SEC Filing — TCR2 Therapeutics

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tcrr-10q_20200930.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, 2020

☐	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.:

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 November 3, 2020, there were 33,422,129 shares of the registrant’s Common Stock, $0.0001 par value per share, outstanding.

TCR² Therapeutics Inc.

Table of Contents

PART I		7
Item 1.	Financial Statements	7
	Unaudited Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	7
	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	8
	Unaudited Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019	9
	Unaudited Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) as of September 30, 2020 and 2019	10
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	12
	Notes to the Unaudited Consolidated Financial Statements	13
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II		41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	103
Item 3.	Defaults Upon Senior Securities	103
Item 4.	Mine Safety Disclosures	103
Item 5.	Other Information	103
Item 6.	Exhibits	104
	Signatures	105

Summary of the Material Risks Associated with Our Business

•

Our approach to the discovery and development of product candidates based on our TRuC-T cell platform represents a novel approach to cancer treatment, which creates significant challenges for us. Further, we are very early in our development efforts. Most of our product candidates are still in preclinical development. 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.

•

Our business is highly dependent on our clinical trials for our lead product candidates, TC-210 and TC-110, and we must complete IND-enabling studies and clinical testing before we can seek regulatory approval and begin commercialization of any of our product candidates. We cannot be certain that we will be able to complete ongoing clinical trials, initiate future planned clinical trials, or advance our product candidates into additional trials, or to successfully develop, or obtain regulatory approval for, or successfully commercialize, any of our product candidates.

•

We have limited experience as a company in conducting clinical trials. Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidate.

•

Manufacturing and administering our product candidates are 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 TRuC-T cells for clinical trials or for commercial purposes could be delayed or stopped. We plan to establish our own manufacturing facility and infrastructure in addition to or in lieu of relying on third parties for the manufacture of our product candidates and the use of third-party manufacturing suites, which will be costly, time-consuming, and which may not be successful.

•

The market opportunities for our product candidates may be relatively small as it 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 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. 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.

•

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability. 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.

•

The current outbreak of novel coronavirus, or COVID-19, has caused, and could continue to cause, severe disruptions in the U.S., regional and global economies. COVID-19 has affected our on-going clinical trials and could seriously harm our development efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.

•

If we are unable to obtain and maintain patent protection for any products 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 and technology similar or identical to ours, and our ability to commercialize any product candidates we may develop, and our technology may be adversely affected.

•

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.

•

Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional

expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

•

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

•

Our stock price has been and will likely continue to be volatile. Securities class action or other litigation involving our company or members of our management team could also substantially harm our business, financial condition and results of operations.

•

We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors. We are also a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

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, conduct successful clinical trials and 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 our specifications and 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 estimates regarding our expenses, future revenues, capital requirements and our needs for additional financing;

•

our ability to maintain and establish collaborations;

•

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;

•

the current and future impact of the COVID-19 pandemic on our business;

•

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 including, without limitation, risks, uncertainties and assumptions regarding the continuing impact of the COVID-19 pandemic on our business, operations, strategy, goals and anticipated timelines, our ongoing and planned preclinical activities, our ability to initiate, enroll, conduct or complete ongoing and planned clinical trials, our timelines for regulatory submissions and our financial position 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, 2019 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, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	101,614		$	65,296
Investments		145,109			92,828
Prepaid expenses and other current assets		7,509			5,061
Total current assets		254,232			163,185

Property and equipment, net		6,201			4,926
Restricted cash		417			417
Total assets	$	260,850		$	168,528

Liabilities and stockholders’ equity
Accounts payable	$	2,948		$	2,483
Accrued expenses and other current liabilities		4,904			5,050
Total current liabilities		7,852			7,533

Other liabilities		635			546
Total liabilities		8,487			8,079

Commitments and contingencies (Note 7)

Stockholders’ equity
Preferred stock, $0.0001 par value. 10,000,000 shares authorized, no shares issued or outstanding at September 30, 2020 and December 31, 2019, respectively.		-			-
Common stock, $0.0001 par value; 150,000,000 shares authorized; 33,397,669 and 24,050,936 shares issued; 33,380,211 and 23,981,109 shares outstanding at September 30, 2020 and December 31, 2019, respectively.		3			2
Additional paid-in capital		483,433			342,896
Accumulated other comprehensive income		191			142
Accumulated deficit		(231,264	)		(182,591	)
Total stockholders’ equity		252,363			160,449
Total liabilities and stockholders’ equity	$	260,850		$	168,528

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)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Operating expenses
Research and development	$	12,820		$	11,374		$	37,682		$	28,096
General and administrative		4,371			3,522			12,451			9,715
Total operating expenses		17,191			14,896			50,133			37,811
Loss from operations		(17,191	)		(14,896	)		(50,133	)		(37,811	)

Interest income, net		300			1,090			1,546			3,039
Loss before income taxes		(16,891	)		(13,806	)		(48,587	)		(34,772	)

Income taxes		31			-			86			-
Net loss		(16,922	)		(13,806	)		(48,673	)		(34,772	)

Accretion of redeemable convertible preferred stock to redemption value		-			-			-		$	(49,900	)
Net loss attributable to common stockholders	$	(16,922	)	$	(13,806	)	$	(48,673	)	$	(84,672	)

Per share information
Net loss per share of common stock, basic and diluted	$	(0.56	)	$	(0.58	)	$	(1.86	)	$	(4.21	)

Weighted average shares outstanding, basic and diluted		30,340,355			23,874,593			26,158,040			20,125,955

See accompanying notes to unaudited consolidated financial statements

TCR² THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(amounts in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Net loss	$	(16,922	)	$	(13,806	)	$	(48,673	)	$	(34,772	)
Unrealized gain (loss) on investments, net		(211	)		18			49			336
Comprehensive loss	$	(17,133	)	$	(13,788	)	$	(48,624	)	$	(34,436	)

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)

					Additional					Accumulated Other			Total
	Common Stock				Paid-In		Accumulated			Comprehensive			Stockholders'
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2019		23,981,109	$	2	$	342,896	$	(182,591	)	$	142		$	160,449
Reclassification of shares issued and previously subject to repurchase		17,456		-		13		-			-			13
Exercise of stock options		57,904		-		185		-			-			185
Stock-based compensation expense		-		-		2,055		-			-			2,055
Unrealized loss on investments		-		-		-		-			(604	)		(604	)
Net loss		-		-		-		(15,506	)		-			(15,506	)
Balance at March 31, 2020		24,056,469		2		345,149		(198,097	)		(462	)		146,592
Reclassification of shares issued and previously subject to repurchase		17,456		-		13		-			-			13
Exercise of stock options		30,670		-		125		-			-			125
Stock-based compensation expense		-		-		2,064		-			-			2,064
Unrealized gain on investments		-		-		-		-			864			864
Net loss		-		-		-		(16,245	)		-			(16,245	)
Balance at June 30, 2020		24,104,595		2		347,351		(214,342	)		402			133,413
Issuance of common stock, net of issuance costs		9,200,000		1		133,570		-			-			133,571
Reclassification of shares issued and previously subject to repurchase		17,457		-		13		-			-			13
Exercise of stock options		58,159		-		432		-			-			432
Stock-based compensation expense		-		-		2,067		-			-			2,067
Unrealized loss on investments		-		-		-		-			(211	)		(211	)
Net loss		-		-		-		(16,922	)		-			(16,922	)
Balance at September 30, 2020		33,380,211	$	3	$	483,433	$	(231,264	)	$	191		$	252,363

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		-			-			-			-			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		-			-			-			-			24,721		-		18			-			-			18
Stock-based compensation expense		-			-			-			-			-		-		1,444			-			-			1,444
Unrealized gain on investments		-			-			-			-			-		-		-