10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38130

 

Aileron Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

13-4196017

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

285 Summer Street, Suite 101

Boston, MA

 

02210

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 995-0900

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value per share

ALRN

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of August 11, 2022, the registrant had 90,823,597 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements (Unaudited)

 

3

 

 

Condensed Balance Sheets

 

3

 

 

Condensed Statements of Operations and Comprehensive Loss

 

4

 

 

Condensed Statement of Stockholders’ Equity

 

5

 

 

Condensed Statements of Cash Flows

 

6

 

 

Notes to Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

27

Item 4.

 

Controls and Procedures

 

27

PART II.

 

OTHER INFORMATION

 

28

Item 1.

 

Legal Proceedings

 

28

Item 1A.

 

Risk Factors

 

28

Item 6.

 

Exhibits

 

30

 

 

Signatures

 

31

 

1


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

our plans to develop and commercialize ALRN-6924, including the potential benefits thereof;
our clinical trials for ALRN-6924, whether conducted by us or by any future collaborators, including with respect to the design of the trials or the timing of initiation of these trials and of the anticipated results;
our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and investments;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
the timing of and our ability to obtain and maintain marketing approvals for ALRN-6924;
the rate and degree of market acceptance and clinical utility of any products for which we receive marketing approval;
our commercialization, marketing and manufacturing capabilities and strategy;
our intellectual property position and strategy;
our plans to enter into collaborations for the development and commercialization of ALRN-6924 and any additional product candidates;
potential benefits of any future collaboration;
developments relating to our competitors and our industry;
the impact of government laws and regulations;
the impact the coronavirus pandemic may have on the timing of our clinical development and on our operations; and
our ability to maintain our listing on the Nasdaq Capital Market.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements in our Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

2


 


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AILERON THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

June 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,628

 

 

$

3,600

 

Investments

 

 

24,754

 

 

 

42,333

 

Prepaid expenses and other current assets

 

 

1,143

 

 

 

2,219

 

Restricted cash

 

 

25

 

 

 

25

 

Total current assets

 

 

33,550

 

 

 

48,177

 

Operating lease, right-of-use asset

 

 

98

 

 

 

152

 

Other non-current assets

 

 

24

 

 

 

24

 

Property and equipment, net

 

 

98

 

 

 

128

 

Total assets

 

$

33,770

 

 

$

48,481

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,741

 

 

$

1,210

 

Accrued expenses and other current liabilities

 

 

3,310

 

 

 

3,205

 

Operating lease liability, current portion

 

 

100

 

 

 

93

 

Total current liabilities

 

 

5,151

 

 

 

4,508

 

Operating lease liability, net of current portion

 

 

 

 

 

69

 

Total liabilities

 

 

5,151

 

 

 

4,577

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized and no shares
   issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 shares authorized at
   June 30, 2022 and December 31, 2021;
90,823,597 and 90,573,597 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

91

 

 

 

91

 

Additional paid-in capital

 

 

290,499

 

 

 

289,282

 

Accumulated other comprehensive loss

 

 

(101

)

 

 

(13

)

Accumulated deficit

 

 

(261,870

)

 

 

(245,456

)

Total stockholders’ equity

 

 

28,619

 

 

 

43,904

 

Total liabilities and stockholders’ equity

 

$

33,770

 

 

$

48,481

 

 

The accompanying notes are an integral part of these condensed financial statements.

3


 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

 

 

$

 

 

$

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,433

 

 

 

3,853

 

 

 

11,326

 

 

 

8,169

 

General and administrative

 

 

2,608

 

 

 

2,156

 

 

 

5,136

 

 

 

4,829

 

Total operating expenses

 

 

8,041

 

 

 

6,009

 

 

 

16,462

 

 

 

12,998

 

Loss from operations

 

 

(8,041

)

 

 

(6,009

)

 

 

(16,462

)

 

 

(12,998

)

Interest income

 

 

49

 

 

 

19

 

 

 

70

 

 

 

33

 

Other income (expense), net

 

 

 

 

 

304

 

 

 

(22

)

 

 

304

 

Net loss

 

 

(7,992

)

 

 

(5,686

)

 

 

(16,414

)

 

 

(12,661

)

Net loss per share — basic and diluted

 

$

(0.09

)

 

$

(0.06

)

 

$

(0.18

)

 

$

(0.15

)

Weighted average common shares outstanding—basic and diluted

 

 

90,823,597

 

 

 

90,458,550

 

 

 

90,749,011

 

 

 

86,941,002

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(7,992

)

 

$

(5,686

)

 

$

(16,414

)

 

$

(12,661

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investments, net of tax of $0

 

 

(26

)

 

 

13

 

 

 

(88

)

 

 

8

 

Total other comprehensive income (loss)

 

 

(26

)

 

 

13

 

 

 

(88

)

 

 

8

 

Total comprehensive loss

 

$

(8,018

)

 

$

(5,673

)

 

$

(16,502

)

 

$

(12,653

)

 

The accompanying notes are an integral part of these condensed financial statements.

4


 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

Shares

 

 

Par
Value

 

 

Paid-in
Capital

 

 

Comprehensive
Loss

 

 

Accumulated
Deficit

 

 

Stockholders'
Equity

 

Balances at December 31, 2021

 

 

90,573,597

 

 

$

91

 

 

$

289,282

 

 

$

(13

)

 

$

(245,456

)

 

$

43,904

 

RSUs vested, net of shares repurchased for tax

 

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

689

 

 

 

 

 

 

 

 

 

689

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(62

)

 

 

 

 

 

(62

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,422

)

 

 

(8,422

)

Balances at March 31, 2022

 

 

90,823,597

 

 

$

91

 

 

$

289,971

 

 

$

(75

)

 

$

(253,878

)

 

$

36,109

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

528

 

 

 

 

 

 

 

 

 

528

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(26

)

 

 

 

 

 

(26

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,992

)

 

 

(7,992

)

Balances at June 30, 2022

 

 

90,823,597

 

 

$

91

 

 

$

290,499

 

 

$

(101

)

 

$

(261,870

)

 

$

28,619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

43,804,175

 

 

$

44

 

 

$

231,412

 

 

$

(2

)

 

$

(219,292

)

 

$

12,162

 

Issuance of common stock

 

 

46,406,382

 

 

 

46

 

 

 

59,042

 

 

 

 

 

 

 

 

 

59,088

 

Issuance costs

 

 

 

 

 

 

 

 

(3,482

)

 

 

 

 

 

 

 

 

(3,482

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

631

 

 

 

 

 

 

 

 

 

631

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,975

)

 

 

(6,975

)

Balances at March 31, 2021

 

 

90,210,557

 

 

$

90

 

 

$

287,603

 

 

$

(7

)

 

$

(226,267

)

 

$

61,419

 

Exercise of stock options

 

 

67,357

 

 

 

 

 

 

47

 

 

 

 

 

 

 

 

 

47

 

Issuance costs

 

 

 

 

 

 

 

 

(24

)

 

 

 

 

 

 

 

 

(24

)

RSU's vested, net of shares withheld

 

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

361

 

 

 

 

 

 

 

 

 

361

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,686

)

 

 

(5,686

)

Balances at June 30, 2021

 

 

90,527,914

 

 

$

90

 

 

$

287,987

 

 

$

6

 

 

$

(231,953

)

 

$

56,130

 

 

The accompanying notes are an integral part of these condensed financial statements.

5


 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(16,414

)

 

$

(12,661

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

83

 

 

 

42

 

Forgiveness of paycheck protection program loan

 

 

 

 

 

(387

)

Net amortization of premiums and discounts on investments

 

 

(21

)

 

 

140

 

Stock-based compensation expense

 

 

1,217

 

 

 

993

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,076

 

 

 

1,280

 

Other assets

 

 

 

 

 

(24

)

Accounts payable

 

 

531

 

 

 

(583

)

Operating lease liabilities

 

 

(62

)

 

 

(7

)

Accrued expenses and other current liabilities

 

 

105

 

 

 

968

 

Net cash used in operating activities

 

 

(13,485

)

 

 

(10,239

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(152

)

Purchases of investments

 

 

(12,098

)

 

 

(51,105

)

Proceeds from sales or maturities of investments

 

 

29,611

 

 

 

9,000

 

Net cash provided by (used in) investing activities

 

 

17,513

 

 

 

(42,257

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

 

 

 

55,583

 

Proceeds from exercise of stock options

 

 

 

 

 

47

 

Net cash provided by financing activities

 

 

 

 

 

55,630

 

Net increase in cash, cash equivalents and restricted cash

 

 

4,028

 

 

 

3,134

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

3,625

 

 

 

7,639

 

Cash, cash equivalents and restricted cash at end of period

 

$

7,653

 

 

$

10,773

 

 

The accompanying notes are an integral part of these condensed financial statements.

6


 

AILERON THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except share and per share data)

1. Nature of the Business and Basis of Presentation

Aileron Therapeutics, Inc. (“Aileron” or the “Company”) is a clinical stage chemoprotection oncology company focused on developing medicines to make chemotherapy safer and thereby more effective to save more patients’ lives. ALRN-6924, the Company’s 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 the Company exclusively focuses on treating patients with p53-mutated cancers. The Company’s targeted strategy is designed to selectively protect multiple healthy cell types throughout the body from chemotherapy without protecting cancer cells.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations, uncertainties in the clinical development of product candidates and in the ability to obtain needed additional financing. ALRN-6924 will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

There can be no assurance that the Company’s research and development of ALRN-6924 will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that ALRN-6924 will obtain necessary governmental regulatory approval or that if approved, will be commercially viable. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its key employees and consultants.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Liquidity

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.

The Company’s interim financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Through June 30, 2022, the Company has financed operations primarily through $145,467 in net proceeds from sales of common stock, $131,211 from sales of preferred stock prior to its IPO, and $34,910 from a collaboration agreement in 2010.

As of June 30, 2022, the Company had cash, cash equivalents and investments of $32,382. The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $261,870 as of June 30, 2022. The Company expects to continue to generate losses for the foreseeable future.

The Company believes that, based on its current operating plan, its cash, cash equivalents and investments of $32,382 as of June 30, 2022 will enable the Company to fund its operating expenses for greater than twelve months from the date of issuance of these financial statements.

7


 

To execute its business plans beyond the next twelve months, the Company will need substantial funding to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through the sale of common stock in public offering and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may not be able to obtain financing when needed, on acceptable terms or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its clinical programs or future commercialization efforts, which could adversely affect its business prospects. The interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

2. Summary of Significant Accounting Policies

 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of common stock based on stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company's estimates.

Unaudited Interim Financial Information

The accompanying unaudited condensed financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 that was filed with the SEC on March 28, 2022.

 

The unaudited interim condensed financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2022, the results of its operations for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2022 and 2021 are unaudited. The results for the six months ended June 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. The accompanying balance sheet as of December 31, 2021 has been derived from the Company’s audited financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 28, 2022.

 

Our significant accounting policies are described in Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 that was filed with the SEC on March 28, 2022.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. From time to time, the Company has maintained all of its cash, cash equivalents and investment balances at three accredited financial institutions, in amounts that exceed federally insured limits. The Company generally invests its excess cash in money market funds, commercial paper and corporate notes that are subject to minimal credit and market risks. Management has established guidelines relative to credit ratings and maturities intended to safeguard principal balances and maintain liquidity. The investment portfolio is maintained in accordance with the Company’s investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

8


 

Risks and Uncertainties

The ongoing COVID-19 pandemic and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce. The future progression of the pandemic and its effects on our business and operations are uncertain.

Potential impacts to the Company’s business include disruptions in supply of the Company’s product candidate and/or procurement of items that are essential for the Company’s research and development activities, including, for example, raw materials used in the manufacturing of ALRN-6924, medical and laboratory supplies used in the Company’s clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the COVID-19 pandemic. While the Company believes that it currently has sufficient supply of its product candidate to conduct the Company’s Phase 1b clinical trial in breast cancer, its product candidate, or materials contained therein, come from facilities located in areas impacted by the COVID-19 pandemic.

Additionally, the Company has enrolled, and is seeking to enroll, cancer patients in the Company’s clinical trials at sites located both in the United States and Europe, which are areas that continue to be impacted by the COVID-19 pandemic. Enrollment at clinical trial sites has been and may continue to be disrupted as the effects of the COVID-19 pandemic persist. In the event that clinical trial sites close to enrollment in the Company’s trials or shift resources to address COVID-19, this could have a material adverse impact on the Company’s clinical trial plans and timelines. The Company may face difficulties recruiting or retaining patients in its clinical trials if patients are affected by the virus or are fearful of visiting or traveling to the Company’s clinical trial sites because of the COVID-19 pandemic.

 

Any negative impact that the COVID-19 outbreak has on the ability of the Company’s suppliers to provide materials necessary for the Company’s product candidate or on recruiting or retaining patients in the Company’s clinical trials could cause costly delays to clinical trial activities, which could adversely affect the Company’s ability to obtain regulatory approval for and to commercialize the Company’s product candidate, increase the Company’s operating expenses, affect the Company’s ability to raise additional capital, and impact the Company’s operating and financial results. The capital markets have also experienced significant volatility as a result of the pandemic. Future disruptions in the capital markets could negatively impact the Company’s ability to raise capital in the future.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (ASU 2016-13 or Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The ASU will be effective for the Company's fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of the adoption of ASU 2016-13 and does not expect adoption to have a material effect on the Company’s consolidated financial statements or disclosures.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

3. Fair Value of Financial Assets

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

 

 

Fair Value Measurements as of
June 30, 2022 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

4,144

 

 

$

 

 

$

 

 

$

4,144

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

16,805

 

 

 

 

 

 

16,805

 

Corporate notes

 

 

 

 

 

1,250

 

 

 

 

 

 

1,250

 

Treasury bills

 

 

 

 

 

6,699

 

 

 

 

 

 

6,699

 

Total Fair Value of Financial Instruments as of June 30, 2022

 

$

4,144

 

 

$

24,754

 

 

$

 

 

$

28,898

 

 

9


 

 

 

 

Fair Value Measurements as of
December 31, 2021 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

2,438

 

 

$

 

 

$

 

 

$

2,438

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

33,969