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, 2023


☐	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 3, 2023, the registrant had 61,794,522 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 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 location, timing of commencement and data reporting of future nonclinical studies and clinical trials and research and development programs;

•

our clinical and regulatory development plans;

•

our expectations regarding the product profile, relative benefits and clinical utility of our product candidates;

•

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 our 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 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 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	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	29
	Signatures	30

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, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	37,893		$	143,235
Marketable securities		228,707			139,879
Prepaid expenses and other current assets		3,855			2,071
Total current assets		270,455			285,185
Property and equipment, net		526			757
Operating lease assets		671			1,047
Other assets		35			37
Total assets	$	271,687		$	287,026
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,325		$	1,645
Accrued expenses and other current liabilities		8,055			6,162
Current portion of operating lease liabilities		707			661
Total current liabilities		12,087			8,468
Taxes payable, non-current		1,112			1,071
Operating lease liabilities, non-current		63			544
Total liabilities		13,262			10,083
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value, 150,000,000 shares authorized at September 30, 2023 and December 31, 2022; 61,785,216 and 53,723,171 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		6			5
Additional paid-in capital		570,864			520,178
Accumulated other comprehensive loss		(836	)		(822	)
Accumulated deficit		(311,609	)		(242,418	)
Total stockholders’ equity		258,425			276,943
Total liabilities and stockholders’ equity	$	271,687		$	287,026

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,
	2023			2022			2023			2022
Operating expenses:
Research and development	$	14,831		$	12,161		$	46,038		$	28,959
General and administrative		18,353			5,131			32,462			16,242
Total operating expenses		33,184			17,292			78,500			45,201
Loss from operations		(33,184	)		(17,292	)		(78,500	)		(45,201	)
Other income:
Interest income		3,480			499			9,568			782
Other expense, net		(5	)		(14	)		(69	)		(64	)
Total other income, net		3,475			485			9,499			718
Loss before income taxes		(29,709	)		(16,807	)		(69,001	)		(44,483	)
Income tax expense		(58	)		(13	)		(190	)		(40	)
Net loss	$	(29,767	)	$	(16,820	)	$	(69,191	)	$	(44,523	)

Net loss per share, basic and diluted	$	(0.42	)	$	(0.44	)	$	(0.98	)	$	(1.50	)
Weighted average common stock outstanding, basic and diluted		71,530,180			38,511,655			70,897,320			29,743,579

Other comprehensive loss:
Net loss	$	(29,767	)	$	(16,820	)	$	(69,191	)	$	(44,523	)
Unrealized (loss) gain on available-for-sale securities, net of tax		(33	)		31			87			(812	)
Foreign exchange translation adjustment, net of tax		(28	)		(138	)		(101	)		(198	)
Comprehensive loss	$	(29,828	)	$	(16,927	)	$	(69,205	)	$	(45,533	)

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

Terns Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited; in thousands, except share data)


Nine Months Ended September 30, 2023
	Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital			Loss			Deficit			Equity
Balances at December 31, 2022		53,723,171	$	5	$	520,178		$	(822	)	$	(242,418	)	$	276,943
Issuance of common stock in at-the-market offering		2,929,922		—		27,924			—			—			27,924
Vesting of restricted stock units		16,503		—		—			—			—			—
Stock-based compensation expense		—		—		3,938			—			—			3,938
Unrealized gain on available-for-sale securities		—		—		—			418			—			418
Foreign exchange translation adjustment		—		—		—			(12	)		—			(12	)
Net loss		—		—		—			—			(21,528	)		(21,528	)
Balances at March 31, 2023		56,669,596	$	5	$	552,040		$	(416	)	$	(263,946	)	$	287,683
Exercise of stock options		95,176		—		248			—			—			248
Issuance of common stock under employee stock purchase plan		114,739		—		241			—			—			241
Issuance of common stock in connection with exercise of pre-funded warrants		4,174,960		1		(1	)		—			—			—
Vesting of restricted stock units		10,552		—		—			—			—			—
Stock-based compensation expense		—		—		4,233			—			—			4,233
Unrealized loss on available-for-sale securities		—		—		—			(298	)		—			(298	)
Foreign exchange translation adjustment		—		—		—			(61	)		—			(61	)
Net loss		—		—		—			—			(17,896	)		(17,896	)
Balances at June 30, 2023		61,065,023	$	6	$	556,761		$	(775	)	$	(281,842	)	$	274,150
Exercise of stock options		9,000		—		20			—			—			20
Issuance of common stock in connection with exercise of pre-funded warrants		703,486		—		—			—			—			—
Vesting of restricted stock units		7,707		—		—			—			—			—
Stock-based compensation expense		—		—		14,083			—			—			14,083
Unrealized loss on available-for-sale securities		—		—		—			(33	)		—			(33	)
Foreign exchange translation adjustment		—		—		—			(28	)		—			(28	)
Net loss		—		—		—			—			(29,767	)		(29,767	)
Balances at September 30, 2023		61,785,216	$	6	$	570,864		$	(836	)	$	(311,609	)	$	258,425

Nine Months Ended September 30, 2022
	Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	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

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

Terns Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited; in thousands)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(69,191	)	$	(44,523	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		22,254			8,081
Depreciation and amortization expense		220			391
(Accretion) amortization on marketable securities		(3,530	)		647
Change in deferred taxes and uncertain tax positions		96			39
Amortization of operating lease assets		441			408
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(1,784	)		(2,301	)
Accounts payable		1,959			(251	)
Accrued expenses and other current liabilities		1,957			66
Operating lease liabilities		(496	)		(455	)
Net cash used in operating activities		(48,074	)		(37,898	)
Cash flows from investing activities:
Purchase of property and equipment		(8	)		(241	)
Purchase of investments		(270,763	)		(91,720	)
Proceeds from sales and maturities of investments		185,552			84,235
Net cash used in investing activities		(85,219	)		(7,726	)
Cash flows from financing activities:
Net proceeds from issuance of common stock in at-the-market offering		27,924			—
Proceeds from stock option exercises		268