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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 001-40603

 

TSCAN THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

82-5282075

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

830 Winter Street

Waltham, Massachusetts

 

02451

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (857399-9500

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Voting Common Stock, $0.0001 par value per share

 

 

TCRX

 

The Nasdaq Global Market, LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☐    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

As of August 16, 2021, the registrant had 18,822,590 shares of voting common stock, $0.0001 par value per share, and 5,143,134 shares of non-voting common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

87

Item 3.

Defaults Upon Senior Securities

87

Item 4.

Mine Safety Disclosures

87

Item 5.

Other Information

87

Item 6.

Exhibits

88

Signatures

89

 

 

 

i


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as information included in oral statements or other written statements made or to be made by us, contains 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, that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, future revenue, business strategy, prospects, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward looking statements. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

• the beneficial characteristics, safety, efficacy, therapeutic effects and potential advantages of our TCR-T therapy candidates;

• our expectations regarding our preclinical studies being predictive of clinical trial results;

• the timing of the initiation, progress and expected results of our preclinical studies, clinical trials and our research and development programs;

• our plans relating to developing and commercializing our TCR-T therapy candidates, if approved, including sales strategy;

• estimates of the size of the addressable market for our TCR-T therapy candidates;

• our manufacturing capabilities and the scalable nature of our manufacturing process;

• our estimates regarding expenses, future milestone payments and revenue, capital requirements and needs for additional financing;

• our expectations regarding competition;

• our anticipated growth strategies;

• our ability to attract or retain key personnel;

• our ability to establish and maintain development partnerships and collaborations;

• our expectations regarding federal, state and foreign regulatory requirements;

• regulatory developments in the United States and foreign countries;

• our ability to obtain and maintain intellectual property protection for our proprietary platform technology and our product candidates;

• the anticipated trends and challenges in our business and the market in which we operate;

• the sufficiency of our existing capital resources to fund our future operating expenses and capital expenditure requirements;

• the effect of the COVID-19 pandemic, including mitigation efforts and political, economic, legal and social effects, on any of the foregoing or other aspects of our business or operations; and

• our anticipated use of our existing cash resources and our ability to obtain additional financing in the future.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk factors” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the

2


 

impact of all factors 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 we may make. In light of these risks, uncertainties and assumptions, the forward- looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements contained in this Quarterly Report are made as of the date of this Quarterly Report, and although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with the SEC with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

In addition, this Quarterly Report contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates, including data regarding the estimated size of such markets and the incidence of certain medical conditions. We obtained the industry, market and similar data set forth in this Quarterly Report from our internal estimates and research, and from academic and industry research, publications, surveys and studies conducted by third parties, including governmental agencies. Industry publications and third party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable. Our estimates of the potential market opportunities for our product candidates include a number of key assumptions based on our industry knowledge, industry publications and third party research, surveys and studies, which may be based on a small sample size and fail to accurately reflect market opportunities. Information based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by us and third parties, industry, medical and general publications, government data and similar sources.

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TScan Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

106,197

 

 

$

34,791

 

Prepaid expenses and other current assets

 

 

3,873

 

 

 

1,654

 

Total current assets

 

 

110,070

 

 

 

36,445

 

Deferred offering costs

 

 

2,540

 

 

 

-

 

Property and equipment, net

 

 

10,451

 

 

 

5,659

 

Right-of-use assets

 

 

6,185

 

 

 

6,873

 

Restricted cash

 

 

595

 

 

 

595

 

Long-term deposit

 

 

166

 

 

 

166

 

Total assets

 

$

130,007

 

 

$

49,738

 

Liabilities, Convertible Preferred Stock and Stockholders' Deficit

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,547

 

 

$

2,910

 

Accrued expenses and other current liabilities

 

 

3,749

 

 

 

2,494

 

Operating lease liability, current portion

 

 

1,575

 

 

 

1,415

 

Deferred revenue, current portion

 

 

11,746

 

 

 

10,627

 

Total current liabilities

 

 

20,617

 

 

 

17,446

 

Deferred revenue, net of current portion

 

 

4,560

 

 

 

8,816

 

Operating lease liability, net of current portion

 

 

5,211

 

 

 

6,019

 

Other long term liabilities

 

 

238

 

 

 

238

 

Total liabilities

 

$

30,626

 

 

$

32,519

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Convertible preferred stock (Note 5)

 

 

159,411

 

 

 

59,681

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 165,210,543 shares authorized; 1,682,805 and

   1,574,138 shares issued; and 1,419,819 and 1,135,858 shares issued outstanding

   at June 30, 2021 and December 31, 2020, respectively

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

2,088

 

 

 

1,070

 

Accumulated deficit

 

 

(62,119

)

 

 

(43,533

)

Total stockholders' deficit

 

 

(60,030

)

 

 

(42,462

)

Total liabilities, convertible preferred stock and stockholders' deficit

 

$

130,007

 

 

$

49,738

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

4


 

 

TScan Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration and license revenue

 

$

2,848

 

 

$

-

 

 

$

4,875

 

 

$

-

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

10,801

 

 

 

4,502

 

 

 

18,140

 

 

$

8,800

 

General and administrative

 

 

2,726

 

 

 

1,114

 

 

 

5,332

 

 

$

2,452

 

Total operating expenses

 

 

13,527

 

 

 

5,616

 

 

 

23,472

 

 

 

11,252

 

Loss from operations

 

 

(10,679

)

 

 

(5,616

)

 

 

(18,597

)

 

 

(11,252

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

5

 

 

 

3

 

 

 

11

 

 

 

102

 

Net loss

 

$

(10,674

)

 

$

(5,613

)

 

$

(18,586

)

 

$

(11,150

)

Net loss per share, basic and diluted

 

$

(7.69

)

 

$

(6.18

)

 

$

(14.25

)

 

$

(13.23

)

Weighted average common shares outstanding—basic and diluted

 

 

1,387,973

 

 

 

908,564

 

 

 

1,303,899

 

 

 

842,643

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

5


 

 

TScan Therapeutics, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balances at March 31, 2020

 

 

7,063,104

 

 

$

59,681

 

 

 

 

843,589

 

 

$

1

 

 

$

599

 

 

$

(22,943

)

 

$

(22,343

)

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

13,064

 

 

 

-

 

 

 

26

 

 

 

-

 

 

 

26

 

Vesting of restricted common stock

 

-

 

 

 

-

 

 

 

 

87,652

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

126

 

 

 

-

 

 

 

126

 

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,613

)

 

 

(5,613

)

Balances at June 30, 2020

 

 

7,063,104

 

 

 

59,681

 

 

 

 

944,305

 

 

 

1

 

 

 

751

 

 

 

(28,556

)

 

 

(27,804

)

Balances at March 31, 2021

 

 

15,616,272

 

 

 

159,411

 

 

 

 

1,304,789

 

 

 

1

 

 

 

1,522

 

 

 

(51,445

)

 

 

(49,922

)

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

27,378

 

 

 

-

 

 

 

63

 

 

 

-

 

 

 

63

 

Vesting of restricted common stock

 

-

 

 

 

-

 

 

 

 

87,652

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

 

 

 

 

 

-

 

 

 

503

 

 

 

-

 

 

 

503

 

Net loss

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,674

)

 

 

(10,674

)

Balances at June 30, 2021

 

 

15,616,272

 

 

$

159,411

 

 

 

 

1,419,819

 

 

$

1

 

 

$

2,088

 

 

$

(62,119

)

 

$

(60,030

)

 

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balances at January 1, 2020

 

 

7,063,104

 

 

$

59,681

 

 

 

 

642,903

 

 

$

-

 

 

$

268

 

 

$

(17,406

)

 

$

(17,138

)

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

124,828

 

 

1

 

 

 

246

 

 

 

-

 

 

 

247

 

Vesting of restricted common stock

 

 

-

 

 

 

-

 

 

 

 

176,574

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

237

 

 

 

-

 

 

 

237

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11,150

)

 

 

(11,150

)

Balances at June 30, 2020

 

 

7,063,104

 

 

 

59,681

 

 

 

 

944,305

 

 

 

1

 

 

 

751

 

 

 

(28,556

)

 

 

(27,804

)

Balances at January 1, 2021

 

 

7,063,104

 

 

 

59,681

 

 

 

 

1,135,858

 

 

 

1

 

 

 

1,070

 

 

 

(43,533

)

 

 

(42,462

)

Issuance of Series C convertible preferred stock (net of issuance costs of $270)

 

 

8,553,168

 

 

 

99,730

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

108,656

 

 

 

-

 

 

 

170

 

 

 

-

 

 

 

170

 

Vesting of restricted common stock

 

 

-

 

 

 

-

 

 

 

 

175,305

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

847

 

 

 

-

 

 

 

847

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(18,586

)

 

 

(18,586

)

Balances at June 30, 2021

 

 

15,616,272

 

 

$

159,411

 

 

 

 

1,419,819

 

 

$

1

 

 

$

2,088

 

 

$

(62,119

)

 

$

(60,030

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

6


 

 

TScan Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(18,586

)

 

$

(11,150

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

1,130

 

 

 

488

 

Stock-based compensation

 

 

847

 

 

 

236

 

Changes in current assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(2,219

)

 

 

(22

)

Right-of-use assets and lease liabilities, net

 

 

40

 

 

 

258

 

Accounts payable

 

 

1,593

 

 

 

505

 

Accrued expense and other liabilities

 

 

(325

)

 

 

(198

)

Deferred revenue

 

 

(3,137

)

 

 

19,999

 

Net cash used in operating activities

 

 

(20,657

)

 

 

10,116

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(6,877

)

 

 

(1,510

)

Net cash used in investing activities

 

 

(6,877

)

 

 

(1,510

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible preferred stock, net of issuance costs

 

 

99,730

 

 

 

-

 

Proceeds from exercise of stock options

 

 

170

 

 

 

247

 

Payment of deferred offering costs

 

 

(960

)

 

 

-

 

Net cash provided by financing activities

 

 

98,940

 

 

 

247

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

71,406

 

 

 

8,853

 

Cash, cash equivalents, and restricted cash - beginning of period

 

 

35,386

 

 

 

42,359

 

Cash, cash equivalents, and restricted cash - end of period

 

$

106,792

 

 

$

51,212

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Purchase of property and equipment in accounts payable and accrued liabilities

 

$

379

 

 

$

228

 

Deferred offering costs included in accrued expenses

 

$

1,580

 

 

$

-

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

7


 

 

TSCAN THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Nature of Business and Basis of Presentation

Nature of Business

TScan Therapeutics, Inc. and its wholly owned subsidiary, TScan Securities Corporation, (the Company) is a biotechnology company that was incorporated in Delaware on April 17, 2018 and has a principal place of business in Waltham, Massachusetts. The Company is a biopharmaceutical company focused on developing a pipeline of T cell receptor-engineered T cell (TCR-T) therapies for the treatment of patients with cancer.

Initial Public Offering

As further discussed in Note 11, in July 2021, the Company completed an initial public offering (IPO) of its voting common stock.

Risks, Uncertainties and Going Concern

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, successful development of technology, obtaining additional funding, protection of proprietary technology, compliance with government regulations, risks of failure of preclinical studies, clinical studies and clinical trials, the need to obtain marketing approval for its product candidates and the ability to successfully market its therapies any products that receive approval, fluctuations in operating results, economic pressure impacting therapeutic pricing, dependence on key personnel, risks associated with changes in technologies, development by competitors of technological innovations and the ability to scale manufacturing to large scale production. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from therapy sales.

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has primarily funded its operations with proceeds from sales of convertible preferred stock and with payments received under its license and collaboration agreements. Since its inception, the Company has incurred recurring losses, including net losses of $18.6 million and $11.2 million for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, the Company had an accumulated deficit of $62.1 million. The Company expects to continue to generate operating losses in the foreseeable future. The Company expects that its cash and cash equivalents as of June 30, 2021, together with the proceeds from its IPO, will be sufficient to fund the Company’s operations for at least the next twelve months from the date of the issuance of the accompanying financial statements.

Reverse Stock Split

The Company’s board of directors (the Board) and stockholders approved a 1-for-8.2 reverse stock split of the Company’s issued and outstanding common stock and outstanding shares of preferred stock, which became effective on May 13, 2021. Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted to reflect the reverse stock split.

Impact of COVID-19

In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 coronavirus has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability and business disruptions for the Company and many of the Company’s vendors.

8


 

In response to public health directives and orders and to help minimize the risk of the virus to employees, the Company has taken a series of actions aimed at safeguarding the Company’s employees and business associates, including implementing a flexible work-at-home policy. These disruptions could result in increased costs of execution of development plans or may negatively impact the quality, quantity, timing and regulatory usability of data that the Company would otherwise be able to collect. While these disruptions are currently expected to be temporary, there is considerable uncertainty around the duration of these disruptions. Therefore, the related financial impact and duration cannot be reasonably estimated at this time. To date, the Company has not experienced material business disruptions, including with its vendors, as a result of the COVID-19 pandemic.

Emerging Growth Company Status

The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (US GAAP) and applicable rules and regulations of the Securities and Exchange Commission (the SEC) regarding interim financial reporting, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. Management believes that the interim financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of its operations and cash flows. The condensed consolidated financial statements include the accounts of TScan Therapeutics, Inc. and its subsidiary TScan Securities Corporation. All intercompany balances and transactions have been eliminated in consolidation. The results for the three and six months ended June 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and unaudited condensed consolidated statements included in the Company’s final prospectus related to the Company’s IPO dated July 15, 2021 and filed with the Securities Exchange Commission on July 16, 2021, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Prospectus).

Deferred offering costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with the IPO as deferred offering costs. The deferred offering costs will be offset against the IPO proceeds during the quarter ending September 30, 2021 as a result of the consummation of the IPO. The Company had no deferred costs capitalized as of December 31, 2020 and $2.5 million of deferred offering costs as of June 30, 2021.

3. Fair Value Measurements

The following tables set forth by level, within the fair value hierarchy, the assets (liabilities) carried at fair value (in thousands):

 

 

 

Fair value measurements at June 30, 2021 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents – money market funds

 

$

104,414

 

 

$

-

 

 

$

-

 

 

$

104,414

 

Total financial assets

 

$

104,414

 

 

$

-

 

 

$

-

 

 

$

104,414

 

 

 

 

Fair value measurements at December 31, 2020 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents—money market funds

 

$

33,748

 

 

$

-

 

 

$

-

 

 

$

33,748

 

Total financial assets

 

$

33,748

 

 

$

-

 

 

$

-

 

 

$

33,748

 

9


 

 

 

The cash equivalents are comprised of funds held in an exchange traded money market fund and the fair value of the cash equivalents is determined based upon quoted market price for that fund. There were no transfers among Level 1, Level 2, or Level 3 categories in the periods presented.

The carrying value of accounts payable and accrued expenses that are reported on the condensed consolidated balance sheets approximate their fair value due to the short-term nature of these assets and liabilities.

 

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Accrued employee compensation and benefits

 

$

1,107

 

 

$

1,535

 

Accrued consulting and professional services

 

$

368

 

 

$

189

 

Accrued legal services and license fee

 

$

1,511

 

 

$

578

 

Other

 

$

763

 

 

$

192

 

Total accrued expenses and other current liabilities

 

$

3,749

 

 

$

2,494

 

 

5. Convertible Preferred Stock

Series A Preferred Stock

In 2018, the Company entered into the Series A Preferred Stock Purchase Agreement with its founding investors providing $25 million in Series A Preferred Stock equity financing and issued 3,209,240 shares of Series A Preferred Stock. Issuance costs associated with the transaction were $0.1 million.

 Series B Preferred Stock

In 2019, the Company entered into the Series B Preferred Stock Purchase Agreements providing $35 million in Series B Preferred Stock equity financing and issued 3,853,864 shares of Series B Preferred Stock. Issuance costs associated with the transaction were $0.2 million.

Series C Preferred Stock

In 2021, the Company entered into the Series C Preferred Stock Purchase Agreements providing $100 million in Series C Preferred Stock equity financing and issued 8,553,168 shares of Series C Preferred Stock. Issuance costs associated with the transaction were $0.3 million.

As of each balance sheet date, the preferred stock consisted of the following (in thousands, except for share data):

 

 

 

June 30, 2021

 

 

 

Preferred Stock Authorized

 

 

Preferred Stock Issued and Outstanding

 

 

Carrying Value

 

 

Liquidation

Preference

 

 

Common Stock

Issuable Upon

Conversion

 

Series A Preferred Stock

 

 

26,315,790

 

 

 

3,209,240

 

 

$

24,874

 

 

$

32,484

 

 

 

3,209,240

 

Series B Preferred Stock

 

 

31,601,732

 

 

 

3,853,864

 

 

 

34,807

 

 

 

44,053

 

 

 

3,853,864

 

Series C Preferred Stock

 

 

70,136,064

 

 

 

8,553,168

 

 

 

99,730

 

 

 

105,342

 

 

 

8,553,168

 

Total

 

 

128,053,586

 

 

 

15,616,272

 

 

$

159,411

 

 

$

181,879

 

 

 

15,616,272

 

 

10


 

 

 

 

December 31, 2020

 

 

 

Preferred Stock Authorized

 

 

Preferred Stock Issued and Outstanding

 

 

Carrying Value

 

 

Liquidation

Preference

 

 

Common Stock

Issuable Upon

Conversion

 

Series A Preferred Stock

 

 

26,315,790