Eterna Therapeutics Inc. (NASDAQ:ERNA) is a life science company committed to realizing the potential of mRNA cell engineering to provide patients with transformational new medicines. The company has in-licensed a portfolio of over 100 patents covering key mRNA cell engineering technologies, including technologies for mRNA cell reprogramming, mRNA gene editing, the NoveSlice™ and UltraSlice™ gene-editing proteins, and the ToRNAdo™ mRNA delivery system, which the company collectively refers to as its "mRNA technology platform."

Financials

In the first quarter of 2024, Eterna reported revenue of $47,000, a significant increase from the $0 reported in the same period of 2023. However, the company incurred a net loss of $6.6 million, compared to a net loss of $5.4 million in the first quarter of 2023. This increase in net loss was primarily driven by higher general and administrative expenses, which rose by $0.7 million, partially offset by a decrease in research and development expenses of $0.2 million.

For the full year 2023, Eterna reported annual revenue of $68,000 and a net loss of $21.7 million. The company's annual operating cash flow was -$20.4 million, and its annual free cash flow was -$20.4 million.

Business Overview

Eterna's mRNA technology platform is designed to enable the development of novel pharmaceutical products to treat a broad range of diseases and address unmet medical needs. The company's near-term focus is on deploying its mRNA technology platform through strategic partnerships, with the goal of generating revenue by licensing its intellectual property to third parties.

In February 2023, Eterna entered into an exclusive option and license agreement with a third party, under which the company granted the third party an option to obtain an exclusive sublicense to certain of Eterna's technology for preclinical, clinical, and commercial purposes in exchange for a non-refundable upfront payment of $0.3 million. In August 2023, the third party requested that Eterna begin developing certain induced pluripotent stem cell lines in exchange for a cell line customization fee, for which the third party paid Eterna $0.4 million.

Eterna's mRNA delivery technology is designed to use a novel chemical substance that is intended to deliver nucleic acids, including mRNA, to cells both ex vivo and in vivo. The company's mRNA gene-editing technology is designed to delete, insert, and repair DNA sequences in living cells, which may be useful for correcting disease-causing mutations, making cells resistant to infection and degenerative disease, modulating the expression of immunoregulatory proteins to enable the generation of durable allogeneic cell therapies, and engineering immune cells to more effectively fight cancer. Eterna's mRNA cell-reprogramming technology is capable of generating clonal lines of pluripotent stem cells that can be expanded and differentiated into many desired cell types that may be useful for the development of regenerative cell therapies.

Recent Developments

In December 2023, Eterna entered into a purchase agreement with certain purchasers for the private placement of $9.2 million of convertible notes and warrants to purchase an aggregate of approximately 9.6 million shares of the company's common stock. The convertible notes bear interest at 12% per annum and mature on the five-year anniversary of their issuance, unless earlier converted or repurchased.

Liquidity

As of March 31, 2024, Eterna had cash and cash equivalents of $9.2 million, of which $4.1 million was restricted cash. The company has not paid its rent obligations under its Somerville, Massachusetts sublease for February, March, April, or May 2024, and as of the date of filing this report, it owes approximately $2.3 million in past due rent. Eterna has been in discussions with the sublessor to renegotiate the terms of the sublease, which may include deferment of rent payments and/or a reduction of the lease term, square footage, and/or base rent.

Eterna's liquidity position is a significant concern, as the company does not expect to have sufficient cash or working capital resources to fund operations for the 12-month period subsequent to the issuance date of its latest financial statements. The company will need to raise additional capital, which could be through the sales of shares of its common stock under the standby equity purchase agreement it entered into with Lincoln Park Capital Fund, LLC in April 2023, public or private equity offerings, debt financings, out-licensing the company's intellectual property, strategic partnerships, or other means. However, there can be no assurance that Eterna will be able to raise the necessary capital when needed, on acceptable terms, or at all.

The company's ability to continue as a going concern is also dependent on its success in renegotiating the terms of its Somerville sublease and avoiding an event of default under its outstanding convertible notes, which could have significant adverse consequences, including the potential loss of the company's Nasdaq listing.

Risks and Challenges

Eterna faces significant risks and challenges in its efforts to develop and commercialize its mRNA technology platform. The company has no approved products and has incurred significant operating losses to date, and it may never achieve or sustain profitability. The development of novel mRNA-based therapies is a highly complex and uncertain process, and Eterna may not be successful in advancing any of its potential product candidates through clinical trials or obtaining regulatory approval.

Furthermore, the company's reliance on strategic partnerships and out-licensing arrangements to generate revenue exposes it to the risk that its partners may not be successful in developing or commercializing the licensed technologies, or that the company may not be able to negotiate favorable terms for such arrangements.

Outlook

Despite these challenges, Eterna remains committed to realizing the potential of its mRNA technology platform to provide patients with transformational new medicines. The company's experienced management team and its portfolio of innovative technologies continue to position it as a leader in the rapidly evolving field of mRNA-based therapeutics. However, Eterna's ability to execute on its strategy and achieve long-term success will depend on its ability to navigate the significant financial and operational hurdles it currently faces.