Aileron Therapeutics, Inc. — Form 10-Q Summary
Filing identity: The supplied filing is for Aileron Therapeutics, Inc. (Nasdaq: ALRN), not Rein Therapeutics, Inc. It covers the quarter and nine months ended September 30, 2021 and was filed November 12, 2021. The financial statements are unaudited.
Business Context and Reporting Period
Aileron is a clinical-stage oncology company developing ALRN-6924, an MDM2/MDMX dual inhibitor intended to protect healthy cells from chemotherapy-related toxicities in patients with p53-mutated cancers. The company had no approved products and generated no product revenue. Its principal program was in Phase 1b clinical development for chemoprotection in small cell lung cancer and non-small cell lung cancer.
Key Financial Metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $4.3 million | $2.7 million | $12.4 million | $9.2 million |
| General and administrative expense | $2.5 million | $2.3 million | $7.3 million | $7.1 million |
| Total operating expenses | $6.8 million | $5.0 million | $19.8 million | $16.3 million |
| Net loss | $6.7 million | $5.0 million | $19.4 million | $16.2 million |
| Net loss per share | $0.07 | $0.13 | $0.22 | $0.49 |
| Cash used in operating activities | Not separately provided | Not separately provided | $17.5 million | $15.8 million |
Because revenue was zero, gross and operating margins are not meaningful. The company remained loss-making with an accumulated deficit of $238.7 million at September 30, 2021.
Balance Sheet, Liquidity and Debt
- Cash and cash equivalents were $7.6 million; short-term investments were $44.6 million. Combined cash, cash equivalents and investments totaled $52.2 million.
- Total assets were $54.8 million and total liabilities were $4.7 million.
- Stockholders’ equity was $50.1 million, compared with $12.2 million at December 31, 2020.
- The $0.4 million Paycheck Protection Program loan was forgiven in full in May 2021 and recognized as other income. No PPP debt remained at September 30, 2021.
- Operating lease liabilities totaled $0.2 million, including current and non-current portions.
- The company stated that its available cash, cash equivalents and investments were expected to fund operating expenses for more than twelve months from issuance of the financial statements and, based on its operating plan, into the second half of 2023. Management also stated that additional funding would be required to execute its business plans beyond that period and to complete development or commercialization of ALRN-6924.
Material Changes Versus the Prior Comparable Period
- Third-quarter research and development expense increased $1.6 million, or approximately 59%, to $4.3 million, primarily due to higher NSCLC and healthy-volunteer clinical development costs, ALRN-6924 manufacturing costs, employee-related costs and nonclinical research.
- Nine-month research and development expense increased $3.2 million, or approximately 35%, to $12.4 million, primarily reflecting increased chemoprotection development spending.
- Third-quarter total operating expenses increased $1.8 million, or approximately 35%, and the quarterly net loss increased $1.7 million, or approximately 33%.
- Nine-month total operating expenses increased $3.5 million, or approximately 21%, and the nine-month net loss increased $3.2 million, or approximately 20%.
- Cash used in operations increased to $17.5 million from $15.8 million. Investing activities used $38.2 million, largely because the company purchased $70.8 million of investments and received $32.8 million from investment sales or maturities.
- Financing activities provided $55.7 million, primarily from common-stock issuances during the first quarter. The company issued approximately 46.8 million common shares during the nine months, increasing shares outstanding to 90.6 million from 43.8 million at year-end 2020.
- Net loss per share declined from $0.49 to $0.22 for the nine-month period, primarily because the weighted-average share count increased substantially following equity financings, rather than because of improved profitability.
Guidance, Outlook, Commentary and Risks
Clinical Program and Guidance
- Final Phase 1b small cell lung cancer results presented in September 2021 indicated reductions in neutropenia, thrombocytopenia, anemia and transfusions. Management identified 0.3 mg/kg administered 24 hours before topotecan as the preferred dose and schedule for subsequent studies.
- The Phase 1b randomized NSCLC trial planned to enroll 60 patients receiving chemotherapy with or without immune checkpoint inhibitors. Twelve sites were open in the United States and Europe as of the filing date.
- COVID-19, particularly the Delta variant in Eastern Europe, delayed site activation and enrollment. Management revised expected readouts to a blinded safety evaluation of 10 patients after one cycle in the first quarter of 2022, interim results for 20 patients after four cycles in the second quarter of 2022, and topline results for 60 patients after four cycles in the fourth quarter of 2022.
- The company continued a healthy-volunteer study to characterize ALRN-6924 pharmacodynamic effects and continued investments in chemistry, manufacturing and controls and a potential p53 companion diagnostic.
Principal Risks and Unusual Items
- The company depends substantially on the successful development and commercialization of ALRN-6924 and has no other product candidate beyond early research or preclinical stages.
- Additional financing will be necessary. Future equity financings could dilute existing holders; debt or collaboration financing may impose restrictive terms or require the company to surrender rights.
- Clinical outcomes, patient enrollment, regulatory review, companion-diagnostic development, manufacturing supply and third-party contract performance remain uncertain.
- COVID-19 may continue to delay clinical-site activation, enrollment, regulatory activities and supply-chain operations.
- The company relies on third parties for clinical research, manufacturing and supply of ALRN-6924, including a limited number of manufacturers and no redundant API supply arrangement.
- Potential obligations under intellectual-property licenses include milestone payments of up to $7.7 million per licensed therapeutic product under the Harvard/Dana-Farber agreement and up to $6.4 million per licensed product under the Umicore agreement, plus royalties. No milestones were accrued as of September 30, 2021.
- The company reported no material legal proceedings, no off-balance-sheet arrangements and no material change in critical accounting policies. Management concluded that disclosure controls and procedures were effective as of September 30, 2021.
Facts Investors Should Verify
- Confirm the issuer’s identity: the filing is Aileron Therapeutics, Inc., whereas the request identifies Rein Therapeutics, Inc.
- Verify the reported $52.2 million of cash, cash equivalents and investments and whether subsequent financing or operating developments changed the stated runway.
- Track the NSCLC trial’s safety evaluation, interim readout and topline readout against the revised 2022 schedule.
- Assess whether ALRN-6924’s early chemoprotection findings are confirmed in the randomized NSCLC trial and later-stage studies.
- Monitor cash burn, additional equity issuance and dilution, particularly under the ATM facility and Lincoln Park Capital equity line.
- Review regulatory requirements and progress for the p53 companion diagnostic, manufacturing scale-up and any FDA feedback.
- Evaluate the effect of COVID-19, patient enrollment, third-party manufacturing concentration and intellectual-property license compliance on development timelines and financing needs.