Genprex, Inc. Form 10-Q Summary
Business Context and Reporting Period
Genprex is a clinical-stage gene therapy company developing REQORSA (GPX-001) for non-small cell lung cancer and GPX-002 for Type 1 and Type 2 diabetes. The report covers the three and six months ended June 30, 2021, and was filed August 13, 2021. The financial statements are unaudited.
- Acclaim-1, a Phase 1/2 trial combining REQORSA with Tagrisso, was initiated in June 2021 after FDA protocol comments were addressed and a first clinical site was engaged. Patient enrollment was expected by no later than the fourth quarter of 2021.
- Acclaim-2, combining REQORSA with Keytruda, was expected to begin in 2021.
- The diabetes program remained in preclinical development.
Financial Results and Liquidity
| Metric | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.5 million | $3.7 million |
| General and administrative expense | $2.5 million | $6.8 million |
| Total costs and expenses | $4.0 million | $10.5 million |
| Net loss | $4.0 million | $10.5 million |
| Net loss per share | $0.08 | $0.23 |
| Net cash used in operating activities | Not separately provided | $8.4 million |
- Cash and cash equivalents were $44.2 million at June 30, 2021, compared with $27.3 million at December 31, 2020.
- Stockholders’ equity was $47.7 million, while current liabilities were $1.0 million. The filing does not disclose material debt.
- Financing activities provided $25.4 million, primarily from equity issuance, including a February 2021 registered direct offering that generated approximately $23.2 million of net proceeds.
- Management estimated that existing cash would fund current operations and planned clinical trial activities into 2024, subject to assumptions and potential expansion of activities.
- Cash concentration risk was significant: $44.0 million of cash equivalents exceeded FDIC insurance limits at June 30, 2021.
Material Changes Versus the Prior Comparable Period
- Second-quarter net loss decreased to $4.0 million from $4.4 million, primarily because the prior-year period included unusually high non-cash equity compensation in research and development.
- Six-month net loss increased to $10.5 million from $9.9 million, and operating cash usage increased 5% to $8.4 million.
- Six-month R&D expense increased 2% to $3.7 million. Excluding equity compensation, R&D expense increased 101% to $3.3 million as the Company advanced manufacturing, staffing, and preparation for Acclaim-1 and Acclaim-2.
- Six-month G&A expense increased 7% to $6.8 million, driven by accrued paid time off and bonuses, higher insurance costs, and increased equity compensation.
- Common shares outstanding increased to 47.5 million at June 30, 2021 from 43.1 million at December 31, 2020, reflecting equity financing and option exercises.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The Company has never generated product revenue, has incurred losses since inception, and expects significant additional spending on clinical development. Management states that additional capital will be required, although future financing may not be available on favorable terms or at all.
- COVID-19 caused delays in engaging clinical sites because of protocol-review backlogs and workforce shortages. Further delays could affect enrollment, manufacturing, testing, site initiation, regulatory review, and the usability of clinical product.
- The Company relies on third parties for manufacturing and research services. Lipid supply may be constrained because lipids are also used in COVID-19 vaccines.
- The March 2021 MD Anderson license amendment added annual maintenance fees, a one-time fee, patent expenses, and aggregate milestone payments of $6.15 million.
- No material litigation was identified. Management stated that no known contingencies were reasonably likely to materially affect financial condition, results, or liquidity.
- Disclosure controls were deemed ineffective because of a material weakness in internal control over financial reporting related to inadequate segregation of duties. Management targeted enhanced procedures by the end of 2021 and remediation of the weakness by the end of 2022.
- Subsequent events included additional stock, warrant, and option issuances, two additional non-U.S. patent allowances, and the expiration of 13 non-U.S. patents.
Important Facts for Investors to Verify
- Whether Acclaim-1 patient enrollment began by the stated fourth-quarter 2021 target and whether Acclaim-2 was initiated as planned.
- Actual cash burn, financing activity, and remaining runway relative to the Company’s estimate of funding into 2024.
- Progress toward resolving the material weakness in internal controls and any subsequent adverse control findings.
- Clinical, regulatory, manufacturing, and supply-chain effects from COVID-19, including availability of lipid materials and potential expiration of clinical product.
- Future equity dilution from outstanding options covering approximately 7.9 million shares and warrants covering approximately 2.2 million shares at June 30, 2021.
- Milestone, maintenance, royalty, and other payment obligations under the MD Anderson and University of Pittsburgh license agreements.