Relay Therapeutics Inc

1. Nature of Business and Basis of Presentation

Relay Therapeutics, Inc. (the "Company") was incorporated in Delaware on May 4, 2015 and is headquartered in Cambridge, Massachusetts. The Company is a clinical-stage, precision medicine company transforming the drug discovery process by combining leading-edge computational and experimental technologies with the goal of bringing life-changing therapies to patients. As the Company believes it is among the first of a new breed of biotech created at the intersection of complementary techniques and technologies, the Company aims to push the boundaries of what’s possible in drug discovery. The Company’s Dynamo™ platform integrates an array of leading-edge computational and experimental approaches designed to drug protein targets that have previously been intractable or inadequately addressed. The Company’s initial focus is on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications. The Company’s lead product candidates, RLY-2608, RLY-4008 (lirafugratinib), and GDC-1971 (migoprotafib, formerly known as RLY-1971), are in clinical development. The Company also has more than seven active discovery stage programs across both precision oncology and genetic diseases.

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations, and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities.

The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval, or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.

The Company has devoted substantially all of its resources to developing its product candidates by developing its computation and experimental approaches, building its intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations.

The Company has incurred net operating losses since inception and had an accumulated deficit of$1.4 billion as of December 31, 2023. The Company expects that its existing cash, cash equivalents, and investments as of December 31, 2023 will enable it to fund its planned operating expenses and capital expenditure requirements for at least one year from the date of the issuance of these consolidated financial statements. The future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a material adverse effect on its financial condition and ability to pursue its business strategies. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into license or collaboration arrangements or obtain government grants. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce, or eliminate its research and development programs, product portfolio expansion, or commercialization efforts, which could adversely affect its business prospects. In the event the Company requires additional funding, there can be no assurance that it will be successful in obtaining sufficient funding on terms acceptable to the Company to fund its continuing operations, if at all.

2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for reporting on Form 10-K.

The Company’s consolidated financial statements include the accounts of Relay Therapeutics, Inc. and its wholly-owned subsidiaries, Relay Securities Corporation and Relay ML Discovery, LLC.

All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the fair value of contingent milestone payments in connection with the acquisition of ZebiAI Therapeutics, Inc. ("ZebiAI"), the determination of the transaction price and standalone selling price of performance obligations under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"), the accrual of research and development and manufacturing expenses, the valuation of equity instruments, and the incremental borrowing rate for determining operating lease assets and liabilities. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience.

Segment Information

In general, operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company's chief operating decision maker is the president and chief executive officer. The Company and the chief operating decision maker view the Company's operations asone operating segment. The Company's singular focus is on using innovative experimental and computational approaches on protein motion for making medicines to drug protein targets that have previously been intractable or inadequately addressed. The Company operates in the United States and all tangible assets are held in the United States.

Cash Equivalents

The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents. Cash equivalents, which consist of money market funds, are stated at fair value.

Restricted Cash

As of December 31, 2023 and 2022, the Company had restricted cash of$2.7 million and$2.6 million, respectively, to secure letters of credit in connection with operating leases of the Company’s facilities, as detailed in Note 13, Leases. The Company classified the restricted cash as a noncurrent asset on its consolidated balance sheets, consistent with the terms of the lease agreements.

Investments

Investments in marketable securities are classified as available-for-sale.

Available-for-sale securities are measured and reported at fair value using quoted prices in active markets for similar securities.

Premiums or discounts from par value are amortized to investment income over the life of the underlying investment.

In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). Certain amendments thereto were also issued by the FASB. The Company adopted ASU 2016-13, as well as the related amendments thereto, on January 1, 2022, pursuant to which the Company reviews investments whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. In connection therewith, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors, considering the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded on the consolidated balance sheet, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that is not related to credit is recognized in other comprehensive loss as a separate component of stockholders' equity. Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in general and administrative expenses within the consolidated statements of operations and comprehensive loss. Losses are charged against the allowance when the Company believes the uncollectability of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

All of the Company’s available-for-sale securities are available to the Company for use in current operations. As a result, the Company classified all such securities as current assets as of December 31, 2023 and 2022, although the stated maturity of some individual securities may be one year or more beyond the balance sheet dates.

The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in general and administrative expenses within the consolidated statements of operations and comprehensive loss.

Concentration of Credit Risk and Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and investments. From time to time, the Company has maintained all of its cash, cash equivalents, and investments at certain accredited financial institutions in amounts that exceed federally insured limits. The Company generally invests its excess capital in money market funds, U.S. treasury bonds, U.S. treasury bills, and agency bonds, all of which are subject to minimal credit and market risk. Management has established guidelines relative to credit ratings and maturities intended to safeguard principal balances and maintain liquidity. The investment portfolio is maintained in accordance with the Company’s investment policy, which defines allowable investments, specifies credit quality standards, and limits the credit exposure of any single issuer.

The Company is dependent on third-party suppliers for research and development activities of its programs, including preclinical and clinical testing. In particular, the Company relies and expects to continue to rely on a small number of these suppliers, including D. E. Shaw Research, LLC, as discussed in Note 12, Commitments and Contingencies, to meet its requirements for certain of its programs. These programs could be adversely affected by a significant interruption in preclinical and clinical testing, as well as the supply of active pharmaceutical ingredients and formulated drugs.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable.

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Level 1—Quoted prices in active markets for identical assets or liabilities.

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Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

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Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies, and similar techniques.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the useful life of the asset. Laboratory and computer equipment are depreciated over three years. Furniture and fixtures are depreciated over five years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the underlying asset. Expenditures for repairs and maintenance of assets are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations.

Impairment of Long-Lived Assets

The Company continually evaluates long-lived assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured in an amount by which the book values of the assets exceed their fair value. The Company didnot recognize any impairment losses for the years ended December 31, 2023, 2022, and 2021.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses include salaries, stock compensation and benefits of employees, third-party license fees, and other operational costs related to the Company’s research and development activities, including allocated facility-related expenses and external costs of outside vendors engaged to conduct both preclinical studies and clinical trials. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Stock Compensation

For stock options and restricted stock units ("RSUs") granted to employees, directors, and other consultants with vesting over specified periods of continued service, the Company measures their fair value on the grant date using (a) the Black-Scholes Option Pricing Model for stock options and (b) the Company’s closing stock price on such date for RSUs. In connection therewith, compensation expense for such awards is recognized under the straight-line method over the requisite service period, which is generally the vesting period. The Company recognizes the impact of forfeitures on compensation expense as they occur.

For stock options and RSUs granted to employees, directors, and other consultants with vesting over specified periods of continued service and contingent upon achievement of certain performance conditions, the Company measures their fair value on the grant date using (a) the Black-Scholes Option Pricing Model for stock options and (b) the Company’s closing stock price on such date for RSUs. In connection therewith, compensation expense for such awards is recognized under the accelerated attribution method over the requisite service period, which is generally the vesting period. The Company recognizes the impact of forfeitures on compensation expense as they occur.

During the year ended December 31, 2023, the Company granted stock options and RSUs to certain employees, with vesting over specified periods of continued service and contingent upon achievement of certain market conditions. The Company measured the fair value of such awards on the grant date using a Monte Carlo Simulation, incorporating various option pricing inputs. In connection therewith, compensation expense for such awards is recognized under the accelerated attribution method over the requisite service period, regardless of whether the market conditions have been achieved. The Company recognizes the impact of forfeitures from market-based awards on compensation expense as they occur.

Revenue Recognition

The Company accounts for revenue recognition in accordance with ASC 606, pursuant to which an entity recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with customer(s); (ii) identify the performance obligation(s) in the contract(s); (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract(s); and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract and determines those that are performance obligations. The Company then determines the transaction price and allocates it to the performance obligations. As part of the accounting for such arrangements, the Company must use judgment to determine: (a) the number of performance obligations based on the determination under step (ii) above; (b) the transaction price under step (iii) above, including the determination of whether milestones or other variable consideration should be included in the transaction price; and (c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of the transaction price in step (iv) above.

The Company utilizes key assumptions and judgments in (a) determining the stand-alone selling price for each performance obligation, which may include discounted cash flow models, evaluation of comparable transactions, and pricing considered in negotiating the transaction and estimated costs, and (b) determining how the transaction price is allocated amongst the performance obligations. The Company also uses judgment to determine whether milestones or other variable consideration should be included in the transaction price. As part of management’s evaluation of the transaction price, the Company considers numerous factors, including whether the achievement of the milestones is outside of the Company's control, contingent upon the efforts of others, or subject to scientific risks of success. If the Company concludes it is probable that a significant revenue reversal would not occur, the associated milestone payment is included in the transaction price. Milestone payments that are not within the Company's control, such as regulatory approvals, are generally not considered probable until those milestones are achieved. The Company re-evaluates the transaction price, including estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur. For revenue-based royalties, including milestone payments based on the level of sales, the Company will include royalties in the transaction price at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty is allocated has been satisfied (or partially satisfied).

Once the performance obligations are identified, the transaction price is allocated to each performance obligation based on the relative stand-alone selling price. The Company then recognizes as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) it is satisfied, either at a point in time or over time. If the performance obligation is satisfied over time, the Company recognizes revenue based on the use of either an output or input method.

Collaboration Agreements

The Company enters into collaborative agreements with third parties to research, develop, and commercialize drug candidates, pursuant to which the risks and rewards for such activities are shared between the parties. Such arrangements also provide for cost sharing between the parties during the research and development phase, as well as potential future profit share payments during the commercialization phase. In general, such contracts are evaluated under the provisions of FASB ASC 808, Collaborative Arrangements ("ASC 808"). The amounts receivable and payable for research and development activities are presented net within research and development expense on the consolidated statements of operations and comprehensive loss. As such, the net costs reflect the Company’s share of the ongoing research and development efforts. The amounts receivable and payable for commercialization activities are presented net as either collaboration revenue, separate from revenue from contracts with customers, or collaboration expense on the consolidated statements of operations, as appropriate.

Research and Manufacturing Contracts

The Company has entered into various research and development contracts with research institutions and other companies whose costs are included in research and development expense in the accompanying consolidated statements of operations and comprehensive loss. These agreements are generally cancelable and related payments are recorded as research and development expenses as the underlying services are performed. When evaluating the adequacy of the expense recognized, the Company analyzes progress of the services, including the phase or completion of events, invoices received, and contracted costs. Judgments and estimates are made in determining the expense recognized and the related prepaid or accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical estimates have not been materially different from the actual costs.

Lease Agreements

Pursuant to ASC 842, Leases, the Company determines if an arrangement is or contains a lease at inception. For leases with a term of 12 months or less, the Company does not recognize a right-of-use asset or lease liability. The Company’s operating leases are recognized on its consolidated balance sheets as other noncurrent assets, other current liabilities, and other noncurrent liabilities. The Company does not have any finance leases.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. Operating lease right-of-use assets also include the effect of any lease payments made prior to commencement and exclude lease incentives. The lease terms may include options toextend orterminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are accounted for as a combined element.

Acquired In-Process Research and Development

In an asset acquisition, the cost allocated to acquire in-process research and development ("IPR&D") with no alternative future use is charged to expense at the acquisition date. Please refer to Note 10, Acquisition of ZebiAI, for a more detailed description of the accounting policies applied to the Company's only asset acquisition during the three years ended December 31, 2023.

Comprehensive Loss

Comprehensive loss includes net loss, as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. For the years ended December 31, 2023, 2022, and 2021, other comprehensive income (loss) consisted of changes in unrealized gains and losses from available-for-sale investments.

Net Loss per Common Share

Basic net loss per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted-average number of common shares outstanding during the period and the effect of any dilutive securities. For periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

For additional discussion of net loss per common share, please refer to Note 9, Net Loss per Share.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of the assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has agreater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Recently Adopted Accounting Pronouncements

As noted above, the Company adopted ASU 2016-13, as well as the related amendments thereto, on January 1, 2022. The adoption of ASU 2016-13, as well as the related amendments thereto, did not have a material impact on the Company’s consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to provide enhancements to segment disclosures, even for entities with only one reportable segment. In particular, the standard will require disclosures of significant segment expenses regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. The standard will also require disclosure of all other segment items by reportable segment and a description of its composition. Finally, the standard will require disclosure of the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and footnotes.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. In particular, the standard will require more detailed informationin the income tax rate reconciliation, as well as the disclosure of income taxes paid disaggregated by jurisdiction, among other enhancements. The standard is effective for years beginning after December 15, 2024 and early adoption is permitted. The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and footnotes.

3. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

In determining the fair value of its investments at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data.

Fair Value of Contingent Consideration

In April 2021, the Company acquired ZebiAI, as detailed further in Note 10, Acquisition of ZebiAI.

The Company’s Level 3 contingent consideration liability is related to $85.0 millionof platform and program milestones ("Contingent Milestone Payments") payable to ZebiAI’s former equity holders upon achievement. The contingent consideration liability for the Contingent Milestone Payments is measured at fair value at each reporting date pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity ("ASC 480"). The Company determines the fair value of the Contingent Milestone Payments based on the probability of achieving the milestones, the related timing, and, to a lesser extent, an appropriate discount rate. Significant judgment is used in determining the underlying assumptions. Due to the uncertainties associated with the development of platforms and drug candidates in the pharmaceutical industry and the effects of changes in assumptions, including probability of success and related timing, the Company expects its estimates regarding the fair value of Contingent Milestone Payments to continue to change, resulting in adjustments to the fair value of the Company’s Contingent Milestone

Payments. The effect of any such adjustments could be material through the date on which the milestones must either be achieved or contractually expire.

The Company also has a contingent consideration liability related to the fair value of $100.0 million in earnout payments ("Contingent Earnout Payments"). Because the Contingent Earnout Payments were not accounted for as derivatives under FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"), they were only measured at fair value as of the acquisition date and are not re-assessed at fair value at each reporting period. The Contingent Earnout Payments will be adjusted when the contingency is resolved and the consideration is paid or becomes payable.

The following table reconciles the change in the contingent consideration liability:

The outstanding Contingent Milestone Payments are payable in shares of the Company's common stock based on a fixed amount assigned to each milestone and the volume weighted-average closing price of the Company’s common stock for a specified period prior to the milestone achievement. Accordingly, the number of shares of common stock to be issued upon a milestone achievement varies dependent on the Company’s common stock price. If the outstanding milestones were achieved in full on December 31, 2023, the number of shares of common stock to be issued would have been 5,272,112 based on a volume weighted-average closing price of the Company's common stock of $11.29 for a specified period prior to December 31, 2023.

4. Investments

The following tables present the fair value of available-for-sale investments by type of security:

The following tables summarize the Company's available-for-sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by major security type and length of time in a continuous unrealized loss position:

As summarized in the tables immediately above, the Company held 70 and 126 debt securities that were in an unrealized loss position as of December 31, 2023 and 2022, respectively. The unrealized losses at December 31, 2023 and 2022 were attributable to changes in interest rates and the unrealized losses do not represent credit losses. The Company does not intend to sell these securities and it is not more likely than not that it will be required to sell them before recovery of their amortized cost basis.

5. Property and Equipment

Property and equipment, net consisted of the following:

The Company recorded$5.3 million,$4.1 million, and$3.9 million of depreciation expense for the years ended December 31, 2023, 2022, and 2021, respectively.

6. Accrued Expenses

Accrued expenses consisted of the following:

7. Common Stock

Each share of common stock entitles the stockholder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the Company’s board of directors. As of December 31, 2023, no dividends had been declared.

Restricted Common Stock

In prior years, the Company issued restricted shares of common stock to its founders and consultants. The Company also issued restricted shares of common stock upon the early exercise of stock options under the Company’s 2016 Stock Option and Grant Plan (the "2016 Stock Plan"). The restrictions on the common shares generally lapsed over vesting terms of four years. The Company included the proceeds from the issuance of the restricted shares of common stock as a restricted stock liability on the accompanying consolidated balance sheets. Amounts were reclassified to additional paid-in capital as the restrictions lapsed. The Company had the right to repurchase any unvested shares of restricted common stock at the original cost upon termination.

As of December 31, 2021, the restrictions had lapsed on each share of restricted common stock issued in prior years.

At-the-Market Offerings

In August 2021, the Company entered into a sales agreement, (the "Sales Agreement"), with Cowen and Company, LLC ("Cowen"), pursuant to which the Company may offer and sell shares of its common stock having aggregate gross proceeds of up to $300.0 million from time to time in "at-the-market" offerings through Cowen, as the Company’s sales agent ("At-the-Market Offerings").

As of December 31, 2022, no shares of common stock had been sold via At-the-Market Offerings under the Sales Agreement.

During the year ended December 31, 2023, the Company sold 3,026,072 shares of common stock via At-the-Market Offerings under the Sales Agreement at a weighted-average average price of $10.26 per share. The Company received proceeds of $30.3 million, which was net of $0.8 million in commissions paid to Cowen and other offering expenses.

Follow-On Offerings

In October 2021, the Company completed a public offering of 15,188,679 shares of common stock, including the exercise in full of the underwriters’ option to purchase an additional 1,981,132 shares, at an offering price of $26.50 per share. The Company received proceeds of $382.2 million, which was net of $20.3 million in underwriting discounts and commissions, as well as other offering expenses.

In September 2022, the Company completed a public offering of 11,320,755 shares of common stock at an offering price of $26.50 per share. The Company received proceeds of $284.7 million, which was net of $15.3 million in underwriting discounts and commissions, as well as other offering expenses.

Private Placement

In January 2024, the Company entered into a securities purchase agreement with Nextech Crossover I SCP for the private placement of 2,500,000 shares of common stock at $12.00 per share (the "Private Placement"). The aggregate gross proceeds for the Private Placement were approximately $30.0 million, before deducting offering expenses payable by the Company in 2024.

8. Stock Compensation

In 2016, the Company adopted the 2016 Stock Plan. Subsequent to July 2020, no further awards have been granted under the 2016 Stock Plan and all equity-based awards have been and will continue to be granted under the 2020 Stock Option and Incentive Plan (the "2020 Stock Plan"). To the extent outstanding options granted under the 2016 Stock Plan are cancelled, forfeited, or otherwise terminated without being exercised and would otherwise have been returned to the share reserve under the 2016 Stock Plan, the number of shares underlying such awards will be available for future grant under the 2020 Stock Plan.

In 2020, the Company’s stockholders approved the 2020 Stock Plan. All of the Company’s employees, officers, directors, and consultants are eligible to be granted options, restricted stock units, and other stock-based awards under the terms of the 2020 Stock Plan, which originally provided for the issuance of up to 8,376,080 of stock-based awards. The 2020 Stock Plan is also subject to annual increases to be added on the first day of each fiscal year, commencing on January 1, 2021, equal to 5%of the number of outstanding shares on the immediately preceding December 31 or such lesser number of shares approved by the

Company’sboard of directors or compensation committee of the board of directors. On January 1, 2023, the number of shares available for issuance under the 2020 Stock Plan was increased by 6,056,111 shares of common stock. There were 9,160,736 stock-based awards available for grant at December 31, 2023 under the 2020 Stock Plan.

In 2020, the Company adopted an Employee Stock Purchase Plan ("ESPP") that permits eligible employees to enroll in six-month offering periods. Participants may purchase shares of the Company’s common stock, through after-tax payroll deductions, at a price equal to 85% of the fair market value of the common stock on the first or last day of the applicable six-month offering period, whichever is lower. Purchase dates under the ESPP occur on or about June 30 and December 31 each year, with the initial purchase date under the ESPP on December 31, 2021. The Company’s stockholders originally authorized 1,092,532 shares for issuance pursuant to the ESPP, which is subject to annual increases to be added on the first day of each fiscal year, commencing on January 1, 2021, equal to the lesser of 2,185,064 shares of the Company’s common stock,1% of the number of outstanding shares on the immediately preceding December 31, or an amount determined by the Company’s board of directors. On January 1, 2023, the number of shares available for issuance under the ESPP was increased by 1,211,222 shares of common stock. There were 3,874,096 shares available for grant at December 31, 2023 under the ESPP.

In connection with all stock-based payments, total stock compensation expense recognized was as follows:

Time-Based Stock Options

The Company has historically granted stock options to employees, directors, and consultants with vesting conditions based on continued service over time. Accordingly, stock compensation expense for such awards is recognized using a straight-line attribution model over the vesting term of each option.

The following table summarizes activity for time-based stock options under the 2016 Stock Plan and the 2020 Stock Plan for the year ended December 31, 2023:

The total intrinsic value of time-based stock options exercised was $4.4 million, $15.5 million, and $32.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The fair value of each time-based stock option granted is estimated on the date of grant using the Black-Scholes option pricing model, pursuant to which the weighted-average grant date fair values were $12.83, $13.67, and $22.95 during the years ended December 31, 2023, 2022, and 2021, respectively. The following table summarizes the assumptions used in calculating the fair value of the time-based stock options granted.

The Company uses the simplified method to calculate the expected term, as it does not have sufficient historical exercise data as a public company to provide a reasonable basis upon which to estimate the expected term for time-based stock options granted.

The expected term is applied to the time-based stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among the Company’s employees, directors, and consultants. The risk-free interest rate is based on a U.S. treasury instrument, whose term is consistent with the expected term of the time-based stock options. The Company’s stock price volatility assumption is based on historical volatility of a group of peer companies with similar characteristics to the Company and who have similar risk profiles and positions within the industry. The Company accounts for forfeitures as they occur.

As of December 31, 2023, the total unrecognized stock compensation related to unvested time-based stock options was $73.1 million, which the Company expects to recognize over a weighted-average period of approximately 1.35 years.

Performance-Based Stock Options

In March 2020 and September 2021, the Company granted options to certain employees with performance-based vesting conditions under the 2016 Stock Plan and 2020 Stock Plan. In both instances, the commencement of vesting is based on the achievement of various scientific and operational milestones during specified periods, subject to the discretion and approval of either the Company’s board of directors or President and Chief Executive Officer.

For the performance-based stock options, the Company applies variable accounting until the performance criteria are determined to be achieved, at which time vesting commences over contractual service periods. Furthermore, because (a) the awards were authorized prior to the accounting grant date in the context of ASC 718, Stock Compensation, (b) the recipients were providing service prior to the accounting grant date, and (c) there were performance conditions that, if not met by the accounting grant date, would have resulted in the forfeiture of the award, the service inception dates preceded the accounting grant dates. Ultimately, the stock compensation expense for the options is determined based on the fair value of the awards on the accounting grant dates, which is then recognized using an accelerated attribution model over the vesting term commencing upon the actual or expected accounting grant dates.

For the performance-based stock options granted in March 2020 and September 2021, all performance conditions were resolved in prior periods and the grant dates were set at or prior to December 31, 2023

The following table summarizes activity for performance-based stock options for the year ended December 31, 2023:

The total intrinsic value of performance-based stock options exercised was $0.3 million, $0.4 million, and $1.1 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

The fair value of each performance-based stock option granted is estimated on the accounting grant date, or at the end of each reporting period if variable accounting is applied, using the Black-Scholes option-pricing model, pursuant to which the grant date fair value was $20.28 for performance-based stock options granted during the year ended December 31, 2021. There wereno performance-based stock options granted during the years ended December 31, 2023 and 2022. The assumptions and methodologies used in calculating the fair value of performance-based stock options granted during the year ended December 31, 2021 was similar to the assumptions and methodologies used in calculating the fair value of time-based stock options granted during the year ended December 31, 2021.

As of December 31, 2023, the total unrecognized stock compensation related to unvested performance-based stock options was $1.9 million, which the Company expects to recognize over a weighted-average period of approximately 0.48 years.

RSUs

Starting in 2021, the Company has granted RSUs to employees, directors, and consultants under the 2020 Stock Plan. Each of the RSUs represents the right to receive one share of the Company’s common stock upon vesting. The majority of RSUs granted to date have vesting conditions based on continued service over time. Accordingly, stock compensation expense for the majority of such awards is recognized using a straight-line attribution model over the vesting term of each RSU. The fair value of each RSU is based on the closing price of the Company’s common stock on the date of grant.

The following table summarizes activity for RSUs under the 2020 Stock Plan for the year ended December 31, 2023:

The fair value of RSUs that vested during the year ended December 31, 2023 was $10.5 million.

As of December 31, 2023, the total unrecognized compensation related to unvested RSUs granted was $51.3 million, which the Company expects to recognize over a weighted-average period of approximately 1.41 years.

Market-Based Awards

During the year ended December 31, 2023, the Company granted 1,512,820 stock options and 405,770 RSUs under the 2020 Stock Plan to certain employees, with vesting over three years of continued service and contingent upon achievement of certain market conditions ("2023 Market-Based Awards"). The Company measured the fair value of the 2023 Market-Based Awards on the grant date using a Monte Carlo Simulation, incorporating various option pricing inputs, including (a) the contractual term, or 10.0 years, (b) exercise price for the stock options and stock price on the grant date for the RSUs, or $20.45, (c) estimated expected term, or 6.5 years, (d) risk-free interest rate, or 3.5%, (e) historical volatility, or 75.0%, and (f) dividend yield, or 0.0%. Ultimately, the fair value of the 2023 Market-Based Awards was estimated as $12.53 per share for the stock options and $16.11 per share for the RSUs, yielding a total of $25.5 million. The total compensation expense, or $25.5 million, is being recognized pursuant to the accelerated attribution method over the requisite service period ofthree years, regardless of whether the market conditions have been achieved. The impact of forfeitures, if any, will be recognized upon occurrence.

As of December 31, 2023, the market conditions underlying the 2023 Market-Based Awards had not been achieved.

During the year ended December 31, 2023, none of the 2023 Market-Based Awards vested and, therefore, none of the options were exercised andnone of the RSUs were released. There were alsono cancellations of the 2023 Market-Based Awards through December 31, 2023

As of December 31, 2023, the total unrecognized compensation related to unvested market-based awards granted was $9.0 million, which the Company expects to recognize over a period of 2.07 years.

Employee Stock Purchase Plan

The following table summarizes activity under the Company's ESPP from the initial offering period, or July 1, 2021 through December 31, 2023, including (a) after-tax contributions from employees, (b) shares purchased, and (c) weighted-average assumptions used in the Black-Scholes option pricing model to estimate the fair value of the option component of the shares purchased under the ESPP in each period.

As of December 31, 2023, there wasno unrecognized stock compensation expense related to ESPP, since the purchase for the offering period between July 1, 2023 and December 31, 2023 was transacted on December 31, 2023.

9. Net Loss per Share

The following table summarizes the computation of basic and diluted net loss per share of the Company:

For the years ended December 31, 2023, 2022, and 2021, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share is the same. In computing diluted net loss per share for the years ended December 31, 2023, 2022, and 2021, the Company excluded the following potentially dilutive securities, as the effect would be anti-dilutive and reduce the net loss per share calculated for each period.

The amounts included in the table above for options and RSUs are presented based on amounts outstanding at each period end.

The amounts included in the table above for common stock issued upon milestone achievement are presented based on the weighted-average anti-dilutive effect from shares issued in connection with Contingent Milestone Payments in each of the periods presented.

10. Acquisition of ZebiAI

On April 22, 2021 (the "Acquisition Date"), the Company acquired ZebiAI, a privately held company focused on using machine learning combined with DNA encoded library data sets for drug discovery. Pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), upfront consideration included (a) payment of approximately $20.0 million in cash and (b) issuance of 1,914,219 shares of the Company’s common stock at an aggregate fair value of $61.8 million, both transferred to ZebiAI’s former stockholders, option holders, and warrant holders (the "ZebiAI Holders") upon closing. In addition, (i) the ZebiAI Holders are eligible to receive up to $85.0 million in other payments upon the achievement of certain platform or program milestones within a specified period from the closing date of the Merger Agreement, payable in shares of the Company's common stock (the "Contingent Milestone Payments"), a portion of which was paid to the ZebiAI Holders in 2022 and 2023, and (ii) the Company will pay 10% of payments it receives within a specified period from the closing date of the Merger Agreement from partnering, collaboration, or other agreements related to ZebiAI’s platform, up to an aggregate maximum amount of $100.0 million, payable in cash (the "Contingent Earnout Payments"), to the ZebiAI Holders.

In accounting for the transaction, the Company assessed if ZebiAI represented an asset or business under ASC 805, Business Combinations ("ASC 805"), as amended by ASU 2017-01. Pursuant to the guidance noted, the Company concluded ZebiAI did not constitute a business, since substantially all of the fair value of the gross assets acquired was concentrated in a single asset, which was the intellectual property for the AI platform and the related data sets in development by ZebiAI. The intellectual property acquired from ZebiAI was at an early stage of development and continues to require a significant investment of time and capital for development. There is no assurance the Company will be successful in completing the additional research and development activities.

The Company also concluded the acquisition represented an initial consolidation of a variable interest entity that does not constitute a business in accordance with ASC 810, Consolidation("ASC 810"). In connection therewith, the Company determined ZebiAI was considered to be a variable interest entity, as it did not have sufficient equity to finance its activities without additional subordinated financial support. Prior to the Acquisition Date, the primary source of funding for ZebiAl had been preferred stock financings and convertible notes. The Company acquired all of the outstanding shares of ZebiAI and, therefore, is the sole equity holder. The Company will absorb the losses of ZebiAI, has the rights to the benefits derived from the ZebiAI platform, and the power to direct all activities. Therefore, the Company is the primary beneficiary. The net assets acquired and liabilities assumed in connection with the acquisition were recorded at their estimated fair values as of the Acquisition Date. Total consideration transferred of $135.5 million included the cash and shares of the Company's common stock issued to ZebiAI Holders, the fair value of the Contingent Milestone Payments, and the fair value of the Contingent Earnout

Payments, as well as an insignificant amount attributed to the replacement of stock options to ZebiAI Holders. The Contingent Milestone Payments were determined to be liabilities pursuant to ASC 480 and, therefore, included in consideration transferred. The Contingent Earnout Payments were required to be included in total consideration transferred as a result of the guidance under ASC 810. The difference between total consideration transferred and the fair value of net assets acquired and liabilities assumed of $11.9 million was recorded as loss on initial consolidation of a variable interest entity pursuant to ASC 810.

The following table summarizes net assets acquired based on their estimated fair values as of the Acquisition Date:

In estimating the fair value of the acquired tangible assets and liabilities assumed, the Company used the carrying value of the net working capital balances as the most reliable indicator of fair value based on the associated short-term nature of the balances. The remaining fair value was attributable to the acquired IPR&D and an intangible asset. The fair value attributable to the IPR&D asset was determined using an Avoided Cost Method, which includes all costs to develop the IPR&D asset, including appropriate mark-ups on the cost estimate and an expected return related to developing the IPR&D asset over a period of time. The fair value of the IPR&D asset was expensed in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2021, as the acquired IPR&D had no alternative future use, which was determined by the Company in accordance with U.S. GAAP, including ASC 730, Research and Development ("ASC 730"). The intangible asset represents the assembled workforce, for which the Company concluded there were no indicators of impairment through December 31, 2023. The Company recognized stock compensation expense of $4.6 million associated with accelerated vesting for certain stock options in connection with the acquisition within the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021, withno incremental charges in connection therewith for the years ended December 31, 2023 and 2022. Finally, the Company recognized other acquisition costs of $0.9 million within general and administrative expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021, withno incremental charges in connection therewith for the years ended December 31, 2023 and 2022.

For the Contingent Milestone Payments and Contingent Earnout Payments, the Company recorded contingent consideration liabilities of $42.4 million and $5.0 million, respectively, representing the fair value of the payment provisions noted as of the Acquisition Date. The Company is required to re-assess the fair value of the Contingent Milestone Payments at each reporting period pursuant to ASC 480, as summarized within Note 3, Fair Value Measurements. However, the Contingent Earnout Payments were not accounted for as derivatives under ASC 815 and, therefore, are not re-assessed at fair value at each reporting period. The Contingent Earnout Payments will be adjusted when the contingency is resolved and the consideration is paid or becomes payable.

11. Collaboration and License Agreement with Genentech, Inc.

Summary of Terms

In December 2020, the Company and Genentech, Inc. ("Genentech") entered into the Collaboration and License Agreement (as amended from time to time, the "Genentech Agreement"), which granted Genentech a license to develop and commercialize GDC-1971 (migoprotafib, formerly known as RLY-1971).

Under the terms of the Genentech Agreement, the Company had the option, exercisable one time at the Company’s sole discretion, to share half of the net profits or net losses of commercializing migoprotafib in the U.S., subject to certain terms and conditions (such option, the "Opt-In Right"). During the year ended December 31, 2023, the Company elected to not exercise the Opt-In Right.

As of December 31, 2023, consideration under the Genentech Agreement included (a) $86.8 million in non-refundable payments ("Genentech Non-Refundable Payments") and (b) $25.0 million in payments upon achievement of certain milestones, which were refundable if the Company had exercised the Opt-In Right ("Genentech Milestones Paid").

In February 2024, the Company received an additional payment of $10.0 million in connection with a milestone achievement occurring after December 31, 2023. The Company is eligible to receive up to an aggregate of $675.0 millionin additional payments upon achievement of other specified development, commercialization, and sales-based milestones for migoprotafib worldwide, as well as tiered royalties ranging from low-to-mid teens on annual worldwide net sales of migoprotafib, on a country-by-country basis, subject to reduction in certain circumstances. Due to the nature of the payments noted, such variable consideration was constrained and excluded from the transaction price of the Genentech Agreement as of December 31, 2023.

Accounting Analysis

Identification of the Contract

The Company concluded Genentech is a customer and, as such, the Genentech Agreement is within the scope of the revenue recognition guidance under ASC 606.

Identification of Performance Obligations

At the commencement of the Genentech Agreement, the Company identified the following performance obligations:

•

License to develop and commercialize migoprotafib and the related know-how;

•

Research and development services to complete the Phase 1a Trial for migoprotafib; and

•

Transfer of active pharmaceutical ingredient and other materials related to migoprotafib.

The Company concluded the performance obligations outlined above are both capable of being distinct and distinct within the context of the contract, given such rights and activities are independent of each other. The license can be used by Genentech without the research and development services or active pharmaceutical ingredient outlined above. Similarly, such services and inventory provide distinct benefit to Genentech within the context of the contract, separate from the license.

Determination of Transaction Price

As of December 31, 2023, the Company concluded the transaction price for the Genentech Agreement was $111.8 million, which includes both the Genentech Non-Refundable Payments and Genentech Milestones Paid.

Upon the Company’s election to not exercise the Opt-In Right during the year ended December 31, 2023, the $25.0 million in Genentech Milestones Paid, which had been received by the Company before the year ended December 31, 2023, were removed from other current liabilities on the condensed consolidated balance sheet and incorporated into the transaction price, since the constraint on such variable consideration had been resolved.

No other milestone payments are included in the transaction price, as such payments are variable consideration fully constrained as of December 31, 2023. As part of management’s evaluation of the constraint, the Company considered numerous factors, including consideration of the fact that achievement of the milestones is outside of the Company’s control, contingent upon Genentech’s efforts, the receipt of regulatory approval, and subject to scientific risks of success.

Allocation of Transaction Price to Performance Obligations

The Company allocated the transaction price of $111.8 million based on the stand-alone selling prices ("SSP") of each of the performance obligations as follows:

•

$107.6 million for the transfer of the license;

•

$3.8 million for research and development services; and

•

$0.4 million for the transfer of active pharmaceutical ingredient.

The SSP for the license was determined using an approach that considered discounted, probability-weighted cash flows related to the license transferred. The Company also reviewed comparable market transactions in determining the SSP of the license. The SSP for the research and development services and the transfer of active pharmaceutical ingredient were based on estimates of the associated effort and cost of these services and cost to manufacture active pharmaceutical ingredient, adjusted for a reasonable profit margin that would be expected to be realized under similar contracts.

Recognition of Revenue

The Company is recognizing revenue for each of the performance obligations as follows.

•

Upon execution of the Genentech Agreement in 2020, the license and related know-how were transferred. Therefore, the full amount allocated to the license and related know-how at such time was recognized immediately in 2020. As the transaction price has been updated through December 31, 2023, any changes to the amount allocated to the performance obligation for transfer of the license and related know-how have also been recognized immediately. Revenue recognized related to the performance obligation during the years ended December 31, 2023, 2022, and 2021 was $24.0 million, $0.3 million, and $0.6 million, respectively.

•

The performance obligation for research and development services consisted of the Company completing the Phase 1a clinical trial initiated in 2020. The Company fully satisfied the performance obligation during the year ended December 31, 2023, recognizing revenue over time using a cost-based input method by calculating actual costs incurred to date at each period end relative to total estimated costs expected to be incurred. Revenue recognized related to the performance obligation during the years ended December 31, 2023, 2022, and 2021 was $1.4 million, $0.7 million, and $1.7 million, respectively.

•

The amount of the transaction price originally allocated to the performance obligation for active pharmaceutical ingredient was recognized in full upon transfer of such material to Genentech in 2021. As the transaction price has been updated through December 31, 2023, any changes to the amount allocated to the performance obligation for transfer of active pharmaceutical ingredient have also been recognized immediately. Revenue recognized related to the performance obligation during the years ended December 31, 2023, 2022, and 2021 was $0.1 million, $0.1 million, and $0.3 million, respectively.

During the years ended December 31, 2023, 2022, and 2021, the Company recognized an aggregate of $25.5 million, $1.0 million, and $2.6 million, respectively, of revenue from the Genentech Agreement.

As of December 31, 2022, the Company also had recorded a contract asset of $4.9 million, which was classified as a current asset on the condensed consolidated balance sheet. The contract asset related to the amount of revenue recognized for which the right to payment was contingent upon conditions besides the passage of time. During the year ended December 31, 2023, such conditions were satisfied and $5.0 million was paid in cash to the Company in June 2023, at which point the contract asset was removed. As of December 31, 2023, no amounts from such payment are recorded on the condensed consolidated balance sheet.

12. Commitments and Contingencies

Intellectual Property License

The Company has a Collaboration and License Agreement with D. E. Shaw Research, LLC ("D. E. Shaw Research"), which held 9,999,999 shares of Series A preferred stock and 1,557,875 shares of Series C preferred stock at December 31, 2019. In conjunction with the Company's initial public offering in 2020, such shares were converted into 3,281,253 shares of common stock of the Company. The contract provides that the parties will jointly conduct research efforts with the goal of identifying and developing product candidates. The original term of the contract wasthree years and required the Company to pay an annual fee of $1.0 million. On June 15, 2020, the Company and D. E. Shaw Research agreed to amend the Collaboration and License Agreement (the "DESRES Agreement"). The DESRES Agreement extended the term of the agreement to August 16, 2025 and increased the annual fee from $1.0 million to $9.9 million. The DESRES Agreement also automatically renews for successiveone-year periods, unless either party provides at least one year notice of non-renewal. The annual fee during each of the one-year renewal terms is subject to mutual agreement of the Company and D. E. Shaw Research.

The Company is obligated to pay potential development milestone payments under the terms of the DESRES Agreement up to $7.3 million per target, plus sales milestones and royalties, upon the achievement of certain specified contingent events. Such payments for achievement of development and regulatory milestones total up to $7.3 million in the aggregate for each of the first three products the Company develops and up to $6.3 million, in the aggregate, for each product the Company develops after the first three. The Company assessed the milestone and royalty events under the DESRES Agreement as of December 31, 2023 and 2022, concluding no such payments were due.

For the years ended December 31, 2023, 2022, and 2021, the Company recorded research and development expenses of $9.5 million, $9.4 million, and $9.5 million, respectively, under the DESRES Agreement on its consolidated statements of operations and comprehensive loss.

As of December 31, 2023 and 2022, the Company had prepaid balances of $5.4 million and $4.9 million, respectively, under the DESRES Agreement on its consolidated balance sheets.

As of December 31, 2023 and 2022, the Company hadno accrued expense and accounts payable balances under the DESRES Agreement on its consolidated balance sheets.

Other Research Arrangements

The Company has certain other research and license arrangements and other collaborations with third parties, which provide the Company with specified research and/or development services.

13. Leases

399 Binney Street

In December 2017, the Company entered into an operating lease agreement for 44,336 square feet of office and laboratory space at 399 Binney Street, Cambridge, Massachusetts, which was increased to 44,807 square feet in January 2018. The Company gained control of the leased space in January 2019 and, accordingly, recorded an operating lease right-of-use asset and liability at such time. The operating lease expires in April 2029, subject to certain renewal options, which have not been included in the Company’s operating lease right-of-use asset and liability, as the Company is not reasonably certain to exercise such options as of December 31, 2023.

In September 2020, the Company entered into an amendment to its operating lease agreement to expand the leased area by 1,824 square feet of office space at 399 Binney Street, Cambridge, Massachusetts. The amendment to the operating lease agreement met the criteria to be accounted for as a separate operating lease. The Company gained control of the leased space in October 2020 and, accordingly, recorded an operating lease right-of-use asset and liability at such time. The operating lease right-of-use asset and lease liability recorded in connection with the amendment were not material. The amended operating lease expires in April 2029, subject to certain renewal options.

As discussed in Note 2, Significant Accounting Policies, the Company provided a letter of credit in the amount of $0.9 million with a financial institution, which expires commensurate with the lease in April 2029.

The following table summarizes the presentation of amounts recorded on the Company’s consolidated balance sheets for the operating lease at 399 Binney Street as of December 31, 2023 and 2022:

The following table summarizes the effect of lease costs for the Company's operating lease at 399 Binney Street on the Company’s condensed consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022, and 2021:

The Company made cash payments of $4.3 million, $4.1 million, and $4.0 million under the operating lease agreement for 399 Binney Street during the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, the minimum lease payments for the Company’s operating lease at 399 Binney Street for the next five years and thereafter are expected to be as follows:

The weighted-average remaining lease term and weighted-average discount rate of the Company's operating lease at 399 Binney Street were 5.33 years and 10.4%, respectively, at December 31, 2023.

The weighted-average remaining lease term and weighted-average discount rate of the Company's operating lease at 399 Binney Street were 6.33 years and 10.4%, respectively, at December 31, 2022.

60 Hampshire Street

In May 2021, the Company entered into an operating lease agreement for 41,474 square feet of office and laboratory space at 60 Hampshire Street, Cambridge, Massachusetts. The Company gained control of the leased space in July 2022 and, accordingly, recorded an operating lease right-of-use asset and liability at such time. The operating lease expires in June 2032 and there are no renewal options.

As discussed in Note 2, Significant Accounting Policies, the Company provided a letter of credit in the amount of $1.8 million with a financial institution, which expires commensurate with the lease in June 2032.

The following table summarizes the presentation of amounts recorded on the Company’s consolidated balance sheets for the operating lease at 60 Hampshire Street as of December 31, 2023 and 2022:

The following table summarizes the effect of lease costs for the Company's operating lease at 60 Hampshire Street on the Company’s condensed consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022, and 2021:

The Company made cash payments of $5.0 million, $11.5 million, and $0 under the operating lease agreement for 60 Hampshire Street during the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, the minimum lease payments for the Company’s operating lease at 60 Hampshire Street for the next five years and thereafter are expected to be as follows:

The weighted-average remaining lease term and weighted-average discount rate of the Company's operating lease at 60 Hampshire Street were 8.50 years and 8.0%, respectively, at December 31, 2023.

The weighted-average remaining lease term and weighted-average discount rate of the Company's operating lease at 60 Hampshire Street were 9.50 years and 8.0%, respectively, at December 31, 2022.

14. Income Taxes

During the years ended December 31, 2023, 2022, and 2021, the Company recordedno income tax benefits due to losses incurred and the uncertainty of future taxable income.

A reconciliation of the expected income tax (benefit) computed using the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31, 2023, 2022, and 2021:

The Company’s deferred tax assets and liabilities at December 31, 2023 and 2022, consist of the following:

The Company has incurred net operating losses ("NOLs") since inception. As of December 31, 2023 and 2022, the Company had federal NOL carryforwards of $498.0 million and $412.1 million, respectively, available to reduce taxable income, of which $43.1 million expire beginning in 2035 and $454.9 million do not expire. The Company also has state NOL carryforwards of $559.7 million and $501.7 million as of December 31, 2023 and 2022, respectively, available to reduce future state taxable income, which expire at various dates beginning in 2035.

As of December 31, 2023 and 2022, the Company also had available federal research and development tax credit carryforwards of $38.9 million and $25.9 million, respectively, available to reduce future tax liabilities, which begin to expire beginning in 2035. The Company also has state research and development tax credit carryforwards of $8.5 million and $5.6 million as of December 31, 2023 and 2022, respectively, available to reduce future state tax liabilities, which expire at various dates beginning in 2030.

Utilization of NOL and research and development credit carryforwards may generally be subject to limitation under Sections 382 and 383 of the Internal Revenue Code of 1986 ("Sections 382 and 383") due to ownership changes that have occurred previously or could occur in the future. Such ownership changes may limit the amount of NOL and research and development credit carryforwards that can be utilized annually to offset any post-ownership change in taxable income and tax, respectively. The most recent Section 382 study was performed by the Company up to December 31, 2023, through which it was noted that a historic ownership change has likely occurred. Nonetheless, the Company has concluded that, as of December 31, 2023, the prospective utilization of NOL and research and development credit carryforwards from inception through December 31, 2023 (and, therefore, the corresponding Federal and state deferred tax assets) should not be restricted by Sections 382 and 383, although ownership changes after December 31, 2023 could impact the Company’s ability to utilize such tax attributes in the future.

The Company recorded a valuation allowance against its deferred tax assets for the years ended December 31, 2023 and 2022, because the Company’s management believes it is more likely than not that such assets will not be realized. The valuation allowance increased by approximately $69.3 million and $87.8 million for the years ended December 31, 2023 and 2022, respectively, primarily as a result of operating losses generated with no corresponding financial statement benefit.

The Company hadno unrecognized tax benefits as of December 31, 2023 and 2022.

The Company files tax returns, as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by Federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from inception to the present.

In 2017, the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") was signed into law. Amongst other provisions, the 2017 Tax Act requires taxpayers to capitalize and amortize research and experimental (R&D) expenditures under Section 174 for tax years beginning after December 31, 2021. As such, the rule noted became effective for the Company during the year ended December 31, 2022, ultimately resulting in the capitalization of certain R&D costs within its tax provision. The Company will amortize such costs for tax purposes over 5 years if the R&D was performed in the United States and over 15 years if the R&D was performed outside the United States.

In 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law. The CARES Act lifts certain deduction limitations originally imposed by the 2017 Tax Act. Corporate taxpayers may carryback NOLs originating during 2018 through 2020 for up tofive years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019, or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any adjustments to the Company’s income tax provision for the years ended December 31, 2023, 2022, and 2021, or to the Company’s net deferred tax assets as of December 31, 2023 and 2022, since the Company hasnot recorded any U.S. Federal or state income tax benefits for the net losses incurred in any year due to the uncertainty of realizing a benefit from such items.

15. Employee Benefits

In 2016, the Company established a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company made matching contributions to the 401(k) Plan of $2.6 million, $2.3 million, and $1.2 million for the years ended December 31, 2023, 2022, and 2021.

16. Subsequent Events

In preparing the consolidated financial statements as of December 31, 2023, the Company evaluated subsequent events for recognition and measurement purposes through the filing date of this Annual Report on Form 10-K. The Company concluded that no events or transactions have occurred that require disclosure in the accompanying consolidated financial statements, except as otherwise described in the notes above.

EXHIBIT INDEX

• Filed herewith.

** The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

† Portions of this exhibit (indicated by asterisks) were omitted in accordance with the rules of Item 601(b)(10) of Regulation S-K.