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 related platform technologies. The filing covers the three and nine months ended September 30, 2018. The financial statements are unaudited. The company had no approved products and no revenue from product sales.
Key Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $2.19 million | $8.94 million |
| Net loss per share | $0.15 | $0.67 |
| Research and development expense | $489,689 | $654,279 |
| General and administrative expense | $1.71 million | $8.26 million |
| Net cash used in operating activities | Not separately provided | $4.78 million |
| Net cash provided by financing activities | Not separately provided | $14.97 million |
Because the company had no revenue, gross and operating margins are not meaningful. Operating loss was $2.20 million for the quarter and $8.92 million for the nine-month period.
- Cash was $10.31 million at September 30, 2018, compared with $161,251 at December 31, 2017.
- Total assets were $11.05 million; current liabilities were $565,393, and no related-party notes payable remained outstanding.
- Accumulated deficit was $26.39 million at September 30, 2018.
- There was no long-term debt reported. The company repaid approximately $201,890 of related-party notes during the nine months.
- Cash exceeded FDIC insurance limits by approximately $10.06 million at September 30, 2018.
Material Changes Versus the Prior Comparable Period
- Quarterly net loss increased from $715,098 to $2.19 million; nine-month net loss increased from $2.65 million to $8.94 million.
- Quarterly R&D expense increased by $434,172, reflecting increased development activity and progression of the Phase I/II trial at MD Anderson. Nine-month R&D expense increased by $425,419.
- Quarterly G&A expense increased by $1.05 million, while nine-month G&A expense increased by $5.85 million, primarily due to expanded operations, public-company costs, travel, professional services, consulting, and equity-based compensation.
- Operating cash usage increased by $2.82 million year over year, while financing cash inflows increased by $14.18 million.
- The company completed its initial public offering on April 3, 2018, generating net proceeds of approximately $5.03 million, and a private placement in May 2018 generated approximately $9.25 million of net proceeds.
- Shares outstanding increased to 15,072,559 at November 12, 2018, from 11,721,584 at December 31, 2017. Substantial additional dilution is possible from outstanding warrants, options, and reserved shares.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- No formal revenue, earnings, or clinical-development guidance was provided. Management expects research and development and general and administrative expenses to increase as development and public-company activities expand.
- Management stated that existing cash and financing proceeds were expected to fund current operations for at least 18 months from the filing, but also stated that additional capital will likely be required to complete development and commercialize Oncoprex.
- The company has sustained recurring losses, has no current source of revenue, and states that additional financing is necessary. Failure to obtain financing could delay, reduce, or terminate development programs or operations.
- The Phase II portion of the Oncoprex/erlotinib trial remained ongoing, with enrollment previously suspended while the company sought FDA guidance regarding protocol changes and potential cohort expansion. Clinical success, regulatory approval, manufacturing, patient enrollment, and market acceptance remain uncertain.
- The company has clinical and sponsored research commitments with MD Anderson, each described as having projected costs of approximately $2 million. The clinical trial is expected to run through early 2023, although the agreement may be terminated.
- An informal demand from a former financial advisor alleges entitlement to a warrant equal to 3% of outstanding shares as of December 1, 2015. The company believes the claim lacks merit and has recorded no related expense or capitalization impact because the outcome is not probable or reasonably estimable.
- The company reported effective disclosure controls at September 30, 2018, with no material changes to internal control over financial reporting during the quarter.
- Subsequent events included a lease extension through May 1, 2019 and approval of options covering 955,908 shares for directors and the CEO.
Important Facts for Investors to Verify
- Whether the company can sustain operations using its reported cash balance and whether additional equity or debt financing will be required sooner than anticipated.
- Progress, enrollment, safety, efficacy, and FDA interactions relating to the Oncoprex clinical program.
- The amount and timing of MD Anderson research and clinical-trial commitments and any changes to trial protocols or sites.
- The potential dilution from 3.86 million outstanding warrants, 3.58 million outstanding stock options, additional private-placement shares, and future equity issuances.
- The status and potential exposure associated with the former financial advisor’s warrant claim.
- The concentration of cash above FDIC insurance limits and the company’s ability to manage liquidity without product revenue.
- Whether the company’s stated expectation of at least 18 months of operating funding remains valid as spending and clinical activities change.