Acumen Pharmaceuticals(ABOS) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial statements and management's discussion and analysis for the company Item 1. Financial Statements (Unaudited) Presents Acumen Pharmaceuticals' unaudited condensed financial statements and accompanying notes for specified interim periods Condensed Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of specific dates | ASSETS (in thousands) | June 30, 2022 (unaudited) | December 31, 2021 | | :-------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $111,067 | $122,162 | | Marketable securities, short-term | $78,844 | $72,075 | | Total current assets | $191,053 | $198,661 | | Total assets | $211,678 | $230,330 | | Total current liabilities | $5,134 | $5,147 | | Total liabilities | $5,159 | $5,147 | | Total stockholders' equity | $206,519 | $225,183 | | Total liabilities and stockholders' equity | $211,678 | $230,330 | Condensed Statements of Operations and Comprehensive Loss Details the company's financial performance, including operating expenses, net loss, and comprehensive loss over specific periods | Operating Expenses (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $7,321 | $2,254 | $13,306 | $4,832 | | General and administrative | $3,090 | $1,187 | $6,312 | $2,402 | | Total operating expenses | $10,411 | $3,441 | $19,618 | $7,234 | | Loss from operations | $(10,411) | $(3,441) | $(19,618) | $(7,234) | | Net loss | $(10,151) | $(61,358) | $(19,280) | $(88,355) | | Comprehensive loss | $(10,302) | $(61,358) | $(20,014) | $(88,355) | | Net loss per common share, basic and diluted | $(0.25) | $(141.93) | $(0.48) | $(207.52) | Condensed Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) Outlines changes in the company's equity, including preferred stock and stockholders' equity, over the reporting periods - For the three months ended June 30, 2022, the Company's total stockholders' equity decreased from $216,089 thousand to $206,519 thousand, primarily due to a net loss of $10,151 thousand and an unrealized loss on marketable securities of $151 thousand, partially offset by stock-based compensation of $715 thousand[19] - For the six months ended June 30, 2022, total stockholders' equity decreased from $225,183 thousand to $206,519 thousand, driven by a net loss of $19,280 thousand and an unrealized loss on marketable securities of $734 thousand, partially offset by stock-based compensation of $1,333 thousand[21] Condensed Statements of Cash Flows Summarizes the company's cash inflows and outflows from operating, investing, and financing activities for specified periods | Cash Flows (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(14,767) | $(6,634) | | Net cash provided by (used in) investing activities | $3,686 | $(6) | | Net cash provided by (used in) financing activities | $(14) | $31,675 | | Net change in cash and cash equivalents | $(11,095) | $25,035 | | Cash and cash equivalents at the end of the period | $111,067 | $68,812 | Notes to Condensed Financial Statements Provides detailed explanations and disclosures supporting the unaudited condensed financial statements NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Describes Acumen Pharmaceuticals' business, its focus on Alzheimer's drug ACU193, IPO details, and financial outlook - Acumen Pharmaceuticals, Inc. is a clinical-stage biopharmaceutical company focused on developing ACU193, a humanized monoclonal antibody targeting amyloid-beta oligomers for Alzheimer's disease[25] - The Company completed an IPO in July 2021, issuing 11,499,998 shares of common stock at $16.00 per share, generating $168.6 million in net proceeds[28][29][30] - The Company has incurred significant operating losses since inception, with an accumulated deficit of $146.9 million as of June 30, 2022. Management believes existing cash and equivalents are sufficient for over 12 months of operations[31] - The INTERCEPT-AD Phase 1 clinical trial for ACU193, initiated in 2021, experienced delays in clinical trial site activation and patient enrollment due to the COVID-19 pandemic, leading to an expansion of trial sites. Patient recruitment is ongoing, with topline data anticipated in the first half of 2023[34] NOTE 2. BASIS OF PRESENTATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Outlines the basis of financial statement presentation, significant accounting policies, and recent accounting pronouncement adoptions - The unaudited condensed financial statements are prepared in accordance with U.S. GAAP for interim financial information and reflect normal recurring adjustments[35] - The Company adopted ASC 842, Leases, on January 1, 2022, using the modified retrospective method, recognizing a right-of-use asset and lease liability of approximately $0.2 million[41] - The Company adopted ASU No. 2019-12, Income Taxes, on January 1, 2022, with no material impact on financial statements[42] - The Company expects no material impact from the adoption of ASC 326, Financial Instruments-Credit Losses, effective for periods beginning after December 15, 2022, as its marketable securities are available-for-sale debt securities[43] NOTE 3. MARKETABLE SECURITIES Details the composition and fair value of the company's marketable securities, including unrealized gains and losses | Marketable Securities (in thousands) | June 30, 2022 Fair Value | December 31, 2021 Fair Value | | :----------------------------------- | :----------------------- | :--------------------------- | | Commercial paper | $43,984 | $47,939 | | Corporate debt securities | $20,305 | $24,694 | | Asset-backed securities | $10,902 | $19,143 | | U.S. treasury securities | $23,654 | $11,918 | | Total available-for-sale securities | $98,845 | $103,694 | - Unrealized losses on available-for-sale securities as of June 30, 2022, totaling $965 thousand, were primarily due to changes in interest rates and not increased credit risks, with no other-than-temporary impairment recorded[44][45] NOTE 4. FAIR VALUE MEASUREMENTS Explains the fair value hierarchy and valuation methods used for the company's financial instruments | Fair Value Measurements (in thousands) | Level 1 (June 30, 2022) | Level 2 (June 30, 2022) | Total Fair Value (June 30, 2022) | | :------------------------------------- | :---------------------- | :---------------------- | :------------------------------- | | Money market securities | $110,067 | — | $110,067 | | Commercial paper | — | $43,984 | $43,984 | | Corporate debt securities | — | $20,305 | $20,305 | | Asset-backed securities | — | $10,902 | $10,902 | | U.S. treasury securities | — | $23,654 | $23,654 | | Total fair value | $110,067 | $98,845 | $208,912 | - Money market funds are valued using Level 1 inputs (quoted market prices), while available-for-sale marketable securities are valued using Level 2 inputs (observable inputs like yield curves and credit spreads)[49][50] NOTE 5. SUPPLEMENTAL FINANCIAL INFORMATION Provides additional details on prepaid expenses, other current assets, accrued expenses, and other current liabilities | Prepaid Expenses and Other Current Assets (in thousands) | June 30, 2022 | December 31, 2021 | | :------------------------------------------------------- | :------------ | :---------------- | | Research and development service agreements | $650 | $2,591 | | Prepaid insurance | $21 | $1,514 | | Total prepaid expenses and other current assets | $1,142 | $4,424 | | Accrued Expenses and Other Current Liabilities (in thousands) | June 30, 2022 | December 31, 2021 | | :------------------------------------------------------------ | :------------ | :---------------- | | Research and development | $2,031 | $2,623 | | Bonuses and other employee liabilities | $934 | $1,102 | | Total accrued expenses and other current liabilities | $3,282 | $4,059 | NOTE 6. STOCKHOLDERS' EQUITY Details the company's authorized capital stock, common stock, and recent shelf registration statement for securities offerings - The Company's authorized capital stock includes 310,000,000 shares, with 10,000,000 preferred stock and 300,000,000 common stock, both with a par value of $0.0001[53][54] - On July 1, 2022, the Company filed a shelf registration statement (Form S-3) to offer up to $200.0 million in securities, including an at-the-market (ATM) offering program for up to $50.0 million in common stock. No shares have been sold under the ATM as of the report date[55] NOTE 7. STOCK-BASED COMPENSATION Describes the company's equity incentive plan, stock option activity, and recognized stock-based compensation expenses - The 2021 Equity Incentive Plan became effective on June 30, 2021, initially reserving 7,698,282 shares, with an automatic annual increase. As of June 30, 2022, 9,721,945 shares were authorized, and 4,460,737 shares remained available[56][57][58] | Stock Options (Six Months Ended June 30) | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Weighted average grant date fair value per share | $3.58 | $1.34 | | Stock Option Activity | Outstanding at Dec 31, 2021 | Granted | Exercised | Forfeited | Outstanding at Jun 30, 2022 | | :-------------------- | :-------------------------- | :------ | :-------- | :-------- | :-------------------------- | | Stock Options | 3,835,618 | 1,455,550 | (29,982) | (33,149) | 5,228,037 | | Weighted Average Exercise Price | $2.51 | $4.80 | $0.84 | $2.11 | $3.16 | - Total unrecognized compensation costs for unvested stock options were approximately $8.5 million as of June 30, 2022, expected to be recognized over a weighted-average period of 3.0 years[64] | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative | $510 | $79 | $962 | $159 | | Research and development | $205 | $48 | $371 | $94 | | Total stock-based compensation | $715 | $127 | $1,333 | $253 | NOTE 8. LEASES Outlines the company's operating lease arrangements, associated costs, and key lease terms - The Company has an operating sublease for space in Indiana, effective February 1, 2021, and expiring August 30, 2023[67] | Operating Leases (in thousands) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :------------------------------ | :------------------------------- | :----------------------------- | | Operating lease cost | $38 | $76 | | Less: sublease income | $(16) | $(32) | | Operating lease expense | $22 | $44 | | Short-term lease rent expense | $5 | $10 | | Total rent expense | $27 | $54 | - As of June 30, 2022, the weighted-average remaining lease term for operating leases is 1.2 years, with a weighted-average discount rate of 10.0%[69] NOTE 9. COMMITMENTS AND CONTINGENCIES Confirms the absence of material legal proceedings or claims that would adversely affect the company's business - The Company is not a party to any material legal proceedings and is unaware of any pending or threatened claims that would materially adversely affect its business[73] NOTE 10. NET LOSS PER SHARE Explains the calculation of basic and diluted net loss per share and lists potentially dilutive securities - Basic and diluted loss per share were the same for all periods presented because the inclusion of all potential common stock outstanding would have been anti-dilutive[74] | Potentially Dilutive Securities (Anti-Dilutive) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------------- | :----------------------------- | :----------------------------- | | Shares issuable upon exercise of stock options | 5,228,037 | 3,664,601 | | Shares issuable upon conversion of Series A Preferred Stock | — | 477,297 | | Shares issuable upon conversion of Series A-1 Preferred Stock | — | 7,985,305 | | Shares issuable upon conversion of Series B Preferred Stock | — | 19,770,070 | | Shares issuable upon exercise of common stock warrants | — | 248,247 | | Total | 5,228,037 | 32,145,520 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion of financial condition, operational results, liquidity, and future outlook, including COVID-19 and macroeconomic impacts Overview Provides a high-level summary of Acumen Pharmaceuticals' business, financial performance, and future funding requirements - Acumen Pharmaceuticals is a clinical-stage biopharmaceutical company developing ACU193, a targeted immunotherapy for early Alzheimer's Disease, currently in a Phase 1 INTERCEPT-AD clinical trial[78] - The Company incurred net losses of $19.3 million and $88.4 million for the six months ended June 30, 2022 and 2021, respectively, and expects increased operating losses as ACU193 advances in clinical trials[79] - Future operations will require substantial additional funding, likely through equity offerings, debt financings, or collaborations, as the Company does not anticipate product sales revenue until regulatory approval[81] COVID-19 and Macroeconomic Update Discusses the impact of the COVID-19 pandemic and broader macroeconomic conditions on clinical trials and business operations - The COVID-19 pandemic caused delays in clinical trial site activation and patient enrollment for the INTERCEPT-AD trial, leading to an expansion of trial sites. Topline data from the INTERCEPT-AD trial is now anticipated in the first half of 2023[85] - Ongoing geopolitical events (Russia-Ukraine conflict) and macroeconomic conditions (inflation, supply chain disruptions) introduce uncertainty and could materially adversely affect the Company's business[86] Components of Results of Operations Explains the primary components of operating expenses, including R&D and G&A, and other income/expense categories - Operating expenses consist of research and development (R&D) expenses and general and administrative (G&A) expenses[87] - R&D expenses include costs for third-party research, manufacturing, clinical trials, consulting, regulatory compliance, and personnel. These are expected to increase substantially with ACU193's clinical development[88][90] - G&A expenses cover personnel, insurance, professional fees, investor relations, and public company costs. These are expected to increase due to organizational growth and public company requirements[91][92] - Other income (expense) primarily includes interest income from marketable securities and, historically, changes in fair value of preferred stock tranche rights and warrant liabilities prior to the IPO[93][94] Results of Operations Compares the company's financial performance for the three and six months ended June 30, 2022 and 2021 Comparison of Three Months Ended June 30, 2022 and 2021 (in thousands) | Metric | 2022 | 2021 | Change | | :-------------------------------- | :--- | :--- | :----- | | Research and Development Expenses | $7,321 | $2,254 | $5,067 | | General and Administrative Expenses | $3,090 | $1,187 | $1,903 | | Total Operating Expenses | $10,411 | $3,441 | $6,970 | | Net Loss | $(10,151) | $(61,358) | $51,207 | - Research and development expenses increased by $5.1 million (YoY) for the three months ended June 30, 2022, driven by increased costs for clinical trials, nonclinical R&D, CROs, materials, drug safety testing, consulting, and personnel[97] - General and administrative expenses increased by $1.9 million (YoY) for the three months ended June 30, 2022, primarily due to higher personnel expenses, insurance costs, legal expenses, and marketing costs[98] - Other income was $0.3 million for Q2 2022 (net interest income), a significant change from other expense of $57.9 million in Q2 2021, which was due to fair value increases in preferred stock tranche and warrant liabilities[99] Comparison of Six Months Ended June 30, 2022 and 2021 (in thousands) | Metric | 2022 | 2021 | Change | | :-------------------------------- | :--- | :--- | :----- | | Research and Development Expenses | $13,306 | $4,832 | $8,474 | | General and Administrative Expenses | $6,312 | $2,402 | $3,910 | | Total Operating Expenses | $19,618 | $7,234 | $12,384 | | Net Loss | $(19,280) | $(88,355) | $69,075 | - Research and development expenses increased by $8.5 million (YoY) for the six months ended June 30, 2022, due to increased clinical trial and nonclinical R&D activities, including higher consulting, CRO, personnel, materials, and drug safety testing costs[101] - General and administrative expenses increased by $3.9 million (YoY) for the six months ended June 30, 2022, primarily driven by increases in insurance, personnel costs, legal expenses, and marketing, largely due to added headcount and public company operating costs[102] - Other income was $0.3 million for H1 2022 (net interest income), compared to other expense of $81.1 million in H1 2021, which was due to fair value increases in preferred stock tranche and warrant liabilities[103] Liquidity and Capital Resources Details the company's cash, cash equivalents, marketable securities, and plans for future funding to support operations - As of June 30, 2022, cash, cash equivalents, and marketable securities totaled $209.9 million. The Company expects these resources to fund operating expenses and capital expenditures through 2025[105] - The Company filed a shelf registration statement (Form S-3) on July 1, 2022, to offer up to $200.0 million in securities, including an at-the-market (ATM) offering program for up to $50.0 million in common stock[108] Cash Flows Analyzes the company's cash flows from operating, investing, and financing activities for the reported periods | Cash Flows (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(14,767) | $(6,634) | | Net cash provided by (used in) investing activities | $3,686 | $(6) | | Net cash provided by (used in) financing activities | $(14) | $31,675 | | Net change in cash and cash equivalents | $(11,095) | $25,035 | - Net cash used in operating activities increased to $14.8 million for the six months ended June 30, 2022, from $6.6 million in the prior year, primarily due to a higher net loss, partially offset by non-cash adjustments and changes in operating assets and liabilities[110][111] - Investing activities provided $3.7 million in cash for H1 2022, mainly from maturities and sales of marketable securities, a shift from de minimis cash used in H1 2021[113] - Financing activities used $14 thousand in cash for H1 2022, compared to $31.7 million provided in H1 2021, which included proceeds from Series B preferred stock and warrant exercises[114][115] Funding Requirements Outlines the company's anticipated future capital needs for R&D, clinical trials, and public company operations - The Company expects increased expenses from ongoing R&D, clinical trials, and public company operations, necessitating substantial additional funding[116] - Future capital requirements depend on factors such as the scope and cost of product development, regulatory review, collaboration terms, commercialization activities, intellectual property costs, and headcount growth[117] - Funding may come from equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements, with potential for dilution or restrictive covenants[118][119] Critical Accounting Policies, Significant Judgments and Use of Estimates Addresses management's estimates and assumptions in financial reporting, noting no significant changes to critical accounting policies - The preparation of financial statements requires management to make estimates and assumptions affecting reported amounts, with no significant changes to critical accounting policies from those disclosed in the Annual Report[120][121] Recent Accounting Pronouncements Refers to Note 2 for details on recently adopted and not-yet-adopted accounting standards and their financial impact - Information on recent accounting pronouncements, both adopted and not yet adopted, is detailed in Note 2 to the unaudited condensed financial statements[122] Emerging Growth Company and Smaller Reporting Company Status Explains the company's status as an emerging growth and smaller reporting company, and associated disclosure exemptions - The Company qualifies as an 'emerging growth company' under the JOBS Act, allowing it to delay adoption of certain accounting standards and benefit from reduced disclosure requirements[123][124] - The Company will cease to be an emerging growth company by December 31, 2025, or earlier if it meets certain revenue or market value thresholds[126] - The Company is also a 'smaller reporting company,' which provides additional exemptions from disclosure requirements, such as presenting only two years of audited financial statements[127] Item 3. Quantitative and Qualitative Disclosures About Market Risk Exempt from quantitative and qualitative market risk disclosures due to smaller reporting company status - The Company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a 'smaller reporting company'[128] Item 4. Controls and Procedures Details the company's disclosure controls and procedures, management's evaluation, and changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, ensuring timely and accurate reporting - As of June 30, 2022, management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective in providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[129][130] Changes in Internal Control Over Financial Reporting Confirms no material changes in the company's internal control over financial reporting during the fiscal quarter ended June 30, 2022 - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2022[131] Inherent Limitations on Effectiveness of Internal Controls Acknowledges that internal controls provide reasonable, not absolute, assurance due to inherent limitations and resource constraints - Management acknowledges that internal controls, regardless of design, can only provide reasonable, not absolute, assurance of achieving control objectives due to inherent limitations and resource constraints[133][134] PART II. OTHER INFORMATION Presents other required information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Acumen Pharmaceuticals is not currently involved in any material legal proceedings or claims that would adversely affect its business - The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims that would materially adversely affect its business[136] Item 1A. Risk Factors Refers readers to the comprehensive discussion of risk factors detailed in the Company's Annual Report on Form 10-K - Readers should refer to the 'Risk Factors' section in the Company's Annual Report on Form 10-K for a discussion of factors that could adversely affect financial condition and results of operations[137] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Confirms no unregistered equity sales and details the use of proceeds from the company's initial public offering (IPO) - There were no unregistered sales of equity securities during the period[138] - The IPO, which closed in July 2021, generated aggregate net proceeds of $168.6 million after underwriting discounts and offering expenses. There has been no material change in the planned use of these proceeds[139] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - This item is not applicable[140] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - This item is not applicable[140] Item 5. Other Information Indicates that there is no other information to report for the period - No other information is reported under this item[140] Item 6. Exhibits Lists the exhibits filed as part of the Form 10-Q, including corporate documents, sales agreements, and certifications - Exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Sales Agreement, and various certifications from executive officers[143] SIGNATURES Formal attestations by the company's executive officers confirming the accuracy and completeness of the report Signatures The report is duly signed by the President and CEO, and CFO and CBO of Acumen Pharmaceuticals, Inc. on August 15, 2022 - The report was signed by Daniel O'Connell, President and CEO, and Matthew Zuga, CFO and CBO, on August 15, 2022[145]