Tenaya Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filed November 10, 2022. Tenaya is a clinical-stage biotechnology company developing heart-disease therapies across gene therapy, cellular regeneration and precision medicine. It had no approved products and had generated no revenue.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data. Interim financial statements are unaudited.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $23.8 | $12.9 | $68.8 | $33.4 |
| General and administrative expense | $7.5 | $5.4 | $22.3 | $13.2 |
| Total operating expenses | $31.3 | $18.3 | $91.1 | $46.6 |
| Net loss | $30.7 | $18.3 | $90.1 | $46.6 |
| Basic and diluted loss per share | $0.74 | $0.68 | $2.18 | $4.75 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $81.7 | $44.5 |
- At September 30, 2022, cash and cash equivalents were $34.5 million and marketable securities were $115.0 million, totaling $149.5 million. Current assets were $157.1 million; current liabilities were $17.7 million.
- Total assets were $226.3 million, versus $314.2 million at December 31, 2021. Stockholders’ equity was $196.3 million; accumulated deficit was $245.7 million.
- Operating lease liabilities totaled $16.1 million ($4.0 million current and $12.0 million noncurrent). The filing reports no material changes in contractual obligations; it does not report borrowings or other financial debt.
- Nine-month investing cash flow was a $77.7 million net inflow, primarily reflecting $206.3 million of marketable-security maturities, partly offset by $108.7 million of purchases and $19.8 million of property and equipment purchases. Financing cash flow was $0.3 million. Cash, cash equivalents and restricted cash decreased $3.8 million.
- Margins are not meaningful because Tenaya had no revenue. Marketable securities recorded a $0.6 million unrealized loss in other comprehensive loss for the first nine months.
Changes versus prior comparable periods
- Q3 operating expenses rose 71% year over year and net loss increased 68%. For the first nine months, operating expenses rose 95% and net loss increased 94%.
- Year-to-date R&D expense more than doubled, mainly from higher external research and CRO costs, facility and laboratory costs, and personnel-related costs. G&A increased 69%, reflecting employee-related, professional-service and insurance costs.
- Operating cash use increased to $81.7 million from $44.5 million in the first nine months of 2021. Unlike 2021, the 2022 period included no IPO or preferred-stock financing proceeds.
- Property and equipment, net, increased to $52.2 million from $43.0 million, including investment in the Union City manufacturing facility, which completed build-out and began operations in 2022.
Outlook, developments and risks
- Management said the $149.5 million of cash, cash equivalents and marketable securities was expected to fund operations for at least 12 months following the filing. It also said substantial additional funding will be needed to complete development and potentially commercialize candidates. The company established a shelf registration for up to $300 million and an ATM program for up to $75 million; no ATM shares had been sold by September 30, 2022.
- Management expects expenses and operating losses to increase as programs advance, clinical trials begin, the manufacturing facility operates, and the company expands its workforce and public-company infrastructure. No specific financial guidance was provided.
- Pipeline milestones: TN-301’s IND was cleared in September 2022 and its Phase 1 trial began; initial single- and multiple-ascending-dose data were expected in 2023. The company planned to submit a TN-201 IND by year-end 2022 and update its status in early 2023; it planned a TN-401 IND submission in 2023. TN-401 production had been scaled to 200L and IND-enabling studies were being initiated.
- The Union City facility received a California drug manufacturing license in June 2022 for cGMP drug-product production. Management noted that the company had limited company-level manufacturing experience despite building internal AAV capabilities.
- Key risks include early-stage clinical and preclinical uncertainty, potential safety or efficacy failures, regulatory delays, dependence on third parties and supply chains, competition for patients and talent, and the need for additional capital on acceptable terms. COVID-19 had caused modest delays, including supplier lead-time issues; further effects were uncertain.
- The filing identifies potential third-party patent issues that could affect TN-201 or AAV vectors; Tenaya said it believed it had defenses but could not assure those defenses would succeed. No material litigation was reported as of September 30, 2022. The filing also describes contingent license milestone and royalty obligations, but no such milestone or royalty payments had been recognized under the specified Gladstone and UTSW agreements.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether clinical progress and timing match the stated TN-301 data, TN-201 IND, and TN-401 IND expectations, and what the trials show on safety and efficacy.
- Actual cash burn and spending needs relative to management’s stated minimum 12-month runway, including the timing and terms of any additional financing or ATM sales.
- Whether internal manufacturing can reliably produce clinical-grade AAV product at scale and on schedule, and whether supply-chain or COVID-related disruptions recur.
- The status and potential impact of third-party intellectual-property claims, license milestones, and other contingent obligations.
- Whether rising R&D, facility, personnel and public-company costs remain consistent with the company’s development priorities and available liquidity.