Aclaris Therapeutics, Inc. — FY2021 Form 10-K Summary
Business context and reporting period
Aclaris is a clinical-stage biopharmaceutical company developing drug candidates for immuno-inflammatory diseases and pursuing strategic partnerships for development, regulatory approval and commercialization. The filing covers the fiscal year ended December 31, 2021, with comparisons to 2020. The company also operates a contract research business and earns royalties from RHOFADE, which was sold in 2019.
- Lead programs: zunsemetinib, an oral MK2 inhibitor; ATI-1777, a topical “soft” JAK 1/3 inhibitor; and ATI-2138, an oral ITK/TXK/JAK3 inhibitor.
- As of December 31, 2021, the company had 77 employees, including 72 full-time employees.
- All drug candidates remained investigational; no product received marketing approval during 2021.
Financial results and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $6.8 million | $6.5 million | +$0.3 million |
| Contract research revenue | $5.8 million | $5.8 million | +$0.04 million |
| Other revenue | $0.9 million | $0.7 million | +$0.2 million |
| Research and development expense | $43.8 million | $29.3 million | +$14.5 million |
| General and administrative expense | $23.6 million | $20.5 million | +$3.1 million |
| Contingent consideration revaluation expense | $24.3 million | $2.4 million | +$21.9 million |
| Loss from operations | $(89.7) million | $(50.9) million | $(38.8) million |
| Net loss | $(90.9) million | $(51.0) million | $(39.9) million |
| Net loss per share | $(1.60) | $(1.20) | $(0.40) |
| Net cash used in operating activities | $(52.1) million | $(38.6) million | $(13.5) million |
Gross margin was not presented because management stated that gross profit is not a meaningful measure given the company’s revenue profile. R&D spending increased primarily because of zunsemetinib Phase 2b and Phase 2a activities, ATI-2138 development, ATI-2231 preclinical work and discovery programs. The $24.3 million contingent consideration charge was driven by higher estimated probabilities of success and future sales assumptions.
- Cash and cash equivalents: $27.3 million at December 31, 2021, compared with $22.1 million at December 31, 2020.
- Marketable securities: $198.3 million at December 31, 2021, compared with $32.1 million at December 31, 2020.
- Total cash, cash equivalents and marketable securities: $225.7 million.
- Total assets: $251.2 million; stockholders’ equity: $197.3 million.
- Long-term debt was eliminated after repayment of the $11.0 million Silicon Valley Bank loan in July 2021. The total payoff was $11.7 million.
- Contingent consideration liability increased to $28.4 million from $4.1 million.
- Net cash provided by financing activities was $225.1 million, including $238.2 million of net proceeds from January and June 2021 public offerings, partially offset by $11.5 million of debt repayment.
Material changes versus the prior comparable period
- Revenue increased modestly, while operating expenses grew substantially as clinical and preclinical development advanced.
- R&D expense increased 49%, led by a $9.6 million increase for zunsemetinib; ATI-2138 and ATI-2231 spending also increased.
- ATI-1777 expense declined as its Phase 2a trial concluded, partially offset by preparation for a Phase 2b trial.
- Net loss increased 78% and operating cash burn increased 35% year over year.
- The company raised $238.2 million net through two equity offerings, materially strengthening liquidity but increasing share count from 45.1 million to 61.2 million shares outstanding.
- Cash and investments rose substantially, largely reflecting equity proceeds invested in marketable securities.
- The company terminated its Rigel license and collaboration effective April 2021.
- Litigation settlements related to securities and derivative actions were approved in December 2021. Accrued obligations were $2.65 million and $0.425 million, respectively, and were within insurance coverage.
Clinical progress, outlook and risks
- Zunsemetinib: Phase 2b rheumatoid arthritis and Phase 2a hidradenitis suppurativa studies began in December 2021. The company expected topline data from both programs in the first half of 2023 and planned to begin a psoriatic arthritis Phase 2a study in the first half of 2022.
- ATI-1777: Its Phase 2a atopic dermatitis study met the primary endpoint, showing a 74.4% reduction in mEASI versus 41.4% for vehicle at week four, with p<0.001. The company planned a Phase 2b study in the first half of 2022 and expected topline data in the first half of 2023.
- ATI-2138: The FDA allowed the IND in November 2021, and a Phase 1 single-ascending-dose study began in December 2021. Topline data were expected in 2022.
- ATI-2231: IND-enabling studies were underway, with an IND submission expected by the end of 2022 and potential clinical development in 2023.
- Management expected continued losses and stated that additional capital would be required to complete development programs and support discovery activities.
- Management believed existing cash, cash equivalents and marketable securities would fund operating and capital requirements for more than 12 months from the financial statement issuance date, based on current assumptions.
- Key risks include clinical failure or delays, regulatory non-approval, patient enrollment challenges, reliance on contract research organizations and manufacturers, COVID-19 and supply-chain disruption, intense competition, uncertain reimbursement, intellectual-property challenges and the need for future financing or successful partnerships.
- The company has no manufacturing facilities and relies on third parties for preclinical and clinical supplies.
- Remaining potential contingent consideration under the Confluence acquisition may reach $75.0 million, in addition to low-single-digit royalties and possible payments related to transfers of acquired intellectual property.
- The company’s financial statements received an unqualified audit opinion, and management and the auditor concluded that internal control over financial reporting was effective as of December 31, 2021.
Most important facts for investors to verify
- Whether zunsemetinib Phase 2b and Phase 2a trials enroll on schedule and produce the expected 2023 data.
- Whether ATI-1777’s Phase 2b results confirm the favorable Phase 2a efficacy signal and acceptable safety profile.
- The duration of the $225.7 million liquidity runway under actual clinical spending and financing conditions.
- Future equity issuance, dilution and the company’s ability to secure additional funding or partnerships.
- The assumptions supporting the $28.4 million contingent consideration liability, including probability of regulatory success and projected sales.
- Potential effects of COVID-19, geopolitical events, including clinical-site exposure in Ukraine, and third-party manufacturing or CRO disruptions.
- Patent scope and remaining exclusivity for zunsemetinib, ATI-1777 and ATI-2138, as well as the absence of issued ATI-2231 patents noted in the filing.
- Coverage and financial impact of the settled securities and derivative litigation and any remaining product-liability exposure.