Tenax Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Tenax is a clinical-stage specialty pharmaceutical company developing treatments for cardiovascular and pulmonary diseases. It reported no product revenue; the filing does not provide a clear revenue figure.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | No product revenue reported | No product revenue reported |
| General and administrative expense | $1.37 million | $1.32 million |
| Research and development expense | $22.38 million | $1.34 million |
| Operating loss | $23.75 million | $2.67 million |
| Net loss | $23.75 million | $2.65 million |
| Basic and diluted loss per share | $1.64 | $0.38 |
| Cash used in operating activities | $3.22 million | $2.67 million |
Gross margin and operating margin are not meaningful for the reported period given the absence of reported product revenue. The rise in R&D expense primarily reflects a $21.73 million charge for acquired in-process research and development related to the PHPrecisionMed transaction; clinical and preclinical development costs otherwise declined year over year.
At March 31, 2021, cash and cash equivalents were $3.54 million and marketable securities were $0.49 million, totaling approximately $4.03 million. Working capital was $3.08 million, versus $4.68 million at December 31, 2020. Total liabilities were $1.46 million, including $244,657 remaining on the Paycheck Protection Program loan. Management estimated available resources would fund planned operations through Q3 2021.
Material developments and comparison with prior period
- On January 15, 2021, Tenax acquired PHPrecisionMed, gaining imatinib development rights for pulmonary arterial hypertension (PAH). The $21.58 million consideration was paid in common and Series B convertible preferred stock; the acquired research asset was expensed because it had no alternative future use at acquisition.
- Net loss rose from $2.65 million to $23.75 million, mainly due to that acquisition charge. Operating cash use increased by approximately $0.55 million. Financing cash inflow fell to $0.54 million from $2.13 million, which included proceeds from a 2020 offering.
- Common shares outstanding increased from 12.62 million at year-end to 14.97 million at March 31. Series B preferred shares issued in the acquisition are convertible into up to 10.232 million common shares, subject to the stated terms and stockholder approval.
Outlook, risks and unusual items
- Funding and going concern: The company reported an accumulated deficit of approximately $270 million and stated that substantial doubt exists about its ability to continue as a going concern. It needs additional financing beyond Q3 2021; availability and terms are uncertain. Equity financing could materially dilute shareholders, while debt or licensing arrangements could impose restrictions or require concessions.
- Development plans: Tenax plans Phase 3 development of oral levosimendan for PH-HFpEF and a Phase 3 study of modified-release imatinib for PAH. The FDA discussed potential Phase 3 designs for levosimendan, but raised the possibility of a need for additional safety data. No formal financial guidance was provided.
- Clinical evidence: In the Phase 2 HELP study, the primary endpoint—exercise PCWP change—was not statistically significant. The filing reports significant results for combined PCWP measurements and a 29-meter improvement in six-minute walk distance versus placebo. These findings are not proof of Phase 3 success or regulatory approval.
- Dilution and conversion: The Series B conversion requires stockholder approval for the principal conversion tranche; the company was required to seek a vote by July 31, 2021. The filing also reports 15.80 million warrants outstanding and 5.26 million pre-funded warrants, in addition to the Series B conversion potential.
- PPP loan: Forgiveness had not been assured. Monthly payments of approximately $31,100 were scheduled to begin September 30, 2021.
- Other items: After quarter-end, Tenax extended its office lease for three years, with an annual base rent of $125,034 at commencement and annual increases. COVID-19 could disrupt trial recruitment and operations. The filing reports no material pending legal proceedings and no material change to previously disclosed risk factors.
Important facts for investors to verify
- Current cash runway, planned financing needs, and whether financing was secured after the filing date.
- Stockholder approval and actual conversion terms for the Series B preferred shares, including dilution from warrants and pre-funded warrants.
- Final protocols, start dates, enrollment plans, and safety requirements for the proposed Phase 3 levosimendan and imatinib trials.
- Whether the Phase 2 HELP findings are replicated in larger trials, given the missed primary endpoint.
- PPP loan forgiveness status and subsequent lease-related obligations.