10-Q Summary: Reneo Pharmaceuticals, Inc.
Filing identity: The supplied filing is for Reneo Pharmaceuticals, Inc. (Nasdaq: RPHM), not OnKure Therapeutics, Inc. It reports the quarter and six months ended June 30, 2021; financial statements are unaudited and prepared under U.S. GAAP.
Business Context and Reporting Period
Reneo is a clinical-stage pharmaceutical company developing therapies for rare genetic mitochondrial diseases. Its lead and only product candidate is REN001, a PPAR-delta agonist being evaluated in primary mitochondrial myopathies, long-chain fatty acid oxidation disorders and McArdle disease. The company has no approved products and has generated no product revenue.
During April 2021, Reneo completed its initial public offering, converted all outstanding preferred stock into common stock and became a public company.
Financial Performance and Liquidity
| Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $6.3 million | $2.8 million | $11.8 million | $6.4 million |
| General and administrative expense | $2.9 million | $0.9 million | $4.7 million | $1.8 million |
| Total operating expenses | $9.2 million | $3.7 million | $16.4 million | $8.2 million |
| Net loss | $9.2 million | $3.7 million | $16.4 million | $8.1 million |
| Net loss per share | $0.43 | $1.82 | $1.40 | $4.02 |
Because the company has no revenue, gross and operating margins are not meaningful. Net loss increased by $5.5 million, or approximately 150%, in the second quarter and by $8.3 million, or approximately 102%, for the six-month period, primarily from higher clinical development, personnel, public-company and insurance costs. The lower per-share loss reflects the substantial increase in weighted-average shares following the IPO and preferred-stock conversion.
- Cash and cash equivalents at June 30, 2021: $140.4 million.
- Short-term investments: $27.0 million; total cash, cash equivalents and short-term investments: $167.3 million.
- Accumulated deficit: $61.4 million.
- Total stockholders’ equity: $167.6 million, compared with a deficit of $42.1 million at December 31, 2020.
- Total liabilities: $3.8 million. The filing does not report outstanding debt.
- Net cash used in operating activities for the first six months: $18.3 million, compared with $7.4 million in the prior-year period.
- Net cash used in investing activities: $27.0 million, primarily for purchases of short-term investments.
- Net cash provided by financing activities: $132.1 million, including $84.6 million of net IPO proceeds and $47.2 million from Series B preferred stock.
Material Changes Versus the Prior Comparable Period
- R&D expense rose 123% in the second quarter and 84% for the six-month period, driven primarily by clinical and regulatory activities for the STRIDE and FORWARD studies and resumed Phase 1b studies.
- G&A expense rose 234% in the second quarter and 160% for the six-month period, reflecting increased personnel costs, directors’ and officers’ insurance, public-company costs and a CEO performance award.
- The April IPO generated $93.8 million of gross proceeds and approximately $84.6 million of net proceeds. All preferred stock converted into 15.9 million common shares, leaving no preferred stock outstanding.
- Common shares outstanding increased to approximately 24.3 million at June 30, 2021 from approximately 2.1 million at year-end 2020, primarily due to the preferred-stock conversion and IPO.
- The company entered into a new Irvine, California headquarters lease with total minimum payments of approximately $1.6 million through November 2026.
Guidance, Outlook, Risks and Unusual Items
Management expects continuing and increasing operating losses as REN001 advances through clinical development, regulatory activities expand and public-company costs increase. Based on its current operating plan, management believes the $167.3 million of cash, cash equivalents and short-term investments will fund operations through planned near-term clinical milestones, and at least one year from issuance of the filing. The company expects to require additional capital in the future.
- In July 2021, the first patient was dosed in the global Phase 2b STRIDE study in primary mitochondrial myopathy. Topline results are expected in 2023.
- Management expected results from the McArdle Phase 1b study in the first quarter of 2022 and from the LC-FAOD Phase 1b study in the first half of 2022. FORWARD observational-study results were expected in the second half of 2022.
- A July 2021 development milestone under the vTv Therapeutics license was achieved, creating a $2.0 million payment obligation. The license also includes up to $64.5 million of development and regulatory milestones, up to $30.0 million of sales milestones and tiered royalties.
- COVID-19 previously caused early closure of the PMM Phase 1b study and temporarily paused enrollment in certain other studies. Future effects on enrollment, sites, CROs, manufacturing, regulatory review and financing remain uncertain.
- REN001 remains subject to substantial clinical, regulatory, manufacturing, intellectual-property and commercialization risks. The company relies on third-party CROs and single-source suppliers for clinical manufacturing.
- An unusual item affecting G&A was the CEO Performance Award, initially valued at $7.5 million and recorded as a liability-classified award; $0.4 million of related compensation expense was recognized during the second quarter and six-month period.
- The company reported no material legal proceedings and stated that disclosure controls and procedures were effective as of June 30, 2021.
Important Facts for Investors to Verify
- Confirm that the intended issuer is Reneo Pharmaceuticals rather than OnKure Therapeutics, as the supplied filing and all financial data identify Reneo.
- Verify STRIDE enrollment, clinical execution and the expected 2023 topline-results timeline.
- Monitor cash burn, the duration of the $167.3 million liquidity balance and the timing and terms of future financing.
- Assess REN001 clinical safety and efficacy, including regulatory expectations for the 12-minute walk test and the reported cataract observation in the McArdle study.
- Review the $2.0 million vTv milestone payment and the remaining milestone, royalty and licensing obligations.
- Evaluate COVID-19-related enrollment, supply-chain and regulatory delays and the company’s dependence on third-party manufacturers and CROs.
- Consider potential dilution from outstanding options, future equity offerings and equity-plan share increases.