What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-02 compared with 2022-08-09 · 62 added, 55 removed, 209 unchanged (36% of the section changed)

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We are developing a pipeline of off-the-shelf T cell product candidates that are designed to target and kill cancer cells.

Our engineered T cells are allogeneic, meaning they are derived from healthy donors for

intended use in any patient, rather than from an individual patient for that patient’s use, as in the case of autologous T cells.

Our engineered T cells are allogeneic, meaning they are derived from healthy donors for intended use in any patient, rather than from an individual patient for that patient’s use, as in the case of autologous T cells.

We believe this key difference will enable us to deliver readily available treatments faster, more reliably, at greater scale, and to more patients.

We have a deep pipeline of allogeneic chimeric antigen receptor (CAR) T cell product candidates targeting multiple promising antigens in a host of hematological malignancies and solid tumors.

Pursuant to the Exclusive Collaboration and License Agreement with Servier (Servier Agreement), we have exclusive rights to ALLO-501 and ALLO-501A, CAR T cell product candidates targeting CD19, in the United States, while Servier retains exclusive rights for these product candidates for all other countries.

Pursuant to our Exclusive Collaboration and License Agreement with Servier (Servier Agreement), we have exclusive rights to ALLO-501 and ALLO-501A, CAR T cell product candidates targeting CD19, in the United States.

ALLO-501 and ALLO-501A use Cellectis S.A.

(Cellectis) technologies under which Servier holds an exclusive worldwide license from Cellectis.

On September 15, 2022, Servier sent a notice of discontinuation (Discontinuation) of its involvement in the development of all licensed products directed against CD19, including UCART19, ALLO-501 and ALLO-501A (collectively, CD19 Products), pursuant to the Servier Agreement.

Servier’s Discontinuation provides us with the right to elect a license to the CD19 Products outside of the United States (Ex-US Option) and does not otherwise affect our current exclusive license for the development and commercialization of CD19 Products in the United States.

Upon any exercise of the Ex-US Option by us, our potential milestone payments with respect to ALLO-501A would increase for any first dosing in Phase 2, first dosing in Phase 3 and regulatory approval by €46 million in the aggregate.

In addition, upon any such exercise of the Ex-US Option, Servier's obligation to reimburse us for 40% of the development costs for CD19 Products would cease.

See “Risk Factors—Servier’s Discontinuation of its involvement in the development of CD19 Products may have adverse consequences.*”

We are conducting long-term follow-up in our Phase 1 clinical trial (the ALPHA trial) of ALLO-501 in patients with relapsed or refractory (R/R) non-Hodgkin lymphoma (NHL).

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We have removed rituximab recognition domains in ALLO-501A, which we believe will potentially facilitate treatment of more patients, as rituximab is a typical part of a treatment regimen for a patient with NHL.

We initiated a Phase 1/2 clinical trial for ALLO-501A (the ALPHA2 trial) in the second quarter of 2020.

We plan to seek agreement with the U.S.

Food and Drug Administration (the FDA) to proceed to Phase 2 on matters such as chemistry, manufacturing and controls (CMC), including for the use of ALLO-501A manufactured at our own manufacturing facility, and trial designs to evaluate both ALLO-501A and ALLO-647.

Subject to FDA clearance, we expect to proceed to the Phase 2 portion of the trial in adult patients with R/R large B-cell lymphoma in the coming weeks.

We recently initiated a Phase 2 clinical trial for ALLO-501A (the ALPHA2 trial) in R/R large B cell lymphoma (LBCL).

We conducted an extensive Phase 1 program designed to evaluate and optimize all aspects of our therapy, including multiple doses and schedules of ALLO-501A and one of our lymphodepletion agents, ALLO-647.

In addition, we conducted a review of the Phase 1 program, which determined a manufacturing process associated with robust clinical performance.

Our selected manufacturing process, named Alloy, will be deployed in the ALPHA2 trial and the EXPAND trial discussed below.

The Phase 2 trial will begin with previously manufactured material from our prior contract manufacturing organization and we may transition to product from our manufacturing facility during the course of the ALPHA2 and EXPAND trials.

The single-arm ALPHA2 trial will utilize a single dose of ALLO-501A at 120 million CAR+ cells with a lymphodepletion regimen comprised of fludarabine (30 mg/m2/day x 3 days) and cyclophosphamide (300 mg/m2/day x 3 days) plus ALLO-647 (90 mg).

We plan to enroll approximately 100 patients who have received at least two prior lines of therapy and have not received any prior anti-CD19 therapy, including CAR T therapy.

The primary endpoint is objective response rate (ORR) and the key secondary endpoint is duration of response (DoR).

We are also in the process of initiating the EXPAND trial, which is expected to enroll approximately 70 patients with R/R LBCL and is intended to demonstrate the contribution of ALLO-647 to the overall benefit of the lymphodepletion regimen.

Patients will be randomized to receive the same single 120 million CAR+ cell dose of ALLO-501A as in the ALPHA2 trial and either lymphodepletion with fludarabine and cyclophosphamide (control arm) or the lymphodepletion regimen of the ALPHA2 trial (active arm).

The primary endpoint of this trial is progression free survival, and the key secondary endpoints are ORR, DoR, and the safety of ALLO-647.

Assuming favorable outcomes and subject to FDA discussions, we plan to seek FDA approval of ALLO-501A and ALLO-647 on the basis of the ALPHA2 trial and the EXPAND companion trial.

We are sponsoring two clinical trials in adult patients with R/R multiple myeloma, a Phase 1 clinical trial (the UNIVERSAL trial) of ALLO-715 and a Phase 1 clinical trial (the IGNITE trial) of ALLO-605, our first product candidate to incorporate our TurboCAR technology.

TurboCAR technology allows cytokine signaling to be engineered selectively into CAR T cells and has shown the ability to improve the potency and persistence of the cells and to delay exhaustion of the cells in preclinical models.

As part of the UNIVERSAL trial, we have made the decision not to advance ALLO-715 in combination with nirogascestat, provided by SpringWorks Therapeutics, Inc., into dose expansion cohorts.

There was no clear indication that the combination would meaningfully improve the benefit-risk profile of ALLO-715 as a monotherapy.

Our Clinical Trial Collaboration Agreement with SpringWorks Therapeutics, Inc.

is expected to remain in effect until the data from the combination study are fully analyzed.

We expect to provide a further update on our R/R multiple myeloma program by the end of 2022.

We also continue to advance the Phase 1 clinical trial (the TRAVERSE trial) of ALLO-316, an allogeneic CAR T cell product candidate targeting CD70, in adult patients with advanced or metastatic clear cell renal cell carcinoma (ccRCC).

Subject to results from the TRAVERSE trial, we plan to investigate the use of ALLO-316 for other solid tumor and hematologic indications.

Subject to results from the TRAVERSE trial, we may investigate the use of ALLO-316 for other solid tumor and hematologic indications.

We are planning an Allogene R&D Showcase on November 29, 2022 to provide an update on certain of our research and development programs, including additional data from the ALPHA, ALPHA2 and UNIVERSAL trials.

Enrollment of patients and the ability to conduct patient follow-up has been adversely impacted by the COVID-19 pandemic.

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Since inception, we have had significant operating losses.

Our net losses were $74.8 million and $154.6 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2022, we had an accumulated deficit of $1.1 billion.

As of June 30, 2022, we had $686.1 million in cash and cash equivalents and investments.

Our net losses were $83.1 million and $237.8 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2022, we had an accumulated deficit of $1.1 billion.

As of September 30, 2022, we had $637.3 million in cash and cash equivalents and investments.

We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses and general and administrative expenses will continue to increase.

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Exclusive License and Collaboration Agreement with Servier

In October 2015, Pfizer entered into the Servier Agreement to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR products, including UCART19, in the United States with the option to obtain the rights over certain additional allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

In October 2015, Pfizer entered into the Servier Agreement to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR products in the United States with the option to obtain the rights over certain additional allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

In April 2018, Pfizer assigned the agreement to us pursuant to the Pfizer Agreement.

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Components of Results of Operations

As of June 30, 2022, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland Biopharm (PRC) Co., Limited.

As of September 30, 2022, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland Biopharm (PRC) Co., Limited.

See Note 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the Allogene Overland Biopharm (PRC) Co., Limited agreement.

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To date, our research and development expenses have related primarily to discovery efforts, preclinical and clinical development, and manufacturing of our product candidates.

Research and development expenses for the three and six months ended June 30, 2022 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

The most significant research and development expenses for the year relate to costs incurred for the development of our most advanced product candidates and include:

Research and development expenses for the three and nine months ended September 30, 2022 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

The most significant research and development expenses for the year to date relate to costs incurred for the development of our most advanced product candidates and include:

• expenses incurred under agreements with our collaboration partners and third-party contract organizations, investigative clinical trial sites that conduct research and development activities on our behalf, and consultants;

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We adjust our accrual as actual costs become known.

Servier is required to reimburse us for 40% of the costs associated with the development of ALLO-501 and ALLO-501A.

Pending any exercise by us of the Ex-US Option, Servier is required to reimburse us for 40% of the costs associated with the development of ALLO-501 and ALLO-501A.

Collaboration expenses and cost reimbursement are recorded on a net basis as a research and development expense in our condensed consolidated statements of operations and comprehensive loss.

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General and administrative costs are expensed as incurred, and we accrue for services provided by third parties related to the above expenses by monitoring the status of services provided and receiving estimates from our service providers, and adjusting our accruals as actual costs become known.

We expect our general and administrative expenses to increase over the next several years to support our continued research and development activities, manufacturing activities, potential commercialization of our product candidates and the increased costs of operating as a public company, including additional compliance-related expenses as a result of no longer being an emerging growth company.

These increases are anticipated to include increased costs related to the hiring of additional

personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and increased costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, complying with and advancing environmental, social and governance matters, and insurance and investor relations costs.

being an emerging growth company.

These increases are anticipated to include increased costs related to the hiring of additional personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and increased costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, complying with and advancing environmental, social and governance matters, and insurance and investor relations costs.

Interest and Other Income, Net

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Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

The following sets forth our results of operations for the three months ended June 30, 2022 and 2021 (dollars in thousands):

Three Months Ended June 30, Change

Comparison of the Three Months Ended September 30, 2022 and 2021

The following sets forth our results of operations for the three months ended September 30, 2022 and 2021 (dollars in thousands):

Three Months Ended September 30, Change

2022 2021 $ %

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Interest and other income, net 1,002 393 609 155 %

Other income (expenses) 1,492 (531) 2,023 *

Other expenses (1,661) (909) (752) 83 %

Total other income (expense), net (659) (516) (143) 28 %

Net Loss $ (83,148) $ (78,186) $ (4,962) 6 %

* - Percentage is not meaningful

Collaboration revenue - related party

Collaboration revenue was less than $0.1 million for the three months ended June 30, 2022 and 2021.

Revenue recognized in the three months ended June 30, 2022 and 2021 was due to the delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Collaboration revenue was less than $0.1 million for the three months ended September 30, 2022 and 2021.

Revenue recognized in the three months ended September 30, 2022 and 2021 was due to the delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Research and Development Expenses

Research and development expenses were $57.2 million and $52.3 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $4.9 million was driven primarily by an increase in personnel related costs of $6.1 million, of which $2.5 million was stock-based compensation expense, an increase in facilities costs and depreciation expense of $5.5 million, offset by a $7.7 million decrease in external costs relating to the advancement of our product candidates primarily due to the timing of development activities and manufacturing runs.

Research and development expenses were $63.6 million and $58.7 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $4.9 million was driven primarily by an increase in personnel related costs of $5.9 million, of which $0.9 million was stock-based compensation expense, and an increase in facilities costs and depreciation expense of $4.3 million, offset by a $5.9 million decrease in external costs relating to the advancement of our product candidates primarily due to the timing of development activities and manufacturing runs.

General and Administrative Expenses

General and administrative expenses were $19.5 million and $18.8 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $0.7 million was primarily due to an increase in expenses related to corporate communications of $0.8 million.

General and administrative expenses were $18.9 million and $19.0 million for the three months ended September 30, 2022 and 2021, respectively.

The decrease of $0.1 million was primarily due to a decrease in business and consulting fees of $1.4 million, offset by a $0.9 million increase in personnel related costs.

Interest and Other Income, Net

Interest and other income, net was $0.3 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following sets forth our results of operations for the six months ended June 30, 2022 and 2021 (dollars in thousands):

Six Months Ended June 30, Change

Interest and other income, net was $1.0 million and $0.4 million for the three months ended September 30, 2022 and 2021, respectively.

Comparison of the Nine Months Ended September 30, 2022 and 2021

The following sets forth our results of operations for the nine months ended September 30, 2022 and 2021 (dollars in thousands):

Nine Months Ended September 30, Change

2022 2021 $ %

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Interest and other income, net 1,809 1,528 281 18 %

Other income (expenses) 1,142 (856) 1,998 *

Other expenses (519) (1,766) 1,247 (71) %

Total other income (expense), net 1,290 (238) 1,528 *

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Collaboration revenue - related party

Collaboration revenue was $0.1 million and $38.4 million for the six months ended June 30, 2022 and 2021, respectively.

Collaboration revenue was $0.2 million and $38.4 million for the nine months ended September 30, 2022 and 2021, respectively.

The decrease of $38.2 million was due to the revenue recognized related to the license of intellectual property and delivery of the know-how performance obligation, which was delivered in the first quarter of 2021, under the License Agreement entered into with Allogene Overland in December 2020.

Research and Development Expenses

Research and development expenses were $117.3 million and $107.5 million for the six months ended June 30, 2022 and 2021, respectively.

Research and development expenses were $181.0 million and $166.2 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase of $14.8 million was driven primarily by an increase in personnel related costs of $18.5 million, of which $6.6 million was stock-based compensation expense, and an increase in facilities costs and depreciation expense of $14.0 million, offset by a $20.3 million decrease in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs.

General and Administrative Expenses

General and administrative expenses were $39.4 million and $35.1 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $4.3 million was primarily due to an increase in personnel related costs of $4.1 million, of which $1.6 million was stock-based compensation expense, mainly driven by our increased headcount.

General and administrative expenses were $58.3 million and $54.1 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase of $4.2 million was primarily due to an increase in personnel related costs of $5.0 million, of which $1.0 million was stock-based compensation expense, and an increase in expenses related to corporate communications of $1.2 million, offset by a $2.0 million decrease in business and consulting fees.

Interest and Other Income, Net

Interest and other income, net was $0.8 million and $1.1 million for the six months ended June 30, 2022 and 2021, respectively.

Interest and other income, net was $1.8 million and $1.5 million for the nine months ended September 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

To date, we have incurred significant net losses and negative cash flows from operations.

As of June 30, 2022, we had $686.1 million in cash and cash equivalents and investments.

As of September 30, 2022, we had $637.3 million in cash and cash equivalents and investments.

We anticipate that the aggregate of our current cash and cash equivalents and investments available for operations will enable us to maintain our operations for a period of at least one year from the date this Quarterly Report on Form 10-Q is filed with the SEC.

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In November 2019, we entered into a sales agreement with Cowen and Company, LLC (Cowen) under which we may from time to time issue and sell shares of our common stock through Cowen in ATM offerings for an aggregate offering price of up to $250.0 million.

As of June 30, 2022, $167.3 million remains available for sale under the sales agreement with Cowen.

As of September 30, 2022, $167.3 million remains available for sale under the sales agreement with Cowen.

In June 2020, we sold 13,457,447 shares of our common stock, which included 1,755,319 shares sold pursuant to the full exercise of the underwriters' option to purchase additional shares, in an underwritten public offering at a price of $47.00 per share, which resulted in net proceeds of approximately $595.7 million after deducting the underwriting discounts and commissions and other expenses.

The following table summarizes our cash flows for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

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Operating Activities

During the six months ended June 30, 2022, cash used in operating activities of $110.8 million was attributable to a net loss of $154.6 million, partially offset by non-cash charges of $58.8 million and an increase of $14.9 million in our net operating assets and liabilities.

During the nine months ended September 30, 2022, cash used in operating activities of $158.4 million was attributable to a net loss of $237.8 million, partially offset by non-cash charges of $86.5 million and an increase of $7.1 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $66.4 million, depreciation of $11.2 million, our share of equity investments' net losses for the period of $4.0 million, net amortization and accretion on investment securities of $2.7 million, and non-cash rent expense of $2.2 million.

The change in operating assets and liabilities was primarily due to a $8.5 million increase in prepaid expenses and other current assets, a $3.3 million decrease in accrued and other current liabilities, a $2.8 million increase in other long-term assets, and a $1.6 million decrease in other long-term liabilities, offset by a $0.9 million increase in accounts payable and a $0.4 million increase in deferred revenue.

The change in operating assets and liabilities was primarily due to a $3.2 million increase in other long-term assets, a $2.8 million increase in prepaid expenses and other current assets, a $1.4 million decrease in accrued and other current liabilities, and a $2.1 million decrease in other long-term liabilities, offset by a $1.9 million increase in accounts payable and a $0.5 million increase in deferred revenue.

Investing Activities

During the six months ended June 30, 2022, net cash provided by investing activities of $31.7 million was related to cash provided by investment maturities of $185.8 million, offset by cash used in purchases of investments of $150.9 million and cash used in the purchase of property and equipment of $3.3 million.

During the nine months ended September 30, 2022, net cash provided by investing activities of $56.6 million was related to cash provided by investment maturities of $260.4 million, offset by cash used in purchases of investments of $200.3 million and cash used in the purchase of property and equipment of $3.5 million.

Financing Activities

During the six months ended June 30, 2022, cash provided by financing activities of $1.8 million was related to $1.5 million of cash provided by the sale of common stock through our employee stock purchase plan and $0.3 million of cash provided by the issuance of common stock upon exercise of stock options.

During the nine months ended September 30, 2022, cash provided by financing activities of $2.9 million was related to $2.5 million of cash provided by the sale of common stock through our employee stock purchase plan and $0.4 million of cash provided by the issuance of common stock upon exercise of stock options.

Material Cash Commitments and Requirements

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The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements.

As of June 30, 2022, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

As of September 30, 2022, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

For additional information regarding our agreements, see Note 6 to our condensed consolidated financial statements included elsewhere in this report.

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These agreements generally provide for termination or cancellation, other than for costs already incurred.

As of June 30, 2022, the Company had non-cancellable purchase commitments of $3.7 million.

As of September 30, 2022, the Company had non-cancellable purchase commitments of $0.4 million.

On October 6, 2020, we announced we entered into a strategic five-year collaboration agreement with MD Anderson for the preclinical and clinical investigation of allogeneic CAR T cell product candidates.

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In July 2020, we entered into a Solar Power Purchase and Energy Services Agreement for the installation and operation of a solar photovoltaic generating system and battery energy storage system at our manufacturing facility in Newark, California.

The agreement has a term of 20 years and is expected to commence in the second half of 2022.

The agreement has a term of 20 years and commenced in September 2022.

We are obligated to pay for electricity generated from the system at an agreed rate for the duration of the agreement term.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis