Terns Pharmaceuticals(TERN) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) The company reported a net loss of $23.9 million for Q1 2025, an increase from $22.4 million in Q1 2024, with total assets decreasing to $339.3 million, reflecting its clinical-stage status with no product revenue Condensed Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $339.3 million from $363.9 million, driven by reduced cash and marketable securities, while total liabilities also decreased to $13.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $139,023 | $161,439 | | Marketable securities | $195,241 | $196,725 | | Total Assets | $339,315 | $363,929 | | Liabilities & Equity | | | | Total current liabilities | $10,935 | $15,650 | | Total Liabilities | $13,272 | $18,059 | | Total Stockholders' Equity | $326,043 | $345,870 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a net loss of $23.9 million for Q1 2025, an increase from $22.4 million in Q1 2024, primarily due to higher general and administrative expenses Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Research and development | $18,720 | $18,587 | | General and administrative | $8,707 | $6,859 | | Total operating expenses | $27,427 | $25,446 | | Loss from operations | ($27,427) | ($25,446) | | Interest income | $3,643 | $3,182 | | Net loss | ($23,908) | ($22,373) | | Net loss per share, basic and diluted | ($0.26) | ($0.30) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased from $345.9 million to $326.0 million in Q1 2025, primarily due to the net loss, partially offset by stock-based compensation - Stockholders' equity decreased by $19.9 million during Q1 2025, from $345.9 million to $326.0 million[19] - The main drivers of the change in equity were the net loss of $23.9 million and stock-based compensation expense of $3.7 million[19] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $24.4 million in Q1 2025, with cash and cash equivalents ending at $139.0 million, down from $161.4 million Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($24,440) | ($22,798) | | Net cash provided by investing activities | $1,959 | $7,997 | | Net cash provided by financing activities | $68 | $0 | | Net decrease in cash and cash equivalents | ($22,416) | ($14,827) | | Cash and cash equivalents at end of period | $139,023 | $65,099 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies and financial activities, including the company's focus on oncology and obesity treatments, financing activities, and breakdowns of stock-based compensation and lease obligations - The company is a clinical-stage biopharmaceutical company focused on developing small-molecule product candidates for oncology and obesity[25] - In September 2024, the company raised aggregate net proceeds of $161.9 million from a public offering of common stock and pre-funded warrants[34] - The company has an effective at-the-market (ATM) offering agreement for up to $150.0 million, with no sales made through March 31, 2025[33] - As of March 31, 2025, there was $33.2 million of unrecognized stock-based compensation expense related to unvested stock options, expected to be recognized over 3.12 years[87] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the clinical-stage pipeline for oncology and obesity, highlighting positive early data and increased operating expenses, while affirming sufficient liquidity of $334.3 million to fund operations into 2028 - The company is a clinical-stage biopharmaceutical company developing small-molecule candidates for oncology and obesity[104] - TERN-701 (CML): Positive early data from Phase 1 dose escalation led to selecting 320 mg and 500 mg doses for the expansion portion, with additional data expected in Q4 2025[105] - TERN-601 (obesity): Positive Phase 1 results showed up to 5.5% weight loss over 28 days, with a Phase 2 trial beginning in March 2025 and top-line 12-week data expected in Q4 2025[106] - The company believes its existing cash and cash equivalents will be sufficient to fund planned operations and capital expenditures into 2028[122][127] Results of Operations Total operating expenses increased slightly to $27.4 million in Q1 2025, driven by higher general and administrative costs, while research and development expenses remained relatively flat Comparison of Operating Results (in thousands) | Expense Category | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Research and development | $18,720 | $18,587 | $133 | | General and administrative | $8,707 | $6,859 | $1,848 | | Total operating expenses | $27,427 | $25,446 | $1,981 | | Net loss | ($23,908) | ($22,373) | ($1,535) | - The increase in R&D expenses was due to a $1.6 million increase in clinical and preclinical program expenses, offset by a $1.3 million decrease in personnel-related costs[113] - The increase in G&A expenses was primarily due to a $1.1 million increase in personnel-related expenses and a $0.7 million increase in professional services consulting[116] Liquidity and Capital Resources As of March 31, 2025, the company held $334.3 million in cash and marketable securities, deemed sufficient to fund operations into 2028, with past funding primarily from equity sales - The company believes its existing cash and cash equivalents of $334.3 million (as of March 31, 2025) will fund planned operating expenses into 2028[122][124][127] - Primary sources of liquidity have been proceeds from sales of common stock, including a September 2024 public offering that yielded $161.9 million in net proceeds[123][126] - The company expects to incur significant expenses and operating losses for the foreseeable future as it advances its product candidates, requiring substantial additional funding[128] Cash Flows Net cash used in operating activities was $24.4 million in Q1 2025, primarily due to the net loss, while investing activities provided $2.0 million from marketable securities - Net cash used in operating activities was $24.4 million in Q1 2025, compared to $22.8 million in Q1 2024[134][135] - Net cash provided by investing activities was $2.0 million in Q1 2025, a decrease from $8.0 million in Q1 2024, due to lower net proceeds from marketable securities transactions[136][137] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's quantitative and qualitative disclosures about market risk since its Annual Report on Form 10-K - There have been no material changes to the company's market risk disclosures since the last Annual Report[143] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[145] - No changes occurred during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[146] PART II. OTHER INFORMATION Legal Proceedings As of March 31, 2025, the company was not involved in any litigation or legal proceedings deemed to have a material adverse effect on its business - The company is not currently involved in any material legal proceedings[149] Risk Factors The company faces significant risks from potential FDA disruptions due to funding cuts and personnel losses, changes in U.S. trade policies, and uncertainties in patent law and U.S.-China trade relations - Disruptions at the FDA from funding cuts, personnel losses, and government shutdowns could hinder the ability to secure timely approval for product candidates[152] - Specific risks include a Reduction in Force (RIF) at HHS affecting 3,500 FDA employees and a proposed $700 million FDA budget cut for the 2026 fiscal year, which could delay PDUFA reviews[153][154] - Changes in U.S. trade policy, including a 10% baseline reciprocal tariff and specific tariffs on China, could negatively impact the company's research and manufacturing environment[163] - Changes in U.S. patent law, such as the America Invents Act (AIA), and recent Supreme Court rulings have created uncertainty regarding the value and enforceability of patents[160][161] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or issuer purchases of equity securities during the period - There were no unregistered sales of equity securities or issuer purchases of equity securities in the quarter[167][168] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[169] Mine Safety Disclosures This item is not applicable to the company - None[170] Other Information No directors or officers entered into, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025 - No directors or officers entered into, modified, or terminated a Rule 10b5-1 trading plan during the quarter[171] Exhibits This section lists exhibits filed with the Form 10-Q, including new consulting and employment agreements, and CEO and CFO certifications - Exhibits filed include a consulting agreement with Mark Vignola and an employment agreement with Andrew Gengos, both dated in February 2025[175] - Standard CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906 were also filed as exhibits[175]