Business Context and Reporting Period
The supplied filing is Aerpio Pharmaceuticals, Inc.’s Form 10-K for the fiscal year ended December 31, 2020, not a filing identified as Whitehawk Therapeutics, Inc. The company is a development-stage biopharmaceutical business focused on Tie2 activation, principally through razuprotafib, with programs in glaucoma, acute respiratory distress syndrome, diabetic vascular complications and preclinical antibody programs. It had no approved products or product sales.
Aerpio reported 12 employees at December 31, 2020 and traded on Nasdaq Capital Market under the symbol ARPO. The filing was signed March 11, 2021.
Key Financial Metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| License revenue | $15.0 million | $0 | +$15.0 million |
| Research and development expense | $12.6 million | $12.8 million | Down 1.8% |
| General and administrative expense | $8.8 million | $9.8 million | Down 10.2% |
| Total operating expenses | $21.4 million | $24.4 million | Down $3.1 million |
| Loss from operations | $6.4 million | $24.4 million | Improved by $18.1 million |
| Net loss | $4.3 million | $23.3 million | Improved by $19.0 million |
| Net loss per share | $0.10 | $0.57 | Improved |
| Net cash used in operating activities | $5.4 million | $23.9 million | Improved by $18.5 million |
| Cash and cash equivalents | $42.6 million | $38.5 million | Up $4.1 million |
| Accumulated deficit | $146.6 million | $142.2 million | Increased $4.3 million |
The $15.0 million of 2020 revenue resulted from a May 2020 amendment to the Gossamer license agreement and was recognized upon receipt. The company stated that it does not expect this revenue to recur unless future milestones are achieved. There were no material debt balances disclosed; total liabilities were $1.9 million, primarily accounts payable, accrued expenses and the current portion of an operating lease liability.
Financing activities provided $9.5 million in 2020, including $9.3 million of net proceeds from the sale of 6.5 million common shares under the company’s at-the-market facility. Total assets were $44.9 million and stockholders’ equity was $43.1 million at year-end.
Material Changes Versus the Prior Comparable Period
- Net loss declined substantially, primarily because of the $15.0 million Gossamer license payment and lower operating expenses.
- Research and development expense declined modestly as spending shifted from the 2019 TIME-2b and glaucoma Phase 1b programs to the 2020 glaucoma Phase 2, I-SPY COVID and RESCUE trials.
- General and administrative expense decreased by $1.0 million, while 2019 included $1.9 million of restructuring expense; no restructuring expense was recorded in 2020.
- Operating cash use fell to $5.4 million from $23.9 million, and year-end cash increased to $42.6 million.
- Shares outstanding increased to 47.3 million at December 31, 2020 from 40.6 million at December 31, 2019, principally due to the ATM offering and option exercises.
- In December 2020, razuprotafib met the Phase 2 glaucoma trial’s primary efficacy endpoint for the twice-daily dose, but the IOP reduction was considered insufficient to advance independently into Phase 3.
Guidance, Outlook, Risks and Unusual Items
- Management estimated that existing cash would fund its current operating plan through the fourth quarter of 2022, assuming no future financings or strategic partnerships. This estimate could change materially with development decisions, trial costs or strategic transactions.
- Following the glaucoma Phase 2 results, the company began reviewing strategic alternatives, including partnering, acquisition, merger, sale of the company or assets, and licensing transactions. No transaction was assured.
- In January 2021, the company announced a workforce reduction of seven employees, approximately 58% of its workforce, and estimated approximately $1.2 million of severance expense in the first quarter of 2021.
- The I-SPY COVID trial was discontinued after 21 patients in January 2021 because of difficulties monitoring patients during an ICU surge. The RESCUE trial stopped recruiting after 31 patients in February 2021 because of recruitment and monitoring challenges. The filing reported no apparent safety signals in either study and expected RESCUE topline data in the second quarter of 2021.
- MTEC agreed to reimburse up to $5.1 million of qualified internal and external RESCUE trial spending; the filing does not establish that the full amount will be received.
- The company remains dependent on razuprotafib and external financing or transactions. It has incurred losses since inception, has no product revenue and may need to delay, reduce or terminate development programs if additional capital is unavailable.
- Major risks include clinical and regulatory failure, patient enrollment difficulties, COVID-19 disruption, reliance on contract research and manufacturing organizations, intellectual-property challenges, competition, adverse events, stock-price volatility and possible Nasdaq listing noncompliance.
- The Gossamer agreement provides potential future approval milestones of up to $40.0 million, sales milestones of up to $50.0 million and tiered royalties, but all future milestones and royalties were constrained and no transaction price had been allocated to them at year-end.
Most Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied text is Aerpio Pharmaceuticals, Inc., whereas the request metadata identifies Whitehawk Therapeutics, Inc.
- Verify the sustainability of the $15.0 million 2020 license revenue and the absence of product sales.
- Review cash-burn assumptions supporting management’s statement that cash lasts through the fourth quarter of 2022.
- Assess the final data and strategic status of razuprotafib after the glaucoma Phase 2 result and the discontinued COVID-19 trials.
- Check subsequent filings for the January 2021 workforce reduction, severance payments, executive transitions and any strategic transaction.
- Evaluate dilution from the ATM facility, outstanding options and warrants; year-end outstanding options totaled 4.6 million and warrants totaled 0.6 million.
- Review the Gossamer amendment, remaining milestone and royalty rights, and the risk of termination or non-development by Gossamer.
- Confirm Nasdaq listing compliance and the company’s ability to obtain additional financing if strategic alternatives do not produce a transaction.