Acrivon Therapeutics, Inc. — Q3 2022 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and nine months ended September 30, 2022. Acrivon is a clinical-stage oncology company developing precision medicines using its proteomics-based AP3 platform and OncoSignature companion diagnostics. Its lead candidate, ACR-368 (prexasertib), is in Phase 2 development; WEE1- and PKMYT1-targeting programs are preclinical. The company had no approved products and no revenue.
Financial highlights
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $7.9 million | $2.2 million | $18.1 million | $10.7 million |
| General and administrative expense | $1.6 million | $0.5 million | $4.6 million | $1.2 million |
| Total operating expenses | $9.6 million | $2.7 million | $22.7 million | $11.9 million |
| Net loss | $9.2 million | $2.4 million | $22.2 million | $11.9 million |
| Net loss per share, basic and diluted | $5.17 | $1.38 | $12.55 | $6.86 |
| Net cash used in operating activities | Not separately presented | Not separately presented | $20.8 million | $10.4 million |
Balance sheet and liquidity at September 30, 2022: Cash and cash equivalents were $32.1 million and short-term investments were $44.7 million, or $76.8 million combined. Current assets totaled $78.7 million; current liabilities were $6.4 million. Total assets were $87.7 million and total liabilities were $10.8 million. The company reported no debt outstanding. Convertible preferred stock, reported separately from liabilities, had a carrying value of $122.5 million and converted into common stock after the quarter.
Cash flows: For the first nine months of 2022, investing activities used $46.6 million, principally net purchases of investments, and property and equipment purchases were $1.9 million. Financing activities used $0.2 million, mainly deferred offering costs. Cash, cash equivalents and restricted cash decreased by $67.5 million to $32.5 million; much of the decline reflected moving funds into investments.
Margins: Not meaningful because the company had no revenue and incurred operating losses.
Changes versus prior comparable periods
- Q3 operating expenses increased $6.9 million year over year; net loss increased $6.8 million. Nine-month operating expenses increased $10.8 million and net loss increased $10.3 million.
- Higher R&D spending reflected ACR-368 trial start-up and clinical supply manufacturing, companion-diagnostic work, increased staffing, and expanded discovery activity. The nine-month comparison also benefited from the absence of the $5.5 million Lilly license-related expense recorded in 2021.
- G&A rose with headcount and legal and professional costs, including IPO preparation. Other income increased, primarily reflecting interest on cash and investments.
- Cash and cash equivalents declined from $99.6 million at December 31, 2021, while investments rose from zero to $44.7 million. Accumulated deficit increased from $24.9 million to $47.1 million.
Outlook, risks and unusual items
- Management said the September 30 cash, cash equivalents and investments, together with IPO and concurrent private-placement proceeds, were expected to fund operations and capital needs into at least Q4 2024. This estimate depends on assumptions and may prove inaccurate. The IPO closed November 17, 2022; the company reported approximately $92.4 million in net proceeds before offering expenses, with an additional underwriters’ option exercise expected to bring the total to approximately $104.5 million before offering expenses. The filing estimated $2.9 million of offering expenses.
- Management expects significant ongoing losses and increasing R&D and public-company costs, and says further funding will be needed. There can be no assurance that future financing will be available on acceptable terms.
- Clinical, regulatory and companion-diagnostic execution are central risks. ACR-368’s development depends on clinical results and successful development and regulatory approval of the OncoSignature test with Akoya. Up to $10.3 million in Akoya development milestones are contemplated; $2.3 million had been paid through the reported subsequent-event disclosure.
- The Lilly license carries up to $168.0 million in development and commercial milestones and tiered royalties up to 10% of net sales. No such milestones or royalties had been incurred as of September 30, 2022.
- Management disclosed material weaknesses in internal control over financial reporting and concluded disclosure controls were ineffective as of September 30. Remediation was underway but the weaknesses were not considered remediated; the filing says they had not caused a financial-statement misstatement.
- Historical safety disclosures include three deaths deemed possibly related to treatment in a prior ACR-368 clinical-trial cohort. A separate death during a trial was described as investigator-determined to be unrelated to treatment. COVID-19 and geopolitical and market conditions were cited as potential sources of operational, enrollment, supply-chain and financing disruption; management reported no material COVID-19 effect on the financial statements to date.
- Post-quarter IPO events included conversion of all preferred shares into common stock, a 1-for-2.466 reverse stock split reflected retroactively in reported share data, and substantial IPO-related option and restricted-stock-unit grants. These events affect the capital structure and potential dilution.
Key facts for investors to verify
- Whether ACR-368 clinical progress, patient enrollment, efficacy and safety support the stated development plans, and whether the OncoSignature diagnostic can be validated and approved.
- Actual IPO and underwriters’ option proceeds after all offering expenses, and whether the projected runway into Q4 2024 remains realistic given trial spending and operating plans.
- Progress in remediating the disclosed internal-control weaknesses and whether future filings report effective controls.
- Potential dilution from outstanding equity awards, post-IPO grants and automatic share-reserve increases under the 2022 equity plans.
- Future milestone obligations to Akoya and Lilly, lease commitments, and any changes in financing needs or material contingencies.