AILERON THERAPEUTICS, INC. The following discussion and analysis is meant to provide material information
relevant to an assessment of the financial condition and results of operations
of our company, including an evaluation of the amounts and certainty of cash
flows from operations and from outside sources, so as to allow investors to
better view our company from management's perspectives. You should read the
following discussion and analysis of our financial condition and results of
operations in conjunction with our unaudited condensed financial statements and
related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our
audited financial statements and related notes for the year ended
Some of the statements contained in this discussion and analysis or set forth
elsewhere in this Quarterly Report on Form 10-Q, including information with
respect to our plans and strategy for our business, constitute forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We
have based these forward-looking statements on our current expectations and
projections about future events. The following information and any
forward-looking statements should be considered in light of factors discussed in
our Annual Report on Form 10-K for the year ended
Our actual results and timing of certain events may differ materially from the
results discussed, projected, anticipated, or indicated in any forward-looking
statements. We caution you that forward-looking statements are not guarantees of
future performance and that our actual results of operations, financial
condition and liquidity, and the development of the industry in which we operate
may differ materially from the forward-looking statements contained in this
Quarterly Report on Form 10-Q. Statements made herein are as of the date of the
filing of this Quarterly Report on Form 10-Q with the
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made.
Announcement of Exploration of Strategic Alternatives
In
We also announced that we are exploring a range of strategic alternatives to
maximize shareholder value. We have engaged
In addition, in
Overview
ALRN-6924 is a MDM2/MDMX dual inhibitor that leverages our proprietary peptide drug technology.
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When used as a chemoprotective agent, ALRN-6924 is designed to activate p53, which in turn upregulates p21, a known inhibitor of the cell replication cycle. ALRN-6924 was the only reported chemoprotective agent in clinical development to employ a biomarker strategy, in which we exclusively focused on treating patients with p53-mutated cancers. We originally initiated development of ALRN-6924 as an anti-cancer agent to restore p53-dependent tumor suppression in p53 wild-type tumors. When used as an anti-cancer agent, ALRN-6924 is designed to disrupt the interaction of p53 suppressors MDM2 and MDMX with tumor suppressor p53 to reactivate tumor suppression in non-mutant, or wild-type, p53 cancers.
Our clinical development program for ALRN-6924 as a selective chemoprotective agent in patients with p53-mutated cancer included the following clinical trials:
•
A Phase 1b open-label clinical trial that evaluated ALRN-6924 as a chemoprotective agent in patients with p53-mutated breast cancer undergoing either neoadjuvant or adjuvant treatment with TAC chemotherapy;
•
A Phase 1b open-label clinical trial that evaluated ALRN-6924 as a chemoprotective agent in patients with p53-mutated small cell lung cancer, or SCLC, undergoing treatment with second-line topotecan;
•
A Phase 1 pharmacology study of ALRN-6924 in healthy volunteers that evaluated the safety and tolerability of ALRN-6924, in addition to its cell cycle arrest mechanism of action, pharmacokinetic, and pharmacodynamic effects, including time to onset, magnitude and duration of cell cycle arrest; and
•
A Phase 1b randomized, double-blind, placebo-controlled clinical trial that evaluated ALRN-6924 as a chemoprotective agent in patients with p53-mutated non-small cell lung cancer, or NSCLC, undergoing first-line treatment with carboplatin plus pemetrexed with or without immune checkpoint inhibitors.
Our clinical development program for ALRN-6924 as an anti-cancer agent in patients with wild-type p53 included the following clinical trials:
•
A single-agent Phase 1 clinical trial that evaluated ALRN-6924 for the treatment of patients with solid tumors and patients with lymphoma;
•
A single-agent Phase 2a clinical trial that evaluated ALRN-6924 for the treatment of patients with peripheral T-cell lymphoma
•
A single-agent and Ara-C-combination Phase 1/1b trial that evaluated ALRN-6924 for the treatment of patients with acute myeloid leukemia and myelodysplastic syndrome; and
•
A combination trial that evaluated ALRN-6924 in combination with palbociclib for the treatment of patients with tumors harboring MDM2 amplifications.
Since our inception, we have devoted a substantial portion of our resources to developing our product candidates, including ALRN-6924, developing our proprietary stabilized cell-permeating peptide platform, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations.
To date, we have financed operations primarily through
Since our inception, we have incurred significant losses on an aggregate basis.
Our net losses were
Subject to the outcome of our exploration of strategic alternatives, we believe
that, based on our current operating plan, our cash, cash equivalents and
investments of
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Reverse Stock Split
On
Components of our Results of Operations
Revenue
We have not generated any revenue from product sales and, as we do not have any product candidates under development, we do not expect to generate any revenue from the sale of products in the future.
Operating Expenses
Our expenses since inception have consisted solely of research and development costs, general and administrative, and restructuring costs.
Research and Development Expenses
For the periods presented in this Quarterly Report on Form 10-Q, research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of ALRN-6924, and include:
•
expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conducted research, preclinical studies and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufactured ALRN-6924 for use in our preclinical studies and clinical trials;
•
salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;
•
costs of outside consultants, including their fees, stock-based compensation and related travel expenses;
•
the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;
•
third-party license fees;
•
costs related to compliance with regulatory requirements; and
•
facility-related expenses, which included direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
For the periods presented in this Quarterly Report on Form 10-Q, our employee and infrastructure resources were primarily devoted to the development of ALRN-6924. We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.
In addition, we typically used our employee and infrastructure resources across our development programs. We tracked outsourced development costs and milestone payments made under our licensing arrangements by product candidate or development program, but we did not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates.
Research and development activities were central to our business model. Our
research and development expenses decreased in the first quarter of 2023 and we
expect our research and development expenses will continue to decrease as our
result of our
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If we had continued development of ALRN-6924, we could not determine with certainty the duration and costs of any clinical trials of ALRN-6924 or if, when, or to what extent we would generate revenue from the commercialization and sale of any of our product candidates for which we obtained marketing approval. We may never have been successful in obtaining marketing approval for any product candidate. If we had continued development of ALRN-6924, the duration, costs and timing of clinical trials and development of ALRN-6924 would depend on a variety of factors, including:
•
the scope, rate of progress, expense and results of clinical trials of ALRN-6924, or other product candidates that we may have developed and other research and development activities that we may have conducted;
•
uncertainties in clinical trial design and patient enrollment rates;
•
significant and changing government regulation and regulatory guidance;
•
the timing and receipt of any marketing approvals; and
•
the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA, or another regulatory authority were to have required us to conduct clinical trials beyond those that we anticipated would be required for the completion of clinical development of a product candidate, or if we experienced significant trial delays due to patient enrollment or other reasons, we would have been required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other
related costs, including stock-based compensation, for personnel in our
executive, finance and corporate and administrative functions. General and
administrative expenses are comprised of professional fees associated with being
a public company including costs of accounting, auditing, legal, regulatory, tax
and consulting services associated with maintaining compliance with exchange
listing and
Our general and administrative expenses decreased in the first quarter of 2023
and we expect our general and administrative expenses will continue to decrease
as a result of our
Restructuring Costs
Restructuring-related charges are comprised of one-time termination costs in connection with the reduction-in-workforce, including severance, benefits, and related costs.
Interest Income
Interest income consists of interest income earned on our cash, cash equivalents and investments. Historically, our interest income had not been significant due to low investment balances and low interest earned on those balances. We anticipate that our interest income will fluctuate in the future in response to our cash, cash equivalents and investments, and the interest rate environment.
Other Income, net
Other income, net consists of gains or losses recognized from non-routine items such as accretion on investments, and gains or losses recognized from foreign currency transactions, and the disposal of fixed assets.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended March 31, Increase
2023 2022 (Decrease)
(in thousands)
Revenue $ - $ - $ -
Operating expenses:
Research and development 1,810 5,893 (4,083 )
General and administrative 2,179 2,528 (349 )
Restructuring and Other Costs 1,022 - 1,022
Total operating expenses 5,011 8,421 (3,410 )
Loss from operations (5,011 ) (8,421 ) 3,410
Interest income 55 21 34
Other income (expense), net 177 (22 ) 199
Net loss $ (4,779 ) $ (8,422 ) $ 3,643 Research and Development Expenses
Research and development expenses for the three months ended
General and Administrative Expenses
General and administrative expenses were
Restructuring and Other Costs
Restructuring-related charges were
Interest Income
Interest income for the three months ended
Other Income (Expense), net
Other income, net for the three months ended
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Liquidity and Capital Resources
Since our inception, we have incurred significant losses on an aggregate basis.
We have not commercialized any product candidate, and as we do not have any
product candidates under development, we do not expect to generate revenue from
sales of any products. We have financed our operations through sales of common
stock in our initial public offering and follow-on public offerings, sales of
common stock and warrants in a private placement, sales of common stock in
"at-the-market" offerings, sales of common stock under our equity line with
Public Offerings
On
In
At-the-Market Offering
In
In
Equity Line Financing
On
Upon entering into the Purchase Agreement, we issued and sold 18,382 shares of
common stock, or the Initial Purchase Shares, to LPC at a price per share of
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Under the Purchase Agreement, we may, at our discretion, direct LPC to purchase
on any single business day, or a Regular Purchase, up to (i) 12,500 shares of
common stock if the closing sale price of our common stock is not below
The purchase price per share for each such Regular Purchase will be based on
prevailing market prices of our common stock immediately preceding the time of
sale as computed under the Purchase Agreement. Under the Purchase Agreement, we
may not effect any sales of shares of common stock on any purchase date that the
closing sale price of our common stock on Nasdaq is less than the floor price of
In addition to Regular Purchases, we may also direct LPC to purchase other amounts as accelerated purchases or as additional accelerated purchases on the terms and subject to the conditions set forth in the Purchase Agreement.
The net proceeds under the Purchase Agreement to us will depend on the frequency of sales and the number of shares sold to LPC and prices at which we sell shares to LPC.
The Purchase Agreement contains customary representations, warranties,
covenants, indemnification and termination provisions. LPC has covenanted not to
cause or engage in any manner whatsoever, any direct or indirect short selling
or hedging of our common stock. There are no limitations on use of proceeds,
financial or business covenants, restrictions on future financings (other than
restrictions on our ability to enter into additional "equity line" or a
substantially similar transaction whereby a specific investor is irrevocably
bound pursuant to an agreement with us to purchase securities over a period of
time from us at a price based on the market price of the common stock at the
time of such purchase), rights of first refusal, participation rights, penalties
or liquidated damages in the Purchase Agreement. The Purchase Agreement may be
terminated by us at any time, at our sole discretion, without any cost or
penalty. During any "event of default" under the Purchase Agreement, LPC does
not have the right to terminate the Purchase Agreement; however, we may not
initiate any purchase of shares by LPC until such event of default is cured.
There were no sales under the Purchase Agreement during the three months ended
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Three Months Ended March 31,
2023 2022
(in thousands)
Cash used in operating activities $ (4,661 ) $ (7,800 )
Cash provided by investing activities 7,250 11,649
Cash provided by financing activities - -
Net increase in cash, cash equivalents and
restricted cash $ 2,589 $ 3,849
Operating Activities.
During the three months ended
Investing Activities.
During the three months ended
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Financing Activities.
During the three months ended
Funding Requirements
Our operating expenses decreased in the first quarter of 2023 and we expect our
operating expenses will continue to decrease as a result of our
Our future capital requirements will depend on many factors, including:
•
whether we realize the anticipated cost savings in connection with our
•
our ability to consummate a strategic transaction and the nature and type of such transaction;
•
the time and costs necessary to close out our Phase 1b breast cancer trial; and
•
the costs associated with operating as a public company.
If we continued to pursue development of ALRN-6924, our capital requirements would have depended on many factors, including:
•
the scope, progress, results and costs of our preclinical studies, CMC, and clinical trials;
•
the costs, timing and outcome of regulatory review of ALRN-6924;
•
our ability to establish and maintain collaborations with third parties on favorable terms, if at all;
•
the success of any collaborations that we may have entered into with third parties;
•
the extent to which we acquired or invested in businesses, products and technologies, including entering into licensing or collaboration arrangements for ALRN-6924, although we currently have no commitments or agreements to complete any such transactions;
•
the costs and timing of commercialization activities, including drug sales, marketing, manufacturing and distribution, for any product candidates for which we may have received marketing approval; and
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims.
Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, or other third-party funding. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include liens or other restrictive covenants limiting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
There can be no assurance that a strategic transaction will be completed and our
board of directors may decide to pursue a dissolution and liquidation. In such
an event, the amount of cash available for distribution to our stockholders will
depend heavily on the timing of such decision and, as with the passage of time
the amount of cash available for distribution will be reduced as we continue to
fund our operations. In addition, if our board of directors were to approve and
recommend, and our stockholders were to approve, a dissolution and liquidation,
we would be required under
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If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our strategic process and we may consider seeking protection under the bankruptcy laws in order to continue to pursue potential strategic alternatives. If we decide to seek protection under the bankruptcy laws, we would expect that we would file for bankruptcy at a time that is earlier than when we would otherwise exhaust our cash resources. If we decide to dissolve and liquidate our assets or to seek protection under the bankruptcy laws, it is unclear to what extent we will be able to pay our obligations, and, it is further unclear whether and to what extent any resources will be available for distributions to stockholders.
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with generally accepted accounting principles in
During the three months ended
Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.
Emerging Growth Company Status
Prior to
We are a "smaller reporting company" as defined in Rule 12b-2 under the Exchange
Act. We may continue to be a smaller reporting company if either (i) the market
value of our shares held by non-affiliates is less than
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