TransCode Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; filed November 14, 2023. TransCode is a pre-revenue oncology biopharmaceutical company developing RNA-based cancer therapeutics and diagnostics, led by TTX-MC138, a candidate targeting metastatic cancers.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $3.34 million | $3.04 million | $8.90 million | $7.55 million |
| General and administrative expense | $1.98 million | $1.91 million | $6.46 million | $5.59 million |
| Net loss | $5.30 million | $4.29 million | $14.46 million | $12.43 million |
| Loss per share | $1.68 | $6.61 | $8.46 | $19.16 |
| Cash used in operating activities | — | — | $12.41 million | $11.74 million |
- Balance sheet at September 30: Cash $7.45 million; current assets $9.37 million; current liabilities $5.60 million; total assets $10.23 million; total liabilities $5.79 million; stockholders’ equity $4.44 million; accumulated deficit $42.33 million.
- Cash flows and financing: Financing provided $14.93 million in the first nine months, primarily from equity offerings, versus $12.41 million used in operations and $0.04 million used in investing. Cash increased by $2.48 million from year-end 2022.
- Debt and liquidity: The filing reports no debt outstanding other than operating lease liabilities. Lease liabilities totaled approximately $594,700. Management estimated September 30 cash would fund operations into mid-January 2024, but stated it would not cover at least 12 months from the financial-statement date; the filing identifies substantial doubt about continuing as a going concern without additional capital.
- Margins are not meaningful because the company had no revenue. The filing does not provide a clear product-level or gross-margin measure.
Material changes versus prior periods
- Nine-month operating expenses rose $2.22 million year over year; R&D increased $1.35 million and G&A increased $0.87 million. Management attributed the R&D increase mainly to materials, clinical-trial and regulatory costs; G&A growth reflected personnel, professional services, facilities and public-company costs.
- Nine-month net loss increased $2.03 million. Q3 grant income fell to $27,441 from $654,949, contributing to the larger quarterly net loss; nine-month grant income increased to $895,786 from $696,669.
- Common shares outstanding rose to 10.69 million from 648,862 at year-end 2022, reflecting a 1-for-20 reverse split and substantial equity issuance. The September offering generated approximately $7.0 million net proceeds and included pre-funded warrants, creating potential additional dilution. Loss-per-share comparisons also reflect reverse-split-adjusted share data.
Outlook, developments and risks
- Clinical and development: FDA authorized a Phase 0 TTX-MC138 trial in December 2022, and Dana-Farber’s IRB approved it in April 2023 for conduct at Massachusetts General Hospital. The planned study aims to measure delivery to metastatic lesions using radiolabeled TTX-MC138 and PET-MRI, with up to 12 patients. The company said it completed the experimental portion of nonclinical IND-enabling studies by July 2023 and was pursuing manufacturing and other work to support a planned Phase I trial. No clinical efficacy results are provided in this filing.
- Funding outlook: The company expects continued operating losses and says it needs additional capital. Future financing may dilute shareholders or impose restrictive terms; failure to raise funds could lead to reduced or discontinued development, disposal of rights on unfavorable terms, or restructuring.
- Grant: The company submitted an application in August 2023 seeking up to $4.5 million in additional SBIR funding over two years beginning in the first half of 2024, if awarded. This funding is not assured.
- MD Anderson commitment: The five-year collaboration contemplates funding of up to $10 million. The company was negotiating upcoming payments and planned work; no expenses were recorded under the arrangement in the periods shown. The outcome of discussions is uncertain.
- Nasdaq: In October 2023, a Nasdaq panel granted continued-listing relief on the stockholders’ equity requirement through January 22, 2024, subject to updates and conditions. In November, the company disclosed a separate minimum-bid-price deficiency, with an initial cure period through May 6, 2024. Delisting remains a risk if requirements are not met.
- Controls and contingencies: Management concluded disclosure controls were not effective as of September 30 due to previously identified, unremediated material weaknesses in internal control over financial reporting. The company also disclosed a disputed investment-bank fee claim; management said it rigorously disputes the claim. It reported no other known pending or threatened proceedings expected to have a material adverse effect.
- Other risks include dependence on licensed intellectual property and third-party manufacturers and research organizations, clinical and regulatory uncertainty, possible delays or supply disruptions, and the need for further financing. The company reported no off-balance-sheet arrangements.
Important facts for investors to verify
- Current cash runway, actual cash burn, and the timing and terms of any financing after September 30, 2023.
- Progress and results of the Phase 0 TTX-MC138 trial, including enrollment, delivery measurements and the timing of any Phase I filing or trial.
- Whether the company regained and continues to meet Nasdaq stockholders’ equity and minimum-bid-price requirements, and the status of any further listing actions.
- The extent of dilution from outstanding pre-funded warrants, other warrants and subsequent share issuances.
- Outcome of negotiations with MD Anderson, potential payment obligations, and whether the requested SBIR renewal is awarded.
- Remediation of material weaknesses in financial reporting controls and developments in the disputed investment-bank fee claim.