Business context and reporting period
Tenax Therapeutics, Inc. is a clinical-stage biopharmaceutical company developing levosimendan for pulmonary hypertension and imatinib for pulmonary arterial hypertension (PAH). This unaudited Form 10-Q covers the three months ended March 31, 2022; comparisons are with the first quarter of 2021 unless noted. The company reported no product revenue.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $2.72 million | $23.75 million |
| Net loss | $2.72 million; $0.11 per share | $23.75 million; $1.64 per share |
| Operating cash used | $2.94 million | $3.22 million |
| Cash and cash equivalents | $2.87 million at March 31, 2022 | $5.58 million at December 31, 2021 |
| Working capital | $1.48 million at March 31, 2022 | $4.13 million at December 31, 2021 |
| Total liabilities | $2.13 million at March 31, 2022 | $1.75 million at December 31, 2021 |
| Stockholders’ equity | $1.61 million at March 31, 2022 | $4.24 million at December 31, 2021 |
Gross margin and operating margin are not meaningful because the company reported no revenue. Q1 2022 financing cash flow was positive $229,000, primarily from a $365,000 insurance-premium financing note, partly offset by $136,000 in payments. The note balance was $229,000, due in monthly installments through August 2022. Investing cash used was $6,000.
Material changes versus the prior period
- Net loss fell substantially year over year largely because Q1 2021 included a $21.73 million noncash in-process research and development charge from the PHPrecisionMed acquisition. That charge did not recur in Q1 2022.
- Excluding that acquisition-related item, research and development expense rose to $1.18 million from $22,000. Clinical and preclinical development costs increased about $497,000, reflecting imatinib formulation work and Phase 1 and Phase 3 expenses, as well as the levosimendan HELP study and other development work.
- General and administrative expense increased to $1.54 million from $1.37 million. Lower personnel costs were more than offset by higher legal and professional fees, including outsourced legal work, intellectual-property costs, investor relations and consulting.
- Cash declined by $2.72 million from year-end, while working capital and equity also decreased. Common shares outstanding remained 25.21 million during the quarter.
Outlook, risks, contingencies and unusual items
- Management estimated that cash on hand would fund planned operations only through the second quarter of calendar 2022. Substantial additional financing would be required thereafter; the filing states that this funding may not be available on acceptable terms, or at all.
- The company disclosed substantial doubt about its ability to continue as a going concern. It may need to reduce or delay research and development, eliminate trials, issue dilutive securities, incur debt with restrictive covenants, or enter licensing or collaboration arrangements that surrender rights.
- Management expects continued losses for at least several years and cannot predict when, or whether, product revenue will be generated. No later-period earnings or revenue guidance is provided.
- COVID-19 could disrupt trial enrollment, site operations, supply chains and regulatory reviews. Development timelines and costs also depend on clinical outcomes, regulatory decisions, manufacturing and financing.
- The January 2022 amendment to the Orion license expanded covered levosimendan dosage forms, subject to limitations. Potential obligations include $2 million upon U.S. approval, $1 million upon Canadian approval, up to $13 million in sales milestones and royalties; no development milestones had been achieved or liability recorded as of March 31, 2022.
- Potential dilution is significant: the company disclosed 20.93 million warrants, 10.03 million pre-funded warrants and approximately 1.30 million options excluded from diluted loss per share as anti-dilutive. There were no material pending legal proceedings, no subsequent events reported, and no material change in risk factors from the 2021 Form 10-K.
- Management concluded disclosure controls were effective as of March 31, 2022, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the company obtained sufficient financing after the stated cash runway through Q2 2022, and the resulting effects on operations and dilution.
- Progress, timing, enrollment and funding needs for the imatinib and levosimendan clinical programs, including planned Phase 3 work.
- The extent to which the sharp year-over-year loss reduction reflects the nonrecurring 2021 acquisition charge rather than improved underlying economics.
- Current cash, operating burn, financing-note repayment status and any updates to the going-concern assessment.
- Potential dilution from outstanding warrants, pre-funded warrants, options and PHPM merger holdback shares, and any changes in those amounts.