GT Biopharma, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; filed May 17, 2021. GT Biopharma is a clinical-stage biopharmaceutical company developing immuno-oncology therapies using its TriKE platform. Its lead candidate, GTB-3550, was in a Phase I/II clinical trial. The company reported no product revenue.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 or comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.64 million | $0.324 million |
| Selling, general and administrative expense | $27.362 million | $0.746 million |
| Operating loss | $29.002 million | $1.070 million |
| Net loss | $29.677 million | $1.708 million |
| Basic and diluted loss per share | $1.83 | $0.41 |
| Cash used in operating activities | $3.684 million | $0.223 million |
At March 31, cash and cash equivalents were $27.555 million, current assets were $27.643 million, and current liabilities were $3.626 million. Convertible notes were reported at zero after mandatory conversion; the company had a $31,000 line-of-credit balance and a $362,000 derivative liability. Stockholders’ equity was $24.017 million, compared with a $29.433 million deficit at December 31, 2020. No meaningful operating margin is available because the company had no revenue.
Material changes and financing
- SG&A expense rose sharply, primarily due to equity compensation. The statements report $14.296 million of officer and director stock compensation; the cash-flow statement also includes $9.807 million of consultant and R&D stock compensation.
- R&D expense increased by $1.316 million, primarily reflecting $1.355 million of stock issued for an R&D agreement.
- A February public offering of 4.945 million common shares generated net proceeds of $24.679 million. Investors also received warrants for 5.192 million shares, exercisable at $5.50 per share for five years.
- Convertible notes and accrued interest totaling $38.806 million were mandatorily converted into 11.413 million common shares. At quarter-end, 7.634 million shares, recorded as $25.956 million of common stock issuable, had not yet been issued; 5.336 million were issued after quarter-end.
- The company completed a 1-for-17 reverse stock split in February and listed its common stock on Nasdaq. Common shares outstanding were 20.517 million at March 31; the filing reports 21.128 million outstanding as of May 12.
- Net financing cash flow was $25.942 million, including offering proceeds, warrant exercises, and note proceeds. There was no material investing cash flow reported.
Outlook, risks, and unusual items
- Going concern: The company reported substantial doubt about its ability to continue as a going concern, citing a $29.7 million quarterly net loss, continuing operating losses, and need for additional financing. Management’s estimates differ within the filing: the notes say cash on hand should fund operations for about six months, while MD&A says financing plans, if successful, could support at least nine months from issuance. The filing also cautions that additional funding is not assured.
- Management anticipated SG&A cash use of $1–$2 million in coming quarters and expected R&D spending to vary with clinical activity; direct clinical costs were expected to increase as the Phase I/II trial continued. No revenue or earnings guidance was provided.
- The company is evaluating equity or debt offerings and strategic research, licensing, or marketing arrangements. It also cited cost-saving measures, including reduced executive salaries and travel.
- Two lawsuits are described: a 2019 dispute seeking damages and shares, with trial scheduled for May 2022, and a 2021 commercial-lease claim seeking damages exceeding $250,000. The company says it will defend both; it believes it has made adequate provision for the lease matter.
- Management concluded disclosure controls were ineffective at March 31 due to material weaknesses involving segregation of duties, executive-override risk, and insufficient accounting and reporting policies. Remediation steps were planned.
- COVID-19 affected operations, but the company reported no related asset impairment or significant fair-value change; the duration and financial effects remained uncertain.
- The University of Minnesota license includes royalties of 4%–6%, minimum annual royalties beginning in 2022, and milestone payments totaling $3.1 million.
Key facts for investors to verify
- Cash runway assumptions and whether additional financing or commercial/strategic arrangements were secured after the filing.
- Progress, costs, and clinical milestones for GTB-3550, including the expected timing and funding needs of the Phase I/II trial.
- Actual diluted share count and remaining issuance obligations, including the 7.634 million shares issuable at quarter-end and outstanding warrants.
- Equity-compensation expense totals: the financial statements and MD&A present figures that merit reconciliation, including the reported $21.535 million SG&A stock compensation versus the separate cash-flow addbacks.
- Developments in the two legal matters and the adequacy of related accruals or provisions.
- Progress in remediating internal-control material weaknesses.