alna-10q_20200630.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to  __________________

Commission File Number: 001-38268

 

ALLENA PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

Securities registered pursuant to Section 12(b) of the Act:

 

 

Delaware

45-2729920

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

One Newton Executive Park, Suite 202

Newton, Massachusetts

02462

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 467-4577

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ALNA

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Small reporting company

 

 

 

 

 

Emerging growth Company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of July 31, 2020, the registrant had 38,118,925 shares of common stock, $0.001 par value per share, outstanding.

 

 


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. These statements include all matters that are not related to present facts or current conditions or that are not historical facts, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth. The words “anticipate,” “believe,” “could,” “continue,” “should,” “predict,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “will,” “may,” “would,” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, regarding, among other things:

 

our estimates and expectations regarding our capital requirements, cash and expense levels, liquidity sources and our need for additional financing;

 

the design and conduct of our planned Phase 3 clinical program of reloxaliase (formerly ALLN-177) in enteric hyperoxaluria;

 

our ability to utilize the accelerated approval regulatory pathway for reloxaliase, including the timing of any Biologic License Application, or BLA, submission utilizing the accelerated approval regulatory pathway;

 

the number, designs, results and timing of our clinical trials, including our pivotal Phase 3 program or reloxaliase, and preclinical studies and the timing of the availability of data from these trials and studies;

 

our ability to enroll a sufficient number of patients  (including as a result of any delays arising from the recent global outbreak of the coronavirus, or the COVID-19 coronavirus, which originated in Wuhan, China) and the ability of subjects in our clinical trials to adhere to the protocol, including capsule and dietary regimen and urinary collection requirements;

 

the therapeutic benefits, effectiveness and safety of reloxaliase, ALLN-346 and our future product candidates;

 

our ability to receive regulatory approval for our product candidates in the United States, Europe and other geographies;

 

our expected regulatory approval pathway, and our ability to obtain, on satisfactory terms or at all, the financing required to support operations, development, clinical trials, and commercialization of products;

 

our reliance on third parties for the planning, conduct and monitoring of clinical trials and for the manufacture of clinical drug supplies and drug product;

 

potential changes in regulatory requirements, and delays or negative outcomes from the regulatory approval process;

 

our estimates of the size and characteristics of the markets that may be addressed by reloxaliase and ALLN-346;

 

the market acceptance of reloxaliase, ALLN-346 or any future product candidates that are approved for marketing in the United States or other countries;

 

our ability to successfully commercialize reloxaliase with a targeted sales force;

 

the safety and efficacy of therapeutics marketed by our competitors that are targeted to indications which our product candidates have been developed to treat;

 


 

 

the impact of natural disasters, global pandemics (including the recent outbreak of a novel strain of the COVID-19 coronavirus), labor disputes, lack of raw material supply, issues with facilities and equipment or other forms of disruption to business operations at our manufacturing facilities;

 

our ability to utilize our proprietary technological approach to develop and commercialize ALLN-346 and future product candidates;

 

potential collaborators to license and commercialize reloxaliase, if approved, or any products for which we receive regulatory approval in the future outside of the United States;

 

our heavy dependence on licensed intellectual property, including our ability to source and maintain licenses from third-party owners;

 

our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;

 

our ability to attract, retain and motivate key personnel; and

 

our ability to generate revenue and become profitable;

.

These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. No forward-looking statement is a guarantee of future performance.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to the registration statement of which this Quarterly Report on Form 10-Q is a part completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements (Unaudited)

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

3

 

Condensed Consolidated Statements of Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities

79

Item 3.

Defaults Upon Senior Securities

79

Item 4.

Mine Safety Disclosures

79

Item 5.

Other Information

79

Item 6.

Exhibits

80

Signatures

81

 

 

 

 

 

 

 

 

1


 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

Allena Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,453

 

 

$

30,007

 

Prepaid expenses and other current assets

 

 

1,923

 

 

 

3,028

 

Total current assets

 

 

28,376

 

 

 

33,035

 

Property and equipment, net

 

 

318

 

 

 

401

 

Operating lease assets

 

 

291

 

 

 

549

 

Other assets

 

 

123

 

 

 

123

 

Total assets

 

$

29,108

 

 

$

34,108

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

570

 

 

$

3,048

 

Loan payable, net of discount

 

 

3,992

 

 

 

3,992

 

Accrued expenses and other current liabilities

 

 

1,885

 

 

 

3,370

 

Operating lease liabilities, net of discount

 

 

296

 

 

 

498

 

Total current liabilities

 

 

6,743

 

 

 

10,908

 

Loan payable, net of current portion and discount

 

 

3,992

 

 

 

5,988

 

Operating lease liabilities, net of current portion

 

 

 

 

 

14

 

Total liabilities

 

 

10,735

 

 

 

16,910

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized;

   no shares issued or outstanding

 

 

 

 

 

 

Common stock, $0.001 par value; 125,000,000 shares authorized; 32,224,734

   and 24,735,009 shares issued and outstanding at June 30, 2020 and

   December 31, 2019, respectively

 

 

32

 

 

 

25

 

Additional paid-in capital

 

 

197,846

 

 

 

182,117

 

Accumulated deficit

 

 

(179,505

)

 

 

(164,944

)

Total stockholders’ equity

 

 

18,373

 

 

 

17,198

 

Total liabilities and stockholders’ equity

 

$

29,108

 

 

$

34,108

 

 

See accompanying notes.

 

2


 

Allena Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

3,808

 

 

$

8,589

 

 

$

8,454

 

 

$

17,717

 

General and administrative

 

 

2,751

 

 

 

2,746

 

 

 

5,629

 

 

 

5,177

 

Total operating expenses

 

 

6,559

 

 

 

11,335

 

 

 

14,083

 

 

 

22,894

 

Loss from operations

 

 

(6,559

)

 

 

(11,335

)

 

 

(14,083

)

 

 

(22,894

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

(103

)

 

 

78

 

 

 

(157

)

 

 

229

 

Other expense, net

 

 

(314

)

 

 

(16

)

 

 

(321

)

 

 

(27

)

Other income (expense), net

 

 

(417

)

 

 

62

 

 

 

(478

)

 

 

202

 

Net loss

 

$

(6,976

)

 

$

(11,273

)

 

$

(14,561

)

 

$

(22,692

)

Net loss per share attributable to common stockholders—basic and

   diluted

 

$

(0.26

)

 

$

(0.54

)

 

$

(0.56

)

 

$

(1.09

)

Weighted-average common shares outstanding—basic and diluted

 

 

26,878,962

 

 

 

20,903,298

 

 

 

25,808,043

 

 

 

20,859,251

 

Net loss

 

$

(6,976

)

 

$

(11,273

)

 

$

(14,561

)

 

$

(22,692

)

Comprehensive loss

 

$

(6,976

)

 

$

(11,273

)

 

$

(14,561

)

 

$

(22,692

)

 

See accompanying notes.

 

 

 

3


 

Allena Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)

 

 

Three Months Ended June 30,

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common stock

 

 

paid-in

 

 

Accumulated

 

 

stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balance at March 31, 2019

 

 

20,816,064

 

 

$

21

 

 

$

167,682

 

 

$

(129,024

)

 

$

38,679

 

Issuance of common stock, net of issuance costs

 

 

2,632,092

 

 

 

2

 

 

 

9,444

 

 

 

 

 

 

9,446

 

Issuance of common stock through

   employee stock purchase plan ("ESPP")

 

 

14,009

 

 

 

 

 

 

49

 

 

 

 

 

 

49

 

Stock-based compensation

 

 

 

 

 

 

 

 

772

 

 

 

 

 

 

772

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,273

)

 

 

(11,273

)

Balance at June 30, 2019

 

 

23,462,165

 

 

$

23

 

 

$

177,947

 

 

$

(140,297

)

 

$

37,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

 

24,742,146

 

 

$

25

 

 

$

183,162

 

 

$

(172,529

)

 

$

10,658

 

Issuance of common stock, net of issuance costs

 

 

7,317,074

 

 

 

7

 

 

 

13,651

 

 

 

 

 

 

13,658

 

Exercise of common stock options

 

 

4,791

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Issuance of common stock through

   employee stock purchase plan ("ESPP")

 

 

20,003

 

 

 

 

 

 

27

 

 

 

 

 

 

27

 

Issuance of common stock through

   release of restricted stock units ("RSUs")

 

 

140,720

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

998

 

 

 

 

 

 

998

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,976

)

 

 

(6,976

)

Balance at June 30, 2020

 

 

32,224,734

 

 

$

32

 

 

$

197,846

 

 

$

(179,505

)

 

$

18,373

 

 

 

See accompanying notes

 

4


 

Allena Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common stock

 

 

paid-in

 

 

Accumulated

 

 

stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balance at December 31, 2018

 

 

20,809,025

 

 

$

21

 

 

$

167,040

 

 

$

(117,605

)

 

$

49,456

 

Issuance of common stock, net of issuance costs

 

 

2,632,092

 

 

 

2

 

 

 

9,444

 

 

 

 

 

 

9,446

 

Exercise of common stock options

 

 

7,039

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Issuance of common stock through

   employee stock purchase plan ("ESPP")

 

 

14,009

 

 

 

 

 

 

49

 

 

 

 

 

 

49

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,401

 

 

 

 

 

 

1,401

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(22,692

)

 

 

(22,692

)

Balance at June 30, 2019

 

 

23,462,165

 

 

$

23

 

 

$

177,947

 

 

$

(140,297

)

 

$

37,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

24,735,009

 

 

$

25

 

 

$

182,117

 

 

$

(164,944

)

 

$

17,198

 

Issuance of common stock, net of issuance costs

 

 

7,317,074

 

 

 

7

 

 

 

13,651

 

 

 

 

 

 

13,658

 

Exercise of common stock options

 

 

11,928

 

 

 

 

 

 

18

 

 

 

 

 

 

18

 

Issuance of common stock through

   employee stock purchase plan ("ESPP")

 

 

20,003

 

 

 

 

 

 

27

 

 

 

 

 

 

27

 

Issuance of common stock through

   release of restricted stock units ("RSUs")

 

 

140,720

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,033

 

 

 

 

 

 

2,033

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,561

)

 

 

(14,561

)

Balance at June 30, 2020

 

 

32,224,734

 

 

$

32

 

 

$

197,846

 

 

$

(179,505

)

 

$

18,373

 

 

See accompanying notes.

 

 

 

 

 

5


 

Allena Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(14,561

)

 

$

(22,692

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

2,033

 

 

 

1,401

 

Depreciation expense

 

 

83

 

 

 

79

 

Non-cash interest expense

 

 

4

 

 

 

4

 

Non-cash lease expense

 

 

268

 

 

 

246

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,105

 

 

 

(900

)

Other assets

 

 

 

 

 

123

 

Accounts payable

 

 

(2,483

)

 

 

216

 

Accrued expenses

 

 

(1,506

)

 

 

(868

)

Operating lease liabilities

 

 

(226

)

 

 

(244

)

Other liabilities

 

 

 

 

 

(1

)

Net cash used in operating activities

 

 

(15,283

)

 

 

(22,636

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(101

)

Net cash used in investing activities

 

 

 

 

 

(101

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from the issuance of common stock, net of issuance costs

 

 

13,700

 

 

 

9,569

 

Proceeds from exercise of stock options

 

 

18

 

 

 

13

 

Proceeds from the issuance of stock through ESPP

 

 

27

 

 

 

49

 

Repayment of loan payable

 

 

(2,000

)

 

 

 

Other

 

 

(16

)

 

 

(14

)

Net cash provided by financing activities

 

 

11,729

 

 

 

9,617

 

Net decrease in cash and cash equivalents

 

 

(3,554

)

 

 

(13,120

)

Cash and cash equivalents, beginning of period

 

 

30,007

 

 

 

61,643

 

Cash and cash equivalents, end of period

 

$

26,453

 

 

$

48,523

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange of operating lease obligations

 

$

 

 

$

992

 

Issuance costs included in accounts payable and accrued expenses

 

$

42

 

 

$

123

 

 

See accompanying notes.

 

 

6

 


 

Allena Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(in thousands, except share and per share data)

1. Nature of Business

Allena Pharmaceuticals, Inc. (the “Company”) is a late-stage clinical biopharmaceutical company dedicated to developing and commercializing first-in-class, oral enzyme therapeutics to treat patients with rare and severe metabolic and kidney disorders. The Company is focused on metabolic disorders that result in excess accumulation of certain metabolites that can cause kidney stones, damage the kidney, and potentially lead to chronic kidney disease (“CKD”) and end-stage renal disease. The Company’s lead product candidate, reloxaliase (formerly known as ALLN-177), is a first-in-class, oral enzyme therapeutic that it is developing for the treatment of hyperoxaluria, a metabolic disorder commonly associated with kidney stones, CKD and other serious kidney diseases. The Company was incorporated under the laws of the State of Delaware on June 24, 2011 and is located in Newton, Massachusetts.

On June 5, 2020, the Company completed a registered direct offering, in which the Company issued and sold 7,317,074 shares of its common stock, at a purchase price of $2.05 per share, for gross proceeds of $15.0 million through a securities purchase agreement with certain institutional and accredited investors.  The shares of common stock sold in this offering were being offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission (the “SEC”) on December 3, 2018, as amended, and was declared effective on December 26, 2018 (File No. 333-228656) and a prospectus supplement thereunder filed on June 5, 2020.  As a result of the registered direct offering, the Company received approximately $13.7 million after deducting offering costs.

On July 30, 2020, the Company completed a public underwritten offering of 5,894,191 shares of its common stock, including the exercise in full of the underwriter’s option to purchase an additional 768,807 shares of common stock, at a price to the public of $1.30 per share, for gross proceeds of $7.7 million , before deducting underwriting discounts and commissions and offering expenses.  As a result of this public offering, the Company received approximately $6.7 million after deducting offering costs.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, reliance on third party manufacturers, ability to transition from pilot-scale manufacturing to large-scale production of products and the need to obtain adequate additional financing to fund the development of its product candidates.

Liquidity and Going Concern

The Company had an accumulated deficit of $179.5 million at June 30, 2020 and will require substantial additional capital to fund operations. The future success of the Company is dependent on its ability to identify and develop its product candidates and ultimately upon its ability to attain profitable operations. At June 30, 2020, the Company had $26.5 million of cash and cash equivalents.  The Company’s available cash and cash equivalents as of June 30, 2020 are not sufficient to fund the Company’s current operating plan for at least the next twelve months following the filing of this Quarterly Report on Form 10-Q. The Company requires additional capital to sustain its operations, including its reloxaliase development program. Management is working to seek additional funds through equity or debt financings or through collaborations, licensing transactions or other sources. The Company may be unable to obtain equity or debt financings or enter into collaboration or licensing transactions. Market volatility resulting from the COVID-19 pandemic or other factors could also adversely impact the Company’s ability to access capital as and when needed. The failure to obtain sufficient funds when needed would have a material adverse effect on the Company’s business, results of operations and financial condition and jeopardize its ability to continue operations.  The Company may implement cost reduction strategies, which may include amending, delaying, limiting, reducing, or terminating one or more of its ongoing or planned clinical trials or development programs of its product candidates. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

7


 

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations.  Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019 and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 16, 2020.  The unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of June 30, 2020, the results of its operations for the three and six months ended June 30, 2020 and June 30, 2019 and cash flows for the six months ended June 30, 2020 and June 30, 2019. Such adjustments are of a normal and recurring nature. The results for the three months ended June 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

Principles of Consolidation

The consolidated financial statements include the accounts of Allena Pharmaceuticals, Inc. and its wholly owned subsidiaries Allena Pharmaceuticals Security Corporation (“Security Corporation”), which was incorporated in December 2014, and Allena Pharmaceuticals Ireland Limited, which was incorporated in March 2017. All intercompany transactions and balances have been eliminated.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability between market participants at measurement dates. ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a three-level valuation hierarchy for instruments measured at fair value. The hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The hierarchy defines three levels of valuation inputs, of which the first two are considered observable and the last is considered unobservable:

 

Level 1

inputs: Quoted prices in active markets for identical assets or liabilities.

 

Level 2

inputs: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

 

Level 3

inputs: Unobservable inputs developed using estimates or assumptions developed by the Company, which reflect those that a market participant would use in pricing the asset or liability.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period.  On an ongoing basis, the Company’s management evaluates its estimates, which include but are not limited to management’s judgement of prepaid and accrued research and development expenses, and the valuation of share-based awards.  Actual results could differ from those estimates.

The remainder of the Company’s significant accounting policies are described in the Annual Report filed on Form 10-K for the year ended December 31, 2019 that was filed with the United States Securities and Exchange Commission on March 16, 2020.

 

8


 

Recently Adopted Accounting Pronouncements  

 In 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements.  The new guidance became effective for the Company on January 1, 2020.  The adoption of ASU 2018-13 did not have a material impact on the Company’s condensed consolidated financial statements.

In 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected. This guidance became effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The amendments in this update are able to be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Accordingly, the Company adopted ASU 2018-15 effective January 1, 2020, and it elected to apply this guidance on a prospective basis. There was no impact to the condensed consolidated financial statements due to the adoption of this guidance.

Recently Issued Accounting Pronouncements  

In 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred.  For available-for-sale debt securities in unrealized loss positions, ASU 2016-13 requires allowances to be recorded instead of reducing the amortized cost of the investment.  ASU 2016-13 is effective for smaller reporting companies on January 1, 2023.  Early adoption is permitted.  The Company does not expect the adoption of ASU 2016-13 will have a material impact on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. The new guidance will become effective for the Company on January 1, 2021.  Early adoption is permitted.  The Company does not expect the adoption of ASU 2019-12 will have a material impact on condensed consolidated financial statements.

3. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. The Company has computed diluted net loss per common share after giving consideration to all potentially dilutive common shares, including options to purchase common stock, restricted stock units and warrants to purchase common stock, outstanding during the period determined using the treasury-stock and if-converted methods, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share have been the same.

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(6,976

)

 

$

(11,273

)

 

$

(14,561

)

 

$

(22,692

)

Net loss attributable to common stockholders

 

$

(6,976

)

 

$

(11,273

)

 

$

(14,561

)

 

$

(22,692

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares—basic and diluted

 

 

26,878,962

 

 

 

20,903,298

 

 

 

25,808,043

 

 

 

20,859,251

 

Net loss per share attributable to common

   stockholders—basic and diluted

 

$

(0.26

)

 

$

(0.54

)

 

$

(0.56

)

 

$

(1.09

)

 

 

9


 

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares):

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Warrants

 

 

9,040

 

 

 

9,040

 

Stock options

 

 

3,766,567

 

 

 

3,142,132

 

Restricted stock units

 

 

553,468

 

 

 

 

Total

 

 

4,329,075

 

 

 

3,151,172

 

 

4. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value at June 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

 

Description

 

June 30,

2020

 

 

Quoted

Prices

in Active

Markets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds, included in cash and cash equivalents

 

$

26,119

 

 

$

26,119

 

 

$

 

 

$

 

Total assets

 

$

26,119

 

 

$

26,119

 

 

$

 

 

$

 

 

Description

 

December 31,

2019

 

 

Quoted

Prices

in Active

Markets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds, included in cash and cash equivalents

 

$

29,592

 

 

$

29,592

 

 

$

 

 

$

 

Total assets

 

$

29,592

 

 

$

29,592

 

 

$

 

 

$

 

 

At June 30, 2020 and December 31, 2019, all of the Company’s cash equivalents were comprised of money market funds.

There were no changes to the valuation methods during the three and six months ended June 30, 2020 and the year ended December 31, 2019. There were no transfers within the fair value hierarchy during the three and six months ended June 30, 2020 and the year ended December 31, 2019.

The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their carrying values. The Company believes the terms of the loan payable reflect current market conditions for an instrument with similar terms and maturity, therefore the carrying value of the Company’s debt approximates its fair value based on Level 3 of the fair value hierarchy.

 

10


 

5. Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Payroll and employee-related expenses

 

$

1,392

 

 

$

1,250

 

Third-party research and development expenses

 

 

267

 

 

 

1,393

 

Professional fees

 

 

179

 

 

 

229

 

Restructuring charges

 

 

 

 

 

373

 

Loan interest

 

 

33

 

 

 

43

 

Other

 

 

14

 

 

 

82

 

Total accrued expenses

 

$

1,885

 

 

$

3,370

 

 

6. Restructuring Charges

 

On November 29, 2019, following the completion of a strategic review of its business, the Company's Board of Directors approved a workforce reduction plan, or the Workforce Reduction, to reduce its workforce headcount by approximately 38%. The Company evaluated the related employee severance and other benefits to employees in connection with the Workforce Reduction to determine whether the benefits were within the scope ASC 712, Compensation - Non-retirement Post-employment Benefits, or within the scope of ASC 420, Exit or Disposal Cost Obligations, depending on the nature of the benefit and whether it is part of an on-going benefit arrangement under ASC 712 or a one-time termination benefit unique to the Workforce Reduction. The Company recorded restructuring expense of $0.6 million at the time of the Workforce Reduction, pursuant to ASC 420 as the Company did not have an on-going benefit arrangement under ASC 712. The Workforce Reduction was complete as of December 31, 2019.

 

Activity related to the Company’s accrued restructuring charges during the six months ended June 30, 2020 is as follows:

 

Accrued restructuring charges at December 31, 2019

 

$

373

 

Amounts paid through June 30, 2020

 

 

(373

)

Accrued restructuring charges at June 30, 2020

 

$

 

 

 

7. Commitments and Contingencies

The Company is a party to operating leases for approximately 7,795 square feet of office space in Newton, MA (Newton Lease), and for approximately 7,564 square feet of laboratory and office space in Sudbury, MA (Sudbury Lease).  The Newton Lease expires on December 31, 2020 and the Sudbury Lease expires on February 28, 2021.  Annualized base rent for the Newton Lease and the Sudbury lease is approximately $0.3 million and $0.2 million, respectively.   

Minimum payments of the Company’s operating lease liabilities in accordance with ASC 842 as of June 30, 2020 are as follows (in thousands):

Remainder of 2020

 

$

273

 

2021

 

 

30

 

Total maturities

 

 

303

 

Less: Amount representing interest

 

 

(7

)

Present value of operating lease liabilities

 

$

296

 

 

Lease costs included in the Company’s condensed consolidated statements of operations and comprehensive loss for each of the three and six months ended June 30, 2020 and 2019 was $0.1 million and $0.3 million, respectively.  The Company’s operating leases had a weighted average remaining lease term of 0.6 years and a weighted average discount rate of 5.5% at June 30, 2020.

 

 

11


 

8. Loan and Security Agreement

On June 29, 2018 the Company entered into a loan agreement with Pacific Western Bank (“PWB Loan Agreement”) providing up to $12.0 million of borrowings, of which $10.0 million was advanced on June 29, 2018.  The remaining $2.0 million of borrowings available under the PWB Loan Agreement were available to the Company through one additional advance request until December 31, 2019.  Borrowings are secured by a lien on all Company assets, excluding intellectual property, and amounts borrowed have a floating per annum interest rate of the greater of 5.0% or the prime rate.  The PWB Loan Agreement has a term of 48 months and an interest only period of 18 months.  Upon the expiration of the interest only period on December 31, 2019, amounts borrowed will be repaid over 30 equal monthly payments of principal plus accrued but unpaid interest. At its option, the Company may prepay all, but not less than all, of the outstanding borrowings subject to a prepayment premium as defined in the Loan Agreement.  Upon the closing of one or more financings, in which the Company receives aggregate gross proceeds of at least $25 million, a success fee of $300,000 will be due and payable to PWB.  As a result of the gross proceeds of $15.0 million received from the registered direct offering completed on June 5, 2020, combined with  $10.0 million of gross proceeds received from the registered direct offering completed in June 2019, and $2.7 million of gross proceeds received through the At-the-Market offering completed in December 2019, the conditions required to trigger the success fee were fulfilled and the success fee was paid to PWB at the time of the closing of the registered direct offering.  The success fee was recorded as other expense on the Company’s condensed consolidated statements of operations and comprehensive loss at the time the registered direct offering was completed.

The PWB Loan Agreement contains negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions, incurring indebtedness or liens, paying dividends or making investments and certain other business transactions. There are no financial covenants associated with the PWB Loan Agreement. The obligations under the PWB Loan Agreement are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in the Company’s business, operations or financial or other condition. The Company has determined that the risk of subjective acceleration under the material adverse events clause is remote and therefore has classified the outstanding principal based on scheduled principal payments.

The Company evaluated the PWB Loan Agreement for embedded features that require bifurcation, noting certain features were required to be bifurcated, but were concluded to be de minimis in value at June 30, 2020 and December 31, 2019.

 

9. Stockholders’ Deficit

Common Stock

The holders of common stock are entitled to one vote for each share held. Common stockholders are not entitled to receive dividends, unless declared by the Board of Directors.

The Company has reserved for future issuances the following shares of common stock as of June 30, 2020 and December 31, 2019:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Warrants

 

 

9,040

 

 

 

9,040

 

Stock options and restricted stock units

 

 

5,907,055

 

 

 

5,070,303

 

Employee stock purchase plan

 

 

360,002

 

 

 

380,005

 

Total

 

 

6,276,097

 

 

 

5,459,348

 

 

10. Stock Incentive Plan    

On October 31, 2017, the Company adopted the 2017 Stock Option and Incentive Plan (“2017 Plan”).  Upon the adoption of the 2017 Plan, no further grants would be made under the 2011 Stock Incentive Plan (“2011 Plan”).  The 2017 Plan initially provided for the grant of awards for 2,038,021 shares of common stock.  In addition to the shares available for grant under the 2017 Plan, any awards outstanding under the 2011 Plan as of the October 31, 2017 are cancelled, forfeited or otherwise terminated without being exercised, the number of shares underlying such awards will be available for future grant under the 2017 Plan. The 2017 Plan also provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2017 Plan on January 1 of each year. The number of shares added each year will be equal to the lesser of: (i) 4% of the outstanding shares on the immediately preceding December 31 or (ii) such amount as determined by

 

12


 

the Compensation Committee of the registrant’s Board of Directors.   On January 1, 2018, 2019 and 2020, the shares available for grant under the 2017 Plan was automatically increased by 827,786, 832,361 and 989,400 shares, respectively.

All of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted options, restricted stock units (“RSUs”), and other share-based awards under the terms of the 2017 Plan.  As of June 30, 2020, 1,587,020 shares of common stock were available for future grant under the 2017 Plan.

All stock option grants are nonstatutory stock options except option grants to employees (including officers and directors) intended to qualify as incentive stock options under the Internal Revenue Code of 1986, as amended. Incentive stock options may not be granted at less than the fair market value of the Company’s common stock on the date of grant, as determined in good faith by the Board of Directors at its sole discretion. Nonqualified stock options may be granted at an exercise price established by the Board of Directors at its sole discretion (which has not been less than fair market value on the date of grant) and the vesting periods may vary. Vesting periods are generally four years and are determined by the Board of Directors or a delegated subcommittee. Stock options become exercisable as they vest. Options granted under both the 2011 Plan and 2017 Plan expire no more than 10 years from the date of grant.

Stock-based compensation expense included in the Company’s statements of operations and comprehensive loss is as follows (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Research and development

 

$

281

 

 

$

311

 

 

$

709

 

 

$

566

 

General and administrative

 

 

717

 

 

 

461

 

 

 

1,324

 

 

 

835

 

Total

 

$

998

 

 

$

772

 

 

$

2,033

 

 

$

1,401

 

 

The fair value of each stock option granted to employees and directors during the three and six months ended June 30, 2019 was estimated on the date of grant using the Black-Scholes option-pricing model, with the following range of assumptions as follows:

 

 

 

Three Months Ended

June 30, 2019

 

Six Months Ended

June 30, 2019

Risk-free interest rate

 

1.9%-2.3%

 

1.9%-2.6%

Expected dividend yield

 

—%

 

—%

Expected term (in years)

 

5.5-6.1

 

5.5-6.8

Expected volatility

 

82%-83%

 

82%-83%

 

The Company did not grant any stock options during the three and six months ended June 30, 2020.  A summary of the stock option activity under the 2011 and 2017 Plans is as follows:

 

 

 

Shares

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Life

(in years)

 

 

Aggregate

Intrinsic

Value

(in thousands)

 

Outstanding at December 31, 2019

 

 

3,915,591

 

 

$

4.33

 

 

 

8.1

 

 

$

1,921

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(11,928

)

 

 

1.42

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(137,096

)

 

 

6.15

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2020

 

 

3,766,567

 

 

$

4.27