Alector(ALEC) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Alector, Inc.'s unaudited condensed consolidated financial statements for Q3 and YTD September 2024 are presented, showing a $117.0 million net loss for the nine-month period and $71.1 million from a January 2024 public offering Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Cash, cash equivalents, and marketable securities | $457,202 | $548,861 | | Total Assets | $516,023 | $621,827 | | Total Liabilities | $397,090 | $487,669 | | Total Stockholders' Equity | $118,933 | $134,158 | Condensed Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2024 (in thousands) | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $15,342 | $9,109 | $46,318 | $81,872 | | Research and Development | $47,998 | $46,328 | $139,479 | $144,392 | | Net Loss | $(42,220) | $(44,475) | $(116,975) | $(88,957) | | Net Loss Per Share | $(0.43) | $(0.53) | $(1.22) | $(1.07) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Metric | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(174,877) | $(138,092) | | Net cash provided by investing activities | $65,729 | $83,847 | | Net cash provided by financing activities | $71,752 | $1,960 | - In January 2024, the company completed a public offering, issuing 10,869,566 shares of common stock which resulted in aggregate net proceeds of $71.1 million[21] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operations, highlighting progress in clinical programs for FTD and Alzheimer's, supported by collaboration revenues and a cash runway through 2026 - The company is focusing its development resources on key clinical candidates: latozinemab for frontotemporal dementia (FTD), and AL002 and AL101 for Alzheimer's disease (AD)[46] - Key clinical milestones achieved include target enrollment in the pivotal Phase 3 INFRONT-3 trial for latozinemab, FDA Breakthrough Therapy Designation for latozinemab, and the first participant dosed in the PROGRESS-AD Phase 2 trial for AL101[46] - As of September 30, 2024, the company had $457.2 million in cash, cash equivalents, and marketable securities, which is anticipated to provide a financial runway through 2026[48][72] Comparison of Results of Operations (in thousands) | Metric | Three Months Ended Sep 30, 2024 (in thousands) | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $15,342 | $9,109 | $46,318 | $81,872 | | R&D Expenses | $47,998 | $46,328 | $139,479 | $144,392 | | G&A Expenses | $15,778 | $13,364 | $44,587 | $41,767 | | Net Loss | $(42,220) | $(44,475) | $(116,975) | $(88,957) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its $457.2 million investment portfolio, with foreign currency risk deemed minimal due to U.S. dollar-denominated expenses - The company's primary market risk is interest rate sensitivity. An immediate 100 basis point change in interest rates would cause a change in the fair value of its investment portfolio of approximately $2.2 million as of September 30, 2024[82] - Foreign currency risk is not considered material as expenses are generally denominated in U.S. dollars. A 10% change in exchange rates would not have a material effect on financial results[83] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2024, the Principal Executive Officer and Principal Financial and Accounting Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[85] - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[86] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business - As of the filing date, the company is not a party to any litigation or legal proceedings that are expected to have a material adverse effect on its business[87] Item 1A. Risk Factors This section outlines significant risks including limited operating history, substantial net losses, high uncertainty in neurodegenerative drug development, reliance on third parties, and the need for additional financing - The company has a limited operating history, no approved products, and has incurred significant net losses each year, with an accumulated deficit of $827.1 million as of September 30, 2024[91][92][93] - The business is heavily dependent on the success of its product candidates, which are in various stages of development. Drug development is inherently risky, particularly in the field of neurodegenerative diseases, which has seen limited success[96][101][106] - The company will need to obtain substantial additional financing to complete development and commercialization. Failure to raise capital could force delays, reductions, or termination of its programs[98] - The company depends on collaborations with third parties like GSK and AbbVie for development and commercialization, and these collaborations pose risks such as potential termination or underperformance by partners[162] - Clinical trials may face substantial delays, enrollment difficulties, or fail to demonstrate safety and efficacy. For example, treatment-emergent MRI findings resembling ARIA have been observed in the INVOKE-2 Phase 2 clinical trial[107][111][114] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None[233] Item 5. Other Information This section discloses the termination and adoption of new Rule 10b5-1 trading plans by the CFO for the potential sale of up to 84,357 shares of common stock - On September 12, 2024, CFO Marc Grasso terminated a Rule 10b5-1 trading plan adopted in August 2023[234] - On September 13, 2024, CFO Marc Grasso adopted a new Rule 10b5-1 trading plan for the exercise of options and sale of up to 84,357 shares of common stock, which will expire on September 13, 2025[234] Item 6. Exhibits This section provides an index of exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[235][237]