Allogene Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. The company is a clinical-stage immuno-oncology biotechnology company developing off-the-shelf allogeneic T-cell therapies. It had no approved products or product-sales revenue. Unless otherwise stated, financial amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $49,000 | None | $38.4 million | None |
| Research and development expense | $58.7 million | $51.4 million | $166.2 million | $140.8 million |
| General and administrative expense | $19.0 million | $16.6 million | $54.1 million | $48.1 million |
| Operating loss | $77.7 million | $68.0 million | $181.9 million | $188.9 million |
| Net loss | $78.2 million | $66.2 million | $182.1 million | $181.7 million |
| Net loss per share, basic and diluted | $0.57 | $0.52 | $1.35 | $1.55 |
| Operating cash used | Not separately presented | Not separately presented | $139.4 million | $105.1 million |
Q3 collaboration revenue was less than $0.1 million; nine-month revenue principally reflected recognition of the license and know-how obligations under the Allogene Overland agreement. This is collaboration revenue, not product-sales revenue. No operating margin is presented; the company remained loss-making.
At September 30, 2021, cash and cash equivalents were $190.0 million and short- and long-term investments totaled $671.7 million, or $861.7 million combined. Total assets were $1.079 billion, total liabilities $109.3 million, and stockholders’ equity $969.9 million. Current liabilities were $53.5 million. The filing reports operating lease liabilities of $53.9 million; it does not disclose conventional borrowings or other funded debt.
Cash, cash equivalents and restricted cash increased by $6.7 million during the first nine months. Investing activities provided $134.4 million, reflecting net investment maturities, partly offset by $20.7 million of property and equipment purchases and a $15.9 million investment in Notch. Financing activities provided $11.6 million, mainly from employee stock-plan issuances and option exercises. The company reported $20.7 million of capital expenditures in cash-flow investing activities.
Changes versus comparable periods
- Q3 operating expenses rose 14% year over year: R&D increased $7.3 million and G&A increased $2.4 million. Q3 net loss widened by $12.0 million, or 18%.
- For the first nine months, R&D increased 18% and G&A increased 13%. Revenue of $38.4 million—principally recognized in 2021—helped reduce operating loss to $181.9 million from $188.9 million, but lower interest income and higher other expenses contributed to net loss remaining broadly flat at $182.1 million versus $181.7 million.
- Operating cash use increased by $34.3 million year over year. The filing attributes a major offset to noncash items; the $38.6 million reduction in deferred revenue was a significant working-capital use of cash.
- Cash and investments fell from $1.032 billion at December 31, 2020 to $861.7 million at September 30, 2021. Total assets declined from $1.228 billion to $1.079 billion.
Outlook, risks and unusual items
- FDA clinical hold: In October 2021, after a chromosomal abnormality was reported in a patient in the ALPHA2 trial of ALLO-501A, the FDA placed the ALPHA2 trial and the company’s other clinical trials on hold. Management said it could not estimate when the review would conclude or trials might resume. The filing warns that an untimely resolution could materially adversely affect results, financial position and prospects.
- Management expected cash and investments to fund operations for at least one year from the filing date, while stating that the company would continue to incur losses and expected R&D and G&A expenses to increase. It also noted that additional capital would be needed to fully implement its business plan; unavailable or inadequate financing could require delays to product development.
- Management planned to report additional pre-hold ALPHA, ALPHA2 and UNIVERSAL trial data at the December 2021 American Society of Hematology meeting. Patient enrollment and follow-up had also been affected by COVID-19; its timing and overall impact remained uncertain.
- The clinical-stage pipeline depends on successful trials, manufacturing scale-up, donor-cell supply and third-party partners, including Cellectis for TALEN gene-editing technology and Servier for collaboration and cost-sharing. Potential milestone, royalty and license obligations are contingent on future development, regulatory and sales events; their timing and likelihood were not estimable.
- Other commitments include $2.9 million of non-cancellable purchase commitments and a 20-year solar-energy agreement expected to commence in Q4 2021; terminating that agreement would trigger an estimated $4.3 million payment. The company reported no material pending legal proceeding and no off-balance-sheet arrangements.
- Management concluded disclosure controls were effective. It continued a phased SAP enterprise-resource-planning implementation and said it would monitor related changes to internal controls. The filing states the interim results are not necessarily indicative of full-year results.
Investor facts to verify
- Current FDA clinical-hold status, required safety or manufacturing actions, and any timeline or conditions for resuming trials.
- Whether the reported chromosomal abnormality has implications for ALLO-501A, other candidates, manufacturing processes or trial designs.
- Cash burn and cash-and-investment runway after the hold, given $139.4 million of operating cash use in the first nine months and management’s at-least-one-year runway statement.
- How much future revenue depends on collaboration milestones or license obligations, rather than recurring product sales; 2021 revenue was tied to the Allogene Overland license and know-how.
- Potential funding needs, equity dilution and the progress and cost of the Newark manufacturing facility and clinical programs.