Alaunos Therapeutics(TCRT) - 2023 Q1 - Quarterly Report

Form 10-Q Cover Page This section identifies the company, filing type, and key corporate status details as of the reporting period - Alaunos Therapeutics, Inc. is filing a Quarterly Report on Form 10-Q for the period ended March 31, 2023[1][2] - Filer Status: | Category | Status | | :--- | :--- | | Large Accelerated Filer | ☐ | | Accelerated Filer | ☐ | | Non-Accelerated Filer | ☒ | | Smaller Reporting Company | ☒ | | Emerging Growth Company | ☐ | - As of May 5, 2023, the number of outstanding shares of common stock was 240,627,055[4] SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements identified by terms such as 'anticipate,' 'believe,' 'estimate,' 'expect,' 'forecast,' 'intend,' 'may,' 'plan,' 'project,' 'target,' 'will' and similar expressions[6] - These statements are based on management's current beliefs and assumptions and involve risks and uncertainties that may cause actual results to differ materially[7][8] - Key forward-looking statements include those regarding the ability to raise capital, estimates of expenses, timing of clinical programs, regulatory approvals, intellectual property, and the impact of external factors like pandemics[9] SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS This section outlines critical financial, operational, and developmental risks impacting the company's business and continuity - The Company requires substantial additional financial resources to continue as a going concern and fund product development; failure to obtain these resources could lead to delays or discontinuation of operations[12] - Development and commercialization of non-viral adoptive cellular therapies based on TCRs are new approaches to cancer treatment, subject to significant challenges and limited clinical data[12] - Other significant risks include the need to recruit and retain qualified personnel, the necessity of regulatory approvals, the high cost and time-consuming nature of clinical development, reliance on sole-source vendors for materials, and potential intellectual property issues[12] PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial statements for Alaunos Therapeutics, Inc., including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's financial position, performance, and significant accounting policies Item 1. Condensed Financial Statements (unaudited) This item provides the unaudited condensed financial statements for Alaunos Therapeutics, Inc., including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows for the periods presented, which are integral to understanding the company's financial health Condensed Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific dates - Condensed Balance Sheet Highlights (in thousands): | Item | March 31, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $23,496 | $39,058 | $(15,562) | | Restricted cash | $13,938 | $13,938 | $0 | | Total current assets | $38,184 | $53,799 | $(15,615) | | Total assets | $48,638 | $64,937 | $(16,299) | | Total current liabilities | $17,063 | $24,166 | $(7,103) | | Total liabilities | $19,129 | $26,382 | $(7,253) | | Total stockholders' equity | $29,509 | $38,555 | $(9,046) | - Cash and cash equivalents decreased by $15.6 million from December 31, 2022, to March 31, 2023[17] - Accumulated deficit increased to $890.7 million as of March 31, 2023, from $880.6 million at December 31, 2022[17] Condensed Statements of Operations This section outlines the company's financial performance, including revenues, expenses, and net loss for specific periods - Condensed Statements of Operations Highlights (in thousands): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Research and development | $6,504 | $5,580 | $924 | | General and administrative | $3,168 | $3,505 | $(337) | | Total operating expenses | $9,672 | $9,085 | $587 | | Loss from operations | $(9,672) | $(9,085) | $(587) | | Interest expense | $(853) | $(683) | $(170) | | Other income (expense), net | $477 | $(20) | $497 | | Net loss | $(10,048) | $(9,788) | $(260) | | Basic and diluted net loss per share | $(0.04) | $(0.05) | $0.01 | | Weighted average common shares outstanding | 239,679,352 | 214,946,569 | 24,732,783 | - Net loss increased to $10.0 million for Q1 2023 from $9.8 million for Q1 2022[20] - Research and development expenses increased by $0.9 million (17%) year-over-year[20] Condensed Statements of Changes in Stockholders' Equity This section details changes in equity accounts, reflecting net loss, stock-based compensation, and stock issuances - Changes in Stockholders' Equity (in thousands): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Balance at December 31 | $38,555 | $58,057 | | Stock-based compensation | $910 | $853 | | Issuance of common stock, net of expenses | $91 | $0 | | Net loss | $(10,048) | $(9,788) | | Balance at March 31 | $29,509 | $49,122 | - Total stockholders' equity decreased by $9.0 million in Q1 2023, primarily due to the net loss[23] Condensed Statements of Cash Flows This section summarizes cash inflows and outflows from operating, investing, and financing activities for the periods - Condensed Statements of Cash Flows (in thousands): | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(9,381) | $(7,770) | | Net cash used in investing activities | $(23) | $(29) | | Net cash used in financing activities | $(6,158) | $0 | | Net decrease in cash and cash equivalents | $(15,562) | $(7,799) | | Cash, cash equivalents and restricted cash, end of period | $37,434 | $68,255 | - Net cash used in operating activities increased by $1.6 million year-over-year[27][166] - Financing activities used $6.2 million in Q1 2023, primarily for long-term debt repayment[27][168] Notes to Condensed Financial Statements (unaudited) This section provides detailed explanations and additional information supporting the condensed financial statements Note 1. Organization This note describes the company's business, its accumulated deficit, and the going concern uncertainty - Alaunos Therapeutics, Inc. is a clinical-stage oncology-focused cell therapy company developing adoptive TCR therapies using its proprietary non-viral Sleeping Beauty gene transfer platform[30] - The Company has operated at a loss since its inception in 2003, with an accumulated deficit of approximately $890.7 million as of March 31, 2023[34] - Management has determined that current capital resources are insufficient to fund planned operations for at least one year from the issuance date, raising substantial doubt about the Company's ability to continue as a going concern[35] Note 2. Financings This note details recent financing activities, including debt repayment and equity offerings - The 2021 Loan and Security Agreement with SVB was fully repaid on May 1, 2023[43] - The 2022 Equity Distribution Agreement allows the Company to sell up to $50.0 million in common stock via an 'at the market offering,' but no sales occurred in Q1 2023[45] - A 2022 Public Offering generated $14.7 million in net proceeds from the sale of 24,228,719 shares, with an additional 216,294 shares purchased by the underwriter in January 2023[47][48] Note 3. Summary of Significant Accounting Policies This note confirms the consistency of the company's significant accounting policies with prior reports - No material changes have occurred in the Company's significant accounting policies since the filing of its Annual Report[51] Note 4. Debt This note outlines the company's debt obligations, including repayment details and interest expense - Debt Obligation (in thousands): | Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Loan and Security Agreement (carrying value) | $10,988 | $16,765 | - The entire outstanding debt under the SVB Facility, totaling $10.4 million in principal, plus accrued interest and a $1.4 million final payment, was repaid on May 1, 2023[56] - Interest expense, including amortization of issuance costs, was $0.9 million for Q1 2023, up from $0.7 million in Q1 2022[59] Note 5. Fair Value Measurements This note describes the fair value classification of cash equivalents and other financial instruments - Fair Value Measurements of Cash Equivalents (in thousands): | Description | Balance as of March 31, 2023 | Level 1 | | :--- | :--- | :--- | | Cash equivalents | $2,479 | $2,479 | | Description | Balance as of December 31, 2022 | Level 1 | | :--- | :--- | :--- | | Cash equivalents | $38,058 | $38,058 | - Cash equivalents are classified as Level 1 assets, reflecting quoted prices in active markets[63][65] - No financial assets or liabilities were classified as Level 2 or Level 3 during the three months ended March 31, 2023[64] Note 6. Net loss per share This note provides details on the calculation of basic and diluted net loss per share - Net Loss Per Share Data: | Item | March 31, 2023 | March 31, 2022 | | :--- | :--- | :--- | | Basic and diluted net loss per share | $(0.04) | $(0.05) | | Weighted average common shares outstanding | 239,679,352 | 214,946,569 | - Potentially Dilutive Shares Excluded from EPS (in thousands): | Item | March 31, 2023 | March 31, 2022 | | :--- | :--- | :--- | | Common stock options | 13,313 | 10,970 | | Unvested restricted stock | 898 | 994 | | Warrants | 22,922 | 22,922 | | Total | 37,134 | 34,886 | - The effect of potentially issuable shares from stock options, unvested restricted stock, and warrants was antidilutive and thus excluded from diluted net loss per share calculation[65] Note 7. Related Party Transactions This note discusses transactions and relationships with related parties, including a joint venture - The joint venture Eden BioCell, formed with TriArm Therapeutics for CAR-T therapies in Greater China, was mutually agreed to be dissolved in September 2021 and is currently in the process of dissolution[68][123] - James Huang, Chair of the Company's board, is also a managing partner of an investor in TriArm and a member of Eden BioCell's board[67] Note 8. Leases This note details the company's lease agreements, including a recent termination and associated costs - The Company terminated its Boston office lease on April 19, 2023, incurring $0.2 million in termination costs[69][176] - The Boston office right-of-use asset was $0.5 million and the associated lease liability was $0.8 million as of March 31, 2023[69] - The sub-sublease of the Boston office space was assigned to the landlord as part of the termination agreement[69][176] Note 9. Commitments and Contingencies This note outlines contractual commitments, license agreements, and potential contingent liabilities - The A&R License Agreement with Precigen (April 2023) eliminated all royalty and milestone obligations, reducing the annual license fee from $0.1 million to $75 thousand[77][180] - Under the A&R License Agreement, the Company retains exclusive worldwide rights for TCR products targeting neoantigens or driver mutations for cancer treatment[74][76][137] - The Company incurred $0.2 million in clinical expenses from MD Anderson and $0.3 million in license payments to the NCI for Q1 2023 under their respective agreements[85][95] Note 10. Stock-Based Compensation This note details the expenses and outstanding awards related to the company's stock-based compensation plans - Stock-Based Compensation Expense (in thousands): | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Research and development | $176 | $315 | | General and administrative | $735 | $538 | | Total | $910 | $853 | - 3,065,168 stock options were granted in Q1 2023 with a weighted-average grant date fair value of $0.39 per share[107] - Total unrecognized compensation costs for unvested stock options and restricted stock were $6.6 million and $0.9 million, respectively, as of March 31, 2023[110][111] Note 11. Warrants This note provides information on the company's outstanding warrants and their potential dilutive impact - As of March 31, 2023, the Company had 22,922,342 warrants outstanding[65] - The 2019 Warrants allow purchase of up to 17,803,031 shares at an exercise price of $7.00[114] - The MD Anderson Warrant for 3,333,333 shares at $0.001 exercise price remains unvested as clinical milestones have not been met[115] Note 12. Joint Venture This note describes the status and accounting treatment of the company's joint venture - Eden BioCell, a joint venture with TriArm Therapeutics for CAR-T therapies in Greater China, was mutually agreed to be dissolved in September 2021[123] - The Company accounted for its 50% equity interest in Eden BioCell under the equity method[122] Note 13. Subsequent Events This note confirms the absence of other material events occurring after the reporting period - No other material subsequent events were identified beyond those already disclosed in the notes to the condensed financial statements[124] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting its clinical-stage oncology focus, recent developments in its TCR-T Library Phase 1/2 Trial and hunTR platform, and a detailed analysis of operating expenses, liquidity, and capital resources Overview This section introduces the company's core business, clinical trial status, and critical financial outlook - Alaunos Therapeutics is a clinical-stage oncology company developing adoptive TCR-T cell therapies for solid tumors, utilizing its proprietary Sleeping Beauty gene transfer platform and cancer hotspot mutation TCR library[129] - The Company is currently enrolling patients in a Phase 1/2 clinical trial evaluating 12 TCRs for various solid tumor indications[129] - As of March 31, 2023, the Company had an accumulated deficit of approximately $890.7 million and anticipates cash resources will fund operations into the fourth quarter of 2023, necessitating additional financing[130][131] Recent Developments This section highlights key operational, clinical, and financial milestones achieved recently by the company - The TCR-T Library Phase 1/2 Trial is actively enrolling patients, with interim data expected in Q3 2023 and Phase 2 readiness by the end of 2023[132] - Manufacturing processes have been enhanced to use cryopreserved cell products, improving flexibility for patient treatment[133] - The hunTR® platform is increasing screening throughput for TCR discovery, aiming to add three new TCRs to the library by the end of 2023[134] - The mbIL-15 TCR-T cell therapy program is targeting an IND filing in the second half of 2023[135] - The Company fully repaid its outstanding debt to Silicon Valley Bank on May 1, 2023, including principal, interest, and a final payment[136] - The Amended and Restated Exclusive License Agreement with Precigen (April 2023) eliminated royalty and milestone obligations and reduced annual license payments, while retaining exclusive rights to TCR products for neoantigens/driver mutations[137] Financial Overview This section outlines the company's financial strategy, anticipated expenditures, and primary expense categories - The Company has not generated product revenue and anticipates continued significant operating expenditures and net losses due to R&D and clinical trial activities[130][139] - Research and development expenses include salaries, contract manufacturing, facility costs, clinical trial fees, and license payments[140] - General and administrative expenses primarily cover salaries, benefits, stock-based compensation, and professional fees[144] Results of Operations This section analyzes the changes in the company's operating expenses and other income/expense items year-over-year - Operating Expenses (in thousands): | Expense Category | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $6,504 | $5,580 | $924 | 17% | | General and administrative | $3,168 | $3,505 | $(337) | (10)% | | Interest expense | $(853) | $(683) | $(170) | 25% | | Other income (expense), net | $477 | $(20) | $497 | (2485)% | | Total Other income (expense), net | $(376) | $(703) | $327 | (47)% | - Research and development expenses increased by $0.9 million, primarily due to increased manufacturing activities for the TCR-T Library Phase 1/2 Trial and hunTR discovery efforts[146] - General and administrative expenses decreased by $0.3 million, mainly due to lower professional fees and reduced insurance/lease costs[148] - Other expense, net, decreased by $0.3 million, driven by higher interest income from increasing interest rates, partially offset by increased interest expense on the Loan and Security Agreement[149] Liquidity and Capital Resources This section discusses funding sources, current cash position, and future capital needs to sustain operations - The Company has financed operations through $729.2 million from equity issuances and $25.0 million from debt since inception[151] - As of March 31, 2023, cash, cash equivalents, and restricted cash totaled $37.4 million, with restricted cash of $13.9 million related to the now-repaid debt agreement[153][169] - Management projects current cash resources will fund operations into Q4 2023, but substantial doubt exists regarding the ability to continue as a going concern without additional financing[153][154][169] - Working Capital (in millions): | Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Current assets | $24.2 | $39.9 | | Current liabilities | $17.0 | $24.2 | | Working capital | $7.2 | $15.7 | Critical Accounting Policies and Significant Estimates This section confirms the consistency of the company's critical accounting policies and estimates with previous reports - The Company's critical accounting policies and estimates, including those for clinical trial expenses, collaboration agreements, stock-based compensation, and income taxes, remain unchanged from the 2022 Annual Report[183] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Alaunos Therapeutics, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk as a smaller reporting company[184] Item 4. Controls and Procedures Management, including the principal executive and accounting officers, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023. There were no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2023[185] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2023[186] PART II. OTHER INFORMATION This section covers non-financial information, including legal proceedings, a comprehensive discussion of risk factors related to the business, clinical development, commercialization, and intellectual property, as well as details on equity securities, defaults, mine safety, other information, and a list of exhibits Item 1. Legal Proceedings As of March 31, 2023, the company was not subject to any material legal proceedings that are likely to have a material adverse effect on its financial position, results of operations, or cash flows - As of March 31, 2023, there are no material legal proceedings likely to result in a material adverse effect on the Company's financial position, results of operations, or cash flows[190] Item 1A. Risk Factors This section details various significant risks that could materially and adversely affect the company's business, financial condition, and results of operations. These risks are categorized into business operations, clinical testing and regulatory compliance, commercialization capabilities, intellectual property protection, and other company-specific factors RISKS RELATED TO OUR BUSINESS This section outlines fundamental risks concerning the company's financial viability, capital needs, and the novel nature of its therapeutic approach - The Company requires substantial additional financial resources to continue as a going concern, with current cash projected to fund operations only into Q4 2023, raising substantial doubt about its ability to continue[192][193] - Future capital raises, particularly equity issuances, will dilute existing stockholders' ownership[198] - Developing and commercializing non-viral adoptive TCR-T cell therapies is a new approach to cancer treatment, subject to significant challenges and limited clinical data[203][205] - The Company faces intense competition for qualified personnel and relies heavily on key scientific and medical advisors, whose loss would be difficult to replace[214][215] RISKS RELATED TO THE CLINICAL TESTING, GOVERNMENT REGULATION AND MANUFACTURING OF OUR PRODUCT CANDIDATES This section details risks associated with clinical trial execution, regulatory approvals, potential side effects, and manufacturing complexities for product candidates - Difficulties in patient enrollment for clinical trials, exacerbated by factors like the COVID-19 pandemic, could delay clinical development and increase costs[248][249][250] - The regulatory approval process for novel cell therapies is extensive, costly, and time-consuming, with no guarantee of approval, and can be delayed by unforeseen safety issues or regulatory changes[251][253][257] - Product candidates may cause undesirable side effects, potentially delaying or preventing regulatory approval, limiting commercialization, or leading to significant negative consequences post-approval[261][262] - The Company relies on a limited number of sole-source vendors for critical reagents, specialized equipment, and materials, which could impair its ability to manufacture and supply products for clinical trials[264][265] - Manufacturing patient-specific cell therapies is complex, requires significant expertise and capital, and faces challenges in scaling, quality control, and ensuring consistency from diverse patient populations[270][272][278] RISKS RELATED TO OUR ABILITY TO COMMERCIALIZE OUR PRODUCT CANDIDATES This section covers risks impacting the company's capacity to market and sell its products, including regulatory hurdles, market acceptance, and reimbursement challenges - Failure to obtain necessary U.S. or worldwide regulatory approvals would severely undermine the business by preventing commercialization and revenue generation[285][286] - The Company currently lacks marketing, sales, and distribution capabilities and may be unable to establish them or secure suitable third-party collaborations, hindering successful commercialization[288][289] - Physician and patient acceptance of engineered T cells as cancer treatments is uncertain, and lack of acceptance would materially impair revenue generation[290] - The ability to commercialize products depends on obtaining sufficient coverage and adequate reimbursement from third-party payors, which is difficult to predict for novel gene and cell therapies[294][296] - Market opportunities may be limited to patients ineligible for or who have failed prior treatments, potentially restricting the addressable patient population[298][300] - Healthcare legislative reforms, such as the ACA and IRA, could lead to more rigorous coverage criteria and downward pressure on drug pricing, adversely affecting profitability[301][305][307] RISKS RELATED TO OUR INTELLECTUAL PROPERTY This section addresses risks concerning the protection, maintenance, and potential infringement of the company's intellectual property assets - The Company's success depends on obtaining and maintaining patent protection and preserving confidential information, much of which is licensed from MD Anderson, NCI, and Precigen[314][315] - Termination of licenses or research and development agreements with key licensors (MD Anderson, NCI, Precigen) could result in the loss of significant rights and harm the ability to commercialize product candidates[221][226][333] - The patent prosecution process is expensive and time-consuming, and there's no guarantee that patents will be granted, provide meaningful protection, or withstand challenges[316][322] - Failure to protect the confidentiality of trade secrets and proprietary information could harm the business and competitive position[323] - Third-party claims of intellectual property infringement could lead to costly litigation, substantial monetary damages, and prevent or delay the development or commercialization of products[324][328][329] OTHER RISKS RELATED TO OUR COMPANY This section covers risks related to stock price volatility, Nasdaq listing compliance, potential dilution, and significant stockholder control - The market price for the Company's common stock is volatile and can fluctuate significantly due to factors like clinical trial results, market conditions, and analyst coverage[340][341] - Failure to satisfy Nasdaq listing standards, particularly the Minimum Bid Price Rule, could lead to delisting, adversely affecting stock price, liquidity, and financing ability[344][346] - A potential reverse stock split, while intended to regain Nasdaq compliance, may not result in the intended benefits or improve stock liquidity[349][350] - The exercise of outstanding warrants (22.9 million shares) and equity awards (13.3 million options) may have a dilutive effect on common stock[364] - Principal stockholders, executive officers, and directors collectively own 22.5% of outstanding common stock, giving them substantial control over corporate decisions[365] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds were reported[368] Item 3. Defaults Upon Senior Securities This item states that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported[368] Item 4. Mine Safety Disclosures This item states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the Company[368] Item 5. Other Information This item states that there is no other information to report for the period - No other information was reported for the period[368] Item 6. Exhibits This item lists the exhibits filed with the Form 10-Q, including the Amended and Restated Certificate of Incorporation, Bylaws, Amended and Restated Exclusive License Agreement with Precigen, various offer and severance letters, and certifications from executive officers - The exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), key agreements (Amended and Restated Exclusive License Agreement with Precigen), and executive certifications[370] SIGNATURES This section provides official signatures of the company's principal executive and accounting officers, certifying the report - The report was signed by Kevin S. Boyle, Sr., CEO and Principal Executive/Financial Officer, and Michael Wong, VP Finance and Principal Accounting Officer, on May 10, 2023[374]