Allogene Therapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Allogene is a clinical-stage immuno-oncology company developing engineered, off-the-shelf allogeneic T-cell therapies. It has no products approved for commercial sale and has not generated product-sales revenue.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Collaboration revenue | Less than $0.1 million | $0 | $38.4 million | $0 |
| Research and development expense | $52.3 million | $47.3 million | $107.5 million | $89.3 million |
| General and administrative expense | $18.8 million | $15.9 million | $35.1 million | $31.5 million |
| Net loss | $70.9 million | $61.0 million | $104.0 million | $115.5 million |
| Basic and diluted net loss per share | $0.53 | $0.53 | $0.78 | $1.03 |
- Revenue and margins: Six-month collaboration revenue was recognized primarily for granting a license and delivering know-how to Allogene Overland, a related-party joint venture. No product revenue or gross margin was reported; the filing does not provide a meaningful product-margin measure.
- Cash flow: Operating cash used was $90.5 million in the first half of 2021, versus $67.5 million in 2020. Investing activities provided $121.4 million, principally reflecting investment maturities net of purchases; financing provided $9.3 million. Cash, cash equivalents and restricted cash increased $40.2 million to $233.0 million.
- Liquidity: Cash and cash equivalents plus short- and long-term investments totaled $913.2 million at June 30, 2021, down from $1,032.1 million at December 31, 2020. Management expected available cash and investments to fund operations for at least one year from the filing date.
- Balance sheet and debt: Total assets were $1,126.7 million and total liabilities were $102.9 million. No borrowings are reported; liabilities include $54.4 million of operating lease liabilities. Stockholders’ equity was $1,023.8 million.
Changes versus the prior comparable period
- Q2 net loss increased $10.0 million year over year as operating expenses rose and interest income declined. R&D increased mainly from personnel and facility costs; G&A rose mainly from personnel costs. Lower external product-development costs partly offset Q2 R&D growth.
- First-half net loss improved by $11.5 million, largely because of $38.4 million in collaboration revenue, despite higher R&D and G&A expenses and lower interest income.
- First-half operating cash use increased $23.0 million. The cash-flow comparison was affected by a $38.7 million decrease in deferred revenue in 2021.
- Cash and investments declined from year-end, while the investment mix shifted toward long-term investments. The company invested a further $15.9 million in Notch Therapeutics; its equity-method investment was $18.8 million at quarter-end.
Outlook, commentary and risks
- Management expects continued operating losses and increases in R&D and G&A as programs advance. It may seek additional capital through equity, debt or other sources; unavailable financing could require delays or reductions to development plans.
- Clinical priorities include continued ALPHA and ALPHA2 studies of ALLO-501/ALLO-501A, with additional data expected in late 2021; additional ALLO-715 data expected in Q4 2021; and advancement of ALLO-605 and ALLO-316. The company said it might proceed to the Phase 2 portion of ALPHA2 at year-end, subject to further data and favorable FDA feedback.
- ALLO-605 received FDA Fast Track designation in June 2021, and the company initiated its Phase 1 IGNITE trial in mid-2021. Fast Track designation is not an assurance of approval.
- COVID-19 was adversely affecting clinical-trial enrollment and follow-up; the timing and full impact remained uncertain. Other principal risks include clinical safety or efficacy failures, manufacturing and donor-material constraints, reliance on partners and licensed technology, regulatory uncertainty, competition, and the need for further financing.
- Potential obligations under license and collaboration agreements include substantial development, regulatory and sales milestones and royalties if specified events occur. Timing and likelihood were not estimable. The company also reported $4.2 million of non-cancellable purchase commitments and a 20-year solar-energy agreement with an approximately $4.3 million termination payment.
- The filing reported no material pending legal proceedings. Disclosure controls were assessed as effective; phased SAP implementation was changing processes and controls, which management said it would continue to monitor.
Key facts for investors to verify
- Whether the $38.4 million first-half collaboration revenue is nonrecurring license-related revenue, and the timing of future revenue or milestone receipts from Allogene Overland.
- Updated trial data, enrollment and safety outcomes, and whether FDA feedback and manufacturing readiness support the stated ALPHA2 Phase 2 timetable.
- Actual operating cash burn and investment balances relative to management’s at-least-one-year liquidity estimate, including the pace and terms of any future financing.
- Progress, cost and qualification of the Newark manufacturing facility, and availability of donor cells, raw materials and contract-manufacturing capacity.
- Potential dilution and contingent milestone, royalty, lease and other contractual obligations as programs progress.