Spyre Therapeutics(SYRE) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Aeglea BioTherapeutics reported a $18.4 million net loss for Q1 2023, total assets at $52.5 million, and a 'going concern' warning Condensed Consolidated Balance Sheets Total assets decreased to $52.5 million from $71.1 million at year-end 2022, driven by reduced marketable securities and cash used in operations Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $35,243 | $34,863 | | Marketable securities | $3,235 | $20,848 | | Total current assets | $44,375 | $62,258 | | Total Assets | $52,453 | $71,144 | | Liabilities & Equity | | | | Total current liabilities | $12,637 | $14,656 | | Total Liabilities | $18,801 | $20,839 | | Total Stockholders' Equity | $33,652 | $50,305 | Condensed Consolidated Statements of Operations Q1 2023 revenue decreased to $0.2 million, operating expenses fell to $19.0 million, narrowing the net loss to $18.4 million from $24.4 million year-over-year Condensed Consolidated Statements of Operations | Line Item | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total revenue | $198 | $1,362 | | Research and development | $13,776 | $16,978 | | General and administrative | $5,228 | $8,825 | | Total operating expenses | $19,004 | $25,803 | | Loss from operations | ($18,806) | ($24,441) | | Net loss | ($18,422) | ($24,436) | | Net loss per share, basic and diluted | ($0.20) | ($0.37) | Condensed Consolidated Statements of Cash Flows Net cash used in operations decreased to $17.6 million, with $17.8 million provided by investing activities, ending the quarter with $36.6 million in cash and equivalents Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($17,634) | ($26,263) | | Net cash provided by investing activities | $17,750 | $25,759 | | Net cash provided by financing activities | $10 | $12 | | Net increase (decrease) in cash | $137 | ($515) | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the company's strategic alternatives, 83% workforce reduction, 'going concern' doubt, Immedica agreement, and pre-funded warrants - The company has substantial doubt about its ability to continue as a going concern within one year, citing its accumulated deficit of $444.0 million and the need for additional financing[30][33] - In April 2023, the company initiated a process to explore strategic alternatives and approved a restructuring plan to reduce its workforce by approximately 83%[29][32] - As of March 31, 2023, the company had 28,891,578 pre-funded warrants outstanding, each with an exercise price of $0.0001[47] - Subsequent to the quarter end, the company announced a restructuring plan estimated to incur $6.2 million in charges, primarily related to employee severance, with the majority expected in Q2 2023[67] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the shift to strategic alternatives, 83% workforce reduction, paused clinical programs, reduced operating expenses, and reiterates 'going concern' doubt Overview and Recent Developments Aeglea is exploring strategic alternatives and implemented an 83% workforce reduction and clinical trial pause after inconclusive pegtarviliase results - The company's current focus is to explore strategic alternatives, including possible business combinations or divestiture of its clinical programs, to maximize stockholder value[71][74] - In April 2023, the company initiated a restructuring plan, reducing its workforce by approximately 83% to about 10 employees to support the evaluation of strategic alternatives[74][84] Pipeline of Product Candidates Clinical development is paused; pegtarviliase showed inconclusive results, while pegzilarginase faces an FDA Refusal to File despite EMA review - Interim results from the Phase 1/2 trial of pegtarviliase showed that participants in the third cohort (1.35 mg/kg) developed anti-drug antibodies, which may have reduced the drug's effect. Clinical development for this program is paused[86] - The FDA has placed the pegtarviliase trial on a partial clinical hold for the enrollment of patients under 18 years of age in the U.S., citing a lack of evidence for direct clinical benefit in pediatric patients[89] - The EMA validated the MAA for pegzilarginase, with a potential decision in late 2023. However, the FDA issued a Refusal to File (RTF) letter for the BLA, requesting additional data to support effectiveness[94][95] Results of Operations Q1 2023 revenue decreased to $0.2 million, while R&D and G&A expenses fell by 19% and 41% respectively, leading to a net loss of $18.4 million Comparison of Results of Operations | Line Item | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total revenue | $198 | $1,362 | | Research and development | $13,776 | $16,978 | | General and administrative | $5,228 | $8,825 | | Net loss | ($18,422) | ($24,436) | - R&D expenses decreased by $3.2 million (19%) primarily due to reduced costs for the pegzilarginase PEACE Phase 3 trial and BLA submission activities[106] - G&A expenses decreased by $3.6 million (41%) due to lower headcount, reduced commercial expenses for Arginase 1 Deficiency, and decreased general support activities[106] Liquidity and Capital Resources The company faces substantial doubt about its 'going concern' ability, with an accumulated deficit of $444.0 million, and is focused on a strategic transaction while minimizing expenditures - The company has determined there is substantial doubt about its ability to continue as a going concern within twelve months of the financial statement issuance date[82][116] - The company's operational plan is to identify, assess, and execute a strategic transaction while reducing R&D and G&A expenditures[114] - As of March 31, 2023, the company had an accumulated deficit of $444.0 million[81][114] Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate sensitivity on short-term marketable securities, deemed immaterial, with minimal foreign currency exchange rate risk - The company's primary market risk is interest rate sensitivity on its marketable securities, but this exposure is not considered significant due to the short-term duration and low-risk profile of the investments[127] - Foreign currency exchange rate risk is minimal as most transactions are denominated in U.S. dollars[129] Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - As of March 31, 2023, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective[130] - No material changes were made to the company's internal control over financial reporting during the quarter ended March 31, 2023[131] PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its financial condition or operations - Management believes there are currently no pending claims or actions that would have a material adverse effect on the company's results of operations, financial condition, or cash flows[133] Risk Factors New risks relate to strategic alternatives, including transaction failure, low asset valuation, 'going concern' doubt, restructuring impacts, and dependence on paused clinical programs Risks Related to Strategic Alternative Process Risks include failure to complete a strategic transaction, potential dissolution and liquidation, and low valuation of assets by counterparties - There is no assurance that the exploration of strategic alternatives will result in a transaction. If one is not consummated, the board may decide to pursue dissolution and liquidation, likely resulting in a total loss for investors[135][138] - The restructuring plan, which reduced the workforce by 83%, may lead to unintended consequences such as loss of institutional knowledge and attrition beyond intended reductions, potentially harming operations[143] Risks Related to Financial Position and Need for Capital Substantial doubt exists about the company's 'going concern' ability due to $444.0 million accumulated deficit and the need for significant additional funding - The company has determined there is substantial doubt about its ability to continue as a going concern within the next twelve months[146] - The company has incurred significant losses since inception, with a net loss of $18.4 million for Q1 2023 and an accumulated deficit of $444.0 million as of March 31, 2023[149] - Substantial additional funding is needed, and if the company is unable to raise capital, its business will be adversely affected[153] Risks Related to Product Development and Regulatory Approval Success depends on two product candidates, both facing setbacks; clinical programs are paused, with inconclusive pegtarviliase results and an FDA Refusal to File for pegzilarginase - The company has voluntarily paused its clinical programs since announcing its plan to explore strategic alternatives in April 2023[157] - The FDA issued a Refuse to File (RTF) letter for the pegzilarginase BLA, and interim results for the pegtarviliase Phase 1/2 trial were inconclusive due to the development of anti-drug antibodies in the third cohort[151][152][156] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL documents