Business Context and Reporting Period
The provided filing is Aileron Therapeutics, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2020, not Rein Therapeutics, Inc. Aileron is a clinical-stage biopharmaceutical company developing ALRN-6924, a stabilized cell-permeating peptide, primarily as a chemoprotective or myelopreservation agent for cancer patients receiving chemotherapy.
The company had no approved products or product revenue and was listed on the Nasdaq Capital Market under the symbol ALRN. It reported 27.8 million common shares outstanding at March 31, 2020 and 29.1 million shares outstanding as of May 8, 2020.
Financial Results and Key Metrics
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $4.1 million | $4.2 million | Down $0.1 million |
| General and administrative expense | $2.8 million | $3.1 million | Down $0.3 million |
| Total operating expenses | $6.9 million | $7.3 million | Down $0.4 million |
| Net loss | $6.7 million | $7.2 million | Improved by $0.5 million |
| Basic and diluted loss per share | $0.24 | $0.49 | Improved; affected by higher share count |
| Cash used in operating activities | $5.7 million | $7.5 million | Improved by $1.8 million |
There was no meaningful operating margin because the company had no revenue. The operating loss was $6.9 million. Interest income was $62,000 and the company recorded a $66,000 gain on the sale of property and equipment.
At March 31, 2020, cash and cash equivalents were $10.7 million, investments were $2.0 million, and total cash, cash equivalents and investments were approximately $12.7 million. Total assets were $20.4 million, total liabilities were $10.6 million, and stockholders’ equity was $9.8 million. The balance sheet included operating lease liabilities totaling $4.9 million.
Cash, cash equivalents and restricted cash increased by $5.4 million during the quarter, primarily because $11.0 million of investments matured or were sold, offsetting $5.7 million of operating cash use. No cash was provided by financing activities during the quarter.
Material Changes Versus the Prior Comparable Period
- Net loss improved by $465,000, primarily because total operating expenses declined $437,000 and the company recorded a $66,000 gain on sale of property and equipment, partly offset by lower interest income.
- Research and development spending declined modestly overall, but ALRN-6924-related spending increased $677,000 to $2.8 million, principally because of manufacturing and clinical development costs.
- Employee, facility and other development costs declined $598,000, reflecting a reduction in research and development personnel from 15 employees in 2019 to seven in 2020 and the elimination of certain early-stage research activities.
- General and administrative expense declined $332,000, primarily due to lower administrative support costs.
- Cash used in operations declined $1.8 million year over year.
- Weighted-average shares outstanding increased to 27.8 million from 14.8 million, reflecting the 2019 private placement and related equity activity. The company also granted options to purchase 1.5 million shares during the quarter at a weighted-average exercise price of $0.65 per share.
Guidance, Outlook, Risks and Unusual Items
Management expected to report interim top-line data from the dose-optimization portion of the Phase 1b chemoprotection trial in the second quarter of 2020 and final dose-optimization data in the fourth quarter of 2020. Schedule-optimization results were expected in the fourth quarter of 2020, subject to potential enrollment delays from COVID-19.
Preliminary data from the 0.6 mg/kg and 1.2 mg/kg cohorts suggested a protective effect against severe anemia and thrombocytopenia, but not neutropenia. These results were preliminary and subject to change as additional data became available.
Due to limited cash resources and COVID-19 uncertainty, management chose to focus development efforts on ALRN-6924 as a chemoprotective agent and did not plan to advance other programs, including the Phase 2a combination program with palbociclib, at that time. The company also implemented cost-saving measures, including personnel reductions and elimination of planned research studies and advisory services.
Management concluded that substantial doubt existed regarding the company’s ability to continue as a going concern. Cash, cash equivalents and investments at March 31, 2020 were expected to fund the current business plan only into the first quarter of 2021. Additional capital was required, but management stated that the success of future financing was not probable under the applicable accounting guidance.
Subsequent to quarter-end, the company sold 1.3 million shares through its at-the-market facility for gross proceeds of $762,000, or approximately $738,000 after commissions and fees. On April 30, 2020, it also received a $400,000 loan under the Paycheck Protection Program.
COVID-19 created risks to clinical-trial enrollment, site operations, patient visits, supply chains, manufacturing, regulatory activities and access to capital markets. The company stated that the pandemic did not materially affect first-quarter results but that the ultimate impact was uncertain.
Nasdaq had extended the deadline for the company to regain compliance with the $1.00 minimum bid-price requirement to September 21, 2020. Management intended to seek stockholder approval for a potential reverse stock split. Failure to regain compliance could result in delisting and impair access to capital.
The company had no material legal proceedings and no off-balance-sheet arrangements. It incurred license fees of $195,000 during the quarter under its Harvard/Dana-Farber and Umicore agreements; no milestone payments were due or recorded.
Most Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing is for Aileron Therapeutics, Inc., whereas the request metadata identifies Rein Therapeutics, Inc.
- Verify the going-concern disclosure and the expected cash runway into the first quarter of 2021.
- Assess the company’s ability to obtain additional financing and the potential dilution, restrictive terms or loss of strategic flexibility from future financings.
- Verify clinical-trial enrollment, COVID-19-related delays and the final results of the ALRN-6924 chemoprotection trial against the preliminary findings described in the filing.
- Monitor Nasdaq bid-price compliance, any reverse stock split proposal, and the risk of delisting by the September 21, 2020 compliance date.
- Reconcile post-quarter-end equity sales and the Paycheck Protection Program loan with subsequent filings and financial statements.
- Review the company’s reliance on third-party manufacturers, clinical research organizations and licensed intellectual property, including milestone, royalty and termination obligations.