Tenax Therapeutics, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing; comparisons below are with fiscal 2019. Filed March 31, 2021.
Business context
Tenax is a clinical-stage specialty pharmaceutical company focused on cardiovascular and pulmonary diseases. It had no approved products or product sales. Its principal programs were levosimendan for pulmonary hypertension associated with heart failure with preserved ejection fraction (PH-HFpEF) and, following a January 2021 acquisition, imatinib for pulmonary arterial hypertension (PAH).
Financial and operating performance
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | No product revenue reported | No product revenue reported |
| Operating expenses | $9.87 million | $8.56 million |
| Net loss | $9.85 million | $8.39 million |
| Research and development | $4.56 million | $3.47 million |
| General and administrative | $5.31 million | $5.08 million |
| Net cash used in operations | $9.27 million | $7.56 million |
| Cash and cash equivalents | $6.25 million | $4.91 million |
| Marketable securities | $0.46 million | $0.49 million |
| Working capital | $4.68 million | $3.65 million |
| Total liabilities | $2.24 million | $2.59 million |
Net loss per share was $1.33 in 2020 versus $1.35 in 2019. No meaningful operating margin is reported because the company had no product revenue. Cash provided by financing was $10.60 million, principally from equity offerings, warrant exercises and a $244,657 Paycheck Protection Program loan. The PPP loan had a 1% interest rate; $120,491 was current and $124,166 long-term at year-end.
Material changes and notable items
- Net loss increased by about $1.46 million year over year. Operating expenses rose about $1.31 million, mainly as HELP Study clinical-development costs increased; R&D rose 31% and G&A rose 4%.
- Operating cash use increased about $1.72 million. Year-end cash and securities totaled approximately $6.71 million, compared with approximately $5.40 million a year earlier.
- March and July 2020 securities offerings generated approximately $8.63 million in net proceeds combined. The company also issued substantial warrants and pre-funded warrants, creating potential dilution.
- In May 2020, an arbitration award found oral levosimendan to be a line-extension product under the Orion license and ordered Orion to reimburse Tenax approximately $358,000 of arbitration costs.
- In October 2020, Tenax amended its Orion license to cover specified oral and subcutaneous levosimendan formulations, with revised royalties and an extended term. Either party may terminate if U.S. regulatory approval has not been obtained by September 20, 2028.
- After year-end, Tenax acquired PHPrecisionMed on January 15, 2021, adding imatinib development rights. Consideration included 1,892,905 common shares and Series B preferred shares convertible into up to 10,232,000 common shares, subject to terms and indemnification holdbacks.
Clinical progress, outlook and risks
- Levosimendan: The Phase 2 HELP study did not meet its primary endpoint: exercise PCWP did not show a statistically significant reduction. Combined measurements at rest, with legs raised and during exercise showed statistically significant PCWP reductions versus baseline and placebo. Six-minute walk distance improved by 29 meters versus placebo (p=0.0329); reported adverse-event rates were similar between groups, with no arrhythmias observed in the described monitoring.
- The FDA indicated that one or two Phase 3 trials using six-minute walk distance over 12 weeks, or one trial using clinical worsening over 24 weeks, could be sufficient for PH-HFpEF development. The FDA also agreed to consideration of daily oral dosing, while flagging that additional safety data may be needed depending on trial design. Phase 3 remained planned, not completed or assured.
- Imatinib: A modified-release formulation and Phase 3 PAH study were planned. FDA discussions included a single Phase 3 trial using six-minute walk distance and a small comparative pharmacokinetic/bioavailability study for the modified-release formulation. Prior sponsor trials showed efficacy signals but encountered substantial treatment discontinuation attributed largely to gastric intolerance.
- Management estimated available resources would fund planned operations only through the third quarter of 2021. The auditor’s report and management both identified substantial doubt about the company’s ability to continue as a going concern. Additional financing, licensing income or other resources would be needed; availability and terms were uncertain.
- Key risks include continued losses and no approved products, clinical and regulatory uncertainty, dependence on Orion as the sole levosimendan manufacturer, potential financing-related dilution, COVID-19 disruption, and whether the PPP loan would be forgiven. The company reported no material litigation expected to adversely affect its financial statements.
- Management said the board continued to review strategic alternatives, including potential transactions, and expected to pursue partnerships and other development opportunities. No transaction or financing outcome was assured.
Investor verification priorities
- Review the full HELP Study results and protocol, especially the missed primary endpoint, secondary outcomes, and whether the findings support Phase 3 design.
- Confirm the timing, funding, endpoints and safety-data requirements for levosimendan and imatinib clinical plans, and any subsequent regulatory developments.
- Assess liquidity after the reported Q3 2021 runway estimate, subsequent cash use, financing activity and the company’s going-concern status.
- Reconcile potential dilution from outstanding warrants and pre-funded warrants and the Series B preferred conversion terms associated with the PHPM acquisition.
- Verify PPP loan forgiveness or repayment status and monitor obligations and milestones under the Orion license.