ALX Oncology(ALXO) - 2020 Q4 - Annual Report

Licensing and Development - The company has entered into license agreements with third parties for the development and commercialization of product candidates, including ALX148, with customary payment terms including milestone payments and low single-digit royalties [140]. - The company intends to retain significant development and commercial rights to its product candidates and plans to build necessary infrastructure for commercialization in the U.S. and potentially other regions [141]. - The existing supply of ALX148 drug product is sufficient to complete clinical trials through the first half of 2021, with plans to manufacture additional supplies with existing CMOs [143]. - The company plans to conduct additional clinical trials and develop manufacturing processes to ensure consistent production of its product candidates [164]. Competition and Market Risks - The company faces competition from major pharmaceutical and biotechnology companies in the development of immuno-oncology therapies, including AstraZeneca, Bristol Myers Squibb, and Merck [145]. - Competitors may have significantly greater financial resources and expertise, which could impact the company's market opportunities if they develop superior products [147]. Regulatory Environment - The FDA regulates biologic products under the Food, Drug, and Cosmetic Act, requiring substantial time and financial resources for compliance and approval processes [149]. - The company must navigate various regulatory requirements for clinical trials and product approvals in the U.S. and other countries [151]. - The BLA submission process includes extensive preclinical and clinical testing, with the FDA's goal to review standard applications within ten months and priority applications within six months [166]. - The FDA may issue an approval letter or a Complete Response letter after evaluating a BLA, with the latter detailing deficiencies identified in the application [167]. - Products approved by the FDA may have limitations on indicated uses and could require a Risk Evaluation and Mitigation Strategy (REMS) to manage associated risks [169]. - The FDA offers expedited development programs such as Fast Track designation for products intended to treat serious conditions, allowing for frequent interactions with the review team [170]. - Breakthrough therapy designation can expedite development for products showing substantial improvement over existing therapies, involving more intensive FDA guidance [171]. - Priority review designation aims for FDA action on marketing applications within six months, compared to ten months under standard review [172]. - Accelerated approval may be granted if a product shows effects on a surrogate endpoint likely to predict clinical benefit, with post-marketing trials required [173]. - Orphan drug designation is available for products treating rare diseases affecting fewer than 200,000 individuals in the U.S., providing potential exclusivity benefits [176]. - Orphan drug exclusivity grants seven years of market protection post-approval, barring certain exceptions [177]. - The FDA imposes ongoing regulations post-approval, including compliance with cGMPs and potential penalties for non-compliance [179]. - The marketing and promotion of biologics are strictly regulated, with manufacturers limited to claims approved by the FDA [183]. Financial and Operational Considerations - The pharmaceutical industry is facing significant pricing pressures due to managed healthcare trends and legislative proposals aimed at controlling costs [196]. - Third-party payors may deny coverage or reimbursement for products deemed not medically necessary, impacting sales potential [195]. - The ACA has substantially changed healthcare financing, affecting pharmaceutical companies through new rebate methodologies and annual fees based on sales to federal programs [200]. - The Right to Try Act allows patients with life-threatening diseases to access investigational drugs post-Phase 1 trials without FDA permission, but manufacturers are not obligated to provide these drugs [205]. - As of December 31, 2020, the company had 23 employees, with 11 holding advanced degrees, focusing on research and development [206]. - The company may incur significant legal expenses and management distraction due to potential violations of healthcare laws and regulations [194]. - Coverage and reimbursement policies vary significantly among third-party payors, complicating the sales process for new products [197]. - The company is subject to various federal and state laws that could impact its operations and financial results, including the Foreign Corrupt Practices Act and anti-kickback statutes [194]. - Legislative changes, including the repeal of the ACA's individual mandate, may affect the healthcare landscape and the company's business operations [201]. - The company must conduct pharmacoeconomic studies to demonstrate the cost-effectiveness of its products to obtain third-party payor coverage [196]. Financial Position - As of December 31, 2020, ALX Oncology had cash and cash equivalents of $434.2 million [597]. - The company holds its cash primarily in interest-bearing bank accounts and money market funds, with minimal exposure to interest rate risk [597]. - At December 31, 2020, ALX Oncology had $434.0 million in cash exceeding the Federal Deposit Insurance Corporation's insured limit of $250,000 [598]. - ALX Oncology's expenses are generally denominated in U.S. dollars, with limited contracts in foreign currencies, primarily the Euro [599]. - Foreign currency transaction gains and losses have not been material to ALX Oncology's consolidated financial statements [599]. - A 10.0% change in current exchange rates would not have a material effect on the company's financial results [599]. - The company has not experienced a loss of principal on any of its cash equivalents to date [597]. - ALX Oncology has not recorded any allowance for credit loss from its cash equivalents as of December 31, 2020 [597]. - The primary exposure to market risk for ALX Oncology is interest rate sensitivity, which is affected by changes in U.S. interest rates [597]. - The company does not have a formal hedging program for foreign currency transactions [599].