Allogene Therapeutics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Allogene is a clinical-stage immuno-oncology company developing off-the-shelf allogeneic CAR T-cell therapies. It had no product sales revenue.
Financial performance and position
| Metric | Q1 2019 | Comparable period / date |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $23.4 million | $0 in Q1 2018 |
| General and administrative expense | $13.1 million | $2.6 million in Q1 2018 |
| Total operating expenses | $36.5 million | $2.6 million in Q1 2018 |
| Operating loss | $36.5 million | $2.6 million in Q1 2018 |
| Interest and other income, net | $4.8 million | None reported in Q1 2018 |
| Net loss | $31.6 million | $2.6 million in Q1 2018 |
| Basic and diluted loss per share | $0.32 | $0.10 in Q1 2018 |
| Operating cash flow | $(30.3) million | $0.005 million provided in Q1 2018 |
| Cash, cash equivalents and investments | $680.7 million | At March 31, 2019 |
At March 31, 2019, cash and cash equivalents were $92.7 million, short- and long-term investments totaled $588.0 million, and restricted cash was $4.3 million. Cash, cash equivalents and restricted cash totaled $97.0 million. Total assets were $749.4 million; total liabilities were $68.1 million, including $34.8 million of noncurrent lease liabilities. The filing reports no revenue or profit margins; margins are not meaningful for this pre-commercial company. No borrowings or other financial debt are reported in the supplied financial statements.
Investing activities provided $32.9 million, mainly reflecting investment maturities net of purchases, while property and equipment purchases were $10.4 million. Financing activities provided $0.7 million through the employee stock purchase plan. Stock-based compensation was $7.9 million.
Changes versus the prior comparable period
Losses and operating expenses rose substantially year over year as Allogene’s principal operations began in April 2018 following its acquisition of assets from Pfizer. Management cautions that Q1 2018 reflected limited start-up activity and says the periods are not directly comparable. The company incurred $31.6 million in net losses in Q1 2019 and had an accumulated deficit of $243.1 million at quarter-end.
Compared with December 31, 2018, cash and cash equivalents were approximately stable, while the mix of investments shifted toward short-term holdings. Property and equipment, net increased to $20.4 million from $8.6 million, and total assets declined to $749.4 million from $773.9 million.
Outlook, management commentary and key risks
- Management expects continuing operating losses and increasing R&D, G&A and capital expenditures. It expects cash, cash equivalents and investments to fund operations for at least one year from the filing date, but says additional capital will be needed to fully implement its business plan.
- ALLO-501: FDA cleared the IND in January 2019; enrollment in the Phase 1/2 ALPHA trial was open at multiple sites. Initial Phase 1 data were expected in the first half of 2020. Allogene planned to introduce a second-generation version before Phase 2.
- ALLO-715: An IND had been submitted for a Phase 1 trial in relapsed/refractory multiple myeloma. Subject to IND clearance, management remained on track to initiate the trial in 2019; manufacturing and product specifications could be a focus of regulatory review.
- UCART19: Servier sponsors the CALM and PALL Phase 1 trials and is responsible for manufacturing. Prior supply issues limited recruitment; Servier was working to improve supply and restart recruitment. Allogene continued to expect advancement to potential registrational trials in 2020, but depends on Servier for trial execution and data access.
- Material safety risk: The filing describes serious adverse events in the UCART19 trials, including two deaths attributed to UCART19, as well as severe or life-threatening CRS, prolonged cytopenia and neutropenic sepsis. Further trial results could change the development outlook.
- Manufacturing and financing risks include reliance on third-party manufacturers, donor material and licensed gene-editing technology. Allogene leased approximately 118,000 square feet for a planned Newark manufacturing facility, expected to commence in May 2020; undiscounted lease payments were approximately $36.2 million.
- License agreements include contingent milestones and royalties, not current fixed debt: potential payments include up to $840 million in Pfizer regulatory and development milestones, up to $2.8 billion in aggregate Cellectis development and sales milestones, and up to $381.5 million in Servier regulatory and sales milestones. Timing and likelihood depend on future development, regulatory and commercial events.
- Allogene recorded $4.8 million of interest and other income, primarily from its cash and investments. It reported no material legal proceedings and no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether cash and investments remain sufficient relative to rising clinical, manufacturing and facility spending, and the assumptions behind the stated minimum one-year runway.
- Progress and safety findings in the ALPHA, CALM and PALL trials, including the implications of reported UCART19 deaths and severe adverse events.
- Whether Servier resolves UCART19 supply constraints and resumes recruitment on the expected timeline.
- Whether ALLO-715 receives IND clearance and begins its trial as planned, and whether product specifications or manufacturing issues delay development.
- The timing, cost and execution risks of the Newark facility build-out, along with contingent milestone and royalty exposure under partner agreements.