TSCAN THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes appearing elsewhere in this Quarterly Report on Form 10-Q, or
Quarterly Report, and our Annual Report on Form 10-K filed with the
Overview
We are a clinical-stage biopharmaceutical company focused on developing a robust pipeline of T cell receptor-engineered T cell, or TCR-T, therapies for the treatment of patients with cancer. Our approach is based on the central premise that we can learn from patients who are winning their fight against cancer in order to treat those who are not. Using one of our proprietary platform technologies, TargetScan, we analyze the T cells of cancer patients with exceptional responses to immunotherapy to discover how the immune system naturally recognizes and eliminates tumor cells in these patients. This allows us to precisely identify the targets of T cell receptors, or TCRs, that are driving these exceptional responses. We aim to use these anti-cancer TCRs to treat patients with cancer by genetically engineering their own T cells to recognize and eliminate their cancer. In addition to discovering TCR-T therapies against novel targets, we are using our ReceptorScan technology to further diversify our portfolio of therapeutic TCRs with TCR-T therapies against known targets. We aim to reduce the risk and enhance the safety profile of these therapeutic TCRs by screening them using SafetyScan to identify potential off-targets of a TCR and eliminate those TCR candidates that cross-react with proteins expressed at high levels in critical organs.
We believe this three-pronged approach will enable us to discover and develop a wide array of potential treatment options for patients with cancer.
We are advancing a robust pipeline of TCR-T therapy candidates for the treatment
of patients with hematologic and solid tumor malignancies. Our lead liquid tumor
product candidates, TSC-100 and TSC-101, are in development for the treatment of
patients with hematologic malignancies to eliminate residual leukemia and
prevent relapse following hematopoietic stem cell transplantation, or HCT.
TSC-100 and TSC-101 target the HA-1 and HA-2 antigens, respectively, which are
well-recognized TCR targets that were identified in patients with exceptional
responses to HCT-associated immunotherapy. We submitted Investigational New
Drug, or IND, applications with the
Since our inception in 2018, we have devoted our efforts to raising capital,
obtaining financing, filing, prosecuting and maintaining intellectual property
rights, organizing and staffing our company and incurring research and
development costs related to the identification of novel targets for TCRs and
development of TCR-T therapies to target and eliminate cancer cells. We do not
have any therapies approved for sale and have not generated any revenue from
product sales. To date, we have funded our operations primarily with proceeds
from sales of convertible preferred stock, proceeds from the initial public
offering completed in
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We have incurred significant operating losses since our inception. We reported
net losses of
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continue our research and development efforts to identify and develop product candidates and submit investigational new drug applications, or INDs, for such product candidates;
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conduct preclinical studies and commence clinical trials for our current and future product candidates based on our proprietary platform;
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develop processes suitable for manufacturing and clinical development;
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continue to develop and expand our manufacturing capabilities;
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seek marketing approvals for any product candidates that successfully complete clinical trials;
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build commercial infrastructure to support sales and marketing for our product candidates;
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expand, maintain and protect our intellectual property portfolio;
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hire additional clinical, regulatory and scientific personnel; and
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continue to operate as a public company.
We will not generate revenue from sales of our therapies unless and until we successfully complete clinical development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support the sales, marketing and distribution of those therapies. Further, we expect to incur additional costs associated with operating as a public company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our therapies, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, or other capital sources, including collaborations with other companies, and other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of one or more of our product candidates.
Because of the numerous risks and uncertainties associated with TCR-T therapy candidate development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate sales of our therapies, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditures into 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See "Liquidity and capital resources" and "Risk factors-Risks related to our financial position and need for additional capital."
Impact of COVID-19
In response to public health directives and orders and to help minimize the risk of the virus to employees, we have taken a series of actions aimed at safeguarding our employees and business associates, including implementing a flexible work-at-home policy. To date, we have not experienced material business disruptions, including with vendors, as a result of the COVID-19 pandemic. However, disruptions and supply chain constraints arising from COVID-19 could result in increased costs of execution of development plans or may negatively impact the quality, quantity, timing and regulatory usability of data that we would otherwise be able to collect. There continues to be uncertainty around the duration and impacts of these potential disruptions.
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Results of Operations
Three months ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
March 31,
2021 2020 Change
Revenue
Collaboration and license revenue$ 3,021 $ 2,027 $ 994 Operating expenses: Research and development 14,690 7,339 7,351 General and administrative 4,494 2,606 1,888 Total operating expenses 19,184 9,945 9,239 Loss from operations (16,163 ) (7,918 ) (8,245 ) Other income: Interest and other income (loss), net 7 6 1 Net loss$ (16,156 ) $ (7,912 ) $ (8,244 ) Revenue
We had
Research and Development Expenses
The following table summarizes our research and development expenses for the
three months ended
Three Months Ended
March 31,
2022 2021 Change
Clinical studies $ 554 $ 95 $ 459
Preclinical studies 6,913 3,168 3,745
Legal and professional fees 149 152 (3 )
Personnel expenses (including stock-based
compensation) 4,398 2,625 1,773
Facility-related and other 2,676 1,299 1,377
Total research and development expenses
The increase in research and development expenses was primarily attributable to
a
General and Administrative Expenses
General and administrative expenses were
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Liquidity and Capital Resources
Sources of Liquidity
We have not generated any revenue from product sales and have incurred net
losses and negative cash flows from our operations. Our primary use of cash is
to fund operating expenses, which consist primarily of research and development
expenditures, and to a lesser extent, general and administrative expenditures.
Under the terms of the Novartis Agreement, we received an upfront payment of
Funding requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our research programs into preclinical and clinical development. In addition, we expect to continue to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on:
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the identification of additional research programs and product candidates;
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the scope, progress, costs and results of preclinical and clinical development of any product candidates we may develop;
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the costs, timing and outcome of regulatory review of any product candidates we may develop;
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our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate a clinical trial;
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our decision to build manufacturing capabilities;
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our decision to invest in facilities to enable growth;
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investing in next-generation T cell engineering capabilities;
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changes in laws or regulations applicable to any product candidates we may develop, including but not limited to clinical trial requirements for approvals;
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the cost and timing of obtaining materials to produce adequate supply for any preclinical or clinical development of any product candidate we may develop;
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the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any product candidate we may develop for which we obtain marketing approval;
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the legal costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims;
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additions or departures of key scientific or management personnel;
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our ability to establish and maintain collaborations on favorable terms, if at all, as well as the costs and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; and
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the costs of continuing to operate as a public company.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements 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 expect.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through additional collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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We have not yet received regulatory approval for or commercialized any of our product candidates and do not expect to generate revenue from product sales for several years, if at all. We do not expect to generate any product revenue unless and until we (1) complete development of any of our product candidates; (2) obtain applicable regulatory approvals; and (3) successfully commercialize or enter into collaborative agreements for our product candidates. We do not know with certainty when, or if, any of these items will ultimately occur. We expect to incur continuing significant losses for the foreseeable future and our losses to increase as we ramp up our preclinical and clinical development programs. We may encounter unforeseen expenses, difficulties, complications, delays and other currently unknown factors that could adversely affect our business.
Moreover, as a public company, we are incurring significant legal, accounting
and other expenses that we were not required to incur as a private company. In
addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the
We will require additional capital to develop our product candidates and fund our operations into the foreseeable future. We anticipate that we will eventually need to raise substantial additional capital, the requirements for which will depend on many factors, including:
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the scope, timing, rate of progress and costs of our drug discovery efforts, preclinical development activities, laboratory testing and clinical trials for our product candidates;
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the number and scope of clinical programs we decide to pursue;
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the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;
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the scope and costs of development and manufacturing activities;
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the cost and timing associated with commercializing our product candidates, if they receive marketing approval;
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the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
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the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time;
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the extent to which we acquire or in-license other product candidates and technologies;
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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
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our ability to establish and maintain collaborations on favorable terms, if at all;
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our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following FDA approval;
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our implementation of various computerized information systems;
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impact of COVID-19 on our clinical development or operations; and
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the costs associated with being a public company.
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A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.
Adequate funding may not be available to us on acceptable terms or at all. Our potential inability to raise capital when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds as required, we may need to delay, reduce, or terminate some or all development programs and clinical trials. We may also be required to sell or license our rights to product candidates in certain territories or indications that we would otherwise prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to address our liquidity needs, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially and adversely affect our business and financial prospects. See Part II, Item 1A. "Risk Factors" of this Quarterly Report for additional risks associated with our substantial capital requirements.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):
Three Months Ended March 31,
2022 2021 Change
Net cash used in operating activities $ (20,124 ) $ (9,957 ) $ (10,167 )
Net cash used in investing activities (531 ) (2,959 ) 2,428
Net cash provided by financing activities 88 99,626 (99,538 )
Net increase (decrease) in cash, cash
equivalents and restricted cash $ (20,567 ) $ 86,710 $ (107,277 )
Operating Activities
During the three months ended
During the three months ended
Investing Activities
During the three months ended
Financing Activities
During the three months ended
During the three months ended
Critical Accounting Policies and Estimates
We prepare our condensed financial statements in accordance with generally
accepted accounting principles in
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There have been no material changes to our critical accounting policies and
estimates from those disclosed in our financial statements and the related notes
and other financial information included in our Annual Report on Form 10-K filed
with the
Emerging Growth Company and Smaller Reporting Company Status
The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to "opt out" of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.
We are also a "smaller reporting company", meaning that the market value of our
stock held by non-affiliates plus the aggregate amount of gross proceeds to us
as a result of the initial public offering is less than
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