Tarsus Pharmaceuticals(TARS) - 2022 Q1 - Quarterly Report

Part I - Financial Information Financial Statements (Unaudited) This section presents the unaudited condensed financial statements for the three months ended March 31, 2022, detailing financial position, operations, and cash flows, including a net loss of $20.2 million Condensed Balance Sheets Total assets slightly increased to $181.5 million, while total liabilities significantly rose to $32.3 million due to a new term loan, decreasing stockholders' equity to $149.2 million Condensed Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $175,010 | $171,332 | | Total current assets | $178,755 | $175,952 | | Total assets | $181,483 | $178,907 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $12,610 | $11,478 | | Term loan, net | $19,180 | $— | | Total liabilities | $32,286 | $12,177 | | Total stockholders' equity | $149,197 | $166,730 | | Total liabilities and stockholders' equity | $181,483 | $178,907 | Condensed Statements of Operations and Comprehensive (Loss) Income The company reported a net loss of $20.2 million for Q1 2022, a significant decline from $10.4 million net income in Q1 2021, primarily due to decreased revenues and lower R&D expenses Condensed Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total revenues | $539 | $33,432 | | Research and development | $12,081 | $16,261 | | General and administrative | $7,946 | $5,160 | | Total operating expenses | $20,060 | $22,718 | | Net (loss) income | $(20,238) | $10,376 | | Net (loss) income per share, diluted | $(0.98) | $0.47 | Condensed Statements of Cash Flows Net cash used in operating activities was $15.3 million, offset by $19.1 million from financing activities, resulting in a net cash increase of $3.7 million for the quarter Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,286) | $(11,794) | | Net cash used in investing activities | $(161) | $(175) | | Net cash provided by financing activities | $19,125 | $19 | | Net increase (decrease) in cash | $3,678 | $(11,950) | Notes to Condensed Financial Statements Detailed notes disclose the company's accumulated deficit of $66.9 million, a new $175 million credit facility, the LianBio out-license agreement, and a May 2022 follow-on public offering - The company has no product sales and an accumulated deficit of $66.9 million as of March 31, 2022. It expects to continue incurring operating losses[21] - On February 2, 2022, the company executed a $175 million credit facility and made an initial draw of $20 million[22][134] - The company has an out-license agreement with LianBio for TP-03 in Greater China, with eligibility for up to $45.0 million in development/regulatory milestones, $100 million in sales-based milestones, and tiered royalties[128][130] - In May 2022, the company completed a follow-on public offering, raising gross proceeds of $75.6 million from the sale of 5.6 million shares at $13.50 per share[142] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business, clinical progress for TP-03, and financial results, including a Q1 2022 net loss of $20.2 million, with sufficient capital to fund operations into 2026 Overview of Business and Recent Highlights Tarsus, a biopharmaceutical company, announced positive Phase 3 results for TP-03 for Demodex blepharitis, supporting a planned NDA submission, and is advancing TP-05 for Lyme disease prevention - The lead product candidate, TP-03, is in Phase 3 for Demodex blepharitis, a condition affecting an estimated 25 million people in the U.S[150] - The Phase 3 Saturn-2 trial for TP-03 met its primary endpoint, with 56% of patients achieving a complete collarette cure compared to 13% on vehicle (p<0.0001). The company plans to submit an NDA in the second half of 2022[152][155][156] - The company is advancing TP-05, a novel oral therapeutic for the prevention of Lyme disease, with Phase 1 data expected in the second half of 2022[157] - A follow-on public offering was completed on May 5, 2022, raising gross proceeds of $75.6 million[163] Results of Operations Total revenues significantly decreased to $0.5 million in Q1 2022 due to the absence of a one-time license fee, while R&D expenses fell and G&A expenses rose Comparison of Operations (in thousands) | Account | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $539 | $33,432 | $(32,893) | | Research and development | $12,081 | $16,261 | $(4,180) | | General and administrative | $7,946 | $5,160 | $2,786 | | Net (loss) income | $(20,238) | $10,376 | $(30,614) | - The decrease in R&D expenses was mainly due to non-recurring costs in Q1 2021, including a $5.5 million stock payment and a $2.0 million cash payment for in-license agreements[181] - The increase in G&A expenses was primarily due to a $2.1 million increase in payroll and personnel-related costs from adding 14 employees, and a $0.6 million increase in commercial and market research costs[182] Liquidity and Capital Resources As of March 31, 2022, the company held $175.3 million in cash and equivalents, with sufficient capital from recent offerings and expected milestones to fund operations into 2026 - As of March 31, 2022, the company had cash, cash equivalents, and marketable securities of $175.3 million[172][185] - The company expects to receive an additional $30 million in cash milestones from the China Out-License during 2022[187][191] - The company believes its capital resources, including the May 2022 equity raise and expected milestone payments, are sufficient to fund operations at least into 2026[191] - A shelf registration statement on Form S-3 is effective, permitting the company to offer up to $300.0 million in securities[193] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations affecting its cash equivalents and $19.2 million in variable-rate debt - The company's main market risk is interest rate risk, affecting its cash equivalents and variable-rate debt[212] - The outstanding debt of $19.2 million bears a variable interest rate tied to the Wall Street Journal prime rate, which was 8.45% at execution and increased to 8.70% on March 17, 2022[138][212] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[214] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[215] Part II - Other Information Legal Proceedings The company is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[218] Risk Factors No material changes to risk factors from the 2021 Annual Report, except for an updated emphasis on the lengthy, expensive, and uncertain nature of clinical drug development - Clinical drug development is a lengthy, expensive, and risky process with uncertain outcomes, and early trial results may not predict future success[220] - The company's product candidates, including TP-03, face a high risk of failure and may not prove safe or effective in later-stage trials despite promising early results[222][223] - Numerous unforeseen events can delay or prevent marketing approval, including issues with CROs, patient enrollment, inconclusive results, safety concerns, and regulatory hurdles[225][226] Unregistered Sales of Equity Securities and Use of Proceeds There has been no material change in the planned use of proceeds from the Initial Public Offering - The planned use of proceeds from the October 2020 IPO has not materially changed[230] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[231] Mine Safety Disclosures This item is not applicable to the company - None[233] Other Information The company reports no other information for this item - None[234] Exhibits This section lists the exhibits filed with the Form 10-Q, including the Loan and Security Agreement and required certifications - A key exhibit filed is the Loan and Security Agreement from February 2, 2022[235]