Tenax Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Tenax is a clinical-stage biotechnology company developing imatinib for pulmonary arterial hypertension (PAH) and levosimendan for pulmonary hypertension associated with heart failure with preserved ejection fraction. The company reported no revenue.
Financial performance and position
- Q3 net loss: $2.92 million, compared with $3.80 million in Q3 2021; loss per share was $0.11 versus $0.15.
- Nine-month net loss: $8.50 million, compared with $29.26 million in 2021; loss per share was $0.33 versus $1.54. The prior-year comparison included $21.7 million of acquired in-process R&D expense related to the PHPrecisionMed acquisition.
- Operating expenses: Q3 expenses were $2.92 million versus $3.80 million. Nine-month expenses were $8.50 million versus $29.52 million. Nine-month G&A declined to $4.26 million from $5.28 million; R&D was $4.24 million versus $24.23 million, largely reflecting the prior-year acquisition charge. Q3 R&D rose to $1.54 million from $1.16 million, while G&A fell to $1.38 million from $2.64 million.
- Cash flow: Operating cash use was $9.70 million for the first nine months, versus $8.09 million in 2021. Financing provided $7.93 million, principally from the May 2022 private placement. Cash declined by $1.78 million over the period.
- Liquidity and balance sheet: Cash and cash equivalents were $3.81 million at September 30, versus $5.58 million at year-end 2021. Working capital was $3.82 million; total assets were $4.74 million, total liabilities $0.79 million, and stockholders’ equity $3.95 million. The company had no material outstanding borrowing: its $364,546 insurance-premium note was paid in full. Lease liabilities totaled $211,590.
- Margins and debt: Margins are not applicable because the company reported no revenue. The filing reports no material funded debt outstanding at quarter-end.
Material changes and outlook
- In September 2022, Tenax shifted its primary focus to evaluating strategic alternatives, including a sale, merger, or other transaction. It engaged Roth Capital Partners to assist. The company gave no assurance that the review would produce a transaction and set no timetable for updates.
- The anticipated start of the imatinib Phase 3 PAH trial was moved from the second half of 2022 into 2023, pending the strategic review. Clinical programs were delayed and management cut expenses, including reducing nonessential spending and relocating to shared office space; most employees work remotely.
- Management estimated that September 30 resources would fund planned operations through the first quarter of 2023. Substantial additional funding would be required thereafter. The filing states that substantial doubt exists about the company’s ability to continue as a going concern.
- Management is pursuing strategic options and seeking equity, debt, collaboration, or licensing funding. These may not be available or favorable; equity financing could dilute stockholders, while debt could add interest and restrictive covenants. If funding or a transaction is unavailable, programs may be curtailed and the board could consider dissolution and liquidation.
- After quarter-end, 14,716,032 shares were issued upon exercise of pre-funded warrants at $0.0001 per share. The filing reports 44,696,215 common shares outstanding as of November 7, 2022.
Risks, contingencies, and other disclosures
- The company’s accumulated deficit was $287.0 million, and it expects continuing operating losses. Completion, timing, cost, and success of clinical development and regulatory approval remain uncertain.
- At September 30, 31.5 million warrants and 15.9 million pre-funded warrants were outstanding, in addition to options and other potential share issuances, creating potential dilution. The May 2022 financing also amended certain existing warrants, including reducing some exercise prices.
- No material legal proceedings were reported. No levosimendan license development milestones had been met, and no related contingent payment liability was recorded.
- Management concluded disclosure controls were effective as of September 30, 2022; no material changes in internal control over financial reporting were reported during the quarter.
Investor verification priorities
- Confirm the status and terms of any strategic transaction, financing, or decision to liquidate, and whether cash runway differs from management’s estimate through Q1 2023.
- Verify the post-quarter share count and remaining pre-funded warrants, warrants, and other potential dilution after the November exercises.
- Track the revised timing and funding plan for the imatinib Phase 3 program and the status of levosimendan development.
- Review the full filing and subsequent disclosures for changes to going-concern assumptions, lease and other commitments, and any new financing or transaction terms.