# Nurix Therapeutics, Inc. (NRIX) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Nurix Therapeutics, Inc.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1549595/000154959523000021/nrix-20221130.htm
Accession: 0001549595-23-000021
Filing date: 2023-02-09
Report date: 2022-11-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/NRIX/
All MD&A years: /company/NRIX/mda/
Previous year: /company/NRIX/mda/fy2021/ (FY 2021)
Next year: /company/NRIX/mda/fy2023/ (FY 2023)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10‑K. As discussed in the section titled “Special Note Regarding Forward Looking Statements,” the following discussion and analysis contains forward looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Overview

We are a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of small molecule and cell therapies based on the modulation of cellular protein levels as a novel treatment approach for cancer and other challenging diseases. Leveraging our extensive expertise in E3 ligases together with our proprietary DNA-encoded libraries, we have built DELigase, an integrated discovery platform to identify and advance novel drug candidates targeting E3 ligases, a broad class of enzymes that can modulate proteins within the cell. Our drug discovery approach is to either harness or inhibit the natural function of E3 ligases within the ubiquitin-proteasome system to selectively decrease or increase cellular protein levels. Our wholly owned, clinical stage pipeline includes targeted protein degraders of Bruton’s tyrosine kinase (BTK), a B-cell signaling protein, and inhibitors of Casitas B-lineage lymphoma proto-oncogene B (CBL-B), an E3 ligase that regulates activation of multiple immune cell types including T cells and NK cells. Our partnered drug discovery pipeline consists of ten programs under collaboration agreements with Sanofi S.A. (Sanofi) and Gilead Sciences, Inc. (Gilead), within which we retain options for co-development and co-commercialization rights in the United States for up to four drug candidates.

Targeted Protein Degradation

Our portfolio of targeted protein degraders of BTK, a B‑cell signaling protein, comprises NX‑2127, an orally bioavailable BTK degrader for the treatment of relapsed or refractory B‑cell malignancies, and NX‑5948, an orally bioavailable BTK degrader for the treatment of relapsed or refractory B-cell malignancies and potentially autoimmune diseases.

NX‑2127: We are currently enrolling patients in a Phase 1 trial for patients with relapsed or refractory B-cell malignancies which comprises a Phase 1a dose-escalation study and a Phase 1b cohort expansion study. We have initiated the first of several potential Phase 1b expansion cohorts for patients with relapsed chronic lymphocytic leukemia, and enrollment continues in the Phase 1a dose-escalation portion of the trial for patients with several types of non-Hodgkin lymphoma.

NX-5948: We are currently enrolling patients in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study in patients with relapsed or refractory B-cell malignancies.

Targeted Protein Elevation

Our portfolio of inhibitors of CBL-B, an E3 ligase that regulates the activation of multiple immune cell types including T cells and NK cells, comprises NX-1607, an orally bioavailable CBL-B inhibitor for immuno-oncology indications and NX-0255, for ex vivo use to enhance adoptive T-cell therapy including our drug-enhanced tumor infiltrating lymphocyte (TIL) therapy, DeTIL-0255.

NX-1607: We are currently enrolling patients in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study in patients with solid tumors and lymphomas. NX-1607 was awarded an Innovative Passport from the UK Medicines and Healthcare products Regulatory Agency to accelerate time to market and facilitate patient access to novel drugs to treat serious and life-threatening diseases.

DeTIL-0255: We completed the safety run-in portion of a Phase 1 trial in patients with advanced gynecologic malignancies, which included three patients with advanced epithelial ovarian cancer who have been dosed with DeTIL-0255 and have cleared the initial safety evaluation. The timing of the expansion of the DeTIL-0255 Phase 1 trial will be established following a determination regarding the potential inclusion of NX-1607 in future cohorts.

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Preclinical programs

Beyond our clinical candidates, we are advancing additional wholly owned and partnered preclinical programs within our core therapeutic focus in cancer and selectively in non-oncology therapeutic areas. Our pipeline includes highly validated and classically undruggable targets across our proprietary efforts, academic collaborations and our established strategic collaborations with Sanofi and Gilead.

Collaboration and License Agreements

Sanofi Collaboration and License Agreement

In December 2019, we entered into a strategic collaboration with Genzyme Corporation, a subsidiary of Sanofi, which became effective in January 2020 (as subsequently expanded and amended, the Sanofi Agreement), to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with challenging diseases in multiple therapeutic areas using our DELigase platform to identify small molecules designed to induce degradation of three specified initial drug targets. In January 2021, as part of the existing Sanofi Agreement, Sanofi paid us $22.0 million to exercise its option to expand the number of targets in the Sanofi Agreement from three to a total of five targets. Over time and subject to certain limitations, Sanofi may elect to replace the drug targets with other reserved targets.

In January 2021, we entered into the First Amendment to the Sanofi Agreement to modify the research term on all targets. In December 2021, we entered into the Second Amendment to the Sanofi Agreement to extend the substitution deadline on certain targets. In July 2022, we entered into the Third Amendment to the Sanofi Agreement to further extend the substitution deadline on certain targets. The extensions of the substitution deadline had no impact on revenue recognition. Also in July 2022, Sanofi elected to replace certain drug targets, and the substitution extended the research term of those targets by one year to 5.25 years and increased overall forecasted costs, which had an immaterial impact on revenue recognition. In August 2022, we entered into the Fourth Amendment to the Sanofi Agreement to modify the research plan for a certain target, which had no impact on revenue recognition.

Under the Sanofi Agreement, Sanofi has exclusive rights and is responsible for the clinical development, commercialization and manufacture of drug candidates resulting from the collaboration, while we retain the option to co-develop, co-promote and co-commercialize all drug candidates in the United States directed to up to two targets, subject to certain conditions and limitations. The collaboration excludes our current internal protein degradation programs for which we retain all rights, and also excludes our future internal programs, provided that we have distinguished future programs as excluded from the scope of the collaboration.

For drug targets that are subject to the collaboration, we have primary responsibility for conducting preclinical research activities (including target validation, drug discovery, identification or synthesis) in accordance with the applicable research plan agreed to by the parties and established on a target-by-target basis. We are obligated to use commercially reasonable efforts to identify relevant target binders and targeted protein degraders in order to identify development candidates. Subject to certain exceptions, each party will bear its own costs in the conduct of such research. Sanofi will be responsible for any development and commercialization activities unless we exercise our co-development and co-promotion option. For those programs that we exercise our option to co-develop, co-promote and co-commercialize, we will be responsible for a portion of the U.S. development costs, and the parties will split U.S. profits and losses evenly, and we will be eligible to receive royalties on ex-U.S. net sales and reduced milestone payments on such optioned products.

Upon signing the Sanofi Agreement, Sanofi paid us an upfront payment of $55.0 million. Subsequently in January 2021, Sanofi paid us an additional $22.0 million to exercise its option to expand the number of targets beyond the initial targets included in the collaboration. In addition, from the signing of the Sanofi Agreement to November 30, 2022, we received payments of $3.0 million for research milestones. As of November 30, 2022, we are eligible to receive up to approximately $2.5 billion in total payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones, as well as tiered royalties ranging from mid-single digit to low teen percentages on annual net sales of any commercial products that may result from the collaboration, subject to certain reductions and excluding sales in the United States of any products for which we exercise our option to co-develop and co-promote, for which we share profits and losses evenly.

We recognized collaboration revenue from the Sanofi Agreement of $15.0 million and $13.2 million during the years ended November 30, 2022 and 2021, respectively. As of November 30, 2022 and 2021, there was $46.2 million and $59.2 million, respectively, of deferred revenue related to payments received by us under the Sanofi Agreement.

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Gilead Collaboration, Option and License Agreement

In June 2019, we entered into a global strategic collaboration agreement with Gilead (as subsequently amended, the Gilead Agreement) to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with cancer and other challenging diseases using our DELigase platform to identify novel agents that utilize E3 ligases to induce degradation of five specified drug targets. In August 2019 and September 2022, we entered into the First and Second Amendment, respectively, to the Gilead Agreement to clarify certain language of the Gilead Agreement. These amendments had no impact on revenue recognition.

Under the Gilead Agreement, Gilead has the option to license drug candidates directed to up to five targets resulting from the collaboration and is responsible for the clinical development and commercialization of drug candidates resulting from the collaboration. We retain the option to co-develop and co-promote, under a profit share structure, up to two drug candidates in the United States under certain conditions. The collaboration excludes our current internal protein degradation programs for which we retain all rights, and also excludes our future internal programs, provided that we have distinguished future programs as excluded from the scope of the collaboration.

Over time, Gilead may elect to replace the initial drug targets with other drug targets. For drug targets that are subject to the collaboration, we are obligated to use commercially reasonable efforts to undertake a research program in accordance with a research plan agreed to by the parties and established on a target-by-target basis. We have primary responsibility under the Gilead Agreement for performing preclinical research activities (including target validation, drug discovery, identification or synthesis) pursuant to a research plan. Each party will bear its own costs in the conduct of research activities. Gilead will be responsible for any development, commercialization and manufacturing activities, unless we exercise our co-development and co-promotion option. For those programs that we exercise our option to co-develop and co-promote, we and Gilead will split U.S. development costs as well as U.S. profits and losses evenly, and we will be eligible to receive royalties on ex-U.S. net sales and reduced milestone payments.

Upon signing the Gilead Agreement, Gilead paid us an upfront payment of $45.0 million, plus $3.0 million in additional fees. In addition, from the signing of the Gilead Agreement to November 30, 2022, we received payments of $34.5 million for research milestones and additional payments. As of November 30, 2022, we are eligible to receive up to approximately $2.3 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones. In addition, we are eligible to receive tiered royalties from mid-single digit to low tens percentages on annual net sales from any commercial products directed to the optioned collaboration targets, subject to certain reductions and excluding sales in the United States of any products for which we exercise our option to co-develop and co-promote, for which we share profits and losses evenly.

We recognized collaboration revenue from the Gilead Agreement of $23.7 million and $16.6 million during the years ended November 30, 2022 and 2021, respectively. As of November 30, 2022 and 2021, there was $27.4 million and $41.1 million of deferred revenue related to payments received by us under the Gilead Agreement.

Financial Overview

Since the commencement of our operations, we have devoted substantially all of our resources to conducting research and development activities, establishing and maintaining our intellectual property portfolio, establishing our corporate infrastructure, raising capital and providing general and administrative support for these operations. We have funded our operations to date primarily from proceeds received under collaboration and license agreements with Sanofi, Gilead and Celgene Corporation and the issuance and sale of common stock and redeemable convertible preferred stock and of pre-funded warrants. We do not expect to generate product revenue unless and until we successfully develop and obtain approval for the commercialization of a drug candidate, and we cannot assure you that we will ever generate significant revenue or profits.

Since inception, we have generally incurred significant losses and negative cash flows from operations. During the years ended November 30, 2022 and 2021, we incurred net losses of $180.4 million and $117.2 million, respectively. As of November 30, 2022, we had an accumulated deficit of $401.3 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations.

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We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our drug candidates, which we expect will take a number of years, if ever. We expect our expenses will increase substantially as we advance our drug candidates through preclinical and clinical development; enter advanced clinical development and scale up external manufacturing capabilities to supply clinical trials; apply our DELigase platform to advance additional drug candidates and expand the capabilities of our platform; seek marketing approvals for any drug candidates that successfully complete clinical trials; ultimately establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any products for which we may obtain marketing approval; expand, maintain and protect our intellectual property portfolio; and hire additional clinical, regulatory, manufacturing, quality assurance and scientific personnel. Furthermore, we expect to continue incurring costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other administrative and professional services expenses.

Our net losses and cash flows may fluctuate significantly from period to period, depending on, among other things, variations in the level of expense related to the ongoing development of our drug candidates, our DELigase platform or future development programs; the delay, addition or termination of clinical trials; and the execution of any additional collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under such arrangements.

As of November 30, 2022, we had $373.0 million in cash, cash equivalents and marketable securities. We expect that our existing cash, cash equivalents and marketable securities are sufficient to fund our operations for at least the next 12 months. See the section titled “—Liquidity and Capital Resources” for more information. To finance our operations beyond that point, we will need to raise substantial additional capital to complete the development and commercialization of our drug candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

We are also subject to risks and uncertainties as a result of macroeconomic events and conditions, including inflation, increasing interest rates, increasing financial market volatility and uncertainty, the impact of war or military conflict, including the war in Ukraine, and public health pandemics. In particular, the COVID-19 pandemic, including the resurgence of cases relating to the spread of new variants, continues to impact worldwide economic activity and poses the risk that we or our employees, contractors, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. While the impact of the COVID‑19 pandemic on our current operations has been minimal during the early stages of clinical development of our four lead drug candidates, the extent to which the COVID-19 pandemic and other macroeconomic factors, including increasing financial market volatility and uncertainty, will impact our business, financial condition, liquidity, access to capital, and results of operations in the future will depend on future developments that are highly uncertain and cannot be predicted at this time.

Components of Results of Operations

Collaboration Revenue

We have no products approved for commercial sale and to date have not generated any revenue from the sale of products and do not expect to generate any revenue from the sale of products in the near future.

Our revenue to date has been generated from payments received pursuant to collaboration and license arrangements with strategic partners. Collaboration revenue consists of revenue received from upfront, milestone and contingent payments received from our collaborators. We recognize revenue from upfront payments over the contract term using the cost-based input method. The material right to the two additional targets under the Sanofi Agreement was accounted for using the practical alternative and the expected consideration to be received on the options was included for revenue allocation. We expect to continue recognizing revenue from upfront payments related to our collaboration agreements using the cost-based input method in the foreseeable future.

In addition to receiving upfront payments, we may also be entitled to milestones and other contingent payments upon achieving predefined objectives. If a milestone is considered probable of being reached, and if it is probable that a significant revenue reversal would not occur, the associated milestone amount would also be included in the transaction price.

We expect that any collaboration revenue we generate from our current collaboration and license agreements, and from any future collaboration partners, will fluctuate in the future as a result of the timing and amount of upfront, milestones and other collaboration agreement payments and other factors.

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Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the discovery and development of our drug candidates. We expense both internal and external research and development expenses to operations in the periods in which they are incurred. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and as services are performed. We track the external research and development costs incurred for each of our drug candidates.

Internal research and development costs include:

• payroll and personnel expenses, including benefits, stock-based compensation and travel expenses, for our research and development functions; and

•depreciation of research and development equipment, allocated overhead and facilities-related expenses.

External research and development expenses consist primarily of costs incurred for the development of our drug candidates and may include:

•fees paid to third parties such as consultants, contractors and contract research organizations to conduct our clinical trials, discovery programs and preclinical studies;

•costs to acquire, develop and manufacture supplies for clinical trials and preclinical studies, including fees paid to third parties such as contract manufacturing organizations; and

•expenses related to laboratory supplies and services.

We expect our research and development expenses to increase substantially for the foreseeable future as we conduct clinical trials for our drug candidates, continue to invest in research and development activities for discovery programs and preclinical studies, pursue regulatory approval of our drug candidates and expand our drug candidate pipeline. The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. To the extent that our drug candidates advance to and continue to advance through clinical trials, our expenses will continue increasing substantially and may become more variable. The actual probability of success for our drug candidates may be affected by a variety of factors, including the safety and efficacy of our drug candidates, investment in our clinical programs, the ability of collaborators to successfully develop our licensed drug candidates, manufacturing capability, competition with other products and commercial viability. As a result of these variables, we are unable to determine when and to what extent we will generate revenue from the commercialization and sale of our drug candidates. We may never succeed in achieving regulatory approval for any of our drug candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of payroll and personnel expenses, including benefits and stock-based compensation, facilities-related expenses and professional fees for legal, consulting and audit and tax services. We expect our general and administrative expenses to increase for the foreseeable future as we continue to improve our infrastructure and operate as a public company. This may include expenses related to compliance with the rules and regulations of the Securities and Exchange Commission (SEC) and listing standards applicable to companies listed on a national securities exchange, additional insurance, investor relations activities and other administrative and professional services. We also expect our intellectual property expenses to increase as we expand our intellectual property portfolio.

Interest and Other Income, Net

Interest and other income, net primarily consists of interest earned on our cash, cash equivalents and marketable securities. We expect interest income to vary each reporting period depending on our average bank deposit, money market fund and marketable securities balances during the period and market interest rates.

Provision for Income Taxes

The provision for income taxes primarily consists of reserves for unrecognized tax benefits and state taxes. We have generated NOLs since inception and have established a full valuation allowance against our deferred tax assets due to the uncertainty surrounding the realization of such assets.

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Critical Accounting Policies and Estimates

Our accounting policies are more fully described in Note 2 of the consolidated financial statements to this Annual Report on Form 10-K. As disclosed in Note 2, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Actual results could differ significantly from those estimates. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

Revenue Recognition

We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To recognize revenue from a contract with a customer, we perform the following five steps:

(i)identify the contract(s) with a customer;

(ii)identify the performance obligations in the contract;

(iii)determine the transaction price;

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

(v)recognize revenue when (or as) we satisfy a performance obligation.

At contract inception, we assess the goods or services promised within each contract, whether each promised good or service is distinct, and determine those that are performance obligations. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied.

We enter into research and collaboration agreements under which we may obtain upfront payments, milestone payments, royalty payments and other fees. Promises under these arrangements may include research licenses, research services, including selection campaign research services for certain replacement targets, the obligation to share information during the research term and the participation of alliance managers and in joint research committees, joint patent committees and joint steering committees. We assess these promises within the context of the agreements to determine the performance obligations.

Research and collaboration licenses: If a license is determined to be distinct from the other promises identified in the arrangement, we recognize revenue from upfront payments allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront payments.

Milestone payments: At the inception of each arrangement that includes research, development or regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price. We use the most likely amount method for research, development and regulatory milestone payments. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. If it is probable that a significant revenue reversal would not occur, the associated milestone amount is included in the transaction price.

Customer options: Customer options, such as options granted to allow a licensee to extend a license or research term, to select additional research targets or to choose to research, develop and commercialize licensed compounds, are evaluated at contract inception to determine whether those options provide a material right (i.e., an optional good or service offered for free or at a discount) to the customer. If the customer options represent a material right, the material right is treated as a separate performance obligation at the outset of the arrangement. We allocate the transaction price to material rights based on the standalone selling price. As a practical alternative to estimating the standalone selling price of a material right when the underlying goods or services are both (i) similar to the original goods or services in the contract and (ii) provided in accordance with the terms of the original contract, we allocate the total amount of consideration expected to be received from the customer to the total goods or services expected to be provided to the customer. Amounts allocated to any material right are recognized as revenue when or as the related future goods or services are transferred or when the option expires.

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For performance obligations satisfied over time, we recognize revenue using the cost-based input method and evaluate the measure of proportional performance each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. To measure the proportional performance, we are required to make our best estimates of forecasted expenditures and development timelines, which are subject to uncertainties associated with pharmaceutical product development. Forecasted total expenditures are driven primarily by the number of full-time employees, and the assumptions over the number of full-time employees require significant management judgement. The number of full-time employees may change based on the progress and timing of our product development, and may be influenced by resource allocation decisions on internal programs and overall constraint on resources. The model is highly sensitive to changes in resources assigned over the research term. Forecasted total expenditures also include other direct costs related to product development, including third-party contract costs, and may also require management’s estimate of costs and market conditions that may impact costs.

Results of Operations

Comparison of the years ended November 30, 2022 and 2021

Our results of operations for the years ended November 30, 2022 and 2021 are summarized as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Year ended November 30,"],["","","2022","","2021","","Change"],["Collaboration revenue","","$","38,627","","","$","29,750","","","$","8,877"],["Operating expenses:"],["Research and development","","184,497","","","116,434","","","68,063"],["General and administrative","","37,997","","","31,202","","","6,795"],["Total operating expenses","","222,494","","","147,636","","","74,858"],["Loss from operations","","(183,867)","","","(117,886)","","","(65,981)"],["Interest and other income, net","","3,507","","","823","","","2,684"],["Loss before income taxes","","(180,360)","","","(117,063)","","","(63,297)"],["Provision for income taxes","","\u2014","","","131","","","(131)"],["Net loss","","$","(180,360)","","","$","(117,194)","","","$","(63,166)"]]
[[/GREPCENT_TABLE]]

Collaboration Revenue

Our collaboration revenue for the years ended November 30, 2022 and 2021 is summarized as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Year ended November 30,"],["","","2022","","2021","","Change"],["Gilead","","$","23,674","","","$","16,578","","","$","7,096"],["Sanofi","","14,953","","","13,172","","","1,781"],["Total collaboration revenue","","$","38,627","","","$","29,750","","","$","8,877"]]
[[/GREPCENT_TABLE]]

Our collaboration revenue increased by $8.9 million during the year ended November 30, 2022 compared to the year ended November 30, 2021 primarily due to increased effort resulting in a higher percentage of completion of performance obligations under our collaborations with Gilead and Sanofi in the current period. The increases were also due to additions to the transaction price from the achievement of research milestones totaling $10.0 million from our collaboration with Gilead and $3.0 million from our collaboration with Sanofi that resulted in higher revenue recognized in each period and impacted the cumulative catch up in revenue for activities satisfied in previous periods. The increases were partially offset by increased overall forecasted costs for our collaboration with Sanofi primarily due to the target substitution in July 2022. The substitutions increased the overall forecasted costs and extended the research term of those targets, which offset the increases in revenue due to increased effort and resulted in less revenue recognized in the current period.

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Research and Development Expenses

Our research and development expenses for the years ended November 30, 2022 and 2021 are summarized as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Year ended November 30,"],["","","2022","","2021","","Change"],["Compensation and related personnel costs","","$","65,336","","","$","39,540","","","$","25,796"],["Stock-based compensation","","16,878","","","8,079","","","8,799"],["Supplies and contract research","","47,814","","","37,676","","","10,138"],["Preclinical activities","","5,912","","","2,757","","","3,155"],["Contract manufacturing","","13,562","","","10,214","","","3,348"],["Clinical costs","","13,887","","","6,236","","","7,651"],["Facility and other costs","","21,108","","","11,932","","","9,176"],["Total research and development expenses","","$","184,497","","","$","116,434","","","$","68,063"]]
[[/GREPCENT_TABLE]]

Our research and development expense increased by $68.1 million during the year ended November 30, 2022 compared to the year ended November 30, 2021. There was an increase in compensation and related personnel costs and in non-cash stock-based compensation expense of $25.8 million and $8.8 million, respectively, that were primarily attributable to higher headcount. The increase in non-cash stock-based compensation expense was also attributable to the issuance of restricted stock units (RSUs) and incentive stock options. There was also an increase in contract manufacturing and clinical costs of $11.0 million primarily due to the ramping up of our clinical trial programs and ongoing patient enrollment, an increase in supplies and contract research costs of $10.1 million to support our programs and an increase in preclinical activities of $3.2 million. There was also an increase in facility and other costs of $9.2 million primarily due to the expansion of leased premises and additional investments in information technology.

General and Administrative Expenses

Our general and administrative expenses increased by $6.8 million during the year ended November 30, 2022, compared to the year ended November 30, 2021. There was an increase of $1.1 million in compensation related expenses and an increase of $3.6 million in non-cash stock-based compensation expense, both of which were primarily attributable to higher headcount. The increase in non-cash stock-based compensation expense was also attributable to the issuance of RSUs and incentive stock options. There was also an increase of $1.4 million primarily attributable to higher public relations, legal and software costs, offset by a decrease in accounting costs, and an increase of $0.7 million in facility and other costs.

Interest and Other Income, Net

Our interest and other income, net increased by $2.7 million during the year ended November 30, 2022, compared to the year ended November 30, 2021, primarily attributable to higher interest rates earning higher interest income on our deposits, money market funds and marketable securities.

Provision for Income Taxes

Our provision for income taxes decreased by $0.1 million during the year ended November 30, 2022, compared to the year ended November 30, 2021. There was no provision for income taxes for the year ended November 30, 2022. The provision for income taxes for the year ended November 30, 2021 was due to state taxes offset by a federal income tax refund.

Liquidity and Capital Resources

Sources of Liquidity

In July 2020, we closed our initial public offering (IPO) and issued 12,550,000 shares of our common stock (including the exercise by the underwriters of their option to purchase an additional 1,550,000 shares of common stock in August 2020) at a price to the public of $19.00 per share for net proceeds of $218.1 million, after deducting underwriting discounts and commissions of $16.7 million and expenses of $3.6 million.

In March 2021, we completed a follow-on offering and issued 5,175,000 shares of our common stock (including the exercise by the underwriters of their option to purchase an additional 675,000 shares of common stock) at a price to the public of $31.00 per share for net proceeds of $150.2 million, after deducting underwriting discounts and commissions of $9.6 million and expenses of $0.6 million.

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In August 2021, we entered into an Equity Distribution Agreement with Piper Sandler & Co. (Piper Sandler) pursuant to which, from time to time, we may offer and sell through Piper Sandler up to $150.0 million of the common stock registered under the shelf registration statement pursuant to one or more “at the market” offerings. We are not required to sell any shares at any time during the term of the Equity Distribution Agreement. We agreed to pay Piper Sandler a commission of 3% of the gross sales price of any shares sold pursuant to the Equity Distribution Agreement. In June 2022, we issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement at a price of $10.0001 per share of common stock for net proceeds of approximately $19.3 million after deducting offering commissions and expenses paid by us (the June 2022 ATM Offering). As of November 30, 2022, we had $130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

In July 2022, we entered into separate securities purchase agreements with certain purchasers to issue and sell pre‑funded warrants to purchase an aggregate of 6,814,920 shares of our common stock in registered direct offerings (RDOs) at a price of $13.939 per pre-funded warrant. Net proceeds from the RDOs were approximately $94.8 million, after deducting offering expenses of $0.2 million. The pre-funded warrants were immediately exercisable, have an exercise price of $0.001 and may be exercised at any time after the date of issuance. A holder of the pre-funded warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of our common stock outstanding immediately after giving effect to such exercise. A holder of the pre-funded warrants may increase or decrease this percentage not in excess of 19.99% by providing us at least 61 days’ prior notice. As of November 30, 2022, all of the pre-funded warrants remained available for exercise.

Funding Requirements

As of November 30, 2022, our operations have primarily been funded through the net proceeds from equity offerings of $650.5 million and proceeds from collaborations of $312.5 million. We do not have any products approved for sale, and we have not generated any revenue from product sales. As of November 30, 2022, we had $373.0 million in cash, cash equivalents and marketable securities.

We expect that our existing cash, cash equivalents and marketable securities are sufficient to meet our cash requirements and continue operating activities, including the clinical trials of our drug candidates NX‑2127, NX‑1607, NX‑5948 and DeTIL‑0255 and the expansion of our intellectual property portfolio and infrastructure, for at least the next 12 months. We will need substantial additional funding to support our continuing operations and pursue our long-term business plan. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated pre-clinical studies and clinical trials.

In the long term, our ability to support our working capital and capital expenditure requirements will depend on many factors, including the following:

•the progress, costs and results of our ongoing Phase 1 clinical trials for our lead drug candidates NX-2127, NX-1607, NX‑5948 and DeTIL-0255, and any future clinical development of such drug candidates;

•the scope, progress, costs and results of preclinical and clinical development for our other drug candidates and development programs;

•the number and development requirements of other drug candidates that we pursue;

•the scope of, and costs associated with, future advancements to our DELigase platform;

•the success of our collaborations with Sanofi, Gilead and any other collaborations we may establish;

•the costs, timing and outcome of regulatory review of our drug candidates;

•the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our drug candidates for which we receive marketing approval;

•the revenue, if any, received from commercial sales of our drug 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; and

•our ability to establish additional collaboration arrangements with other biotechnology or pharmaceutical companies on favorable terms, if at all, for the development or commercialization of our drug candidates.

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If adequate funds are not available at favorable terms, we may be required to reduce operating expenses, delay or reduce the scope of our product development and commercial expansion programs, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, or cease operations. If we do raise additional capital through public or private equity or convertible debt offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

As of November 30, 2022, our material cash requirements include the following contractual and other obligations (in thousands):

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[[/GREPCENT_TABLE]]

In addition, in the normal course of business we enter into agreements with contract research organizations for clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are generally cancelable upon written notice. These payments are not included in the table above.

We did not have during the periods presented, and we do not currently have, any commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

Cash flows

Our cash flows for the years ended November 30, 2022 and 2021 are summarized as follows (in thousands):

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[[/GREPCENT_TABLE]]

Operating activities

Net cash used in operating activities was $159.8 million for the year ended November 30, 2022 and consisted of our net loss of $180.4 million and an increase in net assets of $19.0 million, offset by non-cash adjustments of $39.6 million. The increase in net assets consisted primarily of a decrease in deferred revenue of $26.6 million as we increased effort in our programs and recognized revenue, a decrease in operating lease liabilities of $4.9 million due to payments made on operating leases and an increase in prepaid expenses and other assets of $1.1 million primarily related to increased prepaid clinical and contract manufacturing costs and software license costs, offset by an increase in accrued expenses and other liabilities of $7.5 million primarily related to the accrual of contract research, laboratory supplies and annual incentive compensation and a decrease in accounts receivable of $6.0 million related to payments received under the Gilead Agreement. Non-cash adjustments primarily consisted of stock-based compensation expenses of $28.1 million, amortization of operating lease right-of-use assets of $5.5 million and depreciation and amortization expenses of $5.3 million.

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Net cash used in operating activities was $84.4 million for the year ended November 30, 2021 and consisted of a decrease in net assets of $9.1 million and non-cash adjustments of $23.7 million, offset by our net loss of $117.2 million. The decrease in net assets consisted primarily of an increase in deferred revenue of $14.3 million primarily related to proceeds received pursuant to the Sanofi Agreement and the Gilead Agreement, an increase in accrued expenses and other liabilities of $6.2 million primarily related to an increase in accrued compensation from higher incentive compensation and an increase in accrued contract research and lab supplies due to the growth in clinical development for our lead drug candidates and a decrease in income tax receivable of $3.6 million related to the collection of the NOL carryback claims as a result of the CARES Act. The decrease in net assets was offset by an increase in accounts receivable of $6.0 million related to a Gilead research milestone, an increase in prepaid expenses and other assets of $5.4 million primarily related to an increase in prepaid clinical costs and a decrease in operating lease liabilities of $5.1 million due to payments made on operating leases. Non-cash adjustments primarily consisted of stock-based compensation expenses of $15.8 million, amortization of operating lease right-of-use assets of $3.3 million and depreciation and amortization expenses of $2.8 million.

Investing activities

Net cash provided by investing activities was $27.2 million for the year ended November 30, 2022 and consisted of the maturity of marketable securities of $278.8 million, offset by the purchase of marketable securities of $239.4 million and purchases of property and equipment of $12.2 million.

Net cash used in investing activities was $108.3 million for the year ended November 30, 2021 and consisted of the purchase of investments of $348.5 million and purchases of property and equipment of $5.7 million, offset by the maturity of investments of $238.9 million and the sale of investments of $7.0 million.

Financing activities

Net cash provided by financing activities was $117.2 million for the year ended November 30, 2022 and consisted primarily of net proceeds from the issuance of pre-funded warrants in the RDOs of $94.8 million and from the issuance of common stock in the June 2022 ATM Offering of $19.4 million.

Net cash provided by financing activities was $153.9 million for the year ended November 30, 2021 and consisted primarily of proceeds from the issuance of common stock from the follow-on offering in March 2021.

Information About Segments

We currently operate in a single business segment. See additional information in our financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K.