Aileron Therapeutics, Inc. — Form 10-Q Summary
Filing-period note: The supplied filing is for Aileron Therapeutics, Inc., not Rein Therapeutics, Inc. It covers the quarter and six months ended June 30, 2018; the filing was signed August 7, 2018.
Business Context and Reporting Period
Aileron is a clinical-stage biopharmaceutical company developing stapled-peptide therapeutics. Its lead candidate, ALRN-6924, targets MDMX and MDM2 to reactivate p53-mediated tumor suppression. Clinical programs included Phase 1 studies in advanced solid tumors or lymphomas and AML/MDS, a Phase 2a PTCL study, and a Phase 1b AML/MDS combination study with Ara-C. The company had no approved products or product-sales revenue.
Key Financial Metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.3 million | $10.2 million |
| General and administrative expense | $4.3 million | $7.3 million |
| Total operating expenses | $9.7 million | $17.4 million |
| Net loss | $9.5 million | $17.1 million |
| Net loss per share | $0.64 | $1.16 |
| Cash used in operating activities | Not separately provided | $14.4 million |
Because revenue was zero, gross and operating margins are not meaningful. Interest income was $168,000 for the quarter and $343,000 for the six-month period.
- Cash and cash equivalents were $12.0 million at June 30, 2018, compared with $11.9 million at December 31, 2017.
- Short-term investments were $23.8 million, down from $38.9 million at year-end 2017.
- Cash, cash equivalents and investments totaled $35.8 million; cash, cash equivalents and restricted cash totaled $12.6 million.
- Total assets were $42.6 million and total liabilities were $9.7 million.
- Liabilities included a $3.3 million construction-financing or build-to-suit facility lease liability and $6.4 million of current liabilities.
- Accumulated deficit was $154.0 million.
- Stock-based compensation expense was $2.1 million for the first six months, including a $612,000 incremental charge related to the former CEO’s separation agreement.
Material Changes Versus the Prior Comparable Period
- Second-quarter revenue remained zero, while net loss increased to $9.5 million from $4.9 million.
- For the first six months, net loss increased to $17.1 million from $9.5 million, and operating cash use increased to $14.4 million from $9.5 million.
- Quarterly research and development expense increased $2.2 million, primarily due to greater ALRN-6924 and p53-program research, combination-drug research, and personnel costs.
- Quarterly general and administrative expense increased $2.5 million. Approximately $1.1 million related to the former CEO separation agreement, including salary continuation and accelerated or modified stock-option expense.
- Investing activities provided $15.0 million in the first half of 2018, primarily because investment maturities and sales exceeded purchases. The company also began capitalizing costs for its new facility.
- A new approximately 18,609-square-foot Watertown, Massachusetts office and laboratory lease became effective in April 2018. The initial eight-year minimum rent commitment was approximately $8.8 million, excluding taxes, insurance, maintenance and other operating expenses.
Guidance, Outlook, Risks and Unusual Items
- Management expected June 30, 2018 cash, cash equivalents and investments to fund operating expenses and capital expenditures, including clinical trials, into the second half of 2019, while the liquidity footnote stated funding was expected for at least the next twelve months. Management acknowledged that actual cash usage could be faster than estimated.
- The company expected continuing losses and substantially higher expenses as it advanced clinical trials, expanded combination research, added personnel, moved facilities and potentially initiated additional trials. Additional capital will be required; no committed external funding source was identified.
- Management planned to report additional PTCL and AML/MDS interim data at a major medical conference in the fourth quarter of 2018 and expected to initiate an MDS expansion cohort in the third quarter.
- As of a July 13, 2018 data cutoff, six of 14 evaluable PTCL patients had disease control, including two complete responses, one partial response and three stable-disease cases. The filing cautioned that interim results may not predict final outcomes.
- One patient receiving ALRN-6924 at the 3.8 mg/kg dose in an AML/MDS Phase 1 monotherapy trial died from tumor lysis syndrome determined to be treatment-related. The death was reported to the FDA; the company continued enrollment at the 2.7 mg/kg dose.
- The former CEO left in May 2018. John P. Longenecker was serving as interim CEO while the company searched for a permanent chief executive.
- Principal risks include clinical-trial failure or delay, treatment-related adverse events, regulatory approval uncertainty, potential companion-diagnostic requirements for wild-type p53 patients, dependence on third-party manufacturers and CROs, intellectual-property and license disputes, competition, and the need for additional financing.
- The company disclosed no material legal proceedings and no off-balance-sheet arrangements. Management concluded that disclosure controls and procedures were effective as of June 30, 2018.
Important Facts for Investors to Verify
- Confirm the issuer identity: the provided filing is Aileron Therapeutics, Inc., despite the request naming Rein Therapeutics, Inc.
- Review subsequent clinical and regulatory developments concerning the treatment-related tumor lysis syndrome death and ALRN-6924 trial enrollment.
- Compare actual cash burn and financing activity with management’s projection that available funds would last into the second half of 2019.
- Monitor PTCL response durability, AML/MDS interim data, and whether later-stage or combination trials proceed as planned.
- Assess the financial impact of the new facility lease, build-out costs and the $3.3 million construction-financing liability.
- Review future financing terms and potential dilution, as the company had no product revenue and expected to require substantial additional capital.