SEC Filing | Eloxx Pharmaceuticals, Inc.

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elox-10q_20200930.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 September 30, 2020

☐	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 November 2, 2020, the registrant had 40,152,883 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 September 30, 2020 and December 31, 2019	4

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2020 and 2019	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2020 and 2019	6

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 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	27

Item 4.	Controls and Procedures	27

	PART II. OTHER INFORMATION	28

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28


Item 6.	Exhibits	51

	SIGNATURES	52

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.

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)

	September 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	30,592		$	22,493
Marketable securities		—			33,783
Restricted cash		52			43
Prepaid expenses and other current assets		1,568			1,390
Total current assets		32,212			57,709
Property and equipment, net		149			201
Operating lease right-of-use asset		551			924
Other long-term assets		30			113
Total assets	$	32,942		$	58,947

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	638		$	1,871
Accrued expenses		3,091			4,655
Current portion of long-term debt		4,917			4,336
Advances from collaboration partners		805			403
Current portion of operating lease liability		496			499
Taxes payable		38			43
Total current liabilities		9,985			11,807
Long-term debt		7,823			10,502
Operating lease liability		56			425
Total liabilities		17,864			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 September 30, 2020 and December 31, 2019		—			—
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 40,343,181 and 40,186,469 shares issued, and 40,150,530 and 40,030,763 shares outstanding as of September 30, 2020 and December 31, 2019, respectively		403			402
Common stock in treasury, at cost, 192,651 and 155,706 shares as of September 30, 2020 and December 31, 2019, respectively		(1,825	)		(1,703	)
Additional paid-in capital		181,969			174,515
Accumulated other comprehensive income		—			18
Accumulated deficit		(165,469	)		(137,019	)
Total stockholders’ equity		15,078			36,213
Total liabilities and stockholders’ equity	$	32,942		$	58,947

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 September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Operating expenses:
Research and development	$	3,231		$	6,801		$	11,308		$	20,160
General and administrative		3,065			5,978			12,347			18,907
Restructuring charges		—			—			3,994			—
Total operating expenses		6,296			12,779			27,649			39,067
Loss from operations		(6,296	)		(12,779	)		(27,649	)		(39,067	)
Other expense, net		321			96			801			174
Net loss	$	(6,617	)	$	(12,875	)	$	(28,450	)	$	(39,241	)

Net loss per share, basic and diluted	$	(0.16	)	$	(0.32	)	$	(0.71	)	$	(1.05	)
Weighted average number of shares of common stock used in computing net loss per share, basic and diluted		40,142,178			39,944,324			40,115,351			37,394,310

Comprehensive loss:
Net loss	$	(6,617	)	$	(12,875	)	$	(28,450	)	$	(39,241	)
Other comprehensive income (loss):
Change in unrealized gain (loss) on available-for-sale securities		(13	)		(12	)		(18	)		12
Comprehensive loss	$	(6,630	)	$	(12,887	)	$	(28,468	)	$	(39,229	)

See accompanying notes to unaudited condensed consolidated financial statements

ELOXX PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(28,450	)	$	(39,241	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		7,385			8,631
Depreciation		52			68
Amortization of operating lease right-of-use asset		373			350
Amortization of debt discount		438			378
Amortization, net, of premiums and discounts on investments		15			(228	)
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(137	)		(150	)
Advances from collaboration partners		—			403
Accounts payable		(1,233	)		940
Accrued expenses		(1,564	)		(856	)
Operating lease liabilities		(372	)		(350	)
Taxes payable		(5	)		(79	)
Net cash used in operating activities		(23,498	)		(30,134	)
Cash flows from investing activities:
Purchases of marketable securities		—			(56,041	)
Proceeds from maturities of marketable securities		33,750			13,500
Purchase of property and equipment		—			(40	)
Cash received (paid) for long-term deposits		42			(22	)
Net cash provided by (used in) investing activities		33,792			(42,603	)
Cash flows from financing activities:
Proceeds from underwritten public offering, net of issuance costs		—			32,169
Proceeds from debt financing obligation		797			15,000
Payment of debt issuance costs		—			(276	)
Repayment of term loan principal		(3,333	)		—
Proceeds from exercises of stock options		70			148
Proceeds from sale of common stock under at-the-market sales agreement		—			455
Payment for settlement of taxes upon vesting of restricted stock units		(122	)		(1,215	)
Proceeds from advances from collaboration partners		402			—
Net cash (used in) provided by financing activities		(2,186	)		46,281
Increase (decrease) in cash, cash equivalents and restricted cash		8,108			(26,456	)
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	$	30,644		$	22,195

Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets:
Cash and cash equivalents	$	30,592		$	22,155
Restricted cash		52			40
Total cash, cash equivalents and restricted cash	$	30,644		$	22,195

Supplemental disclosure of cash flow activities:
Cash paid for interest	$	665		$	703
Cash paid for income taxes	$	5		$	79
Supplemental disclosure of non-cash financing activities:
Non-cash acquisition of treasury stock	$	—		$	46
Non-cash issuance of common stock upon exercise of warrants	$	—		$	178
Fair value of warrants issued in connection with long-term debt	$	—		$	421

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, 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
Exercise of stock options		5,401		—		5			—			—			—			—			5
Vesting of restricted stock units		9,839		—		—			—			(1,035	)		(3	)		—			(3	)
Stock-based compensation expense		—		—		1,415			—			—			—			—			1,415
Change in unrealized gain (loss) on investments		—		—		—			(13	)		—			—			—			(13	)
Net loss		—		—		—			—			—			—			(6,617	)		(6,617	)
Balance at September 30, 2020		40,150,530	$	403	$	181,969		$	—			(192,651	)	$	(1,825	)	$	(165,469	)	$	15,078

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		—		—			—