Allogene Therapeutics(ALLO) - 2022 Q4 - Annual Report

PART I Business Allogene Therapeutics develops 'off-the-shelf' allogeneic CAR T cell therapies for hematological and solid tumors, emphasizing GvHD minimization, T cell persistence, and proprietary manufacturing Overview and Our Approach Allogene develops 'off-the-shelf' allogeneic T cell therapies using TALEN gene-editing to minimize GvHD and enhance persistence, focusing on scalability and reliability - Allogene is a clinical-stage immuno-oncology company developing 'off-the-shelf' allogeneic T cell product candidates derived from healthy donors, aiming to provide treatments that are faster, more reliable, and scalable compared to autologous therapies[14][16] - The company's development strategy has four key pillars: engineering to minimize graft-versus-host disease (GvHD), creating a window of T cell persistence, building a leading manufacturing platform, and leveraging next-generation technologies[18] - Allogene utilizes Cellectis's TALEN gene-editing technology to engineer T cells, involving knocking out the T cell receptor (TCR) to limit GvHD risk and inactivating the CD52 gene to enhance persistence when used with their proprietary ALLO-647[19] Our Pipeline This section provides an overview of Allogene Therapeutics' clinical pipeline, detailing product candidates, targets, indications, and development status Allogene Therapeutics Clinical Pipeline Overview | Product Candidate | Target | Indication | Status | | :--- | :--- | :--- | :--- | | ALLO-501A | CD19 | Relapsed/Refractory Large B-Cell Lymphoma (LBCL) | Phase 2 initiated Q4 2022. Enrollment completion expected H1 2024 | | ALLO-715 | BCMA | Relapsed/Refractory Multiple Myeloma | Phase 1 (UNIVERSAL trial). Enrollment paused for manufacturing process optimization | | ALLO-605 | BCMA (TurboCAR™) | Relapsed/Refractory Multiple Myeloma | Phase 1 (IGNITE trial). Enrollment paused for manufacturing process optimization | | ALLO-316 | CD70 | Advanced or Metastatic Clear Cell Renal Cell Carcinoma (ccRCC) | Phase 1 (TRAVERSE trial). Expansion cohort enrollment planned for 2023 | | ALLO-647 | CD52 | Lymphodepletion Component | Phase 2 (EXPAND trial) to open for enrollment in Q2 2023 | Our Strategy Allogene's strategy focuses on advancing lead candidates, expanding into new indications and solid tumors, building proprietary manufacturing, and accelerating global development - Capitalize on the validated CD19 target by advancing ALLO-501A, with plans to complete the Phase 2 ALPHA2 trial enrollment in H1 2024 and initiate a Phase 3 trial in an earlier line of therapy for LBCL in H1 2024[35] - Expand leadership in hematologic indications by advancing the BCMA program and developing candidates against other targets like CD70 (ALLO-316) and FLT3 (ALLO-819)[36] - Build proprietary manufacturing capabilities at its Cell Forge 1 (CF1) facility to improve processes, reduce reliance on CMOs, and accelerate commercialization[37] - Expand into solid tumors (ccRCC, small cell lung cancer, gastric cancer) and leverage next-generation technologies like Dagger to control immune rejection[38] - Accelerate global development through planned clinical trials in Europe, Canada, and Australia, and via its joint venture, Allogene Overland Biopharm, in Greater China, Taiwan, South Korea, and Singapore[39] Allogeneic T Cell Therapy and Manufacturing This section details the allogeneic T cell therapy process, from healthy donor cell collection and gene editing to purification, and highlights next-generation technologies - Allogeneic therapy uses T cells from healthy donors, aiming to overcome limitations of autologous therapy such as lengthy delivery times, variable potency, manufacturing failures, and high costs[49][51] - The manufacturing process involves three main steps: (1) Collection of healthy donor T cells and transduction with a viral vector to integrate the CAR sequence; (2) Gene editing using TALEN technology to inactivate TCRα (to prevent GvHD) and CD52 (to allow for selective lymphodepletion); and (3) Purification, formulation, and cryopreservation for off-the-shelf storage[59][62][69] - The company is investigating next-generation technologies like TurboCARs™ to mimic cytokine signaling within CAR T cells, and Dagger™ technology (an anti-CD70 CAR) to destroy host immune cells that could reject the allogeneic therapy[61] Product Pipeline and Development Strategy This section outlines the development strategy for Allogene's product pipeline, including specific programs and the resolution of a prior FDA clinical hold - In October 2021, the FDA placed a clinical hold on all Allogene trials following a report of a chromosomal abnormality in a patient. The hold was lifted in January 2022 after investigations concluded the abnormality was unrelated to TALEN gene editing or the manufacturing process[73] Anti-CD19 Development Program (ALLO-501/501A) This program focuses on ALLO-501A, a second-generation anti-CD19 candidate, detailing its design, clinical trial results, safety profile, and ongoing Phase 2 development - ALLO-501A is a second-generation anti-CD19 candidate that removes rituximab recognition domains present in ALLO-501, potentially allowing treatment for more NHL patients recently treated with rituximab[77] Phase 1 ALPHA/ALPHA2 Trial Results in LBCL (Alloy Process Material) | Metric | Single Dose FCA90 (n=12) | All Alloy Patients (n=33) | | :--- | :--- | :--- | | Overall Response Rate (ORR) | 67% | 58% | | Complete Response (CR) | 58% | 42% | | 6-Month CR Rate | 50% | 31% | | 12-Month CR Rate | 50% | 28% | - The safety profile was manageable with no dose-limiting toxicities, no GvHD, and no Grade 3+ cytokine release syndrome (CRS) or neurotoxicity observed in the Single Dose FCA90 cohort[85][86] - The company initiated the Phase 2 portion of the ALPHA2 trial in Q4 2022 for R/R LBCL, with enrollment expected to complete in H1 2024. A pivotal Phase 2 EXPAND trial for ALLO-647 is also planned to start in Q2 2023[88][89] Anti-BCMA Development Program (ALLO-715/605) This program details the BCMA-targeting candidates ALLO-715 and ALLO-605, including Phase 1 trial results, safety, and current manufacturing optimization-related enrollment pauses - ALLO-605 is a next-generation version of ALLO-715, incorporating TurboCAR™ technology to enhance potency and persistence by engineering cytokine signaling selectively into the CAR T cells[91] Phase 1 UNIVERSAL Trial Results (ALLO-715) in R/R Multiple Myeloma | Metric | FCA60 Cohort (n=12) | FCA39 Cohort (n=11) | | :--- | :--- | :--- | | Overall Response Rate (ORR) | 67% | 64% | | VGPR+ Rate | 42% | 54% | | Median Duration of Response | 9.2 months | 8.3 months | - The safety profile was manageable, with no GvHD and low-grade, reversible neurotoxicity. Grade 3+ infections and prolonged cytopenias were observed in 29% of patients in the expansion cohorts[97][98] - Enrollment in the UNIVERSAL (ALLO-715) and IGNITE (ALLO-605) trials is currently paused while the company reviews and optimizes the manufacturing process for the BCMA program[99] Anti-CD70 Development Program (ALLO-316) This program focuses on ALLO-316, an anti-CD70 candidate for solid tumors like ccRCC, presenting preliminary Phase 1 trial results, safety, and patient selection strategy - ALLO-316 targets CD70, an antigen expressed in clear cell renal cell carcinoma (ccRCC) and other cancers. The program is exploring a solid tumor indication[100] Preliminary Phase 1 TRAVERSE Trial Results (ALLO-316) in ccRCC | Metric | CD70+ Patients (n=9) | All Patients (n=17) | | :--- | :--- | :--- | | Disease Control Rate (DCR) | 100% | 82% | | Overall Response Rate (ORR) | 33% | 18% | | Partial Response (PR) | 33% | 18% | - The safety profile was generally manageable with no GvHD observed. One dose-limiting toxicity of auto-immune hepatitis occurred. CRS was mostly low grade[106][107] - The company is now using an investigational in vitro diagnostic (IVD) assay to select patients with CD70-expressing tumors and plans to initiate expansion cohort enrollment in 2023[108][109] Manufacturing, IP, and Competition This section covers Allogene's manufacturing strategy, intellectual property protection, and the competitive landscape within the cell therapy and oncology markets - The company is developing its own manufacturing facility, Cell Forge 1 (CF1), but currently relies on a Contract Manufacturing Organization (CMO) for clinical supply, including for the ALLO-501A Phase 2 trial which uses the 'Alloy' process[118][120] - Intellectual property is protected through a combination of owned and in-licensed patents, trade secrets, and know-how. Key licenses include TALEN gene-editing technology from Cellectis and rights to anti-CD19 products from Servier[123][126][127] - The company faces significant competition from developers of autologous CAR T therapies (Novartis, Gilead/Kite, BMS), other allogeneic cell therapy companies (CRISPR Therapeutics, Fate Therapeutics), and non-cell-based platforms like bispecific antibodies[130][131][134][136] Government Regulation This section details the extensive government regulations impacting Allogene's biologic products, including FDA approval processes, expedited designations, healthcare laws, and recent reforms - Allogene's cell products are regulated as biologics by the FDA, requiring extensive preclinical and clinical trials and submission of a Biologics License Application (BLA) for marketing approval[140] - The company has received expedited program designations from the FDA, including Regenerative Medicine Advanced Therapy (RMAT) for ALLO-715 and ALLO-501A, and Fast Track designation for ALLO-605 and ALLO-316[165] - The business is subject to numerous U.S. healthcare laws, including the Anti-Kickback Statute, False Claims Act, HIPAA, and the Physician Payments Sunshine Act, as well as international regulations like the EU GDPR[172][199] - Recent healthcare reforms, such as the Inflation Reduction Act of 2022 (IRA), introduce measures like Medicare drug price negotiation and inflation rebates, which could create downward pressure on pricing and reimbursement for future products[192][193] Human Capital This section describes Allogene's human capital, including employee count, organizational culture, diversity statistics, and strategies for recruitment, development, and retention - As of February 1, 2023, the company had 361 total employees, with 279 engaged in research, development, and technical operations[203] - The company emphasizes a 'One Allogene' culture focused on teamwork, resilience, excellence, ownership, and mutual respect[204] Employee Diversity Statistics (as of Feb 1, 2023) | Group | All Employees | Director-Level & Above | | :--- | :--- | :--- | | Women | 52% | 45% | | Ethnic/Racial Minorities | 67% | 48% | - The company focuses on recruitment, development, and retention through competitive compensation, training programs, and promotional opportunities. The voluntary attrition rate in 2022 was less than 15%[214][216] Risk Factors Allogene faces substantial risks including ongoing net losses, development and manufacturing challenges for novel therapies, reliance on third parties, clinical trial failures, and intense competition Risks Related to Our Business and Industry This section details business and industry risks, including historical net losses, partner disputes, potential product side effects, manufacturing challenges, and intense market competition - The company has a history of significant net losses ($332.6 million in 2022) and an accumulated deficit of $1.24 billion as of year-end 2022, with expectations of continued substantial losses[221] - Servier's discontinuation of its involvement in the development of CD19 products has led to disputes over development cost contributions and the timeframe for exercising ex-U.S. rights, which may have adverse consequences[232] - Product candidates may cause undesirable side effects such as cytokine release syndrome (CRS), neurotoxicity, and GvHD, which could halt clinical development or prevent regulatory approval[242][243] - The company may fail to successfully manufacture its product candidates, particularly in scaling up production and transferring processes to its own facility (CF1), which could adversely affect clinical trials and commercial viability[279][280] - The business faces significant competition from major pharmaceutical and biotechnology companies with greater resources, including those developing autologous CAR T, other allogeneic therapies, and non-cell-based treatments[289][290] Risks Related to Our Reliance on Third Parties This section outlines risks associated with reliance on third parties for clinical trials, contract manufacturing, and the supply of critical raw materials like healthy donor T cells - The company depends on third parties such as CROs and medical institutions to conduct clinical trials, and any failure by these parties to perform their duties could delay or compromise trial results[336][337] - Reliance on a limited number of Contract Manufacturing Organizations (CMOs) for clinical product supply exposes the company to risks of manufacturing failures, delays, and quality control issues[340][343] - Manufacturing depends on a supply of T cells from qualified healthy donors and other specialty raw materials (e.g., viral vectors), which may not be available in sufficient quantity or quality[346][349] Risks Related to Government Regulation This section addresses risks from the lengthy and uncertain FDA regulatory approval process, potential disagreements with regulatory plans, and challenges in market acceptance and reimbursement - The FDA regulatory approval process for novel allogeneic T cell therapies is lengthy, complex, and uncertain, with a risk of significant delays or failure to obtain approval[355][356] - The FDA may disagree with the company's regulatory plan, potentially requiring additional or comparative trials, which would significantly delay development and increase costs[365] - Even if approved, products may not gain market acceptance among physicians and patients, and obtaining adequate coverage and reimbursement from payors is uncertain and critical for commercial success[381][384] Risks Related to Our Intellectual Property This section details intellectual property risks, including reliance on third-party licenses, potential inadequacy of patent protection, and exposure to infringement claims - The company is heavily dependent on intellectual property licensed from third parties like Pfizer, Servier, and Cellectis; termination of these licenses could result in the loss of significant rights[389] - Efforts to protect proprietary technology through patents and trade secrets may be inadequate, and patents may be challenged, invalidated, or circumvented by competitors[392][395] - The company may face third-party claims of intellectual property infringement, which could lead to costly litigation, substantial damages, or the inability to commercialize products[400][403] Risks Related to Ownership of Our Common Stock This section highlights risks for common stock ownership, including stock price volatility, anti-takeover provisions, and the company's policy of not paying dividends - The stock price has been and may continue to be highly volatile due to factors such as clinical trial results, regulatory decisions, and broader market fluctuations[420] - Anti-takeover provisions in the company's charter documents and under Delaware law could delay or prevent a change of control, potentially limiting the market price of the common stock[427] - The company does not intend to pay dividends, so any returns for stockholders will be limited to the appreciation of their stock[426] Properties Allogene's properties include corporate headquarters in South San Francisco and a leased 118,000 square foot cell therapy manufacturing facility in Newark, California - The company's corporate headquarters are in South San Francisco, California, with leases for office and laboratory space totaling over 130,000 square feet, expiring in March 2032[434] - Allogene leases an approximately 118,000 square foot cell therapy manufacturing facility in Newark, California. The lease commenced in November 2020 and has an initial term of 15 years and eight months[435] Legal Proceedings Allogene is not currently involved in any legal proceedings expected to materially adversely affect its business - As of the report date, Allogene is not a party to any legal proceedings that management believes are likely to have a material adverse effect on the business[437] 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'; the company has never paid dividends and intends to retain earnings for future growth - The company's common stock has been listed on The Nasdaq Global Select Market under the symbol 'ALLO' since October 11, 2018[439] - The company has never declared or paid cash dividends and intends to retain all available funds for operations and growth for the foreseeable future[443] Management's Discussion and Analysis of Financial Condition and Results of Operations Allogene reported a net loss of $332.6 million in 2022, driven by increased R&D and G&A expenses and decreased collaboration revenue, ending the year with $576.5 million in liquidity Results of Operations This section provides a comparative analysis of Allogene's financial results, highlighting changes in collaboration revenue, research and development, and general and administrative expenses Comparison of Financial Results (Years Ended Dec 31, in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Collaboration Revenue | $243 | $38,489 | $0 | | Research & Development | $256,387 | $220,176 | $192,987 | | General & Administrative | $79,305 | $74,105 | $65,256 | | Loss from Operations | ($335,449) | ($255,792) | ($258,243) | | Net Loss | ($332,632) | ($257,005) | ($250,221) | - R&D expenses increased by $36.2 million in 2022 compared to 2021, primarily due to a $15.7 million increase in facility costs and a $15.3 million increase in personnel-related costs[478] - G&A expenses increased by $5.2 million in 2022 compared to 2021, mainly from a $4.7 million increase in personnel costs and a $2.8 million increase in corporate communications expenses[480] - Collaboration revenue decreased by $38.2 million in 2022, as the prior year's revenue was primarily from the one-time recognition of licensing intellectual property and know-how to the Allogene Overland joint venture in Q1 2021[477] Liquidity and Capital Resources This section details Allogene's liquidity position, including cash, cash equivalents, and investments, and analyzes cash flow trends from operating, investing, and financing activities - As of December 31, 2022, the company had $576.5 million in cash, cash equivalents, and investments. Management believes this is sufficient to fund operations for at least the next 12 months[483] Summary of Cash Flows (Years Ended Dec 31, in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($220,519) | ($184,812) | ($115,093) | | Net cash provided by (used in) investing activities | $106,159 | $163,655 | ($505,123) | | Net cash provided by financing activities | $2,950 | $11,963 | $633,591 | - Cash used in operating activities increased to $220.5 million in 2022 from $184.8 million in 2021, primarily due to a higher net loss[490][491] Critical Accounting Policies and Significant Judgments and Estimates This section outlines Allogene's critical accounting policies and estimates, focusing on accrued R&D, revenue recognition, and stock-based compensation - The company identifies its critical accounting policies and estimates as those associated with accrued research and development expenditures, revenue recognition, R&D expenses, stock-based compensation, and leases[501] - For stock-based compensation, the company uses the Black-Scholes or lattice option-pricing models, which require subjective assumptions for expected term, volatility, and risk-free interest rate[509][510] - Revenue recognition for collaboration agreements involves identifying distinct performance obligations, determining the transaction price (including constraining variable consideration like milestones), and allocating the price based on standalone selling prices[505][506] Financial Statements and Supplementary Data This section presents Allogene's audited consolidated financial statements for 2020-2022, including balance sheets, statements of operations, and comprehensive notes, along with the auditor's report Consolidated Balance Sheets This section provides a summary of Allogene's consolidated balance sheets as of December 31, 2022 and 2021, detailing assets, liabilities, and equity Consolidated Balance Sheet Summary (as of Dec 31, in thousands) | (In thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Cash, cash equivalents, and investments | $576,500 | $809,481 | | Total Assets | $817,079 | $1,038,634 | | Total Liabilities | $151,209 | $122,228 | | Total Stockholders' Equity | $665,870 | $916,406 | Consolidated Statements of Operations and Comprehensive Loss This section presents a summary of Allogene's consolidated statements of operations and comprehensive loss for the years ended December 31, 2020-2022 Consolidated Statement of Operations Summary (Year Ended Dec 31, in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Collaboration Revenue | $243 | $38,489 | $0 | | Total Operating Expenses | $335,692 | $294,281 | $258,243 | | Net Loss | ($332,632) | ($257,005) | ($250,221) | | Net Loss Per Share | ($2.32) | ($1.89) | ($2.08) | Notes to Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, covering significant accounting policies, collaboration agreements, and stock-based compensation - The company's license agreement with Servier for CD19 products is under dispute following Servier's notice of discontinuation in September 2022 regarding its involvement and cost-sharing obligations[611][612] - In June 2022, the company commenced a stock option exchange program, accepting 3.67 million eligible options for cancellation and granting new options with a new exercise price and vesting schedule. The modification resulted in an incremental expense of $5.2 million[659][660] - The company has established a full valuation allowance against its net deferred tax assets of $316.6 million as of December 31, 2022, due to the uncertainty of realizing these assets given its history of operating losses[685][688] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with an unqualified auditor opinion - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[697] - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2022[699] - The independent registered public accounting firm, Ernst & Young LLP, audited and issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[699][704] PART III Directors, Executive Officers and Corporate Governance This section provides biographical information for Allogene's Board of Directors and executive officers, including co-founders Dr. Arie Belldegrun and Dr. David Chang - The Board of Directors includes key figures from the biotechnology and investment sectors, such as co-founders Dr. Arie Belldegrun (Executive Chair) and Dr. David Chang (President & CEO), both formerly of Kite Pharma[712][714] - The executive team includes Eric Schmidt, Ph.D. as Chief Financial Officer, Alison Moore, Ph.D. as Chief Technical Officer, and Zachary Roberts, M.D., Ph.D. as Executive Vice President, Research and Development[725][727][728] - The company has adopted a Code of Business Conduct and Ethics applicable to all directors, officers, and employees, which is available on its website[729] Executive Compensation, Security Ownership, and Other Matters Information for executive compensation, security ownership, related transactions, and accounting fees is incorporated by reference from the 2023 Proxy Statement - Information required for Items 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for the 2023 Annual Meeting of Stockholders[730][731][732][733] PART IV Exhibits, Financial Statement Schedules This section lists exhibits filed with the Annual Report, including corporate governance documents, material contracts, and officer certifications - The financial statements are located in Part II, Item 8 of the report. All other financial statement schedules have been omitted as they are not required or the information is included elsewhere[735] - The exhibit list includes key corporate governance documents, material contracts, and certifications required by the Sarbanes-Oxley Act[736][737]