Genprex, Inc. Form 10-Q Summary
Business Context and Reporting Period
Genprex is a clinical-stage gene therapy company developing Oncoprex immunogene therapy for non-small cell lung cancer and a preclinical gene therapy intended to treat Type 1 and Type 2 diabetes. The filing covers the unaudited three months ended March 31, 2020, compared with the three months ended March 31, 2019.
The company has no commercial products or current source of revenue. Its lead oncology program uses a proprietary nanovesicle platform to deliver cancer-fighting genes. In January 2020, the FDA granted Fast Track Designation for Oncoprex combined with osimertinib for certain NSCLC patients whose tumors progressed after osimertinib treatment.
Financial Performance and Position
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $1.48 million | $0.51 million | Up 191% |
| General and administrative expense | $4.09 million | $1.66 million | Up 147% |
| Total costs and expenses | $5.58 million | $2.17 million | Up 157% |
| Operating loss | $5.58 million | $2.17 million | Increased |
| Net loss | $5.57 million | $2.16 million | Increased |
| Basic and diluted loss per share | $0.20 | $0.14 | Higher loss per share |
| Net cash used in operating activities | $4.52 million | $1.64 million | Use increased 175% |
| Net cash used in investing activities | $0.14 million | $0.01 million | Use increased |
| Net cash provided by financing activities | $25.73 million | $0 | New financing |
Cash was $23.08 million at March 31, 2020, compared with $2.00 million at December 31, 2019. Total assets were $24.64 million, and stockholders’ equity was $23.94 million. Current liabilities were $697,226. The company reported no outstanding debt and no interest expense.
The accumulated deficit was $46.05 million at March 31, 2020. Share count increased to 32.85 million shares from 19.26 million at December 31, 2019, primarily because of equity offerings. The company also had 7.48 million outstanding warrants with a weighted-average exercise price of $1.45 and 7.15 million outstanding stock options with a weighted-average exercise price of $2.55.
Material Changes Versus the Prior Comparable Period
- R&D expense increased by $969,835, principally because of greater employee utilization and expanded preclinical, clinical, manufacturing and research activities.
- General and administrative expense increased by $2.43 million, primarily because of financing-related costs, legal fees, increased headcount and additional service providers.
- Operating cash use increased by $2.88 million, reflecting higher financing and legal costs and increased personnel and service-provider spending.
- Cash increased by $21.08 million after the company raised $25.73 million through registered direct offerings involving 13.58 million shares.
- In February 2020, Genprex entered into an exclusive license agreement with the University of Pittsburgh for diabetes gene therapy technologies, involving upfront, annual maintenance, royalty, sublicense, and milestone obligations.
Guidance, Outlook, Risks and Unusual Items
- Management expects R&D expenses to increase as programs advance, including planned clinical trials, manufacturing development, regulatory work and preclinical research.
- The company plans to initiate a Phase I/II trial of Oncoprex combined with osimertinib in late 2020 or early 2021, subject to development, regulatory, financing and operational risks.
- Management expects no product revenue unless and until a candidate is successfully developed, approved and commercialized, which could take several years or may never occur.
- The company states that it will need additional capital to fund operations and that failure to obtain financing could delay, reduce or terminate development programs or cause the company to cease operations in whole or in part.
- The financial statements are prepared on a going-concern basis despite recurring losses, negative operating cash flow and no revenue. The filing does not provide a specific estimated cash runway.
- COVID-19 had no material effect on results or operations during the quarter, but management could not determine the pandemic’s future impact on operations, clinical trials or financial results.
- Subsequent events included cancellation of the Cambridge lease, additional equity and option issuances, a 500,000-share warrant issued to a related party, and the April 27, 2020 resignation of the president and chief scientific officer. The separation arrangement included $156,250 of salary payments, potential insurance reimbursement, and accelerated vesting of options exercisable for 410,117 shares.
- On May 4, 2020, after quarter-end, the company entered into an exclusive worldwide MD Anderson license covering cancer treatment using Oncoprex and immunotherapies.
- Management concluded that disclosure controls and procedures were not effective because of a material weakness in internal control over financial reporting arising from inadequate segregation of duties. Remediation efforts had begun but had not yet been demonstrated to be effective.
Most Important Facts for Investors to Verify
- Verify the timing, design, funding and regulatory status of the planned Oncoprex/osimertinib Phase I/II trial.
- Assess whether the $23.08 million cash balance is sufficient relative to the company’s $4.52 million quarterly operating cash burn and anticipated program expansion.
- Review future financing needs, potential dilution from additional offerings, the 7.48 million warrants and the 7.15 million stock options.
- Monitor remediation of the material weakness related to segregation of duties and subsequent control-effectiveness testing.
- Review the financial and development obligations under the University of Pittsburgh and MD Anderson license agreements.
- Evaluate the impact of COVID-19 on clinical enrollment, research activities, manufacturing, regulatory timelines and liquidity.
- Confirm the terms and potential costs of the president and chief scientific officer separation agreement and other post-quarter-end equity awards.