Allarity Therapeutics, Inc. — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. The financial history principally reflects predecessor Allarity Therapeutics A/S, treated as the accounting acquirer in the December 20, 2021 recapitalization and asset transfer to the Delaware company.
Business context and reporting period
Allarity is a clinical-stage oncology company developing previously studied drug candidates alongside its Drug Response Predictor (DRP) companion-diagnostic platform. Its priority programs were dovitinib, stenoparib and IXEMPRA (ixabepilone). The company reported no approved products and no significant product-sales revenue; it relies on financing, collaborations and limited other receipts to fund development.
Key financial metrics
| Metric | 2021 | 2020, restated |
|---|---|---|
| Revenue | No significant product-sales revenue reported | No significant product-sales revenue reported |
| Research and development expense | $14.196 million | $4.218 million |
| General and administrative expense | $12.360 million | $4.101 million |
| Operating loss | $26.556 million | $8.319 million |
| Net loss | $26.648 million | $6.617 million |
| Basic and diluted loss per share | $4.19 | $2.03 |
| Net cash used in operating activities | $15.050 million | $7.251 million |
| Cash at year-end | $19.555 million | $0.298 million |
| Total assets / total liabilities | $49.633 million / $30.849 million | $33.403 million / $8.964 million |
With no meaningful product revenue, gross margin is not informative; the filing does not provide a meaningful operating-margin comparison. Net other income was $41,000 in 2021 versus $1.900 million in restated 2020. The 2021 figure included a $1.005 million gain from an intellectual-property sale and fair-value movements in derivative liabilities and debt.
Year-end liabilities included $11.273 million of warrant liability, $7.181 million of derivative liabilities, $8.590 million of accrued liabilities (including a $5.000 million Novartis development milestone), and a $979,000 convertible promissory note with accrued interest. The company repaid its $2.9 million 2021 bridge loan. Operating lease obligations were $114,000.
Material changes versus the prior comparable period
- Operating expenses rose $18.237 million year over year. R&D increased $9.978 million, including the $5.000 million dovitinib milestone, higher staffing, contractor and manufacturing costs, and resumed clinical activity. G&A increased $8.259 million, largely from professional fees, staffing, and U.S. public-company and listing costs.
- Operating cash use increased by $7.799 million. Financing provided $33.819 million in 2021, principally through the $20 million Series A preferred financing and common-share issuance; investing cash inflow was $1.000 million from an IP sale.
- The 2020 financial statements were restated for an unrecorded Novartis-related convertible note and an understated deferred-tax valuation allowance, among other presentation corrections. Restated 2020 net loss was $6.617 million, $1.544 million higher than previously reported.
- On December 20, 2021, the company completed its recapitalization and Nasdaq listing and issued 20,000 Series A preferred shares for $20 million, together with a warrant to purchase up to 2,018,958 common shares. The preferred stock and warrant include conversion-price adjustments and other provisions that may materially affect dilution and cash obligations.
Outlook, management commentary, risks and unusual items
- Liquidity and going concern: Management said year-end cash was insufficient for at least 12 months of planned operations and estimated available cash would fund approximately six months from the filing date. The auditor included a going-concern explanatory paragraph. Management expects to seek additional equity, debt, collaboration or other financing; success and terms are uncertain.
- Dovitinib regulatory setback: The FDA issued Refusal to File letters on February 15, 2022 for both the dovitinib NDA and its companion-diagnostic PMA. The filing says the FDA questioned the use of data from a superiority-designed Phase 3 study to support a non-inferiority approach. Allarity anticipated that a new prospective Phase 3 study might be needed and planned further FDA discussions. The filing does not establish a definitive approval path.
- Other pipeline: Stenoparib was in a DRP-guided Phase 2 ovarian-cancer trial and IXEMPRA in a Phase 2 European metastatic-breast-cancer trial. Management reported COVID-19-related enrollment delays and expected trial readouts in the second half of 2022 for stenoparib and the second half of 2023 for IXEMPRA; these were forward-looking targets, not reported results.
- Financing obligations: The Series A terms can provide for an 18% annual dividend during specified triggering events and redemption at a minimum of 125% of the conversion amount. Registration delays can also generate payments of 2% of the investor’s purchase price initially and every 30 days thereafter. A triggering event occurred April 29, 2022 related to resale-registration availability. Under a May 2022 forbearance agreement, the investor agreed temporarily to forbear specified remedies, subject to conditions; Allarity paid $538,823 for specified amounts and legal fees. The agreement’s forbearance period was limited and conditional.
- Other post-year-end developments: Allarity licensed pediatric-cancer development rights for dovitinib and stenoparib to Oncoheroes, receiving $350,000 upfront. It transferred LiPlaCis development rights to Chosa and retained potential milestone proceeds, while reporting discussions concerning 2X-111 development. It sold Irofulven rights and inventory to Lantern Pharma for $1 million upfront plus potential milestones and royalties.
- Financial reporting controls: Management concluded disclosure controls were ineffective and identified material weaknesses involving U.S. GAAP and SEC-reporting resources, accounting policies and procedures, complex transactions, and segregation of duties. The company also disclosed the 2020 restatement. Remediation efforts were underway, but completion was not assured.
- Other risks: The company depends on third-party clinical, manufacturing and diagnostic providers; faces uncertain trial outcomes, patient-enrollment and regulatory risks, licensing obligations, competition, and possible financing dilution. COVID-19 had delayed trials. Management said the Russia-Ukraine conflict had not yet affected results but could increase costs.
Important facts for investors to verify
- Current cash, burn rate, financing plans and runway, including whether new funding has been secured on acceptable terms.
- FDA feedback and the required clinical and diagnostic evidence for a complete dovitinib NDA and PMA, including whether a prospective Phase 3 trial is required.
- Enrollment, safety and efficacy updates for stenoparib and IXEMPRA, and whether the stated trial timelines remain achievable.
- Current status and potential cost of Series A registration-delay payments, triggering-event remedies, preferred-stock conversions, warrant dilution and forbearance obligations.
- Remediation of internal-control weaknesses and the impact of the restatement, including the accounting and valuation of complex financial instruments and intangible assets.
- Milestone, royalty and development obligations to Novartis, Eisai and other licensors, plus the status and economics of post-year-end licensing arrangements.