10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from to

Commission File Number: 001-39926

 

Terns Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

98-1448275

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1065 East Hillsdale Blvd., Suite 100

Foster City, California

94404

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (650) 525-5535

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

TERN

 

The Nasdaq Global Select Market

 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of November 4, 2022, the registrant had 37,613,829 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. These statements involve known and unknown risks, uncertainties related to the global COVID-19 pandemic and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

our expectations with regard to the results of our clinical studies, preclinical studies and research and development programs, including the timing and availability of data from such studies;
the timing of commencement of future nonclinical studies and clinical trials and research and development programs;
our clinical and regulatory development plans;
our expectations regarding the potential market size and size of the potential patient populations for our product candidates and any future product candidates if approved for commercial use;
our ability to acquire, discover, develop and advance product candidates into, and successfully complete, clinical trials;
our intentions and our ability to establish collaborations and/or partnerships;
the timing or likelihood of regulatory filings and approvals for our product candidates;
our commercialization, marketing and manufacturing capabilities and expectations;
our intentions with respect to the commercialization of our product candidates;
the pricing and reimbursement of our product candidates, if approved;
the potential effects of COVID-19 and economic uncertainty on our preclinical and clinical programs and business;
the implementation of our business model and strategic plans for our business and product candidates, including additional indications which we may pursue;
the scope of protection we are able to establish, maintain, protect and enforce for intellectual property rights covering our product candidates including the projected terms of patent protection;
estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital and the timing of the sufficiency of our capital resources;
our future financial performance; and
developments and projections relating to our competitors and our industry, including competing products.

 

i


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

 

Signatures

34

 

 

 

 

 

 

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited).

Terns Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited; in thousands, except share and per share data)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,977

 

 

$

47,699

 

Marketable securities

 

 

124,309

 

 

 

118,283

 

Prepaid expenses and other current assets

 

 

3,251

 

 

 

948

 

Total current assets

 

 

190,537

 

 

 

166,930

 

Property and equipment, net

 

 

808

 

 

 

1,046

 

Operating lease assets

 

 

1,194

 

 

 

 

Other assets

 

 

47

 

 

 

94

 

Total assets

 

$

192,586

 

 

$

168,070

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,094

 

 

$

2,126

 

Accrued expenses and other current liabilities

 

 

4,722

 

 

 

4,694

 

Current portion of operating lease liabilities

 

 

665

 

 

 

 

Total current liabilities

 

 

7,481

 

 

 

6,820

 

Deferred rent, net of current portion

 

 

 

 

 

160

 

Taxes payable, non-current

 

 

709

 

 

 

787

 

Operating lease liabilities, non-current

 

 

702

 

 

 

 

Total liabilities

 

 

8,892

 

 

 

7,767

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 shares
   authorized at September 30, 2022 and December 31, 2021;
   
37,613,829 and 25,269,271 shares issued and outstanding at
   September 30, 2022 and December 31, 2021, respectively

 

 

4

 

 

 

3

 

Additional paid-in capital

 

 

411,634

 

 

 

342,711

 

Accumulated other comprehensive loss

 

 

(1,348

)

 

 

(338

)

Accumulated deficit

 

 

(226,596

)

 

 

(182,073

)

Total stockholders’ equity

 

 

183,694

 

 

 

160,303

 

Total liabilities and stockholders’ equity

 

$

192,586

 

 

$

168,070

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


 

Terns Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited; in thousands, except share and per share data)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

12,161

 

 

$

7,153

 

 

$

28,959

 

 

$

21,849

 

General and administrative

 

 

5,131

 

 

 

4,715

 

 

 

16,242

 

 

 

14,133

 

Total operating expenses

 

 

17,292

 

 

 

11,868

 

 

 

45,201

 

 

 

35,982

 

Loss from operations

 

 

(17,292

)

 

 

(11,868

)

 

 

(45,201

)

 

 

(35,982

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

499

 

 

 

49

 

 

 

782

 

 

 

115

 

Other (expense) income, net

 

 

(14

)

 

 

4

 

 

 

(64

)

 

 

30

 

Total other income, net

 

 

485

 

 

 

53

 

 

 

718

 

 

 

145

 

Loss before income taxes

 

 

(16,807

)

 

 

(11,815

)

 

 

(44,483

)

 

 

(35,837

)

Income tax expense

 

 

(13

)

 

 

(20

)

 

 

(40

)

 

 

(73

)

Net loss

 

$

(16,820

)

 

$

(11,835

)

 

$

(44,523

)

 

$

(35,910

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.44

)

 

$

(0.47

)

 

$

(1.50

)

 

$

(1.64

)

Weighted average common stock outstanding, basic and diluted

 

 

38,511,655

 

 

 

25,148,336

 

 

 

29,743,579

 

 

 

21,842,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(16,820

)

 

$

(11,835

)

 

$

(44,523

)

 

$

(35,910

)

Unrealized gain (loss) on available-for-sale securities, net of tax

 

 

31

 

 

 

2

 

 

 

(812

)

 

 

(5

)

Foreign exchange translation adjustment, net of tax

 

 

(138

)

 

 

5

 

 

 

(198

)

 

 

(38

)

Comprehensive loss

 

$

(16,927

)

 

$

(11,828

)

 

$

(45,533

)

 

$

(35,953

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


 

Terns Pharmaceuticals, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

(Unaudited; in thousands, except share data)

 

Nine Months Ended September 30, 2022

 

 

 

Series A
Convertible
Preferred Stock

 

 

Series B
Convertible
Preferred Stock

 

 

Series C
Convertible
Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

25,269,271

 

 

$

3

 

 

$

342,711

 

 

$

(338

)

 

$

(182,073

)

 

$

160,303

 

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 March 31, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

25,269,271

 

 

$

3

 

 

$

345,455

 

 

$

(896

)

 

$

(195,846

)

 

$

148,716

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

84,558

 

 

 

 

 

 

124

 

 

 

 

 

 

 

 

 

124

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,651

 

 

 

 

 

 

 

 

 

2,651

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(292

)

 

 

 

 

 

(292

)

Foreign exchange translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(53

)

 

 

 

 

 

(53

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,930

)

 

 

(13,930

)

Balances at June 30, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

25,363,829

 

 

$

3

 

 

$

348,230

 

 

$

(1,241

)

 

$

(209,776

)

 

$

137,216

 

Issuance of common stock and pre-funded warrants, net of issuance costs of $426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,250,000

 

 

 

1

 

 

 

60,718

 

 

 

 

 

 

 

 

 

60,719

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,686

 

 

 

 

 

 

 

 

 

2,686

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31

 

 

 

 

 

 

31

 

Foreign exchange translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(138

)

 

 

 

 

 

(138

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,820

)

 

 

(16,820

)

Balances at September 30, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

37,613,829

 

 

$

4

 

 

$

411,634

 

 

$

(1,348

)

 

$