Unaudited Pro Forma Condensed Combined Financial Information

Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2020

Unaudited Pro Forma Condensed Combined Statement of Operations for Nine Months Ended September 30, 2020

Unaudited Pro Forma Condensed Combined Statement of Operations for Year Ended December 31, 2019

Notes to the Unaudited Pro Forma Condensed Combined Financial Information

the Merger to be accounted for as a reverse acquisition, with Private Chinook being deemed the acquiring company for accounting purposes;

the 1:5 reverse stock split effected by Aduro immediately prior to the closing of the Merger; and

the sale of common stock of Private Chinook to certain investors under subscription agreements (the Subscription Agreements”), with gross proceeds of $115 million, immediately prior to the closing of the Merger.

Conversion of Chinook preferred stock into shares of Aduro common stock

Assets

Current assets:

Cash and cash equivalents

Marketable securities

Accounts receivable

Prepaid expenses & other current assets

Total current assets

Marketable securities

Property and equipment, net

Operating lease right-of-use assets

Goodwill

Intangible assets, net

Other assets

Total assets

Liabilities and stockholders’ equity (deficit)

Current liabilities:

Accounts payable & accrued expenses

$

4,000

D

Accrued clinical trial & manufacturing expenses

Operating lease liabilities

Deferred revenue

Total current liabilities

Contingent consideration

Deferred revenue

Deferred tax liabilities

Redeemable convertible preferred stock tranche liability

Operating lease liabilities

Contingent value right liability

Other long-term liabilities

Total liabilities

Redeemable Convertible Preferred stock

Stockholders’ equity (deficit):

Common stock

1

(2

) 

C

A(8)

Additional paid-in capital

76,579

109,599

B

C

Accumulated other comprehensive loss

Accumulated deficit

(4,000

) 

D

Total stockholders’ equity (deficit)

Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)

Revenue:

Collaboration and license revenue

Total revenue

Operating expenses:

Research and development

General and administrative

Restructuring and related expense

Amortization of intangible assets

Total operating expenses

Loss from operations

Interest income (expense)

Change in fair value of redeemable convertible preferred stock tranche liability

Other income (expense), net

Loss before income tax

Income tax benefit

Net loss

Net loss per common share, basic and diluted

Weighted average common share outstanding – basic and diluted

Revenue:

Collaboration and license revenue

Total revenue

Operating expenses:

Research and development

General and administrative

Loss on impairment of intangible assets

Amortization of intangible assets

Total operating expenses

Loss from operations

Interest income

Change in fair value of redeemable convertible preferred stock tranche liability

Other income (expense), net

Loss before income tax

Income tax benefit

Net loss

Net loss per common share, basic and diluted

Weighted average common share outstanding – basic and diluted

Value of shares of the combined company owned by Aduro equity holders (1)

Estimated fair value of contingent value rights (2)

Precombination Aduro stock options assumed by Chinook (3)

Total preliminary estimated purchase price

Represents the number of shares of common stock of the combined company that Aduro equity holders would own as of the closing of the transaction pursuant to the Merger Agreement.

Estimated number of shares of the combined company to be owned by Aduro equity holders (a)

Multiplied by the price per share of Aduro stock (b)

Fair value of shares of the combined company owned by Aduro equity holders

Represents the number of shares of common stock of the combined company that Aduro equity holders would own as of the closing of the transaction pursuant to the Merger Agreement. This amount is calculated, for purposes of this unaudited pro forma condensed combined financial information, based on shares of Aduro common stock outstanding as of September 30, 2020.

The estimated purchase price was based on the closing price of Aduro common stock on October 5, 2020, the effective date of the transaction.

Immediately prior to the Merger closing, Aduro granted its shareholders one CVR for each share of Aduro common stock. This CVR gives the holder a right to receive certain cash proceeds from potential future sales of Aduro’s non-renal assets for up to ten years. The preliminary estimate for the fair value of the CVR is based on the carrying value of the intangible assets related to Aduro’s non-renal programs and adjusted for potential payout percentage (declining payout tiers based upon when a sale or distribution occurs).

Effective with the Merger, any Aduro stock option or unvested restricted stock unit held by an Aduro employee who remained employed by Aduro as of immediately prior to the Merger, that is outstanding and unexercised as of immediately prior to the Merger, for accounting purposes is converted into a stock-based compensation award, or the Replacement Award, of the Company and will be subject to the same terms and conditions after the Merger as the terms and conditions applicable to the corresponding Aduro stock-based compensation award. Accordingly, this balance represents the precombination service portion of the estimated fair value of the Replacement Award issued to Aduro employees. In calculating the estimated fair value of the Replacement Awards based on the Black-Scholes model, management used the following weighted-average assumptions:

Expected term (in years)

Volatility

Risk free interest rate

Dividend yield

Cash and cash equivalents

Marketable securities

Accounts receivable

Prepaid and other current assets

Property and equipment, net

Other assets

Operating lease right-of-use assets

Intangible assets

Deferred revenue – current

Other current liabilities, excluding deferred revenue

Deferred revenue – noncurrent

Other non-current liabilities, excluding deferred revenue

Total net assets acquired

The pro forma adjustments to reflect the purchase consideration and the fair value of the assets and liabilities acquired in connection with the Merger consist of the following:

To reflect the fair value of acquired deferred revenue of $4.8 million. The deferred revenue was valued based upon the estimated remaining costs to fulfill the legal performance obligation, plus a reasonable profit margin. The majority of the remaining legal obligations are expected to be satisfied within the next 12 months.

To eliminate the historical Aduro goodwill.

To reflect an adjustment to bring Aduro’s intangible assets to fair value, which primarily relates to the fair value of IPR&D related to the research and development of Aduro’s APRIL program, acquired as part of the transaction. IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the related project. Therefore, no pro forma adjustment has been made to the historical amortization expense in the unaudited pro forma combined statements of operations and comprehensive loss. The IPR&D intangible assets are subject to testing for impairment annually and upon other triggering events.

To reflect changes in accrued liabilities through the closing of the Merger for merger-related transaction costs which are not expected to have a continuing effect on the operating results of the combined company, of approximately $1.1 million consisting of legal fees, advisory fees, accounting and audit fees and other expenses to be incurred by Aduro between September 30, 2020 and the closing of the Merger. This adjustment will result in a reduction of net assets acquired by Chinook at closing.

Represents estimated purchase consideration based on the estimated fair value of Aduro, which includes approximately $237.5 million for the 16,268,861 shares of the combined company that the existing shareholders of Aduro own after the closing of the Merger and approximately $10.6 million for the contingent consideration liability related to the CVRs as discussed in Note 3 above.

Represents estimated purchase consideration of approximately $5.2 million attributable to precombination services for the Aduro’s employee stock options.

To eliminate Aduro’s historical stockholders’ equity balances, including accumulated deficit.

To reflect the reclassification of common stock and additional paid-in capital in connection with the exchange of Private Chinook’s common stock for Aduro’s common stock.

Represents adjustments to reflect the conversion of Private Chinook’s redeemable convertible preferred stock to Aduro common stock and additional paid-in capital based upon the exchange ratio and the termination of Private Chinook’s redeemable convertible preferred stock tranche rights upon closing of the Merger.

Represents an adjustment to reflect the $109.6 million capital raise (gross proceeds of $115.0 million net of issuance costs) by Private Chinook through the issuance of common stock under the Subscription Agreements and the subsequent conversion of such Private Chinook common stock into shares of the Company’s common stock.

Represents an adjustment to accounts payable and accrued expenses to reflect costs that are directly attributable to the closing of the Merger and are not expected to have a continuing effect on the operating results of the Company, including:

Approximately $0.6 million in severance obligations for Aduro’s employees. The payment of these arrangements is contingent on the employees providing service over the transition period, if any, which is expected to be completed in the months following closing of the Merger and will be recognized in the Company’s financial statements following the closing of the Merger.

Estimated costs to complete the transaction of approximately $3.4 million consisting of legal fees, advisory fees, accounting and audit fees and other expenses to be incurred by Chinook that were not incurred as of September 30, 2020.

Represents an adjustment to eliminate non-recurring transaction costs incurred by Aduro and Private Chinook in connection with the Merger and recorded as expense in their respective historical consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2020 as these expenses are not expected to have a continuing effect on the operating results of the Company.

Represents an adjustment to eliminate the impact of the change in fair value of Private Chinook’s redeemable convertible preferred stock tranche liability during the year ended December 31, 2019 and the nine months ended September 30, 2020. The redeemable convertible preferred stock tranche rights terminated upon closing of the Merger. Therefore, the changes in the fair value of redeemable convertible preferred stock tranche liability is removed from the unaudited pro forma condensed combined statements of operations to reflect the continuing impact of the Merger as if it occurred on January 1, 2019.

The weighted average shares outstanding for the period has been calculated as if the Merger occurred on January 1, 2019, calculated as the sum of 1) historical weighted average shares outstanding for Aduro, 2) Aduro shares issuable to Private Chinook’s shareholders upon the closing of the Merger, consisting of Private Chinook outstanding shares of common stock and preferred stock, on an as converted basis, both as of September 30, 2020 and as adjusted for the exchange ratio, and 3) the $109.6 million capital raise (gross proceeds of $115.0 million net of issuance costs) by Private Chinook through the issuance of common stock under the Subscription Agreements and the subsequent conversion of such Private Chinook common stock into shares of the Company’s common stock. As the Company is in a net loss position, any adjustment for potentially dilutive shares would be anti-dilutive, and as such basic and diluted loss per share are the same. The following table presents the calculation of the pro forma weighted average number of common stock outstanding:

Weighted average Aduro shares outstanding

Estimated shares of Aduro common stock issued to Private Chinook shareholders upon closing of the Merger (1)

Aduro shares to be issued under the Subscription Agreements

Pro forma combined weighted average number of shares of common stock—basic and diluted

Estimated shares of common stock to be issued to Chinook shareholders upon closing of the Merger is calculated using the Private Chinook outstanding shares of common stock and preferred stock, on an as converted basis as of September 30, 2020, and as adjusted for the exchange ratio, as follows:

Private Chinook common shares

Private Chinook redeemable convertible preferred stock

Exchange ratio