ALX Oncology Holdings Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023; filed August 10, 2023. ALX Oncology is a clinical-stage immuno-oncology company developing therapies targeting the CD47 pathway. It has no approved products and has generated no product revenue.
Financial position and results
| Metric | Q2 2023 / June 30, 2023 | Comparable period / prior balance |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $29.5 million for Q2; $54.2 million for six months | $26.7 million and $43.8 million, respectively |
| General and administrative expense | $7.3 million for Q2; $14.7 million for six months | $7.0 million and $14.7 million, respectively |
| Net loss | $34.2 million for Q2; $64.3 million for six months | $32.9 million and $57.5 million, respectively |
| Basic and diluted loss per share | $0.84 for Q2; $1.57 for six months | $0.81 and $1.41, respectively |
| Cash used in operating activities | $59.5 million for six months | $37.7 million |
| Cash, cash equivalents and investments | $224.5 million | $282.9 million at December 31, 2022 |
| Term loan | $10.0 million outstanding principal; $9.5 million net carrying value | No debt outstanding at June 30, 2022 |
At June 30, current assets were $219.6 million and current liabilities were $17.6 million. Total assets were $245.9 million, total liabilities $33.2 million, and stockholders’ equity $212.7 million. Gross margin is not applicable because the company has no product revenue.
Changes versus prior periods
- Q2 operating expenses increased 9% year over year; first-half operating expenses increased 18%, principally reflecting higher clinical and development costs as trials and enrollment expanded.
- First-half net loss grew 12% year over year. Higher interest income from rising rates partly offset increased operating expenses; interest expense also rose following the 2022 term loan.
- Operating cash use increased by $21.9 million year over year. The reported $48.5 million of investing cash inflow in first-half 2023 mainly reflected investment maturities exceeding purchases, not operating cash generation.
- Cash, cash equivalents and investments declined about $58.4 million from year-end 2022. Accumulated deficit reached $389.8 million.
Outlook, developments and risks
- Management estimates existing cash, investments and funds available under the term loan will fund operations through the middle of 2025, subject to assumptions that may prove inaccurate. The company expects continuing losses and says additional capital will be needed to fully implement its business plan.
- Evorpacept is being evaluated in multiple clinical programs, including randomized studies in gastric/GEJ cancer and head and neck cancer, and early-stage combination trials. FDA Fast Track designations and orphan drug designations are not assurances of approval.
- After quarter-end, in August 2023, the company announced it was ending development of ASPEN-02 in MDS after preliminary results did not show sufficient improvement over historical azacitidine activity. It also announced termination of ASPEN-05 in AML. The company plans to redirect resources toward solid-tumor programs; full ASPEN-02 results were expected at a future scientific conference.
- The ALTA-002 preclinical program’s IND filing was delayed by chemistry, manufacturing and controls issues and was planned for Q1 2024. The filing gives no assurance this timing will be met.
- The $100 million term-loan facility includes $40 million of additional borrowing availability through year-end 2023 and up to $50 million in further milestone- or lender-discretionary tranches. Availability is not assured. The company reported covenant compliance and amended collateral-account requirements in May 2023. SVB’s successor, SVB-First Citizens, is expected by the company to fulfill SVB’s lending commitments, but the company cautions that the full facility may not remain available.
- Key risks include clinical and regulatory uncertainty, reliance on third-party manufacturers and research providers, need for further financing and potential dilution, loan covenants and floating-rate exposure, competition, and intellectual-property risks. No pending or threatened litigation was reported. Management said disclosure controls were effective; a new procure-to-pay system was implemented during the quarter.
Investor verification priorities
- Confirm the cash runway assumptions and the remaining, actually drawable term-loan capacity, including any lender or milestone conditions.
- Review full ASPEN-02 data and subsequent progress, enrollment and readout timing for the continuing evorpacept trials.
- Track the ALTA-002 CMC remediation and whether the planned Q1 2024 IND filing proceeded.
- Assess cash burn, clinical and manufacturing commitments, and whether additional financing or equity issuance becomes necessary.
- Monitor the debt’s floating interest rate, collateral and covenant terms, and the status of SVB-First Citizens’ funding obligations.