10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36620

 

ELEDON PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

20-1000967

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

19900 MacArthur Blvd., Suite 550

Irvine, California

 

92612

(Address of principal executive offices)

 

(Zip Code)

 

 

(949) 238-8090

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value

 

ELDN

 

Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 10, 2022, there were 13,756,788 shares of the Registrant’s common stock outstanding.

 

 

CONFIDENTIAL


 

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Any statements in this Quarterly Report on Form 10-Q about the Company’s future expectations, plans and prospects, including statements about its strategy, future operations, development of its product candidates, the review of strategic alternatives and the outcome of such review and other statements containing words such as “believes,” “anticipates,” “plans,” “expects,” “estimates,” “intends,” “predicts,” “projects,” “targets,” “could,” “may,” and similar expressions, constitute forward-looking statements, although not all forward-looking statements include such identifying words. Forward-looking statements include, but are not limited to statements regarding:

our product development plans, expectations for and the timing of commencement, enrollment, completion, data, and release of results of clinical trials for our product candidates;
our estimates regarding expenses, capital requirements and needs for additional financing;
our strategies with respect to our preclinical and clinical development programs;
our plans, strategy and timing to obtain and maintain regulatory approvals of our product candidates; and
expectations about our future financial performance or condition.

Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including the factors listed under “Risk Factor Summary” below. These risks and uncertainties, as well as other risks and uncertainties that could cause the Company’s actual results to differ significantly from the forward-looking statements contained herein, are described in greater detail in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.

Any forward-looking statements contained in this Quarterly Report on Form 10-Q speak only as of the date hereof and not as of any future date, and the Company expressly disclaims any intent to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The market data and certain other statistical information used in this Quarterly Report are based on independent industry publications, governmental publications, reports by market research firms or other independent sources. Some data are also based on our good faith estimates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information.

 

2


 

RISK FACTOR SUMMARY

The following summarizes the principal factors that make an investment in the Company speculative or risky, all of which are more fully described in Part II, Item 1A, Risk Factors in this Quarterly Report on Form 10-Q. This summary should be read in conjunction with the Risk Factors section and should not be relied upon as an exhaustive summary of the material risks facing our business. The occurrence of any of these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described in our public filings when evaluating our business.

Our short operating history and the acquisition of Anelixis Therapeutics, Inc. in September 2020 may make it difficult to evaluate the success of our business to date and to assess our future viability.
We have incurred significant operating losses since our inception and expect that we will continue to incur losses over the next several years and may never achieve or maintain profitability.
Our product candidates are in the early stages of clinical development and may not be successfully developed. If we are unable to successfully develop and commercialize these or any other product candidate, or if we experience significant delays in doing so, our business will be materially harmed.
The ongoing COVID-19 pandemic and actions taken in response to it may result in additional disruptions to our business operations, which could have a material adverse effect on our business.
Unfavorable global economic conditions could have a material adverse effect on our business.
Drug development involves a lengthy and expensive process with an uncertain outcome, including failure to demonstrate safety and efficacy to the satisfaction of the FDA or similar regulatory authorities outside the United States. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the formulation and commercialization of our product candidates.
The results of nonclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials, and there is a risk that additional nonclinical and/or clinical safety studies will be required by the U.S. Food and Drug Administration or similar regulatory authorities outside the United States or that subsequent studies will not match results seen in prior studies.
Delays or difficulties in the enrollment of patients in clinical trials could delay or prevent our receipt of necessary regulatory approvals and increase expenses for the development of our product candidates.
If serious adverse events or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.
We will require additional funding to be able to complete the development of our lead drug candidate. If we are unable to raise capital when needed, we may be forced to significantly alter our business strategy, substantially curtail our current operations, or liquidate and cease operations altogether.
Our future success depends on our ability to retain executives and key employees and to attract, retain and motivate qualified personnel in the future.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, or the approvals may be for a narrow indication, we may not be able to commercialize our product candidates, and our ability to generate revenue may be materially impaired.
Legislation regulating the pharmaceutical and healthcare industries may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.
Our internal computer systems, or those of our third-party collaborators, service providers, contractors or consultants, may fail or suffer security breaches, disruptions, or incidents, which could result in a material disruption of our development programs or loss of data or compromise the privacy, security, integrity or confidentiality of sensitive information related to our business and have a material adverse effect on our reputation, business, financial condition or results of operations.
Even if any of our product candidates receives marketing approval, we may fail to achieve the degree of market acceptance by physicians, patients, third-party payers and others in the medical community necessary for commercial success.

3


 

If our current product candidates, or a future product candidate receives marketing approval and we, or others, later discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, the ability to market the product could be compromised.
We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.
The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.
Our reliance on third parties for the manufacture of our product candidates for nonclinical and clinical trials, and for eventual commercialization, increases the risk that we will not have sufficient quantities of our product candidates or products at an acceptable cost and quality, which could delay, prevent or impair our development or commercialization efforts.
We depend on contract research organizations (“CROs”) and other contracted third parties to perform nonclinical and clinical testing and certain other research and development activities. As a result, the outcomes of the activities performed by these organizations will be, to a certain extent, beyond our control.
If we are unable to obtain and maintain intellectual property protection for our technology and products or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.
Our stock price could be volatile, and the market price of our common stock may drop unexpectedly.
If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.
Provisions in our corporate charter and under Delaware law could make an acquisition of the Company more difficult and may prevent attempts by our stockholders to replace or remove our current management.

 

4


 

ELEDON PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2022

Table of Contents

 

 

 

 

Page

 

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements - Unaudited

 

6

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

 

6

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2022 and 2021

 

7

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021

 

8

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

 

9

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

10

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

28

 

 

 

 

Item 4.

Controls and Procedures

 

28

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

29

 

 

 

 

Item 1A.

Risk Factors

 

29

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

49

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

49

 

 

 

 

Item 4.

Mine Safety Disclosures

 

50

 

 

 

 

Item 5.

Other Information

 

50

 

 

 

 

Item 6.

Exhibits

 

51

 

 

 

 

Signatures

 

52

 

5


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

September 30,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

65,889

 

 

$

84,833

 

Prepaid expenses and other current assets

 

 

1,676

 

 

 

3,513

 

Total current assets

 

 

67,565

 

 

 

88,346

 

Operating lease asset, net

 

 

832

 

 

 

768

 

Goodwill

 

 

48,648

 

 

 

48,648

 

In-process research and development

 

 

32,386

 

 

 

32,386

 

Other assets

 

 

155

 

 

 

400

 

Total assets

 

$

149,586

 

 

$

170,548

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,859

 

 

$

1,813

 

Current operating lease liability

 

 

378

 

 

 

369

 

Accrued expenses and other liabilities

 

 

2,043

 

 

 

2,219

 

Total current liabilities

 

 

6,280

 

 

 

4,401

 

Deferred tax liability

 

 

1,752

 

 

 

1,752

 

Non-current operating lease liability

 

 

461

 

 

 

400

 

Total liabilities

 

 

8,493

 

 

 

6,553

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Series X1 non-voting convertible preferred stock, $0.001 par value, 515,000 shares
   authorized;
117,970 and 108,070 shares issued and outstanding at September 30, 2022
   and December 31, 2021, respectively

 

 

 

 

 

 

Series X non-voting convertible preferred stock, $0.001 par value, 10,000 shares
   authorized;
6,204 shares issued and outstanding at September 30, 2022 and
   December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value, 200,000,000 shares authorized at September 30, 2022
   and December 31, 2021;
13,756,788 and 14,306,788 shares issued and
   outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

14

 

 

 

14

 

Additional paid-in capital

 

 

285,560

 

 

 

278,880

 

Accumulated deficit

 

 

(144,481

)

 

 

(114,899

)

Total stockholders’ equity

 

 

141,093

 

 

 

163,995

 

Total liabilities and stockholders’ equity

 

$

149,586

 

 

$

170,548

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

6


 

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

7,452

 

 

$

7,658

 

 

$

19,830

 

 

$

17,553

 

General and administrative

 

 

3,146

 

 

 

2,848

 

 

 

9,910

 

 

 

9,929

 

Total operating expenses

 

 

10,598

 

 

 

10,506

 

 

 

29,740

 

 

 

27,482

 

Loss from operations

 

 

(10,598

)

 

 

(10,506

)

 

 

(29,740

)

 

 

(27,482

)

Other income, net

 

 

127

 

 

 

3

 

 

 

158

 

 

 

7

 

Loss before income tax benefit

 

 

(10,471

)

 

 

(10,503

)

 

 

(29,582

)

 

 

(27,475

)

Income tax benefit

 

 

 

 

 

686

 

 

 

 

 

 

1,775

 

Net loss and comprehensive loss

 

$

(10,471

)

 

$

(9,817

)

 

$

(29,582

)

 

$

(25,700

)

Net loss per share, basic and diluted

 

$

(0.73

)

 

$

(0.66

)

 

$

(2.07

)

 

$

(1.73

)

Weighted-average common shares outstanding, basic and diluted

 

 

14,265,905

 

 

 

14,815,852

 

 

 

14,289,729

 

 

 

14,820,822

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

7


 

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series X1 Non-Voting Convertible Preferred Stock

 

 

Series X Non-Voting Convertible Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance as of December 31, 2021

 

 

108,070

 

 

$

 

 

 

6,204

 

 

$

 

 

 

14,306,788

 

 

$

14

 

 

$

278,880

 

 

$

(114,899

)

 

$

163,995

 

Cancellation of common stock in connection
   with exchange for X
1 non-voting convertible
   preferred stock

 

 

9,900

 

 

 

 

 

 

 

 

 

 

 

 

(550,000

)

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,679

 

 

 

 

 

 

6,679

 

Net loss and other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,582

)

 

 

(29,582

)

Balance as of September 30, 2022

 

 

117,970

 

 

$

 

 

 

6,204

 

 

$

 

 

 

13,756,788

 

 

$

14

 

 

$

285,560

 

 

$

(144,481

)

 

$

141,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of June 30, 2022

 

 

117,970

 

 

$

 

 

 

6,204

 

 

$

 

 

 

13,756,788

 

 

$

14

 

 

$

283,375

 

 

$

(134,010

)

 

$

149,379

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,185

 

 

 

 

 

 

2,185

 

Net loss and other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,471

)

 

 

(10,471

)

Balance as of September 30, 2022

 

 

117,970

 

 

$

 

 

 

6,204

 

 

$

 

 

 

13,756,788

 

 

$

14

 

 

$

285,560

 

 

$

(144,481

)

 

$

141,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

108,070

 

 

$

 

 

 

 

 

$

 

 

 

15,160,397

 

 

$

15

 

 

$

270,974

 

 

$

(80,393

)

 

$

190,596

 

Cancellation of common stock in connection
   with exchange for X non-voting convertible
   preferred stock

 

 

 

 

 

 

 

 

6,204

 

 

 

 

 

 

(344,666

)

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of common stock in connection
   with exchange for warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(509,117

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,851

 

 

 

 

 

 

5,851

 

Stock options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Net loss and other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,700

)

 

 

(25,700

)

Balance as of September 30, 2021

 

 

108,070

 

 

$

 

 

 

6,204

 

 

$

 

 

 

14,306,788

 

 

$

14

 

 

$

276,827

 

 

$

(106,093

)

 

$

170,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of June 30, 2021

 

 

108,070

 

 

$

 

 

 

6,204

 

 

$

 

 

 

14,306,614

 

 

$

14

 

 

$

274,783

 

 

$

(96,276

)

 

$

178,521

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,043

 

 

 

 

 

 

2,043

 

Stock options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Net loss and other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,817

)

 

 

(9,817

)

Balance as of September 30, 2021

 

 

108,070

 

 

$

 

 

 

6,204

 

 

$

 

 

 

14,306,788

 

 

$

14

 

 

$

276,827

 

 

$

(106,093

)

 

$

170,748

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

8


 

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the Nine Months
Ended September 30,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(29,582

)

 

$

(25,700

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Amortization of operating lease asset

 

 

280

 

 

 

134

 

Stock-based compensation

 

 

6,679

 

 

 

5,851

 

Deferred tax liabilities

 

 

 

 

 

(1,775

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

2,082

 

 

 

(55

)

Accounts payable and accrued expenses

 

 

1,871

 

 

 

1,980

 

Operating lease liability

 

 

(274

)

 

 

(140

)

Net cash used in operating activities

 

 

(18,944

)

 

 

(19,705

)

Financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

1

 

Offering costs in connection with PIPE transaction

 

 

 

 

 

(450

)

Net cash used in financing activities