Note 7. Sanofi Agreement

In March 2022, the Company entered into a global collaboration and license agreement (the Sanofi Agreement) with Genzyme Corporation, a wholly owned subsidiary of Sanofi (Sanofi), which became effective in May 2022. Under the terms of the Sanofi Agreement, the Company agreed to generate, develop, manufacture and commercialize IgM antibodies directed to six primary targets, three of which were oncology targets and three of which were immunology targets.

In April 2024, Sanofi exercised its right to terminate the oncology collaboration targets effective June 2024. As a result of this termination, the Company has no further obligations to conduct research and development activities for such terminated targets and Sanofi retains no substitution rights for such terminated targets, pursuant to the terms of the agreement, and the collaboration will now focus exclusively on the immunology collaboration targets. The termination of the oncology targets will not affect any rights and obligations under the Sanofi Agreement with respect to the immunology targets.

For each immunology target collaboration program, the Company will continue to lead research and development activities, and assume related costs, through the completion of the first Phase 1 clinical trials for up to two candidates directed to each immunology target, after which Sanofi will be responsible for all future development and commercialization activities and related costs, in exchange for up to $1.065 billion in aggregate development, regulatory and commercial milestones per immunology target. Following the completion of the first Phase 1 clinical trials for each immunology target, Sanofi will be responsible for subsequent development activities, commercialization efforts, and related costs. The Company is eligible to receive tiered high single-digit to low-teen royalties on global net sales for licensed products related to immunology targets, subject to certain reductions and offsets.

Subject to earlier expiration in certain circumstances, the Sanofi Agreement expires on a licensed product-by-licensed product and country-by-country basis until the expiration of the applicable profit and loss share term or royalty term, as the case may be. Sanofi has the right to terminate the Sanofi Agreement on an immunology collaboration target-by-immunology collaboration target basis or country-by-country basis with or without cause, upon specified prior notice.

At the inception of the Sanofi Agreement, the Company identified promised goods and services, which consisted of the granting of intellectual property licenses and the performance of specified research, development and other various activities. The Company determined that for each of the six targets, the identified promised goods and services were not distinct from each other on a target-by-target basis. The licenses, considered to be functional intellectual property, were determined to not be capable of being distinct due to the specialized nature of the research, development, and other activities to be provided by the Company. Accordingly, the promised goods and services were combined together as one single performance obligation, on a target-by-target basis. The Company determined that the underlying promised goods and services for each of the six targets were both capable of being distinct and distinct within the context of the contract from each of the other targets. Therefore, the Company concluded that there were six performance obligations in the Sanofi Agreement, one for each target, that were comprised of the underlying promised goods and services. Other components and options within the Sanofi Agreement were determined to not provide Sanofi with free or discounted goods or services and therefore did not constitute a material right or were deemed immaterial in the context of the contract.

To determine the transaction price, the Company evaluates all the payments to be received during the duration of the contract. In May 2022, the Company received a $150.0 million upfront payment as part of the Sanofi Agreement. Additionally, in April 2022, Sanofi purchased non-voting common stock in connection with the Company’s public common stock offering. The Company concluded that at inception and as of June 30, 2025, the transaction price was $150.0 million and was comprised solely of the fixed non-refundable upfront payment. No consideration received from Sanofi as part of the April 2022 offering was deemed necessary to include in the transaction price as Sanofi purchased the shares at the same offering price as the other participating investors.

The potential development and regulatory milestone payments that the Company is eligible to receive were excluded from the transaction price, as the milestone amounts were fully constrained, since the milestones relate to successful achievement of certain development results and regulatory approvals, which might not be achieved. The Company determined that the royalties and commercial milestone payments relate predominantly to the license of intellectual property and are therefore excluded from the transaction price under the sales- or usage-based royalty exception of ASC 606. The Company will reevaluate the transaction price, including all constrained amounts, at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and the Company will adjust its estimate of the transaction price as necessary. The Company will recognize the royalties and commercial milestone payments as revenue when the associated sales occur, and relevant sales-based thresholds are met.

At the inception of the Sanofi Agreement, the Company allocated the transaction price based on the estimated SSP of each of the six performance obligations. The Company determined the SSP for each of the six performance obligations based on the estimated costs to complete the underlying activities of each performance obligation and included factors such as forecasted internal costs, estimated third-party expenditures, development timelines and scenarios, probability of target failures and selection of substitute targets, and program-specific factors. These estimated cost forecasts were based on observable data for both market and entity specific factors, such as considering the actual and expected costs of the Company’s existing research and development programs and adjusting for factors specific to the targets identified.

The Company recognizes revenue using an input method of costs incurred as a percentage of total estimated costs for each of the performance obligations under the contract. Costs consist primarily of internal personnel costs and third-party contract expenses related to the programs of the Sanofi Agreement. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations is recorded in the period in which changes are identified and amounts can be reasonably estimated.

The Company determined that Sanofi’s exercise of its right to terminate the oncology collaboration targets in April 2024 was a contract modification because it changed the scope of the contract by reducing the number of performance obligations under the agreement. The remaining performance obligations relating to the three immunology collaboration targets are not distinct from themselves before and after the contract modification occurred; however, they are distinct from the terminated oncology target performance obligations. As a result, the Company allocated the unrecognized transaction price to the three remaining performance obligations based on their relative estimated SSP and calculated a cumulative catch-up adjustment of $0.8 million, which was recognized as collaboration revenue upon the contract modification date.

On May 5, 2025, the Company received a notice of termination pursuant to which Sanofi elected to terminate the Sanofi Agreement, at will, in its entirety, effective as of June 5, 2025. The Company has no remaining performance obligations under the Sanofi Agreement as of June 30, 2025 and recognized the related remaining deferred revenue of $143.6 million in the three months ended June 30, 2025.

For the three and six months ended June 30, 2025, the Company recognized collaboration revenue related to the Sanofi Agreement of $143.6 million and $144.1 million, respectively, and $1.3 million and $1.8 million for the three and six months ended June 30, 2024. There is no remaining deferred revenue balance as of June 30, 2025. As of December 31, 2024, $144.1 million was recorded as deferred revenue related to the Sanofi Agreement, of which $2.7 million was classified as current on the condensed balance sheets.

Contract Balances from Customer Contract

The timing of revenue recognition, billings and cash collections results in contract assets and contract liabilities on the condensed balance sheets. The Company recognizes license and development receivables based on billed services, which are settled upon reimbursement. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the goods or services is transferred to the customer and all revenue recognition criteria have been met.

The Company had no customer contract assets during the three and six months ended June 30, 2025 and 2024.