TENAX THERAPEUTICS, INC. You should read the following discussion and analysis together with the consolidated financial statements and the related notes to those statements included in Item 8 - "Financial Statements and Supplementary Data". This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under "Risk Factors" and elsewhere in this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
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Business Strategy
Having carefully considered alternatives within the ongoing strategic process
announced in
The Company took steps to reduce its monthly operating expenses and conserve cash, as it commenced exploring strategic alternatives in late 2022. The Company has cancelled substantially all of its non-essential operating expenses such as consulting, its office lease, and dues and subscriptions and office supplies associated with that leased office.
Pending the outcome of our ongoing strategic process, the key elements of our business strategy are outlined below.
Efficiently conduct clinical development to establish clinical proof of principle in new indications, refine formulation, and commence Phase 3 testing of our current product candidates.
Levosimendan and imatinib have been approved and prescribed around the world for more than 20 years, but we believe their mechanisms of action have not been fully exploited, despite promising evidence they may significantly improve the lives of patients with pulmonary hypertension. We are conducting clinical development with the intent to establish proof of beneficial activity in cardiopulmonary diseases in which these therapeutics would be expected to have benefit for patients with diseases for which either no pharmaceutical therapies are approved at all, or in the case of PAH, where numerous expensive therapies generally offer a modest reduction of symptoms. Our focus is primarily on designing and executing formulation improvements, protecting these innovations with patents and other forms of exclusivity, and employing innovative clinical trial science to establish a robust foundation for subsequent development, product approval, and commercialization. We intend to submit marketing authorization applications following either one or two Phase 3 trials of levosimendan and, when appropriate, a single Phase 3 trial of imatinib. Our trials are designed to incorporate and reflect advanced clinical trial design science and the regulatory and advisory experience of our team. We intend to continue partnering with innovative companies, renowned biostatisticians and trialists, medical leaders, formulation and regulatory experts, and premier clinical testing organizations to help expedite development, and continue expanding into complementary areas when opportunities arise through our development, research, and discoveries. We also intend to continue outsourcing when designing and executing our research.
Efficiently explore new high-potential therapeutic applications, in particular where expedited regulatory pathways are available, leveraging third-party research collaborations and our results from related areas.
Levosimendan has shown promise in multiple disease areas in the two decades following its approval. Our own Phase 2 study and open-label extension has demonstrated that a formerly under-appreciated mechanism of action of levosimendan, its property of relaxing the venous circulation, brings about durable improvements in exercise capacity and quality of life, as well as other clinical assessments, in patients with heart failure with PH-HFpEF. We believe this patient population today has no pharmaceutical therapies available and we are committed to exploring potential clinical indications where our therapies may achieve best-in-class profile, and where we can address significant unmet medical needs.
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We believe these factors will support approval by the FDA of these product
candidates based on positive Phase 3 data. Through our agreement with our
licensor, Orion, the originator of levosimendan for acute decompensated heart
failure, we have access to a library of ongoing and completed trials and
research projects, including certain documentation, which we believe, in
combination with positive Phase 3 data we hope to generate in at least one
indication, will support FDA approval of levosimendan. Likewise, the regulatory
pathway for approval of imatinib for the treatment of PAH, as formulated by
Continue to expand our intellectual property portfolio.
Our intellectual property, and the confidentiality of all our Company information, is important to our business and we take significant steps to help protect its value. Our research and development efforts, both through internal activities and through collaborative research activities with others, aim to develop new intellectual property and enable us to file patent applications that cover new applications of our existing technologies, alone or in combination with existing therapies, as well as other product candidates.
Notice of Allowance and Patent
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Enter into licensing or product co-development arrangements.
In addition to our internal development efforts, an important part of our product development strategy is to work with collaborators and partners to accelerate product development, maintain our low development and business operations costs, and broaden our commercialization capabilities globally. We believe this strategy will help us to develop a portfolio of high-quality product development opportunities, enhance our clinical development and commercialization capabilities, and increase our ability to generate value from our proprietary technologies.
As we focus on our strategic process, we also continue to position ourselves to execute upon licensing and other partnering opportunities. To do so, we will need to continue to maintain our strategic direction, manage and deploy our available cash efficiently and strengthen our collaborative research development and partner relationships.
Historically, we have financed our operations principally through equity and debt offerings, including private placements and loans from our stockholders. Based on our current operating plan, there is substantial doubt about our ability to continue as a going concern. Management has implemented certain cost-cutting measures as described above and is actively exploring a diverse range of strategic options to help drive stockholder value including, among other things, capital raises, a sale of our Company, merger, one or more license agreements, a co-development agreement, a combination of these, or other strategic transactions? however, there is no assurance that these efforts will result in a transaction or other alternative or that any additional funding will be available. Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities and through collaboration and licensing agreements, to support our future operations. If we are unable to complete a strategic transaction or secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs.
COVID-19
The COVID-19 pandemic or similar epidemics could in the future, directly or indirectly, adversely impact our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to such illnesses, which could negatively impact our trials, increase our operating expenses, and have a material adverse effect on our financial results. We will continue to assess the potential impact of the COVID-19 pandemic on our business and operations, including our clinical operations and manufacturing activities.
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Comparison of Our Results of Operations for the Years Ended December 31, 2022
and 2021
The year ended December 31, Increase/(Decrease)
2022 2021
Operating expenses
General and administrative $ 5,675,231 $ 7,580,847 (1,905,616 )
Research and development 5,377,412 25,147,394 (19,769,982 )
Total operating expenses 11,052,643 32,728,241 (21,675,598 )
General and Administrative Expenses
General and administrative expenses were
Increase/ % Increase/
Year ended December 31, (Decrease) (Decrease)
2022 2021
Personnel costs $ 2,370,362 $ 4,952,334 $ (2,581,972 ) (52 )%
Legal and professional
fees 2,369,126 1,770,483 598,643 34 %
Other costs 782,023 698,473 83,550 12 %
Facilities 153,720 159,557 (5,837 ) (4 )%
Personnel costs decreased approximately
Legal and professional fees increased approximately
Legal fees increased approximately
Professional fees increased approximately
Other costs increased approximately
Facilities costs include costs paid for rent and utilities at our corporate
headquarters in
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Research and Development Expenses
Research and development expenses were
Increase/ % Increase/
Year ended December 31, (Decrease) (Decrease)
2022 2021
Clinical and preclinical
development $ 4,657,916 $ 2,653,571 $ 2,004,345 76 %
Personnel costs 684,451 689,183 (4,732 ) (1 )%
Other costs 35,046 21,804,640 (21,769,594 ) (100 )%
Clinical and preclinical development costs increased approximately
Personnel costs decreased
Other costs decreased approximately
Other Income and Expense
Other income and expense include non-operating income and expense items not
otherwise recorded in our consolidated statement of comprehensive loss. These
items include, but are not limited to, changes in the fair value of financial
assets and derivative liabilities, interest income earned and fixed asset
disposals. Other income decreased approximately
Liquidity, Capital Resources and Plan of Operation
We have incurred losses since our inception and, as of
The process of conducting preclinical studies and clinical trials necessary to obtain approval from the FDA is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among other things, the quality of the product candidate's early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability. As a result of the uncertainties discussed above, uncertainty associated with clinical trial enrollment and risks inherent in the development process, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our product candidates. Development timelines, probability of success and development costs vary widely. We are currently focused on developing our two product candidates, levosimendan and imatinib; however, we will need substantial additional capital in the future in order to complete the development and potential commercialization of levosimendan and imatinib, and to continue with the development of other potential product candidates.
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Liquidity
We have financed our operations since
Clinical and Preclinical Product Development
We are currently concluding an open label extension phase of the levosimendan HELP clinical trial, during which patients were transitioned from an intravenous to oral formulation of levosimendan for the treatment of pulmonary hypertension. We are also developing a new formulation of imatinib. Our ability to continue to pursue development of our products beyond the first quarter of calendar year 2024 will depend on obtaining license income or outside financial resources. There is no assurance that we will obtain any license agreement or outside financing or that we will otherwise succeed in obtaining any necessary resources.
The COVID-19 pandemic or a similar epidemic could in the future, directly or indirectly, adversely affect our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to respiratory illnesses if an outbreak occurs in their geography. Further, some patients may be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services, or if the patients become infected with COVID-19 themselves, which would delay our ability to complete our clinical trials or release clinical trial results. See "Item 1A - Risk Factors" above for additional discussion.
Financings
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Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
Year ended December 31,
2022 2021
Net cash (used in) operating activities $ (12,012,873 ) $ (10,856,203 ) Net cash (used in) provided by investing activities (2,323 ) 452,609 Net cash provided by financing activities
8,554,956 9,737,275
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Net cash (used in) operating activities
Net cash used in operating activities was approximately
Net cash (used in) provided by investing activities
Net cash used in or provided by investing activities was approximately
Net cash provided by financing activities
Net cash provided by financing activities was approximately
Net cash provided by financing activities was approximately
Operating Capital and Capital Expenditure Requirements
Our future capital requirements will depend on many factors that include, but are not limited to the following:
· the initiation, progress, timing and completion of clinical trials for our
product candidates and potential product candidates;
· the outcome, timing and cost of regulatory approvals and the regulatory
approval process;
· delays that may be caused by changing regulatory requirements;
· the number of product candidates we pursue;
· the costs involved in filing and prosecuting patent applications and
enforcing and defending patent claims;
· the timing and terms of future collaboration, licensing, consulting or
other arrangements that we may enter into;
· the cost and timing of establishing sales, marketing, manufacturing and
distribution capabilities;
· the cost of procuring clinical and commercial supplies of our product
candidates;
· the extent to which we acquire or invest in businesses, products or
technologies;
· delays that may be caused by the global coronavirus pandemic or similar
global societal disruptions; and
· the possible costs of litigation.
Based on our working capital on
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We will need substantial additional capital beyond the first quarter of calendar
year 2024 and in the future in order to complete the regulatory approval and
commercialization of levosimendan as well as to fund the development and
commercialization of other future product candidates. Until we can generate a
sufficient amount of product revenue, if ever, we expect to finance future cash
needs through public or private equity offerings, debt financings or corporate
collaboration and licensing arrangements. Such funding, if needed, may not be
available on favorable terms, if at all. In the event we are unable to obtain
additional capital, we may delay or reduce the scope of our current research and
development programs and other expenses. As a result of our historical operating
losses and expected future negative cash flows from operations, we have
concluded that there is substantial doubt about our ability to continue as a
going concern. Similarly, the report of our independent registered public
accounting firm on our
If adequate funds are not available, we may also be required to eliminate one or more of our clinical trials, delaying approval of levosimendan or our commercialization efforts. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates or grant licenses on terms that may not be favorable to us. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. We may also consider strategic alternatives, including a sale of our company, merger, other business combination or recapitalization.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.
Summary of Critical Accounting Policies
Use of Estimates-The preparation of the accompanying consolidated financial
statements in conformity with accounting principles generally accepted in
Preclinical Study and Clinical Accruals-We estimate our preclinical study and clinical trial expenses based on the services received pursuant to contracts with several research institutions and CROs that conduct and manage preclinical and clinical trials on our behalf. The financial terms of the agreements vary from contract to contract and may result in uneven expenses and payment flows. Preclinical study and clinical trial expenses include the following:
· fees paid to CROs in connection with clinical trials;
· fees paid to research institutions in conjunction with preclinical
research studies; and
· fees paid to contract manufacturers and service providers in connection
with the production and testing of active pharmaceutical ingredients and
drug materials for use in preclinical studies and clinical trials.
Stock-Based Compensation-We account for stock-based awards to employees in accordance with Accounting Standards Codification, or ASC, 718, Compensation - Stock Compensation, which provides for the use of the fair value-based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Fair values of equity securities are determined by management based predominantly on the trading price of our common stock. The values of these awards are based upon their grant-date fair value. That cost is recognized over the period during which the employee is required to provide service in exchange for the reward.
We account for equity instruments issued to non-employees in accordance with ASC 505-50, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. Equity instruments issued to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustment as the underlying equity instruments vest.
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Recent Accounting Pronouncements
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