UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Transition Period FromTo
Commission file number:
(Exact name of registrant as specified in its charter)
| ||
(State of Other Jurisdiction of incorporation or Organization) | (I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Name Of Each Exchange |
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Title of Each Class | Trading Symbol(s) | On Which Registered | ||
*
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.
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 (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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.
Large accelerated filer ☐ |
| Accelerated filer ☐ |
|
| Smaller reporting company |
| Emerging growth company |
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
The aggregate number of outstanding ordinary shares of the registrant, each with par value $0.0001 per share, as of July 31, 2024, was
TABLE OF CONTENTS
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”), contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “can,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical facts contained in this Quarterly Report, including without limitation statements regarding:
| ● | the timing, progress and results of preclinical studies and clinical trials for our product candidates, including our product development plans and strategies; |
| ● | the impact of data collection omissions at any of our clinical sites; |
| ● | the timing, scope and likelihood of regulatory filings and approvals, including final regulatory approval of our product candidates; |
| ● | the potential benefits and market opportunity for our product candidates and discovery platform; |
| ● | expectations regarding the size, scope and design of clinical trials; |
| ● | our plans and strategy with respect to our drug discovery efforts and potential benefits of our discovery platform; |
| ● | our manufacturing, commercialization, and marketing plans and strategies; |
| ● | our plans to hire additional personnel and our ability to attract and retain such personnel; |
| ● | our estimates of the number of patients who suffer from the diseases we are targeting and potential growth in our target markets; |
| ● | our expectations regarding the approval and use of our product candidates; |
| ● | our competitive position and the development and impact of competing therapies that are or may become available; |
| ● | expectations regarding future events under collaboration and licensing agreements, including potential future payments, as well as our plans and strategies for entering into further collaboration and licensing agreements; |
| ● | our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights; |
| ● | the rate and degree of market acceptance and clinical utility of product candidates we may develop; |
| ● | our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; |
| ● | our future financial performance; |
| ● | the period over which we estimate our existing cash, cash equivalents and short-term investments will be sufficient to fund our future operating expenses and capital expenditure requirements; |
| ● | the impact of laws and regulations; and |
| ● | the impact of geopolitical and macroeconomic factors. |
The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and trends that we believe may affect our financial
3
condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties, and assumptions, including those described under Part I. Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A. “Risk Factors” elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely upon these forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. The forward-looking statements made in this Quarterly Report relate only to events or information as of the date on which the statements are made in this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
SUMMARY RISK FACTORS
Our business is subject to numerous risks and uncertainties, including those described in Part II. Item 1A. “Risk Factors” in this Quarterly Report. You should carefully consider these risks and uncertainties when investing in our securities. The principal risks and uncertainties affecting our business include the following:
| ◾ | We have a limited operating history, have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future. |
| ◾ | We will require substantial additional capital to finance our operations, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate certain of our product development programs, commercialization efforts or other operations. |
| ◾ | Our approach to the discovery of product candidates based on our technology platform is unproven, and we do not know whether we will be able to develop any products of commercial value. |
| ◾ | We are early in our development efforts and only have three product candidates, GSBR-1290, ANPA-0073 and LTSE-2578, in early clinical development. All of our other development programs are in the preclinical or discovery stage. If we are unable to advance our product candidates in clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed. |
| ◾ | Clinical and preclinical drug development involves a lengthy and expensive process with uncertain timelines and outcomes. The results of prior clinical trials and preclinical studies are not necessarily predictive of future results, and may not be favorable, or receive regulatory approval on a timely basis, if at all. |
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| ◾ | Any difficulties or delays in the commencement or completion, or termination or suspension, of our planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects. |
| ◾ | Serious adverse events, undesirable side effects or other unexpected properties of our product candidates may be identified during development or after approval, which could lead to the discontinuation of our clinical development programs, refusal by regulatory authorities to approve our product candidates or, if discovered following marketing approval, revocation of marketing authorizations or limitations on the use of our product candidates, any of which would limit the commercial potential of such product candidate. |
| ◾ | As an organization, we have never conducted later-stage clinical trials or submitted a New Drug Application (“NDA”), and may be unable to do so for any of our product candidates. |
| ◾ | The marketing approval processes of the U.S. Food and Drug Administration (“FDA”) and applicable foreign authorities are lengthy, time consuming, expensive and inherently unpredictable, and if we are ultimately unable to obtain marketing approval for our product candidates, our business will be substantially harmed. |
| ◾ | We have conducted, or plan to conduct, our initial clinical studies for GSBR-1290, ANPA-0073, LTSE-2578 and our other product candidates outside of the United States. However, the FDA and other foreign equivalents may not accept data from such trials, in which case our development plans will be delayed, which could materially harm our business. |
| ◾ | We rely on third parties for the manufacture of our product candidates for preclinical and clinical development and expect to continue to do so for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts. |
| ◾ | Our current and anticipated future dependence upon others for the manufacture of our product candidates or drugs may adversely affect our future profit margins and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis. |
| ◾ | We rely on third parties to conduct, supervise and monitor our discovery research, preclinical studies and clinical trials. We have experienced delays due to actions of third parties in the past and if in the future third parties do not satisfactorily carry out their contractual duties or fail to meet expected deadlines, our development programs may be delayed or subject to increased costs, each of which may have an adverse effect on our business and prospects. |
| ◾ | We have entered into, and may in the future enter into, collaboration agreements and strategic alliances to maximize the potential of our structure-based drug discovery platform and product candidates, and we may not realize the anticipated benefits of such collaborations or alliances. We expect to continue to form collaborations in the future with respect to our product candidates, but may be unable to do so or to realize the potential benefits of such transactions, which may cause us to alter or delay our development and commercialization plans. |
| ◾ | Our existing discovery collaborations with Schrödinger, LLC (together with its affiliates, “Schrödinger”) are important to our business. If we are unable to maintain these collaborations, or if these collaborations are not successful, our business could be adversely affected. |
| ◾ | We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than us. |
5
| ◾ | We currently have no marketing and sales organization and have no experience as a company in commercializing products, and we may invest significant resources to develop these capabilities. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate product revenue. |
| ◾ | We conduct certain research and development operations through our Australian wholly-owned subsidiaries. If we lose our ability to operate in Australia, or if any of our subsidiaries are unable to receive the research and development tax credit allowed by Australian regulations, or are required to refund any research and development tax credit previously received or reserve for such credit in our financial statements, our business and results of operations could suffer. |
| ◾ | Changes in the political and economic policies or in relations between China and the United States may affect our business, financial condition, results of operations and the market price of our ADSs. |
| ◾ | If we are unable to obtain and maintain sufficient intellectual property protection for our platform technologies and product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected. |
| ◾ | We may rely on one or more in-licenses from third parties. If we lose these rights, our business may be materially adversely affected, and if disputes arise with one or more licensors, we may be subjected to future litigation as well as the potential loss of or limitations on our ability to develop and commercialize products and technologies covered by these license agreements. |
6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
STRUCTURE THERAPEUTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
JUNE 30, | DECEMBER 31, | ||||||
| 2024 |
| 2023 |
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Assets | |||||||
Current assets: |
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Cash and cash equivalents | $ | | $ | | |||
Short-term investments |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating right-of-use assets |
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Other non-current assets |
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Total assets | $ | | $ | | |||
Liabilities and shareholders’ equity |
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Current liabilities: |
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Accounts payable | $ | | $ | | |||
Accrued expenses and other current liabilities |
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Operating lease liabilities, current portion |
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Total current liabilities |
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Operating lease liabilities, net of current portion | | | |||||
Other non-current liabilities | | | |||||
Total liabilities |
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Commitments and contingencies (Note 5) |
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Shareholders’ equity: |
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Undesignated shares – $ | |||||||
Ordinary shares – $ |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
| ( |
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Accumulated deficit |
| ( |
| ( | |||
Total shareholders’ equity |
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Total liabilities and shareholders’ equity | $ | | $ | | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
STRUCTURE THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED | SIX MONTHS ENDED | ||||||||||||
JUNE 30, | JUNE 30, | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
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Operating expenses: |
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Research and development | $ | | $ | | $ | | $ | | |||||
General and administrative |
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Total operating expenses |
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Loss from operations |
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Interest and other income, net |
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Loss before provision for income taxes |
| ( |
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Provision for income taxes |
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Net loss attributable to ordinary shareholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Net loss per share attributable to ordinary shareholders, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Weighted-average ordinary shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted |
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Other comprehensive loss: |
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Unrealized loss on investments, net |
| ( |
| ( |
| ( |
| ( | |||||
Total other comprehensive loss |
| ( |
| ( |
| ( |
| ( | |||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
STRUCTURE THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ EQUITY (DEFICIT)
(IN THOUSANDS)
(UNAUDITED)
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ACCUMULATED | |||||||||||||||||
ORDINARY | ADDITIONAL | OTHER | TOTAL | ||||||||||||||
SHARES | PAID-IN | COMPREHENSIVE | ACCUMULATED | SHAREHOLDERS’ | |||||||||||||
| SHARES |
| AMOUNT |
| CAPITAL |
| INCOME (LOSS) |
| DEFICIT |
| EQUITY | ||||||
Balance at December 31, 2023 | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Issuance of ordinary shares upon exercise of vested share options | | — | | — | — | | |||||||||||
Share-based compensation expense | — |
| — |
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| — | — | | ||||||||
Unrealized loss on investments, net | — |
| — |
| — |
| ( |
| — | ( | |||||||
Net loss | — |
| — |
| — |
| — |
| ( | ( | |||||||
Balance at March 31, 2024 | | | | ( | ( | | |||||||||||
Issuance of ordinary shares upon Follow-On Offering, net of issuance costs and underwriting discounts of $ | | | | — | — | | |||||||||||
Issuance of ordinary shares upon exercise of vested share options | | — | | — | — | | |||||||||||
Issuance of ordinary shares pursuant to employee share purchase plan | | — | | — | — | | |||||||||||
Share-based compensation expense | — | — | | — | — | | |||||||||||
Unrealized loss on investments, net | — | — | — | ( | — | ( | |||||||||||
Net loss | — | — | — | — | ( | ( | |||||||||||
Balance at June 30, 2024 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
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ACCUMULATED | |||||||||||||||||||||||||||||||||||||||||||
REDEEMABLE CONVERTIBLE PREFERRED SHARES | ORDINARY | NON-VOTING | ADDITIONAL | OTHER | TOTAL | ||||||||||||||||||||||||||||||||||||||
SERIES A | SERIES A+ | SERIES B | SERIES B-1 | SHARES | ORDINARY SHARES | PAID-IN | COMPREHENSIVE | ACCUMULATED | SHAREHOLDERS’ | ||||||||||||||||||||||||||||||||||
| SHARES |
| AMOUNT |
| SHARES |
| AMOUNT |
| SHARES |
| AMOUNT |
| SHARES |
| AMOUNT |
|
| SHARES |
| AMOUNT |
| SHARES |
| AMOUNT |
| CAPITAL |
| INCOME (LOSS) |
| DEFICIT |
| EQUITY (DEFICIT) | |||||||||||
Balance at December 31, 2022 | | $ | | | $ | | | $ | | | $ | | | $ | | — | $ | — | $ | | $ | ( | $ | ( | $ | ( | |||||||||||||||||
Conversion of redeemable convertible preferred shares into ordinary shares upon initial public offering |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
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Issuance of ordinary shares upon initial public offering, net of issuance costs and underwriting discounts of $ |
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Net exercise of ordinary share warrants |
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Issuance of ordinary shares upon exercise of vested share options |
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Share-based compensation expense |
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Unrealized gain on investments, net |
| — |
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Net loss |
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| ( |
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Balance at March 31, 2023 |
| — | — |
| — | — |
| — | — |
| — | — |
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| — | — | | | ( |
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Exchange of ordinary shares to non-voting ordinary shares | — |
| — |
| — |
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| — |
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| — | ( | ( | | | — | — | — | — | ||||||||||||||||||||
Issuance of ordinary shares upon exercise of vested share options | — |
| — |
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Share-based compensation expense | — |
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Unrealized loss on investments, net | — |
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| — | — |
| — | — |
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| — |
| ( |
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Net loss | — |
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| — | — |
| — | — |
| — |
| — |
| — |
| ( | ( | |||||||||||||||
Balance at June 30, 2023 | — | $ | — | — | $ | — | — | $ | — | — | $ | — | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
10
STRUCTURE THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED | |||||||
June 30, | |||||||
| 2024 |
| 2023 |
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Cash flows from operating activities | |||||||
Net loss | $ | ( | $ | ( | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Share-based compensation expense |
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Depreciation expense |
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Non-cash lease expense |
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Accretion of net investment discounts |
| ( |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
| ( |
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Other non-current assets |
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Accounts payable |
| ( |
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Accrued expenses and other current liabilities |
| ( |
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Operating lease liabilities |
| ( |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Purchases of short-term investments |
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Maturities of short-term investments |
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Purchases of property and equipment |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Proceeds from issuance of ordinary shares in Follow-On Offering, net of underwriting discounts and commissions | | — | |||||
Proceeds from issuance of ordinary shares in initial public offering, net of underwriting discounts and commissions |
| — |
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Payments of offering costs | ( | ( | |||||
Proceeds from issuance of ordinary shares under employee share purchase plan | | — | |||||
Proceeds from exercise of share options |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Cash and cash equivalents |
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Beginning of the period |
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End of the period | $ | | $ | | |||
Supplemental disclosures of noncash investing and financing activities |
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Offering costs included in accounts payable and accrued expenses and other current liabilities | $ | | $ | — | |||
Conversion of redeemable convertible preferred shares into ordinary shares upon initial public offering | $ | — | $ | | |||
Exchange of ordinary shares to non-voting ordinary shares | $ | — | $ | | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
11
1. Organization and Nature of the Business
Structure Therapeutics Inc. (the “Company”) is a clinical stage global biopharmaceutical company aiming to develop and deliver novel oral therapeutics to treat a wide range of chronic diseases with unmet medical need. The Company was incorporated in February 2019 in the Cayman Islands, with operating subsidiaries in the United States and China. In June 2022, the Company changed its name from ShouTi Inc. to Structure Therapeutics Inc.
Initial Public Offering
In February 2023, the Company closed its initial public offering (“IPO”) of American Depositary Shares (“ADSs”). Each ADS represents
Upon the closing of the IPO, all outstanding shares of the Company’s redeemable convertible preferred shares converted into
Private Placement
On September 29, 2023, the Company entered into a share purchase agreement with certain institutional investors (the “Purchasers”), pursuant to which the Company agreed to sell and issue to the Purchasers an aggregate of
Follow-On Offering
On June 5, 2024, the Company entered into an underwriting agreement with Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Jefferies LLC and Leerink Partners LLC, as representatives of the underwriters named therein (collectively, the “Underwriters”), pursuant to which the Company proposed to issue and sell to the Underwriters an aggregate of
Liquidity and Capital Resources
The Company has incurred significant net operating losses and negative cash flows from operations since inception and had an accumulated deficit of $
12
STRUCTURE THERAPEUTICS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the Company has financed its operations primarily through the private placement of equity securities. In February 2023, the Company completed its IPO for net proceeds of approximately $
As of June 30, 2024, the Company had cash, cash equivalents and short-term investments of $
Impact of Geopolitical and Macroeconomic Factors
There may be significant uncertainty resulting from the impact of other geopolitical and macroeconomic factors, including global pandemics, inflation, supply chain issues, rising interest rates, future bank failures, increased geopolitical tensions between the U.S. and China and the impact of the Russia/Ukraine conflict and the Israel-Hamas war. No adjustments have been made to these condensed consolidated financial statements as a result of these uncertainties.
2. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements and related disclosures have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The functional and reporting currency of the Company and its subsidiaries is the U.S. dollar. The aggregate foreign currency transaction loss included in determining net loss was not material for the periods presented.
Unaudited Interim Financial Information
The condensed consolidated balance sheet as of December 31, 2023 was derived from the Company’s audited financial statements, but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023 and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 8, 2024. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2024 and condensed consolidated results of operations for the three and six months ended June 30, 2024 and 2023 and condensed consolidated cash flows for the six months ended June 30, 2024 and 2023 have been made. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.
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STRUCTURE THERAPEUTICS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of expenses during the reporting periods. Such estimates include lease liability, accruals for research and development activities, share-based compensation and certain other accrued liabilities. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company is exposed to credit risk from its deposits of cash, cash equivalents and short-term investments in excess of the amount of insurance provided on such deposits. The Company invests its cash, cash equivalents and short-term investments in money market funds, corporate debt securities, U.S. government bonds and U.S. government agency bonds. The Company limits its credit risk associated with cash, cash equivalents and short-term investments by investing in investment-grade securities and using banks and institutions it believes are creditworthy. The Company has not experienced any losses on its deposits of cash, cash equivalents and short-term investments to date. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.
Risks and Uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials and regulatory approval prior to commercialization. These efforts require significant amounts of additional resources, adequate personnel, infrastructure and extensive compliance and reporting.
The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale and, therefore, the Company has not generated any revenue from any of its products.
There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate any revenue from any of its products. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies.
The Company relies and expects to continue to rely on a small number of vendors to manufacture supplies and materials for use in its clinical trial programs. These programs could be adversely affected by a significant interruption in these manufacturing services.
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STRUCTURE THERAPEUTICS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Fair Value of Financial Instruments
The Company establishes the fair value of its assets and liabilities using 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 and established a fair value hierarchy based on the inputs used to measure fair value.
The carrying value of cash and cash equivalents, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities. The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy which establishes three levels of inputs that may be used to measure fair value (see Note 4).
Deferred Offering Costs
The Company capitalizes, within other non-current assets, certain legal, accounting and other third-party fees that are directly related to the Company’s in-process equity financings, including its IPO, Private Placement and Follow-On Offering, until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the proceeds received as a result of the equity financing. Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs will be immediately written off to general and administrative expenses. Upon closing the IPO, Private Placement and Follow-On Offering, all deferred offering costs were charged against the proceeds from the IPO, Private Placement and Follow-On Offering and recorded in shareholders’ equity as a reduction of additional paid-in capital. As of June 30, 2024, there were
Net Loss Per Share Attributable to Ordinary Shareholders
Basic net loss per ordinary share is calculated by dividing the net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares, including non-voting ordinary shares, outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares, including non-voting ordinary shares, and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the unvested restricted share units, ordinary shares committed under the employee share purchase plan and share options are considered to be potentially dilutive securities. Because the Company has reported a net loss for all periods presented, diluted net loss per ordinary share is the same as basic net loss per ordinary share for those periods.
Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Account Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures. This ASU requires greater disaggregation of information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. This ASU applies to all entities subject to income taxes and is intended to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and assess income tax information that affects cash flow forecasts and capital allocation decisions. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. This ASU should be applied on a prospective basis although retrospective application is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.
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STRUCTURE THERAPEUTICS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures, and does not expect the standard will have a material impact on the Company’s consolidated financial statements and related disclosures.
3. Composition of Certain Consolidated Financial Statement Line Items
Property and equipment, net consists of the following (in thousands):
JUNE 30, | DECEMBER 31, | ||||||
| 2024 |
| 2023 |
| |||
Laboratory equipment | $ | | $ | | |||
Furniture and fixtures |
| |
| | |||
Computer equipment and software |
| |
| | |||
Leasehold improvements |
| |
| | |||
$ | | $ | | ||||
Less: Accumulated depreciation |
| ( |
| ( | |||
Property and equipment, net | $ | | $ | | |||
Accrued expenses and other current liabilities consisted of the following (in thousands):
JUNE 30, | DECEMBER 31, | ||||||
| 2024 |
| 2023 |
| |||
Accrued compensation | $ | | $ | | |||
Accrued research and development expenses |
| |
| | |||
Accrued clinical expenses | | | |||||
Accrued professional services | | | |||||
Income tax and VAT payable |
| |
| | |||
Accrued other liabilities |
| |
| | |||
Total accrued expenses and other current liabilities | $ | | $ | | |||
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STRUCTURE THERAPEUTICS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Fair Value Measurements
The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy which establishes three levels of inputs that may be used to measure fair value, as follows:
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities;
Level 2—Observable inputs other than Level 1 prices 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; and
Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):
JUNE 30, | DECEMBER 31, | ||||||||||||||||||||||||
| 2024 | 2023 |
| ||||||||||||||||||||||
| LEVEL 1 |
| LEVEL 2 |
| LEVEL 3 |
| TOTAL |
| LEVEL 1 |
| LEVEL 2 |
| LEVEL 3 |
| TOTAL |
| |||||||||
Money market funds | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Cash equivalents |
| |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||||
U.S. government bonds | | — | — | | | — | — | | |||||||||||||||||
U.S. government agency bonds | — | | — | | — | | — | | |||||||||||||||||
Corporate debt securities | |||||||||||||||||||||||||