Tenax Therapeutics, Inc. — 2017 Second-Quarter Form 10-Q
Business context and period. This unaudited quarterly report covers the three and six months ended June 30, 2017. Tenax is a development-stage specialty pharmaceutical company focused on critical-care treatments; its lead candidate is levosimendan. The filing reports no product revenue.
Financial performance and liquidity
| Metric | Three months ended June 30, 2017 | Three months ended June 30, 2016 | Six months ended June 30, 2017 | Six months ended June 30, 2016 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| General and administrative expense | $1.791 million | $1.240 million | $3.239 million | $3.001 million |
| Research and development expense | $1.223 million | $3.432 million | $3.274 million | $7.375 million |
| Total operating expenses / operating loss | $3.014 million | $4.671 million | $6.513 million | $10.377 million |
| Net loss | $2.986 million | $4.641 million | $6.262 million | $10.003 million |
| Net loss per share, basic and diluted | $0.11 | $0.17 | $0.22 | $0.36 |
| Cash used in operating activities | $5.6 million | $5.2 million | $9.633 million | $8.485 million |
Balance sheet and liquidity at June 30, 2017: Cash and cash equivalents were $2.234 million; marketable securities totaled $9.893 million, bringing cash and securities to approximately $12.1 million. Current assets were $8.997 million, current liabilities $2.183 million, and working capital $6.814 million. Total assets were $13.449 million and stockholders’ equity $11.266 million. The filing lists no borrowings or debt balance. Gross margin is not applicable because no revenue was reported.
Changes versus comparable periods
- Second-quarter net loss narrowed to $2.986 million from $4.641 million a year earlier, largely as research and development expense declined after lower spending on the LEVO-CTS Phase III trial.
- For the first half, net loss declined to $6.262 million from $10.003 million. R&D expense fell by $4.101 million, while G&A increased by $0.238 million.
- Management attributed higher quarterly G&A principally to former CEO severance and higher personnel costs. First-half operating cash use rose by $1.147 million, primarily because accrued clinical-trial costs decreased.
- Cash and cash equivalents fell from $9.996 million at December 31, 2016, while marketable securities totaled $9.893 million at June 30, 2017 versus $11.871 million at year-end. Total liabilities declined from $6.199 million to $2.183 million.
Outlook, risks and significant items
- LEVO-CTS did not meet either co-primary endpoint. The company reported statistically significant results for two secondary endpoints, including reduced low cardiac output syndrome and lower postoperative use of secondary inotropes; it described safety results as favorable. In July 2017, after the quarter-end, the FDA and Health Canada said another trial would be required to support an NDA. Tenax was evaluating clinical, regulatory and financing options.
- Management said available resources were expected to fund planned operations through the third quarter of 2018. It expects continuing losses and needs substantial additional financing beyond that period; financing may be unavailable or may dilute shareholders, impose debt covenants, or require licensing away rights.
- The board was conducting a strategic alternatives review, with Ladenburg Thalmann as financial advisor. The review could result in no transaction.
- Tenax received a Nasdaq notice over its share price closing below $1 for 30 consecutive business days. It had until September 11, 2017, to regain compliance; failure could lead to delisting and impair trading and financing access.
- The company recorded a $33.3 million impairment charge in the fourth quarter of 2016 for levosimendan in-process R&D and goodwill after LEVO-CTS results. No further levosimendan development for cardiac-surgery LCOS was then anticipated, though subsequent regulatory discussions left the broader program under evaluation.
- Under its Orion license, contingent payments include $2 million upon U.S. approval, $1 million upon Canadian approval, and up to $13 million in sales-based milestones, plus royalties. No development milestones had been met and no contingent milestone liability was recorded at June 30.
- The filing states there were no material pending legal proceedings and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective at quarter-end.
Important facts for investors to verify
- Whether Tenax secured financing or a strategic transaction, and whether its stated cash runway remained achievable.
- Regulatory feedback, trial design, cost and funding for any additional levosimendan study, including the company’s intended indications.
- Nasdaq minimum-bid compliance by the September 11, 2017 deadline and any subsequent listing action.
- Actual cash burn, changes in accrued clinical-trial obligations, and any dilution or licensing terms from future financing.