Transcode Therapeutics, Inc. quarterly report, Q1 FY2023

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TransCode Therapeutics, Inc. — Q1 2023 Form 10-Q

Reporting period: Three months ended March 31, 2023; filed May 15, 2023. TransCode is a pre-revenue oncology biotechnology company developing RNA-based therapeutics and delivery technologies. Its lead candidate, TTX-MC138, targets miR-10b in metastatic tumors.

Financial performance and position

  • Revenue: None; the company has not generated product revenue.
  • Operating expenses: $4.90 million, up $1.42 million from $3.48 million in Q1 2022. R&D was $2.59 million (up $0.71 million); general and administrative expense was $2.31 million (up $0.71 million).
  • Net loss: $4.82 million versus $3.47 million in Q1 2022. Basic and diluted loss per share was $0.33 versus $0.27.
  • Cash flow: Operating cash use was $4.51 million versus $3.95 million. Investing cash use was $0.01 million; financing provided $1.18 million, primarily from common-stock sales. Cash declined $3.35 million to $1.62 million.
  • Liquidity: Current assets were $4.35 million and current liabilities were $5.45 million, a current-asset shortfall of approximately $1.10 million. Total assets were $5.59 million; total liabilities were $5.83 million; stockholders’ deficit was $0.24 million.
  • Debt and commitments: The company reported no debt outstanding. Lease liabilities totaled $0.77 million at quarter-end. Accounts payable and accrued expenses were $5.06 million, including $2.67 million owed to CROs and CMOs.
  • Margins: Not meaningful because the company had no revenue.

Material changes and financing

  • Compared with Q1 2022, operating expenses rose 41%, reflecting higher R&D consulting, services, supplies and personnel costs, as well as higher compensation, professional, facility and public-company costs.
  • In February 2023, TransCode sold 2,846,300 shares in a registered direct offering for approximately $1.18 million in net proceeds and issued placement-agent warrants for up to 199,241 shares.
  • After quarter-end, the company received approximately $870,597 under the third year of its NIH SBIR award and sold 1,075,000 shares to White Lion for approximately $304,324 in net proceeds. The purchase agreement provided for additional discretionary stock sales, subject to stated limits and conditions.
  • Shares outstanding were 15,823,534 at March 31, 2023 and 16,998,534 at May 11, 2023. Further equity financing could materially dilute existing holders.

Outlook, risks and notable items

  • Management stated that quarter-end cash plus the April SBIR funding and White Lion proceeds would fund operations and capital needs only into, but not through, Q2 2023. The company said it could not fund a full 12 months from the financial-statement date; the filing identifies substantial doubt about its ability to continue as a going concern without additional capital.
  • Management expects losses and expenses to increase as it advances TTX-MC138 and other programs. Additional financing is required, but may not be available on acceptable terms or at all; failure to obtain funding could force delays, reductions or discontinuation of development activities.
  • The FDA authorized a Phase 0 TTX-MC138 trial in December 2022. On April 25, 2023, Dana-Farber’s IRB approved commencement at Massachusetts General Hospital. The planned study is intended to assess delivery to metastatic lesions; the company also reported ongoing work supporting a planned Phase I/II IND pathway.
  • Other programs include TTX-siPDL1, TTX-siLIN28B, TTX-RIGA, TTX-CRISPR and TTX-mRNA. Development and regulatory success are uncertain, and the company depends on third parties for research, manufacturing and clinical-trial services and on licensed intellectual property.
  • Disclosure controls and procedures were found ineffective as of March 31, 2023 because material weaknesses in internal controls remained unremediated. Remediation efforts, including additional finance expertise and outside consulting, were ongoing; completion was not assured.
  • The filing cited possible Nasdaq delisting if the share price did not meet the applicable $1 bid-price requirement by the stated June 7, 2023 deadline. Stockholders approved a possible reverse split of 1-for-2 to 1-for-20 in May; the board had not yet acted as of May 15.
  • No material pending or threatened litigation was reported. The company also noted risks from cash balances exceeding FDIC insurance limits, potential vendor or trial delays, and cybersecurity threats.

Important facts for investors to verify

  1. Current cash runway, subsequent financing proceeds and whether the company has secured sufficient capital to continue operations.
  2. Progress, enrollment timing and costs for the Phase 0 TTX-MC138 trial, and the timeline for planned IND-enabling work.
  3. Terms and actual share issuance under the White Lion agreement, other potential dilution, and any reverse-split or Nasdaq-listing developments.
  4. Status and effectiveness of internal-control remediation, given management’s conclusion that disclosure controls were ineffective.
  5. Near-term obligations, including lease payments, CRO/CMO payables and commitments under the MD Anderson collaboration and intellectual-property licenses.