Allogene Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Allogene is a clinical-stage immuno-oncology company developing engineered, off-the-shelf allogeneic T-cell therapies. It has no approved products and has generated no product sales; reported collaboration revenue is nominal.
Financial performance and position
- Revenue: $52,000, versus $61,000 in Q1 2022, from a related-party collaboration.
- Expenses and losses: Research and development expense was $80.2 million, up 33% from $60.2 million, primarily reflecting higher external development and manufacturing costs and facility costs. General and administrative expense was $18.9 million, down 5% from $19.9 million. Total operating expenses were $99.1 million; operating loss was $99.1 million. Net loss was $98.7 million, compared with $79.9 million in Q1 2022. Net loss per share was $0.68, versus $0.56.
- Margins: Not meaningful given minimal collaboration revenue and the company’s development-stage operations.
- Cash flow: Cash used in operations was $66.6 million, compared with $68.2 million in Q1 2022. Investing activities provided $112.9 million, mainly from investment maturities, while financing activities provided $1.7 million. Cash, cash equivalents and restricted cash increased by $48.0 million during the quarter.
- Liquidity: Management reported $514.0 million of cash, cash equivalents and investments at March 31, 2023, and expects these resources to fund operations for at least 12 months from the filing date. The balance sheet reported $481.5 million in current assets and $59.6 million in current liabilities.
- Debt and other obligations: The filing reports no borrowings. Operating lease liabilities totaled $99.7 million, including $6.2 million current and $93.5 million long-term. Stockholders’ equity was $592.3 million; accumulated deficit was $1.335 billion.
Material changes and developments
- Research and development expense rose $20.1 million year over year; management attributed most of the increase to external product-development and manufacturing activity. General and administrative expense fell $1.0 million.
- Cash and investments declined from $526.3 million at December 31, 2022 to $514.0 million at March 31, 2023. The company used $66.6 million in operating cash during the quarter.
- After the quarter, Allogene reported interim Phase 1 TRAVERSE data for ALLO-316 in advanced or metastatic clear cell renal cell carcinoma. Among 18 efficacy-evaluable patients, disease control rate was 89%; among 10 patients with CD70-positive tumors, it was 100%, including three partial remissions. These are interim results from a small, early-stage trial and may change.
Outlook, risks and unusual items
- Management expects continuing losses and increasing research and development spending, and says additional capital will be needed to fully implement its business plan. It may use equity, debt or other financing; unavailable or unfavorable financing could force delays or reductions to development plans. The company had $167.3 million remaining under its at-the-market offering authorization.
- ALLO-501A’s Phase 2 ALPHA2 trial was initiated in Q4 2022; the company also recently initiated the EXPAND trial to assess ALLO-647’s contribution to the lymphodepletion regimen. Subject to trial outcomes and FDA discussions, Allogene plans to seek approval based on these trials. ALLO-316 dose exploration is ongoing, with expansion enrollment planned for 2023 subject to results.
- Allogene was not enrolling patients in its ALLO-715 and ALLO-605 BCMA trials while it reviewed and optimized manufacturing. Manufacturing consistency, clinical-trial enrollment, safety, regulatory review and reliance on external manufacturers and suppliers remain key risks.
- Servier discontinued its involvement in CD19-product development. Allogene and Servier dispute the implications for development-cost contributions and the timing of Allogene’s option to obtain ex-U.S. rights; Servier also alleged a material breach concerning an audit of manufacturing costs. Allogene disputes Servier’s position and is pursuing recovery of amounts it believes are owed. The outcome could affect costs, rights and development plans.
- The company disclosed a prior FDA clinical hold, resolved in January 2022, following observation of a chromosomal abnormality; it warns that future safety findings could disrupt trials. In TRAVERSE, one Grade 3 autoimmune-hepatitis dose-limiting toxicity and one Grade 3 cytokine-release-syndrome event were reported; a Grade 5 COVID-19-related respiratory failure was deemed unrelated to study treatment.
- Allogene cited financial-services-sector instability and cash balances that may exceed FDIC insurance limits, but reported no adverse liquidity impact from the bank failures discussed in the filing. It also disclosed the General Counsel’s departure effective March 31, 2023 and post-quarter consulting arrangements with the former General Counsel and former Chief Technical Officer.
- Disclosure controls were assessed as effective. The phased SAP enterprise-resource-planning implementation is ongoing; management expects to monitor related control changes. No material legal proceeding was reported as pending.
Key facts for investors to verify
- Cash and investment balances, operating cash burn and the assumptions underlying management’s stated 12-month liquidity runway.
- Enrollment, safety, efficacy and durability updates for ALPHA2, EXPAND and TRAVERSE, including whether interim ALLO-316 findings hold as follow-up increases.
- Progress and costs of BCMA manufacturing optimization, and the effects of any manufacturing changes on trial timing and product comparability.
- Resolution of Servier disputes, continued cost-sharing or reimbursement, and the status and potential economics of the ex-U.S. CD19 option.
- Financing needs, potential equity dilution, and any changes in development plans or leadership following the reported departures.