Alaunos Therapeutics(TCRT) - 2023 Q4 - Annual Report

FORM 10-K Filing Information Filing Details Alaunos Therapeutics, Inc. filed this Annual Report on Form 10-K for fiscal year 2023, identifying as a Delaware corporation, listed on Nasdaq (TCRT), and classified as a Non-Accelerated Filer and Smaller Reporting Company - The registrant is Alaunos Therapeutics, Inc., incorporated in Delaware, with its common stock (TCRT) registered on The Nasdaq Capital Market[2][3] - The company is classified as a Non-Accelerated Filer and a Smaller Reporting Company[4] Market Value and Shares Outstanding | Metric | Value | | :----- | :---- | | Aggregate market value of non-affiliate common stock (June 30, 2023) | $94,764,946 | | Shares of common stock held by non-affiliates (June 30, 2023) | 16,041,804 | | Closing price on Nasdaq (June 30, 2023) | $7.65 | | Shares outstanding (March 27, 2024) | 16,012,479 | Documents Incorporated by Reference Proxy Statement Incorporation Portions of the 2024 Annual Meeting of Stockholders Proxy Statement are incorporated by reference into Part III of this Annual Report on Form 10-K - Portions of the 2024 Annual Meeting of Stockholders Proxy Statement are incorporated by reference into Part III of this 10-K[8] Table of Contents Report Structure The Table of Contents outlines the Annual Report's structure into four main parts: Part I, Part II, Part III, and Part IV, followed by Financial Statements - The report is structured into four main parts: Part I (Items 1-4), Part II (Items 5-9C), Part III (Items 10-14), and Part IV (Items 15-16), followed by Financial Statements[10][11] Special Note Regarding Forward-Looking Statements Forward-Looking Statements Disclaimer This section clarifies that the Annual Report contains forward-looking statements, based on current beliefs and assumptions, which involve risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements, identifiable by terms like 'anticipate,' 'believe,' 'estimate,' 'expect,' 'forecast,' 'intend,' 'may,' 'plan,' 'project,' 'target,' 'potential,' 'will'[15] - These statements are based on current beliefs and assumptions, involving risks and uncertainties that may cause actual results to differ materially[16][17] - Key forward-looking statements include the ability to implement strategic reprioritization, raise capital, consummate strategic transactions, manage expenses, license IP, maintain collaborations, and remain listed on Nasdaq[19] Summary of Selected Risks Associated with Our Business Key Business Risks This section summarizes significant risks, including potential failure of strategic reprioritization, need for additional capital, Nasdaq delisting risk, and challenges in IP, regulatory approvals, and commercialization - The strategic reprioritization may not be successful, potentially leading to dissolution and liquidation if a strategic transaction is not consummated[21] - The company requires substantial additional financial resources to continue as a going concern, and raising funds may dilute existing investments[21] - Nasdaq issued a Delisting Determination in 2023, and while addressed by a reverse stock split, the company remains under panel monitoring until February 2025, with risks of future delisting[21] - Other significant risks include potential litigation, failure to maintain effective internal controls, limitations due to the termination of NCI licenses, inability to commercialize product candidates, product liability lawsuits, cybersecurity incidents, and intense competition[21][22] PART I Item 1. Business Alaunos Therapeutics, Inc., a former clinical-stage oncology cell therapy company, initiated a strategic reprioritization in August 2023, winding down clinical trials, reducing its workforce, and exploring strategic alternatives due to high costs and financing challenges - Alaunos Therapeutics was a clinical-stage oncology-focused cell therapy company developing adoptive TCR-T cell therapies for solid tumors, leveraging its cancer hotspot mutation TCR library and proprietary Sleeping Beauty gene transfer platform[25] - On August 14, 2023, the company announced a strategic reprioritization, winding down its TCR-T Library Phase 1/2 Trial, reducing its workforce by approximately 95%, and exploring strategic alternatives such as acquisition, merger, or sale of assets[26] - The decision to halt clinical development was made despite encouraging Phase 1/2 trial data, citing substantial development costs and the current financing environment[31] Overview Alaunos Therapeutics, a clinical-stage oncology company, initiated a strategic reprioritization in August 2023, winding down its TCR-T Library Phase 1/2 Trial, reducing its workforce, and exploring strategic alternatives - The company was developing TCR-T cell therapies targeting neoantigens from common tumor-related mutations (KRAS, TP53, EGFR) for various solid tumor types[25] - The strategic reprioritization included winding down the TCR-T Library Phase 1/2 Trial, a 95% workforce reduction, and exploring strategic alternatives like acquisition, merger, or asset sale[26] - The company also provided notice to terminate the Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI), effective October 13, 2023[26] Our TCR-T Library Phase 1/2 Trial Approach The TCR-T Library Phase 1/2 Trial evaluated 12 TCRs targeting KRAS, TP53, and EGFR mutations, offering advantages over CAR-T and TIL therapies by targeting intracellular neoantigens with defined specificity - The TCR-T program targeted shared hotspot mutations (KRAS, TP53, EGFR) using a TCR library and the proprietary non-viral Sleeping Beauty Gene Transfer Platform[36] - Potential advantages over CAR-T included targeting intracellular neoantigens, and over TIL, defined target specificity from genetic engineering[34] - The hunTR® (human neoantigen T cell Receptor) Discovery Engine was used to rapidly identify new TCRs for the library[36] Background on TCRs The strategy involved targeting neoantigens, immunogenic peptides from tumor-specific mutated genes, presented by the HLA system, to overcome immune suppression and tumor heterogeneity using a banked TCR library - The strategy was to target genomic instability in cancer with TCRs, recognizing neoantigens presented by the HLA system[35][37] - Neoantigens are derived from tumor-specific mutated genes, often unique to each patient, but driver mutations in hotspots (like KRAS, TP53, EGFR) are shared, allowing for a pre-prepared TCR library[40] Our Approach to Targeting Neoantigens The approach involved genetically modifying peripheral blood-derived T cells to express tumor-specific TCRs, addressing inter-tumor and intra-tumor heterogeneity to overcome antigen-escape variants and limited patient eligibility - The approach involved genetically modifying peripheral blood-derived T cells to express TCRs specific to tumor-derived neoantigens[42] - The goal was to address inter-tumor heterogeneity (not all tumors express the target) and intra-tumor heterogeneity (not all cells within a tumor express the target) to prevent antigen-escape variants[41] - TCR-T cells included effector and memory T cells, with some being T memory stem cells, which have high growth potential and capacity for renewal[43] Our TCR-T Manufacturing Process The manufacturing process involved screening patients for neoantigens and HLA types, collecting white blood cells, and using Sleeping Beauty technology to modify and expand T cells into patient-specific products - The process involved screening patients for KRAS, TP53, and EGFR hotspot mutations and HLA alleles, then matching them to TCRs in the library[45] - Patient's peripheral blood T cells were genetically modified using the non-viral Sleeping Beauty technology and expanded to produce autologous TCR-T cell products[46] - The in-house cGMP manufacturing facility in Houston, Texas, was used for production, allowing for integration of R&D and potentially reducing time from discovery to clinical trials[45][59] Benefits of Our Non-Viral Sleeping Beauty Gene Transfer Platform The Sleeping Beauty platform offered scalability, reduced complexity, customizable therapies, accommodation of large transgenes, and potential for durable clinical benefits and increased T-cell persistence - The Sleeping Beauty platform offered scalability and reduced manufacturing complexity compared to traditional viral gene transfer, requiring only DNA plasmids as starting material[47] - It enabled customizable therapies by allowing a library of TCRs to address diverse mutations and HLA types, supporting both Library TCR-T and personalized TCR approaches[49] - Potential clinical benefits included durable anti-tumor activity, integration into genomic safe harbors, and increased T-cell persistence with membrane-bound interleukin-15 (mbIL-15) co-expression[53] Preclinical and Clinical Development Preclinical studies validated TCR specificity, and the Phase 1/2 trial treated eight patients, showing general tolerability, no DLTs, and an objective partial response in one NSCLC patient, establishing proof-of-concept - Preclinical data showed selected TCRs specifically recognized mutated targets without off-target effects, and mbIL-15 co-expression increased in vitro survival of TCR-T cells[50][51] - The TCR-T Library Phase 1/2 Trial treated eight patients with pancreatic, colorectal, and non-small cell lung cancers, showing general tolerability with no DLTs or ICANS[27][52] - One NSCLC patient achieved an objective partial response with six months progression-free survival, and six others achieved stable disease, resulting in a 13% overall response rate and 87% disease control rate[28][55] Manufacturing In 2023, the Houston cGMP facility manufactured TCR-T cells for early-stage trials, but was closed in November 2023, with personnel laid off by September 2023, as part of strategic reprioritization - The cGMP facility in Houston was operational in 2023 for manufacturing TCR-T cells for early-stage clinical trials, with DNA plasmids sourced from third parties[58] - The facility was closed in November 2023, and all manufacturing personnel were laid off by September 2023, following the strategic reprioritization[58] - The company had doubled manufacturing capacity in 2022 and filed an IND amendment to use cryopreserved products, aiming to reduce process time and increase flexibility[59] IL-12 Program The Controlled IL-12 clinical program for recurrent glioblastoma multiforme was wound down, with assets returned to Precigen, Inc. on April 4, 2023, as part of a strategic shift - The Controlled IL-12 clinical program for recurrent glioblastoma multiforme was wound down[61] - On April 4, 2023, the IL-12 assets were returned to Precigen, Inc. via an Amended and Restated Exclusive License Agreement[61] Intellectual Property The IP strategy focused on patent and trade secret protection; as of December 31, 2023, six patent application families were pending, with no granted patents, relying on licenses from Precigen, MD Anderson, and formerly NCI - As of December 31, 2023, the company had six families of pending patent applications covering its TCR-T library, products, and processes, but no granted patents[63] - The company relies on trade secret protection and confidentiality agreements for unpatentable know-how and inventions[66] - Key license agreements included an exclusive license with PGEN Therapeutics (Precigen) for TCR products and Sleeping Beauty technology, and agreements with MD Anderson for various cellular therapy approaches[68][72][73] - The Patent License with the NCI for TCRs reactive to mutated KRAS, TP53, and EGFR neoantigens was terminated effective December 26, 2023[84][89] - The Cooperative Research and Development Agreement (CRADA) with the NCI, aimed at advancing personalized TCR-T approaches, was terminated effective October 13, 2023[90][96] Governmental Regulation and Product Approval Alaunos Therapeutics, as a biopharmaceutical company, is subject to extensive FDA regulation for its biologic T-cell product candidates, involving rigorous preclinical testing, multi-phase clinical trials, BLA submission, and post-approval requirements, alongside complex rules for exclusivity, pricing, reimbursement, and healthcare fraud laws - Genetically engineered T-cell product candidates are regulated as biologics by the FDA, requiring compliance with cGMPs and submission of a Biologics License Application (BLA) for marketing authorization[98][99] - The U.S. product development process involves preclinical testing, IND submission, multi-phase clinical trials (Phase 1, 2, 3), BLA submission, FDA inspections, and user fees[103][104][107][112][113] - Post-approval, products are subject to continuous FDA regulation, including record-keeping, adverse event reporting, and compliance with cGMP, with potential for product withdrawal or penalties for non-compliance[122][123][124] - Regulatory incentives include 12 years of data exclusivity for reference biologics, pediatric exclusivity, and orphan drug designation for rare diseases, which grants seven years of market exclusivity[128][129][130][131] - Commercial success depends on coverage and adequate reimbursement from third-party payors, which are increasingly challenging product prices and medical necessity[132][134][135] - The company is subject to federal and state healthcare laws, including the Anti-Kickback Statute, False Claims Act, HIPAA, and Physician Payments Sunshine Act, which regulate interactions with healthcare providers and can result in substantial penalties for non-compliance[137] - Healthcare reform efforts, such as the ACA and the Inflation Reduction Act (IRA), aim to contain costs and impact drug pricing and reimbursement, potentially affecting the pharmaceutical industry significantly[141][142][145] - International operations are subject to anti-corruption laws like the FCPA and U.K. Bribery Act, and trade control laws, with non-compliance leading to criminal and civil penalties[147][148][149][150] Competition The oncology market is highly competitive, with Alaunos' TCR-T cell therapies facing competition from various companies and institutions developing TCR, CAR, neoantigen vaccine, non-viral gene, and traditional cancer treatments, with efficacy, safety, administration, price, and reimbursement as key factors - The oncology market is highly competitive, with major pharmaceutical, biotechnology, and specialty cancer companies, as well as academic institutions, conducting research[152] - Alaunos' TCR-T cell therapies faced competition from companies developing TCR and CAR technologies, neoantigen vaccine platforms, non-viral gene therapies (including CRISPR), and allogeneic CAR-T therapies[153][154][155] - Competition also came from more common, cost-effective, and reimbursable non-cellular treatments like surgery, radiation, chemotherapy, and biologic therapies[156] - Key competitive factors for TCR-T candidates include efficacy, safety, ease of administration, price, and insurance/government reimbursement[157] Employees and Human Capital Resources As of March 1, 2024, the company had only one full-time employee after a significant workforce reduction, with human capital objectives focused on recruitment, retention, and incentivization, amidst recent executive departures and consulting agreements - As of March 1, 2024, the company had only 1 full-time employee, following a significant workforce reduction[158] - Human capital objectives include identifying, recruiting, retaining, incentivizing, and integrating employees, with equity incentive plans used for compensation[158][160] - Key personnel changes included the termination of CEO Kevin S. Boyle, Sr. (followed by a consulting agreement), termination of Melinda Lackey (SVP, Legal and Administration) and Drew Deniger (VP, R&D) (both with separation and Lackey with a consulting agreement), and the resignation of Michael Wong (VP, Finance), replaced by Ferdinand Groenewald as VP, Finance via a consulting agreement[163][165][166][167][168][169][170][171] Corporate Information Alaunos Therapeutics, Inc. was incorporated in Colorado in 1998, re-incorporated in Delaware in 2005, became Ziopharm Oncology, Inc. in 2005, and changed to its current name on January 25, 2022, with principal offices in Houston, Texas - The company was originally incorporated in Colorado in 1998, re-incorporated in Delaware in 2005, and became Ziopharm Oncology, Inc. after a reverse acquisition in 2005[175] - The name was changed to Alaunos Therapeutics, Inc. on January 25, 2022[175] - Principal executive offices are located at 2617 Bissonnet Street, Suite 225, Houston, Texas 77005[176] Available Information The company's website, www.alaunos.com, provides free access to SEC filings (10-K, 10-Q, 8-K), which are also available on www.sec.gov - Company's website (www.alaunos.com) provides free access to SEC filings (10-K, 10-Q, 8-K)[177] - SEC filings are also available on the SEC's website (www.sec.gov**)[177](index=177&type=chunk) Item 1A. Risk Factors This section details significant risks, including potential failure of strategic reprioritization, need for additional financing, Nasdaq delisting, challenges in clinical development, IP protection, and market competition, which could materially affect the company's business and prospects - An investment in the company's common stock is risky, and investors should carefully consider the risk factors[179] - Additional risks not currently known or deemed immaterial may also affect the business[179] RISKS RELATED TO OUR STRATEGIC REPRIORITIZATION The strategic reprioritization, including clinical trial wind-down and workforce reduction, may not succeed, potentially leading to dissolution; substantial additional financing is required, which could dilute stockholders, and strategic alternative exploration is costly and uncertain - The strategic reprioritization, including winding down the TCR-T Library Phase 1/2 Trial and a 95% workforce reduction, may not be successful or yield anticipated benefits[180][188] - The company requires substantial additional financial resources to continue as a going concern, with current cash sufficient only into Q3 2024, and future funding may dilute existing stockholders[189][190][191][192] - Failure to consummate a strategic transaction could lead to dissolution and liquidation, with uncertain cash distribution to stockholders[198] - The ability to complete a strategic transaction depends on retaining remaining employees and consultants, and the corporate restructuring may not result in anticipated savings or could disrupt business[199][200] RISKS RELATED TO OUR BUSINESS Key business risks include Nasdaq delisting, lack of shareholder approval for a second reverse stock split, stock price volatility, challenges in TCR-T therapy development, personnel recruitment, internal controls, and the impact of NCI license terminations and potential loss of other agreements - The company received a Nasdaq Delisting Determination in 2023, and while compliance was regained via a reverse stock split, it remains under mandatory panel monitoring until February 2025, with risks of future delisting[205][206] - Delisting could adversely affect stock price, liquidity, and ability to consummate strategic transactions[207][208] - The company lacks shareholder approval for a second reverse stock split, which may be needed if it fails to comply with the Minimum Bid Price Rule during the monitor period[211][212][213] - The development of non-viral adoptive TCR-T cell therapies is a new approach with significant challenges, including regulatory approval, clinical trial design, and manufacturing[221] - The recent termination of NCI licenses and potential termination of agreements with Precigen or MD Anderson could result in the loss of significant rights and harm product development[225][226] - The company has a limited operating history, making it difficult to evaluate business prospects and commercialization capabilities[234] - Reliance on information technology and the risk of cybersecurity incidents could compromise sensitive information and disrupt operations[243][245] RISKS RELATED TO THE CLINICAL TESTING, GOVERNMENT REGULATION AND MANUFACTURING OF OUR PRODUCT CANDIDATES Resuming clinical development faces hurdles like patient enrollment, costly regulatory processes, and early-stage trial risks; manufacturing challenges include sole-source vendors, limited large-scale experience, and gene transfer vector risks, while post-marketing products could face restrictions or withdrawal - Should clinical development resume, patient enrollment may be difficult due to competition, patient unwillingness, and the limited number of qualified investigators[249][250] - Product candidates are subject to extensive, costly, and time-consuming regulation, with no guarantee of FDA approval, which can be delayed or denied for various reasons[252][254][255] - The company halted development early; resuming clinical trials is expensive and time-consuming, with no certainty of BLA submission or approval[258][263] - Product candidates may cause undesirable side effects, potentially delaying approval, limiting commercial profile, or leading to post-marketing consequences like withdrawal or lawsuits[264][265] - Manufacturing relies on sole-source or limited vendors for reagents and equipment, posing risks of delays or inability to supply products if activities resume[267][268] - The company has limited experience in large-scale biopharmaceutical manufacturing, and difficulties in consistently producing products to specifications or in sufficient quantities could arise[273][276] - The Sleeping Beauty gene transfer system carries a theoretical risk of insertional oncogenesis, potentially triggering new cancers or other adverse events[283] - Approved products could face post-marketing restrictions, withdrawal, or penalties for non-compliance with regulatory requirements or unanticipated problems[284][286] RISKS RELATED TO OUR ABILITY TO COMMERCIALIZE OUR PRODUCT CANDIDATES Commercialization of product candidates is highly uncertain due to lack of sales capabilities, uncertain physician/patient acceptance, limited market opportunities, and the adverse impact of healthcare reforms on pricing and reimbursement, alongside substantial penalty risks from non-compliance with fraud and abuse laws - Inability to obtain necessary U.S. or worldwide regulatory approvals would severely undermine the business by preventing product commercialization and revenue generation[288] - The company currently lacks marketing, sales, and distribution capabilities and may be unable to create them or enter into successful third-party agreements[290][292] - Physician and patient acceptance of engineered T cells as cancer treatments is uncertain and depends on factors like efficacy, safety, cost-effectiveness, and reimbursement[294] - Product revenues will be diminished if products do not obtain coverage and adequate reimbursement from third-party payors, who are increasingly focused on cost containment[296][298][300] - Market opportunities may be limited to patients ineligible for or who have failed prior treatments, potentially restricting the addressable patient population[302][304] - Healthcare legislative reforms (e.g., ACA, IRA) and increased scrutiny on drug pricing could lead to more rigorous coverage criteria and downward pressure on product prices[305][306][309][311][312] - Failure to comply with federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA) could result in substantial penalties and materially adverse effects on the business[313][315][317] - Immuno-oncology product candidates may face future competition from biosimilars and new technologies, potentially shortening exclusivity periods[318][319][320] RISKS RELATED TO OUR INTELLECTUAL PROPERTY The company's success depends on protecting and enforcing IP rights, which is challenging due to uncertain patent prosecution and litigation, reliance on licensed IP, and risks from trade secret failure, infringement claims, and non-compliance with patent agency requirements - Failure to adequately protect or enforce intellectual property rights, or secure rights to others' patents, would diminish IP value and materially impair product development and strategic transactions[321] - The company is dependent on licensors (MD Anderson, Precigen) for patent preparation, filing, and prosecution, and cannot guarantee their comments will be solicited or implemented[322] - The patent position in biotechnology is highly uncertain, involves complex legal questions, and is subject to litigation and changes in patent laws, potentially narrowing protection[323][325][326] - Inability to protect confidential information and trade secrets would significantly harm the business and competitive position[330] - Third-party claims of intellectual property infringement are costly, divert management, and could prevent product development or commercialization, potentially requiring substantial damages or licenses[331][332][336][337] - Maintaining patent protection requires compliance with various procedural and fee payment requirements; noncompliance can lead to loss of patent rights[339] - Failure to obtain needed licenses or comply with existing license obligations could result in termination of licenses or claims for damages, materially affecting the business[342] - The company may be subject to claims of misappropriating third-party intellectual property or disputes over ownership of its own IP, leading to costly litigation[345][346] OTHER RISKS RELATED TO OUR COMPANY The company's stock price is volatile, influenced by strategic decisions and market conditions; anti-takeover provisions and exclusive forum clauses may limit stockholder actions, while dividend expectations are low, NOL/R&D credit usage may be limited, activist stockholders pose disruption risks, and 'smaller reporting company' status may deter investors - The company's stock price is volatile and can fluctuate significantly due to strategic decisions, operating results, market conditions, clinical trial outcomes, and analyst coverage[348][350] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult, even if beneficial to stockholders[353] - Exclusive forum provisions in bylaws may limit stockholders' ability to obtain a favorable judicial forum for disputes[355] - The company does not expect to pay dividends, meaning investors will only realize income from selling shares at a profit[358] - The ability to use net operating loss carryforwards (NOLs) and research tax credits (R&D credits) to reduce future tax payments may be limited by ownership changes under Sections 382 and 383 of the Code[359][360] - Activist stockholders could disrupt business operations and strategic plans, potentially making transactions more difficult[364][366] - The exercise of outstanding warrants and issuance of equity awards may have a dilutive effect on common stock[367] - Concentrated ownership by principal stockholders, executive officers, and directors may prevent other stockholders from influencing significant corporate decisions[368] - As a 'smaller reporting company,' reduced disclosure requirements may make its common stock less attractive to investors, potentially leading to a less active trading market and more volatile prices[369] Item 1B. Unresolved Staff Comments There are no unresolved staff comments from the SEC - No unresolved staff comments[373] Item 1C. Cybersecurity The company maintains a risk-based cybersecurity program with safeguards and an incident response plan, reporting to the Board; no material incidents have occurred, but timely detection and adequate security cannot be guaranteed due to evolving threats - The company has a cybersecurity program with safeguards like password protection, multi-factor authentication, and monitoring systems[374] - An incident response program is maintained, with designated personnel for assessing, containing, and remediating threats, and reporting to the Board of Directors[376][377][379] - As of the report date, no material cybersecurity incidents have affected the business, but the evolving nature of threats means timely detection and adequate security measures cannot be guaranteed[381] Item 2. Properties The company's corporate office is in Houston, Texas, with existing facilities deemed adequate for current needs - The corporate office is located in Houston, Texas, and existing facilities are deemed adequate for current needs[382] Item 3. Legal Proceedings The company has no pending litigation with a material adverse effect; a litigation with KBI Biopharma, Inc. was settled for $1.0 million in October 2023 - The company has no pending litigation that is reasonably likely to have a material adverse effect on its business[385] - A breach of contract litigation with KBI Biopharma, Inc. was settled for $1.0 million in October 2023, with all claims dismissed[386] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[387] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock (TCRT) trades on Nasdaq Capital Market, with approximately 167 record holders as of March 18, 2024; no cash dividends have been paid or are anticipated, and no unregistered sales or repurchases occurred in Q4 2023 - Common stock trades on the Nasdaq Capital Market under the symbol 'TCRT'[390] - As of March 18, 2024, there were approximately 167 record holders of common stock[390] - The company has never paid cash dividends and does not anticipate paying any in the foreseeable future[391] - No unregistered sales of equity securities or repurchases of common stock occurred during the three months ended December 31, 2023[392][393] Item 6. [Reserved] This item is reserved and contains no information - This item is reserved[394] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews the company's financial condition and operations, detailing its history of net losses, the August 2023 strategic reprioritization, decreased 2023 revenue and R&D expenses, increased restructuring and impairment costs, and substantial doubt about its going concern ability with cash projected only into Q3 2024 - The company has incurred significant net losses since inception, with a net loss of $35.1 million in 2023 and an accumulated deficit of $915.8 million[398] - A strategic reprioritization in August 2023 led to winding down the TCR-T Library Phase 1/2 Trial, workforce reduction, and exploration of strategic alternatives[399] - The company's cash resources are anticipated to fund operations only into the third quarter of 2024, raising substantial doubt about its ability to continue as a going concern[427][428][446] Overview Alaunos Therapeutics, a clinical-stage oncology company, initiated a strategic reprioritization in August 2023, winding down its TCR-T Library Phase 1/2 Trial, reducing its workforce, and exploring strategic alternatives due to persistent net losses and high operating expenditures - The company was a clinical-stage oncology-focused cell therapy company developing adoptive TCR-T cell therapy for solid tumors[397] - In August 2023, a strategic reprioritization was announced, including winding down the TCR-T Library Phase 1/2 Trial and workforce reduction to extend cash runway[399] - The company has incurred significant net losses since inception, with a $35.1 million net loss in 2023 and an accumulated deficit of $915.8 million[398] 2023 Developments In 2023, the TCR-T Library Phase 1/2 Trial treated eight patients, showing proof-of-concept with an objective partial response, but was wound down due to high costs; strategic alternatives are being explored, the workforce was reduced, NCI agreements terminated, and Nasdaq compliance regained but remains under monitoring - Eight patients were treated in the TCR-T Library Phase 1/2 Trial, showing general tolerability and an objective partial response in one NSCLC patient, establishing proof-of-concept[400][401] - The trial was wound down in August 2023 due to substantial development costs and the financing environment, despite encouraging data[402] - The company discovered multiple proprietary TCRs through its hunTR® platform, targeting driver mutations[403][405] - Strategic alternatives are being explored, and the workforce was reduced by approximately 95% to streamline operations and extend cash runway[406] - The company regained compliance with Nasdaq's minimum bid price rule in February 2024 after a delisting determination, but is subject to a mandatory panel monitor until February 16, 2025[407] Financial Overview The company has no product revenue and anticipates continued net losses; collaboration revenue is recognized over performance, R&D expenses cover personnel, manufacturing, and clinical trials, G&A expenses include salaries and professional fees, restructuring costs are severance, and other income/expense includes interest and sublease income - No product revenue has been generated, and significant net losses are expected to continue[408] - Research and development expenses include salaries, contract manufacturing, facilities, reagents, and clinical trial fees[409] - General and administrative expenses cover salaries, benefits, stock-based compensation, and professional fees[410] - Restructuring costs consist of severance for terminated employees[411] - Other income (expense) primarily includes interest expense, interest income, and sublease income[412] Results of Operations for the Fiscal Years ended December 31, 2023 and 2022 In 2023, the company reported a net loss of $35.1 million, an improvement from $37.7 million in 2022, with collaboration revenue significantly decreasing, R&D expenses down 35%, G&A expenses also decreasing, but restructuring costs and impairment charges increasing due to strategic reprioritization Statements of Operations Summary (in thousands) | Metric | 2023 | 2022 | | :------------------------------------------ | :----- | :----- | | Collaboration revenue | $5 | $2,922 | | Research and development expenses | $16,279 | $25,018 | | General and administrative expenses | $12,219 | $13,142 | | Gain on lease modification and termination | $(298) | $(133) | | Restructuring costs | $1,269 | $— | | Property and equipment and right-of-use assets impairment | $4,803 | $— | | Total operating expenses | $34,272 | $38,027 | | Loss from operations | $(34,267) | $(35,105) | | Interest expense | $(1,921) | $(3,154) | | Other income (expense), net | $1,048 | $529 | | Net loss | $(35,140) | $(37,730) | - Collaboration revenue decreased by $2.9 million (100%) in 2023, primarily due to a non-recurring milestone revenue from the Solasia License and Collaboration Agreement in 2022[414] - Research and development expenses decreased by $8.7 million (35%) in 2023, driven by lower program expenses, a $3.0 million decrease in employee-related expenses, and a $2.5 million milestone payment in 2022 that did not recur[415] - General and administrative expenses decreased by $0.9 million (7%) in 2023, mainly due to reduced headcount and lower insurance fees, partially offset by higher legal costs[417][418][419] - Restructuring costs of $1.3 million were incurred in 2023 due to severance expenses for terminated employees related to the strategic reprioritization[421] - Property and equipment and right-of-use asset impairments of $4.8 million were recorded in 2023 following the strategic reprioritization[422] - Total other expense, net, decreased by $1.8 million (67%) in 2023, primarily due to lower interest expense and increased interest income from higher rates on cash balances[423] Liquidity and Capital Resources The company, historically financed by equity and debt, has incurred net losses and negative cash flows; as of December 31, 2023, cash and equivalents were $6.1 million, projected to fund operations only into Q3 2024, raising substantial doubt about its going concern ability, with significant cash used for debt repayment and high operating cash usage, and most leases and NCI licenses terminated in 2023 - The company has not generated product sales revenue and has incurred net losses and negative cash flows from operations since inception[425] - As of December 31, 2023, cash and cash equivalents were $6.1 million, and resources are expected to fund operations only into Q3 2024, indicating substantial doubt about going concern[446] - Net cash used in operating activities was $30.1 million in 2023, compared to $29.2 million in 2022[439] - Net cash used in financing activities was $18.1 million in 2023, primarily due to $18.1 million in long-term debt repayment, contrasting with $6.4 million provided in 2022 from equity issuance[441] - The company repaid all outstanding obligations under its Loan and Security Agreement with SVB on May 1, 2023[437] - All operating leases were terminated as of December 31, 2023, with no remaining lease commitments other than a short-term lease[452] - The Patent License with the NCI was terminated effective December 26, 2023, and the CRADA with the NCI was terminated effective October 13, 2023[454][455][457][458][459][463][464][465][466][467][468][469][470][471][472][473][474][475][476] Critical Accounting Policies and Significant Estimates Financial statement preparation requires significant management estimates and judgments, particularly for R&D costs, collaboration revenue, stock-based compensation fair value, and income taxes, which are subject to change and could materially impact reported results - Significant estimates and judgments are required for research and development costs, collaboration revenue recognition, fair value of stock-based compensation, and income taxes[459][461] - Accrued R&D expenses are estimated based on open contracts, purchase orders, and communication with vendors, with potential for adjustments if actual services or timing vary[460][462][464] - Revenue from collaboration agreements is recognized under ASC 606, involving identifying performance obligations, determining transaction price (including variable consideration like milestones), and allocating revenue based on standalone selling prices[465][466][467][468][469] - Stock-based compensation is measured at grant date fair value using the Black-Scholes model, requiring estimates for expected term, volatility, and risk-free interest rate[472][477] - Income tax liability involves estimating current tax expense and assessing temporary differences for deferred tax assets and liabilities, with a valuation allowance established when realization is not probable[473][474] Recent Accounting Pronouncements The company adopted ASU 2016-13 effective January 1, 2023, with no material impact, and is evaluating ASU 2023-07 and ASU 2023-09, effective for fiscal years beginning after December 15, 2023, and 2024, respectively - Adopted ASU 2016-13 (Financial Instruments: Credit Losses) effective January 1, 2023, with no material impact[607] - Evaluating ASU 2023-07 (Segment Reporting), effective for fiscal years beginning after December 15, 2023[608] - Evaluating ASU 2023-09 (Income Taxes), effective for annual periods beginning after December 15, 2024[609] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk[476] Item 8. Financial Statements and Supplementary Data This item incorporates financial statements and supplementary data from pages F-1 through F-25, with all share numbers and prices adjusted for the 1-for-15 reverse stock split effective January 31, 2024 - Financial statements and supplementary data are incorporated by reference from pages F-1 through F-25[479] - All share numbers and prices reflect the 1-for-15 reverse stock split effective January 31, 2024[479] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures There have been no changes in or disagreements with accountants on accounting and financial disclosures - No changes in or disagreements with accountants on accounting and financial disclosures[480] Item 9A. Controls and Procedures As of December 31, 2023, management concluded disclosure controls and internal control over financial reporting were effective, though inherent limitations mean reasonable, not absolute, assurance; no material changes occurred in Q4 2023 - As of December 31, 2023, disclosure controls and procedures were evaluated and deemed effective[481] - Management maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO framework[484] - Internal control systems have inherent limitations, providing only reasonable, not absolute, assurance against errors or fraud[485] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2023[489] Item 9B. Other Information No director or Section 16 officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q4 2023 - No director or Section 16 officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q4 2023[490] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections There are no disclosures regarding foreign jurisdictions that prevent inspections - No disclosures regarding foreign jurisdictions that prevent inspections[491] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement[494] Item 11. Executive Compensation Information on executive compensation is incorporated by reference from the 2024 Proxy Statement - Information on executive compensation is incorporated by reference from the 2024 Proxy Statement[495] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and related stockholder matters is incorporated by reference from the 2024 Proxy Statement - Information on security ownership and related stockholder matters is incorporated by reference from the 2024 Proxy Statement[496] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement[497] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement[498] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists financial statements and exhibits, including the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, Notes to Financial Statements, and a comprehensive exhibit list - The financial statements include the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and Notes to Financial Statements[501] - Financial statement schedules are omitted as they are not applicable or included in the financial statements and notes[502] - A comprehensive list of exhibits, including agreements, plans, and certifications, is provided[502] Item 16. Form 10-K Summary This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[510] Signatures The report is signed on behalf of Alaunos Therapeutics, Inc. by Dale Curtis Hogue, Jr. (Interim CEO, PEO, PFO) and Ferdinand Groenewald (VP, Finance, PAO), along with other directors, on April 1, 2024 - The report is signed by Dale Curtis Hogue, Jr. (Interim CEO, PEO, PFO) and Ferdinand Groenewald (VP, Finance, PAO) on April 1, 2024[515][516] Index to Financial Statements This section provides an index to the financial statements, including the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and Notes to Financial Statements - The index lists the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and Notes to Financial Statements[518] Report of Independent Registered Public Accounting Firm RSM US LLP issued an unqualified opinion on the financial statements for December 31, 2023 and 2022, but noted substantial doubt about the company's going concern ability due to recurring losses and capital needs; clinical trial accruals were identified as a critical audit matter - RSM US LLP issued an unqualified opinion on the financial statements for December 31, 2023 and 2022[521] - The auditors noted substantial doubt about the company's ability to continue as a going concern due to recurring losses and the need for additional capital[522] - The critical audit matter was identified as accruals for clinical trials and other research and development expenses, due to the complexity of estimation and potential delays in invoicing[527][528] Balance Sheets The balance sheets show total assets decreased from $64.9 million in 2022 to $8.3 million in 2023, driven by reduced cash and impaired assets; total liabilities decreased from $26.4 million to $2.0 million due to debt repayment, and stockholders' equity decreased from $38.6 million to $6.3 million Balance Sheet Summary (in thousands) | Metric | December 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------------ | :------------------ | | Cash and cash equivalents | $6,062 | $39,058 | | Restricted cash | $— | $13,938 | | Total current assets | $8,261 | $53,799 | | Property and equipment, net | $2 | $8,460 | | Right-of-use assets | $— | $2,136 | | Total assets | $8,263 | $64,937 | | Accounts payable | $616 | $1,389 | | Current portion of long-term debt | $— | $16,765 | | Accrued expenses | $1,340 | $5,454 | | Total current liabilities | $1,956 | $24,166 | | Total liabilities | $1,956 | $26,382 | | Total stockholders' equity | $6,307 | $38,555 | - Total assets decreased significantly from $64.9 million in 2022 to $8.3 million in 2023, driven by reductions in cash and restricted cash, and impairment of property and equipment[533] - Total liabilities decreased from $26.4 million in 2022 to $2.0 million in 2023, primarily due to the repayment of long-term debt[533] - Stockholders' equity decreased from $38.6 million in 2022 to $6.3 million in 2023, reflecting the net loss[533] Statements of Operations The statements of operations show a net loss of $35.1 million in 2023, an improvement from $37.7 million in 2022, with minimal collaboration revenue in 2023 ($5 thousand**) compared to $2.9 million in 2022; operating expenses decreased due to lower R&D and G&A, but were offset by significant restructuring and impairment charges in 2023 Statements of Operations Summary (in thousands) | Metric | 2023 | 2022 | | :------------------------------------------ | :----- | :----- | | Collaboration revenue | $5 | $2,922 | | Research and development | $16,279 | $25,018 | | General and administrative | $12,219 | $13,142 | | Gain on lease modification and termination | $(298) | $(133) | | Restructuring costs | $1,269 | $— | | Property and equipment and right-of-use assets impairment | $4,803 | $— | | Total operating expenses | $34,272 | $38,027 | | Loss from operations | $(34,267) | $(35,105) | | Interest expense | $(1,921) | $(3,154) | | Other income, net | $1,048 | $529 | | Net loss | $(35,140) | $(37,730) | | Basic and diluted net loss per share | $(2.20) | $(2.61) | | Weighted average common shares outstanding | 15,995,323 | 14,475,354 | - Net loss for 2023 was $35.1 million, an improvement from $37.7 million in 2022[536] - Collaboration revenue decreased significantly from $2.9 million in 2022 to $5 thousand in 2023[536] - Research and development expenses decreased by 35% to $16.3 million in 2023, while general and administrative expenses decreased by 7% to $12.2 million[536] - Restructuring costs of $1.3 million and property/equipment impairment of $4.8 million were recorded in 2023[536] Statements of Changes in Stockholders' Equity Stockholders' equity decreased from $38.6 million at December 31, 2022, to $6.3 million at December 31, 2023, primarily due to a net loss of $35.1 million, partially offset by $2.8 million in stock-based compensation and $92 thousand from common stock issuance Stockholders' Equity Summary (in thousands) | Metric | December 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------------ | :------------------ | | Common Stock (Shares) | 16,012,522 | 16,027,384 | | Common Stock (Amount) | $16 | $16 | | Additional Paid-in Capital | $922,058 | $919,166 | | Accumulated Deficit | $(915,767) | $(880,627) | | Total Stockholders' Equity | $6,307 | $38,555 | - Total stockholders' equity decreased from $38.6 million in 2022 to $6.3 million in 2023[539] - The decrease is primarily due to a net loss of $35.1 million, partially offset by $2.8 million in stock-based compensation and $92 thousand from common stock issuance[539] Statements of Cash Flows Cash flows show a net decrease in cash, cash equivalents, and restricted cash of $46.9 million in 2023 (vs. $23.1 million in 2022); operating activities used $30.1 million, investing activities provided $1.3 million, and financing activities used $18.1 million for debt repayment Cash Flow Summary (in thousands) | Metric | 2023 | 2022 | | :------------------------------------------ | :----- | :----- | | Net cash used in operating activities | $(30,142) | $(29,232) | | Net cash provided by (used in) investing activities | $1,346 | $(193) | | Net cash provided by (used in) financing activities | $(18,138) | $6,367 | | Net decrease in cash, cash equivalents and restricted cash | $(46,934) | $(23,058) | | Cash, cash equivalents and restricted cash, end of period | $6,062 | $52,996 | - Net decrease in cash, cash equivalents, and restricted cash was $46.9 million in 2023, significantly higher than $23.1 million in 2022[542] - Operating activities used $30.1 million in cash in 2023, consistent with the prior year[542] - Investing activities provided $1.3 million in 2023, primarily from the disposal of property and equipment, a shift from $0.2 million used in 2022[542][540](