ALX Oncology Holdings Inc. — Q1 2021 Form 10-Q
Business context and reporting period
For the three months ended March 31, 2021. ALX Oncology is a clinical-stage immuno-oncology company developing therapies targeting the CD47 checkpoint pathway. It has no approved products and has not generated product revenue; operations remain focused on research and development, principally lead candidate ALX148.
As of quarter-end, the company reported dosing more than 170 subjects with ALX148 across hematologic and solid tumor studies. It had initiated a randomized Phase 2 first-line head and neck squamous cell carcinoma (HNSCC) trial; the first subject was dosed in May 2021. Management planned further ALX148 studies in 2021, including additional HNSCC and gastric/GEJ cancer trials and a breast cancer Phase 1 study with Zymeworks.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue (related-party services) | $0 | $655,000 |
| Research and development expense | $9.849 million | $3.828 million |
| General and administrative expense | $4.359 million | $1.473 million |
| Total operating expenses | $14.208 million | $5.897 million |
| Net loss | $14.185 million | $5.454 million |
| Net loss per share, basic and diluted | $0.35 | $2.37 |
| Cash used in operating activities | $5.135 million | $8.963 million |
At March 31, 2021, cash and cash equivalents were $429.855 million, down $4.364 million from year-end 2020. Total assets were $432.910 million; total liabilities were $14.426 million, including $14.129 million of current liabilities. Stockholders’ equity was $418.484 million. The company had no term loan outstanding, having repaid it in December 2020. Lease liabilities totaled $532,000 on the balance sheet; additional finance lease commitments include leases not yet commenced.
There was no gross profit or operating margin to report because the company had no product sales. Q1 operating cash use was partly offset by $7.2 million of favorable changes in operating assets and liabilities, primarily a $7.3 million increase in accounts payable tied to payment timing for clinical activities. Financing provided $778,000, principally from stock-option exercises; investing used $7,000.
Changes versus the prior comparable period
- Net loss increased by $8.731 million, or 160%, as operating expenses rose 141%. R&D expense increased 157%, primarily from higher clinical, preclinical and development activity for ALX148; G&A increased 196%, reflecting headcount, stock-based compensation, public-company costs and insurance.
- Related-party revenue and associated service costs ceased after termination of the Tollnine agreement in July 2020. This explains the absence of both in Q1 2021; it is not product or collaboration revenue.
- Cash used in operations declined from $8.963 million to $5.135 million, largely due to working-capital timing rather than lower net loss.
- Q1 2020 included $105.0 million of financing proceeds from preferred-stock issuance; Q1 2021 had no comparable financing transaction.
Outlook, commentary, risks and unusual items
- Management said existing cash was expected to fund projected operating requirements for at least 12 months and, under its current operating plan, through 2024. These estimates depend on assumptions and cash could be consumed sooner. The company expects significant future losses and may need additional capital; no external financing source was committed.
- On March 4, 2021, ALX entered a collaboration with Tallac Therapeutics to develop, manufacture and commercialize an anti-SIRPα antibody conjugated to a TLR9 agonist. The parties will share research and development costs and any profit or loss equally; Q1 expense was nominal. Separately, ALX incurred $0.4 million for preclinical services from Tallac.
- The FDA had verbally required completion of a routine nonclinical safety study before a potentially pivotal trial. The two Phase 2 HNSCC trials could proceed with enrollment capped at 50 ALX148-treated subjects across both trials, excluding safety lead-in cohorts, pending acceptance of the study report. The company expected to submit the report before reaching the cap and said no timeline delays were anticipated.
- Principal risks include clinical-trial failure or delay, safety and efficacy uncertainty, reliance on third-party manufacturers and service providers (including Tallac for preclinical research), competition, intellectual-property challenges, and COVID-19 effects on enrollment, sites and supply chains.
- Manufacturing and service-contract commitments were approximately $9.258 million, in addition to operating and finance lease obligations. The filing reports no pending or threatened litigation and no material off-balance-sheet arrangements.
- Disclosure controls were considered effective as of March 31, 2021. The company implemented a new ERP system during the quarter and said related controls would continue to be evaluated. Previously identified material weaknesses were reported as remediated; no material weakness was identified as of quarter-end.
Important facts for investors to verify
- Whether the clinical program meets its enrollment, safety-study and trial-initiation milestones, and whether FDA requirements or trial results alter the stated timelines.
- Whether the cash runway through 2024 remains reasonable as trial, manufacturing and operating costs increase, and whether additional financing becomes necessary.
- How much of the improvement in operating cash use reflects temporary accounts-payable timing, and how future cash burn compares with the reported net loss.
- The status and terms of the Tallac collaboration, the company’s dependence on Tallac for preclinical work, and the execution of manufacturing commitments.
- Progress in operating the new ERP system and maintaining effective financial-reporting controls; also reconcile the detailed quarter-end statement of no identified material weakness with the risk-factor discussion of prior weaknesses and remediation.