TransCode Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. TransCode is a preclinical-stage oncology company developing RNA therapeutics; it has no approved products and has generated no revenue.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $993,000 | $54,000 | $1.468 million | $133,000 |
| General and administrative expense | $1.367 million | $186,000 | $1.696 million | $215,000 |
| Total operating expenses | $2.360 million | $239,000 | $3.165 million | $348,000 |
| Net loss | $2.330 million | $1.374 million | $4.044 million | $1.542 million |
| Basic and diluted loss per share | $0.20 | $0.30 | $0.58 | $0.33 |
| Net cash used in operating activities | Not separately provided for the quarter | $3.666 million | $237,000 |
- Liquidity: Cash and cash equivalents were $22.500 million at September 30, 2021, versus $828,000 at December 31, 2020. Current assets were $25.204 million and current liabilities $2.205 million, implying working capital of approximately $23.0 million.
- Debt: Convertible notes and accrued interest converted into 1,068,135 common shares at the July IPO. The company reported no debt or derivative liabilities at quarter-end.
- Financing and dilution: The July IPO sold 7,187,500 shares at $4.00 per share, generating approximately $25.4 million net proceeds. Shares outstanding increased from 4,636,216 at year-end 2020 to 12,904,574 at September 30, 2021.
- Margins: Not meaningful because the company had no revenue.
Material changes versus comparable periods
- Q3 net loss rose by $956,000 year over year, as operating expenses increased by $2.121 million; lower interest and fair-value-related expenses and grant income partly offset the increase.
- Nine-month net loss increased by $2.502 million year over year. R&D and G&A grew substantially as the company expanded research activity, personnel, laboratory operations, insurance, and public-company costs.
- Nine-month operating cash use increased to $3.666 million from $237,000, including a $2.701 million increase in prepaid expenses and other current assets.
- Financing provided $25.507 million in the first nine months of 2021, primarily from the IPO, compared with $1.129 million in 2020, primarily from convertible-note proceeds.
Outlook, management commentary, and risks
- Management estimated that available cash would fund operating and capital requirements through December 2022; the liquidity note separately states cash and expected SBIR funding should cover at least the next 12 months. The company expects to need additional capital, with no assurance of availability or acceptable terms.
- The company is pursuing a microdose Phase 0 first-in-human study of TTX-MC138 in 10 patients with late-stage metastatic breast cancer, using radiolabeled drug and PET-MRI. It targeted eIND submission in the first half of 2022 and an IND filing for a Phase I trial in the second half of 2022. These are plans, not assured milestones.
- An NIH/National Cancer Institute Fast-Track SBIR award is expected to provide $2.393 million over three years; $308,861 of first-year funding was received. The company reported recognizing $88,786 of grant income through September 30.
- COVID-19-related disruption, including limited availability of animals for preclinical testing, third-party dependence, manufacturing and clinical delays, and financing needs could affect development and cash requirements. Management cautioned that its runway estimate depends on assumptions.
- A July 2021 phishing incident involved $526,435; $45,682 was recovered within five days, and the remaining $480,753 was included in other current assets at quarter-end. The company reported full recovery on October 15, 2021, and said the incident’s financial impact was immaterial.
- The company disclosed unremediated material weaknesses in internal control over financial reporting and concluded disclosure controls were not effective as of September 30, 2021. It also noted its auditor had previously expressed substantial doubt about going concern before the IPO.
- No pending legal actions were reported. The filing identifies substantial development, regulatory, intellectual-property, manufacturing, competition, and future-financing risks. No formal financial guidance was provided.
Important facts for investors to verify
- Whether the company’s stated cash runway through December 2022 remains achievable given development spending and assumptions, and when additional financing may be required.
- Progress and regulatory status of the planned TTX-MC138 eIND, Phase 0 study, and subsequent IND; confirm timing, enrollment, and study design updates.
- Whether the SBIR award’s subsequent funding tranches and milestones are achieved, and how grant funding relates to operating needs.
- Remediation progress on the disclosed material weaknesses and improvements to disclosure and financial-reporting controls.
- Cash deployment, including prepaid balances and the completed recovery of the phishing-related funds, as well as future dilution from equity financing and outstanding equity awards.