GT Biopharma, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed April 16, 2021. This is an annual report, not a standalone fourth-quarter report. GT Biopharma is a clinical-stage biopharmaceutical company developing TriKE immune-cell engager therapies. It had no approved products and no product sales revenue.
Key financial results and position
| Metric | FY2020 / Dec. 31, 2020 | FY2019 / Dec. 31, 2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $0.485 million | $1.667 million |
| Selling, general and administrative expense | $6.279 million | $9.790 million |
| Operating loss | $6.764 million | $16.056 million |
| Net loss | $28.296 million | $38.647 million |
| Cash used in operating activities | $7.262 million | $3.659 million |
| Cash and cash equivalents | $5.297 million | $0.028 million |
| Current liabilities | $35.094 million | $19.706 million |
| Convertible notes, net of discount | $26.303 million | $13.207 million |
| Stockholders’ deficit | $29.433 million | $19.310 million |
Gross margin is not meaningful because the company reported no revenue. The filing reports basic and diluted loss per share of $6.45 for 2020 and $0.01 for 2019; those figures appear difficult to reconcile with the reported net losses and weighted-average shares, so they should be verified against the financial statements and reverse-split presentation.
Material changes and unusual items
- Net loss narrowed by about $10.4 million year over year, primarily because 2019 included a $20.5 million loss on disposal of assets and a $4.6 million impairment charge. In 2020, lower operating expenses partly offset higher financing-related and settlement costs.
- Interest expense rose to $3.0 million from $2.1 million. 2020 also included a $5.4 million loss on legal settlements, a $12.6 million loss on the debt forbearance transaction, and $0.3 million of debt-discount amortization.
- The company raised $12.5 million through cash issuances of convertible notes in 2020. These notes generally bore 10% interest, were short-term, and were convertible into common stock. At year-end, $16.8 million of notes were past due; the auditor cited defaulted notes totaling $16.8 million as a going-concern factor.
- After year-end, the company reported conversion of approximately $38.7 million of notes and accrued interest into 11.4 million shares, a public offering producing $24.9 million net proceeds, and $3.2 million from warrant exercises. Pro forma cash was reported as $33.4 million, with convertible notes and accrued interest eliminated; this is unaudited pro forma information, not the year-end balance sheet.
- The company completed a 1-for-17 reverse stock split in February 2021. It also issued 5.5 million shares to officers, directors and consultants as incentive compensation after the February 2021 listing, which the filing valued at $34.8 million.
Business, outlook and principal risks
- Pipeline: Lead candidate GTB-3550 targets CD33-expressing malignancies and was in a Phase I/II dose-escalation trial. The first patient was enrolled in January 2020. Management anticipated moving into Phase II in late second-quarter 2021. GTB-C3550 is described as a next-generation candidate; other earlier-stage programs target solid tumors and infectious disease.
- Spending outlook: Management projected 2021 research and development spending of approximately $12–15 million, with selling, general and administrative cash spending of $1–2 million in coming quarters. These plans depended on financing and clinical progress.
- Going concern and liquidity: The auditor’s report states that substantial doubt exists about the company’s ability to continue as a going concern, citing losses, operating cash use, stockholders’ deficit and past-due debt. The notes say management estimated funds on hand would support operations for about six months; the MD&A separately refers to financing efforts supporting at least nine months if successful. Financing availability and timing remain uncertain.
- Development and operating risks: Candidates remain early-stage, with clinical, regulatory, safety, manufacturing, enrollment, intellectual-property and commercialization risks. The company relies on third-party manufacturers, has no long-term manufacturing agreements, and had only three employees at year-end. COVID-19 affected operations, though the company reported no related asset impairment.
- Controls and reporting: Management found material weaknesses in financial reporting controls, including inadequate segregation of duties, risk of executive override, and insufficient written accounting and reporting procedures. Disclosure controls were deemed ineffective at year-end, and the weaknesses had not been remediated. The company also restated its 2020 interim statements after identifying an omitted $8.643 million debt-extinguishment loss.
- Contingencies: A lawsuit by former collaborators alleges breach of license and consulting agreements and seeks damages and stock; trial was scheduled for May 2022. A separate landlord lawsuit sought more than $250,000. The Empery litigation was settled and dismissed with prejudice in June 2020.
- License obligations: The University of Minnesota license includes royalties of 4%–6%, milestone payments totaling $3.1 million, and minimum annual royalties beginning at $250,000 in 2022, increasing in later years.
Important facts for investors to verify
- Current cash runway, financing needs and the status of any past-due or converted debt; distinguish year-end balances from post-year-end transactions.
- Actual GTB-3550 trial enrollment, safety findings, dose escalation and progress relative to the stated Phase II plan.
- The reported per-share loss figures and share counts, including the effects of the reverse split and substantial post-year-end share issuance.
- Progress in remediating internal-control weaknesses and the implications of the interim financial-statement restatement.
- Exposure and status of the Lion/Vallera and landlord litigation, and the terms and potential dilution of outstanding convertible securities and warrants.