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 consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Item 1A, Risk factors, in this Annual Report on Form 10-K.

Overview

We are a biopharmaceutical company focused on transforming the treatment of cancer and other diseases in collaboration with our partners by developing novel therapeutic candidates engineered to harness the body’s natural regulation of protein levels to target and destroy disease-causing proteins. We leverage our proprietary technology platform, TORPEDO (Target ORiented ProtEin Degrader Optimizer), to synthesize a new class of small molecule medicines that selectively and efficiently destroy disease-causing proteins. We are using our TORPEDOplatform to build a robust pipeline of orally administered protein degradation drug candidates, with an initial focus on oncology indications. Our approach to medicine harnesses the innate machinery of the cell to attack disease and potentially bring deep and durable responses to patients.

Our most advanced product candidate, CFT7455, is an orally bioavailable degrader of a protein target called IKZF1/3, for multiple myeloma, or MM, and non-Hodgkin lymphomas, or NHLs, including peripheral T-cell lymphoma, or PTCL, and mantle cell lymphoma, or MCL. We submitted an investigational new drug application, or IND, for this product candidate to the U.S. Food and Drug Administration, or the FDA, in December 2020 and received clearance from the FDA in January 2021; we expect to begin a first-in-human Phase 1/2 clinical trial for this product candidate in the first half of 2021.

We are also developing CFT8634, an orally bioavailable degrader of a protein target called BRD9, for synovial sarcoma and SMARCB1-delete solid tumors, and we expect to submit an IND for this product candidate to the FDA in the second half of 2021 and begin a first-in-human Phase 1/2 clinical trial for this product candidate in 2022.

In addition to our lead product candidates, we are also developing degraders specifically targeting V600E mutant BRAF to treat melanoma, non-small cell lung cancer, colorectal cancer and other solid malignancies that harbor this mutation, as well as degraders targeting RET to treat lung cancer, sporadic medullary thyroid cancers and other solid malignancies that harbor oncogenic RET lesions. We expect to have product candidates from our two other lead programs, BRAF V600E and RET, in the clinic by the end of 2022.

Financial Operations Overview

General

We commenced operations in October 2015, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, establishing development collaborations with Roche, Biogen and Calico, conducting discovery and research activities, filing patent applications, identifying potential product candidates, undertaking preclinical studies and establishing arrangements with third parties for the manufacture of initial quantities of our product candidates. To date, we have not generated any revenue from product sales and have financed our operations primarily through sales of our equity interests and proceeds from our collaborations. Through December 31, 2020, we have raised approximately $224.0 million in gross proceeds from the sale of our preferred stock, $209.8 million in gross proceeds from our initial public offering, and have received an aggregate of $167.5 million in payments from collaboration partners.

Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Since inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our net losses were $66.3 million and $34.1 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $183.8 million.

Our total operating expenses were $93.6 million and $56.8 million for the years ended December 31, 2020 and 2019, respectively. We anticipate that our expenses will increase substantially in the future due to costs including those associated with the following:

• development activities associated with our other product candidates;

• the management of our intellectual property portfolio; and

• operating as a public company.

In addition, our net losses and cash flows may fluctuate significantly from period to period depending on, among other things, variations in the level of our expenses and the execution of any additional collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under these types of arrangements.

As a result of these anticipated expenditures, we will need substantial additional funding to support our operating activities as we advance our product candidates through clinical development, seek regulatory approval and prepare for and, if any of our product candidates are approved, proceed to commercialization. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings, debt offerings, reimbursements and potential milestones earned under our existing collaboration agreements and potential license and development agreements with third parties, including but not limited to our existing collaboration partners. Adequate funding may not be available to us on acceptable terms, or at all.

COVID-19

The impact of the COVID-19 coronavirus outbreak on our financial performance will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions. There are multiple causes of these delays, including laboratory closures, reluctance of patients to enroll or continue in trials for fear of exposure to COVID-19, local and regional shelter-in-place and work from home orders and regulations that discourage, hamper or prohibit patient visits, healthcare providers and health systems shifting away from clinical trials toward the acute care of COVID-19 patients and the FDA and other regulators making product candidates for the treatment of COVID-19 a priority over product candidates unrelated to the pandemic.

In terms of the impact on our operations, we have seen increased risk of delays in production of components used to manufacture our lead degrader candidates due to previous delays at one of our China-based manufacturers, periodic shipping delays and resourcing constraints and, therefore, somewhat higher costs to compete our discovery activities on one or more of our lead projects, and one of our contract research organizations, or CROs, in India was forced to temporarily shut down due to local lockdown orders. In addition, we temporarily closed the office and laboratory spaces at our corporate headquarters in Watertown, Massachusetts, and we transitioned our employees to work from home. We are working closely with our CROs, manufacturers, investigators and preclinical and clinical trial sites to assess the full impact of the COVID-19 pandemic on the timelines and expected costs for each of our programs. While the ongoing impact of the pandemic is uncertain, we believe our CRO redundancies in China, India and Boston and the transition of the majority of our employees to remote work arrangements have helped mitigate the impact of these types of disruptions on our business.

Given the breadth and duration of the global COVID-19 pandemic, it is possible that our directors or employees could, at any time, have been or become infected with this novel coronavirus, especially sincemethods and availability of testing are continuing to evolve. To date, we have not experienced or had to impose any material shutdowns as a result of positive test results for this novel coronavirus.

We note the high level of difficulty in projecting the effects of COVID-19 on our programs and our company, given the rapid and dramatic evolution in the course and impact of the pandemic and the societal and governmental response to it.

Financial Operations Overview

Revenues

As previously discussed, to date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future. Our revenues to date have been generated through research collaboration and license agreements. We recognize revenue over our expected performance period under each agreement. We expect that our revenue for the next several years will be derived primarily from our current collaboration agreements and any additional collaborations that we may enter into in the future. To date, we have not received any royalties under any of our existing collaboration agreements.

Roche Collaboration and License Agreement

In March 2016, we entered into the Original Roche Agreement with Roche, whereby Roche provided us with a non-refundable upfront payment of $15.0 million, which was creditable against our target initiation fees of either $1.0 million or

$4.0 million, depending on the compound selected. Pursuant to the terms of the Original Roche Agreement, we collaborated on research activities to develop novel treatments in the field of targeted protein degradation using our degrader technology. We initially developed therapeutics that utilize degrader technology for up to ten target proteins. On a target-by-target basis, after successful completion of a defined preclinical development phase, Roche had an exclusive option to pursue a license from us for further clinical development and commercialization.

On December 22, 2018, we amended and restated the Original Roche Agreement, or the Roche Agreement. Under the Roche Agreement, we have a more active role in the manufacturing and commercialization of the targets included in the collaboration, whereby if we opt into certain co-development and co-detailing rights, the parties will split future development costs in return for our having rights to a larger share of future earnings from commercialization of the relevant target. The target structure was revised to six potential targets, three of which had been nominated as of the execution of the Roche Agreement and represent continuations of the initial preclinical research and development efforts begun under the Original Roche Agreement, and three additional targets that were not nominated as of the date of execution of the Roche Agreement. At the time of entry into the Roche Agreement, Roche maintained its option rights to license and commercialize these six targets.

Under the Roche Agreement, we received additional upfront consideration of $40.0 million from Roche. Roche will make annual research plan payments of $1.0 million for each active research plan. Finally, adjustments were made to the option exercise fees, whereby targets that have progressed through GLP toxicology studies at the time of exercise now have option exercise fees of $7.0 million to $12.0 million and those progressed through Phase 1 trials have option exercise fees of $20.0 million.

For certain targets, Roche is required to pay us fees of $2.0 million and $3.0 million upon the identification of a lead series and the commencement of GLP toxicology studies, respectively. For each target option exercised by Roche, we are eligible to receive up to $275 million in research, development and commercial milestone payments per target. Roche is also required to pay us up to $150 million per target in one-time sales-based payments if the target achieves certain levels of net sales. Roche is also required to pay us royalties, at percentages from the mid-single digits to the low double-digits, on a licensed product-by licensed product basis, on worldwide net product sales.

In November 2020, we signed a further amendment to the Roche Agreement that provides a mechanism through which we and Roche can mutually agree to terminate the Roche Agreement on a target-by-target basis by the entry into a mutual target termination agreement. Upon a termination of this nature, the Roche Agreement, as amended, provides that all rights in know-how and intellectual property in support of products that use inhibition as their mode of action, referred to as the Roche Field, will revert to Roche and all rights in respect of know-how and intellectual property in support of products that use degradation as their mode of action, referred to as the C4T Field, will revert to us. Further, this amendment states that, following the entry into a mutual target termination agreement, Roche will have rights in and responsibility for any know-how and intellectual property generated as a result of the collaboration that fits within the Roche Field and we will have rights in and responsibility for any know-how and intellectual property generated as a result of the collaboration that fits within the C4T Field. In support of this allocation of rights, under the amendment, Roche provided us, and we provided Roche, with a perpetual, irrevocable, fully paid up, exclusive (even as to party granting the license), sublicensable (including in multiple tiers) license to the patents that are allocated to a party under the mutual target termination agreement and a perpetual, irrevocable fully paid up, non-exclusive, sublicensable (including in multiple tiers) license to the know-how that is allocable to a party under the mutual termination agreement. Finally, through the entry into this amendment, we and Roche mutually agreed to terminate the Roche Agreement as to the target EGFR. As a result, Roche is now free to pursue the target EGFR in the Roche Field and we are free to pursue the target EGFR in the C4T Field and all rights in and responsibility for know-how and intellectual property related to EGFR in the Roche Field reverted to the Roche parties and all rights in and responsibility for know-how and intellectual property related to EGFR in the C4T Field reverted to us, with Roche assigning the relevant patents in the C4T Field to us.

Biogen Collaboration Research and License Agreement

On December 28, 2018, we entered into the Biogen Agreement, with Biogen, whereby we agreed to collaborate on research and development efforts for up to five targets to discover and develop potential new treatments for neurological conditions, such as Alzheimer’s disease and Parkinson’s disease. The Biogen Agreement also has an option for Biogen to nominate additional targets and extend the Biogen Agreement. In February 2020, we entered into an amendment to the Biogen Agreement that provided further clarity around Biogen’s ownership of target binding moieties, which are portions of molecules, and any related intellectual property that are directed at or bind to collaboration targets. This amendment further provides that Biogen licenses to us rights to use these Biogen target binding moieties and any related intellectual property as needed in order to conduct the research and development activities contemplated under the Biogen Agreement.

We granted Biogen a non-exclusive research license under our intellectual property to perform research activities, select and optimize degraders and develop products including the degraders, as well as a commercial license to manufacture and

commercialize the targets once the initial research and development work is complete. The research under the Biogen Agreement will take place over a 54-month research term with Biogen having an option to extend the Biogen Agreement for up to four additional years. If Biogen elects to extend the term of the Biogen Agreement, Biogen would be required to make an additional payment of $62.5 million and would be entitled to nominate up to five additional targets.

The Biogen Agreement provides for three initial targets, with Biogen having the right to initiate up to an additional two targets and to control all post-discovery activities. Biogen paid us a nonrefundable upfront payment of $45.0 million for access to our technology and research services through the discovery research phase. The nonrefundable upfront cash payment of $45.0 million is not creditable against any of the target development milestone fees.

Following the achievement of development candidate criteria, prior to any IND-enabling study, for any target, Biogen will bear all costs and expenses of and will have sole discretion and decision-making authority with respect to the performance of further activities with respect to any degrader under development under the Biogen Agreement and all products that incorporate that degrader. Biogen is also required to pay us up to $35.0 million per target in development milestones and $26.0 million per target in one-time sales-based payments for the first product to achieve certain levels of net sales. In addition, Biogen is required to pay us royalties on a licensed product-by-licensed product basis, on worldwide net product sales, at percentages in the mid-single digits. All milestone and sales-based payments are made after we have met the defined criteria in the joint research plan for that target, at which time Biogen will have control of the targets for commercialization; the receipt of these payments is contingent on the further development of the targets to commercialization by Biogen, without any additional research and development efforts from us.

Biogen also has the option to fund additional discovery activities, whereby we will perform discovery-type research at Biogen’s election to develop other potential targets that may be used as replacement targets for the initially nominated targets or two additional targets under the Biogen Agreement. Revenues earned under this option, if initiated, will be recognized as services are performed and are not included in the transaction price at the outset of the arrangement. These research activities will be reimbursed on a full-time equivalent, or FTE, basis at specified market rates. These additional discovery activities can be purchased up to a maximum amount by Biogen on an à la carte basis at an amount consistent with standalone selling price. If Biogen were to exercise these options, we would recognize revenue as those options are exercised.

Calico License Agreement

In March 2017, we entered into the Calico Agreement, with Calico whereby we agreed to collaborate to develop and commercialize a set number of targets for small molecule protein degraders for diseases of aging, including cancer, for a five-year period ending in March 2022, or the research term.

We provided Calico with a non-exclusive research license under our intellectual property to perform research activities and select and optimize degraders and develop products including the degraders. We also granted Calico a commercial license for any licensed products resulting from the development candidates supplied by us. We are required to perform research and development activities for the nominated targets over the research term, with the intent to provide a development candidate for each target to Calico once the agreed-upon research is complete.

Calico is obligated to reimburse our research and development activities for each target at specified levels through the identification of a development candidate, after which Calico shall assume full responsibility for candidate development.

After the initiation of each target, the Calico Agreement does not contain any options for Calico to license the individual targets; once we complete the initial research and development activities required, Calico controls and directs the targets with no additional work required to be performed by us. There is no exercise price or incremental fee payable to us to progress the research further, though Calico is required to pay an initiation fee with the commencement of each research plan. Once Calico nominates a target and pays the applicable target initiation fee, we will commence research and development activities for that target. The Calico Agreement provides for up to five initial targets. Research activities performed are reimbursed at specified levels for the five-year term of the Calico Agreement.

Under this agreement, Calico paid us a nonrefundable upfront amount of $5.0 million and certain annual payments of $5.0 million through December 31, 2020. Upon our completion of the required discovery research and development services on any target, Calico is entitled to pursue commercial development of that target. For each target, we are eligible to receive potential research, development and commercial milestone payments aggregating up to $132.0 million. Calico is also required to pay one-time sales-based payments aggregating up to $65.0 million for the first product to achieve certain levels of net sales. In addition, Calico is required to pay us royalties, on a licensed product-by-licensed product basis, on worldwide net product sales, at percentages in the mid-single digits. All milestone and sales-based payments are made after we have met the defined criteria in the joint research plan for that target, at which time Calico will have control of the targets for commercialization; the receipt of these payments by us is contingent on the further development of the targets to commercialization by Calico, without any additional research and development efforts required by us.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include:

• third-party licensing fees.

We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and expensed as the related goods are delivered or the services are performed.

We expect that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development activities.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, legal, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future to support our growing operations, including additional personnel to support our operations as a publicly traded company. We also expect to incur increased expenses associated with being a public company, including higher costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs and investor and public relations costs.

Other (Expense) Income

Other income (expense) primarily consists of change in fair value of warrant liability. Prior to the closing of the IPO, a warrant issued in connection with our long-term debt was classified as a liability with changes in fair value of the liability recorded within other (expense) income. Upon closing of the IPO, the warrant was determined to be an equity instrument. Refer to Note 9, Long-term Debt and Warrant Liability, accompanying our consolidated financial statements for additional discussion.

In addition to changes in the fair value of our warrant liability, other income (expense) also includes interest expense and amortization of the long-term debt, which is discussed in greater detail in Note 9, Long-term Debt and Warrant Liability, accompanying our consolidated financial statements.

Finally, other income (expense) also includes interest income earned on our cash, cash equivalents, and marketable securities and accretion of discount on marketable securities.

Results of Operations

Comparison of years ended December 31, 2020, 2019, and 2018

Revenue

Revenue from our collaboration and license agreements consisted of the following for the years ended December 31, 2020, 2019, and 2018 (in thousands):

Years Ended December 31,

The $11.8 million increase in revenue in the year ended December 31, 2020 as compared to the year ended December 31, 2019 is primarily driven by:

The $2.0 million increase in the year ended December 31, 2019 as compared to the year ended December 31, 2018 primarily stems from:

Research and Development Expenses

The following table summarizes our research and development expenses for the years ended December 31, 2020, 2019, and 2018 (in thousands):

Years Ended December 31,

The $30.4 million increase in research and development expense in the year ended December 31, 2020 from the year ended December 31, 2019 is primarily driven by:

The $19.5 million increase in research and development expense for the year ended December 31, 2019 from the year ended December 31, 2018 was primarily due to:

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the years ended December 31, 2020, 2019, and 2018 (in thousands):

Years Ended December 31,

The $6.4 million increase in general and administrative expense in the year ended December 31, 2020 as compared to the year ended December 31, 2019 is primarily driven by:

The $1.6 million increase in general and administrative expense in the year ended December 31, 2019 from the year ended December 31, 2018 was primarily due to:

Other (Expenses) Income

The following table summarizes our other (expense) income for the years ended December 31, 2020, 2019, and 2018 (in thousands):

Years Ended December 31,

Change in fair value of warrant liability—related party $ (5,676 ) $ — $ —

Interest expense and amortization of long-term debt—related party (1,229 ) — —

The $8.7 million change in other (expenses) income for the years ending December 31, 2020 as compared to the year ending December 31, 2019was driven by the following:

The $1.5 million increase in interest and other income (expenses) for the years ending December 31, 2019 as compared to the year ending December 31, 2018was primarily due to increased interest income resulting from a higher average cash balance.

Income Taxes

The following table summarizes our income tax benefit (expense) for the years ended December 31, 2020, 2019, and 2018 (in thousands):

Years Ended December 31,

Income tax benefit (expense) $ 626 $ (804 ) $ —

In the year ended December 31, 2020, we recognized $0.6 million of income tax benefit related to an anticipated refund to be received for federal taxes under the corporate provisions of the CARES Act.

For the year ended December 31, 2019, we recognized income tax expense of $0.8 million resulting from taxable income primarily caused by the Roche Agreement and Biogen Agreement, both entered into in December 2018.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception in 2015, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and, if successful, the clinical development of our programs. We do not currently have any approved products and have never generated any revenue from product sales. To date, we have financed our operations primarily through the sale of preferred stock, our IPO, and through payments from collaboration partners. Through December 31, 2020, we have raised approximately $224.0 million in gross proceeds from the sale of preferred stock, $209.8 million in gross proceeds from our IPO, and have received an aggregate of $167.5 million in payments from collaboration partners. As of December 31, 2020, we had cash, cash equivalents and marketable securities of approximately $371.7 million.

In June 2020 and July 2020, we closed our Series B Financing with both existing and new investors. As part of the Series B Financing, we issued 142,857,142 shares of redeemable convertible Series B preferred stock, or Series B Preferred Stock, at a purchase price of $1.05 per share, for aggregate gross proceeds of $150.0 million, or net proceeds of $145.5 million when taking into account offering costs of $4.5 million. Upon completion of the IPO, every 8.4335 shares of our preferred stock was automatically converted into one share of common stock.

In addition, in June 2020, we secured a $20.0 million credit arrangement with Perceptive Credit Holdings III, LP, or Perceptive Credit, an affiliate of one of the Series B Financing investors, whereby we borrowed $12.5 million at closing, bearing a variable interest rate of 11.25%, and have the opportunity to draw down another $7.5 million subject to the satisfaction of certain milestones relating to the filing of an IND for certain of our pipeline targets, which was met with the filing of our IND for CFT7455 in December 2020. Our ability to draw down on this second tranche expires on June 30, 2021. In connection with the Credit Agreement, we issued Perceptive Credit a warrant to purchase 2,857,142 shares of Series B Preferred Stock exercisable for $1.05 per share. Upon completion of the IPO, this warrant converted to a warrant to purchase 338,784 shares of our common stock for $8.86 per share. The loans extended under the Credit Agreement will be repaid beginning in December 2022 in monthly installments of interest plus principal equal to 2.0% of the initial principal amount through June 2024. We paid a closing fee of $0.3 million related to the loan and have the right to prepay the loan in its entirety prior to the maturity date by paying the applicable prepayment fee. Per the terms of the Credit Agreement, the prepayment fee is $5.0 million, less any interest paid as of the prepayment date, which totaled $4.2 million as of December 31, 2020. If we do not prepay the loan, the entire unpaid principal balance becomes due on the maturity date, which is June 5, 2024. We are also subject to customary financial covenants in the Credit Agreement that dictate accelerated repayment upon the occurrence of certain events of default, none of which are expected to occur based on our current liquidity.

In October 2020, we completed our IPO in which we issued and sold 11,040,000 shares of common stock, including 1,440,000 shares of our common stock sold pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a price to the public of $19.00. The proceeds from our IPO, including the full exercise of the underwriter’s overallotment option, were approximately $191.2 million after deducting underwriting discounts and commissions of $14.7 million and expenses of $3.9 million.

Cash Flows

The following table summarizes our sources and uses of cash for the period presented (in thousands):

Years Ended December 31,

Net cash (used in) provided by investing activities (190,505 ) (1,620 ) 36,921

Operating Activities

Net cash used in operating activities for the year ended December 31, 2020 was driven primarily by:

• our net loss of $66.3 million;

• a $3.3 million change in prepaid expenses and other current assets.

These were offset by:

• a $2.6 million change in accrued expenses and other liabilities.

Net cash provided by operating activities for the year ended December 31, 2019 was driven primarily by:

These were offset by:

• our net loss of $34.1 million and a $3.2 million; and

Net cash used in operating activities for the year ended December 31, 2018 primarily consist of:

• our net loss of $15.7 million; and

Investing Activities

The $190.5 million of net cash used in investing activities for the year ended December 31, 2020 was attributable to:

• $0.7 million for the purchases of property and equipment.

The $1.6 million of net cash used in investing activities for the year ended December 31, 2019 was attributable to:

• $1.3 million for the net purchases of property and equipment; and

• $0.3 million for the purchases of marketable securities, net of maturities.

The $36.9 million of net cash provided by investing activities for the year ended December 31, 2018 was attributable to:

• $39.6 million from maturities of marketable securities, net of purchases; and

• $2.7 million for the purchases of property and equipment.

Financing Activities

The $348.9 million of net cash provided by financing activities for the year ended December 31, 2020 is primarily driven by:

The $0.2 million of net cash provided by financing activities for the year ended December 31, 2019 was primarily attributable to net proceeds received from the issuance of common stock in conjunction with the exercise of stock options.

The $2.0 million of net cash provided by financing activities for the year ended December 31, 2018 was primarily attributable to net proceeds received from the issuance of Series A redeemable convertible preferred stock in December 2018.

Funding Requirements

Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we advance the preclinical and clinical development of our product candidates. In addition, subsequent to our IPO, we expect to incur additional costs associated with operating as a public company.

Specifically, we anticipate that our expenses will increase substantially in the future, if and as we:

• continue to invest in our proprietary TORPEDO platform;

• expand, maintain and protect our intellectual property portfolio;

• hire additional clinical, regulatory and scientific personnel;

Because of the numerous risks and uncertainties associated with development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital and operating costs associated with our current and anticipated preclinical and clinical development. Our future capital requirements will depend on many factors, including:

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

As a result of the anticipated expenditures described above, we will need to obtain substantial additional financing to support our continuing operations and pursue our long-term business plan. Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of equity offerings, debt offerings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. Although we may receive potential future milestone and royalty payments under our collaborations with Roche, Biogen and Calico, we do not have any committed external source of funds, as of December 31, 2020, other than an additional $7.5 million under our Credit Agreement, which we may elect to draw down at any time prior to June 30, 2021. Adequate additional funds may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

To the extent that we raise additional capital through the sale of equity securities, each investor’s ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as making acquisitions or capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

Contractual Obligations

The following is a summary of our significant contractual obligations as of December 31, 2020 (in thousands):

Total Less than 1 Year 1 to 3 Years 4 to 5 Years More than 5 Years

We enter into contracts in the normal course of business with third-party CROs for clinical trials, preclinical studies, manufacturing and other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice and therefore we believe that our non-cancelable obligations under these agreements are not material and they are not included in the table above. We have not included milestone or royalty payments or other contractual payment obligations in the table above if the timing and amount of such obligations are unknown or uncertain.

Critical Accounting Estimates

This management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. 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. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2, Summary of significant accounting policies,to our consolidated financial statements in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenues from Contracts

We account for our revenue in accordance with Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers, or ASC 606. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that 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 at inception of the agreement or upon material modification of the agreement: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Identify the Contract

In determining whether a contract is within the scope of ASC 606, we consider the following criteria:

In determining whether the criteria above have been met, management confirms that the agreement has been signed by both parties or approved in another acceptable manner, reviews that the agreement identifies rights and obligations of each party, both written and implied, determines whether the contract has economic consequences for all parties, and whether we will be able to collect substantially all the consideration that is due or will become due under the contract. The determination of collectability requires the most judgement and, in establishing collectability, management considers payment terms, ability to stop transferring goods or service to customer in the event of nonpayment, experience with the customer, class of customer, and expectations about the customer’s financial stability, as well as other factors.

Identify the Performance Obligations

Once a contract is determined to be within the scope of ASC 606, we identify all promised goods and services in the contract, which includes those that are explicitly stated within the contract and those that are implied. Once all promised goods and services within the contract are identified, we evaluate whether each promised good or service is immaterial in the context of the contract. In assessing materiality, management considers quantitative factors by comparing standalone selling price of the promised good or service to the total consideration in the contract and qualitative factors, such as the importance of the promised good or service to the customer.

We assess whether each material promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct, we consider factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. We also consider the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. We assess if these options provide a material right to the customer and if so, they are considered performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying license relative to the option exercise price, including assumptions about technical feasibility and the probability of developing a candidate that would be subject to the option rights. The exercise of a material right is accounted for as a contract modification for accounting purposes.

Determine the Transaction Price

In determining the transaction price, we consider fixed considerations, variable considerations, non-cash considerations, significant financing components, and any consideration payable to the customer. If the consideration promised in a contract includes a variable amount, we estimate the amount of consideration to which we will be entitled in exchange for transferring the promised goods or services to a customer. We determine the amount of variable consideration by using the expected value method or the most likely amount method. We include the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

If an arrangement includes development and 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 using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

In determining the transaction price, we adjust consideration for the effects of the time value of money if the timing of payments provides us with a significant benefit of financing. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. We assess our revenue generating arrangements in order to determine whether a significant financing component exists.

Allocate the Transaction Price to the Performance Obligations

Once the transaction price is then determined, it is allocated to the identified performance obligations in proportion to their standalone selling prices, or SSP, on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, we consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. We validate the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

Determine When to Recognize Revenue

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time, and if over time recognition is based on the use of an output or input method.

For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.

For arrangements with research and development services to be performed by us, revenue allocated to our performance obligation is generally recognized based on an appropriate measure of progress. We utilize judgment to determine the appropriate method of measuring progress for purposes of recognizing revenue, which is generally an input measure, such as costs incurred. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the arrangement.

Prepaid and Accrued Research and Development Expenses

As part of preparing the consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of the accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. In addition, there may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense, in which case such amounts are reflected as prepaid expenses and other current assets. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be

expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period.

Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized in prepaid expenses and other current assets. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

Stock Options

We account for all stock-based compensation awards granted to employees and non-employees as stock-based compensation expense at fair value. Our stock-based payments include stock options and grants of common stock, including common stock subject to vesting. The measurement date for awards is the date of grant, and stock-based compensation costs are recognized as expense over the requisite service period, which is generally the vesting period, on a straight-line basis. Stock-based compensation expense is classified in the consolidated statements of operations and comprehensive loss based on the function to which the related services are provided. We recognize stock-based compensation expense for the portion of awards that have vested. Forfeitures are recorded as they occur. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option pricing model includes various assumptions, including the expected term of the award, the expected volatility and the expected risk-free interest rate over the expected term of the award, expected dividend payments, and estimated forfeitures.

In addition to the above, inputs, the fair value of the underlying common stock represents the exercise price utilized in the Black-Scholes option pricing model. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside our control. As a result, if other assumptions had been used, stock-based compensation cost could have been materially impacted. Furthermore, if we use different assumptions for future grants, stock-based compensation cost could be materially impacted in future periods.

Determination of the fair value of our common stock issued prior to our IPO

As there has been no public market for our common stock prior to our IPO, the estimated fair value of our common stock was determined by our board of directors as of the date of each stock award, with input from management, considering our most recently available third-party valuations of our common stock. Valuations were updated when facts and circumstances indicated that the most recent valuation was no longer valid, such as changes in the stage of our development efforts, various exit strategies and their timing, and other scientific developments that could be related to the valuation of our company or, at a minimum, annually. Third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations in 2019 were prepared using a market approach, specifically the guideline public company method, which “back-solves” to a common stock price. We allocated equity value to our common stock and shares of our redeemable convertible preferred stock, using either an option-pricing method, or OPM, or a hybrid method, which is a hybrid between the OPM and the probability-weighted expected return method. The hybrid method estimates the probability-weighted value across multiple scenarios. In addition to the OPM, the hybrid method considers liquidity scenarios in which the shares of our redeemable convertible preferred stock are assumed to convert into

common stock. The future value of the common stock in the applicable scenario was discounted back to the valuation date at an appropriate risk-adjusted discount rate. In the hybrid method, the present value indicated for each scenario was probability-weighted to arrive at an indication of value for the common stock. In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date including:

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management judgement. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.

Determination of the fair value of our common stock issued subsequent to our IPO

Following our IPO, the fair value of our common stock was determined based on the quoted market price of our common stock.

New Accounting Pronouncements

For information on new accounting standards, see Note 2, Summary of significant accounting policies,to our consolidated financial statements in this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

Internal Control over Financial Reporting

In the preparation of our consolidated financial statements to meet the requirements of our IPO, we determined that a material weakness in our internal control over financial reporting existed as of December 31, 2019. The material weakness identified in our internal control over financial reporting arose because we did not maintain effective segregation of duties in the process and recording of journal entries. As of December 31, 2020, we remediated the material weakness by engaging system controls that prevent one person from initiating and approving the same journal entry. In addition, we implemented and performed additional reviews and other post-closing procedures. While we believe that this material weakness has now been remediated, we cannot assure you that these measures will be sufficient to prevent future material weaknesses or significant deficiencies in our internal control over financial reporting from occurring. See “Risk Factors—We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.”

Emerging Growth Company Status

As an “emerging growth company,” the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, allows us to delay adoption of new or revised accounting standards applicable to public companies until such standards are made applicable to private companies. We have elected to avail ourselves of this extended transition period for complying with new or revised accounting standards until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of this extended transition period. Accordingly, the information contained herein may be different from the information you receive from other public companies that are not emerging growth companies. in which you hold stock.

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In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

• reduced disclosure about the compensation paid to our executive officers;

We may take advantage of these exemptions for up to the last day of 2025 or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (1) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (2) the last day of 2025; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. We may choose to take advantage of some but not all of these exemptions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. Our interest-earning assets consist of cash, cash equivalents, and marketable securities. Our interest income is sensitive to changes in the general level of interest rates, primarily U.S. interest rates. As of December 31, 2020, we had marketable securities of $190.0 million which consisted entirely of U.S Treasury securities. The contractual maturity dates of our marketable securities are less than one year. These interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant for us.

Item 8. Financial Statements and Supplementary Data.

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

101

in our internal control over financial reporting arose because we did not maintain effective segregation of duties in the process and recording of journal entries. We communicated the material weakness to our audit committee and took measures to remediate the material weakness during 2020, including engaging system controls that prevent one person from initiating and approving the same journal entry. In addition, we have implemented and performed additional reviews and other post-closing procedures.

Based on that evaluation of our disclosure controls and procedures as of December 31, 2020, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered accounting firm due to a transition period established by rules of the SEC for newly public companies. Additionally, our independent registered accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act.

Changes in Internal Control over Financial Reporting

Except as noted above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

We cannot assure you that the steps and measures we have implemented to remediate our material weakness will be sufficient to prevent future material weaknesses or significant deficiencies in our internal control over financial reporting from occurring. The design of any system of control is based upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated objectives under all future events. See “Risk Factors—We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.”

Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 will be included in our definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

1. Financial Statements

For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.

2. Financial Statement Schedules

Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.

3. Exhibits

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21.1 Subsidiaries of the Registrant X

23.1 Consent of KPMG LLP, Independent Registered Public Accounting Firm X

101.INS XBRL Instance Document X

101.SCH XBRL Taxonomy Extension Schema Document X

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X

101.DEF XBRL Taxonomy Extension Definition Linkbase Document X

105

101.LAB XBRL Taxonomy Extension Label Linkbase Document X

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X

Item 16. Form 10-K Summary

Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

C4 Therapeutics, Inc.

Date: March 11, 2021 By: /s/ Andrew J. Hirsch

Andrew J. Hirsch

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

Andrew J. Hirsch (Principal Executive Officer)

/s/ William T. McKee Chief Financial Officer March 11, 2021

William McKee (Principal Financial Officer)

Laura Wahlberg (Principal Accounting Officer)

/s/ Marc A. Cohen Executive Chairman and Director March 11, 2021

Marc A. Cohen

/s/ Kenneth C. Anderson, M.D. Director March 11, 2021

Kenneth C. Anderson, M.D.

/s/ Alain J. Cohen Director March 11, 2021

Alain J. Cohen

/s/ Bruce Downey Director March 11, 2021

Bruce Downey

/s/ Elena Prokupets, Ph.D. Director March 11, 2021

Elena Prokupets, Ph.D.

/s/ Malcolm Salter Director March 11, 2021

Malcolm Salter

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations and Comprehensive Loss F-4

Consolidated Statements of Stockholders’ Equity (Deficit) F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

C4 Therapeutics, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of C4 Therapeutics, Inc. and its subsidiary (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two‐year period ended December 31, 2020,and the related notes collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two‐year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2016.

Boston, Massachusetts

March 11, 2021

F-2

C4 Therapeutics, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Marketable securities 189,962 —

Prepaid expenses and other current assets 4,836 1,595

Current liabilities:

Accrued expenses and other current liabilities 9,524 6,671

Operating lease liability, current 1,042 880

Operating lease liability, net of current 11,826 12,869

Long-term debt—related party 10,052 —

Commitments and contingencies (See Note 6 and Note 9)

Redeemable convertible preferred stock (See Note 10) — 110,995

Stockholders’ equity (deficit):

Accumulated other comprehensive loss 13 —

The accompanying notes are an integral part of these consolidated financial statements.

F-3

C4 Therapeutics, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Years Ended December 31,

Revenue from collaboration agreements $ 33,195 $ 21,381

Operating expenses:

Other (expense) income

Change in fair value of warrant liability—related party (5,676 ) —

Interest expense and amortization of long-term debt—related party (1,229 ) —

Interest and other income, net 393 2,157

Total other (expense) income (6,512 ) 2,157

Income tax benefit (expense) 626 (804 )

Unrealized gain on marketable securities 13 —

Reconciliation of net loss to net loss attributable to common stockholders:

Accrual of preferred stock dividends — (8,468 )

Weighted-average common stock outstanding—basic and diluted 11,370,328 1,371,905

The accompanying notes are an integral part of these consolidated financial statements.

F-4

C4 Therapeutics, Inc.

Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

Shares Amount Shares Amount Capital Income (Loss) Deficit (Deficit)

Stock-based compensation — — — — 1,642 — — 1,642

Repurchase of common stock — — (6,112 ) — (30 ) — — (30 )

Reclassification of warrant liability to equity — — — — 8,001 8,001

Stock-based compensation — — — — 3,432 — — 3,432

Repurchase of common stock — — (43,972 ) — (210 ) — — (210 )

Vested stock option settlement — — — — (727 ) — — (727 )

Unrealized gain on investments — — — — — 13 — 13

The accompanying notes are an integral part of these consolidated financial statements.

F-5

C4 Therapeutics, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Years Ended December 31,

Cash flows used in operating activities:

Depreciation and amortization 1,617 1,595

Stock-based compensation expense 3,432 1,642

Gain on disposal of fixed assets — 16

Accretion of (premium) discount on investments (95 ) 334

Reduction in carrying amount of right-of-use assets 1,224 1,144

Amortization of debt discount 409 —

Change in fair value of warrant liability 5,676 —

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (3,257 ) (814 )

Accrued expenses and other liabilities 2,558 3,719

Operating lease liability (881 ) (734 )

Net cash (used in) provided by operating activities (67,249 ) 55,614

Cash flows used in investing activities:

Proceeds received from maturities of marketable securities 104,000 78,666

Purchases of property and equipment (650 ) (1,349 )

Proceeds from sale of property and equipment — 63

Net cash used in investing activities (190,505 ) (1,620 )

Cash flows provided by financing activities:

Payment of initial public offering costs (3,606 ) —

Proceeds from exercises of stock options 887 274

Repurchase of common stock (194 ) (30 )

Vested stock option settlement (727 ) —

Net cash provided by financing activities 348,932 244

Net change in cash, cash equivalents and restricted cash 91,178 54,238

Cash, cash equivalents and restricted cash at beginning of period 93,126 38,888

Cash, cash equivalents and restricted cash at end of period $ 184,304 $ 93,126

Reconciliation of cash, cash equivalents and restricted cash:

Cash, cash equivalents and restricted cash at end of year $ 184,304 $ 93,126

Cash and cash equivalents at end of the year $ 181,727 $ 90,549

The accompanying notes are an integral part of these consolidated financial statements.

F-6

C4 Therapeutics, Inc.

Consolidated Statements of Cash Flows — Continued

(in thousands)

Years Ended December 31,

Supplemental disclosure of cash flow information:

Cash paid for interest $ 820 $ —

Supplemental disclosures of non-cash investing and financing activities:

Reclassification of warrant liability to equity $ 8,001 $ —

Initial public offering costs in accounts payable and accrued expenses $ 296 $ —

Capital expenditures in accounts payable $ — $ 172

Stock option repurchases included in accrued expenses $ — $ 16

The accompanying notes are an integral part of these consolidated financial statements.

F-7

C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements

Note 1. Nature of the business and basis of presentation

C4 Therapeutics, Inc., or, together with its subsidiary, the Company, is a biopharmaceutical company focused on harnessing the body’s natural regulation of protein levels to develop novel therapeutic candidates to target and eliminate disease-causing proteins for the treatment of cancer, neurodegenerative conditions and other diseases. The Company was incorporated in Delaware on October 7, 2015 and has its principal office in Watertown, Massachusetts.

Liquidity and capital resources

Since its inception, the Company’s primary activities have been focused around research and development activities, building the Company’s intellectual property, recruiting personnel and raising capital to support these activities. To date, the Company has funded its operations primarily with proceeds received from the sales of redeemable convertible preferred stock, sales of common stock through an initial public offering, through its collaboration agreements, and debt financing.

The Company has incurred recurring losses since its inception, including net losses of $66.3 million and $34.1 million for the years ended December 31, 2020 and 2019, respectively. In addition, as of December 31, 2020, the Company had an accumulated deficit of $183.8 million. To date, the Company has not generated any revenue from product sales as none of its product candidates has been approved for commercialization. The Company expects to continue to generate operating losses for the foreseeable future.

On October 6, 2020, the Company completed its initial public offering, or the IPO, at which time the Company issued 11,040,000 shares of its common stock at a price to the public of $19.00 per share, which number includes 1,440,000 shares of common stock that were issued to the underwriters for the IPO when they exercised in full their overallotment option. Upon the closing of the IPO, all outstanding shares of the Company’s redeemable convertible preferred stock automatically converted into 30,355,379 shares of common stock. Net proceeds from the IPO, including the exercise in full of the underwriters’ option to purchase additional shares, were $191.2 million, after deducting underwriting discounts and commissions of $14.7 million and expenses of $3.9 million.

The Company expects that its cash, cash equivalents and marketable securities of $371.7 million as of December 31, 2020 will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these consolidated financial statements. Accordingly, theconsolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Reverse Stock Split

On September 25, 2020, the Company effected a one-for-8.4335 reverse stock split of its issued and outstanding common stock and stock options, and a proportional adjustment to the existing conversion ratios for the Company’s redeemable convertible preferred stock. Additionally, upon closing of the IPO a warrant issued to purchase up to 2,857,142 shares of the Company’s Series B redeemable convertible preferred stock converted into a warrant exercisable for 338,784 shares of the Company’s common stock. Accordingly, all issued and outstanding common stock, options to purchase common stock and per share amounts contained in the consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented, except as otherwise stated.

Risks and Uncertainties

The Company is subject to risks common to other life science companies in the early development stage including, but not limited to, uncertainty of product development and commercialization, lack of marketing and sales history, development by its competitors of new technological innovations, dependence on key personnel, market acceptance of products, product liability, protection of proprietary technology, ability to raise additional financing and compliance with the Food and Drug Administration, or the FDA, and other government regulations. If the Company does not successfully advance its programs into and through human clinical trials and/or enter into collaborations for its programs and commercialize any of its product candidates, the Company may be unable to produce product revenue or achieve profitability. There can be no assurance that the Company’s research and development efforts will be successful, adequate protection for the Company’s intellectual property will be obtained, any products developed will obtain necessary government regulatory approval, or any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain

F-8

C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

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.

COVID-19 Pandemic

The impact of the coronavirus, or COVID-19, pandemic on the Company’s business, results of operations and financial condition is uncertain and will depend on future developments, including the duration and spread of the outbreak, the impact of vaccines and new strains of COVID-19, and any governmental advisories and restrictions.

Note 2. Summary of significant accounting policies

Basis of Presentation

The Company has prepared the accompanying consolidated financial statements in conformity with generally accepted accounting principles in the United States of America, or U.S. GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.

Principles of Consolidation

The Company’s consolidated financial statements include the accounts of C4 Therapeutics, Inc. and its wholly owned subsidiary C4T Securities Corporation, a Massachusetts securities corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

Emerging Growth Company

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. This process may result in actual results differing materially from those estimated amounts used in the preparation of the consolidated financial statements if these results differ from historical experience or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, amounts and timing of revenues recognized under the Company’s research and development collaboration arrangements and accrued research and development expense. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates.

Segments

Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. All of the Company’s long-lived assets are held in the United States.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash equivalents are measured at fair value on a recurring basis.

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

Marketable securities

The Company classifies marketable securities with a remaining maturity when purchased of greater than three months as available-for-sale. Available-for-sale securities are carried at fair value with the unrealized gains and losses included in accumulated other comprehensive income as a component of stockholders’ equity (deficit) until realized. Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense over the life of the instrument. Realized gains and losses are determined using the specific identification method and are included in other income (expense).

Restricted Cash

Restricted cash consists of cash placed in separate restricted bank accounts as required under the terms of the Company’s lease agreements for its Watertown, Massachusetts facility (see Note 6, Leases).

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents, marketable securities, and restricted cash. The Company may maintain deposits in financial institutions in excess of government insured limits. The Company believes that it is not exposed to significant credit risk as its deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses on these deposits. Additionally, the Company has established guidelines relative to credit ratings and maturities intended to safeguard principal balances and maintain liquidity. The Company maintains its funds in accordance with its investment policy, which defines allowable investments, specifies credit quality standards and is designed to limit credit exposure to any single issuer.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement, or ASC 820, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier value hierarchy that distinguishes between the following:

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Cash, cash equivalents and restricted cash are Level 1 assets which are comprised of funds held in checking and money market accounts. Marketable securities are Level 2 assets which are comprised of US treasury funds with maturity dates of less than one year. The carrying amounts of accounts receivable, which relate to the Company’s collaboration agreements, accounts payable, and accrued expenses approximate their fair values due to their short-term nature.

Property and Equipment

Property and equipment are recorded at cost. Expenditures for repairs and maintenance are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are derecognized from the accounts, and any

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

resulting gain or loss is included in the determination of net loss. Depreciation on equipment is calculated using the straight-line method over the estimated useful lives of the assets as follows:

Asset category Estimated useful life

Laboratory equipment 5 years

Computer equipment 3 years

Office equipment, furniture and fixtures 5 years

Leasehold improvements Lesser of useful life or remaining lease term

Leases

The Company accounts for leases in accordance with ASC Topic 842, Leases, or ASC 842. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on specific facts and circumstances present, the existence of an identified asset(s), if any, and the Company’s control over the use of the identified asset(s), if applicable. As provided by ASC 842, the Company elected to combine lease and non-lease components as a single component for all leases. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The Company typically only includes an initial lease term in its assessment of a lease arrangement; options to renew a lease are not included in the assessment unless there is reasonable certainty that the Company will renew. The interest rate implicit in lease contracts is typically not readily determinable. As such, in calculating the lease liability, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Lease expense is recognized over the expected lease term on a straight-line basis.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No impairments were recognized for these assets in the years ended December 31, 2020 and 2019.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC 606. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

The Company enters into collaboration and licensing agreements with strategic partners, which are within the scope of ASC 606, under which it may exclusively license rights to research, develop, manufacture, and commercialize its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: (1) non-refundable, upfront license fees; (2) reimbursement of certain costs; (3) customer option fees for additional goods or services; (4) development milestone payments, (5) regulatory and commercial milestone payments; and (6) royalties on net sales of licensed products.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must use its judgment to determine: (a) the number of performance obligations based on the determination under step (ii) above; (b) the transaction price under step (iii) above; (c) the stand-alone selling price for each performance obligation identified in the

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

contract for the allocation of transaction price in step (iv) above; and (d) the contract term and pattern of satisfaction of the performance obligations under step (v) above. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below. The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied.

Amounts due to the Company for satisfying the revenue recognition criteria or that are contractually due based upon the terms of the collaboration agreements are recorded as accounts receivable in the Company’s consolidated balance sheet. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.

Upfront License Fees

If the license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other promises, the Company considers factors such as the research, manufacturing, and commercialization capabilities of the customer; the retention of any key rights by the Company; and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the customer can benefit from a promise for its intended purpose without the receipt of the remaining promises, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, the Company exercises 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 progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Customer Options

If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights or options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised. If an option is not exercised and the target is terminated, the Company will accelerate and recognize all remaining revenue related to the material right performance obligation.

Research and Development Services

The promises under the Company’s collaboration agreements may include research and development services to be performed by the Company for or on behalf of the customer. Payments or reimbursements resulting from the Company’s research and development efforts are recognized as the services are performed and presented on a gross basis because the Company is the principal for such efforts. Reimbursements from and payments to the customer that are the result of a collaborative relationship with the customer, instead of a customer relationship, such as co-development activities, are recorded as a reduction to research and development expense.

Milestone Payments

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For further discussion of accounting for collaboration revenues, see Note 8, Collaboration and License Agreements.

Research and Development

Research and development costs are expensed as incurred. Research and development costs include salaries, share-based compensation and other employee benefit expenses, lab related supplies 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 research and development activities. Costs associated with licenses of technology are expensed as incurred and are included in research and development expense in the consolidated statement of operations and comprehensive loss. As part of the process of preparing the consolidated financial statements, the Company is required to estimate their accrued research and development expenses. The Company makes estimates of the accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known at that time. In addition, there may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the expense in which case such amounts are reflected as prepaid expenses and other current assets. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts the accrual or the amount of prepaid expenses accordingly. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized in prepaid expenses and other current assets. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

Stock-Based Compensation

The Company measures and recognizes stock-based compensation expense based on the grant date fair value of the awards, which consist of option grants. The fair value of each share option grant was determined using the expected term, expected volatility, risk-free interest rate, dividend rate, and the fair value of the common stock underlying the share-based award. Prior to the IPO, the fair value of common stock underlying share-based awards is based on an estimate at each grant date by the Company’s board of directors. The Company determined the estimated per share fair value of its common stock at various dates considering contemporaneous and retrospective valuations in accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each of these inputs is subjective and generally requires judgment and estimation by management. Subsequent to the IPO, the fair value of the common stock underlying shared based awards is the quoted market price of the Company’s common stock on the date of the grant.

The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the awards for service-based awards, which is generally the vesting period. Stock-based compensation expense is classified in the consolidated statement of operations and comprehensive loss in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.

Warrant Liability Expense

In connection with the Company’s completion of a financing involving the sale of shares of Series B redeemable convertible preferred stock, or the Series B Financing, in June and July 2020 and the entry into the Term Loan (see Note 9, Long-term debt and warrant liability), the Company issued a warrant to purchase shares of its Series B redeemable convertible preferred stock. Upon issuance, the Company classified the warrant as a liability on its consolidated balance sheet and remeasured this warrant liability to fair value at each reporting date and recognized changes in the fair value of the warrant liability, determined using Black-Scholes, as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss.

Upon completion of the IPO, the warrant converted into a warrant to purchase shares of the Company’s common stock, as described in Note 9, Long-term debt and warrant liability. Upon conversion into a warrant exercisable for shares of the Company’s stock, management concluded that the warrant meets the definition of an equity instrument and the fair value of the warrant at the time of conversion, determined using Black-Scholes, was recorded as an increase in additional paid-in capital.

As noted above, the Company utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates, to value the warrant. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying redeemable convertible Series B Preferred Stock or common stock issuable upon exercise of the

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

warrant, remaining contractual term of the warrant, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying redeemable convertible preferred stock or common stock.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the consolidated financial statements or the Company’s tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established.

The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. 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.

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) which includes certain changes in equity that are excluded from net loss. The Company’s only element of other comprehensive income is unrealized gains and losses on marketable securities.

Net Loss Per Share

Basic net loss per share and diluted net loss per share are computed using the weighted-average number of shares of common stock outstanding for the period. Net loss per share attributable to common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines net loss per share for the holders of shares of the Company’s common stock and participating securities. The Company’s Preferred Stock contains participation rights in any dividend paid by the Company and is deemed to be a participating security. The participating securities do not include a contractual obligation to share in losses of the Company and are not included in the calculation of net loss per share in the periods in which a net loss is recorded.

Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method. The Company allocates earnings first to preferred stockholders based on dividend rights and then to common and preferred stockholders based on ownership interests. The weighted-average number of shares of common stock included in the computation of diluted net loss gives effect to all potentially dilutive common stock equivalent shares, including outstanding stock options and Preferred Stock.

Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is generally the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Going Concern

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs and comparing those needs to the current cash and cash equivalent balance.

Recently Adopted Accounting Standards

In June 2016 the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2020. This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used, and establishes additional

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.

This standard became effective for the Company on January 1, 2020 and, based on the composition of the Company’s receivables and available-for-sale debt securities, current economic conditions and historical credit loss activity, the adoption of this standard did not have a material impact on its consolidated financial statements and related disclosures.

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2019-12 is not expected to have a material effect on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance for a limited time to ease the potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (LIBOR). Optional expedients in Topic 848 are generally available until December 31, 2022. The adoption of ASU 2020-04 is not expected have a material effect on the Company’s consolidated financial statements.

Note 3. Fair value measurements

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of December 31, 2020 (in thousands):

Fair Value Level 1 Level 2 Level 3

Assets

Cash equivalents

Marketable securities

The following table sets forth the fair value of the Company’s financial assets by level within the fair value hierarchy at December 31, 2019 (in thousands):

Fair Value Level 1 Level 2 Level 3

Assets

Cash equivalents

The Company classifies its money market funds, which are valued based on quoted market prices in active markets, with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

Marketable securities consist of U.S. Treasury securities and are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities. Marketable securities are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined using models or other valuation methodologies on a recurring basis.

As further discussed in Note 9, Long-term debt and warrant liability, during the year ended December 31, 2020, the Company issued a warrant to purchase shares of its Series B redeemable convertible preferred stock to Perceptive Credit Holdings III, LP, an affiliate of Perceptive Advisors LLC, or Perceptive. Perceptive is a considered a related party to the Company based on its ownership of the Company’s common stock. Upon issuance, the Company classified the warrant as a liability on its consolidated balance sheet and remeasured this warrant liability to fair value at each reporting date. The warrant is considered within Level 3 of the fair value hierarchy because the fair value uses management’s own assumptions

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

about the assumptions that market participants would use in pricing the liability. Upon the completion of the Company’s IPO on October 6, 2020, the warrant was automatically converted into a warrant exercisable for 338,784 shares of the Company’s common stock and was reclassified as equity. The fair value of the warrant was determined on October 6, 2020 using the following assumptions:

Exercise price $ 8.86

Expected term (in years) 9.75

Risk-free interest rate 0.76 %

Dividend yield —

The following table presents the changes in Level 3 instruments, redeemable convertible preferred stock warrant, for the year ended December 31, 2020:

Balance at December 31, 2019 $ —

Issuance of warrant 2,325

Change in fair value 5,676

Reclassification to equity (8,001 )

Balance at December 31, 2020 $ —

As of December 31, 2020, the warrant has not been exercised.

There have been no transfers between fair value levels during the years ended December 31, 2020 and 2019.

Note 4. Marketable securities

Marketable securities at December 31, 2020 consisted of the following:

Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Fair Value

As of December 31, 2020, none of the Company’s marketable securities were in an unrealized loss position. During the year ended December 31, 2020, the Company did not recognize any other-than-temporary impairment losses. The contractual maturity dates of the Company’s marketable securities are less than one year.

The Company did not have any marketable securities at December 31, 2019.

Note 5. Property and equipment

Property and equipment as of December 31, 2020 and 2019 consisted of the following (in thousands):

As of December 31,

Less: accumulated depreciation (5,632 ) (3,954 )

Property and equipment, net $ 3,323 $ 4,463

Depreciation expense related to property and equipment for the years ended December 31, 2020 and 2019 is as follows (in thousands):

Years Ended December 31,

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

Note 6. Leases

In July 2017, the Company entered into a lease of office and laboratory space for its headquarters in Watertown, Massachusetts, or the Watertown Lease. The Watertown Lease has a non-cancelable term of ten years with an option to extend for one additional five-year period and is subject to rent escalation throughout the term. Additionally, the Watertown Lease required the Company to provide collateral in the amount of $2.6 million, which is recorded as restricted cash on the accompanying consolidated balance sheets. The Watertown Lease commenced in April 2018, with rent commencing in May 2018. The Watertown Lease was classified as an operating lease and, upon the commencement in April 2018, the Company recorded a lease liability of $15.1 million and a right-of-use asset of $16.7 million, which is inclusive of $1.5 million of construction costs funded by the Company. In calculating the lease liability and the right-of-use asset, the Company did not include the additional five-year period option as management does not believe there is reasonable certainty the Company will exercise the option. In addition to rent, the Company is also responsible for paying its pro rata share of costs incurred for common area maintenance, real estate taxes and property insurance related to the leased space, which are accounted for as variable lease costs.

The elements of lease costs for the years ended December 31, 2020 and 2019 were as follows (in thousands):

Lease cost:

Other information:

Operating cash flows for operating liabilities $ 2,206 $ 2,141

Remaining lease term 7.3 years 8.3 years

Discount rate 10 % 10 %

Future lease payments under non-cancelable leases as of December 31, 2020 for each of the years ending December 31 are as follows (in thousands):

Total undiscounted lease payments 18,339

Less: imputed interest (5,471 )

Total operating lease liability at December 31, 2020 $ 12,868

Note 7. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following as of December 31, 2020 and 2019 (in thousands):

Accrued research and development $ 3,799 $ 2,615

Accrued compensation and benefits 3,724 3,048

Total accrued expenses and other current liabilities $ 9,524 $ 6,671

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

Note 8. Collaboration and license agreement

Financial information related to the collaboration and license agreements consisted of the following as of and for the year ended December 31, 2020 (in thousands):

Financial information related to the collaboration and license agreements consisted of the following as of and for the year ended December 31, 2019 (in thousands):

Other financial information related to the collaboration and license agreements for the years ended December 31, 2020 and 2019 are (in thousands):

Roche Collaboration and License Agreement

Original Roche Agreement Structure

In March 2016, the Company entered into a license agreement, or the Original Roche Agreement, with Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., or Roche. Pursuant to the terms of the Original Roche Agreement, the Company and Roche agreed to collaborate on research activities to develop novel treatments in the field of targeted protein degradation using the Company’s degrader technology.

In exchange for a $15.0 million nonrefundable upfront payment and additional fees for dedicated personnel, the Company performed initial research and development services for drug discovery and preclinical development, provided a non-exclusive research and development license to its technology and participated on the joint research committee, or the Roche JRC.

Restated Roche Agreement Structure

On December 22, 2018, the Company and Roche executed the Amended and Restated Roche License Agreement, or the Roche Agreement. Under the Roche Agreement, the Company has a more active role in the manufacturing and commercialization of the targets, whereby if certain co-development and co-detailing rights are opted into by the Company, the parties will split future development costs in return for the rights to a larger share of future earnings from commercialization of the target. The target structure was revised to six potential targets, three of which were nominated as of the execution of the Roche Agreement and represent continuations of the initial preclinical research and development efforts begun under the Original Roche Agreement and three additional targets that were not nominated as of the execution of the Roche Agreement. Roche maintained its option rights to license and commercialize these six targets. For certain targets, Roche is required to pay the Company fees of $2.0 million and $3.0 million upon the progression of targets to the lead series identification achievement and GLP toxicology, or Tox, study phase, respectively. For each target option exercised by Roche,

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C4 Therapeutics, Inc.

Notes to Consolidated Financial Statements — Continued

the Company is eligible to receive up to $275.0 million in research and development milestones per target and commercial milestone payments, with the commercial milestones being dependent on underlying net sales. Roche is also required to pay the Company up to $150.0 million per target in one-time sales-based payments if the target achieves certain levels of net sales. In addition, Roche is required to pay the Company royalties, at percentages from the mid-single digits to the low double-digits, on a licensed product-by licensed product basis, on worldwide net product sales.

Under the Roche Agreement:

The collaboration is managed by a joint research committee. The Company has control over the committee and may terminate the Roche Agreement on a target-by-target or product-by-product basis under several scenarios, upon at least 90 days’ prior written notice.

In November 2020, the Company signed an amendment to the Roche Agreement that provides a mechanism through which the Company and Roche can mutually agree to terminate the Roche Agreement on a target-by-target basis by entry into a mutual target termination agreement. Upon a termination of this nature, the Roche Agreement, as amended, provides that all rights in know-how and intellectual property in support of products that use inhibition as their mode of action, referred to as the Roche Field, will revert to Roche and all rights in respect of know-how and intellectual property in support of products that use degradation as their mode of action, referred to as the C4T Field, will revert to the Company. Further, this amendment states that, following the entry into a mutual target termination agreement, Roche will have rights in and responsibility for any know-how and intellectual property generated as a result of the collaboration that fits within the Roche Field and the Company will have rights in and responsibility for any know-how and intellectual property generated as a result of the collaboration that fits within the C4T Field. In support of this allocation of rights, under the amendment, Roche provided the Company, and the Company provided Roche, with a perpetual, irrevocable, fully paid up, exclusive (even as to party granting the license), sublicensable (including in multiple tiers) license to the know-how and intellectual property rights that are allocated to a party under the mutual target termination agreement. Finally, through the entry into this amendment, the Company and Roche mutually agreed to terminate the Roche Agreement as to the target EGFR.

Roche Agreement Accounting

The Roche Agreement is a modification of the Original Roche Agreement under ASC 606 as both the scope and price of the contract were changed under the Roche Agreement and new, distinct performance obligations were created for targets that have different standalone selling prices based on the Company’s revised obligations. The Roche Agreement was not determined to be a separate contract for accounting purposes. The modification was accounted for as if it were a termination of the existing contract and the creation of a new contract, for which the unrecognized consideration from the Original Roche Agreement is added to the new transaction price promised as part of the Roche Agreement and will be recognized as revenue prospectively, as the new performance obligations are satisfied. The Company made this determination after considering the performance obligations under the Roche Agreement. When the amendment was signed, the contract was restructured such that the Company would pursue some of the same targets, but would have additional material responsibility to potentially develop the targets beyond the option exercise point, to either Phase 1 completion or to a point where the Company will exercise its co-development and co-detailing options and more fully share in the costs and future revenues. The $40.0 million upfront payment, $13.5 million of expected research plan funding payments, plus $6.4 million of remaining deferred revenue from the Original Roche Agreement represent the transaction price as of the outset of the arrangement.

The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Roche, is a customer. The Company identified the following promises at the outset of the Roche Agreement: (1) a non-exclusive royalty-free license to use the Company’s intellectual property to conduct research and development activities; (2) research and development services under the research plan for the three initial targets; (3) participation on the Roche JRC; (4) option rights to initiate a research plan for three additional targets; (5) an option to obtain a non-exclusive commercial license to intellectual property and know-how generated from the collaboration, subject to certain exclusivity requirements; (6) option

F-19

C4 Therapeutics, Inc.

CCCC US Equity

CCCC · 10-K · period ended 2020-12-31

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

CCCC US Equity☆

CCCC · 10-K · period ended 2020-12-31

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

CCCC US Equity