10-Q 1 alna-10q_20180331.htm 10-Q alna-10q_20180331.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 March 31, 2018

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)

 

 

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

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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

 

  (Do not check if a small reporting company)

  

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 April 27, 2018, the registrant had 20,695,556 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:

 

the design and conduct of our Phase 3 clinical program of ALLN-177 in enteric hyperoxaluria;

 

the number, designs, results and timing of our clinical trials and preclinical studies and the timing of the availability of data from these trials and activities;

 

our ability to enroll a sufficient number of patients 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 ALLN-177, 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 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 ALLN-177 and ALLN-346;

 

the market acceptance of ALLN-177, ALLN-346 or any future product candidates that are approved for marketing in the United States or other countries;

 

our ability to successfully commercialize ALLN-177 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;

 

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

 

potential collaborators to license and commercialize ALLN-177, 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;

 

our ability to generate revenue and become profitable; and

 

our estimates regarding our capital requirements and our need for additional financing.

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 Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

Item 4.

Controls and Procedures

20

PART II.

OTHER INFORMATION

21

Item 1.

Legal Proceedings

21

Item 1A.

Risk Factors

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

58

Item 3.

Defaults Upon Senior Securities

58

Item 4.

Mine Safety Disclosures

58

Item 5.

Other Information

58

Item 6.

Exhibits

59

Signatures

60

Exhibit Index

 

 

 

 

 

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)

 

 

 

March 31,

2018

 

 

December 31,

2017

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

86,382

 

 

$

94,494

 

Prepaid expenses and other current assets

 

 

962

 

 

 

1,539

 

Total current assets

 

 

87,344

 

 

 

96,033

 

Property and equipment, net

 

 

128

 

 

 

127

 

Other assets

 

 

96

 

 

 

89

 

Total assets

 

$

87,568

 

 

$

96,249

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,154

 

 

$

1,724

 

Loan payable, net of discount

 

 

3,870

 

 

 

3,870

 

Accrued expenses

 

 

1,222

 

 

 

1,949

 

Total current liabilities

 

 

7,246

 

 

 

7,543

 

Loan payable, net of current portion and discount

 

 

4,537

 

 

 

5,516

 

Other liabilities

 

 

377

 

 

 

320

 

Total liabilities

 

 

12,160

 

 

 

13,379

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; no

   shares authorized, issued or outstanding

 

 

 

 

 

 

Common stock, $0.001 par value; 125,000,000 shares authorized; 20,695,556 and

   20,694,658 shares issued and outstanding at March 31, 2018 and December

   31, 2017, respectively

 

 

20

 

 

 

20

 

Additional paid-in capital

 

 

165,225

 

 

 

164,807

 

Accumulated deficit

 

 

(89,837

)

 

 

(81,957

)

Total stockholders’ equity

 

 

75,408

 

 

 

82,870

 

Total liabilities and stockholders’ equity

 

$

87,568

 

 

$

96,249

 

 

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 March 31,

 

 

 

2018

 

 

2017

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

5,931

 

 

$

4,351

 

General and administrative

 

 

2,042

 

 

 

1,191

 

Total operating expenses

 

 

7,973

 

 

 

5,542

 

Loss from operations

 

 

(7,973

)

 

 

(5,542

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

100

 

 

 

(132

)

Other income (expense), net

 

 

(7

)

 

 

3

 

Other income (expense), net

 

 

93

 

 

 

(129

)

Net loss

 

$

(7,880

)

 

$

(5,671

)

Net loss per share attributable to common stockholders—basic and

   diluted

 

$

(0.38

)

 

$

(4.24

)

Weighted-average common shares outstanding—basic and diluted

 

 

20,695,386

 

 

 

1,342,295

 

Net loss

 

$

(7,880

)

 

$

(5,671

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized loss on investments

 

 

 

 

 

(1

)

Total other comprehensive loss

 

 

 

 

 

(1

)

Comprehensive loss

 

$

(7,880

)

 

$

(5,672

)

 

See accompanying notes.

 

 

 

3


 

Allena Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(7,880

)

 

$

(5,671

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

404

 

 

 

96

 

Depreciation expense

 

 

19

 

 

 

17

 

Non-cash interest expense

 

 

75

 

 

 

87

 

Amortization of premium on investments

 

 

 

 

 

28

 

Change in fair value of warrant liability

 

 

 

 

 

(3

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

612

 

 

 

69

 

Other assets

 

 

(42

)

 

 

 

Accounts payable

 

 

529

 

 

 

(96

)

Accrued expenses

 

 

(616

)

 

 

(824

)

Other liabilities

 

 

3

 

 

 

 

Net cash used in operating activities

 

 

(6,896

)

 

 

(6,297

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(31

)

 

 

(51

)

Maturities of investments

 

 

 

 

 

9,350

 

Net cash (used in) provided by investing activities

 

 

(31

)

 

 

9,299

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

1

 

 

 

2

 

Payments of initial public offering costs

 

 

(186

)

 

 

 

Repayment of loan payable

 

 

(1,000

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(1,185

)

 

 

2

 

Net (decrease) increase in cash and cash equivalents

 

 

(8,112

)

 

 

3,004

 

Cash and cash equivalents, beginning of period

 

 

94,494

 

 

 

25,250

 

Cash and cash equivalents, end of period

 

$

86,382

 

 

$

28,254

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

 

Accretion of convertible preferred stock to redemption value

 

$

 

 

$

17

 

 

See accompanying notes.

 

 

4

 


 

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, 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.               

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.

The Company has an accumulated deficit of $89.8 million at March 31, 2018, 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 March 31, 2018, the Company had $86.4 million of cash and cash equivalents.  The Company believes that its cash and cash equivalents as of March 31, 2018 will be sufficient to fund the Company’s operating plan into 2020.

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, 2017 and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 27, 2018.  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 March 31, 2018, the results of its operations for the three months ended March 31, 2018 and 2017 and cash flows for the three months ended March 31, 2018 and 2017. Such adjustments are of a normal and recurring nature. The results for the three months ended March 31, 2018 are not necessarily indicative of the results for the year ending December 31, 2018, 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.

 

5


 

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.

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, 2017 that was filed with the United States Securities and Exchange Commission on March 27, 2018.

 

Recently Adopted Accounting Pronouncements  

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”). This guidance addresses the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2017 and for interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU No. 2016-15 effective January 1, 2018. The adoption of ASU No. 2016-15 did not have a material impact on the Company’s financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU No. 2017-09”). This update clarifies the changes to terms or conditions of a share-based payment award that require an entity to apply modification accounting. ASU No. 2017-09 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. Early application is permitted and prospective application is required. The Company adopted ASU No. 2017-09 effective January 1, 2018.  The adoption of ASU No. 2017-09 did not have a material impact on the Company’s financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The Company adopted ASC 606 on January 1, 2018 under the modified retrospective method. The modified retrospective method requires that the cumulative effect of initially applying ASC 606 be recognized as an adjustment to the opening balance of retained earnings or accumulated deficit of the annual period that includes the date of initial application. The Company did not have any arrangements that were in the scope of ASC 606 and thus there was no impact to the condensed consolidated financial statements as a result of the adoption.

 

Recently Issued Accounting Pronouncements  

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The new standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. ASU No. 2016-02 is effective for public entities for annual periods beginning after December 15, 2018 and for interim periods within those fiscal years.  The Company is currently evaluating the potential impact that ASU No. 2016-02 may have on its financial position and results of operations.

 

 

6


 

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 common stock, convertible preferred stock and warrants to purchase convertible preferred 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 March 31,

 

 

 

2018

 

 

2017

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(7,880

)

 

$

(5,671

)

Accretion of convertible preferred stock

 

 

 

 

 

(17

)

Net loss attributable to common stockholders

 

$

(7,880

)

 

$

(5,688

)

Denominator:

 

 

 

 

 

 

 

 

Weighted-average common shares—basic and diluted

 

 

20,695,386

 

 

 

1,342,295

 

Net loss per share attributable to common

   stockholders—basic and diluted

 

$

(0.38

)

 

$

(4.24

)

 

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):

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Series A convertible preferred stock

 

 

 

 

 

4,400,410

 

Series B convertible preferred stock

 

 

 

 

 

4,753,536

 

Series C convertible preferred stock

 

 

 

 

 

4,791,563

 

Warrants

 

 

9,040

 

 

 

43,265

 

Stock options

 

 

2,043,924

 

 

 

1,395,800

 

Total

 

 

2,052,964

 

 

 

15,384,574

 

 

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 March 31, 2018 and December 31, 2017, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

Description

 

March 31,

2018

 

 

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

 

$

85,736

 

 

$

85,736

 

 

$

 

 

$

 

Total assets

 

$

85,736

 

 

$

85,736

 

 

$

 

 

$

 

 

Description

 

December 31,

2017

 

 

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

 

$

93,745

 

 

$

93,745

 

 

$

 

 

$

 

Total assets

 

$

93,745

 

 

$

93,745

 

 

$

 

 

$

 

 

 

7


 

 

At March 31, 2018 and December 31, 2017, all of the Company’s cash equivalents were comprised of money market funds.

 

There were no changes to the valuation methods during the three months ended March 31, 2018 and the year ended December 31, 2017. There were no transfers within the fair value hierarchy during the three months ended March 31, 2018 and the year ended December 31, 2017.

 

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.

5. Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

 

 

March 31,

2018

 

 

December 31,

2017

 

Payroll and employee-related expenses

 

$

560

 

 

$

1,132

 

Professional fees

 

 

358

 

 

 

420

 

Third-party research and development expenses

 

 

257

 

 

 

135

 

Loan interest

 

 

38

 

 

 

40

 

IPO-related services

 

 

 

 

 

111

 

Other

 

 

9

 

 

 

111

 

Total accrued expenses

 

$

1,222

 

 

$

1,949

 

 

6. Loan and Security Agreement

In August 2014, the Company entered into a Loan Agreement with Silicon Valley Bank (“SVB”) and borrowed $7.0 million under the loan.  

In May 2016, the Loan Agreement was amended (“Amended Loan Agreement”) to borrow up to $10.0 million with a portion of the proceeds to be used to pay down the outstanding balance of the original $7.0 million of advances. At the time of the Amended Loan Agreement, SVB advanced a gross amount of $7.5 million to the Company. Net proceeds received by the Company were $1.6 million after deducting $5.3 million for repayment of the original advances and $0.6 million for final interest due upon maturity or prepayment of the original advances. The Amended Loan Agreement was accounted for as a debt modification pursuant to ASC 450-70, Modifications or Extinguishments. In December 2016, upon the achievement of certain milestones, SVB advanced the remaining $2.5 million available under the Amended Loan Agreement.

The borrowings are secured by a lien on all Company assets, excluding intellectual property. The May 2016 and December 2016 advances have a floating per annum interest rate of the greater of 4.0% or 0.5% above the prime rate. The interest rate on the borrowings at March 31, 2018 and December 31, 2017 was 5.25% and 5.0%, respectively. Beginning in May 2016, payments were interest only for a period of 12 months. In December 2016, the interest only period was extended to 18 months. Upon the expiration of the interest only period, amounts borrowed will be repaid over 30 equal monthly payments of principal and 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 Amended Loan Agreement. The Company is also required to make a final payment equal to 8.25% of the total borrowings which is due on the earliest of the loan maturity date, an acceleration of the loan as defined in the Amended Loan Agreement or at the time of prepayment. The final payment is being accreted to interest expense through the maturity date of the loan.

 

8


 

The Company issued the Series A Warrant to SVB to purchase 71,428 shares of Series A convertible preferred stock (“Series A Preferred Stock”) at $0.98 per share upon executing the Loan Agreement.  In addition, the Company issued an additional warrant to SVB to purchase a number of shares of Series A Preferred Stock equal to 1.0% of each additional loan advance amount.  In connection with the initial advance and the advance in March 2015, the Company issued additional Series A Warrants to purchase up to 38,265 and 33,163 shares of Series A Preferred Stock at $0.98 per share, respectively.  The Series A Warrants expire on August 17, 2024.  Under the terms of the Amended Loan Agreement, the Company issued a Series C Warrant to SVB to purchase a number of shares of Series C convertible preferred stock (“Series C Preferred Stock”) at $2.65 per share equal to 1.0% of each loan advance amount.  In connection with the initial advance and the advance in December 2016, the Company issued Series C Warrants to purchase up to 28,302 and 9,434 shares of Series C Preferred Stock at $2.65 per share, respectively.  The Series C Warrants expire on May 1, 2026.

Upon the closing of the IPO, the Series A Warrants converted to common stock warrants to purchase up to 34,225 shares of common stock at an exercise price of $4.09 per share.  The Series C Warrants converted to common stock warrants to purchase up to 9,040 shares of common stock at an exercise price of $11.06 per share.  On December 12, 2017, SVB exercised its warrants to purchase 34,225 shares of common stock using the cashless exercise option permitted per the terms of the warrant agreement.  The Company issued 24,401 shares of common stock to SVB as settlement of the warrant.  At March 31, 2018, warrants to purchase up to 9,040 shares of common stock at an exercise price of $11.06 remained outstanding.

The Company recorded the fair value of the Warrants at issuance as a reduction to the loan payable balance. The discount is being accreted to interest expense over the period that the loan will be outstanding. The offsetting credit was recorded as warrants to purchase shares subject to redemption in the long-term liabilities section on the consolidated balance sheets.

The Amended 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 Amended Loan Agreement. The obligations under the Amended 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 in current and long-term liabilities based on scheduled principal payments.

The Loan Agreement requires the Company to maintain a balance of cash and cash equivalents in the Company’s operating, depository and securities accounts in an amount not less than 125% of the outstanding debt balance so long as the Company maintains a cash balance in the Security Corporation. At March 31, 2018 and December 31, 2017, the Company was required to have and had a balance of not less than $10.8 million and $12.1 million, respectively, in the Company’s operating account.

The Company evaluated the Loan Agreement and Amended Loan Agreement for embedded features that require bifurcation, noting that the contingent interest feature and the incremental interest upon an event of default were required to be bifurcated, but were concluded to be de minimus in value at inception and at March 31, 2018 and December 31, 2017.

 

7. 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 March 31, 2018 and December 31, 2017 :

 

 

 

March 31,

2018

 

 

December 31,

2017

 

Warrants

 

 

9,040

 

 

 

9,040

 

Stock options

 

 

4,365,233

 

 

 

3,538,345

 

Employee stock purchase plan

 

413,230

 

 

 

206,284

 

Total

 

 

4,374,273

 

 

 

3,753,669

 

 

 

9


 

8. 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 the Compensation Committee of the registrant’s Board of Directors.  On January 1, 2018, the shares available for grant under the 2017 Plan was automatically increased by 827,786 shares

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 March 31, 2018, 2,321,309 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 March 31,

 

 

 

2018

 

 

2017

 

Research and development

 

$

90

 

 

$

27

 

General and administrative

 

 

314

 

 

 

69

 

Total

 

$

404

 

 

$

96

 

 

The fair value of each stock option granted to employees and directors 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 March 31,

 

 

2018

 

2017

Risk-free interest rate

 

2.3%-2.7%

 

1.9%-2.0%

Expected dividend yield

 

—%

 

—%

Expected term (in years)

 

5.9-6.1

 

5.6-6.3

Expected volatility

 

81%-89%

 

84%-87%

 

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, 2017

 

 

1,508,124

 

 

 

1.89

 

 

 

7.9

 

 

$

12,328

 

Granted

 

 

538,400

 

 

 

6.94

 

 

 

 

 

 

 

 

 

Exercised

 

 

(898

)

 

 

1.59

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(1,702

)

 

 

1.59

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2018

 

 

2,043,924

 

 

$

3.22

 

 

 

8.2

 

 

$

15,944

 

Exercisable at March 31, 2018

 

 

890,441

 

 

$

1.37

 

 

 

7.2

 

 

$

8,596

 

Vested and expected to vest at March 31, 2018

 

 

2,043,924

 

 

$

3.22

 

 

 

8.2

 

 

$

15,944

 

 

10


 

As of March 31, 2018, total unrecognized stock-based compensation expense relating to unvested stock options was $4.1 million. This amount is expected to be recognized over a weighted-average period of 3.2 years.

9. Commitments and Contingencies

In August 2011 and October 2013, the Company and an independent third party entered into operating leases for approximately 6,055 square feet of office space in Newton, MA (“Newton Lease”) and approximately 3,170 square feet of laboratory space in Natick, MA, respectively.  In October 2016, the Newton lease was amended to extend the term one year to May 2018 and, effective June 1, 2017 removed the independent third party from the lease and all related obligations of the lease.  In August 2017, the Newton lease was amended again to extend the lease term another year to May 2019.  The lease for the laboratory space in Natick, MA expired in October 2017 and the lease was not renewed by the Company. In December 2017, the Newton lease was amended again to increase the amount of office space to approximately 7,795 square feet and extend the term to December 31, 2020.   Base rent for this space is approximately $0.3 million annually.

In August 2016, the Company entered into an operating lease for approximately 3,890 square feet of laboratory space in Sudbury, MA. This lease was to expire in August 2017. In February 2017, the Company amended this lease to extend the term to February 2019 and increase the amount of rentable space to approximately 5,133 square feet, with an option to lease another 2,029 square feet. In March 2018, the Company amended this lease again to reduce the amount of laboratory space to approximately 4,636 square feet, removed the option to lease another 2,029 square feet and extend the term to February 28, 2021.  Base rent for this space is approximately $0.1 million annually.

 

11


 

Item 2.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2017 that was filed with the United States Securities and Exchange Commission, or the SEC, on March 27, 2018.

Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods. 

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in the Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A. Risk Factors.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are 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. We are 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, or CKD, and end-stage renal disease. Our lead product candidate, ALLN-177, is a first-in-class, oral enzyme therapeutic that we are developing for the treatment of hyperoxaluria, a metabolic disorder characterized by markedly elevated urinary oxalate levels and commonly associated with kidney stones, CKD and other serious kidney diseases. There are currently no approved therapies for the treatment of hyperoxaluria. We have conducted a robust clinical development program of ALLN-177, including three Phase 2 clinical trials, and are in discussions with the U.S. Food and Drug Administration, or the FDA, to finalize the design of our planned pivotal Phase 3 program in enteric hyperoxaluria.  In March 2018, we initiated URIROX-1TM (URIROX-1) (formerly Study 301), the first of two anticipated Phase 3 clinical trials in support of our planned Biologic License Application, or BLA, for ALLN-177 in patients with enteric hyperoxaluria. We expect to announce topline data from this trial in the second half of 2019.   We continue to engage with the FDA to finalize the design of URIROX-2TM (URIROX-2) (formerly Study 302), the second, larger planned Phase 3 clinical trial, and to discuss opportunities for pursuing an accelerated approval pathway for our planned BLA submission for ALLN-177 in patients with enteric hyperoxaluria. In addition to our Phase 3 program of ALLN-177 for enteric hyperoxaluria, we are also evaluating ALLN-177 in Study 206, a Phase 2 basket trial in adults and adolescents with primary hyperoxaluria or enteric hyperoxaluria with hyperoxalemia, which we initiated in March 2018.  We expect to announce interim data from Study 206 in the second half of 2018.

On November 6, 2017, we completed our IPO, in which we issued and sold 5,333,333 shares of our common stock at a public offering price of $14.00 per share, for aggregate gross proceeds of $74.7 million. The underwriters partially exercised their over-allotment option on December 1, 2017, and purchased 16,969 shares of our common stock, for aggregate gross proceeds of $0.2 million.  As a result of the IPO, we received approximately $67.0 million in net proceeds after deducting $7.9 million of underwriting discounts and commissions and offering costs.

Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential product candidates, producing drug substance and drug product material for use in preclinical studies and clinical trials, conducting preclinical studies of our product candidates and clinical trials for our lead product candidate, ALLN-177. We do not have any products approved for sale and have not generated any revenue to date. As of March 31, 2018, we had cash and cash equivalents totaling $86.4 million.

 

12


 

We have incurred significant net operating losses in every year since our inception and expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. Our net losses were $7.9 million and $5.7 million for the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, we had an accumulated deficit of $89.8 million. We anticipate that our expenses will increase significantly as we:

 

conduct ongoing and future clinical trials of our lead product candidate, ALLN-177;

 

manufacture additional material for our planned pivotal Phase 3 clinical program, Phase 2 clinical basket trial and potential future clinical studies we might conduct for our product candidates;

 

scale up our manufacturing process for ALLN-177 to prepare for the filing of a potential BLA and commercialization if our clinical development program is successful;

 

advance the development of our second product candidate, ALLN-346;

 

 

seek regulatory and marketing approvals for product candidates that successfully complete clinical trials, if any;

 

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval in geographies in which we plan to commercialize our products ourselves;

 

maintain, expand and protect our intellectual property portfolio;

 

hire additional staff, including clinical, scientific, technical, operational, and financial personnel, to execute our business plan; and

 

add clinical, scientific, operational, financial and management information systems to support our product development and potential future commercialization efforts, and to enable us to operate as a public company.

We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate. Additionally, we currently use contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, to carry out our preclinical and clinical development activities. We do not yet have a sales organization. If we obtain regulatory approval for our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we may seek to fund our operations through public or private equity or debt financings or other sources, including strategic collaborations. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed.

Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales or any other source and do not expect to generate any revenue from the sale of products for the foreseeable future. If our development efforts for ALLN-177 or other product candidates that we may develop in the future are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our product candidates, which include:

 

employee-related expenses, including salaries, benefits and stock-based compensation expense;

 

costs incurred under agreements with third parties, including CROs, that conduct research and development, preclinical studies and clinical trials on our behalf;

 

costs related to production of preclinical and clinical materials, including fees paid to CMOs;

 

consulting, licensing and professional fees related to research and development activities;

 

costs of purchasing laboratory supplies and non-capital equipment used in our research and development activities;

 

13


 

 

costs related to compliance with clinical regulatory requirements; and

 

facility costs and other allocated expenses, which include expenses for rent and maintenance of facilities, insurance, depreciation and other supplies.

We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as clinical site activations, patient enrollment, or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and may be reflected in our consolidated financial statements as prepaid or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

The following summarizes our most advanced current research and development programs:

 

ALLN-177 is our lead product candidate which we are developing for the treatment of hyperoxaluria. Substantially all of our research and development costs to date have been used to fund this program.

 

ALLN-346 is our second product candidate which we are developing for patients with hyperuricemia and CKD. We began incurring external research and development costs for this program in 2016.

We typically use our employee and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs and other internal costs to specific product candidates or development programs.

The following table summarizes our research and development expenses by program (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

ALLN-177 external costs

 

$

4,135

 

 

$

3,044

 

ALLN-346 external costs

 

 

71

 

 

 

18

 

Employee compensation and benefits

 

 

1,450

 

 

 

1,063

 

Other

 

 

275

 

 

 

226

 

Total research and development expenses

 

$

5,931

 

 

$

4,351

 

 

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. Since inception, we have incurred $53.5 million of external research and development costs for ALLN-177. We expect that our research and development costs will continue to increase for the foreseeable future as we conduct and initiate additional clinical trials of ALLN-177, scale our manufacturing processes and advance development of ALLN-346.

The successful development of ALLN-177, ALLN-346 and other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of these product candidates. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs and timing of preclinical studies, clinical trials and development of our product candidates will depend on a variety of factors, including:

 

successful enrollment in, and completion of, clinical trials for ALLN-177;

 

successful data from our clinical program of ALLN-177 that supports an acceptable benefit-risk profile of ALLN-177 in the intended populations;

 

establishing an appropriate safety profile for ALLN-346 and any potential future product candidate with studies to enable the filing of an investigational new drug application;

 

approval of INDs for ALLN-346 and any potential future product candidate to commence planned or future clinical trials;

 

significant and changing government regulation and regulatory guidance;

 

timing and receipt of marketing approvals from applicable regulatory authorities;

 

14


 

 

making arrangements with CMOs for third-party commercial manufacturing of our product candidates;

 

obtaining and maintaining patent and other intellectual property protection and regulatory exclusivity for our product candidates;

 

commercializing the product candidates, if and when approved, whether alone or in collaboration with others;

 

acceptance of the product, if and when approved, by patients, the medical community and third-party payors; and

 

maintenance of a continued acceptable safety profile of the drugs following approval.

A change in the outcome of any of these variables with respect to the development, manufacture or commercialization enabling activities of any of our product candidates could mean a significant change in the costs, timing and viability associated with the development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and professional fees for accounting, auditing, tax and consulting services.

We expect that our general and administrative expenses will increase in the future to support continued research and development activities and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys and accountants, among other expenses. Additionally, we expect to incur increased expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements, director and officer insurance costs, and investor and public relations costs.

Interest Income (Expense), Net

Interest income (expense), net, primarily consists of interest expense incurred on our credit facility, amortized debt discount related to the fair value of the warrants issued in conjunction with the advances under the credit facility and debt issuance costs, and interest income earned on our cash, cash equivalents and investments.

Other Income (Expense), Net

Other income (expense), net, primarily consists of gain (loss) on foreign currency transactions and non-cash changes in the fair value of warrants issued in connection with our credit facility. The preferred warrants converted upon the closing of our IPO and therefore became exercisable into common stock instead of convertible preferred stock. The warrants met the criteria to be classified in stockholders’ equity and the fair value of the warrant liability as of the IPO date was reclassified to stockholders’ equity (deficit).  As a result, we will no longer recognize any changes to the fair value of the warrants through other income (expense).

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.

Our significant accounting policies are described in detail in the notes to our consolidated financial statements appearing the Annual Report filed on Form 10-K for the year ended December 31, 2017. There have been no changes to our significant accounting policies.

 

15


 

Results of Operations

Comparison of the three months Ended March 31, 2018 and 2017

The following table summarizes our results of operations for the three months ended March 31, 2018 and 2017 (in thousands):

 

 

 

Three Months Ended March 31,

 

 

Dollar

 

 

 

2018

 

 

2017

 

 

Change

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

5,931

 

 

$

4,351

 

 

$

1,580

 

General and administrative

 

 

2,042

 

 

 

1,191

 

 

 

851

 

Total operating expenses

 

 

7,973

 

 

 

5,542

 

 

 

2,431

 

Loss from operations

 

 

(7,973

)

 

 

(5,542

)

 

 

(2,431

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

100

 

 

 

(132

)

 

 

232

 

Other income (expense), net

 

 

(7

)

 

 

3

 

 

 

(10

)

Other income (expense), net

 

 

93

 

 

 

(129

)

 

 

222

 

Net loss

 

$

(7,880

)

 

$

(5,671

)

 

$

(2,209

)

Research and Development Expense

Research and development expense increased by $1.6 million from $4.4 million for the three months ended March 31, 2017 to $5.9 million for the three months ended March 31, 2018. The following table summarizes our research and development expenses for the three months ended March 31, 2018 and 2017 (in thousands):

 

 

 

Three Months Ended March 31,

 

 

Dollar

 

 

 

2018

 

 

2017

 

 

Change

 

Clinical development external costs

 

$

2,260

 

 

$

1,604

 

 

$

656

 

Manufacturing external costs

 

 

1,514

 

 

 

995

 

 

 

519

 

Employee compensation and benefits

 

 

1,450

 

 

 

1,063

 

 

 

387

 

Other

 

 

707

 

 

 

689

 

 

 

18

 

Total research and development expenses

 

$

5,931

 

 

$

4,351

 

 

$

1,580

 

 

The $1.6 million increase in research and development expense was primarily attributable to the following:

 

Our clinical development external costs increased by $0.7 million from $1.6 million for the three months ended March 31, 2017 to $2.3 million for the three months ended March 31, 2018:

 

We initiated our URIROX-1 Study during the three months ended March 31, 2018.  Expenses for this trial were $1.5 million for the three months ended March 31, 2018;

 

We also initiated our 206 Study during the three months ended March 31, 2018 and incurred $0.3 million of costs during this quarter; and

 

The increase in costs due to our URIROX-1 Study and our 206 Study was partially offset by costs incurred during the three months ended March 31, 2017, for which there were no comparable costs for the three months ended March 31, 2018.  We incurred $0.8 million of costs for the three months ended March 31, 2017 as we continued the closeout of our 713 Study and $0.3 million of costs as we completed our 204 Study.

 

Our manufacturing external costs increased by $0.5 million from $1.0 million for the three months ended March 31, 2017 to $1.5 million for the three months ended March 31, 2018.  Included in manufacturing costs for the three months ended March 31, 2018 was $0.8 million of costs incurred at our CMO for the production of engineering and clinical batches of drug substance for our planned Phase 3 clinical program.  Partially offsetting this increase was a decrease of $0.3 million related to drug product formulation and development activities for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017; and

 

Our employee compensation and benefits costs increased by $0.4 million for the three months ended March 31, 2018, primarily due to an increase headcount from 20 employees at March 31, 2017 to 28 employees at March 31, 2018 and an increase in salaries, wages and benefit costs.

 

16


 

General and Administrative Expenses

General and administrative expense increased by $0.8 million from $1.2 million for three months ended March 31, 2017 to $2.0 million for the three months ended March 31, 2018. The following table summarizes our general and administrative expenses for the three months ended March 31, 2018 and 2017 (in thousands):

 

 

 

Three Months Ended March 31,

 

 

Dollar

 

 

 

2018

 

 

2017

 

 

Change

 

Employee compensation and benefits

 

$

1,003

 

 

$

622

 

 

$

381

 

Consulting and professional services

 

 

516

 

 

 

197

 

 

 

319

 

Market research and commercialization planning

 

 

103

 

 

 

227

 

 

 

(124

)

Other

 

 

420

 

 

 

145

 

 

 

275

 

Total general and administrative expenses

 

$

2,042

 

 

$

1,191

 

 

$

851

 

The increase in general and administrative expense was primarily attributable to the following:

 

Our employee compensation and benefits costs increased by $0.4 million for the three months ended March 31, 2018, primarily due an increase in employee salaries, wages and benefit costs;

 

Our consulting and professional services costs increased by $0.3 million. The increase was primarily related to increased legal costs for general corporate purposes, recruiting costs and costs incurred as a public company;  

 

Our other costs increased by $0.3 million.  The increase is primarily related to an increase in corporate insurance and in accounting and tax preparation fees, driven by our transition to a publicly-traded company; and

 

Our market research and commercialization planning costs decreased by $0.1 million, partially offsetting the increases in our other general and administrative costs.  During the three months ended March 31, 2017, we engaged an independent third party to conduct a study to assess the market opportunity for ALLN-177, for which there was no comparable expense during the three months ended March 31, 2018.

Interest Income (Expense), net

Interest income (expense), net consists of interest income earned on our cash and cash equivalents, interest expense charged on our outstanding debt, and amortization of our debt discount related to the fair value of the warrants. We had net interest income of $0.1 million for the three months ended March 31, 2018 and net interest expense of $0.1 million for the three months ended March 31, 2017. The increase was attributable to interest earned from higher average balances of cash and cash equivalents for the three months ended March 31, 2018 due to the net proceeds received from our IPO in November 2017.

 Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations from inception through March 31, 2018 through gross proceeds of $96.0 million from sales of our convertible preferred stock, borrowings of $10.0 million under our credit facility with SVB and net proceeds from our IPO of $67.0 million which was completed in November 2017. Our total cash and cash equivalents was $86.4 million and $94.5 million at March 31, 2018 and December 31, 2017, respectively.

Cash Flows

The following table provides information regarding our cash flows for the three months ended March 31, 2018 and 2017 (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Net cash used in operations

 

$

(6,896

)

 

$

(6,297

)

Net cash  (used in) provided by investing activities

 

 

(31

)

 

 

9,299

 

Net cash (used in) provided by financing activities

 

 

(1,185

)

 

 

2

 

Net (decrease) increase in cash and cash equivalents

 

$

(8,112

)

 

$

3,004

 

 

 

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Net Cash Used in Operating Activities

The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

Net cash used in operating activities was $6.9 million for the three months ended March 31, 2018 compared to $6.3 million for the three months ended March 31, 2017. The increase in cash used in operating activities of $0.6 million was attributable to:

 

a increase in net loss of $2.2 million, partially offset by;

 

an increase in non-cash items of $0.3 million resulting primarily from increases in stock-based compensation expense and non-cash interest expense; and

 

an increase of $1.3 million in changes in the components of working capital, including increases in prepaid expenses and other current assets and in accounts payable.

Net Cash (Used in) Provided by Investing Activities

Net cash used by investing activities was $31,000 for the three months ended March 31, 2018 compared to net cash provided by investing activities of $9.3 million for the three months ended March 31, 2017. The decrease in cash flows from investing activities of $9.2 million was attributable to maturities of short term investments of $9.4 million for the three months ended March 31, 2017, as we converted short-term investments to cash and cash equivalents to fund our operations. We did not have any maturities of short term investments during the three months ended March 31, 2018.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities was $1.2 million for the three months ended March 31, 2018 compared to net cash provided by financing activities of $2,000 for the three months ended March 31, 2017. The net cash used in financing activities for the three months ended March 31, 2018 consisted of $1.0 million for principal payments made on our credit facility and $0.2 million for payments of initial public offering costs that were included in accounts payable and accrued expenses at December 31, 2017.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development for, initiate later stage clinical trials for, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

We believe that our cash and cash equivalents as of March 31, 2018 will enable us to fund our operating expenses and capital requirements into 2020.  We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:

 

the costs of conducting ongoing and future clinical trials of ALLN-177;

 

the costs of manufacturing additional material for our planned pivotal Phase 3 clinical program, Phase 2 basket clinical trial and potential future clinical studies we might conduct for ALLN-177;

 

the costs of scaling up our manufacturing process for ALLN-177 to prepare for the filing of a potential BLA and commercialization if our clinical development program is successful;

 

the advancement of ALLN-346;

 

the scope, progress, results and costs of discovery, preclinical development, laboratory testing and clinical trials for other potential product candidates we may develop, if any;

 

the costs, timing and outcome of regulatory review of our product candidates;

 

our ability to establish and maintain collaborations on favorable terms, if at all;  

 

the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time;

 

18


 

 

the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

 

the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;  

 

the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

 

our headcount growth and associated costs as we expand our business operations and our research and development activities; and

 

the costs of operating as a public company.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. With the exception of our credit facility, we do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.

If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. As of March 31, 2018, our cash equivalents consisted of primarily of short-term money market funds.  Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term nature of the cash equivalents in our portfolio and the low risk profile of our cash equivalents, an immediate 10% change in interest rates would not have a material effect on the fair market value of our financial position or results of operations.

We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with foreign vendors that are located in Europe. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2018 and 2017.

 

19


 

Item 4.

Controls and Procedures.

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.  

Our management, with the participation of our principal executive officer and principal financial and accounting officer, evaluated the effectiveness of our disclosure controls and procedures the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our principal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

20


 

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

From time to time, we may become involved in litigation relating to claims arising from the ordinary course of business. Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations or financial condition.

ITEM 1A.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q and in our other public filings before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. If any such risks or uncertainties actually occur, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our other public filings. The trading price of our common stock could decline due to any of these risks, and as a result, you may lose all or part of your investment.

Those risk factors below denoted with a “*” are newly added or have been materially updated from our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 27, 2018.

Risks Related to Drug Development, Regulatory Approval and Commercialization

We are heavily dependent on the regulatory approval of ALLN-177 in the United States and Europe, and subsequent commercial success of ALLN-177, both of which may never occur.

We are a late-stage biopharmaceutical company with no products approved by regulatory authorities or available for commercial sale. We have generated no revenue to date and do not expect to do so for the foreseeable future. As a result, our future success is currently dependent upon the regulatory approval and commercial success of ALLN-177 in one or more of the indications for which we seek approval. Our ability to generate revenues in the near term will depend on our ability to obtain regulatory approval and successfully commercialize ALLN-177 on our own in the United States, the first country in which we intend to make ALLN-177 available for sale, if approved. We may experience delays in obtaining regulatory approval in the United States for ALLN-177, if it is approved at all, and our stock price may be negatively impacted. Even if we receive regulatory approval, the timing of the commercial launch of ALLN-177 in the United States is dependent upon a number of factors, including, but not limited to, hiring sales and marketing personnel, pricing and reimbursement timelines, the production of sufficient quantities of commercial drug product and implementation of marketing and distribution infrastructure.

In addition, we have incurred and expect to continue to incur significant expenses as we continue to pursue the approval of ALLN-177 in the United States, Europe and elsewhere. We plan to devote a substantial portion of our effort and financial resources in order to continue to grow our operational capabilities. This represents a significant investment in the clinical and regulatory success of ALLN-177, which is uncertain. The success of ALLN-177, if approved, and revenue from commercial sales, will depend on several factors, including:

 

execution of an effective sales and marketing strategy for the commercialization of ALLN-177;

 

acceptance by patients, the medical community and third-party payors;

 

our success in educating physicians and patients about the benefits, administration and use of ALLN-177;

 

the incidence and prevalence of enteric hyperoxaluria in those markets in which ALLN-177 is approved;

 

the prevalence and severity of side effects, if any, experienced by patients treated with ALLN-177;

 

the availability, perceived advantages, cost, safety and efficacy of alternative treatments, including potential alternate treatments that may currently be available or in development or may later be available or in development or regulatory approval of a generic or biosimilar version of oxalate decarboxylase, the active enzyme in ALLN-177;

 

successful implementation of our manufacturing processes that are included in our new biologics license application, or BLA, and production of sufficient quantities of commercial drug product;

 

maintaining compliance with regulatory requirements, including current good manufacturing practices, or cGMPs, good laboratory practices, or GLP, and good clinical practices, or GCPs; and

 

obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity and otherwise protecting our rights in our intellectual property portfolio.

 

21


 

We may also fail in our efforts to develop and commercialize future product candidates, including ALLN-346 for patients with hyperuricemia and chronic kidney disease, or CKD. If this were to occur, we would continue to be heavily dependent on the regulatory approval and successful commercialization of ALLN-177, our development costs may increase and our ability to generate revenue or profits, or to raise additional capital, could be impaired.

Results of earlier studies may not be predictive of future clinical trial results, and planned studies may not establish an adequate safety or efficacy profile for ALLN-177 and other product candidates that we may pursue to justify proceeding to an application for regulatory approval or be worthy of regulatory approval if such an application is made.

The results of preclinical studies and clinical trials of ALLN-177 conducted to date and future studies and trials of other product candidates that we may pursue may not be predictive of the results of later-stage clinical trials, and interim results of a clinical trial do not necessarily predict final results. Data, our interpretation of data and results from our Phase 2 clinical trials of ALLN-177 in adults with enteric hyperoxaluria do not ensure that we will achieve similar results in a pivotal Phase 3 clinical trial in enteric hyperoxaluria or in clinical trials of ALLN-177 in other patient populations. In addition, preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and early-stage clinical trials have nonetheless failed to replicate results in later-stage clinical trials and subsequently failed to obtain marketing approval. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through nonclinical studies and initial clinical trials.

In particular, as is common with Phase 2 clinical trials, particularly with the first clinical trials to be conducted in a patient population with disease, we explored numerous endpoints and analyzed the data from our Phase 2 clinical trials of ALLN-177 in a number of ways. Prior to obtaining approval for ALLN-177, we expect that the results of our registration trials will have to demonstrate statistically significant improvement in the pre-specified primary endpoint in the applicable registration trial. To date, two of our Phase 2 clinical trials of ALLN-177 (Study 713 and Study 649) have not demonstrated statistically significant results in the pre-specified primary endpoints. Our later-stage clinical trials will differ in significant ways from our Phase 2 clinical trials of ALLN-177, which may cause the outcome of these later-stage trials to differ from our earlier stage clinical trials. These differences may include changes to inclusion and exclusion criteria, efficacy endpoints and statistical design. We are still finalizing the design of our planned pivotal Phase 3 clinical program for ALLN-177, including the primary and secondary endpoints and statistical analysis plan for these trials.

Product candidates in Phase 3 clinical trials, such as ALLN-177 in our planned pivotal Phase 3 clinical program, may fail to demonstrate sufficient efficacy despite having progressed through initial clinical trials, even if certain analyses of primary or secondary endpoints in those early trials showed trends toward efficacy. Some of the data we present on the use of ALLN-177 for the treatment of enteric hyperoxaluria is drawn from post-hoc analyses. While we believe these data are useful in informing the design of future clinical trials for ALLN-177, these analyses involve the inherent bias of post-hoc rendering of data and choice of analytical methods. Further, while Study 713 was the largest randomized, controlled trial ever conducted in hyperoxaluria, only 18 subjects with enteric hyperoxaluria, the proposed indication for our planned pivotal Phase 3 program, enrolled in the trial. Thus, we have limited data on the activity of ALLN-177 in the target population for our planned Phase 3 clinical program.

We believe 24 hour urinary oxalate excretion is an appropriate metric of the therapeutic effect of ALLN-177 because 24 hour urinary oxalate excretion is a biochemical measurement of the daily amount of oxalate handling by the kidney and therefore its reduction would indicate lessening of potential kidney damage by oxalate. However, based on published scientific literature and data generated in our own clinical trials, daily urinary oxalate excretion is a biomarker that demonstrates significant variability between patients and day-to-day for the same patient. This variability in 24 hour urinary oxalate excretion, especially in enteric hyperoxaluria patients, can be attributed to changes in diet, metabolic activity, hydration status or other factors. It can also be attributed to the manner in which these measurements are taken. In our completed Phase 2 clinical trials, we relied heavily on the efforts and contributions of investigative clinical sites and study patients to comply with accurate timing of 24 hour urine collection, with the complete collection of all of the patient’s urine during a given 24 hour period and with the proper handling of collected urine specimens, including storage, documentation, sample handling and shipping to the testing laboratory. Following our completed Phase 2 clinical trials, we conducted a post-hoc review of these collection procedures. Although we are not aware of any case where the data reported in our prior clinical trials was inaccurate, due to the variability inherent in these data collection techniques, we cannot assure you that in all cases the data reported in our clinical trials accurately reflect the actual biochemical responses experienced by patients in these trials. We believe a time-weighted average of daily urinary oxalate excretion mitigates the risks of inherent variability, dietary change and sample handling associated with the testing of each individual 24 hour urine specimen, but no assurance can be given that any such variability will be fully addressed by this approach.

 

22


 

A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies, and we cannot be certain that we will not face similar setbacks. Even if early stage clinical trials are successful, we may need to conduct additional clinical trials for product candidates in additional patient populations or under different treatment conditions before we are able to seek approvals from the U.S. Food and Drug Administration, or FDA, and comparable foreign regulators to market and sell these product candidates. Our failure to demonstrate the required characteristics to support marketing approval for ALLN-177 or any other product candidate we may choose to develop in any ongoing or future clinical trials would substantially harm our business, prospects, financial condition and results of operations.

*  We have not yet finalized the design of our pivotal Phase 3 clinical program for ALLN-177, including the primary and secondary endpoints and the statistical analyses for our second of two planned Phase 3 clinical trials (the URIROX-2 trial), and whether ALLN-177 may be eligible for the accelerated approval pathway remains subject to further discussion with the FDA. The FDA and comparable foreign regulators may not agree with our proposed Phase 3 clinical program, in which case we may be required to modify our planned clinical trials, or run additional clinical trials, before we can submit a BLA and comparable foreign applications for this product candidate.

In March 2018, we initiated URIROX-1TM (formerly Study 301), the first of two anticipated Phase 3 clinical trials in support of our planned Biologic License Application (BLA) for ALLN-177 in patients with enteric hyperoxaluria.  However, we remain in active in discussions with the FDA to finalize the design of our pivotal Phase 3 program for ALLN-177, including the primary and secondary endpoints and the statistical analyses for the second of our two planned Phase 3 clinical trials (the URIROX-2 trial). There can be no assurance that we will reach agreement with the FDA on our Phase 3 clinical program as currently proposed.

For our URIROX-2 trial, we have proposed as a primary endpoint the percent change from baseline in 24-hour UOx excretion averaged during Weeks 1-4, comparing ALLN-177 to placebo.  The FDA has advised us that it may be willing to accept a substantial change in 24 hour UOx excretion as a surrogate endpoint in patients with secondary hyperoxaluria, especially patients with enteric hyperoxaluria, a prior history of kidney stones and very high baseline levels of UOx excretion. However, the FDA has also advised us that we have not yet provided sufficient data regarding UOx excretion necessary to support its use as a surrogate endpoint for these clinical trials and questioned whether changes in UOx of the magnitude expected would be reasonably likely to predict clinical benefit.  We have provided the FDA with the details of analyses we have conducted using available data collected from a third-party clinical database, in order to demonstrate an increased probability of kidney stone events in patients with enteric hyperoxaluria and increasing UOx levels. The FDA has advised us that it remains concerned about the strength of this relationship, based in part on the limited clinical data currently available and whether other factors may play a role in the production of kidney stones.  However, the FDA has preliminarily agreed with our proposal to help validate the analyses presented to date with data collected from the planned URIROX-2 trial. This approach is consistent with the FDA’s published guidance on the accelerated approval pathway, which provides that clinical data from a single clinical trial can be used to both support accelerated approval and verify the clinical benefit.  This guidance stipulates that the protocol and statistical analysis plan should clearly account for an analysis of the surrogate endpoint data to provide support for accelerated approval, with continuation of the randomized trial(s) to obtain data on the clinical endpoint that will be the basis for verifying the clinical benefit.  The data generated from the URIROX-1 and URIROX-2 trials could thus potentially form the basis of an accelerated approval BLA for ALLN-177 using reduction in UOx as a surrogate endpoint, with the final results from the URIROX-2 trial used to confirm clinical benefit post-approval.  In addition, we continue to work with scientific experts to identify additional third-party datasets to further substantiate the relationship between urinary oxalate levels and the risk of kidney stones and kidney dysfunction. We remain in active dialogue with the FDA, and the design of the URIROX-2 trial, including the endpoints and statistical analysis plan for this study, and whether ALLN-177 may be eligible for the accelerated approval pathway, remains subject to further discussion with the FDA.  

If the FDA agrees to accept a change in TWA 24 hour UOx excretion as surrogate endpoint for our pivotal Phase 3 program under the accelerated approval pathway, we will be required to provide study data on longer term clinical follow up from trial patients, or conduct a separate clinical outcomes trial, to confirm the clinical benefit predicted by the biochemical therapeutic response demonstrated in our Phase 3 clinical trials. The clinical data we have proposed to collect in URIROX-2 may include serial assessments for kidney stone disease progression and other measures of kidney function. The FDA may require demonstration that we have initiated or made substantial progress in our clinical follow up of trial subjects, or any such clinical outcomes trial, prior to the submission of our BLA for accelerated approval of ALLN-177.  The FDA notes in its guidance that when the same trial is used to support accelerated approval and verify clinical benefit, the data to verify the clinical benefit may be, in some cases, nearly complete by the time of accelerated approval.  If we are unable to reach consensus with the FDA on the magnitude of UOx reduction significant enough to predict clinical benefit, we may be required to demonstrate effectiveness by showing an effect on stone formation directly, or conduct one or more additional clinical trials to demonstrate this effect, prior to the submission of a BLA for ALLN-177. Moreover, the FDA may require us to make other changes to our proposed design of our Phase 3 clinical program for ALLN-177, including expanding the number of patients and/or treatment period evaluated or running one or more additional clinical trials prior to the submission of a BLA. Any of these decisions could have a material adverse effect on our expected clinical and regulatory timelines, business, prospects, financial condition and results of operations.

 

23


 

Similarly, our planned Phase 3 program may not be sufficient to support the submission of applications for marketing approval in foreign jurisdictions, including the European Union. Although our preliminary discussions with regulatory authorities in select countries within the European Union lead us to believe our planned Phase 3 program, if successful, may be sufficient to support the submission of an MAA in Europe via the conditional approval pathway, which is similar to the FDA’s accelerated approval pathway, these discussions are not binding on such authorities or the EMA. Accordingly, no assurance can be given that our planned Phase 3 program will be sufficient to support the submission of an MAA in Europe, and we may be required to modify the design of these planned trials, or run additional clinical trials, before seeking marketing approval. Any of these decisions could have a material adverse effect on our expected clinical and regulatory timelines, business, prospects, financial condition and results of operations.

We may attempt to secure approval from the FDA or comparable non-U.S. regulatory authorities through the use of accelerated registration pathways. If unable to obtain approval under an accelerated pathway, we may be required to conduct additional preclinical studies or clinical trials beyond those that we contemplate, which could increase the expense of obtaining, reduce the likelihood of obtaining and/or delay the timing of obtaining, necessary marketing approvals. Even if we receive accelerated approval from the FDA, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw accelerated approval.

We may seek an accelerated approval development pathway for our product candidates, including ALLN-177. Under the accelerated approval provisions of the Federal Food, Drug, and Cosmetic Act and the FDA’s implementing regulations, the FDA may grant accelerated approval to a product designed to treat a serious or life-threatening condition that provides meaningful therapeutic advantage over available therapies and demonstrates an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval development pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical profile or risks and benefits for accelerated approval. The FDA may require that any such confirmatory study be initiated or substantially underway prior to the submission of an application for accelerated approval. If such post-approval studies fail to confirm the drug’s clinical profile or risks and benefits, the FDA may withdraw its approval of the drug.

If we choose to pursue accelerated approval, we intend to seek further feedback from the FDA or will otherwise evaluate our ability to seek and receive such accelerated approval. There can be no assurance that the FDA will agree that our proposed primary endpoint for our planned pivotal Phase 3 clinical program is an appropriate surrogate endpoint. There also can be no assurance that, after our evaluation of the additional feedback from the FDA or other factors, we will decide to pursue or submit a BLA for accelerated approval or any other form of expedited development, review or approval. Similarly, there can be no assurance that after subsequent FDA feedback that we will continue to pursue or apply for accelerated approval or any other form of expedited development, review or approval, even if we initially decide to do so. Furthermore, if we submit an application for accelerated approval, there can be no assurance that such application will be accepted or that approval will be granted on a timely basis, or at all. For example, if another company receives full approval from the FDA to market a product for treatment of hyperoxaluria, our ability to seek and obtain accelerated approval for ALLN-177 in the same or similar indication may be materially adversely affected. The FDA or foreign regulatory authorities also could require us to conduct further studies or trials prior to considering our application or granting approval of any type. We might not be able to fulfill the FDA’s requirements in a timely manner, which would cause delays, or approval might not be granted because our submission is deemed incomplete by the FDA. A failure to obtain accelerated approval or any other form of expedited development, review or approval for a product candidate would result in a longer time period to commercialize such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.

Even if we receive accelerated approval from the FDA, we will be subject to rigorous post-marketing requirements, including the completion of confirmatory post-market clinical trial(s) to verify the clinical benefit of the product, and submission to the FDA of all promotional materials prior to their dissemination. The FDA could seek to withdraw accelerated approval for multiple reasons, including if we fail to conduct any required post-market study with due diligence, a post-market study does not confirm the predicted clinical benefit, other evidence shows that the product is not safe or effective under the conditions of use, or we disseminate promotional materials that are found by the FDA to be false and misleading

A failure to obtain accelerated approval or any other form of expedited development, review or approval for a product candidate that we may choose to develop would result in a longer time period prior to commercializing such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.

 

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Because we are developing product candidates for the treatment of diseases in which there is little clinical trial experience and, in some cases, using new endpoints or methodologies, there is increased risk that the FDA or other regulatory authorities may not consider the endpoints of our clinical program to provide clinically meaningful results and that these results may be hard to analyze.

There are no pharmacologic therapies approved to treat the underlying causes of hyperoxaluria. In addition, it should be noted that no therapeutic agents have previously been approved by the FDA on the basis of a biochemical measurement of 24 hour urinary oxalate excretion, endpoints used in our Phase 2 clinical program and expected for our planned pivotal Phase 3 clinical program. As a result, the design and conduct of clinical trials for the treatment of hyperoxaluria, and the underlying conditions and disorders that drive the metabolic disease, are subject to increased risk.

We have engaged in discussions with the FDA during our end of Phase 2 meeting, and subsequently, regarding the design of our planned pivotal Phase 3 clinical program for ALLN-177 in adult patients with enteric hyperoxaluria. While we have received initial feedback, we do not yet have definitive feedback from the FDA on the proposed primary endpoint of our second of two planned pivotal Phase 3 clinical trials (the URIROX-2 trial), the measure of what is clinically meaningful in respect of this endpoint, secondary endpoints and the requisite data necessary to justify an approval, including use of our proposed primary endpoint as a surrogate endpoint as part of an accelerated approval. Furthermore, the FDA has discretion to reserve judgment on whether our endpoint and the results seen in our planned pivotal Phase 3 clinical program sufficiently demonstrate clinical meaningfulness until the FDA reviews our BLA several years from now.

Moreover, even if the FDA does find our success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre-specified endpoint to a degree of statistical significance, in either or both of the Phase 3 clinical trials that we believe will be necessary for approval. Further, even if we do achieve the pre-specified criteria, we may produce results that are unpredictable or inconsistent with the results of the secondary efficacy endpoints in the trials. The FDA also could give overriding weight to other efficacy endpoints, even if we achieve statistically significant results on the primary endpoint, if we do not achieve statistically significant or clinically meaningful results on any of our secondary efficacy endpoints. The FDA also weighs the benefits of a product against its risks and the FDA may view the efficacy results in the context of safety as not being supportive of regulatory approval. Other regulatory authorities in the EU and other countries may take similar positions.

The design and conduct of clinical trials is complex, particularly where there is not an established regulatory approval pathway for a given patient population, such as enteric hyperoxaluria, or a new mechanism of action is being tested, as this may result in unpredictable results. For example, in our Phase 2 clinical trial referred to as Study 649, a “crossover” trial design was used, which is a longitudinal study in which subjects receive a sequence of different exposures during the course of the trial. Each treatment sequence consisted of two seven-day treatment periods separated by a seven-day washout period. While no clear factor was identified to account for the lack of differentiation between ALLN-177 and placebo in Study 649, we believe the lack of effect may have been due to, among other things, the complexities inherent in the crossover study design.

In addition, we are planning to conduct a Phase 2 clinical trial of ALLN-177 utilizing an open-label, basket trial design that will enroll subsets of patients suffering from complications of severe hyperoxaluria, including adolescents and adults with primary hyperoxaluria or severe forms of secondary hyperoxaluria, both of which can lead to systemic oxalosis. We have not yet evaluated ALLN-177 in patients with primary hyperoxaluria and as such we have not yet demonstrated proof-of-concept in this patient population. Basket trial designs permit the exploration of a study drug in patient populations with common biochemical markers, such as patients afflicted with different forms of cancer, but the same genetic mutation. Although all patients enrolled in our planned Phase 2 trials will have elevated urinary oxalate levels, the underlying cause of their hyperoxaluria may be different. We cannot predict whether the design of our planned pivotal Phase 3 clinical program, Study 206 or any other future trials that we may conduct may successfully demonstrate ALLN-177 or any future product candidate’s safety and efficacy.

If clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA and other comparable foreign regulators, we, or any future collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these product candidates.

We, and any future collaborators, are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Comparable foreign regulators, such as the European Medicines Agency, or EMA, impose similar restrictions. We, and any future collaborators, may never receive such approvals. We, and any future collaborators, must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy of our product candidates in humans before we, or they, will be able to obtain these approvals.

 

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Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. We have not previously submitted a BLA to the FDA or similar drug approval applications to comparable foreign regulators for any of our product candidates. Any inability to complete preclinical and clinical development successfully could result in additional costs to us, or any future collaborators, and impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Moreover, if (1) we, or any future collaborators, are required to conduct additional clinical trials or other testing of our product candidates beyond the trials and testing that we, or they contemplate, (2) we, or any future collaborators, are unable to successfully complete clinical trials of our product candidates or other testing, (3) the results of these trials or tests are unfavorable, uncertain or are only modestly favorable, or (4) there are unacceptable safety concerns associated with our product candidates, we, or any future collaborators, may:

 

incur additional unplanned costs;

 

be delayed in obtaining marketing approval for our product candidates;

 

not obtain marketing approval at all;

 

obtain approval for indications or patient populations that are not as broad as intended or desired;

 

obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings;

 

be subject to additional post-marketing testing or other requirements; or

 

be required to remove the product from the market after obtaining marketing approval.

Our failure to successfully complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business, prospects, financial condition and results of operations.

Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Our planned pivotal Phase 3 clinical program for ALLN-177 consists of two Phase 3 clinical trials of ALLN-177 in adult patients with enteric hyperoxaluria. We are in discussions with the FDA and have conducted scientific advisory meetings with regulatory authorities in three countries within the European Union. Even after we receive and incorporate guidance from these regulatory authorities, the FDA or other comparable foreign regulators could disagree that we have satisfied their requirements to commence our clinical trials or change their position on the acceptability of our trial designs or the clinical endpoints selected, which may require us to complete additional preclinical studies or clinical trials or impose stricter approval conditions than we currently expect. We may need to conduct additional clinical trials or other testing for, among other things, drug-drug interactions, the generation of formate (i.e. a metabolic byproduct resulting from the degradation of oxalate by ALLN-177) and increased dosages of our product candidates. Successful completion of our clinical trials is a prerequisite to submitting a BLA to the FDA and a Marketing Authorization Application, or MAA, in Europe for each product candidate and, consequently, the ultimate approval and commercial marketing of ALLN-177, ALLN-346 and any product candidates we may develop in the future. We do not know whether any of our clinical trials will begin or be completed on schedule, if at all.

We may experience delays in initiating or completing our planned clinical trials or additional preclinical studies or clinical trials in the future, and we may experience numerous unforeseen events during, or as a result of, any future clinical trials that we conduct that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:

 

regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

 

we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

we may experience delays in recruiting, or be unable to recruit, a sufficient number of suitable patients to participate in our clinical trials;

 

the patients and sites who participate in our trials may not comply with protocols, such as compliance with the capsule and timing regimen and urine collection requirements, rendering the results insufficient or uninterpretable;

 

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials or we may decide to abandon drug development programs;

 

the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;

 

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our third party contractors may fail to comply with regulatory or legal requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators;

 

we may elect to, or regulators or IRBs or ethics committees may require that we or our investigators, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

 

the cost of clinical trials of our product candidates may be greater than we anticipate;

 

the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate;

 

the occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits;

 

any changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;

 

our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs or ethics committees to suspend or terminate the trials, or reports may arise from preclinical or clinical testing of other therapies that raise safety or efficacy concerns about our product candidates; and

 

the FDA or other comparable foreign regulators may require us to submit additional data or impose other requirements before permitting us to initiate a clinical trial.

We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other comparable foreign regulators. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements, GCP or our clinical protocols, inspection of the clinical trial operations or trial sites by the FDA or other comparable foreign regulators resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Further, the FDA may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials.

Our drug development costs will also increase if we experience delays in testing or regulatory approvals. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. Any delays in our preclinical or clinical development programs may significantly harm our business, prospects, financial condition and results of operations.

The regulatory approval processes of the FDA and comparable foreign regulators are lengthy, time-consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for ALLN-177 or our other product candidates, our business will be substantially harmed.

We are not permitted to market ALLN-177 or any of our other product candidates in the United States or the European Union, or EU, until we receive approval of a BLA from the FDA or an MAA from the EMA, respectively. Prior to submitting a BLA to the FDA or an MAA to the EMA for approval of any of our product candidates for a specific indication, we are required to complete preclinical and toxicology studies, as well as Phase 1, Phase 2 and Phase 3 clinical trials.

Successfully initiating and completing our clinical program and obtaining approval of a BLA or an MAA is a complex, lengthy, expensive and uncertain process, and the FDA, the EMA or other comparable foreign regulators may delay, limit or deny approval of any of our candidates for many reasons, including, among others:

 

we may not be able to demonstrate that our product candidates are safe and effective to the satisfaction of the FDA or the EMA;

 

the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or the EMA for marketing approval;

 

the FDA or the EMA may disagree with the number, design, size, conduct or implementation of our clinical trials;

 

the FDA or the EMA may require that we conduct additional clinical trials;

 

the FDA or the EMA or other applicable foreign regulators may not approve the formulation, labeling or specifications of ALLN-177 or our other product candidates;

 

the CROs that we retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials;

 

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the FDA or the EMA may find the data from preclinical studies and clinical trials insufficient to demonstrate that the clinical and other benefits of ALLN-177 and our other product candidates outweigh their safety risks;

 

the FDA or the EMA may disagree with our interpretation of data from our preclinical studies and clinical trials, including our characterization of observed toxicities;

 

the FDA or the EMA may not accept data generated at our clinical trial sites;

 

if our BLAs or MAAs, if and when submitted, are reviewed by the FDA or the EMA, as applicable, the regulatory agency may have difficulties scheduling the necessary review meetings in a timely manner, may recommend against approval of our application or may recommend that the FDA or the EMA, as applicable, require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

 

the FDA may require development of a Risk Evaluation and Mitigation Strategy as a condition of approval or post-approval, and the EMA may grant only conditional approval or impose specific obligations as a condition for marketing authorization, or may require us to conduct post-authorization safety studies;

 

the FDA, the EMA or other applicable foreign regulators may find deficiencies with or not approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or

 

the FDA or the EMA may change their approval policies or adopt new regulations.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market ALLN-177 or any of our other product candidates. Any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects.

In addition to the United States and Europe, we or potential collaborators intend to market our product candidates, if approved, in other international markets. Such marketing will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements. The approval procedures vary from country-to-country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA or EMA approval. In addition, in many countries, a product candidate must be approved for reimbursement before it can be approved for sale in that country, even if regulatory approval has been obtained. Approval by the FDA or the EMA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA or the EMA. The regulatory approval process in other international markets may include all of the risks associated with obtaining FDA or EMA approval.

Changes in regulatory requirements and guidance may also occur and we may need to amend clinical trial protocols submitted to applicable regulatory authorities to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs or ethics committees for re-examination, which may impact the costs, timing or successful completion of a clinical trial.

The FDA’s and other comparable foreign regulators’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of ALLN-177 and any future product candidates we may develop. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States, the EU or other countries or jurisdictions. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability, which would harm our business, prospects, financial condition and results of operations.

If we are required to conduct additional clinical trials or other studies with respect to ALLN-177 or any future product candidates we may develop beyond those that we currently contemplate, or if we are unable to successfully complete our clinical trials or other studies, we may be delayed in obtaining regulatory approval of ALLN-177 and any future product candidates we may develop, we may obtain approval of indications that are not as broad as intended or we may not be able to obtain regulatory approval at all. Our product development costs will also increase if we experience delays in testing or approvals, and we may not have sufficient funding to complete the testing and approval process for ALLN-177 or any future product candidates we may develop. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products if and when approved. If any of this occurs, our business would be harmed.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or comparable foreign regulators. In particular, because we are focused on patients with enteric hyperoxaluria with respect to our Phase 3 development of ALLN-177, our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate.

 

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Patient enrollment may be affected by other factors including, but not limited to:

 

the severity of the disease under investigation;

 

the design of the clinical trial;

 

the size and nature of the patient population;

 

the eligibility criteria for the clinical trial in question;

 

the availability of appropriate screening tests for study subjects;

 

the perceived risks and benefits of the product candidate under study;

 

availability of competing therapies and clinical trials;

 

clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies or treatment approaches;

 

the efforts to facilitate timely enrollment in clinical trials;