TransCode Therapeutics, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. The unaudited filing was issued August 15, 2022. TransCode is a preclinical RNA oncology company and has not generated product revenue.
Financial performance and position
| Metric | Q2 2022 / June 30, 2022 | Comparison |
|---|---|---|
| Revenue | None | No revenue in the comparable 2021 period |
| Research and development expense | $2.62 million | $0.21 million in Q2 2021 |
| General and administrative expense | $2.09 million | $0.14 million in Q2 2021 |
| Total operating expenses / operating loss | $4.71 million / $(4.71) million | Operating loss of $(0.36) million in Q2 2021 |
| Net loss | $(4.67) million; $(0.36) per share | Q2 2021 net income of $2.77 million, or $0.60 per share |
| Cash and cash equivalents | $13.44 million | $20.83 million at December 31, 2021 |
| Total assets / liabilities | $14.16 million / $1.73 million | Liabilities were all current; no debt outstanding |
| Stockholders’ equity | $12.43 million | $20.40 million at December 31, 2021 |
For the six months ended June 30, 2022, revenue was zero, operating expenses were $8.18 million, and net loss was $8.14 million, or $0.63 per share. Net cash used in operations was $7.32 million, compared with $0.60 million in the first half of 2021. Investing activities used $0.07 million; financing activities provided $0.006 million. The filing reports no product sales, so product gross margin is not applicable.
Changes versus comparable periods
- First-half R&D expense rose to $4.50 million from $0.48 million, primarily due to materials, personnel, regulatory and purchased services costs as development activity expanded.
- First-half G&A expense increased to $3.68 million from $0.33 million, mainly from personnel, directors’ and officers’ insurance, and public-company costs.
- Q2 2021 results included a $3.07 million gain from a change in derivative-liability fair value; those liabilities were extinguished at the 2021 IPO. This helped produce reported Q2 2021 net income and makes the period comparison less indicative of operating performance.
- Cash declined by $7.39 million in the first half of 2022. Common shares outstanding were 12,977,234 at June 30, 2022, versus 12,904,574 at year-end 2021.
Outlook, risks and notable items
- Liquidity and going concern: Management said cash, together with anticipated SBIR funding, was expected to fund operations into the first quarter of 2023, but existing cash was not expected to cover a full 12 months from the financial-statement date. The company disclosed substantial doubt about its ability to continue as a going concern without additional capital. Additional financing is uncertain and could dilute shareholders or include restrictive terms; absent funding, the company may need to scale back or delay programs.
- Development: The lead candidate, TTX-MC138, is being prepared for a planned exploratory IND Phase 0 microdosing study using radiolabeled drug and PET-MRI to assess delivery to metastatic lesions; management described a study of up to 12 patients. The company also plans IND-enabling work for a Phase I/II program. These are plans, not completed clinical milestones.
- Pipeline and grant: The FDA granted orphan drug designation to TTX-siPDL1 for pancreatic cancer in June 2022. An NIH/NCI SBIR award is expected to provide $2.39 million over three years through March 2024; the company reported second-year funding of $1.13 million made available and expected approximately $0.87 million in year three, subject to award conditions and receipt.
- Subsequent event: On July 29, 2022, TransCode entered a five-year collaboration with MD Anderson, committing up to $10 million. The stated schedule includes $0.5 million payable within the first year, $2 million on the first anniversary, and $2.5 million on each of the next three anniversaries. Clinical and preclinical work remains subject to agreement between the parties; MD Anderson may terminate without cause during the first 60 days under the agreement’s terms.
- Key risks: The business depends on successful preclinical and clinical development, regulatory authorization, third-party manufacturers and research providers, and access to capital. The filing cites possible COVID-related development delays, inflation and economic-market uncertainty, and cybersecurity risks. No pending legal proceedings were reported.
- Controls: Management concluded disclosure controls and procedures were not effective as of June 30, 2022, due to an unremediated material weakness in internal control over financial reporting. No material control changes were reported during the first half.
Investor verification points
- Track cash burn, actual SBIR receipts, financing plans and any change to the disclosed first-quarter-2023 runway estimate.
- Verify timing and regulatory progress for the TTX-MC138 Phase 0/eIND and IND-enabling programs, and whether the planned patient study begins.
- Monitor the scope, timing and funding obligations of the MD Anderson collaboration, including whether the parties agree on specific studies.
- Review R&D and G&A growth, vendor accruals, and any additional equity or debt financing and resulting dilution.
- Follow remediation of the material weakness and effectiveness of disclosure controls in subsequent filings.