Acrivon Therapeutics(ACRV) - 2023 Q1 - Quarterly Report

Part I Financial Statements (Unaudited) The unaudited financial statements for Q1 2023 report a net loss of $12.8 million and a decrease in total assets to $170.2 million Condensed Consolidated Balance Sheets Total assets decreased to $170.2 million by March 31, 2023, primarily due to reduced cash and investments, with accumulated deficit reaching $68.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $27,489 | $29,519 | | Short-term & Long-term investments | $132,000 | $140,113 | | Total current assets | $123,963 | $132,095 | | Total assets | $170,197 | $181,226 | | Liabilities & Equity | | | | Total liabilities | $9,728 | $10,751 | | Accumulated deficit | $(68,788) | $(56,032) | | Total stockholders' equity | $160,469 | $170,475 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a net loss of $12.8 million for Q1 2023, an increase from $7.2 million in Q1 2022, driven by higher operating expenses Statement of Operations Summary (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Research and development | $9,758 | $6,068 | | General and administrative | $4,635 | $1,144 | | Total operating expenses | $14,393 | $7,212 | | Loss from operations | $(14,393) | $(7,212) | | Net loss | $(12,756) | $(7,220) | | Net loss per share—basic and diluted | $(0.58) | $(4.08) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $11.4 million in Q1 2023, while investing activities provided $9.3 million from investment maturities Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,357) | $(8,418) | | Net cash provided by (used in) investing activities | $9,327 | $(415) | | Net cash provided by financing activities | $— | $— | | Net decrease in cash, cash equivalents, and restricted cash | $(2,030) | $(8,833) | Notes to the Condensed Consolidated Financial Statements Notes detail the company's clinical-stage oncology business, its $159.5 million liquidity position, and key accounting policies, including commitments and lead program ACR-368 - The company is a clinical-stage biopharmaceutical firm developing oncology medicines using its proteomics-based platform, with ACR-368 as its lead program[27] - The company has incurred recurring losses since inception, reporting a net loss of $12.8 million for Q1 2023 and an accumulated deficit of $68.8 million[30] - Existing cash, cash equivalents, and investments totaling $159.5 million as of March 31, 2023, are projected to fund operations for at least 12 months[31] - A license agreement with Eli Lilly may require up to $168.0 million in development and commercial milestone payments, plus tiered royalties[80] - A companion diagnostic agreement with Akoya Biosciences includes up to $10.3 million in potential development milestone payments, with $2.8 million paid as of March 31, 2023[81] - Subsequent to quarter end, ACR-368 received two FDA Fast Track designations for platinum-resistant ovarian and endometrial cancers on May 8, 2023[87] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's $12.8 million net loss in Q1 2023, driven by increased R&D and G&A expenses, and its liquidity position of $159.5 million Results of Operations Total operating expenses increased by $7.2 million to $14.4 million in Q1 2023, primarily due to higher R&D and G&A costs Comparison of Operating Results (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Research and development | $9,758 | $6,068 | $3,690 | | General and administrative | $4,635 | $1,144 | $3,491 | | Total operating expenses | $14,393 | $7,212 | $7,181 | | Net loss | $(12,756) | $(7,220) | $(5,536) | - The $3.7 million increase in R&D expenses was driven by $0.9 million in ACR-368 development costs (including a $1.5 million Akoya milestone) and $2.1 million in personnel costs[114] - The $3.5 million increase in G&A expenses was primarily due to a $2.6 million increase in payroll and $0.7 million in legal and professional fees as a public company[115] Liquidity and Capital Resources As of March 31, 2023, the company held $159.5 million in cash and investments, expected to fund operations into Q4 2024, but acknowledges the need for additional capital - As of March 31, 2023, the company held $159.5 million in cash, cash equivalents, and investments[117] - Existing cash is projected to fund operating expenses and capital expenditures at least into Q4 2024[117][123] - Net cash used in operating activities increased to $11.4 million in Q1 2023 from $8.4 million in Q1 2022, driven by a higher net loss[120] Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Acrivon Therapeutics is exempt from providing market risk disclosures - The company, as a "smaller reporting company," is not required to provide quantitative and qualitative disclosures about market risk[142] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2023, due to identified material weaknesses, with remediation efforts ongoing - Management concluded that disclosure controls and procedures were not effective as of March 31, 2023, due to previously identified material weaknesses[143] - Identified material weaknesses include an ineffective control environment, insufficient accounting resources, and ineffective IT general controls and complex transaction accounting[144] - A remediation plan is underway, involving hiring finance personnel, engaging third-party professionals, and implementing a new financial system[147][148][149] Part II Legal Proceedings The company is not currently involved in any material legal proceedings - The company reports no current involvement in any material legal proceedings[155] Risk Factors The company faces significant risks including ongoing losses, capital dependency, reliance on ACR-368 and AP3 platform, regulatory hurdles, third-party reliance, competition, and intellectual property challenges - The company has a history of significant losses, with an accumulated deficit of $68.8 million as of March 31, 2023, and expects continued losses[158] - The business is highly dependent on the success of its lead drug candidate, ACR-368, and its AP3 platform, with program failure posing significant harm[172][180] - Successful development hinges on co-approval of the OncoSignature test as a companion diagnostic, subject to regulatory risks and reliance on Akoya[190] - Reliance on third-party CROs for clinical trials and CMOs for manufacturing poses substantial business risk if these parties fail[266][273] - The company relies on intellectual property licensed from Eli Lilly for ACR-368, and license termination would result in significant rights loss[353] - Identified material weaknesses in internal control over financial reporting could impede accurate and timely financial reporting if not remediated[395][397] Unregistered Sales of Equity Securities and Use of Proceeds The company details $99.8 million net proceeds from its November 2022 IPO and $4.7 million from a concurrent private placement, with $10.1 million used as of March 31, 2023 - The company received $99.8 million in aggregate net proceeds from its IPO, before $3.6 million in offering expenses[429] - A concurrent private placement with Chione Limited generated an additional $4.7 million in net proceeds[429] - As of March 31, 2023, $10.1 million of the IPO net proceeds had been utilized[430] Defaults Upon Senior Securities This section is not applicable to the company's current financial reporting requirements Mine Safety Disclosures This section is not applicable to the company's operations or reporting requirements Other Information No other material information is required to be disclosed in this section Exhibits This section lists exhibits filed with Form 10-Q, including officer certifications and XBRL data files