Gain Therapeutics, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; filed August 8, 2022. Gain Therapeutics is a preclinical-stage biotechnology company developing small-molecule therapies using its SEE-Tx platform. It has no approved products and has generated no product-sale revenue.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $95,102 | $89,173 | $140,108 | $94,441 |
| Research and development expense | $2.58 million | $1.79 million | $4.14 million | $3.22 million |
| General and administrative expense | $2.69 million | $1.81 million | $4.47 million | $2.86 million |
| Net loss | $5.09 million | $3.56 million | $8.36 million | $6.01 million |
| Net loss per share | $0.43 | $0.30 | $0.70 | $0.71 |
| Cash used in operations | — | $7.50 million | $6.03 million |
- Q2 revenue was primarily Zentalis collaboration revenue. Revenue remains immaterial relative to operating costs; the company reported no product sales.
- Year-over-year Q2 net loss increased about 43%; first-half net loss increased about 39%. Operating expenses rose in both periods, while first-half revenue increased from a low base.
- At June 30, cash and cash equivalents were $14.31 million and marketable securities were $14.86 million, totaling $29.16 million. Cash, cash equivalents and marketable securities were $36.88 million at December 31, 2021. The company purchased $14.84 million of marketable securities during the first half.
- Current assets were $25.83 million and current liabilities $3.41 million. Total liabilities were $4.87 million. Debt was $626,010, including current and long-term portions; the outstanding Swiss loan bears no interest. A separate CHF loan was extinguished early in February 2022 without charges.
- Management reported that cash, cash equivalents and marketable securities were expected to fund operations and capital requirements into 2024. The financial-statement note separately says cash and cash equivalents were expected to cover at least 12 months from issuance.
- No gross margin is presented; the company has no product sales. No meaningful product profitability measure is available.
Business developments, outlook and risks
- Management said it streamlined operations in response to the financing environment, prioritizing Parkinson’s and Gaucher programs, continuing Krabbe research and pursuing new oncology programs. It remained open to partnering its lead programs and platform.
- The Parkinson’s and Gaucher candidates remained in preclinical development. The company reported prior positive in-vitro findings and said its Parkinson’s lead appeared safe up to the highest feasible dose in industry-standard preclinical studies; formulation work remained underway. The filing states that no product candidates had been tested in clinical trials.
- Management expects research and development and general and administrative expenses to increase, including as programs advance and clinical work begins. The company expects to need additional capital; financing may dilute shareholders or require it to limit programs or grant rights to candidates or technology.
- A shelf registration statement effective June 1, 2022 permits up to $100 million of securities offerings. Its sales-agreement prospectus allows up to $16 million of common-stock sales through or to Cantor Fitzgerald. The filing does not report sales under that agreement during the period.
- The Zentalis collaboration covers oncology target discovery and includes potential milestone and royalty payments; these are contingent, not assured. The company reported $133,000 of collaboration revenue recognized as of June 30, 2022 and $55,000 of current deferred revenue.
- Key risks include preclinical and clinical failure or delay, difficulty recruiting patients for rare diseases, reliance on third parties and licensed SEE-Tx technology, uncertain access to future financing, foreign-currency exposure, and possible COVID-19 or geopolitical and supply-chain disruption. Research commitments were $1.443 million. The company reported no material pending or threatened legal proceedings.
- Disclosure controls and procedures were deemed ineffective at June 30, 2022 because of an unremediated material weakness in procedures and controls for timely, accurate financial-statement preparation and review. A separate weakness involving accounting personnel was reported remediated in 2021; ERP implementation was completed March 31, 2022.
Most important facts for investors to verify
- Whether the stated runway into 2024 remains realistic given operating cash burn, program spending and access to financing.
- Whether and when the company uses the $16 million equity sales facility, and the resulting dilution.
- Clinical and formulation milestones for Parkinson’s and Gaucher programs, including timing and outcomes of IND-enabling work and any clinical-trial initiation.
- Progress toward remediating the financial-reporting control weakness and whether controls are operating effectively.
- Whether Zentalis exercises program options or any contingent milestones or royalties become payable.