Aligos Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; balance-sheet comparisons are against December 31, 2022. Aligos is a clinical-stage biopharmaceutical company focused on liver diseases and viral infections. It has no approved products and has not generated product-sales revenue.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Collaboration revenue | $2.583 million | $2.571 million |
| Customer revenue | $0.140 million | None |
| Research and development expense | $18.135 million | $31.676 million; down 43% |
| General and administrative expense | $8.506 million | $6.452 million; up 32% |
| Total operating expenses | $26.641 million | $38.128 million; down 30% |
| Operating loss | $23.918 million | $35.557 million |
| Interest and other income, net | $1.002 million | $0.005 million expense |
| Net loss | $22.955 million | $35.615 million |
| Basic and diluted loss per share | $0.53 | $0.84 |
| Cash used in operating activities | $22.387 million | $20.434 million |
At March 31, cash and cash equivalents were $78.671 million, restricted cash was $0.397 million, and short-term investments were $24.845 million. Unrestricted cash, cash equivalents and investments totaled approximately $103.5 million. Management expected these resources to fund operations for at least 12 months from the financial statements’ issuance date, while cautioning that plans or funding needs could change. The company reported no debt outstanding apart from normal-course payables; it had operating and finance lease liabilities. Current assets were $109.429 million, current liabilities $28.079 million, and total liabilities $36.988 million. Stockholders’ equity was $84.750 million.
Gross or operating margins are not meaningful indicators for this pre-commercial company; reported revenue was primarily collaboration and customer contract revenue, not product sales.
Material changes and management commentary
- R&D expense fell by $13.5 million, mainly from lower third-party costs following discontinuation of the STOPS and ASO programs and reduced manufacturing costs for CHB programs. Direct CHB program expense declined to $1.991 million from $14.347 million.
- G&A expense rose by $2.1 million, primarily because legal and related costs increased $3.5 million, partly offset by lower facility and employee-related costs. The Janssen litigation is a significant legal matter.
- Operating cash use increased despite the lower net loss, reflecting working-capital movements, including a $2.3 million reduction in deferred collaboration and customer revenue. Investment maturities provided $20.0 million of investing cash; cash, cash equivalents and restricted cash declined by $2.395 million in the quarter.
- Interest income increased to $0.748 million from $0.086 million, primarily due to higher market interest rates. Management estimated that a hypothetical 100-basis-point adverse rate movement would not materially affect financial position, results or cash flows.
Pipeline outlook, risks and unusual items
- NASH: ALG-055009 was in Phase 1 development. The company was preparing a Phase 2 proof-of-concept study, including a final multiple-ascending-dose cohort, 13-week GLP toxicology studies and Phase 2 drug supply. It anticipated submitting the Phase 2 protocol to the FDA in Q4 2023. NASH oligonucleotide programs, including work with Merck, were in preclinical development.
- Coronavirus: Aligos reported completing first-in-human-enabling nonclinical studies and a Phase 1 CTA filing for ALG-097558, and anticipated beginning healthy-volunteer dosing in Q2 2023. The filing’s efficacy and potency statements are based on company-reported preclinical findings, not established clinical benefit.
- Chronic hepatitis B: ALG-000184 studies were ongoing, with additional cohorts planned to continue through 2023; management cited preliminary antiviral findings and expected further conference updates. The ALG-125755 Phase 1 study was ongoing, with preliminary CHB data anticipated during 2023.
- Collaboration changes: Merck gave notice in February 2023 terminating one target under its collaboration. Merck’s option to add a third target expired in January 2023. Aligos recognized $2.583 million of collaboration revenue in the quarter; no milestone revenue was recognized.
- Janssen litigation: Janssen alleges breach of contract and interference involving intellectual property and seeks, among other relief, assignment of certain IP and monetary damages. Aligos disputes the allegations, filed counterclaims, and said the case was in discovery. No litigation contingency requiring accrual was recorded at quarter-end; the ultimate outcome and potential cost are uncertain.
- The company accrued approximately $0.4 million related to a February 2023 workforce reduction, expected to be utilized by year-end. Management expects continuing substantial losses and significant R&D spending and says additional capital may be needed; financing may be unavailable or dilutive and could force program delays or reductions.
- Other key risks include clinical and regulatory uncertainty, safety issues, dependence on third-party research and manufacturing, competition, intellectual-property exposure, and the possibility that collaborations or financing do not support development plans. Management reported disclosure controls were effective and no material change in internal control during the quarter.
- After quarter-end, director Thomas Woiwode resigned from the board and its committees, effective July 20, 2023. The filing reported no other subsequent event requiring disclosure.
Important facts for investors to verify
- Reconcile an apparent inconsistency in the risk-factor section: it states quarterly net losses of $18.6 million and $23.0 million, respectively, while the financial statements report $23.0 million for Q1 2023 and $35.6 million for Q1 2022. The statements and MD&A report the latter figures.
- Track actual cash burn and the assumptions underlying management’s stated minimum 12-month runway, including any change in development plans or access to new financing.
- Confirm timing and execution of ALG-055009’s planned Phase 2 filing and the anticipated ALG-097558 Phase 1 start, and assess subsequent clinical data for ALG-000184 and ALG-125755.
- Monitor the Janssen case for rulings, potential IP consequences, legal expenses and any change in the company’s assessment of contingency exposure.
- Assess the effect of Merck’s target termination on collaboration revenue, deferred revenue and the strategic value of the remaining programs.