Business context and reporting period
Tenax Therapeutics is a clinical-stage specialty pharmaceutical company developing treatments for critical-care patients. This Form 10-Q covers the quarter and six months ended October 31, 2015 (fiscal 2016 second quarter), despite the request metadata identifying 2014 Q2. Its lead candidate, levosimendan, is being studied for low cardiac output syndrome (LCOS) in cardiac-surgery patients. The company reported no revenue.
Financial performance and position
- Quarter: Operating expenses and operating loss were $3.75 million, down from $4.14 million a year earlier. Net loss was $3.52 million, versus $4.05 million; basic and diluted loss per share was $0.13, versus $0.14.
- Six months: Operating expenses and operating loss were $6.86 million, compared with $6.56 million in the prior-year period. Net loss was $6.56 million, versus $6.23 million; loss per share was $0.23, versus $0.22.
- Cash flow: Operating cash use was $6.54 million for six months, versus $4.89 million. Investing activities provided $3.82 million, primarily reflecting net sales of marketable securities. Financing activities used $0.10 million.
- Liquidity: At October 31, cash and cash equivalents were $5.10 million and marketable securities totaled $35.76 million, or approximately $40.9 million combined. Working capital was $18.30 million.
- Debt and other obligations: No notes payable remained at quarter-end. Total liabilities were $11.52 million, including a $7.96 million deferred tax liability and $0.50 million warrant liability. Operating lease obligations totaled $0.62 million.
- Margins: The filing reports no revenue, so revenue-based margins are not meaningful.
Changes versus prior comparable periods
Quarterly net loss improved, principally as general and administrative expenses fell; research and development expense was broadly similar. For the six-month period, net loss widened as higher levosimendan trial and consulting costs more than offset lower general and administrative expenses and interest expense. Operating cash use also increased, primarily due to the Phase III trial. The company had suspended Oxycyte development, and related spending fell substantially.
Outlook, commentary, and risks
- Management expected available cash and investments to fund operations through calendar 2017, assuming no accelerated development or unexpected costs. It warned that additional capital will likely be needed for commercialization and further development, and may be unavailable on favorable terms or at all.
- As of December 8, 2015, 72 U.S. and Canadian sites were active and 295 of 760 planned patients had been enrolled in the Phase III LCOS trial. Enrollment was expected to continue through the second half of calendar 2016. The filing also reported 506 of 516 planned patients enrolled in the LeoPARDS Phase II-B trial, conducted by Imperial College London.
- Levosimendan has FDA Fast Track status for LCOS, and the FDA agreed to the Phase III protocol under a Special Protocol Assessment. Approval is not assured; development, enrollment, regulatory, manufacturing, and commercialization risks remain.
- The Orion license provides U.S. and Canadian rights to levosimendan. Potential obligations include $2 million upon U.S. approval, $1 million upon Canadian approval, up to $13 million in sales-based milestones, and royalties. No development milestone had been met by October 31, 2015.
- Oxycyte’s Phase II-B traumatic-brain-injury trial had been stopped; the company cautioned that strategic alternatives for the program were uncertain. There were no material pending legal proceedings, and management said risk factors had not materially changed from its latest annual report.
- Other notable items: no goodwill impairment was recorded; a prior-year impairment of PFC-related intellectual property reduced comparative amortization. Management concluded disclosure controls were effective and reported no significant change in internal control over financial reporting.
Key facts for investors to verify
- Current LCOS trial enrollment, completion timing, results, and regulatory path.
- Whether the stated cash runway through 2017 remains realistic against trial costs and other commitments.
- Availability and potential dilution or restrictions from future financing, and the terms of any partnering arrangements.
- Potential Orion milestone and royalty obligations if levosimendan advances or reaches commercialization.
- The status and recoverability of the $22 million levosimendan in-process research and development asset, and the company’s plans for Oxycyte.