TransCode Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filed November 14, 2022. TransCode is a pre-revenue oncology biopharmaceutical company developing RNA-based therapeutics and diagnostics. Its lead candidate, TTX-MC138, targets metastatic cancer; the company was preparing for its first clinical trial.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development expense | $3.04 million | $0.99 million | $7.55 million | $1.47 million |
| General and administrative expense | $1.91 million | $1.37 million | $5.59 million | $1.70 million |
| Total operating expenses | $4.95 million | $2.36 million | $13.14 million | $3.16 million |
| Net loss | $4.29 million | $2.33 million | $12.43 million | $4.04 million |
| Basic loss per share | $0.33 | $0.20 | $0.96 | $0.58 |
| Operating cash used | Not separately stated | Not separately stated | $11.74 million | $3.67 million |
At September 30, 2022, cash was $8.79 million, current assets were $11.57 million, current liabilities were $3.77 million, total liabilities were $3.77 million, and accumulated deficit was $22.74 million. The company reported no debt outstanding. No meaningful operating margin is presented because the company has no product revenue.
Changes versus the prior comparable period
- Q3 operating expenses more than doubled year over year, primarily reflecting increased R&D materials, personnel, regulatory, vendor and consulting costs, along with higher public-company and insurance expenses.
- Nine-month net loss increased to $12.43 million from $4.04 million. The prior-year period included an $867,000 gain from a change in fair value of derivative liabilities and $95,000 of interest expense; the notes converted at the 2021 IPO.
- Cash fell by $12.04 million during the first nine months of 2022, from $20.83 million at year-end 2021. The comparable 2021 period included $25.51 million of net financing cash, primarily from the IPO.
Outlook, risks and notable items
- Going concern and funding: Management stated that cash and expected second-year SBIR funding should support operations through Q1 2023, but existing cash was not expected to fund a full 12 months from the financial-statement date. The filing identifies substantial doubt about the company’s ability to continue as a going concern without additional capital. Third-year SBIR funding of up to approximately $871,000 is not assured.
- Development plans: The company planned preclinical work to support an exploratory IND and Phase 0 microdosing trial of radiolabeled TTX-MC138, alongside IND-enabling studies for a Phase I/II program. It also described several other preclinical programs. These are plans, not reported clinical outcomes.
- Grant: An NIH/NCI SBIR award may provide up to $2.39 million over three years. The company recognized $697,000 of grant income in the first nine months of 2022 and reported a $488,000 grant receivable at quarter-end.
- Collaboration commitment: A five-year MD Anderson agreement provides for up to $10 million of funding, including $500,000 in the first year and scheduled later payments. The company said later obligations will require additional funding.
- Other commitments and risks: The MGH license includes potential milestone payments, royalties and sublicense-income sharing. The filing discusses dependence on third-party research and manufacturing, clinical and regulatory uncertainty, COVID-related disruption, inflation and capital-market conditions. It reported no pending legal proceedings.
- Controls: Management concluded disclosure controls and procedures were ineffective as of September 30, 2022, due to previously identified, unremediated material weaknesses in internal control over financial reporting. The company engaged a consultant to assist with control design and implementation.
- Unusual prior incident: A 2021 phishing incident involved $526,435; the company reported recovering the full amount by October 15, 2021, and considered the impact immaterial.
Important facts for investors to verify
- Cash runway, actual receipt and timing of remaining SBIR funds, and the amount and terms of any additional financing.
- Progress and regulatory timing for the planned TTX-MC138 studies, including whether the Phase 0 trial and IND-enabling work proceed as described.
- Funding schedule and cash impact of the MD Anderson commitment and other R&D obligations.
- Remediation of the disclosed control weaknesses and the effectiveness of subsequent reporting controls.
- The filing’s loss-per-share disclosure: the statements report basic and diluted loss per share as equal, while Note 13 presents different diluted loss-per-share figures and diluted share counts despite losses. This inconsistency warrants review against the filed financial statements.