Clene Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2022; filed November 7, 2022. Amounts are in U.S. dollars unless otherwise noted.
Business context
Clene is a clinical-stage pharmaceutical company developing clean-surfaced nanotechnology therapeutics, principally CNM-Au8 for neurological diseases and CNM-ZnAg for COVID-19. It has no approved drugs and has generated no drug sales; reported revenue comes from dietary supplements and related-party licensing and royalty arrangements, including 4Life.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0.174 million | $0.110 million | $0.239 million | $0.524 million |
| Operating expenses | $9.979 million | $10.560 million | $36.975 million | $36.444 million |
| Operating loss | $9.805 million | $10.450 million | $36.736 million | $35.920 million |
| Net income (loss) | $(10.976) million | $28.944 million | $(28.864) million | $(14.163) million |
| Operating cash flow | Not separately presented for quarter | Not separately presented for quarter | $(31.295) million | $(25.018) million |
- Q3 revenue rose 58% year over year, while nine-month revenue fell 54%. Nine-month R&D expense increased 28% to $24.149 million; G&A declined 23% to $12.807 million.
- The prior-year Q3 net profit reflected a $35.0 million gain from remeasuring contingent earn-out liabilities. In Q3 2022, remeasurement instead produced a $1.6 million loss. These noncash fair-value changes make net income comparisons unusually volatile.
- At September 30, cash and cash equivalents were $7.267 million and marketable securities were $8.966 million, or $16.233 million combined, versus $50.288 million in cash and no marketable securities at December 31, 2021. Current assets were $21.486 million and current liabilities $6.154 million.
- Nine-month investing cash outflow was $12.446 million, including $3.478 million of property and equipment purchases; financing provided $0.875 million. Total assets were $36.004 million, total liabilities $45.323 million, and stockholders’ deficit $9.319 million.
- Notes payable and convertible notes had net carrying amounts of $15.726 million and $4.763 million, respectively. The $20 million Avenue term loan carried a 12.85% variable rate at quarter-end, is secured by substantially all assets other than intellectual property, and includes a $5 million minimum unrestricted-cash covenant. Operating lease obligations totaled $6.178 million.
Material changes and notable items
- Cash, cash equivalents, and marketable securities decreased to $16.2 million from $50.3 million at year-end 2021. Operating cash use increased to $31.3 million from $25.0 million in the comparable nine-month period.
- R&D spending rose year over year for the first nine months, including higher CNM-ZnAg, personnel, and facility-related costs. Construction in progress and property and equipment also increased as the company expanded manufacturing and laboratory facilities.
- Interest expense rose to $2.390 million for the first nine months from $0.497 million, primarily reflecting debt interest and amortization of debt discounts and issuance costs.
- On October 3, 2022, the company sold ATM shares for $0.6 million gross. On October 31, it agreed to sell 10,723,926 shares at $1.01 per share for $10.8 million gross; estimated offering expenses were approximately $20,000. These transactions occurred after quarter-end.
Outlook, clinical programs, and risks
- Going concern: Management said available resources would not sustain current operations or meet obligations over the next 12 months without additional financing. The filing states that substantial doubt about the company’s ability to continue as a going concern remains and that management’s plans do not alleviate that doubt for one year beyond issuance of the statements.
- Management is pursuing equity and debt financing, collaborations or licensing, and potential additional loan proceeds, while considering cost reductions, including delaying or reducing R&D and commercialization programs, executive compensation reductions, a hiring freeze, and staff eliminations. An October equity offering provided approximately $10.8 million net proceeds. A non-binding Maryland loan commitment for $5 million is conditional on matching it with at least $5 million of new equity.
- CNM-Au8 / ALS: In the Healey ALS Platform Trial, the primary 24-week ALSFRS-R endpoint was not significant, and the secondary CAFS and SVC endpoints were not met. Exploratory survival analyses showed a signal for the 30 mg dose, but the filing notes limitations including unadjusted comparisons. Full analyses and biomarker data were expected in Q1 2023; matured open-label extension survival data were expected in Q2 2023. The company selected 30 mg for continued ALS development and was discussing a Phase 3 design. An FDA end-of-Phase-2 meeting was expected in mid-2023; the filing says it was not yet known whether or when the company could file an NDA. Commercial expansion at Elkton was paused pending regulatory clarity.
- CNM-Au8 / MS: The prematurely stopped VISIONARY-MS trial enrolled 73 of a planned 150 participants amid COVID-19 operational challenges. The primary endpoint and two secondary endpoints were reported as met in the prespecified modified intent-to-treat analysis; the company cautioned that the intent-to-treat results were directionally consistent but not significant. The open-label extension continues.
- CNM-ZnAg: The blinded treatment period of the COVID-19 Phase 2 trial had concluded. Because hospitalization events were insufficient, the protocol’s symptom-alleviation endpoint became primary; topline results were anticipated in Q4 2022.
- COVID-19 disruptions had delayed or curtailed some studies and trial enrollment. Other key risks include financing access, regulatory approval and market acceptance, reliance on CROs and manufacturers, intellectual property, and clinical execution. The company reported no material pending legal matters.
- Disclosure controls and procedures were deemed ineffective as of September 30, 2022 because of material weaknesses involving the control environment, financial reconciliations and journal-entry review, segregation of duties, and IT general controls. Remediation efforts were ongoing.
Important facts for investors to verify
- Current cash runway and financing needs, including the effect of the October equity offering, subsequent ATM sales, and the conditional Maryland loan.
- Compliance with the Avenue loan’s $5 million unrestricted-cash covenant, its repayment terms, and any conditions for accessing additional tranches.
- Full clinical data and regulatory feedback for CNM-Au8, particularly the exploratory ALS survival signal and the basis for any future Phase 3 or NDA path.
- CNM-ZnAg trial results and whether the anticipated topline timing or endpoint changes affected interpretation.
- Share count and potential dilution after the October share issuance, ATM activity, warrants, options, convertible notes, and contingent earn-out shares. The reported 73,820,010 shares outstanding as of November 2 predates the October 31 offering.
- Progress in remediating the disclosed material weaknesses and the reliability of future financial reporting.