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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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:
001-31326
ELOXX PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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84-1368850
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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480 Arsenal Way
Watertown,
Massachusetts
02472
(Address of principal executive offices) (Zip Code)
781-577-5300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.01 par value per share
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ELOX
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The
Nasdaq Capital
Market
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Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for 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.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☐
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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 Exchange Act). Yes
☐
No
☒
On November 8, 2022, the registrant had
86,656,221
shares of common stock, $0.01 par value per share,
outstanding.
ELOXX PHARMACEUTICALS, INC.
TABLE OF CONTENTS
2
Special
Note Regarding Forward-Looking Statements
Eloxx Pharmaceuticals, Inc., together with its subsidiaries, is
collectively referred to herein as “we,” “our,” “us,” “Eloxx” or
the “Company”.
Hyperlinks and web addresses are provided as a convenience and for
informational purposes only. Eloxx bears no responsibility for the
security or content of external websites.
This Quarterly Report on Form 10-Q, and information incorporated
herein, contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. We intend
such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”)
and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). All statements other than statements of
present and historical facts contained in this Quarterly Report on
Form 10-Q, including without limitation statements regarding our
strategy, future operations, future financial position, future
revenues, projected costs, prospects, plans and objectives of
management, are forward-looking statements. Without limiting the
foregoing, in some cases, you can identify forward-looking
statements by terms such as “aim,” “may,” “will,” “would,”
“should,” “expect,” “exploring,” “plan,” “anticipate,” “could,”
“intend,” “target,” “project,” “contemplate,” “believe,”
“estimate,” “predict,” “potential,” “seeks,” or “continue” or the
negative of these terms or other similar expressions, although not
all forward-looking statements contain these words. No
forward-looking statement is a guarantee of future results,
performance, or achievements, and one should avoid placing undue
reliance on such statements.
Forward-looking statements are based on our management’s beliefs
and assumptions and on information currently available to us. Such
beliefs and assumptions may or may not prove to be correct.
Additionally, such forward-looking statements are subject to a
number of known and unknown risks, uncertainties and assumptions,
and actual results may differ materially from those expressed or
implied in the forward-looking statements due to various factors,
including, but not limited to:
•
risks related to our ability to obtain the capital necessary to
fund our operations;
•
risks related to our dependence on our lead product candidate,
ELX-02 and our ability to progress any product candidates in
preclinical or clinical trials;
•
risks related to our ability to obtain adequate financing in the
future through product licensing, grants, public or private equity
or debt financing or otherwise;
•
the length and expense of preclinical and clinical trial
development, the uncertainty of clinical trial results and the fact
that positive results from preclinical studies are not always
indicative of positive clinical results;
•
risks related to the scope, rate and progress of our preclinical
studies and clinical trials and other research and development
activities;
•
risks related to the competition for patient enrollment from drug
candidates in development;
•
the impact of the global COVID-19 pandemic on our clinical trials,
operations, vendors, suppliers and employees;
•
risks related to regulatory approvals and other requirements
applicable to our product candidates;
•
risks relating to the cost of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property
rights;
•
general business conditions, regulatory environment, competition
and market for our products;
•
business abilities and judgment of personnel, and the availability
of qualified personnel; and
•
those identified in Part I, Item 2. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” Part
II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q
and Part II, Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations of our Annual Report
on Form 10-K for the fiscal year ended December 31, 2021 (the “2021
Annual Report”).
Moreover, we operate in an evolving environment. New risk factors
and uncertainties may emerge from time to time, and it is not
possible for management to predict all risks and
uncertainties.
Although we believe the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements. You
should not rely upon forward-looking statements as predictions of
future events. All forward-looking statements speak only as of the
date of this Quarterly Report on Form 10-Q.
3
Unless required by law, we will not undertake and we specifically
disclaim any obligation to release publicly the result of any
revisions which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements
or to reflect the occurrence of events, whether or not anticipated.
In that respect, we wish to caution readers not to place undue
reliance on any such forward-looking statements, which speak only
as of the date they are made.
MARKET
AND INDUSTRY DATA
This Quarterly Report on Form 10-Q and the other documents
incorporated herein by reference include statistical and other
industry and market data that we obtained from industry
publications and research, surveys and studies conducted by third
parties. Industry publications and third-party research, surveys
and studies generally indicate that their information has been
obtained from sources believed to be reliable, although they do not
guarantee the accuracy or completeness of such information. While
we believe these industry publications and third-party research,
surveys and studies are reliable, we have not independently
verified such data and disclaim responsibility for its
content.
4
RISK
FACTOR SUMMARY
The following is a summary of the principal risks of an investment
in our common stock. This summary does not list all the risks that
we face. Additional discussion of the risks summarized below follow
directly under the heading “Risk Factors” and should be carefully
considered, together with other information in our 2021 Annual
Report and our other filings with the SEC before making an
investment decision regarding our common stock.
•
We are heavily dependent on the success of our lead product
candidate, ELX-02. If ELX-02 does not achieve positive results
during development or suffers any material development delays, it
may adversely impact the commercial viability of ELX-02 and our
business.
•
We will need substantial additional funding by the end of the first
half of 2023. If we are unable to raise capital when needed, we
would be forced to delay, reduce, or eliminate our product
development programs or commercialization efforts.
•
Preclinical and clinical drug development is a lengthy and
expensive process, with an uncertain outcome. Our preclinical and
clinical programs may experience delays or may never advance, which
would adversely affect ability to further advance clinical
development, obtain regulatory approvals or commercialize our
product candidates on a timely basis or at all, which could have an
adverse effect on our business.
•
We and our collaborating partners may be subject, directly or
indirectly, to federal and state healthcare fraud and abuse and
false claims laws and regulations. If we or our collaborating
partners are unable to comply, or have not fully complied, with
such laws, we could face substantial penalties.
•
Our product candidates, including ELX-02, may cause adverse events
or have other properties that could delay or prevent their
regulatory approval or limit the scope of any approved label or
market acceptance.
•
Even though we have received orphan drug designation from the FDA
for ELX-02 for the treatment of cystic fibrosis, cystinosis, MPS I,
and Rett syndrome, we may not be able to maintain the benefits of
orphan drug designation or obtain orphan drug marketing exclusivity
for ELX-02 or any of our other product candidates for Alport
syndrome or other indications.
•
A Fast Track Designation by the FDA, even if granted for any of our
product candidates, may not lead to a faster development or
regulatory review or approval process, and does not increase the
likelihood that our product candidates will receive marketing
approval.
•
We may find it difficult to recruit and enroll patients in our
clinical trials, which could cause significant delays in the
completion of such trials or may cause us to abandon one or more
clinical trials.
•
If we are unable to develop and commercialize our product
candidates, our business will be adversely affected.
•
We have incurred significant operating losses since our inception
and anticipate that we will continue to incur substantial operating
losses for the foreseeable future. We may never achieve or maintain
profitability.
•
Our recurring losses from operations raise substantial doubt
regarding our ability to continue as a going concern.
•
If we fail to adequately protect or enforce our intellectual
property rights or secure rights to third party patents, the value
of our intellectual property rights would diminish, and our
business, competitive position and results of operations would
suffer.
•
If we infringe the rights of third parties, we could be prevented
from selling products, forced to pay damages and required to defend
against litigation which could result in substantial costs and may
have a material adverse effect on our business, results of
operations and financial condition.
•
Maintaining and improving our financial controls and the
requirements of being a public company may strain our resources,
divert management’s attention and affect our ability to attract and
retain qualified board members.
•
Our ability to use our net operating losses to offset future
taxable income may be subject to certain limitations.
•
Our stock price may be volatile, and purchasers of our common stock
could incur substantial losses.
5
PART I. FINANCIAL
INFORMATION
Item 1. Condensed Consolidated
Financial Information
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(in thousands, except share and per share data)
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September 30,
2022
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December 31,
2021
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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24,554
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$
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42,268
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Restricted cash
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263
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299
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Prepaid expenses and other current assets
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854
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913
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Total current assets
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25,671
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43,480
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Property and equipment, net
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215
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216
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Operating lease right-of-use asset
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993
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1,443
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Total assets
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$
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26,879
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$
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45,139
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LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
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Current liabilities:
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Accounts payable
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$
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1,595
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$
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1,379
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|
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Accrued expenses
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4,518
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|
|
|
4,196
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Current portion of long-term debt
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2,530
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|
|
|
—
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Advances from collaboration partners
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12,223
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|
|
|
3,723
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|
|
Derivative liabilities
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|
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116
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|
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|
—
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Current portion of operating lease liability
|
|
|
698
|
|
|
|
657
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|
|
Total current liabilities
|
|
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21,680
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|
|
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9,955
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|
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Long-term debt, net of current portion
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|
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9,863
|
|
|
|
11,996
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|
|
Operating lease liability
|
|
|
318
|
|
|
|
804
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|
|
Total liabilities
|
|
|
31,861
|
|
|
|
22,755
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Stockholders’ (deficit) equity:
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par
value per share,
5,000,000 shares
authorized,
no
shares issued or outstanding as of September 30,
2022 and December 31, 2021
|
|
|
—
|
|
|
|
—
|
|
|
Common stock, $0.01 par
value per share,
500,000,000 shares
authorized,
87,077,587 and
87,071,324 shares
issued and
86,656,221 and
86,649,958 shares
outstanding as of September 30, 2022 and
December 31, 2021, respectively
|
|
|
871
|
|
|
|
871
|
|
|
Common stock in treasury, at cost,
421,366 shares
as of both
September 30, 2022 and December 31,
2021
|
|
|
(2,190
|
)
|
|
|
(2,190
|
)
|
|
Additional paid-in capital
|
|
|
264,406
|
|
|
|
262,026
|
|
|
Accumulated deficit
|
|
|
(268,069
|
)
|
|
|
(238,323
|
)
|
|
Total stockholders’ (deficit) equity
|
|
|
(4,982
|
)
|
|
|
22,384
|
|
|
Total liabilities and stockholders’ (deficit) equity
|
|
$
|
26,879
|
|
|
$
|
45,139
|
|
See accompanying notes to unaudited condensed consolidated
financial statements
6
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(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
|
|
$
|
4,880
|
|
|
$
|
5,210
|
|
|
$
|
20,430
|
|
|
$
|
14,987
|
|
|
General and administrative
|
|
|
2,262
|
|
|
|
5,035
|
|
|
|
7,961
|
|
|
|
16,731
|
|
|
In process research and development
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,670
|
|
|
Total operating expenses
|
|
|
7,142
|
|
|
|
10,245
|
|
|
|
28,391
|
|
|
|
54,388
|
|
|
Loss from operations
|
|
|
(7,142
|
)
|
|
|
(10,245
|
)
|
|
|
(28,391
|
)
|
|
|
(54,388
|
)
|
|
Other expense (income), net
|
|
|
366
|
|
|
|
(360
|
)
|
|
|
1,355
|
|
|
|
249
|
|
|
Net loss
|
|
$
|
(7,508
|
)
|
|
$
|
(9,885
|
)
|
|
$
|
(29,746
|
)
|
|
$
|
(54,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
$
|
(0.09
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.85
|
)
|
|
Weighted average number of shares of common stock
used in computing net loss per share, basic and
diluted
|
|
|
86,656,221
|
|
|
|
86,208,754
|
|
|
|
86,653,811
|
|
|
|
64,428,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated
financial statements
7
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(29,746
|
)
|
|
$
|
(54,637
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Acquired in-process research and development
|
|
|
—
|
|
|
|
22,670
|
|
|
Stock-based compensation
|
|
|
2,380
|
|
|
|
7,567
|
|
|
Depreciation
|
|
|
67
|
|
|
|
86
|
|
|
Amortization of operating lease right-of-use asset
|
|
|
450
|
|
|
|
672
|
|
|
Amortization of debt discount
|
|
|
397
|
|
|
|
298
|
|
|
Loss on sales and disposals of property and equipment
|
|
|
—
|
|
|
|
84
|
|
|
Change in fair value of derivative liabilities
|
|
|
116
|
|
|
|
—
|
|
|
Gain on extinguishment of debt
|
|
|
—
|
|
|
|
(808
|
)
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
268
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
59
|
|
|
|
631
|
|
|
Accounts payable
|
|
|
216
|
|
|
|
410
|
|
|
Accrued expenses
|
|
|
322
|
|
|
|
(649
|
)
|
|
Merger related costs paid
|
|
|
—
|
|
|
|
(1,003
|
)
|
|
Operating lease liabilities
|
|
|
(445
|
)
|
|
|
(659
|
)
|
|
Net cash used in operating activities
|
|
|
(26,184
|
)
|
|
|
(25,070
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(66
|
)
|
|
|
(69
|
)
|
|
Cash acquired in merger transaction
|
|
|
—
|
|
|
|
2,145
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(66
|
)
|
|
|
2,076
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from advances from collaboration partners
|
|
|
8,500
|
|
|
|
2,918
|
|
|
Proceeds from underwritten public offerings, net of issuance
costs
|
|
|
—
|
|
|
|
47,718
|
|
|
Proceeds from debt financing obligations
|
|
|
—
|
|
|
|
11,910
|
|
|
Repayment of term loan principal
|
|
|
—
|
|
|
|
(11,383
|
)
|
|
Payment for settlement of taxes upon vesting of restricted stock
units
|
|
|
—
|
|
|
|
(238
|
)
|
|
Proceeds from exercises of stock options
|
|
|
—
|
|
|
|
23
|
|
|
Net cash provided by financing activities
|
|
|
8,500
|
|
|
|
50,948
|
|
|
(Decrease) Increase in cash, cash equivalents and restricted
cash
|
|
|
(17,750
|
)
|
|
|
27,954
|
|
|
Cash, cash equivalents and restricted cash at the beginning of the
period
|
|
|
42,567
|
|
|
|
24,724
|
|
|
Cash, cash equivalents and restricted cash at the end of the
period
|
|
$
|
24,817
|
|
|
$
|
52,678
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents and restricted cash to
condensed
consolidated balance sheets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
24,554
|
|
|
$
|
52,432
|
|
|
Restricted cash
|
|
|
263
|
|
|
|
246
|
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
24,817
|
|
|
$
|
52,678
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow activities:
|
|
|
|
|
|
|
|
Issuance of common stock in merger transaction
|
|
$
|
—
|
|
|
$
|
22,335
|
|
|
Cash paid for interest
|
|
$
|
968
|
|
|
$
|
415
|
|
See accompanying notes to unaudited condensed consolidated
financial statements
8
ELOXX
PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
(DEFICIT) EQUITY
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
Treasury stock
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
paid-in
capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Accumulated
deficit
|
|
|
Total
stockholders'
(deficit) equity
|
|
|
Balance at December 31, 2021
|
|
|
86,649,958
|
|
|
$
|
871
|
|
|
$
|
262,026
|
|
|
|
(421,366
|
)
|
|
$
|
(2,190
|
)
|
|
$
|
(238,323
|
)
|
|
$
|
22,384
|
|
|
Vesting of restricted stock units
|
|
|
3,131
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
922
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
922
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,620
|
)
|
|
|
(11,620
|
)
|
|
Balance at March 31, 2022
|
|
|
86,653,089
|
|
|
$
|
871
|
|
|
$
|
262,948
|
|
|
|
(421,366
|
)
|
|
$
|
(2,190
|
)
|
|
$
|
(249,943
|
)
|
|
$
|
11,686
|
|
|
Vesting of restricted stock units
|
|
|
3,132
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
744
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
744
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,618
|
)
|
|
|
(10,618
|
)
|
|
Balance at June 30, 2022
|
|
|
86,656,221
|
|
|
$
|
871
|
|
|
$
|
263,692
|
|
|
$
|
(421,366
|
)
|
|
$
|
(2,190
|
)
|
|
$
|
(260,561
|
)
|
|
$
|
1,812
|
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
714
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
714
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,508
|
)
|
|
|
(7,508
|
)
|
|
Balance at September 30, 2022
|
|
|
86,656,221
|
|
|
$
|
871
|
|
|
$
|
264,406
|
|
|
|
(421,366
|
)
|
|
$
|
(2,190
|
)
|
|
$
|
(268,069
|
)
|
|
$
|
(4,982
|
)
|
See accompanying notes to unaudited condensed consolidated
financial statements
9
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
(DEFICIT) EQUITY
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
Treasury stock
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
paid-in
capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Accumulated
deficit
|
|
|
Total
stockholders'
equity
|
|
|
Balance at December 31, 2020
|
|
|
40,157,187
|
|
|
$
|
404
|
|
|
$
|
183,250
|
|
|
|
(193,735
|
)
|
|
$
|
(1,828
|
)
|
|
$
|
(171,596
|
)
|
|
$
|
10,230
|
|
|
Vesting of restricted stock units
|
|
|
57,687
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(23,883
|
)
|
|
|
(94
|
)
|
|
|
—
|
|
|
|
(94
|
)
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
1,308
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,308
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,694
|
)
|
|
|
(8,694
|
)
|
|
Balance at March 31, 2021
|
|
|
40,214,874
|
|
|
$
|
404
|
|
|
$
|
184,558
|
|
|
|
(217,618
|
)
|
|
$
|
(1,922
|
)
|
|
$
|
(180,290
|
)
|
|
$
|
2,750
|
|
|
Exercise of stock options
|
|
|
3,525
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
Vesting of restricted stock units
|
|
|
53,224
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(43,970
|
)
|
|
|
(143
|
)
|
|
|
—
|
|
|
|
(143
|
)
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
4,035
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,035
|
|
|
Issuance of common stock in connection with merger
|
|
|
7,596,810
|
|
|
|
76
|
|
|
|
22,259
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,335
|
|
|
Issuance of shares upon public offering
|
|
|
38,333,334
|
|
|
|
383
|
|
|
|
47,335
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,718
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(36,058
|
)
|
|
|
(36,058
|
)
|
|
Balance at June 30, 2021
|
|
|
86,201,767
|
|
|
$
|
863
|
|
|
$
|
258,193
|
|
|
|
(261,588
|
)
|
|
$
|
(2,065
|
)
|
|
$
|
(216,348
|
)
|
|
$
|
40,643
|
|
|
Exercise of stock options
|
|
|
19,966
|
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17
|
|
|
Vesting of restricted stock units
|
|
|
30,632
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,563
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
2,224
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,224
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,885
|
)
|
|
|
(9,885
|
)
|
|
Balance at September 30, 2021
|
|
|
86,252,365
|
|
|
$
|
863
|
|
|
$
|
260,434
|
|
|
|
(273,151
|
)
|
|
$
|
(2,066
|
)
|
|
$
|
(226,233
|
)
|
|
$
|
32,998
|
|
See accompanying notes to unaudited condensed consolidated
financial statements
10
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. Nature of the Business
Eloxx Pharmaceuticals, Inc., together with its subsidiaries
(collectively “Eloxx” or the “Company”), is a clinical-stage
biopharmaceutical company engaged in the science of ribosomal
modulation. The Company is developing novel small molecule drug
candidates from its library of unique Ribosome Modulating Agents
(“RMAs”) and Eukaryotic Ribosomal Selective glycosides (“ERSGs”),
for the treatment of a subset of rare and ultra-rare diseases and
cancers characterized by genetic mutations that cause defects in
protein translation. Specifically, the Company is targeting
restoration of functional proteins in patients with premature stop
codon mutations and ribosomal mutations. Premature stop codons are
point mutations that disrupt the stability of the impacted
messenger RNA (mRNA) and the protein synthesis from that mRNA.
Additionally, certain mutations of the ribosome disrupt normal
protein translation and are drivers of a subset of cancers. On
April 1, 2021, the Company acquired Zikani Therapeutics, Inc.
(“Zikani”), a preclinical stage biopharmaceutical company engaged
in the science of ribosome modulation, leveraging its innovative
TURBO-ZMTM
chemistry technology platform to develop novel ribosome modulating
agents (“RMAs”). The TURBO-ZMTM
platform is designed to enable rapid synthesis of novel macrolides
that can be optimized to modulate the human, bacterial or viral
ribosomes to treat rare diseases and cancers with certain
ribonucleic acid (“RNA”) and ribosomal mutations.
The Company is headquartered in Watertown, Massachusetts, with
additional operations in Israel and Australia.
Liquidity and Going Concern
The Company has a history of net losses and negative cash flows
from operating activities since its inception and, as of September
30, 2022, had an accumulated deficit of
$268.1
million. The Company expects to continue to incur net losses and
negative cash flows from its operations for the foreseeable future.
The Company has not generated revenue from the sale of any product
or service and does not expect to generate significant revenue
unless it obtains marketing approval for and commercializes one or
more of its product candidates currently in development. Successful
transition to profitable operations is dependent upon achieving a
level of revenue adequate to support the Company’s cost
structure.
The Company has financed its operations primarily from the sale of
equity securities and to a lesser extent, loans and grants. The
Company may never achieve profitability, and unless and until it
does, the Company will continue to need to raise additional capital
to fund its operations. In addition, as disclosed in Note 6, in
September 2021, the Company entered into the Hercules Term Loan (as
defined below) for an aggregate principal amount of
$30.0
million of which $12.5
million had been funded as of September 30, 2022. The Hercules Term
Loan Agreement contains customary affirmative and negative
covenants, which among others further described in Note 6, require
the Company to maintain at all times a minimum qualified cash
balance ranging from $6.3
million to $10.0
million ($10.0
million effective as of August 15, 2022) plus qualified accounts
payable (as defined in the Hercules Term Loan
Agreement).
As of September 30, 2022, the Company was in compliance with all
debt covenants. However, the inherent uncertainties described above
may impact the Company’s ability to remain in compliance with these
covenants over the next 12 months. If the Company breaches its
financial covenants and fails to secure a waiver or forbearance
from the third-party lender, such breach or failure could
accelerate the repayment of the outstanding borrowings under the
Hercules Term Loan Agreement or the exercise of other rights or
remedies the third-party lender may have under applicable law. No
assurance can be provided a waiver or forbearance will be granted
or the outstanding borrowings under the Hercules Term Loan
Agreement,
will be successfully refinanced on terms that are acceptable to the
Company.
The Company believes that its cash and cash equivalents of
$24.6
million at September 30, 2022 will not be sufficient to maintain
its current and planned operations for at least the next twelve
months following the filing of this Quarterly Report on Form 10-Q.
The accompanying condensed consolidated financial statements have
been prepared assuming that the Company will continue as a going
concern, which contemplates the realization of assets and
settlement of liabilities in the normal course of business.
However, based on the Company’s current working capital,
anticipated operating expenses and net losses and the uncertainties
surrounding its ability to raise additional capital as needed, as
discussed below, the Company believes that these conditions, in
aggregate, raise substantial doubt about its ability to continue as
a going concern for one year after the date these condensed
consolidated financial statements are issued.
Management intends to fund future operations through private or
public debt or equity financing transactions and may seek
additional capital through arrangements with strategic partners or
from other sources. The availability of sufficient funding to
alleviate the conditions that raise substantial doubt are not
within management’s control and cannot be assessed as
11
being probable of occurring. If the Company is unable to obtain
adequate financing, it will evaluate options which may include
reducing or deferring operating expenses, which may have a material
adverse effect on the Company’s operations and future
prospects.
2. Basis of Presentation and Significant Accounting
Policies
The Company has prepared the accompanying unaudited interim
condensed consolidated financial statements in accordance with
accounting principles generally accepted in the United States of
America (“U.S. GAAP”) as found in the Accounting Standards
Codification (“ASC”) and Accounting Standards Updates (“ASU”)
promulgated by the Financial Accounting Standards Board
(“FASB”).
Certain information and footnote disclosures normally included in
the Company’s annual consolidated financial statements have been
condensed or omitted, as permitted by such rules and regulations.
These interim condensed consolidated financial statements, in the
opinion of management, reflect all normal recurring adjustments
necessary for a fair presentation of the Company’s financial
position, results of operations, and cash flows for the interim
periods ended September 30, 2022 and 2021.
The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected
for the full year. These interim condensed consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements as of and for the year ended
December 31, 2021, and the notes thereto, which are included in the
Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, filed with the U.S. Securities and Exchange
Commission (the “SEC”) on March 30, 2022 (the “2021 Annual
Report”).
The significant accounting policies used in the preparation of
these condensed consolidated financial statements are consistent
with those described in the Company’s audited consolidated
financial statements as of and for the year ended December 31,
2021, and the notes thereto, in the Company’s 2021 Annual
Report.
Recent Accounting Pronouncements
Although the FASB has issued several ASUs for which adoption dates
are pending, the Company does not expect any to have any impacts on
its consolidated financial statements.
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022
|
|
|
December 31, 2021
|
|
|
Research and development
|
|
$
|
138
|
|
|
$
|
413
|
|
|
Insurance
|
|
|
391
|
|
|
|
123
|
|
|
Other
|
|
|
325
|
|
|
|
377
|
|
|
Total
|
|
$
|
854
|
|
|
$
|
913
|
|
4. Property and Equipment
Property and equipment, net consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022
|
|
|
December 31, 2021
|
|
|
Computers and software
|
|
$
|
26
|
|
|
$
|
31
|
|
|
Office furniture and equipment
|
|
|
15
|
|
|
|
27
|
|
|
Laboratory equipment
|
|
|
288
|
|
|
|
221
|
|
|
Leasehold improvements
|
|
|
57
|
|
|
|
88
|
|
|
Assets in progress
|
|
|
—
|
|
|
|
20
|
|
|
|
|
|
386
|
|
|
|
387
|
|
|
Less accumulated depreciation and amortization
|
|
|
(171
|
)
|
|
|
(171
|
)
|
|
Property and equipment, net
|
|
$
|
215
|
|
|
$
|
216
|
|
12
Depreciation expense was $23
thousand and $30
thousand for the three months ended September 30, 2022 and 2021,
respectively, and $67
thousand and $86
thousand for the nine months ended September 30, 2022 and 2021,
respectively.
5. Accrued Expenses
Accrued expenses consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022
|
|
|
December 31, 2021
|
|
|
Research and development expenses
|
|
$
|
3,577
|
|
|
$
|
1,849
|
|
|
Payroll and other employee-related expenses
|
|
|
485
|
|
|
|
1,615
|
|
|
Professional services
|
|
|
214
|
|
|
|
489
|
|
|
Interest on debt
|
|
|
125
|
|
|
|
102
|
|
|
Other
|
|
|
117
|
|
|
|
141
|
|
|
Total
|
|
$
|
4,518
|
|
|
$
|
4,196
|
|
6. Debt
Hercules Term Loan
On September 30, 2021, the Company entered into a Loan and Security
Agreement, dated as of September 30, 2021 (the “Hercules Term Loan
Agreement”) with Hercules Capital, Inc. (“Hercules” or the
“Lender”).
The Hercules Term Loan Agreement provided for term loans in an
aggregate principal amount of up to $30.0
million, comprised of (i) a tranche 1 advance of
$12.5
million (the “Tranche 1 Advance”), (ii) a tranche 2 advance of
$7.5
million (the “Tranche 2 Advance”) and (iii) a tranche 3 advance of
$10.0
million (the “Tranche 3 Advance”) (collectively, the “Term Loan
Advances”). The Tranche 1 Advance under the Hercules Term Loan
Agreement was funded on September 30, 2021. The Tranche 2 Advance
was to be available at the Company’s election until August 15,
2022, subject to the Company's achievement of certain milestone
events relating to data from the clinical trials. The Company did
not meet the requirements for the Tranche 2 Advance and such
funding will, therefore, not be available to the Company. The
Tranche 3 Advance is available subject to approval by the Lenders’
investment committee in its sole discretion. The Tranche 3 Advance
may be available for funding until, initially, April 1, 2023, and
(i) upon the occurrence of certain milestone events relating to the
Company’s receipt of net cash proceeds, October 1, 2023, and (ii)
upon the occurrence of certain milestone events relating to the
Company’s receipt of net cash proceeds and certain milestone events
relating to data from the clinical trials, April 1,
2024.