ALX Oncology(US:ALXO)2025-08-12 20:07PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for ALX Oncology Holdings Inc. as of June 30, 2025, show a decrease in total assets to $95.3 million from $147.8 million at year-end 2024, primarily due to a reduction in cash and investments Condensed Consolidated Balance Sheets As of June 30, 2025, the company had total assets of $95.3 million, a decrease from $147.8 million at December 31, 2024, driven by a reduction in cash, cash equivalents, and short-term investments Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $19,302 | $17,567 | | Short-term investments | $60,012 | $110,190 | | Total current assets | $85,257 | $134,352 | | Total assets | $95,320 | $147,775 | | Liabilities & Equity | | | | Total current liabilities | $18,848 | $18,500 | | Total liabilities | $30,905 | $34,157 | | Total stockholders' equity | $64,415 | $113,618 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, the company reported a net loss of $25.9 million, an improvement from the $39.4 million loss in the same period of 2024, primarily due to lower research and development expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $18,022 | $34,653 | $41,910 | $66,370 | | General and administrative | $5,451 | $6,872 | $13,383 | $12,917 | | Impairment charge | $3,175 | $— | $3,175 | $— | | Total operating expenses | $26,648 | $41,525 | $58,468 | $79,287 | | Loss from operations | $(26,648) | $(41,525) | $(58,468) | $(79,287) | | Net loss | $(25,949) | $(39,399) | $(56,703) | $(74,980) | | Net loss per share | $(0.49) | $(0.76) | $(1.05) | $(1.47) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $48.1 million, offset by $50.0 million provided by investing activities, resulting in a net increase in cash of $1.7 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,069) | $(64,490) | | Net cash provided by investing activities | $49,961 | $27,380 | | Net cash (used in) provided by financing activities | $(157) | $30,238 | | Net increase (decrease) in cash | $1,735 | $(6,872) | | Cash at end of period | $19,368 | $15,600 | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies, financial instruments, and operational structure, including its clinical-stage status, reliance on future financing, and an impairment charge related to a leased property - The company is a clinical-stage biotechnology firm with no product revenues and expects to incur additional losses, though management believes existing capital is sufficient to fund operations for at least the next twelve months272930 - In May 2025, the company decided to sublease its Palo Alto property, resulting in a pre-tax long-lived asset impairment charge of $3.2 million on the right-of-use asset and leasehold improvements55140 - The company has a term loan agreement for up to $100.0 million, with $10.0 million drawn, and a $25.0 million tranche remained available at the lenders' sole discretion as of June 30, 2025, after the company opted not to draw down other available tranches63156 - As of June 30, 2025, the company had non-cancellable commitments of approximately $1.5 million for manufacturing and services, primarily with KBI Biopharma and three other contract manufacturers89 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage pipeline, led by evorpacept and ALX2004, highlighting recent clinical trial results, strategic shifts to preserve capital, and financial performance showing a reduced net loss for Q2 2025 Overview ALX Oncology is a clinical-stage biotechnology company focused on cancer therapies, with lead product evorpacept showing promising results in gastric cancer but not qualifying for accelerated FDA approval, leading to a strategic focus on the ASPEN-Breast trial - Lead product evorpacept is a next-generation CD47 blocker designed to avoid hematologic toxicities of other CD47 approaches9495 - In the ASPEN-06 trial for gastric cancer, evorpacept plus TRP showed a 65% ORR in CD47-high patients, compared to 26% with TRP alone, with full data to be presented in Q4 2025103105 - The FDA advised that ASPEN-06 data is not eligible for accelerated approval, leading the company to not pursue a Phase 3 trial in gastric cancer and instead focus resources on the ASPEN-Breast trial105 - The company's second candidate, ALX2004, an EGFR-targeted ADC, received IND clearance from the FDA in April 2025115 - The company received a Nasdaq minimum bid price non-compliance notice on April 23, 2025, and has until October 20, 2025, to regain compliance114117 Results of Operations The company's net loss decreased to $25.9 million in Q2 2025 from $39.4 million in Q2 2024, primarily driven by a 48% decrease in R&D expenses and a 21% decrease in G&A expenses Comparison of Results of Operations (in thousands) | Item | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $18,022 | $34,653 | $(16,631) | -48% | | General and administrative | $5,451 | $6,872 | $(1,421) | -21% | | Impairment charge | $3,175 | $— | $3,175 | 100% | | Loss from operations | $(26,648) | $(41,525) | $14,877 | -36% | | Net loss | $(25,949) | $(39,399) | $13,450 | -34% | - R&D expenses for Q2 2025 decreased by $16.6 million year-over-year, mainly due to a decrease of $8.5 million in clinical and development costs (less manufacturing of clinical trial materials) and a $4.1 million decrease in stock-based compensation135 - G&A expenses for Q2 2025 decreased by $1.4 million year-over-year, primarily due to a $1.0 million decrease in stock-based compensation and lower legal consulting costs138 - A $3.2 million impairment charge was recorded in Q2 2025 after the company decided to sublease its Palo Alto property140 Liquidity and Capital Resources; Plan of Operations As of June 30, 2025, the company had $83.5 million in cash, cash equivalents, and investments, which management believes is sufficient to fund operations into the first quarter of 2027 - The company had cash, cash equivalents, and investments of $83.5 million as of June 30, 2025144189 - Management estimates that existing cash will fund operating expenses and capital requirements into the first quarter of 2027157189 Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,069) | $(64,490) | | Net cash provided by investing activities | $49,961 | $27,380 | | Net cash (used in) provided by financing activities | $(157) | $30,238 | - The company decided not to draw down on a $40.0 million tranche of its loan agreement by the June 30, 2024 deadline, resulting in only a $25.0 million tranche remaining available at the lenders' sole discretion as of June 30, 2025156 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are related to interest rate sensitivity on its $83.5 million in cash and investments and $10.0 million in floating-rate debt, and credit risk managed through highly-rated securities - The company is exposed to interest rate risk on its $83.5 million in cash, cash equivalents, and investments, and on its $10.0 million in floating-rate debt171172 - Borrowings under the Loan Agreement bear interest at a floating rate equal to the greater of 1-month term SOFR or 2.33%, plus 6.25%172 - Credit risk is concentrated in cash and investments, mitigated by investing in highly-rated securities, though deposits may exceed federally insured limits173 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025178 - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls180 PART II OTHER INFORMATION Item 1. Legal Proceedings The company reports that it is not currently a party to any material legal proceedings, while acknowledging potential involvement in legal matters in the ordinary course of business - As of the filing date, the company is not a party to any material legal proceedings182 Item 1A. Risk Factors This section details significant risks including a history of net losses, the need for substantial additional capital, dependence on evorpacept's success, clinical trial uncertainties, reliance on third-party manufacturers, competition, intellectual property challenges, potential Nasdaq delisting, and regulatory hurdles Risks Related to Financial Position and Need for Additional Capital The company has a history of significant net losses and expects them to continue, requiring substantial additional capital to fund operations, with existing cash projected to last into Q1 2027, subject to restrictive loan covenants - The company has incurred significant net losses since inception, with an accumulated deficit of $677.8 million as of June 30, 2025, and expects to continue incurring losses186 - The company will require substantial additional capital, with existing cash of $83.5 million projected to fund operations into Q1 2027, though this estimate is subject to change188189 - The company's Loan Agreement contains covenants that restrict its ability to, among other things, incur additional debt, make acquisitions, or pay dividends, and a default could lead to acceleration of obligations197200201 Risks Related to Product Discovery, Development, and Commercialization The company's success is heavily dependent on its lead candidate, evorpacept, facing inherent risks in clinical development, potential adverse side effects, substantial competition, and reliance on third-party manufacturers for supply and quality - The business is substantially dependent on the success of its lead product candidate, evorpacept, which has not completed a pivotal trial202 - Early clinical trial outcomes are not predictive of later success, as evidenced by the company's April 2025 announcement that Phase 2 trials for evorpacept in HNSCC (ASPEN-03 and ASPEN-04) did not meet their primary endpoints203205 - The company relies on third-party contract manufacturers for its product candidates and has no manufacturing facilities of its own, creating risks related to supply, quality, and regulatory compliance233 - The company faces substantial competition from major pharmaceutical and biotech companies, many of whom are also developing drugs targeting the CD47 pathway, including Pfizer and Gilead Sciences220221 Risks Related to Government Regulation The company is subject to extensive, costly, and unpredictable government regulation, including lengthy approval processes, post-marketing requirements, potential impacts from healthcare reform, and compliance with fraud, abuse, data privacy, and anti-corruption laws - The regulatory approval process is lengthy and unpredictable, and there is no guarantee of approval for any product candidate271 - While the company has received Fast Track and Orphan Drug designations for evorpacept, these may not lead to a faster review or approval and do not increase the likelihood of receiving marketing approval276278 - Current and future legislation, including the Inflation Reduction Act of 2022, may increase the difficulty and cost of commercialization and negatively affect drug pricing280285 - The company is subject to complex data privacy laws like GDPR in Europe and CCPA/CPRA in California, which impose significant compliance costs and potential liabilities for non-compliance303310311 Risks Related to Intellectual Property The company's success depends on its ability to obtain, maintain, and enforce patent protection, facing an uncertain and litigious patent landscape, global protection challenges, infringement claims from third parties, and difficulties in protecting trade secrets - The company's ability to protect its product candidates through patents is uncertain and may not prevent competitors from developing similar products313315 - The company may not be able to protect its intellectual property rights globally, as laws in some foreign countries are less protective than in the U.S318 - The company is aware of third-party patents, such as those owned by University Health Network (UHN) and licensed to Pfizer, that could potentially be construed to cover evorpacept and limit its ability to commercialize in certain indications and geographies343 - The company relies on trade secrets and confidentiality agreements, but these may be breached, and enforcing claims of misappropriation is difficult and costly334335 Risks Related to Operations The company faces operational risks including managing growth, hiring and retaining key personnel, potential adverse effects from a recent reduction in force, reliance on third parties for critical services, challenges with novel technology, and potential product liability claims - The company is highly dependent on key personnel and faces significant competition for talent, with a recently announced reduction in force (RIF) potentially harming morale and leading to loss of expertise361 - The company relies on third parties for crucial services, including clinical trial management and manufacturing, and any failure by these parties could delay or terminate development programs358 - The company's product candidates are based on novel technology, making it difficult to predict the time and cost of development360 - The company may be exposed to costly product liability claims from clinical trials or commercial use, and its insurance may not be sufficient to cover all damages371373 Risks Related to Ownership of Our Common Stock Ownership of the company's common stock involves significant risk due to high price volatility, non-compliance with Nasdaq's minimum bid price requirement, potential dilution from future equity financings, significant insider control, and a history of material weaknesses in internal controls - The trading price of the company's common stock is highly volatile389 - The company is not in compliance with the Nasdaq Global Select Market's minimum bid price requirement and faces a risk of delisting if it cannot regain compliance by October 20, 2025394 - Future sales of common stock, including under the ATM facility or upon exercise of warrants, will cause dilution to stockholders388414 - As of June 30, 2025, executive officers, directors, and affiliated 5% holders beneficially owned approximately 21.3% of the stock, allowing them to exert significant control410 - The company has identified and remediated material weaknesses in internal control over financial reporting in the past and may identify others in the future, which could harm investor confidence422 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no material change in the planned use of proceeds from its initial public offering and no unregistered sales of equity securities during the period - There has been no material change in the planned use of proceeds from the company's initial public offering438 - There were no unregistered sales of equity securities in the reported quarter439 Item 3. Defaults Upon Senior Securities This item is not applicable as the company has not defaulted upon any senior securities - Not applicable441 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable442 Item 5. Other Information The company reports that none of its officers or directors adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the last fiscal quarter - No officers or directors adopted or terminated a Rule 10b5-1 trading arrangement during the last fiscal quarter443 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act, and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and Inline XBRL documents445