Eloxx Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Eloxx is a clinical-stage biopharmaceutical company developing ribosome-modulating therapies for rare diseases. It has no product revenue and no products approved for sale.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development | $5.2m | $3.4m | $15.0m | $12.0m |
| General and administrative | $5.0m | $2.9m | $16.7m | $11.7m |
| Acquired in-process R&D | — | — | $22.7m | — |
| Total operating expenses | $10.2m | $6.3m | $54.4m | $27.6m |
| Net loss | $9.9m | $6.6m | $54.6m | $28.5m |
| Basic and diluted loss per share | $0.11 | $0.16 | $0.85 | $0.71 |
| Cash used in operating activities | Not presented quarterly | Not presented quarterly | $25.1m | $23.5m |
At September 30, 2021, cash and cash equivalents were $52.4m (restricted cash: $0.2m), versus $24.7m at December 31, 2020. Current assets were $53.5m and current liabilities $9.5m. Total liabilities were $22.4m; stockholders’ equity was $33.0m. Management said cash should fund current and planned operations for at least 12 months from issuance of the financial statements. The company expects continued losses and may need additional financing.
Changes and notable items
- Net loss for the first nine months increased $26.2m year over year, largely reflecting the $22.7m noncash acquired in-process R&D charge related to the April 2021 Zikani acquisition. The acquisition was accounted for as an asset acquisition; Eloxx issued 7.6m common shares as consideration.
- Q3 R&D expense rose 51%, primarily from subcontractors and consultants, personnel, and facilities. Q3 G&A rose 77%, reflecting stock compensation, added personnel, and professional and infrastructure costs.
- The May 2021 public offering raised approximately $47.7m net and issued 38.3m shares. Shares outstanding at September 30 were 86.3m, compared with 40.4m at year-end 2020.
- Eloxx drew $12.5m under a new Hercules term loan on September 30 and repaid its SVB term loan. The Hercules facility permits up to $30.0m total, with further tranches contingent on milestones and, for the third tranche, lender approval. The outstanding principal bears at least 9.5% interest; principal amortization is scheduled to begin in 2023, with maturity in April 2025. The facility is secured by substantially all assets, subject to exceptions. The company reported covenant compliance.
- The company established a $50m at-the-market equity program but had made no sales under it by September 30.
- The $0.8m Paycheck Protection Program loan was forgiven in September, producing a gain on debt extinguishment; repayment of the SVB loan generated a separate $0.3m extinguishment loss.
Outlook, commentary and risks
- ELX-02 was in Phase 2 studies for cystic fibrosis in patients with nonsense mutations. Management said it believed enrollment was sufficient to assess biological activity and expected data from the first four treatment arms before the end of 2021. The FDA granted ELX-02 Fast Track designation in September 2021; orphan drug designations had been granted for cystic fibrosis, cystinosis, MPS I and Rett syndrome.
- Both Phase 2 trials had resumed by August 2021 after COVID-19-related disruption. The filing cautions that further pandemic effects could delay trials, enrollment or operations.
- Following the Zikani acquisition, Eloxx planned to advance preclinical ribosome-modulating programs and stated it planned to file an IND in 2022 for a potential oral therapy for recessive and junctional dystrophic epidermolysis bullosa. These are forward-looking plans, not reported clinical outcomes.
- Key risks include ELX-02’s dependence on successful clinical results, small and difficult-to-recruit patient populations, trial and regulatory uncertainty, reliance on third parties for research and manufacturing, and the need for additional capital. The company disclosed renal toxicity in animal testing at doses above those expected in clinical trials.
- No material pending legal proceedings were reported. Management concluded disclosure controls were effective; internal controls of newly acquired Zikani were excluded from that evaluation while being assessed.
Important facts for investors to verify
- Whether the anticipated ELX-02 Phase 2 data were released, and how complete, durable and clinically meaningful the results were.
- Cash burn, financing needs and runway against the stated minimum 12-month funding horizon; also whether Eloxx used its ATM program or accessed additional Hercules tranches.
- The final Zikani purchase-price allocation and the progress, cost and timing of its preclinical programs and planned 2022 IND.
- The impact of share issuance and equity awards on dilution, and the Hercules loan’s interest, fees, collateral and milestone-dependent funding terms.