Allogene Therapeutics, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 6, 2020. Allogene is a clinical-stage immuno-oncology company developing off-the-shelf allogeneic T-cell therapies. It had no approved products and reported no product revenue.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 or prior period |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $42.0 million | $23.4 million |
| General and administrative expense | $15.6 million | $13.1 million |
| Total operating expenses | $57.7 million | $36.5 million |
| Net loss | $54.5 million | $31.6 million |
| Net loss per share, basic and diluted | $0.50 | $0.32 |
| Net cash used in operating activities | $40.8 million | $30.3 million |
| Cash, cash equivalents and investments | $553.0 million at March 31, 2020 | $536.6 million at December 31, 2019 |
There were no meaningful operating margins to report because the company had no product revenue. At March 31, 2020, current assets were $504.4 million and current liabilities were $26.8 million. Total liabilities were $82.0 million, including $53.3 million of operating lease liabilities; the filing reports no debt borrowings. Total assets were $688.5 million. Accumulated deficit was $450.6 million.
Cash, cash equivalents and restricted cash decreased by $39.2 million during the quarter. Investing activities used $15.0 million, including $12.3 million of property and equipment purchases; financing activities provided $16.6 million, including $14.8 million of net proceeds from January ATM stock sales. Management stated that cash, cash equivalents and investments were expected to fund operations for at least one year from the filing date.
Changes versus the prior comparable period
- Net loss increased $22.9 million, or 72%, from Q1 2019. Operating expenses rose 58%.
- R&D expense increased $18.6 million, primarily from pipeline-related external costs, personnel costs and facilities. G&A expense rose $2.6 million, mainly from personnel and facilities costs.
- Interest and other income declined $1.6 million to $3.3 million, principally due to lower interest earned on cash and investments.
- Operating cash use increased from $30.3 million to $40.8 million. The 2020 period included $14.2 million of stock-based compensation, compared with $7.9 million a year earlier.
Outlook, risks and notable items
- Management expects continuing operating losses and increasing R&D expense, G&A expense and capital expenditures. The company expects to need additional capital over time; financing may dilute shareholders or impose debt covenants, and unavailable financing could force program delays or reductions.
- COVID-19 had already halted recruitment in Servier’s CALM and PALL UCART19 trials. Enrollment and follow-up in Allogene’s ALPHA and UNIVERSAL trials, preclinical work, vendor operations and construction of the Newark manufacturing facility were also at risk of disruption. The company said the timing and overall impact were uncertain.
- Management expected initial ALPHA trial data at the ASCO annual meeting on May 29, 2020; planned to initiate the ALPHA2 Phase 1/2 trial in Q2 2020, subject to manufacturing; and expected initial UNIVERSAL data in Q4 2020. A combination trial of ALLO-715 and nirogacestat was planned for the second half of 2020, subject to regulatory clearance.
- The Newark manufacturing facility build-out had been interrupted by COVID-19. The company continued to expect cGMP manufacturing to begin in 2021, while acknowledging further delays could affect timelines.
- Material development and commercial milestones and royalties under Pfizer, Cellectis, Servier and Notch agreements are contingent on future events. No milestone or royalty payments were made to Pfizer in the quarter. The filing states $5.3 million of non-cancellable purchase commitments.
- The filing highlights clinical, manufacturing, regulatory and funding risks, including potential severe immune-related toxicities. It notes that multiple patients had died in the UCART19 trials, including deaths attributed to UCART19. No material legal proceedings were reported; management said disclosure controls were effective.
Important facts for investors to verify
- Whether COVID-19 materially changed enrollment, patient follow-up, trial timelines or manufacturing plans after the filing.
- Whether ALPHA, ALPHA2 and UNIVERSAL data and trial milestones were achieved, and how updated safety and efficacy findings affect development prospects.
- Cash consumption, financing needs and any subsequent ATM or other equity issuance, including resulting shareholder dilution.
- Progress, cost and timing of the Newark facility and the ability to secure reliable donor material, contract manufacturing and other critical supplies.
- Potential future milestone, royalty and lease obligations, and whether any become probable or payable as programs advance.