ALX Oncology Holdings Inc. — FY2020 Form 10-K Summary
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2020. ALX Oncology is a clinical-stage immuno-oncology company developing ALX148, a CD47-blocking biologic intended for use in combination with other cancer therapies. The company had no approved products and no product-sale revenue. Its reported revenue came from research and development services provided to related party Tallac Therapeutics.
Financial performance and position
| Metric | FY2020 | FY2019 |
|---|---|---|
| Related-party revenue | $1.2 million | $4.8 million |
| Research and development expense | $29.0 million | $16.3 million |
| General and administrative expense | $14.8 million | $3.3 million |
| Total operating expenses | $44.8 million | $24.0 million |
| Net loss | $45.7 million | $19.2 million |
| Net loss attributable to common stockholders | $50.9 million | $23.3 million |
| Basic and diluted loss per share attributable to common stockholders | $2.76 | $7.56 |
| Cash used in operating activities | $38.3 million | $14.2 million |
- Revenue was reimbursement for related-party research services, not product sales. The services agreement ended July 1, 2020.
- At December 31, 2020, cash and cash equivalents were $434.2 million; working capital was $429.8 million; total assets were $436.1 million and total liabilities were $6.2 million. The term loan was repaid in December 2020, leaving no term-loan balance at year-end.
- Cash increased by $425.2 million during 2020, primarily from net proceeds of the IPO, follow-on offering and Series C preferred-stock financing. The company reported no off-balance-sheet arrangements.
- Margins based on product sales are not meaningful because the company had no product revenue. Management estimated existing cash would fund operations through 2024, subject to assumptions and execution risks.
Material changes versus prior periods
- Annual net loss increased to $45.7 million from $19.2 million as research and development spending rose 78% and G&A spending rose substantially while the related-party service revenue declined.
- Operating cash use increased to $38.3 million from $14.2 million, reflecting the larger operating program and changes in working capital.
- Quarter four 2020 operating expenses were $17.8 million, versus $8.9 million in Q4 2019. Net loss attributable to common stockholders was $18.8 million versus $8.8 million; reported loss per share was $0.50 versus $2.83, affected by a much larger weighted-average share count in 2020.
- The company completed its IPO and follow-on offering, converted preferred stock into common stock, and repaid its $6.0 million term-loan principal. It recorded a $0.6 million loss on early debt extinguishment.
Outlook, management commentary, risks and unusual items
- Management expected rising R&D and public-company costs and continuing losses as ALX148 advances. Planned 2021 development included randomized Phase 2 trials in first-line head and neck cancer and second-line HER2-positive gastric/GEJ cancer, a Phase 1 breast-cancer study, and an AML trial planned for the second half of 2021. These are plans, not assured outcomes.
- ALX148 had been administered to more than 170 subjects by year-end. Company-reported early-stage results included a 70.0% objective response rate in the highest-dose evaluable relapsed/refractory NHL cohort (7 of 10), 40% in checkpoint-inhibitor-naïve HNSCC subjects treated with pembrolizumab (4 of 10), and 64.3% in a 14-subject gastric/GEJ combination cohort. These small, non-pivotal cohorts do not establish efficacy or approval prospects.
- The FDA granted Fast Track designation for ALX148 in first-line HNSCC and second-line HER2-positive gastric/GEJ cancer. The FDA also imposed a partial clinical hold limiting enrollment across the two planned HNSCC Phase 2 trials to 50 ALX148-treated subjects pending acceptance of a routine non-clinical safety study report; management did not anticipate timeline delays.
- Key risks include clinical-trial failure or delay, uncertain regulatory approval and accelerated-approval pathways, competition in CD47 blockade, reliance on third-party manufacturers and research/clinical service providers, potential COVID-19 disruption, intellectual-property challenges, and the need for additional capital if spending or timelines exceed assumptions. The company stated that its existing cash was expected to last through 2024 but noted there was no committed external funding.
- Unusual and governance items: $5.4 million of stock-based compensation was recorded in 2020, including $1.7 million related to award modifications; the company reported prior material weaknesses in financial reporting controls as remediated at December 31, 2020. Management’s formal internal-control assessment and auditor attestation were omitted under the transition rules for newly public companies. The auditor issued an unqualified opinion on the financial statements.
- After year-end, on March 4, 2021, ALX Oncology entered a Tallac collaboration to develop an anti-SIRPα antibody conjugated to a TLR9 agonist, with the parties sharing research and development costs and any profit or loss equally.
Important facts for investors to verify
- Whether subsequent trial data confirm the early response and tolerability signals, particularly in adequately sized, randomized studies.
- Progress and FDA acceptance of the non-clinical safety report, the HNSCC enrollment cap, and the timing and design of planned trials and potential accelerated-approval discussions.
- Actual cash burn, clinical and manufacturing commitments, and whether management’s runway estimate through 2024 remains supportable.
- Manufacturing capacity and third-party performance, including the terms, costs and execution of the Tallac research and collaboration arrangements.
- Potential dilution from equity compensation and future financing, and the status of the company’s intellectual-property rights and related third-party patent matters.