Eledon Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; filed November 12, 2021. Eledon is a clinical-stage biopharmaceutical company developing AT-1501, an anti-CD40L antibody, for transplant rejection, autoimmune disease and ALS. The company has no approved products and has not generated product revenue.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development | $7.7 million | $0.6 million | $17.6 million | $3.1 million |
| General and administrative | $2.8 million | $3.7 million | $9.9 million | $6.7 million |
| Operating expenses | $10.5 million | $6.1 million | $27.5 million | $12.1 million |
| Net loss | $9.8 million | $6.1 million | $25.7 million | $16.9 million |
| Net loss per share, basic and diluted | $0.66 | $5.51 | $1.73 | $16.81 |
| Net cash used in operating activities | Not presented quarterly | $19.7 million | $5.8 million |
At September 30, cash and cash equivalents were $94.0 million, working capital was $91.5 million, total current liabilities were $4.0 million, and accumulated deficit was $106.1 million. Total liabilities were $6.4 million; the filing states the company had no outstanding debt. Management said cash resources were sufficient for anticipated needs through at least 12 months from issuance of the financial statements. The company nevertheless expects continuing losses and says it will need additional funding to advance development.
Margins are not meaningful because the company had no product sales. There is no formal revenue or earnings guidance in the filing.
Changes versus comparable periods
- Q3 net loss increased $3.7 million year over year; nine-month net loss increased $8.8 million.
- R&D spending rose substantially as AT-1501 clinical development and clinical-trial material production advanced. For the nine months, management attributed the increase mainly to clinical-trial material production, clinical costs, staffing, stock compensation and consulting.
- Q3 2020 included $1.8 million of restructuring expense and $2.2 million of merger-related costs; neither was recorded in Q3 2021. The nine-month 2020 comparison also included $4.8 million of warrant inducement expense.
- Operating cash use increased to $19.7 million from $5.8 million for the first nine months. The 2020 period included acquisition cash proceeds and substantial financing; 2021 financing cash flow was a net use of $0.4 million.
Business outlook, risks and unusual items
- AT-1501 is the lead program. The company reported an ongoing Phase 2a open-label ALS study, planned for approximately 54 participants. It had Health Canada clearance to initiate a Phase 1b kidney-transplant study and clearance for a Phase 2 islet-transplant study. The filing does not provide a clear current enrollment or initiation status for those latter trials. IgA nephropathy is a planned indication.
- Management described prior Phase 1 dosing in healthy volunteers and people with ALS as well tolerated, but emphasized that efficacy and safety remain uncertain and the candidate is early in development.
- COVID-19 had caused delays in studies, including the islet-transplant program, delayed data collection and trial-planning inefficiencies. Further disruption to trials, manufacturing and financing remains possible.
- Key risks include clinical failure or delays, patient-enrollment challenges, reliance on third-party manufacturers and CROs, lack of redundant manufacturing supply, competition, regulatory uncertainty, and the need for future capital. Additional equity or convertible financing could dilute shareholders; debt could impose repayment and operating constraints.
- Potential contractual obligations include up to $6.0 million in remaining milestones for the first licensed product under the ALSTDI agreement, plus up to $2.5 million for a second licensed product, and low-single-digit royalties if products reach sales. No milestone was achieved in the first nine months of 2021. Israeli Innovation Authority grants are repayable from product royalties; no liability was recorded because there were no related sales.
- The company reported no material legal proceedings and no contingent liabilities requiring accrual. It recognized a $1.8 million year-to-date income tax benefit related to changes in deferred tax liabilities for acquired in-process R&D; this is not operating revenue.
Important facts for investors to verify
- Current trial status, enrollment, timing and forthcoming data for ALS, kidney transplantation and islet-cell transplantation, including the effects of COVID-19.
- Whether the stated cash runway remains adequate as clinical and manufacturing spending increases, and the timing and terms of any additional financing.
- Fully diluted share count and potential dilution: 14,306,788 common shares were outstanding as of November 8, 2021; the filing also reports 1,145,631 common-stock warrants and 50,207 preferred-stock warrants, among other equity awards and preferred shares.
- Manufacturing capacity, supply continuity and costs for AT-1501, given dependence on third parties and the absence of redundant supply arrangements.
- Progress toward clinical proof of safety and efficacy, and the possibility that adverse events, regulatory requirements or trial results could delay or halt development.