Allogene Therapeutics(ALLO) - 2020 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements Allogene Therapeutics reported a $115.5 million net loss for H1 2020, with cash and investments growing to $1.1 billion primarily from a $595.7 million public offering Condensed Consolidated Balance Sheets Total assets increased to $1.26 billion as of June 30, 2020, driven by a $1.11 billion rise in cash and investments, with stockholders' equity reaching $1.16 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $280,379 | $175,126 | | Total current assets | $909,577 | $544,576 | | Total assets | $1,258,544 | $717,802 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $40,895 | $33,079 | | Total liabilities | $95,125 | $88,779 | | Total stockholders' equity | $1,163,419 | $629,023 | | Total liabilities and stockholders' equity | $1,258,544 | $717,802 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss increased to $115.5 million for the six months ended June 30, 2020, from $72.8 million in 2019, driven by higher $89.3 million research and development expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $47,296 | $31,774 | $89,337 | $55,177 | | General and administrative | $15,862 | $14,187 | $31,502 | $27,245 | | Loss from operations | $(63,158) | $(45,961) | $(120,839) | $(82,422) | | Net loss | $(60,974) | $(41,243) | $(115,454) | $(72,829) | | Net loss per share | $(0.53) | $(0.41) | $(1.03) | $(0.74) | Condensed Consolidated Statements of Cash Flows Net cash used in operations was $67.5 million for H1 2020, while financing activities provided $616.8 million from a public offering, resulting in a $105.3 million net cash increase Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(67,530) | $(55,148) | | Net cash (used in) provided by investing activities | $(443,978) | $77,380 | | Net cash provided by financing activities | $616,761 | $920 | | Net change in cash, cash equivalents and restricted cash | $105,253 | $23,152 | - Financing activities were significantly boosted by $595.7 million in net proceeds from a public offering and $14.8 million from an ATM offering during the first half of 2020[15] Notes to Condensed Consolidated Financial Statements Notes detail significant financing activities, key license agreements, lease commitments, and increased stock-based compensation - In June 2020, the company sold 13,457,447 shares of common stock in a public offering, resulting in net proceeds of approximately $595.7 million[19] - The company has key license agreements with Pfizer, Cellectis, Servier, and Notch, which involve potential aggregate milestone payments of up to $840.0 million (Pfizer) and $2.8 billion (Cellectis), plus royalties[44][49] - The company has significant lease commitments, including for a new cell therapy manufacturing facility in Newark, California. As of June 30, 2020, total undiscounted future lease payments were $90.5 million[74][77] Stock-Based Compensation Expense (in thousands) | Period | Research & Development | General & Administrative | Total | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2020 | $7,979 | $8,791 | $16,770 | | Three Months Ended June 30, 2019 | $4,747 | $6,740 | $11,487 | | Six Months Ended June 30, 2020 | $14,636 | $16,349 | $30,985 | | Six Months Ended June 30, 2019 | $7,478 | $11,876 | $19,354 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical progress, financial results, and liquidity, noting COVID-19 impacts, increased net loss from higher expenses, and sufficient cash for future operations - The company is a clinical-stage immuno-oncology company developing a pipeline of off-the-shelf allogeneic T cell product candidates. Key programs include ALLO-501A for Non-Hodgkin Lymphoma (NHL) and ALLO-715 for multiple myeloma[108][110][111] - The COVID-19 pandemic has adversely impacted the business by affecting patient enrollment in clinical trials and causing interruptions in the construction of the Newark, California manufacturing facility[112] Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $47,296 | $31,774 | $15,522 | 49% | | General and administrative | $15,862 | $14,187 | $1,675 | 12% | | Total operating expenses | $63,158 | $45,961 | $17,197 | 37% | - As of June 30, 2020, the company had $1.1 billion in cash, cash equivalents, and investments, and believes this is sufficient to fund operations for at least one year from the filing date[145] Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risks include interest rate risk on $1.1 billion in investments and foreign exchange risk from Euro-denominated payments, with a 10% change in either not materially affecting financials - The company is exposed to interest rate risk on its $1.1 billion in cash, cash equivalents, and available-for-sale securities as of June 30, 2020[165] - Foreign exchange risk exists due to collaboration payments with Servier being denominated in Euros. As of June 30, 2020, the company had $0.8 million of receivables denominated in foreign currency[166] Item 4. Controls and Procedures As of June 30, 2020, the CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of the end of the period covered by the report, the company's disclosure controls and procedures were effective[167] - No changes in internal control over financial reporting were identified during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[168] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its operations, financial condition, or cash flows - Management believes there are currently no pending claims or actions against the company that could have a material adverse effect on its financial condition[170] Item 1A. Risk Factors Significant risks include limited operating history, accumulated net losses of $511.6 million, reliance on partners, COVID-19 impacts on trials and manufacturing, potential for undesirable side effects, and regulatory uncertainties - The company has a limited operating history, has incurred net losses since inception (accumulated deficit of $511.6 million as of June 30, 2020), and expects to incur substantial future losses[172][174] - The COVID-19 pandemic is adversely impacting the business by halting or delaying clinical trial enrollment, interrupting supply chains, and delaying construction of the manufacturing facility[179][180] - The business is heavily reliant on partners, particularly Cellectis for its TALEN gene-editing technology, which is critical for manufacturing allogeneic T cell product candidates[184][185][186] - 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[193] - The company is building its own manufacturing facility but currently relies on CMOs and faces risks related to scaling up production, process control, and securing specialty raw materials[228][284] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company's October 2018 IPO generated $343.3 million in net proceeds, with $95.8 million used by June 30, 2020, and remaining funds allocated for clinical development and manufacturing facility construction - The company's IPO in October 2018 generated net proceeds of approximately $343.3 million[398] - Through June 30, 2020, the company has used $95.8 million of the IPO proceeds, with the remainder intended to fund clinical development and the build-out of its manufacturing facility[399] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[400] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[400] Item 5. Other Information The company reports no other information for this item - None[400] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, a lease amendment, and required officer certifications - The report includes standard corporate governance documents, a second amendment to a lease agreement, and required officer certifications as exhibits[402]