Clene Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Clene is a clinical-stage pharmaceutical company developing clean-surfaced nanotechnology therapeutics; it had no approved drugs and generated only limited dietary-supplement revenue.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $30,000 | $213,000; down 86% |
| Operating expenses | $13.366 million | $11.908 million; up 12% |
| Operating loss | $13.336 million | $11.695 million |
| Net loss | $13.354 million ($0.21 per share) | $39.756 million ($0.66 per share) |
| Net cash used in operations | $13.084 million | $9.161 million |
Product revenue was $7,000, versus $199,000 a year earlier; royalty revenue was $23,000, compared with $14,000. Research and development expense increased 37% to $8.580 million, principally reflecting clinical-program progression, enrollment in the CNM-ZnAg COVID-19 study, staffing, facilities, and manufacturing costs. General and administrative expense declined 11% to $4.786 million.
At March 31, cash and cash equivalents were $12.930 million, marketable securities were $23.586 million, and restricted cash was $58,000—$36.574 million combined, compared with $50.346 million in cash and restricted cash at year-end. Q1 investing cash use was $24.522 million, mostly purchases of marketable securities ($23.586 million) plus $936,000 of property and equipment. Total assets were $53.361 million; current assets were $42.449 million and current liabilities $5.466 million.
Notes payable and convertible notes payable totaled $19.367 million at quarter-end. The Avenue loan carries a variable rate of 10.1% at March 31, is secured by substantially all assets other than intellectual property, and requires at least $5 million of unrestricted cash and cash equivalents while its financial covenant applies. The company reported no covenant violations. Stockholders’ equity was $2.017 million; accumulated deficit was $176.655 million.
Changes, outlook, and material risks
- Operating loss widened year over year, while net loss narrowed substantially because Q1 2021 included $28.6 million of contingent earn-out fair-value expense. The Q1 2022 net loss also included a $420,000 gain on lease termination; interest expense was $782,000.
- Management said that, without additional capital, available resources were expected to fund operations into Q2 2023. It warned that cost reductions, including delaying or reducing research and development and commercialization activities, might be needed beginning as early as Q3 2022. No formal financial guidance was provided.
- On April 14, 2022, after quarter-end, Clene entered an at-the-market agreement to sell up to $50 million of common stock, with a 3% placement-agent commission; the registration statement became effective April 26. No shares had been sold under the agreement during Q1.
- Clinical outlook: topline results from the Healey ALS Platform Trial and VISIONARY-MS were anticipated in Q3 2022; full unblinded Healey results were anticipated in the second half of 2022. The second REPAIR-MS dosing cohort was expected to finish by year-end, and RESCUE-PD was expected to launch in the second half of 2022. CNM-ZnAg COVID-19 topline results were also anticipated in Q3 2022.
- Management cited financing needs, clinical and regulatory uncertainty, reliance on CROs and manufacturers, and possible COVID-19-related trial and supply disruptions. The company had not generated significant revenue and expected expenses and losses to increase. Milestone 3 of the business-combination earn-out was not achieved and the related shares were cancelled in 2021.
- Disclosure controls and procedures were determined to be ineffective due to material weaknesses involving the control environment, reconciliations and journal-entry review, segregation of duties, and IT general controls. Remediation efforts were underway, including accounting-resource additions, external assistance, and a new ERP system.
Important facts for investors to verify
- Actual cash runway and operating cash burn against management’s Q2 2023 estimate, including subsequent ATM issuance and dilution.
- Progress, timing, and results of the stated clinical catalysts, and any resulting regulatory or financing implications.
- Avenue loan covenant status, variable interest cost, maturity obligations, and conditions for drawing the remaining $10 million tranche.
- Whether internal-control remediation is completed and whether disclosure controls become effective.
- Revenue trends and the extent to which supplement and royalty income remain immaterial relative to development spending.