Aileron Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2019. The source identifies the registrant as Aileron Therapeutics, Inc. (Nasdaq: ALRN), although the request metadata refers to Rein Therapeutics, Inc.
Business Context
Aileron is a clinical-stage biopharmaceutical company developing stabilized cell-permeating alpha-helical peptides. Its lead candidate, ALRN-6924, targets the MDM2/MDMX-p53 pathway in oncology. Development during the period focused on a Phase 2a combination expansion cohort with palbociclib for MDM2-amplified advanced solid tumors and preparation for a Phase 1b/2 trial evaluating ALRN-6924 as a myelopreservative in small-cell lung cancer.
- No product candidates have received marketing approval.
- The company has generated no product revenue and expects losses for the foreseeable future.
- The company ceased enrollment and further development in certain PTCL, AML and MDS programs, while seeking potential licensing opportunities outside the United States.
Financial Condition and Results
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | $0 in 2019 and 2018 | $0 in 2019 and 2018 |
| Research and development expense | $4.304 million vs. $5.320 million | $8.478 million vs. $10.166 million |
| General and administrative expense | $3.075 million vs. $4.339 million | $6.214 million vs. $7.256 million |
| Total operating expenses | $7.379 million vs. $9.659 million | $14.692 million vs. $17.422 million |
| Net loss | $7.172 million vs. $9.491 million | $14.385 million vs. $17.079 million |
| Basic and diluted loss per share | $0.26 loss vs. $0.64 loss | $0.68 loss vs. $1.16 loss |
| Operating cash flow | Not separately reported for the quarter | $13.193 million used vs. $14.385 million used |
Operating and net margins are not meaningful because the company had no revenue. Interest income was $0.207 million for the quarter and $0.307 million for the six-month period.
- At June 30, 2019, cash and cash equivalents were $10.157 million, investments were $21.365 million, and total cash, cash equivalents and investments were approximately $31.522 million.
- Total assets were $40.193 million, compared with $30.312 million at December 31, 2018.
- Total liabilities were $10.209 million, compared with $10.712 million at year-end. The balance sheet showed no construction financing liability; lease liabilities totaled $5.228 million.
- Accumulated deficit was $183.151 million and stockholders’ equity was $29.984 million.
- Cash, cash equivalents and restricted cash decreased by $0.478 million during the first six months, ending at $10.750 million.
Material Changes Versus Prior Comparable Period
- Six-month research and development expense declined $1.688 million, primarily because of completed or discontinued prior trials, partially offset by costs for the palbociclib combination program and myelopreservation trial preparation.
- Six-month general and administrative expense declined $1.042 million. The 2018 period included approximately $0.5 million of former CEO salary continuation and approximately $0.6 million related to stock-option modifications.
- Six-month net loss improved by $2.694 million, despite continued clinical development spending.
- The company completed an April 2, 2019 private placement generating approximately $26.0 million of gross proceeds and $23.865 million of net financing cash proceeds after offering costs. The offering included common shares, pre-funded warrants and five-year warrants exercisable at $2.00 per share.
- Common shares issued and outstanding increased from 14.748 million at December 31, 2018 to 26.714 million at June 30, 2019, with 1.097 million pre-funded warrants outstanding at quarter-end. Those pre-funded warrants were exercised in full in July 2019.
- Adoption of ASC 842 resulted in recognition of a $6.385 million operating lease right-of-use asset and $5.228 million of lease liabilities at June 30, 2019, replacing the prior construction financing presentation.
Guidance, Outlook, Risks and Unusual Items
- Management expected interim data from at least 15 patients in the ALRN-6924/palbociclib trial at an oncology conference in September 2019, targeted expansion from 25 to 35 patients, and results from all patients in the second quarter of 2020.
- Management expected to begin enrolling approximately 40 patients in the Phase 1b/2 myelopreservation trial in September 2019 and report Phase 1b proof-of-concept data in the second quarter of 2020.
- Based on the operating plan as of August 6, 2019, management expected available cash, cash equivalents and investments at June 30, 2019 to fund operating and capital requirements into the fourth quarter of 2020. This estimate excludes the capital needed to complete all development activities and is subject to substantial uncertainty.
- The company stated that additional financing will be required and that it has no committed external source of funds. Potential financing could dilute existing holders, impose debt restrictions or require licensing or collaboration of valuable rights.
- On July 12, 2019, Nasdaq notified the company that its stock had closed below the $1.00 minimum bid price for 30 consecutive business days. The initial compliance period ran through January 8, 2020; possible remedies included a transfer to the Nasdaq Capital Market, appeal or reverse stock split.
- Key operating risks include clinical-trial failure or delay, limited patient enrollment, adverse safety findings, regulatory non-approval, dependence on third-party manufacturers and CROs, intellectual-property challenges, competition and inability to secure additional capital.
- The company disclosed a prior treatment-related death from tumor lysis syndrome in an ALRN-6924 AML/MDS trial, while noting that patient deaths may have other causes. No material legal proceedings were reported.
- Clinical-trial liability insurance coverage was stated to be up to $5.0 million, which may not cover all potential liabilities.
Facts Investors Should Verify
- Confirm that the intended issuer is Aileron Therapeutics rather than Rein Therapeutics, as the filing text identifies Aileron throughout.
- Verify subsequent results and enrollment for the ALRN-6924/palbociclib and myelopreservation trials, including whether the stated 2019 and 2020 milestones occurred.
- Assess cash burn, financing activity and the timing of any additional capital raise relative to the projected funding runway into the fourth quarter of 2020.
- Review the status of Nasdaq minimum-bid-price compliance and any reverse split, transfer or delisting actions.
- Evaluate dilution from the April 2019 financing and the approximately 12.935 million common warrants outstanding at June 30, 2019.
- Review clinical safety, efficacy and regulatory developments for ALRN-6924, particularly in light of the disclosed tumor lysis syndrome death and the limited early-stage data.