Allogene Therapeutics(ALLO) - 2019 Q4 - Annual Report

Part I Business Allogene Therapeutics is a clinical-stage immuno-oncology company developing "off-the-shelf" allogeneic T cell therapies for cancer - Allogene is a clinical-stage immuno-oncology company pioneering the development of off-the-shelf allogeneic T cell therapies derived from healthy donors for cancer treatment[11] - The company's strategy is built on four pillars: minimizing Graft-versus-Host Disease (GvHD), enabling T cell persistence, building a leading manufacturing platform, and leveraging next-generation technologies[15] - Allogene utilizes Cellectis's TALEN gene-editing technology to engineer T cells, aiming to reduce GvHD risk by inactivating the T cell receptor (TCR) and enhance persistence by inactivating the CD52 gene[16] - In February 2019, the company leased a facility in Newark, California, to build its own cell therapy manufacturing plant, with manufacturing expected to commence in 2021[28] Our Pipeline Allogene's clinical pipeline overview details product candidates, targets, indications, and development phases Allogene Therapeutics Clinical Pipeline Overview | Product Candidate | Target | Indication(s) | Development Phase | Key Milestone/Status | | :--- | :--- | :--- | :--- | :--- | | UCART19 | CD19 | Relapsed/Refractory (R/R) ALL | Phase 1 (CALM & PALL trials) | 67% CR/CRi in interim results; potential registrational trials in 2021 | | ALLO-501 | CD19 | R/R Non-Hodgkin Lymphoma (NHL) | Phase 1 (ALPHA trial) | Initial data expected in Q2 2020 | | ALLO-501A | CD19 | R/R Large B-cell Lymphoma | Phase 1/2 (ALPHA2 trial) | IND cleared; trial initiation planned for Q2 2020 | | ALLO-715 | BCMA | R/R Multiple Myeloma | Phase 1 (UNIVERSAL trial) | Initial data expected in Q4 2020 | | ALLO-647 | CD52 | Lymphodepletion Agent | Used in ALPHA & UNIVERSAL trials | Designed to enable expansion and persistence of allogeneic CAR T products | Product Pipeline and Development Strategy This section details clinical progress and strategic development plans for Allogene's key product candidates - UCART19, for R/R ALL, showed a 67% CR/CRi rate in interim data from the CALM and PALL Phase 1 trials[80][86] - ALLO-501A is a next-generation anti-CD19 candidate for NHL, with the ALPHA2 Phase 1/2 trial planned to start in Q2 2020[92][99] - ALLO-715, targeting BCMA for R/R multiple myeloma, initiated its UNIVERSAL Phase 1 trial in Q3 2019, with initial data expected in Q4 2020[101][108] - Future pipeline expansion includes ALLO-316 (anti-CD70), ALLO-819 (anti-FLT3), an anti-DLL3 candidate, and next-gen technologies like TurboCARs and iPSC-derived cell sources[109][114][115] Strategic Agreements Allogene's strategic agreements detail key partnerships for technology and product development - The company was founded on an asset acquisition from Pfizer, which included key license and collaboration agreements[23][126] - Allogene holds an exclusive license from Cellectis for TALEN gene-editing technology and an exclusive collaboration with Servier for UCART19, ALLO-501, and ALLO-501A in the U.S[23][126] - A collaboration with Notch Therapeutics was established to research and develop T cell and NK cell products derived from induced pluripotent stem cells (iPSCs)[115][126] Competition Allogene faces intense competition from cell therapy developers and other immuno-oncology platforms - The company faces intense competition from established biopharmaceutical companies with greater resources, including Novartis (Kymriah) and Gilead/Kite (Yescarta) in autologous T cell therapy[135][137] - In the allogeneic T cell therapy space, competitors include Atara Biotherapeutics, CRISPR Therapeutics, Fate Therapeutics, and Precision Biosciences[136] - Competition also arises from non-cell-based immuno-oncology platforms like bispecific antibodies and antibody-drug conjugates from companies such as Amgen, Roche, and GlaxoSmithKline[138] Government Regulation and Product Approval Allogene's cell products are subject to extensive government regulation, including FDA approval and post-market requirements - Allogene's cell products are regulated as biologics by the FDA, requiring clinical trials and an approved Biologics License Application (BLA) for marketing[142] - The U.S. product development process involves preclinical testing, an Investigational New Drug (IND) application, and three phases of clinical trials (Phase 1, 2, 3) under Good Clinical Practices (GCPs)[144][148] - The FDA offers expedited programs like Fast Track, Priority Review, Accelerated Approval, and Regenerative Medicine Advanced Therapy (RMAT) designation, potentially applicable to Allogene's candidates[162][163][164] - Post-approval, the company is subject to ongoing FDA regulation, including cGMP compliance, adverse event reporting, and restrictions on off-label promotion, with approved biologics entitled to 12-year marketing exclusivity[167][171] Risk Factors The company faces substantial risks due to its limited operating history, net losses, and novel allogeneic T cell therapies - The company has a limited operating history, has incurred net losses since inception ($184.6 million in 2019), and anticipates substantial future losses[213][215] - Allogene is heavily reliant on partners, particularly Cellectis for TALEN gene-editing technology and Servier for conducting UCART19 clinical trials, creating dependencies and risks[222][224][225] - Product candidates may cause undesirable side effects such as Cytokine Release Syndrome (CRS), neurotoxicity, and Graft-versus-Host Disease (GvHD), which could halt clinical development or prevent regulatory approval[234][235] - The company intends to operate its own manufacturing facility but currently relies on CMOs, facing risks related to scaling up production and potential manufacturing failures[275][276] - The regulatory approval process for novel allogeneic cell therapies is uncertain and complex, potentially delaying or preventing approval due to extensive data requirements or different trial designs[228][363][376] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None Properties Allogene's corporate headquarters and manufacturing facility are located in South San Francisco and Newark, California, respectively - Corporate headquarters are located in South San Francisco, California, consisting of approximately 68,000 square feet for office and laboratory space[477] - In February 2019, the company leased approximately 118,000 square feet in Newark, California, to develop a state-of-the-art cell therapy manufacturing facility[478] Legal Proceedings The company is not currently a party to any material litigation or legal proceedings - The company is not currently a party to any material legal proceedings[479] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Allogene's common stock trades on Nasdaq under "ALLO" since its October 2018 IPO, with no cash dividends paid - The company's common stock has been listed on The Nasdaq Global Select Market under the symbol "ALLO" since October 11, 2018[482] - The company has never declared or paid cash dividends and intends to retain all available funds for operations and growth[487] - The October 2018 IPO raised net proceeds of approximately $343.3 million; these proceeds have not been used and are intended to fund the product pipeline and general corporate purposes[488][489] Selected Financial Data Selected financial data reflects significant operating losses, consistent with a clinical-stage biopharmaceutical company Selected Financial Data (in thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Statements of Operations Data | | | | Research and development | $144,535 | $151,860 | | General and administrative | $57,473 | $40,982 | | Loss from operations | $(202,008) | $(192,842) | | Net loss | $(184,594) | $(211,505) | | Balance Sheet Data (as of Dec 31) | | | | Cash, cash equivalents and investments | $588,855 | $721,350 | | Total assets | $717,802 | $773,855 | | Accumulated deficit | $(396,122) | $(211,528) | | Total stockholders' equity | $629,023 | $703,164 | Management's Discussion and Analysis of Financial Condition and Results of Operations Allogene reported a net loss of $184.6 million in 2019, an improvement from $211.5 million in 2018 Comparison of Operating Expenses (in thousands) | Expense Category | 2019 | 2018 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $144,535 | $151,860 | $(7,325) | Decrease due to a $109.4M one-time IPR&D expense in 2018, offset by increased pipeline, personnel, and facilities costs in 2019 | | General and administrative | $57,473 | $40,982 | $16,491 | Increase due to higher personnel-related costs (including stock-based compensation) and professional services | - As of December 31, 2019, the company had $588.9 million in cash, cash equivalents, and investments, considered sufficient to fund operations for at least the next 12 months[530] - Operations have been financed primarily by proceeds from convertible preferred stock, convertible notes, the 2018 IPO ($343.3 million net), and a late 2019 at-the-market (ATM) stock offering ($54.2 million net)[531] Cash Flow Summary (in thousands) | Cash Flow Category | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(137,350) | $(44,653) | | Net cash provided by (used in) investing activities | $164,084 | $(632,798) | | Net cash provided by financing activities | $58,960 | $771,182 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks, primarily interest rate risk and foreign currency exchange rate risk - The company's primary market risk is interest rate risk on its $588.9 million in cash, cash equivalents, and investments; a 10% change in interest rates is not expected to have a material effect[563] - Foreign currency exchange risk exists due to collaboration payments with Servier denominated in euros; as of December 31, 2019, liabilities were $2.4 million, and a 10% rate change is not expected to be material[564] Financial Statements and Supplementary Data This section presents the company's audited financial statements for 2019, 2018, and the inception period - The financial statements were audited by Ernst & Young LLP, which issued an unqualified opinion[569][570] - A critical audit matter identified was the estimation of accrued research and development costs, involving significant management judgment regarding work completed by partners and third-party service providers[573][574] Notes to Financial Statements Notes to financial statements detail accounting policies, strategic agreements, and other financial components - The April 2018 asset acquisition from Pfizer was accounted for as an asset acquisition, with total consideration of $113.9 million, of which $109.4 million was allocated to in-process research and development (IPR&D) and expensed immediately[651][652][654] - The company has significant potential future milestone payments: up to $840.0 million to Pfizer, up to $2.8 billion to Cellectis, and up to $215.5 million to Servier[658][664][675] - Total stock-based compensation expense was $46.1 million in 2019 and $18.6 million in 2018; as of December 31, 2019, there was $148.6 million of total unrecognized stock-based compensation[558][726] - The company has significant operating lease obligations, primarily for its headquarters and manufacturing facility, with total undiscounted lease payments of $93.3 million[544][691] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes or disagreements with its accountants on accounting or financial disclosure matters - None Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[755] - Management assessed the effectiveness of internal control over financial reporting and concluded it was effective as of December 31, 2019, based on the COSO framework[757] - Ernst & Young LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2019[758][762] Other Information The company reports no other information for this item - None Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships and Related Transactions, and Principal Accounting Fees and Services Information for Items 10-14 is incorporated by reference from the 2020 Proxy Statement - Information regarding Directors, Executive Officers, and Corporate Governance will be provided in the 2020 Proxy Statement and is incorporated by reference[770] - Information regarding Executive Compensation will be provided in the 2020 Proxy Statement and is incorporated by reference[772] - Information regarding Security Ownership, Certain Relationships and Related Transactions, and Principal Accounting Fees and Services will be provided in the 2020 Proxy Statement and is incorporated by reference[773][775][776] Part IV Exhibits, Financial Statement Schedules This section lists financial statements from Item 8 and provides an index of all exhibits filed with the Form 10-K - This item contains the list of financial statements and an index of exhibits filed with the Form 10-K[778][779] Form 10-K Summary The company reports no information for this item - None