Tenax Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Financial statements are unaudited. Tenax is a clinical-stage specialty pharmaceutical company developing levosimendan for pulmonary hypertension and imatinib for pulmonary arterial hypertension (PAH). No revenue is reported in the statements.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Operating expenses | $3.80 million | $2.23 million | $29.52 million | $7.03 million |
| Net loss | $3.80 million | $2.22 million | $29.26 million | $7.02 million |
| Net loss per share, basic and diluted | $(0.15) | $(0.18) | $(1.54) | $(0.73) |
- Cash and cash equivalents: $8.35 million at September 30, 2021, up from $6.25 million at December 31, 2020. Working capital was $7.12 million, versus $4.68 million at year-end.
- Cash flows, nine months: $8.09 million used in operations, $0.45 million provided by investing activities, and $9.74 million provided by financing activities. Cash increased by $2.10 million.
- Debt and other liabilities: No note payable remained at September 30; the $244,657 Paycheck Protection Program loan and $2,576 interest were forgiven in May and recorded as other income. Total liabilities were $1.67 million, including $315,888 of operating lease liabilities.
- Margins: Not meaningful because the filing reports no revenue.
Material changes versus prior periods
- Nine-month net loss increased to $29.26 million from $7.02 million. The principal driver was a $21.73 million in-process research and development charge related to the January acquisition of PHPrecisionMed (PHPM); the acquired asset was expensed because it had no alternative future use at acquisition.
- Quarterly general and administrative expense rose to $2.64 million from $1.17 million, mainly due to personnel and transition costs, including approximately $930,000 in severance costs and approximately $266,000 in noncash compensation related to the former CEO.
- Quarterly research and development expense was $1.16 million, compared with $1.05 million. Nine-month R&D expense was $24.23 million, compared with $3.67 million, largely reflecting the PHPM acquisition charge; clinical and preclinical development costs excluding that charge declined.
- The July 2021 private placement generated approximately $9.2 million net proceeds. The company issued pre-funded warrants and warrants underlying a combined 9,546,538 shares. Common shares outstanding rose to 25,201,312 from 12,619,369 at December 31, 2020; 10,033,274 pre-funded warrants and 20,928,767 warrants were outstanding at quarter-end.
Outlook, commentary, and risks
- Management said available resources were expected to fund planned operations only through the second quarter of 2022. The company needs substantial additional capital to complete planned trials and pursue regulatory approvals, and there is no assurance financing will be available on acceptable terms.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern for at least one year from issuance of the financial statements. Management may need to reduce or delay development if additional funding cannot be obtained; equity financing could dilute shareholders, while debt or licensing arrangements could impose restrictions or require relinquishing rights.
- For levosimendan, the Phase 2 HELP study’s primary exercise PCWP endpoint was not statistically significant. Secondary analyses showed statistically significant PCWP reductions across combined measurement conditions and a 29-meter improvement in six-minute walk distance versus placebo. Management reported similar adverse-event rates between groups. The FDA had agreed that one or two Phase 3 designs could support effectiveness, but noted that the required safety database may depend on final trial design. The company was evaluating oral dosing and had not reported starting a Phase 3 trial.
- For imatinib, the company planned a Phase 3 study using a modified-release formulation. The company reported prior FDA alignment on a single Phase 3 trial with six-minute walk distance as the primary endpoint and on the 505(b)(2) pathway. Trial initiation was not reported in this filing.
- COVID-19 could hinder trial recruitment, site operations, and timelines. The levosimendan license with Orion includes contingent regulatory milestones of $3 million in total, commercial milestones of up to $13 million, and tiered royalties; no development milestones had been met by September 30, 2021.
- Subsequent event: CFO Michael Jebsen agreed to separate effective October 29, 2021. Subject to a release, severance was expected to total approximately $513,000, with up to 12 months of COBRA reimbursement; he also agreed to provide advisory services for up to six months.
- Management reported disclosure controls were effective as of September 30, 2021 and no material change in internal control over financial reporting during the quarter. No material pending legal proceedings were disclosed.
Important facts for investors to verify
- Whether the company secured financing sufficient to fund operations beyond the stated Q2 2022 runway, and the terms and dilution from any financing.
- Current status, timing, design, funding, and regulatory requirements for the levosimendan and imatinib Phase 3 programs, including safety-database requirements.
- Outstanding common shares, pre-funded warrants, options, and warrants, and the potential dilution from their exercise or conversion.
- PHPM acquisition accounting and progress of the acquired imatinib program, alongside the material acquisition-related expense.
- Potential Orion license milestones, royalties, and the implications if U.S. regulatory approval is not obtained by September 20, 2028.