Aileron Therapeutics Completes Strategic Acquisition to Expand Lung Disease Pipeline

In a move to reshape its therapeutic focus, Aileron Therapeutics (NASDAQ: ALRN) has finalized the acquisition of Lung Therapeutics, bringing a slate of clinical-stage candidates into its portfolio. The merger centers on LTI-03, a novel Caveolin-1-related peptide targeting idiopathic pulmonary fibrosis—a progressive, life-threatening condition with limited treatment options.

The Deal Structure and Financing Details

The acquisition was executed as a stock-for-stock transaction, with Lung Therapeutics becoming a wholly-owned subsidiary of Aileron. Concurrent with the merger closing, Aileron secured approximately $18 million in fresh capital through a private placement led by Bios Partners and Nantahala Capital. These funds will primarily support the ongoing Phase 1b clinical study of LTI-03 and operational needs through the coming year.

The financing structure includes 4,707 shares of Series X preferred stock and warrants to purchase up to 2.35 million common shares at $4.89 per share, exercisable from May 2024 through May 2027. On a pro forma basis, existing Aileron shareholders will retain approximately 14% ownership following the transactions and assuming full conversion of preferred shares.

LTI-03: A Dual-Action Approach to Pulmonary Fibrosis

What distinguishes LTI-03 from existing treatments is its dual mechanism. The Caveolin-1-derived peptide targets both alveolar epithelial cell survival and inhibits profibrotic signaling pathways—a two-pronged approach that contrasts with approved IPF drugs like nintedanib, which address only the fibrotic signaling component.

Preclinical studies and biopsied tissue from IPF patients have demonstrated that Caveolin-1 plays a crucial regulatory role in lung fibrosis development. Lung Therapeutics’ research revealed decreased expression of this key protein in IPF patients and showed that LTI-03 can reduce multiple profibrotic signaling proteins while protecting alveolar epithelial cells.

IPF affects roughly 100,000 Americans, predominantly those over 65, with a typical prognosis of two to five years post-diagnosis. The disease involves progressive lung tissue scarring that impairs respiratory function, underscoring the need for new therapeutic options.

Clinical Progress and Timeline

LTI-03 has advanced through Phase 1a testing in healthy volunteers and is currently enrolled in a randomized, double-blind, placebo-controlled Phase 1b trial in IPF patients. Aileron anticipates the combined entity will have sufficient cash runway to fund operations and capital requirements through Q4 2024 based on current projections.

The company’s second asset, LTI-01, is a proenzyme candidate that completed Phase 1b and Phase 2a trials for loculated pleural effusions. It holds both Orphan Drug Designation in the US and EU, plus Fast Track status in the US.

Leadership and Organizational Structure

Manuel Aivado, M.D., Ph.D. continues as Chief Executive Officer, with Susan Drexler serving as Interim Chief Financial Officer. Brian Windsor, Ph.D.—former CEO of Lung Therapeutics—joins as President and Chief Operating Officer. Dr. Windsor brings 23 years of life sciences company experience, having founded and led Lung Therapeutics from 2013 to 2023. He previously served as President of specialty pharmaceutical firm Enavail and was instrumental in spinning out TFF Pharmaceuticals, which went public on Nasdaq in 2019.

The board will include former Lung Therapeutics directors William C. Fairey and Alan A. Musso, alongside existing Aileron board members: Chairman Josef H. von Rickenbach, CEO Manuel Aivado, Reinhard J. Ambros, Ph.D., and Nolan Sigal, M.D., Ph.D.

Strategic Significance

“We believe this combination represents a meaningful value-creation opportunity,” said Dr. Aivado in a statement. The consolidated entity is positioning itself to pursue first-in-class therapeutic opportunities within orphan pulmonary and fibrosis indications—disease areas with significant unmet medical needs and limited approved treatments. As of late September 2023, the merged companies held approximately $29 million in combined cash reserves following the private placement.