TScan Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. TScan is a clinical-stage biotechnology company developing TCR-engineered T-cell therapies for cancer. It has no approved products and has generated no product-sales revenue; reported revenue is from collaborations and licenses.
Financial results and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Collaboration and license revenue | $3.9 million | $3.4 million | $13.8 million | $10.4 million |
| Research and development expense | $22.7 million | $15.0 million | $65.7 million | $44.2 million |
| General and administrative expense | $5.9 million | $4.9 million | $20.2 million | $14.2 million |
| Operating loss | $24.7 million | $16.6 million | $72.1 million | $48.0 million |
| Net loss | $23.0 million | $16.2 million | $69.6 million | $47.5 million |
| Net loss per share, basic and diluted | $0.24 | $0.67 | $1.25 | $1.98 |
At September 30, 2023, cash and cash equivalents were $155.2 million and marketable securities were $60.2 million, totaling $215.4 million; restricted cash was an additional $5.0 million. Current assets were $217.6 million and current liabilities $33.2 million. Debt had $30.0 million principal outstanding; the balance-sheet carrying amount was $29.9 million, including accrued interest and fees. Operating lease liabilities totaled $57.0 million.
For the first nine months, operating cash use was $37.6 million, versus $50.5 million in 2022; investing cash use was $62.7 million, including $60.0 million of marketable-security purchases and $2.7 million of property and equipment purchases. Financing provided $135.4 million, principally from the June equity offering. Cash, cash equivalents and restricted cash increased $35.2 million to $160.2 million.
Material changes versus prior periods
- Nine-month revenue rose $3.4 million, reflecting recognition of Novartis collaboration revenue and the new Amgen collaboration. The Novartis agreement concluded in Q1 2023.
- Nine-month operating expenses increased $27.5 million and net loss widened $22.1 million. R&D spending rose $21.5 million, driven by clinical-trial start-up and enrollment, expanded facilities and CMC capacity, staffing, and manufacturing supplies. G&A rose $6.0 million, mainly from legal, professional and facility costs.
- In June, TScan raised $134.7 million net through an offering of common shares and pre-funded warrants. The warrants cover up to 47.0 million shares, are immediately exercisable at $0.0001 per share, and had not been exercised as of September 30. The company also has a $75.0 million ATM program; no shares had been sold under it by the reporting date.
- Investing cash outflow increased substantially because the company bought short-term U.S. Treasury bills; these purchases shifted cash into marketable securities.
Outlook, commentary and risks
- Management expects significant losses and rising expenses as research, clinical development and manufacturing activities expand. It does not expect product revenue for several years, if ever.
- The MD&A says existing cash, cash equivalents and marketable securities are expected to fund planned operations and capital expenditures into 2026. The financial-statement note separately says these resources are expected to fund operations for at least 12 months from issuance. These statements use different runway periods and should be reconciled; management cautions that estimates depend on assumptions and capital could be exhausted sooner.
- Amgen paid a $30.0 million upfront fee, collected in July. TScan recognized $7.0 million of Amgen revenue in the first nine months and had $23.0 million deferred at September 30, including $7.8 million classified as long-term. The company may earn more than $500 million in development and commercial milestones and tiered single-digit royalties, but these contingent amounts were excluded from the transaction price because achievement was considered uncertain. Management expected Amgen-related revenue to increase for the remainder of 2023.
- Clinical update: TSC-100 and TSC-101 are in a multi-arm Phase 1 study, with start-up and initial enrollment underway. FDA-cleared INDs include T-Plex and four solid-tumor candidates; the company planned to submit two additional TCR INDs in Q4 2023. These are development plans, not approved therapies.
- The K2 HealthVentures loan bears 9.90% interest at September 30, matures in September 2026, and includes restrictions on operations and a minimum unrestricted-cash covenant. Additional loan tranches are conditional or discretionary; conversion of debt and exercise of warrants could dilute shareholders.
- Key risks include clinical safety and efficacy uncertainty, trial enrollment and regulatory delays, complex and potentially inconsistent cell manufacturing, dependence on third-party and limited-source supplies, competition, intellectual-property exposure, and the need for future financing. The filing reports no material legal proceedings. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting reported.
- After quarter-end, on November 8, 2023, TScan amended its Waltham lease, extending the term from September 2024 to October 2029, with one five-year renewal option.
Investor verification priorities
- Reconcile the stated cash runway: “into 2026” in MD&A versus “at least the next twelve months” in the financial-statement note; assess burn-rate assumptions and the loan cash covenant.
- Track clinical enrollment, safety and efficacy data for TSC-100/TSC-101 and the solid-tumor programs, plus timing and regulatory status of planned IND filings.
- Confirm Amgen research progress, revenue recognition and deferred-revenue release; treat milestone and royalty potential as contingent, not committed funding.
- Assess dilution from the 47.0 million pre-funded warrants, outstanding options and potential loan conversion, and whether the ATM is used.
- Monitor rising R&D and facility costs, manufacturing capacity and supply availability, and the financial impact of the extended lease.