Allogene Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Unaudited quarter ended March 31, 2022. Allogene is a clinical-stage immuno-oncology company developing engineered, off-the-shelf allogeneic T-cell therapies; it had no approved products or product-sales revenue.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Collaboration revenue | $0.1 million | $38.3 million; down $38.3 million |
| Research and development expense | $60.2 million | $55.2 million; up 9% |
| General and administrative expense | $19.9 million | $16.4 million; up 22% |
| Operating loss | $80.0 million | $33.2 million |
| Net loss | $79.9 million | $33.0 million |
| Net loss per share, basic and diluted | $0.56 | $0.25 |
| Operating cash used | $68.2 million | $49.3 million |
The revenue decline primarily reflects recognition in Q1 2021 of $38.3 million related to the Allogene Overland license and know-how. The company attributed higher R&D costs mainly to personnel, facilities and depreciation, partly offset by lower external development and manufacturing costs. G&A growth was principally personnel-related. The filing does not report meaningful operating margins; the business is loss-making and has no product sales.
At March 31, 2022, cash and cash equivalents were $84.5 million, short-term investments $364.5 million, and long-term investments $284.1 million; the company reported combined cash, cash equivalents and investments of $733.1 million. Total assets were $964.6 million, total liabilities $109.4 million, and stockholders’ equity $855.2 million. Accumulated deficit was $983.2 million. No financial borrowings are reported; liabilities include operating lease obligations, totaling $72.6 million. Cash, cash equivalents and restricted cash fell $88.8 million during the quarter.
Investing activities used $22.4 million, primarily reflecting net purchases of investments; financing activities provided $1.8 million, mainly from employee stock-plan proceeds and option exercises. Net unrealized losses on available-for-sale investments were $6.7 million, recorded in other comprehensive loss. Q1 net loss included a $3.8 million share of losses from the Notch equity-method investment.
Material changes and outlook
- Net loss increased by $46.8 million year over year, largely because prior-year collaboration revenue did not recur and operating expenses increased.
- Management expects continued losses and rising R&D and G&A expenses. It expects available cash, cash equivalents and investments to fund operations for at least one year from the filing date, while acknowledging that additional capital will be needed to fully execute its business plan. Financing may require equity issuance, debt or partnerships; equity financing could dilute shareholders.
- Clinical outlook: the FDA clinical hold imposed in October 2021 was resolved in January 2022. Allogene planned further FDA discussions on ALLO-501A CMC and trial design, with the Phase 2 portion of ALPHA2 in adult patients with relapsed/refractory large B-cell lymphoma targeted for mid-2022, subject to FDA discussions and patient follow-up. It expected an update on its multiple-myeloma programs by year-end 2022 and continued the Phase 1 TRAVERSE trial of ALLO-316.
- COVID-19 had adversely affected trial enrollment and patient follow-up; the timing and extent of further effects were uncertain. Management also cited clinical, manufacturing, regulatory, supply-chain, financing and market risks. Investment securities were exposed to interest-rate and market-value changes; the filing said a 10% interest-rate change would not have had a material effect on their fair value.
Risks, commitments and unusual items
- Product candidates remain investigational. Safety, efficacy, durability, trial enrollment, FDA requirements and the ability to scale and validate manufacturing remain uncertain. The prior clinical hold followed observation of a chromosomal abnormality; the company said its investigation found it unrelated to gene editing and without clinical significance.
- Potential future milestone and royalty payments under licensing and collaboration agreements are substantial but contingent on development, regulatory and sales events. The company could not estimate their timing or likelihood. It had $2.8 million of non-cancellable purchase commitments and up to $15 million of committed funding under its MD Anderson collaboration.
- A headquarters expansion lease was expected to commence in April 2022; related rent payments were expected to begin in August 2022. A 20-year solar-energy agreement at the manufacturing facility was expected to commence in the second half of 2022 and includes an approximately $4.3 million termination payment.
- The company entered an Antion collaboration in January 2022, expensing a $3.5 million upfront payment and collaboration costs in the quarter, and invested $3.0 million in Antion preferred stock.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter. No material legal proceedings or subsequent events were noted.
Important facts for investors to verify
- Whether the targeted ALPHA2 Phase 2 timing and other clinical-program milestones were achieved, and what subsequent clinical data show on safety, efficacy and durability.
- Whether the $733.1 million reported liquidity supports the company’s operating plan in light of ongoing cash burn, clinical costs, facility commitments and potential need for additional financing.
- Progress toward using the Newark manufacturing facility in clinical programs, including FDA acceptance, comparability and reliable production at scale.
- Whether COVID-19, patient recruitment, trial-site capacity, suppliers or regulatory review affect clinical timelines or costs.
- The status and potential financial impact of contingent milestone, royalty, lease and collaboration obligations, as well as any dilution from future equity financing or use of the remaining $167.3 million ATM capacity.