Business context and reporting period
Tenax Therapeutics, Inc. filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2017. The specialty pharmaceutical company focused on critical-care therapies, with levosimendan as its lead candidate. The company reported no revenue for the periods presented.
Financial results and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Operating expenses | $1.31 million | $4.50 million | $7.82 million | $14.88 million |
| Net loss | $1.23 million | $4.27 million | $7.50 million | $14.28 million |
| Basic and diluted loss per share | $0.04 | $0.15 | $0.27 | $0.51 |
- At September 30, cash and cash equivalents were $1.76 million, and marketable securities totaled $9.09 million, for approximately $10.9 million in combined cash and investments. Total assets were $11.00 million.
- Current liabilities were $0.84 million; working capital was $7.82 million. The company reported no debt in the balance sheet presented.
- For the first nine months, operating cash outflow was $10.86 million, compared with $12.77 million in the prior-year period. Investing activities provided $2.63 million, versus $9.83 million.
- Stockholders’ equity was $10.16 million, down from $17.14 million at December 31, 2016; accumulated deficit was $212.16 million. Profit margins are not meaningful given the absence of reported revenue and continuing losses.
Material changes versus prior comparable periods
- Q3 net loss fell to $1.23 million from $4.27 million, principally as research and development expense declined following completion of the LEVO-CTS trial. Nine-month research and development expense decreased to $3.53 million from $10.61 million.
- General and administrative expense was broadly stable for the nine-month period ($4.30 million versus $4.27 million), although personnel expense rose, including stock-option vesting and former CEO severance costs.
- Cash and investments decreased from $23.87 million at December 31, 2016 to $10.86 million at September 30, 2017. Operating cash use remained substantial despite being lower year over year.
- The prior year included a $33.3 million impairment charge recorded in Q4 2016 for levosimendan in-process research and development and related goodwill; it was not a charge in the 2017 periods.
Outlook, commentary, risks and contingencies
- Management estimated existing resources would fund planned operations through Q4 2018. Additional substantial financing will be needed beyond that period and to continue development; availability and terms are uncertain. Equity financing could dilute shareholders, debt could impose interest and covenants, and partnering could require granting rights on unfavorable terms.
- LEVO-CTS did not meet either co-primary endpoint. Management noted statistically significant results on two of three secondary endpoints and no clinically significant increases in hypotension or arrhythmias. In July 2017, the FDA and Health Canada determined another trial was needed to support an NDA. The company was evaluating clinical, regulatory and financial options and did not anticipate further development for the cardiac-surgery indication based on the trial results.
- The board was conducting a strategic-alternatives review with financial-advisor assistance, including possible mergers, business combinations, or asset purchases, licenses or other acquisitions. No transaction was assured.
- Nasdaq granted an additional compliance period through March 12, 2018 to meet the $1.00 minimum bid-price requirement. The company said a reverse stock split could be used if necessary; failure to regain compliance could lead to delisting.
- The Orion levosimendan license includes contingent development milestones of $2 million upon U.S. approval and $1 million upon Canadian approval, plus commercialization milestones of up to $13 million and royalties. No development milestone had been met as of September 30, 2017.
- Management reported effective disclosure controls and no significant change in internal control over financial reporting. No material pending legal proceedings were reported.
Important facts for investors to verify
- Whether the company can execute a funded development plan after regulators required another trial, and the expected cost and timing of that trial.
- Cash burn, marketable-securities availability and whether the stated runway through Q4 2018 remains achievable.
- Progress and outcome of the strategic review, including any financing, partnership or transaction terms.
- Whether the stock price regained Nasdaq compliance by March 12, 2018, and whether a reverse split or delisting followed.
- Potential dilution from outstanding options and warrants and the contingent payments and royalties under the Orion license.