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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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

September 30, 2023

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:

001-40603

 

TSCAN THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

82-5282075

(State or other jurisdiction of

incorporation or organization)

 

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

830 Winter Street,

Waltham, Massachusetts

 

02451

(Address of principal executive offices)

 

(Zip Code)

 

(857) 399-9500

(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

Voting Common Stock, $0.0001 par value per share

 

 

TCRX

 

The Nasdaq Global Market, LLC

 

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, a 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 November 3, 2023, the registrant had 43,548,092 shares of voting common stock, $0.0001 par value per share, and 4,276,588 shares of non-voting common stock, $0.0001 par value per share, outstanding.

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (Quarterly Report) contains 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 (Exchange Act) that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report are forward-looking statements.

In some cases, you can identify forward-looking statements by words such as “may,” “can,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “seek,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “possible” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

the beneficial characteristics, safety, efficacy, therapeutic effects and potential advantages of our T cell receptor-engineered T cell (TCR-T), therapy candidates;
our expectations regarding our preclinical studies being predictive of clinical trial results;
the timing of the initiation, progress and expected results of our preclinical studies, clinical trials and our research and development programs;
the timing of and our ability to submit applications for, and obtain and, if approved, maintain regulatory approvals for our product candidates;
our plans relating to developing and commercializing our TCR-T therapy candidates, if approved, including sales strategy;
estimates of the size of the addressable market for our TCR-T therapy candidates;
our manufacturing capabilities and the scalable nature of our manufacturing process;
our estimates regarding expenses, future milestone payments and revenue, capital requirements and needs for additional financing;
our expectations regarding competition;
our anticipated growth strategies;
our ability to attract or retain key personnel;
our ability to establish and maintain development partnerships and collaborations;
our expectations regarding federal, state and foreign regulatory requirements;
regulatory developments in the United States and foreign countries;
our ability to obtain and maintain intellectual property protection for our proprietary platform technology and our product candidates;
the anticipated trends and challenges in our business and the market in which we operate;
the sufficiency of our existing capital resources to fund our future operating expenses and capital expenditure requirements;
the effects of health epidemics, including the lingering effects of the COVID-19 pandemic, in regions where we, our partners, or other third parties on which we rely, on any of the foregoing or other aspects of our business or operations;
the effects of rising inflation rates and the impact on operating costs, liquidity and access to credit on any of the foregoing or other aspects of our business operations;
disruptions and instability in the banking industry and other parts of the financial service sector, such as events involving limited liquidity, defaults, non-performance or other adverse events or developments;
liquidity and/or capital resources changes and the impact of any changes or limitations on factors such as (among others) the company’s ability to borrow funds and/or renew or roll over existing indebtedness and access to private capital sources and public capital markets;
financial market volatility and declines in financial market prices of equity securities;
inflation and rising interest rates and resulting impacts financial market prices of debt and equity securities;

1


 

historical and future operating, financial and investment impacts of inflation, rising interest rates and instability in financial and capital markets;
impacts on customers, distributors, suppliers and others resulting from banking industry disruptions or ongoing or new supply chain and product distribution/logistics issues;
the effects of global economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and conflicts, such as the ongoing conflict between Russia and Ukraine, and Israel and Hamas, on any of the foregoing or other aspects of our business or operations; and
our anticipated use of our existing cash resources and our ability to obtain additional financing in the future.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions included in this Quarterly Report, particularly those described in the “Risk Factors” section in Part II, Item 1A of this Quarterly Report, that could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward- looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements contained in this Quarterly Report are made as of the date of this Quarterly Report, and although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, we assume no obligation to update or revise these any forward-looking statements for any reason even if new information becomes available in the future.

You should read this Quarterly Report and the documents that we have filed as an exhibit to this Quarterly Report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

In addition, this Quarterly Report contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates, including data regarding the estimated size of such markets and the incidence of certain medical conditions. We obtained the industry, market and similar data set forth in this Quarterly Report from our internal estimates and research, and from academic and industry research, publications, surveys and studies conducted by third parties, including governmental agencies. Industry publications and third party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable. Our estimates of the potential market opportunities for our product candidates include a number of key assumptions based on our industry knowledge, industry publications and third party research, surveys and studies, which may be based on a small sample size and fail to accurately reflect market opportunities. Information based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by us and third parties, industry, medical and general publications, government data and similar sources. This Quarterly Report contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents.

Unless stated otherwise, references in this Quarterly Report to “us,” “we,” “our,” “our Company,” or “the Company” and similar terms refer to TScan Therapeutics, Inc.

2


 

RISK FACTOR SUMMARY

 

Our business operations are subject to numerous risks that, if realized, could materially and adversely affect our business, financial condition, results of operations, and future growth prospects. These risks are discussed more fully in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:

 

Risks Related to Our Business and Industry

We have incurred significant losses since inception, and we expect to incur losses over the next several years and may not be able to achieve or sustain revenues or profitability in the future.
Our business depends upon the success of our proprietary platform.
Our limited operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.
We have never generated any revenue from sales of cell therapy products and our ability to generate revenue from cell therapy product sales and become profitable depends significantly on our success in a number of areas.
We will need to obtain substantial additional funding to complete the development and any commercialization of our product candidates, if approved. If we are unable to raise this necessary capital when needed, we would be forced to delay, reduce or eliminate our product development programs, commercialization efforts or other operations.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our intellectual property or product candidates on unfavorable terms to us.
Global economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and conflicts, such as the ongoing conflict between Russia and Ukraine, and Israel and Hamas, could make it more difficult for us to access financing and could adversely affect our business and operations.
Recent volatility in capital markets and lower market prices for many securities may affect our ability to access new capital through sales of shares of our common stock or issuance of indebtedness, which may harm our liquidity, limit our ability to grow our business, pursue acquisitions or improve our operating infrastructure and restrict our ability to compete in our markets.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and its financial condition and results of operations.
The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our operating and financial flexibility.

 

Risks Related to the Development of Our Product Candidates

Our approach to the discovery and development of product candidates based on our proprietary platform represents a novel approach to cancer treatment, which creates significant challenges for us.
We are early in our development efforts. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.
Although many of our personnel have extensive experience in clinical development and manufacturing at other companies, we have limited experience as a company in conducting clinical trials and little direct experience managing a manufacturing facility for our product candidates.
Our preclinical studies and clinical trials may fail to demonstrate adequately the safety, potency and purity of any of our product candidates, which would prevent or delay development, regulatory approval and commercialization.
Our business could be adversely affected by the effects of health epidemics, including any lingering effects of the COVID-19 pandemic, in regions where we, our partners or other third parties on which we rely have significant manufacturing facilities, concentrations of potential clinical trial sites or other business operations.
We may rely on third parties to manufacture our clinical product supplies, and we may rely on third parties to produce and process our product candidates, if licensed.

3


 

Allogeneic hematopoietic cell transplantation (HCT) is a high-risk procedure that may result in complications or adverse events for patients in our clinical trials including those unrelated to the use of our products or for patients that use any of our product candidates, if approved.
Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, require expansion of the trial size, limit their commercial potential, or result in significant negative consequences.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
The market opportunities for our product candidates may be relatively small as they will be limited to those patients who are ineligible for or have failed prior treatments and our estimates of the prevalence of our target patient populations may be inaccurate.
We face significant competition, and our operating results will suffer if we fail to compete effectively.

 

Risks Related to Manufacturing

Manufacturing and administering our product candidates is complex and we may encounter difficulties in production, particularly with respect to process development or scaling up of our manufacturing capabilities. If we encounter such difficulties, our ability to provide supply of our TCR-T therapy candidates for clinical trials or for commercial purposes could be delayed or stopped.
Although we have expanded our existing manufacturing facility and infrastructure in lieu of relying solely on third parties for the manufacture of our product candidates for certain clinical purposes and many of our personnel have experience in clinical manufacturing at other companies, we have no direct experience as a company managing manufacturing for our product candidates, which will be costly and time-consuming, and which may not be successful.
We may have difficulty validating our manufacturing process as we manufacture TCR-T therapy candidates from an increasingly diverse patient population for our clinical trials.

 

Risks Related to Government Regulation

The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and regulatory approval of our product candidates.
We may be unable to obtain regulatory approval for our product candidates under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of our product candidates and adversely impact our potential to generate revenue, our business and our results of operations.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

 

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain patent protection for any product candidates we develop and for our technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products, product candidates and technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected.
We are currently, and expect in the future to be, party to material license or collaboration agreements, which may impose numerous obligations and restrictions on us.
Third party claims of intellectual property infringement, misappropriation or other violations may prevent or delay our product discovery and development efforts.

 

Risks Related to Our Reliance on Third Parties

We plan to rely on third parties to conduct our clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.
We have in the past and may in the future form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such collaborations, alliances or licensing arrangements.

 

4


 

General Risk Factors

Rising inflation rates may result in increased operating costs and reduced liquidity, and affect our ability to access credit.

 

5


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

7

Item 1.

Financial Statements (Unaudited)

7

Condensed Consolidated Balance Sheets

7

Condensed Consolidated Statements of Operations

8

 

Condensed Consolidated Statements of Stockholders’ Equity

9

Condensed Consolidated Statements of Cash Flows

10

Notes to Unaudited Condensed Consolidated Financial Statements

11

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

84

Item 3.

Defaults Upon Senior Securities

84

Item 4.

Mine Safety Disclosures

84

Item 5.

Other Information

84

Item 6.

Exhibits

84

Signatures

86

 

6


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TScan Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

 

 

 

September 30,
2023

 

 

December 31,
2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

155,193

 

 

$

120,027

 

Marketable securities

 

 

60,230

 

 

 

-

 

Prepaid expenses and other current assets

 

 

2,144

 

 

 

4,100

 

Total current assets

 

 

217,567

 

 

 

124,127

 

Property and equipment, net

 

 

8,595

 

 

 

10,100

 

Right-of-use assets

 

 

58,539

 

 

 

59,102

 

Restricted cash

 

 

5,031

 

 

 

5,037

 

Long-term deposit and other assets

 

 

1,647

 

 

 

725

 

Total assets

 

$

291,379

 

 

$

199,091

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,196

 

 

$

2,912

 

Accrued expenses and other current liabilities

 

 

9,257

 

 

 

6,838

 

Operating lease liability, current portion

 

 

4,376

 

 

 

3,681

 

Deferred revenue, current portion

 

 

15,212

 

 

 

3,874

 

Current portion of long-term debt

 

 

1,110

 

 

 

-

 

Total current liabilities

 

 

33,151

 

 

 

17,305

 

Deferred revenue, net of current portion

 

 

7,758

 

 

 

-

 

Operating lease liability, net of current portion

 

 

52,662

 

 

 

53,013

 

Long-term debt and accrued interest

 

 

28,835

 

 

 

29,290

 

Other long term liabilities

 

 

12

 

 

 

49

 

Total liabilities

 

 

122,418

 

 

 

99,657

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Voting common stock, $0.0001 par value; 300,000,000 shares authorized; 43,546,528 and 19,082,820 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

4

 

 

 

2

 

Non-voting common stock, $0.0001 par value; 10,000,000 shares authorized; 4,276,588 and 5,143,134 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

396,940

 

 

 

257,810

 

Accumulated deficit

 

 

(227,984

)

 

 

(158,379

)

Total stockholders' equity

 

 

168,961

 

 

 

99,434

 

Total liabilities and stockholders' equity

 

$

291,379

 

 

$

199,091

 

 

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

7


 

TScan Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration and license revenue

 

$

3,887

 

 

$

3,363

 

 

$

13,838

 

 

$

10,440

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

22,741

 

 

 

15,031

 

 

 

65,747

 

 

 

44,215

 

General and administrative

 

 

5,894

 

 

 

4,910

 

 

 

20,192

 

 

 

14,212

 

Total operating expenses

 

 

28,635

 

 

 

19,941

 

 

 

85,939

 

 

 

58,427

 

Loss from operations

 

 

(24,748

)

 

 

(16,578

)

 

 

(72,101

)

 

 

(47,987

)

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income, net

 

 

2,733

 

 

 

534

 

 

 

5,403

 

 

 

690

 

Interest expense

 

 

(982

)

 

 

(201

)

 

 

(2,907

)

 

 

(201

)

Total other income

 

 

1,751

 

 

 

333

 

 

 

2,496

 

 

 

489

 

Net loss

 

$

(22,997

)

 

$

(16,245

)

 

$

(69,605

)

 

$

(47,498

)

Net loss per share, basic and diluted

 

$

(0.24

)

 

$

(0.67

)

 

$

(1.25

)

 

$

(1.98

)

Weighted average common shares outstanding—basic and diluted

 

 

94,829,844

 

 

 

24,073,935

 

 

 

55,711,252

 

 

 

24,038,257

 

 

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

8


 

TScan Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Non-voting Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2022

 

 

18,929,834

 

 

$

2

 

 

 

5,143,134

 

 

$

1

 

 

$

255,060

 

 

$

(123,411

)

 

$

131,652

 

Exercise of stock options

 

 

1,959

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5

 

 

 

-

 

 

 

5

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,246

 

 

 

-

 

 

 

1,246

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(16,245

)

 

 

(16,245

)

Balances at September 30, 2022

 

 

18,931,793

 

 

$

2

 

 

 

5,143,134

 

 

$

1

 

 

$

256,311

 

 

$

(139,656

)

 

$

116,658

 

Balances at June 30, 2023

 

 

43,542,178

 

 

$

4

 

 

 

4,276,588

 

 

$

1

 

 

$

395,589

 

 

$

(204,987

)

 

$

190,607

 

Exercise of stock options

 

 

4,350

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

9

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,342

 

 

 

-

 

 

 

1,342

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22,997

)

 

 

(22,997

)

Balances at September 30, 2023

 

 

43,546,528

 

 

$

4

 

 

 

4,276,588

 

 

$

1

 

 

$

396,940

 

 

$

(227,984

)

 

$

168,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Non-voting Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2022

 

 

18,764,463

 

 

$

2

 

 

 

5,143,134

 

 

$

1

 

 

$

252,933

 

 

$

(92,158

)

 

$

160,778

 

Exercise of stock options

 

 

50,460

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

124

 

 

 

-

 

 

 

124

 

Vesting of restricted common stock

 

 

116,870

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,254

 

 

 

-

 

 

 

3,254

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(47,498

)

 

 

(47,498

)

Balances at September 30, 2022

 

 

18,931,793

 

 

$

2

 

 

 

5,143,134

 

 

$

1

 

 

$

256,311

 

 

$

(139,656

)

 

$

116,658

 

Balances at January 1, 2023

 

 

19,082,820

 

 

$

2

 

 

 

5,143,134

 

 

$

1

 

 

$

257,810

 

 

$

(158,379

)

 

$

99,434

 

Exercise of stock options

 

 

310,028

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

692

 

 

 

-

 

 

 

692

 

Issuance of common stock, net of offering costs

 

 

23,287,134

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

42,412

 

 

 

-

 

 

 

42,414

 

Issuance of pre-funded warrants, net of offering costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

92,318

 

 

 

-

 

 

 

92,318

 

Conversion of non-voting common stock to voting common stock

 

 

866,546

 

 

 

-

 

 

 

(866,546

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,708

 

 

 

-

 

 

 

3,708

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(69,605

)

 

 

(69,605

)

Balances at September 30, 2023

 

 

43,546,528

 

 

$

4

 

 

 

4,276,588

 

 

$

1

 

 

$

396,940

 

 

$

(227,984

)

 

$

168,961

 

 

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

9


 

TScan Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(69,605

)

 

$

(47,498

)

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

 

 

 

 

 

 

Depreciation expense

 

 

4,081

 

 

 

3,653

 

Accretion of marketable securities

 

 

(235

)

 

 

-

 

Non-cash interest expense related to note payable

 

 

655

 

 

 

44

 

Stock-based compensation

 

 

3,708

 

 

 

3,254

 

Changes in current assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

1,034

 

 

 

(235

)

Prepaid rent

 

 

-

 

 

 

(2,165

)

Right-of-use assets and lease liabilities, net

 

 

543

 

 

 

(94

)

Accounts payable

 

 

589

 

 

 

114

 

Accrued expense and other liabilities

 

 

2,542

 

 

 

(591

)

Deferred revenue

 

 

19,096

 

 

 

(6,975

)

Net cash used in operating activities

 

 

(37,592

)

 

 

(50,493

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,677

)

 

 

(2,848

)

Purchases of marketable securities

 

 

(59,995

)

 

 

-

 

Net cash used in investing activities

 

 

(62,672

)

 

 

(2,848

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net of offering costs

 

 

42,414

 

 

 

-

 

Proceeds from issuance of pre-funded warrants, net of offering costs

 

 

92,318

 

 

 

-

 

Proceeds from exercise of stock options

 

 

692

 

 

 

124

 

Proceeds from issuance of term loan, net of issuance costs paid to lender

 

 

-

 

 

 

29,354

 

Payments of debt issuance costs

 

 

-

 

 

 

(230

)

Net cash provided by financing activities

 

 

135,424

 

 

 

29,248

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

35,160

 

 

 

(24,093

)

Cash, cash equivalents, and restricted cash - beginning of period

 

 

125,064

 

 

 

166,436

 

Cash, cash equivalents, and restricted cash - end of period

 

 

160,224

 

 

 

142,343

 

Summary of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:

 

 

 

 

 

 

Cash and cash equivalents

 

 

155,193

 

 

 

137,306

 

Restricted cash

 

 

5,031

 

 

 

5,037

 

Total cash, cash equivalents, and restricted cash

 

$

160,224

 

 

$

142,343

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

2,261

 

 

$

-

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Purchase of property and equipment in accounts payable and accrued liabilities

 

$

343

 

 

$

572

 

Debt issuance costs not yet paid

 

$

-

 

 

$

94

 

 

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

10


 

TSCAN THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Basis of Presentation

Nature of Business

TScan Therapeutics, Inc. and its wholly-owned subsidiary, TScan Securities Corporation (the Company), is a biotechnology company that was incorporated in Delaware on April 17, 2018 and has a principal place of business in Waltham, Massachusetts. The Company is a biopharmaceutical company focused on developing a pipeline of T cell receptor-engineered T cell (TCR-T) therapies for the treatment of patients with cancer.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (US GAAP) and applicable rules and regulations of the Securities and Exchange Commission (the SEC) regarding interim financial reporting, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. Management believes that the interim financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of its operations and cash flows. The condensed consolidated financial statements include the accounts of TScan Therapeutics, Inc. and its subsidiary, TScan Securities Corporation. All intercompany balances and transactions have been eliminated in consolidation. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 8, 2023. In the opinion of the Company’s management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included.

Risks, Uncertainties and Going Concern

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, successful development of technology, obtaining additional funding, protection of proprietary technology, compliance with government regulations, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for its product candidates and the ability to successfully market any products that receive approval, fluctuations in operating results, economic pressure impacting therapeutic pricing, dependence on key personnel, risks associated with changes in technologies, development by competitors of technological innovations and the ability to scale manufacturing to large scale production. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from sales.

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has primarily funded its operations with proceeds from sales of capital stock, payments received under its license and collaboration agreements and issuance of a debt facility to K2 HealthVentures LLC. Since its inception, the Company has incurred recurring losses, including net losses of $69.6 million and $47.5 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the Company had an accumulated deficit of $228.0 million. The Company expects to continue to generate operating losses in the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities as of September 30, 2023 will be sufficient to fund the Company’s operations for at least the next twelve months from the date of the issuance of these financial statements.

Emerging Growth Company Status

The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act) and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth

11


 

company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.

2. Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in Note 2 to the consolidated financial statements contained in the Company's 2022 Annual Report on Form 10-K, the accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies therein.

Available-for-Sale Securities

The Company classifies all of its investments as available-for-sale based upon its intent with regard to such investments. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in other comprehensive income (loss). The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest and investment income. Realized gains and losses and declines in value judged to be other than temporary on available-for-sale securities, are included in interest and investment income.

The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest and investment income. To determine whether an other-than-temporary impairment exists, the Company considers whether it has the ability and intent to hold the investment until a market price recovery, and whether evidence indicating the recoverability of the cost of the investment outweighs evidence to the contrary.

3. Fair Value Measurements

During the third quarter of 2023, the Company purchased $60.0 million of U.S. treasury bills with original maturities of six months or less. The Company classified these short-term investments as available-for-sale and are carried at fair value. The fair value of these securities approximate amortized cost as of September 30, 2023. The Company did not hold any marketable securities at December 31, 2022.

The following tables set forth by level, within the fair value hierarchy, the assets carried at fair value (in thousands):

 

 

 

Fair value measurements at September 30, 2023 using

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash Equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Government securities

 

$

108,438

 

 

$

-

 

 

$

-

 

 

$

108,438

 

Money market funds

 

 

41,568

 

 

 

-

 

 

 

-

 

 

 

41,568

 

Marketable Securities:

 

 

 

 

 

 

 

 

 

 

 

 

Government securities

 

 

60,230

 

 

 

-

 

 

 

-

 

 

 

60,230

 

Total

 

$

210,236

 

 

$

-

 

 

$

-

 

 

$

210,236

 

 

 

 

Fair value measurements at December 31, 2022 using

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash Equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

116,946

 

 

$

-

 

 

$

-

 

 

$

116,946

 

Total

 

$

116,946

 

 

$

-

 

 

$

-

 

 

$

116,946

 

 

Money market funds and government securities are valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. There were no transfers among Level 1, Level 2, or Level 3 categories in the periods presented.

The carrying value of cash, accounts payable and accrued expenses that are reported on the condensed consolidated balance sheets approximate their fair value due to the short-term nature of these assets and liabilities. The Company entered into long-term debt in September 2022; given the short period to maturity of the debt, the carrying value approximates fair value.

12


 

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Accrued research and development

 

$

3,410

 

 

$

1,322

 

Accrued employee compensation and benefits

 

 

4,002

 

 

 

4,357

 

Accrued consulting and professional services