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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, 2020

OR

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)

 

950 Winter Street

Waltham, Massachusetts 02451

(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 3, 2020, the registrant had 40,137,693 shares of common stock, $0.01 par value per share, outstanding.

 

 


ELOXX PHARMACEUTICALS, INC.

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

4

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months ended June 30, 2020 and 2019

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2020 and 2019

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months ended June 30, 2020 and 2019

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

26

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

27

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

27

 

 

 

 

 

Item 1A.

 

Risk Factors

 

27

 

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

50

 

 

 

 

 

 

 

SIGNATURES

 

51

 


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”. 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 the other documents we have filed with the U.S. Securities and Exchange Commission that are incorporated herein by reference, contain forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. In particular, you should consider the numerous risks described in the “Risk Factors” section in this Report.

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.

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.

The following are some risks and uncertainties, among others, that could cause actual results to differ materially from those expressed or implied by forward looking statements in this Report:

 

risks related to our ability to progress any product candidates in preclinical or clinical trials;

 

the uncertainty of clinical trial results and the fact that positive results from preclinical studies are not always indicative of positive clinical results;

 

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

 

risks related to the competition for patient enrollment from drug candidates in development;

 

the impact of the recent global outbreak of COVID-19 on our clinical trials, operations, vendors, suppliers and employees;

 

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 financing in the future through product licensing, public or private equity or debt financing or otherwise;

 

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

 

business abilities and judgment of personnel, and the availability of qualified personnel; and

 

risks related to the potentially significant, unexpected costs and liabilities arising with respect to the historic Sevion business and operations.

 

3


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,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

30,347

 

 

$

22,493

 

Marketable securities

 

 

6,769

 

 

 

33,783

 

Restricted cash

 

 

52

 

 

 

43

 

Prepaid expenses and other current assets

 

 

1,800

 

 

 

1,390

 

Total current assets

 

 

38,968

 

 

 

57,709

 

Property and equipment, net

 

 

165

 

 

 

201

 

Operating lease right-of-use asset

 

 

678

 

 

 

924

 

Other long-term assets

 

 

110

 

 

 

113

 

Total assets

 

$

39,921

 

 

$

58,947

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

770

 

 

$

1,871

 

Accrued expenses

 

 

3,485

 

 

 

4,655

 

Current portion of long-term debt

 

 

5,149

 

 

 

4,336

 

Advances from collaboration partners

 

 

805

 

 

 

403

 

Current portion of operating lease liability

 

 

524

 

 

 

499

 

Taxes payable

 

 

38

 

 

 

43

 

Total current liabilities

 

 

10,771

 

 

 

11,807

 

Long-term debt

 

 

8,704

 

 

 

10,502

 

Operating lease liability

 

 

155

 

 

 

425

 

Total liabilities

 

 

19,630

 

 

 

22,734

 

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, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.01 par value per share, 500,000,000 shares authorized,

   40,326,906 and 40,186,469 shares issued, and 40,135,290 and

   40,030,763 shares outstanding as of June 30, 2020 and

   December 31, 2019, respectively

 

 

403

 

 

 

402

 

Common stock in treasury, at cost, 191,616 and 155,706 shares as of

   June 30, 2020 and December 31, 2019, respectively

 

 

(1,822

)

 

 

(1,703

)

Additional paid-in capital

 

 

180,549

 

 

 

174,515

 

Accumulated other comprehensive income

 

 

13

 

 

 

18

 

Accumulated deficit

 

 

(158,852

)

 

 

(137,019

)

Total stockholders’ equity

 

 

20,291

 

 

 

36,213

 

Total liabilities and stockholders’ equity

 

$

39,921

 

 

$

58,947

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

4


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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

3,528

 

 

$

7,340

 

 

$

8,077

 

 

$

13,359

 

General and administrative

 

 

4,058

 

 

 

6,971

 

 

 

9,282

 

 

 

12,929

 

Restructuring charges

 

 

 

 

 

 

 

 

3,994

 

 

 

 

Total operating expenses

 

 

7,586

 

 

 

14,311

 

 

 

21,353

 

 

 

26,288

 

Loss from operations

 

 

(7,586

)

 

 

(14,311

)

 

 

(21,353

)

 

 

(26,288

)

Other expense (income), net

 

 

301

 

 

 

138

 

 

 

480

 

 

 

78

 

Net loss

 

$

(7,887

)

 

$

(14,449

)

 

$

(21,833

)

 

$

(26,366

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.20

)

 

$

(0.40

)

 

$

(0.54

)

 

$

(0.73

)

Weighted average number of shares of common stock used in

   computing net loss per share, basic and diluted

 

 

40,129,304

 

 

 

36,278,567

 

 

 

40,101,789

 

 

 

36,098,171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(7,887

)

 

$

(14,449

)

 

$

(21,833

)

 

$

(26,366

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain (loss) on available-for-sale securities

 

 

(52

)

 

 

23

 

 

 

(5

)

 

 

24

 

Comprehensive loss

 

$

(7,939

)

 

$

(14,426

)

 

$

(21,838

)

 

$

(26,342

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

 

 

5


ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(21,833

)

 

$

(26,366

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

5,971

 

 

 

5,674

 

Depreciation

 

 

36

 

 

 

50

 

Amortization of operating lease right-of-use asset

 

 

246

 

 

 

231

 

Amortization of debt discount

 

 

301

 

 

 

234

 

Amortization, net, of premiums and discounts on investments

 

 

9

 

 

 

(109

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(449

)

 

 

339

 

Accounts payable

 

 

(1,101

)

 

 

1,726

 

Accrued expenses

 

 

(1,170

)

 

 

(281

)

Operating lease liabilities

 

 

(245

)

 

 

(231

)

Taxes payable

 

 

(5

)

 

 

(79

)

Net cash used in operating activities

 

 

(18,240

)

 

 

(18,812

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

 

 

 

(33,590

)

Proceeds from maturities of marketable securities

 

 

27,000

 

 

 

6,750

 

Purchase of property and equipment

 

 

 

 

 

(16

)

Cash received (paid) for long-term deposits

 

 

42

 

 

 

(9

)

Net cash provided by (used in) investing activities

 

 

27,042

 

 

 

(26,865

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from underwritten public offering, net of issuance costs

 

 

 

 

 

32,222

 

Proceeds from debt financing obligation

 

 

797

 

 

 

15,000

 

Payment of debt issuance costs

 

 

 

 

 

(276

)

Repayment of term loan principal

 

 

(2,083

)

 

 

 

Proceeds from exercises of stock options

 

 

64

 

 

 

116

 

Proceeds from sale of common stock under at-the-market sales agreement

 

 

 

 

 

455

 

Payment for settlement of taxes upon vesting of restricted stock units

 

 

(119

)

 

 

(1,120

)

Proceeds from advances from collaboration partners

 

 

402

 

 

 

 

Net cash (used in) provided by financing activities

 

 

(939

)

 

 

46,397

 

Increase in cash, cash equivalents and restricted cash

 

 

7,863

 

 

 

720

 

Cash, cash equivalents and restricted cash at the beginning of the period

 

 

22,536

 

 

 

48,651

 

Cash, cash equivalents and restricted cash at the end of the period

 

$

30,399

 

 

$

49,371

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents and restricted cash to condensed

   consolidated balance sheets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

30,347

 

 

$

49,326

 

Restricted cash

 

 

52

 

 

 

45

 

Total cash, cash equivalents and restricted cash

 

$

30,399

 

 

$

49,371

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow activities:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

481

 

 

$

400

 

Cash paid for income taxes

 

$

5

 

 

$

79

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

Non-cash acquisition of treasury stock

 

$

 

 

$

95

 

Non-cash issuance of common stock upon exercise of warrants

 

$

 

 

$

178

 

Fair value of warrants issued in connection with long-term debt

 

$

 

 

$

421

 

Deferred public offering costs in accounts payable and accrued expenses

 

$

 

 

$

172

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

6


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 (loss) 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

 

 

 

 

 

 

 

 

 

 

 

 

(1,036

)

 

 

(3

)

 

 

 

 

 

(3

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,976

 

Change in unrealized gain (loss) on investments

 

 

 

 

 

 

 

 

 

 

 

(52

)

 

 

 

 

 

 

 

 

 

 

 

(52

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,887

)

 

 

(7,887

)

Balance at June 30, 2020

 

 

40,135,290

 

 

$

403

 

 

$

180,549

 

 

$

13

 

 

 

(191,616

)

 

$

(1,822

)

 

$

(158,852

)

 

$

20,291

 

 


7


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, 2018

 

 

35,860,114

 

 

$

360

 

 

$

129,825

 

 

$

 

 

 

(91,423

)

 

$

(1,129

)

 

$

(86,145

)

 

$

42,911

 

Exercise of stock options

 

 

25,000

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

Issuance of common stock under at-the-market sales agreement

 

 

35,362

 

 

 

1

 

 

 

454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

455

 

Issuance of warrants

 

 

 

 

 

 

 

 

421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

421

 

Vesting of restricted stock units

 

 

25,132

 

 

 

 

 

 

 

 

 

 

 

 

(10,467

)

 

 

(121

)

 

 

 

 

 

(121

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,658

 

Change in unrealized gain (loss) on investments

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,917

)

 

 

(11,917

)

Balance at March 31, 2019

 

 

35,945,608

 

 

$

361

 

 

$

133,383

 

 

$

1

 

 

 

(101,890

)

 

$

(1,250

)

 

$

(98,062

)

 

$

34,433

 

Exercise of stock options

 

 

36,790

 

 

 

 

 

 

90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90

 

Issuance of common stock upon exercise of warrants

 

 

44,814

 

 

 

 

 

 

178

 

 

 

 

 

 

(14,893

)

 

 

(178

)

 

 

 

 

 

 

Vesting of restricted stock units

 

 

54,122

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

(11,914

)

 

 

(111

)

 

 

 

 

 

(111

)

Issuance of common stock upon public offering

 

 

3,833,334

 

 

 

38

 

 

 

32,184