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TENX: Tenax 1Q:18 Results

06/07/2018
By John Vandermosten, CFA

NASDAQ:TENX

READ THE FULL RESEARCH REPORT

First Quarter 2018 Review

2018 began a new chapter for Tenax Therapeutics (NASDAQ:TENX). In January, Tenax announced its plan to advance the development of levosimendan for Pulmonary Hypertension associated with Heart Failure and preserved Ejection Fraction (PH-HFpEF). This announcement was followed shortly after by the installation of a scientific advisory board chaired by Stuart Rich, M.D. A reverse stock split occurred in February, followed by the publication of data supporting the use of levosimendan in PH. Positive news was released on April 4 related to the FDA’s acceptance of the Phase II clinical protocol which will remain in effect for levosimendan’s PH-HFpEF indication. This clears the pathway for a 2H:18 start to the Phase II trial.

Following the submission of the first quarter 10-Q, Tenax provided an update to the study design for the Phase II trial and announced the appointment of Anthony DiTonno as CEO.

Tenax reported no revenues in the first quarter. Research and development costs were minimal and stood at $59 thousand, compared to $1.8 million in the prior year. The decline was due to the near absence of clinical development costs, and substantial declines in consulting and personnel spend. General and administrative expenses totaled $1.2 million, a 20% decline. Lower personnel costs contributed the most to the contraction, while legal and professional expenses were second most important. These trends were offset by slight increases in facilities costs and D&A. Net loss for the period was ($1.2) million or ($0.83) per share.

Cash balance was $7.9 million and cash burn in the quarter was ($1.6) million. The company continues with no debt.

New CEO

Tenax announced on June 5th that board member Anthony DiTonno will take the CEO reins from Michael Jebsen effective June 1st. Mr. Jebsen has functioned as interim CEO while the company redirected its strategy and now resumes his role as CFO. Mr. DiTonno has had a long history in executive roles and served as CEO of Avantis Medical Systems for near six years and as CEO of Neurogesx for almost nine years prior to assuming this position at Tenax. He has also had an extensive career at a number of pharmaceutical leaders such as Rhône Poulenc Rorer and Wyeth Laboratories. He is also very familiar with Tenax, having sat on its board since December 2011.

Trial Design

In April the FDA allowed Tenax to submit their Investigational New Drug (IND) application under the existing clinical protocol for levosimendan. The agency also addressed the company’s questions and provided guidance on the upcoming Phase II. This announcement will allow for a timely IND submission and anticipated enrollment in 3Q:18. Substantial safety work has been performed on levosimendan, negating the need for another Phase I trial. The FDA recognized that there are no approved drug therapies to treat PH-HFpEF patients and acknowledged this may allow for a limited Phase III clinical program. Tenax will provide additional detail on the implications of a limited Phase III study at the End-of-Phase II Meeting for PH-HFpEF.

After meeting with the FDA for the pre-IND meeting, Tenax refined its trial design to reflect the input provided by the agency. Based on details provided in the May corporate presentation and the June 1 release, the structure required fewer enrollees and a greater number of sites. The trial will enroll PH-HFpEF patients in an open trial and responders will be randomized into the placebo-control trial (see exhibit). The study is anticipated to enroll 36 PH-HFpEF patients in 25 sites with a trial duration of 14 to 18 months. Based on preliminary work, enrollees will have a pulmonary arterial pressure (PAP) equal to or greater than 35, a pulmonary capillary wedge pressure (PCWP) equal to or greater than 20, a cardiac index (CI) of less than or equal to 2.2, a left ventricular ejection fraction (LVEF) of over 40 and be NYHA Class IIb or III.

The primary endpoint of the study will be a change from baseline PCWP with bicycle exercise at Week 6. Expected secondary endpoints will relate to a change in resting PCWP under a variety of conditions, a change in resting & stressed CI, change in pulmonary vascular resistance (PVR) at rest & under stress, a global assessment at week six based on the Likert scale and length of exercise period, a physician’s assessment of functional class and clinical events, including death and hospitalizations.

Based on management commentary and what has been accomplished in pre-clinical and clinical work to date, infusion for several hours one time per week appears to be the most likely dosing regimen; however, this will be confirmed in Phase II work.

View Exhibit I – Phase II Study Design



Reverse Stock Split

Tenax received a notice from the NASDAQ in 2017 notifying the company that they could be at risk of delisting due to the shares trading below $1.00. The notice indicated that they were not in compliance with Nasdaq Listing Rule 5550(a)(2), due to the minimum bid price falling below $1.00 for 30 consecutive days. On February 15, 2018, Tenax proposed an amendment to allow for a reverse stock split to take place prior to year-end 2018. The primary reasons for recommending the reverse split is to maintain NASDAQ compliance and listing on the exchange and to encourage investor interest in the company’s shares. After receiving a favorable shareholder vote, a reverse stock split became effective on February 23, 2018 at a ratio of 1:20. On March 12, 2018, the NASDAQ indicated that Tenax had regained compliance with NASDAQ minimum bid price requirements.

Milestones

‣ Meet with FDA for Phase II Trial Design – 1Q:18
‣ Complete Phase II Design – 2Q:18
‣ Begin Trial Enrollment – 3Q:18
‣ Conduct Comprehensive Strategic Alternative Review – 2018
‣ Raise Capital – 2H:18

Summary

The first quarter began with an announcement that a new indication would be pursued for levosimendan. Following the announcement, Tenax has populated its scientific advisory board, and highlighted the opportunity for levosimendan in PH-HFpEF to the scientific and investment community. After a favorable meeting with the FDA, the company will launch a Phase II trial for HF-PHpEF in the next couple months. Based on the research and analysis included in our initiation, PH-HFpEF patients should benefit from Levosimendan’s mechanism of action and clinical trials can be pursued with a reasonable cost and time commitment. The indication is also in an area with no other approved treatments. Market size is material and with no other approved therapy available, pricing should be strong and penetration high.

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