Business Context and Reporting Period
Filing identity: The supplied filing is Aileron Therapeutics, Inc.’s Form 10-Q for the quarter ended September 30, 2018, filed November 7, 2018. The request metadata identifies Rein Therapeutics, Inc.; this company-name discrepancy should be verified.
Aileron was a clinical-stage biopharmaceutical company developing cell-permeating alpha-helical peptides, led by ALRN-6924, which targets the p53/MDM2/MDMX pathway in cancer. ALRN-6924 was being evaluated in Phase 1 and Phase 2a trials for solid tumors, lymphomas, AML and MDS, including combination studies with Ara-C.
Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $4.3 million | $14.5 million |
| General and administrative expense | $3.2 million | $10.4 million |
| Total operating expenses | $7.5 million | $24.9 million |
| Net loss | $7.4 million | $24.5 million |
| Net loss per share | $0.50 | $1.66 |
| Net cash used in operating activities | Not separately provided | $21.3 million |
At September 30, 2018, cash and cash equivalents were $7.7 million, investments were $20.2 million, and total cash, cash equivalents and investments were approximately $27.9 million. Total assets were $38.1 million, total liabilities were $12.1 million, and stockholders’ equity was $26.0 million. The company had an accumulated deficit of $161.5 million.
Construction financing liability was $5.0 million. The company capitalized $6.6 million of build-to-suit facility costs and held $0.6 million of non-current restricted cash for a lease security deposit.
Cash flow from investing activities was a $16.4 million source, principally from net sales or maturities of investments, while financing activities provided $1.2 million, primarily from an increase in the construction financing liability and stock-option exercises. Cash, cash equivalents and restricted cash declined by $3.6 million during the nine-month period.
Material Changes Versus the Prior Comparable Period
- Third-quarter net loss increased to $7.4 million from $6.3 million, while nine-month net loss increased to $24.5 million from $15.7 million.
- Third-quarter R&D expense increased $0.5 million, primarily due to higher personnel-related and unallocated development costs. Nine-month R&D expense increased $4.6 million, including higher ALRN-6924 clinical and non-clinical research costs.
- Third-quarter G&A expense increased $0.6 million. Nine-month G&A expense increased $4.4 million, including approximately $1.1 million related to the former Chief Executive Officer’s separation agreement, higher personnel and external costs, and increased stock compensation.
- Operating cash use increased to $21.3 million from $14.7 million for the comparable nine-month period.
- The company moved into a new 18,768-square-foot Watertown office and laboratory facility in August 2018 under an eight-year lease with approximately $8.8 million of minimum rent commitments.
- In the AML/MDS monotherapy trial, one patient receiving ALRN-6924 died from treatment-related tumor lysis syndrome. Following FDA notification and safety review, the company continued enrollment at lower dose levels and was cleared to enroll patients at 3.3 mg/kg.
Guidance, Outlook, Risks and Unusual Items
- Management expected continued losses and increasing expenses as clinical development and research activities expanded.
- Based on its operating plan, management expected available cash, cash equivalents and investments to fund operating and capital requirements into the third quarter of 2019. However, the filing states that substantial doubt existed about the company’s ability to continue as a going concern because funding was not expected to cover at least twelve months from issuance of the interim financial statements.
- The company planned to raise additional capital but stated that the financing plan was not probable under applicable accounting guidance. Potential financing could dilute common stockholders, impose debt restrictions or require the company to surrender rights through collaborations or licensing arrangements.
- Management planned to report interim PTCL and AML/MDS data at the American Society of Hematology conference in December 2018 and, subject to funding, pursue additional combination trials.
- Key clinical risks include limited safety data, potential adverse events, patient enrollment delays, inconclusive efficacy, regulatory requirements for additional trials, and possible requirements for a companion diagnostic for wild-type p53 patients.
- The company had no approved products, no product sales, no committed external funding source and no commercial manufacturing or sales infrastructure.
- Additional risks included dependence on third-party manufacturers and clinical research organizations, intellectual-property license obligations, competition, regulatory approval uncertainty, and the ability to retain key personnel.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2018, and reported no material change in internal control over financial reporting.
Most Important Facts to Verify
- Confirm whether the filing belongs to Aileron Therapeutics, Inc. rather than Rein Therapeutics, Inc.
- Verify the going-concern disclosure and the company’s actual cash runway relative to the stated third-quarter 2019 estimate.
- Review subsequent financing transactions, dilution and any debt or collaboration arrangements after September 30, 2018.
- Assess updated safety and efficacy data for ALRN-6924, particularly the tumor lysis syndrome death and subsequent trial decisions.
- Verify the status of the planned PTCL and AML/MDS data disclosures and whether additional clinical trials were initiated.
- Review lease, construction financing and facility obligations, including the $5.0 million construction financing liability and approximately $8.8 million of minimum rent commitments.
- Evaluate the status and enforceability of key Harvard/Dana-Farber and other intellectual-property licenses, including diligence and milestone obligations.