Aprea Therapeutics, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. The company is a clinical-stage biopharmaceutical developer focused on cancer therapies that reactivate mutant p53. It had no product revenue and no approved products.
Financial and operating metrics
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $4.91 million | $2.31 million | $12.91 million | $9.80 million |
| General and administrative expense | $2.31 million | $0.62 million | $4.66 million | $1.79 million |
| Total operating expenses | $7.22 million | $2.93 million | $17.56 million | $11.59 million |
| Net loss | $6.25 million | $3.14 million | $14.99 million | $10.85 million |
| Net loss per share, basic and diluted | $5.29 | $2.72 | $12.72 | $9.40 |
| Net cash used in operating activities | Not presented quarterly | Not presented quarterly | $16.21 million | $11.40 million |
Gross margin is not meaningful because the company had no revenue. Q3 net loss included a $0.98 million foreign-currency gain, compared with a $0.21 million loss in Q3 2018; the nine-month foreign-currency gain was $2.59 million versus $0.74 million. Comprehensive loss was $9.19 million in Q3 and $19.91 million for the nine-month period, including foreign-currency translation losses.
- Liquidity at September 30: Cash and cash equivalents of $52.33 million, down from $65.68 million at December 31, 2018. Total assets were $57.34 million; total liabilities were $9.94 million. Accumulated deficit was $77.46 million.
- Cash flows, nine months: Operating cash use of $16.21 million; investing cash use of $16,435; financing cash inflow of $5.62 million, mainly from Series C preferred stock. Cash decreased by $10.61 million before a $2.74 million adverse exchange-rate effect.
- Debt and obligations: The filing reports no borrowings; lease liabilities totaled approximately $585,000. Future operating lease payments were $612,649 before imputed interest.
Changes versus the prior comparable period
- Nine-month operating expenses increased $5.97 million and net loss increased $4.14 million year over year. R&D spending rose $3.11 million, primarily from advancing APR-246; G&A rose $2.87 million, principally from reorganization, IPO-readiness, legal and accounting costs, and personnel-related expense.
- Operating cash use increased $4.81 million year over year. The filing attributes the increase mainly to higher adjusted losses and IPO-related deferred offering costs, partly offset by increased accounts payable and accrued liabilities.
- The company adopted the new lease accounting standard in 2019, recognizing right-of-use assets and lease liabilities.
Outlook, notable events, and risks
- Aprea began a pivotal Phase 3 trial of APR-246 with azacitidine for frontline TP53-mutant MDS in Q1 2019. Management expected initial data in the second half of 2020. Other ongoing studies included Phase 1b/2 trials in the United States and France and a Phase 2 post-transplant maintenance study.
- In October 2019, after quarter-end, the company completed its IPO: 6,516,667 shares at $15 per share, for approximately $97.75 million gross proceeds and approximately $90.9 million after underwriting discounts and commissions, before other offering expenses. Management said IPO proceeds plus September cash were expected to fund operations and capital needs into 2023; this estimate depends on assumptions and could prove incorrect. The company reported that IPO proceeds had not yet been used as of the filing.
- The September corporate reorganization made Aprea Therapeutics AB a wholly owned subsidiary. The IPO converted outstanding preferred stock into common stock. Preferred-stock liquidation preferences and accumulated dividend rights were material before conversion.
- Clinical and regulatory outcomes remain uncertain. The filing describes serious adverse events in APR-246 trials and one investigator-reported death possibly related to both APR-246 and azacitidine. Management noted that causality was uncertain and cited underlying disease, comorbidities, or other treatment as possible causes.
- Key risks include trial failure or delay, limited patient populations, reliance on third parties and a single API manufacturer for APR-246, uncertain patent protection (the compound’s chemical structure is in the public domain), and the need for future funding. The company also identified a material weakness in financial-reporting controls related to insufficient U.S. GAAP and SEC-reporting expertise; remediation was underway. Management nevertheless concluded disclosure controls and procedures were effective as of September 30, 2019.
- No material legal proceedings or recorded contingent-loss provision were reported. The filing states that the company had no off-balance-sheet arrangements.
Important facts for investors to verify
- Progress, enrollment, safety findings, and timing of results for the pivotal Phase 3 APR-246 trial, including whether initial data timing remains on track.
- Actual cash use and updated runway assumptions following the IPO, including whether management’s expected funding horizon into 2023 remains supportable.
- Remediation of the disclosed material weakness and the reliability of future financial reporting.
- APR-246 manufacturing continuity and the scope, validity, and enforceability of its method-of-use and formulation patent protection.
- Clinical safety disclosures, especially serious adverse events and the reported possibly treatment-related death, as trial data mature.