Alpine Immune Sciences(ALPN) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2023, present a net loss and a decrease in total assets primarily driven by cash used in operations Condensed Consolidated Balance Sheets The condensed consolidated balance sheets as of June 30, 2023, show a decrease in total assets and liabilities, primarily driven by reduced investments and debt repayment Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $34,076 | $13,376 | | Short-term investments | $169,724 | $224,265 | | Total current assets | $207,321 | $240,993 | | Total assets | $252,836 | $286,686 | | Liabilities & Equity | | | | Deferred revenue, current | $37,252 | $35,571 | | Total current liabilities | $53,410 | $57,996 | | Deferred revenue, noncurrent | $20,475 | $39,185 | | Total liabilities | $83,448 | $107,266 | | Total stockholders' equity | $169,388 | $179,420 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) The condensed consolidated statements of operations for the three and six months ended June 30, 2023, reflect increased collaboration revenue and a reduced net loss for the quarter, primarily due to higher revenue and lower tax expense 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 | $8,593 | $5,292 | $17,980 | $18,921 | | Research and development | $19,241 | $17,587 | $38,822 | $33,898 | | General and administrative | $5,007 | $4,194 | $10,405 | $8,969 | | Loss from operations | ($15,655) | ($16,489) | ($31,247) | ($23,946) | | Net loss | ($13,156) | ($18,098) | ($26,422) | ($25,625) | | Basic and diluted net loss per share | ($0.27) | ($0.60) | ($0.55) | ($0.85) | Condensed Consolidated Statements of Stockholders' Equity The condensed consolidated statements of stockholders' equity show a decrease from year-end 2022 to June 30, 2023, primarily due to net losses, partially offset by proceeds from a stock offering and stock-based compensation - During the six months ended June 30, 2023, the company issued 919,413 shares under an "at the market" offering, generating net proceeds of $9.7 million[11] - The company retired 1,250,467 shares of treasury stock in June 2023[11][51] - The accumulated deficit increased from $224.0 million at year-end 2022 to $250.4 million at June 30, 2023, reflecting the ongoing net losses[11] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, net cash used in operating activities was offset by cash provided by investing and financing activities, resulting in a net increase in cash and cash equivalents Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($44,243) | ($10,620) | | Net cash provided by (used in) investing activities | $57,678 | ($31,239) | | Net cash provided by (used in) financing activities | $7,311 | ($1,670) | | Net increase (decrease) in cash | $20,700 | ($43,547) | Notes to Condensed Consolidated Financial Statements Key notes to the financial statements provide details on collaboration agreements, which are the primary revenue source, along with information on cash, investments, debt repayment, and equity transactions - The company's revenue is derived from collaboration agreements with AbbVie, Horizon, and Adaptimmune, recognized using a cost-based input method[48][49] - Under the AbbVie agreement, Alpine has received $105.0 million in upfront and pre-option milestones through June 30, 2023. An additional $75.0 million is due if AbbVie exercises its license option for acazicolcept, with up to $655.0 million in further potential milestones[41][61] - The Horizon agreement, initiated in December 2021, provided a $25.0 million upfront payment and a $15.0 million equity investment. It has a total potential value of up to $1.5 billion in future milestones across four programs[44][61] - In May 2023, the company fully repaid its remaining $1.4 million term loan with Silicon Valley Bank (SVB) and had no outstanding debt as of June 30, 2023[39] - In April 2023, the company initiated an "at the market" (ATM) equity offering for up to $100.0 million. As of June 30, 2023, it had sold 919,413 shares for gross proceeds of $10.0 million[50] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing immunotherapies, detailing financial results that show a decrease in net loss for Q2 2023, and affirming sufficient liquidity for the next 12 months Overview and Strategy Alpine is a clinical-stage biopharmaceutical company focused on protein-based immunotherapies for autoimmune and inflammatory diseases, advancing lead candidates povetacicept and acazicolcept through clinical studies and strategic partnerships - Lead wholly-owned program is povetacicept (ALPN-303), a dual BAFF/APRIL antagonist, being evaluated in RUBY-3 (glomerulonephritis) and RUBY-4 (autoimmune cytopenias) studies[61] - Acazicolcept (ALPN-101), a dual ICOS/CD28 antagonist, is being evaluated in a Phase 2 study for SLE in collaboration with AbbVie[61] - The company has a multi-program collaboration with Horizon for preclinical candidates and a technology collaboration with Adaptimmune for engineered cell therapies[61][62] Results of Operations The company's financial performance for the three and six months ended June 30, 2023, shows increased collaboration revenue for the quarter and higher R&D expenses due to advancing clinical programs Collaboration Revenue Comparison (in thousands) | Partner | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | AbbVie | $6,748 | $4,563 | $12,346 | $10,523 | | Horizon | $1,715 | $587 | $5,170 | $8,256 | | Adaptimmune | $130 | $142 | $464 | $142 | | Total | $8,593 | $5,292 | $17,980 | $18,921 | Direct R&D Expense by Program (in thousands) | Program | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Acazicolcept | $8,191 | $5,406 | | Davoceticept | $1,959 | $6,081 | | Povetacicept | $7,620 | $6,266 | | Total Direct R&D | $18,144 | $18,096 | - The increase in R&D spending for the six months ended June 30, 2023 was driven by a $4.9 million (31%) increase in indirect costs, primarily personnel-related expenses due to increased headcount to support clinical trials[97][98] - The decrease in davoceticept program costs by $4.1 million (68%) for the six-month period was due to the termination of its clinical studies in October 2022[97][98] Liquidity and Capital Resources As of June 30, 2023, Alpine had $239.6 million in cash and investments, with management believing current capital is sufficient for the next 12 months, though additional future funding will be required - The company had $239.6 million in cash, cash equivalents, restricted cash, and investments as of June 30, 2023[102] - Management believes existing cash is sufficient to fund planned operations for at least the next 12 months from the filing date[112] - Net cash used in operating activities for the first six months of 2023 was $44.2 million[107] - The company established a new $100.0 million ATM equity offering in April 2023 and raised $10.0 million in gross proceeds by June 30, 2023[103] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Alpine Immune Sciences, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from providing market risk disclosures as it qualifies as a "smaller reporting company"[115] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2023 - Management concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[116] - No changes were identified during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[117] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business, financial condition, or operating results - As of the report date, the company is not involved in any material legal proceedings[120] Item 1A. Risk Factors The company outlines numerous risks that could materially affect its business, including those related to its unproven scientific platform, early-stage therapeutic candidates, reliance on collaborators, financial needs, intellectual property, and regulatory hurdles Risks Related to Pipeline and Product Development Risks related to pipeline and product development include the unproven nature of the scientific platform, early-stage candidates, potential for clinical trial failures, intense competition, and challenges in patient enrollment - The company's scientific approach to developing therapies is unproven and may not result in marketable products[122] - All therapeutic candidates are in early stages of development and face a lengthy, expensive, and uncertain process. The termination of davoceticept clinical studies is cited as an example of development risk[127][128] - The company faces competition from major pharmaceutical and biotech companies with greater resources and may struggle with patient enrollment for clinical trials[135][131] Risks Related to Relationships with Third Parties The company's success is highly dependent on collaboration partners for development and commercialization, and it relies on third-party CROs and manufacturers, posing risks of delays or resource allocation issues - Revenue has been primarily derived from collaboration agreements, and future success depends on collaborators' efforts to develop and commercialize therapeutic candidates[144] - The company relies on third-party CROs to conduct clinical trials and has less control over timing and quality, which could lead to delays if these parties underperform[146] - Dependence on third-party manufacturers for clinical trial materials presents risks of supply interruption, quality issues, or delays, which could impair R&D advancement[148] Risks Related to Our Financial Position and Capital Needs Risks related to financial position include a history of losses, the need for substantial additional funding, potential dilution, and limitations on net operating loss carryforwards, alongside broader financial services industry risks - The company will need to raise substantial additional funds for R&D, and there is no guarantee that sufficient funds will be available in the future[159] - The company is an early-stage entity with a history of losses and expects to incur significant losses for the foreseeable future[162] - The company's ability to use its net operating loss (NOL) carryforwards is subject to limitations due to past "ownership changes" under IRC Section 382[183] - Adverse events in the financial services industry, such as the SVB closure in March 2023, could affect access to deposits and credit facilities[180] Risks Related to Cybersecurity and Intellectual Property The company faces significant risks related to cybersecurity breaches, the ability to obtain and enforce patent protection, potential infringement claims, and the need to protect trade secrets - Computer systems are vulnerable to security breaches, which could result in significant liabilities, reputational harm, and disruption of operations[187] - The company's success depends on its ability to obtain and enforce patent protection for its technology, which is uncertain and may not provide a competitive advantage[190] - The company may become subject to third-party litigation alleging infringement of proprietary rights, which could be costly and delay or prevent commercialization[198] - The company must protect the confidentiality of its trade secrets, as disclosure could harm its competitive position[202] Risks Related to Government Regulation The company's therapeutic candidates are subject to extensive government regulation, posing risks of failure to obtain approval, unfavorable pricing, healthcare reform impacts, and penalties for non-compliance with healthcare and data privacy laws - The company may be unable to obtain U.S. or foreign regulatory approval for its therapeutic candidates, which is a costly, time-consuming, and uncertain process[210] - Future products may be subject to unfavorable pricing regulations, third-party coverage limitations, and healthcare reform initiatives (e.g., Inflation Reduction Act), which could harm business[221][222] - Failure to comply with extensive healthcare laws (e.g., Anti-Kickback Statute, False Claims Act) could lead to significant enforcement actions and penalties[216] - The company is subject to complex and evolving data privacy regulations like GDPR and CCPA, and non-compliance could result in significant fines and reputational damage[224] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, the company issued a total of 236,567 shares of common stock upon the net exercise of outstanding prefunded warrants by holders - In April and May 2023, the company issued a combined 236,567 shares of common stock upon the cashless exercise of prefunded warrants[253] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the company's amended corporate documents, the Sales Agreement for the "at the market" offering, an employment agreement, and required certifications by the CEO and CFO - Key exhibits filed include the Sales Agreement with Cowen and Company, LLC for the "at the market" offering, and certifications by the Principal Executive Officer and Principal Financial Officer[255][256][257]