Aligos Therapeutics, Inc. quarterly report, Q3 FY2022

Aligos Therapeutics, Inc. — Q3 2022 Form 10-Q

Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results. Aligos is a clinical-stage biopharmaceutical company developing therapies for viral and liver diseases; it has no approved products and has generated no product sales revenue. Dollar amounts below are in millions unless noted.

Financial performance and liquidity

Collaboration revenue, primarily from Merck arrangements, is not product revenue. As a development-stage company without product sales, a product gross margin is not reported; operating expenses substantially exceed collaboration revenue.

• Cash and investments: $142.3 at September 30, 2022, including $86.4 cash and equivalents and $55.9 short-term investments; down from $205.8 cash and investments at December 31, 2021. Total assets were $164.1 and stockholders’ equity was $122.0.
• Cash flows, nine months: $62.6 used in operations, versus $78.2 used in 2021. Investing activities used $37.9, principally reflecting investment purchases net of maturities. Financing provided $0.04; the prior-year period included $78.6 net proceeds from a follow-on offering.
• Debt and liquidity: The company reported no debt outstanding apart from ordinary-course payables; it had lease liabilities. Current assets were $150.1 and current liabilities $30.5. Management said available unrestricted cash, equivalents and investments were expected to fund operations for at least 12 months after the financial statements were issued, but additional financing may be needed.

Material changes and operating developments

• Q3 operating expenses fell 33% year over year, mainly due to lower R&D costs following wind-downs of discontinued programs and prior manufacturing activity. Nine-month operating expenses fell 10%; lower third-party R&D costs were partly offset by employee and facility costs and NASH activity.
• ALG-000184 (chronic hepatitis B): Phase 1b dose-ranging study ongoing. Management described preliminary safety and antiviral findings as supportive, including reductions in HBV markers; these are interim data and may change. Longer-duration dosing cohorts were underway.
• ALG-125755 (HBV siRNA): Phase 1a study initiated in New Zealand; the company planned to begin single-dose evaluation in HBV patients in Q1 2023.
• ALG-055009 (NASH): Phase 1a/1b study completed. Preliminary findings were described as generally well tolerated with expected pharmacodynamic effects; further multiple-dose data were expected to be presented at AASLD 2022.
• ALG-097558 (coronavirus): Preclinical candidate; the company planned to complete first-in-human-enabling studies in Q1 2023 and initiate healthy-volunteer dosing in Q2 2023, subject to progress and regulatory steps.
• Aligos discontinued development of ALG-010133 after inadequate antiviral activity and ALG-020572 following a serious ALT increase in one participant and ALT flares in others.

Outlook, risks and contingencies

Management expects substantial ongoing R&D spending and operating losses for at least the next several years. No specific revenue or earnings guidance was provided. The stated cash runway is based on assumptions that could change; management cited clinical-development costs, economic conditions, inflation, rising interest rates and capital-market disruption as uncertainties affecting funding access. Future financing could dilute shareholders or require restrictive terms or rights to programs.

• Clinical and regulatory risk: Candidates remain in early development; trial results, safety, enrollment, manufacturing, regulatory approval and commercial success are uncertain. Preliminary and interim findings are not final evidence of efficacy or safety.
• Janssen litigation: Janssen alleges that former employees assigned inventions to Aligos that Janssen claims to own and seeks, among other relief, injunctive relief, assignment of intellectual property and damages. Aligos disputes the allegations, filed counterclaims, and says it intends to defend itself. The company reported no litigation liability requiring accrual at September 30, 2022.
• Other commitments: No material non-cancellable purchase commitments were reported. License agreements may require substantial milestone and royalty payments if specified events occur.
• Geopolitical and pandemic exposure: The company reported that the Russia-Ukraine conflict prevented planned clinical-trial sites in Ukraine and Moldova. COVID-19, supply-chain interruptions and economic disruption could also affect trials, operations or financing.
• Management stated that disclosure controls were effective as of September 30, 2022 and that there was no material change in internal control over financial reporting during the quarter.

Key facts for investors to verify

1. Cash burn, trial spending and whether the stated 12-month-plus runway remains supported by current operating plans and financing conditions.
2. Updated, complete clinical data for ALG-000184, ALG-125755 and ALG-055009, including safety, durability and whether preliminary results hold as studies mature.
3. Timing, regulatory progress and development costs for ALG-097558, including whether planned 2023 milestones were achieved.
4. Developments, potential costs and possible intellectual-property effects of the Janssen litigation.
5. Merck collaboration scope, revenue-recognition progress, deferred revenue and any milestone or partner-payment changes.
6. Effects of discontinued programs, clinical-site availability, third-party manufacturing and any need for additional capital or shareholder dilution.