Tenax Therapeutics, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. The company is a clinical-stage specialty pharmaceutical developer; its lead candidate is levosimendan, licensed for development and commercialization in the United States and Canada. The financial statements are unaudited. Share and per-share amounts reflect the 1-for-20 reverse stock split effective February 23, 2018.
Financial performance and position
- Revenue and margins: The statements report no revenue for the quarter; the filing does not present gross profit or margins.
- Operating results: Operating expenses were $1.223 million, down from $3.499 million in Q1 2017. Net loss was $1.180 million, compared with $3.276 million; net loss per share was $0.83 versus $2.33. There is no positive operating profit.
- Expense drivers: Research and development fell to $58,588 from $2.051 million, primarily because the Phase 3 LEVO-CTS trial had been completed in 2017. General and administrative expense decreased to $1.164 million from $1.447 million.
- Cash flow: Cash used in operating activities was $1.558 million, compared with $4.037 million in Q1 2017. Investing activities provided $2.947 million, mainly from sales of marketable securities. Cash and cash equivalents increased by $1.388 million to $2.993 million.
- Liquidity: Cash and marketable securities totaled approximately $7.917 million at March 31, 2018. Working capital was $6.682 million, versus $7.054 million at December 31, 2017. Total assets were $8.312 million and stockholders’ equity was $8.001 million.
- Debt and liabilities: The balance sheet reports no funded debt. Total liabilities were $311,039, comprising accounts payable, accrued liabilities, and warrant liabilities.
- Other income: Other income was $43,060, down from $223,301 in Q1 2017, reflecting a smaller gain from revaluing Series C warrants and lower interest earned on investments.
Changes versus the prior comparable period
- Net loss and operating cash use were lower than in Q1 2017, largely following completion of the Phase 3 LEVO-CTS trial and reduced related clinical, consulting, and accrued costs.
- Cash and cash equivalents rose from $1.605 million at year-end 2017, while total marketable securities declined from $7.932 million to $4.924 million, in part reflecting securities sold during the quarter.
- Stockholders’ equity declined from $8.882 million at December 31, 2017 to $8.001 million at March 31, 2018.
Outlook, risks, and notable items
- Management expects available resources to fund planned operations through the first quarter of calendar 2019. It will need substantial additional financing beyond that period; management’s going-concern assessment states that substantial doubt exists about the company’s ability to continue as a going concern.
- The company expects continuing losses and development spending. It may seek equity or debt financing, collaborations, or licensing arrangements; funding may not be available on acceptable terms. Equity financing could dilute shareholders, debt could bring restrictive covenants, and partnerships could require giving up product or technology rights. Without funding, the company may delay or reduce development and other spending.
- The company plans to begin enrollment in a Phase 2 trial of levosimendan for pulmonary hypertension associated with heart failure with preserved ejection fraction (PH-HFpEF) in the second half of 2018. Management said the FDA agreed with the planned Phase 2 design, entry criteria, and endpoints, and indicated that a limited Phase 3 program could be discussed after Phase 2. These are development plans, not approvals or demonstrated efficacy in PH-HFpEF.
- The levosimendan license includes contingent development payments of $2 million upon U.S. FDA approval and $1 million upon Canadian approval, plus commercialization milestones of up to $13 million and royalties. No development milestones had been met or related contingent liability recorded as of March 31, 2018.
- The company completed a 1-for-20 reverse stock split in February. It repurchased 8,866 shares during March to satisfy tax-withholding obligations; these were not purchases under a public repurchase plan. The warrant liability is valued using a Level 3 model and unobservable assumptions.
- Management reported effective disclosure controls, no significant changes in internal control, no material pending legal proceedings, and no material change in previously disclosed risk factors. The filing identifies Nasdaq listing compliance as a risk if requirements are not maintained.
Important facts for investors to verify
- Whether cash, marketable securities, and financing plans support operations beyond the stated Q1 2019 runway.
- Whether the planned PH-HFpEF Phase 2 trial starts on schedule, enrolls successfully, and produces results that support further development.
- The terms and availability of any new financing or partnering arrangements, including potential dilution, debt restrictions, or surrendered rights.
- Whether the FDA’s comments and potential limited Phase 3 pathway are confirmed through subsequent regulatory discussions and trial outcomes.
- Future operating cash burn, clinical-development costs, warrant-liability valuation changes, and continued Nasdaq listing compliance.