Eledon Pharmaceuticals, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The unaudited results are for a clinical-stage biotechnology company developing tegoprubart, an anti-CD40L antibody. Eledon has no approved products and has not generated product revenue.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $7.2 million | $5.7 million | $15.3 million | $12.4 million |
| General and administrative | $3.2 million | $3.5 million | $6.2 million | $6.8 million |
| Total operating expenses | $10.4 million | $9.3 million | $21.5 million | $19.1 million |
| Net loss | $9.6 million | $9.2 million | $20.4 million | $19.1 million |
| Basic and diluted loss per share | $0.40 | $0.65 | $1.06 | $1.34 |
- For the six months, operating cash use was $18.1 million, versus $14.4 million a year earlier. Investing activities used $30.3 million, primarily to purchase short-term investments; financing provided $33.0 million net from the private placement.
- At June 30, cash and cash equivalents were $40.9 million and short-term investments were $30.4 million, or $71.4 million combined. Working capital was $68.7 million; current liabilities were $4.9 million.
- Total liabilities were $6.8 million, including operating lease liabilities; the filing reports no debt or committed credit facility. Accumulated deficit was $223.2 million.
- Margins are not meaningful because the company reported no product revenue.
Material changes versus comparable periods
- Q2 R&D expense rose $1.5 million year over year, mainly from clinical development, CRO costs, manufacturing and personnel. Six-month R&D increased $2.9 million, primarily from CRO and personnel costs.
- Q2 G&A decreased $0.4 million and six-month G&A decreased $0.6 million, largely due to lower professional services and stock-based compensation.
- Other income increased substantially, to $0.8 million for Q2 and $1.1 million for the first half, mainly from higher interest income. Despite higher operating costs, the six-month net loss increased $1.2 million year over year.
- Cash and cash equivalents declined from $56.4 million at year-end 2022, while the company added $30.4 million in short-term investments. The combined cash and investment balance was $71.4 million at quarter-end.
Outlook, financing, risks and other items
- Going concern: Management states substantial doubt exists about the company’s ability to continue as a going concern, including within one year after issuance of the financial statements. Eledon expects continued losses and needs additional capital; the contingent financing and warrant proceeds are excluded from its going-concern analysis.
- Private placement and dilution: The May 2023 initial closing generated $35.0 million gross and approximately $33.0 million net. Additional proceeds of up to $105.0 million from two further closings depend on clinical milestones and share-price and trading-volume conditions. Up to $45.5 million more could result if all initial common warrants are exercised. These proceeds are not assured. The company had 22.7 million common-stock warrants outstanding at June 30, in addition to other potential share issuance.
- Clinical priorities: Eledon prioritized kidney-transplant programs, discontinued the islet-transplant program and deprioritized IgA nephropathy. The company expected to begin enrollment in a 120-participant Phase 2 kidney-transplant study in Q3 2023. It reported positive topline safety and tolerability results from its completed Phase 2a ALS study, but says ALS development cannot continue without program-specific financing. IgA nephropathy activities and spending were expected to stop in Q3 2023.
- Other risks: Tegoprubart remains investigational; development, regulatory approval, trial enrollment, manufacturing and commercialization are uncertain. The company also highlights financing-market volatility, potential dilution, reliance on third parties and competition. After Silicon Valley Bank’s failure, Eledon diversified deposits; as of the report date, less than 3% of cash and short-term investments were in FDIC-insured bank accounts.
- Subsequent event: On July 10, 2023, a stockholder exercised pre-funded warrants for 501,197 shares, which were issued July 14.
- Management concluded disclosure controls were effective at a reasonable assurance level as of June 30, 2023; it reported no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Current cash use and the timing of additional financing needs, given the going-concern warning and continued operating losses.
- Whether the clinical milestones and trading conditions for the second and third private-placement closings are met, and whether warrants are exercised.
- Actual timing and enrollment progress of the Phase 2 kidney-transplant trial, and funding and next steps for ALS development.
- Potential dilution from outstanding warrants, contingent financing shares and equity-plan awards; common shares outstanding were 23,043,933 at June 30 and 23,545,130 as of August 8, 2023.