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, 2019. 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 cell-permeating alpha-helical peptide therapies. Its lead candidate, ALRN-6924, was being evaluated in a Phase 2a combination study with palbociclib for MDM2-amplified advanced solid tumors and a Phase 1b/2 study as a myelopreservative agent in chemotherapy-treated patients.
Financial Highlights
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $4.5 million, versus $4.3 million | $13.0 million, versus $14.5 million |
| General and administrative expense | $3.4 million, versus $3.2 million | $9.7 million, versus $10.4 million |
| Total operating expenses | $7.9 million, versus $7.5 million | $22.6 million, versus $24.9 million |
| Net loss | $7.7 million, versus $7.4 million | $22.1 million, versus $24.5 million |
| Net loss per share | $0.28, versus $0.50 | $0.95, versus $1.66 |
| Net cash used in operating activities | Not provided for the quarter | $20.2 million, versus $21.3 million |
Because the company generated no revenue, operating and net margins are not meaningful. Interest income was $0.2 million for the quarter and $0.5 million for the nine-month period.
- At September 30, 2019, cash and cash equivalents were $6.9 million, investments were $17.7 million, and total cash, cash equivalents and investments were approximately $24.6 million.
- Total assets were $34.0 million and total liabilities were $11.1 million. Stockholders’ equity was $22.8 million.
- Operating lease liabilities totaled $5.1 million, including $0.4 million current and $4.7 million non-current. The prior construction financing liability of $5.3 million was removed upon adoption of the new lease accounting standard.
- Accumulated deficit was $190.9 million.
- Net cash used in investing activities was $7.6 million, primarily reflecting net purchases of investments. Financing activities provided $24.0 million.
Material Changes Versus the Prior Comparable Period
- Quarterly operating expenses increased $0.4 million, and quarterly net loss increased $0.3 million, primarily because of higher clinical development and business development costs.
- Nine-month operating expenses declined $2.3 million and net loss declined $2.4 million. Research and development expense decreased $1.5 million, largely because of lower employee, facility and other development costs following a reduction in research and development personnel.
- ALRN-6924-related research and development expense decreased $0.3 million for the nine-month period but increased $0.6 million in the third quarter as resources shifted toward the Phase 2a combination program and myelopreservation trial.
- General and administrative expense declined $0.8 million for the nine-month period. The 2018 period included approximately $1.1 million related to a former chief executive officer separation agreement, partly offset by higher 2019 business development expenses.
- In April 2019, the company completed a private placement generating approximately $26.0 million of gross proceeds and approximately $23.8 million net proceeds after fees and offering expenses. The financing included common stock and warrants. All pre-funded warrants were exercised in July 2019.
- Shares outstanding increased from 14.7 million at December 31, 2018 to 27.8 million at September 30, 2019, before considering the potential dilution from approximately 11.8 million common warrants.
- The company adopted ASC 842 on January 1, 2019, recognizing a $6.2 million operating lease right-of-use asset and $5.1 million of operating lease liabilities at September 30, 2019.
Guidance, Outlook, Risks and Unusual Items
- Management expected the September 30 cash, cash equivalents and investments to fund the current business plan into the fourth quarter of 2020. The filing nevertheless states that substantial doubt exists about the company’s ability to continue as a going concern because funding is not expected to cover at least twelve months from the financial statement issuance date.
- Management planned to seek additional capital through equity or debt financings, collaborations, licensing arrangements or other strategic transactions. No committed external source of funding existed, and additional financing was not considered probable at the filing date.
- The Phase 2a ALRN-6924/palbociclib expansion was increased from 26 to 35 patients, with a final data readout anticipated in the second quarter of 2020. Interim data in 17 previously treated MDM2-amplified liposarcoma patients showed median progression-free survival of 4.4 months, with 53% censoring; no partial or complete responses had been observed in those patients.
- The Phase 1b/2 myelopreservation trial began in September 2019, initially in small-cell lung cancer patients receiving topotecan. Management expected proof-of-concept data from the Phase 1b portion in the second quarter of 2020 and planned additional cohorts, subject to identifying a recommended Phase 2 dose.
- The company ceased enrollment and further development in certain ALRN-6924 programs, including peripheral T-cell lymphoma, acute myeloid leukemia and myelodysplastic syndrome, citing available resources, commercial opportunity and competitive developments.
- On July 12, 2019, Nasdaq notified the company that its stock had traded below the $1.00 minimum bid price for 30 consecutive business days. The initial compliance period ran through January 8, 2020; management considered available alternatives, including a possible reverse stock split.
- Key risks include the need for substantial additional financing, continuing losses and no product revenue, clinical and regulatory failure, patient-enrollment delays, dependence on third-party manufacturers and clinical research organizations, intellectual-property challenges, competition, potential Nasdaq delisting and stock-price volatility.
- The company reported no material legal proceedings, no off-balance-sheet arrangements and no material change in internal control over financial reporting. Management concluded that disclosure controls were effective at the reasonable assurance level.
Most Important Facts for Investors to Verify
- Confirm the registrant identity because the supplied metadata names Rein Therapeutics while the filing names Aileron Therapeutics, Inc.
- Verify the going-concern disclosure and the timing and terms of any subsequent financing.
- Track cash burn, remaining cash and investments, and whether operations remain funded beyond the fourth quarter of 2020.
- Review final results from the ALRN-6924/palbociclib study and proof-of-concept results from the myelopreservation program.
- Assess dilution from the 11.8 million common warrants, outstanding options and future capital raises.
- Confirm whether the company regained Nasdaq minimum-bid-price compliance or pursued a reverse stock split or other listing remedy.