Genprex, Inc. Form 10-Q Summary
Business Context and Reporting Period
Genprex is a clinical-stage gene therapy company developing REQORSA Immunogene Therapy for cancer and a preclinical gene therapy for Type 1 and Type 2 diabetes. The report covers the three months ended March 31, 2022, and was filed May 13, 2022. The financial statements are unaudited.
- REQORSA is being evaluated in Phase 1/2 Acclaim-1 and Acclaim-2 trials for advanced non-small cell lung cancer.
- The first Acclaim-1 patient was dosed in February 2022; the first Acclaim-2 patient was dosed in April 2022.
- The FDA granted Fast Track Designation for both targeted trial populations.
- The diabetes program remained in preclinical studies at the University of Pittsburgh.
Financial Performance, Liquidity, and Capital Structure
| Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.86 million | $2.17 million |
| General and administrative expense | $3.86 million | $4.32 million |
| Total operating expenses | $5.72 million | $6.49 million |
| Net loss | $5.72 million | $6.49 million |
| Net loss per share | $0.12 | $0.14 |
| Net cash used in operating activities | $4.08 million | $5.47 million |
| Cash and cash equivalents at period end | $34.56 million | $47.07 million |
- Gross profit and operating margins are not meaningful because the company had no revenue.
- Cash and cash equivalents declined from $38.63 million at December 31, 2021, to $34.56 million at March 31, 2022.
- Total assets were $39.41 million and stockholders’ equity was $37.02 million at March 31, 2022.
- Current liabilities were $2.38 million, compared with current assets of $35.70 million.
- No debt is reported on the March 31, 2022 balance sheet.
- Research and development supplies totaled $3.01 million, and intellectual property totaled $644,201, net.
- Share-based compensation was approximately $1.5 million during the quarter, with approximately $10.6 million of unrecognized compensation cost remaining.
Material Changes Versus the Prior Comparable Period
- R&D expense decreased $308,306, or 14%, primarily because the first quarter of 2021 included greater manufacturing-program expenditures supporting the clinical trials.
- G&A expense decreased $460,514, or 11%. The prior-year period included a one-time $1.75 million finance fee related to a registered direct offering, partly offset in 2022 by higher share-based compensation, personnel costs, insurance, and headcount.
- Net loss decreased $767,229, or 12%, primarily because of the prior-year finance fee.
- Cash used in operating activities decreased $1.38 million, or 25%.
- No shares were sold for cash during the first quarter of 2022. The first quarter of 2021 included $25.32 million of financing cash inflows from equity issuance.
- Common shares outstanding increased modestly to 47,879,708 at March 31, 2022, from 47,874,708 at December 31, 2021, primarily from shares issued for services.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management estimated that existing cash would fund current operations and planned clinical trial activities into 2024, subject to assumptions that may prove incorrect.
- The company expects to complete the Phase 1 portion of Acclaim-1 by year-end 2022 and Acclaim-2 by the end of the first quarter of 2023.
- Genprex has never generated product revenue, has incurred recurring losses since inception, and expects significant additional spending on clinical development.
- Management states that additional capital will be required and may be obtained through equity offerings, debt financings, or strategic collaborations. Failure to obtain funding could delay, reduce, or terminate development programs or operations.
- Clinical-site activation has been delayed by protocol-review backlogs, workforce shortages, and continuing effects of the COVID-19 pandemic.
- The company disclosed a going-concern risk arising from recurring losses, lack of revenue, negative operating cash flow, and dependence on future financing.
- Cash concentration risk exists because $34.18 million of cash and cash equivalents exceeded FDIC insurance limits at March 31, 2022.
- Disclosure controls and procedures were deemed ineffective because of a material weakness in internal control over financial reporting related to insufficient segregation of duties. Remediation efforts, including new accounting software, additional review procedures, a Disclosure Committee, and additional staffing, were in progress but not yet demonstrated to be effective.
- The company reported no material legal proceedings or contingencies known to management. It has licensing obligations that include milestone payments, maintenance fees, royalties, patent costs, and a contingent NIH payment of $340,000 upon regulatory approval.
- Subsequent events included a May 2022 cashless warrant exercise resulting in 13,643 common shares issued and cancellation of the remaining warrant balance of 10,291 shares.
Important Facts for Investors to Verify
- Whether the cash runway through 2024 remains achievable as enrollment and clinical-site activity accelerate.
- Progress, enrollment, safety data, and milestone timing for Acclaim-1 and Acclaim-2.
- The company’s ability to raise additional capital without substantial dilution or unfavorable terms.
- Whether the disclosed internal-control material weakness is remediated and operating effectively.
- The potential financial impact of license milestones, royalties, patent obligations, and future manufacturing and clinical-trial costs.
- Clinical and regulatory risks associated with REQORSA and the preclinical diabetes program, including the possibility that no product candidate receives approval or generates revenue.