UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
The |
*As previously reported, effective October 16, 2023, the registrant’s common stock is being quoted on the OTC Pink Marketplace under the symbol “ELOX.” Trading of the registrant’s common stock will remain suspended on, but will not be delisted from, the Nasdaq Capital Market during the pendency of the registrant’s appeal from Nasdaq’s delisting determination following the registrant’s non-compliance with Nasdaq Listing Rule 5550(b)(2). Nasdaq will not take any action to delist the Company’s securities pending a final written decision by the Nasdaq Listing Council.
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 |
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Accelerated filer |
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Smaller reporting company |
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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
As of November 9, 2023, the registrant had
ELOXX PHARMACEUTICALS, INC.
TABLE OF CONTENTS
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Special Note Regarding Forward-Looking Statements |
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Market and Industry Data |
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Risk Factor Summary |
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5 |
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Item 1. |
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Balance Sheets as of September 30, 2023 and December 31, 2022 |
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Statements of Operations for the Three and Nine Months ended September 30, 2023 and 2022 |
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Statements of Cash Flows for the Nine Months ended September 30, 2023 and 2022 |
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Statements of Stockholders’ Deficit for the Three and Nine Months ended September 30, 2023 and 2022 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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27 |
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28 |
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Item 1. |
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28 |
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Item 1A. |
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Risk Factors |
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Item 2. |
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Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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Item 3. |
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57 |
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Item 4. |
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57 |
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Item 5. |
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Item 6. |
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58 |
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61 |
2
Special Note Regarding Forward-Looking Statements
Eloxx Pharmaceuticals, Inc., together with its subsidiaries, is collectively referred to herein as “we,” “our,” “us,” “Eloxx” or the “Company.”
This Quarterly Report on Form 10-Q, and information incorporated herein, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding our ability to obtain the capital necessary to fund our operations, including under the ATM Program (defined herein), and continue as a going concern; our ability to remain listed on the Nasdaq Capital Market; our strategy, future results of operations and financial position; the expected timing of trials of our product candidates and the potential of our product candidate to treat nonsense mutations; future revenues, projected costs, prospects, plans and objectives of management; the timing and expectations surrounding regulatory communications; our relationship with third-parties; and the potential, safety, efficacy, and regulatory and clinical progress of our product candidates, prospective products, product approvals, as well as research and development costs, are forward-looking statements. Without limiting the foregoing, in some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “would,” “should,” “expect,” “exploring,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seeks,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. No forward-looking statement is a guarantee of future results, performance, or achievements, and one should avoid placing undue reliance on such statements.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to those risks, uncertainties and assumptions identified in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”).
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risks and uncertainties.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. You should not rely upon forward-looking statements as predictions of future events. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Unless required by law, we will not undertake any obligation and we specifically disclaim any obligation to release publicly the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of events, whether or not anticipated. In that respect, we wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made.
MARKET AND INDUSTRY DATA
This Quarterly Report on Form 10-Q and the other documents incorporated herein by reference include statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data and disclaim responsibility for its content. Furthermore, management’s estimates are derived from publicly available information, their knowledge of our industry and their assumptions based on such information and knowledge, which we believe to be reasonable. This data involves a number of assumptions and limitations which are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in this Quarterly Report on Form 10-Q under “Special Note Regarding Forward-Looking Statements” and Part II, Item 1A “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates.
3
RISK FACTOR SUMMARY
The following is a summary of the principal risks of an investment in our common stock. This summary does not list all the risks that we face. Additional discussion of the risks summarized below follow directly under the heading “Risk Factors” and should be carefully considered, together with other information in our 2022 Annual Report and our other filings with the SEC before making an investment decision regarding our common stock.
4
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Information
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
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September 30, |
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December 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of long-term debt |
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Advances from collaboration partners |
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Warrant liabilities |
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Current portion of operating lease liability |
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Derivative liabilities |
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Total current liabilities |
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Long-term debt, net of current portion |
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Operating lease liability |
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Total liabilities |
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Stockholders’ deficit: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ deficit |
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( |
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( |
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Total liabilities and stockholders’ deficit |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements
5
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
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Three Months Ended |
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Nine Months Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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Other (income) expense, net |
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( |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of shares of common stock |
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See accompanying notes to unaudited condensed consolidated financial statements
6
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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Nine Months Ended |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Depreciation |
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Amortization of operating lease right-of-use asset |
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Amortization of debt discount |
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Change in fair value of derivative liabilities |
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Change in fair value of warrant liabilities |
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( |
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Loss on extinguishment of debt |
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Loss on issuance of common stock |
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Gain on disposal of property and equipment |
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( |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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Accounts payable |
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Accrued expenses |
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( |
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Operating lease liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities: |
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Proceeds from sale of property and equipment |
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Purchases of property and equipment |
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( |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from the issuance of common stock, pre-funded warrants, and common stock warrants from the September 2023 Registered Direct Offering, net of issuance costs |
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Proceeds from sale of common stock through ATM program, net of issuance costs |
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Repayment of term loan principal |
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( |
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Proceeds from advances from collaboration partners |
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Net cash (used in) provided by financing activities |
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( |
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Decrease in cash, cash equivalents and restricted cash |
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( |
) |
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( |
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Cash, cash equivalents and restricted cash at the beginning of the period |
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Cash, cash equivalents and restricted cash at the end of the period |
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$ |
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$ |
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Reconciliation of cash, cash equivalents and restricted cash to condensed |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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Supplemental disclosure of cash flow activities: |
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Cash paid for interest |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements
7
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(in thousands, except share data)
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Common stock |
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Treasury stock |
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Shares |
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Amount |
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Additional |
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Stock subscription receivable |
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Shares |
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Amount |
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Accumulated |
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Total |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
— |
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— |
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$ |
— |
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$ |
( |
) |
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$ |
( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
— |
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— |
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$ |
— |
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$ |
( |
) |
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$ |
( |
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Sale of common stock through ATM, net of issuance costs of $ |
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( |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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— |
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$ |
— |
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$ |
( |
) |
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$ |
( |
) |
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Issuance of common stock and pre-funded warrants related to the September 2023 Registered Direct Offering, net of issuance costs of $ |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Sale of common stock through ATM, net of issuance costs of $ |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at September 30, 2023 |
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$ |
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$ |
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$ |
— |
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— |
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$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
See accompanying notes to unaudited condensed consolidated financial statements
8
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(in thousands, except share data)
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Common stock |
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Treasury stock |
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Shares |
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Amount |
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Additional |
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Stock subscription receivable |
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Shares |
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Amount |
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Accumulated |
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Total |
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||||||||
Balance at December 31, 2021 |
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$ |
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$ |
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$ |
— |
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( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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$ |
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||||
Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|||
See accompanying notes to unaudited condensed consolidated financial statements
9
ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
Eloxx Pharmaceuticals, Inc., together with its subsidiaries (collectively “Eloxx” or the “Company”), is a clinical-stage biopharmaceutical company engaged in the science of ribosomal modulation. The Company is developing novel small molecule drug candidates from its library of unique Ribosome Modulating Agents (“RMAs”) and Eukaryotic Ribosomal Selective Glycosides (“ERSGs”) for the treatment of a subset of rare and ultra-rare diseases and cancers characterized by genetic mutations that cause defects in protein translation. Specifically, the Company is targeting restoration of functional proteins in patients with premature stop codon mutations and ribosomal mutations. Premature stop codons are point mutations that disrupt the stability of the impacted messenger RNA (mRNA) and the protein synthesis from that mRNA. Additionally, certain mutations of the ribosome disrupt normal protein translation and are drivers of a subset of cancers. On April 1, 2021, the Company acquired Zikani Therapeutics, Inc. (“Zikani”), a preclinical stage biopharmaceutical company engaged in the science of ribosome modulation, leveraging its innovative TURBO-ZMTM chemistry technology platform to develop novel ribosome modulating agents (“RMAs”). The TURBO-ZMTM platform is designed to enable rapid synthesis of novel macrolides that can be optimized to modulate the human, bacterial or viral ribosomes to treat rare diseases and cancers with certain ribonucleic acid (“RNA”) and ribosomal mutations.
The Company is headquartered in Watertown, Massachusetts, with additional operations in Israel and Australia.
Liquidity and Going Concern
The Company has a history of net losses and negative cash flows from operating activities since inception and, as of September 30, 2023, had an accumulated deficit of $
The Company has financed its operations primarily from the sale of equity securities and to a lesser extent, loans and grants. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital to fund its operations. In addition, as disclosed in Note 6, in September 2021, the Company entered into the Hercules Loan (as defined below) for an aggregate principal amount of up to $
As of September 30, 2023, the Company was in compliance with all debt covenants. However, the inherent uncertainties described above may impact the Company’s ability to remain in compliance with these covenants over the next 12 months. If the Company breaches its financial covenants and fails to secure a waiver or forbearance from the third-party lender, such breach or failure could accelerate the repayment of the outstanding borrowings under the Hercules Loan Agreement or the exercise of other rights or remedies the third-party lender may have under applicable law. No assurance can be provided a waiver or forbearance will be granted or the outstanding borrowings under the Hercules Loan Agreement, will be successfully refinanced on terms that are acceptable to the Company.
The Company believes that its cash and cash equivalents of $
10
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 the Company is unable to obtain adequate financing, it will evaluate options, which may include reducing or deferring operating expenses, which may have a material adverse effect on the Company’s operations and future prospects.
2. Basis of Presentation and Significant Accounting Policies
The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).
Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted, as permitted by such rules and regulations. These interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows for the interim periods ended September 30, 2023 and 2022.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2023 (the “2022 Annual Report”).
The significant accounting policies used in the preparation of these condensed consolidated financial statements are consistent with those described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022, and the notes thereto, in the Company’s 2022 Annual Report.
The Company records stock issuances at the effective date. If the subscription is not funded upon issuance, the Company records a stock subscription receivable as an asset on the balance sheet. When stock subscription receivables are not received prior to the issuance of financial statements at a reporting date in satisfaction of the requirements under Accounting Standard Codification (“ASC”) 505-10-45-2, the stock subscription receivable is reclassified as a contra account to stockholder’s deficit on the balance sheet.
Reverse Stock Split
On December 1, 2022, the Company effected a 1-for-40 reverse stock split of its common stock (the “Reverse Stock Split”). As further described below, at a special meeting of stockholders held on November 30, 2022 (the “Special Meeting”), the stockholders of the Company approved a proposal to authorize the Company’s Board of Directors, in its discretion following the Special Meeting to amend the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), to effect a reverse stock split of all of the outstanding shares of the Company’s common stock, par value $0.01 per share, at a ratio ranging from any whole number between 1-for-2 and 1-for-40, as determined by the Company’s Board of Directors in its discretion. On November 30, 2022, following the Special Meeting, the Company’s Board of Directors approved the Reverse Stock Split at a ratio of 1-for-40. On December 1, 2022, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment to amend the Company’s Certificate of Incorporation to effect the Reverse Stock Split. The Reverse Stock Split became effective at 5:00 p.m., Eastern Time, on December 1, 2022.
As a result of the Reverse Stock Split, every 40 shares of the Company’s common stock issued or outstanding were automatically reclassified into one validly issued, fully-paid and non-assessable new share of common stock, subject to the treatment of fractional shares as described below, without any action on the part of the holders. Proportionate adjustments will be made to the exercise prices and the number of shares underlying the Company’s outstanding equity awards, as applicable, and warrants exercisable for shares of common stock, as well as to the number of shares issuable under the Company’s equity incentive plans and certain existing agreements. The common stock issued pursuant to the Reverse Stock Split remain fully paid and non-assessable. The Reverse Stock Split did not affect the number of authorized shares of common stock or the par value of the common stock.
No fractional shares were issued in connection with the Reverse Stock Split. Stockholders of record who would otherwise have been entitled to receive fractional shares as a result of the Reverse Stock Split received a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing sales price per share of the common stock (as adjusted for the Reverse Stock Split) on The Nasdaq Capital Market on November 30, 2022, the last trading day immediately preceding the effective time of the Reverse Stock Split.
11
All share and per share amounts in the accompanying financial statements, related footnotes, and management’s discussion and analysis have been adjusted retroactively to reflect the reverse stock split as if it had occurred at the beginning
of the earliest period presented. Effective December 2, 2022, trading of the Company’s common stock on The Nasdaq Capital
Market commenced on a split-adjusted basis, under the existing trading symbol “ ELOX.” On October 12, 2023, the Company received a delisting determination letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) and, on October 16, 2023,the Company’s shares of common stock were suspended from trading on The Nasdaq Capital Market and began trading on the OTC Pink Marketplace. On October 26, 2023, the Company requested a review of the Nasdaq delisting determination by the Nasdaq Listing Council and, as of the date of this Quarterly Report on Form 10-Q, the Listing Council’s review remains ongoing.
Recent Accounting Pronouncements
Although the FASB has issued several ASUs for which adoption dates are pending, the Company does not expect any to have any material impact on its consolidated financial statements.
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, 2022 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
Insurance |
|
|
|
|
|
|
||
Other |
|
|
|
|||||