Genprex, Inc. 10-Q Summary
Business Context and Reporting Period
Genprex, Inc. 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 months ended March 31, 2021; financial statements are unaudited. The company had 47,314,820 common shares outstanding at March 31, 2021 and 47,363,729 shares outstanding as of May 10, 2021.
Financial Performance and Position
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $2.17 million | $1.48 million | Up 47% |
| General and administrative expense | $4.32 million | $4.09 million | Up 5% |
| Total expenses | $6.49 million | $5.58 million | Up 16% |
| Operating loss | $(6.49) million | $(5.58) million | Loss increased |
| Net loss | $(6.49) million | $(5.57) million | Loss increased 17% |
| Net loss per share | $(0.14) | $(0.20) | Improved due primarily to higher share count |
| Cash used in operating activities | $(5.47) million | $(4.52) million | Use increased 21% |
| Cash and cash equivalents at period-end | $47.07 million | $23.08 million | Up from $27.32 million at Dec. 31, 2020 |
Because the company had no revenue, meaningful revenue-based margin percentages are not available. The accumulated deficit was $64.91 million at March 31, 2021. Total assets were $51.04 million, including $3.11 million of research and development supplies. Current liabilities were $613,626, and the company reported no debt balance in the condensed balance sheet.
Financing activities provided $25.32 million during the quarter, consisting principally of a registered direct offering of 4,000,000 shares for gross proceeds of $25.0 million and $324,330 from option exercises. Investing activities used $110,030.
Material Changes Versus the Prior Comparable Period
- R&D expense increased $691,266 as the company hired personnel and consultants, advanced manufacturing programs, prepared for the Acclaim-1 and Acclaim-2 trials, and conducted additional oncology research.
- Operating cash use increased $947,754, which management attributed primarily to an approximately 200% increase in headcount from January 1, 2020 to March 31, 2021.
- G&A expense increased $223,314 due mainly to higher headcount, consulting and business strategy activities, marketing activities, and licensing fees.
- Common shares outstanding increased from 43,117,681 at December 31, 2020 to 47,314,820 at March 31, 2021, reflecting equity financing and other issuances.
- Stock-based compensation was approximately $0.7 million in Q1 2021. Unrecognized compensation cost for non-vested time-based awards was approximately $8.5 million, expected to be recognized over approximately three years.
Guidance, Outlook, Risks, Contingencies and Unusual Items
Management planned to initiate the Phase 1/2 Acclaim-1 trial combining REQORSA with Tagrisso and the Phase 1/2 Acclaim-2 trial combining REQORSA with Keytruda during 2021. The company received FDA Fast Track Designation for the Acclaim-1 patient population in January 2020. The diabetes program remained in preclinical development.
Based on cash and cash equivalents at March 31, 2021, management estimated that available funds could support current operations and planned clinical trial activities into 2024. This estimate depends on assumptions that may prove incorrect, and the company stated that additional capital will likely be required. Failure to raise capital could delay, reduce or terminate development programs or otherwise curtail operations.
On March 3, 2021, the company amended its MD Anderson license to add cancer-treatment patents and related technology. The amendment provides for annual maintenance fees, total milestone payments of $6.15 million, a one-time fee in the mid-five-figure range, and certain patent expenses. The University of Pittsburgh license includes aggregate milestone payments of $3.975 million, royalties and other fees. The company has no current source of product revenue and expects continuing significant clinical-development expenditures.
The company reported that COVID-19 had not materially affected financial results or operations through the filing date, but the future impact remains uncertain. Management reported no legal matters expected to have a material adverse effect and no off-balance-sheet arrangements.
Disclosure controls and procedures were not effective as of March 31, 2021 because of a material weakness in internal control over financial reporting related to inadequate segregation of duties. Remediation efforts include new accounting systems and workflows, additional review procedures, a formal Disclosure Committee and additional accounting staff. Management expects enhanced procedures to operate by the end of 2021 and aims to remediate the weakness by the end of 2022, subject to testing.
Subsequent events included the April 30, 2021 termination of the company's Dell Medical School office agreement by the University of Texas, with the company seeking a new office location. The company also issued 43,909 shares upon an option exercise for $71,133 on April 21, 2021.
Investor Verification Checklist
- Verify the timing, enrollment, funding requirements and regulatory progress of the Acclaim-1 and Acclaim-2 trials.
- Assess whether the estimated cash runway through 2024 remains reasonable in light of trial, manufacturing, staffing and licensing costs.
- Monitor additional equity or debt financing needs and the potential dilution from future share, option and warrant issuances.
- Review the terms, milestones, royalties and maintenance fees under the MD Anderson and University of Pittsburgh license agreements.
- Track remediation of the material weakness in internal control and any subsequent auditor or management conclusions.
- Evaluate clinical, regulatory, manufacturing, intellectual-property and commercialization risks; the filing provides no assurance that any product candidate will obtain approval or generate revenue.