SEC Form 10-Q Summary
Filing entity and period: The supplied filing is for Aerpio Pharmaceuticals, Inc., not Whitehawk Therapeutics, Inc. It covers the quarter ended March 31, 2021, and was filed May 17, 2021. Aerpio is a clinical-stage biopharmaceutical company developing Tie2/VE-PTP-related therapeutics and had no commercial products.
Financial Position and Results
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $0 | Not clearly reported as revenue in the supplied statement | No revenue recognized in Q1 2021 |
| Research and development expense | $2.23 million | $1.83 million | Up 21.8% |
| General and administrative expense | $2.14 million | $2.29 million | Down 6.5% |
| Restructuring expense | $1.24 million | $0 | New in Q1 2021 |
| Total operating expenses | $5.60 million | $4.11 million | Up 36.2% |
| Other income | $1.16 million | $0.20 million total other income | Increase driven primarily by MTEC reimbursement |
| Net loss | $4.44 million | $3.92 million | Loss increased 13.3% |
| Net loss per share | $0.09 | $0.10 | Improved on a per-share basis due to higher share count |
| Cash used in operating activities | $3.67 million | $3.94 million | Use of cash decreased 6.9% |
At March 31, 2021, cash and cash equivalents were $39.0 million, down from $42.6 million at December 31, 2020. Total assets were $41.2 million and total liabilities were $2.1 million. Stockholders’ equity was $39.0 million, and accumulated deficit was $151.0 million.
The filing does not disclose outstanding conventional debt. Liabilities primarily consisted of accounts payable, accrued expenses, and operating lease liabilities. The restructuring accrual was $1.1 million at March 31, 2021.
Material Changes Versus the Prior Comparable Period
- Research and development spending increased $0.4 million, primarily due to the Phase 2 glaucoma program and COVID-19 trials.
- General and administrative expense decreased $0.1 million.
- The Company recorded $1.2 million of one-time severance expense following a workforce reduction of seven employees, approximately 58% of its workforce.
- Other income included approximately $1.2 million of reimbursement under the Medical Technology Enterprise Consortium arrangement for the RESCUE trial. Q1 2020 included $79,900 of grant income, while Q1 2021 included none.
- Cash used in operations declined despite the higher net loss, primarily due to working-capital changes and non-cash expenses.
- Weighted-average shares increased to 47.3 million from 40.6 million, reflecting prior equity issuances and resulting in potential dilution for existing holders.
Business, Outlook, and Unusual Items
- The Phase 2 razuprotafib glaucoma study met its primary efficacy endpoint for twice-daily dosing, but the reduction in intraocular pressure was not considered sufficient to advance to Phase 3. The Company began exploring strategic alternatives for its clinical assets and cash.
- The I-SPY COVID-19 trial was discontinued after 21 patients because of monitoring complexities during an ICU surge. RESCUE recruitment stopped after 31 patients because of recruitment and monitoring challenges. The Company expected to complete RESCUE activities in Q2 2021 and report topline data during Q2.
- RESCUE topline data showed a mechanism-based, dose-dependent blood-pressure reduction and an apparent dose-dependent decrease in Angiopoietin 2. Efficacy could not be fully assessed because of limited enrollment; one death occurred in each treatment group at the 28-day endpoint. Further analysis was ongoing.
- Gossamer Bio was responsible for development of licensed GB004. Aerpio had recognized $15.0 million of license-related revenue in 2020 but recognized no such revenue in Q1 2021. Future milestones and royalties were fully constrained and not recognized.
- Management stated that existing cash, absent future financing or strategic partnerships, was expected to fund the current operating plan through at least the fourth quarter of 2022. Management also stated that additional financing may nevertheless be required if plans or spending change.
- In April 2021, the Company’s Form S-3 shelf registration became effective, allowing potential sales of up to $150.0 million of securities, subject to market conditions and future needs.
- After quarter-end, on May 16, 2021, Aerpio entered into a proposed merger agreement with Aadi Bioscience and agreed to a contingent $155.0 million PIPE financing. Closing was expected in the second half of 2021, subject to shareholder approval and other conditions, including Aerpio maintaining at least $10.0 million of cash.
- If completed, current Aadi shareholders were expected to own approximately 66.8% of the combined company before the PIPE. Following the PIPE, expected ownership was approximately 29.6% for former Aadi shareholders, 14.7% for Aerpio shareholders immediately before closing, and 55.7% for PIPE investors, on a fully diluted basis.
- Under the proposed CVR arrangement, Aerpio shareholders would receive one contingent value right per share, but payments would depend on future proceeds from legacy assets and could be zero.
Risks and Contingencies
- The merger may be delayed or fail to close, and specified termination events could require Aerpio to pay Aadi a $2.0 million termination fee and up to $750,000 of expenses.
- The Company had only five full-time employees as of May 16, 2021 and was substantially dependent on retaining remaining personnel to complete the merger and maintain operations.
- COVID-19 could continue to delay clinical trials, patient enrollment, monitoring, manufacturing, regulatory activities, and vendor performance.
- Aerpio had no approved products, no product sales, recurring operating losses, and negative operating cash flow. Additional capital may be unavailable or dilutive.
- Razuprotafib and other candidates remain subject to clinical, regulatory, safety, intellectual-property, manufacturing, reimbursement, and commercialization risks.
- The Company reported no material legal proceedings and no off-balance-sheet arrangements. Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2021.
Investor Verification Checklist
- Confirm that the intended issuer is Aerpio Pharmaceuticals rather than Whitehawk Therapeutics.
- Verify the status, closing conditions, ownership effects, PIPE funding, termination fees, and any subsequent amendments or termination of the Aadi merger.
- Review final RESCUE trial data, including efficacy, safety, blood-pressure effects, and whether any further development was pursued.
- Assess the Company’s cash burn, restructuring payments, transaction expenses, and actual cash runway against the stated fourth-quarter 2022 estimate.
- Review the terms and potential value of the CVRs, including the assets covered, payment percentage, expiration provisions, and transfer restrictions.
- Evaluate dilution from the proposed PIPE, pre-funded warrants, outstanding options, and the 600,000 outstanding warrants.
- Confirm future milestone and royalty prospects under the Gossamer license, recognizing that all such amounts were constrained as of March 31, 2021.