Allogene Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Allogene is a clinical-stage immuno-oncology company developing off-the-shelf allogeneic T-cell therapies. It reported no product revenue; margins are therefore not meaningful.
Financial and operating performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Research and development expense | $51.4 million | $40.0 million | $140.8 million | $95.2 million |
| General and administrative expense | $16.6 million | $15.0 million | $48.1 million | $42.3 million |
| Total operating expenses | $68.0 million | $55.0 million | $188.9 million | $137.4 million |
| Net loss | $66.2 million | $50.7 million | $181.7 million | $123.6 million |
| Net loss per share, basic and diluted | $0.52 | $0.50 | $1.55 | $1.24 |
- R&D expense increased 29% in Q3 and 48% for the nine-month period, primarily from higher personnel and external program costs, including stock-based compensation. G&A rose 11% and 14%, respectively.
- Interest and other income declined to $2.0 million in Q3 and $7.6 million for nine months, largely due to lower interest earned on cash and investments.
- At September 30, cash and cash equivalents were $158.1 million; short- and long-term investments totaled $890.9 million. Combined cash, cash equivalents and investments were approximately $1.0 billion.
- Current assets were $854.1 million versus current liabilities of $50.1 million. Total liabilities were $103.8 million, including $53.7 million of operating lease liabilities. The filing reports no borrowings or debt financing outstanding.
- Nine-month operating cash use was $105.1 million; property and equipment purchases were $48.6 million. Financing provided $620.6 million, mainly from the June public offering. Cash, cash equivalents and restricted cash ended at $167.6 million.
Material changes and business developments
- In June 2020, Allogene issued 13.46 million shares in a public offering at $47 per share, receiving approximately $595.7 million net. January ATM sales generated $14.8 million net. Shares outstanding were 139.8 million at September 30, compared with 124.3 million at December 31, 2019.
- Property and equipment, net, increased to $102.7 million from $56.4 million at year-end, reflecting continued investment in facilities and manufacturing capacity.
- Servier cost-sharing recoveries reduced R&D expense by $4.1 million in Q3 and $5.9 million for nine months. The company recorded $2.0 million of Notch collaboration costs for the nine-month period.
- On October 6, 2020, Allogene entered a five-year research collaboration with MD Anderson and committed up to $15.0 million for preclinical and clinical investigations.
Outlook, risks and contingencies
- Management expects continued operating losses and increasing R&D, G&A and capital expenditures. It stated that available cash and investments should fund operations for at least one year from the filing date, while also noting that additional capital will be needed to fully implement its business plan.
- COVID-19 adversely affected enrollment and follow-up in the ALPHA, ALPHA2 and UNIVERSAL trials, limited onsite staffing, and interrupted construction of the Newark manufacturing facility. The duration and total impact remain uncertain.
- Key program expectations included initial UNIVERSAL trial data in Q4 2020, progression of ALPHA2 to its Phase 2 portion in 2021, and an IND filing by year-end 2020 for an ALLO-715/nirogacestat combination trial. The company also described planned IND submissions for ALLO-316 by year-end 2020 and ALLO-605 in the first half of 2021.
- Material development risks include clinical efficacy and safety uncertainty, patient enrollment and manufacturing challenges, dependence on third-party manufacturers and licensed gene-editing technology, regulatory uncertainty, and competition. The filing describes serious adverse events in trials, including deaths attributed to UCART19 in the CALM and PALL studies.
- License agreements may require substantial future milestone payments and royalties if development, regulatory or sales events occur; timing and likelihood were not estimable. Other disclosed obligations include $3.9 million of non-cancellable purchase commitments and a 20-year solar-energy agreement with an approximately $4.3 million termination payment under specified circumstances.
- Management reported no pending legal matters believed likely to have a material adverse effect. Disclosure controls and procedures were assessed as effective, with no material change in internal control over financial reporting identified for the quarter.
Important facts for investors to verify
- Clinical-trial updates, including UNIVERSAL data, ALPHA/ALPHA2 progress, safety events and the effects of COVID-19 on enrollment and follow-up.
- Whether planned IND and trial milestones are achieved, and whether regulators require additional studies or manufacturing data.
- Actual cash burn, construction and commissioning progress at the Newark facility, and the durability of the stated funding runway as costs grow.
- Potential dilution and future financing needs, as well as contingent milestone, royalty and collaboration obligations.
- Manufacturing supply, donor-material availability and reliance on Cellectis, Servier, Notch and other third parties.