Allogene Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Allogene is a clinical-stage immuno-oncology company developing off-the-shelf, genetically engineered allogeneic T-cell therapies. It had no approved products or product sales; reported revenue was collaboration revenue.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Collaboration revenue | $0.05 million | $0.05 million | $0.2 million | $38.4 million |
| Research and development expense | $63.6 million | $58.7 million | $181.0 million | $166.2 million |
| General and administrative expense | $18.9 million | $19.0 million | $58.3 million | $54.1 million |
| Net loss | $83.1 million | $78.2 million | $237.8 million | $182.1 million |
| Net loss per share, diluted | $0.58 | $0.57 | $1.67 | $1.35 |
- Cash and investments: $637.3 million at September 30, 2022, versus $809.5 million at December 31, 2021. Cash, cash equivalents and restricted cash totaled $84.6 million.
- Cash flow: Operating activities used $158.4 million in the first nine months, compared with $139.4 million in the comparable 2021 period. Investing activities provided $56.6 million, primarily reflecting investment maturities; financing activities provided $2.9 million.
- Balance sheet: Total assets were $887.6 million and stockholders’ equity was $740.0 million. Total liabilities were $147.6 million, including $102.5 million in operating lease liabilities. The filing reports no borrowings.
- Margins: Gross margin is not applicable to this pre-commercial company; the filing reports no product sales. Operating expenses substantially exceeded collaboration revenue.
Changes versus prior comparable periods
- Nine-month revenue fell $38.2 million year over year because a $38.4 million license and know-how revenue item from the Allogene Overland agreement was recognized in Q1 2021; 2022 revenue was only $0.2 million.
- Nine-month net loss increased $55.6 million, or 31%. Operating expenses rose $18.9 million, or 9%, while the prior-year one-time collaboration revenue did not recur.
- Nine-month R&D expense increased $14.8 million, with higher personnel and facility costs partly offset by lower external development and manufacturing costs. G&A expense increased $4.2 million.
- Available-for-sale investments recorded $10.4 million of net unrealized losses for the first nine months, reflected in other comprehensive loss. The company attributed unrealized losses to market factors, not credit risk.
Outlook, management commentary and material risks
- Management expects continued operating losses and higher R&D and G&A spending. It stated that cash and investments should fund operations for at least one year from the filing date, while also noting that additional capital will be needed to fully implement its business plan. The company may seek equity, debt or other financing; unavailable or inadequate financing could force delays or reductions to development plans.
- On October 6, 2022, Allogene announced initiation of the Phase 2 ALPHA2 trial of ALLO-501A in relapsed/refractory large B-cell lymphoma. An $8.0 million Servier milestone is expected to be recognized in Q4 2022. Allogene was also preparing the EXPAND trial to assess ALLO-647’s contribution to the lymphodepletion regimen. Management described potential approval plans as dependent on trial outcomes and FDA discussions.
- Servier notified Allogene on September 15, 2022 that it was discontinuing its participation in development of CD19 products, including UCART19, ALLO-501 and ALLO-501A. Allogene may elect an ex-U.S. license option. The parties disagree about the option’s timing and Servier’s continued obligation to reimburse 40% of development costs while Allogene considers the option. Exercising the option could increase certain ALLO-501A milestones and end Servier’s cost reimbursements.
- The company cited clinical, regulatory and execution risks, including potential safety events, trial enrollment or timing delays, manufacturing scale-up and transfer of the Alloy process, reliance on third parties and licensed gene-editing technology, and competition from approved therapies. A prior FDA clinical hold, triggered by a chromosomal abnormality observation, was resolved in January 2022; future safety or manufacturing issues could again disrupt trials.
- COVID-19 had adversely affected enrollment and patient follow-up; the extent and duration of future effects were uncertain. The company also identified interest-rate, foreign-exchange, market and financing risks. It reported that a 10% interest-rate or foreign-exchange movement would not have materially affected the financial statements.
- Potential commitments include contingent development, regulatory and sales milestones and royalties under license agreements, a five-year MD Anderson collaboration commitment of up to $15.0 million, and a 20-year solar energy agreement. Lease liabilities were $102.5 million; non-cancellable purchase commitments were $0.4 million. Management reported no pending legal matters expected to have a material adverse effect.
Most important facts for investors to verify
- Available cash and investment balance, cash burn, and whether the stated runway and financing assumptions remain adequate.
- Enrollment, safety and efficacy updates from ALPHA2, EXPAND and other clinical programs, plus the impact of the $8.0 million milestone.
- Resolution of the Servier option and cost-sharing dispute, and any consequences for CD19 product development, economics or Cellectis rights.
- Progress and regulatory comparability of the Alloy manufacturing process and transition to Allogene’s facility.
- Changes in collaboration revenue, R&D spending, investment valuation losses and contingent licensing obligations.