Allogene Therapeutics(ALLO) - 2023 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements Unaudited H1 2023 financial statements show decreased total assets, increased net losses, and cash provided by financing activities Condensed Consolidated Balance Sheets Total assets decreased to $771.0 million by June 30, 2023, from $817.1 million at year-end 2022, due to reduced investments Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $154,758 | $61,904 | | Total current assets | $502,101 | $528,824 | | Total assets | $770,971 | $817,079 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $54,721 | $54,518 | | Total liabilities | $148,065 | $151,209 | | Total stockholders' equity | $622,906 | $665,870 | | Total liabilities and stockholders' equity | $770,971 | $817,079 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss increased to $77.9 million for Q2 2023 and $176.7 million for H1 2023, primarily due to higher R&D expenses Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $44 | $86 | $96 | $147 | | Research and development | $62,038 | $57,171 | $142,276 | $117,327 | | General and administrative | $18,524 | $19,509 | $37,408 | $39,406 | | Loss from operations | ($80,518) | ($76,594) | ($179,588) | ($156,586) | | Net loss | ($77,989) | ($74,787) | ($176,693) | ($154,637) | | Net loss per share | ($0.53) | ($0.52) | ($1.21) | ($1.09) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $622.9 million by June 30, 2023, due to net losses, partially offset by $87.9 million from an ATM offering - During the six months ended June 30, 2023, the company issued 20,288,330 shares of common stock from its ATM offering, resulting in net proceeds of $87.9 million[10] - The accumulated deficit increased from $(1,236.0) million at the end of 2022 to $(1,412.7) million as of June 30, 2023, reflecting the ongoing net losses[10] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $128.5 million for H1 2023, offset by $130.1 million from investing activities and $91.3 million from financing activities Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($128,496) | ($110,768) | | Net cash provided by investing activities | $130,095 | $31,657 | | Net cash provided by financing activities | $91,255 | $1,838 | | Net change in cash, cash equivalents and restricted cash | $92,854 | ($77,273) | Notes to Condensed Consolidated Financial Statements Notes detail the company's immuno-oncology business, financial condition, $544.5 million cash runway, and the ongoing Servier dispute - The company is a clinical-stage immuno-oncology company focused on developing allogeneic T cell product candidates for cancer treatment[17] - As of June 30, 2023, the company had $544.5 million in cash, cash equivalents, and investments, and management expects this to be sufficient to fund operations for at least the next 12 months[19][20] - A dispute exists with Servier, which discontinued its involvement in the development of CD19 products in September 2022. Servier has disputed its obligation to continue development cost contributions and sent notices of material breach, which the company is disputing[59][61] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses progress on allogeneic CAR T cell candidates, increased net loss for H1 2023, and a cash runway into H2 2025 - The company is progressing its pivotal Phase 2 ALPHA2 trial for ALLO-501A in R/R Large B Cell Lymphoma (LBCL) and expects to complete enrollment in H1 2024, with the first data readout by year-end 2024[127][136] - A dispute with Servier over its discontinuation of involvement and cost-sharing for CD19 products is ongoing. Servier sent a second notice of material breach in July 2023, which Allogene disputes[142] Financial Results Comparison (in thousands) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Research and development | $142,276 | $117,327 | | General and administrative | $37,408 | $39,406 | | Loss from operations | ($179,588) | ($156,586) | | Net Loss | ($176,693) | ($154,637) | - As of June 30, 2023, the company had $544.5 million in cash, cash equivalents, and investments, with an expected cash runway to fund operations into the second half of 2025[130][174] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on its $544.5 million in cash and investments, and foreign exchange rates - The primary market risks are interest rate fluctuations on its $544.5 million in cash and investments, and foreign exchange risk on Euro-denominated payments related to the Servier agreement[193][194][195] Controls and Procedures Disclosure controls were effective as of June 30, 2023, with ongoing phased implementation of a new SAP ERP system - Management concluded that disclosure controls and procedures were effective as of the end of the reporting period[197] - The company is undergoing a phased implementation of a new SAP ERP system, which is expected to result in changes to its internal control over financial reporting[198] PART II: OTHER INFORMATION Legal Proceedings No legal proceedings are expected to have a material adverse effect on operations, financial condition, or cash flows - There are currently no pending claims or actions against the company that management believes would have a material adverse effect[201] Risk Factors Key risks include a history of net losses, unproven allogeneic therapies, partner reliance, the Servier dispute, and the need for substantial financing - The company has a history of net losses ($1.4 billion accumulated deficit as of June 30, 2023) and expects to incur substantial future losses[205] - A significant risk is the dispute with Servier following its discontinuation of involvement in CD19 product development, including disagreements over cost contributions and notices of material breach from Servier[216][218] - The business is highly dependent on the success of its lead product candidates, which are based on novel technologies, making development time, cost, and regulatory approval difficult to predict[219][225] - The company will need substantial additional financing to complete the development and commercialization of its product candidates[293] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period - None[436] Other Information David M. Chang was appointed principal financial officer and Jack Chen as principal accounting officer, effective August 3, 2023 - David M. Chang, M.D., Ph.D., President and CEO, was appointed as principal financial officer effective August 3, 2023[437] - Jack Chen, Vice President and Controller, was appointed as principal accounting officer effective August 3, 2023[438] Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents and officer certifications