RenovoRx, Inc. (Nasdaq: RNXT) — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited financial statements; amounts below are in millions of dollars unless otherwise stated.
Business context
RenovoRx is a clinical-stage biopharmaceutical company developing targeted cancer therapies using its Trans-Arterial Micro-Perfusion (TAMP) platform. Its lead candidate, RenovoGem, is being studied in a Phase III trial for locally advanced pancreatic cancer. The company had no approved drug/device combination products and no product-sales revenue.
Financial performance and liquidity
- Revenue and margins: No product-sales revenue. Operating margins are not meaningful in the absence of revenue.
- Q2 results: R&D expense was $1.925 million, up 38% year over year; G&A expense was $1.450 million, up 18%. Total operating expenses were $3.375 million, up 29%, and operating loss was $3.375 million. Net loss was $2.327 million versus $2.594 million a year earlier; basic and diluted loss per share was $0.22 versus $0.29.
- First-half results: R&D expense was $3.263 million, G&A expense $3.373 million, and total operating expenses $6.636 million, up 18% year over year. Net loss was $5.584 million, broadly unchanged from $5.597 million; loss per share was $0.57 versus $0.62.
- Cash flow: Operating cash use was $5.477 million for the first half, compared with $4.458 million in 2022. Investing activities provided $2.032 million, mainly from Treasury bill maturities; financing activities provided $5.008 million, primarily from the March offering. Cash increased by $1.563 million.
- Cash and liquidity: Cash and cash equivalents were $5.954 million at June 30, versus $4.391 million at December 31, 2022; short-term marketable securities were zero versus $2.049 million. Current assets were $6.314 million and current liabilities $1.699 million. Management said available cash is not expected to fund operating needs for at least the next 12 months under current plans and concluded substantial doubt exists about the company’s ability to continue as a going concern.
- Debt and other liabilities: The filing reports no credit facility or committed capital source. It records a $3.427 million common-warrant liability, measured at fair value; no material borrowing balance is identified.
- Capital and dilution: The April 2023 offering generated approximately $5.0 million gross and $4.4 million net. It included 1,557,632 common shares or pre-funded warrants and warrants to purchase 1,947,040 shares. Common shares outstanding were 10,693,080 at June 30, compared with 9,097,701 at year-end.
Changes, outlook, and risks
- Higher clinical-trial and personnel costs drove increased R&D spending; increased headcount and related benefits drove much of the rise in G&A. Management expects both expense categories to continue rising as development advances.
- The first planned TIGeR-PaC interim analysis was triggered at 26 deaths. The company reported interim results of a six-month overall-survival benefit, an eight-month delay in cancer progression, and 65% fewer adverse effects versus systemic chemotherapy. The Data Monitoring Committee recommended continuing the trial without modification and reported no safety concerns. These are interim results, not final trial findings.
- Under the modified study plan, the trial targets 114 randomized SBRT patients and 86 deaths for final analysis. As of July 18, 2023, 55 patients had been randomized; management anticipated enrollment completion in 2024, a second interim analysis around mid-2024, and final readout in 2025. The filing says FDA agreement with the modifications is not assured.
- Management anticipated launching a Phase III trial in extrahepatic cholangiocarcinoma during 2023, while finalizing the protocol and incorporating durvalumab. Timing and execution remain subject to development and regulatory uncertainties.
- Key risks include the need for substantial additional financing, possible dilution or unfavorable financing terms, clinical enrollment and trial-outcome uncertainty, regulatory approval, and reliance on third-party manufacturers, including a single source for RenovoCath. The company also cited potential effects of COVID-19 on trials and operations, while reporting no material supply-chain disruption to date.
- Financial reporting controls: Disclosure controls were deemed ineffective due to previously identified material weaknesses involving accounting expertise and staffing, formal policies, review controls, and segregation of duties. Management was implementing remediation measures and intended to complete them during 2023; effectiveness had not yet been established.
- Unusual accounting item: The Q2 income statement included a $1.573 million gain from a change in warrant fair value and $0.575 million of offering costs allocated to the warrant liability. The balance-sheet warrant liability was $3.427 million at June 30; warrant valuation is Level 3 and depends on estimates.
Most important facts for investors to verify
- Cash runway, near-term financing needs, and the company’s ability to raise capital despite the stated going-concern substantial doubt.
- Full TIGeR-PaC interim data, trial enrollment progress, FDA feedback on the modified protocol/statistical plan, and timing of subsequent analyses.
- Whether the cholangiocarcinoma trial began as anticipated and whether its protocol and timing changed.
- Potential dilution from outstanding warrants and future financing, and the assumptions underlying the warrant liability valuation.
- Progress and independent validation of remediation of the disclosed material weaknesses in financial reporting controls.