Eloxx Pharmaceuticals, Inc. — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021. Eloxx is a clinical-stage biopharmaceutical company with no approved products or product sales. Its lead candidate, ELX-02, is in Phase 2 development for cystic fibrosis (CF) patients with nonsense mutations; acquired TURBO-ZM technology supports preclinical programs including RDEB/JEB and FAP.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $22.9 million | $14.6 million |
| General and administrative expense | $20.4 million | $14.8 million |
| Acquired in-process R&D expense | $22.7 million | — |
| Operating loss | $66.0 million | $33.5 million |
| Net loss | $66.7 million | $34.6 million |
| Net loss per share | $0.95 | $0.86 |
| Net cash used in operating activities | $35.0 million | $28.2 million |
Gross margins are not meaningful because the company had no product revenue. The 2021 net loss includes $22.7 million of acquired in-process R&D from the Zikani acquisition. R&D expense rose 57%, principally reflecting clinical-program and contractor costs; G&A rose 38%, including higher professional fees, severance and stock compensation.
At year-end, cash and cash equivalents were $42.3 million, total current assets were $43.5 million and current liabilities were $10.0 million. Long-term debt had a carrying value of $12.0 million, representing $12.5 million principal less unamortized discount and including a final payment fee. The $30.0 million Hercules facility had funded $12.5 million; additional tranches were conditional on milestones. Total stockholders’ equity was $22.4 million.
Cash flows included $50.8 million provided by financing activities, primarily $47.7 million net proceeds from a May 2021 stock offering and $11.9 million from the Hercules loan, offset by $11.4 million of debt repayments. The company issued 38.3 million shares in the offering at $1.35 per share; year-end shares outstanding increased to 86.6 million from 40.2 million.
Material changes and developments
- On April 1, 2021, Eloxx acquired Zikani for 7.6 million common shares. The transaction was accounted for as an asset acquisition, and the acquired R&D was immediately expensed.
- In November 2021, Eloxx reported positive topline results from ELX-02 Phase 2 monotherapy arms: at 1.5 mg/kg/day, sweat chloride declined by 5.4 mmol/L, reported as statistically significant, and treatment was described as well tolerated. These are topline results, not final data.
- The Phase 2 study was expanded to evaluate ELX-02 with ivacaftor (Kalydeco). First patient dosing had occurred; topline results were expected in the second half of 2022.
- The company repaid its SVB term loan in September 2021, drew the first $12.5 million Hercules tranche, and received forgiveness of its $0.8 million PPP loan.
Outlook, risks and contingencies
- Going concern and funding: Management stated that year-end cash plus the $7.0 million received from the Cystic Fibrosis Foundation (CFF) in March 2022 would not fund current and planned operations for at least 12 months after filing. The auditor also highlighted substantial doubt about the company’s ability to continue as a going concern. Management plans to seek further financing or strategic funding; availability is not assured.
- Additional CFF support: A March 2022 award provides up to $15.9 million for ELX-02 CF development, with $7.0 million paid upfront and $8.9 million subject to milestones. Commercialization may trigger tiered royalties. The filing says the company was in compliance with Hercules covenants at year-end, but minimum qualified-cash requirements and milestone-dependent access to further loan tranches present risks.
- Development plans: Eloxx expected to submit an IND for ZKN-013 in RDEB/JEB in 2022, pursue inhaled ELX-02 development, and planned a small Alport syndrome proof-of-concept trial for the second half of 2022. These are forward-looking plans, not assured outcomes.
- Key risks: ELX-02 is the only candidate in clinical development; clinical efficacy, safety, enrollment and regulatory approval remain uncertain. Preclinical testing observed renal toxicity at doses above those expected for clinical use. COVID-19 may disrupt trials and supply. The company relies on third-party manufacturers and has no product revenue.
- Listing and other items: Nasdaq notified Eloxx in January 2022 that its share price had been below the $1.00 minimum bid requirement; the initial compliance period ran through July 5, 2022. No material pending legal proceedings were reported. No dividends are planned.
Important facts for investors to verify
- Final, audited clinical results from the ELX-02 monotherapy and combination arms, including safety, efficacy and durability.
- Updated cash runway, financing plans, CFF milestone receipts and the company’s ability to satisfy Hercules covenants and access undrawn tranches.
- Nasdaq minimum-bid compliance status and the potential dilution from future equity financing, including the $50 million ATM program.
- Progress and timing of planned IND submissions and trials, and whether third-party manufacturing capacity can support development.
- Potential license, royalty and repayment obligations, including CFF, Technion, Harvard and Israel Innovation Authority commitments.