Aclaris Therapeutics(ACRS) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and notes for the period ended September 30, 2022 Condensed Consolidated Balance Sheets Total assets grew to $267.6 million while total liabilities decreased, boosting stockholders' equity to $219.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $61,653 | $27,349 | | Total current assets | $256,573 | $205,032 | | Total assets | $267,632 | $251,211 | | Liabilities & Equity | | | | Total current liabilities | $19,789 | $22,931 | | Total liabilities | $47,794 | $53,870 | | Total stockholders' equity | $219,838 | $197,341 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company's net loss narrowed year-over-year for both the third quarter and nine-month period, driven by higher licensing revenue Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $19,018 | $1,659 | $21,999 | $5,260 | | Research and development | $23,656 | $13,976 | $56,741 | $29,711 | | Total costs and expenses | $39,892 | $21,954 | $82,774 | $72,090 | | Loss from operations | $(20,874) | $(20,295) | $(60,775) | $(66,830) | | Net loss | $(19,952) | $(21,146) | $(59,273) | $(68,061) | | Net loss per share | $(0.30) | $(0.35) | $(0.92) | $(1.23) | Condensed Consolidated Statements of Cash Flows Financing activities provided $72.8 million in cash, contributing to a net cash increase of $34.3 million for the nine-month period Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,452) | $(35,059) | | Net cash provided by (used in) investing activities | $9,926 | $(158,456) | | Net cash provided by financing activities | $72,830 | $225,054 | | Net increase in cash and cash equivalents | $34,304 | $31,539 | | Cash and cash equivalents at end of period | $61,653 | $53,602 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, segment information, and a significant licensing agreement with Eli Lilly - The company believes its existing cash, cash equivalents, and marketable securities of $248.1 million are sufficient to fund operations for more than 12 months from the report's issuance date[23][25] - In August 2022, the company entered into a non-exclusive patent license agreement with Eli Lilly and Company, recognizing $17.6 million in licensing revenue and recording $7.3 million in related licensing expenses during Q3 2022[76][78] - The company operates in two reportable segments: Therapeutics, focused on developing therapies for immuno-inflammatory diseases, and Contract Research, which provides laboratory services[84] - The fair value of the contingent consideration liability related to the Confluence acquisition decreased by $2.4 million during the first nine months of 2022, primarily due to higher discount rates[41] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial performance, clinical program progress, and confirms sufficient liquidity for the next 12 months Clinical Programs The company provides updates on its key clinical trials, with topline data for several programs expected in 2023 - Zunsemetinib: Topline data for the Phase 2b trial in rheumatoid arthritis and the Phase 2a trial in psoriatic arthritis are expected in the second half of 2023[105][106][109] - ATI-1777: Topline data from the Phase 2b trial for moderate to severe atopic dermatitis is expected in the first half of 2023[113] - ATI-2138: A Phase 1 single ascending dose (SAD) trial was completed and the company plans to initiate a Phase 1 multiple ascending dose (MAD) trial for ulcerative colitis by the end of 2022[115][118] Results of Operations A significant increase in licensing revenue drove Q3 2022 results, offsetting higher R&D expenses from clinical trial activities - Licensing revenue increased to $17.9 million in Q3 2022 from $0.2 million in Q3 2021, primarily due to the upfront and milestone payments from the Eli Lilly agreement[162] Research & Development Expenses by Program (Nine Months Ended Sep 30, in thousands) | Program | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Zunsemetinib | $21,500 | $12,532 | $8,968 | | ATI-1777 | $9,220 | $1,894 | $7,326 | | ATI-2138 | $4,060 | $3,330 | $730 | | ATI-2231 | $4,397 | $333 | $4,064 | | Total R&D Expenses | $56,741 | $29,711 | $27,030 | - The fair value of the contingent consideration liability decreased by $2.4 million in the first nine months of 2022, compared to an increase of $22.1 million in the same period of 2021[181] Liquidity and Capital Resources The company holds $248.1 million in cash and equivalents, deemed sufficient to fund operations for over 12 months - The company had cash, cash equivalents, and marketable securities totaling $248.1 million as of September 30, 2022[184] - In April 2022, the company raised gross proceeds of $75.0 million by selling 4.8 million shares of common stock through its at-the-market facility[54][187] - Management believes existing capital is sufficient to fund operating and capital expenditure requirements for more than 12 months from the date of the report[207] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk from interest rate fluctuations is considered immaterial to its financial condition - The company's main market risk is interest rate sensitivity on its investment portfolio, but it is not expected to have a material effect due to the short-term, low-risk nature of the securities[216] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[221] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[221] PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[226] Risk Factors No material changes to the company's previously disclosed risk factors have occurred - The company's risk factors have not changed materially from those described in its 2021 Annual Report on Form 10-K[227] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - There were no unregistered sales of equity securities to report for the period[229] Exhibits This section lists all exhibits filed with the report, including required certifications and corporate documents