Genprex, Inc. 2021 Q3 Form 10-Q Summary
Business Context and Reporting Period
Genprex is a clinical-stage gene therapy company developing REQORSA (GPX-001) for non-small cell lung cancer and GPX-002 for Type 1 and Type 2 diabetes. The report covers the three and nine months ended September 30, 2021, and was filed November 15, 2021.
REQORSA is being evaluated in the Acclaim-1 trial with Tagrisso and the planned Acclaim-2 trial with Keytruda. Acclaim-1 was open for enrollment but had not enrolled its first patient as of September 30, 2021. The diabetes program remained preclinical.
Financial Results and Key Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | $0 in 2021 and 2020 | $0 in 2021 and 2020 |
| Research and development expense | $1.4 million vs. $1.4 million | $5.1 million vs. $5.0 million |
| General and administrative expense | $2.0 million vs. $1.4 million | $8.8 million vs. $7.7 million |
| Total operating expenses | $3.4 million vs. $2.8 million | $13.9 million vs. $12.7 million |
| Net loss | $3.4 million, or $0.07 per share | $13.9 million, or $0.30 per share |
| Net loss, prior comparable period | $2.8 million, or $0.07 per share | $12.7 million, or $0.37 per share |
Gross margin and EBITDA are not meaningful because the company has no product revenue. The company has incurred losses since inception and reported an accumulated deficit of $72.3 million at September 30, 2021.
- Cash and cash equivalents were $42.0 million at September 30, 2021, compared with $27.3 million at December 31, 2020.
- Total assets were $46.3 million; current liabilities were $1.2 million and stockholders’ equity was $45.2 million.
- The filing does not report outstanding debt at September 30, 2021.
- Research and development supplies were $2.9 million, compared with $3.0 million at December 31, 2020.
- Net cash used in operating activities was $11.1 million for the first nine months of 2021, compared with $10.0 million in 2020.
- Net cash provided by financing activities was $25.7 million, primarily from common-stock issuances, compared with $29.1 million in 2020.
- Net cash provided by investing activities was $89,781, resulting in a $14.7 million net increase in cash during the first nine months.
Material Changes Versus the Prior Comparable Period
- Third-quarter net loss increased by $0.7 million, or approximately 24%, primarily because of higher general and administrative expenses.
- Nine-month net loss increased by $1.2 million, or approximately 9%.
- Third-quarter R&D expense increased 6% to $1.4 million. Nine-month R&D expense increased 3% to $5.1 million, reflecting higher headcount, manufacturing and testing costs, CRO usage, and preparation for the Acclaim-1 and Acclaim-2 trials.
- Third-quarter G&A expense increased 41% to $2.0 million. Nine-month G&A expense increased 13% to $8.8 million due to higher headcount, professional fees, insurance, employee compensation, and equity-based compensation.
- The company raised approximately $23.2 million of net proceeds through a registered direct offering of 4.0 million shares and received approximately $0.7 million from option exercises during the first nine months.
- Shares outstanding increased to 47.8 million at September 30, 2021, from 43.1 million at December 31, 2020, creating dilution for existing holders.
Guidance, Outlook, Risks, and Unusual Items
- Management estimated that existing cash and cash equivalents could fund current operations and planned clinical activities into 2024, subject to assumptions that may prove incorrect.
- Management expects to require additional capital and may use equity offerings, debt financing, or strategic collaborations. Failure to obtain financing could delay, reduce, or terminate development programs and could force the company to curtail or cease operations.
- Management expected the first Acclaim-1 patient enrollment in the fourth quarter of 2021 or first quarter of 2022 and expected to initiate Acclaim-2 by the end of 2021. These are forward-looking expectations, not guarantees.
- COVID-19-related clinical-site backlogs and workforce shortages delayed site engagement and could delay trial enrollment and increase development timelines.
- The company remains dependent on regulatory approval, successful clinical trials, manufacturing capabilities, third-party providers, intellectual-property rights, and future financing. It has no current product revenue and may never commercialize a product.
- The company entered into an amendment to its MD Anderson license requiring annual maintenance fees, a one-time fee, patent-related expenses, and total milestone payments of $6.15 million.
- As of September 30, 2021, management reported a material weakness in internal control over financial reporting caused by inadequate segregation of duties. Remediation efforts were underway, with a goal of remediation by the end of 2022.
- Subsequent events included the October 1, 2021 issuance of 5,000 shares for services and the October 15, 2021 termination of the Chief Operating Officer and Executive Vice President.
- Management reported no legal proceedings or contingencies expected to have a material adverse effect, and no off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Whether Acclaim-1 enrolled its first patient and whether Acclaim-2 began as projected.
- Actual cash runway relative to the company’s “into 2024” estimate, particularly as clinical spending increases.
- Timing, terms, and dilution from future equity or debt financing.
- Progress toward remediation of the material weakness in internal controls.
- FDA feedback and any protocol changes affecting the Phase 2 portion of Acclaim-2.
- Clinical efficacy, safety, enrollment rates, and manufacturing readiness for REQORSA; no clinical success is established by this filing.
- The cover page reports 47,808,570 shares outstanding as of November 8, 2021, while the September 30 balance sheet reports 47,803,570 shares; investors should reconcile the difference.