TENAYA THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that are 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 many factors, including those discussed under "Risk Factors" and elsewhere in this Annual Report on Form 10-K. 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 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 individuals and families.
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 product platforms and core capabilities to target defined sub-populations of 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 product candidates include, TN-201, a gene therapy for MYBPC3-associated HCM, TN-301, a small molecule for HFpEF, and TN-401, a gene therapy for PKP2-associated ARVC.
TN-201 is our first-in-class gene therapy for adults and children with HCM due
to MYBPC3 gene mutations. These mutations 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 disease often experience
significant impairment in overall quality of life. TN-201 uses a differentiated
approach to deliver a functional MYBPC3 gene to the heart utilizing a
recombinant AAV9 capsid to restore expression of the cardiac myosin binding
protein to halt disease progression and potentially reverse the course of
genetic HCM following a single intravenous injection. In
In order to support our development efforts for TN-201, we have initiated 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 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, procedures, and patient outcomes. 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-301 is our highly specific small molecule inhibitor of histone deacetylase 6.
TN-301 is 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 properly during normal heart rhythm, referred to
as diastolic dysfunction. There are several cellular processes thought to
underly the pathophysiology of HFpEF including increases in fibrosis and
inflammation and defects in metabolism. Although HFpEF accounts for
approximately 50% of all heart failures, there are few proven treatment options.
We are currently conducting a Phase 1 clinical trial in healthy adult
participants to evaluate the safety, tolerability, pharmacokinetics and PD of
escalating oral doses of TN-301. The Phase 1 clinical trial is being conducted
in two stages: a SAD stage and a MAD stage. In the SAD stage of the trial,
initial target engagement (as measured by the PD biomarker of tubulin
acetylation) was achieved at dose levels thought to be in therapeutic ranges,
enabling the initiation of the MAD stage of the clinical trial, which commenced
in
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TN-401 is our other AAV-based gene therapy designed to deliver a functional PKP2 gene in adults with ARVC due to a PKP2 genetic mutation. PKP2 mutations can cause enlargement of the RV in affected individuals, replacement of heart muscle with fibrotic tissue and fatty deposits, and severely abnormal heart rhythms (arrhythmia) that can make it harder for the heart to function properly and result in sudden cardiac death in some adults and children. TN-401, has demonstrated prevention of disease progression and survival benefit after a single dose in a mouse model of ARVC, as well as tolerability in a pilot non-Good Laboratory Practices toxicology and biodistribution study. We have initiated IND-enabling studies for TN-401 and expect to submit an IND to the FDA in the second half of 2023 to enable clinical development of TN-401. TN-401 has received orphan drug designation from the FDA. Additionally, in support of our development efforts for TN-401, we have initiated a global non-interventional study to collect treatment history and seroprevalence to AAV9 antibodies data among ARVC patients who carry pathogenic or likely pathogenic PKP2 gene mutations.
In addition to our lead product candidates, we have multiple early-stage programs progressing through pre-clinical development. These programs include an AAV-based gene therapy designed to express the DWORF gene in the heart with potentially broad utility in DCM, as well as our reprogramming program for cardiac regeneration which aims to replace heart cells lost in patients experiencing heart failure due to prior MI. While these named programs have reached candidate selection stage, we also have numerous earlier-stage programs emerging from our proprietary product platforms to address other forms of heart failure.
Our distinct, but interrelated Gene Therapy, Cellular Regeneration and Precision
Medicine platforms and suite of integrated capabilities support our efforts to
discover disease-modifying treatments focused on heart disease in a
modality-agnostic manner. 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, 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. In 2022, we also launched operations of our
GMMC based in
Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the periods presented:
Year Ended
December 31, $ %
(in thousands, except percentages) 2022 2021 Change Change
Operating expenses:
Research and development $ 94,537 $ 54,393 $ 40,144 74%
General and administrative 31,084 18,413 12,671 69%
Total operating expenses 125,621 72,806 52,815 73%
Loss from operations (125,621 ) (72,806 ) (52,815 ) 73%
Other income (expense), net:
Interest income 1,954 108 1,846 1,709%
Other income (expense), net 2 (23 ) 25 109%
Total other income (expense), net 1,956 85 1,871 2,201%
Net loss $ (123,665 ) $ (72,721 ) $ (50,944 ) 70%
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 platforms, programs and product candidates, 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 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 platform, program or product candidate, as a significant amount of
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research and development expenses include internal costs, which are deployed across multiple platforms, programs, product candidates and 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 generally based on an evaluation of the progress and input from external service providers.
The following table summarizes our research and development expenses for the periods presented:
Year Ended
December 31, $ %
(in thousands, except percentages) 2022 2021 Change Change Facility and laboratory costs
$ 33,095 $ 22,833 $ 10,262 45% Outside services 30,930 13,406 17,524 131% Personnel-related costs 29,369 17,729 11,640 66%
Other research and development expenses 1,143 425 718 169%
Total research and development expenses
Research and development expenses were
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an increase of
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an increase of
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an increase of
We expect our research and development expenses to increase for the foreseeable future as we continue to invest in research and development activities related to developing our platforms, programs and product candidates and progressing through preclinical and clinical product development stages. The process of conducting the necessary research to advance to the clinical stage 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.
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.
We expect that our general and administrative expenses will generally increase for the foreseeable future to support our continued research and development activities, future business development opportunities and professional 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.
General and administrative expenses were
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Interest Income
Interest income primarily consists of interest earned on our cash, cash
equivalents and investment balances. The year-over-year increase of
Other Income (Expense), Net
Other income (expense), net primarily consists of gain and loss on disposal of assets and foreign exchange.
Net Loss
Net loss for the year ended
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
Follow-on Offering
On
"At-the-Market" Equity Offering
On
Funding Requirements
We expect our expenses and operating losses will continue to increase over the foreseeable future. The expected increase in expenses will be driven in large part by our ongoing activities, if and as we:
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continue to advance our lead product candidates, TN-201, TN-301 and TN-401, in and toward the clinic;
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continue preclinical development of our earlier-stage product candidates and initiate additional preclinical studies using our Gene Therapy, Cellular Regeneration and Precision Medicine platforms and core capabilities;
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operate our manufacturing facility and develop our manufacturing capabilities;
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seek regulatory approval of our product candidates that successfully complete clinical trials;
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expand our operational, financial, and information systems, including personnel to support our preclinical and clinical development, manufacturing, system infrastructure, regulatory compliance and future commercialization efforts;
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continue to develop, grow, perfect, enforce and defend our intellectual property portfolio; and
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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.
Based on our current operating plan, we believe that our existing cash, cash equivalents and investments in marketable securities will be sufficient to meet our working capital and capital expenditure needs through at least the next twelve months following the date of this Annual Report on Form 10-K.
In order to complete the development of our product candidates and commercialize our product candidates, if approved, we will require substantial additional funding. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through public or private equity offerings or debt financings or other capital sources, which may include strategic collaborations or other arrangements with third parties, or other sources of financing. We may not be able to raise additional capital on terms acceptable to us or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions. If we raise funds through strategic collaborations, partnerships and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. If we are unable to raise additional capital on acceptable terms when needed, our business, results of operations, and financial condition would be adversely affected.
Our ability to raise additional funds may be adversely impacted by continued
worsening global economic conditions and the recent disruptions to, and
volatility in, the credit and financial markets in
Cash Flows
The following table summarizes our cash flows for each of the periods indicated:
Year Ended
December 31,
2022 2021
(In thousands)
Net cash provided by (used in):
Operating activities $ (104,424 ) $ (60,812 )
Investing activities 83,652 (238,564 )
Financing activities 77,767 208,970
Net change in cash, cash equivalents and restricted cash
Operating Activities
Net cash used in operating activities for the year ended
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in operating lease liabilities of
Net cash used in operating activities for the year ended
Investing Activities
Net cash provided by investing activities for the year ended
Net cash used in investing activities for the year ended
Financing Activities
Net cash provided by financing activities for the year ended
Net cash provided by financing activities for the year ended
Contractual and Other Obligations
We lease office space for our corporate headquarters in
In addition, we enter into agreements in the normal course of business with vendors for preclinical research studies, clinical trials and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and are generally cancelable upon written notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred up to the date of cancellation.
We have also entered into license agreements under which we are obligated to make specified milestone and royalty payments. The payment obligations under these agreements are contingent upon future events, such as our achievement of specified development, regulatory, and sales milestones, or generating product sales. Generally, the timing or likelihood of achieving these milestones or generating future product sales are not determinable.
Off-Balance Sheet Arrangements
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Since inception, we have not engaged in any off-balance sheet arrangements as
defined in the rules and regulations of the
Critical Accounting Policies and Estimates
Our management's discussion and analysis of the financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with the
While our significant accounting policies are described in the notes to our financial statements included elsewhere in this Annual Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
Research and Development Expenses
We record research and development expenses in the periods in which they are incurred. Goods or services incurred for research and development activities that have not yet been invoiced are recorded as liabilities within accrued expenses and other current liabilities on the balance sheets. Amounts recorded for unbilled services often represent estimates, which are typically based on contracted amounts for the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the associated services. We make judgments and estimates in determining the accrued and other current liabilities balance. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust accrued expenses or prepaid expenses accordingly, which impact research and development expenses. We have not experienced any material differences between accrued expenses and actual expenses incurred. Changes in these estimates that result in material changes to our accrued costs could materially affect our results of operations.
We have and may continue to acquire the rights to licensed technology that represents in-process research and development to use and develop in the commercialization of product candidates, if approved. The upfront payments made to acquire licenses, products or rights, or payments made related to future milestone payments are recognized as research and development expenses provided that there is no alternative future use of the rights in other research and development projects, up to the point of regulatory approval. Milestone payments made upon regulatory approval are capitalized and amortized over the remaining useful life of the related product.
Stock-Based Compensation
We measure and record expense related to all equity awards granted to employees and non-employees in the statements of operations based on their grant date estimated fair values, including stock options and restricted stock awards. For stock-based awards that vest subject to the satisfaction of a service requirement, we recognize the expense using the straight-line method over the requisite service period, which is generally the vesting period. Forfeitures are recognized as they occur.
For purposes of determining the estimated fair value of options granted to employees and non-employees, we use the Black-Scholes option pricing model, which requires the use of highly subjective assumptions. These assumptions include:
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Fair Value of Common Stock-Prior to our IPO, there was no public market for our
common stock. As such, the estimated fair value of our common stock and
underlying stock options was determined at each grant date by our board of
directors, with input from management, based on the information known to us on
the grant date and upon a review of any recent events and their potential impact
on the estimated per share fair value of our common stock. As part of these fair
value determinations, our board of directors obtained and considered valuation
reports prepared by a third-party valuation firm in accordance with the guidance
outlined in the
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subsequent to our IPO, the grant date fair value of common stock was determined by using the closing price per share of common stock as reported on the Nasdaq Global Select Market.
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Expected Term-We determine the expected term, which represents the period that stock-based awards are expected to be outstanding, in accordance with the simplified method, which is presumed to be the mid-point between the contractual term and the vesting term.
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Expected Volatility- As we have limited trading history of our common stock, we have determined our computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to us, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. We expect to continue to apply this process until enough historical information regarding the volatility of our own stock price becomes available.
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Risk-Free Interest Rate-We base the risk-free interest rate on
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Expected Dividend-The expected dividend yield is assumed to be zero as we have never paid and have no plans to pay dividends on our common stock.
See Note 9 to our financial statements for more information concerning certain of the specific assumptions we used in applying the Black-Scholes valuation model to determine the estimated fair value of our stock options.
Recent Accounting Pronouncements
See Note 2 to our financial statements for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of operations.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business
Startups Act of 2012 (JOBS Act). We will remain an emerging growth company until
the earliest to occur of: (i) the last day of the fiscal year in which we have
more than
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use the extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date on which we (i) are no longer an emerging growth company and (ii) affirmatively and irrevocably opt out of the extended transition period provided by the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We are also a smaller reporting company, meaning that the market value of our
stock held by non-affiliates is less than
If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth company's smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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