Allogene Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Allogene is a clinical-stage immuno-oncology company developing allogeneic CAR T-cell therapies; it has no approved products and has generated no product-sales revenue.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Collaboration revenue | $0.04 million | $0.09 million | $0.10 million | $0.15 million |
| Research and development expense | $62.0 million | $57.2 million | $142.3 million | $117.3 million |
| General and administrative expense | $18.5 million | $19.5 million | $37.4 million | $39.4 million |
| Net loss | $78.0 million | $74.8 million | $176.7 million | $154.6 million |
| Net loss per share, basic and diluted | $0.53 | $0.52 | $1.21 | $1.09 |
| Net cash used in operating activities | — | $128.5 million | $110.8 million |
Q2 operating expenses rose 5%; the loss increased 4%. For the first half, operating expenses rose 15% and the loss increased 14%. Higher R&D reflected substantially lower Servier cost recoveries and, year to date, increased external development and manufacturing costs. Higher interest income partly offset operating losses. Product revenue and meaningful commercial margins are not present; gross margin is not applicable to the company’s current revenue base.
Liquidity, capital and obligations
- At June 30, cash and cash equivalents were $154.8 million; short- and long-term investments were $389.8 million. Together these totaled approximately $544.5 million.
- First-half operating cash use was $128.5 million. Investing activities provided $130.1 million, primarily from investment maturities net of purchases; financing provided $91.3 million, chiefly from ATM share sales. Cash, cash equivalents and restricted cash increased $92.9 million to $165.1 million.
- In Q2, the ATM offering issued 20.3 million shares for $87.9 million net proceeds; $77.9 million remained available under the sales agreement at quarter-end. Common shares outstanding were 167.1 million at June 30 and 167.6 million at July 31.
- The filing reports no borrowings or funded debt. Operating lease liabilities totaled $98.2 million, including $6.4 million current and $91.8 million non-current. Lease obligations are not equivalent to funded debt.
- Management said available cash and investments should fund operations for at least 12 months from filing and described expected runway into the second half of 2025. The company expects continuing losses and says further capital may be needed.
Business, clinical developments and outlook
- Management reported updated Phase 1 ALPHA/ALPHA2 data for 33 CAR-T-naïve patients with relapsed/refractory large B-cell lymphoma: overall response rate was 58% and complete response rate 42%. In the 12-patient Phase 2-regimen subgroup, those rates were 67% and 58%, respectively. Median duration of response was reported as 23.1 months for both the overall group and that subgroup. These are limited, early-stage data, not confirmatory evidence of efficacy.
- Management expected to complete ALPHA2 enrollment in the first half of 2024, with an initial data readout planned by year-end 2024. The randomized EXPAND trial is evaluating ALLO-647’s contribution to the ALLO-501A lymphodepletion regimen. These are company plans, subject to enrollment, results and regulatory discussions.
- Enrollment was paused in the UNIVERSAL and IGNITE multiple-myeloma trials while the company reviewed and optimized manufacturing for its BCMA program. For TRAVERSE (ALLO-316), management intended, subject to results, to complete dose exploration and begin expansion-cohort enrollment in 2023.
- Key risks include uncertain clinical efficacy and durability, serious treatment-related toxicities, manufacturing consistency and scale-up, patient enrollment, regulatory uncertainty, reliance on licensed technology and partners, competition, and the need for additional financing. The company previously experienced an FDA clinical hold following a chromosomal abnormality; it reported that the hold was resolved and its investigation did not attribute the abnormality to gene editing.
- Servier discontinued its involvement in CD19-product development in 2022. Allogene and Servier dispute the scope and timing of the ex-U.S. license option and continuing cost-sharing obligations. In July 2023, Servier issued a further breach notice alleging overcharges; Allogene disputes the allegations. Unresolved matters may go to arbitration.
- After quarter-end, on July 11, Allogene amended its Antion agreement: Antion’s exclusivity obligation ended, and Allogene agreed to a $2 million preferred-share investment and warrants to purchase an additional $3 million of preferred shares. The CFO resigned effective August 2; the CEO was appointed principal financial officer and the controller principal accounting officer effective August 3.
Most important facts for investors to verify
- Cash runway assumptions, quarterly operating cash burn, and the timing and terms of any additional financing or ATM issuance.
- ALPHA2 and EXPAND enrollment progress, final and longer-term efficacy and safety data, and whether regulators accept the proposed evidence for approval.
- BCMA manufacturing optimization and the impact on UNIVERSAL and IGNITE, as well as manufacturing readiness and consistency across programs.
- Outcome of the Servier disputes, including cost-sharing, the ex-U.S. option, and any arbitration or effects on CD19 development.
- Potential dilution from equity compensation and further share sales; first-half ATM issuance materially increased shares outstanding.
- Lease commitments, contingent licensing milestones and royalties, and the resolution of the stated management succession and control-system implementation matters.