TENAX THERAPEUTICS, INC. quarterly report, Q2 FY2023

Tenax Therapeutics, Inc. — Q2 2023 Form 10-Q

Reporting period: Three and six months ended June 30, 2023. The filing was signed August 14, 2023. Tenax is a clinical-stage biopharmaceutical company developing levosimendan for pulmonary hypertension and imatinib for pulmonary arterial hypertension (PAH). It reported no revenue for the periods presented.

Financial performance and liquidity

Cash and cash equivalents were $13.39 million at June 30, 2023, versus $2.12 million at December 31, 2022. Working capital was approximately $13.2 million, compared with $1.4 million at year-end. Total liabilities were $0.82 million, including a $0.35 million current premium-finance note; the note bears 7.39% interest and is payable through December 2023. No profitability or meaningful operating margin was reported.

Six-month cash flow included $13.91 million provided by financing, mainly from the February 2023 public offering and warrant exercises; investing activities provided $2,843. Cash increased by $11.27 million. The company had $13.1 million of cash uninsured by the FDIC at June 30.

Changes versus prior periods and notable items

• Q2 operating expenses fell 57% year over year; first-half expenses fell 50%. General and administrative expense declined 22% in Q2 and 20% for the first half, while research and development expense declined 87% and 83%, respectively. Management attributed the R&D reduction largely to pausing imatinib clinical development and receiving refunds of related development costs.
• First-half operating cash use decreased from $6.37 million to $2.65 million. Management cited changes in prepaid expenses and accounts payable activity.
• In February, Tenax raised approximately $15.6 million gross, or about $13.6–$13.7 million net, through a registered offering of common stock, pre-funded warrants and warrants. Common shares outstanding increased from 2.29 million at December 31, 2022 to 23.86 million at June 30, 2023; the filing also reflects a 1-for-20 reverse stock split in January and substantial warrant exercises.
• The company terminated its former office lease in February, paying $169,867 and eliminating its remaining obligations under that lease. Management reported a roughly $140,000 lease-related loss in the first-half discussion of other income and expense.
• Tenax received U.S. patents covering IV levosimendan use in PH-HFpEF in March and oral levosimendan use in PH-HFpEF in July 2023; the latter is stated to provide exclusivity through December 2040.

Outlook, risks and contingencies

Management said June 30 resources were expected to fund planned operations through the first quarter of calendar 2024. Tenax prioritized levosimendan Phase 3 testing, with plans to commence a study in 2023; the start of an imatinib Phase 3 study was moved outside the 2023 timeframe pending fundraising and strategic considerations. These plans depend on adequate funding, and the filing does not provide assurance that financing or a strategic transaction will be obtained.

The company has an accumulated deficit of approximately $292.1 million and stated that substantial doubt exists about its ability to continue as a going concern. It expects continuing losses and needs substantial additional capital for clinical development and potential commercialization. If funding is unavailable, it may curtail or delay research and development. Equity financing could significantly dilute shareholders; debt could add interest and restrictive covenants; licensing or collaboration could require giving up rights on unfavorable terms.

Tenax continued exploring strategic alternatives, including financing, sale, merger, licensing and co-development arrangements. It cited clinical-trial execution, regulatory approval, patient enrollment, financing, competition, manufacturing and possible future healthcare disruptions among relevant risks. Management reported no material change in risk factors from its 2022 Form 10-K. It said disclosure controls were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter. No material pending legal proceedings or subsequent events were reported.

Important facts for investors to verify

• Whether Tenax secures financing or a strategic transaction before its stated first-quarter 2024 cash runway ends.
• Whether the planned levosimendan Phase 3 study begins, and its design, cost, timeline and funding status.
• The extent and timing of any resumption or financing of imatinib development.
• Potential dilution from outstanding warrants and other securities, including the effects of prior offering and warrant exercises.
• Progress of patent protection, regulatory development and clinical evidence supporting levosimendan in PH-HFpEF.