Genprex, Inc. 10-Q Summary
Business Context and Reporting Period
Genprex is a clinical-stage gene therapy company developing Oncoprex immunogene therapy for non-small cell lung cancer. The company has no approved products and has not generated revenue from product sales. This unaudited Form 10-Q covers the three months ended March 31, 2018, with comparative results for the three months ended March 31, 2017.
Financial Results and Liquidity
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $51,621 | $68,364 |
| General and administrative expense | $634,063 | $682,342 |
| Total operating expenses | $686,631 | $751,303 |
| Net loss | $694,001 | $751,303 |
| Net loss per share | $0.06 | $0.07 |
| Net cash used in operating activities | $203,712 | $649,309 |
| Net cash used in investing activities | $10,452 | $22,978 |
| Net cash provided by financing activities | $77,398 | $0 |
| Cash at period end | $24,485 | $930,008 |
At March 31, 2018, total assets were $1.39 million, current liabilities were $1.43 million, and stockholders’ equity was a deficit of $41,915. The accumulated deficit was $18.15 million. Related-party notes payable totaled $279,288. Deferred offering costs were $1.01 million.
Material Changes Versus the Prior Comparable Period
- Net loss decreased by $57,302, or approximately 8%, primarily because general and administrative expense declined by $48,279 and research and development expense declined by $16,743.
- Research and development spending declined as clinical activity slowed while the company prepared clinical and preclinical data for FDA discussions regarding potential development and approval pathways for Oncoprex.
- Operating cash use decreased by $445,597, partly reflecting changes in accounts payable and accrued expenses and offering-related activity.
- The company borrowed $77,398 from related parties during the quarter.
- Cash declined by $136,766 during the quarter, leaving only $24,485 at March 31, 2018.
Guidance, Outlook, Risks and Unusual Items
Management expects research and development and general and administrative expenses to increase as clinical development advances and as the company incurs additional public-company costs. The company expects continuing losses and negative cash flows and cannot predict when, or whether, it will generate product revenue or achieve profitability.
The company disclosed substantial doubt regarding its ability to continue as a going concern absent additional financing, strategic alliances or asset sales. It expects to require substantial additional capital to fund clinical trials and commercialization efforts; failure to obtain funding could delay, reduce or terminate development programs or operations.
The Phase I/II trial of Oncoprex in combination with erlotinib for NSCLC was ongoing, but enrollment in the Phase II portion had been suspended since April 2016 while the company compiled data and sought FDA guidance on potential protocol modifications, expanded enrollment and patient cohorts. The company expected the clinical trial agreement with MD Anderson to continue through early 2019, with projected total costs of approximately $2 million.
Subsequent to quarter-end, the company completed its IPO on April 3, 2018, selling 1.28 million shares at $5.00 per share for estimated net proceeds of $5.025 million. It also completed a May 9, 2018 private placement generating net proceeds of $9.25 million, before potential warrant adjustments. Related-party notes were repaid in April 2018. Management stated that existing resources and the IPO and private-placement proceeds were expected to fund current operations for at least 18 months, although additional funding may still be required.
Key risks include clinical-trial failure or delay, uncertain FDA approval, patient-enrollment difficulties, dependence on third-party manufacturers and clinical research organizations, intellectual-property challenges, competition, dilution from future financings and equity awards, related-party transactions, and the informal demand from a former financial advisor claiming entitlement to warrants equal to 3% of outstanding shares as of December 1, 2015. The company considers that claim meritless and has recorded no related expense or capitalization effect.
Important Facts for Investors to Verify
- Verify the company’s post-quarter-end cash balance, including the timing and use of the IPO and May 2018 private-placement proceeds.
- Assess the company’s cash runway against expected clinical, manufacturing, regulatory and public-company expenditures.
- Track FDA discussions, the status and design of the Oncoprex Phase II trial, enrollment, clinical data and any accelerated-approval pathway.
- Review the terms, exercise-price adjustment provisions and potential dilution from warrants, options and equity incentive plans.
- Monitor the former financial advisor’s warrant claim and any related legal or capitalization consequences.
- Confirm the company’s ability to maintain its intellectual-property licenses and satisfy the approximately $2 million MD Anderson clinical-trial commitment.