Tango Therapeutics(TNGX) - 2023 Q2 - Quarterly Report

FORM 10-Q This section serves as the cover page for Tango Therapeutics, Inc.'s Quarterly Report on Form 10-Q, detailing company identification, securities, and filer status for the period ended June 30, 2023 - Registrant: Tango Therapeutics, Inc.[2] - Period Ended: June 30, 2023[2] Securities Registered: | Title of each class | Symbol(s) | Name of each exchange on which registered | | :--- | :--- | :--- | | Common stock, par value $0.001 per share | TNGX | Nasdaq Global Market | - Filer Status: Non-accelerated filer, Smaller reporting company, Emerging growth company[4] - Common Stock Outstanding (as of Aug 2, 2023): 88,467,269 shares[4] Table of Contents This section lists all items and their corresponding page numbers within the Quarterly Report on Form 10-Q, organized into Part I and Part II Summary of Material Risks Associated with Our Business This section outlines key business risks for Tango Therapeutics, including limited operating history, lack of approved products, significant losses, funding needs, and uncertain clinical development - The company is a precision oncology company with a limited operating history, no approved products, and no revenue from product sales, facing substantial competition[9] - Significant net losses have been incurred since inception, with expectations of continued losses and the need for substantial additional funding to support product development and commercialization efforts[9] - Clinical product development is a lengthy, expensive, and uncertain process, with no successful clinical trials completed to date, and results from earlier studies are not necessarily predictive of future outcomes[9] Note Regarding Forward-Looking Statements This section cautions that forward-looking statements in the report are subject to risks and uncertainties, potentially causing actual results to differ materially from projections - Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially[11] - Key areas of uncertainty include the timing and cost of R&D programs, ability to obtain funding, regulatory approval, commercialization, intellectual property protection, and the impact of external factors like the COVID-19 pandemic[12][13][14] - The company does not undertake any obligation to update or revise forward-looking statements, except as required by law[15] Use of Defined Terms and Corporate Information This section defines key terms used in the Quarterly Report and provides corporate information, including the company's history and access to SEC filings - Tango Therapeutics, Inc. was formerly BCTG Acquisition Corp. (a SPAC) and changed its name after a merger on August 10, 2021[17] - The company makes its SEC filings and other investor information available free of charge on the "Investors" portion of its website (http://www.tangotx.com)[18](index=18&type=chunk)[19] - Key defined terms include "Gilead" (Gilead Sciences, Inc.), "MTAP" (methylthioadenosine phosphorylase), "NSCLC" (non-small cell lung cancer), and various program/pathway acronyms like "PRMT5" and "USP1"[18] PART I. FINANCIAL INFORMATION This part presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, cash flows, management's discussion, and market risk disclosures Item 1. Financial Statements (Unaudited) This section presents Tango Therapeutics, Inc.'s unaudited condensed consolidated financial statements, encompassing balance sheets, statements of operations, stockholders' equity, cash flows, and detailed explanatory notes Condensed Consolidated Balance Sheets The balance sheets reflect a decrease in total assets from $436.5 million to $379.3 million, and a decline in total stockholders' equity from $249.5 million to $212.9 million Condensed Consolidated Balance Sheets (in thousands): | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $66,052 | $59,968 | | Marketable securities | $244,600 | $306,165 | | Total current assets | $320,543 | $375,272 | | Total assets | $379,328 | $436,470 | | Total current liabilities | $53,633 | $55,545 | | Total liabilities | $166,383 | $186,994 | | Total stockholders' equity | $212,945 | $249,476 | - Total assets decreased by $57.1 million (13.1%) from December 31, 2022, to June 30, 2023, mainly due to a decrease in marketable securities[23] - Total stockholders' equity decreased by $36.5 million (14.6%) from December 31, 2022, to June 30, 2023, primarily due to accumulated deficit[23] Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a net loss of $20.7 million for Q2 2023 and $48.7 million for the six months, with total revenue significantly increasing due to a new Gilead license stream Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands): | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $14,598 | $5,771 | $20,364 | $11,529 | | Research and development expenses | $28,671 | $23,741 | $56,710 | $48,071 | | General and administrative expenses | $9,174 | $7,232 | $17,188 | $14,039 | | Net loss | $(20,710) | $(24,858) | $(48,718) | $(50,066) | | Net loss per common share – basic and diluted | $(0.23) | $(0.28) | $(0.55) | $(0.57) | - Total revenue for the three months ended June 30, 2023, increased by $8.8 million (152.9%) year-over-year, driven by $5.0 million in license revenue from Gilead[24] - Net loss decreased by $4.1 million (16.7%) for the three months ended June 30, 2023, compared to the same period in 2022[24] Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased from $249.5 million to $212.9 million, primarily due to net loss, partially offset by stock-based compensation and other comprehensive income Changes in Stockholders' Equity (in thousands): | Metric | December 31, 2022 | June 30, 2023 | | :--- | :--- | :--- | | Total Stockholders' Equity | $249,476 | $212,945 | | Accumulated Deficit | $(269,512) | $(318,230) | | Additional Paid-in Capital | $522,605 | $532,604 | - Accumulated deficit increased by $48.7 million from December 31, 2022, to June 30, 2023, reflecting the net loss for the period[26] - Additional paid-in capital increased by $9.9 million, primarily due to stock-based compensation expense and common stock issuance from option exercises and ESPP[26] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities decreased to $59.4 million, while net cash provided by investing activities significantly increased to $64.2 million, resulting in a $5.5 million net increase in cash and equivalents Condensed Consolidated Statements of Cash Flows (in thousands): | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(59,380) | $(61,203) | | Net cash provided by investing activities | $64,238 | $23,776 | | Net cash provided by financing activities | $659 | $975 | | Net change in cash, cash equivalents and restricted cash | $5,517 | $(36,452) | | Cash, cash equivalents and restricted cash, end of period | $69,475 | $108,572 | - Net cash used in operating activities decreased by $1.8 million (2.9%) year-over-year, mainly due to a lower net loss[29] - Net cash provided by investing activities increased by $40.5 million (170.2%) year-over-year, driven by increased sales and maturities of marketable securities[29] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide essential context for the financial statements, detailing business nature, accounting policies, Gilead collaboration, fair value, marketable securities, and other financial specifics 1. Nature of the Business and Basis of Presentation Tango Therapeutics is a precision oncology company developing novel drugs, with financial statements prepared in conformity with U.S. GAAP and intercompany accounts eliminated - Tango Therapeutics is a precision oncology company focused on discovering and developing novel drugs for patients with high unmet medical needs[32] - The financial statements are prepared in accordance with U.S. GAAP and are unaudited, with all intercompany accounts and transactions eliminated[34] 2. Summary of Significant Accounting Policies No significant changes occurred in accounting policies from the prior annual report, with estimates used for collaboration revenue, stock-based awards, and R&D expenses, and no material impact expected from new pronouncements - No significant changes from the accounting policies disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[36] - Significant estimates are made for collaboration agreements revenue, valuation of stock-based awards, and accrual for research and development expenses[37] 3. Collaboration Agreements The Gilead collaboration agreement, amended in 2020, provides for milestone payments and royalties, with a $5.0 million license fee recognized in June 2023, and a total allocated transaction price of $199.0 million - The Gilead Agreement, amended in August 2020, allows Tango to receive up to $410.0 million per program in license, research option-extension, and clinical, regulatory, and commercial milestones, plus royalties[43] - In June 2023, Gilead licensed a program for a $5.0 million fee, which was recognized as license revenue in Q2 2023[46] Gilead Collaboration Revenue Recognition (in thousands): | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Collaboration revenue recognized | $15,400 | $11,500 | | Total transaction price allocated (as of June 30, 2023) | $199,000 | N/A | 4. Fair Value Measurements Fair value measurements of financial assets, primarily cash equivalents and marketable debt securities, totaled $271.8 million as of June 30, 2023, with most classified as Level 2 Fair Market Value Measurements (in thousands): | Asset Type | June 30, 2023 (Total) | December 31, 2022 (Total) | | :--- | :--- | :--- | | Money market funds (Level 1) | $11,468 | $7,577 | | U.S. Treasury bills (Level 2) | $15,698 | $16,030 | | Marketable debt securities (U.S. Treasury bills, Level 2) | $119,155 | $199,245 | | Marketable debt securities (U.S. government agency bonds, Level 2) | $125,445 | $106,920 | | Total assets at fair value | $271,766 | $329,772 | - No transfers between fair value levels occurred during the six months ended June 30, 2023[52] 5. Marketable Securities Marketable debt securities, classified as available-for-sale, decreased to $244.6 million at fair value, with $1.5 million in unrealized losses, and the company intends to hold them until cost basis recovery Marketable Debt Securities (in thousands): | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Amortized Cost | $246,117 | $309,870 | | Gross Unrealized Gains | $4 | $21 | | Gross Unrealized Loss | $(1,521) | $(3,726) | | Fair Value | $244,600 | $306,165 | - The company holds investment-grade marketable securities with unrealized losses but does not intend to sell them prior to recovery of their value, expecting cost basis recovery[56] - Marketable securities include $1.3 million in accrued interest as of June 30, 2023[56] 6. Supplemental Balance Sheet Information This section details property and equipment (net $10.9 million), accrued expenses (decreased to $13.2 million), and restricted cash ($3.4 million) primarily for facility leases Property and Equipment, Net (in thousands): | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Laboratory equipment | $8,675 | $7,720 | | Total property and equipment, net | $10,881 | $10,884 | Accrued Expenses and Other Current Liabilities (in thousands): | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Payroll and employee-related costs | $4,191 | $5,738 | | Research and development costs | $7,442 | $10,490 | | Total accrued expenses and other current liabilities | $13,185 | $17,495 | - Restricted cash of $3.4 million as of June 30, 2023, is related to security deposits for facility leases[59][60] 7. Commitments and Contingencies The company has cancellable contracts for studies, indemnification agreements, no material legal proceedings, and received an inconsequential equity stake in August 2023 for providing lab space - Contracts for preclinical and clinical studies are generally cancellable with notice and do not have significant cancellation penalties[61] - The company is not currently a party to any material legal proceedings[63] - In August 2023, Tango received an inconsequential equity stake in a related biotech company in exchange for lab space and resources[64] 8. Redeemable Convertible Preferred Stock The company is authorized to issue 10 million shares of preferred stock, but none were issued or outstanding as of June 30, 2023 - 10 million shares of preferred stock are authorized, but none are issued or outstanding as of June 30, 2023[65] 9. Stock-Based Compensation Stock incentive plans have 6.6 million and 2.3 million shares available; total stock-based compensation expense for six months was $9.3 million, with $45.5 million in unrecognized expense Stock-Based Compensation Expense (in thousands): | Expense Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $2,807 | $1,656 | $4,942 | $3,298 | | General and administrative | $2,314 | $1,769 | $4,398 | $3,332 | | Total | $5,121 | $3,425 | $9,340 | $6,630 | - As of June 30, 2023, 6,557,740 shares were available for future issuance under the 2021 Plan, and 2,256,250 shares under the 2023 Inducement Plan[67][68] - Total unrecognized compensation expense for stock options was $42.4 million (over 2.7 years) and for RSUs was $3.1 million (over 2.5 years) as of June 30, 2023[70][72] 10. Net Loss Per Share Basic and diluted net loss per share was $(0.23) for Q2 2023 and $(0.55) for the six months, with anti-dilutive securities excluded from EPS calculation Net Loss Per Common Share (basic and diluted): | Period | Net Loss | Weighted-Average Common Shares Outstanding | Net Loss Per Share | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2023 | $(20,710) | 88,354,590 | $(0.23) | | Three Months Ended June 30, 2022 | $(24,858) | 87,839,804 | $(0.28) | | Six Months Ended June 30, 2023 | $(48,718) | 88,281,368 | $(0.55) | | Six Months Ended June 30, 2022 | $(50,066) | 87,775,440 | $(0.57) | - Potential dilutive securities (stock options and unvested restricted common stock) were excluded from diluted EPS calculation due to their anti-dilutive effect[74] 11. Income Taxes An insignificant income tax provision of $64 thousand was reported for both periods, with a negative effective tax rate due to a valuation allowance against deferred tax assets Income Tax Provision (in thousands): | Period | Income Tax Provision | | :--- | :--- | | Three Months Ended June 30, 2023 | $64 | | Three Months Ended June 30, 2022 | $3 | | Six Months Ended June 30, 2023 | $64 | | Six Months Ended June 30, 2022 | $3 | - The effective income tax rate was negative (-0.1% for 3 and 6 months ended June 30, 2023) due to a valuation allowance against deferred tax assets, as the company expects a taxable loss in 2023[75][76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance and condition, focusing on precision oncology programs (TNG908, TNG462, TNG260, TNG348), funding, ongoing losses, and detailed analysis of revenue and operating expenses Overview Tango Therapeutics, a precision oncology company, advances novel drug programs including TNG908 (Phase 1/2), TNG462 (first patient dosed July 2023), TNG260 (first patient dosed July 2023), and TNG348 (IND expected mid-2023) - Tango Therapeutics focuses on precision oncology, discovering drugs for tumor suppressor gene loss and immune evasion[79] - TNG908 (MTA-cooperative PRMT5 inhibitor for MTAP-deleted cancers) is in Phase 1/2 clinical trial, with initial PD data showing proof-of-mechanism[80] - TNG462 (next-generation PRMT5 inhibitor) IND cleared in Q1 2023, and the first patient was dosed in July 2023 for a Phase 1/2 trial[81] - TNG260 (CoREST inhibitor for STK11 loss-of-function mutations) IND cleared in Q1 2023, and the first patient was dosed in July 2023 for a Phase 1/2 trial in combination with pembrolizumab[82] - TNG348 (USP1 inhibitor for BRCA1/2-mutant and HRD+ cancers) IND filing is expected in mid-2023, showing single agent and PARP inhibitor combination efficacy in preclinical studies[83][84] Financial Overview Operations are funded by equity and Gilead collaboration, with $310.7 million in cash and equivalents projected to fund into 2026, despite ongoing significant operating losses and an accumulated deficit of $318.2 million - Total funding raised since inception includes $166.9 million from preferred shares, $342.1 million from the Business Combination, and $225.1 million from the Gilead collaboration[85] - Cash, cash equivalents, and marketable securities were $310.7 million as of June 30, 2023, expected to fund operations into 2026[86] - Net losses for the six months ended June 30, 2023 and 2022, were $48.7 million and $50.1 million, respectively, leading to an accumulated deficit of $318.2 million as of June 30, 2023[86] - The company expects to incur significant and increasing expenses for R&D, regulatory approvals, manufacturing, intellectual property, and public company operations, requiring substantial additional funding[86][87] Revenue No product sales revenue is generated; all current revenue stems from Gilead collaboration, totaling $14.6 million for Q2 2023 (including $5.0 million license revenue) and $20.4 million for the six months - No revenue from product sales to date, and none expected for several years[89] - All revenue is currently derived from collaboration agreements with Gilead Sciences[90] Revenue from Gilead Collaboration (in thousands): | Revenue Type | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $9,598 | $5,771 | $15,364 | $11,529 | | License revenue | $5,000 | $0 | $5,000 | $0 | | Total revenue | $14,598 | $5,771 | $20,364 | $11,529 | - In June 2023, Gilead licensed a program for a $5.0 million fee, recognized as license revenue[91] Operating Expenses Operating expenses increased significantly, with R&D reaching $28.7 million for Q2 2023 and G&A rising to $9.2 million, driven by personnel, facilities, and share-based compensation costs Research and Development Expenses R&D expenses increased by $5.0 million (21.0%) for Q2 2023 and $8.6 million (17.9%) for the six months, driven by personnel, facilities, and direct program costs Research and Development Expenses (in thousands): | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | TNG908 direct program expenses | $2,524 | $2,278 | $5,557 | $4,807 | | TNG462 direct program expenses | $1,927 | $2,163 | $3,805 | $4,965 | | TNG260 direct program expenses | $2,744 | $2,127 | $4,166 | $5,132 | | TNG348 direct program expenses | $1,382 | $1,716 | $3,532 | $3,899 | | Discovery direct program expenses | $5,929 | $5,391 | $12,598 | $10,068 | | Personnel related expenses | $9,765 | $7,142 | $18,757 | $13,673 | | Facilities and other related expenses | $4,400 | $2,924 | $8,295 | $5,527 | | Total research and development expenses | $28,671 | $23,741 | $56,710 | $48,071 | - The increase in R&D expenses was primarily driven by a $2.6 million increase in personnel-related costs (including share-based compensation) and a $1.1 million increase in facilities costs for Q2 2023[110] - The company expects to substantially increase R&D expenses as product candidates advance through development, with timelines and costs being highly uncertain[98] General and Administrative Expenses G&A expenses increased by $2.0 million (27.7%) for Q2 2023 and $3.2 million (22.6%) for the six months, driven by higher personnel costs, share-based compensation, and headcount General and Administrative Expenses (in thousands): | Period | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $9,174 | $7,232 | $1,942 | | Six Months Ended June 30 | $17,188 | $14,039 | $3,149 | - The increase in G&A expenses was primarily due to a $1.0 million increase in personnel-related costs (including share-based compensation) and additional headcount for Q2 2023[111] - G&A expenses are expected to increase further due to increased headcount and costs associated with operating as a public company[102] Other Income, Net Total other income, net, significantly increased to $2.6 million for Q2 2023 and $4.9 million for the six months, driven by higher interest income and investment accretion Interest Income Interest income significantly increased to $1.5 million for Q2 2023 and $2.5 million for the six months, primarily due to higher interest rates in 2023 Interest Income (in thousands): | Period | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $1,450 | $297 | $1,153 | | Six Months Ended June 30 | $2,511 | $515 | $1,996 | - The increase in interest income was primarily due to higher interest rates in 2023 compared to 2022[112][120] Other Income, Net (Miscellaneous) Other income, net, substantially increased to $1.2 million for Q2 2023 and $2.4 million for the six months, primarily due to accretion on discounted investments Other Income, Net (in thousands): | Period | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $1,151 | $50 | $1,101 | | Six Months Ended June 30 | $2,369 | $3 | $2,366 | - The increase in other income, net, was primarily due to accretion on investments purchased at a discount[113][121] Provision for Income Taxes The provision for income taxes remained insignificant (less than $0.1 million) for both periods, reflecting the company's ongoing taxable loss position - Provision for income taxes was insignificant (less than $0.1 million) for both the three and six months ended June 30, 2023 and 2022[114][122] Results of Operations This section details the company's financial performance comparison for the three and six months ended June 30, 2023, versus 2022, covering revenue, operating expenses, and other income drivers Comparison of the three months ended June 30, 2023 and 2022 For Q2 2023, total revenue increased by $8.8 million to $14.6 million, operating expenses rose by $6.9 million to $37.8 million, and net loss improved by $4.1 million to $20.7 million Results of Operations (Three Months Ended June 30, in thousands): | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total revenue | $14,598 | $5,771 | $8,827 | | Total operating expenses | $37,845 | $30,973 | $6,872 | | Loss from operations | $(23,247) | $(25,202) | $1,955 | | Total other income, net | $2,601 | $347 | $2,254 | | Net loss | $(20,710) | $(24,858) | $4,148 | - Collaboration revenue increased by $3.8 million due to higher research costs incurred under the Gilead collaboration[108] - License revenue of $5.0 million was recognized in Q2 2023 from Gilead, with no comparable revenue in Q2 2022[109] Comparison of the six months ended June 30, 2023 and 2022 For the six months ended June 30, 2023, total revenue increased by $8.8 million to $20.4 million, operating expenses rose by $11.8 million to $73.9 million, and net loss improved by $1.3 million to $48.7 million Results of Operations (Six Months Ended June 30, in thousands): | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total revenue | $20,364 | $11,529 | $8,835 | | Total operating expenses | $73,898 | $62,110 | $11,788 | | Loss from operations | $(53,534) | $(50,581) | $(2,953) | | Total other income, net | $4,880 | $518 | $4,362 | | Net loss | $(48,718) | $(50,066) | $1,348 | - Collaboration revenue increased by $3.9 million due to higher research costs incurred under the Gilead collaboration[116] - License revenue of $5.0 million was recognized in the six months ended June 30, 2023, from Gilead[117] Liquidity and Capital Resources Operations are funded by equity and Gilead collaboration, with $310.7 million in cash and equivalents expected to fund into 2026; net cash used in operations decreased to $59.4 million, and contractual obligations total $58.7 million Sources of Liquidity Tango Therapeutics' liquidity sources include $166.9 million from preferred shares, $342.1 million from the Business Combination, $225.1 million from Gilead, and $310.7 million in cash and equivalents as of June 30, 2023 - Funding sources include $166.9 million from preferred shares, $342.1 million from the Business Combination and PIPE Financing, and $225.1 million from the Gilead collaboration[123] - As of June 30, 2023, cash, cash equivalents, and marketable securities totaled $310.7 million[123] Funding Requirements Existing cash, cash equivalents, and marketable securities of $310.7 million are projected to fund operations into 2026, though this estimate relies on assumptions that may require earlier additional funding - Existing cash, cash equivalents, and marketable securities ($310.7 million as of June 30, 2023) are expected to fund operations at least into 2026[124] - The estimate is based on assumptions that may be wrong, and capital resources could be expended sooner than expected[124] Cash Flows Net cash used in operating activities decreased by $1.8 million to $59.4 million, while net cash provided by investing activities significantly increased by $40.5 million to $64.2 million Cash Flows (Six Months Ended June 30, in thousands): | Cash Flow Activity | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(59,380) | $(61,203) | $1,823 | | Net cash provided by investing activities | $64,238 | $23,776 | $40,462 | | Net cash provided by financing activities | $659 | $975 | $(316) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $5,517 | $(36,452) | $41,969 | - The decrease in net cash used in operating activities was primarily due to a decrease in net loss[126] - The increase in net cash provided by investing activities was primarily due to increased sales and maturities of marketable securities[128] Contractual Obligations and Commitments Primary contractual obligations total $58.7 million in operating lease commitments, with purchase obligations and contingent milestone payments generally cancellable or not estimable Contractual Obligations at June 30, 2023 (in thousands): | Obligation Type | Total | Less than 1 Year | 1 – 3 Years | 3 – 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease commitments | $58,730 | $5,558 | $11,218 | $11,901 | $30,053 | - Purchase obligations for preclinical studies, clinical operations, and manufacturing are generally cancellable and not included in the contractual obligations table[131] - Future milestone and royalty payments under license agreements are contingent upon future events and are not included as they are not estimable[132] Critical Accounting Policies and Significant Judgments and Estimates This section details critical accounting policies requiring significant judgment and estimates for revenue recognition, accrued R&D expenses, and stock-based compensation, where actual results may differ from assumptions Revenue Recognition Revenue from collaboration agreements is recognized under ASC Topic 606, requiring significant judgment in identifying performance obligations, allocating transaction prices, and recognizing variable consideration like milestone payments - Revenue is recognized under ASC Topic 606 using a five-step framework, assessing distinct performance obligations, transaction price, allocation, and satisfaction[136] - Milestone payments are included in the transaction price only when it is probable that a significant reversal in cumulative revenue will not occur, with regulatory approval milestones constrained until approval is received[138] - For combined performance obligations including services, revenue is recognized over time using the cost-to-cost input method, requiring significant judgment in estimating effort and completion period[140] Accrued Research and Development Expenses Accrued R&D expenses are estimated based on service progress, requiring significant judgment in evaluating task completion and contractual terms, with potential adjustments for variations in actual timing or effort - Accrued R&D expenses are estimated based on the level of service performed and costs incurred, even without invoices, requiring significant judgment[144] - Estimates are corroborated with service providers, and adjustments are made if actual timing or effort varies from the initial assessment[145] Stock-Based Compensation Stock-based awards are measured at fair value using the Black-Scholes method, with compensation expense recognized over the vesting period, where significant judgment in assumptions can materially impact reported expenses - Fair value of stock-based awards is estimated using the Black-Scholes method, with volatility based on a peer group of companies[146] - Compensation expense is recognized over the requisite service period (generally vesting period) using the straight-line method[148] - Different assumptions in valuation methodologies could significantly alter equity-based compensation expense, net loss, and net loss per share[149] Recently Adopted Accounting Pronouncements Recently issued and adopted accounting pronouncements, detailed in Note 2, are not expected to materially impact the company's financial position, results of operations, or cash flows - Recently issued accounting standards not yet effective are not expected to have a material impact on the company's consolidated financial statements[38][150] Emerging Growth Company and Smaller Reporting Company Status Tango Therapeutics' status as an "emerging growth company" and "smaller reporting company" allows for reduced reporting requirements and delayed adoption of new accounting standards - The company is an "emerging growth company" and has elected to delay adoption of new or revised accounting standards[151] - As an emerging growth company, it benefits from reduced reporting requirements, including presenting only two years of audited financial statements and reduced executive compensation disclosures[151] - The company is also a "smaller reporting company," which provides similar disclosure exemptions[153] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses market risks, including interest rate, foreign currency, and inflation, noting minimal material impact due to short-term investments and limited foreign exposure, though future inflation could affect costs Interest Rate Risk The company's $310.7 million investment portfolio, primarily short-term and low-risk, is not expected to be materially affected by a 1% interest rate change, as investments can be held to maturity - As of June 30, 2023, cash, cash equivalents, and marketable securities totaled $310.7 million[155] - An immediate 1% change in interest rates is not expected to have a material effect on the fair market value of the investment portfolio due to its short-term duration and low-risk profile[155] - The company has the ability to hold investments until maturity, mitigating the impact of interest rate changes on operating results or cash flows[155] Foreign Currency Exchange Risk The company's functional currency is the U.S. dollar, with insignificant foreign currency exchange risk exposure and no hedging arrangements in place - The company's functional and reporting currency is the U.S. dollar[156] - Currently, there is insignificant exposure to foreign currency exchange risk, with no foreign exchange contracts or hedging arrangements[156] Effects of Inflation Inflation has not materially affected the company's business to date, but persistent or increased inflation could raise costs for labor, clinical trials, and manufacturing, negatively impacting cash flows - Inflation has not had a material effect on the company's business, financial condition, or results of operations during the three months ended June 30, 2023[157] - If inflation remains high or increases, costs for labor, clinical trials, and manufacturing are likely to increase, which could negatively impact cash flows[157] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023 - Management, with CEO and CFO, evaluated disclosure controls and procedures as of June 30, 2023[158] - Disclosure controls and procedures were concluded to be effective at the reasonable assurance level[158] Changes in Internal Controls Over Financial Reporting No material changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2023 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[159] PART II. OTHER INFORMATION This part covers non-financial information, including legal proceedings, risk factors, equity sales, senior securities defaults, mine safety disclosures, and a list of exhibits Item 1. Legal Proceedings The company is not a party to any material legal proceedings that are probable to have a material adverse effect on its business as of June 30, 2023 - The company is not currently a party to any litigation or legal proceedings that are probable to have a material adverse effect on its business[162] Item 1A. Risk Factors This section refers to the Annual Report on Form 10-K for comprehensive risk factors, noting no material changes since the December 31, 2022, filing - Investing in the company's securities involves a high degree of risk, as discussed in Item 1A, "Risk Factors" of the Annual Report on Form 10-K for the year ended December 31, 2022[164] - There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K as of the filing date of this Quarterly Report[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities and use of proceeds to report[166] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - No defaults upon senior securities to report[167] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[168] Item 5. Other Information No other information was reported for the period - No other information to report[169] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL documents - The report includes various exhibits such as Non-Employee Director Compensation Policy, Certifications of Principal Executive and Financial Officers, and Inline XBRL documents[170] - Certifications under 18 U.S.C. Section 1350 are furnished, not filed, unless specifically incorporated by reference[171] Signatures This section contains the required signatures of the company's authorized officers, including the President and CEO, Barbara Weber, MD, and the CFO, Daniella Beckman - The report is signed by Barbara Weber, MD, President and Chief Executive Officer, and Daniella Beckman, Chief Financial Officer, on August 7, 2023[175][176]