Business context and reporting period
The filing is Aileron Therapeutics, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2017. The request metadata identifies Rein Therapeutics, Inc., but the filing names Aileron Therapeutics, Inc. as the registrant.
Aileron was a clinical-stage biopharmaceutical company developing stapled-peptide therapeutics. Its lead candidate, ALRN-6924, was being evaluated in multiple oncology trials, including Phase 1 studies in solid tumors, lymphomas, AML and MDS, a Phase 2a PTCL trial, and a Phase 1b AML/MDS combination trial.
Key financial metrics
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $3.161 million | $6.103 million |
| General and administrative expense | $1.791 million | $3.438 million |
| Total operating expenses | $4.952 million | $9.541 million |
| Net loss | $4.923 million | $9.480 million |
| Net loss attributable to common stockholders | $4.944 million | $9.521 million |
| Basic and diluted loss per share | $10.98 | $21.56 |
| Net cash used in operating activities | Not provided for the quarter | $9.457 million |
At June 30, 2017, cash and cash equivalents were $9.397 million, investments were $1.946 million, and restricted cash was $88,000. Total assets were $15.105 million. Current liabilities were $5.471 million, with no debt reported. The accumulated deficit was $123.822 million.
Cash and cash equivalents declined from $20.715 million at December 31, 2016. Total cash, cash equivalents and investments were $11.343 million at June 30, 2017.
Material changes versus the prior comparable period
- Second-quarter research and development expense increased $1.075 million, or approximately 52%, primarily because of higher ALRN-6924 and p53-program clinical trial costs.
- Six-month research and development expense increased $1.524 million, or approximately 33%, to $6.103 million.
- General and administrative expense decreased $1.673 million in the quarter and $1.472 million for the six-month period, primarily because the 2016 periods included a $1.5 million write-off of deferred offering costs.
- Total operating expenses were relatively stable for the six-month period, increasing $52,000 to $9.541 million.
- Six-month net loss was broadly unchanged year over year, increasing $21,000 from $9.459 million to $9.480 million.
- Operating cash use increased from $6.855 million to $9.457 million, while investing cash use decreased from $6.046 million to $1.994 million.
- The company completed a one-for-9.937 reverse stock split on June 16, 2017, with prior-period share and per-share amounts adjusted retrospectively.
Financing, outlook, risks and unusual items
After the reporting date, the company closed its initial public offering on July 5, 2017, selling 3.750 million common shares at $15.00 per share for net proceeds of approximately $50.1 million. All 106.115 million outstanding preferred shares converted into 10.510 million common shares. Pro forma June 30, 2017 cash and cash equivalents were presented as $59.907 million, and pro forma stockholders’ equity was $59.725 million.
Management stated that June 30 cash, cash equivalents and investments, together with the IPO proceeds, were expected to fund operating and capital requirements through the second quarter of 2019. The estimate depends on assumptions that may prove incorrect, and additional financing will be required thereafter. The company expected continuing losses and no near-term product revenue.
- ALRN-6924 remained in early clinical development, and no product candidate had marketing approval or commercial sales.
- Key risks included clinical-trial failure or delay, patient enrollment difficulties, adverse safety findings, regulatory rejection, companion-diagnostic requirements, manufacturing dependence, competition, intellectual-property challenges and the need for substantial additional capital.
- The filing disclosed a prior dispute with Harvard regarding alleged diligence obligations under a license agreement. Harvard had not further asserted the breach or sought termination as of the filing date, but termination could affect rights important to ALRN-6924.
- The company relied on third-party manufacturers, including a single supplier for ALRN-6924 active pharmaceutical ingredient and a separate provider for fill-finish, labeling, storage and distribution.
- Clinical-trial safety data disclosed treatment-related adverse events in 96% of patients in the Phase 1 All-comers trial as of May 1, 2017; reported events included gastrointestinal effects, fatigue, anemia, headache and certain grade 3 or 4 toxicities.
- The company reported no material legal proceedings, no off-balance-sheet arrangements and effective disclosure controls as of June 30, 2017.
Facts investors should verify
- Confirm the registrant identity, because the supplied metadata says Rein Therapeutics while the filing is for Aileron Therapeutics, Inc.
- Verify the July 5, 2017 IPO closing, net proceeds, share issuance and conversion of preferred stock.
- Assess whether the projected cash runway through the second quarter of 2019 remains supported by actual clinical spending and trial progress.
- Review subsequent clinical data for ALRN-6924, particularly safety, efficacy, enrollment and regulatory milestones.
- Monitor the Harvard/DFCI license status and any potential impact on the company’s p53 intellectual property rights.
- Evaluate future dilution from outstanding options, future financings and the conversion of preferred stock into common shares.