Alaunos Therapeutics, Inc. quarterly report, Q3 FY2020

Business context and reporting period

This is ZIOPHARM Oncology, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2020, filed November 5, 2020. The filing is by ZIOPHARM, not Alaunos Therapeutics; investors should confirm the issuer identity. ZIOPHARM was a clinical-stage immuno-oncology company developing cell and gene therapies, including Sleeping Beauty T-cell receptor and CAR-T programs and a controlled IL-12 platform. It reported no recurring operating revenue.

Financial results and liquidity

Amounts below are in millions of dollars except per-share data. The company had no product revenue, so gross margin and operating margin are not meaningful.

At September 30, cash and cash equivalents were $135.5 million, up from $79.7 million at December 31, 2019. Working capital was $135.8 million. Total liabilities were $21.0 million, mainly accounts payable, accrued expenses, and lease liabilities; the balance sheet reported no borrowings. Operating lease liabilities had a present value of $2.5 million. Cash from financing activities was $101.7 million for the nine months, including $88.7 million net proceeds from a public offering and $13.0 million from ATM sales. Capital expenditures were $6.0 million.

Material changes versus prior comparable periods

• Q3 operating expenses increased 51% year over year, driven principally by higher gene-therapy manufacturing costs and increased headcount and facilities costs. Nine-month operating expenses rose 38%.
• Net loss declined versus 2019 despite higher operating expenses because 2019 included a $60.8 million non-cash inducement-warrant expense. Excluding that unusual item, the reported improvement in net loss is not evidence of improved operating profitability.
• Operating cash use increased by $10.7 million year over year for the nine-month period; cash reserves increased primarily through equity financing.
• Common shares outstanding rose to 214.2 million from 181.8 million at year-end 2019. The 2020 public offering and ATM sales generated cash but diluted shareholders.

Outlook, management commentary, risks, and unusual items

• Management estimated existing cash would fund planned operations into mid-2022, while noting there were no committed additional funding sources and the forecast depends on assumptions. The company expected continued losses and substantial development spending.
• Clinical updates included initiation of a Phase 1/2 DIPG study, completion of enrollment in the Phase 2 rGBM study of controlled IL-12 plus cemiplimab, and a planned MD Anderson Library TCR-T trial, with an IND submission expected in Q1 2021 and trial initiation expected in mid-2021. Timing and outcomes were uncertain.
• COVID-19 work-from-home measures and health-system pressures could disrupt productivity, manufacturing, trial enrollment, monitoring, and access to capital. The filing specifically noted NCI precautions had delayed commencement of the Sleeping Beauty TCR-T trial.
• Development, regulatory, manufacturing, clinical efficacy and safety, third-party collaboration, and financing risks are substantial. A previously paused pivotal rGBM trial remained subject to resolution of chemistry, manufacturing, and controls requirements; the filing gave no assurance of a Phase 3 start.
• The company had 250 million authorized common shares, 214.2 million outstanding, and approximately 29.7 million additional shares reserved for options and warrants. Management warned that limited authorized share capacity could constrain future financing and other corporate actions.
• Disclosure controls were deemed ineffective because a material weakness in controls over monitoring and expensing third-party clinical trial costs continued at quarter-end. Management described remediation efforts; it stated the financial statements were fairly presented in all material respects.
• No material legal proceedings or material subsequent events were reported. The 2019 $60.8 million non-cash warrant charge is the principal unusual item affecting year-over-year loss comparisons.

Important facts for investors to verify

1. Confirm whether this ZIOPHARM filing is the intended issuer and period for the Alaunos Therapeutics request.
2. Check subsequent cash use, financing, and whether the mid-2022 runway estimate remained supportable.
3. Track clinical trial progress, enrollment, safety and efficacy data, and resolution of rGBM manufacturing requirements.
4. Assess remaining authorized-share capacity, potential dilution from outstanding awards and warrants, and any corporate actions to increase authorization.
5. Review whether remediation of the clinical-trial-cost control material weakness was completed and independently validated.