TScan Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 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 | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Collaboration and license revenue | $3.1 million | $4.1 million | $10.0 million | $7.1 million |
| Research and development expense | $21.2 million | $14.5 million | $43.0 million | $29.2 million |
| General and administrative expense | $6.5 million | $4.8 million | $14.3 million | $9.3 million |
| Operating loss | $(24.6) million | $(15.2) million | $(47.4) million | $(31.4) million |
| Net loss | $(24.0) million | $(15.1) million | $(46.6) million | $(31.3) million |
| Basic and diluted loss per share | $(0.51) | $(0.63) | $(1.30) | $(1.30) |
| Operating cash used | — | $(45.6) million | $(33.5) million |
At June 30, cash and cash equivalents were $208.8 million and restricted cash was $5.0 million. Accounts receivable was $31.9 million; total current assets were $242.2 million and current liabilities were $35.1 million. Total liabilities were $126.3 million, including $29.7 million of long-term debt and accrued interest and $26.9 million of deferred revenue. Accumulated deficit was $205.0 million. The filing does not provide a gross margin; product-sales margins are not applicable because there are no product sales.
Material changes and financing
- Q2 revenue fell $0.9 million year over year as the prior Novartis collaboration had concluded and the Amgen collaboration began in May. First-half revenue increased $2.9 million, reflecting recognition of remaining Novartis revenue and revenue from Amgen.
- Operating expenses rose $8.5 million in Q2 and $18.8 million in the first half. R&D growth reflected clinical-trial start-up and enrollment, expanded facilities and equipment, and additional personnel; G&A growth included higher legal and professional fees.
- On June 1, the company completed an offering of 23.3 million voting shares and pre-funded warrants for up to 47.0 million shares, raising approximately $134.7 million net. No pre-funded warrants had been exercised by June 30; nevertheless, the filing includes the warrant shares in the loss-per-share denominator. The offering materially expanded potential share dilution.
- Six-month financing cash flow was $135.7 million, largely from the offering. Operating cash use increased year over year, partly offset by $23.0 million of deferred-revenue growth; the Amgen payment was still receivable at quarter-end and was collected in July.
Business outlook, commentary and risks
- Management said cash and cash equivalents at June 30, together with the $30 million Amgen upfront payment received in July, were expected to fund planned operations and capital needs into 2026. The financial-statement note separately says June 30 cash was expected to fund operations for at least 12 months from issuance of the statements. Both estimates depend on assumptions and spending plans; the company expects continuing losses and says it will need substantial additional capital to complete development and commercialization.
- The Amgen agreement covers research to identify Crohn’s disease antigens. Amgen retains global development and commercialization rights and has an option to expand the work to ulcerative colitis. TScan received $30 million upfront in July and may earn more than $500 million in success-based milestones plus tiered single-digit royalties; milestones and royalties were excluded from the reported transaction price because they were constrained.
- TSC-100 and TSC-101 are in a multi-arm Phase 1 study. FDA-cleared INDs for T-Plex, TSC-204-A0201, TSC-204-C0702 and TSC-200-A0201 allow study start-up activities; management planned additional solid-tumor IND submissions in the second half of 2023. These are development plans, not evidence of clinical efficacy.
- The company carries $30 million principal under its K2 HealthVentures loan, bearing interest at a rate subject to a 9.90% cap, with a September 2026 maturity. The agreement includes covenants, a minimum-cash requirement, and security over substantially all assets other than intellectual property; default could accelerate repayment. Further tranches are conditional or uncommitted.
- Key risks include early-stage clinical and regulatory uncertainty, patient enrollment and safety, complex cell-therapy manufacturing and scale-up, dependence on third-party suppliers (including single-source materials), financing needs and potential dilution, and intellectual-property protection. The company reported no material legal proceedings and said disclosure controls were effective as of June 30, 2023.
Most important facts for investors to verify
- Whether clinical trials enroll and progress as planned, and whether safety and efficacy results support further development.
- Whether TScan can maintain its stated runway into 2026 as clinical, manufacturing and facility spending increases.
- How Amgen revenue recognition, collection, collaboration performance, and any future milestones or royalties develop.
- The potential dilution from the 47.0 million pre-funded warrants, outstanding options and any further equity or debt financing.
- Compliance with K2 HealthVentures loan covenants and the availability of any conditional additional borrowing.