Acrivon Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; filed August 11, 2023. Acrivon is a clinical-stage oncology company developing precision medicines using its AP3 platform and OncoSignature companion diagnostics. Its lead program, ACR-368 (prexasertib), is in Phase 2; WEE1- and PKMYT1-targeting programs are preclinical.
Financial performance and position
| Metric | Q2 2023 / June 30, 2023 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None; no product revenue to date | None |
| Operating expenses | $15.5 million for Q2; $29.9 million for H1 | $5.9 million for Q2 2022; $13.1 million for H1 2022 |
| Net loss | $13.9 million for Q2; $26.7 million for H1 | $5.8 million for Q2 2022; $13.0 million for H1 2022 |
| Other income, primarily investment income | $1.6 million for Q2; $3.2 million for H1 | $0.1 million for Q2 2022; $0.1 million for H1 2022 |
| Cash, cash equivalents and investments | $151.0 million | $169.6 million at December 31, 2022 |
| Cash used in operating activities | $20.5 million for H1 | $14.2 million for H1 2022 |
| Total liabilities | $10.9 million, including $4.6 million of operating lease liabilities | $10.8 million at December 31, 2022 |
H1 2023 research and development expense was $20.3 million, up $10.1 million year over year; general and administrative expense was $9.6 million, up $6.6 million. Management attributed the increases mainly to advancing ACR-368, increased staffing and stock-based compensation, and public-company costs. H1 stock-based compensation was $5.3 million. Profit margins are not meaningful because the company has no revenue and is loss-making. The filing reports no borrowing debt.
Assets totaled $160.0 million and stockholders’ equity was $149.2 million at June 30, 2023. Cash, cash equivalents and restricted cash increased $8.6 million during H1, principally reflecting $28.7 million of net investment-related cash inflows offset by operating cash use. The company reported $112.9 million of short-term investments and $38.1 million of cash and cash equivalents.
Material changes and business developments
- Q2 operating expenses increased $9.6 million and net loss increased $8.1 million versus Q2 2022. For H1, operating expenses increased $16.8 million and net loss increased $13.6 million versus H1 2022.
- Higher investment income partly offset operating losses; unrealized investment losses were $0.4 million for Q2 and H1, attributed to interest-rate movements, with no credit-loss allowance recorded.
- On May 8, 2023, the FDA granted ACR-368 Fast Track designation for monotherapy in OncoSignature-positive platinum-resistant ovarian cancer and endometrial cancer. Fast Track status does not assure faster review or approval.
- In June 2023, the company adopted an inducement equity plan reserving 450,000 common shares. Common shares outstanding were 22.1 million at June 30.
Outlook, risks and contingencies
- Management estimates that June 30 cash, cash equivalents and investments will fund operating expenses and capital requirements into 2025, based on assumptions that may prove incorrect. The company expects continuing losses, rising development costs and a need for additional funding; no committed external funding source is identified.
- Key execution risks include ACR-368’s clinical efficacy and safety, trial enrollment and timing, regulatory approval, and successful co-development and approval of the OncoSignature companion diagnostic. ACR-368’s historical safety disclosures include hematologic toxicities and three deaths considered possibly treatment-related in a prior cohort of 58 platinum-sensitive patients.
- The Lilly license carries up to $168.0 million in development and commercial milestones, including $5.0 million due before an NDA, plus tiered royalties up to 10%. The Akoya diagnostic agreement includes up to $10.3 million in development milestones; $3.8 million had been paid through June 30, with milestones achieved by August 11, 2023.
- Future funding could require equity dilution, debt with restrictive covenants, or partnering on terms that reduce retained rights or economics. The company also identifies reliance on third-party clinical, manufacturing and diagnostic providers, competition, intellectual-property protection, and reimbursement and regulatory uncertainty as material risks.
- Disclosure controls and procedures were deemed ineffective as of June 30 because material weaknesses in internal control over financial reporting had not been fully remediated. Management reported remediation work in progress; one aspect concerning unusual or complex transactions was considered remediated. No material misstatement had resulted from the identified weaknesses.
- The company reported no material legal proceedings. It regained access to all funds held at SVB after the bank’s March 2023 closure and reported no loss; it had begun diversifying holdings as of August 11.
Important facts for investors to verify
- Clinical-trial progress, enrollment, safety and efficacy results for ACR-368, and the development and regulatory status of its companion diagnostic.
- Whether spending and cash runway track management’s estimate of funding into 2025, and the timing and terms of any required financing.
- Milestone obligations and payments under the Lilly and Akoya agreements, including potential royalties and future contingent payments.
- Progress in remediating internal-control weaknesses and whether controls operate effectively over a sufficient period.
- Potential dilution from equity awards and plan share increases; reported weighted-average shares and per-share losses are affected by the IPO-related share conversion and reverse stock split.