Filing summary
Filing and period: The supplied filing is Oxygen Biotherapeutics, Inc.’s unaudited Form 10-Q for the three months ended July 31, 2014 (fiscal 2015 first quarter), not a 2013 Q1 filing for Tenax Therapeutics. Stockholders approved changing the company’s name to Tenax Therapeutics, Inc. on September 11, 2014.
Business context and results
The company was a development-stage specialty pharmaceutical business focused primarily on levosimendan, licensed for development and commercialization in the United States and Canada. It reported no revenue in the quarter, compared with $165,804 in total revenue a year earlier, including product and government grant revenue.
| Metric | Three months ended July 31, 2014 | Prior-year quarter |
|---|---|---|
| Revenue | $0 | $165,804 |
| Operating expenses | $2.416 million | $1.755 million |
| Operating loss | $2.416 million | $1.590 million |
| Net loss | $2.171 million | $2.245 million |
| Net loss per share, basic | $0.08 | $2.06 |
| Cash used in operations | $1.982 million | $1.563 million |
SG&A rose to $1.450 million from $982,521, and R&D increased to $966,514 from $772,893, largely reflecting levosimendan Phase III spending and added management costs. Lower interest expense and a $291,221 other-income benefit, primarily from a decline in the fair value of warrant liabilities, helped reduce net loss despite the higher operating loss. Comprehensive loss was $2.237 million, including a $65,560 unrealized investment loss.
Financial position and liquidity
At July 31, 2014, cash and cash equivalents were $21.958 million and marketable securities were $34.487 million, or approximately $56.4 million combined. Total assets were $91.395 million; current liabilities were $1.895 million; and working capital was approximately $24.76 million. The company paid the remaining $300,000 convertible-note principal at maturity during the quarter; notes payable, net, stood at $16,007. The $34.6 million investing cash outflow largely reflected purchases of marketable securities, rather than operating cash consumption. Financing provided $196,437, including approximately $544,000 from warrant exercises.
Management believed available resources could fund operations through the fiscal year ending April 30, 2017. It expected continued losses and said substantial additional financing would be needed beyond that period and to complete development and potential commercialization. Future equity financing could dilute shareholders; debt could add interest and restrictive covenants; partnerships could require relinquishing product rights.
Developments, outlook, and risks
- The company had activated the first site for its planned Phase III levosimendan trial in cardiac-surgery patients at risk of low cardiac output syndrome. The filing describes a planned study of approximately 760 patients at about 50 North American centers.
- The levosimendan license was at risk because the required trial had not commenced by July 31, 2014. Orion said on September 9 it would not terminate the license if the study commenced by October 31, 2014; failure to meet that condition could jeopardize the license and materially harm the business.
- On September 11, after quarter-end, the board decided to stop the ongoing Oxycyte Phase II-b traumatic-brain-injury trial and consider strategic alternatives. The filing said no outcome or favorable alternative was assured.
- The filing identifies contingent levosimendan development and sales milestones and royalties under the Orion license; none of the development milestones had been achieved by July 31, 2014.
- Management reported effective disclosure controls and no significant change in internal control over financial reporting. It reported no legal proceedings.
Important facts to verify
- Confirm the intended issuer and period: the source is Oxygen Biotherapeutics’ July 31, 2014 quarter, despite the request metadata identifying Tenax and 2013 Q1.
- Verify whether the levosimendan trial commenced by the October 31, 2014 deadline and whether the Orion license remained in force.
- Review subsequent updates on the Oxycyte program and any strategic alternatives.
- Assess the assumptions behind management’s runway estimate through April 30, 2017, given ongoing operating cash use and the need for future financing.
- Reconcile the filing’s highlighted operating-loss comparison with its financial statements: the statements show a $2.416 million operating loss in 2014 versus $1.590 million in 2013.