10-Q
false0001858848--12-31Q120242 years0001858848us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001858848tnya:TwoThousandAndTwentyOneEquityIncentivePlanMember2024-01-012024-03-310001858848tnya:OfficeAndLaboratorySpaceMembertnya:SouthSanFranciscoCaliforniaMember2016-12-3100018588482023-12-310001858848us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001858848us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001858848tnya:OutstandingStockOptionsAndRestrictedStockUnitsMember2024-01-012024-03-310001858848us-gaap:EmployeeStockMember2024-01-012024-03-310001858848us-gaap:ConstructionInProgressMember2023-12-310001858848us-gaap:LeaseholdImprovementsMember2024-03-310001858848us-gaap:CommonStockMember2024-03-310001858848us-gaap:AdditionalPaidInCapitalMember2023-03-310001858848us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2023-12-310001858848srt:MaximumMember2024-01-012024-03-310001858848us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2023-12-310001858848tnya:SharesAvailableForFurtherIssuanceUnderThe2021EquityIncentivePlanMember2024-03-310001858848tnya:WorkforceReductionMembersrt:MinimumMemberus-gaap:SubsequentEventMember2024-05-140001858848tnya:UsTreasurySecuritiesNotIncludedWithCashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel1Member2023-12-310001858848us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMemberus-gaap:FairValueInputsLevel2Member2023-12-310001858848us-gaap:EquipmentMember2024-03-310001858848tnya:WorkforceReductionMembersrt:MaximumMemberus-gaap:SubsequentEventMember2024-05-140001858848tnya:TwoThousandAndTwentyOneEquityIncentivePlanMember2023-12-310001858848tnya:FollowOnOfferingMember2024-01-012024-03-310001858848us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001858848srt:MinimumMember2024-01-012024-03-310001858848us-gaap:EmployeeStockMember2021-07-310001858848us-gaap:RetainedEarningsMember2023-01-012023-03-310001858848us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMember2023-12-310001858848tnya:WorkforceReductionMemberus-gaap:SubsequentEventMember2024-05-140001858848tnya:AdditionalOfficeAndLaboratorySpaceMembertnya:SouthSanFranciscoCaliforniaMember2022-05-012022-05-310001858848us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001858848us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2024-03-3100018588482024-05-060001858848tnya:OutstandingStockOptionsAndAwardsMember2024-03-310001858848us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-3100018588482024-03-310001858848us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001858848us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2024-03-310001858848tnya:OutstandingPreFundedWarrantsMember2024-03-310001858848tnya:AdditionalOfficeAndLaboratorySpaceMembertnya:SouthSanFranciscoCaliforniaMember2021-11-012021-11-300001858848tnya:FollowOnOfferingMember2024-02-1200018588482023-03-310001858848us-gaap:RetainedEarningsMember2024-03-310001858848us-gaap:FurnitureAndFixturesMember2024-03-310001858848us-gaap:ComputerEquipmentMember2023-12-310001858848tnya:UnionCityFacilityMember2021-02-012021-02-280001858848us-gaap:FurnitureAndFixturesMember2023-12-310001858848tnya:TwoThousandAndTwentyOneEquityIncentivePlanMember2024-03-310001858848us-gaap:AdditionalPaidInCapitalMember2024-03-310001858848tnya:SharesAvailableForFurtherIssuanceUnderThe2021EmployeeStockPurchasePlanMember2024-03-310001858848us-gaap:CommercialPaperNotIncludedWithCashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel2Member2024-03-310001858848us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2024-03-3100018588482022-12-310001858848us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001858848us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2023-12-310001858848us-gaap:ComputerEquipmentMember2024-03-310001858848tnya:TwoThousandAndTwentyOneEquityIncentivePlanMemberus-gaap:RestrictedStockMember2023-12-310001858848us-gaap:CommonStockMember2023-01-012023-03-310001858848us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMember2024-03-310001858848us-gaap:EquipmentMember2023-12-310001858848us-gaap:DebtSecuritiesMember2024-03-310001858848us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001858848us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001858848us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001858848tnya:TwoThousandAndTwentyOneEquityIncentivePlanMemberus-gaap:RestrictedStockMember2024-01-012024-03-310001858848us-gaap:CommonStockMember2022-12-310001858848us-gaap:RestrictedStockMembersrt:MinimumMember2024-01-012024-03-310001858848tnya:AtTheMarketSalesAgreementMemberus-gaap:CommonStockMember2022-08-102022-08-100001858848us-gaap:CommercialPaperNotIncludedWithCashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel2Member2023-12-310001858848us-gaap:ConstructionInProgressMember2024-03-310001858848us-gaap:LeaseholdImprovementsMember2023-12-310001858848tnya:SecondAmendmentMembertnya:SouthSanFranciscoCaliforniaMember2023-10-012023-10-310001858848us-gaap:AdditionalPaidInCapitalMember2022-12-3100018588482023-01-012023-03-310001858848us-gaap:RetainedEarningsMember2023-12-310001858848us-gaap:ManufacturingFacilityMember2023-12-310001858848us-gaap:CommonStockMember2023-03-310001858848us-gaap:CommonStockMember2023-12-310001858848srt:MinimumMember2023-01-012023-03-310001858848tnya:UnionCityFacilityMember2021-02-280001858848srt:MaximumMember2023-01-012023-03-310001858848tnya:UsTreasurySecuritiesNotIncludedWithCashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel1Member2024-03-310001858848tnya:OutstandingStockOptionsAndRestrictedStockUnitsMember2023-01-012023-03-310001858848us-gaap:RetainedEarningsMember2024-01-012024-03-310001858848us-gaap:RetainedEarningsMember2022-12-310001858848tnya:FollowOnOfferingMembertnya:PreFundedWarrantMember2024-02-120001858848tnya:TwoThousandAndTwentyOneEquityIncentivePlanMemberus-gaap:RestrictedStockMember2024-03-310001858848us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001858848us-gaap:EmployeeStockMember2024-03-310001858848us-gaap:RestrictedStockMember2023-01-012023-03-310001858848tnya:FollowOnOfferingMember2024-02-122024-02-1200018588482024-01-012024-03-310001858848us-gaap:ManufacturingFacilityMember2024-03-310001858848us-gaap:AdditionalPaidInCapitalMember2023-12-310001858848srt:MaximumMemberus-gaap:RestrictedStockMember2024-01-012024-03-310001858848tnya:AtTheMarketSalesAgreementMemberus-gaap:CommonStockMember2024-03-310001858848us-gaap:RetainedEarningsMember2023-03-310001858848tnya:OfficeAndLaboratorySpaceMembertnya:SouthSanFranciscoCaliforniaMember2016-12-012016-12-310001858848us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMemberus-gaap:FairValueInputsLevel2Member2024-03-310001858848us-gaap:CommonStockMember2024-01-012024-03-31xbrli:purexbrli:sharestnya:RenewalOptioniso4217:USDiso4217:USDxbrli:shares

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission File Number: 001-40656

 

TENAYA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

81-3789973

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

171 Oyster Point Boulevard, Suite 500

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

 

(650) 825-6990

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

TNYA

 

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of May 6, 2024, the registrant had 78,517,534 shares of common stock, $0.0001 par value per share, outstanding.

 


 

 

Table of Contents

 

 

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

5

 

 

Condensed Balance Sheets as of March 31, 2024 and December 31, 2023

5

 

 

Condensed Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

6

 

 

Condensed Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

7

 

 

Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023

8

 

 

Notes to Unaudited Condensed Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

 

 

PART II—OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

77

Item 3.

Defaults Upon Senior Securities

77

Item 4.

Mine Safety Disclosures

77

Item 5.

Other Information

77

Item 6.

Exhibits

78

SIGNATURES

80

 

 

 


 

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, development plans, planned preclinical studies and clinical trials, future results of clinical trials, expected research and development costs, regulatory strategy, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. In some cases, investors can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements about:

our vision to change the treatment paradigm for heart disease;
the ability of our ongoing preclinical studies and ongoing or planned clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
the timing, dosing, patient enrollment and populations, progress, and results of preclinical studies and ongoing or planned clinical trials for our current product candidates and other product candidates we may develop;
the timing, scope and likelihood of regulatory filings and approvals, including timing of investigational new drugs (INDs), clinical trial applications (CTAs), U.S. Food and Drug Administration (FDA) approvals, and final regulatory approval of our current product candidates and any other future product candidates;
our ability to develop and advance our current product candidates and programs into, and successfully complete, clinical trials;
the size of the market opportunity for our product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting;
our manufacturing, commercialization, and marketing capabilities and strategy;
our competitive position and the success of competing therapies that are or may become available;
our plans relating to the further development of our product candidates, including additional indications and targets we may pursue;
the impact of existing laws and regulations and regulatory developments in the United States (U.S), Europe and other jurisdictions;
our intellectual property position, including the scope and length of protection we are able to establish and maintain for intellectual property rights covering our current product candidates and other product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
our continued reliance on third parties to conduct additional preclinical studies and clinical trials of our product candidates, and for the development and manufacture of our product candidates for preclinical studies and clinical trials;
our ability to obtain, and negotiate favorable terms of, any collaboration, partnership, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;
the pricing and reimbursement of our current product candidates and other product candidates we may develop, if approved, including any increase in demand as a result of the availability of reimbursement from the government and third-party payors;

3


 

the rate and degree of market acceptance and clinical utility of our current product candidates and other product candidates we may develop;
our estimates regarding expenses, operating losses, future revenue, cash outlays, capital requirements and needs for additional financing, including expenses arising as a result of being a public company;
our financial performance;
our facilities;
the period over which we estimate our existing cash, cash equivalents and investments in marketable securities will be sufficient to fund our future operating expenses and capital expenditure requirements;
the impact of critical accounting policies on investor’s ability to understand our financial performance; and
our expectations regarding the period during which we will remain an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act).

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, investors should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

In addition, statements such as “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

4


 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

TENAYA THERAPEUTICS, INC.

Condensed Balance Sheets

(In thousands)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

59,303

 

 

$

45,681

 

Short-term investments in marketable securities

 

 

62,946

 

 

 

58,961

 

Prepaid expenses and other current assets

 

 

6,450

 

 

 

6,940

 

Total current assets

 

 

128,699

 

 

 

111,582

 

Property and equipment, net

 

 

41,396

 

 

 

43,277

 

Operating lease right-of-use assets

 

 

9,177

 

 

 

9,979

 

Other noncurrent assets

 

 

5,627

 

 

 

5,677

 

Total assets

 

$

184,899

 

 

$

170,515

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,659

 

 

$

5,630

 

Accrued and other current liabilities

 

 

8,435

 

 

 

12,784

 

Operating lease liabilities, current

 

 

4,064

 

 

 

4,319

 

Total current liabilities

 

 

19,158

 

 

 

22,733

 

Operating lease liabilities, noncurrent

 

 

7,302

 

 

 

8,105

 

Other noncurrent liabilities

 

 

259

 

 

 

253

 

Total liabilities

 

 

26,719

 

 

 

31,091

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

8

 

 

 

7

 

Additional paid-in capital

 

 

593,802

 

 

 

542,805

 

Accumulated other comprehensive loss

 

 

(120

)

 

 

(106

)

Accumulated deficit

 

 

(435,510

)

 

 

(403,282

)

Total stockholders’ equity

 

 

158,180

 

 

 

139,424

 

Total liabilities and stockholders’ equity

 

$

184,899

 

 

$

170,515

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

5


 

TENAYA THERAPEUTICS, INC.

Condensed Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

25,055

 

 

$

25,605

 

General and administrative

 

 

8,707

 

 

 

8,118

 

Total operating expenses

 

 

33,762

 

 

 

33,723

 

Loss from operations

 

 

(33,762

)

 

 

(33,723

)

Other income, net:

 

 

 

 

 

 

Interest income

 

 

1,452

 

 

 

1,973

 

Other income, net

 

 

82

 

 

 

13

 

Total other income, net

 

 

1,534

 

 

 

1,986

 

Net loss before income tax expense

 

 

(32,228

)

 

 

(31,737

)

Income tax expense

 

 

 

 

 

 

Net loss

 

 

(32,228

)

 

 

(31,737

)

Other comprehensive income (loss):

 

 

 

 

 

 

Net unrealized gain (loss) on marketable securities

 

 

(14

)

 

 

258

 

Comprehensive loss

 

$

(32,242

)

 

$

(31,479

)

Net loss per share, basic and diluted

 

$

(0.40

)

 

$

(0.43

)

Weighted-average shares used in computing net loss per share, basic and diluted

 

 

80,982,326

 

 

 

73,097,889

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

6


 

TENAYA THERAPEUTICS, INC.

Condensed Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total Stockholders’

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2024

 

 

 

68,330,342

 

 

$

7

 

 

$

542,805

 

 

$

(106

)

 

$

(403,282

)

 

$

139,424

 

Issuance of common stock and pre-funded warrants, net of issuance costs of $3,236

 

 

 

8,888,890

 

 

 

1

 

 

 

46,761

 

 

 

 

 

 

 

 

 

46,762

 

Issuance of common stock upon exercise of stock options and vesting of restricted stock units

 

 

 

246,708

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Issuance of common stock upon exercise of pre-funded warrants

 

 

 

1,051,594

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

4,224

 

 

 

 

 

 

 

 

 

4,224

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32,228

)

 

 

(32,228

)

Balance as of March 31, 2024

 

 

 

78,517,534

 

 

$

8

 

 

$

593,802

 

 

$

(120

)

 

$

(435,510

)

 

$

158,180

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total Stockholders’

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2023

 

 

 

66,857,113

 

 

$

7

 

 

$

522,945

 

 

$

(378

)

 

$

(279,198

)

 

$

243,376

 

Issuance of common stock upon exercise
   of stock options and vesting of restricted
   stock units

 

 

 

8,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

3,514

 

 

 

 

 

 

 

 

 

3,514

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

258

 

 

 

 

 

 

258

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,737

)

 

 

(31,737

)

Balance as of March 31, 2023

 

 

 

66,865,424

 

 

$

7

 

 

$

526,460

 

 

$

(120

)

 

$

(310,935

)

 

$

215,412

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

7


 

TENAYA THERAPEUTICS, INC.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(32,228

)

 

$

(31,737

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

2,155

 

 

 

2,130

 

Amortization (accretion) of premium (discount) on marketable securities

 

 

(74

)

 

 

(567

)

Stock-based compensation

 

 

4,224

 

 

 

3,514

 

Non-cash operating lease expense

 

 

802

 

 

 

754

 

Other

 

 

100

 

 

 

52

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

447

 

 

 

366

 

Other noncurrent assets

 

 

50

 

 

 

163

 

Accounts payable

 

 

1,272

 

 

 

(1,324

)

Accrued and other current liabilities

 

 

(4,350

)

 

 

(2,662

)

Operating lease liabilities

 

 

(1,058

)

 

 

(979

)

Net cash used in operating activities

 

 

(28,660

)

 

 

(30,290

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(564

)

 

 

(629

)

Purchases of marketable securities

 

 

(23,643

)

 

 

(25,798

)

Proceeds from maturities of marketable securities

 

 

19,717

 

 

 

34,500

 

Other

 

 

1

 

 

 

(12

)

Net cash (used in) provided by investing activities

 

 

(4,489

)

 

 

8,061

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock and pre-funded warrants in follow-on offering, net of issuance costs

 

 

46,762

 

 

 

 

Proceeds from exercise of stock options and employee stock purchase plan

 

 

8

 

 

 

 

Proceeds from exercises of pre-funded warrants

 

 

1

 

 

 

 

Payment of accrued offering costs

 

 

 

 

 

(501

)

Net cash provided by (used in) financing activities

 

 

46,771

 

 

 

(501

)

Net change in cash, cash equivalents and restricted cash

 

 

13,622

 

 

 

(22,730

)

Cash and cash equivalents and restricted cash at beginning of period

 

 

46,363

 

 

 

95,671

 

Cash and cash equivalents and restricted cash at end of period

 

$

59,985

 

 

$

72,941

 

Components of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

 

$

59,303

 

 

$

72,542

 

Restricted cash included in other noncurrent assets

 

 

682

 

 

 

399

 

Cash, cash equivalents and restricted cash

 

$

59,985

 

 

$

72,941

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Property and equipment included in accounts payable and accrued and other current liabilities

 

$

7

 

 

$

370

 

Non-cash exercise of stock options

 

$

3

 

 

$

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

8


 

TENAYA THERAPEUTICS, INC.

Notes to Unaudited Condensed Financial Statements

1.
Organization and Description of the Business

Description of the Business

Tenaya Therapeutics, Inc. (the Company) was incorporated in the state of Delaware in August 2016 and is headquartered in South San Francisco, California. The Company is a clinical-stage biotechnology company focused on discovering, developing and delivering curative therapies that address the underlying drivers of heart disease. The Company’s lead product candidates include TN-201, a gene therapy for myosin binding protein C3-associated hypertrophic cardiomyopathy, TN-401, a gene therapy for plakophilin 2-associated arrhythmogenic right ventricular cardiomyopathy, and TN-301, a small molecule for heart failure with preserved ejection fraction.

Liquidity

The Company has incurred net losses since inception and expects such losses to continue in the future as it conducts research and development activities. As of March 31, 2024, the Company had an accumulated deficit of $435.5 million. The Company incurred a net loss of $32.2 million and $31.7 million during the three months ended March 31, 2024 and 2023, respectively. The Company had $122.2 million of cash, cash equivalents and investments in marketable securities as of March 31, 2024.

Management recognizes the need to raise additional capital to fully implement its business plan. The Company may seek to raise capital through equity financings, debt financings, license agreements, collaborative agreements or other sources of financing. Management believes that its existing cash, cash equivalents and investments in marketable securities as of March 31, 2024 will be sufficient to fund the Company’s operations for at least the next twelve months following the date these condensed financial statements are filed with the Securities and Exchange Commission (SEC).

2.
Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and follow the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted.

The interim condensed balance sheet as of March 31, 2024, the interim condensed statements of operations and comprehensive loss, stockholders’ equity and cash flows for the three months ended March 31, 2024 and 2023 are unaudited. These unaudited interim condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and reflect all adjustments that are necessary for the fair statement of the Company’s financial position, results of operations and cash flows for the interim periods presented. The condensed results of operations for the three months ended March 31, 2024, are not necessarily indicative of the results to be expected for the full year or for any other future annual or interim period. The condensed balance sheet as of December 31, 2023, included herein was derived from the audited financial statements as of that date. These condensed financial statements should be read in conjunction with the Company’s audited financial statements and the related notes thereto for the year ended December 31, 2023, included in Company’s Annual Report on Form 10-K, filed with the SEC on March 18, 2024.

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions made in the accompanying financial statements include, but are not limited to, accrued expenses related to research and development activities. The Company bases its

9


 

estimates on historical experience, the current economic environment, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Significant Accounting Policies

There have been no material revisions to the Company’s significant accounting policies described in Note 2 to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, ASU 2023-07 enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is evaluating the impact of this standard on its financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for the Company beginning January 1, 2025. The Company is evaluating the impact of this standard on its financial statements and related disclosures.

3.
Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 - Inputs other than quoted market prices included in Level 1 are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

10


 

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy:

 

 

 

 

March 31, 2024

 

 

 

Valuation
Hierarchy

 

Amortized
Cost

 

 

Unrealized
Gain

 

 

Unrealized
Loss

 

 

Fair Value

 

 

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

1,568

 

 

$

 

 

$

 

 

$

1,568

 

U.S. treasuries

 

Level 1

 

 

19,938

 

 

 

 

 

 

 

 

 

19,938

 

Commercial paper

 

Level 2

 

 

25,238

 

 

 

 

 

 

(14

)

 

 

25,224

 

Government agencies bonds

 

Level 2

 

 

11,843

 

 

 

 

 

 

(1

)

 

 

11,842

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

Level 1

 

 

18,282

 

 

 

 

 

 

(15

)

 

 

18,267

 

Commercial paper

 

Level 2

 

 

13,837

 

 

 

 

 

 

(10

)

 

 

13,827

 

Government agencies bonds

 

Level 2

 

 

30,932

 

 

 

 

 

 

(80

)

 

 

30,852

 

Total financial assets

 

 

 

$

121,638

 

 

$

 

 

$

(120

)

 

$

121,518

 

 

 

 

 

 

December 31, 2023

 

 

 

Valuation
Hierarchy

 

Amortized
Cost

 

 

Unrealized
Gain

 

 

Unrealized
Loss

 

 

Fair Value

 

 

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

91

 

 

$

 

 

$

 

 

$

91

 

U.S. treasuries

 

Level 1

 

 

3,595

 

 

 

 

 

 

 

 

 

3,595

 

Commercial paper

 

Level 2

 

 

34,901

 

 

 

 

 

 

(18

)

 

 

34,883

 

Government agencies bonds

 

Level 2

 

 

6,389

 

 

 

1

 

 

 

 

 

 

6,390

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

Level 1

 

 

16,182

 

 

 

4

 

 

 

(15

)

 

 

16,171

 

Commercial paper

 

Level 2

 

 

2,971

 

 

 

 

 

 

(2

)

 

 

2,969

 

Government agencies bonds

 

Level 2

 

 

39,897

 

 

 

6

 

 

 

(82

)

 

 

39,821

 

Total financial assets

 

 

 

$

104,026

 

 

$

11

 

 

$

(117

)

 

$

103,920

 

Money market funds and U.S. treasury securities are classified as Level 1 because they are valued using quoted market prices in active markets for identical assets. Financial instruments classified within Level 2 of the fair value hierarchy are valued based on observable inputs or can be derived from non-binding quotes from the Company’s investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, or historical pricing trends of a security relative to its peers.

The Company believes it is more likely than not that its marketable securities in an unrealized loss position will be held until maturity or the recovery of the cost basis of the investment. To date, the Company has not recorded any allowance for credit losses on its investment securities. Based upon its quarterly impairment review, the Company determined that the unrealized losses were not attributed to credit risk, but were primarily driven by the broader change in interest rates.

As of March 31, 2024, the fair value of available-for-sale marketable securities was $62.9 million, all of which had remaining maturities of less than one year.

The carrying amount of the Company’s remaining financial assets and liabilities, which include cash, receivables and payables, approximate their fair values due to their short-term nature.

4.
Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consists of the following:

11


 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

(In thousands)

 

Leasehold improvements

 

$

25,668

 

 

$

25,608

 

Laboratory equipment

 

 

20,066

 

 

 

19,973

 

Manufacturing equipment

 

 

17,716

 

 

 

17,716

 

Construction in progress

 

 

1,809

 

 

 

1,730

 

Computer equipment and software

 

 

1,636

 

 

 

1,614

 

Furniture and fixtures

 

 

982

 

 

 

976

 

Total property and equipment

 

$

67,877

 

 

$

67,617

 

Less: accumulated depreciation and amortization

 

 

(26,481

)

 

 

(24,340

)

Total property and equipment, net

 

$

41,396

 

 

$

43,277

 

Depreciation and amortization expense for the three months ended March 31, 2024 and 2023 was $2.2 million and $2.1 million, respectively.

Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following:

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

(In thousands)

 

Accrued compensation and related expenses

 

$

3,959

 

 

$

8,700

 

Accrued research and development expenses

 

 

2,416

 

 

 

2,583

 

ESPP deduction liability

 

 

704

 

 

 

88

 

Accrued professional services

 

 

461

 

 

 

743

 

Accrued facility management services

 

 

62

 

 

 

185

 

Other current liabilities

 

 

833

 

 

 

485

 

Total accrued and other current liabilities

 

$

8,435

 

 

$

12,784

 

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

(In thousands)

 

Prepaid expenses

 

$

5,039

 

 

$

5,783

 

Other current assets

 

 

1,411

 

 

 

1,157

 

Total prepaid expenses and other current assets

 

$

6,450

 

 

$

6,940

 

 

5.
Commitments and Contingencies

Facility Leases

In December 2016, the Company entered into a lease agreement for office and laboratory space in South San Francisco, California. The lease expires in May 2025 and the Company may renew the lease term for two additional five-year periods.

In February 2021, the Company entered into a lease agreement for the Union City Facility. The lease commenced in May 2021 and has a ten-year term with one five-year renewal option.

In November 2021, the Company entered into a short-term sublease agreement for additional office and laboratory space in South San Francisco, California with a lease term that was initially set to expire on June 30, 2022. In May 2022, the Company entered into an amendment to extend the term for the existing sublease premise through December 31, 2022. Under the amendment, the Company also subleased additional office and laboratory space at the same sublease premise through November 30, 2023. In October 2023, the Company entered into a second amendment for additional laboratory space and to extend the term of the sublease premise through November 30, 2024.

12


 

Information related to operating lease activity during the three months ended March 31, 2024 was as follows (in thousands):

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

Operating lease cost

 

$

1,075

 

 

$

1,090

 

Variable lease cost

 

 

367

 

 

 

273

 

Short-term lease cost

 

 

 

 

 

5

 

Total lease cost

 

$

1,442

 

 

$

1,368

 

 

 

 

 

 

 

 

Operating lease right-of-use assets obtained in exchange for lease obligations

 

$

 

 

$

1,593

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

1,332

 

 

$

1,315

 

As of March 31, 2024, the Company’s operating leases had a weighted average remaining lease term of 5.2 years and a weighted average discount rate of 9.4%. Future minimum lease payments under the Company’s operating leases as of March 31, 2024 were as follows:

 

 

Amount

 

 

 

(In thousands)

 

2024 (remaining 9 months)

 

$

3,945

 

2025

 

 

2,445

 

2026

 

 

1,386

 

2027

 

 

1,428

 

2028

 

 

1,471

 

Thereafter

 

 

4,006

 

Total undiscounted future minimum lease payments

 

$

14,681

 

Imputed interest

 

 

(3,315

)

Total operating lease liabilities

 

$

11,366

 

Purchase Commitments

The Company enters into contractual agreements with various suppliers in the normal course of its business, including vendors that provide machinery and equipment. All contracts are terminable, with varying provisions regarding termination. If a contract with a specific vendor were to be terminated, the Company would only be obligated for the products or services that the Company had received through the time of termination.

Indemnification

From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated. The Company was not involved in any material litigation as of March 31, 2024.

In the normal course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amounts of future payments the Company could be required to make under these provisions is not determinable. In addition, the Company has entered into indemnification agreements with its directors and certain officers that may require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. As of March 31, 2024, the Company did not have any material indemnification claims that were probable or reasonably possible and, consequently, has not recorded any related liabilities.

13


 

6.
Stock-Based Compensation

2021 Equity Incentive Plan

Under the Company's 2021 Equity Incentive Plan (2021 Plan), 4,000,000 shares of the Company’s common stock were initially reserved for issuance of equity awards to employees, directors, and consultants, under terms and provisions established by the board of directors. The number of shares of common stock available for issuance under the 2021 Plan automatically increases on the first day of January for a period of ten years, commencing on January 1, 2022, in an amount equal to the lesser of: 4,000,000 shares; 4% of the outstanding shares of the Company’s common stock as of the last day of the immediately preceding year; or such other amount as the board of directors may determine.

Total shares reserved and available for grant under the 2021 Plan as of March 31, 2024 are 364,108.

Stock Option Activity

The following table summarizes stock option activity:

 

 

Shares

 

 

Weighted-
Average
Exercise
Price

 

 

 

 

 

 

(in dollars)

 

Outstanding as of December 31, 2023

 

 

8,343,434

 

 

$

7.47

 

Granted

 

 

2,460,100

 

 

$

5.14

 

Exercised

 

 

(3,667

)

 

$

2.91

 

Cancelled

 

 

(10,745

)

 

$

16.89

 

Outstanding as of March 31, 2024

 

 

10,789,122

 

 

$

6.93

 

Stock option awards granted to employees generally vest over a four-year period. The contractual term of stock option awards is generally 10 years from the grant date.

Stock Option Valuation

The fair value of the Company’s stock option awards is estimated on the date of grant using the Black-Scholes option pricing model using the following assumptions:

 

 

Three Months Ended
March 31,

 

 

2024

 

2023

Expected term (in years)

 

6.0 – 6.1

 

6.0 – 6.1

Expected volatility

 

93%

 

94% – 95%

Risk-free interest rate

 

3.9% – 4.3%

 

3.6% – 4.0%

Expected dividend yield

 

%

 

%

Restricted Stock Units

Restricted stock units (RSUs) are awards that entitle the holder to receive freely tradable shares of the Company’s common stock upon the completion of a specific period of continued service. RSUs generally vest over a two to four year period and are subject to forfeiture if employment terminates prior to the release of vesting restrictions. RSUs are valued at the market price of the underlying common stock on the date of grant. The Company recognizes noncash compensation expense for the fair value of RSUs on a straight-line basis over the

14


 

requisite service period of the awards. The following table summarizes activity of RSUs granted to employees with service-based vesting under the 2021 Plan.

 

 

Shares

 

 

Weighted
Average
Grant Date
Fair Value
per Share

 

 

 

 

 

 

(in dollars)

 

Unvested as of December 31, 2023

 

 

1,088,276

 

 

$

3.34

 

  Granted

 

 

885,415

 

 

$

5.22

 

  Vested

 

 

(243,041

)

 

$

3.22

 

  Forfeited

 

 

 

 

$

 

Unvested as of March 31, 2024

 

 

1,730,650

 

 

$

4.32

 

2021 Employee Stock Purchase Plan

Under the Company's 2021 Employee Stock Purchase Plan (ESPP), the Company initially reserved 800,000 shares for future issuance. The number of shares of common stock available for issuance under the ESPP automatically increases on the first day of each fiscal year for a period of ten years beginning with 2022 in an amount equal to the lesser of: 800,000 shares; 1% of the outstanding shares of the Company’s common stock as of the last day of the immediately preceding year; or such other amount as the board of directors may determine. As of March 31, 2024, 2,088,697 shares were reserved for future issuance under the ESPP. Under the Company’s ESPP, employees are generally eligible to participate and can purchase shares on each purchase date established semi-annually through payroll deductions at the lower of 85% of the fair market value of the Company’s stock at the commencement of the offering period or each purchase date of the offering period. Each offering period spans 6 months. The ESPP permits eligible employees to purchase common stock through payroll deductions for up to 15% of qualified compensation, up to an annual limit of $25,000 per the Internal Revenue Service. For the three months ended March 31, 2024 and 2023, the stock-based compensation expense for ESPP was not material.

Stock-Based Compensation

The following table summarizes stock-based compensation recognized in the Company’s condensed statements of operations and comprehensive loss:

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

1,989

 

 

$

1,571

 

General and administrative

 

 

2,235

 

 

 

1,943

 

  Total stock-based compensation

 

$

4,224

 

 

$

3,514

 

 

7.
Stockholders' Equity

“At-the-Market” Equity Offering

On August 10, 2022, the Company entered into a sales agreement (Sales Agreement) with Leerink Partners LLC (formerly SVB Securities LLC) to establish an at-the-market (ATM) offering defined in Rule 415 under the Securities Act. Pursuant to the Sales Agreement, the Company is permitted to offer and sell, from time to time, shares of its common stock having a maximum aggregate offering price of up to $75.0 million. As of March 31, 2024, the Company may issue and sell up to approximately $71.0 million in additional shares of its common stock under the ATM.

Follow-On Offering

On February 12, 2024, the Company completed an underwritten offering of 8,888,890 shares of its common stock at a price of $4.50 per share and, to an investor in lieu of common stock, pre-funded warrants to purchase 2,222,271 shares of its common stock at a price of $4.499 per each pre-funded warrant. The pre-funded warrants can be exercised at any time after issuance for an exercise price of $0.001 per share, subject to certain ownership

15


 

limitations. The Company received net proceeds of approximately $46.8 million, after deducting underwriting discounts and commissions of approximately $3.0 million and offering expenses of $0.2 million.

As of March 31, 2024, total shares of common stock reserved for issuance, on an as-if converted basis, are as follows:

 

 

March 31,
2024

 

Outstanding stock options and awards

 

 

12,519,772

 

Outstanding pre-funded warrants

 

 

7,104,853

 

Shares available for further issuance under the 2021 Equity Incentive Plan

 

 

364,108

 

Shares available for further issuance under the 2021 Employee Stock Purchase Plan

 

 

2,088,697

 

Total

 

 

22,077,430

 

 

8.
Income Taxes

For the three months ended March 31, 2024 and 2023, the Company did not record any income tax expense or benefit. The Company has recorded a full valuation allowance against its U.S. federal and state deferred tax assets as the Company believes it is more likely than not that the benefit will not be realized.

9.
Net Loss Per Share

Basic and diluted loss per share are computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Basic weighted-average shares of common stock outstanding includes the weighted-average effect of the Company’s outstanding pre-funded warrants.

The following potentially dilutive securities were not included in the calculation of diluted net loss per share as of the periods presented because the effect would have been anti-dilutive:

 

 

March 31,

 

 

 

2024

 

 

2023

 

Outstanding stock options and restricted stock units

 

 

12,519,772

 

 

 

9,134,514

 

Restricted stock subject to future vesting

 

 

 

 

 

38

 

  Total

 

 

12,519,772

 

 

 

9,134,552

 

 

10.
Subsequent Event

On May 14, 2024, the Company announced cost containment measures, including a committed plan to reduce its workforce (the “Workforce Reduction”) by approximately 22%. The cost containment measures align with the Company's focus on generating data from its clinical-stage gene therapy programs.

In connection with the Workforce Reduction, the Company estimates that it will incur approximately $1.3 million to $1.5 million of aggregate charges, primarily related to employee cash severance and continuing health benefits, which are expected to be substantially recognized during the second quarter of 2024.

The foregoing estimates that the Company expects to incur in connection with the Workforce Reduction are contingent upon various assumptions and actual results may differ. The Company may also incur additional costs not currently contemplated due to events related to or resulting from the Workforce Reduction.

 

16


 

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes thereto for the year ended December 31, 2023, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2024, or Annual Report.

In addition to historical financial information, this discussion and analysis and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, based upon current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A. below. You should carefully read the “Risk Factors” to gain an understanding of the factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biotechnology company focused on discovering, developing and delivering potentially curative therapies that address the underlying drivers of heart disease. Our vision is to change the treatment paradigm for heart disease, and in doing so improve and extend the lives of millions of patients.

We are advancing a deep and diverse pipeline of disease-modifying therapies that includes both gene therapies and small molecules discovered internally and developed using our extensive core capabilities to target patients with rare or highly prevalent forms of heart disease. All of our programs are currently being assessed in clinical trials or are in the preclinical stage; we do not have any products approved for sale and have not generated any revenue to date.

Our lead investigational product candidates are TN-201, a gene therapy for myosin binding protein C3 (MYBPC3)-associated hypertrophic cardiomyopathy (HCM), TN-401, a gene therapy for plakophilin 2 (PKP2)-associated arrhythmogenic right ventricular cardiomyopathy (ARVC), and TN-301, a small molecule for heart failure with preserved ejection fraction (HFpEF).

TN-201 is our potential first-in-class and best-in-class gene therapy for adults and children with HCM due to MYBPC3 gene mutations. These mutations result in a deficiency of myosin binding protein, which in turn can cause the heart walls of affected individuals to become significantly thickened, leading to fibrosis, abnormal heart rhythms, cardiac dysfunction and heart failure. HCM is a chronic, progressive condition and those diagnosed with the disease often experience significant impairment in overall quality of life. TN-201 utilizes a recombinant adeno-associated virus serotype 9 (AAV9) capsid to deliver a working MYBPC3 gene to specific cells of the heart in order to produce cardiac myosin binding protein and thereby slow or even reverse the course of MYBPC3-associated HCM following a single infusion. In October 2023, we began dosing patients in the MyPEAKTM-1 Phase 1b multi-center, open-label clinical trial, designed to assess the safety, tolerability and efficacy of a one-time intravenous infusion of TN-201. Initial data from the trial is anticipated in the second half of 2024.

To support our development efforts for TN-201 we are conducting two noninterventional studies: a study evaluating seroprevalence to AAV9 antibodies among adults with MYBPC3-associated HCM, and MyClimb, a prospective and retrospective global natural history study focused on pediatric patients with MYBPC3 mutation-associated cardiomyopathy. The seroprevalence study has completed enrollment and data is under analysis. The objective of the natural history study is to characterize the outcomes, burden of illness, risk factors, quality of life, and biomarkers associated with disease progression in pediatric patients with cardiomyopathy due to MYBPC3 gene mutations, as well as treatments and procedures. MyClimb complements existing disease registries focused primarily on adult patient HCM populations and may support and expedite the development of TN-201 in the pediatric patient population. TN-201 has received orphan drug designation from the FDA and orphan medicinal product designation from the EC, as well as Fast Track Designation from the FDA.

TN-401 is our potential first-in-class and best-in-class AAV9-based gene therapy for the treatment of ARVC due to disease-causing variants in the PKP2 gene. ARVC, also known as arrhythmogenic cardiomyopathy, or ACM, is a chronic, progressive disease characterized by potentially dangerous and frequent ventricular arrhythmias. The disease is associated with significant impairment to patients’ overall quality of life, as well as an elevated risk of

17


 

sudden cardiac death. PKP2 mutations are the most common genetic cause of ARVC and result in insufficient expression of a protein needed for proper functioning of the desmosomal complex that maintains physical connections and electrical signaling between heart muscle cells.

In October 2023, the FDA provided clearance of our IND application to initiate clinical testing of TN-401. We plan to initiate patient dosing in RIDGETM-1, our Phase 1b multi-center, open-label clinical trial, designed to assess the safety, tolerability and efficacy of a one-time intravenous infusion of TN-401, in the second half of 2024. In support of our development efforts for TN-401, we have initiated a global noninterventional study to collect treatment history and seroprevalence to AAV9 antibodies data among ARVC patients who carry pathogenic or likely pathogenic PKP2 gene mutations.TN-401 has received orphan drug designation from the FDA and orphan medicinal product designation from the European Commission (EC), as well as Fast Track Designation from the FDA.

TN-301 is our small molecule inhibitor of histone deacetylase-6 (HDAC6), initially being developed for the potential treatment of HFpEF. HFpEF is characterized by a stiffening of the heart muscle resulting in an inability for the left ventricle to relax and pump blood effectively with each contraction. There are several cellular processes thought to underlie the pathophysiology of HFpEF, including increases in fibrosis and inflammation and defects in metabolism. Although HFpEF accounts for approximately half of all heart failures, there are few proven treatment options.

In October 2023, we shared positive data from our Phase 1 clinical trial of TN-301 in healthy participants at the 2023 Heart Failure Society of America Annual Scientific Meeting. The Phase 1 trial enrolled participants in two stages. In Stage 1, participants received single ascending doses and in Stage 2, participants received multiple ascending doses. TN-301 was generally well tolerated across the broad range of doses studied. Pharmacokinetic results showed overall dose proportionality in both stages of the clinical trial with a half-life supportive of once-daily dosing. Increasing doses and exposures with TN-301 correlated with increased pharmacodynamic effects. There were no changes in histone acetylation with TN-301 underscoring the selectivity of TN-301 for HDAC6 and potentially reducing the risk of off target effects observed with less selective HDAC6 inhibitors or pan-HDAC inhibition. In preclinical studies, selective HDAC6 inhibition has been shown to have comparable efficacy to empagliflozin, a sodium-glucose cotransporter-2 (SGLT2) inhibitor which is approved for the treatment of HFpEF. More recently, using a validated mouse model of disease, we demonstrated that HDAC6 inhibition co-administered with a SGLT2 inhibitor demonstrated additive benefit, improving several measures of heart function. Taken together, these data support continued development of TN-301 as a potential treatment for patients with HFpEF. We believe late-stage clinical development of TN-301 is best suited for development by or with a well-resourced partner.

In addition to our lead product candidates, we have multiple early-stage programs progressing through preclinical development using various therapeutic approaches, including gene editing, cellular regeneration and gene addition to address other forms of rare and/or prevalent heart disease.

Our distinct suite of integrated capabilities supports our efforts to discover and develop disease-modifying treatments focused on heart disease. We also continue to invest in complementary new technologies and the optimization of our existing proprietary capabilities, including the use of human-iPSC disease models, machine learning and phenotypic screening, gene editing, capsid engineering and novel promoter constructs to enable the discovery, design, delivery and development of therapeutics that are best suited to a given cardiovascular condition. We have also internalized and integrated both current Good Manufacturing Practices (cGMP) and non-GMP AAV manufacturing capabilities to support our emerging portfolio of gene therapy and cellular regeneration product candidates. Our Genetic Medicines Manufacturing Center, a cGMP facility, is strategically located near our research labs in the San Francisco Bay Area to enable smooth scale-up of production to support our clinical studies and utilizes a modular, scalable design to produce AAV-based gene therapies under current GMP standards. We seek to build on existing proprietary capabilities with the aim of increasing the safety and efficacy of genetic medicines, accelerating early-stage discovery and preclinical optimization and reducing the overall cost of goods by increasing manufacturing productivity.

In May 2024, we announced cost containment measures, including a committed plan to reduce our workforce (the “Workforce Reduction”) by approximately 22%. The cost containment measures align with our focus on generating data from our clinical-stage gene therapy programs.

 

18


 

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023:

The following table summarizes our results of operations for the periods presented:

 

 

Three Months Ended
March 31,

 

 

$

 

 

%

(in thousands, except percentages)

 

2024

 

 

2023

 

 

Change

 

 

Change

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

25,055

 

 

$

25,605

 

 

$

(550

)

 

(2%)

General and administrative

 

 

8,707

 

 

 

8,118

 

 

 

589

 

 

7%

Total operating expenses

 

 

33,762

 

 

 

33,723

 

 

 

39

 

 

0%

Loss from operations

 

 

(33,762

)

 

 

(33,723

)

 

 

(39

)

 

0%

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,452

 

 

 

1,973

 

 

 

(521

)

 

(26%)

Other income (expense), net

 

 

82

 

 

 

13

 

 

 

69

 

 

531%

Total other income (expense), net

 

 

1,534

 

 

 

1,986

 

 

 

(452

)

 

(23%)

Net loss

 

$

(32,228

)

 

$

(31,737

)

 

$

(491

)

 

2%

Research and Development Expenses

Research and development activities account for a significant portion of our operating expenses. Research and development expenses relate primarily to discovery and development of our research programs, product candidates and proprietary platform technology, and are recognized as incurred. Internal research and development costs include, among others, employee-related costs (including salaries, benefits and stock-based compensation for employees engaged in research and development functions), laboratory supplies, other non-capital equipment utilized for in-house research, and allocated overhead costs. External research and development expenses include, among others, fees paid to contract research organizations (CROs) to execute preclinical studies and clinical trials on our behalf, consulting fees and fees related to licensing agreements. We do not allocate our costs by research program, product candidate or proprietary platform technology, as a significant amount of research and development expenses represent internal costs, which are deployed across our programs, product candidates, proprietary platform technology, and other activities.

We expense all research and development costs in the periods in which they are incurred. We enter into various agreements with CROs. Costs of certain research and development activities are recognized based on estimates from a number of factors, including an evaluation of the progress of the activities, as well as input from external service providers.

The following table summarizes our research and development expenses for the periods presented:

 

 

Three Months Ended
March 31,

 

 

$

 

 

%

(in thousands, except percentages)

 

2024

 

 

2023

 

 

Change

 

 

Change

Personnel-related costs

 

$

10,549

 

 

$

9,563

 

 

$

986

 

 

10%

Facility and laboratory costs

 

 

6,932

 

 

 

9,170

 

 

 

(2,238

)

 

(24%)

Outside services

 

 

6,822

 

 

 

6,300

 

 

 

522

 

 

8%

Other research and development expenses

 

 

752

 

 

 

572

 

 

 

180

 

 

31%

Total research and development expenses

 

$

25,055

 

 

$

25,605

 

 

$

(550

)

 

(2%)

Research and development expenses were $25.1 million and $25.6 million for the three months ended March 31, 2024 and 2023, respectively. The year-over-year decrease of $0.6 million, or 2%, was primarily due to:

a decrease of $2.2 million in facility and laboratory costs, reflecting lower costs for laboratory supplies and materials related to IND-enabling activities; partially offset by
an increase of $1.0 million in employee-related costs reflecting higher stock-based compensation and salaries; and
an increase of $0.5 million in outside services reflecting higher costs related to clinical trial activities.

19


 

The process of conducting the necessary research to advance through the clinical stages and ultimately obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we cannot reasonably estimate or know the nature, timing or estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. However, we expect our research and development expenses to generally remain flat for the remainder of 2024.

General and Administrative

General and administrative expenses consist of personnel-related costs (including salaries, benefits and stock-based compensation for our employees in finance, human resources and other administrative functions), legal fees, professional fees incurred for accounting, audit and tax services, information technology and facility costs not otherwise included in research and development expenses. Legal fees primarily include those related to corporate and intellectual property-related matters.

General and administrative expenses were $8.7 million and $8.1 million for the three months ended March 31, 2024 and 2023, respectively. The year-over-year increase of $0.6 million, or 7%, was primarily due to an increase in stock-based compensation and professional fees.

We expect our general and administrative expenses to generally remain flat for the remainder of 2024, as we continue to support our research and development activities and business development opportunities, and incur professional service fees. In addition, we will continue to incur legal, accounting, insurance and other expenses in operating our business as a public company, including costs associated with regulatory and compliance activities.

Interest Income

Interest income primarily consists of interest earned on our cash, cash equivalents and investment balances. The year-over-year decrease of $0.5 million was primarily due to lower cash, cash equivalents and investment balances.

Net Loss

Net loss for the three months ended March 31, 2024, was $32.2 million, compared to a net loss of $31.7 million for the three months ended March 31, 2023.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have not generated any revenue and we have incurred significant net losses and negative cash flows from operations. From our inception through March 31, 2024, we have funded our operations primarily from the sale and issuance of our equity securities. As of March 31, 2024, we had cash, cash equivalents and investments in marketable securities of $122.2 million and an accumulated deficit of $435.5 million.

Follow-on Offering

On February 12, 2024, we completed an underwritten offering of 8,888,890 shares of its common stock at a price of $4.50 per share and, to an investor in lieu of common stock, pre-funded warrants to purchase 2,222,271 shares of its common stock at a price of $4.499 per pre-funded warrant under our registration statement on Form S-3 (File No. 333-266741). The pre-funded warrants can be exercised at any time after issuance for an exercise price of $0.001 per share, subject to certain ownership limitations. We received net proceeds of approximately $46.8 million, after deducting underwriting discounts and commissions of approximately $3.0 million and other offering expenses of approximately $0.2 million.

“At-the-Market” Equity Offering

On August 10, 2022, we entered into a sales agreement (the Sales Agreement) with Leerink Partners LLC (formerly SVB Securities LLC). Pursuant to the Sales Agreement, we may sell from time to time up to an aggregate of $75.0 million of our common stock through an “at-the-market” (ATM) offering defined in Rule 415 under the Securities Act. The $75.0 million of common stock that may be offered, issued and sold under the Sales Agreement

20


 

is included in the $300.0 million of securities that may be offered, issued and sold by us under our registration statement on Form S-3 (File No. 333-266741). As of March 31, 2024, we may issue and sell up to approximately $71.0 million in additional shares of our common stock under the ATM.

Funding Requirements

We expect that we will continue to incur operating losses over the foreseeable future. Our operating expenses are expected to remain relatively flat for the next twelve months but may increase in the future, if and as we:

continue to advance our lead gene therapy product candidates, TN-201 and TN-401;
expand the scope of our existing clinical trials and transition into late-stage clinical development;
seek regulatory and marketing approvals of any of our product candidates that successfully complete clinical trials;
establish commercial-scale manufacturing capabilities;
expand our operational, financial, and information systems and personnel to support our future product development and commercialization efforts;
seek to identify additional research programs and additional product candidates;
initiate preclinical studies and clinical trials for any additional product candidates we identify;
advance our future product candidates into clinical development;
maintain, develop, expand, enforce, defend and protect our intellectual property portfolio; and