ALLENA PHARMACEUTICALS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited financial statements
and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and
our Annual Report on Form 10-K for the year ended
Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A. Risk Factors.
We caution readers not to place undue reliance on any forward-looking statements
made by us, which speak only as of the date they are made. We disclaim any
obligation, except as specifically required by law and the rules of the
Overview
We are a late-stage, clinical biopharmaceutical company dedicated to developing and commercializing first-in-class, oral enzyme therapeutics to treat patients with rare and severe metabolic and kidney disorders. We are focused on metabolic disorders that result in excess accumulation of certain metabolites that can cause kidney stones, damage the kidney, and potentially lead to chronic kidney disease, or CKD, and end-stage renal disease, or ESRD. Our lead product candidate, reloxaliase (formerly known as ALLN-177), is a first-in-class, oral enzyme therapeutic that we are developing for the treatment of hyperoxaluria, a metabolic disorder characterized by markedly elevated urinary oxalate, or UOx, levels and commonly associated with kidney stones, CKD and ESRD. There are currently no approved therapies for the treatment of hyperoxaluria.
We have conducted a robust clinical development program of reloxaliase, including three Phase 2 clinical trials and the first of two planned Phase 3 clinical trials, which demonstrated significant reductions of UOx excretion in patients with enteric hyperoxaluria. Reloxaliase has also been well tolerated in clinical trials to date. Based on these data, the high unmet medical need, reloxaliase's specific mechanism of action, and the significant market opportunity, we are initially developing reloxaliase for adult patients with enteric hyperoxaluria.
In
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In addition to our Phase 3 program of reloxaliase for enteric hyperoxaluria, we
are also evaluating reloxaliase in Study 206, a Phase 2 basket trial in adults
and adolescents with primary hyperoxaluria or enteric hyperoxaluria with
hyperoxalemia, which we initiated in
In addition, we have designed our second product candidate, ALLN-346, an orally
administered, novel, urate degrading enzyme, for patients with hyperuricemia and
gout in the setting of advanced CKD. Hyperuricemia, or elevated levels of uric
acid in the blood, results from overproduction or insufficient excretion of
urate, or often a combination of the two. ALLN-346 has demonstrated a robust
reduction in both plasma and urine uric acid levels in an established urate
oxidase knock-out mouse model, a severe animal model of hyperuricemia with
advanced CKD and kidney damage due to urate crystal deposition. We filed an IND
for ALLN-346 with the FDA in
On
On
On
Our operations to date have been limited to organizing and staffing our company,
business planning, raising capital, developing our technology, identifying
potential product candidates, producing drug substance and drug product material
for use in preclinical studies and clinical trials, conducting preclinical
studies of our product candidates and clinical trials for our lead product
candidate, reloxaliase. We do not have any products approved for sale and have
not generated any revenue to date. As of
We have incurred significant net operating losses in every year since our
inception and expect to continue to incur significant expenses and increasing
operating losses for the foreseeable future. Our net losses may fluctuate
significantly from quarter to quarter and year to year. Our net losses were
• conduct future clinical trials of our lead product candidate, reloxaliase;
• manufacture additional material for our pivotal Phase 3 clinical program
and potential future clinical studies we might conduct for our product
candidates;
• scale up our manufacturing process for reloxaliase to prepare for the
filing of a potential Biologics License Application, or BLA, and
commercialization if our clinical development program is successful;
• advance the development and conduct future clinical trials of ALLN-346;
• conduct research on the discovery and development of additional product
candidates;
• seek regulatory and marketing approvals for product candidates that
successfully complete clinical trials, if any;
• establish a sales, marketing and distribution infrastructure to
commercialize any products for which we may obtain regulatory approval in
geographies in which we plan to commercialize our products ourselves;
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• maintain, expand and protect our intellectual property portfolio;
• hire additional staff, including clinical, scientific, technical,
operational, and financial personnel, to execute our business plan; and
• add clinical, scientific, operational, financial and management
information systems to support our product development and potential
future commercialization efforts, and to enable us to operate as a public
company.
We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate. Additionally, we currently use contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, to carry out our preclinical and clinical development activities. We do not yet have a sales organization. If we obtain regulatory approval for our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we may seek to fund our operations through public or private equity or debt financings or other sources, including strategic collaborations. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales or any other source and do not expect to generate any revenue from the sale of products for the foreseeable future. If our development efforts for reloxaliase or other product candidates that we may develop in the future are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our product candidates, which include:
• employee-related expenses, including salaries, benefits and stock-based
compensation expense;
• costs incurred under agreements with third parties, including CROs, that
conduct research and development, preclinical studies and clinical trials
on our behalf;
• costs related to production of preclinical and clinical materials,
including fees paid to CMOs;
• consulting, licensing and professional fees related to research and
development activities;
• costs of purchasing laboratory supplies and non-capital equipment used in
our research and development activities;
• costs related to compliance with clinical regulatory requirements; and
• facility costs and other allocated expenses, which include expenses for
rent and maintenance of facilities, insurance, depreciation and other
supplies.
We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as clinical site activations, patient enrollment, or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and may be reflected in our consolidated financial statements as prepaid or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
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The following summarizes our most advanced current research and development programs:
• reloxaliase is our lead product candidate which we are developing for the
treatment of hyperoxaluria. Substantially all of our research and
development costs to date have been used to fund this program.
• ALLN-346 is our second product candidate which we are developing for
patients with hyperuricemia and CKD. We began incurring external research
and development costs for this program in 2016.
We typically use our employee and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs and other internal costs to specific product candidates or development programs.
The following table summarizes our research and development expenses by program
(in thousands):
Three Months Ended March 31,
2020 2019
Reloxaliase external costs $ 1,469 $ 4,825
ALLN-346 external costs 418 1,113
Employee compensation and benefits 2,408 2,519
Other 351 671
Total research and development expenses $ 4,646 $ 9,128 Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages, primarily due to the increased
size and duration of later-stage clinical trials. Since inception, we have
incurred
The successful development of reloxaliase, ALLN-346 and other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of these product candidates. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs and timing of preclinical studies, clinical trials and development of our product candidates will depend on a variety of factors, including:
• successful enrollment in, and completion of, clinical trials for reloxaliase;
• successful data from our clinical program of reloxaliase that supports an
acceptable benefit-risk profile of reloxaliase in the intended
populations;
• successful enrollment in, and completion of, clinical trials for ALLN-346;
• establishing an appropriate safety profile for any potential future
product candidates with studies to enable the filing of investigational
new drug application, or INDs;
• approval of INDs for any potential future product candidate to commence
planned or future clinical trials;
• significant and changing government regulation and regulatory guidance;
• timing and receipt of marketing approvals from applicable regulatory
authorities;
• making arrangements with CMOs for third-party commercial manufacturing of
our product candidates;
• obtaining and maintaining patent and other intellectual property
protection and regulatory exclusivity for our product candidates;
• commercializing the product candidates, if and when approved, whether
alone or in collaboration with others;
• acceptance of the product, if and when approved, by patients, the medical
community and third-party payors; and
• maintenance of a continued acceptable safety profile of the drugs
following approval.
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A change in the outcome of any of these variables with respect to the development, manufacture or commercialization enabling activities of any of our product candidates could mean a significant change in the costs, timing and viability associated with the development of that product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and professional fees for accounting, auditing, tax and consulting services.
We expect that our general and administrative expenses will increase in the future to support continued research and development activities and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys and accountants, among other expenses.
Interest Income (Expense), Net
Interest income (expense), net, primarily consists of interest income earned on our cash and cash equivalents, and interest expense incurred on our credit facility, amortized debt discount related to the fair value of the warrants issued in conjunction with the advances under the credit facility and debt issuance costs.
Other Income (Expense), Net
Other income (expense), net, primarily consists of gain (loss) on foreign currency transactions.
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in
Our significant accounting policies are described in detail in the notes to our
consolidated financial statements appearing in the Annual Report filed on Form
10-K for the year ended
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Results of Operations
Comparison of the three months ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended March 31, Dollar
2020 2019 Change
Operating expenses:
Research and development $ 4,646 $ 9,128 $ (4,482 )
General and administrative 2,878 2,431 447
Total operating expenses 7,524 11,559 (4,035 )
Loss from operations (7,524 ) (11,559 ) 4,035
Other income (expense):
Interest income (expense), net (54 ) 151 (205 )
Other expense, net (7 ) (11 ) 4
Other income (expense), net (61 ) 140 (201 )
Net loss $ (7,585 ) $ (11,419 ) $ 3,834 Research and Development Expense
Research and development expense decreased by
Three Months Ended March 31, Dollar
2020 2019 Change
Clinical development external costs
Manufacturing external costs 746 2,423 (1,677 ) Employee compensation and benefits 2,408 2,519 (111 ) Other 284 572 (288 )
Total research and development expenses
The
• Our clinical development external costs decreased by $2.4 million from
$3.6 million for the three months ended March 31, 2019 to $1.2 million for
the three months ended March 31, 2020 :
o Our URIROX-1 costs decreased $1.2 million from $1.5 million for the
three months ended March 31, 2019 to $0.3 million for the three months
ended March 31, 2020 . This study was completed in the fourth quarter
of 2019 and we released top-line date in November 2019 . The costs
incurred during the three months ended March 31, 2020 were related to
closeout activities;
o Our URIROX-2 costs decreased $0.9 million from $1.5 million for the
three months ended March 31, 2019 to $0.6 million for the three months
ended March 31, 2020 . Based on the high rate of kidney stone passage
and the UOx results observed in our completed URIROX-1 trial, and
subsequent engagement with the FDA, we announced in February 2020 that
we reached agreement in principal with the FDA on a streamlined design
for URIROX-2. During the three months ended March 31, 2020 , while we
assessed revisions to the study design and sought additional funds to
support the development of reloxaliase, we limited the opening of new
trial sites for the ongoing URIROX-2 trial. We submitted a protocol
amendment for the revised study design in March 2020 ; and
o We incurred $0.2 million and $0.4 million of costs for our 206 Study
during the three months ended March 31, 2020 and 2019,
respectively. This study was also completed in the fourth quarter of
2019 and we released top-line date in November 2019 .
• Our manufacturing external costs decreased by $1.7 million from $2.4
million for the three months ended March 31, 2019 to $0.7 million for the
three months ended March 31, 2020 :
o Reloxaliase manufacturing costs decreased $0.9 million from $1.2
million for the three months ended March 31, 2019 to $0.3 million for
the three months ended March 31, 2020 . During the three months
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ended March 31, 2019 , we incurred costs at our CMO for the production
of clinical and engineering batches of reloxaliase for our Phase 3
clinical program, of which there were no similar costs for the three
months ended March 31, 2020 ; and
o ALLN-346 manufacturing costs decreased $0.6 million from $1.0 million
for the three months ended March 31, 2019 to $0.4 million for the
three months ended March 31, 2020 . The costs incurred during the
three months ended March 31, 2019 included formulation and
development costs to support our IND filed with the FDA in December
2019 .
General and Administrative Expenses
General and administrative expense increased by
Three Months Ended March 31, Dollar
2020 2019 Change
Employee compensation and benefits $ 1,603 $ 1,090 $ 513
Consulting and professional services 728 773 (45 )
Market research and commercialization planning - 176 (176 )
Other 547 392 155
Total general and administrative expenses
The increase in general and administrative expense was primarily attributable to the following:
• Our employee compensation and benefits costs increased by $0.5 million for
the three months ended March 31, 2020 , primarily due an increase in
employee salaries, wages, benefit costs and stock-based
compensation. Stock-based compensation increased $0.2 million from $0.4
million for the three months ended March 31, 2019 to $0.6 million for the
three months ended March 31, 2020 ; and
• The increase in employee compensation and benefits is partially offset by
a decrease in market research and commercialization planning
costs. Included in market research and development costs for the three
months ended March 31, 2019 , are costs for a study we initiated during the
period with an independent third party to perform a market assessment for
enteric hyperoxaluria. There were no comparable costs for the three months
ended March 31, 2020 .
Interest Income (Expense), net
Interest income (expense), net consists of interest income earned on our cash and cash equivalents and interest expense charged on our outstanding debt.
Liquidity and Capital Resources
Sources of Liquidity
We have funded our operations from inception through
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Cash Flows
The following table provides information regarding our cash flows for the three
months ended
Three Months Ended March 31,
2020 2019
Net cash used in operations $ (8,558 ) $ (9,810 )
Net cash used in investing activities - (84 )
Net cash (used in) provided by financing activities (998 ) 6
Net decrease in cash and cash equivalents $ (9,556 ) $ (9,888 ) The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.
Net cash used in operating activities was
• A decrease in net loss of$3.8 million , partially offset by; • an increase in non-cash items of$0.4 million resulting primarily from increases in stock-based compensation expense; and • a decrease of$3.0 million due to changes in the components of working capital, primarily related to changes in prepaid expenses, accounts payable and accrued expenses.
We did not have any cash flow activity relating to investment activities during
the three months ended
Net cash used in financing activities was
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development for, initiate later stage clinical trials for, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
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Going Concern
As of
• the costs of conducting future clinical trials of reloxaliase, including
any unforeseen costs we may incur as a result of clinical trial delays due
to the COVID-19 pandemic or other causes;
• the costs of manufacturing additional material for our pivotal Phase 3
clinical program, Phase 2 basket clinical trial and potential future
clinical studies we might conduct for reloxaliase;
• the costs of scaling up our manufacturing process for reloxaliase to
prepare for the filing of a potential BLA and commercialization if our
clinical development program is successful;
• the advancement of ALLN-346;
• the scope, progress, results and costs of discovery, preclinical
development, laboratory testing and clinical trials for other potential
product candidates we may develop, if any;
• the costs, timing and outcome of regulatory review of our product candidates;
• our ability to establish and maintain collaborations on favorable terms,
if at all;
• the achievement of milestones or occurrence of other developments that
trigger payments under any collaboration agreements we might have at such
time;
• the costs and timing of future commercialization activities, including
product sales, marketing, manufacturing and distribution, for any of our
product candidates for which we receive marketing approval;
• the amount of revenue, if any, received from commercial sales of our
product candidates, should any of our product candidates receive marketing
approval;
• the costs of preparing, filing and prosecuting patent applications,
obtaining, maintaining and enforcing our intellectual property rights and
defending intellectual property-related claims;
• our headcount growth and associated costs as we expand our business
operations and our research and development activities; and
• the costs of operating as a public company.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
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Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under applicable
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