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, 2023

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.)

 

 

738 Main Street #398

Waltham, MA

02451

(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 9, 2023, the registrant had 4,541,167 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

 

26

Item 4.

Controls and Procedures

 

26

PART II.

OTHER INFORMATION

 

27

Item 1.

Legal Proceedings

 

27

Item 1A.

Risk Factors

 

27

Item 6.

Exhibits

 

27

 

Signatures

 

28

 

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 assessment of strategic options and our ability to identify and implement any strategic transaction;
anticipated cost savings in connection with our discontinuation of ALRN-6924 and our workforce reduction announced in February 2023;
success in retaining, or changes required in, our remaining current officers, key employees or directors;
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;
our intellectual property position and strategy;
developments relating to our competitors and our industry;
the impact of government laws and regulations;
the impact the coronavirus pandemic may have 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,
2023

 

 

December 31,
2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,167

 

 

$

5,194

 

Investments

 

 

499

 

 

 

16,048

 

Prepaid expenses and other current assets

 

 

261

 

 

 

606

 

Restricted cash

 

 

25

 

 

 

25

 

Total current assets

 

 

13,952

 

 

 

21,873

 

Operating lease, right-of-use asset

 

 

 

 

 

40

 

Other non-current assets

 

 

 

 

 

24

 

Property and equipment, net

 

 

39

 

 

 

70

 

Total assets

 

$

13,991

 

 

$

22,007

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

136

 

 

$

1,720

 

Accrued expenses and other current liabilities

 

 

1,061

 

 

 

1,631

 

Operating lease liability, current portion

 

 

 

 

 

33

 

Total current liabilities

 

 

1,197

 

 

 

3,384

 

Total liabilities

 

 

1,197

 

 

 

3,384

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized and no shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Common stock, $0.001 par value; 45,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; 4,541,167 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

 

 

91

 

 

 

91

 

Additional paid-in capital

 

 

292,056

 

 

 

291,365

 

Accumulated other comprehensive loss

 

 

(2

)

 

 

(48

)

Accumulated deficit

 

 

(279,351

)

 

 

(272,785

)

Total stockholders’ equity

 

 

12,794

 

 

 

18,623

 

Total liabilities and stockholders’ equity

 

$

13,991

 

 

$

22,007

 

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

$

 

 

$

 

 

$

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

187

 

 

 

5,433

 

 

 

1,997

 

 

 

11,326

 

General and administrative

 

 

1,893

 

 

 

2,608

 

 

 

4,072

 

 

 

5,136

 

Restructuring and Other

 

 

(88

)

 

 

 

 

 

934

 

 

 

 

Total operating expenses

 

 

1,992

 

 

 

8,041

 

 

 

7,003

 

 

 

16,462

 

Loss from operations

 

 

(1,992

)

 

 

(8,041

)

 

 

(7,003

)

 

 

(16,462

)

Interest income

 

 

112

 

 

 

49

 

 

 

167

 

 

 

70

 

Other income (expense), net

 

 

93

 

 

 

 

 

 

270

 

 

 

(22

)

Net loss

 

 

(1,787

)

 

 

(7,992

)

 

 

(6,566

)

 

 

(16,414

)

Net loss per share — basic and diluted

 

$

(0.39

)

 

$

(1.76

)

 

$

(1.45

)

 

$

(3.62

)

Weighted average common shares outstanding—basic and diluted

 

 

4,541,167

 

 

 

4,541,179

 

 

 

4,541,167

 

 

 

4,537,450

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,787

)

 

$

(7,992

)

 

$

(6,566

)

 

$

(16,414

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

8

 

 

 

(26

)

 

 

46

 

 

 

(88

)

Total other comprehensive gain (loss)

 

 

8

 

 

 

(26

)

 

 

46

 

 

 

(88

)

Total comprehensive loss

 

$

(1,779

)

 

$

(8,018

)

 

$

(6,520

)

 

$

(16,502

)

 

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
Gain (Loss)

 

 

Accumulated
Deficit

 

 

Stockholders'
Equity

 

Balances at December 31, 2022

 

 

4,541,167

 

 

$

91

 

 

$

291,365

 

 

$

(48

)

 

$

(272,785

)

 

$

18,623

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

391

 

 

 

 

 

 

 

 

 

391

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

38

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,779

)

 

 

(4,779

)

Balances at March 31, 2023

 

 

4,541,167

 

 

$

91

 

 

$

291,756

 

 

$

(10

)

 

$

(277,564

)

 

$

14,273

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

300

 

 

 

 

 

 

 

 

 

300

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,787

)

 

 

(1,787

)

Balances at June 30, 2023

 

 

4,541,167

 

 

$

91

 

 

$

292,056

 

 

$

(2

)

 

$

(279,351

)

 

$

12,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

 

4,528,667

 

 

$

91

 

 

$

289,282

 

 

$

(13

)

 

$

(245,456

)

 

$

43,904

 

Issuance of common stock

 

 

12,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

689

 

 

 

 

 

 

 

 

 

689

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(62

)

 

 

 

 

 

(62

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,422

)

 

 

(8,422

)

Balances at March 31, 2022

 

 

4,541,167

 

 

 

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

 

 

4,541,167

 

 

$

91

 

 

$

290,499

 

 

$

(101

)

 

$

(261,870

)

 

$

28,619

 

 

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,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(6,566

)

 

$

(16,414

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

55

 

 

 

83

 

Net amortization of premiums and discounts on investments

 

 

(155

)

 

 

(21

)

Stock-based compensation expense

 

 

691

 

 

 

1,217

 

Loss on disposal of fixed assets

 

 

16

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

345

 

 

 

1,076

 

Other assets

 

 

24

 

 

 

 

Accounts payable

 

 

(1,584

)

 

 

531

 

Operating lease liabilities

 

 

(33

)

 

 

(62

)

Accrued expenses and other current liabilities

 

 

(570

)

 

 

105

 

Net cash used in operating activities

 

 

(7,777

)

 

 

(13,485

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of investments

 

 

 

 

 

(12,098

)

Proceeds from sales or maturities of investments

 

 

15,750

 

 

 

29,611

 

Net cash provided by investing activities

 

 

15,750

 

 

 

17,513

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

 

 

 

 

Net cash provided by financing activities

 

 

 

 

 

 

Net increase in cash, cash equivalents and restricted cash

 

 

7,973

 

 

 

4,028

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

5,219

 

 

 

3,625

 

Cash, cash equivalents and restricted cash at end of period

 

$

13,192

 

 

$

7,653

 

 

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. The Company's product candidate, ALRN-6924, is a MDM2/MDMX dual inhibitor that leverages its proprietary peptide drug technology.

On February 21, 2023, the Company decided to terminate its Phase 1b chemoprotection trial of ALRN-6924 in patients with p53-mutated breast cancer and further development of ALRN-6924. The Company determined to reduce the Company’s remaining workforce from nine to three full-time employees. The Company also announced that it is exploring a range of strategic alternatives to maximize stockholder value. The Company has engaged a third party to act as a strategic advisor for this process. Strategic alternatives that are being evaluated may include, but are not limited to, an acquisition, a merger, a business combination, a sale of assets or other transaction. There is no set timetable for this process and there can be no assurance that this process will result in the Company pursuing a transaction or that any transaction, if pursued, will be completed.

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 the Company exclusively focused on treating patients with p53-mutated cancers. The Company 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.

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.

On November 10, 2022, the Company effected a one-for-twenty reverse stock split on its common stock (the “Reverse Stock Split”). The Reverse Stock Split was reflected on the Nasdaq Capital Market beginning with the opening of trading on November 11, 2022. Pursuant to the Reverse Stock Split, every 20 shares of the Company's issued and outstanding shares of common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share of the common stock. The Reverse Stock Split reduced the authorized number of shares of common stock from 300,000,000 to 15,000,000 and, pursuant to the certificate of amendment, such reduced authorized number of shares of common stock was subsequently multiplied by three, such that following the Reverse Stock Split the Company has 45,000,000 shares of common stock authorized. The Reverse Stock Split affected all issued and outstanding shares of the Company's common stock, and the respective numbers of shares of common stock underlying the Company’s outstanding stock options, outstanding warrants and the Company's equity incentive plans were proportionately adjusted. All share and per share amounts of the common stock included in the accompanying financial statements have been retrospectively adjusted to give effect to the Reverse Stock Split for all periods presented.

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

7


 

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, 2023, the Company has financed operations primarily through $145,467 in net proceeds from sales of common stock and warrants, $131,211 from sales of preferred stock prior to its IPO, and $34,910 from a collaboration agreement in 2010.

As of June 30, 2023, the Company had cash, cash equivalents and investments of $13,666. The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $279,351 as of June 30, 2023. The Company expects to continue to generate losses for the foreseeable future.

While the Company has cash, cash equivalents and investments of $13,666 as of June 30, 2023, due to the inherent uncertainty in the timing and cost of potential strategic alternatives, including their impact on its cash consumption, the Company has concluded that as of the date of this Quarterly Report on Form 10-Q there is substantial doubt about its ability to continue as a going concern for a period of twelve months from the issuance of these interim financial statements.

The Company would need substantial funding to support its continuing operations. There can be no assurance that a strategic transaction will be completed and the Company’s board of directors may decide to pursue a dissolution and liquidation. If the Company is unable to enter into a strategic transaction, on a timely basis or at all, the Company may consider seeking protection under the bankruptcy laws. If the Company decides to seek protection under the bankruptcy laws, the Company would expect that it would file for bankruptcy at a time that is earlier than when it would otherwise exhaust its cash resources. If the Company decides to dissolve and liquidate its assets or to seek protection under the bankruptcy laws, it is unclear to what extent the Company will be able to pay its obligations, and, it is further unclear whether and to what extent any resources will be available for distributions to its stockholders. The 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 at the date of the financial statements and the reported amounts of revenue and 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 and 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, 2023 and for the six months ended June 30, 2023 and 2022 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, 2022 that was filed with the SEC on March 20, 2023.

 

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

8


 

statement of the Company’s financial position as of June 30, 2023, the results of its operations for the three and six months ended June 30, 2023 and 2022 and its cash flows for the six months ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are unaudited. The results for the six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. The accompanying balance sheet as of December 31, 2022 has been derived from the Company’s audited financial statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 20, 2023.

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, 2022 that was filed with the SEC on March 20, 2023.

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.

Prior to the February 2023 decision to discontinue development of ALRN-6924, the Company was 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 relied 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 have been adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

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 was effective for the Company's fiscal year beginning January 1, 2023, and adoption did not have a material effect on the Company’s 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, 2023 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

12,254

 

 

$

 

 

$

 

 

$

12,254

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

499

 

 

 

 

 

 

499

 

 

$

12,254

 

 

$

499

 

 

$

 

 

$

12,753

 

 

9


 

 

 

 

Fair Value Measurements as of
December 31, 2022 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

1,661

 

 

$

 

 

$

 

 

$

1,661

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

12,814

 

 

 

 

 

 

12,814

 

Treasury bills

 

 

 

 

 

3,234

 

 

 

 

 

 

3,234

 

 

 

$

1,661

 

 

$

16,048

 

 

$

 

 

$

17,709

 

 

As of June 30, 2023 and December 31, 2022, the Company’s cash equivalents and investments were invested in money market funds, commercial paper and treasury bills and valued based on Level 1 and Level 2 inputs. In determining the fair value of its commercial paper at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data. The Company’s cash equivalents have original maturities of less than 90 days from the date of purchase. All available-for-sale investments have contractual maturities of less than one year. During the six months ended June 30, 2023 and the year ended December 31, 2022, there were no transfers in or out of Level 3.

4. Investments

As of June 30, 2023 and December 31, 2022, the fair value of available-for-sale investments by type of security was as follows:

 

 

 

June 30, 2023

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gain

 

 

Gross
Unrealized
Loss

 

 

Fair
Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

501

 

 

$

 

 

$

(2

)

 

$

499

 

 

 

$

501

 

 

$