TScan Therapeutics, Inc. — Q2 2021 Form 10-Q
Business context and reporting period. This unaudited report covers the quarter and six months ended June 30, 2021. TScan is a preclinical-stage biotechnology company developing T cell receptor-engineered T cell (TCR-T) cancer therapies. It had no approved therapies or product-sales revenue; all disclosed revenue was from collaboration and licensing activities. Unless noted otherwise, amounts below are in U.S. dollars.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Collaboration and license revenue | 2021: $2.8 million; 2020: none | 2021: $4.9 million; 2020: none |
| Research and development expense | 2021: $10.8 million; 2020: $4.5 million | 2021: $18.1 million; 2020: $8.8 million |
| General and administrative expense | 2021: $2.7 million; 2020: $1.1 million | 2021: $5.3 million; 2020: $2.5 million |
| Net loss | 2021: $10.7 million; 2020: $5.6 million | 2021: $18.6 million; 2020: $11.2 million |
| Basic and diluted net loss per share | 2021: $7.69; 2020: $6.18 | 2021: $14.25; 2020: $13.23 |
At June 30, cash and cash equivalents were $106.2 million, with restricted cash of $0.6 million. Total assets were $130.0 million and total liabilities were $30.6 million. Current liabilities were $20.6 million, including $11.7 million of current deferred revenue. The filing reports no borrowings; lease liabilities totaled $6.8 million. No product gross margin is reported, as the company had no product sales.
For the six months, operating cash use was $20.7 million, investing cash use was $6.9 million, and financing provided $98.9 million, primarily from Series C preferred stock issuance. Cash, cash equivalents and restricted cash increased $71.4 million to $106.8 million.
Changes versus the prior comparable period
- Revenue began to be recognized under the Novartis collaboration: $2.8 million for Q2 and $4.9 million for the first half of 2021, versus none in 2020.
- First-half operating expenses increased $12.2 million year over year. R&D rose $9.3 million, principally due to preclinical work, laboratory supplies and materials, personnel, and facility costs; G&A rose $2.9 million.
- First-half net loss widened by $7.4 million. Operating cash flow shifted from $10.1 million provided in 2020 to $20.7 million used in 2021, in part because the prior-year period included the $20 million Novartis upfront payment.
- Cash and cash equivalents rose from $34.8 million at December 31, 2020 to $106.2 million at June 30, 2021, largely reflecting $99.7 million net proceeds from Series C preferred stock financing.
Outlook, commentary and risks
- In July 2021, after quarter-end, TScan completed its IPO, selling 6,666,667 voting common shares at $15 each for $100 million gross proceeds and $90.5 million net proceeds. Preferred shares automatically converted to common shares at closing.
- Management expects existing cash and IPO proceeds to fund operating expenses and capital expenditures into 2024, but cautions that this estimate depends on assumptions and may prove inaccurate. The company expects continuing and increasing losses and will need substantial additional capital to develop and potentially commercialize its candidates.
- Management expected to submit INDs for TSC-100 and TSC-101 in Q4 2021, at least three solid-tumor candidates in the second half of 2022, and another in 2023. These are plans, not assurances; all candidates remained preclinical, and TSC-100 had not completed IND-enabling studies.
- The Novartis agreement provides a $20 million upfront payment, up to $10 million in research funding, potential clinical, regulatory and sales milestones, and royalties on licensed products. TScan recognized $4.7 million of agreement revenue in the first half; $16.3 million remained in current and long-term deferred revenue at June 30. Milestones were excluded from the transaction price because achievement was considered uncertain.
- Key risks include preclinical and clinical failure, safety and manufacturing challenges, reliance on third parties and limited-source materials, competition, intellectual-property exposure, regulatory delays, and potential COVID-19 disruption. The company reported no material business disruption from COVID-19 to date, but said future impact was uncertain.
- Preferred stock carried cumulative dividends of $21.9 million at June 30, although none had been declared or paid. The company also disclosed a 1% founder royalty on qualifying net sales. No material legal proceedings were reported.
Important facts for investors to verify
- Confirm the post-IPO cash position, actual spending pace, and whether the stated runway into 2024 remains achievable.
- Track IND-enabling work and IND submission timing for TSC-100, TSC-101, and the solid-tumor programs; verify subsequent regulatory and clinical progress.
- Review Novartis collaboration performance, remaining deferred revenue, option and negotiation rights, and any milestone or royalty updates.
- Assess growth in R&D and facility spending, manufacturing readiness, and the availability of critical single- or limited-source supplies.
- Review dilution and share structure after IPO conversion, including voting and non-voting shares, equity-plan reserves, and preferred-stock conversion terms.