Genprex, Inc. Form 10-Q Summary
Business Context and Reporting Period
Genprex is a clinical-stage gene therapy company developing REQORSA Immunogene Therapy for lung cancer and a preclinical gene therapy for Type 1 and Type 2 diabetes. The report covers the three and six months ended June 30, 2022, and was filed August 12, 2022. The company had 47,898,351 common shares outstanding at June 30, 2022 and 48,020,304 shares outstanding as of August 5, 2022.
- REQORSA is being evaluated in the Acclaim-1 and Acclaim-2 Phase 1/2 NSCLC trials, with FDA Fast Track Designations for both programs.
- The first patient in Acclaim-1 was dosed in February 2022; the first patient in Acclaim-2 was dosed in April 2022.
- Management expected to complete the Phase 1 portion of Acclaim-1 by year-end 2022, complete Acclaim-2 Phase 1 by mid-2023, and initiate an SCLC trial by year-end 2022.
Financial Condition and Results
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | $0 in 2022 and 2021 | $0 in 2022 and 2021 |
| Research and development expense | $2.74 million vs. $1.53 million | $4.60 million vs. $3.70 million |
| General and administrative expense | $2.43 million vs. $2.46 million | $6.29 million vs. $6.77 million |
| Total costs and expenses | $5.18 million vs. $3.99 million | $10.90 million vs. $10.48 million |
| Net loss | $5.17 million, or $0.11 per share, vs. $3.99 million, or $0.08 per share | $10.89 million, or $0.23 per share, vs. $10.48 million, or $0.23 per share |
| Net cash used in operating activities | Not separately presented | $8.62 million vs. $8.43 million |
- Gross and operating margins are not meaningful because the company generated no revenue and remains pre-commercial.
- Cash and cash equivalents were $30.05 million at June 30, 2022, down from $38.63 million at December 31, 2021.
- Total assets were $34.57 million, including $2.95 million of research and development supplies and $0.67 million of net intellectual property.
- Total current liabilities were $2.15 million; the filing does not report outstanding debt or long-term borrowings.
- Accumulated deficit was $88.91 million, compared with $78.02 million at December 31, 2021.
- Management estimated that existing cash would fund current operations and planned clinical activities into 2024, but stated that additional capital will be required and that the estimate depends on assumptions that may prove incorrect.
Material Changes Versus the Prior Comparable Period
- Second-quarter R&D expense increased $1.21 million, or 79%, primarily because of increased manufacturing, preclinical, and clinical operations expenses related to Acclaim-1 and Acclaim-2.
- Six-month R&D expense increased $0.90 million, or 24%.
- Second-quarter net loss increased $1.18 million, or 30%, reflecting higher R&D costs and increased headcount, which grew from 13 to 22 employees since June 30, 2021.
- Six-month G&A expense decreased $0.49 million, or 7%, primarily because the prior-year period included a $1.75 million one-time finance fee associated with a registered direct offering.
- Operating cash use increased 2% year over year, while the company received no financing proceeds in the first half of 2022 compared with $25.43 million in the first half of 2021.
- Common shares outstanding increased only modestly during the first half of 2022, but the company had 11.45 million outstanding stock options and 2.08 million outstanding warrants at June 30, 2022, creating potential future dilution.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The company has sustained losses since inception, has no current source of revenue, and expects significant additional spending on clinical development. Management stated that failure to obtain additional 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.
- Research and development expenses are expected to increase as programs advance, although the company cannot determine the duration, completion costs, or ultimate probability of success of its projects.
- As of June 30, 2022, $29.76 million of cash and cash equivalents exceeded FDIC insurance limits, creating cash-concentration risk.
- Management reported a material weakness in internal control over financial reporting caused by insufficient segregation of duties. Remediation efforts include new accounting software and workflows, additional review procedures, a formal Disclosure Committee, and additional accounting personnel; management stated that the weakness had not yet been remediated.
- The company disclosed no material pending legal proceedings and no material contingencies known to management. License arrangements include potential milestone payments, royalties, maintenance fees, and patent-related expenses, including $6.15 million of total milestone payments under an MD Anderson amendment and $3.98 million of aggregate milestone payments under the University of Pittsburgh license.
- Subsequent events included July and August 2022 stock and warrant issuances and a July 2022 exercise of options for 116,953 shares.
- Chairman, CEO, and President J. Rodney Varner disclosed a diagnosis of cutaneous lymphoma and ongoing chemotherapy. The board stated that continuity measures were implemented for periods of potential unavailability.
Important Facts for Investors to Verify
- Whether the company can raise additional capital on acceptable terms before cash resources become insufficient.
- Actual clinical enrollment, safety, dose-escalation, and milestone progress in Acclaim-1 and Acclaim-2, including the stated completion targets.
- Timing and regulatory status of the planned SCLC trial and the development of the diabetes program.
- Progress and independent validation of remediation efforts for the material weakness in internal controls.
- The potential dilution from outstanding options, warrants, and subsequent equity issuances.
- Whether COVID-19, site backlogs, workforce shortages, or supply-chain disruptions are causing further clinical or manufacturing delays.
- The assumptions supporting management’s estimate that cash will fund operations into 2024, including potential changes in trial scope, costs, and timing.