ALLENA PHARMACEUTICALS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited financial statements
and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and
our Annual Report on Form 10-K for the year ended
Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A. Risk Factors.
We caution readers not to place undue reliance on any forward-looking statements
made by us, which speak only as of the date they are made. We disclaim any
obligation, except as specifically required by law and the rules of the
Overview
We are a biopharmaceutical company dedicated to developing and commercializing first-in-class, oral enzyme therapeutics to treat patients with rare and severe metabolic and kidney disorders. We are focused on metabolic disorders that result in excess accumulation of certain metabolites that can stimulate inflammation, damage the kidney, and potentially lead to chronic kidney disease, or CKD, and end-stage renal disease, or ESRD. We believe our proprietary know-how in enzyme technology allows for the design, development, formulation, and scalable manufacturing of non-absorbed and stable enzymes delivered orally and in sufficient doses for activity in the gastrointestinal tract. This approach enables us to develop enzyme therapies that degrade metabolites within the GI tract, which reduces potentially toxic metabolite levels in the blood and urine, and in turn, diminishes the disease burden including on the kidney over time.
Our product candidate, ALLN-346, is an orally administered, novel, urate
degrading enzyme for patients with hyperuricemia and gout in the setting of
advanced CKD. We have conducted a Phase 1 program, including both a
single-ascending dose and multiple-ascending dose study in healthy volunteers.
In both studies, ALLN-346 was well tolerated with no clinically significant
safety signals and no dose-limiting toxicities observed in any cohort up to the
highest administered dose. We are currently conducting two Phase 2a studies.
Study 201 is a 7-day inpatient study in patients with hyperuricemia, for which
we reported initial data in
We previously had been developing reloxaliase, a first-in-class, oral enzyme
therapeutic for the treatment of hyperoxaluria, a metabolic disorder
characterized by markedly elevated urinary oxalate, or UOx, levels and commonly
associated with kidney stones, CKD and ESRD. However, in
Our operations to date have been primarily focused on organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential product candidates, manufacturing our product candidates and conducting preclinical studies and clinical trials of reloxaliase and ALLN-346. We do not have any products approved for sale and have not generated any revenue to date.
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We have incurred significant net operating losses in every year since our
inception and expect to continue to incur significant expenses and increasing
operating losses for the foreseeable future. Our net losses may fluctuate
significantly from quarter to quarter and year to year. Our net losses were
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advance the development and conduct future clinical trials of ALLN-346;
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conduct research on the discovery and development of additional product candidates;
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seek regulatory and marketing approvals for product candidates that successfully complete clinical trials, if any;
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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval in geographies in which we plan to commercialize our products ourselves;
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maintain, expand and protect our intellectual property portfolio;
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hire additional staff, including clinical, scientific, technical, operational, and financial personnel, to execute our business plan; and
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add clinical, scientific, operational, financial and management information systems to support our product development and potential future commercialization efforts, and to enable us to operate as a public company.
We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate. Additionally, we currently use contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, to carry out our preclinical and clinical development activities. We do not yet have a sales organization. If we obtain regulatory approval for our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we may seek to fund our operations through public or private equity or debt financings or other sources, including strategic collaborations. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to continue as a going concern.
NASDAQ Delisting Notification
On
In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the "Compliance Period
Rule"), we were provided an initial period of 180 calendar days, or until
If it appears to the Staff that we will not be able to cure the deficiency, the
Staff will provide written notice to us that our common stock will be subject to
delisting. At that time, we may appeal the Staff's delisting determination to a
We are seeking stockholder approval to effect a reverse stock split. However, there can be no assurance that we will receive such approval or that we will be able to regain compliance with the Minimum Bid Price Requirement or maintain compliance with any of the other Nasdaq continued listing requirements, even if we do obtain such approval.
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Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales or any other source and do not expect to generate any revenue from the sale of products for the foreseeable future. If our development efforts for ALLN-346 or other product candidates that we may develop in the future are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our product candidates, which include:
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employee-related expenses, including salaries, benefits and stock-based compensation expense;
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costs incurred under agreements with third parties, including CROs, that conduct research and development, preclinical studies and clinical trials on our behalf;
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costs related to production of preclinical and clinical materials, including fees paid to CMOs;
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consulting, licensing and professional fees related to research and development activities;
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costs of purchasing laboratory supplies and non-capital equipment used in our research and development activities;
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costs related to compliance with clinical regulatory requirements; and
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facility costs and other allocated expenses, which include expenses for rent and maintenance of facilities, insurance, depreciation and other supplies.
We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as clinical site activations, patient enrollment, or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and may be reflected in our consolidated financial statements as prepaid or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
We are developing ALLN-346 for patients with hyperuricemia and CKD. We began incurring external research and development costs for this program in 2016. We recently terminated development of reloxaliase, which we had been developing for the treatment of enteric hyperoxaluria and which had accounted for the substantial majority of our research and development expenses over the past three years.
We typically use our employee and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs and other internal costs to specific product candidates or development programs.
The following table summarizes our research and development expenses by program
(in thousands):
Three Months Ended March 31,
2022 2021
Reloxaliase external costs $ 2,570 $ 3,970
ALLN-346 external costs 1,096 1,123
Employee compensation and benefits 3,292 2,160
Other 800 599
Total research and development expenses
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Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages, primarily due to the increased
size and duration of later-stage clinical trials. Since inception, we have
incurred
The successful development of ALLN-346 and other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of these product candidates. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs and timing of preclinical studies, clinical trials and development of our product candidates will depend on a variety of factors, including:
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successful enrollment in, and completion of, clinical trials for ALLN-346;
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establishing an appropriate safety profile for any potential future product candidates with studies to enable the filing of investigational new drug application, or INDs;
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approval of INDs for any potential future product candidate to commence planned or future clinical trials;
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significant and changing government regulation and regulatory guidance;
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timing and receipt of marketing approvals from applicable regulatory authorities;
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making arrangements with CMOs for third-party commercial manufacturing of our product candidates;
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obtaining and maintaining patent and other intellectual property protection and regulatory exclusivity for our product candidates;
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commercializing the product candidates, if and when approved, whether alone or in collaboration with others;
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acceptance of the product, if and when approved, by patients, the medical community and third-party payors; and
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maintenance of a continued acceptable safety profile of the drugs following approval.
A change in the outcome of any of these variables with respect to the development, manufacture or commercialization enabling activities of any of our product candidates could mean a significant change in the costs, timing and viability associated with the development of that product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include directors' and officers' insurance, facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and professional fees for accounting, auditing, tax and consulting services.
If we are able to secure adequate financing to continue our operations, we expect that our general and administrative expenses will increase in the future to support continued research and development activities and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys and accountants, among other expenses.
Interest Expense, Net
Interest expense, net, primarily consists of interest income earned on our cash and cash equivalents, interest expense incurred on our credit facility and amortized debt discount related to debt issuance costs.
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Other Income (Expense), Net
Other income (expense), net, primarily consists of gain (loss) on foreign currency transactions.
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in
Our significant accounting policies are described in detail in the notes to our
consolidated financial statements appearing in our Annual Report filed on Form
10-K for the year ended
Results of Operations
Comparison of the three months ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended March 31, Dollar
2022 2021 Change
Operating expenses:
Research and development $ 7,758 $ 7,852 $ (94 )
General and administrative 3,799 3,558 241
Total operating expenses 11,557 11,410 147
Loss from operations (11,557 ) (11,410 ) (147 )
Other income (expense):
Interest expense, net (249 ) (235 ) (14 )
Other income (expense), net (7 ) 9 (16 )
Other income (expense), net (256 ) (226 ) (30 )
Net loss $ (11,813 ) $ (11,636 ) $ (177 ) Research and Development Expense
Research and development expense was
Three Months Ended March 31, Dollar
2022 2021 Change
Clinical development external costs
651 1,283 (632 )
Employee compensation and benefits 3,292 2,160 1,132
Other 492 916 (424 )
Total research and development expenses
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Research and development expense consisted primarily of the following:
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Our clinical development external costs were
o
Our URIROX-2 costs decreased
o
Our ALLN-346 costs increased
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Our manufacturing external costs decreased by
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Reloxaliase manufacturing costs decreased
o
ALLN-346 manufacturing costs decreased from
o
Partially offsetting the decreases in reloxaliase and ALLN-346 manufacturing
costs was an increase of
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Employee benefits and compensation costs increased by
General and Administrative Expenses
General and administrative expense was
Three Months Ended March 31, Dollar
2022 2021 Change
Employee compensation and benefits
1,407 932 475
Other 755 823 (68 )
Total general and administrative expenses
The increase in general and administrative expense was primarily attributable to the following:
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Our employee compensation and benefits expense decreased by
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Our consulting and professional services costs increased by
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recruiting costs incurred during the three months ended
Interest Expense, net
Interest expense, net consists of interest income earned on our cash and cash
equivalents and interest expense charged on our outstanding debt. Net interest
expense was
Liquidity and Capital Resources
Sources of Liquidity
We have funded our operations from inception through
On
In
In
In
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issued and sold 6,804,888 shares of our common stock under the Updated B. Riley
ATM Agreement at a weighted average price of
During the first quarter of 2021, we issued and sold 6,058,318 shares of our
common stock under an At-the Market Equity Offering Sales Agreement with
On
The Pontifax Agreement has a term of 48 months and an interest only period of 24
months. Amounts outstanding under the Pontifax Agreement have a fixed interest
rate of 9.0% per annum. Upon the expiration of the interest only period on
At the option of Pontifax, amounts outstanding under the Pontifax Agreement may
be converted at any time into shares of our common stock at a conversion price
of
The borrowings under the Pontifax Agreement are secured by a lien on all of our assets except intellectual property. The Pontifax Agreement contains customary representations, warranties and covenants by us, including negative covenants restricting our activities, such as disposing of our business or certain assets, incurring additional debt or liens or making payments on other debt, making certain investments and declaring dividends, acquiring or merging with another entity, engaging in transactions with affiliates or encumbering intellectual property, among others. The obligations under the Pontifax Agreement are subject to acceleration upon occurrence of specified events of default, including a material adverse change in our business, operations or financial or other condition.
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Cash Flows
The following table provides information regarding our cash flows for the three
months ended
Three Months Ended March 31,
2022 2021
Net cash used in operations $ (20,037 ) $ (10,036 )
Net cash used in investing activities - (422 )
Net cash (used in) provided by financing activities (1,056 ) 11,703
Net (decrease) increase in cash and cash equivalents
Net cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.
Net cash used in operating activities was
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an increase of
•
an increase in net loss of
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a decrease in non-cash items of
We did not have any cash flow activity relating to investment activities during
the three months ended
Net cash used in financing activities was
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development for, initiate later stage clinical trials for, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
Going Concern
As of
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We are exploring opportunities to secure additional funding through equity or
debt financings or through collaborations, licensing transactions or other
sources. In
As part of the strategic process, the Compensation Committee of the Board of
Directors approved a retention plan on
On
On
In a concurrent private placement, we also issued to the Preferred Stock
investor unregistered warrants (the "Common Warrants") to purchase up to an
aggregate of 22,438,575 shares of our common stock, at an exercise price of
Market volatility resulting from the COVID-19 pandemic, conflicts and sanctions
involving
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amending, delaying, limiting, reducing, or terminating one or more of our ongoing or planned clinical trials or development programs of our product candidates. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business for the foreseeable future. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Our future capital requirements will depend on many factors, including;
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the costs of conducting future clinical trials and other development activities to advance ALLN-346;
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the scope, progress, results and costs of discovery, preclinical development, laboratory testing and clinical trials for other potential product candidates we may develop, if any;
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the costs, timing and outcome of regulatory review of our product candidates;
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our ability to establish and maintain collaborations on favorable terms, if at all;
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the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time;
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the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;
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the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
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the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
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the expansion of our workforce and associated costs as we expand our business operations and our research and development activities; and
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the costs of operating as a public company.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
We do not have any committed external sources of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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