TransCode Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2023; filed August 14, 2023. TransCode is a pre-revenue oncology biotechnology company developing RNA therapeutics and diagnostics. Its lead candidate, TTX-MC138, is designed to target miRNA-10b in metastatic cancers. A 1-for-20 reverse stock split took effect May 23, 2023; share and per-share amounts are presented on a split-adjusted basis.
Financial results and liquidity
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 | Comparison |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue; grant income is reported as other income. |
| Research and development | $2.97 million | $5.56 million | Up $0.35 million and $1.06 million, respectively, year over year. |
| General and administrative | $2.16 million | $4.47 million | Up $0.08 million and $0.79 million, respectively. |
| Total operating expenses | $5.13 million | $10.03 million | Up $0.42 million and $1.85 million, respectively. |
| Grant income | $0.79 million | $0.87 million | Primarily NIH SBIR award income; substantially above prior-year periods. |
| Net loss | $4.34 million | $9.16 million | Quarterly loss narrowed from $4.67 million; six-month loss widened from $8.14 million. |
| Basic and diluted loss per share | $3.29 | $8.97 | Loss per share was $7.20 and $12.55, respectively, in the comparable 2022 periods. |
Gross margin is not meaningful because the company has no product revenue. For the six months, operating cash use was $8.91 million, investing cash use was $0.03 million, and financing provided $7.54 million, primarily from equity offerings. Cash fell from $4.97 million at December 31, 2022, to $3.57 million at June 30, 2023. The company reported $2.09 million of stockholders’ equity, $3.79 million of total liabilities, and $0.66 million of operating lease liabilities. It reported no debt outstanding other than lease liabilities. Current assets were $4.89 million and current liabilities $3.52 million.
Changes, outlook, and material risks
- R&D spending increased, mainly from materials and consulting; G&A rose with compensation, legal, consulting, technology, and facilities costs. Higher NIH grant income partly offset operating expenses, contributing to the narrower quarterly net loss.
- The company raised approximately $1.2 million net in a February registered direct offering, received proceeds from a White Lion share purchase agreement, and raised approximately $6.1 million net in a June registered direct offering involving common shares, pre-funded warrants, and Series A warrants. These financings materially increased potential dilution.
- Management said June 30 cash was expected to fund operations only into September 2023, not for 12 months from the financial statement date. The filing states there is substantial doubt about the company’s ability to continue as a going concern without additional capital. Future financing may be unavailable or dilutive; failure to obtain it could require reducing or stopping programs or disposing of technology rights.
- FDA authorization for a Phase 0 TTX-MC138 study was received in December 2022, and IRB approval to conduct it at Massachusetts General Hospital was received in April 2023. The company planned a microdose PET-MRI study in up to 12 patients and reported completing the experimental portion of nonclinical IND-enabling studies by July 2023; manufacturing and related work remained. No formal financial guidance was provided.
- The company was negotiating with MD Anderson about upcoming payments and planned work under a collaboration that could involve up to $10 million over five years. No collaboration expenses were recorded in the reported periods, and the outcome of negotiations was uncertain.
- Nasdaq notified the company in July 2023 that its compliance plan for the $2.5 million minimum stockholders’ equity requirement was rejected and its shares were subject to delisting. The company appealed; a hearing was scheduled for October 2023, staying delisting pending the process. There is no assurance it will retain its listing or regain compliance.
- Management concluded disclosure controls and procedures were not effective because of an unremediated material weakness in internal control over financial reporting. The company said it had engaged a consultant and implemented new software, but reported no material control changes during the six-month period.
- Other risks include clinical and regulatory uncertainty, dependence on third-party research and manufacturing providers and licensed intellectual property, potential delays including from COVID-19, difficulty raising capital, and possible Nasdaq delisting. The filing reported no material pending or threatened litigation.
Investor verification priorities
- Confirm the company’s post-quarter cash position, subsequent financing, operating runway, and any response to the going-concern warning.
- Check the outcome of the October 2023 Nasdaq hearing and whether the company regained the required stockholders’ equity.
- Verify the clinical timeline and status of the Phase 0 study, remaining TTX-MC138 manufacturing work, and any Phase I IND submission.
- Reconcile the June offering’s pre-funded warrant count: the filing describes 1,901,000 issued in one passage, while its outstanding-warrants table lists 950,000. Assess the full warrant and share dilution overhang.
- Track MD Anderson negotiations, future contractual payments, and whether the planned research program or funding commitment changed.
- Monitor remediation of the material weakness and whether subsequent filings report effective disclosure controls.