Quarterly Report for Quarter Ending June 30, 2022 (Form 10-Q)

10-Q

r

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-39856

CULLINAN ONCOLOGY, INC.

(Exact name of Registrant as specified in its Charter)

Delaware	81-3879991
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Main Street Suite 520 Cambridge, MA	02142
(Address of principal executive offices)	(Zip Code)

(617) 410-4650

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		CGEM		The Nasdaq Global Select Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☒

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐NO ☒

The number of shares of the Registrant's common stock outstanding as of July 31, 2022 was 45,612,205.

Table of Contents

			Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)		1
	Consolidated Balance Sheets		1
	Consolidated Statements of Operations and Comprehensive Income (Loss)		2
	Consolidated Statements of Stockholders' Equity		3
	Consolidated Statements of Cash Flows		5
	Notes to the Consolidated Financial Statements		6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		24
Item 4.	Controls and Procedures		24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		25
Item 1A.	Risk Factors		25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3.	Defaults Upon Senior Securities		30
Item 4.	Mine Safety Disclosures		30
Item 5.	Other Information		30
Item 6.	Exhibits		31
	Signatures		32

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that involve risks, uncertainties, and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "would" and similar expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 10-K") and other filings with the Securities Exchange Commission (the "SEC"), including the following:

ii

These factors are discussed more fully in our 2021 10-K and elsewhere in this Quarterly Report on Form 10-Q and other reports we file with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and investors should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research, as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this Quarterly Report on Form 10-Q, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled "Risk Factors" in our 2021 10-K and elsewhere in this Quarterly Report on Form 10-Q.

iii

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

CULLINAN ONCOLOGY, INC.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share amounts)

		June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents		$	353,563			$	59,774
Short-term investments			257,432				230,692
Prepaid expenses and other current assets			11,846				6,098
Total current assets			622,841				296,564
Property and equipment, net			52				77
Operating lease right-of-use assets			1,074				-
Other assets			100				147
Long-term investments			43,182				140,397
Total assets		$	667,249			$	437,185
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	3,099			$	3,169
Accrued expenses and other current liabilities			11,901				8,577
Income tax payable			46,502				-
Operating lease liabilities, current			533				-
Total current liabilities			62,035				11,746
Long-term liabilities:
Operating lease liabilities, net of current portion		596				-
Deferred rent			-				65
Total liabilities			62,631				11,811
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $0.0001par value, 150,000,000shares authorized as of June 30, 2022 and December 31, 2021; 45,396,398and 44,292,102shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively			5				4
Additional paid-in capital			604,275				584,714
Accumulated other comprehensive loss			(3,633	)			(838	)
Retained earnings (accumulated deficit)			3,891				(158,909	)
Total Cullinan stockholders' equity			604,538				424,971
Noncontrolling interests			80				403
Total stockholders' equity			604,618				425,374
Total liabilities and stockholders' equity		$	667,249			$	437,185

See accompanying notes to the unaudited consolidated financial statements.

1

CULLINAN ONCOLOGY, INC.

Consolidated Statements of Operations and Comprehensive INCOME (LOSS)

(unaudited)

(in thousands, except per share amounts)

		Three Months Ended June 30,			Six Months Ended June 30,
		2022			2021			2022			2021
License revenue		$	-			$	-			$	-			$	18,943
Operating expenses:
Research and development			26,411				11,778				50,947				24,193
General and administrative			10,695				4,826				18,816				9,982
Total operating expenses			37,106				16,604				69,763				34,175
Gain on sale of Cullinan Pearl			276,785				-				276,785				-
Income (loss) from operations			239,679				(16,604	)			207,022				(15,232	)
Other income (expense):
Interest income		697			173			894			222
Other income (expense), net			(241	)			(8	)			(241	)			(10	)
Net income (loss) before income taxes			240,135				(16,439	)			207,675				(15,020	)
Income tax expense			66,070				-				46,502				-
Net income (loss)			174,065				(16,439	)			161,173				(15,020	)
Net income (loss) attributable to noncontrolling interests			(833	)			(803	)			(1,627	)			686
Net income (loss) attributable to common stockholders of Cullinan		$	174,898			$	(15,636	)		$	162,800			$	(15,706	)
Comprehensive income (loss):
Net income (loss)		$	174,065			$	(16,439	)		$	161,173			$	(15,020	)
Unrealized loss on investments			(499	)			(55	)			(2,795	)			(113	)
Comprehensive income (loss)			173,566				(16,494	)			158,378				(15,133	)
Comprehensive income (loss) attributable to noncontrolling interests			(833	)			(803	)			(1,627	)			686
Comprehensive income (loss) attributable to Cullinan		$	174,399			$	(15,691	)		$	160,005			$	(15,819	)
Earnings (net loss) per share:
Basic		$	3.90			$	(0.36	)		$	3.65			$	(0.37	)
Diluted		$	3.77			$	(0.36	)		$	3.51			$	(0.37	)
Weighted-average shares used in computing earnings (net loss) per share:
Basic			44,873				43,295				44,654				42,713
Diluted			46,381				43,295				46,389				42,713

See accompanying notes to the unaudited consolidated financial statements.

2

CULLINAN ONCOLOGY, INC.

Consolidated Statements of STOCKHOLDERS' EQUITY

(unaudited)

(in thousands, except share amounts)

		Common Stock			Additional Paid-In			Accumulated Other Comprehensive			Retained Earnings (Accumulated			Noncontrolling Interest in			Total Stockholders'
		Shares			Amount			Capital			(Loss)			Deficit)			Subsidiaries			Equity
Balances at December 31, 2021			44,292,102			$	4			$	584,714			$	(838	)		$	(158,909	)		$	403			$	425,374
Issuance of subsidiary preferred stock			-				-				-				-				-				1,153				1,153
Net issuance of common stock under equity-based compensation plans			367,924				-				1,566				-				-				-				1,566
Equity-based compensation			-				-				6,559				-				-				6				6,565
Unrealized loss on investments			-				-				-				(2,296	)			-				-				(2,296	)
Net loss			-				-				-				-				(12,098	)			(794	)			(12,892	)
Balances at March 31, 2022			44,660,026				4				592,839				(3,134	)			(171,007	)			768				419,470
Issuance of subsidiary common stock			-				-				-				-				-				139				139
Net issuance of common stock under equity-based compensation plans			736,372				1				2,834				-				-				-				2,835
Equity-based compensation			-				-				8,602				-				-				6				8,608
Unrealized loss on investments			-				-				-				(499	)			-				-				(499	)
Net income (loss)			-				-				-				-				174,898				(833	)			174,065
Balances at June 30, 2022			45,396,398			$	5			$	604,275			$	(3,633	)		$	3,891			$	80			$	604,618

See accompanying notes to the unaudited consolidated financial statements.

3

CULLINAN ONCOLOGY, INC.

Consolidated Statements of STOCKHOLDERS' EQUITY

(unaudited)

(in thousands, except share amounts)

		Common Stock			Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Noncontrolling Interest in			Total Stockholders'
		Shares			Amount			Capital			(Loss)			Deficit			Subsidiaries			Equity
Balances at December 31, 2020			29,831,125			$	3			$	292,348			$	(2	)		$	(93,339	)		$	1,304			$	200,314
Initial public offering, net of issuance costs of $22,870			13,685,000				1				264,515				-				-				-				264,516
Equity-based compensation			-				-				3,503				-				-				5				3,508
Unrealized loss on investments			-				-				-				(58	)			-				-				(58	)
Net income (loss)			-				-				-				-				(70	)			1,489				1,419
Balances at March 31, 2021			43,516,125				4				560,366				(60	)			(93,409	)			2,798				469,699
Issuance of subsidiary common stock			-				-				-				-				-				67				67
Issuance of subsidiary preferred stock			-				-				-				-				-				923				923
Net issuance of common stock under equity-based compensation plans			10,099				-				180				-				-				-				180
Equity-based compensation			-				-				4,159				-				-				6				4,165
Unrealized loss on investments			-				-				-				(55	)			-				-				(55	)
Net loss			-				-				-				-				(15,636	)			(803	)			(16,439	)
Balances at June 30, 2021			43,526,224			$	4			$	564,705			$	(115	)		$	(109,045	)		$	2,991			$	458,540

See accompanying notes to the unaudited consolidated financial statements.

4

CULLINAN ONCOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

		Six Months Ended June 30,
		2022			2021
Operating activities:
Net income (loss)		$	161,173			$	(15,020	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on sale of Cullinan Pearl			(276,785	)			-
Depreciation and amortization			25				28
Equity-based compensation expense			15,173				7,673
Amortization or accretion on marketable securities			1,737				1,047
Realized loss on marketable securities			109				-
License expense in exchange for subsidiary common stock			139				67
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			(1,050	)			(5,199	)
Accounts payable			(70	)			(6,495	)
Accrued expenses and other current liabilities			5,719				188
Income tax payable			46,502				-
Net cash used in operating activities			(47,328	)			(17,711	)
Investing activities:
Purchase of marketable securities			(93,370	)			(363,252	)
Proceeds from sales and maturities of marketable securities			158,933				70,932
Proceeds from sale of Cullinan Pearl, net of escrow of $5,000and cash transferred with sale of $2,898			270,000				-
Net cash provided by (used in) investing activities			335,563				(292,320	)
Financing activities:
Proceeds from initial public offering			-				267,268
Payment of deferred offering costs			-				(2,688	)
Proceeds from issuance of noncontrolling interests			1,153				923
Proceeds from issuance of convertible note			2,200				-
Repayment of convertible note			(2,200	)			-
Proceeds from net issuance of common stock under equity-based compensation plans			4,401				-
Net cash provided by financing activities			5,554				265,503
Net increase (decrease) in cash and cash equivalents			293,789				(44,528	)
Cash and cash equivalents at beginning of period			59,774				168,198
Cash and cash equivalents at end of period		$	353,563			$	123,670
SUPPLEMENTAL NONCASH DISCLOSURE
Noncash financing activities
Deferred offering costs paid in the prior year		$	-			$	65

See accompanying notes to the unaudited consolidated financial statements.

5

CULLINAN ONCOLOGY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

7

9

11

13

Item 2. 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 unaudited consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 10-K"), filed with the Securities and Exchange Commission (the "SEC") on March 17, 2022. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the "Risk Factors" section of this Quarterly Report on Form 10-Q.

Overview

We are a biopharmaceutical company developing a diversified pipeline of targeted oncology therapeutic candidates across multiple modalities in order to bring important medicines to cancer patients. Our strategy is to source innovation through both internal discovery efforts and external collaborations, focusing on advanced-stage assets with novel technology platforms and differentiated mechanisms. Before we advance a product candidate into clinical development, we evaluate its potential for anti-tumor activity as a single agent as well as its ability to generate an immune system response or to inhibit oncogenic drivers. Using this strategy, we have efficiently developed or in-licensed a portfolio of therapeutic candidates.

CLN-081, which we are co-developing with Taiho Pharmaceutical, Co. Ltd ("Taiho"), is an orally available small-molecule, irreversible epidermal growth factor receptor ("EGFR") inhibitor that is designed to selectively target cells expressing EGFR exon 20 insertion ("EGFRex20ins") mutations with relative sparing of cells expressing wild-type EGFR. In June 2022, Taiho acquired our partially-owned subsidiary, Cullinan Pearl Corp. ("Cullinan Pearl"), which has worldwide rights to CLN-081 outside of Japan and Greater China, for an upfront payment of $275.0 million to us with the potential for an additional $130.0 million tied to EGFR exon20 non-small-cell lung cancer ("NSCLC") regulatory milestones. Concurrently with the closing of the sale of Cullinan Pearl, we entered into a co-development and co-commercialization agreement for CLN-081 with an affiliate of Taiho, pursuant to which we will collaborate to develop CLN-081 and will retain the option to co-commercialize CLN-081 in the U.S. Development costs for CLN-081 after the sale of Cullinan Pearl shall be shared equally between the Company and Taiho with each party receiving 50% of any future potential pre-tax profits from U.S. sales of CLN-081.

CLN-081 is being evaluated as a treatment for NSCLC in adult patients with EGFRex20ins mutations in a Phase 1/2a trial. Among 39 response evaluable patients treated at the 100mg twice daily dose in this trial, CLN-081 has shown an initial efficacy profile that is at the high end of exon 20 agents, including a 41% confirmed response rate, an estimated 21-month median duration of response and an estimated 12-month progression-free survival. We have also observed favorable safety and tolerability at this dose, which includes no grade 3 or greater EGFR-related toxicities and relatively low dose discontinuation and interruption rates. The U.S. Food and Drug Administration ("FDA") has granted Breakthrough Therapy Designation to CLN-081.

Our most advanced wholly-owned product candidates include CLN-049, a bispecific antibody targeting FLT3 and CD3, and CLN-619, a monoclonal antibody designed to stimulate natural killer and T cell responses by engaging a unique target, MICA/B. We initiated enrollment in clinical trials in the fourth quarter of 2021 for CLN-049 for patients with relapsed or refractory acute myeloid leukemia or myelodysplastic syndrome and for CLN-619 for patients with advanced solid tumors.

In addition to the above product candidates, our portfolio includes several preclinical oncology programs. The most advanced of these programs include CLN-617, a fusion protein combining two potent antitumor cytokines, interleukin-2 and interleukin-12, with tumor retention domains for the treatment of solid tumors, and CLN-978, an internally-developed half-life extended T-cell engaging antibody construct designed to simultaneously engage CD19 and CD3. We expect to submit investigational new drug applications ("INDs") for both of these programs to the FDA by the first half of 2023.

Our remaining preclinical programs include Opal, a bispecific fusion protein that blocks the PD-1 axis and selectively activates the 4-IBB/CD137 pathway on T cells in tumors; Jade, a cell therapy targeting a novel senescence and cancer-related protein that we are developing in collaboration with the Fred Hutchinson Cancer Research Center; and an HPK1 protein degrader research collaboration with the Icahn School of Medicine at Mount Sinai ("Icahn Mount Sinai"). At the American Association for Cancer Research ("AACR") 2022 Annual Meeting in April 2022, we presented preclinical data across five of these programs, including CLN-049, CLN-619, CLN-617, CLN-978 and Opal. We hold worldwide development and commercialization rights to each of our wholly-owned product candidates.

Since our inception in 2016, we have focused all of our efforts and financial resources on raising capital, organizing and staffing our company, identifying, acquiring or in-licensing and developing product and technology rights, establishing and protecting our intellectual property portfolio and developing and advancing our programs. To support these activities, we (i) identify and secure new programs, (ii) set up new subsidiaries to further advance individual programs, (iii) recruit key management team members, (iv) raise and allocate capital across the portfolio and (v) provide certain shared services, including research and development operations, administrative services, and business development, to our subsidiaries. We do not have any products approved for sale and have not generated any revenue from product sales.

14

We have three partially-owned development subsidiaries ("Asset Subsidiaries"): Cullinan Florentine Corp. ("Cullinan Florentine"), which is advancing CLN-049; Cullinan MICA Corp. ("Cullinan MICA"), which is advancing CLN-619; and Cullinan Amber Corp. ("Cullinan Amber"), which is developing our AMBER platform and advancing CLN-617 as its first product candidate. The Company's former Asset Subsidiary, Cullinan Pearl, which is advancing CLN-081, was divested in the second quarter of 2022. We hold intellectual property rights and exclusive options for worldwide intellectual property for our earlier-stage programs, NexGem, Opal, Jade and the HPK1 degrader collaboration with Icahn Mount Sinai.

Since inception, we have funded our operations primarily through the sale of equity securities and from licensing or selling the rights to our product candidates. As of June 30, 2022, we have received net proceeds of $541.2 million from equity financings, inclusive of our net proceeds of $264.5 million from our initial public offering ("IPO"). We have received $18.9 million in net collaboration revenue from our previous license agreement ("Zai License Agreement") with Zai Lab Shanghai Company, Limited ("Zai Lab") and cash proceeds of $270.0 million, net of $5.0 million in escrow as of June 30, 2022, from the sale of Cullinan Pearl.

As of June 30, 2022, we had cash, cash equivalents and short-term investments of $611.0 million and long-term investments and interest receivable of $44.6 million. Interest receivable is included in prepaid expenses and other current assets on the consolidated balance sheet and represents accrued and unpaid interest on our marketable securities. With the exception of the second quarter 2022, we have incurred operating losses and have had negative cash flows from operations since our inception. As of June 30, 2022, we had retained earnings of $3.9 million. Besides the one-time gain from the sale of Cullinan Pearl, we expect to continue to generate operating losses for the foreseeable future. Our future viability is dependent on the success of our research and development and our ability to access additional capital to fund our operations. There can be no assurance that our current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

We are subject to risks and uncertainties common to early-stage 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 ability to obtain additional capital to fund operations. Our therapeutic programs will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require additional capital, adequate personnel and extensive compliance-reporting capabilities. There can be no assurance that our research and development will be successfully completed, that adequate protection for our intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable.

Impact of COVID-19 Pandemic

The duration and scope of the COVID-19 pandemic continues to be uncertain. Infection rates remain high in many parts of the world, and the virulence and spread of different strains of the virus have caused many local jurisdictions to continue or re-implement quarantines and restrictions on travel and mass gatherings. The extent and duration of the impact of COVID-19 on our operations and financial performance is currently unknown and will depend on future developments that are uncertain and unpredictable.

We implemented remote working and other protective measures, but thus far, have not experienced a significant disruption or delay in our operations as it relates to the clinical development or drug production of our product candidates. However, COVID-19 has at times impacted the pace of our enrollment in our clinical trials and the conduct of our preclinical studies. In the future, COVID-19-related restrictions may adversely impact our operations. Such events may result in a period of business, supply and drug product manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations.

To date, COVID-19 has not had a financial impact on us. The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the ultimate economic impact brought by, and the duration of, the COVID-19 pandemic remain difficult to assess or predict, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others, the pandemic has resulted in significant disruptions in the general commercial activity and the global economy and caused financial market volatility and uncertainty in significant and unforeseen ways. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business.

Basis of Presentation and Consolidation

Since our inception, we have created wholly-owned subsidiaries or made investments in certain controlled entities. Losses attributed to noncontrolling interests are reported separately in our consolidated statements of operations and comprehensive income (loss).

15

The following Asset Subsidiaries are consolidated into our financial statements:

Consolidated Entities		Current Relationship		Date Control First Acquired		Ownership as of June 30, 2022 (1)
Cullinan Pearl Corp. (2)		Divested		November 2018			0	%
Cullinan Amber Corp.		Partially-owned Subsidiary		December 2019			94	%
Cullinan Florentine Corp.		Partially-owned Subsidiary		December 2019			95	%
Cullinan MICA Corp.		Partially-owned Subsidiary		May 2020			54	%

Cullinan Pearl

The Company sold its partially-owned subsidiary, Cullinan Pearl, to Taiho in June 2022. Refer to Note 3 of our notes to the consolidated financial statements for additional details relating to the transaction.

Cullinan Amber

Cullinan Amber, incorporated in December 2019, is our partially-owned operating subsidiary that has a license agreement with the Massachusetts Institute of Technology ("MIT") that provides exclusive worldwide rights to the patents related to technology that originated in the laboratory of Dr. Dane Wittrup to develop novel multifunctional constructs that are retained in the tumor microenvironment, which enables prolonged local activity of immunostimulatory cytokine combinations.

In June 2021, Cullinan Amber issued 3.0 million shares of its Series A Preferred Stock to us for gross proceeds of $3.0 million and 0.2 million shares of its common stock to MIT in exchange for no additional consideration, pursuant to the license agreement with MIT.

In June 2022, Cullinan Amber issued 6.0 million shares of its Series A Preferred Stock to us for gross proceeds of $6.0 million and 0.3 million shares of its common stock to MIT in exchange for no additional consideration, pursuant to the license agreement with MIT.

As of June 30, 2022, we owned 93.5% of the fully-diluted shares outstanding of Cullinan Amber, including 100% of Series A Preferred Stock. As of June 30, 2022, noncontrolling interests collectively owned 6.5% of the equity of Cullinan Amber on a fully-diluted basis.

Pursuant to a voting agreement by and among Cullinan Amber, us, and other stockholders of Cullinan Amber, the holders of Cullinan Amber's Series A Preferred Stock, acting by majority vote, have the right to designate two members of the three-person board of directors.

Cullinan Florentine

Cullinan Florentine, incorporated in December 2019, is our partially-owned operating subsidiary that has exclusive worldwide rights to CLN-049, our bispecific antibody targeting FLT3 and CD3, pursuant to an exclusive license agreement (the "Tübingen License Agreement") with Deutsches Krebsforschungszentrum ("DKFZ"), Eberhard Karls University of Tübingen, Faculty of Medicine ("University of Tübingen"), and Universitätsmedizin Gesellschaft für Forschung und Entwicklung mbH, Tübingen ("UFE").

In July 2021, Cullinan Florentine issued 7.5 million shares of Series B Preferred Stock to us for gross proceeds of $8.1 million.

As of June 30, 2022, we owned 94.8% of the fully-diluted shares outstanding of Cullinan Florentine, including 100% of Series A Preferred Stock. As of June 30, 2022, noncontrolling interests collectively owned 5.2% of the equity of Cullinan Florentine on a fully-diluted basis

Pursuant to a voting agreement between Cullinan Florentine, us and other stockholders of Cullinan Florentine, holders of Cullinan Florentine's Series A Preferred Stock, acting by majority vote, have the right to designate two members of the four-person board of directors. DKFZ and UFE, acting jointly, have the right to appoint one director. Our current chief executive officer, Mr. Ahmed, is the fourth board member.

Cullinan MICA

Cullinan MICA, formerly known as PDI Therapeutics, Inc., of which we assumed operational control in May 2020, is our partially-owned operating subsidiary that owns intellectual property related to CLN-619, our MICA/B-targeted humanized IgG1 monoclonal antibody.

In June 2021, we purchased 5.4 million shares of Cullinan MICA's Series A Senior Preferred Stock for $7.1 million, and certain other existing investors purchased 0.7 million shares for $0.9 million.

In March 2022, we purchased 6.7 million shares of Cullinan MICA's Series A Senior Preferred Stock for $8.8 million, and certain other existing investors purchased 0.9 million shares for $1.2 million.

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As of June 30, 2022, we own 53.5% of the fully-diluted shares outstanding of Cullinan MICA, including 52% of Series A Preferred Stock. Noncontrolling interests own 46.5% of the fully-diluted shares outstanding of Cullinan MICA, including 48% of Series A Preferred Stock.

Pursuant to a voting agreement, by and among Cullinan MICA, us, and other stockholders of Cullinan MICA, we have the right to appoint three members of the five-person board of directors.

Components of Our Results of Operations

Revenue

For the six months ended June 30, 2021, we recognized $18.9 million of revenue, relating to the upfront fee earned from the Zai License Agreement. We have not generated any revenue from the sale of products since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts for our product candidates are successful and result in regulatory approval or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the research and development of our wholly-owned and jointly-developed product candidates and programs. We expense research and development costs and intangible assets acquired that have no alternative future use as incurred. These expenses include:

Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or consumed or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

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 increase substantially in connection with our planned clinical development activities in the near term and in the future. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of any current or future product candidates.

Our clinical development costs may vary significantly based on factors such as:

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The successful development and commercialization of product candidates is highly uncertain due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

A change in the outcome of any of these variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates or programs.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel in executive management, finance, corporate and business development, and other administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax, and administrative consulting services; insurance costs; administrative travel expenses; marketing expenses; and other operating costs.

We have incurred increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with being a public company. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support development of our product candidates and programs and our continued research activities.

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Gain on Sale of Cullinan Pearl

Gain on sale of Cullinan Pearl represents the excess of the consideration received over the carrying value of the non-financial assets sold. Refer to Note 3 of our notes to the consolidated financial statements for additional details relating to the transaction.

Other Income

Other income consists primarily of interest income earned on our cash, cash equivalents, short-term investments and long-term investments.

Income Taxes

Income taxes consist primarily of federal and state income taxes.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2022 and 2021

The following table presents our results of operations:

		Three Months Ended June 30,			Six Months Ended June 30,
(in thousands)		2022			2021			2022			2021
License revenue		$	-			$	-			$	-			$	18,943
Operating expenses:
Research and development			26,411				11,778				50,947				24,193
General and administrative			10,695				4,826				18,816				9,982
Total operating expenses			37,106				16,604				69,763				34,175
Gain on sale of Cullinan Pearl			276,785				-				276,785				-
Income (loss) from operations			239,679				(16,604	)			207,022				(15,232	)
Other income (expense):
Interest income			697				173				894				222
Other income (expense), net			(241	)			(8	)			(241	)			(10	)
Net income (loss) before income taxes			240,135				(16,439	)			207,675				(15,020	)
Income tax expense			66,070				-				46,502				-
Net income (loss)			174,065				(16,439	)			161,173				(15,020	)
Net income (loss) attributable to noncontrolling interest			(833	)			(803	)			(1,627	)			686
Net income (loss) attributable to common stockholders of Cullinan		$	174,898			$	(15,636	)		$	162,800			$	(15,706	)

License Revenue

In the six months ended June 30, 2021, we recognized $18.9 million of revenue relating to the upfront fee earned from the Zai License Agreement.

Research and Development Expenses

		Three Months Ended June 30,			Six Months Ended June 30,
(in thousands)		2022			2021			2022			2021
Cullinan Pearl (CLN-081)		$	4,245			$	3,428			$	12,143			$	9,146
Cullinan MICA (CLN-619)			5,606				1,836				9,167				3,470
Cullinan Amber (CLN-617)			2,738				422				4,518				747
Cullinan Florentine (CLN-049)			1,226				1,781				2,350				3,599
Total Asset Subsidiaries expenses			13,815				7,467				28,178				16,962
Early-stage research			5,311				1,215				10,965				1,647
Other personnel and unallocated			2,906				818				4,764				1,752
Equity-based compensation			4,379				2,278				7,040				3,832
Total research and development expenses		$	26,411			$	11,778			$	50,947			$	24,193

We separately disclose additional details for expenses incurred in connection with the research and development activities conducted for the product candidates and programs being developed by our partially-owned subsidiaries Cullinan Amber, Cullinan Florentine, Cullinan MICA and Cullinan Pearl, as we believe they represent key portfolio value drivers. In June 2022, we completed the sale of Cullinan Pearl to Taiho. We expect to share with Taiho 50% of future development costs for CLN-081 along with 50% of any future potential pre-tax profits from U.S sales of CLN-081.

Research and development expenses were $26.4 million for the three months ended June 30, 2022 compared to $11.8 million for the three months ended June 30, 2021.

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The increase of $6.3 million of research and development expenses of the Asset Subsidiaries was primarily related to an increase in chemistry, manufacturing and controls ("CMC") costs of $4.2 million relating to our ongoing clinical trials for CLN-081 and CLN-619 and to support IND-enabling activities with CLN-617 and an increase of $2.4 million relating to preclinical and clinical activities across CLN-081, CLN-049 and CLN-619.

The remaining increase within research and development expenses was primarily related to an increase in the discovery and development of early-stage product candidates, inclusive of the collaboration agreement entered into with Icahn Mount Sinai in December 2021, and an increase in equity-based compensation expense due to increased headcount and new grants in the three months ended June 30, 2022.

Research and development expenses were $51.0 million for the six months ended June 30, 2022 compared to $24.2 million for the six months ended June 30, 2021.

The increase of $11.2 million of research and development expenses of the Asset Subsidiaries was primarily related to an increase in CMC costs of $10.8 million relating to our ongoing clinical trials for CLN-081 and CLN-619 and to support IND-enabling activities with CLN-617 and an increase of $3.2 million related to preclinical and clinical activity across CLN-081, CLN-049 and CLN-619, partially offset by a $3.0 million royalty payment to Taiho for the upfront fee from the Zai License Agreement that was made in the first six months of 2021 and did not recur in 2022.

The remaining increase within research and development expenses was primarily related to an increase in the discovery and development of early-stage product candidates, inclusive of the collaboration agreement entered into with Icahn Mount Sinai in December 2021, and an increase in equity-based compensation expense due to increased headcount and new grants in the six months ended June 30, 2022.

General and Administrative Expenses

General and administrative expenses were $10.7 million for the three months ended June 30, 2022 compared to $4.8 million for the three months ended June 30, 2021. The increase of $5.9 million was primarily due to a $2.4 million increase in equity-based compensation expense relating to increased headcount and new grants in the three months ended June 30, 2022, a $1.1 million increase in personnel costs relating to increased headcount and non-recurring costs of $1.7 million related to the Cullinan Pearl sale.

General and administrative expenses were $18.8 million for the six months ended June 30, 2022 compared to $10.0 million for the six months ended June 30, 2021. The increase of $8.8 million was primarily due to a $4.4 million increase in equity-based compensation expense relating to increased headcount and new grants in the six months ended June 30, 2022, a $1.7 million increase in personnel costs relating to increased headcount and non-recurring costs of $2.0 million related to the Cullinan Pearl sale.

Gain on Sale of Cullinan Pearl

The $276.8 million gain on sale of Cullinan Pearl represents the excess of the consideration received over the carrying value of the non-financial assets sold. Refer to Note 3 of our notes to the consolidated financial statements for additional details relating to the transaction.

Other Income

Other income was $0.5 million during the three months ended June 30, 2022 compared to $0.2 million during the three months ended June 30, 2021. The increase was primarily related to higher investment income.

Other income was $0.7 million during the six months ended June 30, 2022 compared to $0.2 million during the six months ended June 30, 2021. The increase was primarily related to higher investment income.

Income Tax Expense

The income tax expense was $66.1 million and $46.5 million for the three and six months ended June 30, 2022, respectively. The net income tax expense of $46.5 million recognized for the six months ended June 30, 2022 represents the expected tax from the gain on sale of Cullinan Pearl, including the expected utilization of current year and certain historical tax attributes.

We did not record a provision for income taxes for the three or six months ended June 30, 2021.

Net Income (Loss) Attributable to Noncontrolling Interests

Net loss attributable to noncontrolling interests was $0.8 million during both the three months ended June 30, 2022 and 2021.

Net loss attributable to noncontrolling interests was $1.6 million during the six months ended June 30, 2022 compared to net income of $0.7 million during the six months ended June 30, 2021. The decrease was primarily related to our allocation of income to our noncontrolling interests in the six months ended June 30, 2021 due to the recognition of revenue from the Zai License Agreement under Cullinan Pearl.

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Liquidity and Capital Resources

Overview

We have incurred significant operating losses, with the exception of the one-time gain on the sale of Cullinan Pearl in the three and six months ended June 30, 2022, and negative cash flows from operations since our inception and expect to continue to generate operating losses for the foreseeable future. We have not yet commercialized any products and we do not expect to generate revenue from sales of products for several years, if at all. To date, we have funded our operations primarily with proceeds from the sale of equity securities and from licensing or selling the rights to our product candidates. As of June 30, 2022, we had cash, cash equivalents and short-term investments of $611.0 million and long-term investments and interest receivable of $44.6 million.

In January 2021, we completed our IPO and received net proceeds of $264.5 million from the offering, after deducting underwriting discounts, commissions and other offering expenses. Based on our current operational plans and assumptions, we expect that our current cash, cash equivalents, short-term investments, and long-term investments, will be sufficient to fund operations through 2026. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We cannot guarantee that we will be able to raise additional capital on reasonable terms or at all.

In June 2022, we sold our partially-owned subsidiary, Cullinan Pearl, to Taiho for an upfront payment of $275.0 million, of which $5.0 million will remain in escrow until we and Taiho finalize any post-sale net working capital adjustment, which is not expected to be material.

Cash Flows

Comparison of the Six Months Ended June 30, 2022 and 2021

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

		Six Months Ended June 30,
(in thousands)		2022			2021
Net cash used in operating activities		$	(47,328	)		$	(17,711	)
Net cash provided by (used in) investing activities			335,563				(292,320	)
Net cash provided by financing activities			5,554				265,503
Net increase (decrease) in cash and cash equivalents		$	293,789			$	(44,528	)

Cash Flow from Operating Activities

For the six months ended June 30, 2022, operating activities used $47.3 million of cash. Net income of $161.2 million and a benefit of $51.1 million from the net change in our operating assets and liabilities was more than offset by a net non-cash benefit of $259.6 million. The net non-cash benefit primarily consisted of the gain on sale of Cullinan Pearl of $276.8 million, partially offset by $15.2 million from equity-based compensation expense and $1.7 million in amortization and accretion on marketable securities.

For the six months ended June 30, 2021, operating activities used $17.7 million of cash, primarily consisting of our net loss of $15.0 million and changes in net operating assets and liabilities of $11.5 million, which were partially offset by non-cash charges of $8.8 million. Our non-cash charges of $8.8 million primarily consisted of $7.7 million from equity-based compensation expense and $1.0 million in amortization and accretion on marketable securities.

Cash Flow from Investing Activities

For the six months ended June 30, 2022, net cash provided by investing activities was $335.6 million, which consisted of $270.0 million of proceeds from the sale of Cullinan Pearl, net of $5.0 million in escrow, and $158.9 million from the sales and maturities of investments, partially offset by the purchase of $93.4 million of investments.

For the six months ended June 30, 2021, investing activities used $292.3 million of cash, of which $363.2 million was used for the purchase of investments, partially offset by $70.9 million received from the sales and maturities of investments.

Cash Flow from Financing Activities

For the six months ended June 30, 2022, net cash provided by financing activities was $5.6 million, which primarily consisted of $4.4 million from stock option exercises and $1.2 million from the issuance of noncontrolling interests.

For the six months ended June 30, 2021, net cash provided by financing activities was $265.5 million, which primarily consisted of $267.3 million net proceeds from the initial public offering and $0.9 million from the issuance of noncontrolling interests, partially offset by the $2.7 million payment of deferred offering costs.

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Future Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities, manufacturing and clinical trials of our product candidates. In addition, we have and will continue to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our expenses will also increase as we:

As a publicly-traded company, we incur significant legal, accounting and other expenses. We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act enacted in April 2012. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.

To achieve compliance with Section 404 after we no longer qualify as an emerging growth company, we will be required to provide an attestation of our internal controls over financial reporting processes, which will require additional costs and personnel. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

Based on our current operational plans and assumptions, we expect that our current cash, cash equivalents, short-term and long-term investments, will be sufficient to fund operations through 2026. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. As we progress with our development programs and the regulatory review process, we expect to incur significant commercialization expenses related to product manufacturing, pre-commercial activities and commercialization. We may also require additional capital to pursue in-licenses or acquisitions of other programs to further expand our pipeline.

Because of the numerous risks and uncertainties associated with research, development and commercialization of our product candidates and programs, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

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Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through equity offerings, debt financings, government or other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity, current ownership interests will be diluted. If we raise additional funds through government or third-party funding, collaboration agreements, strategic alliances, licensing arrangements, or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Other Commitments

We have certain payment obligations under various license and collaboration agreements. Under these agreements, we are required to make milestone payments upon successful completion and achievement of certain intellectual property, clinical, regulatory, and sales milestones. The payment obligations under the license and collaboration agreements are contingent upon future events, such as our achievement of specified development, clinical, regulatory, and commercial milestones, and we will be required to make milestone and royalty payments in connection with the sale of products developed under these agreements. As the achievement and timing of these future milestone payments are not probable or estimable, such amounts have not been included in our consolidated balance sheet as of June 30, 2022 and December 31, 2021.

Operating lease obligations as of June 30, 2022 were $1.1 million, with $0.5 million payable within 12 months. See Note 12 to our unaudited consolidated financial statements in this Quarterly Report on Form 10-Q for further detail on our obligations and the timing of expected future payments.

In addition, we enter into agreements in the normal course of business with CROs for clinical trials and with vendors for preclinical studies, manufacturing services, and other services and products for operating purposes, which are generally cancelable upon written notice.

Critical Accounting Policies and Estimates

Our critical accounting policies have not materially changed from those described in the 2021 10-K.

Recently Issued and Adopted Accounting Pronouncements

A description of recently adopted accounting pronouncements that may materially impact our financial position and results of operations is disclosed in Note 2 to our unaudited consolidated financial statements appearing at the beginning of this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Information required by this Item is not applicable as we are electing scaled disclosure requirements available to smaller reporting companies with respect to this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure 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, 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.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of June 30, 2022, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). 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 our 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 concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective at the reasonable assurance level as of June 30, 2022.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II-OTHERINFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are probable to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

The following information updates, and should be read in conjunction with, the risk factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 10-K"). Any of the risk factors contained in this Quarterly Report on Form 10-Q and the 2021 10-K could materially affect our business, financial condition or future results, and such risk factors may not be the only risks we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may adversely affect our business, financial condition or future results.

In June 2022, we completed the sale of our entire equity interest in Cullinan Pearl Corp. ("Cullinan Pearl") which was developing CLN-081/TAS6417, formerly our lead program, to Taiho Pharmaceutical Co., Ltd ("Taiho") and we entered into a co-development agreement with a subsidiary of Taiho, to co-develop and, at our option, co-commercialize CLN-081/TAS6417 in the U.S. Pursuant to the terms of the co-development agreement with Taiho, development costs for CLN-081/TAS6417 incurred after the sale of Cullinan Pearl will be shared equally between Taiho and us with each party receiving 50% of any future pre-tax profits from potential U.S. sales of CLN-081/TAS6417.

Risks Related to Our Financial Condition and Capital Requirements

We have not generated any revenue from the sale of our product candidates and may never be profitable.

Our ability to become profitable depends upon our ability to generate revenue. Besides our previous licensing agreement with Zai Lab, we have not generated any other license or collaboration revenue or any sales revenue from any of our product candidates. We do not expect to generate significant sales revenue or commercial revenue from the sale or license of one or more of our preclinical programs or product candidates unless or until we successfully complete clinical development and obtain regulatory approval of, and then successfully commercialize, at least one of our product candidates or, alternatively, enter into agreements with third parties for the purchase, collaboration, or license of one of our product candidates. We are currently advancing CLN-081 (pursuant to the co-development agreement with Taiho), CLN-049 and CLN-619 in clinical development, but most of our product candidates are in the preclinical stages of development and will require additional preclinical studies. All of our product candidates will require additional clinical development, regulatory review and approval, substantial investment, access to sufficient commercial manufacturing capacity, and significant marketing efforts before we can generate any revenue from product sales. Our ability to generate revenue depends on a number of factors, including, but not limited to:

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Many of the factors listed above are beyond our control and could cause us to experience significant delays or prevent us from obtaining regulatory approvals or commercializing our product candidates. Even if we are able to commercialize our product candidates, we may not achieve profitability soon after generating product sales, if ever. If we are unable to generate sufficient revenue through the commercial sale of our product candidates or any future product candidates, or from agreements with third parties for the purchase, collaboration, or license of one or more of our product candidates, we may be unable to continue operations without continued funding.

We will require substantial additional funding to develop and commercialize our product candidates and identify and invest in new product candidates. If we are unable to raise capital when needed, we would be compelled to delay, reduce, or eliminate our product development programs or other operations.

The development of pharmaceutical products is capital intensive. We are currently advancing CLN-081 (pursuant to the co-development agreement with Taiho), CLN-049 and CLN-619 in clinical development and making further investments in our preclinical programs. We expect our expenses to increase in parallel with our ongoing activities. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations, which may include raising funding by one or more of our subsidiaries that could dilute our equity interest in the subsidiary. We have estimated our current additional funding needs based on assumptions that may prove to be wrong. Changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We cannot be certain that additional funding will be available on acceptable terms, or at all. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of public or private equity offerings, debt financings, governmental funding, collaborations, strategic partnerships, and alliances, or marketing, distribution, or licensing arrangements with third parties, either by us or by one or more of our subsidiaries. If we or our subsidiaries are unable to raise capital when needed or on attractive terms, we or the applicable subsidiary would be forced to delay, reduce, or eliminate our identification, discovery, and preclinical or clinical development programs, or any future commercialization efforts.

We had cash and cash equivalents and short-term investments of $611.0 million and long-term investments and interest receivables of $44.6 million as of June 30, 2022. We believe that, based upon our current operating plan, our existing capital resources will be sufficient to fund our anticipated operations through 2026. Our future capital requirements will depend on many factors, including:

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If we or our subsidiaries engage in acquisitions or strategic partnerships, this may increase our or their capital requirements, dilute our or their stockholders, cause us or them to incur debt or assume contingent liabilities, and subject us or them to other risks.

As noted above, in June 2022, we sold Cullinan Pearl, formerly a partially-owned subsidiary of the Company, to Taiho and we entered into a co-development agreement with a subsidiary of Taiho to co-develop and, at our option, co-commercialize CLN-081/TAS6417 in the U.S. Pursuant to the terms of the co-development agreement with Taiho, development costs for CLN-081/TAS6417 incurred after the sale of Cullinan Pearl will be shared equally between us and Taiho, with each party receiving 50% of any future pre-tax profits from potential U.S. sales of CLN-081/TAS6417.

We intend to engage in various acquisitions and strategic partnerships in the future, including licensing or acquiring products, intellectual property rights, technologies, or businesses, carried out either by u or by one or more of our wholly- or partially-owned subsidiaries, including a newly-formed subsidiary formed for the purpose of such transaction. Any acquisition or strategic partnership, including the co-development agreement with Taiho, may entail numerous risks to us or the applicable subsidiary, including:

If we fail to properly evaluate potential acquisitions, in-licenses, investments or other transactions associated with the creation of new research and development programs or the maintenance of existing ones, we might not achieve the anticipated benefits of any such transaction, we might incur costs in excess of what we anticipate, and management resources and attention might be diverted from other necessary or valuable activities.

Risks Related to Our Corporate Structure

Our ability to realize value from our subsidiaries may be impacted if we reduce our ownership to a minority interest or otherwise cede control to other investors through contractual agreements or otherwise.

In the event that any of our subsidiaries require additional capital and its respective board of directors authorizes the transaction, our equity interest in our subsidiaries may be further reduced to the extent such additional capital is obtained from third-party investors rather than from us. However, such transactions would still need to be approved by the board of directors of our respective subsidiary over which we maintain full or, in the case of Cullinan MICA, majority control. For example, in the event Cullinan MICA were to undertake a transaction that could lead to further dilution of our interest, such action would still be subject to protective provisions requiring the consent of a majority in interest of the then-outstanding shares of Series A Senior Preferred Stock, or the Protective Voting Rights, including, among other things, any authorization, designation, recapitalization or issuance of any new class or series of stock or any other securities convertible into equity securities of Cullinan MICA. Cullinan currently holds a majority of the Series A Senior Preferred Stock. These Protective Voting Rights give holders of Series A Senior Preferred voting control over any actions that would result in redemptions of equity securities.

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However, if we do not wish to or cannot provide additional capital to any of our subsidiaries, we may approve of an issuance of equity by a subsidiary that dilutes our ownership and may lose control over the subsidiary. In addition, if the affairs of such minority-owned subsidiaries such as Cullinan MICA were to be conducted in a manner detrimental to our interests or intentions, our business, reputation, and prospects may be adversely affected. For example, other shareholders of Cullinan MICA could take actions without our consent, including that a majority of shareholders could demand a registration of their shares beginning in April 2025 and such a liquidity event by the other shareholders could have an adverse impact on our investment in the subsidiary.

As noted above, in June 2022, we completed the sale of Cullinan Pearl, formerly a partially owned subsidiary of the Company, to Taiho for an upfront payment of $275.0 million. We may receive up to an additional $130.0 million upon the achievement of certain regulatory milestones related to CLN-081. There is no guarantee that these milestones will be achieved or that we will receive any of the additional $130.0 million. In connection with the sale of Cullinan Pearl, we entered into a co-development agreement with Taiho, pursuant to which we and Taiho will co-develop and, at our option, co-commercialize CLN-081/TAS6417 in the U.S. Taiho and us will share the future clinical development costs of CLN-081/TAS6417 equally, and each will receive 50% of the net profits from future U.S. sales. There is no guarantee that the co-development and co-commercialization will be successful or that we will receive any net profits and we could lose money.

Risks Related to Government Regulation

The Breakthrough Therapy designation by the FDA, if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process and it does not increase the likelihood that any of our product candidates will receive marketing approval.

We may seek Breakthrough Therapy designation for CLN-049 and CLN-619, and some or all of our future product candidates. A Breakthrough Therapy is defined as a drug or biologic that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Sponsors of product candidates that have been designated as Breakthrough Therapies are eligible to receive more intensive FDA guidance on developing an efficient drug development program, an organizational commitment involving senior managers, and eligibility for rolling review and priority review. Drugs and biologics designated as Breakthrough Therapies by the FDA may also be eligible for other expedited approval programs, including accelerated approval.

Designation as a Breakthrough Therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy designation for a product candidate may not result in a faster development process, review or approval compared to candidate products developed and considered for approval that have not received Breakthrough Designation and does not assure ultimate approval by the FDA. Even though we may seek Breakthrough Therapy designation for CLN-049, and CLN-619, and some or all of our future product candidates for the treatment of various cancers, there can be no assurance that we will receive breakthrough therapy designation for such product candidates.

Risks Related to Our Reliance on Third Parties

We may form or seek additional collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such collaborations, alliances or licensing arrangements.

As noted above, in June 2022, we completed the sale of Cullinan Pearl, formerly a partially owned subsidiary of the Company, to Taiho and we entered into the co-development agreement with a subsidiary of Taiho to co-develop and, at our option, co-commercialize CLN-081/TAS6417 in the U.S. Pursuant to the terms of the co-development agreement with Taiho, we will each equally contribute to the future clinical development of CLN-081/TAS6417 in the U.S., with each receiving 50% of the profits from potential U.S. sales.

We may form or seek additional strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business.

Further, collaborations involving our product candidates are subject to numerous risks, which may include the following:

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As a result, if we enter into additional collaboration agreements and strategic partnerships or license our product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results of operations.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Use of Proceeds from IPO of Common Stock

On January 7, 2021, our Registration Statement on Form S-1, as amended (Registration No. 333-251512) was declared effective by the SEC for our IPO. At the closing of the offering on January 12, 2021, we sold 13,685,000 shares of common stock, including the exercise in full by the underwriters of their option to purchase up to 1,785,000 additional shares of common stock, at a public offering price of $21.00 per share. The aggregate net proceeds to us from the public offering, inclusive of the over-allotment exercise and after underwriting discounts and offering expenses, were $264.5 million.

We have invested the proceeds from the IPO and any unused proceeds from our prior equity financings into money market funds and marketable securities. Information related to use of proceeds from registered securities is incorporated herein by reference to the "Use of Proceeds" section of our IPO as described in our final prospectus dated January 7, 2021 and filed with the SEC on January 11, 2021 pursuant to Rule 424(b)(4) of the Securities Act. There has been no material change in the planned use of proceeds as described in our final prospectus.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

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Item 6. Exhibits.

Exhibit Number		Description
3.1		Second Amended and Restated Certificate of Incorporation of the Registrant, as amended by the Certificate of Amendment, effective as of February 25, 2021 (incorporated by reference to Exhibit 3.1 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 30, 2021).
3.2		Second Amended and Restated Bylaws of the Registrant, effective as of February 25, 2021 (incorporated by reference to Exhibit 3.2 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 30, 2021).
10.1*		Share Purchase Agreement, dated May 11, 2022, by and among the Registrant, Taiho Pharmaceutical Co. Ltd. and Cullinan Pearl Corp.
10.2*		Co-Development Agreement, dated June 21, 2022, by and between the Registrant and Taiho Oncology, Inc.
10.3*#		Performance Stock Unit Award Agreement, dated June 9, 2022, by and between the Registrant and Nadim Ahmed
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, has been formatted in Inline XBRL and contained in Exhibit 101.

* Filed herewith.

** The certifications furnished in Exhibit 32.1 hereto are deemed to be furnished with this Quarterly Report on Form 10-Q and will not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

# Indicates a management contract or compensatory plan, contract or arrangement.

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SIGNATURES

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

		Cullinan Oncology, Inc.
Date: August 10, 2022		By:	/s/ Nadim Ahmed
			Name: Nadim Ahmed
			Title: President and Chief Executive Officer (Principal Executive Officer)
Date: August 10, 2022		By:	/s/ Jeffrey Trigilio
			Name: Jeffrey Trigilio
			Title: Chief Financial Officer (Principal Financial and Accounting Officer)

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