Allogene Therapeutics, Inc. quarterly report, Q2 FY2022

Business context and reporting period

Allogene Therapeutics, Inc. is a clinical-stage immuno-oncology company developing off-the-shelf, genetically engineered allogeneic T-cell therapies for cancer. This unaudited Form 10-Q covers the three and six months ended June 30, 2022.

The company has no approved products and has not generated product sales. Reported collaboration revenue is from its related-party agreement with Allogene Overland.

Financial results and liquidity

At June 30, 2022, cash and cash equivalents were $96.0 million, short- and long-term investments totaled $590.1 million, and combined cash and investments were $686.1 million. Total assets were $947.6 million; stockholders’ equity was $801.9 million. The company reported no borrowings in the supplied balance sheet; operating lease liabilities totaled $103.6 million, including $5.3 million current and $98.2 million non-current. Six-month investing cash inflow was $31.7 million, mainly reflecting investment maturities and purchases; financing cash inflow was $1.8 million. Cash, cash equivalents and restricted cash declined by $77.3 million over the period.

Margins are not meaningfully informative for this development-stage company, given minimal collaboration revenue and no product sales. The company recorded $8.9 million of six-month unrealized losses on available-for-sale investments in other comprehensive loss.

Material changes versus the prior comparable period

• Six-month net loss increased $50.7 million, or 49%, to $154.6 million. The principal comparison effect was the $38.4 million of related-party collaboration revenue recognized in the first half of 2021 for license and know-how delivery; 2022 revenue was only $0.1 million.
• Six-month operating expenses rose 10% to $156.7 million. R&D increased 9%, largely from personnel, stock-based compensation, facilities and depreciation, partly offset by lower external development and manufacturing costs due to timing. G&A increased 12%, primarily with headcount-related costs.
• Q2 net loss increased 5% to $74.8 million. Q2 R&D rose 9%; management cited higher personnel and facility costs, partly offset by lower external program costs.
• Cash and investments declined from $809.5 million at December 31, 2021 to $686.1 million at June 30, 2022. Accumulated deficit increased to $1.1 billion.

Outlook, management commentary, risks and contingencies

• Management expects continued operating losses and increasing R&D and G&A expenses. It stated that cash and investments should fund operations for at least one year from the filing date, while also noting that additional capital will be needed to fully implement its business plan. The company may seek equity, debt or other financing; unavailable or inadequate financing could require delays or reductions in development activity.
• The FDA’s clinical hold, imposed in October 2021 after a chromosomal abnormality observation, was resolved in January 2022. Allogene planned to seek FDA agreement on ALLO-501A Phase 2 matters, including CMC and trial design, and expected to proceed in adult patients with relapsed or refractory large B-cell lymphoma subject to FDA clearance.
• In the UNIVERSAL multiple-myeloma trial, the company decided not to advance ALLO-715 plus nirogacestat into dose-expansion cohorts because it saw no clear evidence of a meaningful benefit-risk improvement over ALLO-715 alone. It expected a further multiple-myeloma program update by year-end 2022. The Phase 1 TRAVERSE trial of ALLO-316 in advanced or metastatic clear-cell renal-cell carcinoma was ongoing.
• COVID-19 had adversely affected patient enrollment and follow-up; the timing and overall impact remained uncertain. Principal business risks include clinical safety and efficacy, manufacturing transition and scale-up, regulatory requirements, donor-cell and raw-material supply, reliance on license and collaboration partners, competition, and the need for further financing. The filing also describes potential serious cell-therapy and lymphodepletion risks, including cytokine release syndrome, neurotoxicity, infection, cytopenias and graft-versus-host disease.
• Potential contingent obligations include development, regulatory and sales milestones and royalties under license agreements. Their timing and likelihood were not estimable. Non-cancellable purchase commitments were $3.7 million. The company also disclosed a 20-year solar-energy agreement with an approximately $4.3 million termination payment, and up to $15.0 million of funding committed under its five-year MD Anderson collaboration, contingent on agreed study orders.
• Management reported disclosure controls and procedures were effective. The company continued a phased SAP enterprise-resource-planning implementation and said it would monitor related changes to internal controls. It reported no material pending legal proceeding in the supplied filing text.

Important facts for investors to verify

• Confirm FDA feedback and timing for ALLO-501A Phase 2, including CMC comparability for manufacturing at Allogene’s facility.
• Review updated clinical safety, efficacy, durability and enrollment data for ALLO-501A, ALLO-715, ALLO-605 and ALLO-316, and the planned year-end multiple-myeloma update.
• Track cash burn, investment values and financing needs against management’s stated runway; assess potential dilution or debt constraints from future capital raises.
• Assess manufacturing-facility readiness, clinical supply reliability, donor-cell and specialty-material availability, and dependence on external manufacturers and partners.
• Monitor milestone and royalty exposure, lease commitments, and the execution and cost implications of the facility expansion.