TENAYA THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our condensed financial statements
and related notes included elsewhere in this Quarterly Report on Form 10-Q and
our audited financial statements and related notes thereto for the year ended
In addition to historical financial information, this discussion and analysis and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, based upon current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A. below. You should carefully read the "Risk Factors" to gain an understanding of the factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled "Special Note Regarding Forward-Looking Statements."
Overview
We are a biotechnology company focused on discovering, designing, developing and delivering curative therapies that address the underlying drivers of heart disease. Our vision is to change the treatment paradigm for heart disease, and in doing so improve and extend the lives of millions of individuals and families.
We are advancing a deep and diverse pipeline of disease-modifying therapies that includes both gene therapies and small molecules discovered internally and developed using our product platforms and core capabilities to target defined sub-populations of
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patients with rare or highly prevalent forms of heart disease. All of our programs are currently in the preclinical stage; we do not have any products approved for sale and have not generated any revenue to date.
TN-201: TN-201 is an adeno-associated virus (AAV)-based gene therapy that
addresses genetic hypertrophic cardiomyopathy (HCM) caused by Myosin Binding
Protein C3 (MYBPC3) gene mutations. These mutations can cause the heart walls of
affected individuals to become significantly thickened, leading to fibrosis,
abnormal heart rhythms, cardiac dysfunction, heart failure, and sudden cardiac
death in some adults and children. TN-201 is designed to deliver a fully
functional MYBPC3 gene driven by our proprietary heart-specific promoter to
restore normal levels of MYBPC3 protein. We plan to submit an Investigational
New Drug (IND) application for TN-201 to the
In 2021, we initiated a global natural history study to improve our understanding of disease progression and unmet need in individuals carrying mutations in the MYBPC3 gene, with an initial focus on pediatric patients under the age of 18. We continue site activation and patient enrollment in the global natural history study to support the future evaluation of TN-201 in pediatric patients during clinical development after early safety has been established in adults. This study complements existing disease registries focused primarily on adult patient HCM populations and may support and expedite the development of TN-201 in the pediatric patient population.
TN-301: TN-301 is a highly specific small molecule inhibitor of histone deacetylase 6 (HDAC6i). It has potentially broad utility in both heart failure with preserved ejection fraction (HFpEF) as well as genetic dilated cardiomyopathy. HFpEF is one of the greatest areas of unmet need in heart disease, and is characterized by systemic inflammation, left ventricular hypertrophy, fibrosis, and diastolic dysfunction resulting in high morbidity and mortality in affected individuals. We continue to progress with our IND-enabling studies for TN-301 and expect to submit an IND to the FDA for TN-301 in the second half of 2022.
TN-401: TN-401 uses an AAV-based gene therapy to address genetic arrhythmogenic right ventricular cardiomyopathy (ARVC) caused by plakophilin 2 (PKP2) gene mutations. ARVC is characterized by enlargement of the right ventricle in affected individuals, replacement of heart muscle with fibrotic tissue and fatty deposits, and severely abnormal heart rhythms (arrhythmia) that can make it difficult for the heart to function properly and result in sudden cardiac death in some adults and children. We have scaled up production of TN-401 to 200L and are initiating IND-enabling studies. We intend to support establishment of a global natural history study in 2022 and expect to submit an IND in 2023.
Other: Our earlier-stage discovery programs include an AAV-based gene therapy designed to express the Dwarf Open Reading Frame (DWORF) gene in the heart, has potentially broad utility in dilated cardiomyopathy and heart failure with reduced ejection fraction (HFrEF) and is currently at the candidate selection stage. Another program is an AAV-approach based on science from our founders that involves converting (or reprogramming) cells to replace cardiomyocytes lost due to heart damage, such as myocardial infarction. This program is currently at the candidate selection stage. In addition, we have numerous emerging programs being explored to address other forms of heart failure.
Manufacturing: We have invested in significant gene therapy enabling
capabilities, most notably with the leasing and build out of a current good
manufacturing practices (cGMP) facility in the
COVID-19
The global COVID-19 pandemic continues to evolve, including the continued
emergence of variants. Potential impacts to our business include disruptions or
restrictions on our employees' ability to effectively conduct research and
development activities and the establishment of our internal manufacturing
operations. In addition, some of our suppliers of certain laboratory materials,
or service providers used in the performance of our research activities, are
located in areas significantly impacted by COVID-19, which could limit our
ability to achieve planned progress. COVID-19 could continue to adversely affect
the economies and financial markets, resulting in a prolonged economic downturn
or a period of high inflation rates, which
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ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change. For additional details, see "Risk Factors."
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods
presented:
Three Months Ended
March 31, $ %
2022 2021 Change Change
(In thousands)
Operating expenses:
Research and development $ 24,155 $ 9,590 $ 14,565 152%
General and administrative 6,999 3,515 3,484 99%
Total operating expenses 31,154 13,105 18,049 138%
Loss from operations (31,154 ) (13,105 ) (18,049 ) 138%
Other income (expense), net:
Interest income 99 9 90 1,000%
Other income (expense), net (1 ) (2 ) 1 50%
Total other income (expense), net 98 7 91 1,300%
Net loss $ (31,056 ) $ (13,098 ) $ (17,958 ) 137%
Research and Development Expenses
Research and development activities account for a significant portion of our operating expenses. Research and development expenses relate primarily to discovery and development of our platforms, programs and product candidates, and are recognized as incurred. Internal research and development costs include, among others, employee-related costs (including salaries, benefits and stock-based compensation for employees engaged in research and development functions), laboratory supplies and other non-capital equipment utilized for in-house research, allocated overhead costs. External research and development expenses include, among others, amounts incurred to clinical research organizations (CROs) that conduct research and development activities on our behalf, consulting fees and amounts owed under licensing agreements. We do not allocate our costs by platform, program or product candidate, as a significant amount of research and development expenses include internal costs, which are deployed across multiple platforms, programs, product candidates and activities.
Amounts recorded for external goods or services incurred for research and development activities that have not yet been invoiced often represent estimates. We record estimates for amounts due but not yet invoiced generally based on input from external service providers.
The following table summarizes our research and development expenses for the
periods presented:
Three Months Ended
March 31, $ %
2022 2021 Change Change
(In thousands)
Facility and laboratory costs $ 8,582 $ 4,096 $ 4,486 110%
Personnel-related costs 7,404 3,337 4,067 122%
Outside services 7,774 2,043 5,731 281%
Other research and development expenses 395 114 281 246%
Total research and development expenses
Research and development expenses were
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an increase of
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an increase of
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•
an increase of
We expect our research and development expenses to increase for the foreseeable future as we continue to invest in research and development activities related to developing our platforms, programs and product candidates and progressing through preclinical and clinical product development stages. The process of conducting the necessary research to advance to the clinical stage and ultimately obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
General and Administrative
General and administrative expenses consist of personnel-related costs (including salaries, benefits and stock-based compensation for our employees in finance, human resources, information technology and other administrative functions), legal fees, professional fees incurred for accounting, audit and tax services, information technology and facility costs not otherwise included in research and development expenses. Legal fees primarily include those related to corporate and intellectual property related matters.
We expect that our general and administrative expenses will increase for the foreseeable future to support our continued research and development activities, general operations, future business development opportunities and professional fees. In addition, we will continue to incur legal, accounting, insurance and other expenses in operating our business as a public company, including costs associated with regulatory and compliance activities.
General and administrative expenses were
Interest Income
Interest income primarily consists of interest earned on our cash, cash equivalents and investment balances.
Other Income (Expense), Net
Other income (expense), net primarily consists of gain and loss on disposal of assets and foreign exchange.
Net Loss
Net loss for the three months ended
Since our inception in
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue and we have incurred
significant net losses and negative cash flows from operations. From our
inception through
Funding Requirements
We expect our expenses and operating losses will increase substantially over the foreseeable future. The expected increase in expenses will be driven in large part by our ongoing activities, if and as we:
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continue to advance our Gene Therapy, Cellular Regeneration and Precision Medicine platforms;
•
continue preclinical development of our product candidates and initiate additional preclinical studies;
•
commence clinical trials of our product candidates;
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•
complete build-out of our manufacturing facilities and establish our manufacturing capabilities, including developing our contract development and manufacturing relationships;
•
acquire and license technologies aligned with our Gene Therapy, Cellular Regeneration and Precision Medicine platforms;
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seek regulatory approval of our product candidates that successfully complete clinical trials;
•
expand our operational, financial, and information systems and increase personnel, including personnel to support our preclinical and clinical development, manufacturing, system infrastructure, regulatory compliance and future commercialization efforts;
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continue to develop, grow, perfect, enforce and defend our intellectual property portfolio; and
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continue to incur legal, accounting, insurance and other expenses in operating our business as a public company, including costs associated with regulatory and compliance activities.
Based on our current operating plan, we believe that our existing cash, cash equivalents and investments in marketable securities will be sufficient to meet our working capital and capital expenditure needs through at least the next twelve months following the date of this Quarterly Report on Form 10-Q.
In order to complete the development of our product candidates and commercialize our product candidates, if approved, we will require substantial additional funding. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through public or private equity offerings or debt financings or other capital sources, which may include strategic collaborations or other arrangements with third parties, or other sources of financing. We may not be able to raise additional capital on terms acceptable to us or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions. If we raise funds through strategic collaborations, partnerships and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. If we are unable to raise additional capital on acceptable terms when needed, our business, results of operations, and financial condition would be adversely affected.
Our ability to raise additional funds may be adversely impacted by potential
worsening global economic conditions and the recent disruptions to, and
volatility in, the credit and financial markets in
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Three Months Ended
March 31,
2022 2021
(In thousands)
Net cash (used in) provided by:
Operating activities $ (28,756 ) $ (15,789 )
Investing activities 16,434 (4,323 )
Financing activities 15 20,015
Net change in cash, cash equivalents and restricted cash
Operating Activities
Net cash used in operating activities for the three months ended
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Net cash used in operating activities for the three months ended
Investing Activities
Net cash provided by investing activities for the three months ended
Net cash used in investing activities for the three months ended
Financing Activities
Net cash provided by financing activities for the three months ended
Net cash provided by financing activities for the three months ended
Contractual Obligations and Other Commitments
As of
Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet arrangements as
defined in the rules and regulations of the
Critical Accounting Policies and Estimates
A summary of our critical accounting policies and estimates is presented in Part
II, Item 7 of our Annual Report on Form 10-K for the year ended
Recent Accounting Pronouncements
See Note 2 to our unaudited interim condensed financial statements for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of operations.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business
Startups Act of 2012 ("JOBS Act"). We will remain an emerging growth company
until the earliest to occur of: (i) the last day of the fiscal year in which we
have more than
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use the extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date on which we (i) are no longer an emerging growth company and (ii) affirmatively and irrevocably opt out of the extended transition period provided by the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We are also a smaller reporting company, meaning that the market value of our
stock held by non-affiliates is less than
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smaller reporting company if either (i) the market value of our stock held by
non-affiliates is less than
If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth company's smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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