Tango Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; unaudited. Filed November 9, 2021. Tango is a preclinical precision-oncology company and has no approved products or product-sales revenue.
Financial position and results
| Metric | Q3 2021 / Sep. 30, 2021 | Comparable period / prior year-end |
|---|---|---|
| Collaboration revenue | $6.8 million | Q3 2020: negative $11.3 million, reflecting a Gilead-related cumulative catch-up adjustment |
| Total revenue | $6.8 million | Q3 2020: negative $11.3 million |
| Research and development expense | $21.9 million | Q3 2020: $13.0 million |
| General and administrative expense | $4.4 million | Q3 2020: $2.5 million |
| Net loss | $19.6 million; $0.28 per share | Q3 2020: $26.8 million; $0.76 per share |
| Cash, cash equivalents and marketable securities | $503.8 million | Dec. 31, 2020: $190.3 million |
| Total liabilities | $164.7 million | Dec. 31, 2020: $168.7 million |
| Stockholders’ equity | $365.4 million | Dec. 31, 2020: $38.6 million |
For the nine months ended September 30, revenue was $31.3 million (2020: negative $1.5 million), R&D expense was $56.0 million (2020: $34.9 million), G&A expense was $11.5 million (2020: $6.8 million), and net loss was $36.2 million (2020: $43.1 million). 2021 revenue included an $11.0 million Gilead program-license fee recognized in Q2 and $20.3 million of collaboration revenue. The prior-year revenue comparison is affected by the 2020 amendment-related catch-up adjustment.
Nine-month operating cash flow was negative $42.6 million, versus positive $88.1 million in 2020, when Gilead’s $125.0 million upfront payment supported cash receipts. Investing cash flow was negative $138.2 million and financing cash flow positive $357.4 million, principally from the August business combination and PIPE financing. No debt borrowings are disclosed; liabilities include substantial deferred collaboration revenue and lease obligations. Product gross margin is not meaningful because there are no product sales.
Material changes and business developments
- The August 10, 2021 business combination was accounted for as a reverse recapitalization. The company received approximately $326.5 million net from the business combination and PIPE financing; 18.61 million PIPE shares were sold at $10 per share. Preferred shares converted to common stock.
- R&D expense rose 69% year over year in Q3, primarily due to increased CRO and laboratory costs, program advancement, and added personnel and stock compensation. G&A expense rose 76%, mainly from personnel-related costs.
- At September 30, cash and cash equivalents were $205.0 million, marketable securities $298.8 million, and working capital approximately $474.4 million. The company reported no material legal proceedings.
Outlook, commentary and risks
- Management estimated that September 30 cash, cash equivalents and marketable securities would fund operating expenses and capital expenditures at least into the second half of 2024; this estimate depends on assumptions and could prove wrong. The company expects significant and increasing expenses and operating losses, with no assurance of profitability or additional financing on acceptable terms.
- Pipeline plans: file an IND for lead candidate TNG908 in Q4 2021 and begin a Phase 1/2 trial in H1 2022; file an IND for the USP1 inhibitor in 2022 and for undisclosed Target 3 in 2023. These are forward-looking plans, not achieved milestones. All programs were preclinical at the reporting date.
- Gilead’s amended collaboration covers research and options for up to 15 programs. At September 30, deferred revenue was $144.5 million in total; the remaining long-term amount was expected to be recognized over approximately 5.9 years. Future license, milestone and royalty receipts are uncertain.
- Subsequent event: in November 2021, Tango agreed to terminate its 100 Binney Street lease no later than October 15, 2022, earlier than the original June 2026 expiry. Management expected material reductions in related lease liabilities and right-of-use assets in Q4 2021. A new Boston lease, with fixed annual rent of $5.1 million increasing 3% annually, had not commenced by September 30; a remaining $1.7 million security deposit was expected in H1 2022.
- Key risks include preclinical and clinical failure or delay, patient-identification and enrollment challenges for biomarker-defined cancers, regulatory and companion-diagnostic hurdles, reliance on third-party and single-source manufacturers, dependence on Gilead and other collaborators, intellectual-property challenges, and possible COVID-19 or supply-chain disruption.
Investor verification priorities
- Confirm progress against the stated IND and clinical-trial timelines, and assess what evidence supports the preclinical efficacy claims.
- Track cash burn and spending growth against management’s second-half-2024 runway estimate, including future clinical, manufacturing and public-company costs.
- Review Gilead revenue recognition, deferred revenue, conditional research-extension consideration and the economics of future program options and milestones.
- Check the financial and accounting effects of the November lease termination and the commencement and full cost commitments of the Boston lease.
- Assess dilution and equity compensation following the business combination, PIPE issuance and outstanding options; the filing reported 87.5 million common shares outstanding as of November 5, 2021.