Arcellx(ACLX) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Arcellx, Inc.'s unaudited financial statements reflect decreased cash, assets, and collaboration revenue, alongside an increased net loss Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $62,336 | $105,679 | | Marketable securities | $475,269 | $519,973 | | Total current assets | $463,895 | $599,310 | | Total assets | $619,086 | $711,327 | | Liabilities & Equity | | | | Total current liabilities | $121,850 | $125,405 | | Total liabilities | $226,863 | $256,535 | | Total stockholders' equity | $392,223 | $454,792 | | Total liabilities and stockholders' equity | $619,086 | $711,327 | - Total assets decreased from $711.3 million at the end of 2024 to $619.1 million as of June 30, 2025, primarily driven by a reduction in cash and marketable securities[15] Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $7,554 | $27,384 | $15,683 | $66,640 | | Research and development | $37,627 | $40,953 | $88,428 | $73,271 | | General and administrative | $28,653 | $21,424 | $54,879 | $44,172 | | Loss from operations | $(58,726) | $(34,993) | $(127,624) | $(50,803) | | Net loss | $(52,771) | $(27,202) | $(115,041) | $(34,400) | | Net loss per share | $(0.94) | $(0.51) | $(2.06) | $(0.65) | - Net loss for the six months ended June 30, 2025, increased significantly to $115.0 million from $34.4 million in the prior year period, largely due to a sharp decline in collaboration revenue and increased operating expenses[18] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(102,876) | $(68,156) | | Net cash provided by (used in) investing activities | $48,525 | $(214,685) | | Net cash provided by (used in) financing activities | $10,800 | $(13,412) | | Net decrease in cash, cash equivalents, and restricted cash | $(43,551) | $(296,253) | - Cash used in operating activities increased to $102.9 million in the first six months of 2025, up from $68.2 million in the same period of 2024, reflecting the higher net loss adjusted for non-cash items[25] Notes to Condensed Consolidated Financial Statements - As of June 30, 2025, the company had $537.6 million in cash, cash equivalents, and marketable securities, which management believes is sufficient to fund operations and capital expenditures for at least the next twelve months[28] - The collaboration with Kite involves co-development and co-commercialization of anito-cel. Arcellx is eligible for up to $530.0 million in milestones for anito-cel, plus additional milestones for other products. Revenue is recognized using a cost-based input method[43][45][50] - The company has potential future milestone payment obligations to vendors, including up to $25.3 million for development milestones and up to $52.0 million for commercial milestones[53] - During Q2 2025, the company sold 120,000 shares of common stock through its at-the-market (ATM) offering program, generating net proceeds of $7.8 million[58] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, highlighting decreased collaboration revenue, increased net loss, and sufficient liquidity to fund operations into 2028 Overview - Arcellx is a clinical-stage biotechnology company focused on developing immunotherapies for cancer and other incurable diseases using its novel D-Domain synthetic binding scaffold[73] - The lead program, anito-cel, is being evaluated in a pivotal Phase 2 trial (iMMagine-1) and a Phase 3 trial (iMMagine-3) for relapsed or refractory multiple myeloma (rrMM), in partnership with Kite Pharma[74] - Preliminary data from the iMMagine-1 trial was presented in June 2025. Kite has initiated the global Phase 3 iMMagine-3 trial and is manufacturing anito-cel for it[75] - As of June 30, 2025, the company had an accumulated deficit of $611.9 million, with net losses of $115.0 million for the first six months of 2025[78] Results of Operations Comparison of Three Months Ended June 30, 2025 and 2024 (in thousands) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $7,554 | $27,384 | $(19,830) | | R&D Expenses | $37,627 | $40,953 | $(3,326) | | G&A Expenses | $28,653 | $21,424 | $7,229 | | Net loss | $(52,771) | $(27,202) | $(25,569) | - The decrease in Q2 2025 collaboration revenue was primarily driven by the completion of dosing and manufacturing for the iMMagine-1 trial in late 2024[98] Comparison of Six Months Ended June 30, 2025 and 2024 (in thousands) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $15,683 | $66,640 | $(50,957) | | R&D Expenses | $88,428 | $73,271 | $15,157 | | G&A Expenses | $54,879 | $44,172 | $10,707 | | Net loss | $(115,041) | $(34,400) | $(80,641) | - The increase in R&D expenses for the first half of 2025 was mainly due to a $15.9 million increase in internal costs, primarily higher personnel-related and share-based compensation expenses[105] Liquidity and Capital Resources - As of June 30, 2025, the company had cash, cash equivalents, and marketable securities totaling $537.6 million[109] - Management believes the current cash position is adequate to fund operations into 2028, based on expected operating requirements and capital expenditures[111] - Net cash used in operating activities was $102.9 million for the first six months of 2025, primarily due to the net loss of $115.0 million, offset by non-cash share-based compensation of $41.9 million[113] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is to U.S. interest rate changes, affecting its $537.6 million portfolio of cash, cash equivalents, and marketable securities - The company is exposed to interest rate sensitivity risk on its portfolio of cash, cash equivalents, and marketable securities, which totaled $537.6 million as of June 30, 2025[126] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[128] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[129] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material litigation or legal proceedings expected to adversely affect its business - As of the reporting date, Arcellx is not involved in any material legal proceedings[131] Item 1A. Risk Factors This section outlines significant risks including limited operating history, clinical development uncertainties, reliance on third parties, intellectual property, regulations, commercialization, and stock volatility Risks Related to Our Limited Operating History, Financial Condition, and Capital Requirements - The company has a limited operating history, has incurred significant losses since inception, and expects losses to continue. As of June 30, 2025, the accumulated deficit was $611.9 million[143][144] - Substantial additional funding will be required to advance product candidates through clinical development and potential commercialization[145] Risks Related to Development of Our Product Candidates - The company's ddCAR and ARC-SparX platforms are novel and unproven, making it difficult to predict development timing, costs, and regulatory approval[157] - The FDA previously issued and lifted a partial clinical hold on anito-cel, and there is no assurance that another clinical hold will not be issued in the future[152][171] - Product candidates may cause undesirable side effects, such as cytokine release syndrome and neurologic toxicities, which could halt clinical development or prevent regulatory approval[187] - Manufacturing genetically engineered cell therapies is complex and subject to risks, including difficulties in production, sourcing key components, and maintaining quality control[200][201] Risks Related to Our Business - The company faces significant competition from other biotechnology and pharmaceutical companies with greater financial and technical resources[214][216] - The business is highly dependent on key personnel, and the inability to attract and retain qualified individuals could harm the implementation of its business strategy[229] - Global economic conditions, including inflation and market volatility, as well as geopolitical instability, could adversely affect the business and financial condition[218][219] Risks Related to Reliance on Third Parties - The company relies on third parties, such as CROs and medical institutions, to conduct its clinical trials, which limits direct control over timing and execution[271][272] - The company depends on its collaboration with Kite for the development, manufacturing, and commercialization of anito-cel and other specified product candidates[284][285] - Reliance on third-party manufacturers exposes the company to risks such as production delays, quality control issues, and compliance failures with cGMP regulations[276] Risks Related to Our Intellectual Property - The company's success is heavily dependent on patent protection for its platforms and product candidates, which is an expensive and uncertain process[297][298] - The company may face third-party claims of intellectual property infringement, which could lead to costly litigation, delays, or prevent commercialization of its products[316] - Changes in U.S. patent law and court decisions have increased increased uncertainty regarding the scope and enforceability of patents in the biopharmaceutical industry[327][328] Risks Related to Government Regulation - The FDA regulatory approval process is lengthy, time-consuming, and unpredictable, and there is no guarantee that any product candidates will be approved[338][342] - Even if approved, the company will be subject to extensive ongoing regulatory obligations, and failure to comply could result in significant penalties or withdrawal of approval[358] - Healthcare reform legislation, such as the Inflation Reduction Act, and other changes in healthcare policy could adversely affect drug pricing, reimbursement, and profitability[365][384] Risks Related to Commercialization of Our Product Candidates - Approved products may fail to gain market acceptance among physicians, patients, and payors due to factors like perceived safety, efficacy, cost, and competition[370] - The company currently has no sales organization and limited marketing experience, which could hinder its ability to generate revenue from any approved products[389] - Successful commercialization depends on securing adequate coverage and reimbursement from third-party payors, which is a complex and uncertain process[374][375] Risks Related to Ownership of our Common Stock - The trading price of the company's common stock has been and is likely to continue to be highly volatile[409] - Future sales of common stock to raise capital will result in dilution to existing stockholders[412][414] - Gilead holds approximately 12% of the company's outstanding common stock, and future sales by Gilead could negatively impact the stock price[418] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during Q2 2025 that were not previously disclosed in a Form 8-K - No unregistered sales of equity securities occurred during the quarter that were not previously reported[431] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities during the reporting period - None[432] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[433] Item 5. Other Information No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarter ended June 30, 2025[434] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications - The report includes a list of filed exhibits, such as officer certifications (31.1, 31.2, 32.1, 32.2) and XBRL data files[435][436]