Clene Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited results; amounts below are in U.S. dollars unless noted.
Business context
Clene is a clinical-stage therapeutics company developing clean-surfaced nanotechnology drug candidates, principally CNM-Au8 for ALS, multiple sclerosis and Parkinson’s disease. It has no approved drugs and generates only modest revenue from dietary supplements, including sales and royalties through related party 4Life.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0.108m | $0.174m | $0.484m | $0.239m |
| Operating expenses | $9.650m | $9.979m | $31.094m | $36.975m |
| Loss from operations | $(9.542)m | $(9.805)m | $(30.610)m | $(36.736)m |
| Net loss | $(2.418)m | $(10.976)m | $(39.331)m | $(28.864)m |
| Basic and diluted loss per share | $(0.02) | $(0.17) | $(0.41) | $(0.46) |
| Operating cash used | Not separately stated | Not separately stated | $(22.999)m | $(31.295)m |
Q3 gross profit was approximately $0.096m; nine-month gross profit was approximately $0.401m. All reported revenue was from supplements; the Drugs segment had no external revenue.
At September 30, cash and cash equivalents were $42.113m, with no marketable securities reported on the balance sheet; restricted cash was $0.058m. Current assets were $46.446m and current liabilities $15.268m. Balance-sheet notes payable and convertible notes payable totaled approximately $26.238m, excluding lease obligations. Nine-month financing cash inflow was $42.181m, primarily from the June equity-and-warrant offering.
Material changes versus prior periods
- Q3 revenue fell 38% year over year, reflecting lower supplement product revenue; nine-month revenue rose 103% from a low prior-year base.
- Research and development expense declined 7% in Q3 and 17% year to date, mainly as blinded trial periods concluded and clinical operations costs fell. General and administrative expense was up 3% in Q3 but down 14% year to date.
- Q3 net loss narrowed substantially, despite a similar operating loss, principally because of a $6.341m non-cash gain from remeasurement of warrant liabilities. Nine-month net loss increased, mainly reflecting a $14.840m non-cash loss on initial issuance of equity in the June offering.
- Common shares outstanding increased from 74.760m at December 31, 2022 to 128.412m at September 30, 2023. The June offering issued 50m shares and 100m warrants; the company reported 105.432m potentially issuable warrant shares outstanding at quarter-end.
- Cash and cash equivalents rose from $18.332m at year-end 2022; marketable securities declined from $4.983m to zero on the balance sheet.
Outlook, risks and unusual items
- Going concern: Management stated that available resources are not expected to sustain current operations or meet obligations over the next 12 months without additional financing. The filing says substantial doubt exists about the company’s ability to continue as a going concern, and management’s financing and cost-reduction plans do not alleviate that doubt beyond one year from issuance. Plans include equity or debt financing, licensing or collaboration, and cost reductions; there is no assurance funding will be obtained. Avenue’s loan requires at least $5m of unrestricted cash to avoid possible acceleration.
- Clinical and regulatory outlook: The company reported post hoc long-term CNM-Au8 ALS survival analyses, including comparisons with historical PRO-ACT controls; these are not equivalent to results from a new prospective, placebo-controlled trial. It expected additional ALS biomarker and survival analyses in Q1 2024 and planned to discuss the evidence with FDA in Q4 2023. An NDA in H1 2024 and a potential accelerated-approval decision by year-end 2024 were conditional on FDA discussions and data. RESTORE-ALS Phase 3 was planned for H1 2024. A Phase 3 MS study was contemplated for H2 2024, subject to funding.
- Subsequent development: On October 5, 2023, after quarter-end, Clene announced a four-year, $45.1m NIH grant with Columbia University and Synapticure to support an ALS expanded-access protocol. This is not included in September 30 cash or reported-period revenue.
- Financing and dilution: The June offering generated $40m gross proceeds before discounts and expenses and included warrants exercisable at $1.10 and $1.50. The offering’s fair-value accounting produced a $14.840m initial issuance loss. Potential warrant exercise proceeds are uncertain; warrants may expire unexercised. The Avenue loan carries a 15.10% stated rate at quarter-end, and the filing reports a 22.79% effective rate on its convertible portion.
- Listing and controls: Nasdaq notified the company that its share price had been below the $1 minimum for 30 consecutive business days. The initial compliance deadline was January 29, 2024; delisting risk could impair liquidity and future financing. Management also concluded disclosure controls were ineffective due to material weaknesses in financial close/review and IT general controls; remediation was ongoing.
- Contingencies: NMSS grants may require milestone-based repayments if specified commercialization or other events occur. No liability was recorded because management assessed the events as less than probable; the disclosed possible repayment ranges were approximately $0.2m–$1.5m for the 2019 grant and $0.3m–$3.0m for the 2023 grant.
Most important facts for investors to verify
- Current cash runway, financing availability, and progress against management’s going-concern funding plans.
- FDA feedback on CNM-Au8 ALS evidence, the status and design of planned trials, and the limitations of historical-control and post hoc analyses.
- Warrant terms, actual exercise activity, dilution potential, and Nasdaq minimum-bid compliance or any reverse-split action.
- Whether internal-control material weaknesses are remediated and whether subsequent filings report any changes.
- Terms, timing, and conditions of the NIH expanded-access grant, and any future NMSS repayment triggers.