Marker Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Financial statements are unaudited. Marker is a clinical-stage immuno-oncology company developing MultiTAA T-cell therapies and peptide-based vaccines; it has no approved products and has not generated product-sales revenue.
Key financial metrics
| Metric | Q3 2020 / Sep. 30, 2020 | Comparable period / prior balance |
|---|---|---|
| Revenue | $0 for the quarter; $467,000 for nine months, all grant income | $0 for both periods in 2019 |
| Operating expenses | $7.4 million for quarter; $20.8 million for nine months | $5.7 million; $17.2 million |
| Net loss | $7.4 million for quarter ($0.16/share); $20.2 million for nine months ($0.43/share) | $5.5 million ($0.12/share); $16.3 million ($0.36/share) |
| Cash and cash equivalents | $27.0 million | $43.9 million at Dec. 31, 2019 |
| Working capital | $24.3 million | $43.5 million at Dec. 31, 2019 |
| Cash flow, nine months | Operations: $(12.6) million; investing: $(7.0) million; financing: $2.7 million | Operations: $(13.7) million; investing: $(0.4) million; financing: $0.8 million |
| Liabilities | Total $18.0 million, including $12.2 million operating lease liabilities | Total $2.3 million at Dec. 31, 2019 |
The company reported no borrowings in the balance sheet; lease liabilities are its principal disclosed long-term obligations. Traditional operating margins are not meaningful for this development-stage business.
Material changes versus prior periods
- Quarterly R&D expense increased 54% to $4.8 million; nine-month R&D rose 42% to $12.9 million, principally due to hiring and process-development costs. G&A was broadly flat for the quarter and slightly lower for the nine months.
- Net loss increased 35% for the quarter and 24% for the nine months. Lower interest income, reflecting reduced interest rates, also weighed on results.
- Cash declined by $16.9 million during the first nine months. Investing outflows rose as the company funded manufacturing cleanroom construction and expanded laboratory facilities.
- New headquarters, research, and manufacturing leases contributed to approximately $12.2 million of operating lease liabilities at quarter-end. Property, equipment, and construction in progress increased substantially.
- Common shares outstanding rose to 48.0 million from 45.7 million at year-end. Aspire Capital purchases generated about $2.2 million, and warrant exercises generated about $0.6 million.
Outlook, risks, and unusual items
- Runway and going concern: Management estimated that September 30 cash would fund operating expenses and capital spending into Q2 2021. The filing states that substantial doubt exists about the company’s ability to continue as a going concern; additional financing is needed and timing or terms are uncertain.
- Clinical outlook: Marker had begun enrolling patients in the safety lead-in of its Phase 2 MT-401 trial for post-transplant AML. The trial faced COVID-19-related delays and a partial FDA clinical hold on product made with an alternative-supplier reagent, pending final data and a certificate of analysis. The company reported continuing enrollment and work to satisfy the FDA requirements, but no clear timetable for resolving the delay.
- COVID-19: The pandemic had disrupted research and delayed clinical programs; management could not predict the full effect on trials, operations, or access to capital.
- Manufacturing investment: Cleanroom construction was expected to cost approximately $6.5 million in total; $4.6 million was recorded as construction in progress at September 30. The company also reported a $1.0 million landlord reimbursement receivable.
- Financing and dilution: Aspire Capital committed to purchase up to $30 million of stock over 30 months, subject to agreement terms and share limits. Only about $2.2 million had been received by quarter-end. Further equity financing could dilute shareholders.
- Contingency: A broker sought approximately $1 million in FINRA arbitration relating to 2018 financing transactions. Marker disputed the claims and intended to defend itself; management said it was not party to legal proceedings likely to have a material adverse effect.
- Other items: Nine-month grant income of $467,000 related to clinical supplies for a Mayo Foundation/Department of Defense-funded breast cancer trial; it was not product-sales revenue. The company reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Progress on the FDA partial hold, reagent documentation, site activation, enrollment, and timing of the MT-401 Phase 2 trial.
- Actual cash burn and spending against the stated Q2 2021 runway, including facility buildout and lease-related costs.
- Availability and terms of additional financing, including remaining Aspire Capital capacity and potential share dilution.
- Clinical trial outcomes and whether COVID-19 or manufacturing constraints further affect development timelines.
- Developments in the FINRA arbitration and any resulting exposure.
- Potential dilution from outstanding warrants and options: approximately 21.0 million warrants and 5.9 million options were outstanding at September 30, 2020.