Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in conformity with U.S. GAAP and in accordance with applicable rules and regulations of the Securities and Exchange Commission ("SEC") for financial reporting and include accounts of the Company and its consolidated subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of the Company’s consolidated financial statements and accompanying notes in conformity with U.S. GAAP requires the Company’s management to make estimates and judgments that affect the amounts reported in the financial statements. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimates related to prepaid and accrued research and development expenses and the fair value of royalty transfer agreements. Management's estimates could change period to period based on changes in facts and circumstances. The Company’s management bases its estimates on historical experience and on other relevant assumptions that are believed to be reasonable. Actual results may differ materially from these estimates.

Principles of Consolidation

Principles of Consolidation

The Company consolidates entities in which it has a controlling financial interest. The Company evaluates each of its subsidiaries to determine whether the entity represents a variable interest entity ("VIE") for which consolidation should be evaluated under the VIE model, or alternatively, if the entity is a voting interest entity, for which consolidation should be evaluated using the voting interest model ("VOE"). The Company concluded that none of its subsidiaries is a VIE and has consolidated each subsidiary under the VOE. Under the VOE, the Company consolidates the entity if it determines 1) that it directly, or indirectly, has greater than 50% of the voting shares or other equity holders do not have substantive voting, participation, or liquidation rights, or 2) when the company has a controlling financial interest through its control of the board of directors, and the significant decisions of the entity are made at the board level.

The Company had investments in the following partially-owned subsidiaries during 2022 and 2021:

Consolidated Entities	Relationship as of December 31, 2022	Date Control First Acquired
Cullinan Pearl Corp.	Divested	November 2018
Cullinan Amber Corp.	Partially-owned Subsidiary	December 2019
Cullinan Florentine Corp.	Partially-owned Subsidiary	December 2019
Cullinan Mica Corp.	Partially-owned Subsidiary	May 2020

Noncontrolling Interests

Noncontrolling Interests

Noncontrolling interests represent third-party interests in the Company’s partially-owned subsidiaries. The Company determines the amount of the noncontrolling interests in the net assets of the Company’s partially-owned subsidiaries at each balance sheet date using the hypothetical liquidation at book value ("HLBV") method. Under the HLBV method, the amounts reported as noncontrolling interests in the consolidated balance sheets represent the amounts the third parties would hypothetically receive at each balance sheet date under the liquidation provisions of the partially-owned subsidiaries, assuming the net assets of the partially-owned subsidiaries were liquidated at their recorded amounts determined in accordance with U.S. GAAP and distributed to the owners of the partially-owned subsidiaries. Net income (loss) attributable to noncontrolling interests on the consolidated statements of operations and comprehensive income (loss) is determined as the difference in the noncontrolling interest in the consolidated balance sheets between the start and end of each reporting period, after taking into account any capital transactions between the partially-owned subsidiaries and the third parties.

Comprehensive Loss

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. The Company’s only element of other comprehensive loss is unrealized gains and losses on investments.

Segments

Segments

The Company has determined that its Chief Executive Officer is the Chief Operating Decision Maker ("CODM"). The Company operates and manages the business as one reporting and one operating segment, which is the business of developing early-stage cancer therapeutics. The Company’s CODM reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of the Company’s assets are located in the U.S.

Concentration of Credit Risk and Other Risks and Uncertainties

Concentration of Risk

The Company had no significant concentration of credit risk as of December 31, 2022. Cash and cash equivalents are primarily maintained with two financial institutions in the U.S. as of December 31, 2022. Deposits at banks may exceed the insurance provided on such deposits. These deposits may be redeemed upon demand, and therefore, bear minimal risk. Under our investment policy, the Company limits amounts invested in such securities by investment type, credit rating, maturity, industry group and issuer. The goals of our investment policy are (i) safety and preservation of principal and diversification of risk and (ii) liquidity of investments sufficient to meet cash flow requirements.

The Company is subject to certain risks and uncertainties and believes that changes in any of the following areas could have a material adverse effect on future financial position or results of operations: ability to obtain future financing; regulatory approval and market acceptance of, and reimbursement for, product candidates; performance of third-party clinical research organizations and manufacturers upon which the Company relies; protection of the Company’s intellectual property; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for drug substance and drug products related to these programs. These programs could be adversely affected by a significant interruption in the supply.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2022 and 2021, cash equivalents consist of government-backed money market funds.

Investments

Investments

The Company generally holds investments in marketable securities. Investments not classified as cash equivalents with maturities of less than twelve months are classified as short-term investments in the consolidated balance sheets. Investments with maturities greater than twelve months for which the Company has the intent and ability to hold the investment for greater than twelve months are classified as long-term investments in the consolidated balance sheets.

The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Interest and dividends are also included in interest income. Interest receivable is included in prepaid expenses and other current assets on the consolidated balance sheets and represents accrued and unpaid interest on the Company's marketable securities. The Company periodically reviews its marketable securities for impairment and adjusts these investments to their fair value when a decline in market value is deemed to be other than temporary. Declines in fair value judged to be other-than-temporary on marketable securities, if any, are included in other income (expense), net.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements. The three levels of the fair value hierarchy are described below:

Level 1—Unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access;

Level 2—Quoted prices for similar assets and liabilities in active markets or other market-observable inputs such as interest rates, yield curves and foreign currency spot rates; and

Level 3—Pricing or valuations that require inputs that are both significant to the fair value measurement and unobservable.

There were no transfers of financial assets or liabilities measured at fair value between Level 1 and Level 2, and there were no Level 3 investments during 2022 or 2021.

The Company's financial assets recorded at fair value consist of short-term investments and long-term investments. The fair value of the Company’s short-term and long-term investments is primarily determined using market quotations or prices obtained from independent pricing sources.

As of December 31, 2022 and 2021, the fair values of cash and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximated their carrying values due to the short-term nature of these instruments

Deferred Offering Costs

Deferred Offering Costs

The Company capitalizes costs that are directly associated with in-process equity financings until such financings are consummated at which time such costs are recorded against the gross proceeds of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive income (loss). The Company incurred $2.7 million of deferred offering costs in 2020 and recorded such amounts against the gross proceeds of the Company’s IPO within the statements of stockholders’ equity for 2021.

Property and Equipment

Property and Equipment, net

Property and equipment is stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the estimated useful life of each asset as follows:

Asset Class	Estimated Useful Life
Office furniture and equipment	5 years
Leasehold improvements	Shorter of the useful life of the asset or the lease term

Maintenance and repairs that do not improve or extend the life of the assets are expensed when incurred. Upon disposal or retirement of assets, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheets and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive income (loss).

Leases

Leases

The Company determines if an arrangement is a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company classifies leases at the lease commencement date as operating or finance leases and records a right-of-use asset ("ROU") and a lease liability on the consolidated balance sheets for all leases with an initial lease term of greater than 12 months. Leases with an initial term of 12 months or less are not recorded in the balance sheet, and payments are recognized as expense on a straight-line basis over the lease term.

The Company enters into contracts that contain both lease and non-lease components. Non-lease components may include maintenance, utilities and other operating costs. The Company combines the lease and non-lease components of fixed costs in its lease arrangements as a single lease component. Variable costs, such as utilities or maintenance costs, are not included in the measurement of ROU assets and lease liabilities but rather are expensed when the event determining the amount of variable consideration to be paid occurs.

Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term using the discount rate implicit in the lease. If the discount rate is not readily determinable, the Company utilizes an estimate of its incremental borrowing rate based upon the available information at the lease commencement date. Operating lease assets are further adjusted for prepaid or accrued lease payments. Operating lease payments are expensed using the straight-line method as an operating expense over the lease term. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated. Impairment charges are recognized at the amount by which the carrying amount of an asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

Revenue Recognition

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these goods and services. To achieve this core principle, the Company applies the following five steps: 1) identify the customer contract; 2) identify the contract’s performance obligations; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when or as a performance obligation is satisfied.

Licensing arrangements are analyzed to determine whether the promised goods or services, which could include licenses and research and development materials and services, are distinct or whether they must be accounted for as part of a combined performance obligation.

The transaction price is determined based on the consideration to which the Company will be entitled. The transaction price may include fixed amounts, variable amounts, or both. The Company reevaluates the probability of realizing such variable consideration and any related constraints at each reporting period. The Company includes variable consideration in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations. The Company must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. The Company also utilizes judgement in assessing whether or not variable consideration is constrained or if it can be allocated specifically to one or more performance obligations in the arrangement.

When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price allocated to that performance obligation on a relative standalone selling price basis, which excludes estimates of variable consideration that are constrained. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.

For performance obligations consisting of licenses and other promises, the Company utilizes judgment to assess whether the combined performance obligation is satisfied over time or at a point in time and the recognition pattern for the portion of the transaction price allocated to the performance obligation.

Research and Development Expenses

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development expenses consist primarily of employee compensation costs and amounts incurred with third parties for the provision of services for product candidate development, clinical and preclinical development and related supply and manufacturing costs, and regulatory compliance costs. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these costs.

Costs incurred to obtain licenses are recognized as research and development expense as incurred if the technology licensed has no alternative future use. Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are received or services are performed.

The Company has entered into various research and development related contracts with parties both inside and outside of the U.S. The payments related to these agreements are recorded as research and development expenses as incurred. The Company records accrued liabilities for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates.

Patent Costs

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 in the consolidated statements of operations and comprehensive income (loss).

Equity-Based Compensation

Equity-Based Compensation

Equity-based compensation is measured at the grant date for all equity-based awards made to employees and non-employees using the fair value of the awards and is recognized as expense over the requisite service period, which is generally the vesting period. Forfeitures are recognized as they occur.

The Company grants service-based RSUs, market-based RSUs and stock options to employees and non-employees. The fair value of service-based restricted stock units ("RSUs") is the closing market price of the Company's common stock on the grant date. The fair value of market-based RSUs is measured on the grant date using a Monte Carlo simulation model. The Company estimated the fair value of the stock options using the Black-Scholes option pricing model, which requires the input of objective and subjective assumptions. Certain assumptions used, including the fair value of the Company’s common stock prior to the IPO and stock price volatility, represent management’s estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, equity-based compensation expense could be materially different for future awards.

The Company classifies equity-based compensation in its consolidated statements of operations and comprehensive income (loss) in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Income Taxes

Income Taxes

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount of benefit that is greater than fifty percent likely to be realized upon settlement. Changes in measurement are reflect in the period in which the change in judgment occurs.

Net Loss per Share

Earnings (Net Loss) per Share

Basic earnings (net loss) per share is determined by dividing earnings (net loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (net loss) per share is determined by dividing earnings (net loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of shares of common stock equivalents as determined using the treasury stock method.

Emerging Growth Company Status

Emerging Growth Company Status

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

The JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. The Company expects to use the extended transition period for any other new or revised accounting standards during the period in which it remains an emerging growth company.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

On January 1, 2022, the Company adopted a new standard on leases (as amended, "ASC 842"), which requires lessees to recognize a lease liability and a ROU asset on the balance sheet for all leases, except certain short-term leases. In connection with its implementation of ASC 842, the Company adopted a package of three practical expedients, allowing it to carry forward its previous lease classification and embedded lease evaluations and not to reassess initial direct costs as of the date of adoption. The Company also adopted a practical expedient that allows it to combine lease and non-lease components for its real estate leases.

The Company’s existing lease obligations relating to a single corporate location is subject to the new standard and resulted in operating lease liabilities and ROU assets being recorded on the Company’s consolidated balance sheets on the implementation date. The existing lease obligation is classified as an operating lease.

The below table details the balance sheet adjustments recorded on January 1, 2022 in connection with the Company’s adoption of ASC 842 (in thousands):

	December 31, 2021					January 1, 2022
	As Reported under ASC 840		ASC 842 Adjustments			As Reported Under ASC 842
Assets
Operating lease right-of-use asset	$	—	$	1,311		$	1,311
Liabilities
Current portion of operating lease liabilities	$	—	$	505		$	505
Deferred rent	$	65	$	(65	)	$	—
Noncurrent portion of operating lease liabilities	$	—	$	871		$	871

In December 2019, the Financial Accounting Standards Board issued ASU No. 2019-12, which is intended to simplify the accounting for income taxes. 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 position and consolidated results of operations.