Clene(US:CLNN)2022-11-06 16:00markdown [PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Clene Inc.'s unaudited consolidated financial statements show a Q3 2022 net loss, reduced cash, and going concern doubt - Management has concluded there is **substantial doubt** about the Company's ability to continue as a **going concern**, as it projects it will **not have sufficient cash** to sustain current operations or meet obligations within the next twelve months[18](index=18&type=chunk)[189](index=189&type=chunk) - To mitigate funding needs, the company is implementing cost-saving initiatives and exploring financing options. In October 2022, an equity offering provided net cash proceeds of **$10.8 million**[19](index=19&type=chunk)[133](index=133&type=chunk)[190](index=190&type=chunk) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a significant decrease in total assets and a shift to a stockholders' deficit by Q3 2022 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $7,267 | $50,288 | | Total current assets | $21,486 | $54,583 | | **Total Assets** | **$36,004** | **$63,063** | | **Liabilities & Equity** | | | | Total current liabilities | $6,154 | $6,026 | | **Total Liabilities** | **$45,323** | **$50,466** | | **Total Stockholders' Equity (Deficit)** | **($9,319)** | **$12,597** | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) The company reported a Q3 2022 net loss of **$11.0 million**, a significant reversal from prior year's income Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $174 | $110 | $239 | $524 | | Loss from operations | ($9,805) | ($10,450) | ($36,736) | ($35,920) | | Net income (loss) | ($10,976) | $28,944 | ($28,864) | ($14,163) | | Basic Net income (loss) per share | ($0.17) | $0.47 | ($0.46) | ($0.23) | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) Stockholders' equity transitioned from positive to a **$9.3 million** deficit by Q3 2022 due to cumulative net loss - Stockholders' equity shifted from a positive **$12.6 million** at December 31, 2021, to a deficit of **$9.3 million** at September 30, 2022[13](index=13&type=chunk) - The primary driver for the decrease in equity was the net loss of **$28.9 million** recorded during the first nine months of 2022[11](index=11&type=chunk)[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$31.3 million**, leading to a **$43.0 million** net decrease in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($31,295) | ($25,018) | | Net cash used in investing activities | ($12,446) | ($661) | | Net cash provided by financing activities | $875 | $27,130 | | **Net (decrease) increase in cash** | **($43,021)** | **$1,335** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's business, going concern issues, accounting policies, debt, and segment performance - The company operates in two segments: "Drugs" (development of therapeutics) and "Supplements" (dietary supplements). The Drugs segment generates **no revenue** and **incurred an operating loss** of **$37.0 million** for the nine months ended Sep 30, 2022, while the Supplements segment generated **$0.2 million** in revenue and **$0.3 million** in **operating income**[47](index=47&type=chunk)[129](index=129&type=chunk) - Subsequent to the quarter end, the company raised gross proceeds of **$0.6 million** under its ATM facility and **$10.8 million** from a registered direct offering in October 2022[132](index=132&type=chunk)[133](index=133&type=chunk) - The company has a **$30.0 million** term loan with Avenue, of which **$20.0 million** was drawn as of September 30, 2022. The loan requires the company to maintain at least **$5.0 million** in unrestricted cash and cash equivalents[82](index=82&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, clinical program developments, increased R&D, and going concern issues - The company's lead drug candidate, CNM-Au8®, **did not meet the primary endpoint** in the Phase 2/3 Healey ALS Platform Trial, but an exploratory analysis of the 30 mg dose showed a **>90% reduction in risk of death**[142](index=142&type=chunk)[143](index=143&type=chunk) - The company has paused its commercial expansion project at its Elkton, Maryland facility until it receives further clarity from the FDA on the regulatory path for CNM-Au8[147](index=147&type=chunk) - The Phase 2 VISIONARY-MS trial for CNM-Au8 **met its primary endpoint** for low-contrast vision improvement (**p=0.056**) and a key secondary endpoint for functional improvement (**p=0.0207**)[148](index=148&type=chunk)[149](index=149&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q3 2022 revenue increased, operating loss improved, while nine-month R&D expenses rose and G&A decreased Operating Expense Comparison (Nine Months Ended Sep 30) | Expense Category | 2022 (in thousands) | 2021 (in thousands) | Change % | | :--- | :--- | :--- | :--- | | Research and development | $24,149 | $18,893 | +28% | | General and administrative | $12,807 | $16,739 | -23% | | **Total operating expenses** | **$36,975** | **$36,444** | **+1%** | - The increase in R&D expense for the nine-month period was primarily due to progression of clinical trials for CNM-Au8 (**+15%**) and CNM-ZnAg (**+278%**)[175](index=175&type=chunk)[177](index=177&type=chunk) - The decrease in G&A expense was mainly due to lower legal, finance, and accounting fees after the completion of the Reverse Recapitalization, as well as lower stock-based compensation expense[176](index=176&type=chunk)[178](index=178&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces significant liquidity challenges, with insufficient cash and **substantial doubt** about **going concern** - As of Sep 30, 2022, cash, cash equivalents, and marketable securities totaled **$16.2 million**, a sharp decline from **$50.3 million** at Dec 31, 2021[186](index=186&type=chunk) - Management projects that within the next twelve months, the company will **not have sufficient cash** to sustain current operations, raising **substantial doubt** about its ability to continue as a **going concern**[189](index=189&type=chunk) - Net cash used in operating activities for the nine months ended Sep 30, 2022 was **$31.3 million**[197](index=197&type=chunk)[198](index=198&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies involve significant judgment, including valuation of contingent liabilities and warrants - Critical estimates include the fair value of contingent earn-out liabilities, common stock warrant liability, accounting for convertible notes, income taxes (valuation allowance), and stock-based compensation[214](index=214&type=chunk)[215](index=215&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - The fair value of contingent earn-out liabilities and warrant liabilities are determined using Monte Carlo and Black-Scholes models, respectively, which are sensitive to unobservable inputs like expected stock price volatility[215](index=215&type=chunk)[219](index=219&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is a smaller reporting company and is **not required to provide information** for this item - As a smaller reporting company, Clene Inc. is **not required to provide information** for this item[224](index=224&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were **ineffective** due to **material weaknesses**, with remediation efforts ongoing - Management concluded that disclosure controls and procedures were **not effective** as of September 30, 2022[225](index=225&type=chunk) - The ineffectiveness is due to **material weaknesses** related to the control environment, review of reconciliations and segregation of duties, and IT general controls[228](index=228&type=chunk)[231](index=231&type=chunk) - Remediation efforts are ongoing and include strengthening the accounting team, using external consultants, and implementing a new ERP system[232](index=232&type=chunk)[233](index=233&type=chunk) [PART II—OTHER INFORMATION](index=45&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is **not currently a party to any material pending legal proceedings** - The company is **not currently a party to any material pending legal proceedings**[237](index=237&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) **No material changes** to risk factors previously disclosed in the 2021 Annual Report on Form 10-K - There have been **no material changes** to the risk factors disclosed in the 2021 Annual Report on Form 10-K[238](index=238&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported **no unregistered sales** of equity securities, use of proceeds, or purchases during the period - The company reported **no unregistered sales** of equity securities, use of proceeds, or purchases of equity securities during the period[239](index=239&type=chunk) [Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported **no defaults** upon senior securities - The company reported **no defaults** upon senior securities[240](index=240&type=chunk) [Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is **not applicable** - This item is **not applicable**[241](index=241&type=chunk) [Other Information](index=45&type=section&id=Item%205.%20Other%20Information) The company reported **no information** for this item - The company reported **no information** for this item[242](index=242&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including CEO/CFO certifications and XBRL data - This section lists exhibits filed with the 10-Q, including CEO/CFO certifications and XBRL files[243](index=243&type=chunk)