10-Q
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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 March 31, 2022

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: (857) 399-9500

 

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 May 6, 2022, the registrant had 18,888,085 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

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

Item 4.

Controls and Procedures

19

PART II.

OTHER INFORMATION

20

Item 1.

Legal Proceedings

20

Item 1A.

Risk Factors

20

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

81

Item 3.

Defaults Upon Senior Securities

81

Item 4.

Mine Safety Disclosures

81

Item 5.

Other Information

81

Item 6.

Exhibits

82

Signatures

83

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, 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, or the Exchange Act, that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report are forward-looking statements.

In some cases, you can identify forward-looking statements by words such as “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, although not all forward-looking statements contain these identifying words. 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 T cell receptor-engineered T cell, or 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;

• the timing of and our ability to submit applications for, and obtain and, if approved, maintain regulatory approvals for our product candidates;

• 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.

2


 

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions included in this Quarterly Report, particularly those described in the “Risk Factors” section in Part II, Item 1A of this Quarterly Report, that could cause actual results or events to differ materially from the forward-looking statements that we make. 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 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. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. 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. Except as required by law, we assume no obligation to update or revise these any forward-looking statements for any reason if new information becomes available in the future.

You should read this Quarterly Report and the documents that we have filed as an exhibit to this Quarterly Report 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)

 

 

 

March 31,
2022

 

 

December 31,
2021

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

140,838

 

 

$

161,405

 

Prepaid expenses and other current assets

 

 

4,911

 

 

 

4,249

 

Total current assets

 

 

145,749

 

 

 

165,654

 

Property and equipment, net

 

 

10,689

 

 

 

11,765

 

Right-of-use assets

 

 

5,125

 

 

 

5,491

 

Prepaid rent

 

 

1,444

 

 

 

-

 

Restricted cash

 

 

5,031

 

 

 

5,031

 

Long-term deposit

 

 

166

 

 

 

166

 

Total assets

 

$

168,204

 

 

$

188,107

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,886

 

 

$

1,765

 

Accrued expenses and other current liabilities

 

 

3,012

 

 

 

6,517

 

Operating lease liability, current portion

 

 

1,698

 

 

 

1,651

 

Deferred revenue, current portion

 

 

10,869

 

 

 

11,410

 

Total current liabilities

 

 

18,465

 

 

 

21,343

 

Deferred revenue, net of current portion

 

 

-

 

 

 

1,497

 

Operating lease liability, net of current portion

 

 

3,948

 

 

 

4,392

 

Other long-term liabilities

 

 

97

 

 

 

97

 

Total liabilities

 

 

22,510

 

 

 

27,329

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding

 

 

-

 

 

 

-

 

Voting common stock, $0.0001 par value; 300,000,000 shares authorized; 18,917,304 and 18,881,333 shares issued; and 18,888,085 and 18,764,463 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

2

 

 

 

2

 

Non-voting common stock, $0.0001 par value; 10,000,000 shares authorized; 5,143,134 shares issued and outstanding

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

254,005

 

 

 

252,933

 

Accumulated deficit

 

 

(108,314

)

 

 

(92,158

)

Total stockholders' equity

 

 

145,694

 

 

 

160,778

 

Total liabilities and stockholders' equity

 

$

168,204

 

 

$

188,107

 

 

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
March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

 

 

 

 

 

Collaboration and license revenue

 

$

3,021

 

 

$

2,027

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

14,690

 

 

$

7,339

 

General and administrative

 

 

4,494

 

 

$

2,606

 

Total operating expenses

 

 

19,184

 

 

 

9,945

 

Loss from operations

 

 

(16,163

)

 

 

(7,918

)

Other income:

 

 

 

 

 

 

Interest and other income (loss), net

 

 

7

 

 

 

6

 

Net loss

 

$

(16,156

)

 

$

(7,912

)

Net loss per share, basic and diluted

 

$

(0.67

)

 

$

(6.49

)

Weighted average common shares outstanding—basic and diluted

 

 

23,974,642

 

 

 

1,218,909

 

 

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’ Equity (Deficit)

(in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Non-voting Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity (Deficit)

 

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

 

 

-

 

 

 

-

 

 

 

 

81,289

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

108

 

 

 

-

 

 

 

108

 

Vesting of restricted common stock

 

 

-

 

 

 

-

 

 

 

 

87,642

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

344

 

 

 

-

 

 

 

344

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,912

)

 

 

(7,912

)

Balances at March 31, 2021

 

 

15,616,272

 

 

$

159,411

 

 

 

 

1,304,789

 

 

$

1

 

 

 

-

 

 

$

-

 

 

$

1,522

 

 

$

(51,445

)

 

$

(49,922

)

Balances at January 1, 2022

 

 

-

 

 

$

-

 

 

 

 

18,764,463

 

 

$

2

 

 

 

5,143,134

 

 

$

1

 

 

$

252,933

 

 

$

(92,158

)

 

$

160,778

 

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

35,971

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

88

 

 

 

-

 

 

 

88

 

Vesting of restricted common stock

 

 

-

 

 

 

-

 

 

 

 

87,651

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

984

 

 

 

-

 

 

 

984

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(16,156

)

 

 

(16,156

)

Balances at March 31, 2022

 

 

-

 

 

$

-

 

 

 

 

18,888,085

 

 

$

2

 

 

 

5,143,134

 

 

$

1

 

 

$

254,005

 

 

$

(108,314

)

 

$

145,694

 

 

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)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(16,156

)

 

$

(7,912

)

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

 

 

 

 

 

 

Depreciation expense

 

 

1,195

 

 

 

469

 

Stock-based compensation

 

 

984

 

 

 

344

 

Changes in current assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(662

)

 

 

(718

)

Prepaid rent

 

 

(1,444

)

 

 

-

 

Right-of-use assets and lease liabilities, net

 

 

(31

)

 

 

56

 

Accounts payable

 

 

824

 

 

 

162

 

Accrued expense and other liabilities

 

 

(2,796

)

 

 

(1,053

)

Deferred revenue

 

 

(2,038

)

 

 

(1,305

)

Net cash used in operating activities

 

 

(20,124

)

 

 

(9,957

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(531

)

 

 

(2,959

)

Net cash used in investing activities

 

 

(531

)

 

 

(2,959

)

Cash flows from financing activities:

 

 

 

 

 

 

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

 

 

-

 

 

 

99,730

 

Proceeds from exercise of stock options

 

 

88

 

 

 

108

 

Payment of deferred offering costs

 

 

-

 

 

 

(212

)

Net cash provided by financing activities

 

 

88

 

 

 

99,626

 

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

 

 

(20,567

)

 

 

86,710

 

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

 

 

166,436

 

 

 

35,386

 

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

 

$

145,869

 

 

$

122,096

 

Summary of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:

 

 

 

 

 

 

Cash and cash equivalents

 

 

140,838

 

 

 

121,501

 

Restricted cash

 

 

5,031

 

 

 

595

 

Total cash, cash equivalents, and restricted cash

 

$

145,869

 

 

$

122,096

 

Supplemental cash flow information:

 

 

 

 

 

 

Purchase of property and equipment in accounts payable and accrued liabilities

 

$

416

 

 

$

1,837

 

Deferred offering costs included in accrued expenses

 

$

-

 

 

$

911

 

 

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.

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 months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, 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 notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 9, 2022. In the opinion of the Company’s management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included.

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 and clinical trials, the need to obtain marketing approval for its product candidates and the ability to successfully market 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 capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from 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 capital stock and with payments received under its license and collaboration agreements. Since its inception, the Company has incurred recurring losses, including net losses of $16.2 million and $7.9 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the Company had an accumulated deficit of $108.3 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 March 31, 2022 will be sufficient to fund the Company’s operations for at least the next twelve months from the date of the issuance of the financial statements.

Impact of COVID-19

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. To date, the Company has 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 the Company would otherwise be able to collect. There continues to be uncertainty around the duration and impacts of these potential disruptions.

 

8


 

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. Fair Value Measurements

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

 

 

 

Fair value measurements at March 31, 2022 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents – money market funds

 

$

139,559

 

 

$

-

 

 

$

-

 

 

$

139,559

 

Total financial assets

 

$

139,559

 

 

$

-

 

 

$

-

 

 

$

139,559

 

 

 

 

Fair value measurements at December 31, 2021 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents – money market funds

 

$

159,668

 

 

$

-

 

 

$

-

 

 

$

159,668

 

Total financial assets

 

$

159,668

 

 

$

-

 

 

$

-

 

 

$

159,668

 

 

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.

 

3. Accrued Expenses and Other Current Liabilities

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accrued employee compensation and benefits

 

$

1,001

 

 

$

2,600

 

Accrued research and development

 

 

1,519

 

 

 

1,902

 

Accrued consulting and professional services

 

 

228

 

 

 

949

 

Accrued legal services and license fee

 

 

106

 

 

 

54

 

Other

 

 

158

 

 

 

1,012

 

Total accrued expenses and other current liabilities

 

$

3,012

 

 

$

6,517

 

 

9


 

4. Collaboration and License Agreements

Novartis

In March 2020, the Company entered into a Collaboration and License Agreement (the Novartis Agreement) with Novartis Institutes For Biomedical Research, Inc. (Novartis) to collaborate on their research efforts to discover and develop novel TCR-T therapies. At the inception date of the Novartis Agreement, Novartis or its affiliates held an ownership interest of more than 10% in the Company, and at March 31, 2022, Novartis held less than 10% of the common shares outstanding. Under the Novartis Agreement, the Company will identify and characterize TCRs in accordance with a research plan and transfer data arising from the research plan. Novartis will have the option to license and develop TCRs for up to three novel targets identified in performance of the collaboration during the collaboration period of the Novartis Agreement. Novartis will also have rights of first negotiation for certain additional targets and TCRs identified in performance of the collaboration during a defined collaboration period of the Novartis Agreement and for 180 days after such collaboration period ends (which collaboration period will end no later than March 2023). If during such 180-day right of first negotiation period, the Company notifies Novartis of the Company’s intent to grant a third party a license to a target or TCR identified in the collaboration, then Novartis may obtain the exclusive right to negotiate a license to such target or TCR for an additional 270 days by providing the Company with a term sheet to license such target or TCR within 90 days of the Company’s notice of such intent. The Novartis Agreement provides that the Company will pay an upfront fee of $20.0 million, research funding totaling $10.0 million and potential milestone payments contingent on clinical, regulatory and sales success. In addition to payments upon achievement of certain clinical and regulatory milestones, Novartis will pay the Company mid-single to low double-digit royalties on net sales for each product directed to a target licensed by Novartis. After the end of the collaboration period and the expiration of Novartis’ first right of negotiation, the Company is free to develop TCRs against targets not licensed by Novartis.

The Company concluded that Novartis meets the definition of a customer, as the Company is delivering research and development activities and know-how rights. The Company identified performance obligations for research and development activities, data reporting and participation in joint steering and research committees. The Company determined there is a single performance obligation due to the services being highly interrelated and are therefore not distinct in the context of the contract. The Company combined the pre-option research services and data reporting into a single performance obligation. Novartis has an exclusive option to obtain a commercial license for up to three Targets (as defined in the Novartis Agreement) to pursue further development and commercialization of the respective Target. Pursuant to the Novartis Agreement, the option for Novartis to license, develop, and commercialize Targets is not a performance obligation at the outset of the Novartis Agreement as it is a customer option that does not represent a material right.

The Company looked to the promises in the arrangement to determine the method of recognition that best coincides with the pattern of delivery. The Company concluded that the performance of the research services over the expected research term was the predominant promise within the performance obligation. The Company is recognizing the revenue associated with the performance obligation using the input method, according to the actual costs incurred as a percentage of total expected costs to complete the research services. As costs are incurred, the Company will recognize revenue over time. Any change in the estimated percentage complete due to a revised cost forecast will be adjusted in the period in which the change in estimate occurs and the revenue recognition will be updated accordingly. The Company expects the research term to last approximately three years, which is inclusive of the option to extend the arrangement.

The Company determined that the $20.0 million upfront payment, together with the $10.0 million of estimated research costs to be reimbursed by Novartis, to be the entirety of the consideration to be included in the transaction price as of the outset of the arrangement. The potential milestone payments that the Company is eligible to receive were excluded from the transaction price, as all milestone amounts were fully constrained based on the assessed probability of achievement. The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust the estimate of the transaction price.

During the three months ended March 31, 2022, the Company recognized $3.0 million of revenue associated with the Novartis Agreement based on performance completed during that period. Additionally, during the three months ended March 31, 2022, the Company incurred $1.0 million of costs associated with the Novartis Agreement that were recorded within research and development expenses in the statements of operations. Additionally, as of March 31, 2022, the Company had current deferred revenue of $10.9 million and no long-term deferred revenue due to the Novartis Agreement.

5. Commitments and Contingencies

Brigham and Women’s License Agreement

The Company obtained the worldwide exclusive license to its foundational technology from The Brigham and Women’s Hospital, Inc. (or BWH). The license, as amended, grants worldwide exclusive use to the patent underlying the TargetScan technology in exchange for fees including development milestones and various royalties on product sales should they occur in the future.

 

 

10


 

Royalty Agreement

In June 2018, the Company amended and restated an existing royalty agreement with one of its founders. Under the amended and restated royalty agreement, the Company agreed to pay the founder an aggregate royalty of 1% of net sales of any product sold by the Company or by any of its direct or indirect licensees for use in the treatment of any disease or disorder covered by a pending patent application or issued patent held or controlled by the Company as of the last date that the founder was providing services to the Company as a director or consultant under a written agreement in perpetuity. Royalties are payable with respect to each applicable product for a defined period of time set forth in the royalty agreement. The founder assigned his rights and obligations under the royalty agreement to one of his affiliated entities in January 2021.

Lease

On November 1, 2021, the Company entered a new lease for laboratory and office space. This lease will commence when the Company obtains possession of the underlying asset, which is expected to occur in the fourth quarter of 2022. The Company provided a letter of credit in the amount of $4.4 million as a security for the lease, which expires on November 30, 2022, at which point the letter will automatically renew each calendar year up to but not beyond April 1, 2033. The cash securing the letter of credit is classified as restricted cash on the consolidated balance sheet. Annual fixed rent will start at $7.6 million increasing 3% annually to $9.9 million through the original term of the lease, which is ten years and two months following the lease commencement date. As of March 31, 2022, $1.4 million in payments relating to landlord-owned leasehold improvements was recorded to prepaid rent as a component of other non-current assets. On the lease commencement date, the Company will reclassify the prepayment to the right-of-use asset, thereby increasing its initial value, but it will not be included in the measurement of the lease liability. The lease was not recorded on the condensed consolidated balance sheet as a component of the Company’s right-of-use asset and operating lease liabilities as the facility is under construction at the date of the issuance of these financial statements.

6. Net Loss Per Share

Net Loss Per Share

Basic and diluted net loss per share was calculated as follows (in thousands, except share and per share data):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

Net loss

 

$

(16,156

)

 

$

(7,912

)

Denominator:

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

 

23,974,642

 

 

 

1,218,909

 

Net loss per share, basic and diluted

 

$

(0.67

)

 

$

(6.49

)

 

The Company has two classes of common stock, each with identical participation rights to earnings and liquidation preferences, and therefore the calculation of net loss per share as described above is identical to the calculation under the two-class method. The Company excluded the following potential common shares from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Series A Preferred Stock (as converted to common stock)

 

 

-

 

 

 

3,209,243

 

Series B Preferred Stock (as converted to common stock)

 

 

-

 

 

 

3,853,870

 

Series C Preferred Stock (as converted to common stock)

 

 

-

 

 

 

8,553,168

 

Unvested restricted common stock

 

 

29,219

 

 

 

350,638

 

Options to purchase common stock

 

 

4,085,851

 

 

 

2,525,506

 

Total

 

 

4,115,070

 

 

 

18,492,424

 

 

11


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 Securities and Exchange Commission, or SEC, on March 9, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” and “Special Note Regarding Forward-Looking Statements” sections of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

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 U.S. Food and Drug Administration, or FDA, for each of TSC-100 and TSC-101 in the fourth quarter of 2021. The FDA has cleared the IND for TSC-100 while the IND for TSC-101 remains on clinical hold pending additional assessment of the potential for off-tumor reactivity in certain tissues. We plan to initiate the Phase 1 clinical study of TSC-100 in the first half of 2022. Pending clearance of the IND for TSC-101, we will initiate the TSC-101 arm of the trial. In addition, we are developing multiple TCR-T therapy candidates for the treatment of solid tumors. One of the key goals for our solid tumor program is to develop what we refer to as multiplexed TCR-T therapy. We are designing these multiplexed therapies to be a combination of up to three highly active TCRs that are customized for each patient and selected from our bank of therapeutic TCRs, which we refer to as ImmunoBank. We plan to populate the ImmunoBank with TCRs for multiple targets as well as multiple HLA types for each target, thus helping us to overcome the key solid tumor resistance mechanisms of target loss as well as HLA loss. We are currently advancing five solid tumor programs: TSC-200 is in IND-enabling activities; TSC-204 is advancing to IND-enabling studies; and TSC-201, TSC-202, and TSC-203 are in lead optimization. We expect to submit two IND applications for our solid tumor TCR-T therapy candidates in the second half of 2022 with additional IND applications expected to be submitted in 2023.

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 July 2021 and revenue received under our collaboration agreement, or the Novartis Agreement, with Novartis Institutes for BioMedical Research, Inc., or Novartis. Through March 31, 2022, we have received gross proceeds of $159.4 million from sales of our convertible preferred stock. We received $89.6 million in net proceeds (after deducting underwriting discounts, commissions and offering costs) from our initial public offering. Under the terms of the Novartis Agreement, we received a $20.0 million upfront payment and agreed to invest an estimated $10.0 million in research costs that will be reimbursed by Novartis over the research period of the Novartis Agreement.

12


 

We have incurred significant operating losses since our inception. We reported net losses of $16.2 million and $7.9 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had an accumulated deficit of $108.3 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We expect that our expenses and capital expenditure requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

continue our research and development efforts to identify and develop product candidates and submit investigational new drug applications, or INDs, for such product candidates;
conduct preclinical studies and commence clinical trials for our current and future product candidates based on our proprietary platform;
develop processes suitable for manufacturing and clinical development;
continue to develop and expand our manufacturing capabilities;
seek marketing approvals for any product candidates that successfully complete clinical trials;
build commercial infrastructure to support sales and marketing for our product candidates;
expand, maintain and protect our intellectual property portfolio;
hire additional clinical, regulatory and scientific personnel; and
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.

13


 

Results of Operations

Three months ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021 (in thousands):

 

 

 

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 $3.0 million revenue for the three months ended March 31, 2022 and $2.0 million revenue for the three months ended March 31, 2021. The increase was related to the recognition of revenue associated with the Novartis Agreement, which has an expected term that ends no later than March 2023. The revenue generated from the Novartis Agreement has increased throughout the three months ended March 31, 2022 and is expected to continue through the end of the year.

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021 (in thousands):