Eloxx Pharmaceuticals, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Eloxx is a clinical-stage biopharmaceutical company developing ELX-02 and other candidates for rare diseases involving premature stop codons. It had no product revenue and no approved products.
Financial performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $3.2 million | $6.8 million | $11.3 million | $20.2 million |
| General and administrative expense | $3.1 million | $6.0 million | $12.3 million | $18.9 million |
| Restructuring charges | None | None | $4.0 million | None |
| Net loss | $6.6 million | $12.9 million | $28.5 million | $39.2 million |
| Basic and diluted loss per share | $0.16 | $0.32 | $0.71 | $1.05 |
There are no meaningful sales-based margin figures because the company reported no revenue. Operating expenses were $6.3 million in Q3, down 51% year over year. Lower clinical-trial and research activity, reduced headcount, lower stock compensation, and lower professional-services costs contributed to the expense declines. Management attributed reduced R&D subcontractor and consultant spending partly to COVID-related enrollment delays.
Cash, liquidity and debt
- At September 30, cash and cash equivalents were $30.6 million; there were no marketable securities, compared with $33.8 million at December 31, 2019. Current assets were $32.2 million and current liabilities $10.0 million, implying working capital of about $22.2 million.
- Operating activities used $23.5 million of cash in the first nine months, versus $30.1 million in the comparable 2019 period. Investing activities provided $33.8 million, primarily from maturities of marketable securities. Financing activities used $2.2 million, including $3.3 million of term-loan principal repayments.
- Debt carrying value was $11.8 million, including $4.9 million current and $7.8 million long-term. The term loan bears a floating rate (5.75% at quarter-end), is due January 2023, and is secured by substantially all assets other than intellectual property. The company also received a $0.8 million PPP loan at 1% interest; forgiveness was subject to eligibility requirements and lender/SBA approval.
- Management said available cash was expected to fund current and planned operations for at least 12 months from issuance of the financial statements, including to anticipated cystic-fibrosis Phase 2 top-line data. The company nevertheless expects ongoing losses and may need additional capital.
Material changes, outlook and risks
- Q3 and nine-month net losses narrowed year over year as operating expenses fell. Nine-month results included a one-time $4.0 million restructuring charge after a February 2020 reorganization eliminated 13 positions. Management projected approximately $4.9 million in annual cost savings, including about $2.3 million in 2020 net of severance costs.
- COVID-19 temporarily paused ELX-02 cystic-fibrosis Phase 2 enrollment. Enrollment resumed in Israel and Europe in June and in the U.S. in August. Management targeted top-line data in the first half of 2021, conditional on no further disruption. The filing warns that further pandemic effects on enrollment, trial sites, CROs, employees, suppliers, or regulators could delay development and increase costs.
- The company reported no drug-related serious adverse events to date in the cystic-fibrosis Phase 2 program and said dose escalation had reached the top dose level. These are interim company-reported observations, not proof of efficacy or safety.
- The Phase 2 nephropathic-cystinosis study was discontinued after the first cohort: uncontrolled, elevated baseline white-blood-cell cystine made treatment effects difficult to assess, and the planned second cohort will not proceed under the original protocol. Management said it would review data for possible study redesign.
- ELX-02 received FDA orphan-drug designation for cystic fibrosis in August 2020; designation is not marketing approval. Preclinical renal toxicities at doses above those expected in clinical trials, uncertain clinical outcomes, small patient populations, regulatory requirements, competition, and future financing needs remain significant risks.
- The company reported no material pending legal proceedings and stated that disclosure controls were effective as of September 30, 2020.
Key facts for investors to verify
- Whether cystic-fibrosis Phase 2 enrollment and the first-half-2021 data target remain achievable, and what the eventual clinical results show.
- How much of the reported cash balance is consumed by operating burn and scheduled debt payments, and whether additional financing will be needed sooner than management expects.
- Whether the PPP loan qualifies for forgiveness and whether the company satisfies all applicable requirements.
- Whether a redesigned cystinosis study proceeds, and whether ELX-02’s clinical safety and efficacy support further development.
- Whether projected restructuring savings are realized without impairing pipeline progress.