Nature of business and basis of presentation

9 Months Ended

Sep. 30, 2022

Nature of business and basis of presentation

Nature of business and basis of presentation

1. Nature of business and basis of presentation

Nature of business—Aprea Therapeutics, Inc. (or the “Company”) is a clinical-stage biopharmaceutical company focused on developing and commercializing novel cancer therapeutics targeting DNA damage response pathways. The Company began principal operations in 2006 and is headquartered in Boston, Massachusetts with research facilities in Doylestown, Pennsylvania. Prior to the acquisition of Atrin Pharmaceuticals Inc. (Atrin), the Company was engaged in the clinical development of cancer therapeutics that reactivate the mutant p53 tumor suppressor protein. In December 2020, the Company announced that its pivotal Phase 3 myelodysplastic syndromes trial failed to meet its predefined primary endpoint of complete remission (CR) rate. Given these results, FDA feedback and the costs of continuing the APR-246 development program, the Company has shifted primary focus of its activities to the assets acquired in the May 16, 2022 acquisition of Atrin (see Note 3). The Company’s lead product candidate, which was acquired in the Atrin acquisition, is ATRN-119, a Phase 1-ready small molecule ATR inhibitor being developed for solid tumor indications.

Agreement and plan of merger—On May 16, 2022, the Company acquired Atrin Pharmaceuticals Inc., a Delaware corporation (the “Atrin Acquisition”). Under the terms of the Agreement and Plan or Merger dated May 16, 2022 (the “Merger Agreement”), the Company issued to the stockholders of Atrin 1,117,394 shares of the Company’s common stock, par value $0.001 per share, and 2,949,630 shares of Series A convertible preferred stock (“Series A Preferred Stock”) (as described below). The Series A Preferred Stock had a conversion value on the closing date of $68.8 million. In addition, the Company assumed options granted under the Atrin stock option plan, which became options to purchase 3,275,149 shares of the Company’s common stock. See Note 3 for additional information.

Series A Preferred Stock—As a result of the Atrin Acquisition, the Company issued the following Series A Preferred Stock:

	Series A Preferred Stock	Common Stock Issuable Upon Conversion (1)
Outstanding shares issued in merger	2,949,630	29,496,300

(1) Each share of Series A Preferred Stock is convertible into 10 shares of common stock.

The Company held a stockholders’ meeting on July 28, 2022 where approval of the conversion of the Series A Preferred Stock into shares of the Company’s common stock in accordance with Nasdaq Listing Rule 5635(a) was received. A majority of the Series A Preferred Stockholders elected to convert their Series A Preferred Stock into common stock during the quarter ended September 30, 2022 (see Note 6).

Basis of presentation and management plans—The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of convertible preferred stock and common stock.

The Company is subject to risks common to companies in the biopharmaceutical industry. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be maintained, that any therapeutic products developed will obtain required regulatory approval or that any approved or consumer products will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant product sales.

The Company believes that the September 30, 2022 cash balance of approximately $33.1 million will be sufficient to fund the Company’s operations through the end of 2023. In the event that additional funds are not available thereafter, management would expect to significantly reduce expenditures to conserve cash, which would involve scaling back or curtailing new development activity.