Genprex, Inc. — Form 10-Q Summary
Business context and reporting period
Genprex is a clinical-stage gene therapy company developing oncology and diabetes therapies. Its lead oncology candidate, REQORSA (GPX-001), uses the ONCOPREX nanoparticle delivery system and is being evaluated with approved therapies for non-small cell lung cancer and small cell lung cancer. The company has no product revenue and remains dependent on external financing.
This report covers the three and nine months ended September 30, 2022, compared with the corresponding 2021 periods. The financial statements are unaudited. Genprex is a smaller reporting company and an emerging growth company.
Key financial metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 in 2022 and 2021 | $0 in 2022 and 2021 |
| Research and development expense | $3.6 million, versus $1.4 million | $8.2 million, versus $5.1 million |
| General and administrative expense | $2.5 million, versus $2.0 million | $8.8 million, versus $8.8 million |
| Operating loss | $6.1 million, versus $3.4 million | $17.0 million, versus $13.9 million |
| Net loss | $6.1 million, versus $3.4 million | $17.0 million, versus $13.9 million |
| Net loss per share | $0.13, versus $0.07 | $0.35, versus $0.30 |
| Net cash used in operating activities | Not separately provided | $13.2 million, versus $11.1 million |
Because revenue was zero, gross and operating margins are not meaningful. Cash and cash equivalents were $25.5 million at September 30, 2022, down from $38.6 million at December 31, 2021. Total current assets were $26.3 million and current liabilities were $2.5 million. The filing does not disclose outstanding debt; liabilities shown are primarily accounts payable and other current liabilities.
Accumulated deficit was $95.0 million, compared with $78.0 million at December 31, 2021. Stockholders’ equity was $27.5 million, compared with $41.3 million at year-end 2021. The company had 48.0 million common shares outstanding as of September 30, 2022 and 48.025 million as of November 8, 2022.
Material changes versus the prior comparable period
- Third-quarter R&D expense increased 151% to $3.6 million, primarily from higher personnel, preclinical, manufacturing and clinical-operation costs associated with the Acclaim-1 and Acclaim-2 trials.
- Nine-month R&D expense increased 60% to $8.2 million.
- Third-quarter G&A expense increased 26% to $2.5 million, driven by professional services, personnel expenses, insurance and the newly implemented 401(k) plan.
- Nine-month G&A expense was essentially unchanged year over year. A $1.75 million one-time finance fee in the 2021 period was offset by higher equity-based compensation and personnel costs in 2022.
- Third-quarter net loss increased 77% to $6.1 million. Management attributed the increase primarily to higher headcount and clinical-trial expenses.
- Operating cash burn increased 19% to $13.2 million for the first nine months. Financing cash inflow fell to $1,754 from $25.7 million because the 2021 period included significant equity financing and option and warrant exercises.
- During the first nine months of 2022, the company issued 116,973 shares upon option exercise for approximately $1,755, issued shares for services, and issued 100,000 warrants to consultants.
Guidance, outlook, risks and unusual items
- Management estimated that existing cash and cash equivalents could fund current operations and planned clinical-trial activities into 2024. This estimate depends on assumptions about enrollment, spending, inflation and the scope of planned activities and is not a commitment.
- Management expects to complete the Phase 1 dose-escalation portion of Acclaim-1 in the first quarter of 2023 and the Phase 1 portion of Acclaim-2 by mid-2023.
- Acclaim-1 advanced from a 0.06 mg/kg cohort to a 0.09 mg/kg cohort in August 2022, with a potential escalation to 0.12 mg/kg if safety results permit. Both Acclaim-1 and Acclaim-2 have received FDA Fast Track Designation for their respective treatment combinations.
- The company expected to initiate an SCLC combination trial by year-end 2022, subject to filing a protocol amendment to its open IND.
- Genprex entered into new sponsored research agreements with MD Anderson and the University of Pittsburgh in August 2022. It also entered into a three-year contract development and manufacturing agreement in July 2022 with projected costs of approximately $2.5 million.
- The company acknowledged substantial historical losses, no current revenue source and the need to raise additional capital. Failure to obtain financing could delay, reduce or terminate development programs and could force the company to curtail or cease operations.
- COVID-19-related clinical-site backlogs, workforce shortages and supply-chain disruptions have delayed site engagement and manufacturing and testing activities.
- Disclosure controls and procedures were deemed ineffective because of a material weakness in internal control over financial reporting related to inadequate segregation of duties. Management is implementing new accounting software, review procedures, a formal Disclosure Committee and additional staffing; remediation was not yet considered complete.
- Approximately $9.6 million of unrecognized time-based stock compensation remained at September 30, 2022, expected to be recognized over approximately three years. A further approximately $300,000 of performance-based warrant compensation could be recognized upon achievement of milestones.
- Subsequent events included issuance of 5,000 shares for services on October 1, 2022 and grants of options for 70,000 shares to new employees during October 2022.
Most important facts for investors to verify
- Whether the stated cash runway into 2024 remains valid after updated trial enrollment, manufacturing and operating expenditures.
- Progress, safety findings and enrollment rates in the Acclaim-1 and Acclaim-2 trials, including achievement of planned Phase 1 milestones.
- Whether the planned SCLC trial was initiated by year-end 2022 and the status of the required IND amendment.
- The company’s ability to obtain additional capital without substantial dilution or unfavorable financing terms.
- Remediation and operating effectiveness of controls addressing the segregation-of-duties material weakness.
- The potential dilution from 11.3 million outstanding stock options and 2.2 million outstanding warrants as of September 30, 2022.
- Clinical, regulatory, manufacturing, intellectual-property and commercialization risks associated with REQORSA and the diabetes gene therapy program.