Structure Therapeutics(GPCR) - 2024 Q1 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section highlights that the report contains forward-looking statements, which are subject to significant risks and uncertainties, potentially causing actual results to differ materially - This Quarterly Report contains forward-looking statements, which are predictions based on current expectations and projections about future events and trends. These statements are subject to known and unknown risks, uncertainties, and assumptions, and actual results may differ materially[5][7] - Forward-looking statements cover various aspects including timing and results of preclinical/clinical trials, regulatory approvals, market opportunity, manufacturing, commercialization, personnel, market size, competitive position, collaboration agreements, intellectual property, financial performance, capital requirements, and the impact of laws and geopolitical/macroeconomic factors[6] Summary Risk Factors The company faces substantial risks including a limited operating history, expected future losses, significant capital needs, and challenges in drug discovery and clinical development - The company faces numerous risks, including a limited operating history, significant and expected future losses, and the need for substantial additional capital which may not be available[10] - Key development risks include an unproven discovery platform, early clinical development stage for product candidates (GSBR-1290, ANPA-0073), lengthy and expensive drug development processes with uncertain outcomes, and potential difficulties or delays in clinical trials[10][12] - Other significant risks involve potential serious adverse events, lack of experience in later-stage clinical trials or NDA submissions, reliance on third parties for manufacturing and clinical trials, competition, and the absence of a marketing and sales organization[12][14] Part I. Financial Information This section presents the unaudited condensed consolidated financial statements for Structure Therapeutics Inc., along with detailed notes explaining the company's organization, accounting policies, financial instrument composition, commitments, equity changes, net loss per share, and related party transactions Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Structure Therapeutics Inc., including the balance sheets, statements of operations and comprehensive loss, statements of redeemable convertible preferred shares and shareholders' equity (deficit), and statements of cash flows, along with detailed notes explaining the company's organization, accounting policies, financial instrument composition, commitments, equity changes, net loss per share, and related party transactions Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity as of March 31, 2024, and December 31, 2023 Condensed Consolidated Balance Sheets (in thousands) | Assets/Liabilities/Equity | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------ | :----------------------------- | :------------------------------- | | Assets | | | | Cash and cash equivalents | $97,832 | $129,792 | | Short-term investments | $338,617 | $337,531 | | Total current assets | $449,360 | $473,608 | | Total assets | $457,225 | $482,017 | | Liabilities | | | | Accounts payable | $6,538 | $4,742 | | Accrued expenses and other current liabilities | $15,448 | $18,558 | | Total current liabilities | $23,586 | $24,740 | | Total liabilities | $27,407 | $29,051 | | Shareholders' Equity | | | | Additional paid-in capital| $662,502 | $659,003 | | Accumulated deficit | $(232,608) | $(206,572) | | Total shareholders' equity| $429,818 | $452,966 | | Total liabilities and shareholders' equity | $457,225 | $482,017 | Condensed Consolidated Statements of Operations and Comprehensive Loss This section outlines the company's financial performance, including operating expenses, interest income, and net loss for the three months ended March 31, 2024 and 2023 Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Operating Expenses/Income/Loss | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $20,679 | $13,135 | | General and administrative | $11,336 | $6,514 | | Total operating expenses | $32,015 | $19,649 | | Loss from operations | $(32,015) | $(19,649) | | Interest and other income (expense), net | $6,008 | $1,699 | | Net loss attributable to ordinary shareholders | $(26,036) | $(17,975) | | Net loss per share, basic and diluted | $(0.19) | $(0.25) | | Weighted-average ordinary shares | 139,710 | 71,655 | - Net loss increased to $26.0 million for the three months ended March 31, 2024, from $18.0 million in the prior year period, primarily due to higher operating expenses[21] Condensed Consolidated Statements of Redeemable Convertible Preferred Shares and Shareholders' Equity (Deficit) This section details changes in the company's redeemable convertible preferred shares and shareholders' equity for the three months ended March 31, 2024 Condensed Consolidated Statements of Redeemable Convertible Preferred Shares and Shareholders' Equity (Deficit) (in thousands) | Item | Balance at Dec 31, 2023 (in thousands) | Issuance of ordinary shares | Share-based compensation expense | Unrealized loss on investments, net | Net loss | Balance at Mar 31, 2024 (in thousands) | | :--- | :----------------------------------- | :-------------------------- | :------------------------------- | :---------------------------------- | :------- | :----------------------------------- | | Ordinary Shares (Amount) | $14 | — | — | — | — | $14 | | Additional Paid-in Capital | $659,003 | $755 | $2,744 | — | — | $662,502 | | Accumulated Other Comprehensive Income (Loss) | $521 | — | — | $(611) | — | $(90) | | Accumulated Deficit | $(206,572) | — | — | — | $(26,036) | $(232,608) | | Total Shareholders' Equity | $452,966 | $755 | $2,744 | $(611) | $(26,036) | $429,818 | - Total shareholders' equity decreased from $452.97 million at December 31, 2023, to $429.82 million at March 31, 2024, primarily due to a net loss of $26.04 million and an unrealized loss on investments[24] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2024 and 2023 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------- | :----------------------------------------------- | :----------------------------------------------- | | Operating activities | $(34,080) | $(20,308) | | Investing activities | $1,418 | $(49,016) | | Financing activities | $702 | $169,726 | | Net change in cash and cash equivalents | $(31,960) | $100,402 | | Cash and cash equivalents, end of period | $97,832 | $126,493 | - Net cash used in operating activities increased to $34.1 million in Q1 2024 from $20.3 million in Q1 2023, driven by increased net loss and operating assets[26][134][135] - Investing activities provided $1.4 million in Q1 2024, a significant change from $49.0 million used in Q1 2023, primarily due to net maturities of short-term investments[26][136][137] - Financing activities provided $0.7 million in Q1 2024, a substantial decrease from $169.7 million in Q1 2023, which included proceeds from the IPO[26][138] Notes to Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Structure Therapeutics Inc., including the balance sheets, statements of operations and comprehensive loss, statements of redeemable convertible preferred shares and shareholders' equity (deficit), and statements of cash flows, along with detailed notes explaining the company's organization, accounting policies, financial instrument composition, commitments, equity changes, net loss per share, and related party transactions 1. Organization and Nature of the Business This note describes Structure Therapeutics Inc.'s formation, business focus on novel oral therapeutics, and recent financing activities including its IPO and Private Placement - Structure Therapeutics Inc. is a clinical-stage global biopharmaceutical company focused on developing novel oral therapeutics for chronic diseases, incorporated in February 2019 in the Cayman Islands with subsidiaries in the U.S. and China[28] - The company completed its IPO in February 2023, raising approximately $166.7 million in net proceeds, and a Private Placement in October 2023, raising approximately $281.5 million in net proceeds[29][31][32] Financial Metric (in millions) | Financial Metric | As of March 31, 2024 (in millions) | | :--------------- | :--------------------------------- | | Cash, cash equivalents and short-term investments | $436.4 | | Accumulated deficit | $232.6 | - The company believes its current cash, cash equivalents, and short-term investments are sufficient to fund projected operations for at least 12 months from the financial statement issuance date[33] 2. Summary of Significant Accounting Policies This note outlines the company's accounting principles, including U.S. GAAP conformity, key estimates, credit risk management, and evaluation of new accounting pronouncements - The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, including accounts of the Company and its wholly-owned subsidiaries, with all intercompany accounts and transactions eliminated[35] - Key estimates and assumptions include lease liability, accruals for R&D activities, ordinary share valuation, and share-based compensation[37] - The company is exposed to credit risk from cash, cash equivalents, and short-term investments, which are invested in investment-grade securities with creditworthy institutions[38][39] - The company is evaluating the impact of new FASB ASUs 2023-09 (Income Tax Disclosures) and 2023-07 (Segment Reporting), with no material impact expected from ASU 2023-07[49][50] 3. Composition of Certain Consolidated Financial Statement Line Items This note provides a detailed breakdown of specific balance sheet items, including property and equipment, and accrued expenses and other current liabilities Property and Equipment, Net (in thousands) | Property and Equipment, Net (in thousands) | March 31, 2024 | December 31, 2023 | | :--------------------------------------- | :------------- | :---------------- | | Laboratory equipment | $2,023 | $1,960 | | Furniture and fixtures | $249 | $243 | | Computer equipment and software | $354 | $309 | | Leasehold improvements | $1,360 | $1,360 | | Total | $3,986 | $3,872 | | Less: Accumulated depreciation | $(866) | $(644) | | Property and equipment, net | $3,120 | $3,228 | Accrued Expenses and Other Current Liabilities (in thousands) | Accrued Expenses and Other Current Liabilities (in thousands) | March 31, 2024 | December 31, 2023 | | :---------------------------------------------------- | :------------- | :---------------- | | Accrued compensation | $2,045 | $4,325 | | Accrued research and development expenses | $3,285 | $4,719 | | Accrued clinical expenses | $4,971 | $5,412 | | Accrued professional services | $3,698 | $2,633 | | Income tax and VAT payable | $297 | $356 | | Accrued other liabilities | $1,152 | $1,113 | | Total accrued expenses and other current liabilities | $15,448 | $18,558 | 4. Fair Value Measurements This note explains the company's methodology for classifying and measuring financial assets at fair value using a three-level hierarchy based on input observability - The company classifies financial assets measured at fair value into a three-level hierarchy based on input observability: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (unobservable inputs)[52] Financial Assets (in thousands) | Financial Assets (in thousands) | March 31, 2024 (Level 1) | March 31, 2024 (Level 2) | March 31, 2024 (Total) | December 31, 2023 (Level 1) | December 31, 2023 (Level 2) | December 31, 2023 (Total) | | :------------------------------ | :----------------------- | :----------------------- | :--------------------- | :-------------------------- | :-------------------------- | :------------------------ | | Money market funds | $88,625 | — | $88,625 | $124,443 | — | $124,443 | | U.S. government bonds | $71,029 | — | $71,029 | $84,935 | — | $84,935 | | U.S. government agency bonds | — | $78,587 | $78,587 | — | $82,340 | $82,340 | | Corporate debt securities | — | $189,001 | $189,001 | — | $170,256 | $170,256 | | Total fair value of financial assets | $159,654 | $267,588 | $427,242 | $209,378 | $252,596 | $461,974 | Financial Assets (in thousands) | Financial Assets (in thousands) | March 31, 2024 (Amortized Cost) | March 31, 2024 (Gross Unrealized Losses) | March 31, 2024 (Gross Unrealized Gains) | March 31, 2024 (Fair Value) | December 31, 2023 (Amortized Cost) | December 31, 2023 (Gross Unrealized Losses) | December 31, 2023 (Gross Unrealized Gains) | December 31, 2023 (Fair Value) | | :------------------------------ | :------------------------------ | :--------------------------------------- | :-------------------------------------- | :-------------------------- | :--------------------------------- | :------------------------------------------ | :----------------------------------------- | :----------------------------- | | Money market funds | $88,625 | — | — | $88,625 | $124,443 | — | — | $124,443 | | U.S. government bonds | $71,055 | $(43) | $17 | $71,029 | $84,783 | $(35) | $187 | $84,935 | | U.S. government agency bonds | $78,597 | $(30) | $20 | $78,587 | $82,185 | $(16) | $171 | $82,340 | | Corporate debt securities | $189,055 | $(99) | $45 | $189,001 | $170,042 | $(39) | $253 | $170,256 | | Total fair value of financial assets | $427,332 | $(172) | $82 | $427,242 | $461,453 | $(90) | $611 | $461,974 | 5. Commitments and Contingencies This note details the company's operating lease obligations for office and laboratory spaces and confirms the absence of material legal proceedings - The company has operating lease agreements for office and laboratory spaces in Shanghai, China, and South San Francisco, California, with maturities extending to 2027[56][58][59] Operating Lease Liabilities (in thousands) | Operating Lease Liabilities (in thousands) | March 31, 2024 | | :--------------------------------------- | :------------- | | 2024 (remaining nine months) | $1,436 | | 2025 | $1,968 | | 2026 | $1,921 | | 2027 | $382 | | Total undiscounted lease payments | $5,707 | | Less: imputed interest | $(582) | | Total operating lease liability | $5,125 | | Less: current portion | $(1,600) | | Operating lease liability, net of current portion | $3,525 | - Operating lease cost was $0.6 million for the three months ended March 31, 2024, with a weighted average remaining lease term of 3.0 years and a weighted average discount rate of 7.5%[61] - The company is not aware of any material legal proceedings or indemnification claims that would adversely affect its financial position[62][63] 6. Redeemable Convertible Preferred Shares This note clarifies the conversion of all outstanding redeemable convertible preferred shares into ordinary shares following the company's IPO - Upon the closing of the IPO in February 2023, all outstanding redeemable convertible preferred shares automatically converted into 67,018,087 ordinary shares[30][64] - As of March 31, 2024, there were no issued and outstanding redeemable convertible preferred shares[65] 7. Shareholders' Equity This note describes the company's authorized share capital, share option activity, and share-based compensation expenses, including the Employee Share Purchase Plan - As of March 31, 2024, the company is authorized to issue 500,000,000 ordinary shares and 100,000,000 undesignated shares, with 9,812,438 designated as non-voting ordinary shares[66] - All outstanding non-voting ordinary shares (9,812,438) were converted into ordinary shares as of December 31, 2023[69][91] Share Option Activity (in thousands, except per share amounts) | Share Option Activity (in thousands, except per share amounts) | As of Dec 31, 2023 | Granted | Exercised | Forfeited | As of Mar 31, 2024 | | :--------------------------------------------------- | :----------------- | :------ | :-------- | :-------- | :----------------- | | Number of Shares Underlying Outstanding Options | 11,899 | 2,055 | (635) | (1,258) | 12,061 | | Weighted-Average Exercise Price | $3.94 | $12.36 | $1.19 | $5.21 | $5.38 | | Weighted-Average Remaining Contractual Term (in years) | 8.27 | | | | 8.30 | | Aggregate Intrinsic Value | $117,093 | | | | $109,571 | - The total fair value of options that vested during Q1 2024 was $5.8 million, compared to $1.3 million in Q1 2023[71] - The 2023 Employee Share Purchase Plan (ESPP) was adopted in February 2023, with 2,392,210 shares remaining available for purchase as of March 31, 2024[72][73] Share-Based Compensation (in thousands) | Share-Based Compensation (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $1,223 | $1,592 | | General and administrative | $1,521 | $941 | | Total share-based compensation | $2,744 | $2,533 | | Share options and restricted share units| $2,587 | $2,533 | | ESPP | $157 | — | - Total unrecognized share-based compensation expense was $51.6 million for unvested share options and restricted share units, expected to be recognized over 3.4 years, and $0.4 million for ESPP, over 1.6 years[75][76] 8. Net Loss Per Share This note presents the calculation of basic and diluted net loss per share, identifying potentially dilutive securities that were excluded due to their antidilutive effect Net Loss Per Share | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Net loss attributable to ordinary shareholders (in thousands) | $(26,036) | $(17,975) | | Weighted-average ordinary shares outstanding (in thousands) | 139,710 | 71,894 | | Net loss per share, basic and diluted | $(0.19) | $(0.25) | - Potentially dilutive securities, including options, unvested restricted share units, and ESPP shares, were excluded from diluted net loss per share calculation for both periods as their inclusion would have been antidilutive[48][80] 9. Related Party Transactions This note details collaboration agreements with Schrödinger, LLC, a shareholder, for computational modeling and design support in drug discovery programs - The company has collaboration agreements with Schrödinger, LLC, a shareholder, for computational modeling and design support[81][82][86] - Under the Lhotse-Schrödinger Agreement (October 2020) for LPA1R inhibitors, Lhotse pays quarterly program payments and is obligated for up to $17.0 million in development/regulatory milestones and low single-digit tiered royalties on net sales[82][83][84] - Under the Aconcagua-Schrödinger Agreement (November 2023) for small molecule modulators, Aconcagua pays monthly program payments and is obligated for up to $89.0 million in development/regulatory/commercialization milestones and low single-digit tiered royalties on net sales[86][87][88] - As of March 31, 2024, the company paid $1.0 million to Schrödinger for services and had a payable balance of $0.3 million[81] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting its status as a clinical-stage biopharmaceutical company, recent financing activities (IPO and Private Placement), and the development progress of its lead product candidates. It also discusses the impact of macroeconomic factors, collaboration agreements, and the components and trends of operating expenses, liquidity, and cash flows Overview This section provides an overview of Structure Therapeutics Inc.'s clinical-stage biopharmaceutical focus, lead product candidate progress, and recent financing activities - Structure Therapeutics Inc. is a clinical-stage biopharmaceutical company leveraging structure-based drug discovery and computational chemistry to develop oral small molecule therapeutics for chronic diseases, initially focusing on GPCRs[94][95] - The lead product candidate, GSBR-1290 (GLP-1R agonist for T2DM and obesity), showed encouraging safety and significant weight loss (up to 4.9% placebo-adjusted) in Phase 1b MAD and Phase 2a T2DM/obesity cohorts, supporting once-daily dosing[95] - Full 12-week Phase 2a obesity data and high-level PK study results for a tablet formulation of GSBR-1290 are expected in June 2024, with global Phase 2b for obesity and Phase 2 for T2DM planned for Q4 2024 and H2 2024, respectively[95][96] - The company completed an IPO in February 2023, raising $166.7 million net, and a Private Placement in October 2023, raising $281.5 million net[94][98][99] - As of March 31, 2024, cash, cash equivalents, and short-term investments totaled $436.4 million, projected to fund operations through at least 2026[100] Impact of Geopolitical and Macroeconomic Factors This section discusses the potential, though currently unobserved, risks that geopolitical and macroeconomic factors pose to the company's funding, operations, and clinical trials - While no significant financial impact was observed in Q1 2024, future geopolitical and macroeconomic factors (e.g., bank failures, U.S.-China tensions, inflation, supply chain disruptions) pose highly uncertain risks to funding, operations, and clinical trials[102] Lhotse Collaboration Agreement with Schrödinger, LLC This section details the collaboration between Lhotse Bio, Inc. and Schrödinger, LLC for the discovery and development of oral small molecule LPA1R inhibitors - Lhotse Bio, Inc. (a wholly-owned subsidiary) entered a collaboration with Schrödinger, LLC in October 2020 to discover and develop oral small molecule LPA1R inhibitors[103] - Schrödinger provides computational modeling and design support, while Lhotse provides chemistry and biology support, with Lhotse solely owning the intellectual property generated[103] - Lhotse is obligated to pay Schrödinger quarterly program payments, up to $17.0 million in development and regulatory milestones, and low single-digit tiered royalties on worldwide net sales of Lhotse Collaboration Products[104] Aconcagua Collaboration Agreement with Schrödinger This section outlines the collaboration between Aconcagua Bio, Inc. and Schrödinger for the discovery and development of novel small molecule modulators for a specific target - Aconcagua Bio, Inc. (a wholly-owned subsidiary) entered a collaboration with Schrödinger in November 2023 to discover and develop novel small molecule modulators of a specific target[106] - Schrödinger provides computational modeling and design support, and Aconcagua provides chemistry and biology support, with Aconcagua solely owning the intellectual property generated (excluding improvements to Schrödinger's background IP)[106][107] - Aconcagua is obligated to pay Schrödinger monthly program payments, up to $89.0 million in development, regulatory, and commercialization milestones, and low single-digit tiered royalties on worldwide net sales of Aconcagua Collaboration Products[108] Components of Our Results of Operations This section explains the primary components of the company's operating expenses, specifically research and development and general and administrative costs, and their expected trends - Research and development (R&D) expenses primarily cover discovery, engineering, preclinical and clinical studies, including personnel, consulting, clinical trial, and regulatory costs[110] - R&D expenses are expected to increase substantially as the company advances product candidates, initiates clinical trials, expands its pipeline, and seeks regulatory approvals[115] - General and administrative (G&A) expenses include personnel costs for executive, legal, finance, and administrative functions, professional fees, and other operating expenses[116] - G&A expenses are expected to increase due to headcount expansion, infrastructure growth, and costs associated with operating as a public company[117] Results of Operations This section analyzes the company's financial performance for the three months ended March 31, 2024 and 2023, highlighting changes in operating expenses and net loss Operating Expenses/Income/Loss (in thousands) | Operating Expenses/Income/Loss | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | Percentage Change | | :----------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :---------------- | | Research and development | $20,679 | $13,135 | $7,544 | 57% | | General and administrative | $11,336 | $6,514 | $4,822 | 74% | | Total operating expenses | $32,015 | $19,649 | $12,366 | 63% | | Loss from operations | $(32,015) | $(19,649) | $(12,366) | 63% | | Interest and other income (expense), net | $6,008 | $1,699 | $4,309 | 254% | | Net loss | $(26,036) | $(17,975) | $(8,061) | 45% | - Research and development expenses increased by $7.6 million (57%) due to advancement of GLP-1R franchise and other programs, clinical study activities, and increased personnel[120] - General and administrative expenses increased by $4.8 million (74%) due to higher professional services and employee expenses as the company expanded as a public entity[122] - Interest and other income (expense), net, increased by $4.3 million, primarily due to higher interest rates and increased cash, cash equivalents, and short-term investment balances[123] Liquidity and Capital Resources This section discusses the company's historical financing, current capital position, and future funding requirements for ongoing operations and product development - The company has historically financed operations through equity private placements, raising $198.0 million gross proceeds prior to IPO[124][125] - Net proceeds from the February 2023 IPO were $166.7 million, and from the October 2023 Private Placement were $281.5 million[124][125] Financial Metric (in millions) | Financial Metric | As of March 31, 2024 (in millions) | | :--------------- | :--------------------------------- | | Cash, cash equivalents and short-term investments | $436.4 | | Accumulated deficit | $232.6 | - Existing capital is estimated to fund projected operations for at least 12 months from the financial statement issuance date, but substantial additional capital will be needed for future development and commercialization[126][127][129] Summary Statements of Cash Flows This section provides a summary of the company's cash flow activities from operations, investing, and financing for the three months ended March 31, 2024 and 2023 Summary Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------- | :----------------------------------------------- | :----------------------------------------------- | | Operating activities | $(34,080) | $(20,308) | | Investing activities | $1,418 | $(49,016) | | Financing activities | $702 | $169,726 | | Net (decrease) increase in cash and cash equivalents | $(31,960) | $100,402 | - Net cash used in operating activities increased to $34.1 million in Q1 2024 from $20.3 million in Q1 2023, primarily due to increased net loss and operating assets[134][135] - Net cash provided by investing activities was $1.4 million in Q1 2024, compared to $49.0 million used in Q1 2023, mainly due to net maturities of short-term investments[136][137] - Net cash provided by financing activities was $0.7 million in Q1 2024, significantly lower than $169.7 million in Q1 2023, which included IPO proceeds[138] Contractual Obligations This section outlines the company's significant contractual obligations, primarily consisting of facilities lease payments - As of March 31, 2024, contractual obligations consist of $5.7 million in facilities lease payments, with $2.0 million expected within the next 12 months[139] Critical Accounting Policies This section confirms that there were no material changes to the company's critical accounting policies during the first quarter of 2024 - There were no material changes to the critical accounting policies during the three months ended March 31, 2024, as described in the Annual Report on Form 10-K[141] JOBS Act Accounting Election and Smaller Reporting Company Status This section describes the company's status as an "emerging growth company" and "smaller reporting company," which allows for reduced reporting requirements - The company is an 'emerging growth company' and 'smaller reporting company,' allowing it to delay adopting new accounting standards and take advantage of scaled disclosures[142][143] Recent Accounting Pronouncements This section directs readers to Note 2 for additional information regarding recent accounting pronouncements - Refer to Note 2 of the unaudited interim condensed consolidated financial statements for additional information on recent accounting pronouncements[144] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Structure Therapeutics Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[145] Item 4. Controls and Procedures Management evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2024, concluding they were not effective due to a material weakness in internal control over financial reporting. The company is actively remediating this weakness by hiring additional accounting personnel Evaluation of Disclosure Controls and Procedures This section states management's conclusion that the company's disclosure controls and procedures were not effective as of March 31, 2024 - As of March 31, 2024, management concluded that the company's disclosure controls and procedures were not effective at the reasonable assurance level[147] Material Weakness in Internal Controls Over Financial Reporting This section identifies a continuing material weakness in internal control over financial reporting due to insufficient professional staff, though without material misstatements - A material weakness in internal control over financial reporting continues to exist as of March 31, 2024, due to a lack of sufficient professionals commensurate with financial reporting requirements[149] - This material weakness did not result in any material misstatements to the consolidated financial statements[149] Management's Plan to Remediate the Material Weakness This section outlines management's plan to address the material weakness by hiring additional accounting personnel and implementing new controls - Management is remediating the material weakness by hiring additional accounting personnel, including senior directors for SEC reporting, financial planning and analysis, accounting, internal controls, and controller roles[150] - Remediation will be considered complete only after the design and implementation of these measures are finalized, and controls operate effectively for a sufficient period, as confirmed by testing[150] Changes in Internal Controls Over Financial Reporting This section confirms that no material changes in internal controls over financial reporting occurred during the first quarter ended March 31, 2024 - No changes in internal controls over financial reporting materially affected, or are reasonably likely to materially affect, internal control during the first quarter ended March 31, 2024[151] Part II. Other Information This section provides additional information not covered in Part I, including legal proceedings, detailed risk factors, equity sales, defaults, mine safety, other disclosures, and a list of exhibits Item 1. Legal Proceedings The company is not currently subject to any material governmental investigations, private lawsuits, or other legal proceedings, though it may be involved in ordinary course claims - The company is not currently subject to any material governmental investigation, private lawsuit, or other legal proceeding[156] Item 1A. Risk Factors This section details the significant risks and uncertainties that could materially and adversely affect the company's business, prospects, operating results, and financial condition. These risks span across its limited operating history, product development, reliance on third parties, commercialization, business operations, international operations, intellectual property, and the trading of its ADSs Risks Related to Our Limited Operating History, Financial Position and Capital Requirements This section details risks associated with the company's short operating history, significant accumulated deficit, and ongoing need for substantial additional capital - The company has a limited operating history since its inception in 2016, has incurred significant operating losses ($232.6 million accumulated deficit as of March 31, 2024), and expects to incur significant losses for the foreseeable future[158][159] - Substantial additional capital will be required to finance operations, particularly for ongoing and planned preclinical studies and clinical trials, and may not be available on acceptable terms, leading to potential delays or termination of development programs[162] - Raising additional capital may cause dilution to shareholders, restrict operations through debt covenants, or require relinquishing rights to technologies or product candidates through collaborations[167][168] Risks Related to the Discovery, Development and Regulatory Approval of Product Candidates This section outlines the inherent uncertainties, lengthy processes, and potential failures in drug discovery, preclinical studies, clinical trials, and regulatory approval - The company's structure-based drug discovery platform is unproven, and there is no guarantee of developing commercially valuable products or demonstrating efficacy and safety in clinical trials[169] - Product candidates GSBR-1290 and ANPA-0073 are in early clinical development, and all other programs are preclinical or discovery stage, posing risks of delays, failure to obtain regulatory approval, or commercialization issues[171][172] - Clinical drug development is lengthy, expensive, and uncertain; prior preclinical/clinical results are not predictive of future outcomes, and product candidates can fail at any stage[174] - Difficulties or delays in clinical trials (e.g., data collection omissions, patient enrollment, manufacturing issues, adverse events) could increase costs, delay revenue generation, and adversely affect commercial prospects[177][178][179][182][184][185][187] - Serious adverse events or unexpected properties of product candidates identified during development or after approval could lead to discontinuation, refusal of approval, or revocation of marketing authorizations[190][192][193] - The company lacks experience in conducting later-stage clinical trials or submitting New Drug Applications (NDAs), which could hinder successful regulatory approval[195][196] - The FDA and foreign marketing approval processes are lengthy, expensive, unpredictable, and may require additional trials or lead to denial of approval[197][198][199] - Misallocation of limited resources to less profitable or less likely product candidates or indications could occur, especially given the breadth of potential opportunities[201] - Inability to obtain or maintain orphan drug designations or exclusivity could limit the potential profitability of product candidates[203][204] - Data from clinical trials conducted outside the United States may not be accepted by the FDA or other foreign equivalents, leading to delays and increased costs[205][206][207] - Preliminary, topline, and interim clinical trial data are subject to change upon comprehensive review and audit, and final data may differ materially, potentially harming business prospects[208][209][210] - Obtaining marketing approval in one jurisdiction does not guarantee approval in others, and foreign regulatory processes can be complex and costly[211][212] - Disruptions at the FDA and other government agencies due to funding shortages or global health concerns could delay product development, approval, or commercialization[213][215][216] Risks Related to Our Reliance on Third Parties This section addresses risks stemming from the company's dependence on third parties for manufacturing, research, clinical trials, and collaboration agreements - The company relies on third parties for manufacturing product candidates and raw materials, increasing the risk of insufficient quantities, unacceptable costs, or quality issues, potentially delaying development or commercialization[217][218] - Dependence on third-party manufacturers for cGMP compliance and supply chain stability may adversely affect future profit margins and timely commercialization[219][221][222] - Reliance on third parties for discovery research, preclinical studies, and clinical trials (CROs) poses risks of delays, increased costs, and compromised data quality if they fail to meet contractual duties or deadlines[225][226][228] - Collaboration agreements and strategic alliances, including those with Schrödinger, may not realize anticipated benefits, and termination or failure of these collaborations could adversely affect the business[231][233][234][238][240] - Sharing trade secrets with third parties increases the risk of misappropriation or unauthorized disclosure, potentially harming the company's competitive position[241][243][245] - The adoption and deployment of AI in R&D efforts may not be effective, could lead to flawed results, and exposes the company to competitive, reputational, and cybersecurity risks[246][247] Risks Related to Commercialization of Our Product Candidates This section covers risks associated with achieving market acceptance, securing reimbursement, facing intense competition, and establishing a marketing and sales infrastructure - Even if regulatory approval is received, product candidates will be subject to ongoing regulatory obligations, review, and potential restrictions on marketing or withdrawal from the market, incurring significant additional expense[248][249][250][251] - Failure to achieve market acceptance by physicians, patients, and third-party payors for any approved product candidate could prevent significant product revenue generation and profitability[254][255][256] - Lack of coverage and adequate reimbursement from third-party payors could make it difficult to sell products profitably, impacting demand and pricing[257][258] - The company faces substantial competition from major pharmaceutical and biotechnology companies, as well as other AI-driven drug discovery firms, potentially leading to others commercializing products more successfully[259][260][261][262][263][265] - Underestimating market opportunities for product candidates could adversely affect revenue and business, as patient population estimates may be incorrect[266][267] - The company currently lacks a marketing and sales organization and experience in commercializing products, requiring significant investment or reliance on third parties, which may not generate sufficient product revenue[268] - Commercializing products in foreign markets exposes the company to additional regulatory burdens, economic, political, and other risks[269] Risks Related to Our Business Operations and Industry This section discusses risks related to fluctuating operating results, dependence on key personnel, managing organizational growth, and compliance with healthcare laws and reforms - Quarterly and annual operating results may fluctuate significantly due to factors like R&D costs, regulatory approvals, competition, and macroeconomic conditions, making future results difficult to predict[271][273] - High dependence on senior management and the ability to recruit and retain additional qualified personnel is critical; loss of key personnel or inability to attract new talent could harm the business[275][276][277] - The need to expand the organization to support R&D programs and public company operations may lead to difficulties in managing growth and diverting management resources[278][279] - Operating R&D through Australian subsidiaries exposes the company to risks of losing operational ability or being unable to receive R&D tax credits, which could adversely affect business and results[280][281] - Relationships with healthcare providers and payors are subject to federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, Sunshine Act), and non-compliance could lead to substantial penalties[282][283][284][285][286][287] - Healthcare legislative reforms, such as the ACA and IRA, may negatively impact the business by imposing price controls, limiting reimbursement, or increasing regulatory scrutiny on drug pricing[288][289][290][291][292][293][294] - Use of hazardous and biological materials by third-party manufacturers could lead to liability for damages, fines, or operational disruptions if not handled in compliance with environmental, health, and safety laws[295] Risks Related to Our Information Technology and Data This section highlights risks concerning product liability, cybersecurity breaches, employee misconduct, and compliance with stringent data security and privacy laws - Product liability lawsuits related to clinical trials or commercialized products could result in substantial liabilities, product recalls, loss of revenue, and reputational harm[296][297] - Compromises or disruptions of IT systems or data, including cyberattacks, could lead to financial, legal, regulatory, business, and reputational harm, and loss of sensitive information[298][299][300][301] - Misconduct by employees, principal investigators, consultants, or commercial partners, including non-compliance with regulatory standards or insider trading, could result in regulatory sanctions and reputational damage[304] - Governments outside the U.S. may impose strict price controls on pharmaceuticals, potentially adversely affecting revenues[305] - The company is subject to stringent and evolving U.S. and foreign data security and privacy laws (e.g., HIPAA, CCPA, GDPR, China's Data Security Law, PIPL), and non-compliance could lead to enforcement actions, litigation, fines, and business disruptions[306][307][309][310][311][312][315][316][317][319] - Cross-border data transfer limitations, particularly from Europe to the U.S., could interrupt operations or require costly relocation of data processing activities[313][314] Risks Related to Our International Tax and Regulatory Environment This section addresses risks from cross-border tax arrangements, changes in tax laws, geopolitical tensions, and complex regulatory compliance in international operations, particularly in China - Tax risks are associated with cross-border arrangements and activities between the company and its subsidiaries, as tax authorities may challenge transfer prices or assert taxability in new jurisdictions, potentially increasing tax liabilities[321][322][323][325] - Changes in tax laws or regulations (e.g., IRA, TCJA, BEPS 2.0) could adversely affect the company's business, cash flow, financial condition, or results of operations[326] - Changes in political and economic policies or relations between China and the United States may affect the company's business, financial condition, results of operations, and ADS market price due to its operations in China[327][328][329][330] - Compliance with China's Data Security Law, Cyber Security Law, Cybersecurity Review Measures, Personal Information Protection Law, and HGR Regulation may entail significant expenses, affect business operations, and potentially require cybersecurity reviews for overseas listings[331][332][333][335][336][337][338][339] - The approval, filing, or other procedures with the CSRC or other Chinese regulatory authorities may be required for issuing securities to foreign investors, and delays or inability to obtain such approvals could adversely affect the business and ADS trading price[340][342][344] - Operating in China requires compliance with extensive regulations and permits, and future government regulation may place additional burdens on operations[345][346] - International operations expose the company to economic, political, regulatory, and other risks, including differing regulatory requirements, reduced IP protection, and foreign exchange fluctuations[347][348] - Failure to comply with Chinese environmental, health, and safety laws could lead to fines, penalties, or costs, materially affecting business success[349][350] - Developments in the Chinese legal system, which is civil law based and evolving, could materially and adversely affect the company[351] - Exposure to the U.S. FCPA and similar anti-corruption laws in China and other countries, as well as export controls and trade sanctions, could limit foreign market competition and result in penalties[352][353] - Chinese currency exchange regulations may limit the ability to receive and effectively use foreign currency financing for Chinese subsidiaries, impacting funding and business expansion[354][355] - Chinese regulations (e.g., SAFE Circular 37) regarding offshore special purpose companies by residents in China may subject beneficial owners or subsidiaries to liability, limit capital injection, or restrict profit distribution[356][357][358] - Classification as a China resident enterprise for tax purposes could result in unfavorable tax consequences, including a 25% EIT on global income and withholding taxes on dividends and gains for non-Chinese shareholders[359][360][361] - Uncertainties exist regarding Chinese regulations on indirect transfers of equity interests in China resident enterprises, potentially leading to income tax liabilities and significant compliance costs[362][364] - Failure to comply with Chinese regulations regarding employee equity incentive plans (e.g., Stock Option Rules) may lead to fines, sanctions, and limitations on dividend distribution from Chinese subsidiaries[365] Risks Related to Our Intellectual Property This section details risks concerning the ability to obtain, mai