Aligos Therapeutics, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The company is a clinical-stage biopharmaceutical developer focused on viral and liver diseases; it had no approved products and generated no product-sales revenue. The 10-K was filed March 23, 2021.
Financial results and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $79.9 million | $44.0 million |
| General and administrative expense | $17.9 million | $10.0 million |
| Total operating expenses / operating loss | $97.8 million | $54.0 million |
| Net loss | $108.5 million | $52.3 million |
| Net loss per share, basic and diluted | $10.87 | $26.04 |
| Net cash used in operating activities | $74.3 million | $46.8 million |
| Cash, cash equivalents and investments | $243.5 million | $127.7 million |
| Working capital | $219.7 million | $106.4 million |
Figures are in U.S. dollars. Margins are not meaningful because the company reported no product-sales revenue. The per-share loss comparison is affected by the substantial change in shares outstanding, including the IPO and conversion of preferred stock.
Year-end total assets were $265.3 million and current liabilities were $30.3 million. Total liabilities were $45.3 million, including operating and finance lease obligations; the filing does not report conventional borrowings outstanding at year-end. Operating cash use increased year over year. The company reported $192.3 million of financing cash flow, principally IPO proceeds and preferred-stock financing.
Material changes versus 2019
- Net loss more than doubled, while operating expenses increased 81%. R&D expense rose 81%, primarily from higher third-party research and development costs and employee-related costs as programs advanced.
- G&A expense rose 79%, reflecting higher personnel and third-party costs and expenses associated with becoming a public company.
- Other expense was $11.8 million, versus other income of $0.3 million in 2019. The 2020 amount was primarily a noncash fair-value loss on preferred-stock and warrant liabilities before the IPO; those liabilities were retired or converted in connection with the IPO.
- The October 2020 IPO and partial overallotment generated approximately $155.5 million in net proceeds. The company also received $40.0 million from its Series B-2 preferred-stock financing before conversion of preferred shares into common stock at the IPO.
- Collaboration-related deferred revenue was $12.0 million at year-end. The Merck upfront payment was recorded as deferred revenue, not recognized as 2020 revenue.
Business, outlook and key risks
- Pipeline: The lead programs are ALG-010133, a STOPS oligonucleotide, and ALG-000184, a capsid assembly modulator, both in Phase 1 trials for chronic hepatitis B (CHB). The filing reports that the healthy-volunteer portions had been completed and that patient evaluation for ALG-010133 began in March 2021; safety and antiviral data were anticipated in the second half of 2021. ALG-020572 (ASO) and ALG-125755 (siRNA) were earlier-stage CHB candidates. ALG-055009, a THR-β agonist for NASH, remained in nonclinical development.
- Other programs: Coronavirus candidates, including protease inhibitors and oligonucleotides, were at an early discovery stage. The company’s strategy is to test candidates individually and then pursue combination regimens where supported by results.
- Stated outlook: Management expected significant expenses and operating losses to continue for at least several years and did not expect product revenue for several years, if ever. It estimated existing cash, cash equivalents and investments would fund planned operations for at least 12 months following issuance of the financial statements, while cautioning that plans and capital needs could change.
- Collaborations: Under the December 2020 Merck agreement, Aligos is eligible for up to $458 million in development and commercialization milestones per collaboration target, plus tiered royalties. These amounts are contingent, not assured revenue. Merck is responsible for subsequent research, clinical development and commercialization after Aligos delivers optimized lead molecules.
- Principal risks: Clinical and regulatory failure or delay; adverse effects; competition; dependence on CROs and contract manufacturers; financing needs; COVID-19 disruption; and collaboration and licensing risks. The company also disclosed that it had no issued patents specifically directed to several named lead candidates as of year-end, making patent prosecution and protection important uncertainties.
- Contingencies and controls: No material litigation was reported, and no contingent liabilities requiring accrual were identified at year-end. Management concluded disclosure controls were effective; the auditor did not attest to internal-control effectiveness, consistent with the company’s newly public status.
Important facts for investors to verify
- Subsequent clinical-trial updates, including safety, antiviral activity, enrollment, timelines and any changes to the development plans for ALG-010133 and ALG-000184.
- Cash and investment balances, actual operating cash burn, and whether management’s stated runway remains adequate as R&D spending grows.
- Recognition and timing of collaboration revenue, and the conditions, payment terms and termination provisions attached to Merck and other licensing agreements.
- Patent application progress, third-party intellectual-property claims, and the potential impact of milestone and royalty obligations.
- Whether NASH and coronavirus programs advance, and how competition, regulatory developments and COVID-19-related effects change their prospects.