10-Q
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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, 2022

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

 

https://cdn.kscope.io/87c3163a08983d9a994725323dc53e90-img16045890_0.jpg 

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 1, 2022, there were 38,657,061 shares of the registrant’s Common Stock, $0.0001 par value per share, outstanding.

 

 


 

TCR2 Therapeutics Inc.

 

Table of Contents

 

PART I

 

 

Item 1.

Financial Statements

5

 

Unaudited Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

5

 

Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

6

 

Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2022 and 2021

7

 

Unaudited Consolidated Statements of Stockholders' Equity as of September 30, 2022 and 2021

8

 

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

9

 

Notes to the Unaudited Consolidated Financial Statements

10

Item 2.

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

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II

 

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

98

Item 3.

Defaults Upon Senior Securities

98

Item 4.

Mine Safety Disclosures

98

Item 5.

Other Information

98

Item 6.

Exhibits

99

 

Signatures

100

 

 

 

 


 

Summary of the Material Risks Associated with Our Business

 

Our business is subject to numerous material and other risks and uncertainties that you should be aware of in evaluating our business. These risks are described more fully in “Item 1A—Risk Factors,” and include, but are not limited to, the following:

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. We are early in our development efforts. Gavo-cel, our most advanced product candidate, is in the Phase 2 portion of the Phase 1/2 clinical trial, TC-510 is in the Phase 1 portion of the Phase 1/2 clinical trial, and our other 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, gavo-cel and TC-510, 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 current novel coronavirus, or COVID-19, pandemic 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.
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 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.
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. If we fail to obtain additional financing, we may be unable to continue our research and product development programs.
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 U.S. Food and Drug Administration (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 gavo-cel, TC-510 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 gavo-cel, TC-510 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 gavo-cel, TC-510 or any other product candidates that we may identify or develop;
our ability to manufacture gavo-cel, TC-510 or any other product candidate in conformity with our specifications and with the FDA’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 ongoing 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, 2021 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,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

54,006

 

 

$

222,564

 

Investments

 

121,980

 

 

 

43,029

 

Prepaid expenses and other current assets

 

8,093

 

 

 

10,534

 

Total current assets

 

184,079

 

 

 

276,127

 

 

 

 

 

 

 

Property and equipment, net

 

29,083

 

 

 

17,075

 

Right-of-use assets, operating leases

 

57,704

 

 

 

28,283

 

Restricted cash

 

1,152

 

 

 

1,156

 

Other assets, non-current

 

909

 

 

 

730

 

Total assets

$

272,927

 

 

$

323,371

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Accounts payable

$

2,963

 

 

$

2,144

 

Accrued expenses and other current liabilities

 

13,185

 

 

 

13,094

 

Operating lease liabilities

 

20,545

 

 

 

3,367

 

Total current liabilities

 

36,693

 

 

 

18,605

 

 

 

 

 

 

 

Operating lease liabilities, non-current

 

37,684

 

 

 

22,996

 

Other liabilities

 

-

 

 

 

293

 

Total liabilities

 

74,377

 

 

 

41,894

 

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued or outstanding as of September 30, 2022 and December 31, 2021, respectively.

 

-

 

 

 

-

 

Common stock, $0.0001 par value; 150,000,000 shares authorized; 38,657,061 and 38,496,484 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

 

4

 

 

 

4

 

Additional paid-in capital

 

639,981

 

 

 

631,008

 

Accumulated other comprehensive income (loss)

 

(596

)

 

 

(13

)

Accumulated deficit

 

(440,839

)

 

 

(349,522

)

Total stockholders’ equity

 

198,550

 

 

 

281,477

 

Total liabilities and stockholders’ equity

$

272,927

 

 

$

323,371

 

See accompanying notes to unaudited consolidated financial statements

5


 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

24,791

 

 

$

20,277

 

 

$

73,441

 

 

$

54,828

 

General and administrative

 

 

6,312

 

 

 

5,963

 

 

 

18,636

 

 

 

17,297

 

Total operating expenses

 

 

31,103

 

 

 

26,240

 

 

 

92,077

 

 

 

72,125

 

Loss from operations

 

 

(31,103

)

 

 

(26,240

)

 

 

(92,077

)

 

 

(72,125

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

510

 

 

 

38

 

 

 

925

 

 

 

186

 

Loss before income tax expense

 

 

(30,593

)

 

 

(26,202

)

 

 

(91,152

)

 

 

(71,939

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

1

 

 

 

42

 

 

 

165

 

 

 

129

 

Net loss

 

$

(30,594

)

 

$

(26,244

)

 

$

(91,317

)

 

$

(72,068

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Per share information

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share of common stock, basic and diluted

 

$

(0.79

)

 

$

(0.69

)

 

$

(2.37

)

 

$

(1.91

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic and diluted

 

 

38,620,751

 

 

 

38,197,929

 

 

 

38,567,331

 

 

 

37,816,345

 

 

See accompanying notes to unaudited consolidated financial statements

6


 

TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(30,594

)

 

$

(26,244

)

 

$

(91,317

)

 

$

(72,068

)

Unrealized gain (loss) on investments, net

 

 

75

 

 

 

4

 

 

 

(583

)

 

 

(78

)

Comprehensive loss

 

$

(30,519

)

 

$

(26,240

)

 

$

(91,900

)

 

$

(72,146

)

 

See accompanying notes to unaudited consolidated financial statements

 

 

7


 

TCR2 THERAPEUTICS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated
Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

 Balance as of December 31, 2021

 

 

38,496,484

 

 

$

4

 

 

$

631,008

 

 

$

(349,522

)

 

$

(13

)

 

$

281,477

 

 Exercise of stock options including ESPP shares issued

 

 

49,861

 

 

 

-

 

 

 

115

 

 

 

-

 

 

 

-

 

 

 

115

 

 Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

3,177

 

 

 

-

 

 

 

-

 

 

 

3,177

 

 Unrealized loss on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(331

)

 

 

(331

)

 Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(29,122

)

 

 

-

 

 

 

(29,122

)

 Balance as of March 31, 2022

 

 

38,546,345

 

 

$

4

 

 

$

634,300

 

 

$

(378,644

)

 

$

(344

)

 

$

255,316

 

 Issuance of common stock, net of issuance costs

 

 

10,498

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 Exercise of stock options including ESPP shares issued

 

 

42,073

 

 

 

-

 

 

 

28

 

 

 

-

 

 

 

-

 

 

 

28

 

 Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

2,847

 

 

 

-

 

 

 

-

 

 

 

2,847

 

 Unrealized loss on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(327

)

 

 

(327

)

 Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(31,601

)

 

 

-

 

 

 

(31,601

)

 Balance as of June 30, 2022

 

 

38,598,916

 

 

$

4

 

 

$

637,175

 

 

$

(410,245

)

 

$

(671

)

 

$

226,263

 

 Exercise of stock options including ESPP shares and restricted stock units vested and issued

 

 

58,145

 

 

 

-

 

 

 

113

 

 

 

-

 

 

 

-

 

 

 

113

 

 Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

2,693

 

 

 

-

 

 

 

-

 

 

 

2,693

 

 Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

75

 

 

 

75

 

 Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(30,594

)

 

 

-

 

 

 

(30,594

)

 Balance as of September 30, 2022

 

 

38,657,061

 

 

$

4

 

 

$

639,981

 

 

$

(440,839

)

 

$

(596

)

 

$

198,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated
Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

 Balance as of December 31, 2020

 

 

33,516,795

 

 

$

3

 

 

$

486,197

 

 

$

(249,715

)

 

$

63

 

 

$

236,548

 

 Issuance of common stock, net of issuance costs

 

 

4,590,164

 

 

 

1

 

 

 

131,329

 

 

 

-

 

 

 

-

 

 

 

131,330

 

 Exercise of stock options including ESPP shares issued

 

 

52,243

 

 

 

-

 

 

 

376

 

 

 

-

 

 

 

-

 

 

 

376

 

 Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

3,120

 

 

 

-

 

 

 

-

 

 

 

3,120

 

 Unrealized loss on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(107

)

 

 

(107

)

 Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(21,512

)

 

 

-

 

 

 

(21,512

)

 Balance as of March 31, 2021

 

 

38,159,202

 

 

$

4

 

 

$

621,022

 

 

$

(271,227

)

 

$

(44

)

 

$

349,755

 

 Exercise of stock options including ESPP shares issued

 

 

22,129

 

 

 

-

 

 

 

204

 

 

 

-

 

 

 

-

 

 

 

204

 

 Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

3,219

 

 

 

-

 

 

 

-

 

 

 

3,219

 

 Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25

 

 

 

25

 

 Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24,312

)

 

 

-

 

 

 

(24,312

)

 Balance as of June 30, 2021

 

 

38,181,331

 

 

$

4

 

 

$

624,445

 

 

$

(295,539

)

 

$

(19

)

 

$

328,891

 

 Exercise of stock options including ESPP shares issued

 

 

39,113

 

 

 

-

 

 

 

433

 

 

 

-

 

 

 

-

 

 

 

433

 

 Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

3,186

 

 

 

-

 

 

 

-

 

 

 

3,186

 

 Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

4

 

 Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(26,244

)

 

 

-

 

 

 

(26,244

)

 Balance at September 30, 2021

 

 

38,220,444

 

 

$

4

 

 

$

628,064

 

 

$

(