SEC Filing | Eloxx Pharmaceuticals, Inc.

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elox-10q_20210630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	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: 001-31326

ELOXX PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware

84-1368850

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

480 Arsenal Way

Watertown, Massachusetts 02472

(Address of principal executive offices) (Zip Code)

781-577-5300

(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
Common Stock, $0.01 par value per share	ELOX	The Nasdaq Global 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, 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 ☒

On August 9, 2021, the registrant had 86,202,772 shares of common stock, $0.01 par value per share, outstanding.

ELOXX PHARMACEUTICALS, INC.

TABLE OF CONTENTS

		Page
	Special Note Regarding Forward-Looking Statements	3

	Market and Industry Data	4


	Risk Factor Summary	5

	PART I. FINANCIAL INFORMATION	7

Item 1.	Condensed Consolidated Financial Statements (unaudited)	7

	Balance Sheets as of June 30, 2021 and December 31, 2020	7

	Statements of Operations and Comprehensive Loss for the Three and Six Months ended June 30, 2021 and 2020	8

	Statements of Cash Flows for the Six Months ended June 30, 2021 and 2020	9

	Statements of Stockholders’ Equity for the Three and Six Months ended June 30, 2021 and 2020	10

	Notes to Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

Item 4.	Controls and Procedures	28

	PART II. OTHER INFORMATION	29

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29


Item 6.	Exhibits	54

	SIGNATURES	57

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”. Hyperlinks and web addresses are provided as a convenience and for informational purposes only. Eloxx bears no responsibility for the security or content of external websites.

This Quarterly Report on Form 10-Q, or this Report, 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 Report, including without limitation, statements regarding expected timing of trials and results from our clinical program, strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, 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 identified in Part I. Item 1A. “Risk Factors” and Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties include, but are not limited to:

•

risks related to our dependence on our lead product candidate, ELX-02 and our ability to progress any of our product candidates in preclinical or clinical trials;

•

the length and expense of preclinical and clinical trial development and the uncertain outcomes from such trials;

•

risk related to doing business with collaborators, healthcare professionals, principal investigators, consultants, vendors, customers, and third-party payors;

•

risks that our product candidates may cause adverse events or other properties that delay or prevent regulatory approval or market acceptance;

•

risks related to the scope, rate and progress of our preclinical studies and clinical trials and other research and development activities;

•

risks related to patient recruitment and enrollment in our clinical trials;

•

the impact of the global COVID-19 pandemic or other public health epidemics and other factors beyond our control on our clinical trials, operations, vendors, suppliers and employees;

•

risks related to regulatory approvals and other requirements applicable to our product candidates;

•

risks related to our ability to obtain the capital necessary to fund our operations;

•

risks relating to the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

•

risks related to our ability to obtain adequate funding to finance our operations;

•

our and our stockholders ability to realize benefits from our strategic initiatives, including our acquisition of Zikani Therapeutics, Inc. in April 2021; and

•

general business conditions, regulatory environment, competition and market for our products.

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. Unless required by law, we will not undertake 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 Report 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.

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 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 12, 2021 and our other filings with the SEC before making an investment decision regarding our common stock.

Risks Related to Drug Discovery, Development, Regulatory Approval and Commercialization

•

The success of our lead product candidate, ELX-02, is critical to our business. If ELX-02 fails during development, it may adversely impact the commercial viability of ELX-02 and have a material adverse effect on our business.

•

Positive results from preclinical testing of ELX-02 are not necessarily predictive of the results of clinical trials of ELX-02. If we cannot achieve positive results in our clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize ELX-02.

•

Our product candidates, including ELX-02, may cause adverse events or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance.

•

Our clinical trials are costly, lengthy, time-consuming and difficult to design and implement, may result in unforeseen costs and could be delayed or terminated, which may have a material adverse effect on our business, results of operations and financial condition.

•

We may find it difficult to recruit and enroll patients in our clinical trials, which could cause significant delays in the completion of such trials.

•

Because our clinical trials depend upon third-party researchers, scientists and consultants, the results of our clinical trials and such research activities are subject to delays and other risks that are beyond our control, which could impair our clinical development programs.

•

We are subject to extensive governmental regulation including the requirements of the U.S. Food and Drug Administration (“FDA”) and comparable foreign regulatory authorities for development and approval of our product candidates before they can be marketed.

•

We may not obtain the necessary FDA, European Medicines Agency (or “EMA”) or other worldwide regulatory approvals to commercialize our product candidates in a timely manner, if at all, which would have a material adverse effect on our business, results of operations and financial condition.

•

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell any of our product candidates that obtain regulatory approval, we may be unable to generate any revenue.

•

Even though we have received orphan drug designation from the FDA for ELX-02 for the treatment of cystic fibrosis, cystinosis, MPS I, and Rett syndrome, we may not be able to obtain orphan drug marketing exclusivity for ELX-02 or any of our other potential product candidates for other indications.

•

Developments by competitors may render our products or technologies obsolete or non-competitive which would have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Our Financial Position and Need for Additional Capital

•

We have incurred significant operating losses since our inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future. We may never achieve or maintain profitability.

•

We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

•

Raising additional capital will cause dilution to our stockholders, and may restrict our operations or require us to relinquish rights to our technologies or product candidates.

Risks Related to Our Business and Operations

•

We may seek to expand our business through strategic initiatives. Our efforts to identify opportunities or complete transactions that satisfy our strategic criteria may not be successful, and we may not realize the anticipated benefits of any completed acquisition, collaboration or other strategic transaction.

•

Changes in healthcare laws and implementing regulations, as well as changes in healthcare policy, may affect coverage and reimbursement of our product candidates in ways that we cannot currently predict, and these changes could adversely affect our business and financial condition.

•

Our business could be adversely affected by the effects of widespread public health epidemics and other factors beyond our control.

•

Security breaches, cyber-attacks, or other disruptions could expose us to liability and affect our business and reputation.

•

We rely on third parties to conduct some or all aspects of our product manufacturing, protocol development, research and preclinical and clinical testing, and these third parties may not perform satisfactorily or may experience delays and disruptions that may negatively impact our operations.

•

Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.

Risks Related to Intellectual Property

•

If we fail to adequately protect or enforce our intellectual property rights or secure rights to third party patents, the value of our intellectual property rights would diminish, and our business, competitive position and results of operations would suffer.

•

If we infringe the rights of third parties, we could be prevented from selling products, forced to pay damages and required to defend against litigation which could result in substantial costs and may have a material adverse effect on our business, results of operations and financial condition.

•

We rely on confidentiality agreements that could be breached and may be difficult to enforce which could have a material adverse effect on our business and competitive position.

•

If we cannot meet requirements under our license agreement, we could lose the rights to our product candidates, which could have a material adverse effect on our business.

Risks Related to Our Regional Operations

•

Potential political and economic instability in regions where we conduct business may adversely affect our results of operations.

•

We received Israeli government grants for our research and development activities and programs. The terms of such grants may require us, in the future, to pay royalties and under certain circumstances, penalties in addition to payment of royalties.

General Risk Factors

•

Our stock price may be volatile and may or may not reflect our operations or value, and therefore purchasers of our common stock could incur substantial losses.

•

Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

•

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

•

Our directors, executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that an investor may not consider to be in the best interests of our stockholders.

•

Future sales and issuances of our securities or rights to purchase securities, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause the prices of our securities to decline.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Information

ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	June 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	56,734		$	24,668
Restricted cash		246			56
Prepaid expenses and other current assets		1,579			1,169
Total current assets		58,559			25,893
Property and equipment, net		185			133
Operating lease right-of-use asset		1,866			421
Other long-term assets		—			30
Total assets	$	60,610		$	26,477

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,024		$	481
Accrued expenses		3,302			2,886
Current portion of long-term debt		5,686			5,239
Advances from collaboration partners		3,411			805
Current portion of operating lease liability		753			389
Taxes payable		34			38
Total current liabilities		15,210			9,838
Long-term debt		3,637			6,376
Operating lease liability		1,120			33
Total liabilities		19,967			16,247
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 5,000,000 shares authorized, no shares issued or outstanding as of June 30, 2021 and December 31, 2020		—			—
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 86,463,355 and 40,350,922 shares issued and 86,201,767 and 40,157,187 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		863			404
Common stock in treasury, at cost, 261,588 and 193,735 shares as of June 30, 2021 and December 31, 2020, respectively		(2,065	)		(1,828	)
Additional paid-in capital		258,193			183,250
Accumulated deficit		(216,348	)		(171,596	)
Total stockholders’ equity		40,643			10,230
Total liabilities and stockholders’ equity	$	60,610		$	26,477

See accompanying notes to unaudited condensed consolidated financial statements

ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Operating expenses:
Research and development	$	5,704		$	3,738		$	9,777		$	8,505
General and administrative		7,355			3,848			11,696			8,854
In process research and development		22,670			—			22,670			—
Restructuring charges		—			—			—			3,994
Total operating expenses		35,729			7,586			44,143			21,353
Loss from operations		(35,729	)		(7,586	)		(44,143	)		(21,353	)
Other expense, net		329			301			609			480
Net loss	$	(36,058	)	$	(7,887	)	$	(44,752	)	$	(21,833	)

Net loss per share, basic and diluted	$	(0.54	)	$	(0.20	)	$	(0.84	)	$	(0.54	)
Weighted average number of shares of common stock used in computing net loss per share, basic and diluted		66,389,865			40,129,304			53,357,401			40,101,789

Comprehensive loss:
Net loss	$	(36,058	)	$	(7,887	)	$	(44,752	)	$	(21,833	)
Other comprehensive income:
Change in unrealized gain on available-for-sale securities		—			(52	)					(5	)
Comprehensive loss	$	(36,058	)	$	(7,939	)	$	(44,752	)	$	(21,838	)

See accompanying notes to unaudited condensed consolidated financial statements

ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(44,752	)	$	(21,833	)
Adjustments to reconcile net loss to net cash used in operating activities:
Acquired in-process research and development		22,670			—
Stock-based compensation		5,343			5,971
Depreciation		56			36
Amortization of operating lease right-of-use asset		423			246
Amortization of debt discount		208			301
Amortization, net of premiums and discounts on investments		—			9
Loss on sales and disposals of property and equipment		84			—
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(84	)		(449	)
Accounts payable		(75	)		(1,101	)
Accrued expenses		69			(1,170	)
Merger related costs paid		(1,003	)		—
Operating lease liabilities		(417	)		(245	)
Taxes payable		(4	)		(5	)
Net cash used in operating activities		(17,482	)		(18,240	)
Cash flows from investing activities:
Proceeds from maturities of marketable securities		—			27,000
Cash acquired in merger transaction		2,145			—
Cash received from long-term deposits		—			42
Net cash provided by investing activities		2,145			27,042
Cash flows from financing activities:
Proceeds from underwritten public offerings, net of issuance costs		47,718			—
Proceeds from debt financing obligation		-			797
Repayment of term loan principal		(2,500	)		(2,083	)
Payment for settlement of taxes upon vesting of restricted stock units		(237	)		(119	)
Proceeds from advances from collaboration partners		2,606			402
Proceeds from exercises of stock options		6			64
Net cash provided by (used in) financing activities		47,593			(939	)
Increase (decrease) in cash, cash equivalents and restricted cash		32,256			7,863
Cash, cash equivalents and restricted cash at the beginning of the period		24,724			22,536
Cash, cash equivalents and restricted cash at the end of the period	$	56,980		$	30,399

Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets:
Cash and cash equivalents	$	56,734		$	30,347
Restricted cash		246			52
Total cash, cash equivalents and restricted cash	$	56,980		$	30,399

Supplemental disclosure of cash flow activities:
Issuance of common stock in merger transaction	$	22,335		$	—
Cash paid for interest	$	273		$	481
Cash paid for income taxes	$	2		$	5

See accompanying notes to unaudited condensed consolidated financial statements

ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

	Common stock								Treasury stock
	Shares		Amount		Additional paid-in capital		Accumulated other comprehensive income		Shares			Amount			Accumulated deficit			Total stockholders' equity
Balance at December 31, 2020		40,157,187	$	404	$	183,250	$	—		(193,735	)	$	(1,828	)	$	(171,596	)	$	10,230
Vesting of restricted stock units		57,687		—		-		—		(23,883	)		(94	)		—			(94	)
Stock-based compensation expense		—		—		1,308		—		—			—			—			1,308
Net loss		—		—		—		—		—			—			(8,694	)		(8,694	)
Balance at March 31, 2021		40,214,874	$	404	$	184,558	$	—		(217,618	)	$	(1,922	)	$	(180,290	)	$	2,750
Exercise of stock options		3,525		—		6		—		—			—			—			6
Vesting of restricted stock units		53,224		—		—		—		(43,970	)		(143	)		—			(143	)
Stock-based compensation expense		—		—		4,035		—		—			—			—			4,035
Issuance of common stock in connection with merger		7,596,810		76		22,259		—		—			—			—			22,335
Issuance of shares upon public offering		38,333,334		383		47,335		—		—			—			—			47,718
Net loss		—		—		—		—		—			—			(36,058	)		(36,058	)
Balance at June 30, 2021		86,201,767	$	863	$	258,193	$	—		(261,588	)	$	(2,065	)	$	(216,348	)	$	40,643

ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

	Common stock									Treasury stock
	Shares		Amount		Additional paid-in capital			Accumulated other comprehensive income		Shares			Amount			Accumulated deficit			Total stockholders' equity
Balance at December 31, 2019		40,030,763	$	402	$	174,515		$	18		(155,706	)	$	(1,703	)	$	(137,019	)	$	36,213
Exercise of stock options		10,636		—		64			—		—			—			—			64
Vesting of restricted stock units		84,055		1		(1	)		—		(34,874	)		(116	)		—			(116	)
Stock-based compensation expense		—		—		3,995			—		—			—			—			3,995
Change in unrealized gain on investments		—		—		—			47		—			—			—			47
Net loss		—		—		—			—		—			—			(13,946	)		(13,946	)
Balance at March 31, 2020		40,125,454	$	403	$	178,573		$	65		(190,580	)	$	(1,819	)	$	(150,965	)	$	26,257
Vesting of restricted stock units		9,836		—		—