Aclaris Therapeutics, Inc. — Q1 2022 Form 10-Q Summary
Business context and reporting period
Aclaris is a clinical-stage biopharmaceutical company developing therapies for immuno-inflammatory diseases and pursuing strategic partnerships. The report covers the three months ended March 31, 2022, with comparisons to the same period in 2021.
Key programs included zunsemetinib (ATI-450), ATI-1777, ATI-2138, preclinical candidate ATI-2231, and discovery-stage programs. The company also operates a contract research segment and receives royalties related to RHOFADE.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $1.5 million | $1.8 million | Down $0.3 million |
| Contract research revenue | $1.2 million | $1.5 million | Down $0.3 million |
| Other revenue | $0.2 million | $0.2 million | Down $0.01 million |
| Research and development expense | $14.3 million | $7.8 million | Up $6.5 million |
| General and administrative expense | $6.1 million | $4.8 million | Up $1.3 million |
| Loss from operations | $18.9 million | $28.5 million | Improved by $9.6 million |
| Net loss | $18.8 million | $28.8 million | Improved by $10.0 million |
| Basic and diluted net loss per share | $0.31 loss | $0.57 loss | Improved |
| Cash flow from operations | $(21.0) million | $(12.2) million | Greater use of cash |
The company did not present gross profit because management considers the measure not meaningful based on its revenue profile. Using reported figures, the operating loss represented approximately 1,302% of revenue and the net loss approximately 1,294% of revenue.
- Cash and cash equivalents were $36.3 million at March 31, 2022, compared with $27.3 million at December 31, 2021.
- Short- and long-term marketable securities totaled $167.2 million, resulting in cash, cash equivalents and marketable securities of approximately $203.6 million.
- Total assets were $226.5 million and stockholders’ equity was $180.2 million at March 31, 2022.
- The company had no outstanding term debt after repaying its $11.0 million Silicon Valley Bank loan in July 2021.
- Contingent consideration related to the Confluence acquisition was $27.2 million, down from $28.4 million at December 31, 2021.
- Operating cash use increased primarily because of higher net losses after noncash adjustments and timing-related reductions in accounts payable and accrued expenses.
Material changes versus the prior comparable period
- Revenue declined 18%, primarily because of lower contract research hours billed, partially offset by higher average billing rates.
- Research and development expense increased 83% as the company advanced Phase 2b and Phase 2a studies for zunsemetinib, progressed ATI-1777 clinical activities, developed ATI-2231, and continued discovery programs.
- General and administrative expense increased 26%, driven primarily by higher headcount, stock-based compensation, and facility and support costs.
- The company recorded a $1.2 million gain from revaluing contingent consideration in Q1 2022, compared with a $16.4 million expense in Q1 2021. The 2022 gain primarily reflected higher discount rates caused by higher risk-free rates and wider credit spreads.
- Investing activities provided $29.9 million in Q1 2022, primarily because proceeds from marketable securities exceeded purchases. In Q1 2021, investing activities used $75.3 million.
- Financing cash flow was essentially flat in Q1 2022, compared with $100.8 million of financing inflows in Q1 2021 from a public offering.
- Common shares outstanding increased to 61.7 million at March 31, 2022 from 61.2 million at year-end 2021, primarily from option exercises and restricted stock unit vesting.
Guidance, outlook, commentary, and risks
- Management expects continued net losses and significant research and development spending for the foreseeable future.
- Topline data were expected in 2023 for the zunsemetinib rheumatoid arthritis and hidradenitis suppurativa studies, and for the planned psoriatic arthritis study. ATI-1777 Phase 2b topline data were expected in the first half of 2023.
- Topline data for the ATI-2138 Phase 1 single ascending dose study were expected in 2022. The company expected to submit an IND for ATI-2231 by the end of 2022 and potentially begin clinical development in 2023.
- Management stated that existing cash, cash equivalents and marketable securities were sufficient to fund operating and capital requirements for more than 12 months from issuance of the financial statements. Additional capital will nevertheless be required to complete clinical development, advance preclinical compounds, and support discovery activities.
- In April 2022, after quarter-end, the company sold 4.84 million shares through its at-the-market facility for $75.0 million of gross proceeds, less $2.2 million of selling commissions.
- Key risks include clinical and regulatory failure or delay, difficulty securing additional financing or strategic partners, dilution from future equity offerings, dependence on third-party contract research and manufacturing providers, supply-chain disruption, and continuing COVID-19-related effects on trials and operations.
- The company’s remaining contingent consideration may reach up to $75.0 million based on specified regulatory and commercial milestones, in addition to potential royalties and other transaction-related payments.
- Remaining lease payment obligations for the company’s two principal facilities totaled $3.6 million at March 31, 2022.
- The company stated that it was not currently a party to any material legal proceeding. The previously disclosed securities class action settlement was approved in December 2021, with a $2.7 million obligation covered by insurance.
Most important facts for investors to verify
- Whether clinical trials for zunsemetinib, ATI-1777, and ATI-2138 meet stated enrollment, timing, safety, and efficacy milestones.
- The duration of the company’s cash runway after the April 2022 equity financing and ongoing quarterly operating cash burn.
- Whether revenue from contract research and RHOFADE royalties can grow or offset increasing clinical development costs.
- The assumptions, discount rates, and probability-of-success estimates supporting the $27.2 million contingent consideration liability.
- Potential dilution from the April 2022 share issuance, outstanding options and restricted stock units, and any future capital raises.
- Potential effects of COVID-19, clinical supply constraints, inflation, interest-rate changes, and broader financial-market volatility on development programs and liquidity.