GENPREX, INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our interim condensed financial
statements and the related notes appearing elsewhere in this Quarterly Report on
Form 10-Q. In addition to historical information, this discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those discussed
below. Factors that could cause or contribute to such differences include, but
are not limited to, those identified below, and those discussed in the section
titled "Risk Factors" included in our Annual Report on Form 10-K for the fiscal
year ended
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q (this "Quarterly Report") contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. Any statements in this Quarterly Report about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as "believe," "will," "expect," "anticipate," "estimate," "intend," "plan" and "would." For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.
Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Quarterly Report. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to:
? Market conditions;
? Our capital position;
? Our ability to compete effectively and with larger better financed
pharmaceutical companies;
? Our uncertainty of developing marketable products;
? Our ability to develop and commercialize our products;
? Our ability to obtain regulatory approvals;
? Our ability and third parties' ability to maintain and protect intellectual
property rights;
? Our ability to raise additional future financing and possible lack of
financial and other resources;
? The ultimate impact of the current coronavirus pandemic, or any other health
epidemic, on our business, our clinical trials, our research programs,
healthcare systems or the global economy as a whole;
? The success of our clinical trials through all phases of clinical development;
? Any delays in regulatory review and approval of our current and future
product candidates;
? Our dependence on third-party manufacturers to supply or manufacture our products;
? Our ability to control product development costs;
? Our ability to attract and retain key employees;
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? Our ability to enter into new strategic collaborations, licensing or other
arrangements;
? Changes in government regulation affecting product candidates that could
increase our development costs;
? Our involvement in patent and other intellectual property litigation that
could be expensive and divert management's attention;
? The possibility that there may be no market acceptance for our products; and
? Changes in third-party reimbursement policies which could adversely affect
potential future sales of any of our products that are approved for
marketing.
The foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking statements, which speak only as of the date of this Quarterly Report or the date of the document incorporated by reference into this Quarterly Report. Except as required by law, we assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements contained in this Quarterly Report. All forward-looking statements are expressly qualified in their entirety by the cautionary statements contained in this section.
Overview
We are a clinical stage gene therapy company pioneering the development of gene-based therapies for large patient populations with unmet medical needs. Our oncology platform utilizes our non-viral ONCOPREX™ Nanoparticle Delivery System. Using this system, we encapsulate plasmids that express tumor suppressor genes within lipid nanoparticles and intravenously administer the encapsulated plasmids which are taken up by the tumor cells, after which the tumor suppressor genes express proteins that are missing or found in low quantities in the tumor cells. Our diabetes technology is designed to work by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body's immune system.
Oncology Platform
Our lead oncology drug candidate, REQORSA™ Immunogene Therapy, also sometimes
referred to as GPX-001, initially is being developed in combination with top
selling cancer drugs to treat Non-Small Cell
We currently are enrolling and treating patients in two Phase 1/2 clinical
trials in NSCLC, our Acclaim-1 and Acclaim-2 clinical trials. The Acclaim-1
clinical trial ("Acclaim-1") is using a combination of REQORSA with AstraZeneca
PLC's Tagrisso® in patients with late-stage NSCLC with activating epidermal
growth factor receptor ("EGFR") mutations, whose disease progressed after
treatment with Tagrisso. The first patient was dosed in Acclaim-1 in
The
The TUSC2 gene is one of a series of genes whose therapeutic use is covered by
our exclusive worldwide licenses from
Diabetes Gene Therapy
In diabetes, we are developing a gene therapy that is exclusively licensed from
the
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JOBS Act
On
Notwithstanding the foregoing, subject to certain conditions set forth in the
JOBS Act, as an "emerging growth company," we intend to rely on certain
exemptions, including, without limitation, the exemption from the
requirements (i) to provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act, and (ii) to comply with any requirement that may be adopted
by the
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements appearing in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed financial statements have been prepared in accordance with
generally accepted accounting principles in the
We believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.
Research and Development Costs
We record accrued expenses for costs invoiced from research and development activities conducted on our behalf by third-party service providers, which include the conduct of preclinical studies and clinical trials and contract research, manufacturing, and testing activities. We record the costs of research and development activities based upon the amount of services provided, and we include these costs in accrued liabilities in the condensed balance sheets and within research and development expense in the condensed statements of operations. These costs are a significant component of our research and development expenses. Purchased materials to be used in future research are capitalized and included in research and development supplies.
We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed, the number of patients enrolled and the rate of patient enrollment in any of our clinical trials may vary from our estimates and could result in our reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from contract research organizations ("CROs") and other third-party service providers. To date, there have been no material differences from our accrued expenses to actual expenses.
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Income Taxes
Deferred tax assets or liabilities are recorded for temporary differences
between financial statement and tax basis of assets and liabilities, using
applicable rates in effect for the year in which the differences are expected to
reverse. A valuation allowance is recorded if it is more likely than not that a
deferred tax asset will not be realized. We have provided a full valuation
allowance on our deferred tax assets, which primarily consist of cumulative net
operating losses from
Impairment of Long-Lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset's carrying value to determine if an impairment of such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value.
Components of our Results of Operations and Financial Condition
Operating expenses
We classify our operating expenses into three categories: research and development, general and administrative and depreciation.
Research and development. Research and development expenses consist primarily
of:
• costs incurred to conduct research, such as the discovery and development of
our current and potential product candidates;
costs related to the production and storage of supplies for engineering
• purposes and storage and usage of clinical supplies, including waste created
in the process of producing clinical materials, spoilage, and testing of
clinical materials;
costs related to the use of contract manufacturers, manufacturing
• consultants, testing organizations, cold-storage facilities, and logistics
service providers;
• fees paid to clinical consultants, clinical trial sites and vendors,
including CROs in conjunction with implementing and monitoring our clinical
trials and acquiring and evaluating clinical trial data, including all
related fees, such as patient screening fees, laboratory work, and
statistical compilation and analysis;
• costs related to compliance with drug development regulatory requirements;
and
• costs related to staffing and personnel associated with research and
development activities, including wages, taxes, benefits, leases, overheads,
supplies, and share-based compensation.
We recognize all research and development costs as they are incurred. Clinical trial costs, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed.
We expect our research and development expenses to increase in the future as we
advance our current and future product candidates into and through clinical
trials, as we pursue regulatory approval of our current and potential product
candidates in
General and administrative. General and administrative expense consists of personnel related costs, which include salaries, as well as the costs of professional services, such as accounting and legal, travel, facilities, information technology and other administrative expenses. We expect our general and administrative expense to increase in future periods due to the anticipated growth of our business and related infrastructure as well as accounting, insurance, investor relations, and other costs associated with being a public company.
Depreciation. Depreciation expense consists of depreciation from our fixed assets consisting of our property, equipment, and furniture. We depreciate our assets over their estimated useful life. We estimate furniture and computer and office equipment to have a five-year life.
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Results of Operations
Comparison of the Three Months Ended
The following summarizes our results of operations for the three months ended
Research and Development Expense
R&D expense for the three months ended
General and Administrative Expense
General and administrative ("G&A") expense for the three months ended
Interest Income. Interest income was
Depreciation Expense. Depreciation expense was
Net Loss. We had a net loss of
Liquidity and Capital Resources
From inception through
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As of
We do not expect to generate revenue from product sales unless and until we
successfully complete development of, obtain regulatory approval for and begin
to commercialize one or more of our current or potential product candidates,
which we expect will take several years and which is subject to significant
uncertainty. Accordingly, we anticipate that we will need to raise additional
capital to fund our future operations, which include conducting our Acclaim-1
and our Acclaim-2 clinical trials. Both trials are currently open for
enrollment. The first patient in Acclaim-1 was dosed in
Based on our current cash and cash equivalents, we estimate that we will be able
to fund our expenditure requirements for our current operations and planned
clinical trial activities into 2024. We have based this estimate on assumptions
that may prove to be wrong, and we could utilize our available capital resources
sooner than we currently plan due to economic factors, such as inflation,
incorrect assumptions, or due to a decision to expand our activities, or
innovate existing activities beyond those currently planned. We also have been
experiencing delays in engaging clinical sites for our Acclaim-1 and Acclaim-2
trials because of a backlog of clinical trial protocols at the sites requiring
review created by an accumulation of protocols while clinical trials have been
widely disrupted during the COVID-19 pandemic and workforce shortages impacting
the
The following table sets forth the primary sources and uses of cash and cash
equivalents during the three months ended
Three Months Ended March 31,
2022 2021
Net cash used in operating activities $ (4,083,857 ) $ (5,465,282 )
Net cash provided (used) by investing activities 10,319 (110,030 )
Net cash provided by financing activities - 25,324,330
Net decrease (increase) in cash and cash equivalents
Cash used in operating activities
Net cash used in operating activities was
Cash provided (used) in investing activities
Net cash provided by investing activities was
Cash provided by financing activities
Net cash provided by financing activities was
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