Genprex, Inc. 2021 Form 10-K Summary
Business Context and Reporting Period
Genprex is a clinical-stage gene therapy company reporting for the fiscal year ended December 31, 2021. Its lead oncology candidate, REQORSA (GPX-001), uses the non-viral ONCOPREX Nanoparticle Delivery System to deliver the TUSC2 tumor-suppressor gene. The company is also developing GPX-002, a preclinical gene therapy for Type 1 and Type 2 diabetes.
Genprex had no approved products and generated no product revenue. The filing was signed March 30, 2022.
Financial Performance and Liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $8.6 million | $7.3 million | Up 18% |
| General and administrative expense | $11.0 million | $10.6 million | Up 3% |
| Total costs and expenses | $19.6 million | $18.0 million | Up 9% |
| Net loss | $19.6 million | $17.9 million | Loss increased 9% |
| Net loss per share | $0.42 | $0.51 | Improved due primarily to higher share count |
| Net cash used in operating activities | $14.3 million | $13.9 million | Use increased 3% |
| Net cash provided by financing activities | $25.7 million | $41.6 million | Down 38% |
| Cash at year-end | $38.6 million | $27.3 million | Up $11.3 million |
Operating and net margins are not meaningful because the company had no revenue. There was no outstanding debt or interest expense at December 31, 2021. Total assets were $42.9 million, total current liabilities were $1.6 million, and stockholders’ equity was $41.3 million. Management estimated that existing cash would fund current operations and planned clinical trial activities into 2024, but stated that additional capital will be required to complete development and commercialization.
2021 financing included a registered direct offering of 4.0 million common shares generating $23.2 million in net proceeds and option exercises generating $677,912. Cash concentration risk was significant: approximately $38.4 million of cash exceeded FDIC insurance limits at year-end.
Material Changes Versus the Prior Comparable Period
- R&D spending increased as Genprex expanded manufacturing, clinical-trial preparation, CRO activity, and personnel supporting Acclaim-1 and Acclaim-2.
- G&A expense increased modestly because of higher headcount, employee benefits, bonuses, insurance, and public-company costs.
- Operating cash use increased slightly, while financing proceeds declined substantially from 2020.
- Investing cash use declined to $83,796 from $2.3 million, primarily because 2020 included a large purchase of manufacturing materials.
- Shares outstanding increased to 47.9 million at year-end from 43.1 million, reflecting equity financing, option exercises, and stock issued for services. Outstanding options and warrants totaled approximately 10.8 million shares at year-end, creating potential dilution.
- Management identified a material weakness in internal control over financial reporting caused by insufficient segregation of duties. Remediation included new accounting software, revised workflows, additional reviews, a Corporate Controller, and a formal Disclosure Committee, but the weakness had not yet been remediated.
Pipeline, Outlook, Risks, and Unusual Items
- REQORSA received two FDA Fast Track Designations: in combination with Tagrisso for EGFR-mutated NSCLC that progressed after Tagrisso, and in combination with Keytruda for NSCLC that progressed after Keytruda.
- After year-end, the first patient was dosed in Acclaim-1 in February 2022. Management expected the Phase 1 portion to be completed by year-end 2022.
- Acclaim-2 was expected to begin enrollment in April 2022, with Phase 1 completion expected in the first quarter of 2023. The company also planned a clinical trial in SCLC by year-end 2022.
- The company reported that its final-product CDMO was investigating possible bacterial contamination in an equipment line. Genprex believed its latest REQORSA production batch could have an elevated contamination risk, was conducting release testing, and scheduled an additional manufacturing run. Delays or failed testing could affect clinical-trial supply.
- COVID-19 caused clinical-site initiation delays, enrollment and supply-chain risks, and increased the possibility that drug batches could expire before use.
- Genprex depends on third-party CDMOs, CROs, clinical sites, and licensors. It has no internal manufacturing infrastructure and no products approved for sale.
- The company has never been profitable, had an accumulated deficit of $78.0 million, and expects continuing losses and additional equity or debt financing. Future equity financing could dilute existing holders.
- Genprex reported federal net operating loss carryforwards of approximately $62.4 million, subject to potential limitation under Section 382.
- Licensed intellectual property is subject to ongoing fees, royalties, milestones, patent expenses, termination provisions, and possible U.S. government rights. The company also has related-party arrangements involving Introgen Research Institute, an entity controlled by the CEO’s family.
- The independent auditor issued an unqualified opinion on the financial statements. Because Genprex is an emerging growth company, the auditor was not required to provide an opinion on internal control effectiveness.
Most Important Facts for Investors to Verify
- Actual cash burn, clinical-trial spending, and remaining runway relative to the company’s “into 2024” estimate.
- Status and release-testing results of the potentially contaminated REQORSA batch, the replacement manufacturing run, and any resulting clinical delays.
- Enrollment, safety, dose-limiting toxicities, and efficacy data from Acclaim-1 and Acclaim-2.
- Progress toward the planned SCLC trial and the development status of preclinical GPX-002.
- Remediation and independent testing of the material weakness in internal controls.
- Future financing needs, offering terms, and dilution from equity issuance, options, and warrants.
- Compliance with MD Anderson and University of Pittsburgh license obligations, including milestone payments, royalties, maintenance fees, and patent rights.
- Cash concentration above FDIC insurance limits and the company’s policies for managing that exposure.