Tenax Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Tenax is a clinical-stage biotechnology company developing levosimendan for pulmonary hypertension and imatinib for pulmonary arterial hypertension. The filing reports no product revenue.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / prior year-end |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $1.54 million | $2.72 million |
| Net loss | $1.41 million | $2.72 million |
| Net loss per share | $0.15 | $2.16 |
| Cash used in operating activities | $1.72 million | $2.94 million |
| Cash and cash equivalents | $14.41 million | $2.12 million at Dec. 31, 2022 |
| Working capital | $14.28 million | $1.36 million at Dec. 31, 2022 |
| Total liabilities | $0.99 million | $1.91 million at Dec. 31, 2022 |
With no reported revenue, gross margin and operating margin are not meaningful. The company had a $513,906 current note payable at March 31, 2023, bearing 7.39% interest. It reported no long-term liabilities at quarter-end. Cash increased primarily from financing, not operations.
Changes and notable items
- Operating expenses declined 43% year over year. Research and development fell 77% to $265,735, primarily because imatinib clinical and formulation development activities were paused during the strategic review. General and administrative expense decreased 17% to $1.27 million, chiefly reflecting lower legal and professional fees.
- In February, Tenax completed a registered offering of common stock, pre-funded warrants and warrants. It reported approximately $15.6 million in gross proceeds; disclosures give differing approximate net-proceeds figures ($13.6 million to $13.9 million). The cash-flow statement separately reports $13.90 million of proceeds and $282,647 of offering costs.
- Common shares outstanding increased from 2.29 million at Dec. 31, 2022 to 21.78 million at March 31, 2023. The increase reflects the offering and warrant exercises, including cashless exercises. A 1-for-20 reverse stock split took effect January 4, 2023; the filing presents share data adjusted for the split.
- Other income, net, was $140,055, including license fees and interest income, partly offset by a loss associated with terminating the headquarters lease. Tenax paid $169,867 to terminate the lease and reported no remaining obligations under it.
Outlook, risks and contingencies
- Management said March 31 resources were expected to fund planned operations through the first quarter of 2024. Substantial additional financing will be needed thereafter; the filing states that substantial doubt exists about the company’s ability to continue as a going concern.
- Tenax has prioritized levosimendan over imatinib and planned to commence a levosimendan Phase 3 study in 2023. The timing of a Phase 3 imatinib study is likely outside 2023 and depends on fundraising and other strategic considerations. The company was concluding an open-label extension of its levosimendan HELP study.
- Management is exploring strategic options, including financing, a sale, merger, licensing or co-development, but gives no assurance that any transaction or financing will be completed. Failure to obtain funding could force reduced research and development or delayed or discontinued trials; equity financing could further dilute shareholders.
- A U.S. patent covering intravenous levosimendan use in PH-HFpEF was issued in March 2023. The company said two additional patents were pending, with further decisions expected in 2023.
- The company reported no material pending litigation and no material change in its previously disclosed risk factors. No levosimendan license milestone payments had been triggered as of quarter-end. Disclosure controls were reported effective, with no material quarterly change in internal control over financial reporting.
Key facts for investors to verify
- Available cash, operating burn and the assumptions supporting the stated runway through Q1 2024, particularly given the going-concern warning.
- The offering’s exact net proceeds, warrant terms and potential dilution from outstanding warrants and other securities.
- Whether the planned 2023 levosimendan Phase 3 study begins, and its funding, design and expected cost; also confirm the status of imatinib development.
- The components and accounting for the $140,055 of other income and the lease termination, and the status of license income and contingent payments.