Clene Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless stated otherwise. Clene is a clinical-stage nanotechnology therapeutics company focused on neurological diseases, including ALS, MS and Parkinson’s disease. It has no approved drugs; revenue is from dietary supplements and related royalties.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $0.107 million | $0.030 million, up 257% |
| Operating expenses | $10.839 million | $13.366 million, down 19% |
| Operating loss | $10.732 million | $13.336 million |
| Net loss | $11.770 million | $13.354 million |
| Loss per share, basic and diluted | $0.15 | $0.21 |
| Operating cash flow | $(9.218) million | $(13.084) million |
- Product revenue was $64,000 and royalty revenue $43,000. Supplements segment revenue was $107,000; the Drugs segment generated no external revenue. Gross profit was approximately $102,000, but the small revenue base is not representative of a scaled commercial margin.
- Research and development expense fell 14% to $7.395 million, mainly reflecting trial and program timing; general and administrative expense fell 28% to $3.439 million.
- Interest expense increased to $1.066 million from $782,000. Other expense also included a $399,000 commitment-share expense related to Lincoln Park financing. These items contributed to total other expense of $1.038 million, versus $18,000 in Q1 2022.
- At March 31, cash and cash equivalents were $18.442 million, with no marketable securities (versus $18.332 million cash and $4.983 million marketable securities at year-end 2022). Current assets were $24.822 million and current liabilities $16.876 million, for working capital of about $7.946 million. The filing says cash, cash equivalents and marketable securities totaled $18.4 million.
- Total liabilities were $41.515 million; stockholders’ deficit was $1.627 million. Notes payable and convertible notes payable had carrying amounts of $16.464 million and $9.907 million, respectively. The Avenue loan bears a 14.60% rate and requires at least $5 million of unrestricted cash; its principal is due by December 2024. The filing reports $12.5 million of principal and interest payments on notes payable among short-term material cash requirements.
- Cash, cash equivalents and restricted cash increased by $110,000 during the quarter: $9.218 million used in operations was offset by $4.722 million of investing inflows, mainly securities maturities, and $4.588 million of financing inflows, primarily net equity proceeds.
Material changes and financing
- Net loss improved 12% year over year, largely alongside lower operating expenses; operating cash use declined from $13.084 million to $9.218 million.
- During Q1, Clene sold 2.895 million shares through its ATM facility for $4.5 million gross proceeds and paid $0.1 million in commissions. Shares outstanding increased to 77.987 million at March 31 from 74.760 million at December 31.
- The company entered a $25 million, 36-month equity purchase agreement with Lincoln Park in March. It made no sales under the agreement during Q1; after quarter-end it sold 400,000 shares for $0.4 million and issued additional commitment shares. The filing also reports stockholder approval on May 9 to increase authorized common shares to 300 million and to add 6.4 million shares to the 2020 Stock Plan.
Outlook, risks and unusual items
- Going concern: Management states that available resources are not expected to support current operations and obligations for the next 12 months without additional financing. The filing identifies substantial doubt about the company’s ability to continue as a going concern and says its financing and cost-reduction plans do not alleviate that doubt beyond one year from issuance.
- Management is pursuing equity and debt financing, licensing or collaboration arrangements, and use of its ATM and equity purchase agreement. Cost measures include delaying or reducing R&D and commercialization, lower executive compensation, a hiring freeze and staff reductions. Funding plans depend on market conditions and third parties; there is no assurance they will succeed.
- For ALS, the company expected further HEALEY trial biomarker and exploratory analyses and mature survival data in mid-2023. It expected an FDA end-of-Phase-2 meeting in Q3 2023; possible NDA discussions and a mid-2024 filing were contingent on forthcoming data and FDA discussions. A proposed Phase 3 ALS trial was expected in H1 2024, contingent on funding.
- For MS, the company expected further VISIONARY-MS extension results in H2 2023, an FDA end-of-Phase-2 meeting in Q4 2023 and a possible Phase 3 trial in mid-2024, contingent on funding.
- Clinical and regulatory outcomes remain uncertain. The company notes reliance on additional financing, CROs and manufacturers, regulatory approval and market acceptance, intellectual property protection, and trial execution. COVID-19-related disruptions had previously delayed research and trials; management reported no material current business disruption from COVID-19.
- Disclosure controls were not effective at March 31 due to material weaknesses involving the control environment, account reconciliations and journal-entry review, segregation of duties, and IT general controls. Remediation efforts were ongoing.
- A $0.3 million National Multiple Sclerosis Society grant may require repayments tied to future sales or specified transactions; no liability was recorded because the triggering events were assessed as less than probable. The stated possible repayment range is approximately $0.2 million to $1.5 million.
Important facts for investors to verify
- Whether Clene secures sufficient financing to address the disclosed going-concern doubt, planned trial costs and near-term obligations.
- Cash burn, remaining ATM and Lincoln Park capacity, financing terms, and share issuance and dilution following the quarter-end transactions and share authorizations.
- Performance against the stated ALS and MS data, FDA-meeting and trial-start timelines, and whether future clinical programs are funded.
- Avenue loan repayment and minimum-cash covenant compliance, including the consequences of any covenant breach or default.
- Progress and evidence of remediation of the disclosed material weaknesses in financial reporting controls.
- Any developments in the contingent NMSS grant repayment, clinical-trial disruptions, or other material contingencies.