Tenax Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Tenax is a clinical-stage specialty pharmaceutical company developing levosimendan, principally for pulmonary hypertension associated with heart failure with preserved ejection fraction (PH-HFpEF). The filing reports no product revenue; accordingly, revenue-based margins are not meaningful.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| General and administrative expense | $1.17 million | $1.34 million | $3.36 million | $3.69 million |
| Research and development expense | $1.05 million | $0.92 million | $3.67 million | $2.05 million |
| Total operating expenses / operating loss | $2.23 million | $2.26 million | $7.03 million | $5.74 million |
| Net loss | $2.22 million | $2.22 million | $7.02 million | $5.60 million |
| Basic and diluted loss per share | $0.18 | $0.33 | $0.73 | $0.93 |
| Cash used in operating activities | $2.4 million | $1.8 million | $7.29 million | $5.83 million |
At September 30, cash and cash equivalents were $8.24 million and marketable securities were $0.47 million (approximately $8.7 million combined). Current assets were $8.90 million; current liabilities were $1.38 million; working capital was $7.52 million. Total liabilities were $1.59 million, including a $244,657 Paycheck Protection Program (PPP) loan, and stockholders’ equity was $7.40 million. Accumulated deficit was $243.19 million.
Operating cash use rose year over year for the nine-month period, primarily with increased Phase 2 HELP Study costs. Financing provided $10.60 million in the first nine months, principally from March and July equity and warrant offerings, warrant exercises, and the PPP loan. The company’s common shares outstanding increased from 6.74 million at year-end 2019 to 12.62 million at September 30, 2020.
Material changes and business developments
- Nine-month R&D expense increased about 80% to $3.67 million, largely from higher contract research organization costs and HELP Study expenses. G&A declined to $3.36 million, mainly due to lower legal and professional fees, including reduced arbitration-related costs and the arbitration-cost reimbursement.
- In the Phase 2 HELP Study, the primary analysis—exercise PCWP—did not show a statistically significant reduction. Combined measurements at rest, with legs raised, and during exercise showed statistically significant PCWP reductions versus baseline and placebo. Six-minute walk distance improved by 29 meters versus placebo (p=0.0329), a secondary endpoint. The filing reports similar adverse-event rates between groups and no observed arrhythmias in the stated monitoring comparison.
- In an October 2020 End-of-Phase 2 meeting, after the reporting date, the FDA agreed that one or two Phase 3 studies using specified endpoints could support effectiveness and agreed to a plan using daily oral rather than weekly IV dosing in a Phase 3 study. Tenax expected to submit a REMS and Phase 3 outline in Q1 2021.
- Tenax won its arbitration with Orion in May 2020 concerning whether oral levosimendan was a license line extension; Orion was ordered to reimburse approximately $358,000 in direct arbitration costs. An October 9, 2020 license amendment added specified oral and subcutaneous formulations and revised royalties and license term. Either party may terminate if U.S. approval has not been granted by September 20, 2028.
Outlook, risks and contingencies
- Management estimated existing resources would fund planned operations through Q3 2021. It expects continued losses and states that substantial additional financing will be needed thereafter to develop and potentially commercialize levosimendan. Management is actively seeking equity or debt financing and may pursue licensing or partnering; availability and terms are uncertain.
- The filing states that recurring operating losses, the accumulated deficit, cash use and dependence on future financing raise substantial doubt about the company’s ability to continue as a going concern. The financial statements contain no adjustments that might be required if it cannot continue operations.
- Further equity financing could materially dilute shareholders; debt could add interest and restrictive covenants; licensing could require surrendering rights on unfavorable terms. Outstanding warrants and pre-funded warrants add potential dilution: the filing reports 20.95 million warrants and 5.26 million pre-funded warrants at September 30.
- COVID-19 could disrupt trial enrollment, investigator and site availability, CRO and manufacturer operations, supply chains, or regulatory review, delaying development. Trial duration, costs, and likelihood of success remain uncertain.
- The $244,657 PPP loan bears 1% interest, with payments scheduled to begin September 30, 2021. Forgiveness is uncertain; the company also disclosed risks of eligibility challenges, audits, repayment, penalties, and reputational harm.
- Tenax reported that it had regained Nasdaq’s minimum-bid-price compliance in June 2020, but future compliance is not assured. It also disclosed Armistice Capital’s significant share and warrant position and the potential for substantial influence, subject to beneficial-ownership limits.
- The company reported no material pending legal proceedings. The PPP loan and Orion license obligations remain relevant; no Orion development milestone liability had been recorded because none had been achieved.
Important facts for investors to verify
- Whether Tenax secures financing beyond its stated Q3 2021 runway, and the resulting dilution, debt terms, or licensing concessions.
- Complete HELP Study results and the actual Phase 3 protocol, timing, endpoints, REMS requirements, and FDA interactions.
- Whether the PPP loan qualifies for forgiveness and whether any review, audit, or repayment obligation arises.
- The number and terms of outstanding warrants and pre-funded warrants, subsequent exercises, and resulting fully diluted share count.
- Progress under the amended Orion license, including royalty terms, product-development obligations, and the 2028 approval-related termination provision.
- Potential COVID-19 effects on clinical development and continued compliance with Nasdaq listing standards.