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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 consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage precision medicines company transforming the drug discovery process by combining leading-edge computational and experimental technologies with the goal of bringing life-changing therapies to patients. We are among the first of a new breed of biotech created at the intersection of disparate disciplines. Our DynamoTM platform integrates an array of leading-edge computational and experimental approaches designed to drug protein targets that have previously been intractable, or inadequately addressed. Our initial focus is on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications.

We have deployed our technology platform to build a pipeline of product candidates to address targets in precision medicine where there is clear evidence linking target proteins to disease and where molecular diagnostics can unambiguously identify relevant patients for treatment. We believe this approach will increase the likelihood of successfully translating a specific pharmacological mechanism into clinical benefit.

Our pipeline consists of programs which we believe target previously unsolved drug discovery challenges, or what we term “Innovators”, and programs which we believe target problems with “existing” answers, such as an approved therapy, for which we believe there is inadequate treatment and seek to rapidly create novel solutions, or what we term “Challengers.” Our lead product candidates are RLY-4008, RLY-2608, which are part of our Innovator portfolio, and RLY-1971, which is part of our Challenger portfolio.

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RLY-4008. In the third quarter of 2020, we initiated a first-in-human clinical trial for RLY-4008, a potent, selective and oral small molecule inhibitor of fibroblast growth factor receptor 2, or FGFR2, for patients with advanced or metastatic FGFR2-altered solid tumors. In October 2021, we announced initial clinical data from this trial. We believe the interim clinical data as of the data cut-off date of September 9, 2021, or the Interim Data Cut-off Date, suggest robust inhibition of FGFR2 in the first 49 subjects that was not shown to be limited by off-target toxicities, including hyperphosphatemia and diarrhea. The initial pharmacokinetic and predicted receptor occupancy data suggest that all once daily dose levels above 30 mg of RLY-4008 administered as of the Interim Data Cut-off Date can achieve >85% continuous inhibition of FGFR2. At those levels, acute toxicities that would limit dose intensity have generally not been observed as of the Interim Data Cut-off Date. Approximately 80% of all patients treated achieved reductions in tumor size as of the Interim Data Cut-off Date, which was observed across dose levels, tumor types and FGFR2 alterations and lines of treatment. In December 2021, we initiated expansion cohorts at a continuous 70 mg once-daily dose. In January 2022, the U.S. Food and Drug Administration, or FDA, granted orphan drug designation to RLY-4008 for the treatment of cholangiocarcinoma.

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RLY-2608. In December 2021, we dosed the first patient in a first-in-human clinical trial for RLY-2608, the first known allosteric, pan-mutant (H1047X, E542X and E545X) and isoform-selective phosphoinostide 3 kinase alpha, or PI3Kα, inhibitor in clinical development. RLY-2608 is the lead program of multiple efforts in our PI3Kα franchise to discover and develop mutant selective inhibitors of PI3Kα. In the fourth quarter of 2021, we announced preclinical data for RLY-2608. The data show that in preclinical models, RLY-2608 preferentially binds to mutant PI3Kα at a novel allosteric site discovered by the Dynamo platform. The data also suggest that projected clinically relevant doses of RLY-2608 achieved tumor regression in PIK3CAmutant in vivo xenograft mouse models representing H1047R and E545K mutations with significantly reduced impact on glucose metabolism compared to non-mutant selective active site inhibitors. The data further show that in preclinical models, RLY-2608 combines with standard of care therapies facilitated regressions in ER+/HER2- breast cancer.

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RLY-1971. We initiated a Phase 1 clinical trial for RLY-1971, our inhibitor of Src homology region 2 domain-containing phosphatase-2, or SHP2, in patients with advanced solid tumors in the first quarter of 2020. In December 2020, we entered into a global collaboration and license agreement, or the Genentech Agreement, with Genentech, Inc., a member of the Roche Group, or Genentech, for the development and commercialization of RLY-1971. In July 2021, Genentech initiated the cohort of RLY-1971 in combination with GDC-6036, its KRAS G12Cinhibitor, in a Phase 1b trial.

In addition to the three product candidates described above, we have over five discovery stage programs across both precision oncology and genetic disease indications. We are focused on using the novel insights derived from our approach to transform the lives of patients suffering from debilitating and life-threatening diseases through the discovery, development and commercialization of our therapies.

We were incorporated in May 2015. We have devoted substantially all of our resources to developing our lead product candidates, developing our innovative computational and experimental approaches on protein motion, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. To date, we have principally financed our operations through private placements of preferred stock, convertible debt and proceeds from public offerings of our common stock. Additionally, in 2021, we received an aggregate of $95.0 million in connection with the Genentech Agreement.

In October 2021, we completed a public offering, or the October 2021 Offering, of 15,188,679 shares of common stock, including the exercise in full of the underwriters’ option to purchase an additional 1,981,132 shares, at an offering price of $26.50 per share, for net proceeds of $382.2 million, after deducting underwriting discounts and commissions and other offering expenses. In July 2020, we closed our initial public offering, or IPO, and issued 23,000,000 shares of our common stock at a price of $20.00 per share for net proceeds of $425.3 million, after deducting underwriting discounts and commissions and offering expenses. Prior to our IPO, we had received gross proceeds of approximately $520.0 million from sales of our preferred stock and our issuance of convertible debt.

In December 2020, we entered into the Genentech Agreement with Genentech, for the development and commercialization of RLY-1971. Under the terms of the Genentech Agreement, we received $75.0 million in an upfront payment and $20.0 million in milestone payments from Genentech in 2021. We are eligible to receive an additional $5.0 million in near-term payments; and, if we do not opt into a U.S. profit/cost share, up to $695.0 million in additional development, commercialization and sales-based milestones for RLY-1971; and tiered royalties on annual global net sales (on a country-by-country basis), anticipated to be in the low-to-mid-teens, subject to reductions in certain circumstances. Additionally, we are eligible to receive additional royalties in the event of regulatory approval of RLY-1971 and Genentech’s compound, GDC-6036, that directly binds to and inhibits KRAS G12C, in combination. We have the right to opt-in to a 50/50 U.S. profit/cost share and if we do opt into the U.S. profit/cost share, we are eligible to receive up to $410.0 million in additional commercialization and sales-based milestones for RLY-1971 outside of the U.S. and tiered royalties on annual net sales outside of the U.S. (on a country-by-country basis), anticipated to be in the low-to-mid-teens, subject to reduction in certain circumstances. We also retain the right to develop RLY-1971 in combination with our FGFR2 and PI3Kα programs.

On April 15, 2021, we entered into an Agreement and Plan of Merger, or the Merger Agreement, and on April 22, 2021, we acquired ZebiAI Therapeutics, Inc., or ZebiAI. Pursuant to the Merger Agreement, we were required to pay ZebiAI’s former stockholders, option holders and warrant holders, or the ZebiAI Holders, upfront consideration in an aggregate amount of approximately $85.0 million, excluding customary purchase price adjustments, composed of approximately $20.0 million payable in cash and approximately $65.0 million payable in shares of our common stock. In addition, (i) the ZebiAI Holders will be eligible to receive up to an additional $85.0 million in milestone payments upon the achievement of certain platform or program-related milestones, payable in our common stock and (ii) we will pay to the ZebiAI Holders 10% of the payments we receive within three years of the closing date of the Merger Agreement from partnering, collaboration or other agreements related to ZebiAI’s platform up to an aggregate maximum amount of $100.0 million, payable in cash.

The ongoing COVID-19 pandemic has presented a substantial public health and economic challenge around the world and continues to affect our employees, patients, communities and business operations. The extent to which the

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COVID-19 pandemic may continue to affect our operations or those of our third-party partners, including our preclinical studies or clinical trial operations, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the severity and duration of additional variant outbreaks, vaccination rates where we or our third party partners conduct operations, and the actions to contain COVID-19 or treat its impact, among others. The continued spread of COVID-19 globally could adversely impact our preclinical or clinical trial operations in the United States, including our ability to obtain slots for IND-enabling studies, recruit and retain patients, principal investigators and site staff in our clinical trials, obtain sufficient clinical trial supply of our product candidates due to supply chain disruptions or interruptions in global shipping, as well as activate new clinical trial sites. To date, we have been able to continue to enroll our patients in first-in-human clinical trials for RLY-1971, RLY-4008 and RLY-2608, and we currently do not anticipate any interruptions in clinical enrollment or any material adverse impact on our financial condition or results of operations due to the COVID-19 pandemic. However, we are continuing to assess the potential impact of the ongoing COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system. See “—The ongoing COVID-19 pandemic has impacted our business and any future pandemic, epidemic, or outbreak of an infectious disease could similarly affect our business and our financial results and could cause further disruption to the development of our product candidates” for a more detailed discussion of the risks related to the COVID-19 pandemic.

Additionally, inflation generally affects us by increasing our employee-related costs and clinical trial expenses. We do not believe that inflation had a material effect on our results of operations during the year ended December 31, 2021.

Since our inception, we have incurred significant operating losses on an aggregate basis. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $363.9 million, $52.4 million and $75.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $768.1 million. These losses have resulted primarily from costs incurred in connection with research and development activities, licensing and patent investment and general and administrative costs associated with our operations. We expect to continue to incur significant expenses, including the costs of operating as a public company, and generate increasing operating losses for at least the next several years.

We anticipate that our expenses will increase substantially if and as we:

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conduct our current and future clinical trials of RLY-4008, and RLY-2608 and additional preclinical research and development of our PI3Kα mutant selective inhibitor programs and other early-stage programs;

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initiate and continue research and preclinical and clinical development of our other product candidates;

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seek to identify additional product candidates;

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pursue marketing approvals for any of our product candidates that successfully complete clinical trials, if any;

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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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require the manufacture of larger quantities of our product candidates for clinical development and potentially commercialization;

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obtain, maintain, expand and protect our intellectual property portfolio;

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acquire or in-license other drugs and technologies;

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hire and retain additional clinical, regulatory, quality and scientific personnel;

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build out new facilities or expand existing facilities to support our ongoing development activity; and

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add operational, financial and management information systems and personnel, including personnel to support our drug development, any future commercialization efforts and our operations as a public company.

In addition, if we obtain marketing approval for any of our lead product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.

As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed, on favorable 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 or commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce or terminate our operations.

We believe our cash, cash equivalents and investments of $958.1 million as of December 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into at least 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We will need to raise additional capital in the future to continue developing the drugs in our pipeline and to commercialize any approved drug. We may seek to obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan.

Components of our Results of Operations

Revenue

To date, our revenue consists primarily of amounts related to the Genentech Agreement. We recognize our revenue as the performance obligations are satisfied under the agreement.

Operating Expenses

Our operating expenses since inception have primarily consisted of research and development costs and general and administrative costs. During the year ended December 31, 2021, we also incurred other operating expenses in connection with the acquisition of ZebiAI.

Research and Development Expenses

Research and development expenses include:

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salaries, benefits and other employee related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

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costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

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expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, or CMOs, and other vendors that conduct our clinical trials and preclinical activities;

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costs of acquiring, developing and manufacturing clinical trial materials and lab supplies;

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costs related to compliance with regulatory requirements; and

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facility costs, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.

We expense research and development costs as the services are performed or the goods are received. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid expenses or accrued research and development expenses.

We began tracking external development costs by program on January 1, 2020 for programs that have entered clinical trials.We do not allocate internal costs, facilities costs or other overhead costs to specific programs. The following summarizes our costs based on their status in development:

Year EndedDecember 31,

External costs for programs in clinical trials $ 18,367 $ 7,447

External costs for programs in discovery and pre-clinical studies 69,838 42,431

Total research and development expenses $ 172,650 $ 99,862

Our most advanced development programs, RLY-1971, RLY-4008 and RLY-2608, are enrolling patients in first-in-human clinical trials. We have over five discovery stage programs across both precision oncology and genetic disease indications. Costs incurred for these programs include costs incurred to support our discovery research and translational science efforts up to the initiation of first-in-human clinical development. Platform research and other research and development activities include costs that are not specifically allocated to active product candidates, including facilities costs, depreciation expense and other costs. Employee related expenses includes salary, wages, stock-based compensation and other costs related to our personnel, which are not allocated to specific programs or activities.

We cannot determine with certainty the duration and costs of future clinical trials and future development costs, if, when or to what extent we will generate revenue from the commercialization and sale of any our product candidates for which we obtain marketing approval or our other research and development costs. We may never succeed in obtaining marketing approval for any of our product candidates.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

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the scope, rate of progress, expense and results of our preclinical development activities, any future clinical trials of RLY-4008, RLY-2608 or other product candidates and other research and development activities that we may conduct;

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uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;

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establishing an appropriate safety and efficacy profile with IND-enabling studies;

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the initiation and completion of future clinical trial results;

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the timing, receipt and terms of any approvals from applicable regulatory authorities including the FDA and non-U.S. regulators;

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significant and changing government regulation and regulatory guidance;

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potential additional studies requested by regulatory agencies;

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establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party manufacturers are able to make product successfully;

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the impact of any business interruptions to our operations, including the timing and enrollment of patients in our planned clinical trials, or to those of our manufacturers, suppliers or other vendors resulting from the ongoing COVID-19 pandemic or a similar public health crisis;

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the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and

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maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we continue to conduct clinical trials of RLY-4008 and RLY-2608, as well as identify and develop additional product candidates.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.

In-Process Research and Development Expenses

In-process research and development expenses consist of the cost of acquiring in-process research and development assets that have no alternative future use, specifically in connection with our acquisition of ZebiAI. We do not expect to record incremental expenses in connection therewith in future periods.

Loss on Initial Consolidation of Variable Interest Entity

Loss on initial consolidation of variable interest entity consists of the difference between total consideration transferred and the fair value of net assets acquired and liabilities assumed in connection with our acquisition of ZebiAI. We do not expect to record incremental losses in connection therewith in future periods.

Change in Fair Value of Contingent Consideration Liability

Change in fair value of contingent consideration liability consists of fluctuations in the estimated fair value of contingent milestone payments under the Merger Agreement with ZebiAI. In future periods, we expect the fair value of such contingent milestone payments to increase or decrease based on, among other things, our estimates of the probability of achieving and timing of the contingent milestone payments, as well as changes in market interest rates and the time value of money.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; other expenses associated with operating as a public company, including compliance with exchange listing and Securities and Exchange Commission, or SEC requirements, director and officer insurance costs, and investor and public relations costs; travel expenses; and

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facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative personnel headcount to support personnel in research and development and to support our operations generally as we increase our research and development activities and activities related to the potential commercialization of our product candidates.

Other Income, Net

Other income, net primarily consists of interest income related to interest earned on our cash, cash equivalents and investments.

Income Taxes

Since our inception in 2015, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in any year or for our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2021, we had federal NOL carryforwards of $371.4 million available to reduce taxable income, of which $43.1 million expire beginning in 2035 and $328.2 million do not expire. We have state NOL carryforwards of $466.2 million as of December 31, 2021 available to reduce future state taxable income, which expire at various dates beginning in 2035.

As of December 31, 2021, we also had federal and state research and development tax credit carryforwards of $14.9 million and $4.2 million, respectively, which begin to expire in 2035 and 2030, respectively.

Results of Operations

Comparison of years ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:

Year EndedDecember 31,

(in thousands)

Operating expenses:

In-process research and development expenses 123,000 - 123,000

Loss on initial consolidation of variable interest entity 11,855 - 11,855

Change in fair value of contingent consideration liability 2,836 - 2,836

License and Other Revenue

We recognized revenue of $3.0 million and $82.7 million for the years ended December 31, 2021 and 2020, respectively. During the year ended December 31, 2020, revenue was recognized for substantially all of the $85.0 million upfront payment under the Genentech Agreement upon transfer of the license. During the year ended December 31, 2021, $3.0 million of revenue was recognized, primarily due to the satisfaction of certain ongoing

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performance obligations to provide research and development services under the Genentech Agreement to Genentech.

Research and Development Expenses

Year EndedDecember 31,

(in thousands)

Research and development expenses were $172.7 million for the year ended December 31, 2021 compared to $99.9 million for the year ended December 31, 2020. The increase of $72.8 million was primarily due to $30.0 million of increased employee related costs, including $10.2 million of additional stock-based compensation expense, primarily due to increases in our stock price and increased headcount, $25.3 million of increased outside and consulting services for clinical and pre-clinical candidates, $10.9 million of increased clinical trial expenses and $6.6 million of increased laboratory supplies and other costs, facility costs and depreciation expense.

In-Process Research and Development Expenses

In-process research and development expenses of $123.0 million were recognized for the year ended December 31, 2021 in connection with the in-process research and development asset pursuant to the asset acquisition of ZebiAI in the second quarter of 2021. No such expenses were incurred during the year ended December 31, 2020.

Loss on Initial Consolidation of Variable Interest Entity

Loss on initial consolidation of variable interest entity of $11.9 million was recognized for the year ended December 31, 2021 in connection with the acquisition of ZebiAI in the second quarter of 2021. No such expenses were incurred during the year ended December 31, 2020.

Change in Fair Value of Contingent Consideration Liability

The fair value of our contingent consideration liability for milestone payments under the Merger Agreement with ZebiAI increased by $2.8 million between the acquisition date in April 2021 and December 31, 2021. The increase was attributable to the time value of money. There were no similar amounts in the prior period. In future periods, we expect the fair value of contingent consideration to increase or decrease based on, among other things, our estimates of the probability of achieving and timing of the contingent milestone payments, as well as changes in market interest rates and the time value of money.

General and Administrative Expenses

General and administrative expenses were $57.4 million for the year ended December 31, 2021 compared to $38.6 million for the year ended December 31, 2020. The increase of $18.8 million was primarily due to $12.8 million of increased employee related costs, including $6.3 million of additional stock-based compensation expense, primarily due to increases in our stock price and increased general and administrative headcount to support the growth of our organization, and $6.0 million of other general and administrative expenses primarily attributed to increases in insurance, advisory, consulting and other expenses.

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Other Income (Expense), Net

Other income, net, was $0.8 million for the year ended December 31, 2021 compared to $3.4 million for the year ended December 31, 2020 due primarily to decreases in interest rates.

Comparison of years ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:

Year EndedDecember 31,

(in thousands)

Operating expenses:

License and Other Revenue

We recognized revenue of $82.7 million for the year ended December 31, 2020 in connection with the Genentech Agreement related to the satisfaction of our performance obligation for the license transfer. We did not recognize any revenue for the year ended December 31, 2019.

Research and Development Expenses

Year EndedDecember 31,

(in thousands)

Facilities and other allocated expenses 5,770 6,108 (338 )

Research and development expenses were $99.9 million for the year ended December 31, 2020 compared to $70.3 million for the year ended December 31, 2019. The increase of $29.6 million was primarily due to $18.5 million of increased employee related costs, including $12.0 million of additional stock-based compensation expense, primarily due to increases in our stock price and increased headcount, and $11.4 million in increased outside and consulting expenses associated with our clinical and pre-clinical candidates.

General and Administrative Expenses

General and administrative expenses were $38.6 million for the year ended December 31, 2020 compared to $13.7 million for the year ended December 31, 2019. The increase of $24.8 million was primarily due to $19.2 million of increased employee related costs, including $15.5 million of additional stock-based compensation expense, primarily due to increases in our stock price and increased general and administrative headcount to support the

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growth of our organization, and $5.2 million of other general and administrative expenses primarily attributed to increases in insurance, legal and other expenses.

Other Income (Expense), Net

Other income, net, was $3.4 million for the year ended December 31, 2020 compared to $8.7 million for the year ended December 31, 2019 due primarily to decreases in interest rates and lower investment amounts.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for several years, if ever. To date, we have principally financed our operations through private placements of preferred stock, convertible debt and proceeds from public offerings of our common stock. In July 2020, we closed our IPO and issued 23,000,000 shares of common stock for net proceeds of $425.3 million. Prior to our IPO, we received gross proceeds of $520.0 million from sales of our preferred stock and our issuance of convertible debt. We received an upfront payment of $75.0 million from Genentech pursuant to the Genentech Agreement in January 2021 and $20.0 million in milestone payments in 2021. As of December 31, 2021, we had cash, cash equivalents and investments of $958.1 million.

In August 2021, we filed a universal shelf registration statement on Form S-3ASR with the SEC, or the 2021 Shelf, to register for sale an amount of our common stock, preferred stock, debt securities, warrants and/or units in one or more offerings, which became effective upon filing with the SEC (File No. 333-258768).

In August 2021, we entered into a sales agreement, or Sales Agreement, with Cowen and Company, LLC, or Cowen, pursuant to which we may offer and sell shares of our common stock having aggregate gross proceeds of up to $300.0 million from time to time in “at-the-market” offerings through Cowen, as our sales agent. We agreed to pay Cowen a commission of up to 3.0% of the gross proceeds of any shares sold by Cowen under the Sales Agreement. There have been no shares of our common stock sold under the Sales Agreement as of December 31, 2021.

In October 2021, we completed the October 2021 Offering of 15,188,679 shares of common stock, including the exercise in full of the underwriters’ option to purchase an additional 1,981,132 shares, at an offering price of $26.50 per share. We received net proceeds of $382.2 million, after deducting underwriting discounts and commissions and other offering expenses.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

Year EndedDecember 31,

(in thousands)

Operating Activities

During the year ended December 31, 2021, operating activities used $74.4 million of cash, primarily resulting from our net loss of $363.9 million, offset by non-cash charges of $192.1 million and cash provided by changes in our operating assets and liabilities of $97.3 million.

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During the year ended December 31, 2020, operating activities used $102.5 million of cash, primarily resulting from our net loss of $52.4 million and cash used by changes in our operating assets and liabilities of $85.2 million, partially offset by non-cash charges of $35.1 million.

During the year ended December 31, 2019, operating activities used $66.1 million of cash, primarily resulting from our net loss of $75.3 million, partially offset by non-cash charges of $4.9 million and cash provided by changes in our operating assets and liabilities of $4.3 million.

Investing Activities

During the year ended December 31, 2021, investing activities used $479.5 million, consisting primarily of $450.7 million of net purchases of investments, $25.3 million related to cash paid for the acquisition of ZebiAI and $3.5 million for the purchase of property and equipment.

During the year ended December 31, 2020, investing activities provided $81.7 million, consisting primarily of $83.6 million of net investment proceeds from maturities offset by $1.9 million for the purchase of property and equipment.

During the year ended December 31, 2019, investing activities used $319.0 million, consisting primarily of $311.0 million of net investment purchases and $8.0 million for the purchase of property and equipment.

Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities was $388.1 million, consisting of net proceeds from our follow-on offering in October 2021 of $382.2 million, proceeds from stock option exercises of $4.7 million and proceeds from the issuance of common stock under our 2020 Employee Stock Purchase Plan of $1.1 million.

During the year ended December 31, 2020, net cash provided by financing activities was $426.5 million, consisting of net proceeds from the issuance of common stock upon the closing of our IPO of $425.3 million and proceeds from stock option exercises of $1.2 million.

During the year ended December 31, 2019, net cash provided by financing activities was $5.6 million, consisting of net proceeds from our sales of Series C convertible preferred stock of $5.0 million and proceeds from the exercise of stock options of $0.6 million.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing clinical development activities related to the potential clinical development activities of RLY-4008 and RLY-2608 and the ongoing pre-clinical development activities of our PI3Ka program. In addition, we are now incurring additional costs associated with operating as a public company. We expect that our expenses will increase substantially as discussed in more detail in “ Overview” above.

As of December 31, 2021, we had cash, cash equivalents and investments of $958.1 million. We believe that our existing cash, cash equivalents and investments will enable us to fund our operating expenses and capital expenditure requirements into at least 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with the development of RLY-4008, RLY-2608 and our other product candidates and programs, and because the extent to which we may enter into collaborations with third parties for the development of our product candidates is unknown, we are unable to estimate the timing and amounts

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of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

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the impact of any business interruptions to our operations, including the timing and enrollment of patients in our planned clinical trials, or to those of our manufacturers, suppliers or other vendors, resulting from the ongoing COVID-19 pandemic or similar public health crisis;

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the scope, progress, results and costs of our current and future clinical trials of RLY-4008 and RLY-2608 and additional preclinical research of our PI3Ka programs;

•

the scope, progress, results and costs of drug discovery, preclinical research and clinical trials for our other product candidates;

•

the number of future product candidates that we pursue and their development requirements;

•

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

•

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

•

the success of any existing or future collaborations that we may enter into with third parties;

•

the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates, such as our collaboration with Genentech;

•

the achievement of milestones or occurrence of other developments that trigger payments under any existing or future collaboration agreements, if any;

•

the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under any existing or future collaboration agreements, if any;

•

the costs and timing of future commercialization activities, including drug sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval, to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of any collaborator that we may have at such time;

•

the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;

•

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

•

our headcount growth and associated costs as we expand our business operations and our research and development activities; and

•

the costs of operating as a public company.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any product candidate for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute your ownership interest.

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If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

Intellectual Property License

On June 15, 2020, we entered into an Amended and Restated Collaboration and License Agreement, or DESRES Agreement, with D. E. Shaw Research, LLC, or D. E. Shaw Research, extending the term and otherwise modifying the terms of the Collaboration and License Agreement originally entered into on August 17, 2016. The DESRES Agreement provides that the parties will jointly conduct research efforts with the goal of identifying and developing product candidates. On a product-by-product basis, we have agreed to pay D. E. Shaw Research milestone payments upon the achievement of certain development and regulatory milestone events for products we develop under the DESRES Agreement that are directed to a Category 1 Target or any target that was a Category 1 Target. Such payments for achievement of development and regulatory milestones total up to $7.3 million in the aggregate for each of the first three products we develop, and up to $6.3 million in the aggregate for each product we develop after the first three. In addition, we are obligated to pay D. E. Shaw Research royalty payments as defined in the DESRES Agreement. We assessed the milestone and royalty events under the DESRES Agreement as of December 31, 2021 and 2020 and concluded that $1.5 million was due related to the execution of the Genentech Agreement as of December 31, 2020 and no such payments were due as of December 31, 2021.

The DESRES Agreement extended the term of the original agreement to August 16, 2025 and increased the annual fee from $1.0 million to $7.9 million, commencing on August 16, 2020. In May 2021, the annual fee was further increased, by mutual agreement of the parties, from $7.9 million to $9.9 million. The DESRES Agreement automatically renews for successive one year periods unless either party provides at least one year notice of non-renewal, and the annual fee during each of the one year renewal terms is subject to the mutual agreement of us and D. E. Shaw Research.

399 Binney Street

In December 2017, we entered into a facility lease agreement for approximately 44,336 square feet of office and laboratory space at 399 Binney Street, Cambridge, Massachusetts 02139, which was increased to 44,807 square feet in January 2018. We gained control of the space in January 2019 and the lease expires in April 2029, subject to certain renewal options, which have not been included in our right of use asset and liability on the balance sheet through December 31, 2021. In September 2020, we entered into an amendment to our existing facility lease agreement to expand the leased area by approximately 1,824 square feet of office space at 399 Binney Street, Cambridge, Massachusetts 02139. The amendment commenced in October 2020 and expires in April 2029, subject to certain renewal options. We provided a letter of credit in connection with our facility lease agreement in the amount of $0.9 million with a financial institution, which expires September 30, 2028.

60 Hampshire Street

On May 26, 2021, the Company entered into an agreement to lease approximately 41,474 square feet of laboratory and office space at 60 Hampshire Street, Cambridge, Massachusetts 02139. Our obligation to pay rent under the agreement is expected to start in 2022. The term of the agreement is ten years following the rent commencement, which is currently expected in 2022. We provided a letter of credit in connection with the agreement in the amount of $1.7 million with a financial institution, which expires August 31, 2033.

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Other Significant Arrangements

We also have certain research and license arrangements with other third parties, which provide us with research services with the goal of identifying and developing product candidates until all payment obligations by us to the third party have expired. We have the right to terminate these agreements with a reasonable period of notice. We are also obligated to pay development milestone payments for up to four targets, each in the range of $4.0 million to $7.0 million, upon the achievement of certain specified contingent events. We assessed the milestones as of December 31, 2021 and 2020 and concluded $0.5 million was due as of December 31, 2021 andno such milestone payments were due as of December 31, 2020.

We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior notice of 30 days. Payments due upon cancelation consist only of payments for services provided and expenses incurred up to the date of cancelation.

For more information, see Note 13, Commitments and Contingencies, and Note 14, Leases, of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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

Acquisition Accounting

We are required to make significant judgments and estimates to determine whether an acquisition constitutes an acquisition of a business or assets. For asset acquisitions, this includes whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. We are also required to make several significant judgments and estimates in order to determine the total consideration transferred for the asset acquisition and then allocate it to the assets that we have acquired and the liabilities that we have assumed on our consolidated balance sheet.

With respect to the acquisition of ZebiAI, the determination of the fair value of in-process research and development, or IPR&D, expense did not include significant judgment, given that substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset. Estimating the fair value of contingent milestone payments required significant judgment and estimation, primarily with respect to estimating the probability of achieving and the related timing of the contingent milestone payments.

We are also required to reassess the fair value of the contingent milestone payments from the acquisition of ZebiAI on a quarterly basis, which requires significant judgments and estimation. These significant judgments are primarily the result of our estimates of the probability of achieving and timing of the contingent milestone payments. Changes in the fair value of the contingent milestone payments can result from changes to one or multiple inputs, including adjustments to the probability of achievement and timing of the contingent milestone payments, and, to a lesser extent, changes to the applicable discount rates. Significant judgment is used in determining these assumptions

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during each reporting period. Reasonable changes in these assumptions can cause material changes to the fair value of our contingent consideration liability.

Revenue Recognition

We account for revenue recognition in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, or ASC 606. We recognize revenue pursuant to ASC 606 when our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within the contract and determine those that are performance obligations. We then determine the transaction price and allocate it to the performance obligations. As part of the accounting for these arrangements, we must use significant judgment to determine: (a) the number of performance obligations; (b) the transaction price, including the determination of whether milestones or other variable consideration should be included in the transaction price; and (c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of the transaction price.

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

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

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development and manufacturing expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

•

CROs in connection with performing research activities on our behalf and conducting preclinical studies and clinical trials on our behalf;

•

investigative sites or other service providers in connection with clinical trials;

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•

vendors in connection with preclinical and clinical development activities; and

•

vendors related to product manufacturing and development and distribution of preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract, which may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

Recently Issued and Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that we have adopted is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. None of these pronouncements had a material impact on our financial position or results of operations.

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

Interest rate risk

We are exposed to market risk related to changes in interest rates of our investment portfolio of cash equivalents and investments. As of December 31, 2021, our cash equivalents consisted of money market funds. As of December 31, 2021, our investments consisted of investments in United States Treasury Bills, United States Treasury Bonds and agency bonds that have contractual maturities of less than two years. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. The fair value of our marketable securities is subject to change as a result of potential changes in market interest rates. The potential change in fair value for interest rate sensitive instruments has been assessed on a hypothetical 100 basis point adverse movement across all maturities. As of December 31, 2021, 2020 and 2019 we estimate that such hypothetical 100 basis point adverse movement would not result in a material impact to our consolidated results of operations.

As of December 31, 2021, we had no debt outstanding and are therefore not exposed to interest rate risk with respect to debt.

Foreign currency exchange risk

All of our employees and our operations are currently located in the United States and our expenses are generally denominated in U.S. dollars. However, we have entered into a limited number of contracts with vendors for research and development services that permit us to satisfy our payment obligations in U.S. dollars (at prevailing exchange rates) but have underlying payment obligations denominated in foreign currencies, including the Euro. We are subject to foreign currency transaction gains or losses on our contracts denominated in foreign currencies. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we do not have a formal hedging program with respect to foreign currency. A 10% increase or decrease in current exchange rates would not have a material effect on our financial results for the years ended December 31, 2021, 2020 and 2019.

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Item 8. Financial Statements and Supplementary Data.

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements is found in Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, as incorporated into Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K, by reference.

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

None.

Item 9A. Controls and Procedures.

We have established 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) designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), to allow timely decisions regarding required disclosure. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures were effective.

Internal Control over Financial Reporting

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, a company’s principal executive officer and principal financial officer, or persons performing similar functions, and effected by a company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of a company’s assets;

•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of the company’s management and directors; and

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our internal control over financial reporting is a process designed under the supervision of our principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

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, 2021 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 framework). Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2021.

Our independent registered public accounting firm has issued an attestation report of our internal control over financial reporting. This report appears below.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Relay Therapeutics, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Relay Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Relay Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 24, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Boston, Massachusetts

February 24, 2022

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Item 9B. Other Information.

On February 18, 2022, we entered into an employment agreement, or the Employment Agreement, with Thomas Catinazzo, who currently serves as our Chief Financial Officer. The Employment Agreement supersedes the prior letter agreement entered into between us and Mr. Catinazzo on March 1, 2018.

Pursuant to the terms of the Employment Agreement, Mr. Catinazzo will receive an annual base salary of $420,000 and an annual target bonus equal to 40% of his annual base salary. The Employment Agreement also provides for Mr. Catinazzo’s eligibility to participate in our benefit plans generally.

Additionally, the Employment Agreement provides that upon (i) a termination of Mr. Catinazzo’s employment by us for any reason other than for “cause”, death or disability or (ii) a resignation for “good reason”, in each case outside of the change in control period (i.e., the period beginning in anticipation of, and ending 12 months after, a change in control of the Company), he will be entitled to receive, subject to the execution and delivery of an effective separation agreement and release, (A) an amount equal to the sum of 12 months of his base salary and his target bonus opportunity for the then-current year, which amount shall be prorated, payable in substantially equal installments over 12 months following the date of termination of employment and (B) the employer portion of the premiums for health insurance benefits continuation under COBRA for up to 12 months.

Upon (i) a termination of Mr. Catinazzo’s employment by us other than for cause, death or disability or (ii) a resignation for good reason, in each case, within the change in control period described above, he will be entitled to receive, subject to the execution and delivery of an effective separation agreement and release, (A) a lump sum payment equal to the sum of his then current base salary and target bonus opportunity for the then-current year, (B) the employer portion of the premiums for health insurance benefits continuation under COBRA for up to 12 months and (C) accelerated vesting of all stock options subject to time-based vesting and any other stock-based awards subject to time-based vesting, as of the later of (y) the date of termination of employment and (z) the effective date of the separation agreement and release.

The Employment Agreement is in substantially the same form as our form of Amended and Restated Employment Agreement for executive officers. The foregoing description of the Employment Agreement is qualified in its entirety by reference to such form of Amended and Restated Employment Agreement, a copy of which was filed as Exhibit 10.8 to our Registration Statement on Form S-1/A (File No. 333-239412) filed with the Securities and Exchange Commission on July 9, 2020.

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 10 will be included in our Definitive Proxy Statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2022 Annual Meeting of Stockholders within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K and is incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this Item 11 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K and is incorporated herein by reference.

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

The information required by this Item 12 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K and is incorporated herein by reference.

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

The information required by this Item 13 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

Our independent public accounting firm is Ernst & Young LLP, Boston, Massachusetts, United States, PCAOB Auditor ID 42.

The information required by this Item 14 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K and is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(1)

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

(2)

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

(3)

The exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K. The Exhibit Index is incorporated herein by reference.

Item 16. Form 10-K Summary

The Company has elected not to include summary information.

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm F-2

Consolidated Financial Statements

Consolidated Balance Sheets F-4

Consolidated Statements of Operations and Comprehensive Loss F-5

Consolidated Statements of Cash Flows F-7

Notes to Consolidated Financial Statements F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Relay Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Relay Therapeutics, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2022 expressed an unqualified opinion thereon.

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 in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the 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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

F-2

Valuation of Contingent Milestone Payment Liability

/s/ Ernst & Young

We have served as the Company’s auditor since 2017.

Boston, Massachusetts

February 24, 2022

F-3

Relay Therapeutics, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

Assets

Current assets:

Prepaid expenses and other current assets 13,229 9,385

Intangible asset 2,300 —

Other assets — 22

Liabilities and Stockholders’ Equity

Current liabilities:

Accrued expenses and other current liabilities 13,953 5,760

Operating lease liabilities, current 1,844 1,521

Deferred revenue 248 —

Operating lease liabilities, net of current portion 21,056 22,901

Restricted stock liability — 3

Contingent consideration liability 50,258 —

Other liabilities 15,000 —

Commitments and contingencies (Note 13)

Stockholders’ equity:

Accumulated other comprehensive (loss) income (1,088 ) 64

See accompanying notes.

F-4

Relay Therapeutics, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

Year Ended December 31,

Revenue:

License and other revenue $ 3,029 $ 82,654 $ —

Operating expenses:

In-process research and development expenses 123,000 — —

Loss on initial consolidation of variable interest entity 11,855 — —

Change in fair value of contingent consideration liability 2,836 — —

Other income (expense):

Other expense (4 ) (16 ) (58 )

Other comprehensive income (loss):

Total other comprehensive (loss) income (1,152 ) (261 ) 325

See accompanying notes.

F-5

Relay Therapeutics, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except share and per share data)

Stock-based compensation expense — — — — 4,456 — — 4,456

Unrealized gain on investments — — — — — 325 — 325

Stock-based compensation expense — — — — 31,960 — — 31,960

Unrealized loss on investments — — — — — (261 ) — (261 )

Vesting of restricted common stock — — 160,364 — 3 — — 3

Stock-based compensation expense — — — — 48,454 — — 48,454

Unrealized loss on investments — — — — — (1,152 ) — (1,152 )

See accompanying notes.

F-6

Relay Therapeutics, Inc.

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net amortization of premiums and discounts on investments 2,052 (416 ) (2,495 )

Acquired in-process research and development 123,000 — —

Loss on initial consolidation of variable interest entity 11,855 — —

Change in fair value of contingent milestone liability 2,836 — —

Loss on sale of equipment — — 56

Changes in assets and liabilities:

Prepaid expenses and other current assets (2,681 ) (4,665 ) (2,123 )

Operating lease assets and liabilities, net 277 571 1,233

Other liabilities 15,000 — —

Other assets 22 (22 ) —

Cash flows from investing activities:

Purchases of property and equipment (3,471 ) (1,931 ) (8,002 )

Proceeds from sale of equipment — — 20

Cash paid for acquisition of ZebiAI, net of cash acquired (25,298 ) — —

Cash flows from financing activities:

Proceeds from issuance of common stock upon follow-on offering, net 382,210 — —

Proceeds from issuance of common stock under ESPP 1,141 — —

Supplemental disclosure of non-cash investing and financing activities:

Assets obtained in asset acquisition $ 662 $ — $ —

Liabilities assumed in asset acquisition $ 2,330 $ — $ —

Right of use asset obtained in exchange for lease obligation $ — $ 819 $ 24,936

F-7

Reconciliation of Cash, Cash Equivalents and Restricted Cash from Balance Sheets to Statements of Cash Flows

Year Ended December 31,

See accompanying notes.

F-8

Relay Therapeutics, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share data)

1. Nature of Business and Basis of Presentation

Relay Therapeutics, Inc. (the “Company”) was incorporated in Delaware on May 4, 2015 and is headquartered in Cambridge, Massachusetts. The Company is a clinical-stage, precision medicines company transforming the drug discovery process by combining leading-edge computational and experimental technologies with the goal of bringing life-changing therapies to patients. The Company is among the first of a new breed of biotech created at the intersection of disparate disciplines. The Company’s DynamoTM platform integrates an array of leading-edge computational and experimental approaches designed to drug protein targets that have previously been intractable or inadequately addressed. The Company’s initial focus is on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications. The Company’s lead product candidates, RLY-4008, RLY-2608 and RLY-1971, are in clinical development. The Company also has over five discovery stage programs across both precision oncology and genetic disease indications.

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

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

The Company has devoted substantially all of its resources to developing its product candidates, including RLY-4008, RLY-2608 and RLY-1971, by developing its computation and experimental approaches, building its intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations.

The Company has incurred net operating losses since inception and had an accumulated deficit of $768.1 million as of December 31, 2021. The Company expects that its existing cash, cash equivalents and investments as of December 31, 2021 will enable it to fund its planned operating expenses and capital expenditure requirements for at least one year from the date of the issuance of these consolidated financial statements. The future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a material adverse effect on its financial condition and ability to pursue its business strategies. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into license or collaboration arrangements or obtain government grants. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects. In the event the Company requires additional funding, there can be no assurance that it will be successful in obtaining sufficient funding on terms acceptable to the Company to fund its continuing operations, if at all.

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2. Significant Accounting Policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for reporting on Form 10-K. The Company’s consolidated financial statements include the accounts of Relay Therapeutics, Inc. and its wholly-owned subsidiaries, Relay Therapeutics Securities Corporation and Relay ML Discovery, LLC. All intercompany balances and transactions have been eliminated.

Use of Estimates

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

Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on using innovative experimental and computational approaches on protein motion for making medicines to drug protein targets that have previously been intractable or inadequately addressed. The Company operates in the United States and all tangible assets are held in the United States.

Cash Equivalents

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

Restricted Cash

The Company had restricted cash of $2.6 million and $0.9 million as of December 31, 2021 and 2020, respectively, to secure letters of credit in connection with the leases of the Company’s facilities (see Note 14). The Company classified the restricted cash as a noncurrent asset on its consolidated balance sheets, consistent with the terms of the underlying lease agreements.

Investments

Investments in marketable securities are classified as available-for-sale. Available-for-sale securities are measured and reported at fair value using quoted prices in active markets for similar securities. Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders’ equity. Premiums or discounts from par value are amortized to investment income over the life of the underlying investment. All of the Company’s available-for-sale securities are available to the Company for use in current operations. As a result, the Company classified all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

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The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (expense) within the consolidated statements of operations and comprehensive loss. If any adjustment is required to reflect a decline in the value of the investment that the Company considers to be “other than temporary”, the Company recognizes a charge to the consolidated statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Concentration of Credit Risk and Significant Suppliers

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

The Company is dependent on third-party suppliers for research and development activities of its programs, including preclinical and clinical testing. In particular, the Company relies and expects to continue to rely on a small number of these suppliers, including D. E. Shaw Research, LLC as discussed in Note 13, to meet its requirements for its programs. These programs could be adversely affected by a significant interruption in pre-clinical and clinical testing and the supply of active pharmaceutical ingredients and formulated drugs.

Fair Value Measurements

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

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

•

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

•

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

•

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

Revenue Recognition

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

F-11

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

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

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

Collaboration Agreements

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

Lease Agreements

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

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date in

F-12

determining the present value of lease payments. Operating lease right-of-use assets also include the effect of any lease payments made prior to commencement and excludes lease incentives. The 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 is recognized on a straight-line basis over the lease term.

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

Property and Equipment

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

Impairment of Long-Lived Assets

The Company continually evaluates long-lived assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured in an amount by which the book values of the assets exceed their fair value. The Company did not recognize any impairment losses for the years ended December 31, 2021, 2020 and 2019.

Stock-Based Compensation

The Company measures stock options and other stock-based awards granted to employees, directors and non-employees based on their fair value on the date of grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company recognizes the impact of forfeitures on stock-based compensation expense as forfeitures occur.

The Company estimates the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of the Company’s common stock and assumptions the Company makes for the volatility of its common stock, the expected term of the stock options, the risk-free interest rate for a period that approximates the expected term of the stock options and the expected dividend yield.

Prior to the Company’s IPO, the estimated fair value of its common stock was determined by the board of directors, or compensation committee thereof, as of the date of each option grant, with input from management, considering the most recently available third-party valuations of common stock and the board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. Historically, these independent third-party valuations of the Company’s equity instruments were performed contemporaneously with identified value inflection points.

These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”). The Practice Aid identifies various available methods for allocating the enterprise value across classes of series of capital stock in determining the fair value of the Company’s common stock at each valuation date.

Following the Company’s IPO, in connection with the accounting for granted stock options and other awards the Company may grant, the fair value of the Company’s common stock is determined based on the quoted market price of its common stock.

F-13

Research and Development Costs

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

Research and Manufacturing Contracts

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

Acquired In-Process Research and Development

In an asset acquisition, the cost allocated to acquire in-process research and development (“IPR&D”) with no alternative future use is charged to expense at the acquisition date. Refer to Note 5, Acquisition of ZebiAI, for a more detailed description of the accounting policies applied to the asset acquisition.

Patent Costs

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

Income Taxes

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

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

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. For the years ended December 31, 2021, 2020

F-14

and 2019, other comprehensive income (loss) consisted of changes in unrealized gains and losses from available-for-sale investments.

Net Loss Per Common Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period and the effect of dilutive securities.

The Company applies the two-class method to calculate its basic and diluted net loss per share as the Company has issued shares that meet the definition of participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. The Company’s participating securities contractually entitle the holders of such shares to participate in dividends; but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities.

Additionally, in periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. For additional discussion of net loss per common share, please see Note 12, Net Loss Per Share.

Recently Adopted Accounting Pronouncements

The Company adopted Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and OtherOptions (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). This standard amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and amends the related earnings per share (“EPS”) guidance. The Company adopted this standard on January 1, 2021 and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

The Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends certain aspects of the existing guidance to improve consistent application. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires that credit losses be reported as an allowance using an expected losses model, representing the entity’s current estimate of credit losses expected to be incurred. The accounting guidance in effect for the Company through December 31, 2021 is based on an incurred losses model. For available-for-sale debt securities with expected credit losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. The Company adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

F-15

3. Fair Value of Financial Assets

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

Fair Value Measurements as ofDecember 31, 2021:

Level 1 Level 2 Level 3 Total

Assets

Cash equivalents:

Investments:

Liabilities

Contingent Milestone Payments $ — $ — $ 45,258 $ 45,258

Fair Value Measurements as ofDecember 31, 2020:

Level 1 Level 2 Level 3 Total

Assets

Cash equivalents:

Investments:

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

Fair Value of Contingent Consideration

In April 2021, the Company acquired ZebiAI, as discussed further in Note 5.

The Company’s Level 3 contingent consideration liability is related to $85.0 million of platform and program-related milestones (“Contingent Milestone Payments”) potentially payable to ZebiAI’s former equity holders. The contingent consideration liability for the Contingent Milestone Payments is measured at fair value at each reporting date pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), as discussed further in Note 5. The Company determines the fair value of the Contingent Milestone Payments based on the probability of achieving the milestones, the related timing, and, to a lesser extent, an appropriate discount rate. Significant judgment is used in determining the appropriateness of these assumptions. Due to the uncertainties associated with the development of platforms and drug candidates in the pharmaceutical industry and the effects of changes in assumptions including probability of success and related timing, the Company expects its estimates regarding the fair value of Contingent Milestone Payments to continue to change in the future, resulting in adjustments to the fair value of the Company’s Contingent Milestone Payments, and the effect of any such adjustments could be material.

The Company also has a contingent consideration liability related to the fair value of the $100.0 million earnout payments (“Contingent Earnout Payments”), which was a nonrecurring fair value measurement as of the acquisition date, as further discussed in Note 5.

F-16

The following table reconciles the change in fair value of the contingent consideration liability (in thousands):

Balance at December 31, 2020 $ —

Contingent Milestone Payments related to acquisition of ZebiAI 42,422

Contingent Earnout Payments related to acquisition of ZebiAI 5,000

Increase in fair value of Contingent Milestone Payments 2,836

The “Increase in fair value of Contingent Milestone Payments” in the table above was primarily attributable to the time value of money.

4. Investments

The fair value of available-for-sale investments by type of security was as follows:

AmortizedCost UnrealizedGains UnrealizedLosses FairValue

Investments:

Total investments with a maturity of one year or less 298,301 — (366 ) 297,935

Total investments with a maturity of one to two years 380,741 — (722 ) 380,019

AmortizedCost UnrealizedGains UnrealizedLosses FairValue

Investments:

Total investments with a maturity of one year or less 50,993 26 — 51,019

Total investments with a maturity of one to two years 179,358 38 — 179,396

The Company held 88 and 9 debt securities that were in an unrealized loss position as of December 31, 2021 and 2020, respectively. The aggregate fair value of debt securities in an unrealized loss position was $667.0 million and $70.5 million as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, the Company did not hold any debt securities in a continuous unrealized loss position for more than 12 months.

The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. Other-than-temporary impairments of investments are recognized in the consolidated statements of operations if we have the intent to sell theinvestment or if it is more likely than not that the Company will be required to sell the investment before recovery of the amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with our investment policy, the severity and the duration of the impairment, and changes in value subsequent to the end of the period. The unrealized losses at

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December 31, 2021 and 2020 are attributable to changes in interest rates, and we do not believe any unrealized losses represent other-than-temporary impairments.

5. Acquisition of ZebiAI

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

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

The Company also determined that the acquisition represented an initial consolidation of a variable interest entity that does not constitute a business in accordance with FASB Topic 810, Consolidation (“ASC 810”), primarily as a result of the fact that ZebiAI was deemed to be a variable interest entity, as it did not have sufficient equity to finance its activities without additional subordinated financial support. Prior to the Acquisition Date, the source of funding for ZebiAl had primarily been preferred stock financings and convertible notes. The Company acquired all of the outstanding shares of ZebiAI and, therefore, is the sole equity holder. The Company will absorb the losses of ZebiAI, has the rights to the benefits derived from the ZebiAI platform, and the power to direct all activities and, therefore, is the primary beneficiary. As a result, the net assets acquired and liabilities assumed in connection with the ZebiAI acquisition were recorded at their estimated fair values as of the Acquisition Date. Total consideration transferred of $135.5 million included the cash and shares issued to ZebiAI Holders, the fair value of the Contingent Milestone Payments and the Contingent Earnout Payments and an insignificant amount attributed to the replacement of stock options to ZebiAI Holders. The Contingent Milestone Payments were determined to be liabilities pursuant to ASC 480 and, therefore, were included in consideration transferred. The Contingent Earnout Payments were required to be included in total consideration transferred as a result of the guidance under ASC 810. The difference between total consideration transferred and the fair value of net assets acquired and liabilities assumed of $11.9 million was recorded as loss on initial consolidation of a variable interest entity pursuant to ASC 810.

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

Loss on initial consolidation of VIE 11,855

Assets obtained in asset acquisition 662

Liabilities assumed in asset acquisition (2,330 )

Intangible asset 2,300

In estimating the fair value of the acquired tangible assets and liabilities assumed, the Company used the carrying value of the net working capital balances as the most reliable indicator of fair value based on the associated short-term nature of the balances. The remaining fair value was attributable to the acquired IPR&D and an intangible asset. The fair value attributable to the IPR&D asset was determined using an Avoided Cost Method that includes all

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costs to develop the IPR&D asset, including appropriate mark-ups on the cost estimate and an expected return related to developing the IPR&D asset over a period of time. The fair value of the IPR&D asset was expensed in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2021, as the acquired IPR&D had no alternative future use, as determined by the Company in accordance with U.S. GAAP, including ASC 730. The intangible asset represents the assembled workforce, for which the Company concluded there were no indicators of impairment through December 31, 2021. The Company recognized stock-based compensation expense associated with the accelerated vesting for certain stock options in connection with the acquisition of ZebiAI in the amount of $4.6 million in the consolidated statement of operations for the year ended December 31, 2021. Finally, the Company also recognized acquisition-related costs of $0.9 million within general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2021.

For the Contingent Milestone Payments and Contingent Earnout Payments, the Company recorded contingent consideration liabilities of $42.4 million and $5.0 million, respectively, representing the fair value of the payment provisions noted as of the Acquisition Date. The Company is required to re-assess the fair value of the Contingent Milestone Payments at each reporting period pursuant to ASC 480 (refer to Note 3). In connection therewith, the Company adjusted the contingent consideration liability for the Contingent Milestone Payments to $45.3 million as of December 31, 2021, representing the fair value of the payment provision noted as of the balance sheet date. The Contingent Milestone Payments are payable in common shares based on a fixed amount assigned to each milestone and the weighted average share price of the Company’s stock for the 5-day period prior to the milestone achievement. Accordingly, the number of shares to be issued upon a milestone achievement vary dependent on the Company’s stock price. The settlement amounts of Contingent Milestone Payments are predominantly fixed. If the milestones had been achieved in full on December 31, 2021, the number of shares to be issued would have been 2,817,555 based on a weighted-average per share price of $30.17 for the 5-day period prior to December 31, 2021. The Contingent Earnout Payments were not accounted for as derivatives under FASB ASC Topic 815, Derivatives and Hedging and, therefore, are not re-assessed at fair value at each reporting period. The Contingent Earnout Payments will be adjusted when the contingency is resolved and the consideration is paid or becomes payable.

6. Collaboration and License Arrangements

Discovery Collaboration Agreement with EQRx, Inc.

In August 2021, the Company and EQRx, Inc. (“EQRx”) entered into the Discovery Collaboration Agreement (“Collaboration Agreement”) to discover, develop, and commercialize novel medicines against validated oncology targets.Under the terms of the Collaboration Agreement, the Company is responsible for the discovery collaboration phase through to filing of the application for an Investigational New Drug (“IND”), while EQRx is responsible for clinical development, regulatory and commercialization of the product candidates under the collaboration. Subject to certain opt-out rights, the Company and EQRx share equally in the discovery, development and commercialization costs, as well as the net profits and losses from sales of any collaboration medicines, if approved. The Company retains the right to develop any collaboration medicines in combination with its wholly-owned pipeline.