Elicio Therapeutics(ELTX) - 2023 Q2 - Quarterly Report

Preliminary Information Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements covered by safe harbor provisions, identifiable by terms like 'aim,' 'anticipate,' 'believe,' 'expect,' 'intend,' 'may,' 'plan,' 'will,' and similar expressions[7] - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied[10] - The company assumes no obligation to publicly update forward-looking statements or the reasons actual results could differ, except as required by law[10] Explanatory Note The company completed a reverse merger with Angion Biomedica Corp on June 1, 2023, which was accounted for as a reverse recapitalization - On June 1, 2023, Angion Biomedica Corp completed a merger with Elicio Operating Company, Inc (Former Elicio), with Former Elicio surviving as a wholly-owned subsidiary[12] - Angion Biomedica Corp changed its name to Elicio Therapeutics, Inc following the merger[12] - The merger was accounted for as a reverse recapitalization, with Former Elicio treated as the accounting acquirer[14] - Historical share and per share figures of Former Elicio have been retroactively restated based on an exchange ratio of 0.0181[15] PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and accompanying notes for the period Condensed Consolidated Balance Sheets (unaudited) Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $21,682 | $6,156 | | Total current assets | $26,225 | $10,717 | | Total assets | $37,619 | $22,664 | | Liabilities & Equity (Deficit) | | | | Total current liabilities | $7,597 | $6,868 | | Total liabilities | $14,062 | $13,749 | | Total convertible preferred stock | $0 | $111,060 | | Total stockholders' equity (deficit) | $23,557 | $(102,145) | | Accumulated deficit | $(122,596) | $(107,008) | - Cash and cash equivalents increased significantly from $6.156 million at December 31, 2022, to $21.682 million at June 30, 2023[22] - Total stockholders' equity shifted from a deficit of $(102.145) million to a positive $23.557 million, primarily due to the conversion of preferred stock and the merger[22] Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $4,944 | $5,041 | $10,428 | $9,220 | | General and administrative | $2,833 | $1,191 | $5,154 | $2,782 | | Total operating expenses | $7,777 | $6,232 | $15,582 | $12,002 | | Loss from operations | $(7,777) | $(6,232) | $(15,582) | $(12,002) | | Total other income (expense) | $218 | $(1,067) | $(4) | $(2,357) | | Net loss | $(7,559) | $(7,299) | $(15,586) | $(14,359) | | Net loss per common share, basic and diluted | $(2.44) | $(23.20) | $(9.06) | $(45.85) | | Weighted average common shares outstanding | 3,100,957 | 314,572 | 1,720,202 | 313,148 | - Net loss for the three months ended June 30, 2023, was $(7.559) million, a slight increase from $(7.299) million in the prior year period[23] - General and administrative expenses significantly increased by 138% for the three months ended June 30, 2023, compared to the same period in 2022, primarily due to merger-related professional fees and organizational growth[23][146] - Net loss per common share, basic and diluted, improved significantly from $(23.20) to $(2.44) for the three months ended June 30, 2023, largely due to an increase in weighted average common shares outstanding[23] Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (unaudited) - As of June 30, 2023, all convertible preferred stock was converted to common stock, resulting in zero preferred stock amount compared to $111.060 million at December 31, 2022[25] - Additional paid-in capital increased substantially from $4.860 million at December 31, 2022, to $146.221 million at June 30, 2023, driven by the conversion of preferred stock and issuance of common stock due to the merger[25] - Accumulated deficit increased from $(107.008) million at December 31, 2022, to $(122.596) million at June 30, 2023, reflecting ongoing net losses[25] Condensed Consolidated Statements of Cash Flows (unaudited) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(17,614) | $(9,517) | | Net cash provided by (used in) investing activities | $13 | $(559) | | Net cash provided by financing activities | $31,552 | $1,247 | | Net increase (decrease) in cash and cash equivalents | $13,949 | $(8,829) | | Cash, cash equivalents and restricted cash at end of period | $22,363 | $1,216 | - Net cash used in operating activities increased to $(17.614) million for the six months ended June 30, 2023, from $(9.517) million in the prior year, primarily due to higher net loss and changes in operating assets and liabilities[30][159] - Net cash provided by financing activities significantly increased to $31.552 million for the six months ended June 30, 2023, primarily due to cash acquired in connection with the reverse merger and proceeds from promissory notes[30][162] - Cash, cash equivalents and restricted cash at the end of the period increased to $22.363 million at June 30, 2023, from $1.216 million at June 30, 2022[30] Notes to Unaudited Interim Condensed Consolidated Financial Statements Note 1—Description of the Business and Financial Condition - Elicio Therapeutics, Inc is a clinical-stage biotechnology company focused on developing therapeutic cancer vaccines using its proprietary Amphiphile (AMP) platform[31] - The company completed a reverse merger with Angion Biomedica Corp on June 1, 2023, with Former Elicio treated as the accounting acquirer[32][33][34] - As of June 30, 2023, the company had an accumulated deficit of $122.6 million and $21.7 million in cash and cash equivalents, raising substantial doubt about its ability to continue as a going concern without additional financing[35][36] Note 2—Summary of Significant Accounting Policies - The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP and SEC rules for interim reporting, consistent with prior audited statements[37] - The company operates as one operating segment, with the chief executive officer identified as the chief operating decision-maker[42] - Key accounting policies include accrual of R&D expenses, valuation of stock-based awards, operating right-of-use assets and lease liabilities, and going concern assessment[43] - The company adopted ASU No 2016-13 (CECL model) on January 1, 2023, with no material impact on its financial statements[70] Note 3—Merger and Related Transactions - The merger was accounted for as a reverse recapitalization, with Former Elicio as the accounting acquirer, resulting in Former Elicio stockholders owning approximately 65.2% of the combined company[71] - Prior to the merger, Angion effected a 10:1 reverse stock split, and Former Elicio capital stock was converted into Angion common stock at an exchange ratio of 0.0181[72] - In connection with the merger, Angion provided a bridge loan of up to $12.5 million to Former Elicio, which was forgiven upon completion of the merger, resulting in a $0.6 million gain related to embedded derivatives[73][75] Net Assets Acquired in Recapitalization (in thousands) | Asset/Liability | Amount | | :--- | :--- | | Cash and cash equivalents | $24,000 | | Other current assets | $539 | | Promissory Notes | $10,028 | | Accrued liabilities | $(2,438) | | Net assets acquired | $32,129 | Note 4—Fair Value Measurements Financial Assets and Liabilities Measured at Fair Value (in thousands) | Item | June 30, 2023 (Level 1) | December 31, 2022 (Level 1) | | :--- | :--- | :--- | | Money market funds | $18,634 | $5,340 | | Warrant liabilities | $32 (Level 3) | $0 (Level 3) | - The company adopted Angion's warrant liabilities as part of the merger, with a fair value of $32 thousand at June 30, 2023, determined using a variant of the Black-Scholes model[78][79] Fair Value Assumptions for Common Stock Warrant Liability | Assumption | June 30, 2023 | June 1, 2023 | | :--- | :--- | :--- | | Weighted average strike price | $76.00 | $76.00 | | Contractual term (years) | 5.2 | 5.2 | | Volatility (annual) | 164.1% | 100.0% | | Risk-free rate | 4.1% | 3.9% | | Dividend yield (per share) | 0.0% | 0.0% | Note 5—Balance Sheet Components Prepaid and Other Current Assets (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Prepaid research and development contract services | $2,278 | $2,132 | | Advanced professional fees | $241 | $648 | | Prepaid insurance | $714 | $104 | | Return of collateral for letter of credit | $618 | $0 | | Miscellaneous receivables | $557 | $0 | | Other prepaid expenses and other current assets | $135 | $36 | | Total prepaid and other current assets | $4,543 | $2,920 | Property and Equipment, Net (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Equipment | $1,643 | $1,787 | | Furniture and fixtures | $374 | $359 | | Leasehold improvements | $124 | $124 | | Total property and equipment | $2,141 | $2,270 | | Less: accumulated depreciation | $(1,222) | $(1,123) | | Property and equipment, net | $919 | $1,147 | Accrued Expenses (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Accrued professional fees | $709 | $180 | | Accrued compensation and benefits | $1,489 | $1,491 | | Accrued research and development | $112 | $260 | | Other operating expenses | $5 | $4 | | Total accrued expenses | $2,315 | $1,935 | Note 6 — Research Grant - In September 2022, Former Elicio entered a grant agreement with The Gastro-Intestinal Research Foundation (GIRF) for $2.8 million, with $2.3 million received in 2022 and the remaining $0.5 million in June 2023[86] - For the three and six months ended June 30, 2023, the Company incurred $1.4 million and $1.9 million, respectively, in R&D expenses related to this project, with the award recognized as a contra R&D expense[87] Note 7—Convertible Preferred Stock, Common Stock and Stockholders' Equity - The Company's Amended and Restated Certificate of Incorporation authorizes 300 million shares of common stock and 10 million shares of preferred stock[88] - On June 1, 2023, immediately prior to the merger, all Former Elicio preferred stock was converted into Former Elicio common stock, which was then exchanged for 5,375,751 shares of the Company's common stock[92] Former Elicio Convertible Preferred Stock as of December 31, 2022 (in thousands, except share amounts) | Series | Authorized Shares | Shares Issued and Outstanding | Aggregate Liquidation Amount | Proceeds Net of Liquidation Costs | | :--- | :--- | :--- | :--- | :--- | | Series A Convertible Preferred Shares | 132,387 | 132,387 | $7,495 | $7,495 | | Series B Convertible Preferred Shares | 1,927,375 | 1,927,375 | $72,803 | $62,944 | | Series C Convertible Preferred Shares | 4,888,798 | 2,938,158 | $41,816 | $40,621 | | Total Preferred Shares | 6,948,560 | 4,997,920 | | | Note 8—Stock-Based Compensation - The Company assumed Former Elicio's 2012 and 2022 Equity Incentive Plans and Angion's 2015 and 2021 Plans, adjusting outstanding stock options and warrants to reflect the new common stock[96][97][99] Stock Option Activity Summary | Metric | Number of Stock Options | Weighted Average Exercise Price | | :--- | :--- | :--- | | Outstanding as of December 31, 2022 | 854,076 | $5.24 | | Options granted | 135,526 | $10.00 | | Existing Angion Options outstanding | 351,656 | $62.04 | | Options exercised | (35,709) | $6.99 | | Forfeited (unvested) | (20,292) | $30.96 | | Outstanding as of June 30, 2023 | 1,285,257 | $20.62 | | Options vested and exercisable | 558,512 | $41.00 | Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $229 | $71 | $412 | $132 | | General and administrative | $50 | $42 | $91 | $138 | | Total | $279 | $113 | $503 | $270 | - Total unrecognized compensation related to unvested stock option awards was $2.7 million as of June 30, 2023, expected to be recognized over approximately 1.4 years[101] Note 9—Warrants - Warrants classified as liabilities are recorded at fair value, with changes recognized in the condensed consolidated statements of operations[108] - The Company assumed previously issued Angion warrants, with no other warrant activity during the six months ended June 30, 2023[110] Common Stock Warrants Outstanding at June 30, 2023 | Metric | Warrants | Weighted Average Exercise Price | Weighted Average Life (years) | | :--- | :--- | :--- | :--- | | Outstanding at December 31, 2022 | 144,814 | $53.59 | 6.5 | | Angion Warrants assumed | 3,950 | $76.00 | 5.2 | | Outstanding at June 30, 2023 | 148,764 | $54.19 | 6.5 | Note 10—Commitments and Contingencies - The Company has an operating lease for office and laboratory space in Boston, Massachusetts, commencing February 2022 and expiring January 2030, with total rent payments of $11.1 million[112] - As part of the merger, the Company assumed a lease for clinical and regulatory space in Newton, Massachusetts, through June 30, 2024[113] Operating Lease Liabilities Maturities (in thousands) | Year Ended December 31, | Amounts | | :--- | :--- | | 2023 (remaining six months) | $751 | | 2024 | $1,427 | | 2025 | $1,349 | | 2026 | $1,383 | | 2027 | $1,425 | | Thereafter | $3,232 | | Total | $9,567 | | Less present value discount | $(2,163) | | Operating lease liabilities | $7,404 | | Less: operating lease liability, current portion | $(985) | | Operating lease liability, noncurrent portion | $6,419 | - A lawsuit challenging the merger was filed in February 2023 but was voluntarily dismissed by the plaintiff[115] - The Company has license agreements for intellectual property from a university, requiring annual maintenance payments of $0.1 million and potential milestone payments and royalties on product sales[118][119] Note 11—Income Taxes - The Company did not record a provision or benefit for income taxes during the three and six months ended June 30, 2023 and 2022[120] - A full valuation allowance is maintained against all deferred tax assets due to a history of cumulative net losses[120] Note 12—Net Loss Per Share - Basic and diluted net loss per share are the same for all periods presented due to the Company's net losses, making potentially dilutive securities anti-dilutive[121] Net Loss Per Share Calculation (in thousands, except share and per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(7,559) | $(7,299) | $(15,586) | $(14,359) | | Weighted-average shares outstanding | 3,100,957 | 314,572 | 1,720,202 | 313,148 | | Net loss per share, basic and diluted | $(2.44) | $(23.20) | $(9.06) | $(45.85) | Potentially Dilutive Securities Not Included in Diluted EPS Calculation | Security Type | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Convertible preferred stock | 0 | 2,059,762 | | Shares issuable upon exercise of stock options | 1,285,257 | 8,515 | | Shares issuable upon the exercise of warrants | 148,764 | 127,982 | | Options to purchase Common Stock | 0 | 250,288 | | Total | 1,434,021 | 2,446,547 | Note 13—Related Party Transactions - The Company paid $0.3 million and $0.7 million for consulting services to an entity affiliated with its former interim CFO and board member for the three and six months ended June 30, 2023, respectively[123] - For the same periods in 2022, these payments were $0.1 million and $0.2 million, respectively[123] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, results of operations, impact of the reverse merger, and future funding needs Overview - Elicio Therapeutics is a clinical-stage biotechnology company developing novel immunotherapies for cancer and other diseases, utilizing its proprietary Amphiphile (AMP) platform[125] - The lead product candidate, ELI-002, is currently in Phase 1 trials, with initial data presented at the 2023 ASCO Annual Meeting[125] - The company has experienced significant operating losses and negative cash flows since inception, with an accumulated deficit of $122.6 million and $21.7 million in cash and cash equivalents as of June 30, 2023[126] - The company's financial condition raises substantial doubt about its ability to continue as a going concern, necessitating additional financing for future operations and product development[128] Components of Results of Operations - Operating expenses primarily consist of research and development (R&D) expenses and general and administrative (G&A) costs[136] - R&D expenses include personnel costs, consultant and contract organization fees, sponsored research, preclinical and clinical material production, laboratory expenses, and supplies[138] - G&A expenses include personnel costs (salaries, benefits, equity-based compensation) and professional services (legal, recruiting, audit, accounting, facility-related costs)[141] - Other income and expense primarily include interest income, foreign exchange gains, changes in fair value of embedded derivatives, and gains/losses from promissory note settlements and warrant liabilities[142] Results of Operations Comparison of the Three Months Ended June 30, 2023 and 2022 Results of Operations (Three Months Ended June 30, in thousands, except percentages) | Metric | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $4,944 | $5,041 | $(97) | (2)% | | General and administrative | $2,833 | $1,191 | $1,642 | 138% | | Total operating expenses | $7,777 | $6,232 | $1,545 | 25% | | Loss from operations | $(7,777) | $(6,232) | $(1,545) | 25% | | Total other income (expense) | $218 | $(1,067) | $1,285 | (120)% | | Net loss | $(7,559) | $(7,299) | $(260) | | - Research and development expenses decreased by $0.1 million (2%) due to a GIRF grant offsetting increased manufacturing and clinical trial expenses for ELI-002[145] - General and administrative expenses increased by $1.6 million (138%) due to higher personnel costs and professional fees related to the merger and public company operations[146] - Other income/(expense) shifted from an expense of $1.1 million in 2022 to an income of $0.2 million in 2023, primarily due to reduced interest expense from convertible notes conversion[147] Comparison of the Six Months Ended June 30, 2023 and 2022 Results of Operations (Six Months Ended June 30, in thousands, except percentages) | Metric | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $10,428 | $9,220 | $1,208 | 13% | | General and administrative | $5,154 | $2,782 | $2,372 | 85% | | Total operating expenses | $15,582 | $12,002 | $3,580 | 30% | | Loss from operations | $(15,582) | $(12,002) | $(3,580) | 30% | | Other income (expense), net | $(4) | $(2,357) | $2,353 | (100)% | | Net loss | $(15,586) | $(14,359) | $(1,227) | | - Research and development expenses increased by $1.2 million (13%) due to higher external costs for manufacturing and clinical trials[149] - General and administrative expenses increased by $2.4 million (85%) due to higher personnel costs and professional fees related to the merger and public company operations[150] - Other expense decreased by $2.4 million (100%) from $(2.357) million in 2022 to $(4) thousand in 2023, primarily due to reduced interest expense associated with convertible notes[151] Liquidity and Capital Resources Sources and Uses of Liquidity - Operations have been financed primarily by $89.1 million from common stock, convertible preferred stock, convertible notes, and stock option/warrant exercises[152] - The company reported a net loss of $15.6 million for the six months ended June 30, 2023, and an accumulated deficit of $122.6 million[152] - Cash and cash equivalents stood at $21.7 million as of June 30, 2023[152] - Significant operating losses and accumulated deficit raise substantial doubt about the company's ability to continue as a going concern, requiring additional financing[153] Future Cash Needs and Funding Requirements - Current cash and cash equivalents are expected to fund operations through calendar year 2023[155] - Future funding requirements are highly dependent on the scope and progress of product candidate development, clinical trials, regulatory approvals, and commercialization efforts[156] - The company expects to finance future operations through equity offerings, debt financings, collaborations, licenses, or grants, acknowledging the risk of not securing adequate funding on favorable terms[156] Summary Statement of Cash Flows Summary of Net Cash Flow Activity (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(17,614) | $(9,517) | | Net cash provided by (used in) investing activities | $13 | $(559) | | Net cash provided by financing activities | $31,552 | $1,247 | | Effect of foreign currency on cash | $(2) | $0 | | Net increase (decrease) in cash | $13,949 | $(8,829) | - Net cash used in operating activities increased to $17.6 million in 2023, driven by a higher net loss and changes in operating assets and liabilities[159] - Net cash provided by financing activities significantly increased to $31.6 million in 2023, primarily due to cash acquired from the reverse merger[162] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Elicio Therapeutics, Inc is not required to provide these disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[169] Item 4. Controls and Procedures Disclosure controls and procedures were not effective as of June 30, 2023, due to a material weakness in internal control over financial reporting - As of June 30, 2023, the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[171] - The material weakness stems from inadequate formal accounting policies, processes, and controls related to complex transactions, and a lack of finance and accounting staff with appropriate GAAP technical expertise[172][173][186] - Remediation efforts include designing additional controls around identification, documentation, and application of technical accounting guidance for complex and non-routine transactions, with an expected completion in 2023[174][187] - As an emerging growth company, Elicio is exempt from the auditor's attestation report on internal controls over financial reporting under Sarbanes-Oxley Section 404[165] PART II OTHER INFORMATION Item 1. Legal Proceedings A lawsuit filed by an Angion stockholder challenging the merger was voluntarily dismissed by the plaintiff - A lawsuit (Klein v Angion Biomedica Corp, et al) was filed on February 17, 2023, by an Angion stockholder, alleging violations of Section 14(a) and 20(a) of the Exchange Act related to the merger[180] - The plaintiff contended that the Form S-4 registration statement omitted or misrepresented material information regarding the proposed merger[180] - The lawsuit was voluntarily dismissed by the plaintiff on February 21, 2023[180] - The company acknowledges that future litigation of this type is possible and could result in substantial costs[180][181] Item 1A. Risk Factors The company highlights a material weakness in internal control over financial reporting as a significant investment risk - Investing in the company's common stock involves a high degree of risk[183] - A material weakness in internal control over financial reporting has been identified, specifically related to inadequate formal accounting policies and lack of finance and accounting staff with appropriate GAAP technical expertise for complex transactions[184][186] - Failure to remediate this material weakness could lead to inaccurate financial reporting, loss of investor confidence, and a decline in stock price[184][188] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds during the reporting period - There were no unregistered sales of equity securities during the fiscal quarter ended June 30, 2023[190] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the fiscal quarter ended June 30, 2023[191] Item 4. Mine Safety Disclosures There are no mine safety disclosures required for the company - No mine safety disclosures are applicable or required for the company[192] Item 5. Other Information No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1(c) trading arrangements during the fiscal quarter ended June 30, 2023[193] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including merger agreements, corporate documents, and certifications - The exhibits include the Agreement and Plan of Merger and Reorganization, Amended and Restated Certificate of Incorporation, and Amended and Restated Bylaws[194] - Key exhibits also cover employment agreements, equity incentive plans (2012, 2022, 2015, 2021), and exclusive patent license agreements[194][196] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Securities Exchange Act and Sarbanes-Oxley Act are included[196] Signatures The report is certified by the company's President and Chief Executive Officer and its Chief Financial Officer - The report is signed by Robert Connelly, President and Chief Executive Officer, and Brian Piekos, Chief Financial Officer, on August 11, 2023[200]