Allogene Therapeutics, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Allogene is a clinical-stage immuno-oncology company developing off-the-shelf allogeneic T-cell therapies. It had no approved products and reported no product revenue.
Financial position and results
Amounts below are in millions of dollars unless noted. The company remained loss-making, with no meaningful revenue base from which to assess operating margins.
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Research and development expense | $31.8 | $122.5 | $55.2 | $122.5 |
| General and administrative expense | $14.2 | $12.5 | $27.2 | $15.1 |
| Total operating expenses | $46.0 | $135.0 | $82.4 | $137.6 |
| Net loss | $41.2 | $134.9 | $72.8 | $137.5 |
| Net loss per share, basic and diluted | $0.41 | $43.82 | $0.74 | $9.42 |
| Interest and other income, net | $4.6 | $0.1 | $9.4 | $0.1 |
At June 30, 2019, cash and cash equivalents were $112.6 million, short- and long-term investments totaled $537.6 million, and combined cash and investments were $650.2 million. Total assets were $734.0 million, total liabilities $78.4 million, and stockholders’ equity $655.6 million. No borrowing debt is listed on the balance sheet; it reports a $34.9 million noncurrent operating lease liability. The company had an accumulated deficit of $284.4 million.
For the six months, operating cash flow was negative $55.1 million, investing cash flow was positive $77.4 million, and financing cash flow was positive $0.9 million. Cash, cash equivalents and restricted cash ended at $116.9 million. Investing cash inflows primarily reflected investment maturities, partly offset by investment purchases and $18.3 million of property and equipment purchases. Property and equipment rose to $35.8 million, including $23.5 million of construction in progress.
Changes versus prior comparable periods
- Reported R&D expense and net loss fell substantially from 2018, largely because 2018 included a $109.4 million noncash charge for acquired in-process R&D from Pfizer. Excluding that comparison effect, the company said underlying R&D costs increased as personnel, pipeline development and facility costs grew.
- Six-month G&A expense increased 80% to $27.2 million, primarily due to higher personnel costs, including stock-based compensation.
- Interest and other income increased as the company held a much larger cash and investment portfolio following its 2018 IPO. Per-share loss comparisons are also affected by the substantially different weighted-average share counts.
- Operating cash use increased from $6.0 million to $55.1 million. The 2018 comparison included the large noncash acquired-R&D charge and different working-capital timing.
Outlook, developments and risks
- Management expected cash, cash equivalents and investments to fund operations for at least one year from the filing date, while anticipating continued losses and increases in R&D, G&A and capital expenditures. It stated that additional capital would be needed to fully implement its business plan; no specific earnings or revenue guidance was provided.
- Management expected UCART19 to advance to potential registrational trials in 2020. The company expected ALLO-501 Phase 1 top-line data in the first half of 2020 and anticipated starting Phase 2 in 2020, with a second-generation ALLO-501 planned before Phase 2. Following FDA clearance of the ALLO-715 IND in May 2019, it expected the UNIVERSAL Phase 1 trial to begin in 2019.
- Execution risks include early-stage clinical evidence, regulatory uncertainty, manufacturing scale-up, dependence on Cellectis gene-editing rights and reliance on Servier for UCART19 trials. The filing reports UCART19 supply issues that limited new patient recruitment and discloses two deaths attributed to UCART19 in the CALM/PALL trials. The company also warns of potential severe toxicities, including cytokine release syndrome, neurotoxicity, graft-versus-host disease and prolonged cytopenia.
- Contingent license obligations could be significant if milestones are achieved: potential payments include up to $840 million under the Pfizer agreement and up to $2.8 billion in aggregate development and sales milestones under the Cellectis agreement, in addition to Servier milestone obligations. These are contingent future amounts, not reported current debt.
- A 118,000-square-foot Newark manufacturing-facility lease carries $36.2 million of undiscounted payments and was not yet recognized as a lease asset or liability at June 30. Total undiscounted future lease payments shown in the note were $95.9 million, including that facility.
Investor verification priorities
- Track trial enrollment, safety and efficacy data, especially UCART19 supply constraints and reported treatment-related deaths, as well as the timing of planned 2020 milestones.
- Assess cash consumption, investment liquidity and the runway estimate against clinical-program spending, facility build-out and future financing needs.
- Review manufacturing-facility costs and lease commitments, and clarify the filing’s differing expected Newark lease commencement references: April 2020 in the lease note and May 2020 in MD&A.
- Monitor partner dependence, milestone and royalty terms, and any changes to clinical, regulatory or manufacturing plans.