Allogene Therapeutics, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter report. Allogene is a clinical-stage cell-therapy company developing engineered, off-the-shelf allogeneic T-cell treatments for cancer. It had no approved products and reported no product-sales revenue.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | No product-sales revenue; reported revenue is not clearly stated in the excerpt | No product-sales revenue |
| Research and development expense | $193.0 million | $144.5 million |
| General and administrative expense | $65.3 million | $57.5 million |
| Total operating expenses | $258.2 million | $202.0 million |
| Net loss | $250.2 million | $184.6 million |
| Net loss per share, basic and diluted | $2.08 | $1.83 |
| Cash used in operating activities | $115.1 million | $137.4 million |
| Cash, cash equivalents and investments | Approximately $1.0 billion | Approximately $588.9 million |
| Current assets / current liabilities | $845.1 million / $94.3 million | $544.6 million / $33.1 million |
Operating margins are not meaningful because the company has no product-sales revenue. Allogene reported an accumulated deficit of $646.3 million at year-end. The balance sheet shows no outstanding convertible notes or other debt; the 2018 notes converted to common shares at the IPO. Operating lease liabilities were $53.8 million.
Cash and investments increased substantially following 2020 equity financing. The company raised $621.9 million net through ATM and underwritten offerings, including approximately $595.7 million net from its June public offering. Common shares outstanding rose to 140.5 million from 124.3 million at year-end 2019. The company stated that available cash and investments were expected to fund operations for at least 12 months from the filing date.
Changes versus the prior year
- Net loss increased $65.6 million, or about 36%, as total operating expenses grew $56.2 million.
- R&D expense increased $48.5 million, principally from higher personnel and stock-based compensation, product-development costs, and facilities spending.
- G&A expense increased $7.8 million, mainly from personnel, stock-based compensation, facilities, and professional services.
- Operating cash use declined by $22.3 million. The filing attributes the difference between net loss and operating cash use largely to non-cash charges and working-capital changes, including $39.0 million of deferred revenue recorded from the Allogene Overland transaction.
- Investing cash outflow was $505.1 million, including $66.0 million of property and equipment purchases and purchases of investments; financing cash inflow was $633.6 million, mostly from equity offerings.
Business outlook, commentary and principal risks
- Clinical programs: Management planned to report updated ALLO-501 trial data and initial ALLO-501A data in the second quarter of 2021, and updated ALLO-715 data in the fourth quarter of 2021. Subject to trial results, it planned to advance ALLO-501A into Phase 2 by year-end 2021.
- Pipeline plans: Allogene expected to submit an IND for ALLO-605 in the first half of 2021 and planned to initiate the ALLO-316 TRAVERSE trial in the first quarter of 2021. These are forward-looking plans, not completed milestones.
- Preliminary clinical evidence: In the ALPHA trial, 19 evaluable patients had a 63% overall response rate and 37% complete response rate at the May 2020 cutoff, with median follow-up of 3.8 months. In UNIVERSAL, the reported overall response rate in the 320-million-cell cohort was 60%; across the trial, one Grade 5 event related to progressive myeloma and the conditioning regimen was reported. The company cautioned that early results may change with additional follow-up and verification.
- Manufacturing: Most of the build-out of the Newark facility was completed by year-end 2020, and cGMP manufacturing was expected to begin in 2021. Allogene remained reliant on contract manufacturers and suppliers and noted execution, scale-up, quality, and raw-material risks.
- COVID-19 and development risks: The pandemic adversely affected trial enrollment and follow-up and could disrupt sites, vendors, supplies, and timelines. Other key risks include clinical failure or toxicity, immune rejection or graft-versus-host disease, gene-editing uncertainties, regulatory requirements, competition, and dependence on collaborators and licensed technology.
- Funding and contingencies: Management expects substantial future losses and expense growth and may need additional financing. Undiscounted operating lease obligations totaled $87.7 million; non-cancellable purchase commitments were $5.4 million; and the MD Anderson collaboration involved up to $15.0 million of conditional funding. The company reported no legal proceedings considered likely to have a material adverse effect.
- Joint venture and revenue recognition: Allogene received $40.0 million from Allogene Overland for a license and recorded it as deferred revenue at year-end; it expected to recognize a substantial portion in the first quarter of 2021 as obligations were satisfied. Overland received a 51% interest in the venture and Allogene held 49%.
Important facts for investors to verify
- Subsequent ALPHA, ALPHA2 and UNIVERSAL clinical data, including response durability, patient numbers, adverse events and the significance of the Grade 5 UNIVERSAL event.
- Actual trial progress and enrollment relative to the stated 2021 timelines, including effects of COVID-19.
- Whether the Newark facility began cGMP manufacturing as planned and whether internal production can meet quality, scale and cost targets.
- Cash and investment balances, operating cash burn, financing needs, and potential dilution from further equity issuance.
- Recognition of Allogene Overland’s deferred revenue and the venture’s funding, milestone and royalty arrangements.
- Ongoing access to TALEN technology, donor material, contract manufacturing and other critical inputs under partner agreements.