Eledon Pharmaceuticals, Inc. [ELDN] Filings

10-Q 1 eldn-20240930.htm 10-Q 10-Q

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, 2024

☐ 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.)

19800 MacArthur Blvd., Suite 250 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 8, 2024 there were 59,739,275 shares of the Registrant’s common stock outstanding.

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 other than statements of historical or current fact in this Quarterly Report on Form 10-Q are forward looking statements. In some instances, you can identify forward-looking statements by the use of words such as “believes,” “anticipates,” “plans,” “expects,” “estimates,” “intends,” “predicts,” “projects,” “targets,” “could,” “may,” “will,” and similar expressions, 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 our liquidity, expenses, capital requirements and needs for additional financing;

•

our strategies with respect to our preclinical and clinical development programs, including our expectations regarding the production of clinical quantities of our product candidates;

•

our plans, strategy and timing to obtain and maintain regulatory approvals of our product candidates;

•

our expectations regarding competitive conditions for our product candidates;

•

our review of strategic alternatives and the outcome of such review; and

•

our 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 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.

Forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current beliefs, assumptions, expectations, estimates and projections, which may be impacted by known or unknown factors. 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. You are therefore cautioned not to place undue reliance on the forward-looking statements included in this Quarterly Report on Form 10-Q.

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.

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 shifts in our business strategy 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.

•

We will require additional funding to be able to complete the development of our lead drug candidate. If we are unable to raise such capital, or if we are unable to do so on acceptable terms, we will be forced to significantly alter our business strategy, substantially curtail our current operations, or liquidate and cease operations altogether.

•

Issuances of our common stock, including common stock that may be issuable pursuant to outstanding warrants or other convertible securities as well as shares and warrants issued or issuable in connection with our recent private placement transactions, could result in significant dilution and could cause our stock price to fall.

•

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.

•

Unfavorable global economic conditions could have a material adverse effect on our business.

•

Adverse conditions in the financial markets, including bank failures, could adversely affect our liquidity and financial performance.

•

Drug development involves a lengthy and expensive process with an uncertain outcome, including failure to demonstrate safety and efficacy to the satisfaction of the U.S. Food and Drug Administration (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 development, 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 FDA 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.

•

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.

•

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, our 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.

•

Public health crises, including pandemics or epidemics, could adversely affect our business.

•

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.

ELEDON PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2024

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements - Unaudited	6

	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (As Restated)	6

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 (As Restated)	7

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 (As Restated)	8

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2024 and 2023 (As Restated)	9

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (As Restated)	11

	Notes to Condensed Consolidated Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	41

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65

Item 3.	Defaults Upon Senior Securities	65

Item 4.	Mine Safety Disclosures	65

Item 5.	Other Information	65

Item 6.	Exhibits	66

	Signatures	68

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	September 30, 2024			December 31, 2023
				(As Restated)
ASSETS
Current assets:
Cash and cash equivalents	$	6,751		$	4,612
Short-term investments		71,440			46,490
Prepaid expenses and other current assets		3,318			5,027
Total current assets		81,509			56,129
Operating lease asset, net		471			365
In-process research and development		32,386			32,386
Other assets		210			186
Total assets	$	114,576		$	89,066
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,860		$	967
Current operating lease liabilities		186			383
Accrued expenses and other liabilities		6,443			2,545
Total current liabilities		12,489			3,895
Deferred tax liabilities		1,752			1,752
Non-current operating lease liabilities		315			—
Warrant liabilities		23,962			76,211
Total liabilities		38,518			81,858

Commitments and contingencies (Note 7)

Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized at September 30, 2024 and December 31, 2023:
Series X1 non-voting convertible preferred stock, $0.001 par value, 515,000 shares designated; 110,086 shares issued and outstanding at September 30, 2024 and December 31, 2023		—			—
Series X non-voting convertible preferred stock, $0.001 par value, 10,000 shares designated; 4,422 shares issued and outstanding at September 30, 2024 and December 31, 2023		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized at September 30, 2024 and December 31, 2023; 41,183,102 and 24,213,130 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		41			24
Additional paid-in capital		386,884			326,586
Accumulated other comprehensive income		102			—
Accumulated deficit		(310,969	)		(319,402	)
Total stockholders’ equity		76,058			7,208
Total liabilities and stockholders’ equity	$	114,576		$	89,066

See accompanying notes to unaudited condensed consolidated financial statements.

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024			2023			2024			2023
				(As Restated)						(As Restated)
Operating expenses
Research and development	$	16,520		$	7,931		$	34,036		$	23,245
General and administrative		3,990			3,267			11,845			9,417
Total operating expenses		20,510			11,198			45,881			32,662
Loss from operations		(20,510	)		(11,198	)		(45,881	)		(32,662	)
Other income, net		1,042			849			2,485			1,962
Change in fair value of warrant liabilities and fair value of financial instruments issued in excess of proceeds		96,439			443			51,829			(55,738	)
Net income (loss)	$	76,971		$	(9,906	)	$	8,433		$	(86,438	)

Net income (loss) attributable to common shares - basic	$	54,429		$	(9,906	)	$	5,551		$	(86,438	)
Basic net income (loss) per common share	$	1.05		$	(0.33	)	$	0.13		$	(3.79	)
Weighted-average number of shares outstanding - basic		51,945,920			29,974,400			41,443,049			22,813,085

Net income (loss) attributable to common shares - diluted	$	(17,504	)	$	(9,906	)	$	(61,086	)	$	(86,438	)
Basic net income (loss) per common share	$	(0.32	)	$	(0.33	)	$	(1.42	)	$	(3.79	)
Weighted-average number of shares outstanding - diluted		55,478,342			29,974,400			43,106,746			22,813,085

See accompanying notes to unaudited condensed consolidated financial statements.

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2024		2023			2024		2023
			(As Restated)					(As Restated)
Net income (loss)	$	76,971	$	(9,906	)	$	8,433	$	(86,438	)
Unrealized gain on available-for-sale securities, net		102		—			102		—
Comprehensive income (loss)	$	77,073	$	(9,906	)	$	8,535	$	(86,438	)

See accompanying notes to unaudited condensed consolidated financial statements.

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(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 Other Comprehensive		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Income		Deficit			Equity (Deficit)
Balance as of December 31, 2023 (As Restated)		110,086	$	—		4,422	$	—		24,213,130	$	24	$	326,586	$	—	$	(319,402	)	$	7,208
Issuance of common stock in connection with exercise of pre-funded warrants		—		—		—		—		600,000		1		—		—		—			1
Stock-based compensation		—		—		—		—		—		—		1,694		—		—			1,694
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		(23,631	)		(23,631	)
Balance as of March 31, 2024 (As Restated)		110,086	$	—		4,422	$	—		24,813,130	$	25	$	328,280	$	—	$	(343,033	)	$	(14,728	)
Issuance of common stock and pre-funded warrants in connection with 2024 Securities Purchase Agreement, net of issuance costs		—		—		—		—		13,110,484		13		48,057		—		—			48,070
Issuance of common stock in connection with exercise of pre-funded warrants		—		—		—		—		583,000		1		—		—		—			1
Stock-based compensation		—		—		—		—		—		—		3,063		—		—			3,063
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		(44,907	)		(44,907	)
Balance as of June 30, 2024		110,086	$	—		4,422	$	—		38,506,614	$	39	$	379,400	$	—	$	(387,940	)	$	(8,501	)
Issuance of common stock in connection with 2023 Securities Purchase Agreement in Second and Third Closing, net of issuance costs		—		—		—		—		2,436,488		2		5,701		—		—			5,703
Issuance of common stock in connection with exercise of pre-funded warrants		—		—		—		—		240,000		—		—		—		—			—
Stock-based compensation		—		—		—		—		—		—		1,783		—		—			1,783
Other comprehensive income		—		—		—		—		—		—		—		102		—			102
Net income		—		—		—		—		—		—		—		—		76,971			76,971
Balance as of September 30, 2024		110,086	$	—		4,422	$	—		41,183,102	$	41	$	386,884	$	102	$	(310,969	)	$	76,058

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(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			Total Stockholders'
	Shares			Amount		Shares			Amount		Shares		Amount		Capital			Deficit			Equity
Balance as of December 31, 2022		117,970		$	—		6,204		$	—		13,776,788	$	14	$	287,034		$	(202,865	)	$	84,183
Stock-based compensation		—			—		—			—		—		—		1,381			—			1,381
Net loss and comprehensive loss		—			—		—			—		—		—		—			(10,772	)		(10,772	)
Balance as of March 31, 2023		117,970		$	—		6,204		$	—		13,776,788	$	14	$	288,415		$	(213,637	)	$	74,792
Issuance of common stock and pre-funded warrants in connection with 2023 Securities Purchase Agreement, net of issuance costs		—			—		—			—		8,730,168		9		33,008			—			33,017
Issuance of common stock in connection with conversion of X non-voting convertible preferred stock		—			—		(1,782	)		—		99,000		—		—			—			—
Issuance of common stock in connection with conversion of X1 non-voting convertible preferred stock		(7,884	)		—		—			—		437,977		—		(1	)		—			(1	)
Stock-based compensation		—			—		—			—		—		—		1,720			—			1,720
Net loss and comprehensive loss		—			—		—			—		—		—		—			(65,760	)		(65,760	)
Balance as of June 30, 2023 (As Restated)		110,086		$	—		4,422		$	—		23,043,933	$	23	$	323,142		$	(279,397	)	$	43,768
Issuance of common stock in connection with exercise of pre-funded warrants		—			—		—			—		501,197		1		—			—			1
Stock-based compensation		—			—		—			—		—		—		1,734			—			1,734
Net loss and comprehensive loss		—			—		—			—		—		—		—			(9,906	)		(9,906	)
Balance as of September 30, 2023 (As Restated)		110,086		$	—		4,422		$	—		23,545,130	$	24	$	324,876		$	(289,303	)	$	35,597

See accompanying notes to unaudited condensed consolidated financial statements.

ELEDON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	For the Nine Months Ended September 30,
	2024			2023
				(As Restated)
Cash flows used in operating activities:
Net income (loss)	$	8,433		$	(86,438	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on lease termination		(10	)		—
Amortization of operating lease asset		271			280
Accretion on investment discounts		(1,916	)		(579	)
Stock-based compensation		6,540			4,835
Change in fair value of warrant liabilities and fair value of financial instruments issued in excess of proceeds		(51,829	)		55,738
Changes in operating assets and liabilities:
Prepaid expenses and other assets		1,685			(356	)
Accounts payable, accrued expenses and other liabilities		8,791			(3,609	)
Operating lease liabilities		(249	)		(267	)
Net cash used in operating activities		(28,284	)		(30,396	)
Cash flows from investing activities:
Purchase of available-for-sale short-term investments		(83,350	)		(60,363	)
Proceeds from maturities of available-for-sale short-term investments		60,418			5,000
Net cash used in investing activities		(22,932	)		(55,363	)
Cash flows from financing activities:
Proceeds from issuances of common stock and pre-funded warrants, net		53,355			33,017
Net cash provided by financing activities		53,355			33,017
Net change in cash and cash equivalents		2,139			(52,742	)
Cash and cash equivalents at beginning of period		4,612			56,409
Cash and cash equivalents at end of period	$	6,751		$	3,667
Supplemental disclosure of non-cash investing and financing activities
Non-cash activities:
Common stock exchanged for X and X1 non-voting convertible preferred stock	$	—		$	1
Unrealized gain on available-for-sale securities	$	102		$	—
Increase in operating lease asset and liability due to new lease	$	377		$	—
Settlement of warrant liability into common stock due to exercise	$	420		$	—

See accompanying notes to unaudited condensed consolidated financial statements.

ELEDON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Description of Business

Eledon Pharmaceuticals, Inc. is a clinical stage biotechnology company using its immunology expertise in targeting the CD40 Ligand (“CD40L”) pathway to develop therapies to protect transplanted organs and prevent rejection, and to treat amyotrophic lateral sclerosis (“ALS”). The Company’s lead compound in development is tegoprubart, an IgG1, anti-CD40L antibody with high affinity for the CD40 Ligand, a well-validated biological target that we believe has broad therapeutic potential. Unless otherwise indicated, references to the terms “Eledon,” “our,” “us,” “we,” or the “Company” refer to Eledon Pharmaceuticals, Inc. and its wholly owned subsidiaries, on a consolidated basis.

On September 14, 2020, Eledon acquired Anelixis Therapeutics, Inc. (“Anelixis”), a privately held clinical stage biotechnology company developing a next generation anti-CD40L antibody as a potential treatment for organ and cellular transplantation, autoimmune diseases, and neurodegenerative diseases. The Company maintains its corporate headquarters in Irvine, California and has research and development facilities in Burlington, Massachusetts.

Restatement of Previously Issued Financial Statements

During the preparation of the Company’s Condensed Consolidated Financial Statements for the fiscal quarter ended June 30, 2024, the Company determined that the Common Warrants and the Subsequent Closing Warrants (each as defined in Note 8) do not meet the conditions to be classified as equity instruments under ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” (“ASC 815-40”) and must instead be recorded as liabilities on the Company’s consolidated balance sheet at their fair value and remeasured at fair value for each subsequent reporting period. As a result, the Company determined that a correction was necessary with respect to the Company’s reporting and recording of the fair value of the Common Warrants and the Subsequent Closing Warrants. Certain prior period financial statements and financial information are presented herein as restated. See Note 12 for further information.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and Article 8 of Regulation S-X requirements as set forth by the Securities and Exchange Commission (“SEC”) for interim financial information and reflect all adjustments and disclosures, which are, in the opinion of management, of a normal and recurring nature, and considered necessary for a fair presentation of the financial information contained herein. Pursuant to these rules and regulations, the unaudited condensed consolidated financial statements do not include all information and notes necessary for a complete presentation of results of operations and comprehensive loss, financial position, and cash flows in conformity with GAAP.

The accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and accompanying notes of Eledon for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed by the Company with the SEC on March 28, 2024, as amended on each of April 26, 2024 and August 19, 2024 (together, the “Amended Form 10-K”). The results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2024 are not necessarily indicative of results expected for the full fiscal year or any other future period.

Principles of Consolidation

Eledon, a Delaware corporation, owns 100% of the issued and outstanding common stock or other ownership interest in Anelixis Therapeutics, LLC, a Delaware limited liability company, and Otic Pharma, Ltd., a private limited company organized under the laws of the State of Israel (“Otic”). Otic owns 100% of the issued and outstanding common stock or other ownership interest in its U.S. subsidiary, Otic Pharma, Inc.

The functional currency of the Company’s foreign subsidiary is the U.S. Dollar; however, certain expenses, assets and liabilities are transacted at the local currency. These transactions are translated from the local currency into U.S. Dollars at exchange rates during or at the end of the reporting period. The activities of the Company’s foreign subsidiary are not significant to the condensed consolidated financial statements.

All significant intercompany accounts and transactions among the entities have been eliminated from the condensed consolidated financial statements.

Liquidity and Financial Condition

The accompanying unaudited condensed consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of the Company’s liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company has experienced recurring net losses and negative cash flows from operating activities since its inception. The Company recorded net income of $77.0 million and $8.4 million for the three and nine months ended September 30, 2024, respectively. These results include a $96.4 million gain related to changes in the fair value of warrant liabilities and the fair value of financial instruments issued in excess of proceeds, recorded in the third quarter ending September 30, 2024. Excluding this gain, the Company would have recorded net losses of $19.5 million and $43.4 million for the three and nine months ended September 30, 2024, respectively. As of September 30, 2024, the Company had cash and cash equivalents and short-term investments of $78.2 million, working capital of $69.0 million and an accumulated deficit of $311.0 million.

On October 29, 2024, the Company entered into an underwriting agreement with Leerink Partners, LLC, as representative of the several underwriters named therein in connection with the underwritten offering, issuance and sale by the Company (the "Offering") of 18,356,173 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $3.65 per share, and pre-funded warrants at a price of $3.649 per pre-funded warrant, which are exercisable to purchase 4,931,507 shares of the Company’s common stock at an exercise price of $0.001 per share. The Offering resulted in gross proceeds to the Company of $85.0 million, or net proceeds of approximately $79.5 million after deducting underwriting discounts and commissions and offering expenses. See Note 11. Subsequent Events for additional

information. The Company currently plans to use the net proceeds from the Offering to advance our pipeline and for working capital and general corporate purposes.

Due to continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future. In order to continue these activities, the Company will need to raise additional funds through public or private debt and equity financings or strategic collaboration and licensing arrangements. The Company’s ability to raise additional capital in the equity and debt markets is dependent on a number of factors, including, but not limited to, the market demand for the Company’s common stock, which itself is subject to a number of risks and uncertainties, as well as uncertainty as to whether the Company would be able to raise such additional capital at a price or on terms that are favorable to the Company. If the Company issues equity or convertible debt securities to raise additional funding, its existing stockholders may experience dilution, it may incur significant financing costs, and the new equity or convertible debt securities may have rights, preferences and privileges senior to those of its existing stockholders. If the Company issues debt securities to raise additional funding, it would incur additional debt service obligations, it could become subject to additional restrictions limiting its ability to operate its business, and it may be required to further encumber its assets.

At the time of issuance of the condensed consolidated financial statements for the three and nine months ended September 30, 2024, the Company’s management performed an analysis and concluded that the Company had sufficient cash resources to meet its anticipated cash needs through at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make informed estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. The most significant estimates in the Company’s consolidated financial statements relate to stock-based compensation expense, warrant liabilities, the fair value of right-of-use assets and liabilities, accruals for liabilities, impairment of long-lived assets, and other matters that affect the consolidated financial statements and related disclosures. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions and the differences may be material to the consolidated financial statements.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to significant concentration of credit risk consists of cash, cash equivalents and short-term investments. The Company maintains deposits in federally insured institutions in excess of federally insured limits and invests in short-term investments with the primary objective of seeking to preserve principal, achieve liquidity requirements and safeguard invested funds. We believe that the Company is not exposed to significant credit risk due to the financial position of the depository institution in which those deposits are held and the nature, including the credit ratings, of our cash equivalents and short-term investments, but we have not eliminated all credit risk.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include cash in readily available checking accounts, money market funds, U.S. government securities and U.S. government agency securities. The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents are valued at cost, which approximates their fair value due to the short-term maturities of these investments.

Risks and Uncertainties

As of September 30, 2024 and December 31, 2023, all of the Company’s long-lived assets were located in the United States.

The Company’s products will require approval from the U.S. Food and Drug Administration (“FDA”) and foreign regulatory agencies before commercial sales can commence. There can be no assurance that its products will receive any of these required approvals. The denial or delay of such approvals may impact the Company’s business in the future. In

addition, after the approval by the FDA, there is still an ongoing risk of adverse events that did not appear during the product approval process.

The Company is subject to risks common to companies in the pharmaceutical industry, including, but not limited to, new technological innovations, clinical development risk, establishment of appropriate commercial partnerships, protection of proprietary technology, compliance with government and environmental regulations, uncertainty of market acceptance of products, product liability, the volatility of its stock price and the need to obtain additional financing.

The Company's facilities and equipment, including those of the Company's suppliers and vendors, may be affected by natural or man-made disasters. The Company's administrative office is based in Irvine, California and the Company manages all its research and development activities through third parties that are located throughout the world. The Company has taken precautions to safeguard its facilities, equipment and systems, including insurance, health and safety protocols, and off-site storage of computer data. However, the Company's facilities and systems, as well as those of its third-party suppliers and vendors, may be vulnerable to earthquakes, fire, storm, public health or similar emergencies, power loss, telecommunications failures, physical and software break-ins, software viruses and similar events which could cause substantial delays in its operations, damage or destroy its equipment or inventory, and cause the Company to incur additional expenses and delay research and development activities. In addition, the insurance coverage the Company maintains may not be adequate to cover its losses in any circumstance and may not continue to be available to use on acceptable terms, or at all.

In-Process Research and Development

The fair values of in-process research and development (“IPR&D”) projects acquired in a business combination that are not complete are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related research and development (“R&D”) efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. Major risks and uncertainties are often associated with IPR&D projects because we are required to obtain regulatory approvals before marketing the resulting products. Such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. Consequently, the eventual realized value of the acquired IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods.

Capitalized IPR&D projects are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We consider various factors for potential impairment, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, significant delays in obtaining marketing approval, the inability to bring a product to market and the introduction or advancement of competitors’ products could result in partial or full impairment of the related intangible assets.

Research and Development Expenses

Research and development expenses include personnel and facility-related expenses, outside contracted services including clinical trial costs, manufacturing and process development costs, research costs and other consulting services and non-cash stock-based compensation. Research and development costs are expensed as incurred. Amounts due under contracts with third parties may be either fixed fee or fee for service, and may include upfront payments, monthly payments and payments upon the completion of milestones or receipt of deliverables. Non-refundable advance payments under agreements are capitalized and expensed as the related goods are delivered or services are performed.

The Company contracts with third parties to perform various clinical trial activities in the on-going development of potential products. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows to its vendors. Payments under the contracts depend on factors such as the achievement of certain events, successful enrollment of patients, and completion of portions of the clinical trial or similar conditions. The Company’s accrual for clinical trials is based on estimates of the services received and efforts expended pursuant to contracts with clinical trial centers and clinical research organizations. These contracts may be terminated by the Company upon written notice and the Company is generally only liable for actual effort expended by the organizations to the date of termination, although in certain instances the Company may be further responsible for termination fees and penalties. The Company estimates its research and development expenses and the related accrual as of each balance sheet date based on the facts and circumstances known to the Company at that time. There have been no material adjustments to the Company’s prior period accrued estimates for clinical trial activities during the three and nine months ended September 30, 2024.

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU No. 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024, with early adoptions permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future financial position, results of operations or cash flows.

Warrant Liabilities

The Company accounts for issued warrants either as a liability or equity in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting period. Any change in the fair value of the warrants after the issuance date is recorded in the condensed consolidated statements of operations and comprehensive loss as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.

Note 3. Short-Term Investments

The objectives of the Company’s investment policy are to preserve principal, meet the Company's liquidity requirements and safeguard invested funds. Short-term investments consist of U.S. government securities and U.S. government agency securities. The Company has classified these investments as available-for-sale securities, as the sale of such investments may be required prior to maturity to implement management strategies, and therefore has classified all investments with maturity dates beyond three months at the date of purchase as current assets in the accompanying unaudited condensed consolidated balance sheets. Any premium or discount arising at purchase is amortized and/or accreted to interest income as an adjustment to yield using the straight-line method over the life of the instrument. The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. Investments are reported at their estimated fair value. Unrealized gains and losses are included in accumulated other comprehensive loss as a component of stockholders' equity until realized.

The following is a summary of short-term investments, which were classified as available-for-sale securities as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024									December 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Fair Value
U.S. government securities	$	67,745	$	105	$	(3	)	$	67,847	$	33,213	$	33,213
U.S. government agency securities		3,593		—		—			3,593		13,277		13,277

Eledon Pharmaceuticals, Inc. [ELDN] Filings
10-Q	[2024-11-12]
10-Q	[2024-08-19]
10-Q	[2024-05-15]
10-K	[2024-03-28]
10-Q	[2023-11-09]
10-Q	[2023-08-10]
10-Q	[2023-05-11]
10-K	[2023-03-30]
10-Q	[2022-11-14]
10-Q	[2022-08-11]
10-Q	[2022-05-12]
10-K	[2022-03-24]
10-Q	[2021-11-12]
10-Q	[2021-08-12]
10-Q	[2021-05-14]
10-K	[2021-03-31]
10-Q	[2020-11-16]
10-Q	[2020-08-14]
10-Q	[2020-05-15]
S-1	[2020-03-25]
10-K	[2020-03-17]
10-Q	[2019-11-13]
10-Q	[2019-08-13]
S-1	[2019-06-07]
10-Q	[2019-05-14]
10-K	[2019-03-28]
10-Q	[2018-11-13]
10-Q	[2018-08-07]
S-1	[2018-08-01]
10-Q	[2018-05-11]
10-K	[2018-04-02]
10-Q	[2017-11-08]
10-Q	[2017-08-09]
10-Q	[2017-05-03]
10-K	[2017-03-03]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-10]
10-K	[2016-03-10]
10-Q	[2015-11-10]
10-Q	[2015-08-12]
10-Q	[2015-05-12]
10-K	[2015-03-26]
10-Q	[2014-11-13]
S-1	[2014-08-11]