Axcella Health Inc. (NASDAQ:AXLA) is a clinical-stage biotechnology company that is pioneering a new approach to address the biology of complex diseases using compositions of endogenous metabolic modulators (EMMs). The company's pipeline includes lead candidates for Long COVID associated fatigue. However, Axcella has faced significant challenges in recent years, including the discontinuation of its NASH program and a major corporate restructuring.

Financials

For the full year 2022, Axcella reported an annual net loss of $82,363,000. The company did not generate any revenue during the year. Operating cash flow for the year was -$69,588,000, while free cash flow was -$70,014,000. These financial results reflect the significant investments Axcella has made in its research and development efforts, as well as the challenges it has faced in advancing its product candidates.

In the first quarter of 2023, Axcella reported a net loss of $3,976,000 and a net loss per share of $0.05. The company's cash and cash equivalents stood at $17,147,000 as of March 31, 2023. Research and development expenses for the quarter were $1,433,000, while general and administrative expenses were $2,750,000.

For the second quarter of 2023, Axcella reported a net loss of $3,413,000 and a net loss per share of $0.05. The company's cash and cash equivalents had decreased to $8,884,000 as of June 30, 2023. Research and development expenses for the quarter were $1,224,000, while general and administrative expenses were $2,319,000.

Business Overview

Axcella was founded in 2008 with the goal of developing novel therapies for complex diseases using its proprietary human-focused development platform. The company's approach involves engineering combinations of EMMs, which are naturally occurring molecules that play key roles in regulating metabolism and other biological processes.

The company's lead product candidate, AXA1125, was initially developed for the treatment of NASH, a serious liver disease characterized by the accumulation of fat in the liver, inflammation, and fibrosis. In December 2022, Axcella announced that it had discontinued its EMMPACT Phase 2b clinical trial of AXA1125 for the treatment of NASH in order to focus on the development of AXA1125 for the treatment of Long COVID associated fatigue.

Long COVID, also known as Post-Acute Sequelae of SARS-CoV-2 infection (PASC), is a condition that can persist for weeks or months after the initial COVID-19 infection. Symptoms of Long COVID can include fatigue, brain fog, and other debilitating effects. Axcella believes that its AXA1125 product candidate, with its potential to modulate dysregulated metabolism, may be able to address the underlying biology of Long COVID associated fatigue.

Challenges and Strategic Alternatives

Axcella has faced significant challenges in recent years, including the discontinuation of its NASH program and a major corporate restructuring. In December 2022, the company announced that it had reduced its workforce by approximately 85% and initiated a process to explore a range of strategic alternatives to maximize stakeholder value.

The company has engaged an investment bank to act as a strategic advisor for this process, which may include the sale of all or substantially all of Axcella's assets, a strategic merger or other business combination transaction, or another change of control transaction. However, there is no guarantee that this strategic review process will result in a successful transaction, and the company may be forced to further reduce or terminate its operations if it is unable to secure additional funding.

Liquidity

As of June 30, 2023, Axcella had $8,884,000 in cash and cash equivalents, down from $17,147,000 as of March 31, 2023.

Axcella will require substantial additional capital to sustain its operations and pursue its strategy, including the development of its Long COVID product candidate. The company's ability to continue as a going concern is dependent on its ability to obtain additional funding, either through a strategic transaction or other means.

Risks and Challenges

Axcella faces a number of risks and uncertainties that could impact its ability to successfully develop and commercialize its product candidates. These include the inherent risks of clinical development, regulatory approval, and commercialization, as well as the company's ability to attract and retain key personnel, secure sufficient manufacturing and supply chain capacity, and compete effectively in the highly competitive biotechnology industry.

Additionally, the company's non-compliance with Nasdaq's continued listing standards and the potential for delisting from the Nasdaq Global Market present significant challenges. Axcella has requested a hearing before a Nasdaq Hearings Panel to address the deficiencies and present a plan to regain compliance, but there is no assurance that the appeal will be successful.

Conclusion

Axcella Health Inc. is a clinical-stage biotechnology company that is facing significant challenges as it navigates the complex landscape of drug development and commercialization. The company's discontinuation of its NASH program and the initiation of a strategic review process highlight the difficulties it has encountered in advancing its product candidates and securing the necessary funding to support its operations.

While Axcella's focus on the development of AXA1125 for the treatment of Long COVID associated fatigue represents a potential opportunity, the company's ability to successfully execute on this strategy is uncertain. Investors should closely monitor the company's progress in its strategic review process and its efforts to regain compliance with Nasdaq's listing requirements, as these developments will be critical to Axcella's long-term viability and the potential for shareholder value creation.