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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2025
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-39926
Terns Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
98-1448275 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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1065 East Hillsdale Blvd., Suite 100
Foster City, California
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94404 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (650) 525-5535
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, $0.0001 par value per share |
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TERN |
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The Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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☐ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☒ |
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Smaller reporting company |
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☒ |
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Emerging growth company |
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☒ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 2, 2025, the registrant had 87,337,801 shares of common stock, $0.0001 par value per share, outstanding.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
•
our expectations with regard to the results of our clinical studies, preclinical studies and research and development programs, including the timing and availability of data from such studies;
•
the location, timing of commencement and data reporting of future nonclinical studies and clinical trials and research and development programs;
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our clinical and regulatory development plans;
•
our expectations regarding the product profile, relative benefits and clinical utility of our product candidates;
•
our expectations regarding the potential market size and size of the potential patient populations for our product candidates and any future product candidates if approved for commercial use;
•
our ability to acquire, discover, develop and advance our product candidates into, and successfully complete, clinical trials;
•
our intentions and our ability to establish collaborations and/or partnerships;
•
the timing or likelihood of regulatory filings and approvals for our product candidates;
•
our commercialization, marketing and manufacturing capabilities and expectations;
•
our intentions with respect to the commercialization of our product candidates;
•
the pricing and reimbursement of our product candidates, if approved;
•
the implementation of our business model and strategic plans for our business and product candidates, including additional indications which we may pursue or elect not to pursue;
•
the scope of protection we are able to establish, maintain, protect and enforce for intellectual property rights covering our product candidates, including the projected terms of patent protection;
•
estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital and the timing of the sufficiency of our capital resources;
•
our future financial performance; and
•
developments and projections relating to our competitors and our industry, including competing products.
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited).
Terns Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(Unaudited; in thousands, except share and per share data)
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March 31, 2025 |
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December 31, 2024 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
139,023 |
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$ |
161,439 |
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Marketable securities |
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195,241 |
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196,725 |
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Prepaid expenses and other current assets |
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3,484 |
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3,945 |
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Total current assets |
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337,748 |
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362,109 |
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Property and equipment, net |
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82 |
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222 |
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Operating lease assets |
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1,134 |
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1,248 |
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Other assets |
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351 |
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350 |
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Total assets |
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$ |
339,315 |
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$ |
363,929 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
2,778 |
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$ |
2,148 |
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Accrued expenses and other current liabilities |
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7,728 |
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13,074 |
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Current portion of operating lease liabilities |
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429 |
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428 |
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Total current liabilities |
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10,935 |
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15,650 |
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Taxes payable, non-current |
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1,531 |
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1,490 |
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Operating lease liabilities, non-current |
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806 |
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919 |
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Total liabilities |
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13,272 |
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18,059 |
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Commitments and contingencies |
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Stockholders’ equity: |
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Common stock, $0.0001 par value, 150,000,000 shares
authorized at March 31, 2025 and December 31, 2024;
87,297,629 and 87,126,583 shares issued and outstanding at
March 31, 2025 and December 31, 2024, respectively |
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9 |
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9 |
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Additional paid-in capital |
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771,372 |
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767,621 |
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Accumulated other comprehensive income (loss) |
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51 |
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(279 |
) |
Accumulated deficit |
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(445,389 |
) |
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(421,481 |
) |
Total stockholders’ equity |
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326,043 |
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345,870 |
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Total liabilities and stockholders’ equity |
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$ |
339,315 |
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$ |
363,929 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Terns Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited; in thousands, except share and per share data)
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Three Months Ended March 31, |
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2025 |
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2024 |
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Operating expenses: |
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Research and development |
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$ |
18,720 |
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$ |
18,587 |
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General and administrative |
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8,707 |
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6,859 |
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Total operating expenses |
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27,427 |
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25,446 |
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Loss from operations |
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(27,427 |
) |
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(25,446 |
) |
Other income: |
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Interest income |
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3,643 |
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3,182 |
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Other expense, net |
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(36 |
) |
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(12 |
) |
Total other income, net |
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3,607 |
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3,170 |
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Loss before income taxes |
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(23,820 |
) |
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(22,276 |
) |
Income tax expense |
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(88 |
) |
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(97 |
) |
Net loss |
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$ |
(23,908 |
) |
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$ |
(22,373 |
) |
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Net loss per share, basic and diluted |
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$ |
(0.26 |
) |
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$ |
(0.30 |
) |
Weighted average common stock outstanding, basic and diluted |
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91,473,948 |
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74,399,378 |
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Other comprehensive loss: |
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Net loss |
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$ |
(23,908 |
) |
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$ |
(22,373 |
) |
Net unrealized gain (loss) on available-for-sale securities, net of tax |
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339 |
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(293 |
) |
Foreign exchange translation adjustment, net of tax |
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(9 |
) |
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(9 |
) |
Comprehensive loss |
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$ |
(23,578 |
) |
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$ |
(22,675 |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Terns Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited; in thousands, except share data)
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Three Months Ended March 31, 2025 |
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Common Stock |
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Additional
Paid-in |
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Accumulated
Other
Comprehensive |
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Accumulated |
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Total
Stockholders’ |
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Shares |
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Amount |
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Capital |
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(Loss) Income |
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Deficit |
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Equity |
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Balances at December 31, 2024 |
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87,126,583 |
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$ |
9 |
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$ |
767,621 |
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$ |
(279 |
) |
|
$ |
(421,481 |
) |
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$ |
345,870 |
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Exercise of stock options |
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42,000 |
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— |
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74 |
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— |
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— |
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74 |
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Vesting of restricted stock units with service conditions |
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129,046 |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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3,677 |
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|
— |
|
|
|
— |
|
|
|
3,677 |
|
Net unrealized gain on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
339 |
|
|
|
— |
|
|
|
339 |
|
Foreign exchange translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9 |
) |
|
|
— |
|
|
|
(9 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23,908 |
) |
|
|
(23,908 |
) |
Balances at March 31, 2025 |
|
|
87,297,629 |
|
|
$ |
9 |
|
|
$ |
771,372 |
|
|
$ |
51 |
|
|
$ |
(445,389 |
) |
|
$ |
326,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2024 |
|
|
|
Common Stock |
|
|
Additional
Paid-in |
|
|
Accumulated
Other
Comprehensive |
|
|
Accumulated |
|
|
Total
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
Equity |
|
Balances at December 31, 2023 |
|
|
64,576,719 |
|
|
$ |
6 |
|
|
$ |
588,008 |
|
|
$ |
(19 |
) |
|
$ |
(332,628 |
) |
|
$ |
255,367 |
|
Vesting of restricted stock units with service conditions |
|
|
74,974 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
4,028 |
|
|
|
— |
|
|
|
— |
|
|
|
4,028 |
|
Net unrealized loss on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(293 |
) |
|
|
— |
|
|
|
(293 |
) |
Foreign exchange translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9 |
) |
|
|
— |
|
|
|
(9 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(22,373 |
) |
|
|
(22,373 |
) |
Balances at March 31, 2024 |
|
|
64,651,693 |
|
|
$ |
6 |
|
|
$ |
592,036 |
|
|
$ |
(321 |
) |
|
$ |
(355,001 |
) |
|
$ |
236,720 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Terns Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited; in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2025 |
|
|
2024 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(23,908 |
) |
|
$ |
(22,373 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
3,677 |
|
|
|
4,028 |
|
Depreciation expense |
|
|
55 |
|
|
|
82 |
|
Net accretion on marketable securities |
|
|
(109 |
) |
|
|
(915 |
) |
Change in deferred taxes and uncertain tax positions |
|
|
34 |
|
|
|
34 |
|
Amortization of right-of-use assets |
|
|
114 |
|
|
|
154 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
547 |
|
|
|
(1,249 |
) |
Accrued interest, net of interest received |
|
|
(27 |
) |
|
|
555 |
|
Accounts payable |
|
|
630 |
|
|
|
(814 |
) |
Accrued expenses and other current liabilities |
|
|
(5,341 |
) |
|
|
(2,125 |
) |
Operating lease liabilities |
|
|
(112 |
) |
|
|
(175 |
) |
Net cash used in operating activities |
|
|
(24,440 |
) |
|
|
(22,798 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
Purchase of property and equipment |
|
|
— |
|
|
|
(29 |
) |
Purchase of marketable securities |
|
|
(25,041 |
) |
|
|
(50,594 |
) |
Proceeds from maturities of marketable securities |
|
|
27,000 |
|
|
|
58,620 |
|
Net cash provided by investing activities |
|
|
1,959 |
|
|
|
7,997 |
|
Cash flows from financing activities: |
|
|
|
|
|
|
Payment of deferred offering costs |
|
|
(6 |
) |
|
|
— |
|
Proceeds from stock option exercises |
|
|
74 |
|
|
|
— |
|
Net cash provided by financing activities |
|
|
68 |
|
|
|
— |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(3 |
) |
|
|
(26 |
) |
Net decrease in cash and cash equivalents |
|
|
(22,416 |
) |
|
|
(14,827 |
) |
Cash and cash equivalents at beginning of period |
|
|
161,439 |
|
|
|
79,926 |
|
Cash and cash equivalents at end of period |
|
$ |
139,023 |
|
|
$ |
65,099 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities |
|
$ |
106 |
|
|
$ |
183 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Terns Pharmaceuticals, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Nature of the Business, Basis of Presentation and Summary of Significant Accounting Policies
Nature of the Business
Terns Pharmaceuticals, Inc. (Terns or the Company) is a clinical-stage biopharmaceutical company developing a portfolio of small-molecule product candidates to address serious diseases, including oncology and obesity.
Terns was incorporated as an exempted company in the Cayman Islands in December 2016. In December 2020, the Company effected a de-registration of the Company in the Cayman Islands and a domestication in the State of Delaware, pursuant to which it became a Delaware corporation. Terns owns all of the share capital of Terns Pharmaceutical HongKong Limited (Terns Hong Kong) and Terns, Inc., a Delaware corporation (Terns U.S. Opco). Terns Hong Kong holds all of the share capital of Terns China Biotechnology Co., Ltd. (organized in Shanghai, People’s Republic of China (PRC)) (Terns China) and Terns (Suzhou) Biotechnology Co., Ltd. (organized in Suzhou, PRC) (Terns Suzhou).
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.
Basis of Presentation
The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the accounts of Terns and its wholly owned subsidiaries Terns U.S. Opco and Terns Hong Kong and its wholly owned subsidiaries Terns China and Terns Suzhou, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated balance sheet as of December 31, 2024 has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.
Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or for any other future periods.
Reclassifications
Certain reclassifications have been made to prior period balances in the accompanying Condensed Consolidated Financial Statements and Notes thereto to conform to the current year presentation. The reclassifications had no effect on previously reported results of operations, accumulated deficit, subtotals of operating, investing or financing cash flows or consolidated balance sheet totals.
Unaudited Interim Financial Information
These unaudited condensed consolidated financial statements include all adjustments necessary, consisting of only normal recurring adjustments, to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim periods. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K (the Annual Report) for the fiscal year ended December 31, 2024, as filed with the Securities and Exchange Commission (SEC) on March 20, 2025. There have been no significant changes to the Company's significant accounting policies described in Note 1, Nature of the Business, Basis of Presentation and Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of the Form 10-K for the fiscal year ended December 31, 2024.
Any reference to these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASUs) of the Financial Accounting Standards Board (FASB).
At-the-Market Offering
In May 2023, the Company entered into a Sales Agreement with Cowen (Sales Agreement) as sales agent, pursuant to which the Company has the ability to offer and sell, from time to time, through Cowen, shares of its common stock having an aggregate offering price of up to $150.0 million in an at-the-market offering. This Sales Agreement remains in effect. The shares are offered pursuant to the Company's shelf registration statement on Form S-3 filed with the SEC, which became effective in February 2023. There were no sales of the Company's common stock pursuant to this agreement through March 31, 2025.
September 2024 Financing
In September 2024, the Company issued 14,064,048 shares of its common stock at a public offering price of $10.50 per share and, to certain investors in lieu of common stock, pre-funded warrants to purchase 2,380,952 shares of common stock at a public offering price of $10.4999 per pre-funded warrant in an underwritten public offering. The purchase price per share of each pre-funded warrant represents the per share public offering price for the common stock, minus the $0.0001 per share exercise price of each such pre-funded warrant. Aggregate net proceeds were $161.9 million after deducting underwriting discounts and commissions and offering expenses.
The pre-funded warrants were classified as a component of permanent stockholders’ equity within additional paid-in capital and were recorded at the issuance date using a relative fair value allocation method. The pre-funded warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria. In addition, such pre-funded warrants do not provide any guarantee of value or return. The Company valued the pre-funded warrants at issuance, concluding that their sales price approximated their fair value, and allocated net proceeds from the sale proportionately to the common stock and pre-funded warrants, of which $23.4 million was allocated to the pre-funded warrants and recorded as a component of additional paid-in capital. No pre-funded warrants have been exercised as of March 31, 2025.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to, the estimates for accruals of research and development expenses, accrual of research contract costs, unrecognized tax benefits, fair value of common stock and stock option valuations. On an ongoing basis, the Company evaluates its estimates and judgments, using historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents consist of standard checking accounts and money market funds. The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents.
The Company classifies as available-for-sale marketable securities with a remaining maturity when purchased of greater than three months. The Company’s marketable securities are maintained by investment managers and consist of U.S. government securities. Debt securities are carried at fair value with the unrealized gains and losses included in the condensed consolidated statements of operations and comprehensive loss and as a component of stockholders’ equity until realized. Any premium arising at purchase is amortized to the earliest call date and any discount arising at purchase is accreted to maturity. Amortization and accretion of premiums and discounts are recorded in interest income and/or expense. Gains and losses on securities sold are recorded based on the specific identification method and are included in interest income, net in the condensed consolidated statements of operations and comprehensive loss. The Company has not incurred any material realized gains or losses from sales of securities to date.
The Company assesses its available-for-sale debt securities for impairment as of each reporting date in order to determine if a portion of any decline in fair value below carrying value is the result of a credit loss. The Company records credit losses in the condensed consolidated statements of operations and comprehensive loss as credit loss expense within other expense, net, which is limited to the difference between the fair value and the amortized cost of the security. To date, the Company has not recorded any credit losses on its available-for-sale debt securities.
Interest receivable related to the Company's available-for-sale debt securities is presented as marketable securities on the Company's condensed consolidated balance sheets. The Company writes off interest receivable once it has determined that the asset is not realizable. To date, the Company has not written off any interest receivables associated with its marketable securities.
Operating Leases and Rent Expense
At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, upon lease commencement, the Company records a lease liability which represents the Company’s obligation to make lease payments arising from the lease, and a corresponding right-of-use (ROU) asset which represents the Company’s right to use an underlying asset during the lease term.
Operating lease ROU assets and liabilities are recognized on the balance sheet at the lease commencement date based on the present value of the future minimum lease payments over the lease term. In determining the net present value of the lease payments, the Company uses its incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable. Any lease incentives received are deferred and recorded as a reduction of the ROU asset and amortized over the term of the lease. The Company does not separate lease and non-lease components and instead treats them as a single component. Rent expense is recognized on a straight-line basis over the lease term. The Company determines the lease term as the noncancellable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
The Company elected to not apply the recognition requirements of the new leasing standard to short-term leases with terms of 12 months or less which do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. For short-term leases, lease payments are recognized as operating expenses on a straight-line basis over the lease term. As a result, leases with a term of 12 months or less are not recognized on the balance sheet.
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees and external costs, including fees paid to consultants and contract research organizations (CROs) in connection with nonclinical studies and clinical trials and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. Costs incurred in obtaining technology licenses are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future uses.
The Company has from time to time entered into various research and development and other agreements with commercial firms, researchers, universities and others for provisions of goods and services. These agreements are generally cancelable, and the related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates. Since inception, the Company’s historical accrual estimates have not been materially different from the actual costs.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities included the following:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
March 31, 2025 |
|
|
December 31, 2024 |
|
Research and development costs |
|
$ |
3,354 |
|
|
$ |
3,388 |
|
Compensation and benefit costs |
|
|
2,615 |
|
|
|
7,912 |
|
Accrued professional fees |
|
|
1,179 |
|
|
|
1,319 |
|
Other |
|
|
580 |
|
|
|
455 |
|
Total accrued expenses and other current liabilities |
|
$ |
7,728 |
|
|
$ |
13,074 |
|
Executive Leadership Transition
In August 2023, Bryan Yoon, former chief operating officer and general counsel, and Mark Vignola, Ph.D., former chief financial officer, received retention awards that were fully paid in 2024. During the year ended December 31, 2024, the Company recognized an expense of $0.7 million related to the retention awards. The expenses were recognized as operating expenses within the Condensed Consolidated Statements of Operations and Comprehensive Loss under General and administrative.
In July 2024, Mr. Yoon entered into a separation agreement with the Company. During the year ended December 31, 2024, the Company recorded an accrued liability and recognized expense of $0.6 million related to the departure. As of March 31, 2025, the ending accrued liability was $0.3 million and is presented within the Condensed Consolidated Balance Sheets under Accrued expenses and other current liabilities. Additionally, the separation agreement provided that the time for Mr. Yoon to exercise any outstanding equity award that is vested as of the separation date shall continue to April 30, 2025. As a result of the change in terms for these option grants to Mr. Yoon, the Company recognized an additional $0.6 million in stock-based compensation expense during the year ended December 31, 2024. The expenses were recognized as operating expenses within the Condensed Consolidated Statements of Operations and Comprehensive Loss under General and administrative.
In July 2024, Dr. Vignola entered into a transition agreement with the Company. During the year ended December 31, 2024, the Company recorded an accrued liability and recognized expense of $1.0 million related to the transition. As of March 31, 2025, the ending accrued liability was $0.4 million and is presented within the Condensed Consolidated Balance Sheets under Accrued expenses and other current liabilities. Additionally, the transition agreement provided that the time for Dr. Vignola to exercise any outstanding equity award that is vested as of the separation date shall continue to the end of the 12th month following the separation date. As a result of the change in terms for these option grants to Dr. Vignola, the Company recognized an additional $0.4 million in stock-based compensation expense during the year ended December 31, 2024. The expenses were recognized as operating expenses within the Condensed Consolidated Statements of Operations and Comprehensive Loss under General and administrative.
In November 2023, Erin Quirk, M.D., former president and head of research & development, received a retention award payable in cash in the aggregate amount of $0.6 million. In May 2024, Dr. Quirk entered into a separation agreement with the Company. Pursuant to the separation agreement, Dr. Quirk was entitled to receive severance in the amount of $0.2 million. During the year ended December 31, 2024, the Company recognized expense of $0.7 million related to retention and severance which were fully paid in 2024. Additionally, the separation agreement provided the vesting of each equity award held by Dr. Quirk to be accelerated with respect to the number of shares of common stock that would have become vested had Dr. Quirk remained employed at the Company through August 31, 2024, and the time for Dr. Quirk to exercise any vested stock options continued up to November 30, 2024. As a result of the change in terms for these option grants to Dr. Quirk, in May 2024, the Company recognized $0.4 million in stock-based compensation expense during the year ended December 31, 2024. The expenses were recognized as operating expenses within the Condensed Consolidated Statements of Operations and Comprehensive Loss under Research and development.
Income Taxes
The provision for income taxes primarily relates to projected federal, state and foreign income taxes. To determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is generally based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. In addition, the tax effects of certain significant or unusual items are recognized discretely in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter.
Income taxes are computed using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements. In estimating future tax consequences, the Company considers all expected future events including the enactment of changes in tax laws or rates. A valuation allowance is recorded, if necessary, to reduce net deferred tax assets to their realizable values if management does not believe it is more likely than not that the net deferred tax assets will be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the period such determination is made.
The Company assesses accounting for uncertainty in income taxes by modeling for the recognition, measurement and disclosure in financial statements any uncertain income tax positions that the Company has taken or expects to take on a tax return. The Company accrues interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes.
The Company recorded income tax expense for each of the three months ended March 31, 2025 and 2024 of $0.1 million. The expenses are primarily related to foreign income tax expenses from China.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.
Stock-Based Compensation
Stock-based compensation expense relates to stock options, restricted stock units (RSUs) with service conditions, and RSUs with market conditions issued under the Company’s equity incentive plan and rights to acquire stock granted under the Company’s employee stock purchase plan (ESPP). Grants are measured at the grant date based on the fair value of the awards and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. Forfeitures are recognized as they occur.
The Black-Scholes option pricing model estimates the fair value of stock options with time-based vesting and rights to acquire stock under the ESPP. The Company lacks sufficient company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The Company estimates risk-free rates using the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term and dividend yield using the Company’s expectations and historical data. The Company uses the simplified method to calculate the expected term of stock option grants as the Company has limited historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. Under the simplified method, the expected term is estimated to be the mid-point between the vesting date and the contractual term of the option. The fair value is calculated based upon the Company’s common stock valuation on the date of the grant.
The fair value of RSUs with service conditions is based upon the Company’s common stock valuation on the date of the grant.
The Monte Carlo simulation model estimates the fair value of the RSUs with market conditions, using inputs for the common stock valuation on the date of the grant, volatility, the risk-free interest rate, and the dividend yield. Compensation expense is recognized on a straight-line basis over the derived service period commencing on the grant date. The derived service period is the median duration of the successful stock price paths to meet the price goal for each tranche as simulated in the Monte Carlo valuation model. If the related market condition is achieved earlier than its estimated derived service period, the stock-based compensation expense is accelerated, and a cumulative catch-up expense is recorded during the period in which the market condition is met.
Pre-funded Warrants
Pre-funded warrants are classified as a component of permanent stockholders’ equity within additional paid-in capital and are recorded at the issuance date using a relative fair value allocation method. The pre-funded warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria. In addition, such pre-funded warrants do not provide any guarantee of value or return. The value of the pre-funded warrants is known at issuance, as their sales price approximates their fair value, and net proceeds from the sale are recorded as a component of additional paid-in capital.
Net Loss Per Share of Common Stock
Basic net income (loss) per share of common stock is computed by dividing the net income (loss) per share of common stock by the weighted average number of shares of common stock outstanding for the period. The weighted-average shares of common stock outstanding as of March 31, 2025 included pre-funded warrants, as the warrants were issued for minimal consideration and were immediately exercisable.
Diluted net income (loss) per share of common stock is computed by adjusting net income (loss) to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share of common stock is computed by dividing the diluted net loss by the weighted average number of shares of common stock outstanding for the period, including potential dilutive shares.
The Company reported a net loss for each of the three months ended March 31, 2025 and 2024. In periods in which the Company reported a net loss, diluted net loss per share of common stock was the same as basic net loss per share of common stock, since dilutive shares were not assumed to have been issued if their effect is anti-dilutive. The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss attributable to common stockholders per share of common stock for the periods indicated because including them would have had an anti-dilutive effect:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2025 |
|
|
2024 |
|
Options to purchase common stock |
|
|
14,998,501 |
|
|
|
10,964,422 |
|
Unvested restricted stock units with service conditions |
|
|
648,354 |
|
|
|
923,693 |
|
Unvested restricted stock units with market conditions |
|
|
150,000 |
|
|
|
150,000 |
|
Shares issuable under employee stock purchase plan |
|
|
102,405 |
|
|
|
66,202 |
|
Total |
|
|
15,899,260 |
|
|
|
12,104,317 |
|
Deferred Offering Costs
The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.
After consummation of the equity financing, these costs are recorded as a reduction to the carrying value of stockholders’ equity as a reduction of additional paid-in capital or equity generated as a result of such offering. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss.
Commitments and Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. For all periods presented, the Company was not a party to any pending material litigation or other material legal proceedings.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, as amended (JOBS Act). Under the JOBS Act, emerging growth companies have extended transition periods available for complying with new or revised accounting standards. The Company has elected to use this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies. Where allowable, the Company has early adopted certain standards as described below.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires additional income tax disclosures in the annual consolidated financial statements. The amendments in ASU 2023-09 are intended to enhance the transparency and decision usefulness of income tax disclosures. For non-public entities, ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2025. Under the JOBS Act, emerging growth companies have extended transition periods available for complying with new or revised accounting standards. The Company is currently evaluating the impact of ASU 2023-09 on its financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which enhances the disclosures required for expense disaggregation in annual and interim consolidated financial statements. In January 2025, the FASB issued ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) – Clarifying the effective Date (ASU 2025-01), which clarifies the effective date of ASU 2024-03. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact the adoption of this ASU will have on disclosures in its consolidated financial statements.
2. Cash Equivalents and Marketable Securities
The amortized cost and fair value of cash equivalents and marketable securities by major security type is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2025 |
|
(in thousands) |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
Money market funds |
|
$ |
110,305 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
110,305 |
|
U.S. government securities |
|
|
194,980 |
|
|
|
266 |
|
|
|
(5 |
) |
|
|
195,241 |
|
Total |
|
$ |
305,285 |
|
|
$ |
266 |
|
|
$ |
(5 |
) |
|
$ |
305,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
$ |
110,305 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
195,241 |
|
Total |
|
|
|
|
|
|
|
|
|
|
$ |
305,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
(in thousands) |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
Money market funds |
|
$ |
147,566 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
147,566 |
|
U.S. government securities |
|
|
196,803 |
|
|
|
175 |
|
|
|
(253 |
) |
|
|
196,725 |
|
Total |
|
$ |
344,369 |
|
|
$ |
175 |
|
|
$ |
(253 |
) |
|
$ |
344,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
$ |
147,566 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
196,725 |
|
Total |
|
|
|
|
|
|
|
|
|
|
$ |
344,291 |
|
The aggregate fair value of the Company’s available-for-sale marketable securities that have been in a continuous unrealized loss position for less than twelve months or twelve months or longer is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2025 |
|
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
(in thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
U.S. government securities |
|
$ |
25,238 |
|
|
$ |
(5 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
25,238 |
|
|
$ |
(5 |
) |
Total |
|
$ |
25,238 |
|
|
$ |
(5 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
25,238 |
|
|
$ |
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
(in thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
U.S. government securities |
|
$ |
119,081 |
|
|
$ |
(252 |
) |
|
$ |
2,007 |
|
|
$ |
(1 |
) |
|
$ |
121,088 |
|
|
$ |
(253 |
) |
Total |
|
$ |
119,081 |
|
|
$ |
(252 |
) |
|
$ |
2,007 |
|
|
$ |
(1 |
) |
|
$ |
121,088 |
|
|
$ |
(253 |
) |
At March 31, 2025, the Company had 2 available-for-sale marketable securities in an unrealized loss position without an allowance for credit losses. The Company does not intend to sell these securities and the Company believes it is more likely than not that marketable securities in an unrealized loss position will be held until maturity and that the Company will not be required to sell these securities before recovery of their amortized cost basis. The Company believes that an allowance for credit losses is unnecessary as the securities are of high credit quality and the decline in fair value is due to market conditions and/or changes in interest rates.
3. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs that may be used to measure fair value are defined below:
•
Level 1—Quoted prices in active markets for identical assets or liabilities at the measurement date.
•
Level 2—Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The carrying values of the Company’s other assets, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at March 31, 2025 |
|
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
Cash in bank balances |
|
$ |
28,718 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
28,718 |
|
Money market funds |
|
|
110,305 |
|
|
|
— |
|
|
|
— |
|
|
|
110,305 |
|
Total cash and cash equivalents |
|
$ |
139,023 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
139,023 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government securities |
|
$ |
— |
|
|
$ |
195,241 |
|
|
$ |
— |
|
|
$ |
195,241 |
|
Total marketable securities |
|
$ |
— |
|
|
$ |
195,241 |
|
|
$ |
— |
|
|
$ |
195,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at December 31, 2024 |
|
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
Cash in bank balances |
|
$ |
13,873 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
13,873 |
|
Money market funds |
|
|
147,566 |
|
|
|
— |
|
|
|
— |
|
|
|
147,566 |
|
Total cash and equivalents |
|
$ |
161,439 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
161,439 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government securities |
|
$ |
— |
|
|
$ |
196,725 |
|
|
$ |
— |
|
|
$ |
196,725 |
|
Total marketable securities |
|
$ |
— |
|
|
$ |
196,725 |
|
|
$ |
— |
|
|
$ |
196,725 |
|
The aggregate amortized cost and fair value of marketable securities as of March 31, 2025, by contractual maturity, are as follows:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Amortized Cost |
|
|
Fair Value |
|
Due in one year or less |
|
$ |
101,818 |
|
|
$ |
101,894 |
|
Due after one year through two years |
|
|
93,162 |
|
|
|
93,347 |
|
Total marketable securities |
|
$ |
194,980 |
|
|
$ |
195,241 |
|
There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.
4. Leases
The Company has an operating lease agreement for office space in Foster City, California. In July 2024, the Company amended the lease agreement to extend for three years commencing as of November 1, 2024, and expiring on October 31, 2027. The Company has the option to extend the amended lease agreement for an additional three years. The option to extend the term was not recognized as part of the Company’s lease liability and ROU assets. The annual lease payments are approximately $0.5 million.
Components of lease cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2025 |
|
|
2024 |
|
Operating lease cost |
|
$ |
103 |
|
|
$ |
161 |
|
Short-term cost |
|
|
6 |
|
|
|
4 |
|
Total lease cost |
|
$ |
109 |
|
|
$ |
165 |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2025 |
|
|
2024 |
|
Weighted-average remaining lease term |
|
|
2.58 |
|
|
|
0.59 |
|
Weighted-average discount rate |
|
|
10.00 |
% |
|
|
6.00 |
% |
The Company's future minimum lease payments are as follows:
|
|
|
|
|
(in thousands) |
|
Operating Leases |
|
2025 |
|
$ |
398 |
|
2026 |
|
|
545 |
|
2027 |
|
|
465 |
|
2028 and thereafter |
|
|
— |
|
Total lease payments |
|
|
1,408 |
|
Less: Imputed interest |
|
|
(173 |
) |
Present value of lease liabilities |
|
|
1,235 |
|
Less: Current portion of lease liabilities |
|
|
(429 |
) |
Total lease liabilities, non-current |
|
$ |
806 |
|
5. Common Stock and Stock-Based Compensation
The Company is authorized to issue 150,000,000 shares of common stock and 10,000,000 shares of preferred stock. All classes of stock have a par value of $0.0001. There were no shares of preferred stock outstanding as of March 31, 2025 and December 31, 2024.
The Company had reserved shares of common stock for issuance in connection with the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
Options outstanding under incentive award plans |
|
|
14,998,501 |
|
|
|
10,610,387 |
|
Unvested restricted stock units with service conditions |
|
|
648,354 |
|
|
|
547,430 |
|
Unvested restricted stock units with market conditions |
|
|
150,000 |
|
|
|
150,000 |
|
Shares available for future grant under incentive award plans |
|
|
4,702,063 |
|
|
|
4,092,569 |
|
Shares available for future grant under employee stock purchase plans |
|
|
2,080,102 |
|
|
|
1,208,837 |
|
Shares available for future grant under employment inducement award plans |
|
|
1,771,752 |
|
|
|
2,685,001 |
|
Pre-funded warrants |
|
|
4,190,952 |
|
|
|
4,190,952 |
|
Total shares reserved |
|
|
28,541,724 |
|
|
|
23,485,176 |
|
Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, if any, as may be declared by the Company’s board of directors. Through March 31, 2025, no cash dividends have been declared or paid by the Company.
Stock-Based Compensation Plans
The Company has three stock-based compensation plans, the 2017 Incentive Award Plan (the 2017 Plan), the 2021 Incentive Award Plan (the 2021 Plan) and the 2022 Employment Inducement Award Plan (the 2022 Inducement Plan). Although awards made under the 2017 Plan continue to be governed by its terms, the 2017 Plan was terminated at the time of the Company’s initial public offering and no further awards are made under this plan. The 2021 Plan, while effective, authorizes the granting of equity awards to employees and directors of the Company, as well as non-employee consultants. The 2022 Inducement Plan authorizes the granting of equity awards to newly hired employees of the Company.
2021 Incentive Award Plan
In January 2021, the Company's board of directors approved the 2021 Plan which permits the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSU awards, performance bonus awards, performance stock unit awards and other stock awards to employees, directors, officers and consultants. In February 2021, 2,400,007 shares were authorized for issuance under the 2021 Plan, which shall be cumulatively increased on the first day of each year beginning in 2022 and ending in 2031 equal to the lesser of (i) the amount equal to 5% of the number of shares issued and outstanding on the last day of the immediately preceding fiscal year or (ii) such lower number of shares as may be determined by the Company’s board of directors. The 2021 Plan is the successor to the 2017 Incentive Award Plan and no additional awards may be issued from the 2017 Plan. However, the 2017 Plan will continue to govern the terms and conditions of the outstanding awards granted under this plan. Shares of common stock subject to awards granted under the 2017 Plan that are forfeited or lapse unexercised and which following the effective date of the 2021 Plan are not issued under the 2017 Plan will be available for issuance under the 2021 Plan. The number of authorized shares reserved for issuance under the 2021 Plan was increased by 4,356,329 shares effective as of January 1, 2025. As of March 31, 2025, 4,702,063 shares of the Company’s common stock were available for future grants under the 2021 Plan.
2021 Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the 2021 ESPP) was approved by the Company’s board of directors in January 2021. In February 2021, a total of 240,000 shares were initially reserved for issuance under this plan, which shall be cumulatively increased on the first day of each year beginning in 2022 and ending in 2031 equal to the lesser of (i) 1% of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares as may be determined by the Company’s board of directors. The number of authorized shares reserved for issuance under the 2021 ESPP was increased by 871,265 shares effective as of January 1, 2025. As of March 31, 2025, 2,080,102 shares of the Company’s common stock were available for future grants under the 2021 ESPP.
Under the 2021 ESPP, eligible employees may select a rate of payroll deduction up to 15% of their eligible compensation subject to certain maximum purchase limitations. The duration for each offering period is 24 months and is divided into four purchase periods of approximately six months in length. Offerings are concurrent. The purchase price of the shares under the offering is the lesser of 85% of the fair market value of the shares on the offering date or 85% of the fair market value of the shares on the purchase date. A look-back feature in the 2021 ESPP causes the offering period to automatically reset if the fair value of the Company’s common stock on the last day of the purchase period is less than that on the original offering date. 2021 ESPP purchases by employees are settled with newly-issued common stock from the 2021 ESPP’s previously authorized and available pool of shares.
As of March 31, 2025, there was $0.3 million of unrecognized stock-based compensation expense related to unvested employee stock purchases. The unrecognized stock-based compensation expense is estimated to be recognized over a period of 0.97 years as of March 31, 2025. There were no shares purchased by employees under the 2021 ESPP during the three months ended March 31, 2025 and 2024.
2022 Employment Inducement Award Plan
In September 2022, the Company's compensation committee approved the 2022 Inducement Plan which authorized 1,400,000 shares of common stock to be issued and permitted the granting of nonqualified stock options, stock appreciation rights, restricted stock awards and RSU awards to newly hired employees and officers. In August 2024, the Company approved an amendment to the 2022 Inducement Plan which increased the number of authorized shares reserved for issuance by 2,250,000 shares. As of March 31, 2025, 1,771,752 shares of the Company's common stock were available for future grants under the 2022 Inducement Plan.
Pre-Funded Warrants
In September 2024, the Company sold pre-funded warrants to purchase 2,380,952 shares of common stock at a price of $10.4999 per pre-funded warrant. The purchase price per share of each pre-funded warrant represents the per share public offering price for the common stock sold in the same offering, minus the $0.0001 per share exercise price of such pre-funded warrant. As of March 31, 2025, no pre-funded warrants have been exercised.
In August 2022, the Company sold pre-funded warrants to purchase 14,630,000 shares of common stock at a price of $2.4199 per pre-funded warrant. The purchase price per share of each pre-funded warrant represents the per share offering price for the common stock, minus the $0.0001 per share exercise price of such pre-funded warrant. As of March 31, 2025, 12,820,000 pre-funded warrants have been exercised.
Stock Options
Stock options granted to employees and non-employees under the plans generally vest over four years and allow the holder of the option to purchase common stock at a stated exercise price. Options granted under the plans generally expire ten years after the date of grant. The Company recognizes the stock-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period.
The following table summarizes the stock option activity for all stock plans during the three months ended March 31, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares |
|
|
Weighted-
Average
Exercise
Price |
|
|
Weighted-
Average
Remaining
Contractual
Term |
|
|
Aggregate
Intrinsic
Value |
|
|
|
|
|
|
|
|
|
(in years) |
|
|
(in thousands) |
|
Outstanding as of December 31, 2024 |
|
|
10,610,387 |
|
|
$ |
8.07 |
|
|
|
6.66 |
|
|
$ |
1,288 |
|
Granted |
|
|
4,734,383 |
|
|
|
4.31 |
|
|
|
|
|
|
|
Exercised |
|
|
(42,000 |
) |
|
|
1.77 |
|
|
|
|
|
|
104 |
|
Forfeited |
|
|
(304,269 |
) |
|
|
9.31 |
|
|
|
|
|
|
|
Outstanding as of March 31, 2025 |
|
|
14,998,501 |
|
|
$ |
6.88 |
|
|
|
7.46 |
|
|
$ |
166 |
|
Exercisable, March 31, 2025 |
|
|
5,718,010 |
|
|
$ |
8.74 |
|
|
|
4.33 |
|
|
$ |
160 |
|
Vested and expected to vest, March 31, 2025 |
|
|
14,998,501 |
|
|
$ |
6.88 |
|
|
|
7.46 |
|
|
$ |
166 |
|
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.
As of March 31, 2025, there was $33.2 million of unrecognized stock-based compensation expense related to unvested stock options which is estimated to be recognized over a period of 3.12 years.
Restricted Stock Units with Service Conditions
RSUs with service conditions granted to employees under the plans generally vest over four years. The number of shares issued on the date the RSUs vest is net of the minimum statutory tax withholdings, which are paid in cash to the appropriate taxing authorities on behalf of the Company’s employees. The Company recognizes the stock-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period.
The following table summarizes the RSUs with service conditions activity for all stock plans during the three months ended March 31, 2025:
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares |
|
|
Weighted Average Grant-Date
Fair Value Per Share |
|
Unvested restricted stock units as of December 31, 2024 |
|
|
547,430 |
|
|
$ |
7.09 |
|
Granted |
|
|
244,595 |
|
|
|
3.18 |
|
Vested |
|
|
(129,046 |
) |
|
|
6.56 |
|
Forfeited |
|
|
(14,625 |
) |
|
|
7.20 |
|
Unvested restricted stock units as of March 31, 2025 |
|
|
648,354 |
|
|
$ |
5.71 |
|
As of March 31, 2025, there was $3.4 million of unrecognized stock-based compensation expense related to RSUs with service conditions which is estimated to be recognized over a period of 2.65 years.
Restricted Stock Units with Market Conditions
In March 2024, the Company granted 150,000 RSUs with market conditions, which are subject to the achievement of certain escalating stock price thresholds established by the Company's compensation committee of the board of directors. The RSUs with market conditions vest in equal installments upon the achievement of escalating stock price thresholds of $15.00 and $20.00, respectively, calculated based on the average price per share of the Company’s common stock for a period of 30 consecutive trading days equaling or exceeding the applicable price threshold, with vesting occurring as of the last day of the 30 consecutive trading day period. The escalating stock price thresholds can be met any time after the first anniversary of employment of the recipient but prior to the fourth anniversary from the date of grant.
The Company estimated the fair value of RSUs with market conditions granted using a Monte Carlo simulation model with the following assumptions:
|
|
|
|
|
|
|
Three Months Ended March 31, 2024 |
|
Expected volatility |
|
|
78.45 |
% |
Risk-free interest rate |
|
|
4.27 |
% |
Fair value of underlying common stock |
|
$ |
7.31 |
|
Weighted average grant-date fair value per share |
|
$ |
5.39 |
|
As of March 31, 2025, none of the escalating stock price thresholds had been met for any of the RSUs with market conditions, resulting in no shares vested.
As of March 31, 2025, there was $0.3 million of unrecognized stock-based compensation expense related to RSUs with market conditions which is estimated to be recognized over a period of 0.57 years.
Stock-Based Compensation Expense
The Company estimated the fair value of options granted and rights to acquire stock granted under the Company’s employee stock purchase plan using a Black-Scholes option pricing model with the following assumptions presented on a weighted average basis:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2025 |
|
|
2024 |
|
Stock Option Plans |
|
|
|
|
|
|
Expected term (years) |
|
|
6.06 |
|
|
|
6.08 |
|
Expected volatility |
|
|
74.10 |
% |
|
|
78.46 |
% |
Risk-free interest rate |
|
|
4.29 |
% |
|
|
4.14 |
% |
Fair value of underlying common stock |
|
$ |
4.31 |
|
|
$ |
6.75 |
|
Weighted average grant-date fair value per share |
|
$ |
2.95 |
|
|
$ |
4.78 |
|
Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2025 |
|
|
2024 |
|
Research and development expense |
|
$ |
1,636 |
|
|
$ |
2,088 |
|
General and administrative expense |
|
|
2,041 |
|
|
|
1,940 |
|
Total stock-based compensation expense |
|
$ |
3,677 |
|
|
$ |
4,028 |
|
6. Assignment, License and Collaboration Agreements
Assignment Agreement
In June 2019, the Company entered into an assignment agreement with Vintagence Biotechnology Ltd. (Vintagence) (Vintagence 2019 Assignment Agreement). Under the terms of the Vintagence 2019 Assignment Agreement, Vintagence assigned and agreed to assign to the Company any and all worldwide rights, title, and interest in and to the Vintagence technology and gave Terns a sublicensing right that allows the Company to grant sublicenses to any of its affiliates and/or to licensees or contractors to perform any portion of the development, manufacture, and/or commercialization of covered compounds or covered products. The Company will remain directly responsible for all amounts owed to Vintagence under this agreement, regardless of sublicenses. The Company is required to use commercially reasonable efforts to commercialize the covered product in the field in the major markets.
In June 2019, the Company paid Vintagence an upfront payment of $0.7 million. In addition, pursuant to the terms of the Vintagence 2019 Assignment Agreement, the Company agreed to pay Vintagence up to CNY 205.0 million in development milestones for the first covered product. The term of the Vintagence 2019 Assignment Agreement will continue in effect on a country-by-country basis until all milestone payments are made. The Company has the right to terminate the agreement in its entirety or on a covered product-by-covered product and country-by-country basis, in its sole discretion by giving 60 days advance written notice to Vintagence. As of March 31, 2025, the Company has paid $4.4 million to Vintagence which includes a milestone payment of $1.5 million in connection with the Company’s Investigational New Drug Application filing for TERN-501 in December 2020 and a milestone payment of $2.2 million in connection with the initiation of dosing in the Phase 2a DUET trial in July 2022. The Company has not recognized any research and development expense during the three months ended March 31, 2025 and 2024 related to this agreement.
Hansoh Option and License Agreement
In July 2020, the Company entered into an exclusive option and license agreement with Hansoh (Shanghai) Healthtech Co., Ltd. (Hansoh Healthtech) and Jiangsu Hansoh Pharmaceutical Group Company Ltd. (Jiangsu Hansoh) (collectively, Hansoh) (Hansoh 2020 Option and License Agreement). Under the terms of the Hansoh 2020 Option and License Agreement, the Company granted Hansoh an exclusive, non-transferable, non-sublicensable, fully-paid, royalty-free license to conduct preliminary studies on the licensed compound, TERN-701, with an option to exclusively license the same for development and commercialization of licensed products in all prophylactic, palliative, therapeutic and/or diagnostic uses in connection with all human diseases and disorders (including development and research activities on animal models thereof) in the field of oncology, including all types of cancers (Field) in mainland China, Taiwan, Hong Kong and Macau (collectively, the Territory).
In November 2021, Hansoh exercised its option and was granted an exclusive, royalty-bearing license, with the right to sublicense to exploit licensed compound and licensed products in the Field and in the Territory. In connection with Hansoh’s exercise of its option, the Company recognized $1.0 million in license fee revenue within the consolidated statements of operations and comprehensive loss during the year ended December 31, 2021. In addition, Hansoh has agreed to pay the Company up to $67.0 million in pre-specified clinical, regulatory and sales milestones. Hansoh must also pay the Company royalties in the mid-single digits based on net sales of all licensed products. The term of the Hansoh 2020 Option and License Agreement will continue until the end of the last-to-expire royalty term. As of March 31, 2025, no milestones have been met and future payments are all constrained.
7. Segment Reporting
The Company has one reportable segment, the consolidated entity’s operations, relating to the research and development of its portfolio of small-molecule product candidates to address serious diseases, including oncology and obesity.
The Company’s chief operating decision maker (the CODM), its chief executive officer, manages the Company’s operations as a single segment for the purposes of assessing performance and making operating decisions. When evaluating the Company’s financial position, the CODM reviews, as presented on a consolidated basis, cash, cash equivalents and marketable securities, total assets, cash flows from operating activities, research and development expenses by program, personnel and other, general and administrative expenses and net loss.
Cash, cash equivalents and marketable securities and total assets are presented on the Company’s Consolidated Balance Sheets. Cash flows from operating activities are presented on the Company's Consolidated Statements of Cash Flows.
Consolidated segment loss, including segment expenses reviewed by the CODM, include the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2025 |
|
|
2024 |
|
Research and development expenses |
|
|
|
|
|
|
External expenses by program: |
|
|
|
|
|
|
TERN-701 |
|
$ |
4,441 |
|
|
$ |
3,454 |
|
TERN-601 |
|
|
5,800 |
|
|
|
4,137 |
|
Other programs |
|
|
2,728 |
|
|
|
3,762 |
|
Total external expenses |
|
|
12,969 |
|
|
|
11,353 |
|
Unallocated internal expenses: |
|
|
|
|
|
|
Personnel-related expenses |
|
|
5,555 |
|
|
|
6,886 |
|
Other expenses |
|
|
196 |
|
|
|
348 |
|
Total research and development expenses |
|
|
18,720 |
|
|
|
18,587 |
|
General and administrative |
|
|
8,707 |
|
|
|
6,859 |
|
Total operating expenses |
|
|
27,427 |
|
|
|
25,446 |
|
Loss from operations |
|
|
(27,427 |
) |
|
|
(25,446 |
) |
Other income: |
|
|
|
|
|
|
Interest income |
|
|
3,643 |
|
|
|
3,182 |
|
Other expense, net |
|
|
(36 |
) |
|
|
(12 |
) |
Total other income, net |
|
|
3,607 |
|
|
|
3,170 |
|
Loss before income taxes |
|
|
(23,820 |
) |
|
|
(22,276 |
) |
Income tax expense |
|
|
(88 |
) |
|
|
(97 |
) |
Net loss |
|
$ |
(23,908 |
) |
|
$ |
(22,373 |
) |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 20, 2025. In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Special Note Regarding Forward-Looking Statements” and “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Our fiscal year ends on December 31 each year.
Overview
We are a clinical-stage biopharmaceutical company developing a portfolio of small-molecule product candidates to address serious diseases, including oncology and obesity. Our programs are based on mechanisms of action that have achieved proof-of-concept in clinical trials in indications with significant unmet medical needs. We are advancing multiple drug candidates we believe have the potential to deliver improved clinical outcomes in the target indication as either single-agent or combination therapies. The most advanced product candidates in our pipeline – TERN-701, TERN-601 and TERN-501 – were internally discovered. Additionally, we have an ongoing discovery effort for the TERN-800 series of small-molecule glucose-dependent insulinotropic polypeptide receptor (GIPR) modulators for obesity, which have the potential to be combined with glucagon-like peptide-1 (GLP-1) receptor agonists, such as TERN-601.
TERN-701 is our proprietary, oral, potent, next-generation allosteric BCR-ABL inhibitor specifically targeting the ABL myristoyl pocket for chronic myeloid leukemia (CML), a form of cancer that begins in the bone marrow and leads to the growth of leukemic cells. In December 2024, we announced positive early data from the dose escalation portion of the phase 1 CARDINAL study. As of the October 2024 cutoff date, 15 patients were enrolled across three once-daily (QD) dose cohorts of 160 mg, 320 mg and 400 mg, with an overall median treatment duration of 3 months. TERN-701 demonstrated compelling molecular responses starting at the lowest dose level in heavily pre-treated patients with high baseline BCR-ABL transcript levels. TERN-701 also showed an encouraging safety profile with no dose limiting toxicities, adverse event (AE) related treatment discontinuations or dose reductions across all dose escalation cohorts. While the dose escalation portion of the study is complete, optional backfill dosing of new participants continues in existing cohorts of the dose escalation. Both the encouraging safety profile and dose-related increase in molecular responses observed in the escalation portion of the study that evaluated a maximum QD dose of 500 mg, provided the basis to select two of the higher QD dose levels, 320 mg and 500 mg, for evaluation in the expansion portion of the study. The first patient was enrolled in the dose expansion portion of the study in April 2025 with planned enrollment to include 40 patients at each dose level. Additional safety and efficacy data are expected to be released in the fourth quarter of 2025 and are anticipated to include a larger cohort of patients with longer durations of treatment and with read through to a potential approval endpoint of a six-month major molecular response. The United States Food and Drug Administration (FDA) granted Orphan Drug Designation for TERN-701 for the treatment of CML in March 2024.
TERN-601 is our small-molecule GLP-1 receptor agonist that is intended to be orally administered once-daily (QD) for obesity. In September 2024, we announced positive results from the Phase 1 study of TERN-601, demonstrating weight loss over 28 days up to 5.5% and favorable safety and tolerability despite rapid dose titration every three days. The Phase 1 study was a randomized, double-blind, placebo-controlled single and multiple-ascending dose (MAD) study in healthy adults with obesity or who are overweight. The primary endpoint of the study was to evaluate safety and tolerability of TERN-601 administered QD for 28 days. Secondary endpoints included pharmacokinetics, efficacy as measured by body weight loss following 28 days of treatment with TERN-601, and other exploratory markers. The clinical study results showed TERN-601 was well tolerated and demonstrated dose-dependent, statistically significant placebo-adjusted mean weight loss across all three doses evaluated in the 28-day MAD study, with maximum placebo-adjusted mean weight loss of 4.9% (p<0.0001) at the highest dose of 740 mg QD. Additionally, 67% of participants lost 5% or more of their baseline body weight at the top dose. TERN-601 was well tolerated with no treatment-related dose interruptions, reductions or discontinuations at any dose, despite fast titration to high doses. The majority (>95%) of treatment emergent AEs were mild. All gastrointestinal events were mild to moderate and consistent with the GLP-1R agonist class. Importantly, there were no clinically meaningful changes in liver enzymes, vital signs or electrocardiograms observed. The absence of treatment-related dose interruptions, reductions, or discontinuations with mostly mild AEs, despite aggressive titration to high doses in this 28-day study, indicates potential for further improved tolerability in subsequent studies with slower titration. The first patient enrolled in the Phase 2 FALCON trial of TERN-601 in March 2025, enrollment is continuing as expected, and top-line 12-week data are anticipated in the fourth quarter of 2025.
TERN-501 is our thyroid hormone receptor beta (THR-β) agonist initially developed for metabolic dysfunction-associated steatohepatitis (MASH). Agonism of THR-β increases fatty acid metabolism via mitochondrial oxidation and affects cholesterol synthesis and metabolism. As a result, THR-β stimulation has the potential to provide broad metabolic benefits including reducing hepatic steatosis, increasing fat oxidation, and improving fibrosis and serum lipid parameters such as LDL cholesterol and triglycerides. Since announcing positive top-line data from the Phase 2a DUET trial in August 2023, we have decided to limit spend in the development of TERN-501 for MASH given the current regulatory and clinical development requirements for the indication. We continue to evaluate opportunities for TERN-501 in metabolic diseases. Based on non-clinical studies, THR-β agonism is a complementary mechanism to GLP-1 receptor antagonism, potentially providing broader metabolic and liver benefits in addition to increased weight loss. In June 2024, we highlighted preclinical data supporting TERN-501 in combination with a GLP-1R agonist for obesity at the American Diabetes Association 84th Scientific Sessions. TERN-501 significantly improved the efficacy of a GLP-1 receptor agonist in an obese mouse model by normalizing energy expenditure, resulting in greater weight loss, increased fat mass loss and relative preservation of lean mass compared to the GLP-1R agonist alone. These preclinical combination data support the potential for TERN-501 as a combination partner for injectable and oral GLP-1 agonists for use in obesity and other metabolic disorders.
TERN-800 series is our ongoing effort to discover small molecule GIPR modulators for obesity, which we believe have the potential for combination with GLP-1 receptor agonists, such as TERN-601. We are prioritizing our discovery efforts towards nominating a GIPR antagonist development candidate based on in-house discoveries and growing specific scientific rationale supporting the potential of GLP-1 receptor agonist and GIPR antagonist combinations for obesity.
Since the commencement of our operations, we have devoted substantially all of our resources to research and development activities, organizing and staffing our company, business planning, raising capital, establishing and maintaining our intellectual property portfolio, conducting preclinical studies and clinical trials and providing general and administrative support for these operations.
Results of operations
The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
18,720 |
|
|
$ |
18,587 |
|
|
$ |
133 |
|
General and administrative |
|
|
8,707 |
|
|
|
6,859 |
|
|
|
1,848 |
|
Total operating expenses |
|
|
27,427 |
|
|
|
25,446 |
|
|
|
1,981 |
|
Loss from operations |
|
|
(27,427 |
) |
|
|
(25,446 |
) |
|
|
(1,981 |
) |
Other income: |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
3,643 |
|
|
|
3,182 |
|
|
|
461 |
|
Other expense, net |
|
|
(36 |
) |
|
|
(12 |
) |
|
|
(24 |
) |
Total other income, net |
|
|
3,607 |
|
|
|
3,170 |
|
|
|
437 |
|
Loss before income taxes |
|
|
(23,820 |
) |
|
|
(22,276 |
) |
|
|
(1,544 |
) |
Income tax expense |
|
|
(88 |
) |
|
|
(97 |
) |
|
|
9 |
|
Net loss |
|
$ |
(23,908 |
) |
|
$ |
(22,373 |
) |
|
$ |
(1,535 |
) |
Revenue
To date, we have not generated, and do not expect to generate for the foreseeable future, any revenue from the sale of products. We may generate revenue from pre-specified clinical, regulatory and sales milestones as part of an exclusive option and license agreement for TERN-701 in greater China with Hansoh.
Research and development expenses
Research and development expenses account for a significant portion of our operating expenses and consist primarily of external and internal expenses incurred in connection with the discovery and development of our product candidates. To date, our research and development expenses have related primarily to discovery efforts, preclinical and clinical development of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Costs for certain activities, such as manufacturing and preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators. Technology acquisitions are expensed or capitalized based upon the asset achieving technological feasibility in accordance with management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use.
External expenses include:
•
expenses incurred in connection with the discovery and preclinical and clinical development of our product candidates, including those incurred under agreements with third parties, such as consultants and contract research organizations (CROs);
•
the cost of manufacturing products for use in our preclinical studies and clinical trials, including payments to contract manufacturing organizations (CMOs), and consultants;
•
the costs of funding research performed by third-party vendors for performing preclinical testing on our behalf;
•
the costs of purchasing lab supplies and non-capital equipment used in designing, developing and manufacturing preclinical study and clinical trial materials;
•
costs associated with consultants for chemistry, manufacturing and controls development, regulatory, statistics and other services;
•
expenses related to regulatory activities, including filing fees paid to regulatory agencies; and
•
expenses incurred in connection with the acquisition or in-licensing of assets from other parties.
Internal expenses include:
•
personnel-related expenses, including salaries, benefits and stock-based compensation expense for personnel engaged in research and development functions. We use internal resources primarily to oversee the research and discovery as well as for managing our preclinical development, process development, manufacturing and clinical development activities; and
•
other expenses, including rent, depreciation, maintenance and allocated overhead.
The following table summarizes our research and development expenses for the three months ended March 31, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Change |
|
Research and development expenses |
|
|
|
|
|
|
|
|
|
External expenses by program: |
|
|
|
|
|
|
|
|
|
TERN-701 |
|
$ |
4,441 |
|
|
$ |
3,454 |
|
|
$ |
987 |
|
TERN-601 |
|
|
5,800 |
|
|
|
4,137 |
|
|
|
1,663 |
|
Other programs |
|
|
2,728 |
|
|
|
3,762 |
|
|
|
(1,034 |
) |
Total external expenses |
|
|
12,969 |
|
|
|
11,353 |
|
|
|
1,616 |
|
Unallocated internal expenses: |
|
|
|
|
|
|
|
|
|
Personnel-related expenses |
|
|
5,555 |
|
|
|
6,886 |
|
|
|
(1,331 |
) |
Other expenses |
|
|
196 |
|
|
|
348 |
|
|
|
(152 |
) |
Total research and development expenses |
|
$ |
18,720 |
|
|
$ |
18,587 |
|
|
$ |
133 |
|
The increase in research and development expenses for the three months ended March 31, 2025, compared to the same period in 2024, was primarily due to a $1.6 million increase in clinical and preclinical program expenses, partially offset by a $1.3 million decrease in personnel-related expenses and a $0.2 million decrease due to lower allocated overhead, facility-related and depreciation expenses to research and development expenses.
General and administrative expenses
General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation expense, for personnel in executive, finance, accounting, business development, legal, human resources, information technology, and other administrative functions. General and administrative expenses also include corporate facility costs, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and tax services.
The increase in general and administrative expenses for the three months ended March 31, 2025, compared to the same period in 2024, was primarily due to a $1.1 million increase in personnel-related expenses and a $0.7 million increase in other professional services consulting.
Interest income
Interest income primarily consists of interest income on our cash equivalents and marketable securities.
Interest income for the three months ended March 31, 2025 was $3.6 million, compared to $3.2 million for the same period in 2024. The increase in interest income was primarily due to an increase in cash, cash equivalents and marketable securities.
Other expense, net
Other expense, net for the three months ended March 31, 2025 and 2024 was less than $0.1 million in each respective period.
Income tax expense
Income tax expense for the three months ended March 31, 2025 and 2024 was $0.1 million in each respective period.
Trends and uncertainties
As we continue to pursue clinical and discovery development in both U.S. and international markets, and given our research operations have included work within China, as well as other countries, we remain attentive to evolving global economic conditions, including uncertainties related to international trade policies, tariffs, and supply chain dynamics. Although these factors have not had a material impact on our operations to date, we continue to monitor these developments closely.
Liquidity and capital resources
Uses of cash
Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures and general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
We believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2028, including key clinical data readouts from our lead programs in CML and obesity. However, we continue to anticipate that our research and development expenses, general and administrative expenses and capital expenditures will remain significant to support our ongoing and planned activities. We expect to continue to incur net operating losses for at least the next several years.
Sources of liquidity
We have primarily funded our operations through proceeds from the sale of shares of our common stock, convertible preferred stock and convertible promissory notes. We have devoted substantially all of our resources to research and development activities, organizing and staffing our company, raising capital, establishing and maintaining our intellectual property portfolio, conducting preclinical studies and clinical trials and providing general and administrative support for these operations.
Since our inception, we have not generated any revenue from product sales and we have incurred significant operating losses and negative cash flows from our operations. As of March 31, 2025, we had an accumulated deficit of approximately $445.4 million and cash, cash equivalents and marketable securities of $334.3 million. For the three months ended March 31, 2025, we had a net loss of approximately $23.9 million and negative cash flows from operations of approximately $24.4 million.
In May 2023, we entered into the Sales Agreement pursuant to which we have the ability to offer and sell, from time to time, through Cowen, shares of our common stock having an aggregate offering price of up to $150.0 million in an at-the-market offering. The shares are offered pursuant to our shelf registration statement on Form S-3 filed with the SEC, which became effective in February 2023. This Sales Agreement remains in effect. There were no sales of our common stock pursuant to this agreement through March 31, 2025.
In September 2024, we issued 14,064,048 shares of our common stock at a public offering price of $10.50 per share and, to certain investors in lieu of common stock, pre-funded warrants to purchase 2,380,952 shares of common stock at a public offering price of $10.4999 per pre-funded warrant in an underwritten public offering. The purchase price per share of each pre-funded warrant represents the per share public offering price for the common stock, minus the $0.0001 per share exercise price of such pre-funded warrant. Aggregate net proceeds were $161.9 million after deducting underwriting discounts and commissions and offering expenses.
We believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2028. We will need substantial additional funding to support our operating activities.
Future funding requirements
We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our product candidates. We expect that our research and development and general and administrative costs will remain significant for the foreseeable future in connection with conducting additional preclinical studies and clinical trials for our current and future research programs and product candidates, contracting with CROs and CMOs to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.
Our primary uses of cash are to fund our research and development activities, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital and providing general and administrative support for these operations.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for our product candidates, we expect to incur significant commercialization expenses related to any approved products, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.
Our future capital requirements will depend on many factors, including:
•
the scope, progress, results and costs of product discovery, preclinical studies and clinical trials;
•
the scope, prioritization and number of our research and development programs;
•
the costs, timing and outcome of regulatory review of our product candidates;
•
our ability to establish and maintain collaborations on favorable terms, if at all;
•
the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we enter into;
•
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;
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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
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the extent to which we acquire or in-license other product candidates and technologies; the costs of securing manufacturing arrangements for commercial production; and
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the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates.
Until such time, if ever, as we can generate substantial revenues from product sales, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
Cash flows
Operating activities
Net cash used in operating activities during the three months ended March 31, 2025 was $24.4 million and consisted primarily of our net loss of $23.9 million, a $4.3 million decrease from changes in operating assets and liabilities primarily attributable to the timing of expenses incurred and payments issued as well as a non-cash adjustment of $0.1 million due to net accretion on marketable securities. This was partially offset by non-cash adjustments of $3.7 million of stock-based compensation, $0.1 million in amortization of right-of-use assets and $0.1 million of depreciation.
Net cash used in operating activities during the three months ended March 31, 2024 was $22.8 million and consisted primarily of our net loss of $22.4 million, a $3.8 million decrease from changes in operating assets and liabilities primarily attributable to the timing of expenses incurred and payments issued as well as a non-cash adjustment of $0.9 million due to net accretion on marketable securities. This was partially offset by non-cash adjustments of $4.0 million of stock-based compensation, $0.2 million in amortization of right-of-use assets and $0.1 million of depreciation.
Investing activities
Net cash provided by investing activities during the three months ended March 31, 2025 was $2.0 million and consisted primarily of proceeds from the maturity of marketable securities of $27.0 million, partially offset by $25.0 million in purchases of marketable securities.
Net cash provided by investing activities during the three months ended March 31, 2024 was $8.0 million and consisted primarily of proceeds from the maturity of marketable securities of $58.6 million partially offset by $50.6 million in purchases of marketable securities.
Financing activities
Net cash provided by financing activities during the three months ended March 31, 2025 was $0.1 million and consisted of $0.1 million in proceeds from stock option exercises.
There were no financing activities during the three months ended March 31, 2024.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and use of estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. For a discussion of our critical accounting policies and use of estimates, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.
Adoption of New and Recently Issued Accounting Pronouncements
Note 1 – Nature of the Business, Basis of Presentation and Summary of Significant Accounting Policies – Recent Accounting Pronouncements which is contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, describes these accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes to the information provided under Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" which is included and described in our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 4. Controls and Procedures.
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
As of March 31, 2025, management, with the supervision and participation of our chief executive officer and the chief financial officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our chief executive officer and the chief financial officer concluded that, as of March 31, 2025, the design and operation of our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes during the quarter ended March 31, 2025 to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business. While the outcome of any such proceedings cannot be predicted with certainty, as of March 31, 2025, we were not a party to any litigation or legal proceedings that, in the opinion of our management, are probable to have a material adverse effect on our business. Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources, reputational harm, and other factors, and there can be no assurances that favorable outcomes will be obtained.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K for the year ended December 31, 2024 may not be the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Our Company’s business may be materially affected by the imposition of duties, tariffs and other trade barriers, including retaliatory countermeasures, implemented by the U.S. and other governments.
Recently, there have been significant changes to U.S. trade policies, sanctions, legislation, treaties and tariffs, including, but not limited to, trade policies and tariffs affecting products from outside of the U.S. While the timing regarding the implementation, if any, of such changes is uncertain, any implementation of such changes could increase uncertainties and associated risks relating to the supply of pharmaceutical ingredients and/or products given our operations within China, Canada and other international jurisdictions, as well as supplying global trials conducted in China, Europe and other countries.
Disruptions at the FDA and other government agencies from funding cuts, personnel losses, regulatory reform, government shutdowns and other developments could hinder our ability to obtain guidance from the FDA regarding our clinical development program and develop and secure approval of our product candidates in a timely manner, which would negatively impact our business.
The FDA and comparable regulatory agencies in foreign jurisdictions, such as the European Medicines Agency and Committee for Medicinal Products for Human Use, play an important role in the development of our product candidates by providing guidance on our clinical development programs and reviewing our regulatory submissions, including investigational new drug applications (INDs), requests for special designations and marketing applications. If these oversight and review activities are disrupted, then correspondingly our ability to develop and secure timely approval of our product candidates could be impacted in a negative manner.
For example, the recent loss of FDA leadership and personnel could lead to disruptions and delays in FDA guidance, review and approval of our product candidates. Pursuant to President Trump's E.O. 14210, “Implementing the President’s ‘Department of Government Efficiency’ Workforce Optimization Initiative,” the Secretary of the Department of Health and Human Services (HHS) announced on March 27, 2025, a reorganization and Reduction in Force (RIF), across the Department of approximately 20,000 employees (82,000 to 62,000), with FDA’s workforce to decrease by 3,500 full-time employees. Shortly thereafter, thousands of employees at the FDA were fired on April 1, 2025. Subsequently, there have been reports from the preliminary budget memorandum for HHS that the administration will propose an additional 30% cut in the overall budget for the Department, with a reduction of $700 million in funding at the FDA ($7.2 billion to $6.5 billion) for the 2026 federal fiscal year.
Further, while the FDA’s review of marketing applications and other activities for new drugs and biologics is largely funded through the user fee program established under the Prescription Drug User Fee Act (PDUFA), it remains unclear how the administration’s RIF and budget cuts will impact this program and the ability of the FDA to provide guidance and review our product candidates in a timely manner. For example, while the FDA RIF did not reportedly specifically target FDA reviewers, many operations, administrative and policy staff that help support such reviews were affected and those losses could lead to delays in PDUFA reviews and related activities. In addition, while currently unclear, there is a risk that the RIF and budget cutbacks could threaten the integrity of the PDUFA program itself. That is because, for the FDA to obligate user fees collected under PDUFA in the first place, a certain amount of non-user fee appropriations must be spent on the process for the review of applications plus certain other costs during the same fiscal year.
There is also substantial uncertainty as to how regulatory reform measures being implemented by the Trump Administration across the government will impact the FDA and other federal agencies with jurisdiction over our activities. For example, since taking office, the President has issued a number of executive orders that could have a significant impact on the manner in which the FDA conducts its operations and engages in regulatory and oversight activities. These include E.O. 14192, “Unleashing Prosperity Through Deregulation,” January 31, 2025; E.O. 14212, “Establishing the President’s Make America Healthy Again Commission,” February 13, 2025; and E.O. 14219, Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency” Deregulatory Initiative,” February 21, 2025. If these or other orders or executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
Similarly, actions by the U.S. government have significantly disrupted the operations of U.S. government agencies such as the National Institutes of Health, National Science Foundation, Centers for Disease Control and Prevention, and FDA, which have traditionally provided funding for basic research, research and development, and clinical testing. These U.S. government actions have included, among other things, suspending, terminating and withholding of disbursements of funds owed under ongoing contracts, grants, and other financial assistance agreements; declining to continue multi-year research projects for additional annual budget periods; canceling or delaying solicitations for new contract, grant and other financial assistance awards; canceling or delaying proposal evaluation processes and issuance of such new awards; substantially reducing federal agency staff responsible for managing contract and financial assistance programs; eliminating agency information and resources for facilitating research activity; delaying or terminating federal agency procedures for authorizing international transactions; initiating aggressive enforcement actions that may disrupt the operations of major research universities that are significant contributors to life sciences research in the U.S., and threatening access to federal agency contracts and other funding awards based on companies’ otherwise lawful corporate policies and choice of counsel. These U.S. government actions could, directly or indirectly, significantly disrupt, delay, prevent, or increase the costs of our research and product commercialization programs, including our ability to develop new product candidates, conduct clinical trials, implement research collaborations with other companies or institutions, and obtain approvals to market and sell new products.
In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions and could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
At the same time, disruptions at the FDA and other government agencies may result from public health events similar to the COVID-19 pandemic. For example, during the pandemic, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. In the event of a similar public health emergency in the future, the FDA may not be able to continue its current pace and review timelines could be extended. Regulatory authorities outside the United States facing similar circumstances may adopt similar restrictions or other policy measures in response to a similar public health emergency and may also experience delays in their regulatory activities.
Accordingly, if any of the foregoing developments and others impact the ability of the FDA to provide us with guidance regarding our clinical development programs or delay the agency’s review and processing of our regulatory submissions, including INDs and new drug applications or biologics license applications, our business would be negatively impacted. Further, any future government shutdown could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Changes in patent law in the United States or in other countries could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Our patent rights may be affected by developments or uncertainty in U.S. or ex-U.S. patent statutes, patent case laws in USPTO rules and regulations or in the rules and regulations of ex-U.S. patent offices. There are a number of changes to the U.S. patent laws that may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, in September 2011, the AIA, was signed into law. The AIA includes provisions that affect the way patent applications are prosecuted and affect patent litigation. In particular, under the AIA, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application is entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and may become involved in post-grant proceedings including opposition, derivation, reexamination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position. This could have a negative impact on some of our intellectual property and could increase uncertainties surrounding obtaining and enforcement or defense of our issued patents.
In addition, Congress may pass patent reform legislation that is unfavorable to us. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on decisions by Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future. Similarly, statutory or judicial changes to the patent laws of other countries may increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and international legislative bodies. Those changes may materially affect the patents and patent applications of our licensors, our existing or future patents and patent applications and our ability to obtain additional patents in the future.
Additionally, recent reforms and changes at government agencies of the United States and those of non-U.S. jurisdictions could increase the uncertainties and costs surrounding the prosecution or maintenance of our patent applications, and the maintenance, enforcement, or defense of our issued patents. For example, the ability of the USPTO and other applicable patent authorities to properly administer their functions is highly dependent on the levels of funding available to the agency and their ability to retain key personnel and fill key leadership appointments, among various factors. Termination of employees or delays in replacing or hiring for key positions could significantly impact the ability of the USPTO and other applicable patent authorities to fulfill their functions and could greatly impact our ability to timely and adequately prosecute or maintain our patent applications, and our ability to timely and adequately maintain, enforce, or defend our issued patents.
Changes in and uncertainty surrounding U.S. trade policy could have a material adverse impact on our business, financial condition and results of operations.
The Trump Administration has recently imposed a series of tariffs on U.S. trading partners. On April 2, 2025, the President issued an Executive Order announcing a “baseline” reciprocal tariff of 10% on all U.S. trading partners effective April 5, 2025, and higher individualized reciprocal tariffs on 57 countries (with certain product exemptions for pharmaceutical-related products, among others). Previously, the administration had imposed a 25% tariff on Canada and Mexico for goods not covered by the United States-Mexico-Canada Agreement (USMCA), and tariffs equaling 20% on China. In response, several countries threatened retaliatory measures, including Canada and China, which then imposed retaliatory tariffs. Prior to when the country-specific reciprocal tariffs were scheduled to take effect, the administration delayed the effective date of such tariffs for all countries except China. The 10% baseline reciprocal tariff on all countries remains in effect, in addition to the tariffs on China, Canada and Mexico. Sustained uncertainty about, or the further escalation of, trade and political tensions between the United States and China could result in a disadvantageous research and manufacturing environment in China, particularly for U.S. based companies, including retaliatory restrictions that hinder or potentially inhibit our ability to rely on contract development and manufacturing organizations and other service providers that operate in China.
Separately, on April 16, 2025, the U.S. Department of Commerce announced an investigation under Section 232 of the Trade Expansion Act of 1962 into imports of pharmaceuticals and pharmaceutical ingredients, including finished drug products, medical countermeasures, critical inputs such as active pharmaceutical ingredients, and key starting materials, and derivative products of those items. The investigation will examine the impact of these imports on U.S. national security culminating in a decision by the President whether to take action to remedy any identified threats, including by imposing additional tariffs. The statute provides that the Commerce Department report must be completed within 270 days of initiation of the investigation and that the President must decide whether to act within 90 days of receiving the report.
As a result of changes in tariffs that have been announced and/or implemented, and the underlying uncertainty currently surrounding international trade, we could experience a negative impact to our costs of materials as a result of any new tariff policies or trade restrictions. If we are unable to obtain necessary raw materials or product components in sufficient quantity and in a timely manner due to disruptions in the global supply chain caused by macroeconomic events and conditions, the development, testing and clinical trials of our product candidates may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business. We cannot yet predict the effect of the recently imposed U.S. tariffs on imports, or the extent to which other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon imports or exports in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
Rule 10b5-1 Trading Plans
During the three months ended March 31, 2025, none of our directors or officers, or the Company, has entered into, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c), in each case as defined in Item 408 of Regulation S-K.
Item 6. Exhibits.
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Incorporated by Reference |
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Exhibit
Number
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Exhibit Description |
Form |
Date |
Number |
Filed Herewith |
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3.1 |
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Amended and Restated Certificate of Incorporation. |
8-K |
2/9/2021 |
3.1 |
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3.2 |
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Amended and Restated Bylaws. |
8-K |
10/10/2023 |
3.1 |
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4.1 |
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Form of Common Stock Certificate. |
S-1/A |
2/1/2021 |
4.2 |
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4.2 |
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Form of Pre-Funded Warrant (August 2022). |
8-K |
8/16/2022 |
4.1 |
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4.3 |
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Form of Pre-Funded Warrant (September 2024). |
8-K |
9/12/2024 |
4.1 |
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4.4 |
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Amended and Restated Investors' Rights Agreement, dated December 29, 2020, by and among the Registrant and the investors listed therein. |
S-1 |
1/15/2021 |
10.1 |
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10.1 |
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Consulting Agreement, dated February 1, 2025, by and between the Registrant and Mark Vignola. |
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X |
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10.2 |
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Employment Agreement, dated February 22, 2025, by and between the Registrant and Andrew Gengos. |
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X |
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31.1 |
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Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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X |
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31.2 |
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Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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X |
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32.1^ |
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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X |
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32.2^ |
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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X |
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101.INS |
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Inline XBRL Instance Document |
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X |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents |
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X |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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X |
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# |
Indicates management contract or compensatory plan. |
^ |
The certification that accompanies this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is not deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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TERNS PHARMACEUTICALS, INC. |
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Date: May 8, 2025 |
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By: |
/s/Amy Burroughs |
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Amy Burroughs |
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Chief Executive Officer and Director
(Principal Executive Officer)
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Date: May 8, 2025 |
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By: |
/s/ Andrew Gengos |
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Andrew Gengos |
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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EX-10.1
2
tern-ex10_1.htm
EX-10.1
EX-10.1
Exhibit 10.1
TERNS PHARMACEUTICALS, INC. CONSULTING AGREEMENT
This Consulting Agreement (this “Agreement”) is made and entered into as of February 1, 2025 (the “Effective Date”) by and between Terns Pharmaceuticals, Inc. (the “Company”), and Mark Vignola (“Consultant”) (each herein referred to individually as a “Party,” or collectively as the “Parties”).
WHEREAS, the Company desires to retain Consultant as an independent contractor to perform consulting services for the Company, and Consultant is willing to perform such services, on the terms described below; and
WHEREAS, the Parties desire that Consultant’s services under this Agreement commence immediately following Consultant’s termination from employment with the Company, such that Consultant has no break in service between the termination of Consultant’s employment with the Company and the commencement of consulting services under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Parties agree as follows:
1.
Services and Compensation
Consultant shall perform the services described in Exhibit A (the “Services”) for the Company (or its designee), and the Company agrees to pay Consultant the compensation described in Exhibit A for Consultant’s performance of the Services.
A.
Definition of Confidential Information. “Confidential Information” means any information (including any and all combinations of individual items of information) that relates to the actual or anticipated business and/or products, research or development of the Company, its affiliates or subsidiaries, or to the Company’s, its affiliates’ or subsidiaries’ technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s, its affiliates’ or subsidiaries’ products or services and markets therefor, customer lists and customers (including, but not limited to, customers of the Company on whom Consultant called or with whom Consultant became acquainted during the term of this Agreement), software, developments, inventions, discoveries, ideas, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, and other business information disclosed by the Company, its affiliates or subsidiaries, either directly or indirectly, in writing, orally or by drawings or inspection of premises, parts, equipment, or other property of Company, its affiliates or subsidiaries. Notwithstanding the foregoing, Confidential Information shall not include any such information which Consultant can establish (i) was publicly known or made generally available prior to the time of disclosure to Consultant;
(ii) becomes publicly known or made generally available after disclosure to Consultant through no wrongful action or inaction of Consultant; or (iii) is in the rightful possession of Consultant, without confidentiality obligations, at the time of disclosure as shown by Consultant’s then-contemporaneous written records; provided that any combination of individual items of information shall not be deemed to be within any of the foregoing exceptions merely because one or more of the individual items are within such exception, unless the combination as a whole is within such exception.
B.
Nonuse and Nondisclosure.
During and after the term of this Agreement, Consultant will hold in the strictest confidence, and take all reasonable precautions to prevent any unauthorized use or disclosure of Confidential Information, and Consultant will not (i) use the Confidential Information for any purpose whatsoever other than as necessary for the performance of the Services on behalf of the Company, or (ii) subject to Consultant’s right to engage in Protected Activity (as defined below) disclose the Confidential Information to any third party without the prior written consent of an authorized representative of the Company, except that Consultant may disclose Confidential Information to the extent compelled by applicable law; provided however, prior to such disclosure, Consultant shall provide prior written notice to the Company and seek a protective order or such similar confidential protection as may be available under applicable law. Consultant agrees that no ownership of Confidential Information is conveyed to the Consultant. Without limiting the foregoing, Consultant shall not use or disclose any Company property, intellectual property rights, trade secrets or other proprietary know-how of the Company to invent, author, make, develop, design, or otherwise enable others to invent, author, make, develop, or design identical or substantially similar designs as those developed under this Agreement for any third party. Consultant agrees that Consultant’s obligations under this Section 2.B shall continue after the termination of this Agreement.
C.
Other Client Confidential Information. Consultant agrees that Consultant will not improperly use, disclose, or induce the Company to use any proprietary information or trade secrets of any former or current employer of Consultant or other person or entity with which Consultant has an obligation to keep in confidence. Consultant also agrees that Consultant will not bring onto the Company’s premises or transfer onto the Company’s technology systems any unpublished document, proprietary information, or trade secrets belonging to any third party unless disclosure to, and use by, the Company has been consented to in writing by such third party.
D.
Third Party Confidential Information. Consultant recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Consultant agrees that at all times during the term of this Agreement and thereafter, Consultant owes the Company and such third parties a duty to hold all such confidential or proprietary information in the strictest confidence and not to use it or to disclose it to any person, firm, corporation, or other third party except as necessary in carrying out the Services for the Company consistent with the Company’s agreement with such third party.
A.
Assignment of Inventions. Consultant agrees that all right, title, and interest in and to any copyrightable material, notes, records, drawings, designs, inventions, improvements, developments, discoveries, ideas, and trade secrets conceived, discovered, authored, invented, developed or reduced to practice by Consultant, solely or in collaboration with others, during the term of this Agreement and arising out of, or in connection with, performing the Services under this Agreement and any copyrights, patents, trade secrets, mask work rights or other intellectual property rights relating to the foregoing (collectively, “Inventions”), are the sole property of the Company. Consultant also agrees to promptly make full written disclosure to the Company of any Inventions and to deliver and assign (or cause to be assigned) and hereby irrevocably assigns fully to the Company all right, title and interest in and to the Inventions.
B.
Pre-Existing Materials. Subject to Section 3.A, Consultant will provide the Company with prior written notice if, in the course of performing the Services, Consultant incorporates into any Invention or utilizes in the performance of the Services any invention, discovery, idea, original works of authorship, development, improvements, trade secret, concept, or other proprietary information or intellectual property right owned by Consultant or in which Consultant has an interest, prior to, or separate from, performing the Services under this Agreement (“Prior Inventions”), and the Company is hereby granted a nonexclusive, royalty-free, perpetual, irrevocable, transferable, worldwide license (with the right to grant and authorize sublicenses) to make, have made, use, import, offer for sale, sell, reproduce, distribute, modify, adapt, prepare derivative works of, display, perform, and otherwise exploit such Prior Inventions, without restriction, including, without limitation, as part of or in connection with such Invention, and to practice any method related thereto.
Consultant will not incorporate any invention, discovery, idea, original works of authorship, development, improvements, trade secret, concept, or other proprietary information or intellectual property right owned by any third party into any Invention without the Company’s prior written permission, including without limitation any free software or open source software.
C.
Moral Rights. Any assignment to the Company of Inventions includes all rights of attribution, paternity, integrity, modification, disclosure and withdrawal, and any other rights throughout the world that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like (collectively, “Moral Rights”). To the extent that Moral Rights cannot be assigned under applicable law, Consultant hereby waives and agrees not to enforce any and all Moral Rights, including, without limitation, any limitation on subsequent modification, to the extent permitted under applicable law.
D.
Maintenance of Records. Consultant agrees to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by Consultant (solely or jointly with others) during the term of this Agreement, and for a period of three (3) years thereafter. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that is customary in the industry and/or otherwise specified by the Company. Such records are and remain the sole property of the Company at all times and upon the Company’s request, Consultant shall deliver (or cause to be delivered) the same.
E.
Further Assurances. Consultant agrees to assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in Inventions in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments that the Company may deem necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to deliver, assign and convey to the Company, its successors, assigns and nominees the sole and exclusive right, title, and interest in and to all Inventions and testifying in a suit or other proceeding relating to such Inventions. Consultant further agrees that Consultant’s obligations under this Section 3.E shall continue after the termination of this Agreement.
F.
Attorney-in-Fact. Consultant agrees that, if the Company is unable because of Consultant’s unavailability, dissolution, mental or physical incapacity, or for any other reason, to secure Consultant’s signature with respect to any Inventions, including, without limitation, for the purpose of applying for or pursuing any application for any United States or foreign patents or mask work or copyright registrations covering the Inventions assigned to the Company in Section 3.A, then Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Consultant’s agent and attorney-in-fact, to act for and on Consultant’s behalf to execute and file any papers and oaths and to do all other lawfully permitted acts with respect to such Inventions to further the prosecution and issuance of patents, copyright and mask work registrations with the same legal force and effect as if executed by Consultant. This power of attorney shall be deemed coupled with an interest, and shall be irrevocable.
4.
Conflicting Obligations
A.
Consultant represents and warrants that Consultant has no agreements, relationships, or commitments to any other person or entity that materially conflict with the provisions of this Agreement, Consultant’s obligations to the Company under this Agreement, and/or Consultant’s ability to perform the Services.
Consultant will not enter into any such conflicting agreement during the term of this Agreement.
B.
Consultant represents and warrants that he is not employed on the Effective Date of this Agreement. Consultant further represents and warrants that he will provide written notice to Company of his employment no later than the effective date of such employment.
5.
Return of Company Materials
Except as may otherwise be set forth in any other written agreement between the Parties, upon the termination of this Agreement, or upon the Company’s earlier request, Consultant will promptly deliver to the Company, and will not keep in Consultant’s possession, recreate, or deliver to anyone else, any and all Company property, including, but not limited to, Confidential Information, tangible embodiments of the Inventions, all devices and equipment belonging to the Company, all electronically-stored information and passwords to access such property, those records maintained pursuant to Section 3.D and any reproductions of any of the foregoing items that Consultant may have in Consultant’s possession or control.
A.
Term. The term of this Agreement will begin on the Effective Date of this Agreement and will continue until July 31, 2025 unless terminated as provided in Section 6.B.
B.
Termination. The Company may terminate this Agreement immediately and without prior notice if Consultant: (i) refuses to or is unable to perform the Services, (ii) commences full time employment or (ii) is in breach of any material provision of this Agreement. Consultant may terminate at any time, upon the provision of written notice, with or without cause.
C.
Survival. Upon any termination, all rights and duties of the Company and Consultant toward each other shall cease except:
(1)
The Company will pay, within thirty (30) days after the effective date of termination, all amounts owing to Consultant for Services completed and accepted by the Company prior to the termination date and related reimbursable expenses, if any, submitted in accordance with the Company’s policies;
(2)
Section 2 (Confidentiality), Section 3 (Ownership), Section 4.B (Conflicting Obligations), Section 5 (Return of Company Materials), Section 6 (Term and Termination), Section 7 (Independent Contractor; Benefits), Section 8 (Non-solicitation), Section 9 (Limitation of Liability), Section 10 (Arbitration and Equitable Relief), and Section 11 (Miscellaneous) will survive termination or expiration of this Agreement in accordance with their terms; and
(3)
This Agreement in no way affects, alters, or modifies any of the obligations of the Parties under the July 23, 2024 Transition Agreement.
7.
Independent Contractor; Benefits
A.
Independent Contractor. It is the express intention of the Company and Consultant that Consultant perform the Services as an independent contractor to the Company. Nothing in this Agreement shall in any way be construed to constitute Consultant as an agent, employee or representative of the Company. Without limiting the generality of the foregoing, Consultant is not authorized to bind the Company to any liability or obligation or to represent that Consultant has any such authority.
Except as provided for herein, Consultant agrees to furnish (or reimburse the Company for) all tools and materials necessary to accomplish this Agreement and shall incur all expenses associated with performance. Consultant acknowledges and agrees that Consultant is obligated to report as income all compensation received by Consultant pursuant to this Agreement. Consultant agrees to and acknowledges the obligation to pay all self-employment and other taxes on such income.
B.
Benefits. The Company and Consultant agree that Consultant will receive no Company-sponsored benefits from the Company where benefits include, but are not limited to, paid vacation, sick leave, medical insurance and 401k participation. If Consultant is reclassified by a state or federal agency or court as the Company’s employee, Consultant will become a reclassified employee and will receive no benefits from the Company, except those mandated by state or federal law, even if by the terms of the Company’s benefit plans or programs of the Company in effect at the time of such reclassification, Consultant would otherwise be eligible for such benefits.
A.
Non-solicitation of Employees and Contractors. From the date of this Agreement until 12 months after the termination of this Agreement (the “Restricted Period”), Consultant will not, without the Company’s prior written consent, directly or indirectly, hire, solicit, recruit, or encourage, or attempt to hire, solicit, recruit, or encourage, any employee or contractor of the Company or its affiliates to terminate employment with, or cease providing services to, the Company or its affiliates.
B.
Acknowledgments. Consultant acknowledges that Consultant will derive significant value from the Company’s agreement to provide Consultant with Company Confidential Information to enable Consultant to optimize the performance of Consultant’s duties to the Company. Consultant further acknowledges that Consultant’s fulfillment of the obligations contained in this Agreement, including, but not limited to, Consultant’s obligation neither to disclose nor to use Company Confidential Information other than for the Company’s exclusive benefit and Consultant’s obligations not to solicit contained in subsections A above, is necessary to protect Company Confidential Information and, consequently, to preserve the value and goodwill of the Company. Consultant also acknowledges the time and scope limitations of Consultant’s obligations under subsections A above are fair and reasonable in all respects, especially in light of the Company’s need to protect Company Confidential Information and the scope and nature of the Company’s business, and that Consultant will not be precluded from gainful employment if Consultant is obligated not to solicit employees or others during the period described above. In the event of Consultant’s breach or violation of this Section 8, or good faith allegation by the Company of Consultant’s breach or violation of this Section 8, the restricted periods set forth in this Section 8 shall be tolled until such breach or violation, or dispute related to an allegation by the Company that Consultant has breached or violated this Section 8, has been duly cured or resolved, as applicable.
C.
Separate Covenants. If, in any judicial or arbitral proceeding, a court or arbitrator refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be revised, or if revision is not permitted it shall be eliminated from this Agreement, to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event that the provisions of subsection A above are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law. In the event that the applicable court or arbitrator does not exercise the power granted to it in the prior sentence, Consultant and the Company agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term. Consultant agrees that nothing in this Section 8 shall affect Consultant’s continuing obligations under this Agreement during and after the Restricted Period, including, without limitation, Consultant’s obligations under Section 2.
9.
Indemnification. To the extent not already covered by any Company by-laws, articles of incorporation, indemnification agreement or liability insurance policy to which Consultant is a party or a beneficiary, the Company shall defend, hold harmless and indemnify Consultant, to the fullest extent permitted by applicable laws and regulations, from and against all actions, claims, costs, damages, liabilities and expenses (including without limitation, reasonable attorneys’ fees) (collectively, “Damages”) arising out of the good-faith performance of the Services hereunder; provided, the Consultant must notify the Company within 5 calendar days of any threatened or asserted claims in order to allow the Company to defend and mitigate any Damages.
10.
Limitation of Liability
IN NO EVENT SHALL THE COMPANY BE LIABLE TO CONSULTANT OR TO ANY OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOST PROFITS OR LOSS OF BUSINESS, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY, WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHER THEORY OF LIABILITY, REGARDLESS OF WHETHER THE COMPANY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. IN NO EVENT SHALL THE COMPANY’S LIABILITY ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT EXCEED THE AMOUNTS PAID BY THE COMPANY TO CONSULTANT UNDER THIS AGREEMENT FOR THE SERVICES, DELIVERABLES OR INVENTION GIVING RISE TO SUCH LIABILITY.
11.
Arbitration and Equitable Relief
A.
Arbitration. IN CONSIDERATION OF CONSULTANT’S CONSULTING RELATIONSHIP WITH THE COMPANY, ITS PROMISE TO ARBITRATE ALL DISPUTES RELATED TO CONSULTANT’S CONSULTING RELATIONSHIP OR OTHER RELATIONSHIP WITH THE COMPANY, INCLUDING ANY PREVIOUS SERVICE RELATIONSHIP, AND CONSULTANT’S RECEIPT OF THE COMPENSATION AND OTHER BENEFITS PAID TO CONSULTANT BY THE COMPANY, AT PRESENT AND IN THE FUTURE, CONSULTANT AGREES THAT, EXCEPT FOR ANY CONTROVERSIES, CLAIMS, OR DISPUTES ALLEGING OR ASSERTING CLAIMS OF DISCRIMINATION (“DISCRIMINATION CLAIMS”), ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE (INCLUDING THE COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER OR BENEFIT PLAN OF THE COMPANY IN THEIR CAPACITY AS SUCH OR OTHERWISE) ARISING OUT OF, RELATING TO, OR RESULTING FROM CONSULTANT’S CONSULTING OR OTHER RELATIONSHIP WITH THE COMPANY, INCLUDING ANY PREVIOUS SERVICE RELATIONSHIP, OR THE TERMINATION OF CONSULTANT’S CONSULTING OR OTHER RELATIONSHIP WITH THE COMPANY, INCLUDING ANY BREACH OF THIS AGREEMENT, SHALL BE SUBJECT TO BINDING ARBITRATION UNDER THE FEDERAL ARBITRATION ACT (THE “FAA”) AND THAT THE FAA SHALL GOVERN AND APPLY TO THIS ARBITRATION AGREEMENT WITH FULL FORCE AND EFFECT. CONSULTANT FURTHER AGREES THAT, TO THE FULLEST EXTENT PERMITTED BY LAW, CONSULTANT MAY BRING ANY ARBITRATION PROCEEDING ONLY IN CONSULTANT’S INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF, REPRESENTATIVE, OR CLASS MEMBER IN ANY PURPORTED CLASS, COLLECTIVE, OR REPRESENTATIVE LAWSUIT OR PROCEEDING.
EXCEPT FOR DISCRIMINATION CLAIMS, CONSULTANT AGREES TO ARBITRATE ANY AND ALL COMMON LAW AND/OR STATUTORY CLAIMS UNDER LOCAL, STATE, OR FEDERAL LAW, INCLUDING, BUT NOT LIMITED TO, CLAIMS UNDER THE NEW YORK LABOR CODE, CLAIMS RELATING TO EMPLOYMENT OR INDEPENDENT CONTRACTOR STATUS, CLASSIFICATION, AND RELATIONSHIP WITH THE COMPANY, AND CLAIMS OF BREACH OF CONTRACT, EXCEPT AS PROHIBITED BY LAW. CONSULTANT ALSO AGREES TO ARBITRATE ANY AND ALL DISPUTES ARISING OUT OF OR RELATING TO THE INTERPRETATION OR APPLICATION OF THIS AGREEMENT TO ARBITRATE, BUT NOT TO DISPUTES ABOUT THE ENFORCEABILITY, REVOCABILITY OR VALIDITY OF THIS AGREEMENT TO ARBITRATE OR ANY PORTION HEREOF OR THE CLASS, COLLECTIVE AND REPRESENTATIVE PROCEEDING WAIVER HEREIN. WITH RESPECT TO ALL SUCH CLAIMS AND DISPUTES THAT CONSULTANT AGREES TO ARBITRATE, CONSULTANT HEREBY EXPRESSLY AGREES TO WAIVE, AND DOES WAIVE, ANY RIGHT TO A TRIAL BY JURY. CONSULTANT FURTHER UNDERSTANDS THAT THIS AGREEMENT TO ARBITRATE ALSO APPLIES TO ANY DISPUTES THAT THE COMPANY MAY HAVE WITH CONSULTANT. B. Procedure. CONSULTANT AGREES THAT ANY ARBITRATION WILL BE ADMINISTERED BY JAMS PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES & PROCEDURES (THE “JAMS RULES”), WHICH ARE AVAILABLE AT HTTP://WWW.JAMSADR.COM/RULES-EMPLOYMENT-ARBITRATION/. CONSULTANT AGREES THAT THE USE OF THE JAMS RULES DOES NOT CHANGE CONSULTANT’S CLASSIFICATION TO THAT OF AN EMPLOYEE. TO THE CONTRARY, CONSULTANT REAFFIRMS THAT HE/SHE IS AN INDEPENDENT CONTRACTOR. THE ARBITRATION SHALL BE BEFORE A SINGLE ARBITRATOR WHO SHALL BE A FORMER FEDERAL OR STATE COURT JUDGE. THE ARBITRATION SHALL APPLY THE FEDERAL RULES OF CIVIL PROCEDURE, EXCEPT TO THE EXTENT SUCH RULES CONFLICT WITH THE JAMS RULES. CONSULTANT UNDERSTANDS THAT THE PARTIES TO THE ARBITRATION SHALL EACH PAY AN EQUAL SHARE OF THE COSTS AND EXPENSES OF SUCH ARBITRATION (“ARBITRATION COSTS”), EXCEPT AS PROHIBITED BY LAW, AND UNDERSTANDS THAT EACH PARTY SHALL SEPARATELY PAY ITS RESPECTIVE ATTORNEYS’ FEES AND COSTS. IN THE EVENT THAT JAMS FAILS, REFUSES, OR OTHERWISE DOES NOT ENFORCE THE AFOREMENTIONED ARBITRATION COSTS SHARING PROVISION, EITHER PARTY MAY COMMENCE AN ACTION TO RECOVER SUCH AMOUNTS AGAINST THE NON-PAYING PARTY IN COURT AND THE NON-PAYING PARTY SHALL REIMBURSE THE MOVING PARTY FOR THE ATTORNEYS’ FEES AND COSTS INCURRED IN CONNECTION WITH SUCH ACTION. CONSULTANT AGREES THAT THE ARBITRATOR SHALL CONSIDER AND SHALL HAVE THE POWER TO DECIDE ANY MOTIONS BROUGHT BY ANY PARTY TO THE ARBITRATION, INCLUDING MOTIONS FOR SUMMARY JUDGMENT AND/OR ADJUDICATION, AND MOTIONS TO DISMISS, PRIOR TO ANY ARBITRATION HEARING. CONSULTANT AGREES THAT THE ARBITRATOR SHALL ISSUE A WRITTEN DECISION ON THE MERITS. CONSULTANT ALSO AGREES THAT THE ARBITRATOR SHALL HAVE THE POWER TO AWARD ANY REMEDIES AVAILABLE UNDER APPLICABLE LAW. CONSULTANT AGREES THAT THE DECREE OR AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED AS A FINAL AND BINDING JUDGMENT IN ANY COURT HAVING JURISDICTION THEREOF. CONSULTANT AGREES THAT THE ARBITRATOR SHALL APPLY SUBSTANTIVE NEW YORK LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO RULES OF CONFLICT OF LAW. TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH SUBSTANTIVE NEW YORK LAW, NEW YORK LAW SHALL TAKE PRECEDENCE. CONSULTANT AGREES THAT ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED IN NEW YORK, NEW YORK. C. Remedy. EXCEPT AS PROHIBITED BY LAW OR PROVIDED BY THIS AGREEMENT, ARBITRATION SHALL BE THE SOLE, EXCLUSIVE AND FINAL REMEDY FOR
ANY DISPUTE BETWEEN CONSULTANT AND THE COMPANY. ACCORDINGLY, EXCEPT AS PROVIDED BY LAW OR THIS AGREEMENT, NEITHER CONSULTANT NOR THE COMPANY WILL BE PERMITTED TO PURSUE COURT ACTION REGARDING CLAIMS THAT ARE SUBJECT TO ARBITRATION. NOTWITHSTANDING, THE ARBITRATOR WILL NOT HAVE THE AUTHORITY TO DISREGARD OR REFUSE TO ENFORCE ANY LAWFUL COMPANY POLICY, AND THE ARBITRATOR SHALL NOT ORDER OR REQUIRE THE COMPANY TO ADOPT A POLICY NOT OTHERWISE REQUIRED BY LAW WHICH THE COMPANY HAS NOT ADOPTED.
D.
Availability of Injunctive Relief. EITHER PARTY MAY ALSO PETITION THE COURT FOR INJUNCTIVE RELIEF WHERE EITHER PARTY ALLEGES OR CLAIMS A VIOLATION OF ANY AGREEMENT REGARDING TRADE SECRETS, OR CONFIDENTIAL INFORMATION, OR A BREACH OF ANY RESTRICTIVE COVENANT. IN THE EVENT EITHER PARTY SEEKS INJUNCTIVE RELIEF, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER REASONABLE COSTS AND ATTORNEYS’ FEES.
E.
Administrative Relief. CONSULTANT UNDERSTANDS THAT THIS AGREEMENT DOES NOT PROHIBIT CONSULTANT FROM PURSUING AN ADMINISTRATIVE CLAIM WITH A LOCAL, STATE OR FEDERAL ADMINISTRATIVE BODY SUCH AS THE NEW YORK STATE DIVISION OF HUMAN RIGHTS, THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, THE NATIONAL LABOR RELATIONS BOARD, OR THE WORKERS’ COMPENSATION BOARD. THIS AGREEMENT DOES, HOWEVER, PRECLUDE CONSULTANT FROM PURSUING COURT ACTION REGARDING ANY SUCH CLAIM, EXCEPT AS PERMITTED BY LAW.
F.
Voluntary Nature of Agreement. CONSULTANT ACKNOWLEDGES AND AGREES THAT CONSULTANT IS EXECUTING THIS AGREEMENT VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE BY THE COMPANY OR ANYONE ELSE. CONSULTANT FURTHER ACKNOWLEDGES AND AGREES THAT CONSULTANT HAS CAREFULLY READ THIS AGREEMENT AND THAT CONSULTANT HAS ASKED ANY QUESTIONS NEEDED FOR CONSULTANT TO UNDERSTAND THE TERMS, CONSEQUENCES AND BINDING EFFECT OF THIS AGREEMENT AND FULLY UNDERSTAND IT, INCLUDING THAT CONSULTANT IS WAIVING CONSULTANT’S RIGHT TO A JURY TRIAL. FINALLY, CONSULTANT AGREES THAT CONSULTANT HAS BEEN PROVIDED AN OPPORTUNITY TO SEEK THE ADVICE OF AN ATTORNEY OF CONSULTANT’S CHOICE BEFORE SIGNING THIS AGREEMENT.
A.
Governing Law; Consent to Personal Jurisdiction. With the exception of the arbitration requirements set forth herein, this Agreement shall be governed by the laws of the State of New York, without regard to the conflicts of law provisions of any jurisdiction. To the extent that any lawsuit is permitted under this Agreement, the Parties hereby expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in New York.
B.
Assignability. This Agreement will be binding upon Consultant’s heirs, executors, assigns, administrators, and other legal representatives, and will be for the benefit of the Company, its successors, and its assigns. There are no intended third-party beneficiaries to this Agreement, except as expressly stated. Except as may otherwise be provided in this Agreement, Consultant may not sell, assign or delegate any rights or obligations under this Agreement. Notwithstanding anything to the contrary herein, the Company may assign this Agreement and its rights and obligations under this Agreement to any successor to all or substantially all of the Company’s relevant assets, whether by merger, consolidation, reorganization, reincorporation, sale of assets or stock, change of control or otherwise.
C.
Entire Agreement. This Agreement constitutes the entire agreement and understanding between the Parties with respect to the subject matter herein and supersedes all prior written and oral agreements, discussions, or representations between the Parties with respect to the subject matter herein. Consultant represents and warrants that Consultant is not relying on any statement or representation not contained in this Agreement. To the extent any terms set forth in any exhibit or schedule conflict with the terms set forth in this Agreement, the terms of this Agreement shall control unless otherwise expressly agreed by the Parties in such exhibit or schedule. For the avoidance of doubt, this Agreement in no way affects, alters, or modifies any obligation of the Parties under the July 23, 2024 Transition Agreement. The Company will provide Consultant with the payments and benefits set forth in Consultant’s July 23, 2024 Transition Agreement, including, but not limited to, the Section 3 Transition Retention Bonus and the Section 4 Separation Benefits.
D.
Headings. Headings are used in this Agreement for reference only and shall not be considered when interpreting this Agreement.
E.
Severability. If a court or other body of competent jurisdiction finds, or the Parties mutually believe, any provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision will be enforced to the maximum extent permissible so as to effect the intent of the Parties, and the remainder of this Agreement will continue in full force and effect.
F.
Modification, Waiver. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in a writing signed by the Parties. Waiver by the Company of a breach of any provision of this Agreement will not operate as a waiver of any other or subsequent breach.
G.
Notices. Any notice or other communication required or permitted by this Agreement to be given to a Party shall be in writing and shall be deemed given (i) if delivered personally or by commercial messenger or courier service, (ii) when sent by email (so long as such email is not returned as undelivered), or (iii) if mailed by U.S. registered or certified mail (return receipt requested), to the Party at the Party’s address written below or at such other address as the Party may have previously specified by like notice. If by mail, delivery shall be deemed effective three business days after mailing in accordance with this Section 12.G. If by email, delivery shall be deemed effective as of the date it is sent.
(1)
If to the Company, to: Terns Pharmaceuticals, Inc.
1065 East Hillsdale Blvd, Suite 100 Foster City, CA 94404
Attention: Chief Legal Officer Copy to: Chief Executive Officer
(2)
If to Consultant, to the address for notice on the signature page to this Agreement or, if no such address is provided, to the last address of Consultant provided by Consultant to the Company.
H.
Signatures. This Agreement may be signed in two counterparts, each of which shall be deemed an original, with the same force and effectiveness as though executed in a single document.
I.
Protected Activity Not Prohibited. Consultant understands that nothing in this Agreement shall in any way limit or prohibit Consultant from engaging in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall mean filing a charge, complaint, or report with, or otherwise communicating, cooperating, or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission (“Government Agencies”). Consultant understands that in connection with such Protected Activity, Consultant is permitted to disclose documents or other information as permitted by law, and without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, Consultant agrees to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Company confidential information to any parties other than the Government Agencies. Consultant further understands that “Protected Activity” does not include the disclosure of any Company attorney-client privileged communications. Pursuant to the Defend Trade Secrets Act of 2016, Consultant is notified that an individual will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made in confidence to a federal, state, or local government official (directly or indirectly) or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if (and only if) such filing is made under seal. In addition, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the individual’s attorney and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
IN WITNESS WHEREOF, the Parties hereto have executed this Consulting Agreement as of the date first written above.
CONSULTANT TERNS PHARMACEUTICALS, INC.
By: /s/ Mark Vignola By: /s/ Amy Burroughs
Name: Mark Vignola Name: Amy Burroughs
Title: Consultant Title: Chief Executive Officer
Address for Notice:
____________________
____________________
Email address: ____________________
EXHIBIT A
SERVICES AND COMPENSATION
1.
Contact. Consultant’s principal Company contact: Name: Amy Burroughs
Title: Chief Executive Officer
Email: __________________
Phone: __________________
2.
Services. The Services will include, but will not be limited to, the following:
Consultant will provide such services as requested by the Company’s Chief Executive Officer, including but not limited to transfer of Company knowledge to designated parties and consulting services related to the Company’s financial and human resources functions.
A.
February 1, 2025 through and including March 31, 2025 (“Consulting Period 1”): For Services during Consulting Period 1, the Company will pay Consultant a monthly fee of $30,000.00. During Consulting Period 1, Consultant will provide the Services for up to 50 hours each month. Consultant may bill up to an additional 10 hours per month, at a rate of $600 per hour, for services rendered during Consulting Period 1. Compensation for each month during Consulting Period 1 will be paid to Consultant on a 1099 within fifteen (15) days following the end of the applicable month.
B.
April 1, 2025 through and including May 31, 2025 (“Consulting Period 2”): For Services during Consulting Period 2, the Company will pay Consultant a monthly fee of $15,000.00. During Consulting Period 2, Consultant will provide the Services for up to 25 hours each month. . Consultant may bill up to an additional 5 hours per month, at a rate of $600 per hour, for services rendered during Consulting Period
2. Compensation for each month during Consulting Period 2 will be paid to Consultant on a 1099 within fifteen
(15) days following the end of the applicable month.
C.
June 1, 2025 through and including July 31, 2025 (“Consulting Period 3”): For Services during Consulting Period 3, the Company will pay Consultant $600 per hour, except that Consultant will not be paid for more than fifteen (15) hours per month unless Services in excess of such hours are approved in writing (which, for the avoidance of doubt, may include e-mail) in advance by the Company’s Chief Executive Officer or Chief Legal Officer. During Consulting Period 3, Consultant shall submit to the Company a monthly written invoice for Services and expenses, and such statement shall be subject to the approval of the contact person listed above or other designated agent of the Company. The Company will remit payment on a 1099 for properly submitted and approved invoices for Services during Consulting Period 3 within thirty (30) days following invoice submission.
D.
Equity Continuance. For the avoidance of doubt, the Parties agree and acknowledge that Consultant’s services under this Agreement commenced immediately following Consultant’s termination from employment with the Company, such that Consultant has had no break in service between the termination of Consultant’s employment with the Company and the commencement of consulting services under this Agreement.
As a result, while Consultant remains in service to the Company, Consultant’s Company equity awards will continue to vest and remain outstanding in accordance with their terms (including as such terms may have been modified by the Transition Agreement between the Company and Consultant dated July 23, 2024).
E.
Expenses. The Company will reimburse Consultant, in accordance with Company policy, for all reasonable expenses incurred by Consultant in performing the Services pursuant to this Agreement, if Consultant receives written consent from an authorized agent of the Company prior to incurring such expenses and submits receipts for such expenses to the Company in accordance with Company policy. The Company shall provide Consultant with reasonable assistance such as access to office space, to facilitate the Services, including Consultant’s retention of certain Company equipment that was issued to Consultant prior to the Effective Date.
F.
New York Office Space. During the term of this Agreement, the Company anticipates maintaining the lease on its New York offices and for so long as the Company does so, Consultant may, in Consultant’s discretion, utilize such office space including, but not limited to, Consultant’s former office, for the provision of the Services during the term of this Agreement.
In order to help prevent adverse tax consequences to Consultant under Section 409A (as defined below), in no event will any payment under Section 3.A., Section 3.B. or Section 3.C. of this Exhibit be made later than the later of (1) March 15th of the calendar year following the calendar year in which such payment was earned, or (2) the 15th day of the third (3rd) month following the end of the Company’s fiscal year in which such payment was earned.
G.
All payments and benefits provided for under this Agreement are intended to be exempt from or otherwise comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance thereunder (together, “Section 409A”), so that none of the payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. Specifically, it is the intention of the parties that the Services performed hereunder shall not exceed 50% of the average level of services performed by Consultant for the Company and any of its subsidiaries or affiliates over the preceding 36-month period. Further, it is the intention of the parties that the Services shall not implicate Consultant’s “separation from service” (as that term is defined in Treasury Regulation § 1.409A-1(h)). Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
This Exhibit A is accepted and agreed upon as of February 1, 2025.
CONSULTANT TERNS PHARMACEUTICALS, INC.
By: /s/ Mark Vignola By: /s/ Amy Burroughs
Name: Mark Vignola Name: Amy Burroughs
Title: Consultant Title: Chief Executive Officer
EX-10.2
3
tern-ex10_2.htm
EX-10.2
EX-10.2
TERNS, INC.
February 21, 2025
Andrew Gengos
Sent via email
Dear Andrew:
Terns, Inc., a Delaware corporation (the “Company”), is pleased to offer you employment with the Company on the terms and conditions set forth in this agreement (the “Employment Agreement”). Your start date (the “Start Date”) is February 24, 2025.
1.
Position. You will be employed as the Chief Financial Officer (“CFO”) of the Company and will also serve as the CFO of the Company’s parent entity Terns Pharmaceuticals, Inc., a Delaware corporation (“Parent”). You will have the duties, responsibilities and authority customary for a CFO, you will report to the Company’s Chief Executive Officer. Your primary work location will be your home office located in the State of New Hampshire, and you will be expected to travel regularly as part of your duties, including to the Company’s headquarters in Foster City, California. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company or be competitive with the Company. By signing this Employment Agreement, you confirm to the Company that, as of the Start Date, you will have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.
2.
Base Salary. The Company will pay you a salary at the rate of $510,00.00 per year (as adjusted from time to time, the “Base Salary”), payable in accordance with the Company’s standard payroll schedule commencing on the Start Date. This salary may be increased, as determined from time to time by the Company in its sole discretion at the same general times as salary reviews are conducted for other Company employees.
3.
Annual Bonus and Signing Bonus.
(a)
You will be eligible to receive from the Company an annual target cash bonus of 40% of your Base Salary (your “Target Bonus”). The actual annual bonus amount awarded to you (your “Annual Bonus”) may be higher or lower than the Target Bonus based upon the achievement of performance objectives established by the Board. For calendar year 2025, you will be eligible for a pro-rated Annual Bonus, which will be determined based on achievement of performance goals to be determined by the Board. The Annual Bonus will be paid no later than two- and one-half months following the end of the applicable performance year to which it relates, and otherwise in accordance with the Company’s standard payroll schedule.
4.
Equity Grant. As an inducement for you to enter into employment with the Company, the Company will recommend to the Board that you be granted a non-statutory stock option to purchase 750,000 shares of Common Stock in Parent (the “Option”), pursuant to Parent’s 2022 Employment Inducement Award Plan (the “Plan”) and Nasdaq Rule 5635(c)(4), which will have an exercise price per share equal to the fair market value of the Parent’s Common Stock as of the date of grant.
It is anticipated that the grant date of the Option shall be the Start Date, or as soon as practicable thereafter. The Option shall be scheduled to vest over a four-year period as follows: 25% of the shares underlying the Option shall be scheduled to vest on the first day of the month following the one-year anniversary of the Start Date; thereafter the remaining 75% of the shares underlying the Option shall vest on the first day of each month, in monthly pro-rata increments, beginning thirty (30) days after the anniversary of the Start Date, and continuing to vest monthly thereafter until the Option is fully vested, subject to your continued employment and this Employment Agreement.
5.
Employee Benefits and Expenses.
(a)
Benefits. In connection with your service, you will be eligible to receive from the Company employee benefits, bonus plan participation and perquisites commensurate with those provided to the Company’s senior executives, as may be in effect from time to time.
(b)
General Business Expenses. The Company shall pay or reimburse you for all business expenses reasonably and necessarily incurred by you in the performance of your duties under this Employment Agreement, consistent with the Company’s business expense reimbursement policy, as in effect from time to time.
(a)
Upon the termination of your employment with the Company at any time for any reason, you will be paid your salary through your termination date and any other benefits or payments, including any expense reimbursements and accrued and unused vacation, which must be provided to you under applicable law.
(b)
If you are subject to an Involuntary Termination, and subject to Section 6(d), you will be entitled to receive the following benefits (collectively, the “Severance”):
(i)
The Company will pay to you the value of all accrued and vested payments under any benefit plans not otherwise described in this Section 6 that have not been paid or otherwise used through your termination date, which benefits will be paid to you on the first regular payroll date following the end of the Release Period;
(ii)
The Company will pay to you a pro-rated portion of your Target Bonus based on the number of days of such performance year you were employed, which payment will be made to you at the time annual bonuses for such performance year are paid to other C-level officers, or, if earlier, by March 15 of the year following the year of the Involuntary Termination;
(iii)
The Company will continue to pay your then-current Base Salary on the Company’s regular payroll dates as if your employment continued for a period of twelve (12) months following the Involuntary Termination (which payments, for the avoidance of doubt, will continue even if you find subsequent employment with another employer);
Subject to your timely and proper election of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), for both you and your eligible dependents, the Company will provide continuation of your then-effective group medical, vision and dental coverage, at Company cost, for twelve (12) months following the Involuntary Termination, provided that to the extent the payments would result in adverse penalties under applicable laws or COBRA coverage is not otherwise available, the Company will provide to you, in lieu of any portion of this continued coverage, taxable installment payments equal to the amount of the applicable premiums in effect at the Involuntary Termination for the remainder of this twelve (12) month period, on the first day of each such month. The Company’s obligations under this subsection shall not apply once you become eligible for medical and dental, coverage from another employer where the cost to you is consistent with similarly situated participants under such plans and you agree to provide prompt notice to the Company if you become so eligible.
(c)
If you are subject to an Involuntary Termination within three (3) months prior to or twelve (12) months following a Change in Control, (the “Change in Control Period”) and subject to Section 6(d) and Section 9, you will be entitled to receive the following Change in Control benefits in lieu of the Severance benefits pursuant to Section 6(b) (the “Change in Control Benefits”):
(i)
The Company will pay to you the value of all accrued and vested payments under any benefit plans not otherwise described in this Section 6 that have not been paid or otherwise used through your termination date, which benefits will be paid to you on the first regular payroll date following the end of the Release Period;
(ii)
The Company will pay to you a lump sum payment equal to 100% of your Annual Bonus, which payment will be made in a lump sum on the first regular payroll date following the end of the Release Period;
(iii)
The Company will pay your then-current Base Salary equivalent to twelve (12) months in a lump sum on the first regular payroll date following the end of the Release Period; and
(iv)
100% of your then outstanding Equity Awards, including awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and become vested and exercisable. Equity Awards that vest upon satisfaction of performance criteria for which those criteria have not yet been satisfied or cannot be determined as of the date of your Involuntary Termination shall be measured as if all applicable performance criteria were achieved at target levels, except to the extent otherwise provided in the award agreement evidencing such award. For the avoidance of doubt, if you experience an Involuntary Termination following a Potential Change in Control, and the applicable Change in Control is consummated within the Change in Control Period, then your vesting acceleration under this Employment Agreement shall occur on the date of such Change in Control rather than upon the date of your Involuntary Termination. Upon your Separation within the Change in Control Period, all of your then- outstanding Equity Awards shall remain outstanding and eligible to vest as necessary to give effect to this provision; and
(v)
Subject to your timely and proper election of coverage under COBRA, for both you and your eligible dependents, the Company will provide continuation of your then-effective group medical, vision and dental coverage, at Company cost, for twelve (12)
months following the Involuntary Termination, provided that to the extent the payments would result in adverse penalties under applicable laws or COBRA coverage is not otherwise available the Company will provide to you, in lieu of any portion of this continued coverage, taxable installment payments equal to the amount of the applicable premiums in effect at the Involuntary Termination for the remainder of this twelve (12) month period, on the first day of each such month. The Company’s obligations under this subsection shall not apply once you become eligible for medical and dental, coverage from another employer where the cost to you is consistent with similarly situated participants under such plans and you agree to provide prompt notice to the Company if you become so eligible.
Notwithstanding the foregoing, you shall be entitled to the greater benefits, if any, as may be provided under the Parent’s Change In Control Policy, as it may be amended from time to time (the “CIC Policy”), subject to its terms and conditions; provided, however, that nothing in this Agreement or the CIC Policy shall require the Parent to provide any duplicate payments or benefits.
If the basis for the Involuntary Termination is a resignation for Good Reason due to a reduction in your base salary, the Severance or Change in Control Benefits (as applicable) will be calculated by reference to your base salary in effect prior to the reduction.
For purposes of this Employment Agreement, “Potential Change in Control” means the date of execution of a legally binding and definitive agreement for a corporate transaction which, if consummated, would constitute the applicable Change in Control (which for the avoidance of doubt, would include a merger agreement, but not a term sheet for a merger agreement).
(d)
Receipt of the Severance or Change in Control Benefits (as applicable) will be conditioned upon your execution and timely delivery to the Company of a release of claims in substantially the form attached hereto as Exhibit A (the “Release”) and your continued compliance with the terms thereof, which Release must be executed, delivered to the Company and become irrevocable, within 60 days following your Involuntary Termination (this 60-day period, the “Release Period”). Any installment payments under Section 6(b)(iv) will begin to be paid on the first regular payroll date beginning after the expiration of the Release Period, and will include any amounts that would have been payable during the Release Period but for this sentence.
(e)
Notwithstanding anything to the contrary herein or in any equity plan or any applicable award agreement pursuant to Equity Awards granted thereunder, to the extent that the successor or acquiring corporation (if any) of the Parent, or the definitive agreement governing a Change in Control, provides that your Equity Awards should be cancelled without consideration upon a Change in Control, each of your unvested Equity Awards that would otherwise be so cancelled shall instead accelerate and become fully vested and if applicable, exercisable, effective immediately prior to the Change in Control. With respect to Performance-Based Awards (if any are provided to you), the grant agreement may provide for alternative treatment in lieu of the foregoing and, absent any such treatment in the grant agreement, the vesting acceleration provided for herein shall be deemed to have been met based on the achievement of the Performance-Based Award based on “at target” performance.
7.
Proprietary Information and Inventions Agreement. You affirm that you will execute the Employee Invention Assignment and Confidentiality Agreement between you and the Company (the “Invention Assignment Agreement”) simultaneously with the execution of this Employment Agreement.
8.
Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without Cause or notice. Any contrary representations that may have been made to you are superseded by this Employment Agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you, if you are an officer).
(a)
Withholding. All forms of compensation referred to in this Employment Agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.
(b)
Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Section 409A”), the Company intends that all amounts in this Agreement are exempt and each installment payment under this Agreement, including the severance payments in Section 6, is hereby designated as a separate payment. If the Company determines that you are a “specified employee” under Section 409A(a)(2)(B)(i) at the time of your Separation, then (i) the benefits under Section 6, to the extent that they are subject to Section 409A, will commence on the first business day following (A) expiration of the six month period measured from your Separation or (B) the date of your death and (ii) the installments that otherwise would have been paid prior to such date will be paid in a lump sum when the salary continuation payments commence. Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this Employment Agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A,
(x) the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other calendar year; (y) in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which you incurred such expenses; and (z) in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit. Further, to the extent any nonqualified deferred compensation subject to Section 409A payable to you hereunder could be paid in one or more taxable years depending upon you completing certain employment-related actions (such as resigning after a failure to cure a Good Reason event and/or returning an effective release), then any such payments will commence or occur in the later taxable year to the extent required by Section 409A.
If any payment or benefit you would receive from the Company or otherwise in connection with a Change in Control or other similar transaction (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for you. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).
(ii)
Notwithstanding the foregoing, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Code that would not otherwise be subject to taxes pursuant to Section 409A of the Code, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A of the Code as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for you as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A of the Code shall be reduced (or eliminated) pro rata with payments that are not deferred compensation within the meaning of Section 409A of the Code.
(iii)
Unless you and the Company agree on an alternative accounting firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction triggering the Payment shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to you and the Company at least (5) calendar days prior to the date of the change in control transaction (if requested at that time by you or the Company) or such other time as requested by you or the Company.
If you receive a Payment for which the Reduced Amount was determined to be the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax, and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, then the accounting firm will redo the calculation of the Reduced Amount, and to the extent the better after tax position would be to reduce the Payment, you shall promptly return to the Company a sufficient amount of the Payment (gross of applicable tax withholdings previously made) after reduction pursuant to the first paragraph of this Section so that no portion of the remaining Payment is subject to the Excise Tax.
(d)
Tax Advice. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company has no duty to design its compensation policies in a manner that minimizes your tax liabilities, and provided the Company implements this Employment Agreement in accordance with its terms, you will not make any claim against the Company, its Parent, or the Company or Parent Board related to tax liabilities arising from your compensation.
10.
Interpretation, Amendment and Miscellaneous. This Employment Agreement supersedes and replaces all prior offer letters and written and oral agreements between you and the Company, as well as any other prior or contemporaneous agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company, and constitute the complete agreement between you and the Company regarding the subject matter set forth herein; provided, however, that, for the avoidance of doubt, the Invention Assignment Agreement, the Indemnification Agreement and the Arbitration Agreement shall continue to be in force. This Employment Agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company (other than you, if you are an officer). This Employment Agreement shall be governed by and construed in accordance with the laws of the State of California. If any term, covenant, condition or provision of this Employment Agreement or the application thereof to any person or circumstance shall, at any time, or to any extent, be determined invalid or unenforceable, the remaining provisions of this Employment Agreement shall not be affected thereby and shall be deemed valid and fully enforceable to the extent permitted by law. This Employment Agreement may be executed in any number of counterparts, and each such counterpart hereof will be deemed to be an original instrument, but all such counterparts together will constitute but one agreement. Signature pages delivered by facsimile or electronic mail will be treated as are originals. The rights and obligations of the Company under this Employment Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company. Your rights and obligations hereunder are non- assignable. The Company may assign its rights and obligations to any entity in which the Company or an entity affiliated with the Company, has a majority ownership interest. Any notice required by this Employment Agreement shall be sufficient if in writing and delivered to the party or sent by certified mail, return receipt requested and addressed to the party’s last business or residential address, or otherwise delivered in person or through a reliable electronic delivery system. Either party may change the specified address by giving written notice of such change.
11.
Arbitration. You and the Company agree to submit to mandatory binding arbitration any and all claims arising out of or related to your employment with the Company in accordance with the separate Mutual Arbitration Agreement executed simultaneously herewith.
The Arbitration Agreement will not restrict your right to file administrative claims you may bring before any government agency where, as a matter of law, the parties may not restrict the employee’s ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, the parties agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims.
12.
Indemnification. You will receive defense and be indemnified by the Company and Parent to the full extent of the provisions of any indemnification agreement between you and Parent (any such agreement, your “Indemnification Agreement”), the charter and bylaws of the Company and Parent and applicable law.
13.
Definitions. The following terms have the meaning set forth below wherever they are used in this Employment Agreement:
“Cause” means the occurrence of any one or more of the following: (i) your commission of any crime involving fraud, dishonesty or moral turpitude; (ii) your attempted commission of or participation in a fraud or act of dishonesty against the Company that results in (or might have reasonably resulted in) material harm to the business of the Company; (iii) your intentional, material violation of any contract or agreement between you and the Company or any statutory duty you owe to the Company; or (iv) your conduct that constitutes gross insubordination or habitual neglect of duties and that results in (or might have reasonably resulted in) material harm to the business of the Company; provided, however, that the action or conduct described in clauses (iii) and (iv) above will constitute “Cause” only if such action or conduct continues after the Company has provided you with written notice thereof and thirty (30) days to cure, or otherwise remedy to the extent possible under direct control of you, the same. An occurrence of “Cause” as set forth in the preceding sentence shall be based upon a good faith determination by the Company.
“Change in Control” shall mean an Acquisition (as defined in Parent’s 2021 Incentive Award Plan, as it may be amended or restated from time to time). Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Agreement by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also qualify as a “change in control event” within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
“Equity Awards” means all options to purchase Parent common stock as well as any and all other stock-based awards granted to you by Parent, including but not limited to stock bonus awards, restricted stock awards, restricted stock unit awards or stock appreciation rights.
“Good Reason” means, without your consent, any of the following actions: (i) there occurs a material diminution in your duties, authority or responsibilities; provided, however, that Good Reason shall not be deemed to have occurred solely due to a change in your title; (ii) a reduction of greater than 10% in your annual base salary as in effect on the Effective Date, or immediately following the effective date of the Change in Control; provided, however, that Good Reason shall not be deemed to have occurred in the event of a reduction in your annual base salary that is pursuant to a salary reduction program affecting all of the C-level officers of the Company and that does not adversely affect you to a greater extent than the other C-level officers; or (iii) a relocation of your primary business office to a location more than 30 miles from the location of your then-primary business office, provided that, with respect to each of the reasons set forth above, (1) you provide the Company with written notice of your intention to terminate your employment for Good Reason within ninety (90) calendar days after the occurrence of the event that you believe would constitute Good Reason and (2) you provide the Company with a period of at least thirty (30) calendar days (the “Company Cure Period”) following receipt of such notice from you in which to cure the event giving rise to such Good Reason termination, and (3) your resignation is effective within ten (10) calendar days of the earlier of expiration of the Company Cure Period or written notice from the Company that it will not undertake to cure the condition set forth in set forth in subclauses (i) through (iii).
“Involuntary Termination” means you experience a Separation resulting from (A) a Termination without Cause, or (B) you voluntarily resigning your employment for Good Reason. A termination or resignation due to your death or disability shall not constitute an Involuntary Termination.
“Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code.
“Termination Without Cause” means a Separation as a result of a termination of your employment by the Company without Cause, provided you are willing and able to continue performing services within the meaning of Treasury Regulation 1.409A-1(n)(1).
14.
Board Service. It shall not be a violation of this Employment Agreement for the executive to serve on the two (2) corporate boards and committees that he currently serves so long as such activities do not significantly interfere with the performance of his responsibilities as an employee of the Company. Except as set forth above in this Section 14, you may only assume outside board duties with prior written disclosure and approval of the Company, which approval shall not be unreasonably withheld, as long as the business activity is not directly competitive with any line of business of the Company and Parent and such board service does not interfere with your performance of your duties to the Company and Parent.
15.
Contingencies. The Company reserves the right to conduct a background investigation and/or reference check. This Employment Agreement is contingent upon the completion of: (a) a background investigation and/or reference check satisfactory to the Company; and (b) Company’s receipt of documentary evidence of identity and eligibility for employment in the United States within three (3) business days after the applicant’s Start Date, as required by applicable law.
[Signature Page Follows]
TERNS, INC.
By: /s/Amy Burroughs Name: Amy Burroughs
Title: Chief Executive Officer
TERNS PHARMACEUTICALS, INC.
(solely in respect of its explicit obligations under this Employment Agreement)
By: /s/Amy Burroughs
Name: Amy Burroughs
Title: Chief Executive Officer I have read and accept this Employment Agreement:
/s/ Andrew Gengos
Andrew Gengos
Exhibit A – Form of Release
In consideration of the benefits provided and to be provided to me by Terns, Inc., or any successor thereof (the “Company”) pursuant to the Employment Agreement with Company dated
, (the “Agreement”) (the “Benefits”) and in connection with the termination of my employment, I agree to the following general release (the “Release”).
1.
On behalf of myself, my heirs, executors, administrators, successors, and assigns, I hereby fully and forever generally release and discharge Company, its current, former and future parents, subsidiaries, affiliated companies, related entities, employee benefit plans, and, in such capacities, their fiduciaries, predecessors, successors, officers, directors, stockholders, agents, employees and assigns from any and all claims, causes of action, and liabilities up through the date of my execution of the Release. The claims subject to this release include, but are not limited to, those relating to my employment with Company and/or any predecessor to Company and the termination of such employment. All such claims (including related attorneys’ fees and costs) are barred without regard to whether those claims are based on any alleged breach of a duty arising in statute, contract, or tort. This expressly includes waiver and release of any rights and claims arising under any and all laws, rules, regulations, and ordinances, including, but not limited to: Title VII of the Civil Rights Act of 1964; the Older Workers Benefit Protection Act; the Americans With Disabilities Act; the Age Discrimination in Employment Act; the Fair Labor Standards Act; the National Labor Relations Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); the Workers Adjustment and Retraining Notification Act; any and all applicable state laws; and any laws of any other state or governmental entity. This Release does not extend to, and has no effect upon, any benefits that have accrued or equity that has vested or is eligible for vesting post-employment, to, under any employee benefit or equity plan, program, policy or grant sponsored or maintained by the Company, or to my right to indemnification by the Company or its parent, and continued coverage by the Company’s or its parent’s director’s and officer’s insurance.
2.
If this release is executed relating to employment in California, the following applies: **Unknown Claims, Waiver of California Civil Code Section 1542. I understand and expressly agree that this Agreement extends to all claims of every nature and kind, known or unknown, suspected or unsuspected, past, present, or future, arising from or attributable to any conduct of the Company, whether set forth in any claim or demand referred to in this Agreement or not, and that any and all rights granted to me under Section 1542 of the California Civil Code or any analogous state law or federal law or regulation, are expressly WAIVED. Section 1542 of the California Civil Code reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASING PARTY.
In waiving the provisions of Section 1542 of the California Civil Code, I acknowledge I may later discover facts in addition to or different from those I now believe to be true with respect to the matters released in this Agreement. I however, agree I have taken that possibility into account in reaching this Agreement, and that the release in this Agreement will remain in effect as a full and complete release notwithstanding the discovery or existence of additional or different facts.
3.
In understanding the terms of the Release and my rights, I have been advised to consult with an attorney of my choice prior to executing the Release. I understand that nothing in the Release shall prohibit me from exercising legal rights that are, as a matter of law, not subject to waiver such as: (a) my rights under applicable workers’ compensation laws; (b) my right, if any, to seek unemployment benefits; (c) my rights to indemnification under applicable law, contract or the Company’s organizational documents; (d) my right to file a charge or complaint with a government agency such as but not limited to the Equal Employment Opportunity Commission, the National Labor Relations Board, the Department of Labor, the state departments of labor or fair employment practices authority, and (e) my right to report any violation to the Securities and Exchange Commission or any other federal or state agency. I further understand that nothing in this Release precludes me from entitlement to any monetary recovery awarded by the Securities and Exchange Commission in connection with any action asserted by the Securities and Exchange Commission. Moreover, I will continue to be indemnified for my actions taken while employed by the Company to the same extent as other former directors and officers of the Company or its parent under the Company’s Certificate of Incorporation and Bylaws, the Memorandum and Articles of Association of the Company’s parent, and the Director Indemnification Agreement between me and the Company’s parent, if any, and I will continue to be covered by the Company’s and/or its parent’s directors and officers liability insurance policy as in effect from time to time to the same extent as other former directors and officers of the Company and its parent, each subject to the requirements of the laws of the State of Delaware. To the fullest extent permitted by law, any dispute regarding the scope of this general release shall be resolved through binding arbitration as set forth in my Agreement.
4.
I understand and agree that Company will not provide me with the Benefits unless I execute the Release. I also understand that I have received or will receive, regardless of the execution of the Release, all wages owed to me together with any accrued but unused vacation pay, less applicable withholdings and deductions, earned through my termination date.
5.
As part of my existing and continuing obligations to Company, I have returned to Company all Company documents (and all copies thereof) and other Company property that I have had in my possession at any time, including but not limited to Company files, notes, drawings, records, business plans and forecasts, financial information, specification, computer-recorded information, tangible property (including, but not limited to, computers, laptops, pagers, etc.), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of Company (and all reproductions thereof, except as otherwise I am entitled to retain under any agreement with the Company). I understand that, even if I did not sign the Release, I am still bound by any and all confidential/proprietary/trade secret information, non-disclosure and inventions assignment agreement(s) signed by me in connection with my employment with Company, or with a predecessor or successor of Company pursuant to the terms of such agreement(s).
6.
I represent and warrant that I am the sole owner of all claims relating to my employment with Company and/or with any predecessor of Company, and that I have not assigned or transferred any claims relating to my employment to any other person or entity.
7.
I agree to keep the Benefits and the provisions of the Release confidential and not to reveal its contents to anyone except my lawyer, my spouse or other immediate family member, and/or my financial consultant, or as required by legal process or applicable law or requested by taxing authorities unless and until they become publicly available. I will not, however, be bound from speaking about any harassment or discrimination that I believe occurred at the Company during my employment, consistent with applicable law.
8.
I understand and agree that the Release shall not be construed at any time as an admission of liability or wrongdoing by either Company or myself.
9.
I agree that for following my termination of employment, and subject to paragraph 7 above, I will not, directly or indirectly, make any disparaging statements or comments, either as fact or as opinion, about Company, its employees, officers, directors, stockholders, vendors, products or services, business, technologies, market position or performance. In addition, The Company shall use its best efforts to ensure that the Company’s and Parent’s executive officers and Board members (to the extent then in service) shall not make, directly or indirectly, any negative or disparaging statements or comments, either as fact or as opinion about you, with any written or oral statement. Nothing in this paragraph shall prohibit you or the Company or its executive officers or Company Board members from providing truthful information in response to a subpoena or other legal process.
10.
I agree to reasonably cooperate with the Company in any internal investigation, any administrative, regulatory, or judicial proceeding or any dispute with a third party related to my employment period. I understand and agree that my cooperation may include, but not be limited to, making myself reasonably available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s reasonable request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over to the Company all relevant documents which are or may come into my possession all at times and on schedules that are reasonably consistent with my other permitted activities and commitments. The Company shall to the extent reasonably feasible limit my travel and not interfere with my other obligations in seeking such cooperation. The Company shall reimburse my reasonable expenses incurred in connection with such cooperation.
11.
I agree to submit any claims arising from this Release or my employment to mandatory binding arbitration consistent with my arbitration agreement. I HEREBY WAIVE ANY RIGHTS TO TRIAL BY JURY IN REGARD TO SUCH CLAIMS. This agreement to arbitrate does not restrict my right to file administrative claims I may bring before any government agency where, as a matter of law, the parties may not restrict my ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, I agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims.
12.
I agree that if I am over the age of 40, I have had at least twenty-one (21) calendar days in which to consider whether to execute the Release, no one hurried me into executing the Release during that period, and no one coerced me into executing the Release. I understand that the offer of the Benefits and the Release shall expire on the twenty-second (22nd) calendar day after my employment termination date if I have not accepted it by that time. I further understand that Company’s obligations under the Release shall not become effective or enforceable until the eighth (8th) calendar day after the date I sign the Release provided that I have timely delivered it to Company (the “Effective Date”) and that in the seven (7) day period following the date I deliver a signed copy of the Release to Company. I understand that I may revoke my acceptance of the Release. I understand that the Benefits will become available to me at such time after the Effective Date. If I am under the age of 40, I have 10 days to consider the terms of the Release once the Release is presented to me for signature. The Effective Date for me if I am over the age of 40 is the date I sign and return the Release to the Company.
13.
In executing the Release, I acknowledge that I have not relied upon any statement made by Company, or any of its representatives or employees, with regard to the Release unless the representation is specifically included herein. Furthermore, the Release contains our entire understanding regarding eligibility for Benefits and supersedes any or all prior representation and agreement regarding the subject matter of the Release. However, the Release does not modify, amend or supersede written Company agreements that are consistent with enforceable provisions of this Release such as my Agreement, proprietary information and invention assignment agreement, and any equity award, stock option and/or stock purchase agreements between Company or its Parent and me. Once effective and enforceable, this agreement can only be changed by another written agreement signed by me and an authorized representative of Company.
14.
Should any provision of the Release be determined by an arbitrator, court of competent jurisdiction, or government agency to be wholly or partially invalid or unenforceable, the legality, validity and enforceability of the remaining parts, terms, or provisions are intended to remain in full force and effect. Specifically, should a court, arbitrator, or agency conclude that a particular claim may not be released as a matter of law, it is the intention of the parties that the general release and the waiver of unknown claims above shall otherwise remain effective to release any and all other claims. I acknowledge that I have obtained sufficient information to intelligently exercise my own judgment regarding the terms of the Release before executing the Release.
15.
Section RESERVED in the event additional release provisions are required by modifications or amendment to existing Federal, state or local law applicable to release agreements delivered by employees.
I have read the release, I understand it and I know that I am giving up important rights. I have obtained sufficient information to intelligently exercise my own judgment. I have been advised that I should consult with an attorney before signing it, and I have signed the release knowingly and voluntarily. Effective upon execution by employee.
Date delivered to employee: _______________
________________________________________
Employee Name
EXAMPLE/DO NOT SIGN Date executed: ______________ I, Amy Burroughs, certify that:
Employee signature
EX-31.1
4
tern-ex31_1.htm
EX-31.1
EX-31.1
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this Quarterly Report on Form 10-Q of Terns Pharmaceuticals, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: May 8, 2025 |
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By: |
/s/ Amy Burroughs |
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Amy Burroughs |
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Chief Executive Officer and Director
(Principal Executive Officer)
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EX-31.2
5
tern-ex31_2.htm
EX-31.2
EX-31.2
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew Gengos, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Terns Pharmaceuticals, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: May 8, 2025 |
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By: |
/s/ Andrew Gengos |
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Andrew Gengos |
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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EX-32.1
6
tern-ex32_1.htm
EX-32.1
EX-32.1
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Terns Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 8, 2025 |
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By: |
/s/ Amy Burroughs |
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Amy Burroughs |
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Chief Executive Officer and Director
(Principal Executive Officer)
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EX-32.2
7
tern-ex32_2.htm
EX-32.2
EX-32.2
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Terns Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 8, 2025 |
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By: |
/s/ Andrew Gengos |
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Andrew Gengos |
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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