Aligos Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. The unaudited financial statements are presented in thousands of dollars, except per-share amounts. Aligos is a clinical-stage biopharmaceutical company developing treatments for hepatitis B and other viral diseases, NASH, and coronaviruses. It had no product revenue.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $17.3 million | $11.7 million | $51.8 million | $29.1 million |
| General and administrative expense | $4.2 million | $2.8 million | $11.7 million | $6.5 million |
| Total operating expenses | $21.6 million | $14.5 million | $63.5 million | $35.6 million |
| Net loss | $33.3 million | $14.1 million | $74.1 million | $34.1 million |
| Net loss per share, basic and diluted | $11.00 | $6.74 | $26.20 | $18.40 |
| Cash used in operating activities | Not provided for quarter | Not provided for quarter | $54.6 million | $31.7 million |
Losses increased as the company expanded research and development and administrative operations. The nine-month R&D increase was attributed mainly to third-party program costs and employee-related expenses. Q3 and nine-month losses also included significant noncash expense from remeasurement of the preferred-stock liability, which rose to $14.6 million at September 30 from $3.2 million at year-end 2019. Gross margin and operating margin are not meaningful for this pre-revenue company.
At September 30, 2020, cash and cash equivalents were $31.8 million; cash, cash equivalents, and investments totaled approximately $70.1 million. Current assets were $73.7 million and current liabilities $20.0 million. The company reported no debt outstanding apart from ordinary-course payables; it did have operating and finance lease liabilities. Accumulated deficit was $140.3 million.
Material changes and developments
- Nine-month operating cash use rose to $54.6 million from $31.7 million a year earlier; cash, cash equivalents, and restricted cash declined by $37.7 million during the period.
- After quarter-end, Aligos raised $40.0 million from issuing Series B-2 preferred stock on October 6, 2020. Its October IPO raised $135.4 million net; a partial overallotment exercise on November 5 added $16.0 million net. The filing reports total net IPO proceeds of approximately $151.4 million.
- In connection with the IPO, preferred shares converted into common stock. The company had also effected a 1-for-9.3197 reverse stock split in October; share and per-share data in the financial statements were retrospectively adjusted.
- Aligos reported first dosing in the Phase 1a/b trial of ALG-000184 on October 30, triggering a $4.5 million milestone payment. It described ALG-010133 as in Phase 1 and ALG-055009 for NASH as in nonclinical development.
Outlook, risks, and unusual items
Management expects substantial additional losses and higher R&D and public-company costs as programs advance. It stated that available cash, cash equivalents, and investments were expected to fund operations for at least 12 months following issuance of the financial statements, while cautioning that plans could change and additional capital may be needed. No quantified revenue or earnings guidance was provided.
- Clinical candidates are early-stage; success, safety, efficacy, regulatory approval, and commercialization are uncertain. The company relies substantially on third parties for research, trials, and manufacturing.
- Aligos warned that COVID-19 could disrupt trials, suppliers, operations, and access to capital, despite stating it did not then anticipate clinical-program impacts or supply issues.
- Intellectual property is a notable risk: the filing says the company had no issued patents specifically covering its named drug candidates and identifies potential third-party patent issues.
- The preferred-stock liability remeasurement materially increased reported expense; the filing describes the fair value estimates as dependent on significant unobservable inputs and assumptions.
- The filing reported no material legal proceedings or accrued contingencies at September 30. Management concluded disclosure controls were effective as of that date.
Investor verification points
- Confirm the post-IPO cash balance, subsequent spending, and current runway against the stated 12-month estimate.
- Track clinical-trial progress and data for ALG-010133 and ALG-000184, including timing, safety, enrollment, and any effects from COVID-19.
- Assess the status and scope of patent applications and potential third-party intellectual-property claims for the lead candidates.
- Verify the accounting and cash impact of the $4.5 million ALG-000184 milestone and other collaboration or licensing obligations.
- Reconcile reported losses with noncash preferred-stock liability remeasurement and monitor the continuing rise in operating expenses.