SEC Filing — TCR2 Therapeutics

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tcrr-10q_20190930.htm

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

☐	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

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

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

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

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

Amount

Capital

Deficit

Income (Loss)

(Deficit)

Balance at December 31, 2017

44,500,001

47,102

435,626