Aprea Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Aprea is a clinical-stage oncology biopharmaceutical company with no product revenue. Following its May 2022 acquisition of Atrin Pharmaceuticals, its primary focus shifted to DNA damage response programs, led by ATR inhibitor candidate ATRN-119.
Financial performance and position
| Metric | Q3 2022 / September 30, 2022 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None reported |
| Research and development expense | $1.1 million for Q3; $15.9 million for nine months | $6.0 million and $19.4 million, respectively, in 2021 |
| General and administrative expense | $3.1 million for Q3; $18.8 million for nine months | $3.4 million and $10.2 million, respectively, in 2021 |
| Acquired in-process R&D expense | $76.0 million for nine months | None in 2021 |
| Net loss | $4.0 million for Q3; $110.2 million for nine months | $9.5 million and $29.4 million, respectively, in 2021 |
| Cash and cash equivalents | $33.1 million | $53.1 million at December 31, 2021 |
| Operating cash used | $21.0 million for nine months | $27.5 million in 2021 |
| Current liabilities | $4.0 million | $7.3 million at December 31, 2021 |
| Lease liabilities | $110,551, all current | No noncurrent lease liability reported |
Basic and diluted loss per share was $0.12 for Q3 and $4.17 for the nine-month period, versus $0.45 and $1.39 in 2021. Gross margin is not meaningful because the company reported no revenue. The filing reports no conventional borrowings; the reported lease liability is the principal balance-sheet obligation described here.
Changes versus prior periods and notable transactions
- Q3 net loss narrowed by $5.4 million year over year, mainly as legacy eprenetapopt trials wound down and R&D expense declined. Nine-month net loss widened by $80.8 million, primarily because the Atrin acquisition generated a one-time $76.0 million acquired IPR&D charge.
- Nine-month G&A expense increased $8.7 million, principally reflecting higher stock-based compensation and post-acquisition professional costs. Nine-month stock-based compensation totaled $16.9 million.
- Aprea acquired Atrin on May 16, 2022, issuing common and Series A preferred shares and assuming Atrin options. The acquisition was accounted for as an asset acquisition. Most preferred shares converted into common stock after shareholder approval; 128,597 preferred shares remained outstanding at September 30.
- The company raised approximately $0.6 million net through ATM common-stock sales in the first nine months. Cash used in operations was partly offset by noncash expenses and working-capital movements; financing cash inflow was $0.6 million.
- Stockholders’ equity was $26.6 million at September 30, compared with $49.5 million at year-end 2021. Common shares outstanding were 52,237,885 at September 30 and 52,997,814 as of November 9, 2022.
Outlook, risks, and other matters
- Management estimated that September 30 cash would fund operating and capital expenditure needs through the end of 2023. This estimate depends on assumptions that may prove incorrect; the company expects to need additional financing and may cut or curtail development if funds are unavailable.
- ATRN-119’s Phase 1 trial opened for enrollment in Q3 2022; management expected to add one or two sites in Q4. ATRN-W1051 remained preclinical, with IND-enabling studies anticipated to begin in Q4 2022. These are plans, not assurances.
- The company has no approved products, has never generated product revenue, and expects continued losses. Clinical, regulatory, manufacturing, enrollment, intellectual-property, competition, and financing risks are significant. The company also identified dependence on a single third-party manufacturer and possible COVID-19-related disruption.
- Legacy p53 programs face setbacks: the pivotal Phase 3 eprenetapopt MDS trial failed its primary endpoint, and the FDA continued a partial hold on three myeloid studies while permitting a new relapsed/refractory MDS/AML trial under an existing IND. The company said it had no ongoing patients in the previously held trials.
- Following a Nasdaq stockholders’ equity deficiency notice based on June 2022 figures, Aprea said it believed conversion of preferred shares into common stock would likely resolve the deficiency. A proposed 1-for-3 to 1-for-20 reverse split was scheduled for a November 16, 2022 shareholder vote; neither the split nor continued Nasdaq compliance was assured.
- The filing reports no material legal proceedings and no provision for contingent losses. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported for the quarter.
Investor verification priorities
- Confirm the actual cash runway and financing needs against subsequent cash use, trial spending, and any new capital raises.
- Check ATRN-119 enrollment, safety and trial progress, and whether ATRN-W1051 entered IND-enabling studies on the anticipated timeline.
- Review the Nasdaq equity deficiency’s resolution and the outcome and implementation, if any, of the proposed reverse split.
- Assess the impact of the Atrin acquisition, preferred-share conversions, ATM issuance, and remaining potential dilution from options and securities.
- Track regulatory status and development plans for eprenetapopt and other legacy programs, including any further FDA actions.