Aclaris Therapeutics(ACRS) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited financial statements and management's analysis of its financial condition and operations Item 1. Financial Statements This section presents Aclaris Therapeutics' unaudited condensed consolidated financial statements for Q2 and H1 2023, including balance sheets and cash flows Unaudited Condensed Consolidated Balance Sheets As of June 30, 2023, total assets decreased to $235.6 million, driven by reduced cash and marketable securities Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $31,150 | $45,277 | | Total current assets | $132,935 | $231,550 | | Total Assets | $235,649 | $254,596 | | Total current liabilities | $22,829 | $21,938 | | Total Liabilities | $55,899 | $56,975 | | Total Stockholders' Equity | $179,750 | $197,621 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss Total revenue increased to $4.4 million, but rising R&D expenses led to a net loss of $57.7 million for H1 2023 Statement of Operations Highlights (in thousands, except per share data) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Total Revenue | $4,397 | $2,981 | | Research and development | $47,862 | $33,085 | | Total costs and expenses | $66,130 | $42,882 | | Loss from operations | $(61,733) | $(39,901) | | Net Loss | $(57,729) | $(39,321) | | Net loss per share | $(0.84) | $(0.62) | Unaudited Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $179.8 million due to net loss, partially offset by stock issuance and compensation - Total stockholders' equity decreased from $197.6 million on Dec 31, 2022, to $179.8 million on June 30, 2023[23] - The decrease was driven by a net loss of $57.7 million (sum of Q1 and Q2 net losses), partially offset by $26.7 million in net proceeds from an at-the-market stock sale and $13.3 million in stock-based compensation[23] Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operations was $47.0 million, with a net decrease in cash of $14.1 million for H1 2023 Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(47,007) | $(40,635) | | Net cash provided by investing activities | $6,136 | $8,709 | | Net cash provided by financing activities | $26,744 | $72,841 | | Net (decrease) increase in cash | $(14,127) | $40,915 | | Cash and cash equivalents at end of period | $31,150 | $68,264 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the company's focus on immuno-inflammatory diseases, liquidity, fair value adjustments, and segment reporting - The company is a clinical-stage biopharmaceutical firm focused on immuno-inflammatory diseases[30] - As of June 30, 2023, the company had $210.8 million in cash, cash equivalents, and marketable securities and believes this is sufficient to fund operations for more than 12 months[31][33] - The fair value of the contingent consideration liability related to the Confluence acquisition decreased by $2.3 million during the first six months of 2023, primarily due to ceasing the pursuit of zunsemetinib for hidradenitis suppurativa[54] - In April 2023, the company sold 3.4 million shares of common stock for gross proceeds of $27.5 million through its at-the-market (ATM) facility[64] - The company recorded licensing revenue of $2.3 million from its agreement with Eli Lilly for the six months ended June 30, 2023[82] - The company operates in two segments: Therapeutics, which focuses on drug development, and Contract Research, which provides laboratory services[90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, and clinical program progress, confirming sufficient capital for over 12 months Development Programs The company provides updates on zunsemetinib, ATI-1777, and ATI-2138 clinical trials, including expected data readouts - Zunsemetinib (oral MK2 inhibitor): Topline data for the Phase 2b trial in rheumatoid arthritis is expected in Q4 2023. Topline data for the Phase 2a trial in psoriatic arthritis is expected in H1 2024[100][103] - ATI-1777 (topical JAK 1/3 inhibitor): Topline data for the Phase 2b trial in mild to severe atopic dermatitis is expected in H2 2023[106] - ATI-2138 (oral ITK/JAK3 inhibitor): A Phase 1 trial in healthy volunteers was completed, with data supporting progression to Phase 2 development in ulcerative colitis. Data is expected to be reported in September 2023[108] - The company has ceased development of zunsemetinib for moderate to severe hidradenitis suppurativa after a Phase 2a study failed to meet its primary or secondary endpoints[104] Results of Operations Total revenue increased to $4.4 million, but higher R&D and G&A expenses led to a larger operating loss Comparison of Results of Operations (in thousands) | Line Item | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Total revenue | $4,397 | $2,981 | $1,416 | | Research and development | $47,862 | $33,085 | $14,777 | | General and administrative | $17,107 | $12,174 | $4,933 | | Loss from operations | $(61,733) | $(39,901) | $(21,832) | Research & Development Expenses by Program (Six Months Ended June 30, in thousands) | Program | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Zunsemetinib | $15,450 | $11,318 | $4,132 | | ATI-1777 | $5,292 | $5,866 | $(574) | | ATI-2138 | $6,631 | $2,267 | $4,364 | | ATI-2231 | $520 | $3,089 | $(2,569) | - A bad debt expense of $1.0 million was recorded for the three and six months ended June 30, 2023, due to the bankruptcy filing of EPI Health[86][121][169] Liquidity and Capital Resources The company held $210.8 million in cash and marketable securities, believing it has sufficient funds for over 12 months - The company had cash, cash equivalents, and marketable securities of $210.8 million as of June 30, 2023[175] - Management believes existing cash is sufficient to fund operations for a period greater than 12 months from the date of the 10-Q issuance[190] Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(47,007) | $(40,635) | | Net cash provided by investing activities | $6,136 | $8,709 | | Net cash provided by financing activities | $26,744 | $72,841 | - In April 2023, the company sold 3.4 million shares of common stock for gross proceeds of $27.5 million under its ATM facility[179] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate sensitivity, but it expects no material effect due to short-term investments - The primary market risk is interest rate sensitivity on cash equivalents and marketable securities, but the company does not expect a 10% change in rates to have a material effect due to the short-term nature of its portfolio[199] - The company does not believe that inflation has had a material effect on its business, financial condition, or results of operations during the six months ended June 30, 2023[200] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes - Based on an evaluation as of June 30, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[203] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[204] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings or aware of any pending actions - The company is not currently a party to any material legal proceedings[212] Item 1A. Risk Factors The company reports no material changes to its risk factors since its 2022 Annual Report on Form 10-K - There have been no material changes to the company's risk factors since its 2022 Annual Report on Form 10-K[213] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[213] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Certificate of Amendment to the Certificate of Incorporation, certifications by the CEO and CFO, and XBRL data files