Tourmaline Bio(TRML) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements reflect significant changes post-IPO, including a substantial increase in assets and a shift to positive equity, alongside higher operating expenses and net loss Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $36,297 | $17,589 | | Marketable securities | $229,923 | $131,899 | | Total Assets | $272,814 | $152,778 | | Liabilities & Equity | | | | Total Liabilities | $5,461 | $4,774 | | Total convertible preferred stock | $0 | $186,151 | | Total stockholders' equity (deficit) | $267,353 | ($38,147) | - Following the IPO in May 2021, all convertible preferred stock was converted to common stock, resulting in a significant shift from a stockholders' deficit to a positive stockholders' equity[9][22] Condensed Consolidated Statements of Operations Operating Results (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $7,570 | $3,402 | $14,473 | $6,932 | | General and administrative | $3,487 | $1,335 | $5,589 | $2,779 | | Loss from operations | ($11,057) | ($4,737) | ($20,062) | ($9,711) | | Net loss | ($11,352) | ($4,663) | ($20,651) | ($9,511) | | Net loss per common share | ($0.41) | ($0.73) | ($1.19) | ($1.49) | - Operating expenses more than doubled for both the three and six-month periods ended June 30, 2021, compared to the same periods in 2020, driven by increased research and development activities and general and administrative costs[12] Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity - In May 2021, the company completed its IPO, issuing 8,825,000 shares of common stock for net proceeds of approximately $137.2 million[15][107] - Upon the IPO, all outstanding shares of convertible preferred stock were automatically converted into 24,392,498 shares of common and non-voting common stock[15][85] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($20,029) | ($8,736) | | Net cash used in investing activities | ($98,802) | ($15,889) | | Net cash provided by financing activities | $137,539 | $24 | | Net increase (decrease) in cash | $18,708 | ($24,601) | - Financing activities provided $137.5 million in cash during the first six months of 2021, primarily from the IPO proceeds, which more than offset cash used in operations and investments[18][145] Notes to Unaudited Condensed Consolidated Financial Statements - The company completed its IPO on May 11, 2021, selling 8,825,000 shares at $17.00 per share for gross proceeds of $150.0 million[22] - Management expects that cash, cash equivalents, and marketable securities totaling $266.2 million as of June 30, 2021, are sufficient to fund operating expenses and capital requirements for more than 12 months[23][110] - In May 2021, the company settled its contingent stock liability with the University of Louisville Research Foundation Inc. (ULRF) by issuing 48,889 shares of common stock and paying approximately $0.3 million in cash[55][67] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes increased operating losses to higher R&D and G&A expenses, while the IPO significantly strengthened liquidity, expected to fund operations into 2025 Comparison of Operating Expenses (in thousands) | Expense Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $14,473 | $6,932 | $7,541 | | General and administrative | $5,589 | $2,779 | $2,810 | | Total operating expenses | $20,062 | $9,711 | $10,351 | - The increase in R&D expenses was primarily driven by a $4.0 million increase in personnel costs and a $1.9 million increase in FCR001 clinical program expenses related to the FREEDOM-1, FREEDOM-2, and FREEDOM-3 trials[134] - The company's cash, cash equivalents, and marketable securities of $266.2 million as of June 30, 2021, are expected to fund operations and capital expenditures at least into 2025[110][148] - The COVID-19 pandemic has adversely impacted the screening and enrollment in the company's FREEDOM-1 Phase 3 clinical trial[113] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its $266.2 million cash and marketable securities, with minimal foreign currency or inflation exposure - The company's main market risk is interest rate sensitivity on its cash and marketable securities, which totaled $266.2 million as of June 30, 2021[172] - The company has minimal exposure to foreign currency exchange risk as operations are located in the U.S. and contracts in foreign currencies have been minimal[173] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - As of June 30, 2021, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[176] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, internal controls[177] PART II. OTHER INFORMATION Item 1. Legal Proceedings As of June 30, 2021, the company is not a party to any material legal proceedings expected to have an adverse effect on its business - The company is not currently a party to any material legal proceedings[180] Item 1A. Risk Factors The company faces significant risks including a history of losses, dependence on FCR001's clinical success, manufacturing scale-up challenges, competition, and COVID-19 impacts - The company has a history of net losses, with an accumulated deficit of $63.7 million as of June 30, 2021, and anticipates continued significant losses for the foreseeable future[182] - The business is substantially dependent on the successful development and regulatory approval of its lead product candidate, FCR001, and failure to achieve this would materially harm the business[193] - The COVID-19 pandemic has adversely affected the business, including causing delays in clinical trial initiation and patient enrollment, and could continue to do so[378][380] - The company operates its own manufacturing facility and faces risks in scaling up production for commercial needs, which is a complex, costly, and uncertain process[293][296] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company raised $137.2 million net proceeds from its May 2021 IPO, using $5.1 million for clinical trials and corporate purposes, and also reported unregistered equity issuances - The IPO on May 11, 2021, generated net proceeds of approximately $137.2 million after deducting underwriting discounts and other offering expenses[432][433] - As of June 30, 2021, the company had used approximately $5.1 million of the net IPO proceeds for advancing its clinical trials and for working capital[434] - In May 2021, the company issued 48,889 shares of common stock to ULRF as part of a license agreement, which was exempt from registration[431] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities, thus this item is not applicable - Not applicable[436] Item 4. Mine Safety Disclosures This item is not applicable as the company has no mine safety disclosures - Not applicable[437] Item 5. Other Information The company reports no other information for this period - None[438] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including key corporate documents, agreements, and certifications by the CEO and CFO - The report includes key corporate documents and agreements as exhibits, such as the Amended and Restated Exclusive License Agreement with the University of Louisville Research Foundation, Inc[443] - Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are included as exhibits[443]