Genprex(GNPX) - 2022 Q4 - Annual Report

Part I Business Genprex is a clinical-stage gene therapy company developing cancer and diabetes treatments through its ONCOPREX® and AAV platforms Overview Genprex is a clinical-stage gene therapy company with two main platforms. The first is an oncology platform using the non-viral ONCOPREX® Nanoparticle Delivery System to deliver tumor suppressor genes for cancer treatment. The second is a diabetes technology platform designed to treat Type 1 and Type 2 diabetes by transforming pancreatic cells to produce insulin. The company has recently conducted financings, including an At-the-Market (ATM) offering and a registered direct offering, to fund its operations - The company's oncology platform uses the ONCOPREX® Nanoparticle Delivery System to re-express deleted tumor suppressor genes in cancer cells[17] - The diabetes platform aims to transform pancreatic alpha cells into functional beta-like cells for Type 1 diabetes and to replenish beta cells for Type 2 diabetes[17] - Completed a registered direct offering on March 1, 2023, raising net proceeds of approximately $3.6 million[26] - Initiated an At-the-Market (ATM) offering program in November 2022 for up to $50.0 million, with minimal sales of $4,532 as of December 31, 2022[25] Our Pipeline Genprex's pipeline is focused on gene therapies for cancer and diabetes. The lead candidate, REQORSA®, is being developed for NSCLC and SCLC in combination with existing targeted and immunotherapies. The diabetes program includes preclinical candidates GPX-002 and GPX-003 Genprex Product Development Pipeline | Product Candidate | Indication | Development Stage | | :--- | :--- | :--- | | ONCOLOGY | | | | REQORSA® + Tagrisso® (Acclaim-1) | NSCLC | Phase 1/2 | | REQORSA® + Keytruda® (Acclaim-2) | NSCLC | Phase 1/2 | | REQORSA® + Tecentriq® (Acclaim-3) | SCLC | Phase 1/2 | | DIABETES | | | | GPX-002 | Type 1 Diabetes | Preclinical | | GPX-003 | Type 2 Diabetes | Preclinical | Oncology Program The oncology program is centered on REQORSA®, an immunogene therapy delivering the TUSC2 tumor suppressor gene via the ONCOPREX® Nanoparticle Delivery System. TUSC2 is absent in a high percentage of lung cancers (82% of NSCLCs, 100% of SCLCs). REQORSA has a multimodal action, interrupting cancer cell proliferation, inducing apoptosis, and modulating the immune response. The company is conducting three key clinical trials: Acclaim-1 (with Tagrisso for NSCLC), Acclaim-2 (with Keytruda for NSCLC), and Acclaim-3 (with Tecentriq for SCLC). Both Acclaim-1 and Acclaim-2 have received FDA Fast Track Designation - REQORSA® delivers the TUSC2 tumor suppressor gene, which is reduced or absent in approximately 82% of NSCLCs and 100% of SCLCs[49] - The ONCOPREX® Nanoparticle Delivery System uses positively charged lipid nanoparticles to target negatively charged cancer cells, delivering the TUSC2 gene intravenously[43][60] - Acclaim-1 trial combines REQORSA® with Tagrisso® for late-stage NSCLC patients who have progressed on Tagrisso. The trial is in the final cohort of its Phase 1 dose escalation[19][73] - Acclaim-2 trial combines REQORSA® with Keytruda® for late-stage NSCLC patients who have progressed on Keytruda. Enrollment in the Phase 1 dose escalation is expected to complete by the end of 2023[20][79] - Acclaim-3 trial will combine REQORSA® with Tecentriq® as maintenance therapy for extensive-stage SCLC. The first patient is expected to be dosed by the end of Q3 2023[22][82] - The FDA has granted Fast Track Designation for both the Acclaim-1 trial and Acclaim-2 trial combination therapies[19][20] Diabetes Program Genprex's diabetes program, licensed from the University of Pittsburgh, uses an AAV vector to deliver Pdx1 and MafA genes directly to the pancreas. GPX-002 for Type 1 diabetes aims to convert alpha cells into insulin-producing beta-like cells that can evade the immune system. GPX-003 for Type 2 diabetes is designed to rejuvenate existing beta cells. Recent preclinical data in a non-human primate (NHP) model of Type 1 diabetes showed that GPX-002 treatment led to decreased insulin requirements, increased c-peptide levels, and improved glucose tolerance - The diabetes gene therapy approach uses an adeno-associated virus (AAV) vector to deliver Pdx1 and MafA genes into the pancreatic duct[24][129] - GPX-002 (Type 1) is designed to transform alpha cells into functional, insulin-producing beta-like cells that evade the immune system[24][129] - GPX-003 (Type 2) is believed to replenish and rejuvenate insulin-making beta cells[24][129] - Preclinical data in a non-human primate model of Type 1 diabetes showed statistically significant therapeutic potential for GPX-002, with treated animals showing decreased insulin requirements and improved glucose tolerance[136] Process Development and Manufacturing Genprex utilizes third-party contract development and manufacturing organizations (CDMOs) for its product candidates but has developed internal core competencies in CMC strategy, risk assessment, and supply chain management. For the oncology program, the company has established a robust, scalable cGMP manufacturing process for REQORSA, successfully transferring the technology from MD Anderson to CDMOs. For the earlier-stage diabetes program, it is working with the University of Pittsburgh to transfer manufacturing technologies for GPX-002 and GPX-003 to a network of CDMOs - The company uses third-party CDMOs for manufacturing but has developed internal expertise in CMC strategy, risk assessment, and supply chain management[144][150] - Manufacturing for REQORSA has been successfully transferred from MD Anderson to CDMOs and scaled up for clinical trial supply in accordance with cGMP[144] - The company is currently transferring manufacturing processes for its diabetes candidates, GPX-002 and GPX-003, to a network of CDMOs[145] Intellectual Property Genprex's intellectual property strategy relies on patents, trade secrets, and trademarks. The company holds worldwide, exclusive licenses from MD Anderson for its oncology portfolio, which includes 14 issued patents and 13 pending applications expected to expire between 2024 and 2038. For its diabetes technologies, it has exclusive licenses from the University of Pittsburgh covering an issued patent and 7 pending applications, expected to expire between 2035 and 2043. The company also holds registered trademarks for GENPREX®, REQORSA®, and ONCOPREX® - Holds exclusive licenses from MD Anderson for oncology technologies, covering 14 issued patents and 13 pending applications[148] - Holds exclusive licenses from the University of Pittsburgh for diabetes technologies, covering 1 issued patent and 7 pending applications[148] - Owns registered trademarks for GENPREX®, REQORSA®, and ONCOPREX®[149] Licenses and Research Collaborations Genprex's core technologies are secured through key license agreements. The ONCOPREX® and REQORSA® technologies are licensed from MD Anderson, requiring royalty payments of 1.5% of net sales to MD Anderson and 1.0% to Introgen Research Institute (IRI). A 2020 agreement with MD Anderson for TUSC2 in combination with immunotherapies involves up to $6.15 million in milestone payments and tiered royalties. The diabetes technologies are licensed from the University of Pittsburgh under three separate agreements, each requiring an initial fee, annual maintenance fees, milestone payments up to $3.975 million, and tiered royalties - The primary oncology technology is licensed from MD Anderson, with a 1.5% royalty on net sales payable to MD Anderson and a 1.0% royalty payable to IRI[159] - A 2020 license with MD Anderson for TUSC2 with immunotherapies includes up to $6.15 million in milestone payments and low single-digit to low double-digit royalties[160] - Three separate exclusive license agreements with the University of Pittsburgh cover diabetes gene therapies, each with potential milestone payments of up to $3.975 million plus royalties[163][164] Government Regulation Genprex's products are subject to extensive regulation by the FDA in the U.S. and other global authorities. Gene therapy products are regulated as biologics and require a Biologics License Application (BLA) for marketing approval, a process involving preclinical studies and multi-phase clinical trials under Good Laboratory, Clinical, and Manufacturing Practices (GLP, GCP, GMP). The company has received two Fast Track Designations from the FDA for its lead programs. The regulatory landscape also includes post-approval requirements, potential for orphan drug designation, and compliance with fraud, abuse, and privacy laws like the Anti-Kickback Statute and HIPAA - Gene therapy products are regulated by the FDA's Center for Biologics Evaluation and Research (CBER) and require an approved Biologics License Application (BLA) for marketing[173][175] - The FDA has four expedited programs: Fast Track Designation, Breakthrough Therapy Designation, Accelerated Approval, and Priority Review. Genprex has received two Fast Track Designations for REQORSA[196][197] - The company's activities are also subject to federal and state fraud and abuse laws, including the Anti-Kickback Statute, False Claims Act, and privacy laws like HIPAA[220][222] Risk Factors The company faces significant financial, operational, and regulatory risks, including a history of losses and reliance on third parties - Financial Risk: The company has a history of net losses ($100.4 million accumulated deficit as of Dec 31, 2022), has never been profitable, and requires substantial additional funding to continue operations. Existing cash is expected to fund operations into Q2 2024[266][268][273] - Development & Commercialization Risk: Success depends heavily on REQORSA, GPX-002, and GPX-003. Clinical trials face risks of failure, delays in patient enrollment, and undesirable side effects. The COVID-19 pandemic has caused and may continue to cause trial delays and supply chain disruptions[281][289][311] - Third-Party Dependence Risk: The company relies on third-party CDMOs for manufacturing and CROs for clinical trials. Any failure by these parties to perform, maintain cGMP compliance, or meet deadlines could significantly harm development programs[355][358] - Intellectual Property Risk: The company's business depends on licenses from MD Anderson and the University of Pittsburgh. Failure to comply with license terms could result in loss of rights. The licensed IP is also subject to U.S. government rights due to federal funding[367][371] - Regulatory Risk: There is no assurance that product candidates will receive regulatory approval. Even if approved, products will be subject to extensive ongoing regulatory oversight, and coverage and reimbursement from payors are uncertain[319][328][340] Unresolved Staff Comments No unresolved staff comments were reported Properties The company operates virtually and does not own real property, with its principal office in Austin, Texas - The company operates as a virtual company and does not own any real property[435] Legal Proceedings The company is not aware of any material legal proceedings or claims impacting its operations - As of the report date, the company is not aware of any material legal proceedings[436] Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, has never paid dividends, and issued unregistered securities in 2022 - Common stock trades on The Nasdaq Capital Market under the symbol "GNPX"[440] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[442] - In 2022, the company issued an aggregate of 81,752 shares of common stock and a warrant for 3,000 shares to consultants as compensation for services in unregistered transactions[443][445] Management's Discussion and Analysis of Financial Condition and Results of Operations Net loss increased in 2022 due to higher R&D and G&A expenses, with current cash projected to fund operations into Q2 2024 Results of Operations For the year ended December 31, 2022, Genprex reported a net loss of $23.7 million, a 15% increase from the $20.7 million net loss in 2021. This was driven by a $2.5 million (28%) increase in R&D expenses to $11.5 million, due to manufacturing and clinical trial activities for Acclaim-1 and Acclaim-2. General & Administrative expenses rose by $0.6 million (5%) to $12.3 million, mainly from increased headcount Comparison of Operating Results (Years Ended Dec 31) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | R&D Expense | $11,510,074 | $8,970,865 | +$2,539,209 | +28% | | G&A Expense | $12,295,070 | $11,676,703 | +$618,367 | +5% | | Net Loss | $23,740,621 | $20,664,969 | +$3,075,652 | +15% | - The 28% increase in R&D expense was primarily due to advancements in manufacturing programs and increased use of CROs for the Acclaim-1 and Acclaim-2 clinical trials[472] - The 5% increase in G&A expense was mainly due to an increase in G&A headcount from 7 to 10 full-time employees[473] Liquidity and Capital Resources As of December 31, 2022, Genprex had $21.0 million in cash and an accumulated deficit of $102.8 million. The company has funded operations primarily through equity sales, including a $50 million ATM facility established in November 2022 and a registered direct offering in March 2023 that raised approximately $3.6 million in net proceeds. Management estimates current cash is sufficient to fund operations and planned clinical trials into the second quarter of 2024. However, significant additional capital will be necessary to complete development and commercialize its product candidates - As of December 31, 2022, the company had $20,954,069 in cash and an accumulated deficit of $102,827,819[478][480] - The company estimates its current cash will fund operations and planned clinical activities into the second quarter of 2024[482] - Subsequent to year-end, the company raised approximately $3.6 million in net proceeds from a registered direct offering on March 1, 2023[480] - An At-the-Market (ATM) facility for up to $50.0 million was established in November 2022, with minimal proceeds raised by year-end[479] Cash Flow Summary (Years Ended Dec 31) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(17,778,964) | $(14,284,924) | | Net cash provided (used) in investing activities | $97,731 | $(83,796) | | Net cash provided in financing activities | $6,426 | $25,677,911 | Financial Statements and Supplementary Data This section presents the company's audited financial statements and the independent auditor's report for 2021 and 2022 - The financial statements and supplementary data required by this item are included after Part IV of this Annual Report on Form 10-K beginning on page F-1[492] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on accounting and financial disclosure were reported Controls and Procedures Disclosure controls were ineffective as of December 31, 2022, due to a material weakness in segregation of duties, with remediation efforts underway - Management concluded that disclosure controls and procedures were not effective as of December 31, 2022[495] - A material weakness in internal control over financial reporting was identified due to a lack of segregation of duties in accounting functions[496][499] - Remediation plans are underway, including implementing new accounting software processes, enhancing review procedures with legal and manufacturing teams, forming a Disclosure Committee, and hiring additional staff[501][506] Other Information No other material information was reported Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[508] Executive Compensation Executive compensation information is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[510] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related stockholder matters are incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[511] Certain Relationships and Related Transactions, and Director Independence Related party transactions and director independence information are incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[512] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[513] Part IV Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed as part of the Form 10-K, with financial statements starting on page F-1 - The financial statements required by this item begin on page F-1[515] - All financial statement schedules are omitted because the required information is inapplicable or already presented in the financial statements[516] Financial Statements Report of Independent Registered Public Accounting Firm The auditor issued a fair opinion on the financial statements, highlighting equity transaction valuation as a critical audit matter and noting revised 2021 financials - The auditor issued a standard opinion on the financial statements[532] - A critical audit matter was identified related to the valuation of equity transactions, specifically stock options and warrants, due to the significant judgment involved[537][538][539] - The auditor noted that the 2021 financial statements have been revised[533] Financial Statements Tables Financial tables show decreased assets and equity, increased net loss, and higher cash usage in operations for 2022 compared to 2021 Balance Sheet Data (as of December 31) | | 2022 | 2021 (Revised) | | :--- | :--- | :--- | | Cash | $20,954,069 | $38,628,876 | | Total Assets | $25,085,027 | $42,862,286 | | Total Liabilities | $2,810,287 | $1,585,295 | | Total Stockholders' Equity | $22,274,740 | $41,276,991 | Statement of Operations Data (for the year ended December 31) | | 2022 | 2021 (Revised) | | :--- | :--- | :--- | | Research and development | $11,510,074 | $8,970,865 | | General and administrative | $12,295,070 | $11,676,703 | | Net loss | $(23,740,621) | $(20,664,969) | | Net loss per share | $(0.50) | $(0.44) | Statement of Cash Flows Data (for the year ended December 31) | | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(17,778,964) | $(14,284,924) | | Net cash provided by financing activities | $6,426 | $25,677,911 | Notes to Financial Statements Notes detail accounting policies, equity transactions, and commitments, including a 2021 error correction and a March 2023 financing event - Correction of Error: The 2021 financial statements were revised to correct an error in recognizing share-based compensation expense for cliff-vesting awards. This increased the 2021 net loss by $1,069,345[563][564] - Commitments: The company has a contingent obligation to the NIH for $340,000 (as of Dec 31, 2022), payable upon FDA approval using NIH technology. It also has significant milestone and royalty commitments to MD Anderson and the University of Pittsburgh[608][609][611] - Equity Plans: The 2018 Equity Incentive Plan reserve was increased by 2,393,735 shares on Jan 1, 2022. As of Dec 31, 2022, 481,772 shares remained available for future awards[593] - Subsequent Events: On March 1, 2023, the company completed a registered direct offering, selling 3,809,524 shares and accompanying warrants, for net proceeds of approximately $3.6 million[626]