Alpine Immune Sciences(ALPN) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Presents unaudited condensed consolidated financial statements and notes for Alpine Immune Sciences, Inc. for Q1 2024, a clinical-stage biopharmaceutical company with a pending merger with Vertex Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show a slight decrease in total assets and liabilities, while stockholders' equity increased from December 31, 2023, to March 31, 2024 | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :---------------------------- | :------------------------------- | | Cash and cash equivalents | $33,015 | $43,921 | | Short-term investments | $272,646 | $283,491 | | Total current assets | $308,251 | $330,034 | | Total assets | $373,646 | $379,852 | | Total current liabilities | $32,238 | $41,980 | | Total liabilities | $40,943 | $51,911 | | Total stockholders' equity | $332,703 | $327,941 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) The company reported an increased net loss for the three months ended March 31, 2024, compared to the same period in 2023, driven by higher operating expenses despite a decrease in collaboration revenue | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Collaboration revenue | $7,032 | $9,387 | $(2,355) | (25)% | | Research and development expenses | $22,457 | $19,581 | $2,876 | 15% | | General and administrative expenses | $7,271 | $5,398 | $1,873 | 35% | | Total operating expenses | $29,728 | $24,979 | $4,749 | 19% | | Loss from operations | $(22,696) | $(15,592) | $(7,104) | 46% | | Interest income | $4,781 | $2,418 | $2,363 | 98% | | Net loss | $(17,918) | $(13,266) | $(4,652) | 35% | | Basic and diluted net loss per share | $(0.28) | $(0.28) | $0.00 | 0% | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased by $4.762 million from December 31, 2023, to March 31, 2024, primarily due to proceeds from warrant exercises and stock-based compensation, partially offset by the net loss - Total stockholders' equity increased from $327,941 thousand at December 31, 2023, to $332,703 thousand at March 31, 2024. This increase was driven by $17,579 thousand from warrant exercises, $1,780 thousand from common stock issuance under equity plans, and $3,989 thousand in stock-based compensation, offset by a net loss of $17,918 thousand[14] Condensed Consolidated Statements of Cash Flows The company experienced a net decrease in cash and cash equivalents and restricted cash of $10.905 million for the three months ended March 31, 2024, primarily due to cash used in operating activities, partially offset by cash provided by financing activities | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(27,690) | $(26,152) | | Net cash (used in) provided by investing activities | $(2,562) | $28,350 | | Net cash provided by (used in) financing activities | $19,351 | $(1,087) | | Net (decrease) increase in cash and restricted cash | $(10,905) | $1,089 | | Cash and cash equivalents and restricted cash, end of period | $33,284 | $14,719 | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures on the company's business, significant accounting policies, financial instruments, collaboration agreements, equity, income taxes, and related party transactions, offering context to the unaudited financial statements 1. Description of Business Alpine Immune Sciences, Inc. is a clinical-stage biopharmaceutical company focused on developing protein-based immunotherapies for autoimmune and inflammatory diseases, and recently entered into a merger agreement with Vertex Pharmaceuticals - Alpine Immune Sciences, Inc. is a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat autoimmune and inflammatory diseases[19] - In April 2024, the company entered into a merger agreement with Vertex Pharmaceuticals, with a cash tender offer of $65.00 per share, expected to close in the second quarter of 2024, after which Alpine will cease to be publicly traded[20] 2. Summary of Significant Accounting Policies Outlines the basis of presentation for the unaudited condensed consolidated financial statements, key accounting estimates, principles of consolidation, and policies for cash, cash equivalents, restricted cash, and investments, while also noting recently issued accounting pronouncements - Financial statements are unaudited, prepared in accordance with GAAP, and involve significant management judgments, estimates, and assumptions[21] - The company's condensed consolidated financial statements include Alpine Immune Sciences, Inc. and its wholly owned subsidiaries[22] - Cash equivalents consist of highly liquid investments with original maturities of 90 days or less; restricted cash serves as a security deposit for an operating lease[24] - Investments are classified as available-for-sale debt securities, recorded at fair value, with unrealized gains and losses reported in other comprehensive income (loss)[25] - The company plans to adopt ASU 2023-09 (Income Tax Disclosures) for fiscal year 2025 and ASU 2023-07 (Segment Reporting) for fiscal year 2024, neither of which are expected to materially impact financial condition, results of operations, or cash flows[26] 3. Net Loss Per Share Basic and diluted net loss per share remained at $(0.28) for the three months ended March 31, 2024 and 2023, despite an increase in weighted-average shares outstanding due to warrant exercises and public offerings - Basic and diluted net loss per share was $(0.28) for both the three months ended March 31, 2024, and 2023[11] - Weighted-average shares used to compute basic and diluted net loss per share increased to 64,033,018 in Q1 2024 from 47,568,149 in Q1 2023, reflecting increases from a November 2023 public offering, a June 2023 at-the-market offering, and warrant exercises[11][27] - Dilutive securities, including warrants and stock options, were excluded from the diluted net loss per share calculation because their effect would have been anti-dilutive[28][29] 4. Cash Equivalents and Investments The company's cash equivalents and investments decreased from $364.578 million at December 31, 2023, to $356.270 million at March 31, 2024, with unrealized losses primarily due to interest rate changes | Asset Category | March 31, 2024 Fair Value (in thousands) | December 31, 2023 Fair Value (in thousands) | | :------------------------------------------- | :--------------------------------------- | :------------------------------------------ | | Money market funds | $27,171 | $31,530 | | U.S. treasury bills | $201,128 | $218,187 | | U.S. agency securities | $30,940 | $30,369 | | Corporate debt securities and commercial paper | $97,031 | $84,492 | | Total Investments | $356,270 | $364,578 | - All investments held as of March 31, 2024, and December 31, 2023, were classified as available-for-sale debt securities, consisting of highly liquid funds with high credit ratings and contractual maturities of two years or less[31] - Unrealized gains and losses on investments were primarily due to changes in interest rates. The company believes it is more likely than not that it will hold these investments until maturity and recover their amortized cost basis[35] 5. Fair Value Measurements The company categorizes its financial instruments into a three-tier fair value hierarchy, with most investments classified as Level 1 (quoted prices in active markets) or Level 2 (observable inputs other than Level 1 prices) | Asset Category | March 31, 2024 Level 1 (in thousands) | March 31, 2024 Level 2 (in thousands) | December 31, 2023 Level 1 (in thousands) | December 31, 2023 Level 2 (in thousands) | | :------------------------------------------- | :------------------------------------ | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Money market funds | $27,171 | $— | $31,530 | $— | | U.S. treasury bills | $201,128 | $— | $218,187 | $— | | U.S. agency securities | $— | $30,940 | $— | $30,369 | | Corporate debt securities and commercial paper | $— | $97,031 | $— | $84,492 | | Total | $228,299 | $127,971 | $249,717 | $114,861 | - Level 2 assets, including U.S. agency securities, corporate debt securities, and commercial paper, are valued based on market pricing and other observable market inputs for similar securities[39] 6. Additional Balance Sheet Information Details changes in prepaid expenses and other current assets, and accrued liabilities from December 31, 2023, to March 31, 2024, highlighting a decrease in employee compensation accruals | Prepaid Expenses and Other Current Assets | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :---------------------------------------- | :---------------------------- | :------------------------------- | | Prepaid research and development | $1,248 | $1,025 | | Prepaid insurance | $345 | $521 | | Prepaid other | $454 | $327 | | Other receivables | $501 | $582 | | Total | $2,548 | $2,455 | | Accrued Liabilities | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :---------------------------------- | :---------------------------- | :------------------------------- | | Research and development services | $13,438 | $12,838 | | Employee compensation | $2,594 | $7,970 | | Legal and professional fees | $653 | $283 | | Accrued other | $206 | $96 | | Total | $16,891 | $21,187 | 7. License and Collaboration Agreements Details the company's collaboration agreements with AbbVie, Amgen, and Adaptimmune, outlining revenue recognition, milestone payments, and program statuses, including the termination of certain Amgen research programs and reduced AbbVie option fees - The AbbVie Agreement for acazicolcept was amended in December 2023 to stop enrollment in the Phase 2 Synergy study for early data assessment. The License Option fee was reduced to $10.0 million, and other potential payments were reduced by 25%[43][69][76] - Under the Amgen Agreement, the company completed activities for the Existing Program and was supporting limited final activities for the First Research Program as of March 31, 2024. Amgen terminated the non-exclusive license for the Second Research Program in January 2024, and the Third Research Program was not selected[47][69][77] - The company is eligible to receive up to $381.0 million per program (total $762.0 million for remaining programs) in future success-based payments and tiered royalties under the Amgen Agreement[47][69][78] - Under the Adaptimmune Agreement, the company recorded $3.0 million in license payments and $2.1 million in research support payments through March 31, 2024, and is eligible for up to $105.0 million in downstream milestones and low-single digit royalties[48][79] | Partner | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------- | :----------------------------------------------- | :----------------------------------------------- | | AbbVie | $5,369 | $5,598 | | Amgen | $1,663 | $3,455 | | Adaptimmune | $— | $334 | | Total collaboration revenue | $7,032 | $9,387 | 8. Stockholders' Equity Details changes in stockholders' equity, including the issuance of common stock from warrant exercises and equity incentive plans, and the recognition of stock-based compensation expense for the three months ended March 31, 2024 - During Q1 2024, the company issued 1,694,282 net shares of common stock and received $17.6 million from exercises of 2,309,404 common stock warrants[53] - An additional 3,199,879 shares of common stock were issued in Q1 2024 from the net exercise of 3,200,000 prefunded warrants, with 2,902,081 more shares issued in April 2024 from prefunded warrant exercises[53] - On January 1, 2024, 1,500,000 additional shares were automatically added to the 2018 Equity Incentive Plan. In Q1 2024, 1,281,182 stock options and 463,705 restricted stock units (RSUs) were granted[54] | Category | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $2,049 | $1,481 | | General and administrative | $1,940 | $1,071 | | Total stock-based compensation expense | $3,989 | $2,552 | 9. Income Taxes The company maintained an effective tax rate of 0% for both Q1 2024 and Q1 2023, primarily due to a full valuation allowance against domestic and foreign deferred tax assets, reflecting expectations of continued losses - The effective tax rate was 0% for both the three months ended March 31, 2024, and 2023[57] - As of March 31, 2024, a full valuation allowance was recorded against both domestic and foreign deferred tax assets, as it was deemed more likely than not that none of these assets would be realized due to cumulative losses and latest forecasts[57] 10. Related Party Transactions Discloses warrant exercises by affiliated funds and stockholders with significant beneficial ownership, and the entry into Tender and Support Agreements by certain related parties in connection with the pending merger with Vertex - In Q1 2024, certain funds affiliated with a director and stockholders with over 5% beneficial ownership exercised 3,200,000 prefunded warrants and 1,379,887 common stock warrants, generating $17.6 million in proceeds[58] - In April 2024, an additional 2,902,081 shares were issued in connection with the net exercises of 2,902,127 prefunded warrants by certain funds affiliated with a director[58] - Certain Supporting Stockholders, collectively owning approximately 25.5% of outstanding shares, entered into Tender and Support Agreements to tender their shares into the Vertex offer[59] - Alpine Immune Sciences, Inc. is a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat autoimmune and inflammatory diseases[19] - In April 2024, the company entered into a merger agreement with Vertex Pharmaceuticals Incorporated, with a cash tender offer of $65.00 per share, expected to close in the second quarter of 2024, after which Alpine will cease to be a publicly traded company[20] - The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with GAAP, with significant estimates inherent in their preparation[21] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operations, and outlook, including the Vertex merger, product development, collaborations, and liquidity Forward-Looking Statements This section highlights that the report contains forward-looking statements regarding future expectations, financial conditions, and operational plans, which are subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements concerning the pending merger with Vertex, product development, financial estimates, and regulatory approvals[62] - These statements are subject to certain risks and uncertainties, including those discussed in the 'Risk Factors' section, which could cause actual results to differ materially from anticipated outcomes[63] Overview Alpine Immune Sciences is a clinical-stage biopharmaceutical company developing innovative protein-based immunotherapies for autoimmune and inflammatory diseases, and is currently in the process of being acquired by Vertex Pharmaceuticals - Alpine is a clinical-stage biopharmaceutical company focused on discovering and developing innovative, protein-based immunotherapies for autoimmune and inflammatory diseases using a proprietary scientific platform[64] - The company entered into a merger agreement with Vertex Pharmaceuticals in April 2024, with a cash tender offer of $65.00 per share, and is expected to become a wholly owned subsidiary of Vertex in Q2 2024[65] Autoimmune and Inflammatory Diseases Details the development progress of povetacicept (ALPN-303) and acazicolcept (ALPN-101) for autoimmune and inflammatory diseases, including clinical trial results and strategic decisions for each candidate - Povetacicept (ALPN-303) is a dual antagonist of BAFF and APRIL cytokines, showing greater potency in preclinical studies and well-tolerated in a Phase 1 healthy volunteer study, supporting a once every four-weeks dose regimen[66] - Clinical data from the RUBY-3 study in autoimmune glomerulonephritis (including IgAN) demonstrated encouraging improvements, leading to FDA support for advancement to a registrational Phase 3 study in IgAN in the second half of 2024[68] - Acazicolcept (ALPN-101) is a dual ICOS and CD28 antagonist. Enrollment in the Synergy Phase 2 study for moderate-to-severe SLE was stopped in December 2023 for early data assessment, with final analysis expected by the end of 2024[69] Scientific Platform The company's scientific platform generates immune modulatory proteins with potential for engineered cell therapies and is continuously leveraged for internal development and external partnering opportunities - The scientific platform has generated immune modulatory proteins with potential for improving engineered cell therapies such as chimeric antigen receptor T cells (CAR T cells), T cell receptor-engineered T cells, and tumor infiltrating lymphocytes[70] - The company intends to continue leveraging its existing pipeline and platform for internal development opportunities and to actively explore and evaluate potential value-creating partnering opportunities[72] Operations The company's operations have focused on R&D, capital raising, and clinical studies, primarily financed through equity offerings, collaboration agreements, and debt. It anticipates continued significant losses and the need for additional capital, with a current focus on completing the merger with Vertex - Operations to date have been limited to business planning, capital raising, platform technology development, identifying immunotherapy candidates, clinical studies, and other research and development activities[73] - The company has financed operations primarily through public offerings of common stock and warrants, private placements, funds from license and research agreements, and debt financing, raising approximately $690.3 million since inception[73] - Net loss was $17.9 million for Q1 2024 and $13.3 million for Q1 2023, with expectations to continue incurring significant expenses and operating losses for the foreseeable future[73] - As of March 31, 2024, the company had cash, cash equivalents, restricted cash, and investments totaling $362.4 million[73] Financial Overview Provides a detailed breakdown of collaboration revenue from AbbVie, Amgen, and Adaptimmune, along with an overview of research and development and general and administrative expenses, and notes on accounting policies and recent pronouncements - Collaboration revenue is primarily derived from collaboration and licensing agreements, with future revenue expected to fluctuate[74] - Research and development expenses are expected to increase significantly as the company continues to develop its platform and product candidates, particularly povetacicept[80] - General and administrative expenses are expected to increase due to infrastructure expansion, headcount, and intellectual property prosecution[81] - The company ceased to be an 'emerging growth company' in 2020 but remains exempt from auditor attestation requirements of Section 404(b) of Sarbanes-Oxley as a non-accelerated filer[82] - No significant or material changes in critical accounting policies occurred during the three months ended March 31, 2024[84] - Recently issued ASUs on Income Tax Disclosures (2023-09) and Segment Reporting (2023-07) are being evaluated but are not expected to materially impact financial condition, results of operations, or cash flows[85] Results of Operations This section provides a detailed comparison of the company's financial performance for the three months ended March 31, 2024, versus 2023, highlighting changes in collaboration revenue, operating expenses, and other income/expense items | Metric | 2024 (in thousands) | 2023 (in thousands) | $ Change (in thousands) | % Change | | :----------------------------- | :------------------ | :------------------ | :---------------------- | :------- | | Collaboration revenue | $7,032 | $9,387 | $(2,355) | (25)% | | Research and development | $22,457 | $19,581 | $2,876 | 15% | | General and administrative | $7,271 | $5,398 | $1,873 | 35% | | Total operating expenses | $29,728 | $24,979 | $4,749 | 19% | | Loss from operations | $(22,696) | $(15,592) | $(7,104) | 46% | | Interest income | $4,781 | $2,418 | $2,363 | 98% | | Interest expense | $— | $(70) | $70 | (100)% | | Net loss | $(17,918) | $(13,266) | $(4,652) | 35% | Collaboration Revenue Collaboration revenue decreased by 25% to $7.032 million in Q1 2024 compared to Q1 2023, primarily due to reduced activity under the Amgen Agreement and completion of Adaptimmune services | Partner | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | $ Change (in thousands) | % Change | | :-------------- | :----------------------------------------------- | :----------------------------------------------- | :---------------------- | :------- | | AbbVie | $5,369 | $5,598 | $(229) | (4)% | | Amgen | $1,663 | $3,455 | $(1,792) | (52)% | | Adaptimmune | $— | $334 | $(334) | (100)% | | Total collaboration revenue | $7,032 | $9,387 | $(2,355) | (25)% | - The $1.8 million decrease in Amgen revenue was due to work progressing simultaneously on the Second Research Program (completed in 2023) and the First Research Program (nearing completion in Q1 2024)[89] - All services related to the Adaptimmune collaboration were completed by June 2023[89] Research and Development Expenses Total R&D expenses increased by 15% to $22.457 million in Q1 2024, driven by higher costs for povetacicept clinical trials and increased personnel-related expenses, partially offset by decreases in acazicolcept and davoceticept costs | R&D Expense Category | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | $ Change (in thousands) | % Change | | :---------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :---------------------- | :------- | | Povetacicept | $8,267 | $3,456 | $4,811 | 139% | | Acazicolcept | $1,336 | $4,023 | $(2,687) | (67)% | | Davoceticept | $56 | $1,419 | $(1,363) | (96)% | | Total direct research and development expense | $9,745 | $9,099 | $646 | 7% | | Personnel-related costs | $10,594 | $9,016 | $1,578 | 18% | | Total indirect research and development expense | $12,712 | $10,482 | $2,230 | 21% | | Total research and development expense | $22,457 | $19,581 | $2,876 | 15% | - Povetacicept costs increased by $4.8 million due to higher clinical trial, process development, and manufacturing costs as RUBY studies continued[91] - Acazicolcept costs decreased by $2.7 million primarily due to reduced manufacturing, and davoceticept costs decreased by $1.4 million due to study closeout[91] General and Administrative Expenses General and administrative expenses increased by 35% to $7.271 million in Q1 2024, primarily due to higher personnel-related costs, including stock-based compensation, and increased legal and professional fees | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | General and administrative expenses | $7,271 | $5,398 | - The $1.9 million increase was primarily attributable to a $1.4 million rise in personnel-related expenses (including $0.9 million in higher non-cash stock-based compensation expense) and a $0.7 million increase in legal and professional services[93] Interest Income Interest income significantly increased by 98% to $4.781 million in Q1 2024, attributed to a higher average investment balance and improved yields on cash equivalents and investments | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------- | :----------------------------------------------- | :----------------------------------------------- | | Interest income | $4,781 | $2,418 | - The $2.4 million increase in interest income was attributable to a higher average investments balance and higher yields on cash equivalents and investments[94] Interest Expense Interest expense decreased by 100% to $0 in Q1 2024, from $0.070 million in Q1 2023, due to the voluntary early termination and payoff of term loans with SVB in May 2023 | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--------------- | :----------------------------------------------- | :----------------------------------------------- | | Interest expense | $— | $(70) | - The $0.1 million decrease in interest expense was due to the voluntary early termination and payoff of term loans with SVB in May 2023[95] Liquidity and Capital Resources The company's liquidity is primarily from equity sales, collaboration agreements, and investments, totaling $362.4 million as of March 31, 2024. It expects existing resources to fund operations for at least 12 months, with future funding needs dependent on product development and the pending merger with Vertex - As of March 31, 2024, the company had cash, cash equivalents, restricted cash, and investments totaling $362.4 million[96] - The company expects to finance its cash needs through a combination of collaboration agreements and equity or debt financings until substantial product revenue is generated[96] - Based on current plans and strategies, the company anticipates its operating expenses will decrease as it does not plan to invest in commercializing therapeutic candidates and plans to complete the Offer and Merger with Vertex[104] Sources of Liquidity The company's primary sources of liquidity are equity offerings, collaboration agreements, and debt financing, with $362.4 million in cash, cash equivalents, restricted cash, and investments as of March 31, 2024 - The company has financed its operations primarily through the sale of equity securities, payments received under collaboration agreements, and debt[96] - As of March 31, 2024, the company had cash, cash equivalents, restricted cash, and investments totaling $362.4 million[96] - Until substantial product revenue is generated, the company expects to finance its cash needs through collaboration agreements and equity or debt financings, as there are no committed external sources of capital[96] Equity Financing Agreements Details recent equity financing activities, including a November 2023 public offering that raised $152.2 million net proceeds and an ongoing "at-the-market" offering that generated $10.0 million gross proceeds through March 31, 2024 - In November 2023, the company completed an underwritten public offering of 9,791,832 common shares and 3,200,000 prefunded warrants, generating $152.2 million in net proceeds[97] - As of March 31, 2024, the company sold 919,413 shares of common stock under an "at-the-market" equity offering for $10.0 million in gross proceeds[97] Debt Financing Agreements The company voluntarily repaid its remaining term loans with SVB in May 2023, resulting in no outstanding debt balance as of March 31, 2024 - In May 2023, the company voluntarily repaid in full the remaining outstanding carrying value of $1.4 million under its Term Loans with SVB[99] - As of March 31, 2024, the company had no remaining balance outstanding under its Loan Agreement with SVB[99] Cash Flows Net cash used in operating activities increased to $27.7 million in Q1 2024, while investing activities shifted from providing $28.4 million in Q1 2023 to using $2.6 million in Q1 2024. Financing activities provided $19.4 million in Q1 2024, primarily from warrant and stock option exercises | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(27,690) | $(26,152) | | Net cash (used in) provided by investing activities | $(2,562) | $28,350 | | Net cash provided by (used in) financing activities | $19,351 | $(1,087) | - Net cash used in operating activities was $27.7 million during Q1 2024, consisting of a net loss of $17.9 million and a net change of $11.2 million in operating assets and liabilities, partially offset by $1.4 million in net non-cash adjustments[101] - Net cash provided by financing activities was $19.4 million for Q1 2024, primarily from $17.6 million in proceeds from warrant exercises and $1.8 million from stock option exercises[103] Funding Requirements The company anticipates continued operating losses and significant expenses for R&D and clinical development, with future capital needs dependent on product development, collaborations, and the pending merger. Existing resources are expected to fund operations for at least 12 months, but additional capital may be required - The company expects to incur significant expenses and operating losses for the foreseeable future due to ongoing research, preclinical and clinical development of product candidates, and regulatory processes[104] - Future capital requirements are difficult to forecast and will depend on factors such as the ability to complete the Offer and Merger, the number and characteristics of future product candidates, and the scope and costs of clinical trials[104] - Based on the current operating plan, available cash and investments are believed to be sufficient to fund planned operations for at least the next 12 months, but this estimate is subject to change[104] - The company does not intend to pursue further funding and is seeking to complete the Offer and Merger with Vertex[104] Operating Lease The company has a 10.8-year operating lease for office and laboratory space in Seattle, with annual base rent increasing by 3.0% each year, and a $254,000 letter of credit as a security deposit - In March 2019, the company entered into a 10.8-year lease for 27,164 square feet of office and laboratory space in Seattle, Washington, with the lease term commencing in June 2019[106] - The annual base rent is $1.7 million for the first year, increasing by 3.0% each year thereafter, plus additional amounts for operating and maintenance expenses[106] - A $254,000 letter of credit serves as a security deposit for the operating lease, recorded as noncurrent restricted cash[106] - The company is a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat autoimmune and inflammatory diseases[64] - In April 2024, the company entered into a merger agreement with Vertex Pharmaceuticals, with a cash tender offer of $65.00 per share, expected to close in the second quarter of 2024[65] - The company expects to continue incurring significant expenses and operating losses for at least the next several years due to ongoing research and development, clinical trials, and manufacturing activities[73] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a "smaller reporting company," Alpine Immune Sciences, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - The company is a "smaller reporting company" and is not required to provide quantitative and qualitative disclosures about market risk pursuant to Item 305 of Regulation S-K[107] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting during the period. The section also acknowledges the inherent limitations of internal control systems Evaluation of Disclosure Controls and Procedures The CEO and CFO evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2024, and concluded they were effective at a reasonable assurance level - The company's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2024[108] - Based on the evaluation, the CEO and CFO concluded that the disclosure controls and procedures were effective, in design and operation, at the reasonable assurance level[108] Changes in Internal Control over Financial Reporting Management, including the CEO and CFO, confirmed that there were no changes in internal control over financial reporting during the first quarter of 2024 that materially affected or are reasonably likely to materially affect these controls - Management, including the Chief Executive Officer and Chief Financial Officer, evaluated changes in internal control over financial reporting during the period ended March 31, 2024[109] - It was concluded that there were no changes that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[109] Inherent Limitation on the Effectiveness of Internal Control Highlights that any internal control system has inherent limitations, providing only reasonable, not absolute, assurance, and is subject to risks like judgment errors, misconduct, or changes in conditions - The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment and the inability to eliminate misconduct completely[110] - Any internal control system, no matter how well designed and operated, can only provide reasonable, not absolute, assurances[110] - Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions or deterioration in compliance[110] - Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of March 31, 2024[108] - There were no changes in internal control over financial reporting during the period ended March 31, 2024, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[109] - The effectiveness of any internal control system is subject to inherent limitations, providing only reasonable, not absolute, assurance, and is susceptible to judgment errors, misconduct, or changes in conditions[110] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings that, in management's opinion, would reasonably be expected to have a material adverse effect on its business, financial condition, operating results, or cash flows - The company is not presently a party to any legal proceedings that are expected to have a material adverse effect on its business, financial condition, operating results, or cash flows[112] - Regardless of the outcome, litigation can have an adverse impact due to defense and settlement costs, diversion of management resources, and other factors[112] Item 1A. Risk Factors This extensive section outlines numerous risks and uncertainties facing the company, including those related to the pending merger with Vertex, product development, third-party relationships, commercialization, personnel, financial position, cybersecurity, intellectual property, government regulation, and common stock ownership. These factors could materially affect the company's business, operating results, and financial condition Risks Related to the Merger with Vertex The company faces significant risks related to its pending merger with Vertex, including the possibility of failure to complete the transaction, potential termination fees, business disruptions, diversion of management attention, and the loss of long-term value for stockholders - Failure to complete the Merger in a timely manner or at all could have a material and adverse effect on the company's business, financial condition, results of operations, and stock price[5][114] - The Merger is subject to certain closing conditions, including the tender of a majority of outstanding shares and regulatory approvals, which may not be satisfied, potentially leading to abandonment[5][114][117] - The Merger Agreement contains provisions that could discourage competing acquirers or result in lower acquisition proposals, and the company may be required to pay a $173 million termination fee under specified circumstances[5][115][119] - During the pendency of the Merger, the company is subject to contractual restrictions and other risks that could disrupt its business, divert management's attention, and adversely affect ongoing operations and financial condition[5][115][120] - Legal or regulatory proceedings may arise in connection with the Merger, which could be costly, prevent consummation, and divert management's attention[5][123] - Current and prospective employees may experience uncertainty about their future, potentially leading to departures of key personnel[5][124] Risks Related to Our Pipeline and Product Development The company's novel therapeutic approach is unproven, and its early-stage product candidates face high risks of failure, delays in development, and potential undesirable side effects, which could significantly impact commercial viability and regulatory approval. Additionally, competition, unproven mechanisms of action, combination therapy risks, and global health crises pose further challenges - The company's approach to the discovery and development of innovative therapeutic treatments based on its technology is unproven and may not result in marketable products[5][125] - Therapeutic candidates are in early stages of development and may fail or suffer delays that materially and adversely affect their commercial viability[5][130] - Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier preclinical and clinical trials may not be predictive of future clinical trial results[5][134] - If the company encounters delays or difficulties enrolling patients in its clinical trials and/or retaining patients, clinical development activities could be delayed or otherwise adversely affected[5][136] - Product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent regulatory approval, require expansion of trial size, limit commercial potential, or result in significant negative consequences[138] - The company faces competition from entities that have developed or may develop therapeutic candidates for its target disease indications, including companies developing novel treatments and technology platforms similar to its own[5][140] - The scientific platform is novel, and its underlying science, particularly the mechanism of action of vIgDs, is not exhaustively understood nor conclusively proven, which may adversely affect capital raising, regulatory clearance, and market acceptance[142] - Development of product candidates in combination with other therapies could expose the company to additional risks, such as increased serious adverse events and regulatory restrictions[143][144] - Risks related to pandemics, other health epidemics, and outbreaks could significantly disrupt operations and clinical trials, causing delays or difficulties in patient enrollment, clinical site initiation, and supply chains[62][146][148] - Any inability to present data in scientific journals or at scientific conferences, or adverse scientific publications or editorial opinions, could adversely impact the business and stock price[150][151] Risks Related to Our Relationships with Third Parties The company's revenue and success are highly dependent on collaboration agreements, where third parties conduct development efforts. Any failure in their performance, supply chain disruptions, or inability to secure new strategic transactions could materially harm the business - The company's revenue has been primarily derived from collaboration agreements, and its success will be dependent, in part, on its collaborators' efforts to develop therapeutic candidates[5][152] - Reliance on third-party clinical investigators, CROs, and consultants to conduct clinical or preclinical studies means less control over timing, quality, and compliance, potentially leading to delays[5][155] - Dependence on third-party manufacturing and supply partners means the supply of clinical trial materials may become limited, interrupted, or not of satisfactory quantity or quality, impairing research and development[5][156] - Failure to successfully engage in strategic transactions, including additional collaborations, could adversely affect the ability to develop and commercialize therapeutic candidates, impact cash position, increase expenses, and distract management[5][159] Risks Related to Our Ability to Commercialize Product Candidates If approved, the company faces challenges in commercializing its therapeutic candidates, including developing sales and marketing capabilities, complying with extensive regulatory requirements, potential price controls, and risks associated with international operations - If any therapeutic candidates are approved for marketing and commercialization, the company may be unable to develop sales, marketing, and distribution capabilities on its own or enter into agreements with third parties on acceptable terms, hindering successful commercialization[5][160] - Failure to comply with U.S. and foreign regulatory requirements could lead regulatory authorities to limit or withdraw marketing or commercialization approvals and subject the company to other penalties[6][162] - Imposed price controls in most countries, along with governmental and stakeholder pressure on prices and reimbursement levels, may adversely affect future profitability[164] - The business may be subject to economic, political, regulatory, and other risks associated with international operations, including compliance with non-U.S. laws, currency exchange rate changes, and trade barriers[165] Risks Related to Our Personnel and Operations The company requires substantial additional funds for development and commercialization, faces a history of losses, and depends heavily on key management and technical personnel. Operational growth, product liability, employee misconduct, hazardous materials, and geographic concentration also pose significant risks - The company will need to raise substantial additional funds to advance development of its therapeutic candidates and cannot guarantee sufficient funds will be available in the future to develop and commercialize current or future candidates[5][167] - As an early-stage biopharmaceutical company with a history of losses, it expects to continue incurring significant losses for the foreseeable future and may never achieve or maintain profitability[5][169] - Interim, preliminary, or topline data from clinical trials may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data[170] - Any inability to attract and retain qualified key management and technical personnel would impair the company's ability to implement its business plan[173] - As therapeutic candidates advance into clinical trials, the company may experience difficulties in managing its growth and expanding operations[174] - The business entails a significant risk of product liability, and the inability to obtain sufficient insurance coverage could harm the business, financial condition, results of operations, or prospects[5][176] - Employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on the business[178] - The business involves the use of hazardous materials, and compliance with environmental laws and regulations may be expensive and restrict how business is conducted[180] - Compliance with governmental regulations regarding the treatment of animals used in research could increase operating costs, adversely affecting the commercialization of technology[182] - Current operations are concentrated in one location (Seattle, Washington), and any events affecting this location may have material adverse consequences[184] - The business may be affected by litigation and government investigations, such as inquiries and claims from competitors[185] Risks Related to Our Financial Position and Capital Needs The company's financial position is subject to risks from investments, potential disruptions in the financial services industry, changes in fiscal and tax policies, and limitations on net operating loss carryforwards. Debt instruments may also restrict business strategies - The investment of cash and cash equivalents in fixed income and other investments is subject to risks which may cause losses and affect the liquidity of these investments[186] - Adverse events or perceptions affecting the financial services industry, such as bank failures, could adversely affect operating results, financial condition, and prospects[187] - The business may be materially affected by changes to fiscal and tax policies, and negative or unexpected tax consequences could adversely affect results of operations[188] - Net operating loss carryforwards and certain other tax attributes may be subject to limitations due to ownership changes, potentially impacting the ability to offset future taxable income[190] - Provisions of debt instruments may restrict the company's ability to pursue its business strategies, and defaults could lead to accelerated repayment obligations[191] Risks Related to Cybersecurity The company's computer systems and those of its third-party partners are vulnerable to security breaches and disruptions, which could lead to data loss, financial harm, reputational damage, and operational delays - Computer systems, or those of any CROs, manufacturers, other contractors, or collaborators, may fail or suffer security or data privacy breaches or incidents, resulting in additional costs, loss of revenue, significant liabilities, harm to brand, and material disruption of operations[6][193] - Any disruption or security incident could cause the company to incur liability, financial harm, and reputational damage, and could lead to delays in the development and commercialization of product candidates[193] - Information technology systems face the risk of systemic failure, potentially disrupting operations and collaborations[195] Risks Related to Our Intellectual Property The company's success depends on obtaining and enforcing patent protection for its technology and products, which is costly, uncertain, and subject to challenges. Reliance on licensed IP, limited patent terms, global enforcement difficulties, and trade secret protection also pose significant risks - Failure to obtain and enforce patent protection for technology, including therapeutic candidates, therapeutic products, and platform technology, may materially and adversely affect development and commercialization[6][196] - The company may license patent rights from third-party owners or licensors, and if they do not properly obtain, maintain, or enforce these patents, the company's competitive position and business prospects may be materially and adversely affected[6][199] - Patent terms may be inadequate to protect the competitive position on platform technology and therapeutic candidates and products for an adequate amount of time[201] - The company may be unable to protect its patent intellectual property rights throughout the world, especially in jurisdictions with weaker IP enforcement, which could impair its competitive position[202] - The company or its licensors, collaborators, or future strategic partners may become subject to third-party claims or litigation alleging infringement of patents or other proprietary rights, or seeking to invalidate patents, which could be costly and delay development[6][204] - Failure to obtain patent term extension and data exclusivity for any therapeutic candidate or product may materially harm the business by allowing competitors to enter the market sooner[207] - If the confidentiality of trade secrets is not protected, the business and competitive position would be harmed[209] - The company may be subject to claims of wrongful use or disclosure of alleged trade secrets of former employers by its employees or consultants, which could be costly to defend and result in loss of IP or personnel[210] - If trademarks and trade names are not adequately protected, the company may not be able to build name recognition, adversely affecting its business[211] - Third parties may independently develop similar or superior technology or design around existing technology, which could materially and adversely affect the company's competitive position[212] - Failure to comply with obligations under license, collaboration, or other agreements may require payment of damages and could result in the loss of intellectual property rights necessary for developing and protecting technology[6][214] - Breaches of internal computer systems, or those of contractors, vendors, or consultants, may place patents or proprietary rights at risk, leading to delays, increased costs, and interference with IP protection[6][215] Risks Related to Government Regulation The company faces extensive governmental regulations for its therapeutic candidates, and failure to obtain U.S. or foreign regulatory approval, comply with healthcare laws, or navigate evolving pricing and reimbursement policies could severely hinder commercialization and financial performance - The company may be unable to obtain U.S. or foreign regulatory approval for its therapeutic candidates, which would prevent commercialization[6][216] - Failure to obtain orphan drug designation or maintain orphan drug exclusivity for certain products could lead to competitors selling products for the same conditions, reducing revenue[219] - If the company or its collaborators, manufacturers, or service providers fail to comply with healthcare laws and regulations, they could be subject to enforcement actions, adversely affecting the ability to develop, market, and sell therapeutics[6][221] - Enacted and future legislation may increase the difficulty and cost for the company to obtain or maintain marketing approval of its therapeutic candidates[224] - Any therapeutics developed may become subject to unfavorable pricing regulations, third-party coverage and reimbursement practices, or healthcare reform initiatives, thereby harming the business[226] - The healthcare industry is heavily regulated in the U.S. and other jurisdictions, and failure to comply with applicable requirements may subject the company to penalties and negatively affect its financial condition[6][228] - Data collection is governed by restrictive regulations (e.g., GDPR, CCPA), and actual or perceived failures to comply with applicable data protection, privacy, and security laws could adversely affect the business[230][231] - The ability to obtain services, reimbursement, or funding from the federal government may be impacted by possible reductions in federal spending[232] - Disruptions at the FDA, SEC, and other government agencies caused by funding shortages or global health concerns could hinder their ability to approve or commercialize products in a timely manner[233] - If any therapeutic candidates receive marketing approval and undesirable side effects are later identified, the ability to market and derive revenue from the therapeutic products could be compromised[234] - Therapeutic candidates for which approval is sought as biologic products may face competition sooner than anticipated due to the Biologics Price Competition and Innovation Act (BPCIA)[236] Risks Related to Ownership of Our Common Stock The company's stock price may be volatile, influenced by various factors including the pending merger, clinical trial results, and market perceptions. Significant influence by officers and directors, potential future stock sales, and anti-takeover provisions could also affect stock value and stockholder rights - The company's stock price may be volatile, and an active, liquid, and orderly trading market may not be maintained for its common stock, potentially preventing stockholders from reselling shares at or above their purchase price[6][237] - Officers and directors, and their respective affiliates, have significant influence over the company's business affairs and may make business decisions with which stockholders disagree, potentially adversely affecting the value of their investment[6][240] - Future sales, or the perception of future sales, of a substantial amount of common stock could depress the trading price[242] - The company has broad discretion over the use of proceeds from financing activities, and their application may not improve operating results or the value of securities[244] - Anti-takeover provisions in charter documents and under Delaware or Washington law could discourage, delay, or prevent a change in control of the company[245] - Claims for indemnification by directors and officers may reduce available funds to satisfy successful third-party claims against the company and may reduce the amount of available cash[246][248] - The company's amended and restated certificate of incorporation and bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain actions, which could limit stockholders' ability to obtain a favorable judicial forum[249] - The company does not expect to pay any dividends on its common stock for the foreseeable future, as earnings are expected to be retained for future operations and expansion[250] - The Nasdaq Global Market may delist the company's common stock, which could limit investors' ability to make transactions and subject the company to additional trading restrictions[252] Risks Related to Our Financial Reporting and Disclosure As a smaller reporting company, the company benefits from reduced reporting requirements, but this could make its stock less attractive. It also faces risks related to maintaining effective internal controls and incurring ongoing costs associated with public company compliance - As a smaller reporting company, any decision to comply only with reduced reporting and disclosure req