TARS

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

For the quarterly period ended September 30, 2022

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

For the transition period from _____ to ____ . 

Delaware						81-4717861
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

15440 Laguna Canyon Road, Suite 160
Irvine, California						92618
(Address of principal executive offices)						(Zip Code)

Title of each class			Trading Symbol			Name of each exchange on which registered
Common Stock, $0.0001 par value per share			TARS			The Nasdaq Global Market LLC (Nasdaq Global Select Market)

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

Part I - Financial Information			1
Item 1. Financial Statements (Unaudited)			1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4. Controls and Procedures			37
Part II - Other Information			39
Item 1. Legal Proceedings			39
Item 1A. Risk Factors			39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 3. Defaults Upon Senior Securities			39
Item 4. Mine Safety Disclosures			39
Item 5. Other Information			39
Item 6. Exhibits			40
Signatures			41

			Pages
Condensed Balance Sheets			F-2
Condensed Statements of Operations and Comprehensive (Loss) Income			F-3
Condensed Statements of Stockholders’ Equity			F-4
Condensed Statements of Cash Flows			F-5
Notes to Condensed Financial Statements			F-6

 

			September 30, 2022						December 31, 2021
			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents			$	169,489					$	171,332
Marketable securities			57,083						483
Accounts receivable			17						—
Other receivables			3,995						92
Prepaid expenses			3,494						4,045
Total current assets			234,078						175,952
Property and equipment, net			951						755
Operating lease right-of-use assets			696						1,074
Long-term investments			157						—
Other assets			583						1,126
Total assets			$	236,465					$	178,907
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities			$	10,181					$	8,680
Accrued payroll and benefits			4,092						2,798
Total current liabilities			14,273						11,478
Term loan, net			19,356						—
Other long-term liabilities			209						699
Total liabilities			33,838						12,177
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 authorized; no shares issued and outstanding			—						—
Common stock, $0.0001 par value; 200,000,000 shares authorized; 26,671,812 shares issued and outstanding at September 30, 2022 (unaudited); 20,726,580 shares issued and 20,698,737 outstanding, which excludes 27,840 shares subject to repurchase at December 31, 2021			5						4
Additional paid-in capital			297,796						213,398
Accumulated other comprehensive loss			(10)						—
Accumulated deficit			(95,164)						(46,672)
Total stockholders’ equity			202,627						166,730
Total liabilities and stockholders’ equity			$	236,465					$	178,907

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Revenues:
License fees			$	—					$	708					$	13,893					$	53,067
Collaboration revenue			—						532						1,923						3,622
Total revenues			—						1,240						15,816						56,689
Operating expenses:
Cost of license fees and collaboration revenue			—						65						555						2,099
Research and development			10,912						10,209						32,596						33,674
General and administrative			11,994						6,671						30,316						18,625
Total operating expenses			22,906						16,945						63,467						54,398
(Loss) income from operations before other income (expense) and income taxes			(22,906)						(15,705)						(47,651)						2,291
Other income (expense):
Interest income			1,061						8						1,372						24
Interest expense			(633)						—						(1,507)						—
Other (expense) income, net			(7)						5						136						(68)
Unrealized loss on equity investments			(13)						—						(326)						—
Change in fair value of equity warrants issued by licensee			(18)						(346)						(520)						(1,222)
Total other income (expense), net			390						(333)						(845)						(1,266)
Benefit (provision) for income taxes			5						341						4						(1)
Net (loss) income			$	(22,511)					$	(15,697)					$	(48,492)					$	1,024
Other comprehensive (loss) income:
Unrealized loss on marketable securities and cash equivalents			(10)						—						(10)						—
Comprehensive (loss) income			$	(22,521)					$	(15,697)					$	(48,502)					$	1,024
Net (loss) income per share, basic			$	(0.84)					$	(0.76)					$	(2.03)					$	0.05
Net (loss) income per share, diluted			$	(0.84)					$	(0.76)					$	(2.03)					$	0.05
Weighted-average shares outstanding, basic			26,662,374						20,641,285						23,923,512						20,511,973
Weighted-average shares outstanding, diluted			26,662,374						20,641,285						23,923,512						22,032,487

			Preferred Stock												Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Accumulated Deficit						Total Stockholders’ Equity
			Shares						Amount						Shares						Amount
Balance as of December 31, 2021			—						$	—					20,698,737						$	4					$	213,398					$	—					$	(46,672)					$	166,730
Net loss			—						—						—						—						—						—						(20,238)						(20,238)
Recognition of stock-based compensation expense			—						—						—						—						2,674						—						—						2,674
Exercise of vested stock options			—						—						225						—						—						—						—						—
Issuance of common stock upon the vesting of restricted stock units			—						—						4,257						—						—						—						—						—
Lapse of repurchase obligation for stock option exercises, prior to vesting			—						—						15,309						—						31						—						—						31
Balance as of March 31, 2022			—						$	—					20,718,528						$	4					$	216,103					$	—					$	(66,910)					$	149,197
Net loss			—						—						—						—						—						—						(5,743)						(5,743)
Recognition of stock-based compensation expense			—						—						—						—						3,532						—						—						3,532
Issuance of common stock upon follow-on public offering, net of issuance costs of $5,246			—						—						5,889,832						1						74,266						—						—						74,267
Shares issued in connection with the employee stock purchase plan			—						—						17,874						—						222						—												222
Exercise of vested stock options			—						—						7,056						—						17						—						—						17
Issuance of common stock upon the vesting of restricted stock units			—						—						4,257						—						—						—						—						—
Lapse of repurchase obligation for stock option exercises, prior to vesting			—						—						6,705						—						13						—						—						13
Balance as of June 30, 2022			—						$	—					26,644,252						$	5					$	294,153					$	—					$	(72,653)					$	221,505
Net loss			—						—						—						—						—						—						(22,511)						(22,511)
Recognition of stock-based compensation expense			—						—						—						—						3,583						—						—						3,583
Lapse of repurchase obligation for stock option exercises, prior to vesting			—						—						5,826						—						12						—						—						12
Exercise of vested stock options			—						—						21,734						—						82						—						—						82
Issuance costs related to follow-on public offering			—						—						—						—						(34)						—						—						(34)
Unrealized loss on marketable securities and cash equivalents			—						—						—						—						—						(10)						—						(10)
Balance as of September 30, 2022			—						$	—					26,671,812						$	5					$	297,796					$	(10)					$	(95,164)					$	202,627

			Preferred Stock												Common Stock												Additional Paid-In Capital						Accumulated Deficit						Total Stockholders’ Equity
			Shares						Amount						Shares						Amount
Balance as of December 31, 2020			—						$	—					20,323,201						$	4					$	198,821					$	(32,845)					$	165,980
Net income			—						—						—						—						—						10,376						10,376
Recognition of stock-based compensation expense			—						—						—						—						1,363						—						1,363
Exercise of vested stock options			—						—						13,773						—						19						—						19
Shares issued as consideration for in-license rights			—						—						187,500						—						5,494						—						5,494
Balance as of March 31, 2021			—						$	—					20,524,474						$	4					$	205,697					(22,469)						$	183,232
Net income			—						—						—						—						—						6,345						6,345
Recognition of stock-based compensation expense			—						—						—						—						2,794						—						2,794
Lapse of repurchase obligation for stock option exercises, prior to vesting			—						—						49,222						—						99						—						99
Exercise of vested stock options			—						—						255						—						1						—						1
Balance as of June 30, 2021			—						$	—					20,573,951						$	4					$	208,591					(16,124)						$	192,471
Net loss			—						—						—						—						—						(15,697)						(15,697)
Recognition of stock-based compensation expense			—						$	—					—						$	—					$	2,119					$	—					$	2,119
Lapse of repurchase obligation for stock option exercises, prior to vesting			—						—						87,004						—						174						—						174
Exercise of vested stock options			—						—						10,124						—						75						—						75
Balance as of September 30, 2021			—						$	—					20,671,079						$	4					$	210,959					$	(31,821)					$	179,142

			Nine Months Ended September 30,
			2022						2021
Cash Flows From Operating Activities:
Net (loss) income			$	(48,492)					$	1,024
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization			227						272
Accretion of term loan-related costs			231						—
Stock-based compensation			9,789						6,276
Non-cash lease expense			343						178
Loss on disposal of property and equipment			—						70
Loss on lease termination			—						2
Unrealized loss on equity investment			326						—
Amortization of discount on available-for-sale debt securities			(63)						—
Change in fair value of equity warrants issued by licensee			520						1,222
Unrealized gain from transactions denominated in a foreign currency			(1)						(4)
Issuance of common stock upon in-license agreement milestone achievement			—						5,494
Changes in operating assets and liabilities:
Accounts receivable			(17)						—
Other receivables			(3,902)						(119)
Prepaid expenses			551						(663)
Other non-current assets			(75)						(2,762)
Accounts payable and other accrued liabilities			1,187						3,523
Accrued payroll and benefits			1,294						1,206
Other long-term liabilities			(74)						150
Net cash (used in) provided by operating activities			(38,156)						15,869
Cash Flows From Investing Activities:
Purchases of marketable securities			(57,031)						—
Purchases of property and equipment			(379)						(312)
Cash used in investing activities			(57,410)						(312)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock upon follow-on public offering, net of paid issuance costs			74,352						—
Proceeds from sale of common stock under employee stock purchase plan			222						—
Proceeds from exercise of vested stock options			99						95
Payment of deferred offering costs			(75)						—
Proceeds from term loan			20,000						—
Payment of term loan issuance costs			(875)						—
Net cash provided by financing activities			93,723						95
Net (decrease) increase in cash and cash equivalents			(1,843)						15,652
Cash and cash equivalents — beginning of period			171,332						168,149
Cash and cash equivalents — end of period			$	169,489					$	183,801
Supplemental Disclosures Noncash Investing and Financing Activities:
"Operating lease right-of-use asset" obtained in exchange for operating lease liability			$	—					$	741
"Interest expense" paid in cash			$	1,094					$	—
Additions of "property and equipment, net" included within "accounts payable and other accrued liabilities"			$	44					$	—
Expensing of "operating lease right-of-use assets" upon lease termination			$	—					$	(38)
Stock issued for in-license agreements included within "research and development" expense			$	—					$	5,494

The Company’s operations currently consist of its preclinical and clinical studies, corporate administration build-out to support its planned business growth, commercial leadership build-out in anticipation of the potential approval of TP-03 by the FDA in 2023 (see Note 11), and in/out-licensing activities. The Company faces the clinical, business, and liquidity risks that are typically associated with biopharma companies. It must significantly invest in and conduct research and development activities with inherently uncertain outcomes, recruit and retain skilled personnel (including executive management), and expand and defend its intellectual property rights.

The Company’s Condensed Financial Statements have been prepared in conformity with generally accepted accounting principles ("GAAP") in the United States ("U.S.") for interim financial information and pursuant to Form 10-Q and with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the accompanying Condensed Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements and the related notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 14, 2022.

As of September 30, 2022, marketable securities consist of short term fixed income investments that have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities (see Note 7). Management determines the appropriate classification of its investments in fixed income securities at the time of purchase. Available-for-sale securities are classified as current assets on the accompanying Condensed Balance Sheets due to their highly liquid nature and availability for use in current operations.

The Company currently has no product revenue. Reported revenue in the accompanying Statements of Operations and Comprehensive (Loss) Income is associated with one out-license agreement (the "China Out-License") that allows the third-party licensee to market the Company's TP-03 product candidate (representing "functional intellectual property") in the People's Republic of China, Hong Kong, Macau, and Taiwan (the "China territory") - see Note 9. The accounting and reporting of revenue for out-license arrangements requires significant judgment for: (a) identification of the number of performance obligations within the contract, (b) the contract’s transaction price for allocation (including variable consideration), (c) the stand-alone selling price for each identified performance obligation, and (d) the timing and amount of revenue recognition in each period.

(1) Upfront License Fees: The Company determines whether non-refundable license fee consideration is recognized at the time of contract execution (i.e., when the license is transferred to the customer and the customer is able to use and benefit from the license) or over the actual (or implied) contractual period of the China Out-License. The Company also evaluates whether it has any other requirements to provide substantive services that are inseparable from the performance obligation of the license transfer to determine whether any combined performance obligation is satisfied over time or at a point in time. Upfront payments may require deferral of revenue recognition to a future period until the Company performs obligations under these arrangements.

(2) Development Milestones: The Company utilizes the “most likely amount” method to estimate the amount of consideration to which it will be entitled for achievement of development milestones as these represent variable consideration. For those payments based on development milestones (e.g., patient dosing in a clinical study or the achievement of statistically significant clinical results), the Company assesses the probability that the milestone will be achieved, including its ability to control the timing or likelihood of achievement, and any associated revenue constraint. Given the high degree of uncertainty around the occurrence of these events, the Company determines the milestone and other contingent amounts to be "constrained" until the uncertainty associated with these payments is resolved. At each reporting period, the Company re-evaluates this associated revenue recognition constraint. Any resulting adjustments are recorded to revenue on a cumulative catch-up basis, and reflected in the financial statements in the period of adjustment.

(3) Regulatory Milestones: The Company utilizes the “most likely amount” method to estimate the consideration to which it will be entitled and recognizes revenue in the period regulatory approval occurs (the performance obligation is satisfied) as these represent variable consideration. Amounts constrained as variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company evaluates whether the milestones are considered probable of being reached and not otherwise "constrained." Accordingly, due to the inherent uncertainty of achieving regulatory approval, associated milestones are deemed constrained for revenue recognition until achievement.

(4) Royalties: Under the "sales-or-usage-based royalty exception" the Company recognizes revenue based on the contractual percentage of the licensee’s sale of products to its customers at the later of (i) the occurrence of the related product sales or (ii) the date upon which the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any royalty revenue from its out-licensing arrangement.

(5) Sales Threshold Milestones: Similar to royalties, applying the "sales-or-usage-based royalty exception", the Company recognizes revenue from sales threshold milestones at the later of (i) the period the licensee achieves the one-time annual product sales levels in their territories for which the Company is contractually entitled to a specified lump-sum receipt, or (ii) the date upon which the performance obligation to which some or all of the milestone has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any sales threshold milestone revenue from the out-licensing arrangement.

The Company has entered, and may continue to enter into, license agreements to access and utilize intellectual property for drug development. In each case, the Company evaluates if the assets acquired in a transaction represent the acquisition of an "asset" or a "business" as defined under applicable GAAP. The Company’s executed in-license agreements (see Note 8(b)) were evaluated and determined to represent "asset" acquisitions. Because these assets have not yet received regulatory approval and have no alternative future use, the purchase price for each was immediately recognized as "research and development" expense in the accompanying financial statements. In addition, any future milestone payments (whether in the form of cash or stock) made before product regulatory approval (that do not meet the definition of a "derivative") will also be immediately recognized as "research and development" expense when it becomes payable, provided there is no alternative future use in other research and development projects for its capitalization.

•Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are publicly accessible at the measurement date.

•Level 2: Observable prices that are based on inputs not quoted on active markets, but that are corroborated by market data. These inputs may include quoted prices for similar assets or liabilities or quoted market prices in markets that are not active to the general public.

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts for financial instruments consisting of cash and cash equivalents, accounts payable and accrued liabilities approximate fair value due to the short maturities for each. The Company's equity warrant holdings are carried at fair value based on unobservable market inputs (see Note 7).

			September 30, 2022						December 31, 2021
Other prepaid expenses			$	3,430					$	2,832
Prepaid insurance			64						1,213
Prepaid expenses			$	3,494					$	4,045

			September 30, 2022						December 31, 2021
PDUFA Fee reimbursement (1)			$	3,117					$	—
R&D payroll tax receivable			340						90
Clinical receivables			292						—
Interest receivable			198						2
Income tax receivable			48						—
Other receivables			$	3,995					$	92

(1)    This amount represents the required FDA filing fee upon the Company's submission of its New Drug Application ("NDA") for TP-03 in the third quarter of 2022. This fee is expected to be refunded in full, based on the Company's status as a qualified "Small Business" as defined in the relevant Federal statute.

(c) Property and Equipment, Net

			September 30, 2022						December 31, 2021
Furniture and fixtures			$	632					$	596
Office equipment			197						84
Laboratory equipment			167						167
Leasehold improvements			403						129
Property and equipment, at cost			1,399						976
(Less): Accumulated depreciation and amortization			448						221
Property and equipment, net			$	951					$	755

			September 30, 2022						December 31, 2021
Deposits			$	71					$	71
Equity warrants issued by licensee (Note 7)			246						663
Other non-current assets			266						392
Other assets			$	583					$	1,126

			September 30, 2022						December 31, 2021
Trade accounts payable and other			$	5,592					$	2,856
Operating lease liability, current			572						609
Accrued clinical studies			3,821						4,407
Contract liability			—						697
Accrued interest, current			182						—
Income taxes payable			14						55
Employee stock option pre-vesting exercise liability			—						56
Accounts payable and other accrued liabilities			$	10,181					$	8,680

			September 30, 2022						December 31, 2021
Operating lease liability, non-current			$	169					$	585
Lotilaner licensor liability			40						114
Other long-term liabilities			$	209					$	699

			September 30, 2022						December 31, 2021
Common stock awards reserved for future issuance under 2020 and 2016 Equity Incentive Plans			8,482,877						9,266,200
Common stock awards reserved for future issuance under the 2020 Employee Stock Purchase Plan			2,682,601						2,493,488
Stock options issued and outstanding (unvested and vested) under 2020 and 2016 Equity Incentive Plans			3,839,077						2,759,830
Restricted stock units issued and outstanding (unvested) under 2020 Equity Incentive Plan			516,005						17,251
Total shares of common stock reserved			15,520,560						14,536,769

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Research and development			$	1,015					$	544					$	2,677					$	1,315
General and administrative			2,568						1,575						7,112						4,961
Total stock-based compensation			$	3,583					$	2,119					$	9,789					$	6,276

The following table sets forth the computation of basic and diluted net (loss) income per share:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Basic EPS
Net (loss) income			$	(22,511)					$	(15,697)					$	(48,492)					$	1,024
Less: undistributed income allocated to participating securities			—						—						—						7
Net (loss) income available to common shareholders			$	(22,511)					$	(15,697)					$	(48,492)					$	1,017
Basic weighted average shares outstanding			26,662,374						20,641,285						23,923,512						20,511,973
Net (loss) income per share—basic			$	(0.84)					$	(0.76)					$	(2.03)					$	0.05
Diluted EPS
Net (loss) income			$	(22,511)					$	(15,697)					$	(48,492)					$	1,024
Less: undistributed income reallocated to participating securities			—						—						—						7
Net (loss) income available to common shareholders			$	(22,511)					$	(15,697)					$	(48,492)					$	1,017
Basic weighted average shares outstanding			26,662,374						20,641,285						23,923,512						20,511,973
Effect of dilutive securities:
Common stock options			—						—						—						1,520,514
Diluted weighted average shares outstanding			26,662,374						20,641,285						23,923,512						22,032,487
Net (loss) income per share—diluted			$	(0.84)					$	(0.76)					$	(2.03)					$	0.05

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Stock options, unexercised—vested and unvested			3,839,077						2,663,356						3,839,077						902,981
Stock options exercised prior to vesting— remaining unvested			—						43,149						—						43,149
Restricted stock units—unvested			516,005						4,257						516,005						4,257
Total			4,355,082						2,710,762						4,355,082						950,387

The table below summarizes certain financial instruments measured at fair value that are included within the accompanying balance sheets, and their designation among the three fair value measurement categories (see Note 2(ix)):

			September 30, 2022 Fair Value Measurements
			Level 1						Level 2						Level 3						Total
Assets:
Money market funds			$	159,552					$	—					$	—					$	159,552
U.S. Treasury securities			34,482						—						—						34,482
Commercial paper			—						27,377						—						27,377
Corporate debt securities			—						5,161						—						5,161
Common stock (LianBio shares included in "long-term investments")			157						—						—						157
Equity warrants (for LianBio shares included in "other assets")			—						—						246						246
Total assets measured at fair value			$	194,191					$	32,538					$	246					$	226,975
			December 31, 2021 Fair Value Measurements
			Level 1						Level 2						Level 3						Total
Assets:
Money market funds			$	171,332					$	—					$	—					$	171,332
Common stock (LianBio shares included in "marketable securities")			483						—						—						483
Equity warrants (for LianBio shares included in "other assets")			—						—						663						663
Total assets measured at fair value			$	171,815					$	—					$	663					$	172,478

In March 2021, contemporaneous with the China Out-License transaction (see Note 9), the Company and LianBio (a pharmaceutical company focused on the Greater China and other Asian markets; NASDAQ: LIAN), executed a warrant agreement for the Company to purchase, in three tranches, a stated number of common shares in LianBio. The first two tranches are vested as of September 30, 2022 and the third warrant tranche will vest upon the achievement of a certain regulatory event; each has an exercise price at common stock par value.

In June 2021, one of these three warrant tranches was vested and then-converted to 78,373 shares of LianBio common stock, reported within "marketable securities" as of December 31, 2021, and within "long-term investments" as of September 30, 2022. LianBio common stock is classified within Level 1 of the fair value hierarchy, given its publicly reported price on the NASDAQ Global Market.

In May 2022, the second warrant tranche vested, but has not yet been exercised. The second and third warrant tranche remain classified as Level 3 in the fair value hierarchy as of September 30, 2022 and December 31, 2021 and are presented within "other assets" in the accompanying Condensed Balance Sheets (see Note 3(d)). The most significant assumptions used in the option pricing valuation model as of each balance sheet date to determine its fair value included: LianBio common stock volatility (based on the historical volatility of similar companies), the probability of regulatory milestone achievement for vesting, and the application of an assumed discount rate.

			Value of equity warrants (see Note 3(d))
Fair value as of December 31, 2021			$	663
Revaluation of equity warrant value in "other income (expense), net" within the Condensed Statement of Operations			(245)
Fair value as of March 31, 2022			$	418
Recognition of equity warrant value in "total revenues" within the Condensed Statement of Operations			103
Revaluation of equity warrant value in "other income (expense), net" within the Condensed Statement of Operations			(257)
Fair value as of June 30, 2022			$	264
Revaluation of equity warrant value in "other income (expense), net" within the Condensed Statement of Operations for the three months ended September 30, 2022			(18)
Fair value as of September 30, 2022			$	246

			Value of equity warrants (see Note 3(d))
Fair value as of December 31, 2020			$	—
Initial fair value estimate of equity warrant value in "total revenues"			1,233
Fair value as of March 31, 2021			$	1,233
Recognition of equity warrant value in "total revenues" within the Condensed Statement of Operations			719
Revaluation of equity warrant value in "other income (expense), net" within the Condensed Statement of Operations			(876)
Fair value as of June 30, 2021			$	1,076
Recognition of equity warrant value in "total revenues" within the Condensed Statement of Operations for the three months ended September 30, 2021			771
Revaluation of equity warrant value in "other income (expense), net" within the Condensed Statement of Operations for the three months ended September 30, 2021			(346)
Fair value as of September 30, 2021			$	1,501

			September 30, 2022
			Amortized cost						Unrealized gains						Unrealized losses						Estimated fair value
Cash and cash equivalents:
Money market funds			$	159,552					$	—					$	—					$	159,552
U.S. Treasury securities			3,978						1						—						3,979
Commercial paper			5,958						—						—						5,958
Total cash and cash equivalents			$	169,488					$	1					$	—					$	169,489
Marketable securities:
U.S. Treasury securities			$	30,511					$	7					$	(15)					$	30,503
Commercial paper			21,419						—						—						21,419
Corporate debt securities			5,164						—						(3)						5,161
Total marketable securities			$	57,094					$	7					$	(18)					$	57,083
Long-term investments:
Common stock in LianBio			$	483					$	—					$	(326)					$	157
Total long-term investments			$	483					$	—					$	(326)					$	157

			December 31, 2021
			Amortized cost						Unrealized gains						Unrealized losses						Estimated fair value
Cash and cash equivalents:
Money market funds			$	171,332					$	—					$	—					$	171,332
Total cash and cash equivalents			$	171,332					$	—					$	—					$	171,332
Marketable securities:
Common stock in LianBio			$	1,074					$	—					$	(591)					$	483
Total marketable securities			$	1,074					$	—					$	(591)					$	483

Operating Leases						Condensed Balance Sheet Caption						September 30, 2022						December 31, 2021
Operating lease right-of-use assets— non-current						Operating lease right-of-use assets						$	696					$	1,074
Operating lease liability— current						Accounts payable and other accrued liabilities						$	572					$	609
Operating lease liability— non-current						Other long-term liabilities						169						585
Total lease liabilities												$	741					$	1,194

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Operating lease cost			$	142					$	118					$	427					$	238
Variable lease cost			67						33						168						104
Short-term lease cost (lease with 12 month term or less)			—						21						—						116
Total lease expense			$	209					$	172					$	595					$	458

Operating Leases - Future Payments						September 30, 2022
2022 (remaining three months, net of landlord credits)						$	—
2023						736
2024						66
2025						—
2026						—
Total future lease payments, undiscounted						$	802
(Less): Imputed interest						(61)
Present value of operating lease payments						$	741

The Company made a $1.0 million upfront payment at execution of the Eye and Derm Elanco Agreement in January 2019, and also made a required $1.0 million clinical milestone payment in September 2020, associated with the first two U.S. pivotal trials for the treatment of Demodex blepharitis. The Company paid an additional $2.0 million for its second pivotal trial milestone in April 2021, which was recorded in “research and development” expense in the accompanying Condensed Statements of Operations and Comprehensive (Loss) Income for the three months ended June 30, 2021. As part of the China Out-License discussed in Note 9, the Company made a contractual payment in the amount of $2.5 million to Elanco following the receipt of $25 million of initial proceeds from LianBio during the second quarter of 2021. In June 2022, the Company made a contractual prepayment of $1.5 million that can be applied towards any milestones that become due under the Eye and Derm Elanco Agreement and/or the Company’s in-license agreement with Elanco, granting it a worldwide license to certain intellectual property for the development and commercialization of lotilaner for the treatment, palliation, prevention, or cure of “all other” diseases and conditions in humans (i.e., beyond that of the eye or skin), as amended in June 2022 (the “All Human Uses Elanco Agreement”). This prepayment is included within "prepaid expenses" on the accompanying Condensed Balance Sheet as of September 30, 2022.

In March 2021, the Company entered into the China Out-License with LianBio (see Note 9) that required it to grant Elanco an additional fixed 187,500 shares of its common stock that otherwise would have been issuable no later than the 18-month anniversary of the All Human Uses Elanco Agreement for its continued license exclusivity. These issued shares were valued at $5.5 million, based on the Company's stock closing price of $29.30 per share on the date this issuance became contractually required and is reported within "research and development" expense within the accompanying Condensed Statements of Operations and Comprehensive (Loss) Income for the nine months ended September 30, 2021.

The Company is eligible to receive further consideration from LianBio upon the achievement of additional events, including: (i) TP-03 clinical development and regulatory milestones (China-based) of up to $30.0 million ($10 million of which was achieved in November 2022 - see Note 11), (ii) TP-03 drug supply agreement milestone of $5.0 million, (iii) TP-03 sales-based milestones for the China Territory of up to $100 million, (iv) tiered mid-to-high-teen royalties for China Territory TP-03 product sales, and (v) vesting of a LianBio equity warrant upon China regulatory milestone achievement.

For the nine months ended September 30, 2022 and the three and nine months ended 2021, the Company reported "license fees" and "collaboration revenue" in the accompanying Condensed Statements of Operations and Comprehensive (Loss) Income, in accordance with the revenue recognition accounting policy described in Note 2(vii). Reported revenue in each presented period relates to the satisfaction performance obligations relating to (i) the transfer of TP-03 license rights in the China Territory to LianBio and (ii) the completion of U.S. clinical activities and then providing LianBio with the related data to supplement its local pivotal trial package for TP-03 in the treatment of Demodex blepharitis.

Principal draws accrue interest on the outstanding principal balance at a floating interest rate per annum equal to the greater of either (i) The Wall Street Journal ("WSJ") prime rate plus 5.20% or (ii) 8.45%. At the execution date of the Credit Facility, the WSJ prime rate was 3.25% and further increased during 2022, reaching 6.25% as of September 30, 2022.

The Company is required to pay a specified fee upon the earlier of (i) February 2, 2027 or (ii) the date the Company prepays, in full or in part, the outstanding principal balance of the Credit Facility ("End of Term Charge"). The current End of Term Charge of $1.0 million was derived at the execution of the Credit Facility by multiplying 4.75% by the $20.0 million drawn at closing and is accreted to "interest expense" through maturity.

As of September 30, 2022, the carrying value of the Credit Facility (reported as "term loan, net" on the accompanying Condensed Balance Sheets) consisted of $20.0 million principal outstanding less legal and administrative issuance costs of approximately $0.9 million that were recorded as a "contra-liability" to "term loan, net" and will continue to be accreted to "interest expense" using the effective interest method during its term. As of December 31, 2021 the Company had no outstanding debt.

			Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
Interest expense for term loan			$	539					$	1,275
Accretion of end of term charge			48						127
Amortization of debt issuance costs			46						105
Total interest expense related to term loan			$	633					$	1,507

			September 30, 2022
Term loan, gross (amount drawn)			$	20,000
Debt issuance costs (legal and other administrative fees)			(875)
Accretion of end of term charge			127
Accumulated amortization of debt issuance costs			104
Term loan, net			$	19,356

•the timing or likelihood of regulatory filings and approval for our product candidates;

•our ability to obtain and maintain regulatory approval of our product candidates and our product candidates to meet existing or future regulatory standards;

•the likelihood of our clinical trials demonstrating safety and efficacy of our product candidates, and other positive results;

•the timing and progress of our current clinical trials and timing of initiation of our future clinical trials, and the reporting of data from our current and future trials;

•our plans relating to the clinical development of our current and future product candidates, including the size, number and disease areas to be evaluated;

•the prevalence of Demodex blepharitis and the size of the market opportunity for our product candidates;

•the rate and degree of market acceptance and clinical utility of our product candidates;

•our plans relating to commercializing our product candidates, if approved, including sales strategy;

•the impact of COVID-19 on our business and operations;

•the success of competing therapies that are or may become available;

•our estimates of the number of patients in the United States ("U.S.") or globally, as applicable, who suffer from Demodex blepharitis, Meibomian Gland Disease ("MGD"), rosacea, Lyme disease and malaria and the number of patients that will enroll in our clinical trials;

•the beneficial characteristics, safety, efficacy, therapeutic effects and potential advantages of our product candidates;

•our plans relating to the further development and manufacturing of our product candidates, including additional indications for which we may pursue;

•our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

•the expected potential benefits of strategic collaborations with third parties (including, for example, the receipt of payments, achievement and timing of milestones under license agreements, and the ability of our third party collaborators to commercialize our product candidates in the territories under license) and our ability to attract collaborators with development, regulatory and commercialization expertise;

•existing regulations and regulatory developments in the U.S. and other jurisdictions;

•our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;

•our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;

•the need to hire additional personnel, in particular sales personnel, and our ability to attract and retain such personnel;

•the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•our financial performance;

•the sufficiency of our existing capital resources to fund our future operating expenses and capital expenditure requirements;

•our competitive position;

•our expectations regarding the period during which we will qualify as an emerging growth company under the JOBS Act; and

•our anticipated use of our existing resources and the proceeds from our Initial Public Offering ("IPO") and Follow-on Public Offering (defined below).

We designed TP-03 to target and eradicate the root cause of Demodex blepharitis — Demodex mite infestation. The active pharmaceutical ingredient ("API") of TP-03, lotilaner, paralyzes and eradicates mites and other parasites through the inhibition of parasite-specific gamma-aminobutyric acid-gated chloride ("GABA-Cl") channels.

Credit Facility with Hercules Capital and Silicon Valley Bank: On February 2, 2022, we executed a loan and security agreement with Hercules Capital and Silicon Valley Bank (the "Credit Facility). This $175.0 million Credit Facility has tranched availability as follows:

Follow-On Public Offering: In May 2022, we completed a follow-on public offering under our effective Form S-3 shelf registration statement through an initial underwritten sale of 5.6 million shares of common stock at a price of $13.50 per share (the “Follow-On Public Offering”). We also granted the underwriters a 30-day option to purchase up to 840,000 additional shares of common stock at the public offering price, less discounts and commissions. In June 2022, the underwriters partially exercised this option by purchasing an additional 289,832 shares of common stock at $13.50 per share.

•seek regulatory approvals for TP-03 and other product candidates that successfully complete clinical development, if any;

•advance the clinical development of TP-03 for the potential treatment of MGD, TP-04 for the potential treatment of rosacea and TP-05 for potential Lyme prophylaxis and community malaria reduction;

•establish our own sales force in the U.S. to commercialize TP-03 upon regulatory approval and our other products for which we obtain such approvals;

•engage with contract manufacturers to ensure a sufficient supply chain capacity to provide commercial quantities of any products for which we may obtain marketing approval;

•maintain, expand and protect our intellectual property portfolio;

•hire additional staff, including clinical, scientific, technical, regulatory, marketing, operations, financial, and other support personnel, to execute our business plan; and

•add information systems and personnel to support our product development and potential future commercialization efforts, and to enable us to operate as a public company.

We do not yet have revenue from product sales. Our reported revenue within "license fees" and "collaboration revenue" is from our China Out-License; we expect to report additional revenue under these captions in future periods (see Note 9).

			Three Months Ended September 30,												Change
			2022						2021
			(in thousands)
Revenues:
License fees			$	—					$	708					$	(708)
Collaboration revenue			—						532						(532)
Total revenues			—						1,240						(1,240)
Operating expenses:
Cost of license fees and collaboration revenue			—						65						(65)
Research and development			10,912						10,209						703
General and administrative			11,994						6,671						5,323
Total operating expenses			22,906						16,945						5,961
Loss from operations before other income (expense) and income taxes			(22,906)						(15,705)						(7,201)
Other income (expense):
Interest income			1,061						8						1,053
Interest expense			(633)						—						(633)
Other (expense) income, net			(7)						5						(12)
Unrealized loss on equity investments			(13)						—						(13)
Change in fair value of equity warrants issued by licensee			(18)						(346)						328
Total other income (expense), net			390						(333)						723
Benefit for income taxes			5						341						(336)
Net loss			$	(22,511)					$	(15,697)					$	(6,814)

For the three months ended September 30, 2022, we had no reported license fees and collaboration revenue under the China Out-License (see Note 9), as there were no contractual milestones achieved or allocated in the current year period. In the prior year period, license fees and collaboration revenue was $1.2 million, which was attributable to the portion of the contractual milestones that were fully or partially complete by September 30, 2021. These allocated amounts respectively represent the satisfaction of the transfer of license rights to LianBio and the partial completion of clinical-related "performance obligations".

We will recognize additional "license fees" and "collaboration revenue" to the extent other events occur, specifically related to (i) milestone achievement of a drug supply agreement execution, (ii) milestone achievement of clinical and regulatory events in the China Territory (see Note 11), and (iii) royalties and milestones from our licensee's product sales of TP-03 in the China Territory.

			Nine Months Ended September 30,												Change
			2022						2021
			(in thousands)
Revenues:
License fees			$	13,893					$	53,067					$	(39,174)
Collaboration revenue			1,923						3,622						(1,699)
Total revenues			15,816						56,689						(40,873)
Operating expenses:
Cost of license fees and collaboration revenue			555						2,099						(1,544)
Research and development			32,596						33,674						(1,078)
General and administrative			30,316						18,625						11,691
Total operating expenses			63,467						54,398						9,069
(Loss) income from operations before other (expense) income and income taxes			(47,651)						2,291						(49,942)
Other (expense) income:
Interest income			1,372						24						1,348
Interest expense			(1,507)						—						(1,507)
Other income (expense), net			136						(68)						204
Unrealized loss on equity investments			(326)						—						(326)
Change in fair value of equity warrants issued by licensee			(520)						(1,222)						702
Total other expense, net			(845)						(1,266)						421
Benefit (provision) for income taxes			4						(1)						5
Net (loss) income			$	(48,492)					$	1,024					$	(49,516)