Reneo Pharmaceuticals(US:RPHM)2024-05-07 20:03markdown PART I — FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and related disclosures for the company [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Net loss reduced due to decreased R&D after mavodelpar suspension, maintaining stable liquidity Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | Change | | :-------------------------------- | :------------- | :---------------- | :----- | | Cash and cash equivalents | $20,375 | $27,632 | $(7,257) | | Short-term investments | $62,460 | $75,331 | $(12,871) | | Total current assets | $83,927 | $106,622 | $(22,695) | | Total assets | $84,639 | $107,436 | $(22,797) | | Total current liabilities | $2,814 | $18,177 | $(15,363) | | Total liabilities | $3,397 | $18,826 | $(15,429) | | Total stockholders' equity | $81,242 | $88,610 | $(7,368) | | Accumulated deficit | $(226,900) | $(218,474) | $(8,426) | Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | | Research and development expenses | $4,942 | $10,991 | $(6,049) | | General and administrative expenses | $4,622 | $5,132 | $(510) | | Total operating expenses | $9,564 | $16,123 | $(6,559) | | Loss from operations | $(9,564) | $(16,123) | $6,559 | | Other income | $1,138 | $1,016 | $122 | | Net loss | $(8,426) | $(15,107) | $6,681 | | Comprehensive loss | $(8,446) | $(15,052) | $6,606 | | Net loss per share, basic and diluted | $(0.25) | $(0.60) | $0.35 | | Weighted-average shares outstanding | 33,420,808 | 25,036,410 | 8,384,398 | Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in operating activities | $(21,014) | $(9,048) | $(11,966) | | Net cash provided by investing activities | $13,757 | $18,507 | $(4,750) | | Net cash provided by financing activities | $0 | $1,009 | $(1,009) | | Net (decrease) increase in cash and cash equivalents | $(7,257) | $10,468 | $(17,725) | | Cash and cash equivalents, end of period | $20,375 | $30,395 | $(10,020) | - The Company has **suspended all development activities** for its only product candidate, mavodelpar, after its pivotal STRIDE study failed to meet primary or secondary efficacy endpoints on December 14, 2023, leading to **workforce reductions** and **approximately $4.1 million in severance and benefit expenses**[24](index=24&type=chunk)[122](index=122&type=chunk) - As of March 31, 2024, the Company had **$82.8 million in cash, cash equivalents, and short-term investments**, which management believes will be **sufficient to fund operations for at least one year**[26](index=26&type=chunk)[91](index=91&type=chunk)[94](index=94&type=chunk) Accrued Expenses (in thousands) | Category | March 31, 2024 | December 31, 2023 | Change | | :-------------------------- | :------------- | :---------------- | :----- | | Accrued clinical and regulatory | $190 | $3,661 | $(3,471) | | Accrued contract manufacturing cost | $1 | $1,100 | $(1,099) | | Accrued compensation | $1,170 | $3,948 | $(2,778) | | Total accrued expenses | $1,807 | $9,129 | $(7,322) | - The Company exercised an **early termination option** for its Sandwich, United Kingdom office lease in January 2024[46](index=46&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Research and development | $253 | $473 | $(220) | | General and administrative | $825 | $684 | $141 | | Total | $1,078 | $1,157 | $(79) | - The Company **repurchased all 576,443 shares** of its common stock previously issued to vTv Therapeutics under the vTv License Agreement for **approximately $4.4 million** in October 2023, and **No milestone payments were achieved or recorded** for the three months ended March 31, 2024 and 2023[68](index=68&type=chunk)[69](index=69&type=chunk) [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time [Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This statement details the company's revenues, expenses, and net loss over specific reporting periods [Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement outlines the changes in the company's equity accounts, including common stock and accumulated deficit, over time [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows from operating, investing, and financing activities for specific periods [Notes to Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide additional detailed information and explanations essential for understanding the company's financial statements [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Strategic shift after mavodelpar failure led to reduced R&D expenses and workforce, with sufficient liquidity for 12 months - Reneo Pharmaceuticals, Inc. has **suspended all development activities** for its only product candidate, mavodelpar, following the **failure of its pivotal STRIDE study** in December 2023[74](index=74&type=chunk) - The Board of Directors initiated a formal process in January 2024 to **evaluate potential strategic alternatives**, including **merger, sale, or other business combinations**, to maximize stockholder value, with **dissolution and liquidation** potentially pursued if no strategic alternative is consummated[75](index=75&type=chunk)[120](index=120&type=chunk) Operating Expenses (in thousands) | Expense Category | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Research and development | $4,942 | $10,991 | $(6,049) | | General and administrative | $4,622 | $5,132 | $(510) | | Total operating expenses | $9,564 | $16,123 | $(6,559) | - **Research and development expenses decreased by $6.0 million**, primarily due to the **suspension of mavodelpar development** and **workforce reductions**[88](index=88&type=chunk) - **General and administrative expenses decreased by $0.5 million**, mainly due to **workforce reductions**[89](index=89&type=chunk) - **Other income increased by $0.1 million**, driven by higher interest rates in 2024[90](index=90&type=chunk) - As of March 31, 2024, the company had an **accumulated deficit of $226.9 million** and a **net loss of $8.4 million** for the quarter[93](index=93&type=chunk) - The company **terminated its at-the-market equity offering sales agreement** (2023 ATM Facility) with Leerink Partners LLC on April 8, 2024, under which **no shares were sold**[92](index=92&type=chunk) - **Material cash requirements** include future operating lease payments, a **special performance award for the CEO (up to $7.5 million)**, and **potential milestone/royalty payments** under the vTv License Agreement, in addition to **costs for evaluating strategic alternatives**[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) [Overview](index=18&type=section&id=Overview) This section provides a high-level introduction to the company's financial condition and operational results, emphasizing recent strategic shifts [History of Mavodelpar Clinical Trials Overview](index=19&type=section&id=History%20of%20Mavodelpar%20Clinical%20Trials%20Overview) This section summarizes the development and clinical trial history of the company's lead product candidate, mavodelpar [License Agreement](index=19&type=section&id=License%20Agreement) This section details the terms and financial implications of the company's licensing agreements, particularly concerning its product candidates [Components of Our Results of Operations](index=20&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section explains the key revenue and expense categories that constitute the company's financial performance [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, comparing current and prior period operating results [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations and its sources of funding [Cash Flows](index=23&type=section&id=Cash%20Flows) This section analyzes the sources and uses of cash across operating, investing, and financing activities [Material Cash Requirements](index=23&type=section&id=Material%20Cash%20Requirements) This section outlines the company's significant future contractual obligations and other cash commitments [Critical Accounting Policies and Estimates](index=24&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section describes the accounting policies and estimates that require significant judgment and can materially impact financial reporting [Recent Accounting Pronouncements](index=24&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses the impact of recently issued accounting standards on the company's financial statements [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Reneo Pharmaceuticals, Inc. is not required to provide market risk disclosures [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting - **Disclosure controls and procedures were effective as of March 31, 2024**[107](index=107&type=chunk) - **No material changes in internal control over financial reporting occurred during the three months ended March 31, 2024**[109](index=109&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=24&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section provides an overview of Evaluation of Disclosure Controls and Procedures [Changes in Internal Control over Financial Reporting](index=25&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section provides an overview of Changes in Internal Control over Financial Reporting PART II — OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, and equity disclosures [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings, but acknowledges potential future litigation - The company is **not currently a party to any material legal proceedings**[112](index=112&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) Significant ongoing net losses, strategic alternative uncertainties, and employee retention challenges pose substantial risks to the company - The company has **incurred significant net losses** since its inception in 2014, with an **accumulated deficit of $226.9 million** as of March 31, 2024, and **expects to continue incurring losses**[117](index=117&type=chunk)[118](index=118&type=chunk) - There is **no assurance** that the evaluation of strategic alternatives will result in a definitive transaction or enhance stockholder value, and a **dissolution and liquidation could lead to a total loss of investment**[119](index=119&type=chunk)[121](index=121&type=chunk) - The company's recent **workforce reductions** (December 2023 and February 2024) may lead to a **loss of key employees**, **impacting the ability to pursue strategic alternatives**[123](index=123&type=chunk) - Future development of any product candidates would require **substantial additional capital**, which may not be available on acceptable terms, potentially forcing **delays or elimination of programs**[124](index=124&type=chunk)[126](index=126&type=chunk) - The regulatory approval process is **lengthy, expensive, and uncertain**, with **no guarantee of success**, and any approved products may face **challenges in market acceptance and reimbursement**[136](index=136&type=chunk)[160](index=160&type=chunk) - The company relies on third parties for clinical trials and manufacturing, and their **failure to meet contractual duties or regulatory requirements could delay or prevent product development**[211](index=211&type=chunk)[218](index=218&type=chunk) - Obtaining and maintaining intellectual property protection is **critical but uncertain**, with **risks of patent invalidation, infringement claims, and challenges in global enforcement**[222](index=222&type=chunk)[233](index=233&type=chunk)[286](index=286&type=chunk) - The company's **common stock price is highly volatile**, influenced by clinical trial results, regulatory decisions, and general market factors, and could **decline due to substantial sales or future dilution**[328](index=328&type=chunk)[344](index=344&type=chunk)[347](index=347&type=chunk) - The company is subject to various U.S. and foreign laws, including anti-corruption, data privacy, and cybersecurity regulations, with non-compliance potentially leading to **significant penalties and business disruptions**[187](index=187&type=chunk)[357](index=357&type=chunk)[359](index=359&type=chunk) [Risks Related to Our Business and Industry](index=26&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) This section details the specific challenges and uncertainties inherent in the company's operations and the pharmaceutical industry [Risks Related to Our Reliance on Third Parties](index=47&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) This section highlights the potential risks arising from the company's dependence on external partners for key functions like manufacturing and clinical trials [Risks Related to Our Intellectual Property](index=50&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) This section addresses the challenges and uncertainties associated with protecting and enforcing the company's intellectual property rights [Risks Related to Ownership of Our Common Stock](index=72&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) This section outlines the factors that could negatively impact the value and liquidity of the company's common stock for investors [General Risk Factors](index=80&type=section&id=General%20Risk%20Factors) This section covers broad, overarching risks that could affect the company's overall business, financial condition, and future prospects [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales occurred; IPO proceeds primarily funded operations, with remaining funds in liquid assets - **No unregistered sales of equity securities occurred during the period**[375](index=375&type=chunk) - The company **completed its IPO in April 2021, generating net proceeds of $84.6 million**. As of March 31, 2024, **approximately $66.6 million of these proceeds have been used to fund operations**, with the remaining invested in **highly liquid money market funds and short-term investments**[376](index=376&type=chunk)[377](index=377&type=chunk) [Unregistered Sales of Equity Securities](index=83&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities) This section discloses any sales of equity securities that were not registered under the Securities Act of 1933 [Use of Proceeds](index=83&type=section&id=Use%20of%20Proceeds) This section details how the net proceeds from the company's public offerings, such as its IPO, have been utilized [Item 3. Defaults Upon Senior Securities](index=82&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Reneo Pharmaceuticals, Inc. reported no defaults upon senior securities - **There were no defaults upon senior securities**[378](index=378&type=chunk) [Item 4. Mine Safety Disclosures](index=82&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Reneo Pharmaceuticals, Inc. reported no mine safety disclosures - **There were no mine safety disclosures**[378](index=378&type=chunk) [Item 5. Other Information](index=82&type=section&id=Item%205.%20Other%20Information) Reneo Pharmaceuticals, Inc. reported no other information required to be disclosed under this item - **No other information was reported**[379](index=379&type=chunk) [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications and data files - The report includes **certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1) and Inline XBRL Instance Document (Exhibit 101.INS)**[382](index=382&type=chunk) [Signatures](index=84&type=section&id=Signatures) The report is duly signed by the President and CEO, and SVP of Finance and Administration, as of May 7, 2024 - The report was **signed by Gregory J. Flesher, President and Chief Executive Officer, and Jennifer P. Lam, Senior Vice President, Finance and Administration, on May 7, 2024**[386](index=386&type=chunk)