| Business and Basis of Presentation | 1. Business and Basis of Presentation
GTx, Inc. (“GTx” or the “Company”), a Delaware corporation incorporated on September 24, 1997 and headquartered in Memphis, Tennessee, is a biopharmaceutical company dedicated to the discovery, development and commercialization of medicines to treat serious and/or significant unmet medical conditions.
In 2015, the Company entered into an exclusive license agreement with the University of Tennessee Research Foundation (“UTRF”) to develop UTRF’s proprietary selective androgen receptor degrader (“SARD”) technology which may have the potential to provide compounds that can degrade multiple forms of androgen receptor to treat those patients who do not respond or are resistant to current therapies by inhibiting tumor growth in patients with progressive castration-resistant prostate cancer (“CRPC”). The Company plans to complete ongoing mechanistic preclinical studies by the end of 2018 or early in the first quarter of 2019, select the most appropriate SARD compounds to move forward with those additional preclinical studies required to file an investigational new drug application (“IND”) in 2019, and potentially advance one of its SARD compounds into a first-in-human clinical trial in 2020. While the Company believes that its existing capital resources will be adequate to enable it to conduct and complete planned IND-enabling preclinical studies of SARD compounds during 2019, it will require significant additional financial resources in order to initiate and complete initial human clinical trials and to otherwise further the development of its SARD program. Accordingly, the Company is actively seeking additional funds through potential collaborative, partnering or other strategic arrangements to provide it with the necessary resources for the development of its SARD program.
The Company has also been developing selective androgen receptor modulators (“SARMs”), including, enobosarm (GTx-024). Most recently, enobosarm was evaluated in post-menopausal women with SUI compared to placebo. During the third quarter of 2018, the Company announced that the Phase 2 double-blind, placebo-controlled clinical trial of orally-administered enobosarm (3 mg or 1 mg) in post-menopausal women with SUI, did not achieve statistical significance on the primary endpoint for the trial. Enobosarm was generally safe and well tolerated, and reported adverse events were minimal and similar across all treatment groups. The Company is conducting a comprehensive review of all the clinical trial data and is consulting with key experts to fully understand the trial outcomes to determine if there is a rationale for continued SARM development. Even if the Company determines that there is a rationale for continued SARM development, it does not expect to conduct any further development of enobosarm and its other SARMs absent it raising additional funds to do so, whether through potential collaborative, partnering or other strategic arrangements or otherwise. If the Company is unable to determine such a rationale or to raise additional funds for the continued development of enobosarm and its other SARMs, it may determine to discontinue the development of enobosarm and its SARM program altogether, in which case the Company will not receive any return on its investment in enobosarm and its other SARMs.
The Company also evaluated enobosarm as a hormonal therapy for women with estrogen receptor positive and androgen receptor positive breast cancer in a Phase 2 clinical trial. The trial met the primary efficacy endpoint in the trial; however, approximately one year ago, the Company determined that treatment paradigms had shifted to immunotherapies and/or combination therapies, and that it was no longer feasible for the Company to conduct further development of enobosarm in breast cancer.
Basis of Presentation
The accompanying unaudited condensed financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of GTx’s financial position, results of operations and cash flows for each period presented in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted from the accompanying condensed financial statements. These interim condensed financial statements should be read in conjunction with the audited financial statements and related notes thereto, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2018. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2018.
Use of Estimates
The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts and results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments (which include cash, cash equivalents, short-term investments, and accounts payable) approximate their fair values. The Company’s financial assets and liabilities are classified within a three-level fair value hierarchy that prioritizes the inputs used to measure fair value, which is defined as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date
Level 2 — Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly
Level 3 — Inputs that are unobservable for the asset or liability
As the Company has the positive intent and ability to hold its certificates of deposit classified as short-term investments until maturity, these investments have been classified as held to maturity investments and are stated at cost, which approximates fair value. The Company considers these to be Level 2 investments as the fair values of these investments are determined using third-party pricing sources, which generally utilize observable inputs, such as interest rates and maturities of similar assets.
Research and Development Expenses
Research and development expenses include, but are not limited to, the Company’s expenses for personnel, supplies, and facilities associated with research activities, screening and identification of product candidates, formulation and synthesis activities, manufacturing, preclinical studies, toxicology studies, clinical trials, regulatory and medical affairs activities, quality assurance activities and license fees. The Company expenses these costs in the period in which they are incurred. The Company estimates its liabilities for research and development expenses in order to match the recognition of expenses to the period in which the actual services are received. As such, accrued liabilities related to third party research and development activities are recognized based upon the Company’s estimate of services received and degree of completion of the services in accordance with the specific third party contract.
Cash, Cash Equivalents and Short-term Investments
The Company considers highly liquid investments with initial maturities of three months or less to be cash equivalents.
At September 30, 2018 and December 31, 2017, short-term investments consisted of Federal Deposit Insurance Corporation insured certificates of deposit with original maturities of greater than three months and less than one year.
Income Taxes
The Company accounts for deferred taxes by recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, at September 30, 2018 and December 31, 2017, net of the valuation allowance, the net deferred tax assets were reduced to zero. Income taxes are described more fully in Note 8 to the Company’s financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2018.
Other Income, net
Other income, net consists of foreign currency transaction gains and losses, interest earned on the Company’s cash, cash equivalents and short-term investments, and other non-operating income or expense.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842). This ASU requires that lessees recognize assets and liabilities on the balance sheet for the present value of the rights and obligations created by all leases with terms of more than 12 months. The ASU also will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. This new guidance will be effective for the Company as of January 1, 2019. The Company does not expect the adoption of the standard update to have a significant impact on its financial position or results of operations.
Subsequent Events
The Company has evaluated all events or transactions that occurred after September 30, 2018 up through the date the condensed financial statements were issued. There were no material recognizable or nonrecognizable subsequent events during the period evaluated. |
