GT Biopharma, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial amounts below are in U.S. dollars; statement amounts are generally in millions unless otherwise noted.
Business context
GT Biopharma is a clinical-stage biopharmaceutical company developing immuno-oncology treatments using its TriKE platform, designed to direct and enhance natural killer cells against targeted cancer cells. The company reported no revenue and had no product candidates approved for sale. Its reported development work included candidates GTB-3650 and GTB-5550.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $2.743 million | $1.008 million | $5.969 million | $3.287 million |
| Selling, general and administrative expense | $4.280 million | $4.946 million | $9.510 million | $36.050 million |
| Operating loss | $7.023 million | $5.954 million | $15.479 million | $39.337 million |
| Net loss | $6.881 million | $5.453 million | $15.300 million | $39.991 million |
| Net loss per share, basic and diluted | $0.22 | $0.17 | $0.48 | $1.54 |
Gross margin and operating margin are not meaningful because the company had no revenue. Cash used in operating activities was $10.919 million for the first nine months of 2022, compared with $11.901 million in 2021. Investing activities provided $4.639 million, primarily from net sales of investments; financing activities used $0.223 million. Cash declined $6.503 million from year-end 2021.
At September 30, 2022, cash and cash equivalents were $2.465 million and short-term investments were $18.319 million, totaling approximately $20.8 million. Working capital was $15.8 million and stockholders’ equity was $16.0 million. Total liabilities were $5.117 million, including $5.025 million current liabilities. The company reported no outstanding convertible notes during 2022; operating lease liabilities totaled $0.198 million.
Changes versus the prior comparable periods
- Q3 R&D expense increased $1.735 million year over year; management attributed the increase to added personnel and continued development and manufacturing of product candidates.
- Nine-month R&D expense rose $2.682 million. In contrast, nine-month SG&A fell $26.540 million, primarily because of lower stock-based compensation and lower legal, consulting, and other professional costs than in 2021.
- Net loss improved substantially for the nine-month period, but increased in Q3. The nine-month comparison reflects the much higher 2021 SG&A and stock-compensation expense; Q3 operating expenses and net loss were higher in 2022.
- Cash and short-term investments fell from $31.979 million at December 31, 2021 to approximately $20.784 million at September 30, 2022.
Outlook, management commentary, and risks
- Management said available cash and short-term investments were expected to fund operations for more than 12 months from the filing date. It anticipated the next 12 months’ cash use for SG&A of $4–$5 million and R&D of $13–$15 million.
- The company expects continuing operating losses and is evaluating financing options, including equity or debt offerings, research grants, and licensing or marketing arrangements. No revenue or product-launch guidance was provided.
- On August 24, 2022, the company agreed with its contract manufacturer to settle amounts using 1,222,281 common shares valued at $3.3 million, cash payments, and potentially cash or shares for specified future services at the company’s discretion. It paid $1.3 million in September, $1.0 million in October, and agreed to pay another $1.0 million in November 2022. The amendment eliminated remaining commitments under specified manufacturing statements of work. The manufacturer remained a significant vendor concentration.
- Remaining commitments under the University of Minnesota research agreement were approximately $0.601 million. The agreement runs through June 2023.
- Disclosure controls and procedures were deemed ineffective at September 30, 2022 due to material weaknesses involving segregation of duties, executive-override risk, and insufficient accounting and financial-reporting policies. Management described remediation efforts, including an experienced CFO, outside consultants, and planned accounting and control improvements.
- The company is pursuing arbitration against its former CFO, alleging misappropriation of funds and shares and seeking, among other relief, estimated monetary damages of $370,000. A hearing date had not yet been received. The filing does not report a resolution.
- Management said COVID-19 had limited impact on results in the first nine months, but noted uncertainty about future effects. It also identified potential exposure to inflation, supply-chain disruptions, and broader economic and geopolitical conditions.
- Q3 included substantial equity compensation and share issuance, including shares issued to settle a vendor payable. These items affect reported expenses and dilution; the filing reports 32,507,618 common shares outstanding at September 30, 2022 and 32,557,720 at October 31, 2022.
Important facts for investors to verify
- Whether the company’s stated funding runway remains adequate given forecast R&D spending, operating cash use, and the absence of revenue.
- Progress, costs, and development timelines for GTB-3650, GTB-5550, and other TriKE candidates, including the company’s manufacturing and research commitments.
- Amounts and timing of remaining manufacturer payments, and any future settlement of services in cash or shares.
- Progress in remediating the disclosed internal-control material weaknesses and the status of the former-CFO arbitration.
- Potential future dilution from stock awards, options, warrants, and any financing; the filing lists 1,835,452 options and 2,337,274 warrants outstanding at September 30, 2022.