AILERON THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of
operations should be read 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.
Overview
We are a clinical stage chemoprotection oncology company that aspires to make chemotherapy safer and thereby more effective to save more patients' lives. ALRN-6924, our first-in-class MDM2/MDMX dual inhibitor, is designed to activate p53, which in turn upregulates p21, a known inhibitor of the cell replication cycle. ALRN-6924 is the only reported chemoprotective agent in clinical development to employ a biomarker strategy, in which we exclusively focus on treating patients with p53-mutated cancers. Our targeted strategy is designed to selectively protect multiple healthy cell types throughout the body from chemotherapy without protecting cancer cells. As a result, healthy cells are spared from chemotherapeutic destruction while chemotherapy continues to kill cancer cells. By reducing or eliminating multiple chemotherapy-induced side effects, ALRN-6924 may improve patients' quality of life and help them better tolerate chemotherapy. Enhanced tolerability may result in fewer dose reductions or delays of chemotherapy and the potential for improved efficacy. Our vision is to bring chemoprotection to all patients with p53-mutated cancer regardless of type of cancer or chemotherapy.
Our clinical development program for ALRN-6924 as a selective chemoprotective agent includes:
•
Our ongoing Phase 1b open-label clinical trial to evaluate ALRN-6924 as a chemoprotective agent in patients with p53-mutated breast cancer undergoing either neoadjuvant or adjuvant treatment with docetaxel, doxorubicin and cyclophosphamide, a chemotherapy regimen also known as TAC;
•
Our completed Phase 1b open-label clinical trial evaluating ALRN-6924 as a chemoprotective agent in patients with p53-mutated small cell lung cancer, or SCLC, undergoing treatment with second-line topotecan;
•
Our completed Phase 1 pharmacology study of ALRN-6924 in healthy volunteers evaluating the safety and tolerability of ALRN-6924, in addition to its cell cycle arrest mechanism of action and pharmacodynamic effects, including time to onset, magnitude and duration of cell cycle arrest; and
•
Our Phase 1b randomized, double-blind, placebo-controlled clinical trial
evaluating ALRN-6924 as a chemoprotective agent in patients with p53-mutated
non-small cell lung cancer, or NSCLC, undergoing treatment with first-line
carboplatin plus pemetrexed with or without immune checkpoint inhibitors, for
which we announced on
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interim data from the first 20 patients enrolled, we would stop further enrollment in the NSCLC trial and focus our clinical development strategy and resources on our Phase 1b breast cancer trial.
Our Phase 1b breast cancer trial is designed to evaluate the safety,
tolerability and chemoprotective effect of ALRN-6924 in up to 24 patients with
p53-mutated breast cancer undergoing either neoadjuvant or adjuvant treatment
with TAC. In
Additionally, upon successful completion of the Phase 1b breast cancer trial, and subject to obtaining additional funding, we may expand our clinical program to evaluate ALRN-6924 as a chemoprotective agent, across additional p53-mutated tumor types and chemotherapy regimens.
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
Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through public or private equity offerings, collaborations and licensing arrangements, or other sources of capital. Adequate additional financing may not be available to us on acceptable terms, if at all. Market conditions are volatile and may continue to be volatile for the foreseeable future, which may limit our ability to raise capital. In addition, while we may seek one or more collaborators for future development of ALRN-6924 for one or more indications, we may not be able to enter into a collaboration for ALRN-6924 for such indications on suitable terms, on a timely basis or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. If we are unable to raise capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate some or all of our clinical and drug development programs and future commercialization efforts. We may also be forced to take other actions that could adversely affect our business.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
Following our decision to cease enrollment in our NSCLC trial in
COVID-19
In
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minimize patient exposure. We have enrolled, and are seeking to enroll, cancer
patients in our clinical trials at sites located both in
In particular, the COVID-19 pandemic impacted our ability to activate clinical
trial sites and resulted in slower-than-anticipated enrollment in our Phase 1b
clinical trial of ALRN-6924 in patients with advanced p53-mutated NSCLC and
could result in slower than anticipated enrollment in our Phase 1b clinical
trial in patients with breast cancer. The ultimate impact of the COVID-19
pandemic on our operations is unknown and will depend on future developments.
Such future events are highly uncertain and cannot be predicted with confidence,
including the duration of the COVID-19 pandemic, new information which may
emerge concerning the severity of the COVID-19 pandemic, including the new
variants and subvariants of the virus that causes COVID-19 that have been
identified and are spreading in
Components of our Results of Operations
Revenue
We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for ALRN-6924 or other product candidates that we may develop in the future are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements that we may enter into with third parties.
Operating Expenses
Our expenses since inception have consisted solely of research and development costs and general and administrative costs.
We expect that our operating expenses will increase if and as we increase our level of clinical development of ALRN-6924 and hire additional personnel to carry out such clinical development.
Research and Development Expenses
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 conduct research, preclinical studies and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture 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 include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
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Our employee and infrastructure resources are 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.
We typically use our employee and infrastructure resources across our development programs. We track outsourced development costs and milestone payments made under our licensing arrangements by product candidate or development program, but we do 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 are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect to incur significant research and development expenses in the foreseeable future as we continue clinical development of ALRN-6924, initiate additional clinical trials of ALRN-6924, and pursue later stages of clinical development of ALRN-6924.
We cannot determine with certainty the duration and costs of the current, planned, or future clinical trials of ALRN-6924 or if, when, or to what extent we will generate revenue from the commercialization and sale of any of our product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs, and timing of clinical trials and development of ALRN-6924 will depend on a variety of factors, including:
•
the scope, rate of progress, expense and results of our Phase 1b breast cancer trial , as well as of any future clinical trials of ALRN-6924 or other product candidates that we may develop and other research and development activities that we may conduct;
•
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 require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we would be 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
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 amount of cash, cash equivalents and investments, and the interest rate environment.
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Other Income, net
Other income, net consists of gains or losses recognized from non-routine items such as debt forgiveness under the Paycheck Protection Program, and gains or losses recognized from foreign currency transactions and the disposal of fixed assets.
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 June 30, Increase
2022 2021 (Decrease)
(in thousands)
Revenue $ - $ - $ -
Operating expenses:
Research and development 5,433 3,853 1,580
General and administrative 2,608 2,156 452
Total operating expenses 8,041 6,009 2,032
Loss from operations (8,041 ) (6,009 ) (2,032 )
Interest income 49 19 30
Other income, net 0 304 (304 )
Net loss $ (7,992 ) $ (5,686 ) $ (2,306 ) Research and Development Expenses
Research and development expenses increased by
General and Administrative Expenses
General and administrative expenses increased by
Interest Income
We anticipate that our interest income will fluctuate in the future in response to our then-current cash, cash equivalents and investments, and then-current interest rates.
Other Income, net
The decrease in other income, net, for the three months ended
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
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Six Months Ended June 30, Increase
2022 2021 (Decrease)
(in thousands)
Revenue $ - $ - $ -
Operating expenses:
Research and development 11,326 8,169 3,157
General and administrative 5,136 4,829 307
Total operating expenses 16,462 12,998 3,464
Loss from operations (16,462 ) (12,998 ) (3,464 )
Interest income 70 33 37
Other income, net (22 ) 304 (326 )
Net loss $ (16,414 ) $ (12,661 ) $ (3,753 ) Research and Development Expenses
Research and development expenses increased
General and Administrative Expenses
General and administrative increased
Interest Income
We anticipate that our interest income will fluctuate in the future in response to our then-current cash, cash equivalents and investments, and then-current interest rates.
Other Income (Expense), net
The decrease in other income, net, for the six months ended
Liquidity and Capital Resources
Since our inception, we have incurred significant losses on an aggregate basis.
We have not yet commercialized any product candidate, including ALRN-6924, which
is in clinical development, and we do not expect to generate revenue from sales
of any products for several years, if at all. 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 under the Capital on Demand
Sales Agreements, sales of common stock under our equity line with
Public Offerings
In
At-the-Market Offering
In
In
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issue and sell shares of common stock, having an aggregate offering price of up
to
Equity Line Financing
On
Upon entering into the Purchase Agreement, we issued and sold 367,647 shares of
common stock, or the Initial Purchase Shares, to LPC at a price per share of
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) 250,000 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. In
the year ended
Private Placement
On
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combined price of
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Six Months Ended June 30,
2022 2021
(in thousands)
Cash used in operating activities $ (13,485 ) $ (10,239 )
Cash provided by/(used in) investing activities 17,513 (42,257 )
Cash provided by financing activities - 55,630
Net increase/(decrease) in cash, cash equivalents
and restricted cash $ 4,028 $ 3,134
Operating Activities.
During the six months ended
Investing Activities.
During the six months ended
of
Financing Activities.
During the six months ended
received from the sale of common stock during the first quarter of 2021.
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing development activities related to ALRN-6924, which is still in clinical development, and any other product candidates and programs that we may pursue in the future. We expect that our expenses will increase substantially if and as we:
•
conduct our current, planned, and future preclinical studies and clinical trials of ALRN-6924;
•
initiate and resume research and preclinical and clinical development of any other product candidates that we may develop;
•
seek to identify additional product candidates;
•
seek marketing approvals for any product candidate that successfully completes clinical trials, if any;
•
require the manufacture of larger quantities of ALRN-6924 for clinical development and potential commercialization;
•
establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
•
maintain, expand and protect our intellectual property portfolio;
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•
acquire or in-license other drugs and technologies;
•
hire and retain additional clinical, quality control, and scientific personnel;
•
build out new facilities or expand existing facilities to support our ongoing development activity; and
•
add operational, financial, and management information systems and personnel, including personnel to support our drug development, any future commercialization effort and our compliance with our obligations as a public company.
We believe, based on our current operating plan, that our cash, cash
equivalents, and investments of
Accordingly, we will be required to obtain further funding through public or private equity offerings, collaborations and licensing arrangements, or other sources of capital. Adequate additional financing may not be available to us on acceptable terms, if at all. In addition, while we may seek one or more collaborators for future development of ALRN-6924 or other product candidates that we may develop, we may not be able to enter into a collaboration for ALRN-6924 or other product candidates that we may develop on suitable terms, on a timely basis or at all.
Because of the numerous risks and uncertainties associated with the development of ALRN-6924 and other product candidates that we may develop and programs we may pursue, and because the extent to which we may enter into collaborations with third parties for the development of ALRN-6924 is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of ALRN-6924 or other product candidates that we may develop. Our future capital requirements will depend on many factors, including:
•
the scope, progress, results, and costs of our ongoing, planned and future preclinical studies and clinical trials of ALRN-6924;
•
the impact of the COVID-19 pandemic on our business and operations;
•
the scope, progress, results, and costs of drug discovery, preclinical studies and clinical trials for any other product candidates that we may develop;
•
the number of future product candidates that we pursue and their development requirements;
•
the costs, timing, and outcome of regulatory review of ALRN-6924;
•
our ability to establish and maintain collaborations on favorable terms, if at all;
•
the success of any collaborations that we may enter into with third parties;
•
the extent to which we acquire or invest in businesses, products, and technologies, including entering into licensing or collaboration arrangements for product candidates, although we currently have no commitments or agreements to complete any such transactions;
•
the costs and timing of future commercialization activities, including drug sales, marketing, manufacturing and distribution, for any product candidate for which we receive marketing approval;
•
the amount of revenue, if any, received from commercial sales of ALRN-6924, should ALRN-6924 receive marketing approval;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
our headcount growth and associated costs, as we expand our business operations and our research and development activities; and
•
the costs of operating as a public company.
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Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, ALRN-6924, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. Other than the Purchase Agreement with LPC, which is subject to certain limitations and conditions, we do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our common stockholders. Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making capital expenditures, or declaring dividends, which could adversely impact our ability to conduct our business.
On
As of the date of this Quarterly Report on Form 10-Q, we have not yet regained
compliance with the Bid Price Rule. We intend to monitor the closing bid price
of our common stock and may, if appropriate, consider available options to
regain compliance with the Bid Price Rule, including seeking to effect a reverse
stock split. On
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. In addition, if, during the course of our breast cancer trial, we determine, based on interim data from that trial, that ALRN-6924 is not demonstrating sufficient chemoprotection to support continued clinical development, and have not obtained additional funding, our ability to pursue strategic alternatives may be limited and we may consider seeking protection under the bankruptcy laws in order to continue to pursue potential transactions and conduct a wind-down of our company. If we decide to seek protection under the bankruptcy laws, we would expect that we would file for bankruptcy at a time that is significantly 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
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During the three and six 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
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.
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