Clene Inc. annual report, FY2022

Clene Inc. — 2022 Form 10-K Summary

Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022; it was filed March 13, 2023. Clene is a clinical-stage pharmaceutical company developing clean-surfaced nanotechnology therapeutics, principally CNM-Au8 for ALS, multiple sclerosis (MS), and Parkinson’s disease (PD). It has no approved drugs and generates only immaterial revenue from dietary supplements and related royalties.

Financial results and liquidity

Metric	2022	2021
Revenue	$0.47 million	$0.72 million
Research and development expense	$31.9 million	$28.4 million
General and administrative expense	$16.9 million	$22.0 million
Operating loss	$48.4 million	$50.0 million
Net loss	$29.9 million	$9.7 million
Net loss per share, basic and diluted	$0.46	$0.16
Net cash used in operating activities	$39.0 million	$34.6 million

Revenue consisted of supplement product sales ($329,000) and royalties ($144,000); no revenue came from drug candidates. Revenue declined 35% year over year.
Operating expenses were $48.9 million, against revenue of $0.5 million. A conventional operating margin is not meaningful given the very small supplement business and the company’s development-stage operations.
Cash and cash equivalents were $18.3 million and marketable securities $5.0 million at year-end, for $23.3 million combined, versus $50.3 million a year earlier. Current assets were $29.2 million and current liabilities $13.9 million.
Balance-sheet carrying amounts included $15.9 million of notes payable and $9.8 million of convertible notes payable, or approximately $25.7 million combined. Avenue’s loan carried a 14.1% rate at year-end and requires at least $5.0 million of unrestricted cash to avoid potential acceleration.
Stockholders’ equity fell to $3.2 million from $12.6 million. Cash used in investing was $10.2 million, including $5.2 million of property and equipment purchases; financing provided $17.2 million.

Material changes versus 2021

Net loss increased by $20.2 million even though operating loss improved by $1.6 million. The primary difference was lower non-cash gains from remeasurement of contingent earn-out liabilities: $17.9 million in 2022 versus $37.5 million in 2021. Interest expense also rose to $3.3 million from $0.9 million.
R&D expense rose 12%, reflecting increased spending on CNM-ZnAg, personnel, facilities and other unallocated costs; CNM-Au8 expense declined overall as several blinded trial periods ended.
G&A expense fell 23%, largely following lower legal, finance and accounting, and stock-based compensation costs.
Year-end cash and marketable securities fell by $27.0 million, while operating cash outflow increased by $4.4 million. The company raised $10.8 million gross in an October registered offering and $0.8 million gross through its ATM during 2022, with additional borrowing also contributing to financing cash flow.

Outlook, clinical developments and risks

Going concern and funding: Management and the auditor state that substantial doubt exists about Clene’s ability to continue as a going concern. The company said it might not have sufficient resources to sustain current operations or meet obligations over the following 12 months, and concluded its plans did not alleviate the doubt for more than one year after issuance of the financial statements. Plans include equity or debt financing, collaborations or licensing, and ATM sales. After year-end, it raised $3.9 million gross through its ATM and entered a $25 million equity line with Lincoln Park; availability depends on the agreement’s conditions and sales may dilute shareholders. Cost reductions included delaying or reducing R&D and commercialization efforts, executive compensation reductions, a hiring freeze and staff eliminations.
Expected spending: Management anticipated lower R&D expense in 2023 as trials completed, with potential increases in later years if programs advance into Phase 3. Further G&A spending depends on regulatory discussions and development plans. No specific revenue, earnings or cash-runway guidance is provided.
ALS: The Phase 2 RESCUE-ALS trial missed its primary and secondary endpoints, although the company reported exploratory signals and favorable post-hoc open-label extension analyses. The HEALEY ALS Platform Trial did not meet its primary endpoint or key secondary endpoints at 24 weeks. Prespecified exploratory analyses for the 30 mg dose reported a reduced risk of certain clinical-worsening events; some analyses were not adjusted for multiple comparisons. Clene selected 30 mg for continued development and expected an FDA end-of-Phase-2 meeting in Q3 2023; a Phase 3 design was under discussion. Approval timing and the sufficiency of the evidence remain uncertain.
MS and other programs: VISIONARY-MS ended early amid COVID-19 operational challenges, enrolling 73 of 150 planned participants. The company reported efficacy signals in the modified intent-to-treat population and selected imaging and visual-evoked-potential measures. The open-label REPAIR studies reported brain-metabolite target engagement, but involved small cohorts. CNM-ZnAg’s 288-participant COVID-19 trial showed no benefit on its primary endpoint; Clene ended development for that use. CNM-AgZn17 remained preclinical, with a first-in-human study anticipated in 2024, subject to progress and regulatory requirements.
Other material risks: Drug candidates remain investigational, and clinical efficacy, regulatory approval, commercial uptake, reimbursement and manufacturing scale-up are uncertain. The company relies on third parties and certain limited-source raw materials, is expanding leased manufacturing facilities, and faces potential clinical-trial, supply, intellectual-property, cyber-security, inflation and regulatory risks. No material legal proceedings were reported.
Controls and audit: The auditor issued an unqualified opinion on the financial statements but highlighted the going-concern uncertainty. Management reported material weaknesses in financial reporting controls, including account reconciliations and journal-entry review, segregation of duties, and IT general controls; disclosure controls were deemed ineffective at year-end. The auditor did not provide an opinion on internal control effectiveness.

Most important facts for investors to verify

Current liquidity, actual ATM and Lincoln Park proceeds, remaining financing capacity, dilution and compliance with Avenue’s $5.0 million minimum-cash covenant.
Debt repayment schedule, interest costs, potential acceleration provisions and the effect of any additional borrowing.
Full HEALEY ALS trial analyses, including the exploratory endpoints, multiplicity and baseline-risk adjustments, and FDA feedback on whether the data can support further development or a future NDA.
Whether MS findings from the prematurely ended VISIONARY-MS trial are confirmed in adequately powered studies and support progression toward Phase 3.
Progress in remediating the material weaknesses and establishing effective financial-reporting controls.
Manufacturing-facility expansion costs and commitments, and whether planned cost reductions preserve key clinical and regulatory milestones.