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Aerpio Reports Second Quarter 2018 Financial Results and Provides Business Update

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TIME-2b Clinical Trial of AKB-9778 in Patients with Diabetic
Retinopathy Remains on Track; Data in Q2 2019

Partnership for AKB-4924 with Gossamer Bio Will Accelerate
Development of the Compound and Allow Aerpio to Focus on Core
Ophthalmology and Diabetes Programs

Recent Equity Financing Strengthens Balance Sheet

Conference Call and Webcast Today, August 14th
at 8:30 a.m. EDT

Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO), a biopharmaceutical company
focused on advancing first-in-class treatments for ocular diseases,
today reported financial results for the second quarter ended June 30,
2018 and provided a business update.

"We had a busy and productive second quarter at Aerpio," commented
Stephen Hoffman, M.D. Ph.D., Chief Executive Officer of Aerpio. "Our
ongoing TIME-2b study, evaluating the effect of AKB-9778, our
first-in-class Tie2 activator, in patients with non-proliferative
diabetic retinopathy (NPDR) is on schedule, and we expect to report
top-line data from the study in the second quarter of 2019.

Dr. Hoffman added, "In addition, we announced several important
corporate milestones in the second quarter. First, in June, we completed
a partnership with Gossamer Bio for AKB-4924, our HIF-1 alpha compound
for inflammatory bowel disease ("IBD"). We believe Gossamer is the ideal
partner to develop AKB-4924 as they have a demonstrated track record of
successful therapeutic development in IBD. Our partnership will now
allow us to focus our resources on our ophthalmology and diabetes
programs currently in development. Second, we completed an underwritten
public offering that resulted in net proceeds to Aerpio of approximately
$48.0 million. This will provide funding for the Company through the
first quarter of 2020, which we believe gives us sufficient resources to
complete the TIME-2b study on its expected timeframe, finish
preparations for our expected Phase 3 program, and continue to advance
our earlier pipeline programs, including a topical formulation of
AKB-9778 in glaucoma. Finally, we also up-listed from the OTC to Nasdaq
in June, which we believe will give the Company greater visibility as we
move toward the announcement of results from our TIME-2b study."

Recent Company Highlights

  • In June 2018, the Company entered into a license agreement ("License
    Agreement") with a wholly-owned subsidiary of Gossamer Bio, Inc.
    (including its affiliates, "Gossamer"), under which the Company has
    granted Gossamer an exclusive worldwide license to develop and
    commercialize AKB-4924 (now known as GB004), our selective stabilizer
    of hypoxia-inducible factor-1 alpha, or HIF-1 alpha, in development
    for the treatment of IBD. Pursuant to the terms of the License
    Agreement, Gossamer made an upfront payment to the Company of
    $20.0 million. The Company is also eligible to receive up to $400.0
    million in development, commercial, and sales milestone payments. If
    GB004 is approved and commercialized, the Company is also eligible to
    receive tiered royalties on sales of GB004 ranging from a
    high-single-digit to a mid-teens percentage of net sales. In May 2018,
    the Company announced the initiation of dosing in a Phase 1a,
    multiple-ascending dose study of GB004.
  • In June 2018, the Company completed an underwritten public offering of
    its common stock. The total net proceeds from the offering to Aerpio
    was approximately $48.0 million, including the partial exercise of the
    underwriters' overallotment option in early July.
  • Concurrent with the underwritten public offering, the Company
    transitioned its common stock listing to Nasdaq and the common stock
    began trading on the Nasdaq Capital Market under the symbol "ARPO" on
    June 26, 2018.

Second Quarter 2018 Financial Highlights

As of June 30, 2018, cash and cash equivalents totaled $68.8 million,
compared to $20.3 million as of December 31, 2017. Total shares
outstanding as of June 30, 2018 were 38.8 million. On July 2, 2018, an
additional 1.7 million shares were issued pursuant to the exercise of
the underwriters' overallotment option in the public offering.

Revenue for the three and six months ended June 30, 2018 of $1.3 million
relates to the $20.0 million upfront payment from Gossamer in
consideration of the license agreement for AKB-4924 (the "License
Agreement"). Pursuant to the terms of the License Agreement and
applicable accounting guidance, the $20.0 million will be recognized
over a ninety-day performance period beginning June 25, 2018. The
remaining $18.7 million, shown as deferred revenue on the Company's
consolidated balance sheet as of June 30, 2018, is expected to be
recognized as revenue during the third quarter of 2018.

For the three months ended June 30, 2018, operating expenses totaled
$7.4 million, including $0.9 million in non-cash stock compensation
expense, compared to $5.6 million, including $0.1 million in non-cash
stock compensation expense, for the same period in 2017. For the six
months ended June 30, 2018, operating expenses totaled $14.8 million,
including $2.0 million in non-cash stock compensation expense, compared
to $10.3 million, including $0.3 million in non-cash stock compensation
expense, for six months ended June 30, 2017.

Research and development expenses for the three months ended June 30,
2018 increased $1.1 million, or 33%, compared to the same period in
2017. Research and development expenses for the six months ended June
30, 2018 increased $2.8 million, or 52%, compared to the six months
ended June 30, 2017. The increase in both periods was the primarily the
result of increased spending on the Company's lead program, AKB-9778,
currently in Phase 2b development.

General and administrative expenses for the three months ended June 30,
2018 increased $0.7 million, or 30%, compared to the same period in
2017. General and administrative expenses for the six months ended June
30, 2018 increased $1.7 million, or 34%, compared to the six months
ended June 30, 2017. The increase in both periods was primarily
attributable to personnel and related costs.

Net loss attributable to common shareholders for the three months ended
June 30, 2018 was $6.0 million, or $0.22 per share, compared to a net
loss attributable to common shareholders of $5.5 million, or $0.21 per
share, for the same period in 2017. Net loss attributable to common
shareholders for the six months ended June 30, 2018 was $13.4 million,
or $0.49 per share, compared to a net loss attributable to common
shareholders of $11.5 million, or $0.70 per share, for the six months
ended June 30, 2017.

Conference Call and Webcast

Aerpio management will host a live conference call and webcast at 8:30
a.m. EDT today to discuss Aerpio's financial results and provide a
general business update.

The live webcast and a replay may be accessed by visiting Aerpio's
website at http://ir.aerpio.com/.
Please connect to the Company's website at least 15 minutes prior to the
live webcast to ensure adequate time for any software download that may
be needed to access the webcast. Alternatively, please call (877)
216-7943 (U.S.) or (417) 629-5045 (international) to listen to the live
conference call. The conference ID number for the live call is 1372519.
Please dial in approximately 10 minutes prior to the call. Telephone
replay will be available approximately two hours after the call. To
access the replay, please call (855) 859-2056 (U.S.) or (404) 537-3406
(international). The conference ID number for the replay is 1372519.

About Aerpio Pharmaceuticals

Aerpio Pharmaceuticals, Inc. is a biopharmaceutical company focused on
advancing first-in-class treatments for ocular diseases. The Company's
lead compound, AKB-9778, is a small molecule activator of the Tie2
pathway and is in clinical development for the treatment of
non-proliferative diabetic retinopathy. For more information, please
visit www.aerpio.com.

About AKB-9778

AKB-9778 is being developed as a subcutaneous injection for the
treatment of non-proliferative diabetic retinopathy. AKB-9778 binds to
and inhibits the intracellular domain of VE-PTP, the most critical
negative regulator of Tie2. AKB-9778 has demonstrated the ability to
activate the Tie2 receptor irrespective of extracellular levels of its
binding ligands, angiopoietin-1 (agonist) or angiopoietin-2 (antagonist)
and may be the most efficient pharmacologic approach to activating Tie2.

About Diabetic Retinopathy

Diabetic Retinopathy (DR) is a complication of diabetes caused by damage
to blood vessels in the retina. DR is the leading cause of blindness
among working-age people. Severity of DR ranges from mild
non-proliferative diabetic retinopathy (NPDR) to more advanced
proliferative diabetic retinopathy (PDR), the hallmark of which is the
development of new abnormal blood vessels.

Forward Looking Statements

This press release contains forward-looking statements. Statements in
this press release that are not purely historical are forward-looking
statements. Such forward-looking statements include, among other things,
projections regarding future revenue and financial performance, the
Company's long-term growth, the development of the Company's product
candidates, including AKB-9778 for non-proliferative diabetic
retinopathy or otherwise, the therapeutic potential of the Company's
product candidates, including AKB-9778, the Company's cash position and
expected runway, the Company's collaboration with Gossamer Bio, and the
Company's listing on Nasdaq. Actual results could differ from those
projected in any forward-looking statements due to several risk factors.
Such factors include, among others, the ability to raise the additional
funding needed to continue to develop AKB-9778 or other product
development plans, the inherent uncertainties associated with the FDA
and drug development process, competition in the industry in which the
Company operates, overall market conditions, the maintenance of the
Company's collaboration with Gossamer Bio, and the Company's ability to
maintain its listing on Nasdaq. These forward-looking statements are
made as of the date of this press release, and the Company assumes no
obligation to update the forward-looking statements, or to update the
reasons why actual results could differ from those projected in the
forward-looking statements, except as required by law. Investors should
consult all the information set forth herein and should also refer to
the risk factor disclosures set forth in the reports and other documents
the Company files with the SEC available at www.sec.gov.

 
AERPIO PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
  Three months ended   Six months ended
June 30, June 30,
  2018       2017     2018       2017  
 
Licensing revenue $ 1,333 $ - $ 1,333 $ -
 
Operating expenses:
Research and development 4,229 3,169 8,258 5,424
General and administrative   3,140     2,415     6,588     4,919  
Total operating expenses   7,369     5,584     14,846     10,343  
Loss from operations (6,036 ) (5,584 ) (13,513 ) (10,343 )
 
Interest and other income (expense), net   46     64     97     (173 )
Net and comprehensive loss (5,990 ) (5,520 ) (13,416 ) (10,516 )
 
Adjustment of convertible preferred stock   -     -     -     (943 )
Net loss attributable to common shareholders $ (5,990 ) $ (5,520 ) $ (13,416 ) $ (11,459 )
 

Net loss per common share basic and diluted

$ (0.22 ) $ (0.21 ) $ (0.49 ) $ (0.70 )

Weighted average common shares outstanding,
basic and dilluted

  27,341     26,895     27,194     16,313  
 
 
AERPIO PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
   
June 30, December 31,
2018   2017
Assets
Current assets:
Cash and cash equivalents $ 68,783 $ 20,264
Prepaid R&D contracts 429 313
Other current assets   214     323  
Total current assets 69,426 20,900
Furniture and equipment, net 92 107
Deposits   21     21  
Total assets $ 69,539   $ 21,028  
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 2,965 $ 3,592
Deferred revenue   18,667     -  
Total current liabilities 21,632 3,592
 
Stockholders' equity:
Capital 169,885 125,999
Accumulated deficit   (121,978 )   (108,563 )
Total stockholders' equity   47,907     17,436  
Total liabilities and shareholders' equity $ 69,539   $ 21,028  
 

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