Aclaris Therapeutics, Inc. — Form 10-Q Summary
Business context and reporting period
Clinical-stage biopharmaceutical company developing immuno-inflammatory therapies, including zunsemetinib, ATI-1777 and ATI-2138, while also operating a contract research laboratory business and pursuing strategic partnerships. The filing covers the quarter and six months ended June 30, 2022; results are unaudited.
Key financial metrics
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Total revenue | $1.5 million | $3.0 million |
| Operating loss | $21.0 million | $39.9 million |
| Net loss | $20.5 million | $39.3 million |
| Net loss per share | $0.31 | $0.62 |
| Net cash used in operating activities | Not separately reported | $40.6 million |
- Revenue consisted primarily of contract research services and RHOFADE royalties. Contract research revenue was $1.2 million for the quarter and $2.4 million for the six months; other revenue was $0.3 million and $0.5 million, respectively.
- Research and development expense increased to $18.8 million for the quarter and $33.1 million for the six months, driven by clinical and preclinical development activities.
- General and administrative expense was $6.1 million for the quarter and $12.2 million for the six months.
- The company does not present gross profit because management does not consider it meaningful given the level of revenue. Based on reported revenue and cost of revenue, the implied difference was approximately $0.5 million for the quarter and $0.8 million for the six months.
- Cash, cash equivalents and marketable securities totaled $255.8 million at June 30, 2022, compared with $225.7 million at December 31, 2021. Cash and cash equivalents were $68.3 million.
- Stockholders’ equity was $235.8 million, compared with $197.3 million at year-end 2021. The accumulated deficit was $634.7 million.
- The company had no outstanding term debt; its $11.0 million Silicon Valley Bank loan was repaid in July 2021. Lease liabilities totaled $2.6 million, and remaining lease payment obligations were approximately $3.3 million.
- Current liabilities were $16.2 million. Contingent consideration related to the Confluence acquisition was $23.8 million, with up to $75.0 million of potential future milestone payments remaining.
Material changes versus the prior comparable periods
- Second-quarter revenue decreased $0.3 million, or approximately 16%, while six-month revenue decreased $0.6 million, or approximately 17%, primarily because of lower contract research hours billed.
- Second-quarter R&D expense increased $10.9 million, or approximately 138%; six-month R&D expense increased $17.4 million, or approximately 110%. Major drivers were Phase 2 development of zunsemetinib and ATI-1777, ATI-2231 preclinical work and higher personnel costs.
- Second-quarter operating loss increased $3.0 million, while the six-month operating loss improved by $6.6 million. The six-month comparison benefited from a $4.6 million decrease in the fair value of contingent consideration in 2022 versus a $21.2 million increase in 2021.
- Net loss improved by $7.6 million for the six months but increased by $2.4 million for the quarter. The quarter included a $3.4 million contingent-consideration gain, compared with a $4.8 million expense in the prior-year quarter.
- Operating cash use increased from $24.5 million to $40.6 million for the six months. Financing cash inflow was $72.8 million, primarily from the April 2022 at-the-market offering, in which 4.84 million shares generated $72.7 million of net proceeds.
- Shares outstanding increased to 66.7 million at June 30, 2022 from 61.2 million at December 31, 2021, reflecting equity issuance and equity-award activity.
Guidance, outlook, risks and unusual items
- Management expects continuing net losses and significant R&D spending as clinical programs advance. It expects existing cash, cash equivalents and marketable securities to fund operating and capital requirements for more than 12 months from issuance of the financial statements, but states that additional capital will be required for longer-term development.
- Expected development milestones include topline data in 2023 for zunsemetinib rheumatoid arthritis, hidradenitis suppurativa and psoriatic arthritis studies, and ATI-1777 atopic dermatitis Phase 2b. ATI-2138 Phase 1 topline data was expected in 2022, with a planned multiple-ascending-dose study in 2022 if successful.
- The company expected to submit an IND for preclinical candidate ATI-2231 by the end of 2022 and, if cleared, advance it into clinical development in 2023.
- Key risks include clinical-trial failure or delay, regulatory nonapproval, inability to obtain strategic partners or financing, dilution from future equity offerings, supply-chain constraints, COVID-19 effects, inflation, market volatility and geopolitical tensions.
- Contingent consideration is a Level 3 fair-value estimate based on milestone probabilities, estimated future sales and discount rates. Changes in these assumptions may materially affect reported earnings.
- The company reported no material pending legal proceedings and stated that its risk factors had not materially changed from the 2021 Form 10-K. A previously disclosed securities class-action settlement required a $2.7 million obligation, within insurance coverage.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting.
Important facts for investors to verify
- Whether the reported cash and marketable securities balance supports the planned clinical portfolio under updated trial costs and enrollment assumptions.
- Timing and results of the zunsemetinib, ATI-1777 and ATI-2138 clinical programs, including the expected 2023 data readouts.
- Future financing needs, potential equity dilution and the availability of strategic partnerships or licensing transactions.
- Assumptions supporting the $23.8 million contingent-consideration liability and the remaining potential payments of up to $75.0 million.
- Clinical-trial safety, enrollment, regulatory and manufacturing risks, including any continuing effects from COVID-19 and supply-chain disruptions.