TScan Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. TScan is a clinical-stage biotechnology company developing T cell receptor-engineered T cell (TCR-T) therapies for cancer. It has no approved products and has generated no product-sales revenue.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Collaboration and license revenue | $6.8 million | $3.0 million |
| Research and development expense | $21.8 million | $14.7 million |
| General and administrative expense | $7.8 million | $4.5 million |
| Total operating expenses | $29.5 million | $19.2 million |
| Operating loss | $22.7 million | $16.2 million |
| Net loss | $22.6 million | $16.2 million |
| Basic and diluted loss per share | $0.93 | $0.67 |
| Cash used in operating activities | $23.6 million | $20.1 million |
Revenue was collaboration-based; the filing reports no product-sales revenue. Gross margin is not presented. At March 31, 2023, cash and cash equivalents were $95.6 million, plus $5.0 million of restricted cash. Current assets were $100.9 million and current liabilities $14.0 million. Long-term debt and accrued interest were $29.5 million; stockholders’ equity was $78.0 million. Cash, cash equivalents and restricted cash declined $24.4 million during the quarter.
Changes versus the prior comparable period
- Revenue increased $3.8 million, mainly because TScan recognized remaining revenue under its Novartis collaboration, which concluded in March 2023. No deferred revenue remained under that agreement at quarter-end.
- Operating expenses rose $10.4 million. R&D increased $7.1 million, reflecting facility and equipment expansion, higher personnel costs, and clinical-trial start-up and enrollment activity. G&A increased $3.3 million, primarily from personnel and facility-related costs.
- Net loss increased $6.4 million. Interest expense of $1.0 million arose from the K2 HealthVentures loan; higher interest and other income partly offset the larger operating loss.
- Operating cash use increased $3.5 million, with recognition of Novartis revenue contributing to a $3.9 million reduction in deferred revenue.
Outlook, commentary and risks
- Management expects continued significant losses and higher expenses as research, clinical development and manufacturing activities advance. The company expects no product revenue unless and until a candidate is developed, approved and commercialized.
- The financial statements state that March 31 cash and cash equivalents were expected to fund operations for at least 12 months from issuance. Management’s broader outlook, which includes the subsequent Amgen upfront payment, projected funding into the third quarter of 2024; this estimate depends on assumptions and could prove inaccurate.
- On May 8, 2023, after quarter-end, TScan entered an Amgen collaboration to identify targets associated with Crohn’s disease. Amgen is to pay $30 million upfront; TScan may also earn more than $500 million in success-based milestones and tiered single-digit royalties, subject to agreement terms. Amgen retains global development and commercialization rights and has an option to expand the work to ulcerative colitis.
- The K2 HealthVentures facility funded $30 million of a possible $60 million. A further $10 million tranche is conditional on specified milestones; a $20 million third tranche requires mutual agreement. The funded debt bears interest, matures September 1, 2026, and is secured by substantially all assets other than intellectual property. The agreement includes operating restrictions and a minimum unrestricted-cash covenant.
- Key business risks include clinical and regulatory uncertainty, patient enrollment, manufacturing scale-up and quality, reliance on third parties and limited-source materials, financing needs, competition, intellectual-property protection, and potential TCR-T safety issues. Management reported no material legal proceedings and concluded disclosure controls were effective.
Most important facts for investors to verify
- Whether the Amgen $30 million upfront payment was received and when, and how it affects the cash runway estimate; distinguish the upfront payment from contingent milestones and royalties.
- Current cash, quarterly cash burn and management’s assumptions behind the projected runway into Q3 2024.
- Progress and clinical updates for TSC-100/TSC-101 and the cleared T-Plex and TSC-204 INDs, including enrollment, safety and trial timelines.
- Availability and covenant conditions for additional K2 HealthVentures borrowing, along with interest, repayment and potential dilution from conversion.
- Whether expense growth, manufacturing expansion and the end of Novartis collaboration revenue change future funding needs or the pace of development.