Tenax Therapeutics, Inc. — 2019 Q2 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. The company is a clinical-stage specialty pharmaceutical business developing treatments for cardiovascular and pulmonary diseases. Its lead candidate, levosimendan, is being studied in a Phase 2 trial for pulmonary hypertension associated with heart failure with preserved ejection fraction (PH-HFpEF). The filing reports no revenue.
Key financial results
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Operating expenses | $1.82 million | $1.89 million | $3.48 million | $3.11 million |
| Net loss | $1.76 million | $1.87 million | $3.38 million | $3.06 million |
| Net loss per share, basic and diluted | $0.28 | $1.28 | $0.60 | $2.13 |
| Cash used in operating activities | $1.9 million | $1.2 million | $4.05 million | $2.75 million |
As of June 30, 2019, cash and cash equivalents were $8.41 million and marketable securities were $0.50 million, for approximately $8.9 million in combined cash and investments. Working capital was $8.49 million; total assets were $9.66 million, total liabilities $1.04 million, and stockholders’ equity $8.62 million. The filing reports no borrowing debt; liabilities included lease obligations. Profit margins are not applicable because the company had no revenue and incurred losses.
Changes from comparable periods
- Q2 net loss narrowed about 6% year over year, while six-month net loss increased about 10%.
- Research and development expense rose to $649,000 in Q2 from $311,000, and to $1.13 million for the half-year from $370,000, mainly as Phase 2 trial and site costs increased.
- General and administrative expense declined to $1.17 million in Q2 from $1.58 million and to $2.35 million for the half-year from $2.74 million, primarily reflecting lower personnel and professional costs.
- Six-month operating cash use increased to $4.05 million from $2.75 million, chiefly because of higher clinical-trial costs and accrued expenses. Cash and investments declined from $12.86 million at year-end 2018 to $8.91 million.
Outlook, risks and notable items
- Management estimated existing resources would fund planned operations through the first quarter of 2020; substantial additional financing will be needed beyond that point. Management stated that financing availability is uncertain, and the filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern.
- The Phase 2 HELP trial is planned for 36 patients. The first patient was enrolled in March 2019; as of August 9, 2019, six patients had enrolled. Management anticipated enrollment would continue through the end of 2019. No trial outcome or product-approval guidance was provided.
- Orion, the licensor and sole-source manufacturer of levosimendan under the license, initiated arbitration in June 2019 over whether its oral levosimendan formulation is covered by the license’s line-extension provisions and sought reimbursement of legal fees. Tenax disputed Orion’s position. The company warned that deterioration in the relationship could materially harm its business and financial condition.
- Additional equity financing could dilute shareholders; debt financing could add interest and restrictive covenants; licensing or collaboration arrangements could require granting rights on unfavorable terms. Failure to secure funding could force reductions or delays in development.
- During the first half, Tenax received $96,500 from warrant exercises. At June 30, 10.64 million warrants remained outstanding. Stockholders approved an increase of 600,000 shares authorized under the 2016 Stock Incentive Plan.
- The company adopted the new lease accounting standard in January 2019, recognizing a $222,963 operating lease liability at June 30. The filing reported no material change in other contractual obligations and no material pending litigation apart from the Orion arbitration described in the notes.
Important facts for investors to verify
- Cash burn and the timing, terms, and availability of financing needed after the stated first-quarter 2020 runway.
- Enrollment progress, trial costs, and eventual clinical results for the Phase 2 HELP study.
- Developments and potential consequences of the Orion arbitration, including continued access to supply and commercialization rights.
- Potential dilution from outstanding warrants, preferred-stock conversion provisions, and the expanded stock incentive plan.