Aileron Therapeutics, Inc. [ALRN] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q 1 alrn-20240930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38130

Aileron Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		13-4196017
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12407 N. Mopac Expy. Suite 250 #390 Austin, TX		78758
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (737) 802-1989

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	ALRN	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 12, 2024, the registrant had 21,665,941 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION		4
Item 1.	Financial Statements (Unaudited)		4
	Condensed Consolidated Balance Sheets		4
	Condensed Consolidated Statements of Operations and Comprehensive Loss		5
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity		6
	Condensed Consolidated Statements of Cash Flows		7
	Notes to Condensed Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		30
Item 4.	Controls and Procedures		30
PART II.	OTHER INFORMATION		33
Item 1.	Legal Proceedings		33
Item 1A.	Risk Factors		33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3.	Defaults Upon Senior Securities		34
Item 4.	Mine Safety Disclosures		34
Item 5.	Other Information		34
Item 6.	Exhibits		34
	Signatures		35

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q of Aileron Therapeutics, Inc. (“Aileron,” “we,” “us,” “our,” or the “Company”) contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

•

our plans to develop and commercialize LTI-03, including the potential benefits thereof;

•

our decision to temporarily delay further clinical development of LTI-01 until additional funds are raised;

•

our plans for a Phase 2 trial of LTI-03;

•

our unproven approach to drug research and development in the area of fibrotic diseases, with a focus on Caveolin-1, or Cav1, -related peptides, and our ability to develop marketable products;

•

our future clinical trials for LTI-03 and LTI-01, whether conducted by us or by any future collaborators, including our ability to enroll patients in our clinical trials, the timing of initiation of these trials and of the anticipated results;

•

the possibility that we may be adversely affected by economic, business, and/or competitive factors, including risks inherent in pharmaceutical research and development, such as: adverse results in our drug discovery, preclinical and clinical development activities, the risk that the results of our preclinical studies and early clinical trials may not be replicated in later clinical trials, including a Phase 2 trial of LTI-03, or that partial results of a trial may not be indicative of the full results of the trial, and the risk that any of our clinical trials may not commence, continue or be completed on time, or at all;

•

our ability to recognize the anticipated benefits of our acquisition of Lung Therapeutics, Inc. in October 2023;

•

our expectations regarding our ability to fund our operating expenses, our planned activities, and capital expenditure requirements with our cash, cash equivalents and investments;

•

our belief that our existing cash and cash equivalents will not be sufficient to enable us to fund our current operations for longer than twelve months from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which raises substantial doubt about our ability to continue as a going concern;

•

the success of our remediation efforts related to the material weaknesses identified in our internal controls over financial reporting and disclosure controls and procedures;

•

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•

the timing of and our ability to obtain and maintain marketing approvals for LTI-03 and LTI-01;

•

the rate and degree of market acceptance and clinical utility of any products for which we receive marketing approval;

•

our commercialization, marketing and manufacturing capabilities and strategy;

•

our intellectual property position and strategy, and our ability to obtain, maintain and enforce intellectual property rights for our platform and development candidates;

•

our ability to identify additional product candidates with significant commercial potential;

•

our plans to enter into collaborations for the development and commercialization of LTI-03, LTI-01 and any additional product candidates;

•

our reliance on third-party manufacturing and supply vendors;

•

potential benefits of any future collaboration;

•

developments relating to our competitors and our industry; and

•

the impact of government laws and regulations.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions

and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included or incorporated by reference in our Annual Report on Form 10-K, and this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, which could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Quarterly Report on Form 10-Q includes or incorporates by reference statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AILERON THERAPEUTICS, INC.

Condensed Consolidated BALANCE SHEETS

(UNAUDITED)

(In thousands, except share and per share data)


	September 30, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	17,652		$	17,313
Prepaid expenses and other current assets		1,007			882
Restricted cash		25			25
Operating lease, right-of-use asset, current portion		—			46
Total current assets		18,684			18,266
Property and equipment, net		1			19
Goodwill		6,330			6,330
Intangible assets		79,200			79,200
Other non-current assets		2			2,193
Total assets	$	104,217		$	106,008
Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,079		$	1,190
Accrued expenses and other current liabilities		4,580			3,147
Operating lease liabilities, current portion		—			48
Total current liabilities		5,659			4,385
Deferred tax liability		3,326			3,326
Total liabilities		8,985			7,711
Commitments and contingencies (Note 15)
Convertible preferred stock, $0.001 par value, 5,000,000 shares authorized at September 30, 2024 and at December 31, 2023; 24,610 shares issued and 12,232 shares outstanding at September 30, 2024 and 24,610 shares issued and outstanding at December 31, 2023		45,005			91,410
Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized at September 30, 2024 and 45,000,000 at December 31, 2023; 21,665,941 shares and 4,885,512 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		108			91
Additional paid-in capital		360,564			295,376
Accumulated other comprehensive loss		(26	)		(63	)
Accumulated deficit		(310,419	)		(288,517	)
Total liabilities, convertible preferred stock and stockholders’ equity	$	104,217		$	106,008

The accompanying notes are an integral part of these condensed consolidated financial statements.

AILERON THERAPEUTICS, INC.

Condensed Consolidated STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(In thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenue	$	—		$	—		$	—		$	—
Operating expenses:
Research and development		3,722			22			10,926			2,019
General and administrative		2,349			1,955			11,389			6,027
Restructuring and other costs		—			6			—			940
Total operating expenses		6,071			1,983			22,315			8,986
Loss from operations		(6,071	)		(1,983	)		(22,315	)		(8,986	)
Other income, net		224			156			413			593
Net loss	$	(5,847	)	$	(1,827	)	$	(21,902	)	$	(8,393	)
Net loss per share—basic and diluted	$	(0.27	)	$	(0.40	)	$	(1.31	)	$	(1.85	)
Weighted average common shares outstanding—basic and diluted		21,663,089			4,541,167			16,687,473			4,541,167
Comprehensive loss:
Net loss	$	(5,847	)	$	(1,827	)	$	(21,902	)	$	(8,393	)
Other comprehensive gain:
Unrealized (loss) gain on investments, net of tax of $0		(4	)		2			37			48
Total other comprehensive (loss) gain		(4	)		2			37			48
Total comprehensive loss	$	(5,851	)	$	(1,825	)	$	(21,865	)	$	(8,345	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

AILERON THERAPEUTICS, INC.

Condensed Consolidated STATEMENT OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share data)


	Series X Non-Voting Convertible Preferred Stock						Common Stock													Total Convertible
	Shares			Amount			Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Preferred Stock and Stockholders’ Equity
Balances at December 31, 2023		24,610		$	91,410			4,885,512	$	91	$	295,376		$	(63	)	$	(288,517	)	$	98,297
Issuance of common stock in connection with conversion of Series X non-voting convertible preferred stock		(11,957	)		(44,826	)		11,957,000		12		44,814			—			—			—
Stock-based compensation expense		—			—			—		—		150			—			—			150
Net loss		—			—			—		—		—			—			(7,113	)		(7,113	)
Balances at March 31, 2024		12,653		$	46,584			16,842,512	$	103	$	340,340		$	(63	)	$	(295,630	)	$	91,334
Issuance of common stock in connection with conversion of Series X non-voting convertible preferred stock		(421	)	$	(1,579	)		421,000	$	—	$	1,578		$	—		$	—		$	(1	)
Issuance of common stock		—			—			4,273,505		4		10,933			—			—			10,937
Issuance of warrants		—			—			—		—		7,225			—			—			7,225
Stock-based compensation expense		—			—			—		—		326			—			—			326
Exercises of stock options		—			—			88,068		—		101			—			—			101
Unrealized gain on investments		—			—			—		—		—			41			—			41
Net loss		—			—			—		—		—			—			(8,942	)		(8,942	)
Balance at June 30, 2024		12,232		$	45,005			21,625,085	$	107	$	360,503		$	(22	)	$	(304,572	)	$	101,021
Stock-based compensation expense		—			—			—		—		508			—			—			508
Issuance cost in connection with the Offering		—			—			—		—		(488	)		—			—			(488	)
Exercises of stock options		—			—			40,856		1		41			—			—			42
Unrealized gain on investments		—			—			—		—		—			(4	)		—			(4	)
Net loss		—			—			—		—		—			—			(5,847	)		(5,847	)
Balance at September 30, 2024		12,232		$	45,005			21,665,941	$	108	$	360,564		$	(26	)	$	(310,419	)	$	95,232

Balances at December 31, 2022		—		$	—			4,541,167	$	91	$	291,365		$	(48	)	$	(272,785	)	$	18,623
Stock-based compensation expense		—			—			—		—		391			—			—			391
Unrealized gain on investments		—			—			—		—		—			38			—			38
Net loss		—			—			—		—		—			—			(4,779	)		(4,779	)
Balances at March 31, 2023		—		$	—			4,541,167	$	91	$	291,756		$	(10	)	$	(277,564	)	$	14,273
Stock-based compensation expense		—			—			—		—		300			—			—			300
Unrealized gain on investments		—			—			—		—		—			8			—			8
Net loss		—			—			—		—		—			—			(1,787	)		(1,787	)
Balances at June 30, 2023		—		$	—			4,541,167	$	91	$	292,056		$	(2	)	$	(279,351	)	$	12,794
Stock-based compensation expense		—			—			—		—		229			—			—			229
Unrealized gain on investments		—			—			—		—		—			2			—			2
Net loss		—			—			—		—		—			—			(1,827	)		(1,827	)
Balances at September 30, 2023	$	—		$	—		$	4,541,167	$	91	$	292,285		$	—		$	(281,178	)	$	11,198

The accompanying notes are an integral part of these condensed consolidated financial statements.

AILERON THERAPEUTICS, INC.

Condensed Consolidated STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Nine Months Ended September 30,
	2024			2023
Cash flows from operating activities:
Net loss	$	(21,902	)	$	(8,393	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		63			67
Net amortization of premiums and discounts on investments		—			(156	)
Stock-based compensation expense		984			920
Gain on sale of property and equipment		—			(42	)
Loss on disposition of property and equipment		—			16
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(89	)		(93	)
Other assets		2,191			24
Accounts payable		(111	)		(1,236	)
Operating lease liabilities		(48	)		(33	)
Accrued expenses and other current liabilities		1,433			(491	)
Net cash used in operating activities		(17,479	)		(9,417	)
Cash flows from investing activities:
Proceeds from sale of property and equipment		—			42
Proceeds from sales or maturities of investments		—			16,250
Net cash provided by investing activities		—			16,292
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering costs		10,645			—
Proceeds from issuance of common stock in connection with stock option exercises		142			—
Proceeds from issuance of warrants, net of offering costs		7,030			—
Net cash provided by financing activities		17,817			—
Effect of exchange rate changes on cash and cash equivalents		1			—
Net increase in cash, cash equivalents and restricted cash		339			6,875
Cash, cash equivalents and restricted cash at beginning of period		17,338			5,219
Cash, cash equivalents and restricted cash at end of period	$	17,677		$	12,094

Cash and cash equivalents at end of period	$	17,652		$	12,069
Restricted cash at end of period		25			25
Cash, cash equivalents and restricted cash at end of period	$	17,677		$	12,094

Supplemental disclosure of non-cash investing and financing activities:
Conversion of Series X non-voting convertible preferred stock into common stock shares	$	46,405		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

AILERON THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Amounts in thousands, except share and per share data)

1. Nature of the Business

Aileron Therapeutics, Inc. (“Aileron” or the “Company”) is a clinical stage biopharmaceutical company focused on developing novel therapies for the treatment of orphan pulmonary and fibrosis indications with no approved or limited effective treatments. The Company currently has two product candidates in clinical development, LTI-03 and LTI-01, and multiple candidates in preclinical development focused on fibrosis indications.

On October 31, 2023, Aileron acquired Lung Therapeutics, Inc. (“Lung Therapeutics” or “Lung”) pursuant to an Agreement and Plan of Merger, dated October 31, 2023 (the “Lung Acquisition Agreement”), by and among the Company, AT Merger Sub I, Inc., a Delaware corporation and its wholly owned subsidiary (“First Merger Sub”), AT Merger Sub II, LLC, a Delaware limited liability company and its wholly owned subsidiary (“Second Merger Sub”), and Lung. Pursuant to the Lung Acquisition Agreement, First Merger Sub merged with and into Lung, pursuant to which Lung was the surviving entity and became its wholly owned subsidiary (the “First Merger”). Immediately following the First Merger, Lung merged with and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity (such merger, together with the First Merger, the “Lung Acquisition”). Lung was incorporated on November 13, 2012 under the laws of the state of Texas. Following the Lung Acquisition, the Company shifted its operating disease focus to advancing a pipeline of first-in-class medicines to address significant unmet medical needs in orphan pulmonary and fibrosis indications with the potential to greatly improve patient outcomes over currently available treatments. Following expiration of the operating lease agreement to rent an office space for its corporate headquarters in Austin, Texas, on March 31, 2024, the Company has been operating virtually and expects to continue to do so for the foreseeable future (see Note 15 for further details).

The Company is subject to risks and uncertainties common to clinical-stage companies in the biotechnology industry, including, but not limited to the risk that the Company never achieves profitability, the need for substantial additional financing, the risk of relying on third parties, risks of clinical trial failures, dependence on key personnel, protection of proprietary technology, and compliance with government regulations. The Company’s lead product candidate, LTI-03, is being developed for the treatment of Idiopathic Pulmonary Fibrosis (“IPF”) and has completed a healthy volunteer Phase 1a clinical trial. The Company has also conducted a Phase 1b clinical trial of LTI-03 in patients diagnosed with IPF and, in November 2024, the Company announced positive topline data from Cohort 2 of the Phase 1b clinical trial. The Company’s second product candidate, LTI-01, is in development for loculated pleural effusion (“LPE”). The Company has completed Phase 1b and Phase 2a clinical trials in LPE patients. In June 2024, the Company decided to temporarily delay clinical development of LTI-01 in an effort to focus the Company’s resources on clinical development of LTI-03 and until additional funds are raised.

Liquidity and Going Concern

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the condensed consolidated financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the consolidated financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the consolidated financial statements are issued.

The Company’s condensed consolidated financial statements have been prepared assuming that the Company will continue to operate as a going concern, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Through September 30, 2024, the Company has financed its operations primarily through $145,467 in net proceeds from sales of common stock and warrants, $131,211 from sales of preferred stock prior to its initial public offering (“IPO”), $34,910 from a collaboration agreement in 2010, $17,536 in net proceeds in connection with a private placement following the Lung Acquisition in 2023, and $17,675 in net proceeds in connection with an underwritten offering of the Company's common stock and accompanying warrants to purchase common stock in May 2024. As of September 30, 2024, the Company had $17,652 in cash and cash equivalents.

In May 2024, Aileron completed an underwritten follow-on public offering (the “Offering”), pursuant to which the Company issued and sold 4,273,505 shares of the Company’s common stock, par value $0.001 per share (the “Offering Shares”) and accompanying warrants (the “Offering Warrants”) to purchase 4,273,505 shares of common stock (the “Offering Warrant Shares”). All of the Offering Shares and Offering Warrants were sold by the Company. Each Offering Share was offered and sold together with an accompanying

Offering Warrant at a combined offering price of $4.68, and the underwriter purchased each Offering Share with an accompanying Offering Warrant from the Company at a combined price of $4.35. Net proceeds from the Offering were $17,675, after deducting underwriting discounts and commissions and offering expenses, and excluding any proceeds that may be received from exercise of the Offering Warrants.

On July 26, 2024, the Company entered into an Equity Distribution Agreement with Citizens JMP Securities, LLC (“Citizens JMP”), as agent and/or principal, under which the Company may offer and sell up to $50,000 of shares of its common stock from time to time through or to Citizens JMP. Sales of common stock through or to Citizens JMP may be made by any method that is deemed an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Capital Market. There have been no sales on the "at the market" offering through September 30, 2024.

Management believes that, based on the Company’s current operating plan, the Company’s cash and cash equivalents of $17,652 as of September 30, 2024 will not be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of these condensed consolidated financial statements, which raises substantial doubt about our ability to continue as a going concern.

Since its inception, the Company has not generated any revenue from product sales and has never generated an operating profit. The Company has incurred significant losses on an aggregate basis. The Company’s net losses were $21,902 and $8,393 for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company had an accumulated deficit of $310,419. These losses have resulted primarily from costs incurred in connection with research and development activities, licensing and patent investment and general and administrative costs associated with the Company’s operations. Management expects to continue to incur operating losses for the foreseeable future. The Company expects to finance its operations primarily through utilization of its current financial resources and through the sale of additional equity or debt financings, collaborations, licensing arrangements or other sources.

The Company plans to address these conditions by, among other things, raising additional funds through equity or debt financings, strategic collaborations, licensing arrangements or other sources. However, there is no assurance that such funding will be available to the Company, will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives. The Company’s funding estimates are based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than it currently expects. If additional funds are not available, the Company could be forced to delay, reduce or eliminate its research and development programs or future commercialization efforts and its business could be materially harmed. The Company’s future viability is dependent on its ability to raise additional capital, enter into a financing, consummate a successful acquisition, merger, business combination, or a sale of assets or other transaction. If the Company becomes unable to continue as a going concern, it may have to liquidate its assets and the values it receives for its assets in liquidation or dissolution could be significantly lower than the values reflected in its consolidated financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by ASUs of the Financial Accounting Standards Board (“FASB”).

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Lung Therapeutics, LLC, Lung Therapeutics Australia Pty Ltd, and Lung Therapeutics Limited. Lung Therapeutics Limited is currently inactive. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual for research and development expenses, the prepaid research and development expenses, and the value of stock-based compensation. Estimates are

periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements as of September 30, 2024 and for the nine months ended September 30, 2024 and 2023 have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 that was filed with the SEC on April 15, 2024.

The condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2024, the results of its operations for the three and nine months ended September 30, 2024 and 2023 and its cash flows for the nine months ended September 30, 2024 and 2023. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2024 and 2023 are unaudited. The results for the nine months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. The accompanying balance sheet as of December 31, 2023 has been derived from the Company’s audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K.

The Company’s significant accounting policies are described in Note 2 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Periodically, the Company maintains balances in operating accounts above federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality. The Company has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. In particular, the Company relies on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could have been adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses (“ASU 2024-03”), to enhance the transparency and decision usefulness of financial information presented in the income statement by requiring disaggregated information about certain income statement expense line items. This ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company has not evaluated the impact of this ASU on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements, that contains amendments to the Codification that remove references to various FASB Concepts Statements. This effort facilitates Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor improvements. The amendments are effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted. Early application of the amendments in this ASU is permitted for all entities, for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, to improve GAAP by adding an illustrative example that includes four fact patterns to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with Topic 718, Compensation—Stock Compensation. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If an entity

adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes that interim period. The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures by requiring disaggregated information about an entity’s effective tax rate reconciliation, as well as information on taxes paid. This ASU is effective for annual periods beginning after December 15, 2024. Interim disclosures are not impacted by this update. The Company has not evaluated the impact of these amendments on its annual disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Segment Disclosures, to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the impact of the new requirements, effective for its 2024 consolidated financial statements, to determine the level of disclosure of segment expenses.

3. Business Acquisition

On October 31, 2023, Aileron acquired 100% of Lung, pursuant to the Lung Acquisition Agreement. At the closing of the Lung Acquisition, Aileron issued to the stockholders of Lung 344,345 shares of its common stock (excluding 221 fractional shares from the total 344,566 shares pursuant to the Lung Acquisition Agreement) and 19,903 shares of its newly designated Series X non-voting convertible preferred stock (the “Series X Preferred Stock”) (excluding 238 fractional shares from the total 20,141 shares pursuant to the Lung Acquisition Agreement). Each share of Series X Preferred Stock is convertible into 1,000 shares of common stock. The Company paid $290 cash in lieu of fractional shares of both common stock and Series X Preferred Stock. In addition, Aileron assumed all of Lung’s stock options (1,780,459) and all warrants (726,437) exercisable for Lung common stock immediately outstanding prior to the closing of the Lung Acquisition, each subject to adjustment pursuant to the terms of the Lung Acquisition Agreement.

Immediately following the closing of the Lung Acquisition, on October 31, 2023, Aileron entered into a Stock and Warrant Purchase Agreement (the “Purchase Agreement”) with a group of accredited investors, pursuant to which Aileron issued and sold (i) an aggregate of 4,707 shares of Series X Preferred Stock, and (ii) warrants (the “PIPE Warrants”) to purchase up to an aggregate of 2,353,500 shares of Aileron common stock (the “PIPE Warrant Shares”), for an aggregate purchase price of approximately $18,429, which included the conversion of certain convertible promissory notes in the aggregate principal amount of $1,553 issued by Lung to Bios Partners, the majority stockholder of Lung prior to the closing of the Lung Acquisition, at a 10% discount to the per share price of the Series X Preferred Stock (collectively, the “PIPE Financing”). The PIPE Financing closed on November 2, 2023. Each share of Series X Preferred Stock is convertible into 1,000 shares of common stock.

At the 2023 annual meeting of stockholders (the “2023 Annual Meeting”), the Company’s stockholders approved the issuance, in accordance with Nasdaq Listing Rule 5635(a), of shares of common stock, upon conversion of the Company’s outstanding Series X Preferred Stock. On March 5, 2024, subject to then existing beneficial ownership limitations, 11,957 shares of Series X Preferred Stock were automatically converted into 11,957,000 shares of common stock.

The Lung Acquisition was accounted for under the acquisition method of accounting under ASC 805, Business Combinations. Under the acquisition method, the total purchase price of the acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on the fair values as of the date of the acquisition. Consideration transferred is the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred by the acquirer to the former owners of the acquiree, and the equity interests issued by the acquirer to the former owners of the acquiree (except for the measurement of share-based payment awards). The Company recorded the assets acquired and liabilities assumed as of the date of the Lung Acquisition based on the information available at that date.

4. Fair Value of Financial Assets

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:


	September 30, 2024
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	7,213	$	—	$	—	$	7,213
Treasury bills	$	10,174	$	—	$	—	$	10,174
	$	17,387	$	—	$	—	$	17,387


	December 31, 2023
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	10,322	$	—	$	—	$	10,322
	$	10,322	$	—	$	—	$	10,322

During the nine months ended September 30, 2024 and the year ended December 31, 2023, there were no transfers between levels.

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	September 30, 2024		December 31, 2023
Prepaid research and development	$	252	$	207
Other current assets		755		675
Total prepaid expenses and other current assets	$	1,007	$	882

6. Goodwill and Indefinite-Lived Intangible Assets

$6,330 of goodwill and $79,200 of indefinite-lived intangible assets acquired in the Lung Acquisition were recorded at fair value on the Lung Acquisition date. The Company performed a qualitative assessment of goodwill and indefinite-lived intangible assets for potential impairment as of September 30, 2024, and concluded that there was no goodwill or intangible assets impairment as of September 30, 2024.

7. Other Assets

Other assets consisted of the following:


	September 30, 2024		December 31, 2023
Non-current prepaid research and development	$	—	$	2,140
Other assets		2		53
Total other non-current assets	$	2	$	2,193

The non-current prepaid research and development was fully expensed during the nine months ended September 30, 2024 due to the temporary delay of clinical development of LTI-01.

8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	September 30, 2024		December 31, 2023
External research and development services	$	2,207	$	1,110
Payroll and payroll-related costs		1,453		1,178
Professional fees		847		653
Other		73		206
Total accrued expenses and other current liabilities	$	4,580	$	3,147

9. Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock, par value $0.001 per share. As of September 30, 2024, the Company had issued 24,610 shares of Series X Preferred Stock, of which 12,232 shares of Series X Preferred Stock remained outstanding. As of December 31, 2023, 24,610 shares of Series X Preferred Stock were issued and outstanding.

On October 31, 2023, under the terms of the Lung Acquisition Agreement, at the closing of the Lung Acquisition, Aileron issued to the stockholders of Lung 344,345 shares of common stock, and 19,903 shares of Series X Preferred Stock.

Immediately following the closing of the Lung Acquisition, on October 31, 2023, Aileron entered into the Purchase Agreement with a group of accredited investors, pursuant to which Aileron issued and sold an aggregate of 4,707 shares of Series X Preferred Stock

and PIPE Warrants to purchase up to an aggregate of 2,353,500 shares of Aileron common stock. Refer to Note 3 for more details on the PIPE Financing in connection with the Purchase Agreement. Since the Series X Preferred Stock was sold as a unit with the PIPE Warrants according to the Purchase Agreement, the proceeds received were allocated to each instrument on a relative fair value basis. Total gross proceeds of $18,429, less $893 of issuance costs were allocated as follows: $16,795 to the Series X Preferred Stock and $741 to the PIPE Warrants. The Series X Preferred Stock and the PIPE Warrants issued in the PIPE Financing were recorded at par value of $0.001.

At the 2023 Annual Meeting, the Company’s stockholders approved the issuance, in accordance with Nasdaq Listing Rule 5635(a), of shares of common stock, upon conversion of the Company’s outstanding Series X Preferred Stock. On March 5, 2024, subject to then existing beneficial ownership limitations, 11,957 shares of Series X Preferred Stock were automatically converted into 11,957,000 shares of common stock. On May 8, 2024, individuals and entities affiliated with Bios Partners (collectively, the “Bios Entities”) provided notice to the Company and converted 421 shares of Series X Preferred Stock held by them into 421,000 shares of common stock. As of September 30, 2024, 12,232 shares of Series X Preferred Stock (which are convertible into 12,232,000 shares of common stock) remained convertible at the option of the holder thereof, subject to certain beneficial ownership limitations (as described below).

The Company evaluated the Series X Preferred Stock for liability classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity ("ASC 480"), and determined that equity treatment was appropriate because the Series X Preferred Stock did not meet the definition of the liability instruments. Specifically, the Series X Preferred Stock is not mandatorily redeemable and does not embody an obligation to buy back the shares outside of the Company’s control in a manner that could require the transfer of assets. The Company determined that the Series X Preferred Stock would be recorded as temporary equity, based on the guidance of ASC 480, given that it is contingently redeemable.

Each share of Series X Preferred Stock is convertible into 1,000 shares of Common Stock. The preferences, rights, and limitations initially applicable to the Series X Preferred Stock are set forth in the Certificate of Designation of Series X Non-Voting Convertible Preferred Stock (the “Certificate of Designation”).

The Series X Preferred Stock has the following characteristics:

Voting

Except as otherwise required by law, the Series X Preferred Stock does not have voting rights. However, as long as any shares of Series X Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series X Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series X Preferred Stock or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Certificate of Incorporation or by-laws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of preferred stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series X Preferred Stock, (ii) issue further shares of Series X Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series X Preferred Stock, or (iii) enter into any agreement with respect to any of the foregoing.

Dividends

Holders of Series X Preferred Stock are entitled to receive dividends on shares of Series X Preferred Stock equal, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of the common stock. Such dividends are not cumulative. Since the Company’s inception, no dividends have been declared or paid.

Liquidation, dissolution or winding up

The Series X Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company.

Upon liquidation, dissolution or winding up of the Company, the Series X preferred stockholders shall be entitled to receive an equivalent amount of distributions as would be paid on the common stock underlying the Series X Preferred Stock, determined on an as-converted basis, pari passu with any distributions to the common stock shareholders.

Conversion

The Series X Preferred Stock is convertible into common stock at a rate of 1,000 shares of common stock for every one share of Series X Preferred Stock that is converted. The Series X Preferred Stock is subject to certain beneficial ownership limitations, including that a holder of Series X Preferred Stock is prohibited from converting shares of Series X Preferred Stock into shares of common stock if, as a result of such conversion, such holder (together with its affiliates and any other persons acting as a group together with the holder or any of its affiliates) would beneficially own more than a specified percentage (to be initially set at 19.99% and thereafter adjusted by the holder to a number not to exceed 19.99%) of the total number of shares of common stock issued and outstanding immediately after giving effect to such conversion.

Redemption

Shares of the Series X Preferred Stock are not redeemable at the election of the holder.

Maturity

The Series X Preferred Stock shall be perpetual unless converted.

10. Common Stock

On February 28, 2024, the Company held the 2023 Annual Meeting, at which the Company’s stockholders approved an amendment to the Company’s Restated Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock of the Company from 45,000,000 to 100,000,000 shares. The Company filed the Certificate of Amendment to implement the increase in the number of authorized shares, which was effective upon filing, with the Secretary of State of the State of Delaware on February 28, 2024. The additional shares of common stock authorized by the Certificate of Amendment have rights identical to the Company’s currently outstanding common stock. As of September 30, 2024 and December 31, 2023, the Company was authorized to issue 100,000,000 and 45,000,000 shares of common stock, respectively, par value $0.001 per share.

As of September 30, 2024, the Company had 21,665,941 shares of common stock issued and outstanding. As of December 31, 2023, the Company had

Aileron Therapeutics, Inc. [ALRN] Filings
10-Q	[2024-11-14]
10-Q	[2024-08-14]
10-Q	[2024-05-15]
10-K	[2024-04-15]
10-Q	[2023-10-13]
10-Q	[2023-08-11]
10-Q	[2023-05-08]
10-K	[2023-03-20]
10-Q	[2022-11-01]
10-Q	[2022-08-15]
10-Q	[2022-05-05]
10-K	[2022-03-28]
10-Q	[2021-11-12]
10-Q	[2021-08-11]
10-Q	[2021-05-11]
10-K	[2021-03-24]
10-Q	[2020-11-12]
S-1	[2020-10-05]
10-Q	[2020-08-05]
10-Q	[2020-05-11]
10-K	[2020-03-30]
10-Q	[2019-11-07]
10-Q	[2019-08-06]
10-Q	[2019-05-08]
S-1	[2019-05-01]
10-K	[2019-03-29]
10-Q	[2018-11-07]
10-Q	[2018-08-07]
10-Q	[2018-05-09]
10-K	[2018-04-02]
10-Q	[2017-11-09]
10-Q	[2017-08-10]
S-1	[2017-06-02]