Genprex, Inc. 10-Q Summary
Reporting period: Three months ended March 31, 2023, compared with the three months ended March 31, 2022. The interim financial statements are unaudited. Genprex is a clinical-stage gene therapy company with oncology programs using the ONCOPREX Nanoparticle Delivery System and preclinical Type 1 and Type 2 diabetes programs.
Financial Position and Results
| Metric | Q1 2023 | Q1 2022 or prior period |
|---|---|---|
| Revenue | $0; no product revenue | $0; no product revenue |
| Research and development expense | $5.3 million | $2.0 million |
| General and administrative expense | $4.0 million | $3.3 million |
| Total operating expenses | $9.3 million | $5.3 million |
| Operating loss | $9.3 million | $5.3 million |
| Net loss | $9.2 million | $5.3 million |
| Net loss per share | $0.19 | $0.11 |
| Net cash used in operating activities | $6.9 million | $4.1 million |
| Cash and cash equivalents at period-end | $18.1 million | $34.6 million at March 31, 2022 |
- Cash declined from $21.0 million at December 31, 2022, to $18.1 million at March 31, 2023.
- Current assets were $19.9 million and current liabilities were $4.8 million at March 31, 2023. The filing text does not identify material long-term debt; current liabilities consisted primarily of accounts payable and other current liabilities.
- Accumulated deficit was $112.0 million, compared with $102.8 million at December 31, 2022.
- Research and development supplies totaled $2.6 million, and intellectual property, net, totaled $0.7 million.
- The company estimates that existing cash will fund necessary operations and expected clinical trial activities through the second quarter of 2024, subject to assumptions regarding spending, trial timing and capital needs.
Material Changes Versus the Prior Comparable Period
- R&D expense increased 160% to $5.3 million, primarily due to expanded manufacturing programs, increased CRO and clinical-trial activity, and higher personnel costs. R&D headcount increased from 8 to 17 employees.
- G&A expense increased 21% to $4.0 million due primarily to higher headcount, professional services and share-based compensation.
- Net loss increased 73% to $9.2 million, reflecting expanded clinical and manufacturing activities and an increase in total employees from 18 to 28.
- Operating cash burn increased 70% to $6.9 million.
- Genprex raised approximately $4.1 million in gross financing proceeds during the quarter, including a registered direct offering and ATM sales. The registered direct offering included 3.8 million common shares and warrants to purchase 3.8 million shares, with warrants exercisable at $1.10 per share.
- Shares outstanding increased to 51.97 million at March 31, 2023, from 48.11 million at December 31, 2022. Additional dilution may result from approximately 11.5 million outstanding stock options, 5.9 million warrants and 1.9 million restricted stock units.
Guidance, Outlook, Risks and Unusual Items
- Genprex expects to complete enrollment in the Acclaim-2 Phase 1 dose-escalation portion by the end of 2023, begin the Acclaim-3 trial by the end of the third quarter of 2023, and proceed with the Acclaim-1 Phase 2 expansion following safety review and site additions.
- Acclaim-1 evaluates REQORSA with Tagrisso in late-stage NSCLC; Acclaim-2 evaluates REQORSA with Keytruda in late-stage NSCLC; and Acclaim-3 is planned to evaluate REQORSA with Tecentriq in extensive-stage SCLC. The FDA has granted Fast Track Designation for the Acclaim-1 and Acclaim-2 combinations.
- The diabetes candidates GPX-002 and GPX-003 remain in preclinical development. Management expects to finalize constructs and seek FDA guidance on toxicology studies before the end of 2023.
- The company has no current source of revenue and expects significant continuing expenditures. Management states that additional capital will be required and that failure to raise capital could delay, reduce or terminate development programs or operations.
- Material commitments include approximately $2.9 million for an MD Anderson sponsored research agreement, approximately $4.5 million for a contract development and manufacturing organization agreement, and milestone, royalty and maintenance obligations under University of Pittsburgh and MD Anderson licenses.
- COVID-19-related clinical-site and supply-chain disruptions, competition for trial patients, dependence on third-party manufacturers and CROs, regulatory uncertainty, clinical-trial failure, intellectual-property risks and reimbursement uncertainty could adversely affect results.
- Disclosure controls and procedures were not effective as of March 31, 2023 because of material weaknesses involving segregation of duties and insufficient accounting personnel with expertise in complex transactions. Management is implementing workflow, review, staffing and disclosure-committee remediation measures, but the weaknesses had not been demonstrated as remediated.
- Share-based compensation was approximately $1.3 million in the quarter. Approximately $8.8 million of unrecognized compensation cost remained for non-vested time-based awards, plus approximately $0.3 million related to a performance-based warrant.
- Management reported no legal proceedings or contingencies expected to have a material adverse effect. The financial statements are prepared on a going-concern basis despite substantial historical losses and dependence on future financing.
Investor Verification Checklist
- Verify the timing and terms of future equity or other financing, including potential dilution from the ATM facility, warrants, options and restricted stock units.
- Assess whether the $18.1 million cash balance and projected funding through Q2 2024 remain adequate as clinical, manufacturing and personnel spending increases.
- Track enrollment, safety reviews, dose selection and clinical data for Acclaim-1, Acclaim-2 and Acclaim-3.
- Confirm whether management remediates the material weaknesses in internal control and whether subsequent filings report effective disclosure controls.
- Evaluate manufacturing readiness, third-party dependence and the approximately $4.5 million CDMO commitment.
- Review regulatory, intellectual-property and milestone obligations under the MD Anderson and University of Pittsburgh license arrangements.