AEON Biopharma, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 14, 2024. AEON is a clinical-stage biopharmaceutical company developing ABP-450, a botulinum toxin candidate for therapeutic indications. It has generated no product revenue. The merger in July 2023 created “Successor” and “Predecessor” reporting periods, which the company says are not directly comparable.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | None | None |
| Selling, general and administrative expense | $4.6 million | $3.8 million |
| Research and development expense | $5.7 million | $9.2 million |
| Operating loss | $74.2 million | $13.0 million |
| Net loss | $118.0 million | $17.6 million |
| Basic and diluted loss per share | $3.17 | $0.13 |
| Net cash used in operating activities | $8.6 million | $11.1 million |
At March 31, cash and cash equivalents were $1.6 million, down from $5.2 million at December 31, 2023. Current assets were $2.5 million versus current liabilities of $16.0 million. Total liabilities were $201.4 million, including a $168.1 million contingent-consideration liability and a $12.0 million warrant liability; stockholders’ deficit was $198.4 million. The balance sheet reports convertible notes at fair value of $5.1 million. The filing reports $5 million principal issued to Daewoong in March, with a further $10 million note issued April 12.
Operating cash use was partly offset by $5.0 million of financing proceeds from convertible notes. No revenue or meaningful gross margin was reported. The company says it expects cash to fund its operating plan through June 2024, including the full $15 million Daewoong financing; management nevertheless concluded substantial doubt exists about the company’s ability to continue as a going concern for the year after issuance of the financial statements.
Material changes, outlook and risks
- Losses include substantial fair-value and transaction-related charges. Q1 operating loss included a $63.8 million noncash increase in contingent consideration, primarily due to the higher share price. Other loss included $20.9 million from warrant remeasurement and a reported $22.9 million loss on forward purchase agreements and derivative liabilities. These items materially increased net loss and are not equivalent to operating cash outflows.
- Operating expenses: SG&A rose 21%, principally due to legal/professional fees and public-company insurance. R&D fell 38%, primarily because of winding down Phase 2 migraine and cervical-dystonia trials.
- Clinical developments: After quarter-end, on May 3, AEON reported that the planned interim analysis of its chronic-migraine Phase 2 trial did not meet primary or secondary endpoints; it is reviewing the full dataset and next steps. The episodic-migraine Phase 2 trial had previously missed its primary endpoint, although the company reported positive results on some secondary and exploratory endpoints. The cervical-dystonia Phase 2 study met its primary endpoints; a Phase 3 study remained dependent on available capital.
- Funding and dilution: AEON says further development requires additional funding and is pursuing cash-preservation measures and reviewing strategic options, including equity or debt financing. The company warned financing may not be available on acceptable terms; equity financing would dilute shareholders. Daewoong’s senior secured convertible notes carry 15.79% annual interest and mature three years after funding, subject to their terms.
- Forward purchase agreements: Terminated in March. ACM and Polar retained the associated prepayment amounts and retained 3.1 million and 3.175 million shares, respectively. AEON recorded up to $3.0 million in potential liquidated damages tied to registration requirements.
- Other significant risks: AEON depends on Daewoong as its exclusive, sole-source manufacturer. A license amendment provides for possible termination if specified commercialization and clinical-development activity stops for six months; upon such termination, Daewoong could acquire ABP-450 know-how for $1. The company also disclosed a lawsuit by Odeon Capital seeking a $1.25 million deferred underwriting fee, plus other damages.
- Financial reporting controls: Management concluded disclosure controls were ineffective at March 31 due to material weaknesses involving complex transactions, valuations and insufficient qualified resources. The filing notes prior financial-statement restatements and says remediation is ongoing, not yet complete.
Most important facts for investors to verify
- Cash runway assumptions, including the timing and availability of the full $15 million Daewoong financing, and funding needs after the stated June 2024 runway.
- Next steps for ABP-450 following the chronic-migraine interim failure, and the status, cost and funding plan for cervical-dystonia and other programs.
- Potential dilution and creditor terms from convertible notes, warrants, contingent shares and any future financing.
- Final exposure under the forward-purchase registration obligations and the Odeon lawsuit.
- Progress in remediating material weaknesses and the reliability of fair-value estimates, particularly contingent consideration and warrant liabilities.