Clene Inc. quarterly report, Q2 FY2023

Clene Inc. 2023 Q2 Form 10-Q Summary

Reporting period: Quarter and six months ended June 30, 2023. Unaudited results. Clene is a clinical-stage therapeutics company focused on neurological conditions; it has no approved drugs and reported revenue only from dietary supplements and related royalties.

Financial results and liquidity

Metric	Q2 2023	Q2 2022	Six months 2023	Six months 2022
Revenue	$0.269 million	$0.035 million	$0.376 million	$0.065 million
Operating expenses	$10.605 million	$13.630 million	$21.444 million	$26.996 million
Operating loss	$10.336 million	$13.595 million	$21.068 million	$26.931 million
Net loss	$25.143 million	$4.534 million	$36.913 million	$17.888 million
Basic and diluted loss per share	$0.29	$0.07	$0.46	$0.28

Q2 gross profit was approximately $0.203 million, or about 75% of revenue, before operating expenses; revenue remains immaterial relative to the company’s development costs. No drug revenue was reported.
At June 30, cash and cash equivalents were $49.243 million, marketable securities were zero, and current assets totaled $53.371 million. Total assets were $67.845 million.
Six-month operating cash use was $16.239 million, compared with $22.814 million in 2022. Investing activities provided $4.761 million, and financing activities provided $42.418 million, principally from the equity-and-warrant offering.
Notes payable and convertible notes had carrying amounts of $16.017 million and $9.822 million, respectively. Avenue debt bears a 14.85% stated rate; total interest expense was $2.170 million for the first half. Lease obligations totaled $5.826 million.
Management states that available resources will not be sufficient to sustain current operations or meet obligations within the next 12 months without additional financing. The company disclosed substantial doubt about its ability to continue as a going concern, and its financing and cost-reduction plans do not alleviate that doubt beyond one year from issuance.

Material changes versus the comparable period

Revenue increased from a very low base, driven by the timing of supplement purchases and royalties, including sales to related party 4Life. Q2 2023 revenue included $0.193 million of related-party product sales and $0.043 million of related-party royalties.
Operating expenses fell 22% in Q2 and 21% for the six-month period, mainly as clinical programs completed blinded periods, preclinical spending declined, and headcount was reduced. Research and development expense fell 28% in Q2 and 21% year to date.
Net loss increased sharply, primarily because the June 2023 offering generated a $14.840 million accounting loss on initial issuance of equity, reflecting the fair value of shares and warrants exceeding proceeds. This was not equivalent to an operating cash outflow.
In June, the company raised $40.0 million gross from 50 million units, each comprising one common share and two warrants; net proceeds were about $37.4 million. Shares outstanding rose from 74.8 million at year-end 2022 to 128.4 million at June 30, 2023.
Operating cash use improved year over year, but cash at period-end was supported by financing. The company also reduced capital spending and reported $0.4 million of remaining manufacturing-facility capital commitments.

Outlook, risks and unusual items

Management reported a statistically significant reduction in plasma neurofilament light chain in CNM-Au8-treated participants versus placebo after 24 weeks in the HEALEY ALS Platform Trial. Further biomarker, survival and extension-study results were expected in the second half of 2023; these are clinical updates, not evidence of regulatory approval or commercial efficacy.
Management expected an FDA Type B meeting in Q4 2023 to discuss the totality of CNM-Au8 evidence. Depending on that discussion, the company said it believed it could file an ALS NDA in the first half of 2024, with a potential accelerated-approval action date by year-end 2024. These milestones are uncertain. A Phase 3 ALS study was expected to begin in the first half of 2024.
For MS, the company expected further VISIONARY-MS extension data in Q4 2023, an FDA end-of-Phase-2 meeting in the first half of 2024, and a possible Phase 3 start in the second half of 2024, contingent on funding.
Management cited possible equity or debt financing, licensing or collaboration deals, ATM/equity-purchase facilities and warrant exercises as funding sources, but noted there is no assurance of obtaining sufficient funds. Cost actions include reduced or delayed R&D and commercialization programs, executive compensation reductions, a hiring freeze and staff eliminations.
The Avenue loan requires at least $5.0 million of unrestricted cash and includes acceleration provisions for certain defaults or material adverse effects. Its interest-only period was extended through June 30, 2024 after the equity milestone; further extensions depend on additional equity proceeds and an FDA NDA-acceptance milestone.
The offering included 50 million Tranche A warrants at $1.10 and 50 million Tranche B warrants at $1.50. Together with other warrants, outstanding warrants covered 105.4 million shares at June 30, 2023; exercise is uncertain, but potential dilution is substantial. The company also recorded $8.201 million of common-stock warrant liabilities, subject to fair-value remeasurement.
Two NMSS research grants carry possible repayment obligations if specified sales or corporate transactions occur. No liability was recorded because management assessed the triggering events as less than probable; disclosed possible repayment ranges were approximately $0.2–$1.5 million for one grant and $0.3–$3.0 million for the other.
Disclosure controls were not effective at June 30, 2023 due to material weaknesses in the control environment, financial reconciliations and journal-entry review, segregation of duties, and IT general controls. Remediation efforts were ongoing. The company reported no material pending legal proceedings.

Important facts for investors to verify

Whether subsequent financing, collaborations, or cost reductions have improved the disclosed going-concern outlook and extended the cash runway.
Progress and outcomes from the FDA Type B meeting, the planned ALS NDA path, and the clinical data supporting CNM-Au8; confirm whether announced results are exploratory, post hoc, or prespecified.
The timing and funding feasibility of planned ALS and MS trials, and any changes to the company’s development spending plans.
Actual warrant exercises, share-count changes, and the resulting dilution and liability remeasurement; confirm the terms and availability of any resumed ATM or Lincoln Park sales.
Compliance with Avenue’s minimum-cash covenant, debt maturity and extension conditions, and the status of internal-control remediation.
Potential NMSS grant repayments and the extent to which related-party 4Life sales and royalties contribute to reported revenue.