ALX Oncology Holdings Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. ALX Oncology is a clinical-stage immuno-oncology company developing therapies targeting the CD47 checkpoint pathway. It had no approved products and generated no product revenue.
Financial performance and liquidity
Amounts are in millions of dollars, except per-share data. No revenue-based margins are meaningful because the company reported no product revenue.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Research and development expense | $29.4 | $18.2 | $73.2 | $39.3 |
| General and administrative expense | $7.3 | $6.4 | $22.0 | $15.8 |
| Total operating expenses | $36.7 | $24.6 | $95.2 | $55.1 |
| Net loss | $35.3 | $24.6 | $92.8 | $55.0 |
| Net loss per share, basic and diluted | $0.87 | $0.61 | $2.28 | $1.37 |
- At September 30, cash and cash equivalents were $49.1 million; short- and long-term investments were $235.9 million and $8.2 million, respectively. Combined cash, cash equivalents and investments were approximately $293.1 million.
- Current assets were $290.8 million and current liabilities $25.2 million. Total liabilities were $30.7 million; these included $0.4 million of finance lease liabilities and $6.2 million of operating lease liabilities. The October term loan described below was entered into after quarter-end.
- For the nine months, operating cash use was $68.6 million. Investing cash use was $246.4 million, primarily reflecting purchases of investments; financing cash provided was $0.4 million. The $314.5 million decrease in cash, cash equivalents and restricted cash therefore principally reflects investment purchases, not operating cash burn alone.
- Accumulated deficit was $294.8 million. Available-for-sale investments had $1.5 million of unrealized losses in accumulated other comprehensive loss; the company reported no credit-loss allowance or investment impairment.
Changes versus prior comparable periods
- Q3 operating expenses increased 49% year over year, and net loss increased 44%. For the first nine months, operating expenses rose 73% and net loss rose 69%.
- R&D expense increased 61% in Q3 and 86% for the nine-month period, mainly due to more active trials and enrollment, clinical-trial material manufacturing, collaboration work, headcount and stock-based compensation.
- G&A expense increased 15% in Q3 and 39% for the nine-month period, primarily reflecting higher stock-based compensation and, for the nine-month period, personnel, legal, facility and IT costs.
- Cash and cash equivalents declined from $363.7 million at December 31, 2021, while the company built an investment portfolio; short- and long-term investments totaled $244.1 million at September 30, 2022.
Outlook, development, risks and unusual items
- Management expected expenses and operating losses to increase as it advanced evorpacept trials and other programs. It stated that existing cash, investments and funds available under the term loan should fund operations through the middle of 2025, while cautioning that estimates depend on assumptions. Note 1 separately says capital resources are expected to cover at least the next 12 months.
- In October 2022, the company entered a secured term-loan facility of up to $100 million and drew $10 million. It could draw another $40 million through the end of 2023; an additional $50 million is subject to development milestones and lender discretion. The facility has a minimum annual interest rate of 8.58%, matures October 1, 2027, and is secured by substantially all assets, with intellectual property subject to a negative pledge unless specified borrowing conditions are met.
- Evorpacept was being studied in multiple Phase 1 and Phase 2 trials; more than 300 subjects had received it as of September 30. Enrollment in the ASPEN-05 AML trial was paused in June 2022 pending dose-optimization data from the ASPEN-02 MDS study. The company expected to start the ASPEN-07 urothelial cancer study in Q4 2022. An IND for ALTA-002 was planned for 2023.
- Material risks include clinical and regulatory uncertainty, dependence on evorpacept, reliance on third-party research and manufacturing, the need for additional capital, possible dilution and debt covenants, and exposure to COVID-19, inflation and geopolitical disruption. The filing also notes potential intellectual-property constraints: a European patent appeal involving soluble SIRPα was remanded for further consideration, which could affect certain indications and geographies if relevant claims are upheld.
- Manufacturing and service commitments totaled approximately $42.7 million, including about $42.0 million under KBI Biopharma statements of work. The company reported no pending or threatened litigation and no material legal proceedings.
- Management concluded disclosure controls were effective as of September 30, 2022, and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether clinical-trial progress, enrollment, safety and efficacy data support the company’s stated development plans and anticipated timelines.
- Whether the stated cash runway through mid-2025 remains achievable, given operating cash use, rising development costs and the difference between the MD&A runway statement and Note 1’s “at least the next twelve months” statement.
- Availability and conditions for undrawn loan tranches, the facility’s effective borrowing cost, collateral provisions and covenant compliance.
- Timing and utilization of the $450 million shelf registration and $150 million at-the-market program; the filing reported no sales under these arrangements as of its date.
- Manufacturing commitments, clinical-supply capacity and dependence on third parties, including Tallac and KBI Biopharma.
- Developments in the European patent proceeding and any resulting effect on evorpacept’s potential indications or markets.