TRACON(TCON) - 2022 Q2 - Quarterly Report

PART I Financial Statements The company reported increased net losses and decreased assets, raising substantial doubt about its ability to continue as a going concern Condensed Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $13,580 | $24,072 | | Total current assets | $14,156 | $24,936 | | Total assets | $15,677 | $26,557 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $12,063 | $13,676 | | Total liabilities | $13,135 | $14,843 | | Total stockholders' equity | $2,542 | $11,714 | | Total liabilities and stockholders' equity | $15,677 | $26,557 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | (in thousands, except per share data) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Collaboration revenue | $0 | $0 | | Research and development expenses | $2,923 | $5,916 | | General and administrative expenses | $3,316 | $9,769 | | Loss from operations | $(6,239) | $(15,685) | | Net loss | $(6,230) | $(15,703) | | Net loss per share, basic and diluted | $(0.31) | $(0.79) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,759) | $(9,033) | | Net cash (used in) provided by investing activities | $(6) | $3,970 | | Net cash provided by (used in) financing activities | $4,273 | $(1,488) | | Change in cash and cash equivalents | $(10,492) | $(6,551) | | Cash and cash equivalents at end of period | $13,580 | $25,580 | - The company has incurred operating losses since inception, with an accumulated deficit of $223.5 million as of June 30, 2022[24] - Management has substantial doubt about the company's ability to continue as a going concern for the next 12 months, as existing cash of $13.6 million may not be sufficient to meet obligations[24] Management's Discussion and Analysis of Financial Condition and Results of Operations The biopharmaceutical company focuses on envafolimab development, with increased R&D and G&A expenses, and faces substantial doubt about its going concern status - TRACON is a biopharmaceutical company focused on developing and commercializing novel targeted cancer therapeutics[69] - Its lead product candidate is envafolimab, a PD-L1 antibody for treating sarcoma, currently in the ENVASARC Phase 2 pivotal trial[70] - The company is involved in a significant legal dispute with I-Mab Biopharma concerning collaboration agreements for TJ004309 and up to five bispecific antibodies[81][117] - An arbitration tribunal decision is expected by September 30, 2022, with an unpredictable outcome that could materially impact the company[81][117] Key Clinical Pipeline and Expected Data | Product Candidate | Indication | Phase | Data Expected | | :--- | :--- | :--- | :--- | | Envafolimab | Soft Tissue Sarcoma (UPS and MFS) | Pivotal Phase 2 | Interim Data - 2022 and 2023; Final Data – 2024 | | Envafolimab + YH001 | Multiple Soft Tissue Sarcoma Subtypes | Phase 1/2 (planned) | 2023 and 2024 | | TRC102 | Lung Cancer | Randomized Phase 2 | 2024 | - For the six months ended June 30, 2022, R&D expenses increased by $0.6 million to $5.9 million compared to the same period in 2021, driven by the ENVASARC trial[131] - G&A expenses increased by $1.0 million to $9.8 million, primarily due to legal expenses from the I-Mab arbitration[132] - The company has substantial doubt about its ability to continue as a going concern[134][146] - Cash and cash equivalents of $13.6 million as of June 30, 2022, are expected to fund operations into 2023, but not for a full 12 months from the report's issuance, necessitating additional funding[134][146] Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this section is not applicable - Not applicable[149] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2022, with no material changes in internal control over financial reporting during the quarter - The company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were effective as of June 30, 2022[152] - There were no changes in the company's internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[153] PART II OTHER INFORMATION Legal Proceedings The company is not party to any material legal proceedings, except for its ongoing arbitration with I-Mab Biopharma regarding collaboration agreements - The company is not currently a party to any material legal proceedings, except for the ongoing dispute and related arbitration with I-Mab Biopharma[156] Risk Factors The company faces significant financial, development, and operational risks, including going concern doubt, reliance on its lead candidate and third parties, and macroeconomic impacts - The company has a history of operating losses, an accumulated deficit of $223.5 million, and expects to incur substantial losses for the foreseeable future[160][162] - There is substantial doubt about its ability to continue as a going concern without raising additional capital[160][162] - The business is heavily dependent on the success of its lead product candidate, envafolimab[158] - Clinical development is lengthy, expensive, and uncertain, with a risk of failure at any stage[158] - The company relies on collaboration partners such as 3D Medicines, Alphamab, Eucure, and Biocytogen for critical development and manufacturing activities[215][218] - The ongoing dispute with I-Mab over collaboration agreements creates significant uncertainty and could adversely affect business and financial results[215][218] - The COVID-19 pandemic and adverse macroeconomic conditions, such as inflation and geopolitical conflicts (e.g., Ukraine-Russia), could continue to disrupt clinical trials, supply chains, and access to capital[289][297] - The company faces risks related to protecting its intellectual property, potential infringement claims from third parties, and its reliance on licensors to maintain and enforce patents[226][234][236] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[336] Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[337] Mine Safety Disclosures This section is not applicable to the company - Not applicable[338] Other Information There is no other information to report for the period - None[339] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, securities purchase agreements, warrant forms, and officer certifications - The exhibits include corporate governance documents, securities purchase agreements from various dates, forms of warrants, and required officer certifications (Rule 13a-14(a) and Section 1350)[340] - Interactive data files (Inline XBRL) are also included as exhibits[340]