Alector, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Alector is a clinical-stage biopharmaceutical company developing immuno-neurology therapies. It had no approved products and generated no product-sale revenue; reported revenue was collaboration revenue, principally under the AbbVie agreement. Figures below are in millions of dollars except per-share data.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $6.6 | $3.2 | $10.7 | $10.3 |
| Research and development expense | $47.8 | $34.1 | $93.6 | $68.7 |
| General and administrative expense | $14.1 | $15.7 | $25.1 | $30.3 |
| Total operating expenses | $61.9 | $49.8 | $118.6 | $99.0 |
| Operating loss | $(55.3) | $(46.6) | $(108.0) | $(88.7) |
| Net loss | $(55.1) | $(45.3) | $(107.3) | $(85.3) |
| Net loss per share, basic and diluted | $(0.69) | $(0.58) | $(1.35) | $(1.11) |
| Cash used in operating activities | — | $(97.2) | $(78.3) |
- R&D growth reflected investment in early-stage programs, higher AL002 clinical costs, and increased personnel expenses. Lower G&A reflected the end of arbitration-related legal costs, partly offset by higher personnel costs.
- At June 30, cash and cash equivalents were $125.7 million and marketable securities were $193.9 million, totaling $319.6 million. Current assets were $329.3 million and current liabilities $74.4 million.
- No borrowings or financial debt are reported in the balance sheet. Liabilities included $121.6 million of deferred revenue and operating lease liabilities.
- Accumulated deficit was $517.4 million. Stockholders’ equity was $184.5 million. The company had 80.0 million shares outstanding at June 30.
- Margins are not a meaningful measure for this clinical-stage company; it had no product sales and operating expenses substantially exceeded collaboration revenue.
Material changes and notable developments
- Q2 collaboration revenue rose $3.4 million year over year, while R&D expense increased $13.8 million and net loss widened $9.8 million. For the first half, revenue was nearly flat, R&D expense rose $24.9 million, and net loss widened $22.0 million.
- Operating cash use increased by $19.0 million year over year in the first half. Investing cash inflow of $166.1 million primarily reflected maturities of marketable securities; financing cash inflow was $6.8 million, mainly from stock-option exercises.
- Subsequent event: On July 1, 2021, Alector signed a collaboration and license agreement with GSK for AL001 and AL101. Subject to required approvals and closing conditions, Alector is to receive $700 million in upfront payments ($500 million expected in Q3 2021 and $200 million expected in Q1 2022), plus potential milestones of up to $1.5 billion. In the U.S., the parties will generally share development costs 40% Alector/60% GSK and share commercialization profits and losses equally; outside the U.S., GSK will commercialize and Alector is eligible for double-digit tiered royalties. The agreement was not reflected in June 30 cash or financial results.
- Management said existing cash, cash equivalents, and marketable securities, together with anticipated GSK proceeds, were expected to fund operations into mid-2024. This estimate depends on assumptions and may change; management also stated it may seek financing opportunistically.
Outlook, commentary, and risks
- No approved products or product-sale revenue are expected in the near term. Management expects continued losses and substantially higher R&D spending as trials and discovery programs advance.
- AL001 was in a pivotal Phase 3 trial for FTD-GRN; AL002 had entered Phase 2; AL003 and AL101 were in Phase 1. Management expected initial AL101 Phase 1a data in 2021 and expected to advance AL044 into first-in-human studies in 2022.
- Management reported July 2021 open-label Phase 2 AL001 results in up to 12 symptomatic FTD-GRN patients: favorable safety, restoration of progranulin levels, and exploratory biomarker and clinical measures compared with a matched historical control. These findings are not definitive evidence of efficacy; the pivotal Phase 3 trial remains an important test.
- COVID-19-related site interruptions, delayed visits or doses, and enrollment challenges could delay trials or affect data integrity. Other central risks include clinical failure or adverse effects, regulatory uncertainty, reliance on collaborators and contract manufacturers, competition, and the need for future capital.
- The company reported effective disclosure controls as of June 30, 2021, no material changes in internal control over financial reporting during the quarter, and no legal proceedings management considered likely to have a material adverse effect.
Investor facts to verify
- Whether the GSK agreement obtained required approvals and closed, and when the upfront payments were received.
- Cash burn and updated runway assumptions, including Alector’s share of collaboration development costs and future financing needs.
- Enrollment, timing, and results of the AL001 Phase 3 trial; assess the July 2021 open-label findings separately from controlled pivotal evidence.
- Progress and data timing for AL002, AL003, and AL101, and the effect of COVID-19 or other operational disruptions on trial quality and timelines.
- Future AbbVie collaboration revenue recognition, which depends on estimated program costs; the filing says a cost-forecast increase reduced Q2 revenue by about $0.7 million.