IDYA US Equity☆

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

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this report. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this report.

Overview

We are a synthetic lethality focused precision medicine oncology company committed to the discovery and development of targeted therapeutics for patient populations selected using molecular diagnostics. Our approach integrates small molecule drug discovery with extensive capabilities in identifying and validating translational biomarkers to develop targeted therapies for select patient populations most likely to benefit. Our small molecule drug discovery expertise includes discovery and development of small molecule inhibitors and protein degrader modalities. We are applying these capabilities to develop a robust pipeline in precision medicine oncology, with a research focus in synthetic lethality – which represents an emerging class of precision medicine targets.

Our clinical pipeline continues to mature – with three clinical-stage product candidates being evaluated in four active clinical trials. Our most advanced clinical program is evaluating darovasertib, or IDE196, a small molecule protein kinase C, or PKC, inhibitor, in combination with crizotinib, an investigational cMET inhibitor, in a Phase 2 clinical trial in patients having metastatic uveal melanoma, or MUM, and separately as a single-agent in a Phase 2 clinical trial as neoadjuvant and adjuvant therapy in patients having primary uveal melanoma, or UM. IDE397, our small molecule methionine adenosyltransferase 2a, MAT2A, inhibitor, is being evaluated in Phase 1/2 clinical trial, including in selected Phase 2 monotherapy expansion cohorts and in selected combinations in Phase 1 does escalation in patients having tumors with methylthioadenosine phosphorylase, or MTAP, gene deletion. IDE161, our small molecule poly (ADP-ribose) glycohydrolase, or PARG, inhibitor, is being evaluated in a Phase 1/2 clinical trial in patients having tumors with homologous recombination deficiency, or HRD.

Darovasertib – PKC Inhibitor Clinical Candidate in Metastatic Uveal Melanoma and Primary Uveal Melanoma

Darovasertib is our most advanced clinical-stage product candidate. Darovasertib is a potent, selective small molecule inhibitor of PKC which we are developing for genetically-defined cancers having GNAQ or GNA11 gene mutations. PKC is a protein kinase that functions downstream of the GTPases GNAQ and GNA11.

We are pursuing a clinical strategy for darovasertib to broadly address ocular melanoma, alternatively referred to as uveal melanoma – a patient population with a significant unmet medical need. There are no U.S. Food and Drug Administration, or FDA, approved systemic therapies for primary uveal melanoma, or UM, as either neoadjuvant or adjuvant therapies. There are likewise no FDA approved therapies for patients having metastatic uveal melanoma, or MUM, with HLA-A*02:01 negative, or HLA-A(-), serotype. These primary UM patients and HLA-A(-) MUM patients collectively represent approximately 85% of all ocular melanoma patients.

We are evaluating darovasertib in our ongoing Phase 2 clinical trial, designated as IDE196-001, as a combination therapy with crizotinib, pursuant to our Clinical Trial Collaboration and Supply Agreement, or Pfizer Agreement, with Pfizer, in patients with MUM, a population in which greater than 90% of patients have tumors harboring GNAQ or GNA11 mutations.

Subject to FDA feedback following our scheduled meeting in the first quarter of 2023, we plan to initiate a potentially registration-enabling Phase 2/3 clinical trial to evaluate darovasertib and crizotinib as a combination therapy in MUM pursuant to the Second Pfizer Agreement, with Pfizer. We are planning to present a summary of the potentially registration-enabling Phase 2/3 clinical trial design reflecting guidance, if any, following our scheduled meeting with the FDA.

We are increasing enrollment to include additional first-line, or 1L, patients in the ongoing Phase 2 clinical trial evaluating darovasertib in combination with crizotinib in MUM. We are planning to present a clinical data update, including clinical efficacy (e.g., overall response rate, or ORR, median progression free survival, or PFS) in approximately 20 1L patients, from this ongoing Phase 2 clinical trial in mid-year, or the second or third quarters of, 2023. The timing of each of these clinical data updates may be influenced by data maturity, including for example, appropriate interim assessments of median duration of response, or DOR, median PFS, and/or median overall survival, or OS.

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We are also clinically evaluating darovasertib as a single agent in a separate Phase 2 clinical trial designated as IDE196-009 as a neoadjuvant and adjuvant therapy in primary, non-metastatic UM. We are additionally supporting evaluation of darovasertib as neoadjuvant and adjuvant therapy, or (neo)adjuvant therapy, in primary UM in an ongoing investigator-sponsored clinical trial, or IST, captioned as “Neoadjuvant / Adjuvant trial of Darovasertib in Ocular Melanoma” (NADOM) led by St. Vincent’s Hospital in Sydney with participation of Alfred Health and the Royal Victorian Eye and Ear Hospital in Melbourne.

We are planning to present additional interim clinical data in 2023 from the IST for darovasertib as neoadjuvant therapy in UM.

We own or control all commercial rights in our darovasertib program, including in MUM and in UM, subject to certain economic obligations pursuant to our exclusive, worldwide license to darovasertib with Novartis.

IDE397 – MAT2A Inhibitor Clinical Candidate in Tumors with MTAP Deletion

IDE397 is a potent, selective small molecule inhibitor of MAT2A which we are developing for patients having solid tumors with MTAP deletions. The prevalence of MTAP deletions is estimated to be approximately 15% of all human tumors. MTAP deletion in patient tumors is identified by commercial or institutional next generation sequencing, or NGS, panels or by MTAP immunohistochemistry, or IHC, assay with confirmation by NGS.

We are enrolling patients into a Phase 1/2 clinical trial designated as IDE397-001 to evaluate IDE397 as monotherapy and in combination therapies for patients having certain tumors with MTAP gene deletion.

For monotherapy, we are enrolling into Phase 2 expansion cohorts with an initial focus on non-small cell lung cancer, or NSCLC, esophagogastric cancer, and bladder cancer. In parallel, we are continuing to enroll additional patients into the Phase 1 dose escalation portion of the clinical trial. We initiated dose escalation studies of IDE397 in combination with chemotherapy agents, including pemetrexed and taxanes.

We are, in collaboration with Amgen Inc., or Amgen, planning to evaluate IDE397 in combination with AMG 193, the Amgen investigational methylthioadenosine-, or MTA-cooperative protein arginine methyltransferase 5, or PRMT5, inhibitor, in patients having tumors with MTAP deletion, in an Amgen-sponsored clinical trial pursuant to a Clinical Trial Collaboration and Supply Agreement, or Amgen CTCSA, with Amgen. The combination of IDE397 with AMG 193 is a novel and potential first-in-class synthetic lethality combination which targets two distinct and mechanistically complementary nodes of the MTAP methylation pathway – MAT2A and PRMT5, providing a complementary approach for targeting MTAP-null tumors.

We are prioritizing the IDE397 / AMG 193 clinical combination and, at this time are discontinuing enrollment into the IDE397-001 clinical trial cohorts evaluating chemotherapy combinations. This approach is based on favorable preclinical combination efficacy and tolerability data observed with the IDE397 / AMG 193 combination, and on the proposed target enrollment and budget for the planned global clinical trial pursuant to the Amgen CTCSA.

We own all right, title and interest in and to IDE397 and the MAT2A program, including all worldwide commercial rights thereto.

IDE161 – PARG Inhibitor Clinical Candidate in Tumors with Homologous Recombination Deficiency

IDE161 is a clinical-stage small molecule inhibitor of PARG being evaluated in a Phase 1/2 clinical trial desigated as IDE161-001 for patients having tumors with HRD and potentially other genetic and/or molecular signatures.

An IND application for clinical evaluation of IDE161 in solid tumors was submitted to and has been cleared by the FDA in the fourth quarter of 2022 following completion of its safety review.

We are initiating a Phase 1/2 clinical trial designated as IDE161-001 to evaluate IDE161, a PARG inhibitor, for the treatment of patients having solid tumors with HRD, such as BRCA1/2-mutant breast and ovarian cancer patients. We are preparing to initiate dosing of a first patient in the Phase 1 dose escalation portion of this clinical trial in the first quarter of 2023, with a planned initial starting dose of IDE161 in the dose escalation that is estimated to be approximately one-half of the projected human efficacious dose, based on preclinical studies.

The Phase 1/2 clinical trial will evaluate IDE161 as monotherapy with a focus on an expansion cohort of breast cancer patientshaving tumors with HRD which are estrogen receptor positive, or ER+ and human epidermal growth factor receptor 2 negative, or Her2-. This patient population of ER+ / Her2- breast cancer with HRD represents approximately 10% to 14%

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of breast cancer. The Phase 1/2 clinical trial will also include an expansion cohort of ovarian cancer patients having tumors with HRD, and a basket expansion cohort of other solid tumors with HRD.

We own or control all commercial rights in our PARG program, subject to certain economic obligations pursuant to our exclusive, worldwide license to certain PARG inhibitors, including IDE161, with Cancer Research UK and University of Manchester.

Pol Theta

We are advancing DNA Polymerase Theta program, in collaboration with GSK pursuant to the Collaboration, Option and License Agreement with GSK, or GSK Collaboration Agreement, for patients having solid tumors with BRCA or other homologous recombination deficiency, or HRD, mutations.

In collaboration with GSK, we have selected a development candidate small molecule inhibitor of Pol Theta Helicase, or ATPase, domain. We are, in collaboration with GSK, targeting an IND submission to the U.S. FDA in the second quarter of 2023 for a GSK-sponsored Phase 1/2 first-in-human clinical evaluation of our Pol Theta Helicase inhibitor DC in combination with niraparib for patients having tumors with BRCA mutation or HRD.

We have the potential to receive up to $20 million in aggregate milestone payments from GSK for certain milestones, which may occur as we, in collaboration with GSK, advance a Pol Theta helicase inhibitor from preclinical development into early Phase 1 clinical trials, including up to $10 million aggregate for advancing this DC through IND effectiveness.

In August 2022, we achieved the first preclinical development milestone in connection with ongoing IND-enabling studies to support evaluation of Pol Theta Helicase inhibitor DC, triggering a $3.0 million milestone payment, with the potential to receive up to an additional $7.0 million for advancing the Pol Theta Helicase inhibitor DC through IND effectiveness.

Following selection of the Pol Theta Helicase inhibitor development candidate, GSK will lead further research and development for the Pol Theta program pursuant to the GSK Collaboration Agreement.

Werner Helicase

We are also continuing to advance our preclinical research in collaboration with GSK for an inhibitor targeting Werner Helicase, or WRN, for patients having tumors with high microsatellite instability, or MSI.

We are, in collaboration with GSK, targeting nomination of a Werner Helicase inhibitor development candidate in 2023.

For this program, we plan to continue further preclinical development in collaboration with GSK pursuant to the GSK Collaboration Agreement. We have the potential to receive up to $20 million in aggregate milestone payments from GSK for certain milestones which may occur as we, in collaboration with GSK, advance a Werner Helicase inhibitor from preclinical into early Phase 1 clinical trials. These milestones include up to $10 million aggregate for a development candidate through IND effectiveness – up to $3 million in connection with IND-enabling studies and up to $7 million upon IND effectiveness.

Next-Generation Synthetic Lethality Pipeline Programs

We have initiated early preclinical research programs targeting multiple SLTs, which we believe are next-generation SLTs, for patients with solid tumors characterized by defined biomarkers based on genetic mutations and/or molecular signatures.

We own or control all commercial rights in our MTAP-SL and SLT programs.

Prospectus Supplement - At-the-Market Facility

In January 2021, we entered into a new Open Market Sale Agreement, or January 2021 Sales Agreement, with Jefferies, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of its common stock, par value $0.0001 per share, having aggregate gross proceeds of up to $90.0 million through Jefferies as its sales agent. Pursuant to the January 2021 Sales Agreement, Jefferies, as sales agent, receives a commission of 3.0% of the aggregate gross proceeds that the Company receives from each sale of its shares of common stock sold under the January 2021 Sales Agreement.

During the year ended December 31, 2022, we sold an aggregate of 601,844 shares of our common stock through at-the-market offerings for aggregate net proceeds of $8.8 million, after deducting underwriting discounts and commissions and other offering expenses, at a weighted average sales price of approximately $15.56 per share under the at-the-market offering pursuant to the January 2021 Sales Agreements with Jeffries as sales agent. As of December 31, 2022, approximately $64.4 million of common stock remained available to be sold under the ATM facility.

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Subsequent to December 31, 2022, from January 1, 2023 through March 3, 2023, we sold an aggregate of 142,160 shares of our common stock for aggregate net proceeds of $2.5 million at a weighted average sales price of approximately $18.38 per share under the at-the-market offering pursuant to the January 2021 Sales Agreement with Jefferies as sales agent.

We may cancel our at-the-market program at any time upon written notice, pursuant to its terms.

2022 Public Offering and Sale of IDEAYA Common Stock

On September 19, 2022, the Company completed an underwritten public offering of 8,761,905 shares of our common stock at an offering price to the public of $10.50 per share, including 1,142,857 shares of common stock upon the exercise in full of the overallotment option by the underwriters, pursuant to which we received aggregate net proceeds of $86.1 million, after deducting underwriting discounts and commissions and other offering expenses.

2021 Public Offering and Sale of IDEAYA Common Stock

On July 12, 2021, we completed an underwritten public offering of 5,333,333 shares of our common stock at an offering price to the public of $17.25 per share, including 695,652 shares of common stock upon the exercise in full of the overallotment option by the underwriters, pursuant to which we received aggregate net proceeds of $86.0 million, after deducting underwriting discounts and commissions and other offering expenses.

Management / Leadership Team

We continue to enhance our leadership team. Darrin Beaupre, M.D., Ph.D., joined as Senior Vice President and Chief Medical Officer, in November 2022. Dr. Beaupre has over twenty-five years of experience in clinical development and translational research, including at leading pharmaceutical companies and major research institutions. Dr. Beaupre’s extensive career includes various roles, including most recently at BioSplice Therapeutics, a subsidiary of Samumed, as Chief Medical Officer and Head of Research and Development in Oncology. Dr. Beaupre previously served as Senior Vice President, Head of Early Oncology Development and Clinical Research at Pfizer, Inc., where he led cross-disciplinary groups including clinical development, clinical pharmacology, translational oncology and clinical operations related study clinicians. There he was responsible for oversight of IND submissions and early clinical development across multiple oncology programs. Dr. Beaupre also served at Pharmacyclics (Abbvie) as Vice President, Head of Early Development and Immunotherapy, and at Amgen as Medical Director. He was previously an Assistant Professor at the H. Lee Moffitt Cancer Center and Research Institute, and also held various earlier appointments at the University of Miami and the M.D. Anderson Cancer Center.

Board of Directors

Catherine Mackey, Ph.D., has joined as a member of our board of directors effective in April 2022, serving as a Class I director, with an initial term expiring at our 2023 annual meeting of stockholders. Dr. Mackey brings over 30 years of life sciences research, development and operational experience to IDEAYA. As Senior Vice President of Pfizer Worldwide Research and Development and Director of Pfizer La Jolla Laboratories, she established a premier research and development capability and a robust drug pipeline of oncology therapeutics, including sunitinib (Sutent), axitinib (Inlyta), crizotinib (Xalkori) and palbociclib (Ibrance). She earlier served as Pfizer’s Head of Strategic Alliances and Genomic and Proteomic Sciences.

Corporate Update

We do not have any products approved for sale and have not generated any product revenue since inception. We have funded our operations through December 31, 2022 primarily through the sale and issuance of common stock, redeemable convertible preferred stock, and convertible promissory notes, including our initial public offering, or IPO, in May 2019, a follow-on underwritten public offering in June 2020, a direct private placement equity investment by Glaxo Group Limited, an affiliate of GSK, in June 2020, the sale and issuance of common stock under our at-the-market facility pursuant to the August 2020 and January 2021 Sales Agreements with Jefferies as sales agent, and through follow-on underwritten public offerings in July 2021 and September 2022. Additionally, we received a non-dilutive upfront cash payment of $100 million from GSK in connection with the GSK Collaboration Agreement in July 2020.

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Since our inception in June 2015, we have devoted substantially all of our resources to discovering and developing our product candidates. We have incurred significant operating losses to date and expect that our operating expenses will increase significantly as we advance our product candidates through preclinical and clinical development; seek regulatory approval, and prepare for, and, if approved, proceed to commercialization; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. Certain program costs that contribute to our operating expenses have been and/or will be reimbursed by GSK pursuant to the GSK Collaboration Agreement, including 100% of costs we incur for research we perform in connection with the Pol Theta program and 80% of the aggregate program costs incurred by us and GSK for research each of us performs for the Werner Helicase program. We anticipate that payments which we may make to Amgen will also contribute to our operating expenses as they are reimbursed by us pursuant to the Amgen CTCSA, including 50% of external costs Amgen incurs in connection with the Amgen-sponsored and executed IDE397 / AMG 193 Combination Study. In addition, we expect to incur additional costs associated with operating as a public company.

Our net losses were $58.7 million and $49.8 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $235.4 million.

Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates, ourselves, or for some programs, in collaboration with our strategic partners. We are leading and solely responsible for preclinical, translational and clinical research and development, as applicable, for (i) the clinical development of darovasertib, our PKC inhibitor, in combination with crizotinib in the ongoing IDE196-001 Phase 1/2 clinical trial in MUM, in coordination with Pfizer pursuant to the Second Pfizer Agreement, and as a single agent in the ongoing IDE196-009 Phase 2 clinical trial as neoadjuvant and adjuvant therapy in MUM, (ii) the clinical development of IDE397, our MAT2A inhibitor, in the ongoing IDE397-001 Phase 1/2 clinical trial, (iii) the clinical development of IDE161, our PARG inhibitor, in the ongoing IDE161-001 Phase 1/2 clinical trial and (iv) our earlier pipeline programs, including our next-generation synthetic lethality programs.

We are collaborating with Amgen to evaluate the clinical combination of IDE397, our investigational MAT2A inhibitor, in combination with AMG 193, the Amgen investigational PRMT5 inhibitor, in an Amgen-sponsored clinical trial, pursuant to the Amgen CTCSA. We are collaborating with GSK on preclinical research for our Pol Theta and Werner Helicase programs, pursuant to the GSK Collaboration Agreement.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.

As of December 31, 2022, we had cash, cash equivalents, and short-term and long-term marketable securities of $373.1 million.

We believe that our cash, cash equivalents, and short-term and long-term marketable securities will be sufficient to fund our planned operations for at least twelve months from the date of the issuance of our Annual Report on Form 10-K filed March 7, 2023.

These funds will support our efforts through potential achievement of multiple preclinical and clinical milestones across multiple programs.

Components of Operating Results

Collaboration Revenues

To date, we have not generated any revenue from product sales, and we do not expect to generate any revenue from product sales unless and until we are able to initiate a registrational clinical trial, obtain regulatory approval and commercialize one of our product candidates in the future. Our revenue consists exclusively of collaboration revenue under the GSK Collaboration Agreement, including amounts that are recognized related to previously received upfront payments and amounts due and payable to us for research and development services. The amount of revenue recognized related to the GSK Collaboration Agreement, including as related to the previously received upfront payment or to certain development milestone payments, may vary considerably by period and certain components thereof may generally decrease year-over-year as we satisfy remaining performance obligations, for example, relating to the Pol Theta and WRN R&D Services. We do not anticpiate revenue to be recognized in the future in connection with the Pol Theta program, as our performance obligations relating to the Pol Theta R&D Services are complete under the GSK Collaboration Agreement. In the future, revenue may include additional milestone payments, profit sharing, and royalties on any net product sales under our collaborations. We expect that any revenue we generate will fluctuate from period to period as a result of various factors, such as the timing and amount of

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license, research and development services, and milestone and other payments. The revenue we recognize or generate under the GSK Collaboration Agreement may also fluctuate from period to period due to changes to prospective collaboration research budgets or changes to respective allocation of resources as between the parties and as between internal or external (e.g., CRO) sources, in each case on a program-by-program basis, as part of ongoing collaboration research management.

Operating Expenses

Research and Development Expenses

Substantially all of our research and development expenses consist of expenses incurred in connection with discovery and development of our product candidates. These expenses include certain payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expenses for our research and product development employees, fees to third parties to conduct certain research and development activities on our behalf including fees to CMOs and CROs in support of manufacturing and clinical activity for darovasertib, IDE397 and IDE161, consulting costs, costs for laboratory supplies, costs for product licenses and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities. We expense both internal and external research and development expenses as they are incurred.

We have entered into various agreements with CMOs and CROs. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

Costs of certain activities, such as preclinical studies, are generally recognized based on an evaluation of the progress to completion of specific tasks. Nonrefundable payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.

We do not allocate our internal costs by product candidate, including internal costs, such as payroll and other personnel expenses, laboratory supplies and allocated overhead. With respect to internal costs, several of our departments support multiple product candidate research and development programs, and therefore the costs cannot be allocated to a particular product candidate or development program. The following table summarizes our external clinical development expenses by program:

Year Ended December 31,

External clinical development expenses (1):

Personnel related and stock-based compensation 26,717 18,656

Other research and development expenses 39,960 27,963

Total research and development expenses $ 89,536 $ 58,158

(1)

External clinical development expenses include manufacturing and clinical trial costs. These expenses are primarily for services provided by external consultants, CMOs and CROs.

We are focusing substantially all of our resources on the development of our product candidates. We expect our research and development expenses to increase substantially during the next few years, as we seek to initiate and/or advance clinical trials for our product candidates, complete our clinical program, pursue regulatory approval of our product candidates and prepare for a possible commercial launch. Predicting the timing or the cost to complete our clinical program or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.

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General and Administrative Expenses

General and administrative expenses consist primarily of payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expense, professional fees for legal, patent, consulting, accounting and tax services, allocated overhead, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase, as a result of increased personnel costs, including salaries, benefits and stock-based compensation expense, patent costs for our product candidates, expanded infrastructure and higher consulting, legal and accounting services associated with maintaining compliance with our NASDAQ stock exchange listing and requirements of the Securities and Exchange Commission, or the SEC, investor relations costs and director and officer insurance policy premiums associated with being a public company.

Other Income (Expense)

Interest Income and Other Income (Expense), Net

Interest income and other income (expense), net consists primarily of interest income earned on our cash, cash equivalents and marketable securities.

Results of Operations

A discussion regarding our financial condition and results of operations for fiscal year 2022 compared to fiscal year 2021 is presented below. A discussion regarding our financial condition and results of operations for fiscal year 2021 compared to fiscal year 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 18, 2022.

Comparison of the Years Ended December 31, 2022 and December 31, 2021

The following table summarizes our results of operations for the periods indicated (in thousands):

Year Ended December 31,

Revenue

Operating expenses

Other income (expense)

Collaboration Revenue

Collaboration revenue increased by $23.0 million, or 82%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. In July 2020, the GSK Collaboration Agreement became effective, and we started recognizing collaboration revenue, which consists of revenue from preclinical and Phase 1 monotherapy clinical research and development services under the MAT2A program as well as preclinical research services and the related license under the Pol Theta and WRN programs. Revenue we recognize from satisfaction of performance obligations under the GSK Collaboration Agreement is impacted by our estimates of the remaining costs to complete our obligations, which may vary due to changes to prospective collaboration research budgets or changes to respective allocation of resources and in any case require significant judgment, and may cause fluctuation in the revenue recognized from period to period.

During 2022, the Company recognized revenue of $17.4 million relating to GSK's waiver of its right to exercise its Option for the MAT2A program. The POLQ program achieved an initial preclinical development milestone for which the Company recognized a portion of the $3.0 million milestone consideration as revenue in the amount of $2.6 million.

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Research and Development Expenses

Research and development expenses increased by $31.4 million, or 54%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase in research and development expenses was primarily due to increases of $20.9 million in fees paid to CROs, CMOs and consultants related to the advancement of our lead product candidates through preclinical and clinical studies, $8.1 million in personnel-related expenses, including salaries, benefits and stock-based compensation, related to an increase in headcount to support our growth, and $2.4 million in costs for laboratory supplies, facilities and software to support our research programs.

General and Administrative Expenses

General and administrative expenses increased by $3.8 million, or 19%, during the year ended December 31, 2022 compared to the year ended December 31, 2021.The increase in general and administrative expenses was primarily due to increases of $2.5 million for consulting services related mainly to information technology support, $2.2 million in personnel-related expenses, including salaries, benefits and stock-based compensation, related to an increase in headcount to support our growth, partially offset by a decrease in $0.3 million in software licenses and facility costs, and $0.6 million in directors’ and officers’ liability insurance premiums.

Interest Income and Other Income (Expense), Net

Interest income increased by $3.3 million, or 660%, during the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to higher interest rates on our investments.

Liquidity and Capital Resources; Plan of Operations

Sources of Liquidity

We have funded our operations primarily through the sale and issuance of common stock, redeemable convertible preferred stock, and convertible promissory notes, as well as the up-front payment received from GSK. As of December 31, 2022, we had cash, cash equivalents and marketable securities of $373.1 million, consisting primarily of money market funds, U.S. government securities, commercial paper, and corporate bonds.

Material Cash Requirements

We have incurred net losses since our inception. For the years ended December 31, 2022 and December 31, 2021, we had net losses of $58.7 million and $49.8 million, respectively, and we expect to incur substantial additional losses in future periods. As of December 31, 2022, we had an accumulated deficit of $235.4 million. Based on our current business plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations for at least the next 12 months from the issuance date of this Annual Report on Form 10-K.

To date, we have not generated any product revenue. We do not expect to generate any meaningful product revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, it will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, we expect to incur additional costs associated with operating as a public company.

We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We may seek to raise capital through private or public equity or debt financings, collaboration or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements for which will depend on many factors, including:

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the scope, timing, rate of progress and costs of our drug discovery, preclinical development activities, laboratory testing and clinical trials for our product candidates;

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the number and scope of clinical programs we decide to pursue;

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the scope and costs of manufacturing development and commercial manufacturing activities;

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the extent to which we acquire or in-license other product candidates and technologies;

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

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potential delays in our ongoing clinical programs as a result of the COVID-19 pandemic;

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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

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our ability to establish and maintain collaborations on favorable terms, if at all;

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our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates;

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the costs associated with being a public company; and

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the cost and timing associated with commercializing our product candidates, if they receive marketing approval.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

We lease our laboratory and office facilities in South San Francisco, California under non-cancelable operating leases with expiration dates in July 2024. In May 2018, we amended our South San Francisco facility lease agreement to expand the size of the original premises by adding approximately 7,340 rentable square feet of additional space. In September 2019, we further amended our South San Francisco facility lease agreement to expand the size of the premises by adding 5,588 rentable square feet of additional space. As of December 31, 2022, we expect to make the total lease payments of $3.7 million through July 2024.

We enter into contracts in the normal course of business with third-party contract organizations for preclinical and clinical studies and testing, manufacture and supply of our preclinical and clinical materials and providing 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.

Pursuant to the GSK Collaboration Agreement, we will be responsible for 20% of global research and development costs for the WRN program. The cost-sharing percentages will be adjusted based on the actual ratio of U.S. to global profits for WRN products, as measured three and six years after global commercial launch thereof. We may opt out of 50% U.S. net profit share and corresponding development cost share for the WRN program.

In September 2018, we entered into a license agreement with Novartis International Pharmaceuticals Ltd., or Novartis, to develop and commercialize Novartis’ LXS196 (also known as IDE196), a PKC inhibitor for the treatment of cancers having GNAQ and GNA11 mutations. In consideration of license and rights granted under the license agreement, we made a one-time cash payment of $2.5 million to Novartis and issued 263,615 shares of Series B redeemable convertible preferred stock to an affiliate of Novartis. Under the license agreement, we agreed to make contingent development and sales milestone payments of up to $29.0 million and mid to high single digit royalty payments of the net sales of licensed products. Such milestones and royalties are dependent on future activity or product sales and are not provided for in the table above as the timing and amounts, if any, are not estimable.

In January 2022, we exercised our option for an exclusive worldwide license covering a broad class of PARG inhibitors from Cancer Research Technology Ltd. (CRT) and the University of Manchester, and in connection therewith, paid a one-time option exercise fee of £250,000. We are obligated to make payments to CRT aggregating up to £19.5 million upon the achievement of specific development and regulatory approval events for development of a PARG inhibitor in oncologic diseases. Certain of the clinical and regulatory milestones are related to and may be due and payable by us if certain milestones are achieved in connection with the IDE161-001 Phase 1/2 clinical trial.

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We may be obligated to make aggregate payments of up to £2,250,000, subject to achievement of certain milestones through the Phase 1 and Phase 2 portions of the clinical trial in oncologic diseases - including aggregate payments of up to £1,500,000 for milestones relating to a first tumor histology (e.g., a breast cancer) and aggregate payments of up to £750,000 for milestones relating to in a different second tumor histology (e.g., ovarian cancer). Subject to commercialization, we are also obligated to pay low single-digit tiered royalties, and potentially also sales milestones, to CRT based on net sales of licensed products. In addition, in the event we sublicense the intellectual property, we will also be obligated to pay CRT a specified percentage of any sublicense revenue.

In July 2022, we entered into a Clinical Trial Collaboration and Supply Agreement, or Amgen CTCSA with Amgen to clinically evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics and

efficacy of IDE397 in combination with the Amgen investigational small molecule MTA-cooperative inhibitor of PRMT5, AMG 193, in patients having MTAP-null solid tumors, in a Phase 1/2 clinical trial (the “IDE397-AMG 193 Combination Study”). Pursuant to the mutually non-exclusive Amgen CTCSA, Amgen is the sponsor of the IDE397-AMG 193 Combination Study and will provide AMG 193, we will provide the IDE397 compound and each party will pay for fifty percent (50%) of the third party costs of the IDE397/AMG 193 Combination Study. Each party will be responsible for its own internal costs and expenses in support of the IDE397/AMG 193 Combination Study.

Adequate additional funding may not be available to us on acceptable terms or at all. See the section of this Annual Report titled “Part I, Item 1A. – Risk Factors” for additional risks associated with our substantial capital requirements.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Summary Statement of Cash Flows

The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for each of the periods presented below (in thousands):

Year Ended December 31,

Net cash (used in) provided by:

Cash Flows from Operating Activities

Net cash used in operating activities was $87.2 million for the year ended December 31, 2022. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $58.7 million, adjusted for net non-cash charges of $13.0 million and changes in net operating assets and liabilities of $41.6 million. Our non-cash charges consisted of $11.6 million in stock-based compensation, and $2.1 million in depreciation, partially offset by $0.7 million accretion of discounts on marketable securities. The net change in our operating assets and liabilities consisted primarily of decreases of $46.5 million in contract liabilities due to revenue recognized under the GSK Collaboration Agreement, $2.1 million in prepaid and other assets, and $1.7 million in lease liabilities, partially offset by $4.6 million accrued and other liabilities due to due to CRO fees in support of research and manufacturing activities, $1.9 million in accounts payable, $1.4 million in right-of-use asset, and $0.9 million in accounts receivable from GSK for estimated program costs under the GSK Collaboration Agreement.

Net cash used in operating activities was $55.8 million for the year ended December 31, 2021. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $49.8 million, adjusted for net non-cash charges of $11.8 million and changes in net operating assets and liabilities of $17.8 million. Our non-cash charges consisted of $8.2 million in stock-based compensation, $1.9 million amortization of premium on marketable securities and $1.7 million in depreciation. The net change in our operating assets and liabilities consisted primarily of decreases of $23.5 million in contract liabilities due to revenue recognized under the GSK Collaboration Agreement, $1.5 million in lease liabilities, $1.3 million in right-of-use assets and $0.8 million in accounts receivable from

105

GSK for estimated program costs under the GSK Collaboration Agreement, partially offset by increases of $4.2 million in accrued and other liabilities due to CRO fees in support of research and manufacturing activities and $1.2 million in accounts payable.

Cash Flows from Investing Activities

Net cash used in investing activities was $33.4 million for the year ended December 31, 2022, which consisted primarily of $255.8 million used to purchase marketable securities and $3.4 million used to purchase property and equipment, partially offset by $225.8 million provided by maturities of marketable securities.

Net cash used in investing activities was $69.7 million for the year ended December 31, 2021, which consisted primarily of $315.0 million used to purchase marketable securities and $2.6 million used to purchase property and equipment, partially offset by $244.0 million provided by maturities of marketable securities and $4.0 million from sale of marketable securities.

Cash Flows from Financing Activities

Net cash provided by financing activities was $97.2 million for the year ended December 31, 2022, which consisted primarily of $86.1 million of net proceeds from our follow-on offering, $8.8 million of proceeds from ATM offering, $1.4 million of proceeds from exercise of common stock options, and $0.8 million of proceeds from ESPP purchase.

Net cash provided by financing activities was $145.5 million for the year ended December 31, 2021, which consisted primarily of $86.0 million of net proceeds from our follow-on offering, $57.3 million of proceeds from ATM offering, $1.5 million of proceeds from exercise of common stock options, and $0.7 million of proceeds from ESPP purchase.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue recognized and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. For more detail on our critical accounting policies, refer to Note 2 to the financial statements appearing elsewhere in this Annual Report on Form 10-K.

Revenue Recognition

Licenses of intellectual property: If a license to our intellectual property is determined to be distinct from the other promised goods or services identified in an arrangement, we recognize revenue from non-refundable, upfront fees allocated to the license at the point in time when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other goods or services, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress toward satisfying the performance obligation for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition.

Customer options for additional goods or services: If a contract contains customer options that allow the customer to acquire additional goods or services, including a license to our intellectual property, the goods and services underlying the customer options are evaluated to determine whether they are deemed to represent a material right. In determining whether the customer option has a material right, we assess whether there is an option to acquire additional goods or services at a discount. If the customer option is determined not to represent a material right, the option is not considered to be a performance obligation. If the customer option is determined to represent a material right, the material right is recognized as a separate performance obligation. We allocate 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 the option is exercised.

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Milestone payments: At the inception of each arrangement or amendment that includes development, regulatory or commercial milestone payments, we evaluate whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. ASC 606 prescribes two methods to use when estimating the amount of variable consideration: the expected value method and the most likely amount method. Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. Whichever method is used, it should be consistently applied throughout the life of the contract; however, it is not necessary for us to use the same approach for all contracts. If it is probable that a significant revenue reversal would not occur when the uncertainty associated with the milestone is resolved, the associated milestone value is included in the transaction price. Milestone payments that are highly susceptible to factors outside our influence, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. If there is more than one performance obligation, the transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis. We recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability or achievement of each milestone and any related constraint, and if necessary, adjusts our estimates 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.

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

Upfront payments and fees are recorded as contract liabilities upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements. Amounts payable to us are recorded as accounts receivable when our right to consideration is unconditional. 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 customer and the transfer of the promised goods or services to the customer will be one year or less.

Contractual cost sharing payments received from a customer or collaboration partner are accounted for as variable consideration. We include an expected value in the transaction price. Contractual cost sharing payments made to a customer or collaboration partner are accounted for as a reduction to the transaction price if such payments are not related to distinct goods or services received from the customer or collaboration partner.

Contracts may be amended to account for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for goods and services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is accounted for as a separate contract. If a contract modification is not accounted for as a separate contract, we account for the promised goods or services not yet transferred at the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. We account for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).

Upfront payment contract liabilities resulting from our license and collaboration agreements do not represent a financing component as the payment is not financing the transfer of goods and services, and the technology underlying the licenses granted reflects research and development expenses already incurred by us. As such, we do not adjust our revenues for the effects of a significant financing component.

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Determination of the estimate of standalone selling price (“SSP”)

Prior to entering into the GSK Collaboration Agreement, we have never entered into a similar collaboration agreement nor have ever recognized any revenue, and the SSP of performance obligations identified in the GSK Collaboration Agreement is not directly observable. Accordingly, we developed an estimate of the SSP of each performance obligation based on the information known to us on the Effective Date and on input from an independent third-party valuation firm.

We applied the income approach as a primary methodology to determine the SSP of each performance obligation. Specifically, based on our early stage of development and other relevant factors, we determined to use the following methodologies:

(1)

Preclinical and Phase 1 Monotherapy clinical research and development services under the MAT2A program (“MAT2A R&D Services”) – the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;

(2)

Preclinical research services and the related license to IDEAYA-owned technology under the Pol Theta program (“Pol Theta R&D Services”) – a combination of risk-adjusted net present value analysis and the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;

(3)

Preclinical research services and the related license to IDEAYA-owned technology under the WRN program (“WRN R&D Services”) – a combination of risk-adjusted net present value analysis and the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;

(4)

The Option – risk-adjusted net present value analysis;

(5)

Material right associated with the option to license to IDEAYA-owned technology under the MAT2A program to the extent necessary for preclinical activities in preparation for the MAT2A Combination Trial (“Preclinical MAT2A License”) – the expected costs of satisfying the performance obligation; and,

(6)

Material right associated with the supply of MAT2A product for the MAT2A Combination Trial (“MAT2A Supply”) – the expected costs of satisfying the performance obligation.

The assumptions used to determine the SSP of each performance obligation are based on numerous objective and subjective factors, combined with management judgment, including:

•

projected preclinical and clinical research and development expenses;

•

the probability of technical success for the development, regulatory approval and commercialization of our product candidates;

•

projected cash flow during development and commercialization periods;

•

discount rates based on cost of capital;

•

the probability of exercise of the Option; and,

•

the projected manufacturing cost and overhead expense for IDE 397.

We considered reasonably available data points, market conditions and entity-specific factors in estimating the SSP of performance obligations. However, some of these assumptions are specific to us and are not directly observable. We also applied our own judgment as management in determining these assumptions. Accordingly, these assumptions are subject to uncertainty, and changing methodology and/or assumption could materially impact the estimate of the SSP of performance obligations, and as a result, an amount of subsequent revenue recognition and/or its timing.

Determination of the timing of satisfaction of performance obligations

We recognize revenue from the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services over time, as GSK simultaneously receives and consumes the benefits provided by our performance as we perform. We measure our progress toward complete satisfaction of the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services based on the costs incurred as a percentage of the estimated total costs to be incurred to complete the performance obligations.

The estimated total costs to be incurred to complete the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services may evolve and be updated throughout the performance period with the consultation with GSK through the joint development committee. The change in the estimated total costs and/or the timing of completion may materially impact an amount of subsequent revenue recognition and/or its timing. MAT2A R&D Services and Pol Theta R&D Services are completed. The expected timing of completing the WRN R&D Services may be updated.

108

JOBS Act Accounting Election

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. However, we have chosen to irrevocably “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

Recent Accounting Pronouncements

See the section titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

109

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

Interest Rate Sensitivity

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates or exchange rates. As of December 31, 2022, we had cash equivalents and marketable securities of $373.1 million, consisting of interest-bearing money market funds, investments in U.S. government securities, commercial paper, and corporate bonds, for which the fair value would be affected by changes in the general level of U.S. interest rates. Even if the fair value of certain government securities, commercial paper, and corporate bonds is affected by changes in U.S. interest rates, the principal of such instruments will be due to us upon maturity.

While we are seeing, and expect to continue to see, record inflation and elevated interest rates due to, among other things, the COVID-19 pandemic and other geopolitical and macroeconomic events, such as the ongoing Ukraine-Russia conflict and related sanctions, we do not believe that inflation, interest rate changes or exchange rate fluctuations have had a significant impact on our results of operations for any periods presented herein.

Item 8. Financial Statements and Supplementary Data

The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.

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

None.

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Item 9A. Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial and accounting officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Our management, with the participation of our principal executive officer and principal financial and accounting officer, evaluated the effectiveness of our disclosure controls and procedures at the end of the period covered by this Annual Report on Form 10-K. Based upon such evaluation, our principal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting that occurred during the year ended December 31, 2022 that have materially affected, or are reasonably likely to materially effect, the Company's internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Under the supervision of and with the participation of our principal executive officer and principal financial officer, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control—Integrated Framework” (2013). Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2022.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on our internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”

Item 9B. Other Information

On February 24, 2023, the Company adopted the IDEAYA Biosciences, Inc. 2023 Employment Inducement Award Plan (the “Inducement Plan”), pursuant to which the Company reserved 1,000,000 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The Inducement Plan was approved by the Company’s board of directors without stockholder approval in accordance with such rule.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with the Annual Meeting of Stockholders within 120 days after December 31, 2022, or the Proxy Statement, and is incorporated in this Annual Report on Form 10-K by reference.

Item 11. Executive Compensation.

The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.

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

The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.

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

The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.

Item 14. Principal Accounting Fees and Services.

The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.

112

Part IV

Item 15. Exhibits, Financial Statement Schedules.

(a)

The following documents are filed as part of this report:

(1)

FINANCIAL STATEMENTS

The following documents are included on pages F-1 through F-27 attached hereto and are filed as part of this Annual Report on Form 10-K.

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) F-2

Audited Financial Statements:

Balance Sheets F-3

Statements of Operations and Comprehensive Loss F-4

Statements of Stockholders’ Equity F-5

Statements of Cash Flows F-6

Notes to Financial Statements F-7

(2)

FINANCIAL STATEMENT SCHEDULES

All schedules to the financial statements are omitted as the required information is either inapplicable or presented in the financial statements.

(3)

EXHIBITS

The exhibits listed in the accompanying Exhibit Index are filed as part of, or incorporated by reference into, this report.

113

Exhibit Index

(a) Exhibits.

ExhibitNumber Exhibit Description Incorporated by Reference FiledHerewith

Form Date Number

3.1 Amended and Restated Certificate of Incorporation. 8-K 5/28/2019 3.1

4.1 Reference is made to Exhibits 3.1 through 3.2.

4.3 Description of Common Stock. X

114

10.11# Non-Employee Director Compensation Program. X

115

(No. 4) Limited and IDEAYA Biosciences, Inc. dated as of October 23, 2020.

23.1 Consent of Independent Registered Public Accounting Firm. X

101.INS Inline XBRL Instance Document X

101.SCH Inline XBRL Taxonomy Extension Schema Document X

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X

101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document X

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X

104 Cover Page Interactive Data File (embedded with the Inline XBRL document) X

† Certain information in this exhibit has been excluded pursuant to Regulation S-K, Item 601(b)(10).

116

# Indicates management contract or compensatory plan.

* The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K is not deemed filed with the SEC and is not to be incorporated by reference into any filing of IDEAYA Biosciences, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing.

Item 16. Form 10-K Summary.

None.

117

INDEX TO THE FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) F-2

Balance Sheets F-3

Statements of Operations and Comprehensive Loss F-4

Statements of Stockholders’ Equity F-5

Statements of Cash Flows F-6

Notes to Financial Statements F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of IDEAYA Biosciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of IDEAYA Biosciences, Inc. (the “Company”) as of December 31, 2022 and 2021, and the related statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Jose, California

March 7, 2023

We have served as the Company’s auditor since 2017, which includes periods before the Company became subject to SEC reporting requirements.

F-2

IDEAYA Biosciences, Inc.

Balance Sheets

(in thousands, except share and per share amounts)

December 31,

Assets

Current assets

Prepaid expenses and other current assets 5,414 3,123

Other non-current assets 99 291

Liabilities and Stockholders’ Equity

Current liabilities

Operating lease liabilities, current 1,871 1,699

Long-term operating lease liabilities 1,611 3,482

Commitments and contingencies (Note 6)

Stockholders’ equity

Accumulated other comprehensive loss (2,871 ) (712 )

Total liabilities and stockholders’ equity $ 387,969 $ 381,347

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

F-3

IDEAYA Biosciences, Inc.

Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Year Ended December 31,

Operating expenses

Other income

Interest income and other income, net 3,847 506 849

Unrealized losses on marketable securities (2,159 ) (719 ) (58 )

Net loss per common share, basic and diluted $ (1.42 ) $ (1.41 ) $ (1.40 )

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

F-4

IDEAYA Biosciences, Inc.

Statements of Stockholders’ Equity

(in thousands, except share amounts)

Accumulated

Additional Other Total

Common Stock Paid-In Comprehensive Accumulated Stockholders'

Shares Amount Capital Income (Loss) Deficit Equity

Employee stock purchase plan (ESPP) purchase 40,794 — 326 — — 326

Repurchase of early exercised shares (10,518 ) — — — — —

Vesting of early exercised common stock options — — 56 — — 56

Stock-based compensation — — 3,609 — — 3,609

Other comprehensive loss — — — (58 ) — (58 )

Employee stock purchase plan (ESPP) purchase 50,037 — 697 — — 697

Repurchase of unvested restricted stock (7,313 ) — — — — —

Stock-based compensation — — 8,237 — — 8,237

Other comprehensive loss — — — (719 ) — (719 )

Employee stock purchase plan (ESPP) purchase 81,742 — 755 — — 755

Other comprehensive loss — — — (2,159 ) — (2,159 )

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

F-5

IDEAYA Biosciences, Inc.

Statements of Cash Flows

(in thousands)

Year Ended December 31,

Cash flows from operating activities

Loss on sale of property and equipment — — 2

Realized gain on marketable securities — — (18 )

Changes in assets and liabilities

Prepaid expenses and other assets (2,119 ) (189 ) (510 )

Net cash provided by (used in) operating activities (87,175 ) (55,779 ) 55,463

Cash flows from investing activities

Purchases of property and equipment, net (3,443 ) (2,644 ) (493 )

Sales of marketable securities - 4,018 —

Cash flows from financing activities

Cash, cash equivalents and restricted cash

Reconciliation of cash, cash equivalents and restricted cash

Supplemental disclosure of cash flow information:

Cash paid for income taxes $ — $ 4 $ 1

Cash paid for interest $ 60 $ 71 $ 82

Supplemental non-cash investing and financing activities:

Vesting of early exercised options and restricted stock $ — $ 24 $ 56

Unpaid offering costs $ 39 $ — $ —

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

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IDEAYA Biosciences, Inc.

Notes to Financial Statements

1. Organization

Description of the Business

IDEAYA Biosciences, Inc. (the “Company”) is a synthetic lethality-focused precision medicine oncology company committed to the discovery and development of targeted therapeutics for patient populations selected using molecular diagnostics. The Company is headquartered in South San Francisco, California and was incorporated in the State of Delaware in June 2015. To date, the Company has been primarily engaged in business planning, research, development, recruiting and raising capital.

Follow-On Offering

On June 22, 2020, the Company completed an underwritten public offering and sold and issued 6,666,667 shares of common stock at a price to the public of $15.00 per share for gross proceeds of $100.0 million. On July 22, 2020, the Company sold and issued an additional 500,000 shares of common stock upon the exercise of the overallotment option by the underwriters for gross proceeds of $7.5 million. The aggregate net proceeds to the Company were $100.7 million after deducting underwriting discounts and commissions and other offering costs.

On July 12, 2021, the Company completed an underwritten public offering and sold and issued 5,333,333 shares of common stock, which included shares issued upon the underwriters’ exercise in full of their overallotment option to purchase 695,652 additional shares, at a price to the public of $17.25 per share for net proceeds of $86.0 million, after deducting underwriting discounts and commissions and other offering expenses.

On September 19, 2022, we completed an underwritten public offering of 8,761,905 shares of our common stock at an offering price to the public of $10.50 per share, including 1,142,857 shares of common stock upon the exercise in full of the overallotment option by the underwriters, pursuant to which we received aggregate net proceeds of $86.1 million, after deducting underwriting discounts and commissions and other offering expenses.

Private Placement

The Company entered into a stock purchase agreement with Glaxo Group Limited, or GGL, on June 17, 2020, pursuant to which, on August 3, 2020, the Company sold 1,333,333 shares at a price of $15.00 per shares to GGL for net proceeds of $20.0 million in a private placement.

At-the-Market Offering

On August 12, 2020, the Company filed a prospectus supplement to the prospectus dated June 10, 2020, activating its at-the-market facility by entering into an open market sale agreement (the “August 2020 Sales Agreement”) with Jefferies LLC (“Jefferies”), pursuant to which the Company could offer and sell shares of its common stock with an aggregate offering price of up to $50.0 million under an “at the market” offering program. As of January 15, 2021, the Company exhausted all sales under the August 2020 Sales Agreement. On January 20, 2021, the Company entered into a new open market sale agreement (the “January 2021 Sales Agreement”) with Jefferies, pursuant to which the Company may offer and sell shares of its common stock with an aggregate offering price of up to $90.0 million under an “at the market” offering program.

For the year ended December 31, 2022, the Company sold an aggregate of 601,844 shares for aggregate net proceeds of $8.8 million, after deducting underwriting discounts and commissions and other offering expenses, under the January 2021 Sales Agreement. As of December 31, 2022, approximately $64.4 million of common stock remained available to be sold under the ATM facility.

Liquidity

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $235.4 million as of December 31, 2022. The Company has historically financed its operations primarily through the sale of convertible notes, redeemable convertible preferred stock and common stock, and payments received from its collaboration arrangement. To date, none of the Company’s product candidates have been approved for sale, and the Company has not generated any revenue from commercial products since inception. Management expects operating losses to continue and increase for the foreseeable future, as the Company progresses into clinical development activities for its lead product candidates. The Company’s prospects are subject to risks, expenses and uncertainties frequently

F-7

encountered by companies in the biotechnology industry as discussed under Risks and Uncertainties in Note 2. While the Company has been able to raise multiple rounds of financing, there can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As of December 31, 2022, the Company had cash, cash equivalents and marketable securities of $373.1 million. Management believes that the Company’s current cash, cash equivalents and marketable securities will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation

The financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

Use of Estimates

The preparation of 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include useful lives of property and equipment, determination of the discount rate for operating leases, accruals for research and development activities, revenue recognition, stock-based compensation, and income taxes. On an ongoing basis, management reviews these estimates and assumptions. Changes in facts and circumstances may alter such estimates and actual results could differ from those estimates.

Segments

The Company operates and manages its business as one operating and reportable segment, which is the business of research and development for oncology-focused precision medicine. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of the Company's long-lived assets are located in the United States.

Risks and Uncertainties

The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturers, contract research organizations and collaboration partners, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows: ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials and collaboration activities; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

Beginning in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak on the Company’s business will depend on certain developments,

F-8

including the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and operations.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, marketable securities and accounts receivable. Substantially all the Company’s cash is held by two financial institutions that management believes are of high credit quality. Such deposits may, at times, exceed federally insured limits.

The Company’s investment policy addresses credit ratings, diversification, and maturity dates. The Company invests its cash equivalents and marketable securities in money market funds, U.S. government securities, commercial paper, and corporate bonds. The Company limits its credit risk associated with cash equivalents and marketable securities by placing them with banks and institutions it believes are creditworthy and in highly rated investments and, by policy, limits the amount of credit exposure with any one commercial issuer. The Company has not experienced any credit losses on its deposits of cash, cash equivalents or marketable securities.

Accounts receivable represents amounts due from GlaxoSmithKline. The Company monitors economic conditions to identify facts or circumstances that may indicate that any of its accounts receivable are at risk of collection.

Cash Equivalents

Cash equivalents that are readily convertible to cash are stated at cost, which approximates fair value. The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents.

Restricted Cash

Restricted cash as of December 31, 2022 and December 31, 2021 consisted of cash balances held as security in connection with the Company’s facility lease agreement in South San Francisco, California. The balances are classified as long-term assets on the Company’s balance sheet.

Marketable Securities

Marketable securities are investments in marketable securities with maturities greater than three months at the time of purchase. The Company determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale. After consideration of the Company’s risk versus reward objectives and liquidity requirements, the Company may sell these securities prior to their stated maturities. The Company classifies highly liquid securities with maturities beyond 12 months as long-term marketable securities in the balance sheet. These securities are carried at fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses, if any, are excluded from earnings and are reported as a component of accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the statements of operations and comprehensive loss. Realized gains and losses, if any, on available-for-sale securities are included in interest income and other income (expense), net. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. The Company did not identify any of its marketable securities as other-than-temporarily impaired as of December 31, 2022 and December 31, 2021.

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Fair Value of Financial Instruments

The carrying amounts of the Company’s certain financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities and market interest rates if applicable. Refer to Note 3 for details on the fair value of marketable securities.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally between three and five years. Leasehold improvements are stated at cost and amortized over the shorter of the useful lives of the assets or the lease term. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the statements of operations and comprehensive loss in the period realized.

Impairment of Long-Lived Assets

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability is measured by comparison of the carrying amount of the asset or asset group to the future net cash flows which the asset or asset group is expected to generate. If such asset or asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. There have been no such impairments of long-lived assets for the years ended December 31, 2022 and December 31, 2021.

Leases

The Company determines if an arrangement is a lease, or contains a lease, at its inception. Operating leases are included in right-of-use (“ROU”) assets, lease liabilities, and long-term lease liabilities on the Company’s balance sheet.

ROU assets and lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The ROU asset also includes any lease payments made to the lessor at or before the commencement date, minus lease incentives received, and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company combines lease and nonlease components.

Cloud Computing Arrangements

The Company capitalizes certain implementation costs incurred under a cloud computing arrangement that is a service contract. Costs incurred during the application development stage related to the implementation of the hosting arrangement are capitalized and included within prepaid expenses and other current assets, and other non-current assets on the accompanying balance sheets. Amortization of capitalized implementation costs is recognized on a straight-line basis over the term of the associated hosting arrangement when it is ready for its intended use. Costs related to preliminary project activities and post-implementation activities are expensed as incurred.

Revenue Recognition

The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company applies the five-step model to contracts when (1) parties have approved the contract and are committed to performing respective obligations, (2) the Company can identify each party’s rights regarding the goods or services to be transferred, (3) the Company can identify the payment terms for the goods or services to be transferred, (4) the contract has commercial substance, and (5) it is probable that the Company will collect the consideration it is entitled to in exchange for

F-10

the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines the performance obligations by assessing whether each promised good or service is distinct. Goods or services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligations when (or as) the performance obligations are satisfied. The Company constrains its estimate of the transaction price up to the amount (the “variable consideration constraint”) that a significant reversal of recognized revenue is not probable.

Licenses of intellectual property: If a license to the Company’s intellectual property is determined to be distinct from the other promised goods or services identified in an arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license at the point in time when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other goods or services, the Company applies 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 toward satisfying the performance obligation for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition.

Customer options for additional goods or services: If a contract contains customer options that allow the customer to acquire additional goods or services, including a license to the Company’s intellectual property, the goods and services underlying the customer options are evaluated to determine whether they are deemed to represent a material right. In determining whether the customer option has a material right, the Company assesses whether there is an option to acquire additional goods or services at a discount. If the customer option is determined not to represent a material right, the option is not considered to be a performance obligation. If the customer option is determined to represent a material right, the material right is recognized as a separate performance obligation. 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 the option is exercised.

Milestone payments: At the inception of each arrangement or amendment that includes development, regulatory or commercial milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. ASC 606 prescribes two methods to use when estimating the amount of variable consideration: the expected value method and the most likely amount method. Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. The Company uses the expected value method to estimate the amount of variable consideration related to the reimbursement of PolQ and WRN program costs which is consistently applied throughout the life of the contract: however, it is not necessary for the Company to use the same approach for all contracts. If it is probable that a significant revenue reversal would not occur when the uncertainty associated with the milestone is resolved, the associated milestone value is included in the transaction price. Milestone payments that are highly susceptible to factors outside the Company’s influence, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. If there is more than one performance obligation, the transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis. The Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability or achievement of each milestone and any related constraint, and if necessary, adjusts its estimates 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.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Upfront payments and fees are recorded as contract liabilities upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does 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 customer and the transfer of the promised goods or services to the customer will be one year or less.

Contractual cost sharing payments received from a customer or collaboration partner are accounted for as variable consideration. The Company includes an expected value in the transaction price. Contractual cost sharing payments made to a customer or collaboration partner are accounted for as a reduction to the transaction price if such payments are not related to distinct goods or services received from the customer or collaboration partner.

Contracts may be amended to account for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. When contract

F-11

modifications create new performance obligations and the increase in consideration approximates the standalone selling price for goods and services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is accounted for as a separate contract. If a contract modification is not accounted for as a separate contract, the Company accounts for the promised goods or services not yet transferred at the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. The Company accounts for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. In such case, the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).

Upfront payment contract liabilities resulting from the Company’s license and collaboration agreements do not represent a financing component as the payment is not financing the transfer of goods and services, and the technology underlying the licenses granted reflects research and development expenses already incurred by the Company. As such, the Company does not adjust its revenues for the effects of a significant financing component. Amounts received prior to satisfying the revenue recognition criteria are recorded as contract liability in the Company’s balance sheets. If the related performance obligation is expected to be satisfied within the next twelve (12) months, this will be classified and included within current contract liability.

Research and Development Expenses

Research and development expenses consist of compensation costs, employee benefit costs, costs for contract manufacturing organizations (“CMOs”), costs for contract research organizations (“CROs”), costs for sponsored research, consulting costs, costs for laboratory supplies, costs for product licenses, facility-related expenses and depreciation. All research and development costs are charged to research and development expenses as incurred and included within the statements of operations and comprehensive loss. Payments associated with licensing agreements to acquire exclusive licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternate commercial use are also expensed as incurred. Payments made to third parties under these arrangements in advance of the performance of the related services by the third parties are recorded as prepaid expenses until the services are rendered.

Accrued Research and Development Expenses

The Company has entered into various agreements with CMOs and CROs. The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

Stock-Based Compensation

The Company accounts for stock-based compensation arrangements with employees and non-employees in accordance with ASC 718, Stock Compensation. The Company accounts for stock-based compensation arrangements using a fair value method which requires the recognition of compensation expense related to all stock-based awards. The fair value method requires the Company to estimate the fair value of stock option awards on the date of grant using an option pricing model. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted, which is expensed on a straight-line basis over the vesting period. Generally, the stock options granted by the Company to its employees have a 10 year term and vest over a 4-year period with 1-year cliff vesting.

Income Taxes

The Company accounts for income taxes using the asset and liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are currently in effect unless such rate is expected to be different when the deferred item reverses. Valuation allowances are established where necessary to reduce deferred tax assets to the amounts expected to be realized. Deferred tax assets and liabilities are classified as noncurrent on the balance sheet.

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The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in interest expense and other expense, respectively.

Comprehensive Loss

Comprehensive loss includes net loss and certain changes in stockholders’ equity that are excluded from net loss, primarily unrealized gains and losses from the Company’s marketable securities.

Net Loss per Share Attributable to Common Stockholders

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options, restricted stock and restricted stock that is subject to repurchase at the original purchase price are considered to be potentially dilutive securities. The Company considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of early exercised shares subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications (“ASC”) or other standard setting bodies and adopted by the Company as of the specified effective date, unless otherwise discussed below.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The FASB subsequently issued supplemental guidance to ASC 326 within ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief, ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. ASU 2019-10 extended the effectiveness of Topic 326 for smaller reporting companies until fiscal years beginning after December 15, 2022. ASU 2019-10 requires entities to make a one-time determination of whether an entity is eligible to be a smaller reporting company as of November 15, 2019 for the purpose of determining the effective date of ASU 2016-13. The Company determined that it was eligible to be a smaller reporting company as of November 15, 2019. The Company will adopt this ASU on January 1, 2023. The Company evaluated the impact of the adoption of the ASU, and it does not result in a material impact on the Company's financial statements and related disclosures.

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3. Fair Value Measurement and Marketable Securities

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an 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 such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

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

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of December 31, 2022, financial assets measured and recorded at fair value are as follows (in thousands):

AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses EstimatedFair Value

Assets

(1)

Included in cash and cash equivalents on the balance sheet

(2)

$4.0 million was included in cash and cash equivalents on the balance sheet due to securities with purchase dates within 90 days of maturity dates

As of December 31, 2021, financial assets measured and recognized at fair value are as follows (in thousands):

AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses EstimatedFair Value

Assets

(1)

Included in cash and cash equivalents on the balance sheet

As of December 31, 2022 and December 31, 2021, all marketable securities had a remaining maturity of less than two years. There were no financial liabilities measured and recognized at fair value as of December 31, 2022 and December 31, 2021.

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4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Useful Life As of December 31,

Leasehold improvements Shorter of usefullife or lease term 3,321 3,133

Less: Accumulated depreciation and amortization (7,553 ) (5,597 )

Property and equipment, net $ 6,509 $ 4,763

Depreciation and amortization expense was $2.1 million, $1.7 million and $1.4 million for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

As of December 31,

Accrued research and development expenses $ 11,146 $ 7,864

Accrued salaries and benefits 5,248 3,971

Legal and professional fees 513 485

5. Operating Leases

The Company leases its laboratory and office facilities in South San Francisco, California under a non-cancelable operating lease with expiration date in July 2024 (“Original Lease”).

On September 30, 2019, the Company and the landlord of the laboratory and office facilities in South San Francisco entered into a second amendment (“Second Amendment”) to lease additional office spaces at the same location. The Company accounts for the Second Amendment as a separate contract and recognized a related right-of-use (“ROU”) asset and lease liability of $1.2 million on the lease commencement date in August 2020.

The maturities of operating lease liabilities as of December 31, 2022 are as follows (in thousands):

As of December 31, 2022 Operating Leases

Total lease payments 3,683

Less: Interest (201 )

Present value of lease liabilities $ 3,482

Amounts recognized on the balance sheet

Current lease liabilities $ 1,871

Long-term lease liabilities 1,611

Total lease liabilities $ 3,482

Operating lease cost was $1.7 million, $1.7 million and $1.5 million for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively.

F-15

As of December 31, 2022, the ROU assets of $2.5 million are included in non-current assets on the balance sheet, and lease liabilities of $3.5 million are included in current liabilities and non-current liabilities on the balance sheet.

As of December 31, 2022, the remaining term for the operating lease in South San Francisco, California is 1.6 years, and the discount rate used to measure the lease liability for such operating lease upon recognition is 7.0% for the Original Lease and 6.0% for the Second Amendment. The Company has one right to extend the lease term of the operating lease in South San Francisco for two years by giving the landlord written notice. The remaining term does not include the additional two years, as the Company assessed at commencement date that it was not reasonably certain to extend the lease term.

During the years ended December 31, 2022 December 31, 2021 and December 31, 2020, cash paid for amounts included in operating lease liabilities of $2.0 million, $1.9 million and $1.7 million, respectively, is included in cash flows from operating activities on the statement of cash flows.

6. Commitments and Contingencies

Contingencies

From time to time, the Company may be involved in litigation related to claims that arise in the ordinary course of its business activities. The Company accrues for these matters when it is probable that future expenditures will be made and these expenditures can be reasonably estimated. As of December 31, 2022, the Company does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Indemnification

The Company enters into standard indemnification arrangements in the ordinary course of business with vendors, clinical trial sites and other parties. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. Accordingly, the Company has not recorded a liability related to such indemnification agreements as of December 31, 2022.

7. Income Taxes

No provision for income taxes was recorded for the years ended December 31, 2022, December 31, 2021 and December 31, 2020. The Company has incurred net operating losses only in the United States since its inception. The Company has not reflected any benefit of such net operating loss carryforwards in the financial statements.

The provision for income taxes differs from the amount expected by applying the federal statutory rate to the loss before taxes as follows:

Year Ended December 31,

Federal statutory income tax rate 21.0 % 21.0 % 21.0 %

State income taxes 1.9 % 0.7 % (1.9 %)

Change in valuation allowance (23.4 %) (25.2 %) (21.5 %)

Stock Based Compensation (1.2 %) (0.2 %) (0.3 %)

Research tax credits 4.4 % 3.8 % 2.7 %

Other permanent differences (0.1 %) (0.1 %) 0.0 %

Provision for income taxes 0.0 % 0.0 % 0.0 %

F-16

The tax effects of temporary differences and carryforwards of the deferred tax assets are presented below (in thousands):

As of December 31,

Deferred tax assets:

Research and development credit carryforwards 9,454 5,939

Capitalized R&D Expenditures 15,134 -

Deferred tax assets, net of valuation allowance 769 1,146

Deferred tax liabilities:

Right-of-use assets (527 ) (825 )

Property and equipment (242 ) (321 )

Net deferred tax assets $ — $ —

The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

As of December 31, 2022, the Company had net operating loss carryforwards of $122.0 million available to reduce future taxable income, if any, for federal income tax purposes. As of December 31, 2022, the Company had net operating loss carryforwards of $87.5 million available to reduce future taxable income, if any, for state income tax purposes. If not utilized, the federal carryforwards of $11.6 million and the state carryforwards of $87.5 million will begin to expire in 2037 and 2036, respectively. The federal net operating loss carryforwards of $110.4 million arising after December 31, 2017 do not expire.

The Company also had federal and state research and development credit carryforwards of $6.5 million and $4.9 million, respectively, as of December 31, 2022. The Company received orphan drug designation of darovasertib in Q1 2022, and it generated $0.9 million of Orphan Drug Credits, or ODC. The federal credits will expire starting in 2037 if not utilized, and the state research credit can be carried forward indefinitely.

The Tax Reform Act of 1986 limits the use of net operating loss carryforwards in certain situations where changes occur in the stock ownership of a company. The annual limitation may result in the expiration of net operating losses and credits before utilization. The Company performed a Section 382 analysis through December 31, 2022. The Company has experienced ownership changes in the past and in the current year. None of the tax attribute carryforwards will be permanently limited as a result of the ownership change in 2022. Subsequent ownership changes may affect the limitation in future years.

Related to unrecognized tax benefits noted below, the Company accrued no penalties or interest during the years ended December 31, 2022, December 31, 2021 and December 31, 2020. The Company does not expect its unrecognized tax benefit balance to change materially over the next 12 months.

The Company had $2.0 million and $1.3 million of unrecognized tax benefits as of December 31, 2022 and December 31, 2021, respectively.

F-17

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands).

Increase related to prior year tax positions 73

Increase related to current year tax positions 330

Increase related to prior year tax positions 51

Increase related to current year tax positions 607

The Company files income tax returns in the U.S. federal jurisdiction and in the state of California, New Jersey, Oregon and Pennsylvania. For jurisdictions in which tax filings have been filed, all tax years remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating losses or credits.

The Inflation Reduction Act was signed into law on August 16, 2022, and contained several tax provisions to curb inflation by reducing the deficit, lowering prescription drug prices, investing into domestic energy production while promoting clean energy, and introduced the topic of corporate alternative minimum tax on applicable corporations. There is no impact to the Company’s current tax provision.

In accordance with the 2017 Tax Act, research and experimental (R&E) expenses under Internal Revenue Code Section 174 are required to be capitalized beginning in 2022. R&E expenses are required to be amortized over a period of 5 years for domestic expenses and 15 years for foreign expenses. The Company has reflected this in its current tax provision.

8. Common Stock

As of December 31, 2022 and December 31, 2021, the Company’s certificate of incorporation authorized the Company to issue 300,000,000 shares of common stock at a par value of $0.0001 per share. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Company’s board of directors. As of December 31, 2022, no dividends have been declared to date.

The Company had reserved common stock for future issuance as follows:

As of December 31,

Shares reserved for common stock options under the 2019 Plan as of December 31, 2021 reflects the removal of 107,989 shares under the 2015 Plan, effective upon approval of the 2019 Plan.

9. Stock-Based Compensation

2019 Incentive Award Plan

In May 2019, the Company’s board of directors adopted and the Company’s stockholders approved the 2019 Incentive Award Plan (the “2019 Plan”), under which the Company may grant cash and equity-based incentive awards to the Company’s employees, consultants and directors. Following the effectiveness of the 2019 Plan, the Company will not make any further grants under the 2015 Equity Incentive Plan (the “2015 Plan”). However, the 2015 Plan continues to govern the terms and conditions of the outstanding awards granted under it. Shares of common stock subject to awards granted under the 2015 Plan that are forfeited or lapse unexercised and which following the effective date of the 2019 Plan are not issued under the 2015 Plan will be available for issuance under the 2019 Plan.

Options granted under the 2019 Plan may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees and consultants. The 2019 Plan is subject to an annual increase on the first day of each year beginning in 2020 and ending in 2029, equal to the lesser of 4% of the shares outstanding on the last day of the immediately preceding fiscal year, and such small number of shares as determined by the Company's board of directors. Options granted under the 2019 Plan have a term of 10 years (or five years if granted to a 10% stockholder) and generally vest over a 4-year period with 1-year cliff vesting.

As of December 31, 2022, the number of shares available for issuance under the 2019 Plan was 664,919.

F-18

2015 Equity Incentive Plan

In 2015, the Company established its 2015 Plan which provides for the granting of stock options to employees and consultants of the Company. Options granted under the 2015 Plan may be either ISOs or NSOs.

2019 Employee Stock Purchase Plan

In May 2019, the Company’s board of directors adopted and the Company’s stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions up to 15% of eligible compensation. The offering period is determined by the Company in its discretion but may not exceed 27 months. The per-share purchase price on the applicable exercise date for an offering period is equal to the lesser of 85% of the fair market value of the common stock at either the first business day or last business day of the offering period, provided that no more than 4,000 shares of common stock may be purchased by any one employee during each offering period.

The ESPP is intended to constitute an “employee stock purchase plan” under Section 423(b) of the Internal Revenue Code of 1986, as amended. A total of 195,000 shares of common stock were initially reserved for issuance under the ESPP, subject to an annual increase on January 1 of each year, beginning on January 1, 2020, equal to the lesser of 1% of the shares outstanding on the last day of the immediately preceding fiscal year and such number of shares as may be determined by the board of directors, provided, however, no more than 2,500,000 shares may be issued under the ESPP. As of December 31, 2022, the number of shares available for issuance under the ESPP was 906,523. For the years ended December 31, 2022 and December 31, 2021, the Company recorded $0.4 million and $0.3 million, respectively, of compensation expense related to employee participation in the ESPP.

Stock-Based Compensation Expense

Total stock-based compensation expense recorded related to awards granted to employees and non-employees was as follows (in thousands):

Year Ended December 31,