0000950170-22-015561 | 10-Q | XBRL Viewer | Terns Pharmaceuticals INC

Leases

6 Months Ended

Jun. 30, 2022

3. Leases

In March 2019, the Company entered into a lease agreement for office space in Foster City, California which expires October 2024. The Company has the option to extend the lease agreement for a period of five years. In June 2019, the Company entered into a lease agreement for office space in Suzhou China, which expires in October 2022.

Components of lease cost are as follows:


	Three Months Ended		Six Months Ended
(in thousands)	June 30, 2022		June 30, 2022
Operating lease cost	$	151	$	305
Short-term cost		12		27
Total lease cost	$	163	$	332

Weighted-average remaining lease term				2.30
Weighted-average discount rate				6.00	%

The Company's future minimum lease payments are as follows:


(in thousands)	Operating Leases
2022	$	333
2023		652
2024		559
2025 and thereafter		—
Total lease payments		1,544
Less: Imputed interest		(107	)
Present value of lease liabilities		1,437
Less: Current portion of lease liabilities		(586	)
Total lease liabilities, non-current	$	851

The future minimum annual lease payments required under the Company’s existing operating lease agreements as of December 31, 2021 prior to the adoption of ASC 842 were as follows:


(in thousands)	Operating Leases
2022	$	669
2023		652
2024		559
2025 and thereafter		—
Total	$	1,880

Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Schedule of components of lease cost

Components of lease cost are as follows:


	Three Months Ended		Six Months Ended
(in thousands)	June 30, 2022		June 30, 2022
Operating lease cost	$	151	$	305
Short-term cost		12		27
Total lease cost	$	163	$	332

Weighted-average remaining lease term				2.30
Weighted-average discount rate				6.00	%

Schedule of future minimum lease payments required under operating leases

The Company's future minimum lease payments are as follows:


(in thousands)	Operating Leases
2022	$	333
2023		652
2024		559
2025 and thereafter		—
Total lease payments		1,544
Less: Imputed interest		(107	)
Present value of lease liabilities		1,437
Less: Current portion of lease liabilities		(586	)
Total lease liabilities, non-current	$	851

Schedule of future minimum lease payments required under operating leases

The future minimum annual lease payments required under the Company’s existing operating lease agreements as of December 31, 2021 prior to the adoption of ASC 842 were as follows:


(in thousands)	Operating Leases
2022	$	669
2023		652
2024		559
2025 and thereafter		—
Total	$	1,880

Fair Value - Schedule of Aggregate Amortized Cost and Fair Value of Marketable Securities (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Fair Value Disclosures [Abstract]
Due in one year or less	$ 123,004
Due after one year through two years	0
Total marketable securities	123,004
Due in one year or less	124,042
Due after one year through two years	0
Total marketable securities	$ 124,042

Leases - Schedule of future minimum lease payments required under operating leases (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Leases [Abstract]
2022	$ 669
2023	652
2024	559
2025 and thereafter	0
Total	$ 1,880

Fair Value

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value

2. Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs that may be used to measure fair value are defined below:

•

Level 1—Quoted prices in active markets for identical assets or liabilities at the measurement date.

•

Level 2—Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

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

The carrying values of the Company’s other assets, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:


	Fair Value at June 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents
Cash in bank balances	$	13,858	$	—	$	—	$	13,858
Money market funds		2,948		—		—		2,948
Total cash and cash equivalents	$	16,806	$	—	$	—	$	16,806
Marketable securities
U.S. government securities	$	—	$	49,440	$	—	$	49,440
Non-U.S. government securities		—		2,997		—		2,997
Corporate debt securities		—		25,087		—		25,087
Commercial paper		—		45,480		—		45,480
Total marketable securities	$	—	$	123,004	$	—	$	123,004

	Fair Value at December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents
Cash in bank balances	$	14,460	$	—	$	—	$	14,460
Money market funds		33,239		—		—		33,239
Total cash and equivalents	$	47,699	$	—	$	—	$	47,699
Marketable securities
U.S. government securities	$	—	$	36,192	$	—	$	36,192
Non-U.S. government securities		—		11,182		—		11,182
Corporate debt securities		—		39,443		—		39,443
Commercial paper		—		31,466		—		31,466
Total marketable securities	$	—	$	118,283	$	—	$	118,283

The aggregate amortized cost and fair value of marketable securities as of June 30, 2022, by contractual maturity, are as follows:


(in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	124,042	$	123,004
Due after one year through two years		—		—
Total marketable securities	$	124,042	$	123,004

There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Fair Value - Additional Information (Details)	6 Months Ended
Fair Value - Additional Information (Details)	Jun. 30, 2022 USD ($)
Fair Value Disclosures [Abstract]
Assets, Level 1 to Level 2 transfers	$ 0
Assets, Level 2 to Level 1 Transfers	0
Assets, Transfers into Level 3	0
Assets, Transfers out of Level 3	0
Liabilities, Level 1 to Level 2 transfers	0
Liabilities, Level 2 to Level 1 transfers	0
Liabilities, Transfers into Level 3	0
Liabilities, Transfers out of Level 3	$ 0

Loans Payable - Additional Information (Details) - USD ($) $ in Millions	1 Months Ended		6 Months Ended
	Dec. 31, 2020	May 31, 2020	Jun. 30, 2022	Oct. 31, 2018	Apr. 30, 2017
Short Term Debt [Line Items]
Proceeds from issuance of debt		$ 15.0
Bridge Loan
Short Term Debt [Line Items]
Debt Instrument, fair value	$ 2.1
Proceeds from issuance of debt		$ 1.8
Debt instrument, interest rate		10.00%
Debt conversion, original debt, amount	1.8
Proceeds from debt payable in different currency, description			payable in renminbi (RMB) at an established USD/RMB exchange rate, based on an average of the previous five working days before May 8, 2020.
Debt conversion to stock, aggregate debt plus accrued interest	1.9
Conversion of 2020 convertible promissory notes to Series C convertible preferred stock	1.8
Debt conversion, accrued interest, amount	$ 0.1
Series C convertible preferred stock
Short Term Debt [Line Items]
Convertible preferred stock, shares issued	7,500,665
Series C convertible preferred stock \| Bridge Loan
Short Term Debt [Line Items]
Debt conversion, converted instrument, shares	167,159
Series A convertible preferred stock
Short Term Debt [Line Items]
Convertible preferred stock, shares issued					2,089,285
Series A convertible preferred stock \| LAV Affiliate
Short Term Debt [Line Items]
Convertible preferred stock, shares issued	767,857
Series B convertible preferred stock
Short Term Debt [Line Items]
Convertible preferred stock, shares issued				2,384,195
Series B convertible preferred stock \| LAV Affiliate
Short Term Debt [Line Items]
Convertible preferred stock, shares issued	216,450
2020 Notes
Short Term Debt [Line Items]
Debt instrument, interest rate		10.00%
Debt conversion, original debt, amount		$ 15.9
Debt conversion to stock, aggregate debt plus accrued interest	$ 15.9
Conversion of 2020 convertible promissory notes to Series C convertible preferred stock		$ 15.9
2020 Notes \| Series C convertible preferred stock
Short Term Debt [Line Items]
Debt conversion, converted instrument, shares	1,366,820

Common Stock and Stock-Based Compensation - Schedule of Common Stock Shares Reserved for Issuance (Details) - shares	Jun. 30, 2022	Dec. 31, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total shares reserved	6,377,704	4,956,107
Options Outstanding Under Incentive Award Plans
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total shares reserved	4,478,338	3,577,485
Unvested shares of restricted stock units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total shares reserved	97,330	0
Shares Available for Future Grant under Incentive Award Plans
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total shares reserved	1,393,902	1,138,622
Shares Available for Future Grant under Employee Stock Purchase Plans
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total shares reserved	408,134	240,000

Common Stock and Stock-Based Compensation - Schedule of Stock Options Weighted Average Assumptions (Details) - $ / shares	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Employee Stock Purchase Plans
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected option life	9 months
Expected volatility	70.86%	0.00%
Risk-free interest rate	1.89%	0.00%
Fair value of underlying common stock	$ 1.66	$ 0
Weighted average grant-date fair value per share	$ 0.65	$ 0
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected option life	5 years 11 months 19 days	6 years
Expected volatility	72.83%	70.56%
Risk-free interest rate	2.01%	0.88%
Fair value of underlying common stock	$ 4.84	$ 19.85
Weighted average grant-date fair value per share	$ 3.16	$ 12.32

Leases (Additional Information) (Details)	1 Months Ended
Leases (Additional Information) (Details)	Mar. 31, 2019
Lease Agreements [Member] \| Foster City, California
Lessor, Lease, Description [Line Items]
Option to extend	The Company has the option to extend the lease agreement for a period of five years

Fair Value - Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Assets:
Marketable securities	$ 123,004
Recurring
Assets:
Total cash and cash equivalents	16,806	$ 47,699
Marketable securities	123,004	118,283
Recurring \| Cash in bank balances
Assets:
Total cash and cash equivalents	13,858	14,460
Recurring \| Money Market Funds
Assets:
Total cash and cash equivalents	2,948	33,239
Recurring \| U.S. government securities
Assets:
Marketable securities	49,440	36,192
Recurring \| Non-U.S. Government Securities
Assets:
Marketable securities	2,997	11,182
Recurring \| Corporate Debt Securities
Assets:
Marketable securities	25,087	39,443
Recurring \| Commercial Paper
Assets:
Marketable securities	45,480	31,466
Recurring \| Level 1
Assets:
Total cash and cash equivalents	16,806	47,699
Recurring \| Level 1 \| Cash in bank balances
Assets:
Total cash and cash equivalents	13,858	14,460
Recurring \| Level 1 \| Money Market Funds
Assets:
Total cash and cash equivalents	2,948	33,239
Recurring \| Level 2
Assets:
Marketable securities	123,004	118,283
Recurring \| Level 2 \| U.S. government securities
Assets:
Marketable securities	49,440	36,192
Recurring \| Level 2 \| Non-U.S. Government Securities
Assets:
Marketable securities	2,997	11,182
Recurring \| Level 2 \| Corporate Debt Securities
Assets:
Marketable securities	25,087	39,443
Recurring \| Level 2 \| Commercial Paper
Assets:
Marketable securities	$ 45,480	$ 31,466

Common Stock and Stock-Based Compensation - Schedule of Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation expense	$ 2,651	$ 1,909	$ 5,395	$ 3,741
Research and Development Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation expense	687	491	1,457	973
General and Administrative Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation expense	$ 1,964	$ 1,418	$ 3,938	$ 2,768

Convertible Preferred Stock - Schedule of Convertible Preferred Stock (Details) - shares	Dec. 31, 2020	Oct. 31, 2018	Apr. 30, 2017
Series A convertible preferred stock
Convertible Preferred Stock [Line Items]
Convertible Preferred Stock Authorized	40,000,000
Convertible Preferred Stock Issued			2,089,285
Convertible Preferred Stock Outstanding	2,857,142
Series B convertible preferred stock
Convertible Preferred Stock [Line Items]
Convertible Preferred Stock Authorized	36,409,088
Convertible Preferred Stock Issued		2,384,195
Convertible Preferred Stock Outstanding	2,600,645
Series C convertible preferred stock
Convertible Preferred Stock [Line Items]
Convertible Preferred Stock Authorized	111,619,996
Convertible Preferred Stock Issued	7,500,665
Convertible Preferred Stock Outstanding	7,500,665

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash flows from operating activities:
Net loss	$ (27,703)	$ (24,075)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	5,395	3,741
Depreciation and amortization expense	279	291
Amortization on marketable securities	673	150
Change in deferred taxes and uncertain tax positions	25	38
Amortization of operating lease assets	268	0
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(1,841)	(581)
Other assets	0	(8)
Accounts payable	(1,115)	1,327
Accrued expenses and other current liabilities	(147)	(3,932)
Operating lease liabilities	(296)	0
Deferred rent	0	(27)
Net cash used in operating activities	(24,462)	(23,076)
Cash flows from investing activities:
Purchase of property and equipment	(249)	(66)
Purchase of investments	(62,471)	(137,593)
Proceeds from sales and maturities of investments	56,234	19,941
Net cash used in investing activities	(6,486)	(117,718)
Cash flows from financing activities:
Net proceeds from initial public offering	0	136,362
Proceeds from notes receivable	0	12,718
Payment of loans payable	0	(12,880)
Payment of deferred offering costs	0	(2,721)
Proceeds from stock option exercises	0	101
Proceeds from the issuance of common stock under employee stock purchase plan	124	0
Net cash provided by financing activities	124	133,580
Effect of exchange rate changes on cash and cash equivalents	(69)	(51)
Net decrease in cash and cash equivalents	(30,893)	(7,265)
Cash and cash equivalents at beginning of period	47,699	74,854
Cash and cash equivalents at end of period	16,806	67,589
Supplemental disclosure of cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	334	0
Supplemental disclosure of non-cash activities:
Right-of-use assets obtained in exchange for lease liabilities	1,513	0
Conversion of preferred stock to common stock upon closing of the initial public offering	$ 0	$ 186,033

Organization, Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Accounting Policies [Abstract]
Research and development costs	$ 1,927	$ 1,570
Compensation and benefit costs	1,320	2,403
Accrued professional fees	1,089	363
Other	149	358
Total accrued expenses and other current liabilities	$ 4,485	$ 4,694

Organization, Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended	3 Months Ended	6 Months Ended
	Feb. 28, 2021	Mar. 31, 2022	Jun. 30, 2022	Dec. 31, 2021	Dec. 31, 2020	Oct. 31, 2018	Apr. 30, 2017
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Common stock, authorized	150,000,000		150,000,000	150,000,000	299,700,000
Common stock, par value			$ 0.0001	$ 0.0001	$ 0.0001
Convertible preferred stock, par value					$ 0.0001
Preferred stock, shares authorized	10,000,000
Preferred stock, par or stated value per share	$ 0.0001
Description of reverse stock split			In January 2021, the Company filed an amended and restated certificate of incorporation to effectuate a reverse split of shares of the Company’s common stock and convertible preferred stock on a 1-for-14 basis (the “Reverse Stock Split”). The par value and the number of authorized shares of the convertible preferred stock and common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the consolidated financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.
ASU 2016-02
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Change in accounting principle, accounting standards update, adopted [true false]			false
Change in accounting principle, accounting standards update, adoption date			Jan. 01, 2022
Additional operating lease liability			$ 1.7
Operating lease right of use assets			$ 1.5
Series A convertible preferred stock
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Convertible preferred stock,authorized					40,000,000
Convertible preferred stock, par value							$ 10.50
Series B convertible preferred stock
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Convertible preferred stock,authorized					36,409,088
Convertible preferred stock, par value						$ 30.80
Series C convertible preferred stock
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Convertible preferred stock,authorized					111,619,996
Convertible preferred stock, par value					$ 11.65
IPO
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of shares issued	8,625,000
Underwriters option to purchase additional shares	1,125,000
Net proceeds from issuance of common stock	$ 133.0
Convertible preferred stock, shares issued upon conversion	16,079,230
At-the-Market Offering
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Offer price		$ 75.0

Organization, Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Organization, Basis of Presentation and Summary of Significant Accounting Policies

1. Organization, Basis of Presentation and Summary of Significant Accounting Policies

Terns Pharmaceuticals, Inc. (Terns) is a clinical-stage biopharmaceutical company developing a portfolio of small-molecule product candidates to address serious diseases including oncology, obesity and non-alcoholic steatohepatitis (NASH).

Terns was incorporated as an exempted company in the Cayman Islands in December 2016. In December 2020, the Company effected a de-registration of the Company in the Cayman Islands and a domestication in the State of Delaware (the "Domestication"), pursuant to which it became a Delaware corporation. Terns owns all of the share capital of Terns Pharmaceutical HongKong Limited (Terns Hong Kong) and Terns, Inc., a Delaware corporation (Terns U.S. Opco). Terns Hong Kong holds all of the share capital of Terns China Biotechnology Co., Ltd. (organized in Shanghai, People’s Republic of China (PRC)) (Terns China) and Terns (Suzhou) Biotechnology Co., Ltd. (organized in Suzhou, PRC) (Terns Suzhou).

Basis of Presentation

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the accounts of Terns and its wholly owned subsidiaries Terns U.S. Opco and Terns Hong Kong and its wholly owned subsidiaries Terns China and Terns Suzhou. The Company’s condensed consolidated financial statements have been prepared in conformity with U.S. GAAP. All intercompany balances and transactions have been eliminated in consolidation.

Initial Public Offering

In February 2021, the Company completed an initial public offering (the “IPO”) of 8,625,000 shares of its common stock, including the exercise in full by the underwriters of their option to purchase up to 1,125,000 additional shares of common stock, for net proceeds of $133.0 million, after deducting underwriting discounts and commissions and offering expenses, and its shares started trading on the Nasdaq Global Select Market under the ticker symbol “TERN.” Upon closing of the IPO, all of the Company's outstanding shares of convertible preferred stock automatically converted into an aggregate of 16,079,230 shares of common stock.

At-the-Market Offering

In March 2022, the Company entered into a Sales Agreement with Cowen and Company, LLC (Cowen) as sales agent, pursuant to which the Company has the ability to offer and sell, from time to time, through Cowen, shares of its common stock having an aggregate offering price of up to $75.0 million in an at-the-market offering. The shares are offered pursuant to the Company's shelf registration statement on Form S-3 filed with the Securities and Exchange Commission, or SEC. There were no sales of the Company's common stock pursuant to this agreement through June 30, 2022.

Certificate of Incorporation

Prior to the IPO, the Company’s certificate of incorporation adopted in December 2020 in connection with the Domestication (the “December 2020 Charter”) authorized the Company to issue the following shares of capital stock: (i) 299,700,000 shares of common stock, (ii) 40,000,000 shares of Series A convertible preferred stock, (iii) 36,409,088 shares of Series B convertible preferred stock, and (iii) 111,619,996 shares of Series C convertible preferred stock. All classes of stock under the December 2020 Charter were authorized at a par value of $0.0001.

In February 2021, the Company’s amended and restated certificate of incorporation filed with the Secretary of State of the State of Delaware became effective in connection with the closing of the IPO. Under the amended and restated certificate of incorporation, the Company is authorized to issue 150,000,000 shares of common stock and 10,000,000 shares of preferred stock. All classes of stock have a par value of $0.0001.

Reverse Stock Split

In January 2021, the Company filed an amended and restated certificate of incorporation to effectuate a reverse split of shares of the Company’s common stock and convertible preferred stock on a 1-for-14 basis (the “Reverse Stock Split”). The par value and the number of authorized shares of the convertible preferred stock and common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the consolidated financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic is rapidly evolving. The COVID-19 virus and new variants that emerge continue to impact countries worldwide, including the United States and China where the Company has business operations. The extent of the impact of the COVID-19 pandemic on business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the outbreak and its impact on the Company’s development activities, planned clinical trial enrollment, future trial sites, contract research organizations (CROs), third-party manufacturers and other third parties with whom the Company conducts business, as well as its impact on regulatory authorities and the Company’s key scientific and management personnel. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. To the extent possible, the Company is conducting business as usual, with necessary or advisable modifications to employee travel and to the on-site and in-person activities of the Company's personnel. The Company will continue to actively monitor the rapidly evolving situation related to the COVID-19 pandemic and may take further actions that alter the Company’s operations, including those that may be required by federal, state or local authorities in the United States and China, or that the Company determines are in the best interest of its employees and other third parties with whom the Company conducts business. At this point, the extent to which the COVID-19 pandemic may affect the Company’s business, operations and development timelines and plans, including the resulting impact on expenditures and capital needs, remains uncertain.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Significant estimates and assumptions made in the accompanying consolidated financial statements include, but are not limited to, the estimates for accruals of research and development expenses, accrual of research contract costs, unrecognized tax benefits, fair value of common stock and stock option valuations. On an ongoing basis, the Company evaluates its estimates and judgments, using historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.

Unaudited Interim Financial Information

These unaudited condensed consolidated financial statements include all adjustments necessary, consisting of only normal recurring adjustments, to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2021, as filed with the SEC on March 7, 2022. There have been no significant changes to the Company's significant accounting policies described in Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of the Form 10-K for the fiscal year ended December 31, 2021.

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of standard checking accounts and money market funds. The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents.

The Company classifies as available-for-sale marketable securities with a remaining maturity when purchased of greater than three months. Marketable securities are maintained by investment managers and consist of U.S. government and non-U.S. government securities, corporate debt securities, and commercial paper. Debt securities are carried at fair value with the unrealized gains and losses included in other comprehensive loss as a component of stockholders’ equity until realized. Any premium arising at purchase is amortized to the earliest call date and any discount arising at purchase is accreted to maturity. Amortization and accretion of premiums and discounts are recorded in interest income and/or expense. Realized gains and losses on debt securities are determined using the specific identification method and are included in other (expense) income, net.

If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other-than-temporary” and, if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss.

The fair value and amortized cost of marketable securities by major security type is as follows:


	June 30, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	2,948	$	—	$	—		$	2,948
U.S. government securities		50,180		—		(740	)		49,440
Non-U.S. government securities		3,045		—		(48	)		2,997
Corporate debt securities		25,337		—		(250	)		25,087
Commercial paper		45,480		—		—			45,480
Total	$	126,990	$	—	$	(1,038	)	$	125,952

Classified as:
Cash equivalents								$	2,948
Marketable securities									123,004
Total								$	125,952

	December 31, 2021
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	33,239	$	—	$	—		$	33,239
U.S. government securities		36,322		—		(130	)		36,192
Non-U.S. government securities		11,194		—		(12	)		11,182
Corporate debt securities		39,495		—		(52	)		39,443
Commercial paper		31,466		—		—			31,466
Total	$	151,716	$	—	$	(194	)	$	151,522

Classified as:
Cash equivalents								$	33,239
Marketable securities									118,283
Total								$	151,522

Operating Leases and Rent Expense

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, upon lease commencement, the Company records a lease liability which represents the Company’s obligation to make lease payments arising from the lease, and a corresponding right-of-use (“ROU”) asset which represents the Company’s right to use an underlying asset during the lease term.

Operating lease right-of-use assets and liabilities are recognized on the balance sheet at the lease commencement date based on the present value of the future minimum lease payments over the lease term. In determining the net present value of the lease payments, the Company uses its incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable. Any lease incentives received are deferred and recorded as a reduction of the ROU asset and amortized over the term of the lease. The Company does not separate lease and non-lease components and instead treats them as a single component. Rent expense, comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term. The Company determines the lease term as the noncancellable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The Company elected to not apply the recognition requirements of the new leasing standard to short term leases with terms of 12 months or less. As a result, leases with a term of 12 months or less are not recognized on the balance sheet.

Classification of Convertible Preferred Stock

The holders of Series A, Series B and Series C convertible preferred stock, which were outstanding prior to the IPO, had certain liquidation rights in the event of a deemed liquidation that, in certain situations, were not solely within the control of the Company and would call for the redemption of the then outstanding convertible preferred stock. Therefore, the Series A, Series B and Series C convertible preferred stock were classified outside of shareholders’ equity on the consolidated balance sheets. In February 2021, upon the completion of the IPO, all the outstanding shares of convertible preferred stock converted into common stock and the Company does not have any shares of preferred stock outstanding.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees and external costs, including fees paid to consultants and contract research organizations, or CROs, in connection with nonclinical studies and clinical trials and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. Costs incurred in obtaining technology licenses are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future uses.

The Company has from time to time entered into various research and development and other agreements with commercial firms, researchers, universities and others for provisions of goods and services. These agreements are generally cancelable, and the related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates. Since inception, the Company’s historical accrual estimates have not been materially different from the actual costs.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities included the following:


(in thousands)	June 30, 2022		December 31, 2021
Research and development costs	$	1,927	$	1,570
Compensation and benefit costs		1,320		2,403
Accrued professional fees		1,089		363
Other		149		358
Total accrued expenses and other current liabilities	$	4,485	$	4,694

Income Taxes

The provision for income taxes primarily relates to projected federal, state, and foreign income taxes. To determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is generally based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. In addition, the tax effects of certain significant or unusual items are recognized discretely in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

Income taxes are computed using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements. In estimating future tax consequences, the Company considers all expected future events including the enactment of changes in tax laws or rates. A valuation allowance is recorded, if necessary, to reduce net deferred tax assets to their realizable values if management does not believe it is more likely than not that the net deferred tax assets will be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the period such determination is made.

The Company assesses accounting for uncertainty in income taxes by modeling for the recognition, measurement and disclosure in financial statements any uncertain income tax positions that the Company has taken or expects to take on a tax return. As of each balance sheet date, unresolved uncertain tax positions are reassessed. The Company accrues interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of June 30, 2022 and 2021, the total amount of gross interest accrued and penalties was nominal.

The Company recorded income tax expense for the three and six months ended June 30, 2022 and 2021 of less than $0.1 million. The expenses are primarily related to foreign income tax expenses from China.

Common Stock Valuation

Due to the absence of an active market for the Company’s common stock prior to the completion of the IPO in February 2021, the Company utilized methodologies to estimate the fair value of its common stock. In determining the fair value of options granted prior to the IPO, the Company has considered the estimated fair value of the common stock as of the measurement date. The estimated fair value of the common stock prior to the IPO was determined at each grant date based upon a variety of factors, including:

•

the prices at which the Company sold shares of convertible preferred stock and the superior rights and preferences of the convertible preferred stock relative to its common stock at the time of each grant;

•

the progress of the Company’s research and development programs, including the status and results of clinical and nonclinical studies for its drugs;

•

the Company’s stage of development and commercialization and its business strategy;

•

external market conditions affecting the biotechnology industry and trends within the biotechnology industry;

•

the Company’s financial position, including cash on hand, and its historical and forecasted performance and operating results;

•

the lack of an active public market for the Company’s common stock and convertible preferred stock;

•

the likelihood of achieving a liquidity event, such as an IPO or sale of the Company in light of prevailing market conditions; and

•

the analysis of IPOs and the market performance of similar companies in the biotechnology industry.

Significant changes to the key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date.

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Stock-Based Compensation

Stock-based compensation expense, including grants of stock options and restricted stock awards issued under the Company’s equity incentive plan and rights to acquire stock granted under the Company’s employee stock purchase plan (ESPP), is measured at the grant date based on the fair value of the awards and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company’s determination of the fair value of stock options with time-based vesting and rights to acquire stock under the ESPP utilizes the Black-Scholes option-pricing model. The Company lacks sufficient company-specific historical and implied volatility information. Therefore, the Company estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The Company estimates risk-free rates using the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term and dividend yield using the Company’s expectations and historical data. The Company uses the simplified method to calculate the expected term of stock option grants. Under the simplified method, the expected term is estimated to be the mid-point between the vesting date and the contractual term of the option. The fair value of each stock option grant and right to acquire stock under the ESPP is calculated based upon the Company’s common stock valuation on the date of the grant. The Company accounts for forfeitures of stock option grants as they occur.

Net Loss Per Share of Common Stock

The Company follows the two-class method when computing net income (loss) per share of common stock as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share of common stock for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net income (loss) per share of common stock is computed by dividing the net income (loss) per share of common stock by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per share of common stock is computed by adjusting net income (loss) to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share of common stock is computed by dividing the diluted net loss by the weighted average number of shares of common stock outstanding for the period, including potential dilutive shares. For purposes of this calculation, outstanding stock options and convertible preferred stock are considered potential dilutive shares.

The Company’s convertible preferred stock outstanding prior to the IPO contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reported a net loss, such losses were not allocated to such securities. In periods in which the Company reported a net loss, diluted net loss per share of common stock was the same as basic net loss per share of common stock, since dilutive shares were not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss for the three and six months ended June 30, 2022 and 2021.

The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss attributable to common stockholders per share of common stock for the periods indicated because including them would have had an anti-dilutive effect:


	June 30,
	2022		2021
Options to purchase common stock		4,478,338		2,583,563
Unvested restricted stock units		97,330		—
Shares issuable under employee stock purchase plan		29,837		—
Total		4,605,505		2,583,563

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.

After consummation of the equity financing, these costs are recorded as a reduction to the carrying value of stockholders’ equity as a reduction of additional paid-in capital or equity generated as a result of such offering. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss.

Commitments and Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. For all periods presented, the Company was not a party to any pending material litigation or other material legal proceedings.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, as amended (JOBS Act). Under the JOBS Act, emerging growth companies have extended transition periods available for complying with new or revised accounting standards. The Company has elected to use this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies. Where allowable, the Company has early adopted certain standards as described below.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today. For non-public entities, ASU 2016-02 is effective for annual reporting periods, and interim periods within those fiscal years, beginning after December 15, 2021, and early adoption is permitted. Under the JOBS Act, emerging growth companies have extended transition periods available for complying with new or revised accounting standards.

The Company adopted the new standard on January 1, 2022 using the effective date as the date of initial application. Consequently, prior period amounts were not adjusted and continue to be reported in accordance with historical accounting policies under ASC 840: Leases (Topic 840). The Company elected the package of practical expedients under which the Company has not reassessed prior conclusions about lease identification, lease classification and initial direct costs. Additionally, the Company made a policy election that does not recognize ROU assets and lease liabilities related to leases with a term of 12 months or less. The Company has elected to not separate lease and non-lease components and instead treat them as a single component. The pattern of recognition for operating leases within the consolidated statements of comprehensive loss has not significantly changed. Upon adoption, the Company recognized operating liabilities of $1.7 million, with corresponding ROU assets of $1.5 million based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The Company’s current operating lease portfolio is primarily comprised of property leases.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. For non-public entities, ASU 2016-13 is effective for annual reporting periods, and interim periods within those fiscal years, beginning after December 15, 2022. Under the JOBS Act, emerging growth companies have extended transition periods available for complying with new or revised accounting standards. The Company has elected to use this exemption to delay adopting ASU 2016-13. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements and related disclosures.

Common Stock and Stock-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-based Payment Arrangement [Abstract]

Common Stock and Stock-Based Compensation

6. Common Stock and Stock-Based Compensation

As of each balance sheet date, the Company had reserved shares of common stock for issuance in connection with the following:


	June 30, 2022		December 31, 2021
Options outstanding under incentive award plans		4,478,338		3,577,485
Unvested restricted stock units		97,330		—
Shares available for future grant under incentive award plans		1,393,902		1,138,622
Shares available for future grant under employee stock purchase plans		408,134		240,000
Total shares reserved		6,377,704		4,956,107

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, if any, as may be declared by the Company’s board of directors, subject to the preferential dividend rights of the convertible preferred stock. Through June 30, 2022, no cash dividends have been declared or paid by the Company.

Stock-Based Compensation Plans

The Company has two stock-based compensation plans, the 2017 Incentive Award Plan (the “2017 Plan”) and the 2021 Incentive Award Plan (the “2021 Plan”) which was adopted in February 2021. Although awards made under the 2017 Plan continue to be governed by its terms, the 2017 Plan was terminated at the time of our IPO and no further awards are made under this plan. The 2021 Plan, while effective, authorizes the granting of equity awards to employees and directors of the Company, as well as non-employee consultants.

2021 Incentive Award Plan

In January 2021, the Company's board of directors approved the 2021 Plan which permits the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance bonus awards, performance stock unit awards and other stock awards to employees, directors, officers and consultants. In February 2021, 2,400,007 shares were authorized for issuance under the 2021 Plan, which shall be cumulatively increased on the first day of each year beginning in 2022 and ending in 2031 equal to the lesser of (i) the amount equal to 5% of the number of shares issued and outstanding on the last day of the immediately preceding fiscal year or (ii) such lower number of shares as may be determined by the Company’s board of directors. The 2021 Plan is the successor to the 2017 Incentive Award Plan and no additional awards may be issued from the 2017 Plan. However, the 2017 Plan will continue to govern the terms and conditions of the outstanding awards granted under this plan. Shares of common stock subject to awards granted under the 2017 Plan that are forfeited or lapse unexercised and which following the effective date of the 2021 Plan are not issued under the 2017 Plan will be available for issuance under the 2021 Plan. The number of authorized shares reserved for issuance under the 2021 Plan was increased by 1,263,463 shares effective as of January 1, 2022. As of June 30, 2022, 1,393,902 shares of the Company’s common stock were available for future grants under the 2021 Plan.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) was approved by the Company’s board of directors in January 2021. In February 2021, a total of 240,000 shares were initially reserved for issuance under this plan, which shall be cumulatively increased on the first day of each year beginning in 2022 and ending in 2031 equal to the lesser of (i) 1% of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares as may be determined by the Company’s board of directors. The number of authorized shares reserved for issuance under the 2021 ESPP was increased by 252,692 shares effective as of January 1, 2022. As of June 30, 2022, 408,134 shares of the Company’s common stock were available for future grants under the 2021 ESPP.

Under the ESPP, eligible employees may select a rate of payroll deduction up to 15% of their eligible compensation subject to certain maximum purchase limitations. The duration for each offering period is 12 months and is divided into two purchase periods of approximately six months in length. Offerings are concurrent. The purchase price of the shares under the offering is the lesser of 85% of the fair market value of the shares on the offering date or 85% of the fair market value of the shares on the purchase date. A one-year look-back feature in the ESPP causes the offering period to automatically reset if the fair value of the Company’s common stock on the last day of the purchase period is less than that on the original offering date. ESPP purchases by employees are settled with newly-issued common stock from the ESPP’s previously authorized and available pool of shares.

As of June 30, 2022, there was $0.2 million of unrecognized stock-based compensation expense related to unvested employee stock purchases. The unrecognized stock-based compensation expense is estimated to be recognized over a period of 0.92 years as of June 30, 2022. There were 84,558 shares purchased by employees under the ESPP during the period ended June 30, 2022.

Stock Options

Stock options granted to employees and nonemployees under the plans generally vest over four years and allow the holder of the option to purchase common stock at a stated exercise price. Options granted under the plans generally expire ten years after the date of grant. The Company recognizes the stock-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period.

The following table summarizes the stock option activity for all stock plans during the six months ended June 30, 2022:


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2021		3,577,485		$	9.72		9.09	$	491
Granted		1,026,020			4.84
Exercised		(10,000	)		0.00				21
Forfeited		(115,167	)		10.31
Outstanding as of June 30, 2022		4,478,338		$	8.62		8.86	$	175
Exercisable, June 30, 2022		2,081,155		$	8.80		8.33	$	17
Vested and expected to vest, June 30, 2022		4,478,338		$	8.62		8.86	$	175

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

As of June 30, 2022, there was $25.7 million of unrecognized stock-based compensation expense related to unvested stock options which is estimated to be recognized over a period of 2.61 years.

Restricted Stock

Restricted stock units ("RSUs") granted to employees under the plans generally vest over four years. The number of shares issued on the date the RSUs vest is net of the minimum statutory tax withholdings, which are paid in cash to the appropriate taxing authorities on behalf of the Company’s employees. The Company recognizes the stock-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period.

The following table summarizes the RSU activity for all stock plans during the six months ended June 30, 2022:


	Number of Shares			Grant-Date Fair Value
Unvested restricted stock units as of December 31, 2021		—		$	—
Granted		111,200			3.24
Forfeited		(13,870	)		3.44
Unvested restricted stock units as of June 30, 2022		97,330		$	3.21

As of June 30, 2022, there was $0.3 million of unrecognized stock-based compensation expense related to restricted stock which is estimated to be recognized over a period of 3.57 years.

Stock-Based Compensation Expense

The Company estimated the fair value of options granted and rights to acquire stock granted under the Company’s employee stock purchase plan using a Black-Scholes option pricing model with the following assumptions presented on a weighted average basis:


	Six Months Ended June 30,
	2022			2021
Stock Option Plans
Expected term (years)		5.97			6.00
Expected volatility		72.83	%		70.56	%
Risk-free interest rate		2.01	%		0.88	%
Fair value of underlying common stock	$	4.84		$	19.85
Weighted average grant-date fair value per share	$	3.16		$	12.32
Employee Stock Purchase Plans
Expected term (years)		0.75			—
Expected volatility		70.86	%		—	%
Risk-free interest rate		1.89	%		—	%
Fair value of underlying common stock	$	1.66		$	—
Weighted average grant-date fair value per share	$	0.65		$	—

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Research and development expense	$	687	$	491	$	1,457	$	973
General and administrative expense		1,964		1,418		3,938		2,768
Total stock-based compensation expense	$	2,651	$	1,909	$	5,395	$	3,741

Loans Payable

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Loans Payable

4. Loans Payable

2020 Notes

In May 2020, the Company issued convertible promissory notes (2020 Notes) in the aggregate amount of $15.0 million. The 2020 Notes had an interest rate of 10.0% per annum, were unsecured, and were due and payable, including accrued interest, in May 2021. In connection with the Series C Convertible Preferred Stock Financing, the 2020 Notes, totaling unpaid principal and accrued interest of $15.9 million, converted into 1,366,820 shares of Series C convertible preferred stock.

Bridge Loan

In May 2020, the Company entered into a bridge loan with Terns China (Bridge Loan) for aggregate proceeds of $1.8 million, payable in renminbi (RMB) at an established USD/RMB exchange rate, based on an average of the previous five working days before May 8, 2020. The Bridge Loan had an interest rate of 10% per year, which began to accrue on the date of drawdown, and was computed based on the actual number of days elapsed based on a year of 365 days. The Bridge Loan holders have the same conversion rights as the 2020 Notes holders.

In connection with the closing of the Series C convertible preferred stock financing in December 2020, entities that are a part of LAV agreed to effectively convert the Bridge Loan into shares of Series C preferred stock on the same terms as the 2020 Notes. The conversion was to be based on an outstanding loan balance equal to $1.9 million, consisting of (i) the principal loan amount ($1.8 million) plus (ii) accrued interest through December 29, 2020 ($0.1 million).

To help facilitate the transfer of cash from China to the United States to effectively convert the Bridge Loan, the Company and Terns China agreed to enter into an agreement with LAV to (i) repay the Bridge Loan, and (ii) issue shares of Series C convertible preferred stock at the initial closing of the Series C financing to entities that are a part of LAV in exchange for a promissory note issued to the Company by LAV, or the LAV Affiliate Promissory Note.

The Bridge Loan was repaid in full by the Company following the requisite government approvals in China. Proceeds from the repayment of the Bridge Loan by Terns China were used by LAV to repay the LAV Affiliate Promissory Note in full. The fair value of the Bridge Loan was determined to be $2.1 million as of December 31, 2020. The Bridge Loan and the LAV Affiliate Promissory Note were paid in full in March 2021.

LAV Series A and Series B Promissory Notes

In November 2020, the Chinese government provided approval for entities affiliated with LAV to exercise the LAV Option (see Note 5, Convertible Preferred Stock). Terns Hong Kong agreed to repurchase all equity interests held by the LAV PRC Entities with proceeds to be used by LAV to purchase shares of Series A convertible preferred stock and Series B convertible preferred stock of the Company (Repurchase).

In December 2020, the Company issued 767,857 shares of Series A convertible preferred stock and 216,450 shares of Series B convertible preferred stock to an affiliate of LAV (LAV Affiliate) in exchange for a promissory note with a principal amount equal to the original investment by LAV in Terns China (LAV Series A and Series B Promissory Note). The LAV Series A and Series B Promissory Note was repaid through proceeds of the Repurchase which was completed in January 2021.

Prior to their repayment, the carrying value of the LAV Series A and Series B Promissory Notes approximated their respective fair value due to the short-term nature of the liability.

The outstanding LAV Series A and Series B Promissory Note was settled in January 2021 and was paid with the proceeds received from the note receivable of $10.8 million. The outstanding Bridge Loan was settled in March 2021 and was substantially paid with the proceeds received from the LAV Affiliate Promissory Note receivable of $1.9 million.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (h)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (c)
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+ Details

Common Stock and Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2022

Share-based Payment Arrangement [Abstract]

Schedule of Common Stock Shares Reserved for Issuance

As of each balance sheet date, the Company had reserved shares of common stock for issuance in connection with the following:


	June 30, 2022		December 31, 2021
Options outstanding under incentive award plans		4,478,338		3,577,485
Unvested restricted stock units		97,330		—
Shares available for future grant under incentive award plans		1,393,902		1,138,622
Shares available for future grant under employee stock purchase plans		408,134		240,000
Total shares reserved		6,377,704		4,956,107

Summary of Stock Option Activity

The following table summarizes the stock option activity for all stock plans during the six months ended June 30, 2022:


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2021		3,577,485		$	9.72		9.09	$	491
Granted		1,026,020			4.84
Exercised		(10,000	)		0.00				21
Forfeited		(115,167	)		10.31
Outstanding as of June 30, 2022		4,478,338		$	8.62		8.86	$	175
Exercisable, June 30, 2022		2,081,155		$	8.80		8.33	$	17
Vested and expected to vest, June 30, 2022		4,478,338		$	8.62		8.86	$	175

Schedule of Stock Options Weighted Average Assumptions


	Six Months Ended June 30,
	2022			2021
Stock Option Plans
Expected term (years)		5.97			6.00
Expected volatility		72.83	%		70.56	%
Risk-free interest rate		2.01	%		0.88	%
Fair value of underlying common stock	$	4.84		$	19.85
Weighted average grant-date fair value per share	$	3.16		$	12.32
Employee Stock Purchase Plans
Expected term (years)		0.75			—
Expected volatility		70.86	%		—	%
Risk-free interest rate		1.89	%		—	%
Fair value of underlying common stock	$	1.66		$	—
Weighted average grant-date fair value per share	$	0.65		$	—

Summary of Restricted Stock Award Activity

The following table summarizes the RSU activity for all stock plans during the six months ended June 30, 2022:


	Number of Shares			Grant-Date Fair Value
Unvested restricted stock units as of December 31, 2021		—		$	—
Granted		111,200			3.24
Forfeited		(13,870	)		3.44
Unvested restricted stock units as of June 30, 2022		97,330		$	3.21

Schedule of Stock-based Compensation Expense

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Research and development expense	$	687	$	491	$	1,457	$	973
General and administrative expense		1,964		1,418		3,938		2,768
Total stock-based compensation expense	$	2,651	$	1,909	$	5,395	$	3,741

Convertible Preferred Stock - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended
	Dec. 31, 2020	Oct. 31, 2018	Apr. 30, 2017	Feb. 28, 2021
Convertible Preferred Stock [Line Items]
Convertible preferred stock, par value	$ 0.0001
Bridge Loan
Convertible Preferred Stock [Line Items]
Debt conversion to stock, aggregate debt plus accrued interest	$ 1.9
2020 Notes
Convertible Preferred Stock [Line Items]
Debt conversion to stock, aggregate debt plus accrued interest	$ 15.9
Series A convertible preferred stock
Convertible Preferred Stock [Line Items]
Convertible preferred stock, shares issued			2,089,285
Convertible preferred stock, par value			$ 10.50
Aggregate purchase price			$ 21.9
Series A convertible preferred stock \| LAV Affiliate
Convertible Preferred Stock [Line Items]
Convertible preferred stock, shares issued	767,857
Series A convertible preferred stock \| Terns China
Convertible Preferred Stock [Line Items]
Proceeds from sale of convertible preferred stock			$ 8.0
Series B convertible preferred stock
Convertible Preferred Stock [Line Items]
Convertible preferred stock, shares issued		2,384,195
Convertible preferred stock, par value		$ 30.80
Aggregate purchase price		$ 73.4
Series B convertible preferred stock \| LAV Affiliate
Convertible Preferred Stock [Line Items]
Convertible preferred stock, shares issued	216,450
Series B convertible preferred stock \| Terns China
Convertible Preferred Stock [Line Items]
Proceeds from sale of convertible preferred stock		$ 6.7
Series C convertible preferred stock
Convertible Preferred Stock [Line Items]
Convertible preferred stock, shares issued	7,500,665
Convertible preferred stock, par value	$ 11.65
Gross proceeds from issuance and conversion of convertible preferred stock	$ 87.4
Series C convertible preferred stock \| Bridge Loan
Convertible Preferred Stock [Line Items]
Debt conversion, converted instrument, shares	167,159
Series C convertible preferred stock \| 2020 Notes
Convertible Preferred Stock [Line Items]
Debt conversion, converted instrument, shares	1,366,820
IPO
Convertible Preferred Stock [Line Items]
Convertible preferred stock, shares issued upon conversion				16,079,230

Loans Payable - Change in Fair Value of Loans Payable - Additional Information (Details) - Loans Payable $ in Millions	1 Months Ended
	Mar. 31, 2021 USD ($)
L A V Series A And Series B Promissory Note
Short Term Debt [Line Items]
Outstanding amount settlement from proceeds received from note receivable	$ 10.8
Series C convertible preferred stock
Short Term Debt [Line Items]
Proceeds from promissory note receivable	$ 1.9

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional paid-in capital	Accumulated Other Comprehensive (Loss) Income	Accumulated deficit	Series A convertible preferred stock	Series B convertible preferred stock	Series C convertible preferred stock
Balances at Dec. 31, 2020	$ (117,441)		$ 14,598	$ (124)	$ (131,915)
Balance at Beginning of period at Dec. 31, 2020						$ 30,000	$ 68,995	$ 87,038
Balance at Beginning of period (in shares) at Dec. 31, 2020						2,857,142	2,600,645	7,500,665
Balance at Beginning of period (in shares) at Dec. 31, 2020		337,508
Conversion of preferred stock to common stock upon closing of the initial public offering	186,033	$ 2	186,031
Temporary equity, conversion of convertible preferred stock into common stock upon closing of the initial public offering (in shares)						(2,857,142)	(2,600,645)	(7,500,665)
Temporary equity, conversion of convertible preferred stock into common stock upon closing of the initial public offering						$ (30,000)	$ (68,995)	$ (87,038)
Conversion of preferred stock to common stock upon closing of the initial public offering (in shares)		16,079,230
Sale of common stock in initial public offering, net of issuance costs	133,023	$ 1	133,022
Sale of common stock in initial public offering, net of issuance costs (in shares)		8,625,000
Stock-based compensation expense	1,832		1,832
Unrealized loss on available-for-sale securities	(43)			(43)
Foreign exchange translation adjustment	(65)			(65)
Net loss	(13,337)				(13,337)
Balances at Mar. 31, 2021	190,002	$ 3	335,483	(232)	(145,252)
Balance at end of period (in shares) at Mar. 31, 2021		25,041,738
Balances at Dec. 31, 2020	(117,441)		14,598	(124)	(131,915)
Balance at Beginning of period at Dec. 31, 2020						$ 30,000	$ 68,995	$ 87,038
Balance at Beginning of period (in shares) at Dec. 31, 2020						2,857,142	2,600,645	7,500,665
Balance at Beginning of period (in shares) at Dec. 31, 2020		337,508
Foreign exchange translation adjustment	(43)
Balances at Jun. 30, 2021	181,332	$ 3	337,493	(174)	(155,990)
Balance at end of period (in shares) at Jun. 30, 2021		25,130,613
Balances at Mar. 31, 2021	190,002	$ 3	335,483	(232)	(145,252)
Balance at Beginning of period (in shares) at Mar. 31, 2021		25,041,738
Exercise of stock options	101		101
Exercise of stock options (in shares)		17,446
Vesting of restricted stock (in shares)		71,429
Stock-based compensation expense	1,909		1,909
Unrealized loss on available-for-sale securities	36			36
Foreign exchange translation adjustment	22			22
Net loss	(10,738)				(10,738)
Balances at Jun. 30, 2021	181,332	$ 3	337,493	(174)	(155,990)
Balance at end of period (in shares) at Jun. 30, 2021		25,130,613
Balances at Dec. 31, 2021	160,303	$ 3	342,711	(338)	(182,073)
Balance at Beginning of period (in shares) at Dec. 31, 2021		25,269,271
Stock-based compensation expense	2,744		2,744
Unrealized loss on available-for-sale securities	(551)			(551)
Foreign exchange translation adjustment	(7)			(7)
Net loss	(13,773)				(13,773)
Balances at Mar. 31, 2022	148,716	$ 3	345,455	(896)	(195,846)
Balance at end of period (in shares) at Mar. 31, 2022		25,269,271
Balances at Dec. 31, 2021	160,303	$ 3	342,711	(338)	(182,073)
Balance at Beginning of period (in shares) at Dec. 31, 2021		25,269,271
Foreign exchange translation adjustment	(60)
Balances at Jun. 30, 2022	137,216	$ 3	348,230	(1,241)	(209,776)
Balance at end of period (in shares) at Jun. 30, 2022		25,363,829
Balances at Mar. 31, 2022	148,716	$ 3	345,455	(896)	(195,846)
Balance at Beginning of period (in shares) at Mar. 31, 2022		25,269,271
Exercise of stock options (in shares)		10,000
Stock-based compensation expense	2,651		2,651
Issuance of common stock under employee stock purchase plan (in shares)		84,558
Issuance of common stock under employee stock purchase plan	124		124
Unrealized loss on available-for-sale securities	(292)			(292)
Foreign exchange translation adjustment	(53)			(53)
Net loss	(13,930)				(13,930)
Balances at Jun. 30, 2022	$ 137,216	$ 3	$ 348,230	$ (1,241)	$ (209,776)
Balance at end of period (in shares) at Jun. 30, 2022		25,363,829

Leases - Schedule of maturities of operating leases (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Operating Leases
2022	$ 333
2023	652
2024	559
2025 and thereafter	0
Total lease payments	1,544
Less: Imputed interest	(107)
Present value of lease liabilities	1,437
Less: Current obligation of lease liabilities	(586)	$ 0
Total lease liabilities, non-current	$ 851

Leases - Schedule of Components of lease cost (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)
Leases [Abstract]
Operating lease cost	$ 151	$ 305
Short-term cost	12	27
Lease, Cost, Total	$ 163	$ 332
Weighted-average remaining lease term	2 years 3 months 18 days	2 years 3 months 18 days
Weighted-average discount rate	6.00%	6.00%

Organization, Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Net Loss per Share (Details) - shares	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	4,605,505	2,583,563
Options to Purchase Common Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	4,478,338	2,583,563
Unvested restricted stock units
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	97,330	0
Shares issuable under employee stock purchase plan
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	29,837	0

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Operating expenses:
Research and development	$ 8,662	$ 5,961	$ 16,798	$ 14,696
General and administrative	5,422	4,857	11,111	9,418
Total operating expenses	14,084	10,818	27,909	24,114
Loss from operations	(14,084)	(10,818)	(27,909)	(24,114)
Other income:
Interest income	214	55	283	66
Other (expense) income, net	(54)	39	(50)	26
Total other income, net	160	94	233	92
Loss before income taxes	(13,924)	(10,724)	(27,676)	(24,022)
Income tax expense	(6)	(14)	(27)	(53)
Net loss	$ (13,930)	$ (10,738)	$ (27,703)	$ (24,075)
Net loss per share, basic and diluted	$ (0.55)	$ (0.43)	$ (1.10)	$ (1.19)
Weighted average common stock outstanding, basic and diluted	25,304,290	25,109,973	25,286,877	20,162,496
Other comprehensive loss:
Net loss	$ (13,930)	$ (10,738)	$ (27,703)	$ (24,075)
Unrealized (loss) gain on available-for-sale securities, net of tax	(292)	36	(843)	(7)
Foreign exchange translation adjustment, net of tax	(53)	22	(60)	(43)
Comprehensive loss	$ (14,275)	$ (10,680)	$ (28,606)	$ (24,125)

Assignment, License and Collaboration Agreements - Additional Information (Details) ¥ in Millions		1 Months Ended					3 Months Ended		6 Months Ended		12 Months Ended
	Nov. 30, 2021 USD ($)	Aug. 31, 2022 USD ($)	Jul. 31, 2020 USD ($)	Jun. 30, 2019 CNY (¥)	Mar. 31, 2018 USD ($)	Feb. 28, 2018 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
TERN-101 License Agreement with Eli Lilly
Assignment License And Collaboration Agreements [Line Items]
Agreement milestones payment									$ 0
Research and development expense							$ 0	$ 0	0	$ 0
TERN-101 License Agreement with Eli Lilly \| China
Assignment License And Collaboration Agreements [Line Items]
Aggregate pre-specified development milestones for the first covered product						$ 6,000,000.0
Aggregate pre-specified development milestones for the first covered product in ex-mainland						$ 50,000,000.0
TERN-201 License Agreement with Eli Lilly
Assignment License And Collaboration Agreements [Line Items]
Aggregate pre-specified development milestones for the first covered product in ex-mainland					$ 74,000,000.0
Agreement milestones payment									0
Research and development expense							0	0	0	0
Aggregate pre-specified development milestones for second indication of covered product					$ 30,000,000.0
Amount paid under the agreement									4,000,000.0
TERN-201 License Agreement with Eli Lilly \| Research and Development Expense
Assignment License And Collaboration Agreements [Line Items]
Upfront payment													$ 4,000,000.0
Assignment Agreement
Assignment License And Collaboration Agreements [Line Items]
Aggregate pre-specified development milestones for the first covered product \| ¥				¥ 205.0
Research and development expense							$ 0	$ 0	0	$ 0
Amount paid under the agreement									$ 2,200,000
Number of days advance written notice									60 days
Milestone payment		$ 2,200							$ 1,500,000
Assignment Agreement \| Research and Development Expense
Assignment License And Collaboration Agreements [Line Items]
Upfront payment												$ 700,000
Hansoh Option and License Agreement
Assignment License And Collaboration Agreements [Line Items]
Upfront payment received											$ 800,000
License revenue	$ 1,000,000.0
Hansoh Option and License Agreement \| Maximum
Assignment License And Collaboration Agreements [Line Items]
Amount agree to pay in pre-specified clinical, regulatory and sales milestones			$ 67,000,000.0

Fair Value (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:


	Fair Value at June 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents
Cash in bank balances	$	13,858	$	—	$	—	$	13,858
Money market funds		2,948		—		—		2,948
Total cash and cash equivalents	$	16,806	$	—	$	—	$	16,806
Marketable securities
U.S. government securities	$	—	$	49,440	$	—	$	49,440
Non-U.S. government securities		—		2,997		—		2,997
Corporate debt securities		—		25,087		—		25,087
Commercial paper		—		45,480		—		45,480
Total marketable securities	$	—	$	123,004	$	—	$	123,004

	Fair Value at December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents
Cash in bank balances	$	14,460	$	—	$	—	$	14,460
Money market funds		33,239		—		—		33,239
Total cash and equivalents	$	47,699	$	—	$	—	$	47,699
Marketable securities
U.S. government securities	$	—	$	36,192	$	—	$	36,192
Non-U.S. government securities		—		11,182		—		11,182
Corporate debt securities		—		39,443		—		39,443
Commercial paper		—		31,466		—		31,466
Total marketable securities	$	—	$	118,283	$	—	$	118,283

Schedule of Aggregate Fair Value of Marketable Securities

The aggregate amortized cost and fair value of marketable securities as of June 30, 2022, by contractual maturity, are as follows:


(in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	124,042	$	123,004
Due after one year through two years		—		—
Total marketable securities	$	124,042	$	123,004

Assignment, License and Collaboration Agreements

6 Months Ended

Jun. 30, 2022

Assignment License And Collaboration Agreements [Abstract]

Assignment, License and Collaboration Agreements

7. Assignment, License and Collaboration Agreements

TERN-101 License Agreement with Eli Lilly

In February 2018, the Company entered a worldwide exclusive license agreement with Eli Lilly and Company (Lilly) (Lilly FXR 2018 License Agreement). Under the terms of the Lilly FXR 2018 License Agreement, Lilly granted the Company an exclusive, royalty-bearing license to make, have made, use, offer for sale, sell, import, and have imported, including all rights to develop, manufacture, and commercialize covered products in the field in the territory and a sublicensing right that allows the Company to grant sublicenses to affiliates and third parties to perform any portion of the development, manufacture, and commercialization of covered products. The Company is required to use commercially reasonable efforts to meet development event milestones, develop the covered product in the field in mainland China and commercialize the covered product in the field in mainland China.

The Company agreed to pay Lilly up to an aggregate of $6.0 million in pre-specified development milestones for the first covered product in mainland China, and up to an aggregate of $50.0 million in pre-specified development milestones for the first covered product in ex-mainland China. The Company also agreed to pay Lilly tiered royalties calculated on a calendar year basis, in the mid-single digits to low teens on net sales ranging from the low hundreds of millions of dollars to the low billions of dollars. The Lilly FXR 2018 License Agreement expires upon expiry of the last remaining royalty obligation for a licensed product. As of June 30, 2022, the Company has not paid any amounts under the agreement and no milestones have been achieved. The Company has not recorded any research and development expense during the three and six months ended June 30, 2022 and 2021 related to this agreement.

TERN-201 License Agreement with Eli Lilly

In March 2018, the Company entered into an exclusive license agreement with Lilly (Lilly VAP-1 2018 License Agreement). Under the terms of the Lilly VAP-1 2018 License Agreement, Lilly granted the Company an exclusive, royalty-bearing license to make, have made, use, offer for sale, sell, import, and have imported, including all rights to develop, manufacture, and commercialize covered products and a sublicensing right that allows the Company to grant sublicenses to affiliates and third parties to perform any portion of the development, manufacture, and commercialization of covered products. The Company will remain directly responsible for all amounts owed to Lilly, regardless of sublicenses. The Company is required to use commercially reasonable efforts to meet development events according to achievement due dates and commercialize the covered product in the field in the major markets.

The Company paid Lilly a non-refundable, non-creditable upfront payment of $4.0 million, which was recorded as research and development expense in the Company’s statement of operations and comprehensive loss for the year ended December 31, 2018. In addition, pursuant to the terms of the Lilly VAP-1 2018 License Agreement, the Company agreed to pay Lilly up to an aggregate of $74.0 million in pre-specified development milestones for the first covered product, and up to an aggregate of $30.0 million in pre-specified development milestones for the second indication of a covered product. The Company must also pay Lilly tiered royalties calculated on a calendar year basis, in the mid-single digits to mid-teens on net sales ranging from the high tens of millions of dollars to the low billions of dollars. The Lilly VAP-1 2018 License Agreement expires upon expiry of the last remaining royalty obligation for a licensed product. As of June 30, 2022, the Company has paid $4.0 million to Lilly. No development milestones have been met as of June 30, 2022. The Company has not recorded any research and development expense during the three and six months ended June 30, 2022 and 2021 related to this agreement.

Assignment Agreement

In June 2019, the Company entered into an assignment agreement with Vintagence Biotechnology Ltd. (Vintagence) (Vintagence 2019 Assignment Agreement). Under the terms of the Vintagence 2019 Assignment Agreement, Vintagence assigned and agreed to assign to the Company any and all worldwide rights, title, and interest in and to the Vintagence technology and gave Terns a sublicensing right that allows the Company to grant sublicenses to any of its affiliates and/or to licensees or contractors to perform any portion of the development, manufacture, and/or commercialization of covered compounds or covered products. The Company will remain directly responsible for all amounts owed to Vintagence under this agreement, regardless of sublicenses. The Company is required to use commercially reasonable efforts to commercialize the covered product in the field in the major markets.

The Company paid Vintagence a non-refundable, non-creditable upfront payment of $0.7 million, which was recorded as research and development expense in the Company’s statements of operations and comprehensive loss for the year ended December 31, 2019. In addition, pursuant to the terms of the Vintagence 2019 Assignment Agreement, the Company agreed to pay Vintagence up to CNY 205.0 million in development milestones for the first covered product. The term of the Vintagence 2019 Assignment Agreement will continue in effect on a country-by-country basis until all milestone payments are made. The Company has the right to terminate the agreement in its entirety or on a covered product-by-covered product and country-by-country basis, in its sole discretion by giving 60 days advance written notice to Vintagence. As of June 30, 2022, the Company has paid $2.2 million to Vintagence which includes a milestone payment of $1.5 million in connection with the Company’s IND filing for TERN-501 in December 2020. The Company has not recognized any research and development expense during the three and six months ended June 30, 2022 and 2021 related to this agreement.

In August 2022, the Company made a milestone payment of $2.2 million to Vintagence in connection with the initiation of dosing in the Phase 2a DUET trial. The Company will recognize the research and development expense related to the payment during the third quarter of fiscal 2022.

Hansoh Option and License Agreement

In July 2020, the Company entered into an exclusive option and license agreement with Hansoh (Shanghai) Healthtech Co., Ltd. (Hansoh Healthtech) and Jiangsu Hansoh Pharmaceutical Group Company Ltd. (Jiangsu Hansoh) (collectively, Hansoh) (Hansoh 2020 Option and License Agreement). Under the terms of the Hansoh 2020 Option and License Agreement, the Company granted Hansoh an exclusive, non-transferable, non-sublicensable, fully-paid, royalty-free license to conduct preliminary studies on the licensed compound (TERN-701, formerly known as TRN-000632) with an option to exclusively license the same for development and commercialization of licensed products in all prophylactic, palliative, therapeutic and/or diagnostic uses in connection with all human diseases and disorders (including development and research activities on animal models thereof) in the field of oncology, including all types of cancers (Field) in mainland China, Taiwan, Hong Kong and Macau (collectively, the Territory). In November 2021, Hansoh exercised its option and was granted an exclusive, royalty-bearing license, with the right to sublicense to exploit licensed compound and licensed products in the Field and in the Territory.

Under the Hansoh 2020 Option and License Agreement, Hansoh was required to pay the Company a refundable, non-creditable upfront payment. The Company received an upfront payment of $0.8 million during the year ended December 31, 2020, which was recognized as a refund liability and presented within accrued expenses and other current liabilities on the consolidated balance sheets as of December 31, 2020. In connection with Hansoh’s exercise of its option in November 2021, the Company recognized $1.0 million in license fee revenue within the consolidated statements of operations and comprehensive loss during the year ended December 31, 2021.

In addition, pursuant to the Hansoh 2020 Option and License Agreement, Hansoh has agreed to pay the Company up to $67.0 million in pre-specified clinical, regulatory and sales milestones. Hansoh must also pay the Company royalties in the mid-single digits based on net sales of all licensed products. The term of the Hansoh 2020 Option and License Agreement will continue until the end of the last-to-expire royalty term. As of June 30, 2022, no milestones have been met and future payments are all constrained.

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 16,806	$ 47,699
Marketable securities	123,004	118,283
Prepaid expenses and other current assets	2,791	948
Total current assets	142,601	166,930
Property and equipment, net	950	1,046
Operating lease assets	1,245	0
Other assets	64	94
Total assets	144,860	168,070
Current liabilities:
Accounts payable	973	2,126
Accrued expenses and other current liabilities	4,485	4,694
Current portion of operating lease liabilities	586	0
Total current liabilities	6,044	6,820
Deferred rent, net of current portion	0	160
Taxes payable, non-current	749	787
Operating lease liabilities, non-current	851	0
Total liabilities	7,644	7,767
Commitments and contingencies
Stockholders' equity:
Common stock, $0.0001 par value, 150,000,000 shares authorized at June 30, 2022 and December 31, 2021; 25,363,829 and 25,269,271 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	3	3
Additional paid-in capital	348,230	342,711
Accumulated other comprehensive loss	(1,241)	(338)
Accumulated deficit	(209,776)	(182,073)
Total stockholders' equity	137,216	160,303
Total liabilities and stockholders' equity	$ 144,860	$ 168,070

Common Stock and Stock-Based Compensation - Additional Information (Details)		1 Months Ended	6 Months Ended
	Jan. 01, 2022 shares	Feb. 28, 2021 shares	Jun. 30, 2022 USD ($) Plan Vote shares	Dec. 31, 2021 shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, voting rights			Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends
Number of voting rights per share \| Vote			1
Cash dividends declared or paid \| $			$ 0
Number of stock-based compensation plans \| Plan			2
Initial total shares reserved			6,377,704	4,956,107
Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock-based compensation expense related to unvested stock options \| $			$ 25,700,000
Unrecognized stock-based compensation expense recognized period			2 years 7 months 9 days
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock-based compensation expense related to unvested stock options \| $			$ 300,000
Unrecognized stock-based compensation expense recognized period			3 years 6 months 25 days
2021 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based payment award, number of shares authorized		2,400,007
Increase of number of authorized shares reserved for issuance under the 2021 Plan	1,263,463
Share-based payment award, shares available for future grants			1,393,902
Increase of authorized shares, percent of common stock outstanding		5.00%
2017 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Increase of number of authorized shares reserved for issuance under the 2021 Plan		0
2021 Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Increase of number of authorized shares reserved for issuance under the 2021 Plan	252,692
Share-based payment award, shares available for future grants			408,134
Initial total shares reserved		240,000
Shares purchased by employees under the ESPP			84,558
Increase of authorized shares, percent of common stock outstanding		1.00%
Unrecognized stock-based compensation expense recognized period			11 months 1 day
Share Based Compensation Rate of Payroll Deduction			15.00%
Percentage of fair market value of the shares on the offering date			85.00%
Percentage of fair market value of the shares on the purchase date			85.00%
Unrecognized stock-based compensation expense related to unvested employee stock purchases \| $			$ 200,000

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders Equity' (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Statement of Stockholders' Equity [Abstract]
Stock issuance cost	$ 3,339

Convertible Preferred Stock

6 Months Ended

Jun. 30, 2022

Convertible Preferred Stock [Abstract]

Convertible Preferred Stock

5. Convertible Preferred Stock

All shares of preferred stock described below were converted into 16,079,230 shares of the Company’s common stock at the time of the IPO in February 2021.

Series A Preferred Stock

In April 2017, the Company entered into a Series A convertible preferred stock purchase agreement (Series A Agreement) whereby the Company issued 2,089,285 shares of Series A convertible preferred stock at $10.50 per share for an aggregate purchase price of $21.9 million.

Terns China received an aggregate $8.0 million from the LAV PRC Entities in connection with the Series A financing, which was presented as a noncontrolling interest. In connection with the Series A Agreement and this Terns China investment, the Company also issued an option to the LAV PRC Entities to convert their interest in the China Subsidiaries into an interest in Terns Cayman (the LAV Option).

Series B Preferred Stock

In October 2018, the Company entered into a Series B convertible preferred share purchase agreement (Series B Agreement), whereby the Company issued an aggregate of 2,384,195 shares of Series B convertible preferred stock at $30.80 per share for an aggregate purchase price of $73.4 million.

Terns China received $6.7 million from the LAV PRC Entities in connection with the Series B financing, which was presented as a noncontrolling interest. In connection with the Series B Agreement and this Terns China investment, the LAV Option was to allow the LAV PRC Entities to convert this interest in the China Subsidiaries into an interest in Terns Cayman.

LAV Series A and Series B Preferred Stock Options

In November 2020, the Chinese government provided approval for entities affiliated with Lilly Asia Ventures (LAV) to exercise the LAV Option. Terns Hong Kong agreed to repurchase all equity interests held by the LAV PRC Entities with proceeds to be used by LAV to purchase shares of Series A convertible preferred stock and Series B convertible preferred stock of the Company (Repurchase).

Series C Preferred Stock

In December 2020, the Company entered into a Series C preferred stock purchase agreement (Series C Convertible Preferred Stock Financing) whereby it issued an aggregate of 7,500,665 shares of Series C convertible preferred stock at $11.65 per share for gross proceeds of $87.4 million, which includes shares issued upon conversion of the 2020 Notes.

In connection with the Series C Convertible Preferred Stock Financing, the 2020 Notes, totaling unpaid principal and accrued interest of $15.9 million, converted into 1,366,820 shares of Series C convertible preferred stock. Furthermore, in December 2020, as part of the effective conversion of the Bridge Loan, the Company issued LAV an aggregate of 167,159 shares of Series C convertible preferred stock.

Series A convertible preferred stock, Series B convertible preferred stock and Series C convertible preferred stock are collectively referred to as “convertible preferred stock.”

In connection with the IPO, all the outstanding shares of convertible preferred stock converted into common stock and the Company does not have any shares of preferred stock outstanding as of June 30, 2022.

Organization, Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

Initial Public Offering

At-the-Market Offering

Certificate of Incorporation

Reverse Stock Split

Impact of the COVID-19 Pandemic

Use of Estimates

Unaudited Interim Financial Information

Cash, Cash Equivalents, Restricted Cash and Marketable Securities

Cash, Cash Equivalents and Marketable Securities

The fair value and amortized cost of marketable securities by major security type is as follows:


	June 30, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	2,948	$	—	$	—		$	2,948
U.S. government securities		50,180		—		(740	)		49,440
Non-U.S. government securities		3,045		—		(48	)		2,997
Corporate debt securities		25,337		—		(250	)		25,087
Commercial paper		45,480		—		—			45,480
Total	$	126,990	$	—	$	(1,038	)	$	125,952

Classified as:
Cash equivalents								$	2,948
Marketable securities									123,004
Total								$	125,952

	December 31, 2021
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	33,239	$	—	$	—		$	33,239
U.S. government securities		36,322		—		(130	)		36,192
Non-U.S. government securities		11,194		—		(12	)		11,182
Corporate debt securities		39,495		—		(52	)		39,443
Commercial paper		31,466		—		—			31,466
Total	$	151,716	$	—	$	(194	)	$	151,522

Classified as:
Cash equivalents								$	33,239
Marketable securities									118,283
Total								$	151,522

Operating Leases and Rent Expense

Classification of Convertible Preferred Stock

Research and Development Expenses

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities included the following:


(in thousands)	June 30, 2022		December 31, 2021
Research and development costs	$	1,927	$	1,570
Compensation and benefit costs		1,320		2,403
Accrued professional fees		1,089		363
Other		149		358
Total accrued expenses and other current liabilities	$	4,485	$	4,694

Income Taxes

Common Stock Valuation

•

the progress of the Company’s research and development programs, including the status and results of clinical and nonclinical studies for its drugs;

•

the Company’s stage of development and commercialization and its business strategy;

•

external market conditions affecting the biotechnology industry and trends within the biotechnology industry;

•

the Company’s financial position, including cash on hand, and its historical and forecasted performance and operating results;

•

the lack of an active public market for the Company’s common stock and convertible preferred stock;

•

the likelihood of achieving a liquidity event, such as an IPO or sale of the Company in light of prevailing market conditions; and

•

the analysis of IPOs and the market performance of similar companies in the biotechnology industry.

Significant changes to the key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date.

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Stock-Based Compensation

Net Loss Per Share of Common Stock


	June 30,
	2022		2021
Options to purchase common stock		4,478,338		2,583,563
Unvested restricted stock units		97,330		—
Shares issuable under employee stock purchase plan		29,837		—
Total		4,605,505		2,583,563

Deferred Offering Costs

Commitments and Contingencies

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

Organization, Basis of Presentation and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Schedule of Fair Value And Amortized Cost of Marketable Securities

The fair value and amortized cost of marketable securities by major security type is as follows:


	June 30, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	2,948	$	—	$	—		$	2,948
U.S. government securities		50,180		—		(740	)		49,440
Non-U.S. government securities		3,045		—		(48	)		2,997
Corporate debt securities		25,337		—		(250	)		25,087
Commercial paper		45,480		—		—			45,480
Total	$	126,990	$	—	$	(1,038	)	$	125,952

Classified as:
Cash equivalents								$	2,948
Marketable securities									123,004
Total								$	125,952

	December 31, 2021
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	33,239	$	—	$	—		$	33,239
U.S. government securities		36,322		—		(130	)		36,192
Non-U.S. government securities		11,194		—		(12	)		11,182
Corporate debt securities		39,495		—		(52	)		39,443
Commercial paper		31,466		—		—			31,466
Total	$	151,716	$	—	$	(194	)	$	151,522

Classified as:
Cash equivalents								$	33,239
Marketable securities									118,283
Total								$	151,522

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities included the following:


(in thousands)	June 30, 2022		December 31, 2021
Research and development costs	$	1,927	$	1,570
Compensation and benefit costs		1,320		2,403
Accrued professional fees		1,089		363
Other		149		358
Total accrued expenses and other current liabilities	$	4,485	$	4,694

Schedule of Antidilutive Securities Excluded from Computation of Net Loss per Share


	June 30,
	2022		2021
Options to purchase common stock		4,478,338		2,583,563
Unvested restricted stock units		97,330		—
Shares issuable under employee stock purchase plan		29,837		—
Total		4,605,505		2,583,563

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, authorized	150,000,000	150,000,000
Common stock, shares issued	25,363,829	25,269,271
Common stock, shares outstanding	25,363,829	25,269,271

Common Stock and Stock-Based Compensation - Summary of Restricted Stock Award Activity (Details) - Restricted Stock	6 Months Ended
	Jun. 30, 2022 $ / shares shares
Number of Shares
Number of Shares, Unvested restricted common stock, beginning balance \| shares	0
Number of Shares, Granted \| shares	111,200
Number of Shares, Forfeited \| shares	(13,870)
Number of Shares, Unvested restricted common stock, ending balance \| shares	97,330
Grant-Date Fair Value
Grant-Date Fair Value, Unvested restricted common stock, beginning balance \| $ / shares	$ 0
Grant-Date Fair Value, Granted \| $ / shares	3.24
Grant-Date Fair Value, Forfeited \| $ / shares	3.44
Grant-Date Fair Value, Unvested restricted common stock, ending balance \| $ / shares	$ 3.21

Organization, Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Fair Value And Amortized Cost of Marketable Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Amortized Cost	$ 126,990	$ 151,716
Unrealized Gains	0	0
Unrealized Losses	(1,038)	(194)
Fair Value	125,952	151,522
Cash equivalents	2,948	33,239
Marketable securities	123,004	118,283
Total	125,952	151,522
Money Market Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Amortized Cost	2,948	33,239
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	2,948	33,239
U.S. government securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Amortized Cost	50,180	36,322
Unrealized Gains	0	0
Unrealized Losses	(740)	(130)
Fair Value	49,440	36,192
Non-U.S. Government Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Amortized Cost	3,045	11,194
Unrealized Gains	0	0
Unrealized Losses	(48)	(12)
Fair Value	2,997	11,182
Corporate Debt Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Amortized Cost	25,337	39,495
Unrealized Gains	0	0
Unrealized Losses	(250)	(52)
Fair Value	25,087	39,443
Commercial Paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Amortized Cost	45,480	31,466
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	$ 45,480	$ 31,466

Common Stock and Stock-Based Compensation - Summary of Stock Option Activity (Details) - Stock Options $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares
Number of Shares
Number of Shares, Outstanding beginning balance \| shares	3,577,485
Number of Shares, Granted \| shares	1,026,020
Number of Shares, Exercised \| shares	(10,000)
Number of Shares, Forfeited \| shares	(115,167)
Number of Shares, Outstanding ending balance \| shares	4,478,338	3,577,485
Number of Shares, Exercisable \| shares	2,081,155
Number of Shares, Vested and expected to vest \| shares	4,478,338
Weighted-Average Exercise Price
Weighted-Average Exercise Price, Outstanding beginning balance \| $ / shares	$ 9.72
Weighted-Average Exercise Price, Granted \| $ / shares	4.84
Weighted-Average Exercise Price, Exercised \| $ / shares	0.00
Weighted-Average Exercise Price, Forfeited \| $ / shares	10.31
Weighted-Average Exercise Price, Outstanding ending balance \| $ / shares	8.62	$ 9.72
Weighted-Average Exercise Price, Exercisable \| $ / shares	8.80
Weighted-Average Exercise Price, Vested and expected to vest \| $ / shares	$ 8.62
Weighted-Average Remaining Contractual Term and Aggregate Intrinsic Value
Weighted-Average Remaining Contractual Term, Outstanding	8 years 10 months 9 days	9 years 1 month 2 days
Weighted-Average Remaining Contractual Term, Exercisable	8 years 3 months 29 days
Weighted-Average Remaining Contractual Term, Vested and expected to vest	8 years 10 months 9 days
Aggregate Intrinsic Value, Outstanding, beginning balance \| $	$ 491
Aggregate Intrinsic Value, Exercised \| $	21
Aggregate Intrinsic Value, Outstanding, ending balance \| $	175	$ 491
Aggregate Intrinsic Value, Exercisable \| $	17
Aggregate Intrinsic Value, Vested and expected to vest \| $	$ 175