Eliem Therapeutics Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
CLYM$10.29+16.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0000950170-24-059995
Item 2. Management’s Discussion and Analysis of Financial Condition and Results and OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0000950170-24-096626
Item 2. Management’s Discussion and Analysis of Financial Condition and Results and OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 85 previous paragraphs and 87 current paragraphs.
32 unchanged; 22 reworded; 29 added; 30 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
We are a biotechnology company primarily focused on developing therapeutics for autoimmune-driven inflammatory diseases, including advancing budoprutug (previously referred to as TNT119), an anti-CD19 monoclonal antibody designed for a broad range of autoimmune diseases, including systemic lupus erythematosus and lupus nephritis (SLE/LN) immune thrombocytopenia (ITP) and membranous nephropathy (MN). Budoprutug is designed to achieve broad and deep depletion of pathogenic B cells with a favorable tolerability profile and convenient dosing regimen with the potential for subcutaneous administration. We believe this reduction of autoantibodies has the potential to be disease modifying in autoantibody driven diseases, such as SLE/LN, ITP and MN. In a Phase 1b clinical trial of budoprutug in MN, 3 out of 5 (or 60%) of patients that received four doses of budoprutug achieved a complete remission of proteinuria, a primary symptom of MN.
Current report
We are developing budoprutug for the treatment of SLE/LN, the underlying pathology of which involves production of autoantibodies by autoreactive B cells that contribute to inflammation and tissue damage. CD19 is a protein expressed on the surface of these B cells and plays a key role in B cell activation. Because budoprutug is designed to target and deplete CD19-expressing B cells known to produce autoantibodies, we believe budoprutug has the potential to treat SLE/LN. In ITP, we believe targeting plasmablasts and plasma cells is likely to decrease the production of autoantibodies, increase platelet count and ameliorate disease. B cell depletion with anti-CD20 targeting monoclonal antibodies (mAbs) whose expression initiates somewhat later and is lost somewhat earlier than anti-CD19, has demonstrated efficacy in ITP disease for some patients in clinical trials by third parties. For those patients who do not respond to anti-CD20 therapy, we believe an anti-CD19 approach, such as budoprutug, may have the ability to further deplete pathogenic CD20-CD19+ cells.
Current report
Based on the preliminary results of the Phase 1b clinical trial of budoprutug in MN, we are working towards the submission of an investigational new drug application (IND) and/or clinical trial application (CTA) for budoprutug in SLE/LN and ITP. Subject to regulatory clearance, we plan to conduct a Phase 2 clinical trial of budoprutug for each of these indications. Further, by the end of 2024, we expect to have finalized a high concentration formulation of budoprutug to potentially support subcutaneous dosing. In addition, we expect to disclose more comprehensive MN data from the Phase 1b clinical trial in the fourth quarter of 2024. In connection with the closing of our acquisition of Tenet Medicines, Inc. (Tenet) in June 2024, our board of directors appointed Dr. Aoife Brennan as our President and Chief Executive Officer. Our management team, led by Dr. Brennan, is currently evaluating and considering revisions to our development plan on a go-forward basis. We expect to provide a comprehensive update on our corporate and budoprutug development strategy and timelines at an Investor Day later this year.
Current report
Tenet Acquisition
Current report
On June 27, 2024, we acquired 100% of the share capital of Tenet in exchange for 5,560,047 shares of our common stock, valued at $41.9 million, or $7.53 per share. The Acquisition is accounted for as an asset acquisition. The total cost of the asset acquisition was $52.8 million, which also included (i) $5.8 million of direct transaction costs incurred and (ii) $5.0 million related to a loan provided to Tenet prior to the closing of the Acquisition that was effectively settled upon the closing of the Acquisition. We recognized in-process research and development (IPR&D) expense of $51.7 million for the three and six months ended June 30, 2024, as the IPR&D was determined to have no future alternative use.
Current report
Our acquired IPR&D expense consists of the relative fair value of the assets acquired and consideration transferred in connection with the Acquisition. As the assets acquired were in the research and development phase and were determined to not have any alternative future use, it was expensed as IPR&D.
Current report
We expect our research and development expenses to increase substantially for the foreseeable future as we conduct our ongoing research and development activities. The process of conducting preclinical studies, acquiring drug product supply, and conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for budoprutug or any future product candidate we may develop.
Current report
The timelines and costs associated with research and development activities are uncertain and can vary significantly among product candidates and development programs due to the inherently unpredictable nature of preclinical and clinical development. We anticipate that we will make determinations as to which indications to pursue in connection with our clinical development of budoprutug or any future product candidates we may develop and how much funding to direct to each such indication on an ongoing basis in response to preclinical and clinical results, regulatory developments, and ongoing assessments as to each such indication’s commercial potential. We will need to raise substantial additional capital in the future.
Current report
Our future research and development costs may vary significantly based on factors such as:
Current report
the potential delays in our preclinical studies, our development programs and our ongoing and planned clinical trial activities due to the effects of global events, including macroeconomic conditions and continued supply chain disruptions;
Current report
A change in the outcome of any of these variables with respect to the development of budoprutug or any future product candidates we may develop could significantly change the costs and timing associated with the development.
Current report
We expect that our general and administrative expenses will significantly increase in the future as we increase our headcount to support our operations.
Current report
Acquired IPR&D expense, related party was $51.7 million for the three months ended June 30, 2024. This amount represents the recognition of IPR&D expense from the Acquisition completed on June 27, 2024.
Current report
General and administrative expenses increased by 21.2% from $3.0 million for the three months ended June 30, 2023 to $3.7 million for the three months ended June 30, 2024. This increase was due to a (i) $1.1 million increase in other general and administrative expenses, primarily driven by an increase in consulting fees and legal expenses, and (ii) an increase of $0.3 million in personnel-related expenses from increased headcount. The increase was partially offset by a $0.6 million decrease in restructuring costs in the prior period and a $0.2 million decrease in insurance costs.
Current report
Comparison of the Six Months Ended June 30, 2024 and June 30, 2023
Current report
Acquired IPR&D expense, related party was $51.7 million for the six months ended June 30, 2024. This amount represents the recognition of IPR&D expense from the Acquisition completed on June 27, 2024.
Current report
Interest Income net
Current report
We believe our cash and cash equivalents of $223.1 million as of June 30, 2024 will be sufficient to fund our operations into 2027. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Current report
We anticipate that our expenses will increase for the foreseeable future as we continue to advance budoprutugand any future product candidates we may develop, expand our corporate infrastructure, and incur costs associated with potential commercialization. We are subject to all of the risks typically related to the development of biopharmaceutical candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business.
Current report
Our future funding requirements will depend on many factors, including the following:
Current report
the potential delays in our preclinical studies, our development programs and our ongoing and planned clinical trial activities due to the effects of global events, including macroeconomic conditions and continued supply chain disruptions;
Current report
Furthermore, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures.
Current report
Until such time, if ever, as we can generate substantial revenue from product sales, we may finance our operations through equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or budoprutug, or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. 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 budoprutug or any future product candidates we may develop even if we would otherwise prefer to develop and market such product candidates ourselves.
Current report
Financing activities
Current report
For the six months ended June 30, 2024, net cash provided by financing activities was $128.4 million. This consisted of $119.7 million in proceeds received from the issuance of our common stock in the Private Placement and $8.7 million in proceeds from exercises of stock options.
Current report
Following the Acquisition, we have obligations under an asset purchase agreement and certain license agreements that obligate us to make specified milestone and royalty payments. The payment obligations under these agreements are contingent upon future events, such as our achievement of specified development, regulatory and commercial milestones, or generating product sales. We are unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. See Note 6 in our condensed consolidated financial statements included herein for a discussion of these milestone and royalty obligations.
Current report
We also have obligations under a non-cancelable operating lease. See Note 7 in our condensed consolidated financial statements included herein for a discussion of our lease obligations.
Current report
Asset Acquisitions
Current report
In accordance with the guidance in Topic 805, Business Combinations, in the Financial Accounting Standards Board’s (the FASB) Accounting Standards Codification (ASC), we evaluate acquisitions of assets and related liabilities and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen test is met, the transaction is accounted for as an asset acquisition. If the screen test is not met, further determination is required as to whether or not we have acquired inputs and processes that have the ability to create outputs which would meet the requirements of a business. We account for an asset acquisition by recognizing net assets based on the cost to the acquiring entity on a relative fair value basis. Goodwill is not recognized in an asset acquisition; any excess consideration transferred over the fair value of the net assets acquired is allocated to the non-monetary identifiable assets and liabilities assumed based on relative fair values. IPR&D acquired in an asset acquisition is expensed provided there is no alternative future use. We account for future payments such as those upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying milestones are achieved. Milestone payments made to third parties subsequent to regulatory approval may be capitalized as intangible assets, if deemed to have alternative future use, and amortized over the estimated remaining useful life of the related product.
Removed paragraphs (30)
Previous report
Forward-Looking Statements
Previous report
The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions, including those relating to future events or our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of terms like these or other comparable terminology, and other words or terms of similar meaning in connection with any discussion of future operating or financial performance. These statements are only predictions.
Previous report
All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Any or all of our forward-looking statements in this document may turn out to be wrong. Actual events or results may differ materially. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and other factors. In evaluating these statements, you should specifically consider various factors, including the risks outlined under the caption “Risk Factors” set forth in Item 1A of Part II of this Quarterly Report on Form 10-Q, as well as those contained from time to time in our other filings with the SEC. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.
Previous report
In July 2023, we made the determination to pause further development of our Kv7 program and to conduct a comprehensive exploration of strategic alternatives focused on maximizing stockholder value. As part of that effort, we are exploring a variety of options, including seeking a partner for further development of both Kv7 and ETX-155. We formed a Special Committee of independent and disinterested directors to oversee our exploration of strategic alternatives.
Previous report
As a part of this process, our representatives and representatives of Tenet Medicines, Inc. (Tenet), which is majority-owned by funds affiliated with RA Capital, engaged in preliminary discussions in an effort to determine whether a potential transaction between the two companies could be mutually beneficial. On March 14, 2024, Tenet submitted a Non-Binding Term Sheet, that contemplated our acquisition of Tenet through a transaction whereby we would issue common stock to Tenet’s equityholders in exchange for all of the outstanding equity of Tenet, and Tenet would become our wholly owned subsidiary.
Previous report
After a comprehensive review of strategic alternatives, including identifying and reviewing potential candidates for a strategic transaction, on April 10, 2024, we entered into an Agreement and Plan of Merger and Reorganization (the Acquisition Agreement) with Tango Merger Sub, Inc., a Delaware corporation and our wholly owned subsidiary (Transitory Subsidiary), Tenet, and, solely in his capacity as company equityholder representative, Stephen Thomas. The Acquisition Agreement provides for the acquisition of Tenet by us through the merger of Transitory Subsidiary into Tenet, with Tenet surviving as our wholly owned subsidiary (the Acquisition). Tenet is a privately held development stage biotechnology company focused on advancing its clinical stage development program, TNT119, an anti-CD19 monoclonal antibody designed for broad range of autoimmune disorders, including systemic lupus erythematosus (SLE), immune thrombocytopenia (IPT) and membranous nephropathy (MN).
Previous report
At the effective time of the Acquisition, by virtue of the Acquisition and without any action on the part of the holders of common stock of Tenet, (i) all issued and outstanding shares of the common stock of Tenet and (ii) all securities convertible into shares of common stock of Tenet will be converted into the right to receive, in the aggregate, a number of shares of our common stock (the Aggregate Consideration) (rounded to the nearest whole share) equal to fifteen and two-fifths percent (15.4%) of the outstanding shares of our common stock as of immediately following the closing of the Acquisition (and for the avoidance of doubt, before giving effect to the issuance of any securities pursuant to the Private Placement), calculated on a fully-diluted basis using the treasury stock method (including, for clarity, calculated by disregarding any out-of-the-money outstanding stock options of our company).
Previous report
Upon the unanimous recommendation of a special committee of our board of directors consisting solely of independent and disinterested directors, our board of directors determined that the terms of the Acquisition and the other transactions are fair to and in the best interests of our company and the unaffiliated stockholders, approved the execution of the Acquisition Agreement and, subject to the terms and conditions of the Acquisition Agreement, recommended that our stockholders vote to, among other things, issue the Aggregate Consideration issuable in connection with the Acquisition under the rules of The Nasdaq Stock Market LLC (the Company Voting Proposals).
Previous report
The Acquisition and the Private Placement are expected to close in the middle of 2024, subject to the satisfaction of customary closing conditions, including regarding receipt of the required approvals by the parties’ stockholders (including the affirmative vote of a majority of the aggregate voting power held by disinterested stockholders of our company), the accuracy of the representations and warranties and compliance by the parties with their respective covenants.
Previous report
The Acquisition Agreement contains certain termination rights of each of us and Tenet, including if our stockholders fail to adopt and approve the Company Voting Proposals. Upon termination of the Acquisition Agreement under specified circumstances, we may be required to pay Tenet a termination fee of $1.0 million and reimburse Tenet’s transaction-related expenses up to a maximum of $0.5 million.
Previous report
Our future operations are highly dependent on the success of the Acquisition and Private Placement, and there can be no assurances that the Acquisition and Private Placement will be successfully consummated. In the event that we do not complete the Acquisition and Private Placement, we may explore strategic alternatives, including, without limitation, another strategic transaction.
Previous report
Restructuring Costs
Previous report
On February 7, 2023, our board of directors approved a restructuring plan (the Restructuring Plan) to conserve financial resources and better align our workforce with current business needs, as a result of the decision to pause development of ETX-155 and focus on our preclinical Kv7.2/3 program. As part of the Restructuring Plan, our workforce was reduced by approximately 55%, with substantially all of the reduction in personnel completed in the first half of 2023. We further reduced our workforce by 10 employees in October 2023.
Previous report
We incurred aggregate restructuring costs of $18.8 million, substantially all of which were recognized in 2023 and have been fully recognized as of March 31, 2024. Restructuring costs incurred during the three months ended March 31, 2024 were not material.
Previous report
During the three months ended March 31, 2023, we recorded restructuring costs of $15.8 million. These costs primarily related to severance payments, healthcare benefits and stock-based compensation.
Previous report
A summary of the restructuring costs recorded in the statement of operations and comprehensive loss for the three months ended March 31, 2023 is as follows (in thousands):
Previous report
Operating Expenses
Previous report
Research and Development
Previous report
General and Administrative
Previous report
Other Income (Expense)
Previous report
Foreign Currency Gain (Loss)
Previous report
Operating Expenses
Previous report
Research and Development
Previous report
General and Administrative
Previous report
Other Income (Expense)
Previous report
Foreign Currency Gain (Loss)
Previous report
We believe our cash and cash equivalents of $105.0 million as of March 31, 2024 will be sufficient to meet our projected operating requirements for at least the next twelve months following the filing date of this Form 10-Q. Continued cash generation is highly dependent on our ability to finance our operations through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or other strategic arrangements. However, our resource requirements could materially change depending on the outcome of our ongoing strategic alternative review process, including to the extent we identify and enter into any potential strategic transaction, and future operations are highly dependent on the success of the Acquisition and the closing of the Private Placement.
Previous report
As of March 31, 2024, our restructuring liability was $0.3 million, substantially all of which was paid in April 2024.
Previous report
Off Balance Sheet Arrangements
Previous report
We did not have any off-balance sheet arrangements as of March 31, 2024 and December 31, 2023.
Reworded paragraphs (22)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the SEC on March 28, 2024. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to Eliem Therapeutics, Inc. and its wholly owned subsidiary.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the SEC on March 28, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve substantial risks and uncertainties. As a result of many factors, including those factors set forth in Part II, Item 1A. “Risk Factors” of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For further information regarding our forward-looking statements, see “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to Eliem Therapeutics, Inc. and its wholly owned subsidiaries.
Previous wording
Prior to July 2023, our lead program was ETX-123, a Kv7.2/3 potassium channel opener. ETX-123 is designed to harness the efficacy of the Kv7.2/3 channel mechanism while attempting to improve the safety and tolerability relative to earlier molecules, based on our insights into the mechanisms of toxicity and the potency and selectivity profile.
Current wording
Previously, we focused primarily on developing novel therapies for neuronal excitability disorders to address unmet needs in psychiatry, epilepsy, chronic pain, and other disorders of the peripheral and central nervous systems, and our lead program was ETX-123, a Kv7.2/3 potassium channel opener. ETX-123 is designed to harness the efficacy of the Kv7.2/3 channel mechanism while attempting to improve the safety and tolerability relative to earlier molecules, based on our insights into the mechanisms of toxicity and the potency and selectivity profile. In July 2023, we made the determination to pause further development of our Kv7 program, and we continue to evaluate our Kv7 program, including seeking a partner for further development of both Kv7 and ETX-155.
Previous wording
Concurrently with the execution of the Acquisition Agreement, we entered into a Securities Purchase Agreement (the Securities Purchase Agreement) with several accredited institutional investors, pursuant to which we agreed to issue and sell to such investors in a private placement an aggregate of 31,238,282 shares of our common stock, at a price of $3.84 per share (the Private Placement). We expect to receive aggregate gross proceeds from the Private Placement of approximately $120.0 million, before deducting estimated offering costs.
Current wording
On June 27, 2024, we completed our acquisition of Tenet (the Acquisition). In connection with the closing of the Acquisition, we issued and sold 31,238,282 shares of our common stock at a price of $3.84 per share in a private placement (the Private Placement) to several accredited institutional investors. We received aggregate gross proceeds from the private placement of approximately $120.0 million, before deducting offering expenses of $0.3 million.
Previous wording
We have incurred significant operating losses since inception, as we have devoted substantially all of our resources to organizing and staffing our company, identifying potential product candidates, business planning, raising capital, undertaking research, executing preclinical studies and clinical development trials, and providing general and administrative support for business activities. We incurred net losses of $1.7 million and $22.3 million for the three months ended March 31, 2024 and 2023, respectively. We had an accumulated deficit of $157.7 million and $156.0 million as of March 31, 2024 and December 31, 2023, respectively.
Current wording
We have incurred significant operating losses since inception, as we have devoted substantially all of our resources to organizing and staffing our company, identifying potential product candidates, business planning, raising capital, undertaking research, executing preclinical studies and clinical development trials, and providing general and administrative support for business activities. We incurred net losses of $54.9 million and $5.2 million for the three months ended June 30, 2024 and 2023, respectively, and $56.6 million and $27.5 million for the six months ended June 30, 2024 and 2023, respectively. We had an accumulated deficit of $212.6 million and $156.0 million as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
Since our inception, we have primarily funded our operations with an aggregate of $208.3 million in net proceeds from the sale and issuance of shares of our redeemable convertible preferred stock and our initial public offering of our common stock, and to a lesser extent from cash received pursuant to U.K. research and development tax credits and incentives. We had cash and cash equivalents of $105.0 million as of March 31, 2024 and cash, cash equivalents, and marketable securities of $106.8 million as of December 31, 2023. Based on our current operating plan, we estimate that our cash and cash equivalents will be sufficient to fund our planned operations through at least 12 months following the filing date of this Form 10-Q.
Current wording
Since our inception, we have primarily funded our operations with an aggregate of $328.0 million in net proceeds from the sale and issuance of shares of our redeemable convertible preferred stock, our initial public offering of our common stock and the sale and issuance of shares in the Private Placement of our common stock that was completed in June 2024. We had cash and cash equivalents of $223.1 million and cash, cash equivalents, and marketable securities of $106.8 million as of June 30, 2024 and December 31, 2023, respectively. Based on our current operating plan, we estimate that our cash and cash equivalents will be sufficient to fund our planned operations into 2027. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate, which case we would be required to obtain additional financing, which may not be available to us on acceptable terms, or at all.
Previous wording
If the Acquisition or other strategic transaction is not consummated and/or if product development is resumed, we will require substantial additional funding to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we may finance our operations through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or other strategic arrangements. Adequate funding may not be available when needed or on terms acceptable to us, or at all. If we are unable to raise additional capital as needed, we may have to significantly delay, scale back or discontinue any future development of our product candidates. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, resulting from increased volatility in the trading prices for shares in the biopharmaceutical industry, the ongoing pandemic, or otherwise. In addition, our ability to continue to benefit from research and development tax credits and incentives will depend on our ability to continue meet the applicable requirements for them. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose.
Current wording
Until such time, if ever, as we can generate significant revenue from product sales, if ever, we may finance our operations through equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. Adequate funding may not be available when needed or on terms acceptable to us, or at all. If we are unable to raise additional capital as needed, we may have to significantly delay, scale back or discontinue any future development of our product candidates. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, resulting from increased volatility in the trading prices for shares in the biopharmaceutical industry, or otherwise. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose.
Previous wording
We do not have any products approved for sale and have not generated any revenue from product sales since our inception. To the extent we continue to pursue clinical development of any future product candidate, our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates, if approved. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities. We expect to continue to incur operating losses for the foreseeable future in connection with the Acquisition and Private Placement.
Current wording
We do not have any products approved for sale and have not generated any revenue from product sales since our inception. Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates, if approved. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities. We expect to continue to incur operating losses for the foreseeable future.
Previous wording
Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.
Current wording
Our operating expenses consist of (i) acquired IPR&D, related party, (ii) research and development expenses, and (iii) general and administrative expenses.
Previous wording
Our research and development expenses consist primarily of direct and indirect costs incurred in connection with our discovery efforts, preclinical studies, and clinical trial activities related to our pipeline, including our paused product candidates ETX-123 and ETX-155.
Current wording
Our research and development expenses consist primarily of direct and indirect costs incurred in connection with our discovery efforts, preclinical studies, and clinical trial activities related to our pipeline, including our paused product candidates ETX-123 and ETX-155. Research and development expenses related to our recently acquired product candidate budoprutug as part of the Tenet Acquisition were not material in the three and six months ended June 30, 2024.
Previous wording
Foreign currency loss increased from a $0.2 million gain for the three months ended March 31, 2023 to a $33,000 loss for the three months ended March 31, 2024. The increase was driven by unfavorable changes in foreign currency exchange rates between the British Pound and the U.S. Dollar in the current period.
Current wording
Foreign currency gain (loss) decreased from a $0.4 million gain for the three months ended June 30, 2023 to a $2,000 loss for the three months ended June 30, 2024. The decrease was driven by unfavorable changes in foreign currency exchange rates between the British Pound and the U.S. Dollar in the three months ended June 30, 2024.
Previous wording
Interest income, net increased from $0.9 million for the three months ended March 31, 2023 to $1.3 million for the three months ended March 31, 2024, which was driven by an increase in investment income. The increase was due to greater rates of return on our investments as a result of higher interest rates in the current period.
Current wording
Interest income, net increased from $1.1 million for the three months ended June 30, 2023 to $1.5 million for the three months ended June 30, 2024, which was driven by an increase in investment income. The increase was due to greater rates of return on our investments as a result of higher interest rates in the three months ended June 30, 2024.
Previous wording
Research and development expenses decreased by 80.9% from $5.7 million for the three months ended March 31, 2023 to $1.1 million for the three months ended March 31, 2024. The decrease was due to a (i) a $3.2 million reduction in personnel-related expenses, which was driven by restructuring costs of $1.8 million in the prior period and $1.3 million from reduced headcount, and (ii) a $2.5 million decrease in direct clinical and preclinical expenses, primarily due to the pause of ETX-123 in July 2023 and ETX-155 in February 2023. This decrease was partially offset by a $1.0 million decrease in the U.K. refundable research and development tax credits due to the overall reduction in qualifying research and development expenses.
Current wording
Research and development expenses decreased by 77.3% from $9.4 million for the six months ended June 30, 2023 to $2.1 million for the six months ended June 30, 2024. The decrease was due to a (i) a $4.7 million decrease in direct clinical and preclinical expenses, primarily due to the pause of ETX-123 in July 2023 and ETX-155 in February 2023, and (ii) a $4.2 million decrease in personnel-related expenses, which was driven by restructuring costs of $1.8 million in the prior period and $2.4 million from reduced headcount. This decrease was partially offset by a $1.6 million decrease in the U.K. refundable research and development tax credits due to the overall reduction in qualifying research and development expenses.
Previous wording
General and administrative expenses decreased 89.2% from $17.7 million for the three months ended March 31, 2023 to $1.9 million for the three months ended March 31, 2024. This decrease was due to (i) a $15.0 million reduction in personnel-related expenses, which was driven by restructuring costs of $14.0 million in the prior period and $1.0 million from reduced headcount, and (ii) a $0.8 million decrease in other general and administrative expenses, largely due to a reduction in legal expenses, consulting fees, and insurance costs.
Current wording
General and administrative expenses decreased by 73.1% from $20.7 million for the six months ended June 30, 2023 to $5.6 million for the six months ended June 30, 2024. This decrease was due to (i) a $15.3 million reduction in personnel-related expenses, which was driven by restructuring costs of $14.5 million in the prior period and $0.7 million from reduced headcount. The decrease was partially offset by a $0.2 million increase in other general and administrative expenses, largely driven by an increase in consulting fees and legal expenses.
Previous wording
We primarily generate cash and cash equivalents from the sale of our equity securities, including common stock and redeemable convertible preferred stock, and to a lesser extent from cash received pursuant to U.K. research and development tax credits and incentives. From our inception to March 31, 2024, we raised aggregate proceeds of $208.3 million from the issuance of shares of our redeemable convertible preferred stock and from our initial public offering of our common stock. We have not generated any revenue from product sales or otherwise. We have incurred net losses from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. We had cash and cash equivalents of $105.0 million as of March 31, 2024 and cash, cash equivalents, and marketable securities of $106.8 million as of December 31, 2023. As of March 31, 2024 and December 31, 2023, we had an accumulated deficit of $157.7 million and $156.0 million, respectively.
Current wording
Since our inception, we have primarily funded our operations with an aggregate of $328.0 million in net proceeds from the sale and issuance of shares of our redeemable convertible preferred stock, our initial public offering of our common stock and the sale and issuance of shares of our common stock in the Private Placement. We have not generated any revenue from product sales or otherwise. We have incurred net losses from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $223.1 million and cash, cash equivalents, and marketable securities of $106.8 million, respectively, and an accumulated deficit of $212.6 million and $156.0 million, respectively.
Previous wording
For the three months ended March 31, 2024, net cash used in operating activities was $1.8 million. This consisted primarily of net loss of $1.7 million and changes in our operating assets and liabilities that resulted in a net decrease in cash of $0.6 million. The decrease in cash was partially offset by total non-cash adjustments of $0.5 million that primarily related to stock-based compensation expense.
Current wording
For the six months ended June 30, 2024, net cash used in operating activities was $2.5 million. This consisted primarily of net loss of $56.6 million. The decrease in cash was partially offset by total non-cash adjustments of $52.8 million that primarily related to IPR&D and stock-based compensation expense, as well as changes in our operating assets and liabilities that resulted in a net increase in cash of $1.3 million.
Previous wording
For the three months ended March 31, 2023, net cash used in operating activities was $15.2 million. This consisted primarily of net loss of $22.3 million and changes in our operating assets and liabilities that resulted in a net decrease in cash of $2.5 million, primarily related to personnel and research and development activities. The decrease in cash was partially offset by total non-cash adjustments of $9.6 million that included stock-based compensation expense of $10.2 million and non-cash lease expense of $0.1 million, as well as accretion of discounts on investments of $0.5 million, and foreign currency gain on remeasurement of $0.2 million.
Current wording
For the six months ended June 30, 2023, net cash used in operating activities was $23.1 million. This consisted primarily of net loss of $27.5 million and changes in our operating assets and liabilities that resulted in a net decrease in cash of $5.1 million, primarily related to personnel and research and development activities. The decrease in cash was partially offset by total non-cash adjustments of $9.5 million that primarily related to stock-based compensation expense.
Previous wording
For the three months ended March 31, 2024, net cash provided by investing activities was $13.8 million, which consisted of proceeds received from maturities of marketable securities.
Current wording
For the six months ended June 30, 2024, net cash provided by investing activities was $4.1 million. This consisted of $13.8 million in proceeds received from maturities of marketable securities, primarily offset by the issuance of a promissory loan of $5.0 million and cash paid of $4.6 million in connection with the Acquisition.
Previous wording
For the three months ended March 31, 2023, net cash provided by investing activities was $5.8 million. This consisted of $23.2 million of proceeds received from maturities of marketable securities, partially offset by purchases of $17.4 million of marketable securities.
Current wording
For the six months ended June 30, 2023, net cash provided by investing activities was $4.2 million. This consisted of $60.2 million in proceeds received from maturities of marketable securities, primarily offset by purchases of $56.0 million of marketable securities.
Previous wording
This management’s discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and notes to the condensed consolidated financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions and conditions.
Current wording
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and notes to the condensed consolidated financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions and conditions.
Previous wording
A summary of our critical accounting policies is presented in our audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 included in our Annual Report on Form 10-K. There were no material changes to our critical accounting policies during the three months ended March 31, 2024.
Current wording
A summary of our critical accounting policies is presented in our audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 included in our Annual Report on Form 10-K. There were no other material changes to our critical accounting policies during the six months ended June 30, 2024.
Previous wording
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for emerging growth companies include presentation of only two years audited consolidated financial statements in a registration statement for an IPO, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to the Sarbanes-Oxley Act, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
Current wording
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for emerging growth companies include presentation of only two years of audited consolidated financial statements in a registration statement for an initial public offering (IPO), an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to the Sarbanes-Oxley Act, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
Previous wording
As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenue of $1.24 billion or more, (ii) the date on which we have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years, (iii) the date on which we are deemed a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates, or (iv) December 31, 2026.
Current wording
As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenue of $1.235 billion or more, (ii) the date on which we have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years, (iii) the date on which we are deemed a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates, or (iv) December 31, 2026.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Research and development expenses decreased by 71.6% from $3.7 million for the three months ended June 30, 2023 to $1.0 million for the three months ended June 30, 2024. The decrease was due to a (i) a $2.1 million decrease in direct clinical and preclinical expenses, primarily due to the pause of ETX-123 in July 2023, and (ii) a $1.0 million reduction in personnel-related expenses from reduced headcount. This decrease was partially offset by a $0.5 million decrease in the U.K. refundable research and development tax credits due to the overall reduction in qualifying research and development expenses.
Current report — wording carried from elsewhere
The following table sets forth our results of operations (dollars in thousands):
Current report — wording carried from elsewhere
Foreign currency gain (loss) decreased from a $0.6 million gain for the six months ended June 30, 2023 to a $35,000 loss for the six months ended June 30, 2024. The decrease was driven by unfavorable changes in foreign currency exchange rates between the British Pound and the U.S. Dollar in the six months ended June 30, 2024.
Current report — wording carried from elsewhere
Interest income, net increased from $2.0 million for the six months ended June 30, 2023 to $2.8 million for the six months ended June 30, 2024, which was driven by an increase in investment income. The increase was due to greater rates of return on our investments as a result of higher interest rates in the six months ended June 30, 2024.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We are a biotechnology company focused on developing novel therapies for neuronal excitability disorders to address unmet needs in psychiatry, epilepsy, chronic pain, and other disorders of the peripheral and central nervous systems.