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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2019

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 001-38811

 

TCR2 Therapeutics Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware

 

47-4152751

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

 

100 Binney Street

Suite 710

Cambridge

MA

02142

(Address of Principal Executive Offices)

(Zip Code)

 

(617) 949-5200

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 Par Value

 

TCRR

 

The Nasdaq Stock Market, LLC

 

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

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

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

 

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 Act). Yes  No 

As of October 31, 2019, there were 24,034,024 shares of the registrant’s Common Stock, $0.0001 par value per share, outstanding.

 

 

 

 


TCR2 Therapeutics Inc.

 

Table of Contents

 

PART I

 

4

Item 1.

Financial Statements

4

 

Unaudited Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

4

 

Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018

5

 

Unaudited Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018

6

 

Unaudited Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) as of September 30, 2019 and 2018

7

 

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

9

 

Notes to the Unaudited Consolidated Financial Statements

10

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

37

PART II

 

38

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

97

Item 3.

Defaults Upon Senior Securities

97

Item 4.

Mine Safety Disclosures

97

Item 5.

Other Information

97

Item 6.

Exhibits

98

 

Signatures

99

 

 

 

 


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of TCR2 Therapeutics Inc. ("we," "us," and "our") contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could”, “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects”, “potential,” “continue” or the negative of these terms or other comparable terminology. Forward-looking statements appear in a number of places in this Quarterly Report on Form 10-Q and include, but are not limited to, statements about:

 

the timing of preclinical studies and clinical trials of TC-210, TC-110 and any other product candidates;

 

our need to raise additional funding before we can expect to generate any revenues from product sales;

 

our ability to submit our planned INDs and conduct successful clinical trials or obtain regulatory approval for TC-210, TC-110 or any other product candidates that we may identify or develop;

 

the ability of our TRuC-T cell platform to generate and advance additional product candidates;

 

our ability to establish an adequate safety, potency and purity profile for TC-210, TC-110 or any other product candidates that we may pursue;

 

our ability to manufacture TC-210, TC-110 or any other product candidate in conformity with the U.S. Food and Drug Administration’s requirements and to scale up manufacturing of our product candidates to commercial scale, if approved;

 

the implementation of our strategic plans for our business, any product candidates we may develop and our technology;

 

our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

 

the rate and degree of market acceptance and clinical utility for any product candidates we may develop;

 

our expectations related to the use of proceeds from our initial public offering;

 

our estimates regarding our expenses, future revenues, capital requirements and our needs for additional financing;

 

our ability to maintain and establish collaborations;

 

our financial performance;

 

our ability to effectively manage our anticipated growth;

 

developments relating to our competitors and our industry, including the impact of government regulation;

 

our estimates regarding the market opportunities for our product candidates;

 

our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

 

our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional financing;

 

our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or the JOBS Act;

 

our financial performance; and

 

other risks and uncertainties, including those listed under the section titled “Risk Factors.”

Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results under “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2018 and in this Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. We do not intend, and undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.

 

 

 


Part I

Item 1. Financial Statements

TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

49,317

 

 

$

47,674

 

Investments

 

 

111,688

 

 

 

75,493

 

Prepaid expenses and other current assets

 

 

5,612

 

 

 

2,326

 

Total current assets

 

 

166,617

 

 

 

125,493

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

4,463

 

 

 

1,638

 

Investments, non-current

 

 

8,014

 

 

 

-

 

Restricted cash

 

 

417

 

 

 

290

 

Deferred offering costs

 

 

-

 

 

 

2,012

 

Total assets

 

$

179,511

 

 

$

129,433

 

 

 

 

 

 

 

 

 

 

Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,621

 

 

$

2,663

 

Accrued expenses and other current liabilities

 

 

4,262

 

 

 

2,802

 

Total current liabilities

 

 

7,883

 

 

 

5,465

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

474

 

 

 

434

 

Total liabilities

 

 

8,357

 

 

 

5,899

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock

 

 

 

 

 

 

 

 

Series A preferred stock, $0.0001 par value; no shares and 45,000,000 authorized at September 30, 2019 and December 31, 2018; no shares and 44,500,001 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively.

 

 

-

 

 

 

72,980

 

Series B preferred stock, $0.0001 par value; no shares and 62,500,000 authorized, issued, and outstanding at September 30, 2019 and December 31, 2018, respectively.

 

 

-

 

 

 

136,250

 

Total redeemable convertible preferred stock

 

 

-

 

 

 

209,230

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value. 10,000,000 shares and no shares authorized, no shares issued or outstanding at September 30, 2019 and December 31, 2018, respectively.

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value; 150,000,000 and 20,988,730 shares authorized at September 30, 2019 and December 31, 2018, respectively; 24,033,032 and 914,602 shares issued at September 30, 2019 and December 31, 2018, respectively; 23,944,083 and 726,990 shares outstanding at September 30, 2019 and December 31, 2018, respectively.

 

 

2

 

 

 

-

 

Additional paid-in capital

 

 

340,686

 

 

 

-

 

Accumulated other comprehensive income (loss)

 

 

230

 

 

 

(106

)

Accumulated deficit

 

 

(169,764

)

 

 

(85,590

)

Total stockholders’ equity (deficit)

 

 

171,154

 

 

 

(85,696

)

Total liabilities, redeemable preferred stock and stockholders’ equity (deficit)

 

$

179,511

 

 

$

129,433

 

 

See accompanying notes to unaudited consolidated financial statements

4


TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share and per share data)

 

 

 

For the Three Months

Ended September 30,

 

 

For the Nine Months

Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

11,374

 

 

$

5,386

 

 

$

28,096

 

 

$

13,454

 

General and administrative

 

 

3,522

 

 

 

1,704

 

 

 

9,715

 

 

 

4,558

 

Total operating expenses

 

 

14,896

 

 

 

7,090

 

 

 

37,811

 

 

 

18,012

 

Loss from operations

 

 

(14,896

)

 

 

(7,090

)

 

 

(37,811

)

 

 

(18,012

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

1,090

 

 

 

702

 

 

 

3,039

 

 

 

1,451

 

Net loss

 

 

(13,806

)

 

 

(6,388

)

 

 

(34,772

)

 

 

(16,561

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of redeemable convertible preferred stock to redemption value

 

 

-

 

 

 

(11,590

)

 

 

(49,900

)

 

 

(33,568

)

Net loss attributable to common stockholders

 

$

(13,806

)

 

$

(17,978

)

 

$

(84,672

)

 

$

(50,129

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per share information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share of common stock, basic and diluted

 

$

(0.58

)

 

$

(27.25

)

 

$

(4.21

)

 

$

(83.83

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic and diluted

 

 

23,874,593

 

 

 

659,840

 

 

 

20,125,955

 

 

 

597,964

 

 

See accompanying notes to unaudited consolidated financial statements

5


TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(amounts in thousands)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(13,806

)

 

$

(6,388

)

 

$

(34,772

)

 

$

(16,561

)

Unrealized gain (loss) on investments, net

 

 

18

 

 

 

(1

)

 

 

336

 

 

 

(3

)

Comprehensive loss

 

$

(13,788

)

 

$

(6,389

)

 

$

(34,436

)

 

$

(16,564

)

 

See accompanying notes to unaudited consolidated financial statements

 

 

6


TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(amounts in thousands, except share data)

 

 

 

Redeemable Convertible Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

 

 

Total

Stockholders'

 

 

 

Series A

 

 

Series B

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

(Deficit)

 

Balance at December 31, 2018

 

 

44,500,001

 

 

$

72,980

 

 

 

62,500,000

 

 

$

136,250

 

 

 

 

726,990

 

 

$

-

 

 

$

-

 

 

$

(85,590

)

 

$

(106

)

 

$

(85,696

)

Reclassification of shares issued and previously subject to repurchase

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

39,779

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

13

 

Exercise of stock options and warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

124

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

1,141

 

 

 

-

 

 

 

-

 

 

 

1,141

 

Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

107

 

 

 

107

 

Accretion of redeemable preferred stock to redemption value

 

 

-

 

 

 

34,789

 

 

 

-

 

 

 

15,111

 

 

 

 

-

 

 

 

-

 

 

 

(498

)

 

 

(49,402

)

 

 

-

 

 

 

(49,900

)

Conversion of shares upon IPO

 

 

(44,500,001

)

 

 

(107,769

)

 

 

(62,500,000

)

 

 

(151,361

)

 

 

 

17,275,299

 

 

 

2

 

 

 

259,128

 

 

 

-

 

 

 

-

 

 

 

259,130

 

Initial public offering, net of issuance costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

5,750,000

 

 

 

-

 

 

 

77,155

 

 

 

-

 

 

 

-

 

 

 

77,155

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,903

)

 

 

-

 

 

 

(9,903

)

Balance at March 31, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

23,792,192

 

 

 

2

 

 

 

336,939

 

 

 

(144,895

)

 

 

1

 

 

 

192,047

 

Reclassification of shares issued and previously subject to repurchase

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

39,777

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

13

 

Exercise of stock options and warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

24,721

 

 

 

-

 

 

 

18

 

 

 

-

 

 

 

-

 

 

 

18

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

1,444

 

 

 

-

 

 

 

-

 

 

 

1,444

 

Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

211

 

 

 

211

 

Initial public offering, issuance costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

(34

)

 

 

-

 

 

 

-

 

 

 

(34

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11,063

)

 

 

-

 

 

 

(11,063

)

Balance at June 30, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

23,856,690

 

 

 

2

 

 

 

338,380

 

 

 

(155,958

)

 

 

212

 

 

 

182,636

 

Reclassification of shares issued and previously subject to repurchase

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

19,115

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

13

 

Exercise of stock options and warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

68,278

 

 

 

-

 

 

 

281

 

 

 

-

 

 

 

-

 

 

 

281

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

2,012

 

 

 

-

 

 

 

-

 

 

 

2,012

 

Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18

 

 

 

18

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(13,806

)

 

 

-

 

 

 

(13,806

)

Balance at September 30, 2019

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

 

 

23,944,083

 

 

$

2

 

 

$

340,686

 

 

$

(169,764

)

 

$

230

 

 

$

171,154

 

 

See accompanying notes to unaudited consolidated financial statements

7


TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(amounts in thousands, except share data)

 

 

 

Redeemable Convertible Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

 

 

Total

Stockholders'

 

 

 

Series A

 

 

Series B

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

(Deficit)

 

Balance at December 31, 2017

 

 

44,500,001

 

 

$

47,102

 

 

 

-

 

 

$

-

 

 

 

 

435,626

 

 

$

-

 

 

$

-

 

 

$

(26,324

)

 

$

-

 

 

$

(26,324

)

Sale of Series B preferred stock, net of issuance costs of $170

 

 

-

 

 

 

-

 

 

 

60,000,000

 

 

 

119,830

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Reclassification of shares issued and previously subject to repurchase