10-Q: Turnstone Biologics Reports Q3 2024 Results, Announces Strategic Pipeline Prioritization and Workforce Reduction

Turnstone Biologics reported its Q3 2024 financial results, alongside a strategic pipeline prioritization and a 60% workforce reduction to focus on TIDAL-01.

Summary

• Turnstone Biologics, a clinical-stage biotechnology company, released its financial results for the third quarter of 2024, showing a net loss of $17.0 million, compared to a net loss of $17.3 million for the same period in 2023.
• For the nine months ended September 30, 2024, the company reported a net loss of $58.0 million, compared to a net loss of $38.8 million for the same period in 2023.
• The company's cash, cash equivalents, and short-term investments totaled $45.3 million as of September 30, 2024, down from $94.8 million at the end of 2023.
• Turnstone announced a strategic prioritization of its pipeline, focusing on TIDAL-01, and a workforce reduction of approximately 60%, expected to incur a one-time severance charge of approximately $2.3 million.
• The company received a Nasdaq deficiency notice for its stock price falling below $1.00 per share for 30 consecutive business days.
• Turnstone has three ongoing Phase 1 clinical trials for TIDAL-01, including a multi-site trial and two investigator-sponsored trials with Moffitt Cancer Center.
• Preliminary data from the first four evaluable patients in the TIDAL-01 multi-site trial showed a 25% overall response rate and a 50% disease control rate in advanced colorectal cancer patients.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive clinical trial results, the company is facing significant financial challenges, including a substantial decrease in cash reserves, increasing losses, a Nasdaq deficiency notice, and a major workforce reduction. The need for additional capital raises and the uncertainty surrounding future funding contribute to a negative outlook.

Positives

• Preliminary data from the TIDAL-01 multi-site trial showed a 25% overall response rate and a 50% disease control rate in advanced colorectal cancer patients, which is notable in a population generally unresponsive to checkpoint inhibitors.
• The company has secured additional dedicated cleanroom capacity at Moffitt's on-site cGMP facility for manufacturing of TIDAL-01, which will support the multi-site solid tumor clinical trial.
• The company has a revolving credit facility of up to $20 million with Banc of California, though no amounts have been drawn as of September 30, 2024.

Negatives

• The company's cash, cash equivalents, and short-term investments have decreased significantly from $94.8 million at the end of 2023 to $45.3 million as of September 30, 2024.
• The company has incurred substantial net losses since its inception and expects to continue to incur significant operating losses for the foreseeable future.
• The company received a Nasdaq deficiency notice for its stock price falling below $1.00 per share for 30 consecutive business days.
• The company is implementing a 60% workforce reduction, which will result in a one-time severance charge of approximately $2.3 million.

Risks

• The company's ability to continue as a going concern is dependent on its ability to raise additional funding.
• The company may not be able to secure additional financing in a timely manner or on favorable terms.
• The company's business is highly dependent on the success of its clinical Selected TIL product candidate TIDAL-01.
• Clinical development involves a lengthy and expensive process, with uncertain outcomes.
• The manufacture of the company's product candidates is complex, and the company may encounter difficulties in production.
• The company faces significant competition and may not be able to compete effectively.
• The company has relied and expects to continue to rely on third parties to conduct certain aspects of its preclinical studies and clinical trials.
• The regulatory approval process for the company's product candidates is lengthy, time-consuming and inherently unpredictable.
• The company's success depends in part on its ability to protect its intellectual property.
• The company currently does not meet, and may not regain compliance with, the listing standards of Nasdaq and as a result its common stock may be delisted.

Future Outlook

The company plans to fund future operations through equity and debt financings, licensing transactions, and collaborations. They expect to continue to incur significant operating losses for the foreseeable future as they continue the preclinical development, manufacturing and clinical development of, and seek regulatory approval for, their product candidates. The company intends to provide the next clinical update in the first half of 2025.

Management Comments

• Management's cash flow forecasts indicate that based on the company's expected future operating losses and negative cash flows, there is substantial doubt about the company's ability to continue as a going concern for 12 months after the date the unaudited consolidated financial statements are filed with the SEC.
• Management intends to raise additional capital through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements.

Industry Context

The company is operating in the competitive biotechnology and pharmaceutical industries, facing competition from companies developing TIL therapies, CAR-T and TCR-T cell therapies, and other cancer treatments. The company's innovative Selected TIL approach aims to overcome the limitations of bulk TILs, which have shown limited success in certain solid tumor types.

Comparison to Industry Standards

• The company's preliminary data from the TIDAL-01 multi-site trial showed a 25% overall response rate and a 50% disease control rate in advanced colorectal cancer patients, which is notable compared to the current standard of care treatment that provides an ORR of 1 to 6% and a median progression free survival of 2.0 to 5.6 months.
• The company is competing with other companies developing TIL therapies such as Iovance Biotherapeutics, Inc., Achilles Therapeutics plc, Instil Bio, Inc., KSQ Therapeutics, Inc., Lyell Immunopharma, Inc., Obsidian Therapeutics, Inc., Intima Bioscience, Inc. and others.
• The company is also competing with companies focused on CAR-T and TCR-T cell therapies for solid-tumors, such as Adaptimmune Therapeutics PLC, Adicet Bio, Inc., Alaunos Therapeutics, Inc., Atara Biotherapeutics, Inc., and Immatics N.V.

Management Changes

Stakeholder Impact

• Shareholders may experience dilution if the company issues equity securities to raise additional funds.
• Employees are impacted by the workforce reduction of approximately 60%.
• Customers (patients) may benefit from the company's focus on TIDAL-01, but the company's financial instability could impact the development timeline.
• Suppliers and creditors may be impacted by the company's financial challenges and potential reductions in spending.

Next Steps

• The company intends to provide the next clinical update in the first half of 2025.
• The company will continue to advance its Phase 1 program, TIDAL-01.
• The company will continue to seek additional funding through equity and debt financings, licensing transactions, and collaborations.

Key Dates

Keywords

TIDAL-01, Selected TILs, immunotherapy, clinical trials, biotechnology, oncology, cancer, workforce reduction, Nasdaq, financial results