Tenax Therapeutics, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Tenax is a development-stage specialty pharmaceutical company focused on cardiovascular and pulmonary diseases. Its lead candidate, levosimendan, is being studied for pulmonary hypertension associated with heart failure with preserved ejection fraction (PH-HFpEF). The company reported no revenue.
Financial performance and liquidity
| Metric | Q2 2020 / June 30, 2020 | Comparable period / prior year-end |
|---|---|---|
| Operating expenses | $2.14 million | $1.82 million in Q2 2019 |
| Net loss | $2.15 million; $0.23 per share | $1.76 million; $0.28 per share in Q2 2019 |
| Cash used in operations | $2.2 million in Q2; $4.90 million for first half | $1.9 million in Q2 2019; $4.05 million for first half 2019 |
| Cash and marketable securities | Approximately $4.56 million | $5.40 million at December 31, 2019 |
| Working capital | $3.03 million | $3.65 million at December 31, 2019 |
| Total liabilities | $2.32 million, including PPP debt | $2.59 million at December 31, 2019 |
| Stockholders’ equity | $3.03 million | $3.77 million at December 31, 2019 |
Research and development expense increased 96% year over year in Q2 to $1.27 million, primarily reflecting higher HELP Study clinical research and patient costs. General and administrative expense declined to $869,000 from $1.17 million, largely because of reimbursement of arbitration costs and lower investor-relations expense. No revenue or meaningful operating margin was reported.
Material changes and financing
- For the first half, net loss increased to $4.80 million from $3.38 million in 2019, mainly as HELP Study development spending rose. Net cash used in operations also increased.
- First-half financing provided $4.07 million, including approximately $2.13 million net proceeds from a March equity and pre-funded warrant offering, $1.69 million from warrant exercises, and a $244,657 Paycheck Protection Program (PPP) loan.
- After quarter-end, a July 2020 offering generated approximately $8.0 million gross and $6.5 million net proceeds. The company said it expected available resources, including those proceeds, to fund planned operations through Q3 2021. Additional financing will be needed thereafter; there is no assurance it will be available.
- Common shares outstanding were 10.10 million at June 30 and 12.62 million as of August 11. The July financing also included substantial pre-funded and common-stock warrants, creating potential further dilution.
Clinical progress, outlook, risks, and unusual items
- Enrollment in the 36-patient Phase 2 HELP Study was completed in March 2020. Preliminary results announced June 2 showed the primary endpoint—exercise PCWP—did not achieve a statistically significant reduction. Combined measurements at rest, with legs raised, and during exercise showed statistically significant PCWP reductions versus baseline and placebo. Six-minute walk distance improved by 29 meters versus placebo, a statistically significant secondary result. The company reported similar adverse-event rates between groups and no observed arrhythmias; full results were to be presented and submitted for publication.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing its accumulated deficit of approximately $241 million, operating cash use, and need for further funding. The financial statements include no adjustments that might be required if the company cannot continue as a going concern.
- COVID-19 could disrupt trial sites, patient recruitment, CRO and manufacturing operations, or regulatory review, potentially delaying trials and results.
- The PPP loan bears 1% interest, has a two-year term, and may qualify for forgiveness based on eligible uses; forgiveness is not assured. The company also warned of potential eligibility challenges, repayment, penalties, or investigations. The filing reports different current-portion figures in separate sections: $107,606 on the balance sheet and $108,012 in MD&A.
- An arbitration over the levosimendan license was decided in Tenax’s favor on May 21, 2020. The tribunal found oral levosimendan covered as a line extension and ordered Orion to reimburse approximately $358,000 of direct arbitration costs, including legal fees.
- Tenax reported regaining Nasdaq’s $1.00 minimum-bid-price compliance in June 2020. It also disclosed Armistice Capital’s significant potential influence, including warrants and pre-funded warrants that could represent substantial ownership if exercised, subject to beneficial-ownership limits.
Key facts for investors to verify
- Full HELP Study results, especially the missed primary endpoint, secondary endpoint findings, and implications for further trials and regulatory discussions.
- Cash burn, the stated Q3 2021 runway assumption, and the timing and terms of any additional financing.
- Potential dilution from outstanding and newly issued warrants, and Armistice’s ownership and governance influence.
- PPP loan forgiveness and eligibility status, including reconciliation of the two reported current-liability amounts.
- Whether COVID-19, trial execution, or Nasdaq listing requirements materially affect development plans or financing access.