Spyre Therapeutics, Inc. (formerly Aeglea BioTherapeutics, Inc.) — Q3 2023 Form 10-Q Summary
Business context and reporting period
The filing is Aeglea BioTherapeutics, Inc.’s unaudited quarterly report for the three and nine months ended September 30, 2023. During June 2023, Aeglea acquired Spyre’s assets and shifted its focus to a preclinical inflammatory bowel disease (IBD) pipeline under the Spyre name. The company operates in one segment and has no approved products or product revenue.
The portfolio includes SPY001, an anti-α4β7 antibody; SPY002, an anti-TL1A antibody; discovery-stage SPY003 and SPY004 programs; and proposed antibody combinations. SPY001 was expected to enter first-in-human studies in the first half of 2024, while SPY002 was expected to enter first-in-human studies in the second half of 2024.
Financial condition and key metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Total revenue | $0.0 million in 2023 versus $0.2 million in 2022 | $0.9 million versus $2.2 million |
| Research and development expense | $24.7 million versus $12.0 million | $55.8 million versus $44.3 million |
| General and administrative expense | $8.6 million versus $7.0 million | $25.9 million versus $23.5 million |
| Loss from operations | $18.3 million versus $18.8 million | $196.4 million versus $65.6 million |
| Net loss | $40.1 million versus $18.2 million | $275.6 million versus $65.0 million |
| Basic and diluted loss per share | $9.34 versus $4.84 | $69.57 versus $20.17 |
| Operating cash used | Not separately presented | $68.9 million versus $62.0 million |
The company had $90.6 million of cash and cash equivalents and $113.0 million of marketable securities at September 30, 2023, for total cash, cash equivalents and marketable securities of approximately $203.6 million. Total assets were $207.3 million, while total liabilities were $65.6 million. The company had no debt or credit facility.
Series A non-voting convertible preferred stock was recorded outside stockholders’ equity at $387.1 million. Its September 30, 2023 redemption value was approximately $532.3 million. Stockholders’ deficit was $245.4 million, compared with stockholders’ equity of $50.3 million at December 31, 2022.
Financing activities provided $197.5 million during the first nine months, primarily from net proceeds of approximately $197.3 million from the June 2023 private placement of Series A Preferred Stock. Investing activities used $73.1 million, principally due to purchases of marketable securities. Cash, cash equivalents and restricted cash increased by $55.5 million to $91.9 million.
Material changes versus the prior comparable period
- Research and development expense increased 106% in the third quarter and 26% year to date, primarily due to Spyre-related preclinical development and manufacturing costs, including $19.4 million of related-party expenses in the third quarter.
- The company recorded $130.2 million of acquired in-process research and development expense in connection with the Spyre asset acquisition. It also recorded an $83.5 million year-to-date non-cash expense from remeasurement of the forward contract liability for Series A Preferred Stock.
- The company recorded a $14.6 million gain from selling global pegzilarginase rights to Immedica for $15.0 million upfront cash proceeds. Up to $100.0 million of contingent milestone payments may be payable, with proceeds generally subject to the legacy stockholder contingent value rights.
- Revenue declined because the former Immedica license arrangement was terminated following the pegzilarginase sale. No revenue was recognized in the third quarter; $0.9 million was recognized year to date.
- A restructuring reduced headcount by approximately 83%. The company recognized $10.95 million of restructuring-related costs, including severance, stock compensation, asset disposal losses and lease impairment. Management stated that no further restructuring charges were expected under that plan.
- Aeglea completed a 1-for-25 reverse stock split on September 8, 2023 and transferred its Nasdaq listing to the Nasdaq Capital Market. Nasdaq notified the company on September 22 that it had regained compliance with the minimum bid price requirement.
Guidance, outlook, commentary and risks
Management expects continued operating losses and increasing research and development expenditures as the company advances its preclinical and clinical programs. No formal financial revenue or earnings guidance was provided.
The company disclosed substantial doubt about its ability to continue as a going concern within one year after issuance of the financial statements. Stockholder approval of conversion of the Series A Preferred Stock into common stock was scheduled for November 21, 2023. If approval is not obtained, preferred holders may require cash settlement at fair value. This redemption obligation is outside the company’s control and could materially impair liquidity.
The company exercised its Paragon option for SPY001 and retained options for SPY002, SPY003 and SPY004. Following execution of the SPY001 license agreement, potential payments to Paragon could reach $22.0 million upon specified development and clinical milestones, including expected payments of $1.5 million upon development-candidate nomination and $2.5 million upon first dosing in a Phase 1 trial. Each of the three remaining programs could involve similar milestone obligations if its option is exercised.
Key risks include the preclinical status of all programs, dependence on SPY001 and SPY002, regulatory and clinical-development uncertainty, reliance on Paragon and third-party manufacturers, potential supply-chain interruptions, intellectual-property risks, competition in IBD, the need for additional capital and dilution, potential cash redemption of preferred stock, and possible Nasdaq listing issues. The company also disclosed related-party dependence on Paragon and Fairmount-affiliated entities.
Most important facts for investors to verify
- Whether stockholders approved conversion of the Series A Preferred Stock and whether any cash redemption rights were exercised.
- The company’s subsequent liquidity, cash burn and financing activities relative to the $203.6 million of cash, cash equivalents and marketable securities at September 30, 2023.
- Execution and terms of the SPY001 license agreement, including milestone payments and the timing of first-in-human studies.
- Progress and option-exercise decisions for SPY002, SPY003 and SPY004.
- Whether the stated SPY001 and SPY002 clinical timelines were achieved and whether preclinical data support advancement.
- Actual proceeds and timing of any contingent payments from the pegzilarginase transaction and related CVR distributions.
- The magnitude of related-party expenses and outstanding amounts owed to Paragon, including the $16.8 million payable reported at September 30, 2023.
- Future capital requirements, potential equity dilution and the company’s ability to resolve the disclosed going-concern uncertainty.