ALX ONCOLOGY HOLDINGS INC quarterly report, Q3 FY2023

Business context and reporting period

ALX Oncology Holdings Inc. is a clinical-stage immuno-oncology company developing therapies targeting the CD47 checkpoint. Its lead candidate, evorpacept, is being studied in multiple Phase 1 and Phase 2 trials. The unaudited 10-Q covers the quarter and nine months ended September 30, 2023. The company reported no product revenue and has no approved products.

Financial performance and position

• Research and development spending drove the increase in losses, primarily reflecting more active trials, patient enrollment, and clinical-material manufacturing. The company has no meaningful product-sales margins to report.
• Net cash used in operating activities was $90.7m for the first nine months of 2023, versus $68.6m in 2022. Investing activities provided $61.3m, mainly from investment maturities; financing activities provided $0.1m.
• At September 30, cash and cash equivalents were $19.6m, with short- and long-term investments of $176.9m, for total cash and investments of about $196.4m. Total assets were $220.1m and stockholders’ equity was $168.8m.
• The balance sheet reported $9.6m of net non-current term debt; the loan’s gross outstanding principal was approximately $10.0m. The loan bears floating-rate interest and is secured by substantially all assets, subject to stated exceptions. The company reported compliance with its financial reporting covenants.

Changes versus the prior comparable period

• Q3 operating expenses increased 45% year over year to $53.3m; nine-month expenses increased 28% to $122.3m. Q3 net loss widened 44%, and nine-month net loss widened 24%.
• Q3 R&D expense rose 56%; management attributed the increase mainly to clinical development and manufacturing costs. G&A expense was broadly stable.
• Interest income increased with higher interest rates, while interest expense rose because the term loan was entered into in October 2022.
• Cash, cash equivalents and investments declined from approximately $282.9m at December 31, 2022 to $196.4m at September 30, 2023.

Outlook, commentary, and risks

• In October 2023, after quarter-end, the company completed a follow-on offering of 8,663,793 common shares and pre-funded warrants for 1,250,000 shares, generating approximately $59.0m net proceeds. As of November 6, 2023, 49,818,812 common shares were outstanding.
• Management estimated that cash, investments, the October offering proceeds and funds available under the term loan would support operations into early 2026, subject to assumptions that may prove inaccurate. The filing also notes the need for additional capital and that financing may not be available on acceptable terms.
• In October, the company reported prespecified interim Phase 2 results from ASPEN-06 in gastric/GEJ cancer: confirmed response rate was 52% with evorpacept plus the treatment backbone versus 22% for the control backbone; median duration of response was not reached versus 7.4 months. Results are interim and may change with further follow-up and data review.
• The company terminated development of evorpacept with azacitidine in MDS after ASPEN-02 did not show sufficient activity to support Phase 2, and will not proceed with the planned ASPEN-05 dose-optimization study in AML. It plans to redirect resources toward antibody and PD-1/PD-L1 combination programs.
• Management expected to submit an IND for preclinical candidate ALTA-002 in Q1 2024, while noting a CMC-related delay. Evorpacept development depends on clinical results, regulatory decisions, trial enrollment, and third-party manufacturers and service providers.
• Other notable risks include continuing losses, dependence on evorpacept, potential dilution from future financings and the recent offering, loan covenants and lender availability, competition, and uncertainty around clinical and regulatory outcomes. The company reported no pending or threatened litigation and no off-balance-sheet arrangements. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting.

Important facts for investors to verify

• Follow-up and final results from ASPEN-06, including whether interim response and duration-of-response findings persist.
• Clinical, enrollment, safety, and regulatory milestones for evorpacept’s ongoing trials, and the timing of the ALTA-002 IND filing.
• Cash burn and runway assumptions, including the availability and terms of any remaining loan tranches and the need for additional financing.
• The effects of the October 2023 offering and pre-funded warrants on fully diluted share count and future dilution.
• Manufacturing commitments and third-party supply capacity, as well as compliance with loan covenants and any material changes in liquidity or investment risk.