Tenax Therapeutics, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter report. Tenax is a development-stage specialty pharmaceutical company with no approved products or product sales; its main program is levosimendan for pulmonary hypertension associated with heart failure with preserved ejection fraction (PH-HFpEF).
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | No product revenue reported | No product revenue reported |
| Operating expenses | $8.56 million | $6.89 million |
| Research and development | $3.47 million | $1.24 million |
| General and administrative | $5.08 million | $5.65 million |
| Net loss | $8.39 million | $14.14 million |
| Net cash used in operating activities | $7.56 million | $5.50 million |
| Cash and cash equivalents | $4.91 million | $12.37 million |
| Marketable securities | $0.49 million | $0.49 million |
| Working capital | $3.65 million | $11.75 million |
- Operating loss increased as research and development spending rose $2.23 million, principally for the Phase 2 HELP Study. General and administrative expenses declined $0.57 million, mainly because of lower personnel costs.
- The 2019 net loss was lower than 2018 largely because 2018 included a $7.33 million deemed dividend on preferred stock; the underlying operating loss increased in 2019.
- Cash used in investing activities was approximately $2,000 in 2019, compared with $7.35 million provided in 2018, primarily reflecting lower sales of marketable securities. Financing provided $97,000 in 2019 versus $8.91 million in 2018.
- Total assets were $6.37 million and total liabilities were $2.59 million at year-end. Liabilities were mainly accounts payable, accrued liabilities and operating lease obligations; the filing reports no material debt balance.
- No meaningful product margins are available because the company had no approved products or product revenue.
Business, development and material changes
- The HELP Study is a randomized, double-blind Phase 2 trial evaluating five weekly infusions of levosimendan in PH-HFpEF patients, with change in pulmonary capillary wedge pressure (PCWP) versus placebo as the primary endpoint. Enrollment began in 2019 and was completed in March 2020; primary endpoint results were pending unblinding at the filing date.
- Management reported preliminary, investigator-reported lead-in data: 80–85% of patients met responder criteria, and the first 30 evaluable responders showed statistically significant improvements in exercise hemodynamics. These open-label findings are preliminary and are not the randomized primary endpoint results.
- The prior Phase 3 LEVO-CTS cardiac-surgery trial did not meet its co-primary endpoints. Secondary endpoints included reductions in low cardiac output syndrome and use of secondary inotropes. A post hoc isolated-CABG analysis indicated improved 90-day survival, but the FDA advised that a further prospective study would be needed; Tenax suspended that development path.
- Tenax’s board continued to review strategic alternatives. Management also cited partnering, licensing, and potential product acquisitions as 2020 priorities.
Outlook, risks and contingencies
- Runway and going concern: Year-end cash and marketable securities were about $5.4 million. A March 2020 offering raised approximately $2.75 million gross and $2.125 million net. Management said these resources were expected to fund planned operations through the third quarter of 2020. The company expects substantial additional capital needs and concluded there is substantial doubt about its ability to continue as a going concern; the auditor’s report includes a going-concern explanatory paragraph.
- Financing and dilution: Future funding may require equity, debt, licensing or collaboration arrangements, none assured. Equity issuance may materially dilute stockholders. At December 31, 2019, 10.52 million warrants were outstanding. The March 2020 financing also included pre-funded warrants and additional warrants. The filing states that approximately $72.3 million remained under the shelf registration statement, subject to public-float and market limitations.
- Clinical and regulatory risk: Levosimendan remains investigational in the United States and Canada. The company planned an FDA End-of-Phase 2 meeting in 2020 to discuss HELP results and a potential Phase 3 program; approval, timing and commercial viability are uncertain.
- COVID-19: The filing warned that the pandemic could disrupt trial recruitment, site operations, supply, and regulatory review. The company could not predict the extent or duration of any disruption.
- Orion dispute and supply dependence: Orion is the sole levosimendan manufacturer. In June 2019, Orion initiated arbitration over whether its oral formulation was a license “line extension” and sought reimbursement of legal fees; Tenax disputed Orion’s interpretation and sought its own legal-fee reimbursement. The dispute could strain the relationship and affect supply or development.
- Intellectual property: Tenax disclosed that its principal U.S. licensed patents for levosimendan expire in September 2020. The company relies on licensed rights, and Orion retains important manufacturing, regulatory and intellectual-property roles.
- The license includes contingent development payments of $2 million upon U.S. approval and $1 million upon Canadian approval, plus commercialization milestones of up to $13 million and tiered royalties. No development milestone had been achieved or accrued at year-end.
Important facts for investors to verify
- HELP Study unblinded primary endpoint data, complete safety findings, and the FDA’s feedback on any proposed Phase 3 design.
- Actual cash burn and financing needs relative to the stated third-quarter 2020 runway, including the net proceeds and dilution from the March 2020 offering.
- Status and outcome of the Orion arbitration, continued access to levosimendan supply, and implications of the September 2020 patent expirations.
- Whether strategic alternatives, licensing or partnering discussions result in a transaction or financing, and the terms and potential dilution involved.
- Progress in managing COVID-19-related trial, supply-chain and regulatory disruptions.