Business Context and Reporting Period
The filing is Aileron Therapeutics, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2020. The request metadata identifies Rein Therapeutics, Inc.; the filing text identifies the registrant as Aileron Therapeutics, Inc. (Nasdaq: ALRN).
Aileron is a clinical-stage biopharmaceutical 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 lead program was in Phase 1b clinical development for chemoprotection in patients with small cell lung cancer receiving second-line topotecan.
Key Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | $0 in 2020 and 2019 | $0 in 2020 and 2019 |
| Research and development expense | $2.7 million vs. $4.5 million | $9.2 million vs. $13.0 million |
| General and administrative expense | $2.3 million vs. $3.4 million | $7.1 million vs. $9.7 million |
| Total operating expenses | $5.0 million vs. $7.9 million | $16.3 million vs. $22.6 million |
| Net loss | $5.0 million vs. $7.7 million | $16.2 million vs. $22.1 million |
| Net loss per share | $0.13 vs. $0.28 | $0.49 vs. $0.95 |
| Cash flow from operating activities | Not provided for the quarter | $(15.8) million vs. $(20.2) million |
- Cash, cash equivalents and investments totaled $14.1 million at September 30, 2020, comprising $7.9 million of cash and cash equivalents and $6.3 million of investments.
- Total assets were $22.2 million, total liabilities were $9.8 million, and stockholders’ equity was $12.5 million.
- The company had $384,000 of Paycheck Protection Program debt, of which $48,000 was classified as current and $336,000 as non-current.
- Cash, cash equivalents and restricted cash increased by $2.5 million during the first nine months of 2020 to $8.4 million, compared with a $3.8 million decrease in the 2019 period.
- Financing activities provided $11.6 million, primarily from equity issuances and the PPP loan. Investing activities provided $6.8 million, primarily from net sales and maturities of investments.
- The company had an accumulated deficit of $214.3 million at September 30, 2020 and recorded no income tax benefit.
Material Changes Versus the Prior Comparable Period
- Quarterly research and development expense declined by $1.8 million, or approximately 40%, primarily because the Phase 2a ALRN-6924/palbociclib expansion cohort had completed patient dosing and because of cost-saving measures.
- Nine-month research and development expense declined by $3.7 million, while general and administrative expense declined by $2.6 million. Management attributed the reductions to completed or discontinued studies, employee reductions, and elimination of selected research activities and advisory services.
- The nine-month net loss improved by $6.0 million, although the company remained loss-making and generated no revenue.
- In June 2020, the company sold 10.2 million common shares in an underwritten offering for approximately $11.2 million of gross proceeds, before $0.9 million of underwriting discounts and offering expenses.
- In September 2020, the company entered into a purchase agreement with Lincoln Park Capital Fund, LLC allowing it, subject to conditions and limitations, to sell up to $15.0 million of common stock over 36 months. The initial purchase was $500,000, and 367,647 additional shares were issued as consideration for the commitment.
- Common shares outstanding increased from 27.8 million at December 31, 2019 to 39.9 million at September 30, 2020, reflecting substantial equity financing and potential dilution.
Guidance, Outlook, Risks and Unusual Items
- Management expected existing cash, cash equivalents and investments as of September 30, 2020 to fund the current business plan into the fourth quarter of 2021. Nevertheless, the filing states that substantial doubt exists regarding the company’s ability to continue as a going concern without additional capital.
- The company expects to continue incurring losses and stated that additional financing will be required. Potential sources include equity or debt financings, collaborations, licensing arrangements, and strategic transactions.
- Management expected to report final Phase 1b data, including schedule-optimization results, in the first quarter of 2021. It also planned a healthy-volunteer study in the fourth quarter of 2020 and, subject to funding and clinical results, a randomized Phase 1b study in non-small cell lung cancer in the second quarter of 2021.
- Preliminary data announced in October 2020 from 26 enrolled patients suggested reduced severe chemotherapy-related hematologic toxicities. The data were early-stage, based on an August 31, 2020 cutoff, and require confirmation in final and later-stage trials.
- COVID-19 created risks to patient enrollment, clinical-site operations, manufacturing supply, regulatory activities and access to capital. The filing states that the pandemic had not significantly affected results through September 30, 2020, but had delayed the planned healthy-volunteer study.
- On November 11, 2020, the company entered into a lease termination agreement for its headquarters and stated that it had moved to a remote-work environment while evaluating future office-space needs.
- Between October 1 and November 11, 2020, the company sold 650,000 shares to Lincoln Park for $889,000 of gross proceeds. Between October 1 and October 5, 2020, it sold 159,802 shares under its JonesTrading at-the-market agreement for $202,000 of gross proceeds.
- The PPP loan was accounted for as debt. Forgiveness had not been recognized because it would become probable only upon acceptance of the forgiveness application.
- The company reported no material legal proceedings. It also disclosed a prior 2016 assertion by Harvard regarding potential diligence-milestone noncompliance under a license agreement; management stated that it believes it remains compliant, but loss of license rights would adversely affect the business.
- Key business risks include dependence on ALRN-6924, clinical and regulatory uncertainty, limited cash resources, potential dilution from equity financings, reliance on third-party manufacturers and clinical research organizations, intellectual-property challenges, competition, and the absence of any approved product or product revenue.
Important Facts for Investors to Verify
- Confirm the correct registrant: the supplied filing is for Aileron Therapeutics, Inc., not Rein Therapeutics, Inc.
- Assess the going-concern disclosure and the timing and terms of any required additional financing.
- Review the final Phase 1b ALRN-6924 results and determine whether preliminary chemoprotection findings are statistically and clinically durable.
- Evaluate cash burn, remaining availability under the Lincoln Park purchase agreement, and the potential dilution from future equity sales, options and warrants.
- Verify the status of the PPP-loan forgiveness application and any resulting accounting treatment.
- Monitor the effects of COVID-19 on clinical enrollment, trial timelines, product supply and capital-market access.
- Review lease-termination costs, relocation plans and the impact of the remote-work transition on future operating expenses.