Genprex, Inc. 2020 Form 10-K Summary
Business context and reporting period
Genprex is a clinical-stage gene therapy company developing REQORSA (GPX-001), a non-viral TUSC2 immunogene therapy for non-small cell lung cancer, and GPX-002, a preclinical gene therapy candidate for Type 1 and Type 2 diabetes. This Form 10-K covers the fiscal year ended December 31, 2020; the filing does not provide separate fourth-quarter results.
REQORSA was planned for two Phase 1/2 trials in 2021: Acclaim-1 with Tagrisso in EGFR-mutated NSCLC patients whose disease progressed after Tagrisso, and Acclaim-2 with Keytruda in NSCLC patients with PD-L1 expression of 1% to 49%. The company had no products approved for commercial sale and no product revenue.
Financial results and key metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue in either period |
| Research and development expense | $7.3 million | $2.0 million | Up 271% |
| General and administrative expense | $10.6 million | $8.7 million | Up 22% |
| Total costs and expenses | $18.0 million | $10.7 million | Up 68% |
| Operating loss | $18.0 million | $10.7 million | Loss increased |
| Net loss | $17.9 million | $10.7 million | Loss increased 68% |
| Net loss per share | $0.51 | $0.66 | Improved due to higher share count |
| Operating cash flow | $(13.9) million | $(6.9) million | Cash use increased 101% |
| Cash provided by financing | $41.6 million | $1.3 million | Increased substantially |
| Cash at year-end | $27.3 million | $2.0 million | Increased $25.3 million |
| Debt at year-end | $0 | $0 | No outstanding debt |
| Accumulated deficit | $58.4 million | $40.5 million | Increased by $17.9 million |
Gross and operating margins are not meaningful because the company had no revenue. Total assets were $31.4 million at December 31, 2020, including $3.0 million of research and development supplies. Current liabilities were $0.5 million and stockholders’ equity was $30.9 million.
Material changes versus the prior comparable period
- R&D expense rose by $5.3 million, primarily due to hiring, clinical-trial planning, manufacturing advances and research involving REQORSA and immunotherapies.
- G&A expense increased by $1.9 million, mainly from financing-related costs, legal fees and accelerated vesting of options for a former executive. Lower travel and office costs partially offset the increase.
- Operating cash use doubled as the company expanded its workforce and service-provider base in preparation for the planned 2021 trials.
- Investing cash use increased to $2.3 million, primarily because of purchases of manufacturing materials for REQORSA.
- The company raised $34.5 million of net proceeds from registered direct offerings and received $3.9 million of gross proceeds from warrant and option exercises. Shares outstanding increased from 19.3 million at year-end 2019 to 43.1 million at year-end 2020, creating substantial dilution.
- The company had no outstanding debt and no off-balance-sheet arrangements disclosed at year-end.
Guidance, outlook, commentary and risks
- Management estimated that cash on hand would fund current operations and planned clinical-trial activities into 2024, but stated that additional capital will be required to complete development and commercialization of REQORSA and GPX-002.
- Management expected R&D spending to continue increasing as Acclaim-1 and Acclaim-2 advance, manufacturing activities expand and additional preclinical work proceeds.
- FDA Fast Track Designation was received in January 2020 for the REQORSA/Tagrisso combination in the Acclaim-1 population. Fast Track status does not assure approval or clinical success.
- Historical early-stage data showed tolerability and signs of activity, but the completed studies were small and primarily designed to evaluate safety and maximum tolerated dose. The filing cautions that early results may not predict later-stage outcomes.
- Manufacturing was transferred from MD Anderson to third-party contract development and manufacturing organizations. The company remains dependent on those parties for clinical and potential commercial supply and had not secured binding agreements for ongoing commercial supply.
- COVID-19 could delay manufacturing, clinical-site activation, patient enrollment, dosing, monitoring, regulatory review and access to capital. The company reported no material financial or operational impact through year-end 2020 but stated that future effects remained uncertain.
- The company reported a material weakness in internal control over financial reporting due to insufficient segregation of duties. Management began remediation and targeted enhanced procedures by the end of 2021 and remediation of the weakness by the end of 2022, subject to testing.
- The company depends on licensed intellectual property from MD Anderson and the University of Pittsburgh and must satisfy payment, milestone, royalty, patent and other obligations. Failure to comply could result in loss of important rights.
- Other principal risks include clinical failure, regulatory delays or rejection, adverse effects, patient-enrollment difficulties, competition, intellectual-property disputes, reliance on third parties, future financing and dilution, market volatility, and the possibility of never achieving profitability.
Subsequent events
- On February 10, 2021, Genprex sold 4.0 million shares at $6.25 per share and received approximately $23.2 million in net proceeds.
- On March 3, 2021, the company amended its MD Anderson license to add cancer-treatment patents and related technology. The amendment includes annual maintenance fees, a one-time fee, patent expenses and milestone payments totaling $6.15 million.
- On March 19, 2021, the company approved approximately $0.6 million of executive incentive awards and granted options to purchase approximately 1.1 million shares.
Most important facts for investors to verify
- Whether Acclaim-1 and Acclaim-2 began on schedule, enrolled patients as planned and generated clinically meaningful safety and efficacy data.
- Actual cash burn and whether the stated cash runway into 2024 remains valid after trial expansion, manufacturing costs and subsequent financing activity.
- The company’s continuing need for additional capital, including the extent of future equity dilution or potential debt and collaboration financing.
- Progress in remediating the material weakness in internal control over financial reporting.
- Availability, quality, scalability and regulatory acceptability of REQORSA manufactured by third-party CDMOs.
- Milestone, royalty, maintenance-fee and patent obligations under the MD Anderson and University of Pittsburgh license agreements.
- Whether later-stage clinical results validate the limited early clinical and preclinical findings cited in the filing.