Eloxx Pharmaceuticals, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unaudited results are for the company before its April 1, 2021 acquisition of Zikani Therapeutics. Eloxx is a clinical-stage biopharmaceutical company focused on therapies for rare diseases involving premature stop codons. It had no approved products and generated no product or service revenue.
Financial highlights
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.073 million | $4.767 million |
| General and administrative expense | $4.341 million | $5.006 million |
| Restructuring charges | None | $3.994 million |
| Total operating expenses | $8.414 million | $13.767 million |
| Net loss | $8.694 million | $13.946 million |
| Net loss per share, basic and diluted | $0.22 | $0.35 |
| Cash used in operating activities | $7.685 million | $11.924 million |
The year-over-year reduction in expenses and net loss primarily reflects the absence of 2020 restructuring charges and lower personnel, stock-based compensation, and external development costs. R&D expense fell 15%, G&A expense fell 13%, and total operating expenses fell 39%. Margins are not meaningful because the company had no revenue.
At March 31, 2021, cash and cash equivalents were $18.247 million, restricted cash was $0.054 million, total assets were $20.366 million, total liabilities were $17.616 million, and stockholders’ equity was $2.750 million. Cash and cash equivalents were $24.668 million at December 31, 2020. Reported debt included a $5.562 million current portion and $4.913 million long-term portion. The term loan bears a floating rate; its stated rate was 5.75% at quarter-end, and its effective rate was 10.85%.
Financing activities provided $1.262 million, including $2.606 million in collaboration-partner advances, partly offset by $1.250 million of term-loan principal repayments. The advances relate to Cystic Fibrosis Foundation funding, which is milestone-dependent and may require repayment or royalties in specified circumstances.
Business developments, outlook, and risks
- ELX-02 was in Phase 2 development for cystic fibrosis in patients with nonsense mutations. After a temporary COVID-19-related enrollment pause in 2020, enrollment resumed in Israel and Europe and then the United States. Management expected to complete enrollment in the first four treatment arms by mid-2021 and report data in the second half of 2021, subject to further disruptions. The company reported no drug-related serious adverse events to date in the trial’s safety review and that dose escalation had reached the top protocol dose.
- On April 1, 2021, Eloxx acquired preclinical-stage Zikani in an all-stock transaction, issuing 7,596,810 common shares. The purchase-price allocation was still being prepared. The company expected Q2 one-time charges of approximately $1.0 million for employee separation and $2.4 million in noncash accelerated stock compensation. The acquisition also brought leadership and board changes.
- Management said $18.2 million of cash and cash equivalents at March 31 was expected to fund anticipated needs only into Q3 2021, and would not support current and planned operations for at least 12 months after the filing. The company concluded that substantial doubt existed about its ability to continue as a going concern without additional funding. It planned to seek debt or equity financing and strategic funding; availability was not considered probable. Without financing, it could reduce expenses, workforce, or development programs.
- Key risks include dependence on ELX-02, uncertain clinical and regulatory outcomes, rare-disease patient recruitment, potential adverse effects (including renal toxicity observed in preclinical testing at doses above those expected in trials), reliance on third-party manufacturers and research partners, COVID-19 disruption, and the need for additional capital and potential dilution.
- The filing said COVID-19 had not materially adversely affected financial condition to date, but had temporarily disrupted clinical enrollment and could cause further operational or trial delays. No material pending legal proceedings were reported. Disclosure controls were concluded effective as of March 31, 2021.
Most important facts for investors to verify
- Whether additional financing was secured, on what terms, and whether the going-concern uncertainty was alleviated.
- Actual ELX-02 enrollment progress and Phase 2 data timing and results versus the stated mid-year and second-half 2021 targets.
- The final Zikani purchase-price allocation, integration progress, incremental costs, and effect of the 7.6 million shares issued on dilution.
- Debt repayment requirements, collaboration-funding milestones and repayment or royalty terms, and the status of the PPP loan forgiveness.
- Whether trial safety, recruitment, manufacturing, or COVID-19 issues changed development plans or expected spending.