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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025


☐	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)


Delaware	98-1448275
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1065 East Hillsdale Blvd., Suite 100 Foster City, California	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:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	TERN	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.

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 August 1, 2025, the registrant had 87,511,048 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;

•

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.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
	Signatures	32

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)


	June 30, 2025			December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	145,966		$	161,439
Marketable securities		169,479			196,725
Prepaid expenses and other current assets		3,507			3,945
Total current assets		318,952			362,109
Property and equipment, net		70			222
Operating lease assets		1,037			1,248
Other assets		356			350
Total assets	$	320,415		$	363,929
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,849		$	2,148
Accrued expenses and other current liabilities		9,621			13,074
Current portion of operating lease liabilities		444			428
Total current liabilities		12,914			15,650
Taxes payable, non-current		1,583			1,490
Operating lease liabilities, non-current		689			919
Total liabilities		15,186			18,059
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value, 150,000,000 shares authorized at June 30, 2025 and December 31, 2024; 87,470,136 and 87,126,583 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively		9			9
Additional paid-in capital		774,724			767,621
Accumulated other comprehensive loss		(22	)		(279	)
Accumulated deficit		(469,482	)		(421,481	)
Total stockholders’ equity		305,229			345,870
Total liabilities and stockholders’ equity	$	320,415		$	363,929

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)


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Operating expenses:
Research and development	$	20,353		$	18,352		$	39,073		$	36,939
General and administrative		7,030			7,185			15,737			14,044
Total operating expenses		27,383			25,537			54,810			50,983
Loss from operations		(27,383	)		(25,537	)		(54,810	)		(50,983	)
Other income:
Interest income		3,350			2,876			6,993			6,058
Other income (expense), net		4			(14	)		(32	)		(26	)
Total other income, net		3,354			2,862			6,961			6,032
Loss before income taxes		(24,029	)		(22,675	)		(47,849	)		(44,951	)
Income tax expense		(64	)		(61	)		(152	)		(158	)
Net loss	$	(24,093	)	$	(22,736	)	$	(48,001	)	$	(45,109	)

Net loss per share, basic and diluted	$	(0.26	)	$	(0.31	)	$	(0.52	)	$	(0.61	)
Weighted average common stock outstanding, basic and diluted		91,575,039			74,459,774			91,524,772			74,429,576

Other comprehensive loss:
Net loss	$	(24,093	)	$	(22,736	)	$	(48,001	)	$	(45,109	)
Net unrealized (loss) gain on available-for-sale securities, net of tax		(54	)		(115	)		285			(408	)
Foreign exchange translation adjustment, net of tax		(19	)		(7	)		(28	)		(16	)
Comprehensive loss	$	(24,166	)	$	(22,858	)	$	(47,744	)	$	(45,533	)

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)


Six Months Ended June 30, 2025
	Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital			(Loss) Income			Deficit			Equity
Balances at December 31, 2024		87,126,583	$	9	$	767,621		$	(279	)	$	(421,481	)	$	345,870
Exercise of stock options		42,000		—		74			—			—			74
Vesting of restricted stock units with service conditions		129,046		—		—			—			—			—
Stock-based compensation expense		—		—		3,677			—			—			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
Exercise of stock options		36,637		—		72			—			—			72
Issuance of common stock under employee stock purchase plan		95,276		—		252			—			—			252
Vesting of restricted stock units with service conditions		40,594		—		—			—			—			—
Stock-based compensation expense		—		—		3,028			—			—			3,028
Net unrealized loss on available-for-sale securities		—		—		—			(54	)		—			(54	)
Foreign exchange translation adjustment		—		—		—			(19	)		—			(19	)
Net loss		—		—		—			—			(24,093	)		(24,093	)
Balances at June 30, 2025		87,470,136	$	9	$	774,724		$	(22	)	$	(469,482	)	$	305,229

Six Months Ended June 30, 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
Exercise of stock options		4,000		—		12			—			—			12
Issuance of common stock under employee stock purchase plan		87,083		—		387			—			—			387
Issuance of common stock in connection with exercise of pre-funded warrants		5,564,904		1		(1	)		—			—			—
Vesting of restricted stock units with service conditions		27,956		—		—			—			—			—
Stock-based compensation expense		—		—		4,420			—			—			4,420
Net unrealized loss on available-for-sale securities		—		—		—			(115	)		—			(115	)
Foreign exchange translation adjustment		—		—		—			(7	)		—			(7	)
Net loss		—		—		—			—			(22,736	)		(22,736	)
Balances at June 30, 2024		70,335,636	$	7	$	596,854		$	(443	)	$	(377,737	)	$	218,681

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)


	Six Months Ended June 30,
	2025			2024
Cash flows from operating activities:
Net loss	$	(48,001	)	$	(45,109	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		6,705			8,448
Depreciation expense		66			170
Net accretion on marketable securities		(135	)		(1,522	)
Change in deferred taxes and uncertain tax positions		68			68
Amortization of right-of-use assets		211			306
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		524			(949	)
Accrued interest, net of interest received		207			597
Accounts payable		701			(642	)
Accrued expenses and other liabilities		(3,452	)		8
Operating lease liabilities		(214	)		(352	)
Net cash used in operating activities		(43,320	)		(38,977	)
Cash flows from investing activities:
Purchase of property and equipment		—			(42	)
Purchase of marketable securities		(25,041	)		(50,594	)
Proceeds from maturities of marketable securities		52,500			100,824
Net cash provided by investing activities		27,459			50,188
Cash flows from financing activities:
Payment of deferred offering costs		(6	)		—
Proceeds from stock option exercises		146			12
Proceeds from issuance of common stock under employee stock purchase plan		252			387
Net cash provided by financing activities		392			399
Effect of exchange rate changes on cash and cash equivalents		(4	)		(40	)
Net (decrease) increase in cash and cash equivalents		(15,473	)		11,570
Cash and cash equivalents at beginning of period		161,439			79,926
Cash and cash equivalents at end of period	$	145,966		$	91,496
Supplemental disclosure of cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	237		$	366

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 and six months ended June 30, 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 in 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 and Company, LLC (Cowen) as sales agent, pursuant to which the Company has the ability to offer and sell, from time to time, through TD Securities (USA) LLC, as successor to 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 June 30, 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 June 30, 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 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)	June 30, 2025		December 31, 2024
Research and development costs	$	4,512	$	3,388
Compensation and benefit costs		3,215		7,912
Accrued professional fees		1,433		1,319
Other		461		455
Total accrued expenses and other current liabilities	$	9,621	$	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 June 30, 2025, the ending accrued liability was $0.1 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 continued until 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 June 30, 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 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 the three months ended June 30, 2025 and 2024 of $0.1 million. The Company recorded income tax expense for the six months ended June 30, 2025 and 2024 of $0.2 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 June 30, 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 and six months ended June 30, 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:


	June 30,
	2025		2024
Options to purchase common stock		14,854,546		11,366,749
Unvested restricted stock units with service conditions		607,760		782,737
Unvested restricted stock units with market conditions		150,000		150,000
Shares issuable under employee stock purchase plan		27,833		13,589
Total		15,640,139		12,313,075

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:


	June 30, 2025
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	124,002	$	—	$	—		$	124,002
U.S. government securities		169,272		228		(21	)		169,479
Total	$	293,274	$	228	$	(21	)	$	293,481

Classified as:
Cash equivalents								$	124,002
Marketable securities									169,479
Total								$	293,481

	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:


	June 30, 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	$	60,498	$	(21	)	$	—	$	—		$	60,498	$	(21	)
Total	$	60,498	$	(21	)	$	—	$	—		$	60,498	$	(21	)

	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 June 30, 2025, the Company had 5 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 June 30, 2025
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents
Cash in bank balances	$	21,964	$	—	$	—	$	21,964
Money market funds		124,002		—		—		124,002
Total cash and cash equivalents	$	145,966	$	—	$	—	$	145,966
Marketable securities
U.S. government securities	$	—	$	169,479	$	—	$	169,479
Total marketable securities	$	—	$	169,479	$	—	$	169,479

	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 cash 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 June 30, 2025, by contractual maturity, are as follows:


(in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	101,118	$	101,127
Due after one year through two years		68,154		68,352
Total marketable securities	$	169,272	$	169,479

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 June 30,				Six Months Ended June 30,
(in thousands)	2025		2024		2025			2024
Operating lease cost	$	128	$	162	$	231		$	323
Short-term cost		3		3		9			7
Total lease cost	$	131	$	165	$	240		$	330

					June 30,
					2025			2024
Weighted-average remaining lease term						2.33			0.34
Weighted-average discount rate						10.00	%		6.00	%

The Company's future minimum lease payments are as follows:


(in thousands)	Operating Leases
2025	$	267
2026		545
2027		465
2028 and thereafter		—
Total lease payments		1,277
Less: Imputed interest		(144	)
Present value of lease liabilities		1,133
Less: Current portion of lease liabilities		(444	)
Total lease liabilities, non-current	$	689

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 June 30, 2025 and December 31, 2024.

The Company had reserved shares of common stock for issuance in connection with the following:


	June 30, 2025		December 31, 2024
Options outstanding under incentive award plans		14,854,546		10,610,387
Unvested restricted stock units with service conditions		607,760		547,430
Unvested restricted stock units with market conditions		150,000		150,000
Shares available for future grant under incentive award plans		5,211,132		4,092,569
Shares available for future grant under employee stock purchase plans		1,984,826		1,208,837
Shares available for future grant under employment inducement award plans		1,370,001		2,685,001
Pre-funded warrants		4,190,952		4,190,952
Total shares reserved		28,369,217		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 June 30, 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 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 June 30, 2025, 5,211,132 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 June 30, 2025, 1,984,826 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 June 30, 2025, there was $0.8 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 1.92 years as of June 30, 2025. There were 95,276 and 87,083 shares purchased by employees under the 2021 ESPP during the six months ended June 30, 2025 and 2024, respectively.

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 June 30, 2025, 1,370,001 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 June 30, 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 June 30, 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 six months ended June 30, 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		6,090,383			4.04
Exercised		(78,637	)		1.85				152
Forfeited		(1,767,587	)		8.52
Outstanding as of June 30, 2025		14,854,546		$	6.40		7.59	$	1,515
Exercisable, June 30, 2025		5,697,974		$	8.40		4.87	$	294
Vested and expected to vest, June 30, 2025		14,854,546		$	6.40		7.59	$	1,515

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 June 30, 2025, there was $30.0 million of unrecognized stock-based compensation expense related to unvested stock options which is estimated to be recognized over a period of 2.91 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 six months ended June 30, 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		(169,640	)		6.75
Forfeited		(14,625	)		7.20
Unvested restricted stock units as of June 30, 2025		607,760		$	5.61

As of June 30, 2025, there was $3.0 million of unrecognized stock-based compensation expense related to RSUs with service conditions which is estimated to be recognized over a period of 2.43 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 June 30, 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 June 30, 2025, there was $0.1 million of unrecognized stock-based compensation expense related to RSUs with market conditions which is estimated to be recognized over a period of 0.34 years.

Stock-Based Compensation Expense

The Company estimated the fair value of options granted and rights to acquire stock granted under the Company’s ESPP using a Black-Scholes option pricing model with the following assumptions presented on a weighted average basis:


	Six Months Ended June 30,
	2025			2024
Stock Option Plans
Expected term (years)		6.04			6.05
Expected volatility		74.47	%		77.61	%
Risk-free interest rate		4.21	%		4.26	%
Fair value of underlying common stock	$	4.04		$	6.50
Weighted average grant-date fair value per share	$	2.77		$	4.56
Employee Stock Purchase Plans
Expected term (years)		1.28			1.22
Expected volatility		81.29	%		83.43	%
Risk-free interest rate		4.05	%		5.10	%
Fair value of underlying common stock	$	3.11		$	6.01
Weighted average grant-date fair value per share	$	1.56		$	3.03

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2025		2024		2025		2024
Research and development expense	$	1,617	$	2,090	$	3,253	$	4,178
General and administrative expense		1,411		2,330		3,452		4,270
Total stock-based compensation expense	$	3,028	$	4,420	$	6,705	$	8,448

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 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 June 30, 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 and six months ended June 30, 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 June 30, 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 June 30,						Six Months Ended June 30,
(in thousands)	2025			2024			2025			2024
Research and development expenses
External expenses by program:
TERN-701	$	5,924		$	3,114		$	10,365		$	6,568
TERN-601		6,227			5,121			12,027			9,258
Other programs		2,431			2,742			5,159			6,504
Total external expenses		14,582			10,977			27,551			22,330
Unallocated internal expenses:
Personnel-related expenses		5,551			7,082			11,106			13,968
Other expenses		220			293			416			641
Total research and development expenses		20,353			18,352			39,073			36,939
General and administrative		7,030			7,185			15,737			14,044
Total operating expenses		27,383			25,537			54,810			50,983
Loss from operations		(27,383	)		(25,537	)		(54,810	)		(50,983	)
Other income:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Terns Pharmaceuticals, Inc. 10-Q