Clene Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. All amounts below are in U.S. dollars; financial-statement amounts are unaudited. Clene is a clinical-stage therapeutics company with a small dietary-supplement business and no approved drugs.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0.035m | $0.201m | $0.065m | $0.414m |
| Research and development | $9.166m | $6.472m | $17.746m | $12.747m |
| General and administrative | $4.464m | $6.949m | $9.250m | $12.339m |
| Operating loss | $13.595m | $13.775m | $26.931m | $25.470m |
| Net loss | $4.534m | $3.351m | $17.888m | $43.107m |
| Basic and diluted loss per share | $0.07 | $0.05 | $0.28 | $0.71 |
| Net cash used in operating activities | Not separately stated | Not separately stated | $22.814m | $17.713m |
At June 30, cash and cash equivalents were $7.253m and marketable securities were $19.033m, or $26.286m combined. Current assets were $31.587m; current liabilities were $7.655m. Total assets were $44.542m, total liabilities $45.105m, and stockholders’ equity was negative $0.563m. Notes payable were $15.551m and convertible notes payable $4.709m; these exclude lease obligations.
For the first half, investing activities used $20.857m, primarily reflecting purchases of marketable securities and property and equipment. Financing activities provided $0.783m. Cash, cash equivalents, and restricted cash declined by $43.035m to $7.311m.
Cost of revenue was zero in both 2022 periods, versus $0.555m for Q2 2021 and $0.798m for first-half 2021. Given minimal revenue, reported operating margins are not a meaningful indicator of a mature commercial business.
Material changes versus comparable periods
- Q2 revenue fell 83% year over year; first-half revenue fell 84%. Revenue came from dietary supplements and royalties, not drug sales.
- R&D expense rose 42% in Q2 and 39% for the first half, reflecting clinical-program activity, increased personnel, facilities, and research/manufacturing costs.
- G&A expense declined 36% in Q2 and 25% for the first half, mainly due to lower stock compensation and reduced legal, accounting, and public-company service costs, partly offset by higher personnel and other expenses.
- First-half operating cash use increased to $22.814m from $17.713m. Cash and cash equivalents fell from $50.288m at year-end 2021, while the company acquired marketable securities.
- First-half net loss improved year over year largely because the 2021 period included substantial non-cash losses from revaluing contingent earn-out liabilities. Q2 2022 net loss was higher than Q2 2021, despite a slightly lower operating loss, primarily reflecting higher interest expense and lower other income.
Outlook, risks, and unusual items
- Going concern: Management stated that available resources were not expected to sustain current operations or meet obligations over the next 12 months without additional financing. The filing says substantial doubt about the company’s ability to continue as a going concern is not alleviated by its financing plans.
- Funding and debt: Potential funding sources include equity or debt, collaborations/licensing, the at-the-market facility, and—if conditions are met—up to $10m of additional Avenue loan proceeds. The Avenue loan requires at least $5m of unrestricted cash and cash equivalents unless specified conditions are satisfied; breach could permit acceleration. The $50m ATM facility had no shares sold through June 30, 2022 and carries a 3% commission.
- Cash commitments: Management cited $3.7m of capital-expenditure commitments for manufacturing-facility construction. It also disclosed near-term lease payments and $2.3m of interest payments, and longer-term principal and interest obligations on notes payable.
- Clinical program expectations stated in the filing: Healey ALS Platform Trial topline results were anticipated in Q3 2022 and full unblinded results in Q4 2022; CNM-ZnAg COVID-19 topline results were also anticipated in Q3 2022. The company expected the second REPAIR-MS dosing cohort to finish by year-end and planned to launch RESCUE-PD in Q4 2022. These are filing-date expectations, not reported outcomes.
- Trial qualification: VISIONARY-MS reported positive topline findings on its primary and secondary endpoints, but enrollment ended early at 73 of 150 planned participants because of pandemic-related operational challenges. The filing describes a prespecified p=0.10 significance threshold; intention-to-treat results were directionally consistent but not significant.
- Non-cash valuation effects: Fair-value reductions in contingent earn-out liabilities generated $9.307m of other income in the first half, materially reducing reported net loss relative to operating loss. These gains were driven primarily by the company’s share price and valuation assumptions, not operating cash generation.
- Controls and other risks: Disclosure controls were deemed ineffective because of material weaknesses in financial-reporting controls, including reconciliations, journal-entry review, segregation of duties, and IT general controls. Remediation was ongoing. The company also cited clinical, regulatory, financing, CRO/manufacturer, supply-chain, and pandemic-related risks. It reported no material pending legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether the company obtained financing sufficient to fund operations and maintain the Avenue loan’s cash covenant, and the resulting dilution, cost, and terms.
- Actual cash burn, marketable-security availability, and progress against manufacturing capital commitments and debt payments.
- Subsequent Healey ALS, CNM-ZnAg, REPAIR-MS, and RESCUE-PD developments, including complete trial data, statistical significance, safety, and regulatory implications.
- Whether VISIONARY-MS findings are supported by the limited enrollment and how the ITT analysis affects interpretation.
- Whether the disclosed material weaknesses were remediated and controls were independently tested as effective.
- Changes in contingent earn-out valuations and other non-cash items when assessing underlying operating performance.