TENAX THERAPEUTICS, INC. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Filed March 29, 2022. Tenax is a clinical-stage biopharmaceutical company developing therapies for pulmonary hypertension; it reported no approved products for sale.
Business context and development programs
- Levosimendan: Developing oral TNX-103 and subcutaneous TNX-102 for pulmonary hypertension associated with heart failure with preserved ejection fraction (PH-HFpEF). The Phase 2 HELP study did not meet its primary endpoint of reducing exercise PCWP. Other reported findings included improvement in combined PCWP measurements and a 29-meter improvement in six-minute walk distance versus placebo; the filing describes these as secondary or other analyses.
- Imatinib (TNX-201): Developing a modified-release formulation for pulmonary arterial hypertension (PAH), intended to address gastrointestinal intolerance observed in prior studies. A further Phase 1 study was planned for the first half of 2022 and a Phase 3 trial for the second half of 2022.
- Tenax acquired PHPrecisionMed in January 2021, adding the imatinib program. It relies on external manufacturers, contract research organizations and clinical sites, and has no sales or marketing organization.
Financial results and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | No product revenue reported | No product revenue reported |
| Operating expenses | $32.73 million | $9.87 million |
| Net loss | $32.47 million | $9.85 million |
| Net loss per share, basic and diluted | $1.58 | $0.95 |
| Net cash used in operating activities | $10.86 million | $9.27 million |
| Net cash provided by financing activities | $9.74 million | $10.60 million |
- Research and development expense rose to $25.15 million from $4.56 million, principally because of a $21.73 million acquired in-process research and development charge related to PHPrecisionMed. General and administrative expense increased to $7.58 million from $5.31 million, including severance and CEO-transition-related costs.
- Cash and cash equivalents were $5.58 million at year-end, down from $6.25 million; working capital was $4.13 million, versus $4.68 million. Current assets were $5.69 million and current liabilities $1.56 million.
- Year-end total liabilities were $1.75 million. No notes payable remained; lease liabilities totaled approximately $291,000. The company raised approximately $9.2 million net in a July 2021 private placement.
- Profit margins are not meaningful because the company had no product revenue and incurred operating losses. No dividend is planned.
Changes, outlook, risks and unusual items
- The net loss increased substantially year over year, primarily due to the PHPrecisionMed acquired IPR&D charge; operating cash use also increased. The acquisition was accounted for as an asset acquisition, and the acquired research and development was expensed because it had no alternative future use at acquisition.
- Management said year-end resources were expected to fund planned operations only through the second quarter of 2022. Additional financing was required thereafter; the filing states there is substantial doubt about the company’s ability to continue as a going concern. The auditor included a going-concern explanatory paragraph.
- Management’s development plans depended on obtaining financing or licensing income. Failure to secure capital could require reducing or stopping programs. Equity financing could materially dilute shareholders; debt or partnership financing could impose restrictions or require relinquishing rights.
- The HELP study’s primary exercise PCWP endpoint was not statistically significant. The encouraging secondary and other analyses do not establish efficacy or assure Phase 3 success. FDA feedback described potential Phase 3 paths for levosimendan; in February 2022, the FDA advised that the safety database at NDA filing should meet minimum ICH standards for a chronic medication.
- Key risks include clinical and regulatory failure or delay, reliance on Orion as the sole source of oral levosimendan, dependence on third-party manufacturers and CROs, lack of commercialization capabilities, COVID-19-related disruption, and limited patent protection. The filing reports one granted patent and three pending U.S. applications; it also reports a January 2022 levosimendan subcutaneous patent expected to expire no earlier than 2039.
- Potential dilution is material: at year-end the company had 20.9 million warrants and 10.0 million pre-funded warrants outstanding, in addition to options. Nasdaq had notified the company of a minimum-bid-price deficiency, with an August 16, 2022 deadline stated in the filing; the audit-committee composition deficiency was reported cured in February 2022.
- The $244,657 PPP loan plus $2,576 interest was forgiven in 2021 and recorded as other income. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Current cash runway, subsequent financing or licensing arrangements, and whether the going-concern uncertainty has changed.
- Actual timing, design, funding and regulatory status of the planned TNX-103 and TNX-201 trials, including whether the trials began and met enrollment and safety requirements.
- Final clinical data and the distinction between HELP’s failed primary endpoint and its secondary or exploratory positive findings.
- Current share count, warrant and pre-funded warrant overhang, ownership concentrations, and any dilution or changes to Nasdaq listing status.
- Manufacturing continuity and license terms with Orion, as well as the status and scope of pending patent applications.