ELOXX PHARMACEUTICALS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes included elsewhere in this Quarterly Report, as well as the
audited financial statements and the related notes thereto, and the discussion
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business" included in our Annual Report on Form 10-K for the
fiscal year ended
Company Overview
We are a clinical-stage biopharmaceutical company developing novel ribonucleic acid (RNA)-modulating drug candidates, each designed to be a eukaryotic ribosomal selective glycoside (ERSG), for the treatment of rare and ultra-rare premature stop codon diseases. Premature stop codons are point mutations that disrupt the stability of the impacted messenger RNA (mRNA) and the protein synthesis from that mRNA.
Our lead clinical program, ELX-02, is currently in Phase 2 clinical development for the treatment of cystic fibrosis in patients with diagnosed nonsense mutations.
Our Phase 2 clinical trial for ELX-02 is being conducted at leading global
investigator sites in
The FDA has granted orphan drug designation to ELX-02 for the treatment of nephropathic cystinosis, MPS I, Rett syndrome, and cystic fibrosis.
Acquisition of
On
We expect the combined company to emerge as a leader in the science of ribosome modulation through our complementary platforms and continued development of our library of RMAs and Eukaryotic Ribosome Selective Glycosides (ERSGs). ELX-02, is a small molecule drug candidate designed to restore production of full-length functional proteins. The investigational therapy has shown strong activity across a full range of mutations in CF preclinical models. In Phase 1 testing, ELX-02 was generally well tolerated and demonstrated high bioavailability with consistent pharmacokinetics across both single and multiple-dose studies. The Phase 2 trials are designed to validate the safety of ELX-02 and assess its biological activity. We look forward to completing enrollment in the first four treatment arms by mid-year and reporting data
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from these treatment arms in the second half of this year. ELX-02 is an investigational drug that has not been approved by any global regulatory body.
With the strength of our ELX-02 program for CF, the acquisition of Zikani provides us with the opportunity to amplify the potential of our innovative science by developing a new class of therapies to treat diseases with limited to no treatment options. Our preclinical programs are focused on select rare diseases including inherited diseases, cancer caused by nonsense mutations, kidney diseases, including autosomal dominant polycystic kidney disease, as well as rare ocular genetic disorders. In addition, we plan to file an IND in 2022 for what could potentially become the first oral therapy for protein restoration for patients with nonsense mutations in Recessive Dystrophic Epidermolysis Bullosa (RDEB) and Junctional Epidermolysis Bullosa (JEB). RDEB is an incurable, extremely painful and often fatal skin blistering condition caused by a lack of collagen type VII that is estimated to affect more than 3,000 people worldwide. JEB is the most severe form of EB, with most patients dying in infancy. By extending the application of ribosomal RNA modulation to the readthrough of nonsense mutations in tumor suppressor genes, we are also rapidly advancing preclinical research for familial adenomatous polyposis (FAP), an inherited pre-cancerous colorectal disease frequently caused by nonsense mutations in the adenomatous polyposis coli (APC) gene.
Nonsense mutations cause approximately 10-12 percent of rare inherited diseases. ELX-02 along with the TURBO-ZMTM library of compounds are anticipated to significantly expand to include the treatment of many other rare diseases and certain cancers.
Under the terms of the Merger Agreement, the Company issued 7,596,810 shares of common stock in exchange for all of the issued and outstanding equity interests of Zikani. (the "Merger Consideration").
The Company is in the process of determining the purchase price allocation for the Merger Consideration and other assets acquired, which it expects to finalize in the second quarter of 2021.
In connection with the acquisition, on
COVID-19
The ongoing COVID-19 pandemic and the measures that we, our employees, consultants, suppliers, contract research organizations ("CROs"), and other partners or governments may take in response to the pandemic may significantly disrupt our business operations. We are working to ensure that we can operate with minimal disruption, and mitigate the impact of the pandemic on the health and safety of our employees and the patients and healthcare professionals that participate in our clinical trials. However, given the significant uncertainty regarding the ongoing impact of the COVID-19 pandemic, there remains a risk that we or our employees, contractors, suppliers, and other partners may be prevented or prohibited from conducting business activities for indefinite periods of time, for example due to a substantial percentage of personnel contracting the virus or due to government-mandated shutdowns.
We continue to focus on the operational challenges resulting from the COVID-19 pandemic. The pandemic has not had a material adverse impact on our financial condition, and we have not had to furlough any employees. Operations have continued, though our clinical trials were temporarily paused. Both Phase 2 clinical trials have now resumed. We are evaluating various alternatives to remain flexible and adapt to changing circumstances that may arise in the near and long term. We continue to monitor our operations, states of affairs in the regions in which we and our business partners operate and conduct research and clinical trial activities, and applicable government recommendations. As a result, we have made modifications to our normal operations, including restrictions on business travel and meetings, permitting employees to work remotely and the implementation of COVID-19 workplace safety guidelines.
The extent and severity of the impact of the pandemic on our business and clinical trials will be determined largely by the ability of patients and prospective patients in our clinical trials to access trial sites, the ability of personnel from our CROs to oversee the administration of our drug candidates in accordance with trial protocols and our ability to monitor and communicate effectively with our CROs, staff at clinical trial sites and principal investigators.
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Results of Operations
The following table summarizes our results of operations for the periods
presented (in thousands):
Three Months Ended
March 31, Change
2021 2020 $ %
Operating expenses:
Research and development $ 4,073 $ 4,767 $ (694 ) (15 ) %
General and administrative 4,341 5,006 (665 ) (13 ) %
Restructuring charges - 3,994 (3,994 ) -
Total operating expenses 8,414 13,767 (5,353 ) (39 ) %
Loss from operations (8,414 ) (13,767 ) 5,353 (39 ) %
Other expense, net 280 179 101 56 %
Net loss $ (8,694 ) $ (13,946 ) $ 5,252 (38 ) %
Research and development expense
Research and development expenses were
General and administrative expenses
General and administrative expenses were
Restructuring charges
Restructuring charges of
Other expense, net
We recorded
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. We have not generated revenue from sales of any product or service.
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We have incurred significant operating losses to date and have not generated
revenue from sales of any products or services. Our net losses were
• advance ELX-02 and/or other product candidates further into clinical
development;
• experience additional delays in enrollment and completion of our clinical
trials due to the COVID-19 pandemic;
• continue the preclinical development of our research programs and advance
candidates into clinical trials;
• pursue regulatory authorization to conduct clinical trials of additional
product candidates;
• seek marketing approvals for our product candidates;
• establish a sales, marketing and distribution infrastructure to
commercialize any product candidates for which we obtain marketing
approval;
• maintain, expand and protect our intellectual property portfolio;
• hire additional clinical, regulatory, management and scientific personnel;
• add operational, financial and management information systems and personnel;
• acquire or in-license other product candidates and technologies; and
• operate as a public company.
We may never achieve profitability and until we do, we will continue to need to raise additional cash to fund our operations. Our cash and cash equivalents are highly liquid investments with original maturities of one year or less at the date of purchase and consist of cash in operating accounts and secured investments, primarily money market funds.
Although the impact of the COVID-19 pandemic on clinical operations and trial
enrollment cannot fully be determined, we believe that our cash and cash
equivalents of
Management intends to fund future operations through private or public debt or equity financing transactions and may seek additional capital through arrangements with strategic partners or from other sources. The availability of sufficient funding to alleviate the conditions that raise substantial doubt are not within management's control and cannot be assessed as being probable of occurring. If we are unable to obtain adequate financing, we will evaluate alternatives which may include reducing or deferring operating expenses, including by downsizing our workforce and curtailing certain development programs, which could have a material adverse effect on our operations and future prospects.
Principal Financing Activities
In
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or restoring headcount and maintaining salary levels. Forgiveness is reduced if headcount declines or if salaries decrease. Any loan forgiveness will be made subject to SVB approval in accordance with SBA requirements.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):
Three Months Ended
March 31,
2021 2020
Net cash used in operating activities $ (7,685 ) $ (11,924 )
Net cash provided by investing activities - 15,789
Net cash (used in) provided by financing activities 1,262 (483 )
Our operating activities used cash of
Our investing activities provided cash of
Our financing activities provided cash of
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by applicable
regulations of the
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our unaudited condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in
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The critical accounting policies that we believe impact significant judgments
and estimates used in the preparation of our condensed consolidated financial
statements presented in this Report are described in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in our Annual
Report. There have been no material changes to our critical accounting policies
through
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