ALX Oncology(ALXO) - 2022 Q4 - Annual Report

Licensing and Development - The company has entered into license agreements with third parties for the development and commercialization of product candidates, including evorpacept, with customary payment terms including milestone payments and low single-digit royalties[117]. - The company plans to retain significant development and commercial rights for its product candidates and aims to build the necessary infrastructure for commercialization in the U.S. and potentially other regions[118]. - The existing supply of evorpacept drug product is sufficient to complete clinical trials through Q1 2024, with plans to manufacture additional supplies with existing CMOs[121]. - The company relies on contract manufacturing organizations (CMOs) for drug substance and product, and does not intend to establish its own manufacturing facilities[119]. - The company has established agreements with KBI Biopharma, Inc. and other CMOs for analytical method development and drug product manufacturing since 2015[121]. Regulatory Environment - The competitive landscape includes major pharmaceutical and biotechnology companies, with potential competitors having greater financial resources and expertise in R&D, manufacturing, and regulatory approvals[122]. - The FDA regulates biologic products under the FDCA and PHSA, requiring substantial time and financial resources for compliance and approval processes[123]. - The BLA approval process involves extensive preclinical and clinical testing, with significant requirements for safety, efficacy, and manufacturing compliance[126]. - Clinical trials are conducted in three phases, with Phase 1 focusing on safety and dosage, Phase 2 on preliminary efficacy, and Phase 3 on expanded patient populations for statistical significance[128]. - Regulatory compliance is critical, as failure to meet requirements can lead to sanctions, including withdrawal of approvals and clinical holds[125]. - The FDA aims to review standard BLA applications within ten months and priority review applications within six months after acceptance[130]. - Products with Fast Track designation can have frequent interactions with the FDA review team and may be eligible for rolling review[131]. - Breakthrough therapy designation allows for more intensive FDA interaction and guidance starting as early as Phase 1, expediting development and review[132]. - Orphan drug designation is granted for drugs intended to treat rare diseases affecting fewer than 200,000 individuals in the U.S., providing potential exclusivity for seven years upon approval[133]. - The FDA may withdraw product approval if compliance with regulatory requirements is not maintained, leading to potential market withdrawal or recalls[136]. - Changes to approved products, such as new indications, require prior FDA review and approval, which may involve additional studies[136]. - The FDA enforces strict regulations on marketing, labeling, and promotion of biologics, allowing only claims approved in the product's labeling[138]. - Non-compliance with FDA requirements can result in adverse publicity, warning letters, and potential civil or criminal penalties[138]. - The FDA's approval process includes inspections of manufacturing facilities to ensure compliance with cGMP requirements[130]. - The FDA may require post-marketing studies to monitor safety and efficacy, which can impact the product's market status[136]. Financial Performance - As of December 31, 2022, the company had cash, cash equivalents, and short-term and long-term investments totaling $282.9 million[314]. - The company had outstanding borrowings of $10.0 million under a Loan Agreement, with interest rates tied to the greater of 1-month term SOFR or 2.33% plus 6.25%[314]. - The company is exposed to interest rate risk, but an immediate 100 basis point change in interest rates would not materially affect the fair market value of its cash and investments[314]. - The company has not experienced any realized losses on its deposits of cash, cash equivalents, or investments during the reported periods[315]. - The company is subject to significant uncertainty regarding coverage and reimbursement for its product candidates, which may affect sales and profitability[146]. - Legislative changes, including the Inflation Reduction Act of 2022, may impact the pharmaceutical industry and the company's ability to generate revenue[150]. - As of December 31, 2022, total assets decreased to $306,489 thousand from $380,183 thousand as of December 31, 2021, representing a decline of approximately 19.4%[334]. - Cash and cash equivalents significantly decreased to $48,822 thousand in 2022 from $363,667 thousand in 2021, a reduction of about 86.6%[334]. - Total operating expenses increased to $127,436 thousand in 2022, up from $83,555 thousand in 2021, marking a rise of approximately 52.6%[337]. - Research and development expenses rose to $98,400 thousand in 2022, compared to $60,170 thousand in 2021, an increase of about 63.4%[337]. - The net loss attributable to common stockholders for 2022 was $123,482 thousand, compared to a net loss of $83,463 thousand in 2021, reflecting an increase of approximately 48%[340]. - The net loss per share attributable to common stockholders was $(3.03) in 2022, compared to $(2.07) in 2021, indicating a worsening loss per share[337]. - Total liabilities increased to $43,025 thousand in 2022 from $17,134 thousand in 2021, representing a rise of approximately 151.5%[334]. - Stockholders' equity decreased to $263,464 thousand in 2022 from $363,049 thousand in 2021, a decline of about 27.5%[334]. - The company incurred $376,789 thousand in investments purchases during 2022, indicating a significant investment activity[347]. - The company reported depreciation and amortization of $342 thousand in 2022, compared to $51 thousand in 2021 and $202 thousand in 2020, indicating increased asset utilization[347]. - The company had a net cash outflow from investing activities of $235,416 thousand in 2022, compared to an outflow of $4,923 thousand in 2021[347]. - The company reported a pre-tax loss of $123.4 million for 2022, compared to a loss of $83.5 million in 2021[432]. Employee and Workplace Culture - The company employs 58 individuals, with 24 holding Ph.D. or M.D. degrees, and emphasizes a diverse and inclusive workplace culture[151]. - The company is focused on recruiting and retaining skilled employees to support its research and development activities[151]. Compliance and Legal Matters - Biopharmaceutical companies must comply with various U.S. healthcare regulations, including the federal Anti-Kickback Statute and the False Claims Act, which impose significant legal obligations[144]. - The Foreign Corrupt Practices Act (FCPA) prohibits U.S. businesses from making payments to foreign officials to influence business decisions[145]. - Compliance with state and foreign laws regarding healthcare items and services can complicate operations, as these laws often differ significantly[145]. - Violations of healthcare laws can result in severe penalties, including fines, imprisonment, and exclusion from government healthcare programs[145]. - The complexity of the BPCIA and ongoing litigation may create uncertainty regarding its implementation and impact on the market[139]. Investments and Capital Structure - The Company intends to raise additional capital through the sale of equity, debt financings, and/or strategic alliances, but there is no assurance of success in acquiring sufficient funding[350]. - The Company has not recorded impairment of any long-lived assets, indicating stable asset valuation[364]. - The Company holds cash and cash equivalents primarily in money market funds and U.S. government agency securities, which approximate fair value[356]. - Investments are classified as available-for-sale and carried at estimated fair values, with regular reviews for declines in estimated fair value[357]. - The Company has adopted ASC 842 for leases, recognizing right-of-use assets and lease liabilities based on the present value of future minimum lease payments[362]. - The Company entered into a loan agreement for a secured term loan facility of up to $100.0 million, with an initial draw of $10.0 million and access to an additional $40.0 million through the end of 2023[407]. - The term loans bear interest at a minimum rate of 8.58%, with principal payments starting on December 1, 2025, unless milestone-related tranches are funded, which would delay payments to December 1, 2026[407]. - The Company had 40,861,386 shares of common stock outstanding as of December 31, 2022, an increase from 40,587,067 shares in 2021[410]. - The Company raised approximately $169.5 million from its initial public offering in July 2020 and $194.9 million from a follow-on public offering in December 2020[411]. - The Company recorded stock-based compensation expenses primarily from stock options and restricted stock units, with the fair value estimated using the Black-Scholes model[377]. - The Company has not reported any material differences between accrued estimated expenses and actual clinical trial expenses through December 31, 2022[376]. Tax Matters - The company had deferred tax assets totaling $33.5 million as of December 31, 2022, up from $23.3 million in 2021[438]. - The valuation allowance for deferred tax assets increased by approximately $9.1 million in 2022, reflecting management's assessment of realizability[439]. - Unrecognized tax benefits increased to $1.7 million as of December 31, 2022, from $1.2 million in 2021 and $0.8 million in 2020, indicating a growing uncertainty in tax positions[441]. - The company anticipates no significant changes to unrecognized tax benefits over the next 12 months, indicating stability in its tax positions[442].