SEC Filing | Terns Pharmaceuticals, Inc.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

View:

Download DOC Download PDF Download XLS Download XBRL

10-Q

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


☐	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.

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.

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

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.

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.

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	)	$	(226,596	)	$	183,694