ELEDON PHARMACEUTICALS, INC. The unaudited interim financial statements and this Management's Discussion and
Analysis of Financial Condition and Results of Operations should be read
together with our audited financial statements and accompanying notes for the
year ended
ABOUT
Overview
Tegoprubart is engineered to potentially both improve safety and provide pharmacokinetic, pharmacodynamic, and dosing advantages compared to other anti-CD40 approaches. The CD40L/CD40 pathway is recognized for its prominent role in immune regulation. CD40L is primarily expressed on activated CD4+ T cells, platelets and endothelial cells while the CD40 receptor is constitutively expressed on antigen presenting cells such as macrophages and dendritic cells, as well as B cells. By blocking CD40L and not the CD40 receptor, tegoprubart inhibits both the CD40 and CD11 costimulatory signaling pathways, providing the potential for improved efficacy compared to anti-CD40 receptor approaches. Blocking CD40L also increases polarization of CD4+ lymphocytes to Tregs, a specialized subpopulation of T cells that act to suppress an immune response, thus creating a more tolerogenic environment, which may play a therapeutic role for autoimmune diseases and in the transplant setting.
Tegoprubart is designed to negate the risk of thrombolytic events seen in the first generation of anti-CD40L antibodies by introducing structural modifications that have been shown in preclinical models to eliminate binding to the Fc? receptors associated with platelet activation without altering the binding of tegoprubart to CD40L. In non-human primate studies, dosing of Tegoprubart up to 200 mg/kg per week for 26 weeks, demonstrated no adverse events regarding coagulation, platelet activation or thromboembolism.
In
Our business strategy is to optimize the clinical and commercial value of tegoprubart and become a global biopharmaceutical company with a focused autoimmune franchise. We plan to develop tegoprubart in up to four indications: ALS, prevention of kidney allograft rejection, prevention of islet cell allograft rejection, and IgA Nephropathy ("IgAN"). We selected our indications based on preclinical and clinical data that was generated with either our molecule or historical anti-CD40L molecules.
Amyotrophic Lateral Sclerosis
ALS is a progressive, paralytic disorder characterized by degeneration of motor
neurons in the brain and spinal cord. In the
While the exact pathogenic mechanism of ALS is still not fully understood, there is strong evidence indicating that neuroinflammation plays an important role in the disease's pathogenesis. Neuroinflammation in ALS is characterized by the infiltration of lymphocytes and macrophages into the central nervous system, and the activation of microglia and reactive astrocytes. Reactive astrocytes and microglia as well as infiltrating lymphocytes, dendritic cells, monocytes, macrophages
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--------------------------------------------------------------------------------and immune complexes have been identified in cerebrospinal fluid and neural tissues in both animal models of ALS and at autopsy in ALS patients.
Tegoprubart is designed to block CD40L binding to CD40, thereby potentially inhibiting neuroinflammatory pathways leading to disease progression in ALS. In vitro proof-of-concept studies have shown that tegoprubart binds to CD40L in human cells and blocks CD40L binding on APCs and activated T cells. The potential for therapeutic benefit of CD40L blockage in treating ALS has been demonstrated in a SOD1 mouse model of ALS, where a murine anti-CD40L antibody, MR1, prolonged survival and delayed the onset of neurological disease progression. These clinical manifestations are believed to be due to reduced immune cell infiltration of macrophages into skeletal muscle and their destroying denervated nerves. The plasticity of the nervous system to repair itself in the absence of this immune cell attack is believed to result in improved neuromuscular junction occupancy and improved muscle function. Blocking CD40L signaling also prevents pro-inflammatory polarization of lymphocytes, reduced neuroinflammation and improved motor neuron survival in rodent ALS models.
In 2019, we completed a single ascending dose Phase 1 study of tegoprubart in healthy volunteers and people with ALS. In this study, the doses of tegoprubart studied were well tolerated in healthy subjects and adults with ALS. Tegoprubart demonstrated low anti-drug antibody responses that were not dose related, linear dose proportionality across the dose ranges, and a half-life of up to 26 days.
In
Kidney transplantation: prevention of allograft rejection
Kidney transplantation is the most common type of solid organ transplantation in
Calcineurin inhibitors ("CNI"s) are a critical component of many immunosuppressive regimens to prevent acute and long-term kidney transplant rejection. However, chronic exposure to certain CNIs including tacrolimus is associated with nephrotoxicity, cardiotoxicity, new onset diabetes due to pancreatic Beta cell toxicity and an increase in both opportunistic infections and malignancies. Over time, these CNI side effects may significantly damage transplanted kidneys or result in a requirement for reduced exposures to CNIs and a resulting potential decrease in the ability to prevent long-term rejection.
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--------------------------------------------------------------------------------Tegoprubart seeks to address challenges associated with current immunosuppressive transplantation regimens using CNI-based therapies. The ability to prevent acute and chronic transplant rejection without the need for CNIs has the potential to transform the clinical management of preventing graft rejection by mitigating the adverse events associated with CNIs and improving long-term graft survival, thus potentially decreasing the need for repeat kidney transplants.
In
Islet cell transplantation: prevention of allograft rejection
Type 1 diabetes is a T cell mediated autoimmune disease with progressive loss of
insulin producing pancreatic beta cells and affects over one million persons in
the
A number of issues are believed to continue to hamper the overall success of islet cell transplantation and to need to be addressed in order for there to be widespread clinical acceptance. These include the acute loss of transplanted islets with current immunosuppressive treatments, particularly those with CNI-based therapies, due to islet cell toxicity and alloreactive immunologic responses to transplanted islets. Over time, the progressive loss of islet cells and decline in islet cell function often leads to the need for multiple transplant procedures in order for BTID patients to have optimal response to blood glucose levels and possibly achieve insulin independence. We believe that treatment with tegoprubart will address the challenges associated with current islet cell transplantation immunosuppressive regimens using CNI-based therapies, by replacing the CNIs with tegoprubart. CD40L blockade may abolish many effector mechanisms of inflammation, prevent, and intervene in the progression of autoimmunity, and instill transplant tolerance without causing harm to islet cells.
Historical studies in nonhuman primate models of islet cell transplantation have demonstrated that treatment with anti-CD40L antibodies induces long term islet cell function and graft survival, even as a monotherapy. Tegoprubart has shown pre-clinical, proof-of-concept efficacy in a non-human primate model of type 1 diabetes, where animals undergoing islet cell transplantation maintained glucose control and sustained levels of C-peptide with chronic tegoprubart treatment for up to a year. Compared to combination immunosuppressive therapy including CNIs, tegoprubart monotherapy was more effective in preventing long term islet cell rejection, associated with better graft function, and showed an improved safety profile.
In
IgA Nephropathy
IgAN is the leading cause of glomerulonephritis, a state of inflammation
producing damage to the filtering part of the kidney. Disease manifestation and
clinical presentation involves renal dysfunction characterized by proteinuria
with a slow relentless course. Approximately 30%-40% of patients ultimately
reach end stage renal disease (ESRD). The standard of care for ESRD is dialysis
or kidney transplant, which represents a significant economic burden as well as
a major impact on a patient's quality of life. With an estimated prevalence of
approximately 150,000 persons in
The pathophysiology of IgAN has been well characterized, and based on its mechanism of action, tegoprubart has the potential to impact the disease process both upstream, at the source of the immune complexes, and downstream in the kidney
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--------------------------------------------------------------------------------itself, where it may reduce inflammation in the glomeruli. By disrupting multiple steps in the IgAN's pathophysiology, tegoprubart has the potential to affect the clinical course of the disease and improve outcomes for patients. The inhibition of CD40L has been shown to be effective in models of multiple glomerulonephritides, as measured by a reduction in proteinuria and were associated with a decrease in immune cell infiltrate into the glomeruli
Through
Market Trends and Uncertainties
We may face future business disruption and related risks resulting from the ongoing outbreak of COVID-19 or from another pandemic, epidemic or infectious disease outbreak, or from broader macroeconomic trends, any of which could have a significant impact on our business or delay the development of our product candidates or completion of our current and proposed clinical trials. Although the impacts of COVID-19 have not been material to-date, we have experienced delays in certain clinical studies and resulting delays in data collection and have also experienced inefficiencies in planning and executing trials due to our limited ability to conduct meetings with key third parties and we could experience further delays and inefficiencies in the future. We will continue to monitor the impact of COVID-19 on our operations, including enrollment and execution of our clinical trials.
In addition, the global economy, including the financial and credit markets, has recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, rising interest rates and uncertainty about economic stability. We have utilized a range of financing methods to fund our operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding or increase the cost of funding. If we are unable to obtain necessary debt or equity financing in a timely manner or on favorable terms, if at all, then our ability to continue clinical development of our product candidates or fund additional clinical studies will be adversely impacted.
Any of the foregoing items could materially affect our business, possibly to a significant degree. The severity and duration of any such impacts cannot be predicted. See Item 1A, "Risk Factors" for additional information.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
Our management's discussion and analysis of our financial condition and results
of operations are based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
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--------------------------------------------------------------------------------RESULTS OF OPERATIONS
Comparison of the Three Months Ended
The following table provides comparative unaudited results of operations for the
three months ended
For the Three Months
Ended June 30,
2022 2021 $ Variance
Operating expenses:
Research and development $ 5,743 $ 4,242 $ 1,501
General and administrative 3,540 3,729 (189 )
Total operating expenses 9,283 7,971 1,312
Loss from operations (9,283 ) (7,971 ) (1,312 )
Other income/(expense), net 36 (1 ) 37
Loss before income tax benefit (9,247 ) (7,972 ) (1,275 )
Income tax benefit - 588 (588 )
Net loss $ (9,247 ) $ (7,384 ) $ (1,863 ) Research and Development Expenses
Research and development expenses increased
General and Administrative Expenses
General and administrative expenses decreased
Other Income (Expense), Net
The increase in other income (expense), net was primarily due to an increase in
interest income and a decrease in realized losses on foreign currency
translation for the three months ended
Income Tax Benefit
The Company recognized an income tax benefit of
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Comparison of the Six Months Ended
The following table provides comparative unaudited results of operations for the
six months ended
For the Six Months
Ended June 30,
2022 2021 $ Variance
Operating expenses:
Research and development $ 12,378 $ 9,895 $ 2,483
General and administrative 6,764 7,081 (317 )
Total operating expenses 19,142 16,976 2,166
Loss from operations (19,142 ) (16,976 ) (2,166 )
Other income, net 31 4 27Loss before income tax benefit (19,111 ) (16,972 ) (2,139 ) Income tax benefit
- 1,089 (1,089 )
Net loss $ (19,111 ) $ (15,883 ) $ (3,228 ) Research and Development Expenses
Research and development expenses increased
General and Administrative Expenses
General and administrative expenses decreased
Other Income (Expense), Net
The increase in other income, net, was primarily due to an increase in interest
income and a decrease in realized losses on foreign currency translation for the
six months ended
Income Tax Benefit
The Company recognized an income tax benefit of
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
As of
We do not have any approved products for commercial sale and have never generated revenue from product sales and have incurred significant net losses since our inception and expect to continue to incur net operating losses for the foreseeable future. We do not expect to receive any revenue from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our product candidates or enter into collaborative arrangements with third parties. We currently have no credit facility or committed sources of capital.
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We believe our cash balance at
Material Cash Requirements
Our primary use of cash is to fund operating expenses, which consist of clinical
research and development expenses, manufacturing expenses, legal and compliance
expenses, compensation and related expenses, and general overhead costs. Cash
used to fund operating expenses is impacted by the timing of when we pay or
prepay these expenses. As of
We expect our expenses to increase in connection with our ongoing activities, particularly as we expand our clinical program with tegoprubart, continue the research and development of, 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.
We will continue to require additional financing in order to advance our drug product through clinical development, to manufacture, obtain regulatory approval for and to commercialize our product candidates, to develop, acquire or in-license other potential product candidates, and to fund operations for the foreseeable future. Therefore, we will seek to raise additional capital through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. The ability to raise substantial additional capital will depend on many factors, including:
•
the initiation, progress, timing, costs and results of our ongoing and future
clinical trials of tegoprubart, including as such activities may be adversely
impacted by global events, including the COVID-19 pandemic, the ongoing conflict
in
•
the impact of global macroeconomic trends and uncertainties, which have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, rising interest rates and uncertainty about economic stability;
•
the number and scope of indications we decide to pursue for tegoprubart development;
•
the cost, timing and outcome of regulatory review of any BLA, we may submit for tegoprubart;
•
the costs and timing of manufacturing for tegoprubart, if approved;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of tegoprubart;
•
the costs associated with being a public company;
•
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
•
the extent to which we acquire or in-license other product candidates and technologies; and
•
the cost associated with commercializing tegoprubart, if approved for commercial sale.
Current conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding. As a result of any of the foregoing factors, adequate additional funding may not be available to us on acceptable
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--------------------------------------------------------------------------------terms on a timely basis, or at all. The severity and duration of any such impacts cannot be predicted. Any such failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, and may result in a prolonged suspension of our ALS clinical development or cause us to delay the scope of or suspend one or more of our other clinical trials, research and development programs or commercialization efforts, out-license intellectual property rights to our product candidates or sell unsecured assets, or a combination of the above. Any of these actions could materially harm our business. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders' ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. Debt financing, if available, would result in fixed payment obligations and 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, licenses and other similar 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. Please see Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q for additional risks associated with our substantial capital requirements and the challenges we may face in raising capital.
On
Cash Flows
The following table provides a summary of our net cash flow activity (in
thousands):
For the Six Months
Ended June 30,
2022 2021
Net cash used in operating activities
- (450 )
Net change in cash and cash equivalents
Comparison of the Six Months Ended
Net cash used in operating activities for the six months ended
Net cash used in operating activities for the six months ended
There was no cash provided by or used in the Company's investing activities for
the six months ended
Net cash used in financing activities for the six months ended
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