What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-29 · 85 added, 62 removed, 134 unchanged (52% of the section changed)

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As a result of the merger, we plan to develop and commercialize pharmaceutical products containing imatinib for the treatment of pulmonary arterial hypertension, or PAH.

Our principal business objective is to identify, develop, and commercialize late-stage pharmaceutical therapeutic products for serious cardiovascular and pulmonary diseases with high unmet medical need.

The key elements of our business strategy are outlined below.

Business Strategy

Having carefully considered alternatives within the ongoing strategic process announced in September 2022, and having raised capital to fund the Company through to the first quarter of 2024, the Company has recently elected to prioritize the Phase 3 testing of levosimendan, ahead of imatinib, with plans to commence a levosimendan Phase 3 study in 2023.

Supporting this strategic decision is a U.S.

Patent issued in March 2023, covering the use of IV levosimendan in patients with PH-HFpEF.

This patent is the second levosimendan patent granted to Tenax since the start of 2022, and Tenax believes it provides strong precedent for the ongoing review of a third patent which may be granted in 2023 or 2024.

This prioritization of the Phase 3 testing of levosimendan places the start of a Phase 3 imatinib trial likely outside the 2023 timeframe, pending fundraising to support that trial, as well as other strategic considerations.

The Company took steps to reduce its monthly operating expenses and conserve cash, as it commenced exploring strategic alternatives in late 2022.

The Company has cancelled substantially all of its non-essential operating expenses such as consulting, its office lease, and dues and subscriptions and office supplies associated with that leased office.

Pending the outcome of our ongoing strategic process, the key elements of our business strategy are outlined below.

Efficiently conduct clinical development to establish clinical proof of principle in new indications, refine formulation, and commence Phase 3 testing of our current product candidates.

Levosimendan and imatinib have been approved and prescribed globally for more than 20 years, but we believe their mechanisms of action have not been fully exploited, despite promising evidence they may significantly improve the lives of patients with pulmonary hypertension.

Levosimendan and imatinib have been approved and prescribed around the world for more than 20 years, but we believe their mechanisms of action have not been fully exploited, despite promising evidence they may significantly improve the lives of patients with pulmonary hypertension.

We are conducting clinical development with the intent to establish proof of beneficial activity in cardiopulmonary diseases in which these therapeutics would be expected to have benefit for patients with diseases for which either no pharmaceutical therapies are approved at all, or in the case of PAH, where numerous expensive therapies generally offer a modest reduction of symptoms.

Our focus is primarily on designing and executing formulation improvements, protecting these innovations with patents and other forms of exclusivity, and employing innovative clinical trial science to establish a robust foundation for subsequent development, product approval, and commercialization.

We intend to submit marketing authorization applications following either one or two Phase 3 trials of levosimendan and, when appropriate, a single Phase 3 trial of imatinib.

Our trials are designed to incorporate and reflect advanced clinical trial design science and the regulatory and advisory experience of our team.

We intend to continue partnering with innovative companies, renowned biostatisticians and trialists, medical leaders, formulation and regulatory experts, and premier clinical testing organizations to help expedite development, and continue expanding into complementary areas when opportunities arise through our development, research, and discoveries.

We also intend to continue outsourcing when designing and executing our research.

Efficiently explore new high-potential therapeutic applications, in particular where expedited regulatory pathways are available, leveraging third-party research collaborations and our results from related areas .

Levosimendan has shown promise in multiple disease areas in its two decades of use following its approval.

Levosimendan has shown promise in multiple disease areas in the two decades following its approval.

Our own Phase 2 study and open-label extension has demonstrated that a formerly under-appreciated mechanism of action of levosimendan, its property of relaxing the venous circulation, brings about durable improvements in exercise capacity and quality of life, as well as other clinical assessments, in patients with heart failure with PH-HFpEF.

We believe this patient population today has no pharmaceutical therapies available and we are committed to exploring potential clinical indications where our therapies may achieve best-in-class profile, and where we can address significant unmet medical needs.

We believe these factors will support approval by the FDA of these product candidates based on positive Phase 3 data.

Through our agreement with our licensor, Orion, the originator of levosimendan for acute decompensated heart failure, we have access to a library of ongoing and completed trials and research projects, including certain documentation, which we believe, in combination with positive Phase 3 data we hope to generate in at least one indication, will support FDA approval of levosimendan.

Likewise, the regulatory pathway for approval of imatinib for the treatment of PAH, as formulated by Tenax Therapeutics at the dose shown to be effective in a prior Phase 3 trial conducted by Novartis, allows Tenax to build on the dossier of research results already reviewed by the FDA.

In order to achieve our objectives of developing these medicines for new groups of patients, we have established collaborative research relationships with investigators from leading research and clinical institutions, and our strategic partners.

These collaborative relationships have enabled us to explore where our product candidates may have therapeutic relevance, gain the advice and support of key opinion leaders in medicine and clinical trial science, and invest in development efforts to exploit opportunities to advance beyond current clinical care.

Additionally, we believe we will be able to leverage clinical safety data and preclinical results from some programs to support accelerated clinical development efforts in other areas, saving substantial development time and resources compared to traditional drug development.

Continue to expand our intellectual property portfolio.

Our intellectual property, and the confidentiality of all our company information, is important to our business and we take significant steps to protect its value.

We have ongoing research and development efforts, both through internal activities and through collaborative research activities with others, which aim to develop new intellectual property and enable us to file patent applications that cover new applications of our existing technologies, alone or in combination with existing therapies, as well as other product candidates.

Our intellectual property, and the confidentiality of all our Company information, is important to our business and we take significant steps to help protect its value.

Our research and development efforts, both through internal activities and through collaborative research activities with others, aim to develop new intellectual property and enable us to file patent applications that cover new applications of our existing technologies, alone or in combination with existing therapies, as well as other product candidates.

Notice of Allowance and Patent

On February 1, 2023, the Company announced it was granted a Notice of Allowance from the United States Patent and Trademark Office (USPTO) for its patent application with claims covering the use of IV levosimendan (TNX-101) in the treatment of PH-HFpEF.

This patent was issued on March 21, 2023.

At present, we have two patents pending, with additional decisions expected in 2023.

Enter into licensing or product co-development arrangements.

In addition to our internal development efforts, an important part of our product development strategy is to work with collaborators and partners to accelerate product development, maintain our low development and business operations costs, and broaden our commercialization capabilities globally.

As we focus on the development of our existing product candidates, we also continue to position ourselves to execute upon licensing and other partnering opportunities.

We believe this strategy will help us to develop a portfolio of high-quality product development opportunities, enhance our clinical development and commercialization capabilities, and increase our ability to generate value from our proprietary technologies.

As we focus on our strategic process, we also continue to position ourselves to execute upon licensing and other partnering opportunities.

To do so, we will need to continue to maintain our strategic direction, manage and deploy our available cash efficiently and strengthen our collaborative research development and partner relationships.

Historically, we have financed our operations principally through equity and debt offerings, including private placements and loans from our stockholders.

Based on our current operating plan, there is substantial doubt about our ability to continue as going concern.

Based on our current operating plan, there is substantial doubt about our ability to continue as a going concern.

Management has implemented certain cost-cutting measures as described above and is actively exploring a diverse range of strategic options to help drive stockholder value including, among other things, capital raises, a sale of our Company, merger, one or more license agreements, a co-development agreement, a combination of these, or other strategic transactions; however, there is no assurance that these efforts will result in a transaction or other alternative or that any additional funding will be available.

Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities and through collaboration and licensing agreements, to support our future operations.

If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs.

The continued spread of COVID-19, including variant strains, globally, may affect our operations, including the potential interruption of our clinical trial activities and our supply chain.

The continued spread of COVID-19 may result in a period of continued or recurring business disruption in these and other areas impacting our business, including the establishment of contractual relationships with investigators enrolling subjects in our clinical trials, the continuity of care provided by these institutions to the patients we seek to enroll and their ability to support industry-funded research as a means of caring for their patients, supply of these sites with study materials, and the enrolment of subjects and their adherence with study requirements.

In addition, there could be a potential effect of COVID-19 to the business at FDA or other health authorities, which could result in delays of reviews and approvals, including with respect to our product candidates.

Financial Overview

If we are unable to complete a strategic transaction or secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs.

The COVID-19 pandemic or similar epidemics could in the future, directly or indirectly, adversely impact our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to such illnesses, which could negatively impact our trials, increase our operating expenses, and have a material adverse effect on our financial results.

We will continue to assess the potential impact of the COVID-19 pandemic on our business and operations, including our clinical operations and manufacturing activities.

Comparison of Our Results of Operations for the Years Ended December 31, 2022 and 2021

The year ended December 31,

Increase/(Decrease)

Operating expenses

General and administrative

Research and development

(19,769,982 )

Total operating expenses

(21,675,598 )

General and Administrative Expenses

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General and administrative expenses and percentage changes for the years ended December 31, 2022 and 2021, respectively, are as follows:

For the year ended December 31,

Year ended December 31,

Increase/ (Decrease)

% Increase/ (Decrease)

Personnel costs

$ (2,581,972 )

Legal and professional fees

Personnel costs increased approximately $1.5 million for the year ended December 31, 2021, compared to the same period in the prior year.

The increase was primarily due to approximately $1.2 million in severance costs associated with the departure from the Company of the former CEO and other employees, as well as approximately $266,000 in noncash compensation expense resulting from the modification of the former CEO’s outstanding stock options and the grant of an additional stock option on his separation date.

Personnel costs decreased approximately $2.6 million for the year ended December 31, 2022, compared to the same period in the prior year.

The decrease was primarily due to approximately $1.2 million in severance costs associated with the departure from the Company of the former CEO and other employees in 2021, as well as approximately $266,000 in noncash compensation expense resulting from the modification of the former CEO’s outstanding stock options and the grant of an additional stock option on his separation date.

Legal and professional fees increased approximately $599,000 for the year ended December 31, 2022, compared to the same period in the prior year.

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Legal fees increased approximately $245,000 for the year ended December 31, 2022, as compared to the same period in the prior year.

The increase was primarily due to the reimbursement of approximately $358,000 in legal fees associated with arbitration proceedings in the prior year, as well as an increase in fees paid associated with the PHPM acquisition and costs associated with the CEO transition that were not incurred during the same period in the prior year.

The increase was primarily due to capital market activities and IP related costs.

Professional fees increased approximately $354,000 for the year ended December 31, 2022, compared to the same period in the prior year.

The increase was primarily attributable to increased accounting, director, consulting and capital market fees offset by a decrease in investor relations costs.

The increase was primarily attributable to increased consulting fees offset by a decrease in accounting, capital markets, and investor relations costs.

Other costs increased approximately $84,000 for the year ended December 31, 2022, compared to the same period in the prior year.

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Research and development expenses and percentage changes for the years ended December 31, 2022 and 2021, respectively, are as follows:

For the year ended December 31,

Year ended December 31,

Increase/ (Decrease)

% Increase/ (Decrease)

Clinical and preclinical development

$ (1,628,313 )

Personnel costs

Clinical and preclinical development costs decreased approximately $1.6 million for the year ended December 31, 2021 as compared to the same period in the prior year.

Clinical and preclinical development costs consist of expenses associated with our Phase 2 HELP Study for levosimendan, which was completed during fiscal year 2020, costs associated with our intravenous to oral levosimendan transition study and development costs associated with the formulation for imatinib.

The decrease is primarily attributable to a decrease of approximately $2.0 million in expenditures for CRO costs, a reduction of approximately $1.1 million in enrolled patient and direct site costs and a decrease of approximately $86,000 in fees paid for clinical research associates and other direct costs to manage the Phase 2 HELP Study in the current period as compared to the same period in the prior year.

These cost reductions were partially offset by an increase of approximately $1.5 million in costs associated with formulation development of imatinib in the current period that were not incurred in the same period in the prior year.

Personnel costs increased approximately $439,000 for the year ended December 31, 2021, as compared to the same period in the prior year, primarily attributable to the addition of our Chief Medical Officer in the current period.

Other costs increased approximately $21.8 million for the year ended December 31, 2021, as compared to the same period in the prior year, primarily attributable to the recognition of in-process research and development acquired as part of the merger with PHPM in the current period.

There were no such expenses incurred in the same period in the prior year.

(21,769,594 )

Clinical and preclinical development costs increased approximately $2.0 million for the year ended December 31, 2022 as compared to the same period in the prior year.

Clinical and preclinical development costs consist of expenses associated with our Phase 2 HELP Study for levosimendan, which was completed during fiscal year 2020, the ongoing open label extension phase of this study, costs associated with our intravenous-to-oral levosimendan transition study, and development costs associated with the formulation for imatinib.

The increase is primarily attributable to approximately $2.8 million in expenditures for CRO and development costs associated with imatinib offset by decreased costs of approximately $800,000 related to our modified release imatinib.

Personnel costs decreased $4,732 for the year ended December 31, 2022, as compared to the same period in the prior year.

The decrease is primarily attributable to increased compensation costs offset by a decrease in annual bonus expense.

Other costs decreased approximately $21.8 million for the year ended December 31, 2022, as compared to the same period in the prior year.

The decrease is primarily attributable to the recognition of in-process research and development acquired as part of the merger with PHPM in the prior period.

There were no such expenses incurred in the current year.

Other Income and Expense

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These items include, but are not limited to, changes in the fair value of financial assets and derivative liabilities, interest income earned and fixed asset disposals.

Other income increased approximately $237,000 for the year ended December 31, 2021, compared to the same period in the prior year.

This increase is due primarily to the forgiveness of our PPP Loan in the current period.

Other income decreased approximately $246,000 for the year ended December 31, 2022, compared to the same period in the prior year.

This increase is due primarily to the forgiveness of our loan pursuant to the Paycheck Protection Program (“PPP Loan”) in the prior period.

Liquidity, Capital Resources and Plan of Operation

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We have financed our operations since September 1990 through the issuance of debt and equity securities and loans from stockholders.

We had total current assets of $5,689,000 and $6,795,506 and working capital of $4,125,022 and $4,676,543 as of December 31, 2021 and December 31, 2020, respectively.

We had total current assets of approximately $3.2 million and $5.7 million and working capital of approximately $1.4 million and $4.1 million as of December 31, 2022 and December 31, 2021, respectively.

Our practice is to invest excess cash, where available, in short-term money market investment instruments and high quality corporate and government bonds.

Clinical and Preclinical Product Development

We are currently developing a new formulation for imatinib and conducting a clinical trial to transition from an intravenous to oral formulation of levosimendan in North America for the treatment of pulmonary hypertension.

Our ability to continue to pursue development of our products beyond the second quarter of calendar year 2022 will depend on obtaining license income or outside financial resources.

We are currently concluding an open label extension phase of the levosimendan HELP clinical trial, during which patients were transitioned from an intravenous to oral formulation of levosimendan for the treatment of pulmonary hypertension.

We are also developing a new formulation of imatinib.

Our ability to continue to pursue development of our products beyond the first quarter of calendar year 2024 will depend on obtaining license income or outside financial resources.

There is no assurance that we will obtain any license agreement or outside financing or that we will otherwise succeed in obtaining any necessary resources.

The continued spread of COVID-19, including variant strains, globally could adversely affect our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography.

The COVID-19 pandemic or a similar epidemic could in the future, directly or indirectly, adversely affect our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to respiratory illnesses if an outbreak occurs in their geography.

Further, some patients may be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services, or if the patients become infected with COVID-19 themselves, which would delay our ability to complete our clinical trials or release clinical trial results.

See “ Item 1A – Risk Factors ” above for additional discussion.

On February 3, 2023, we sold in a registered public offering (i) an aggregate of 6,959,444 shares of our common stock and pre-funded warrants to purchase an aggregate of 1,707,222 shares of our common stock and (ii) accompanying warrants to purchase up to an aggregate of 17,333,332 shares of our common stock at a combined offering price of $1.80 per share of common stock and associated warrant, or $1.799 per pre-funded warrant and associated warrant, resulting in gross proceeds to the Company of approximately $15.6 million.

Net proceeds of the offering were approximately $14.1 million, after deducting the placement agent fees and estimated offering expenses payable by the Company.

On May 17, 2022, we sold 529,802 units in a private placement at a purchase price of $15.50 per unit for net proceeds of approximately $7.9 million.

Each unit consisted of one unregistered pre-funded warrant to purchase one share of our common stock and one unregistered warrant to purchase one share of common stock.

On July 6, 2021, we sold 238,664 units in a private placement at a purchase price of $41.90 per unit for net proceeds of approximately $10 million.

Each unit consisted of one unregistered pre-funded warrant to purchase one share of our common stock and one unregistered warrant to purchase one share of common stock.

On July 6, 2020, we sold 2,523,611 shares of our common stock at a purchase price of $1.0278 per share and pre-funded warrants to purchase up to 652,313 shares of common stock, at a purchase price of $1.0277 per pre-funded warrant, in a registered direct offering.

Additionally, in a concurrent private placement, sold pre-funded warrants to purchase up to 4,607,692 shares of common stock, at the same purchase price as the registered pre-funded warrants, as well as unregistered warrants to purchase up to an aggregate of 7,783,616 shares of common stock.

The unregistered warrants have an exercise price of $0.903 per share, were immediately exercisable upon issuance, and expire five and one-half years from the date of issuance.

We also issued to the placement agent five-year warrants to purchase 583,771 shares of common stock with an exercise price of $1.2848.

The aggregate net proceeds for offerings were approximately $6.5 million after deducting placement agent discounts and commissions and offering expenses.

We are using the net proceeds to further our clinical trials of levosimendan, for research and development and general corporate purposes, including working capital and potential acquisitions.

On March 11, 2020, we sold 750,000 shares of our common stock at a purchase price of $1.1651 per share and pre-funded warrants to purchase up to 1,610,313 shares of common stock, at a purchase price of $1.1650 per pre-funded warrant, in a registered direct offering.

Additionally, in a concurrent private placement, we sold unregistered warrants to purchase up to 2,360,313 shares of common stock.

The unregistered warrants have an exercise price of $1.04 per share and exercise period commencing immediately upon the issuance date and a term of five and one-half years.

We also issued to the placement agent five-year warrants to purchase 177,023 shares of common stock with an exercise price of $1.4564.

The net proceeds from the March 2020 offering, after deducting placement agent fees and other direct offering expenses, were approximately $2.125 million.

Paycheck Protection Program Loan

On April 30, 2020, we received a loan in the principal amount of $244,657 pursuant to the Paycheck Protection Program (the “PPP Loan”) under the Coronavirus Aid, Relief, and Economic Security Act, as administered by the U.S.

Small Business Administration (“SBA”).

On May 28, 2021, we received notice from the SBA that the SBA had remitted $244,657 in principal and $2,576 in interest to the lender in full forgiveness of our PPP Loan pursuant to our application to the SBA for forgiveness of the PPP Loan.

The total amount was recorded as other income in our consolidated statement of comprehensive loss for the year ended December 31, 2021.

The following table shows a summary of our cash flows for the periods indicated:

For the year ended December 31,

Year ended December 31,

Net cash (used in) operating activities

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$ (10,856,203 )

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Net cash provided by financing activities

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Net cash used in operating activities was approximately $12.0 million for the year ended December 31, 2022 compared to approximately $10.9 million for the year ended December 31, 2021.

The increase in cash used for operating activities was primarily due to an increase in our annual insurance premiums, employee severance and accrued bonuses paid in the current period as compared to the prior year.

Net cash provided by investing activities .

Net cash provided by investing activities was approximately $453,000 for the year ended December 31, 2021, compared to approximately $20,000 in the year ended December 31, 2020.

The increase in cash provided by investing activities was primarily due to the sale of marketable securities in the current period.

The increase in cash used for operating activities was primarily due to an increase in our annual insurance premiums, trade accounts payable and accrued compensation as compared to the prior year.

Net cash (used in) provided by investing activities

Net cash used in or provided by investing activities was approximately $(2,323) for the year ended December 31, 2022, compared to approximately $454,000 in the year ended December 31, 2021.

The decrease in cash provided by investing activities was primarily due to the purchase of fixed assets in the current period offset by sale of marketable securities in the prior period.

Net cash provided by financing activities

Net cash provided by financing activities was approximately $9.7 million, for the year ended December 31, 2021, primarily attributable to net proceeds from the sale of stock units in our July 2021 private placement of $9.2 million and the exercise of stock warrants of $0.5 million.

Net cash provided by financing activities in the prior year totaled $10.6 million, primarily attributable to aggregate net proceeds from the sale of common stock, warrants and pre-funded warrants in our July 2020 registered direct offering and concurrent private placement of $6.5 million, aggregate net proceeds from the sale of common stock and pre-funded warrants in our March 2020 registered direct offering and concurrent private placement of $2.1 million, $0.2 million in proceeds from the PPP Loan under the Cares Act and $1.7 million of proceeds from the exercise of stock warrants.

Net cash provided by financing activities was approximately $8.6 million for the year ended December 31, 2022 and is primarily attributable to net proceeds from the sale of stock units in our May 2022 private placement of $7.9 million and the exercise of stock warrants of $0.6 million.

Net cash provided by financing activities was approximately $9.7 million for the year ended December 31, 2021 and is primarily attributable to net proceeds from the sale of stock units in our July 2021 private placement of $9.2 million and the exercise of stock warrants of $0.5 million.

Operating Capital and Capital Expenditure Requirements

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the outcome, timing and cost of regulatory approvals and the regulatory approval process;

delays that may be caused by the global coronavirus pandemic;

delays that may be caused by changing regulatory requirements;

the number of product candidates that we pursue;

the number of product candidates we pursue;

the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;

3 unchanged sentences

the extent to which we acquire or invest in businesses, products or technologies;

delays that may be caused by the global coronavirus pandemic or similar global societal disruptions;

the possible costs of litigation.

Based on our working capital on December 31, 2021, we believe we have sufficient capital on hand to continue to fund operations through the second quarter of calendar year 2022.

We will need substantial additional capital beyond the second quarter of calendar year 2022 and in the future in order to complete the regulatory approval and commercialization of imatinib and levosimendan as well as to fund the development and commercialization of other future product candidates.

Based on our working capital on December 31, 2022, and the financing completed on February 7, 2023 we believe we have sufficient capital on hand to continue to fund operations through to the first quarter of calendar year 2024.

We will need substantial additional capital beyond the first quarter of calendar year 2024 and in the future in order to complete the regulatory approval and commercialization of levosimendan as well as to fund the development and commercialization of other future product candidates.

Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements.

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Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board, or FASB, issued an accounting standard intended to simplify accounting for income taxes.

In December 2019, the Financial Accounting Standards Board, or the FASB, issued an accounting standard intended to simplify accounting for income taxes.

It removes certain exceptions to the general principles in Topic 740, Income Taxes, and amends existing guidance to improve consistent application.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis