabilities - The company had no outstanding, pending, or threatened material legal proceedings as of August 31, 2020[110] - Future minimum lease payments under operating leases totaled $15.971 million as of August 31, 2020, with $3.342 million due within one year[115] Note 7. Common Stock This note details the authorized, issued, and reserved shares of the company's common stock - As of August 31, 2020, the company had 500,000,000 authorized shares of common stock and 38,845,196 shares issued and outstanding[13] Common Stock Reserved for Future Issuance | Common Stock Reserved for Future Issuance | August 31, 2020 | November 30, 2019 | | :---------------------------------------- | :-------------- | :---------------- | | Conversion of redeemable convertible preferred stock | — | 12,813,887 | | Issuance of options under stock option plan | 3,460,677 | 1,913,792 | | Shares available for future stock option grants | 3,982,545 | 412,204 | | Shares available for issuance under employee stock purchase plan | 730,000 | — | | Total | 8,173,222 | 15,139,883 | Note 8. Redeemable Convertible Preferred Stock This note describes the issuance and conversion of the company's preferred stock - In March 2020, the company issued 9,431,364 shares of Series D redeemable convertible preferred stock for net proceeds of $119.9 million[119] - Immediately prior to the IPO in July 2020, all outstanding redeemable convertible preferred stock, including Series D, converted into 22,245,251 shares of common stock, resulting in no preferred stock outstanding as of August 31, 2020[120] Note 9. Stock-Based Compensation This note outlines the company's stock-based compensation plans and related expenses - The company adopted the 2020 Equity Incentive Plan and 2020 Employee Stock Purchase Plan (ESPP) in July 2020, reserving 3,982,545 and 730,000 shares for future issuance, respectively[122][124][128][129] Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three Months Ended Aug 31, 2020 | Three Months Ended Aug 31, 2019 | Nine Months Ended Aug 31, 2020 | Nine Months Ended Aug 31, 2019 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $566 | $79 | $930 | $220 | | General and administrative | $549 | $57 | $835 | $123 | | Total stock-based compensation | $1,115 | $136 | $1,765 | $343 | - Total unrecognized stock-based compensation cost was $12.5 million as of August 31, 2020, to be amortized over approximately 3.48 years[130] Note 10. Defined Contribution Plan This note details the company's contributions to its employee defined contribution plan - The company sponsors a 401(k) plan and made contributions of $57,000 and $39,000 for the three months ended August 31, 2020 and 2019, respectively, and $0.3 million for both nine-month periods[131] Note 11. Income Taxes This note explains the company's income tax provisions, benefits, and deferred tax assets - The company recorded a discrete income tax benefit of $20.6 million for the nine months ended August 31, 2020, primarily due to the CARES Act allowing NOL carrybacks[132][133] - A refund claim of $15.7 million was filed for 2018 NOLs, and an additional $3.9 million claim is anticipated for 2019 NOLs[132] - The company maintains a full valuation allowance against deferred tax assets due to uncertainty of realizing future tax benefits from NOL carryforwards[133] Note 12. Net Loss Per Share This note presents the calculation of basic and diluted net loss per share | Metric | Three Months Ended Aug 31, 2020 | Three Months Ended Aug 31, 2019 | Nine Months Ended Aug 31, 2020 | Nine Months Ended Aug 31, 2019 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(18,517) | $(2,427) | $(23,328) | $(8,180) | | Weighted-average shares outstanding | 31,383,936 | 3,667,335 | 27,688,972 | 3,433,809 | | Net loss per share | $(0.59) | $(0.66) | $(0.84) | $(2.38) | - Potentially dilutive securities, including redeemable convertible preferred stock (in 2019), stock options, and ESPP shares, were excluded from diluted EPS calculation due to their anti-dilutive effect[137] Note 13. Related Party Transactions This note discloses transactions and relationships with related parties - BMS (post-Celgene acquisition) owned 1,622,222 shares of the company's common stock as of August 31, 2020. No collaboration revenue was recorded from Celgene for the three and nine months ended August 31, 2020, following the agreement's termination in June 2019[138] Note 14. Subsequent Events This note describes significant events that occurred after the balance sheet date - On September 21, 2020, the company settled with the IRS regarding R&D credits for 2016 and 2017, agreeing to a reduction of $1.1 million in R&D credit carryforward, with no adjustment to income tax provision[139] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, liquidity, and capital resources, highlighting significant increases in R&D and G&A expenses, the impact of collaboration agreements, and the financial boost from the IPO. It also discusses future funding needs and the ongoing effects of the COVID-19 pandemic Overview This section provides a high-level summary of the company's business, financial performance, and future outlook - Nurix Therapeutics is a biopharmaceutical company focused on small molecule therapies for cancer and immune disorders, utilizing its DELigase platform[141] - The company incurred net losses of $18.5 million and $23.3 million for the three and nine months ended August 31, 2020, respectively, with an accumulated deficit of $83.8 million[143] - The IPO in July 2020 generated approximately $218.1 million in net proceeds, increasing cash, cash equivalents, and investments to $395.1 million as of August 31, 2020[147] - The company expects substantial increases in expenses as product candidates advance to clinical development and anticipates needing additional capital beyond the next 12 months[144][147] Collaboration and License Agreements This section discusses the financial implications and status of key collaboration and licensing agreements - The Sanofi Agreement, effective January 2020, includes a $55.0 million upfront payment and potential payments up to $2.5 billion for milestones and royalties[152] - The Gilead Agreement, amended in August 2019, provided a $45.0 million upfront payment plus $3.0 million in additional fees, with potential for up to $2.3 billion in additional payments[157] - The Celgene Agreement was terminated in June 2019, resulting in no collaboration revenue from Celgene in 2020, compared to $28.4 million in the nine months ended August 31, 2019[159][160] Formation of DeCART Therapeutics Inc. This section details the establishment and strategic objectives of the company's new subsidiary - In June 2020, Nurix established DeCART Therapeutics Inc., a wholly owned subsidiary, with a $3.0 million investment and licensed three compounds for drug-enhanced T cell isolation[162] - DeCART aims to combine protein modulation technologies with CAR-T therapies and plans to seek third-party equity financing to become an independent operating entity[162] Financial Operations Overview This section outlines the company's accounting policies and expectations for key financial metrics - Collaboration revenue is recognized from upfront, milestone, and contingent payments, with the company adopting a cost-based input method under Topic 606 since December 1, 2019[164] - Research and development expenses are expensed as incurred and are expected to increase substantially as product candidates advance[167][169] - General and administrative expenses are also expected to increase significantly due to infrastructure build-out and public company operating costs[170] - The company has generated net operating losses since inception and has a full valuation allowance against deferred tax assets[172] Results of Operations This section analyzes the company's revenue, expenses, and net loss for the reported periods | Metric | Three Months Ended Aug 31, 2020 (in thousands) | Three Months Ended Aug 31, 2019 (in thousands) | Change ($) | Nine Months Ended Aug 31, 2020 (in thousands) | Nine Months Ended Aug 31, 2019 (in thousands) | Change ($) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :-------------------------------------------- | :-------------------------------------------- | :--------- | | Collaboration revenue | $4,085 | $10,580 | $(6,495) | $11,131 | $29,253 | $(18,122) | | Research and development | $18,939 | $11,008 | $7,931 | $46,049 | $32,201 | $13,848 | | General and administrative | $4,338 | $2,184 | $2,154 | $10,057 | $5,724 | $4,333 | | Net loss | $(18,517) | $(2,427) | $(16,090) | $(23,328) | $(8,180) | $(15,148) | - Collaboration revenue decreased year-over-year due to the termination of the Celgene Agreement, partially offset by revenue from Gilead and Sanofi agreements[175][176] - Research and development expenses increased by 72% ($7.9 million) for the three months and 43% ($13.8 million) for the nine months ended August 31, 2020, driven by increased preclinical activities, drug discovery, headcount, and stock-based compensation[177][178][179] - General and administrative expenses increased by 99% ($2.2 million) for the three months and 76% ($4.3 million) for the nine months ended August 31, 2020, primarily due to higher headcount, legal, accounting, and professional services related to becoming a public company[180][181] - The company recorded a $20.6 million income tax benefit for the nine months ended August 31, 2020, due to NOL carryback claims under the CARES Act[183] Liquidity and Capital Resources This section assesses the company's cash position, funding sources, and future capital requirements - The company's IPO in July 2020 generated approximately $218.1 million in net proceeds, contributing to $395.1 million in cash, cash equivalents, and investments as of August 31, 2020[186][187] - Existing capital is expected to fund operations for at least the next 12 months, but substantial additional funding will be required for long-term development and commercialization[189] Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Aug 31, 2020 | Nine Months Ended Aug 31, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $20,402 | $13,349 | | Cash provided by (used in) investing activities | $(129,841) | $12,863 | | Cash provided by financing activities | $340,150 | $46 | - Net cash provided by financing activities significantly increased to $340.2 million in 2020, primarily from the IPO and Series D preferred stock issuance[195] Contractual Obligations (in thousands) | Contractual Obligations (in thousands) | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | Total | | :------------------------------------- | :--------------- | :----------- | :----------- | :---------------- | :---- | | Operating lease obligations | $3,342 | $6,725 | $5,904 | — | $15,971 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is interest rate sensitivity, particularly concerning its cash, cash equivalents, and investment portfolio. A hypothetical 100 basis point increase in interest rates would result in an estimated $0.9 million decrease in the fair market value of its investment portfolio as of August 31, 2020 - The company's investment activities aim to preserve capital and maximize income without significant risk, maintaining a portfolio of high-credit-quality cash equivalents and investments[204] - As of August 31, 2020, cash and cash equivalents were $265.5 million, and investments were $129.6 million[205] - A hypothetical 100 basis point increase in interest rates would decrease the fair market value of the investment portfolio by an estimated $0.9 million as of August 31, 2020[206] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of August 31, 2020, due to a previously identified material weakness in internal control over financial reporting. Remediation efforts are ongoing, including hiring personnel and implementing new financial systems and processes - Disclosure controls and procedures were deemed not effective as of August 31, 2020, due to a material weakness in internal control over financial reporting[208] - The material weakness involved a lack of formally documented controls, accounting policies, and procedures, including IT general controls and segregation of duties over account reconciliations and manual journal entries[209] - Remediation efforts include hiring additional accounting and financial reporting personnel, formalizing documentation of policies and procedures, and evolving accounting processes[210] - Despite the material weakness, management concluded that the condensed consolidated financial statements fairly present the company's financial position, results of operations, and cash flows[208] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other miscellaneous disclosures Item 1. Legal Proceedings The company is not currently a party to any legal proceedings that management believes would have a material adverse effect on its business or financial statements - No material legal proceedings are currently outstanding, pending, or threatened against the company[217] Item 1A. Risk Factors This section outlines significant risks associated with investing in the company's common stock, covering financial position, product development, competition, reliance on third parties, commercialization, intellectual property, regulatory approval, and operational challenges, including the impact of COVID-19 Risk Factors Summary This section provides a concise overview of the most critical risks facing the company - Key risks include significant losses since inception, no product revenue, need for substantial additional funding, early stage of product development, and reliance on collaborations[219] - Other risks involve potential adverse events in clinical trials, intense competition, manufacturing reliance on third parties, intellectual property protection challenges, and the adverse impact of the COVID-19 pandemic[219][220] Risks Related to Our Financial Position and Need for Additional Capital This section details financial risks, including historical losses and the need for future funding - The company has incurred significant losses ($83.8 million accumulated deficit as of Aug 31, 2020) and expects to continue incurring losses for several years, with no product revenue to date[221][225] - Substantial additional funding will be required to advance product candidates through clinical development and commercialization, which may lead to equity dilution or restrictive debt covenants[227][231] - The company's limited operating history makes it difficult to assess future viability and success, with significant quarterly and annual fluctuations expected[233][235] Risks Related to the Discovery and Development of Our Product Candidates This section outlines risks associated with the preclinical and clinical development of product candidates - All product candidates are in preclinical development, with a high risk of failure, and success depends on timely completion of preclinical studies, IND submissions, and clinical trials[236][242] - The targeted protein degradation platform is unproven, and there is limited safety data for CTM product candidates in animals, with potential for unforeseen adverse effects in humans[238][240][246] - Delays in patient enrollment for clinical trials, manufacturing complexities, and limited experience with adoptive cellular therapeutics (ACTs) could significantly harm development efforts[252][256][257] Risks Related to Competition This section addresses competitive pressures and the potential impact on the company's market position - The biopharmaceutical industry is highly competitive, with numerous companies developing protein modulation, antibody, ACT, and traditional small molecule therapies[260][261] - Many competitors have greater financial resources and expertise, posing a risk that they may develop and commercialize products more successfully or rapidly[262][263] - Failure to meet projected development goals or overestimating market opportunities could lead to delays in commercialization and a decline in stock price[264][265] Risks Related to Dependence on Third Parties This section highlights risks arising from reliance on external partners for development, manufacturing, and clinical trials - The company relies on collaborations with third parties (e.g., Sanofi, Gilead) for research, development, and commercialization, which limits control and poses risks of delays or termination[266][267][268] - Reliance on third-party CROs for clinical trials and CMOs for manufacturing increases the risk of insufficient supply, quality issues, and delays, potentially impairing development and commercialization[274][277] - Supply chain disruptions, including those caused by the COVID-19 pandemic, could delay the development and testing of product candidates[283] Risks Related to the Commercialization of Our Product Candidates This section covers challenges in achieving market acceptance and profitability for approved products - Even with marketing approval, product candidates may fail to achieve sufficient market acceptance due to competition, side effects, pricing, or lack of third-party payor coverage[285] - The company lacks a sales and marketing infrastructure and faces risks in establishing its own capabilities or relying on third parties, potentially leading to lower revenue and profitability[286][288] - Unfavorable pricing regulations, reimbursement practices, or healthcare reform initiatives could harm business by limiting coverage or reducing prices[290][291] - Product liability lawsuits pose an inherent risk, potentially leading to substantial liabilities, decreased demand, and reputational damage, which may not be fully covered by insurance[293][294][295] Risks Related to Our Intellectual Property This section discusses risks concerning patent protection, intellectual property infringement, and trade secrets - Failure to obtain and maintain broad patent protection for technology and product candidates could allow competitors to commercialize similar products, impairing competitive advantage[296][297] - Changes in patent law, such as the America Invents Act and recent Supreme Court rulings, increase uncertainty and costs, potentially diminishing the value and scope of patent protection[304][305] - Third parties may allege infringement of their intellectual property rights, leading to costly litigation, potential licensing requirements, or forced cessation of product development[311][312][313] - Inability to protect trade secrets through confidentiality agreements or against independent development by competitors could harm the company's business and competitive position[332][334] Risks Related to Regulatory Approval and Marketing of Our Product Candidates This section details the complex and uncertain regulatory approval process and post-market compliance risks - The FDA regulatory approval process is lengthy, unpredictable, and may result in failure to obtain marketing approval or approval for limited indications, significantly harming the business[337][338][339] - Inexperience in regulatory filings and manufacturing/quality assurance for new drugs may lead to delays or failure in obtaining necessary approvals[340] - Failure to obtain marketing approval in foreign jurisdictions or comply with international regulatory requirements (including post-Brexit uncertainty) would limit market potential and revenue[341][342][343] - Approved products are subject to ongoing stringent regulations, and non-compliance could lead to withdrawal from the market, substantial penalties, and limitations on marketing[349][351] - Future legislation and regulatory reforms (e.g., drug pricing, healthcare funding) could increase costs, delay approvals, and negatively impact product pricing and reimbursement[358][359][360] Risks Related to Employees, Managing Our Growth and Other Legal Matters This section addresses operational risks, including human resources, IT security, and legal compliance - The COVID-19 pandemic poses risks of supply chain disruption, delays in clinical trials, and adverse impacts on global economic conditions and stock price[365] - Failure to attract and retain key management and scientific personnel, or difficulties in managing organizational growth, could disrupt operations and hinder business plan implementation[366][369][371] - Misconduct by employees or third parties, IT system failures, security breaches, and non-compliance with privacy and data security laws could lead to significant penalties, reputational damage, and operational disruptions[372][373][375][378] - U.S. federal income tax reform (TCJA, CARES Act) and limitations on net operating loss (NOL) carryforwards may impact future tax liabilities[385][386][389][390] - Future acquisitions, joint ventures (like DeCART), or strategic alliances could disrupt business, incur debt, or dilute ownership, and anti-corruption/export laws and environmental regulations pose compliance risks[391][393][394][397] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details unregistered sales of equity securities, including stock option grants and the conversion of preferred stock into common stock, and confirms the use of proceeds from the initial public offering aligns with previously disclosed plans - From June 1 to July 23, 2020, the company granted 798,590 stock options and issued 248,900 common shares upon option exercise, exempt from registration under Section 4(a)(2) or Rule 701[430] - Upon IPO completion on July 24, 2020, all outstanding convertible preferred stock automatically converted into 22,245,251 shares of common stock, exempt under Section 3(a)(9) and 4(a)(2) of the Securities Act[431] - Net proceeds from the IPO were approximately $218.1 million, and there has been no material change in the planned use of these proceeds[433][434] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[435] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures - No mine safety disclosures were reported[436] Item 5. Other Information The company reported no other information - No other information was reported[437] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, equity incentive plans, employment agreements, and certifications - Exhibits include the Restated Certificate of Incorporation, Restated Bylaws, 2020 Equity Incentive Plan, 2020 Employee Stock Purchase Plan, employment agreements, and certifications of principal executive and financial officers[440]