ALX Oncology Holdings Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited financial statements; amounts below are in U.S. dollars unless noted. ALX Oncology is a clinical-stage immuno-oncology company developing therapies targeting the CD47 checkpoint pathway. It has no marketed products and has not generated product revenue.
Financial and operating highlights
| Metric | Q2 2021 / June 30, 2021 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 | Q2 2020: $0.5 million related-party service revenue |
| Research and development expense | $11.2 million | Q2 2020: $7.7 million; up 46% |
| General and administrative expense | $5.1 million | Q2 2020: $3.2 million; up 60% |
| Net loss | $16.3 million; $0.40 per share | Q2 2020: $11.3 million net loss; $0.40 per share attributable to common stockholders was $13.97 million after preferred dividends, or $4.41 per share |
| Six-month net loss | $30.5 million | Six months 2020: $16.8 million |
| Cash and cash equivalents | $410.0 million | $434.2 million at December 31, 2020 |
| Cash used in operating activities | $25.8 million for six months | $15.1 million for six months 2020 |
| Debt and liquidity | No term loan outstanding; current liabilities $14.0 million | Term loan repaid in December 2020 |
At June 30, total assets were $421.3 million, total liabilities $16.3 million, and stockholders’ equity $405.0 million. The filing reports no product-sales revenue and no commercial gross margin; therefore, a product margin is not applicable. Management estimated existing cash would fund operations through 2024, subject to assumptions that could prove inaccurate. The company also stated that capital will likely be needed to fully implement its business plan; it had no committed external funding source.
Changes versus comparable periods
- Q2 operating expenses rose 44% to $16.3 million; six-month operating expenses rose 77% to $30.5 million. Higher clinical and development spending, personnel growth, and public-company costs were key drivers.
- R&D expense increased 83% for the first six months, primarily reflecting expanded evorpacept preclinical and clinical activity. G&A expense more than doubled, with higher stock compensation, headcount, insurance, legal, and filing costs.
- Related-party service revenue ended after the Tollnine agreement was terminated effective July 1, 2020. The 2021 Tallac Services Agreement instead generates R&D expense for preclinical services.
- Cash declined $24.3 million in the first half of 2021, versus a $89.1 million increase in the first half of 2020, when financing included $104.7 million net proceeds from preferred-stock issuance.
Outlook, commentary, risks, and unusual items
- Pipeline: More than 170 subjects had received evorpacept across hematologic and solid tumor studies. The company had initiated two randomized Phase 2 HNSCC trials and dosed the first subject in one in May; the first subject in the second was dosed in July 2021. First subjects had been dosed in an MDS study. Management planned AML clinical development, a second-line gastric/GEJ Phase 2 trial, and a Zymeworks-collaboration breast cancer Phase 1 trial in the second half of 2021.
- Regulatory development: In June 2021, FDA removed the partial clinical hold and 50-subject cap on the two HNSCC Phase 2 studies after reviewing a nonclinical safety study. Evorpacept had Fast Track designations for first-line HNSCC and second-line advanced HER2-positive gastric/GEJ cancer; the filing cautions that designation does not assure faster review or approval.
- Collaboration: The March 2021 Tallac collaboration covers development, manufacture, and commercialization of an anti-SIRPα antibody conjugated to a TLR9 agonist. The parties share R&D costs and profit or loss equally. ALX recorded $0.6 million of collaboration R&D expense in the first half and had $0.6 million accrued to Tallac at quarter-end.
- Funding and spending: The company expects significant continuing losses and higher R&D expense as trials advance. Management’s runway estimate through 2024 is based on assumptions; faster-than-expected spending or development needs could shorten it. Additional financing could dilute shareholders or impose restrictions, and may not be available on acceptable terms.
- Commitments and unusual items: Contractual obligations totaled $10.7 million, including $7.5 million for manufacturing and service contracts. Stanford and Selexis milestone payments of $0.2 million and $0.1 million, respectively, were recorded in Q2 following clinical milestones. A new South San Francisco office lease contributed approximately $1.8 million of ROU asset and lease liability; total operating and finance lease liabilities were $3.0 million at quarter-end. No material litigation was pending or threatened, and no off-balance-sheet arrangements were reported.
- Principal risks: Clinical efficacy and safety remain unproven; later trials may not confirm early findings. The company depends heavily on evorpacept, third-party manufacturers and CROs, and Tallac for preclinical research. COVID-19 could disrupt trials, enrollment, suppliers, or timelines. Competition, intellectual-property challenges, and the need for future financing are material risks.
- Controls: Management concluded disclosure controls were effective as of June 30, 2021. No material weakness was identified for the quarter; the filing notes prior material weaknesses had been remediated and that ERP-related controls would continue to be evaluated.
Important facts for investors to verify
- Clinical-trial enrollment, safety, efficacy, and timing for evorpacept, including progress following removal of the HNSCC patient cap.
- Whether management’s cash-runway estimate through 2024 remains supportable as trial and collaboration spending develops.
- Future R&D spending, manufacturing commitments, lease payments, and any additional milestone obligations.
- Execution and economics of the Tallac collaboration, including related-party balances and reliance on Tallac for preclinical research.
- Availability and terms of any future financing, and the potential for dilution or other shareholder impacts.