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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________________________
FORM 10-Q
________________________________________________________
(Mark One) | | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2024
OR | | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-38693
________________________________________________________
Allogene Therapeutics, Inc.
(Exact Name of Registrant as Specified in its Charter)
________________________________________________________ | | | | | | | | |
Delaware | | 82-3562771 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
210 East Grand Avenue, South San Francisco, California 94080
(Address of principal executive offices including zip code)
Registrant’s telephone number, including area code: (650) 457-2700 | | | | | | | | |
| N/A | |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.001 par value per share | | ALLO | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | |
Large Accelerated Filer | ☐ | | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | | Smaller reporting company | ☒ |
Emerging growth company | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 1, 2024, the registrant had 209,672,091 shares of common stock, $0.001 par value per share, outstanding.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
ALLOGENE THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share amounts) | | | | | | | | | | | |
| September 30, 2024 | | December 31, 2023 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 51,239 | | | $ | 83,155 | |
Short-term investments | 240,325 | | | 365,542 | |
Prepaid expenses and other current assets | 12,851 | | | 10,418 | |
Total current assets | 304,415 | | | 459,115 | |
Long-term investments | 111,821 | | | — | |
Operating lease right-of-use asset | 46,313 | | | 63,703 | |
Property and equipment, net | 88,989 | | | 99,478 | |
Deposit placed in escrow | 22,320 | | | — | |
Restricted cash | 10,292 | | | 10,292 | |
Other long-term assets | 4,970 | | | 6,604 | |
Equity method investments | — | | | 3,645 | |
Total assets | $ | 589,120 | | | $ | 642,837 | |
Liabilities and stockholders’ equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 5,506 | | | $ | 5,897 | |
Accrued and other current liabilities | 27,065 | | | 31,182 | |
Total current liabilities | 32,571 | | | 37,079 | |
Operating lease liability, noncurrent | 85,135 | | | 88,346 | |
Other long-term liabilities | 7,666 | | | 5,179 | |
Total liabilities | 125,372 | | | 130,604 | |
Commitments and Contingencies (Notes 6 and 7) | | | |
Stockholders’ equity: | | | |
Preferred stock, $0.001 par value: 10,000,000 shares authorized as of September 30, 2024 and December 31, 2023; no shares were issued and outstanding as of September 30, 2024 and December 31, 2023 | — | | | — | |
Common stock, $0.001 par value: 400,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 209,500,137 and 168,642,238 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | 210 | | | 169 | |
Additional paid-in capital | 2,223,265 | | | 2,075,252 | |
Accumulated deficit | (1,759,884) | | | (1,562,233) | |
Accumulated other comprehensive income/(loss) | 157 | | | (955) | |
Total stockholders’ equity | 463,748 | | | 512,233 | |
Total liabilities and stockholders’ equity | $ | 589,120 | | | $ | 642,837 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALLOGENE THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Collaboration revenue - related party | $ | — | | | $ | 22 | | | $ | 22 | | | $ | 74 | |
Operating expenses: | | | | | | | |
Research and development | 44,713 | | | 45,977 | | | 147,327 | | | 188,253 | |
General and administrative | 16,333 | | | 17,041 | | | 49,687 | | | 54,449 | |
Impairment of long-lived assets | 10,728 | | | — | | | 15,717 | | | — | |
Total operating expenses | 71,774 | | | 63,018 | | | 212,731 | | | 242,702 | |
Loss from operations | (71,774) | | | (62,996) | | | (212,709) | | | (242,628) | |
Other income (expense), net: | | | | | | | |
Interest and other income, net | 6,705 | | | 6,205 | | | 17,126 | | | 12,042 | |
Interest expense | (100) | | | — | | | (100) | | | — | |
Other income and (expense), net | (1,124) | | | (5,496) | | | (1,968) | | | (10,901) | |
Total other income (expense), net | 5,481 | | | 709 | | | 15,058 | | | 1,141 | |
Net loss | (66,293) | | | (62,287) | | | (197,651) | | | (241,487) | |
Other comprehensive loss: | | | | | | | |
Net unrealized gain on available-for-sale investments | 937 | | | 1,440 | | | 1,112 | | | 7,515 | |
Net comprehensive loss | $ | (65,356) | | | $ | (60,847) | | | $ | (196,539) | | | $ | (233,972) | |
Net loss per share, basic and diluted | $ | (0.32) | | | $ | (0.37) | | | $ | (1.04) | | | $ | (1.58) | |
Weighted-average number of shares used in computing net loss per share, basic and diluted | 209,188,551 | | | 167,649,010 | | | 189,519,897 | | | 153,087,449 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALLOGENE THERAPEUTICS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders’ Equity |
| Shares | | Amount |
Balance - December 31, 2023 | 168,642,238 | | | $ | 169 | | | $ | 2,075,252 | | | $ | (1,562,233) | | | $ | (955) | | | $ | 512,233 | |
Issuance of common stock upon exercise of stock options and vesting of RSUs | 1,551,729 | | | 1 | | | 793 | | | — | | | — | | | 794 | |
Vesting of early exercised common stock | — | | | — | | | 532 | | | — | | | — | | | 532 | |
Stock-based compensation | — | | | — | | | 11,924 | | | — | | | — | | | 11,924 | |
Employee stock purchase plan | 259,000 | | | — | | | 856 | | | — | | | — | | | 856 | |
Net loss | — | | | — | | | — | | | (65,000) | | | — | | | (65,000) | |
Net unrealized gain on available-for-sale investments | — | | | — | | | — | | | — | | | 28 | | | 28 | |
Balance - March 31, 2024 | 170,452,967 | | | 170 | | | 2,089,357 | | | (1,627,233) | | | (927) | | | 461,367 | |
Issuance of common stock upon exercise of stock options and vesting of RSU's | 415,483 | | | 1 | | | 18 | | | — | | | — | | | 19 | |
Stock-based compensation | — | | | — | | | 13,559 | | | — | | | — | | | 13,559 | |
Issuance of common stock from ATM offering | 250,000 | | | — | | | 1,021 | | | — | | | — | | | 1,021 | |
Issuance of common stock from registered offering, net of commissions and offering costs of $4.7 million | 37,931,035 | | | 38 | | | 105,245 | | | — | | | — | | | 105,283 | |
Net loss | — | | | — | | | — | | | (66,358) | | | — | | | (66,358) | |
Net unrealized gain on available-for-sale investments | — | | | — | | | — | | | — | | | 147 | | | 147 | |
Balance - June 30, 2024 | 209,049,485 | | | 209 | | | 2,209,200 | | | (1,693,591) | | | (780) | | | 515,038 | |
Issuance of common stock upon exercise of stock options and vesting of RSU's | 181,142 | | | — | | | — | | | — | | | — | | | — | |
Stock-based compensation | | | | | 13,387 | | | — | | | — | | | 13,387 | |
Employee stock purchase plan | 269,510 | | | 1 | | | 678 | | | — | | | — | | | 679 | |
Net loss | — | | | — | | | — | | | (66,293) | | | — | | | (66,293) | |
Net unrealized gain on available-for-sale investments | — | | | — | | | — | | | — | | | 937 | | | 937 | |
Balance - September 30, 2024 | 209,500,137 | | | $ | 210 | | | $ | 2,223,265 | | | $ | (1,759,884) | | | $ | 157 | | | $ | 463,748 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders’ Equity |
| Shares | | Amount |
Balance - December 31, 2022 | 144,438,304 | | | $ | 144 | | | $ | 1,911,632 | | | $ | (1,234,968) | | | $ | (9,926) | | | $ | 666,882 | |
Issuance of common stock upon exercise of stock options and vesting of RSUs | 942,276 | | | 1 | | | (1) | | | — | | | — | | | — | |
Vesting of early exercised common stock | — | | | — | | | 603 | | | — | | | — | | | 603 | |
Stock-based compensation | — | | | — | | | 18,770 | | | — | | | — | | | 18,770 | |
Employee stock purchase plan | 359,753 | | | 1 | | | 1,730 | | | — | | | — | | | 1,731 | |
Net loss | — | | | — | | | — | | | (99,968) | | | — | | | (99,968) | |
Net unrealized gain on available-for-sale investments | — | | | — | | | — | | | — | | | 3,992 | | | 3,992 | |
Balance - March 31, 2023 | 145,740,333 | | | 146 | | | 1,932,734 | | | (1,334,936) | | | (5,934) | | | 592,010 | |
Issuance of common stock from ATM offering, net of commissions and offering costs of $1.6 million | 20,288,330 | | | 20 | | | 87,898 | | | — | | | — | | | 87,918 | |
Issuance of common stock upon exercise of stock options and vesting of RSUs | 1,105,001 | | | 1 | | | 1,605 | | | — | | | — | | | 1,606 | |
Vesting of early exercised common stock | — | | | — | | | 432 | | | — | | | — | | | 432 | |
Stock-based compensation | — | | | — | | | 16,594 | | | — | | | — | | | 16,594 | |
Net loss | — | | | — | | | — | | | (79,232) | | | — | | | (79,232) | |
Net unrealized gain on available-for-sale investments | — | | | — | | | — | | | — | | | 2,083 | | | 2,083 | |
Balance - June 30, 2023 | 167,133,664 | | | 167 | | | 2,039,263 | | | (1,414,168) | | | (3,851) | | | 621,411 | |
Issuance of common stock from ATM offering, net of offering costs of $50.0 thousand | 606,235 | | | 1 | | | 3,193 | | | — | | | — | | | 3,194 | |
Issuance of common stock upon exercise of stock options and vesting of RSUs | 204,116 | | | — | | | 326 | | | — | | | — | | | 326 | |
Vesting of early exercised common stock | — | | | — | | | 432 | | | — | | | — | | | 432 | |
Stock-based compensation | — | | | — | | | 15,354 | | | — | | | — | | | 15,354 | |
Employee stock purchase plan | 231,206 | | | — | | | 765 | | | — | | | — | | | 765 | |
Net loss | — | | | — | | | — | | | (62,287) | | | — | | | (62,287) | |
Net unrealized gain on available-for-sale investments | — | | | — | | | — | | | — | | | 1,440 | | | 1,440 | |
Balance - September 30, 2023 | 168,175,221 | | | $ | 168 | | | $ | 2,059,333 | | | $ | (1,476,455) | | | $ | (2,411) | | | $ | 580,635 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALLOGENE THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 |
Cash flows from operating activities: | | | |
Net loss | $ | (197,651) | | | $ | (241,487) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Stock-based compensation | 38,870 | | | 50,718 | |
Depreciation and amortization | 10,406 | | | 10,722 | |
Amortization/accretion on investment securities, net | (6,697) | | | (3,510) | |
Impairment of long-lived assets | 15,717 | | | — | |
Impairment of equity method investment | — | | | 3,000 | |
Non-cash rent expense | 4,148 | | | 4,949 | |
Non-cash collaboration revenue - related party | (14) | | | (49) | |
Share of gain/loss from equity method investments, net | 1,688 | | | 7,866 | |
Changes in operating assets and liabilities: | | | |
Deposit placed in escrow | (22,320) | | | — | |
Prepaid expenses and other current assets | (2,294) | | | 3,555 | |
Other long-term assets | 3,591 | | | (421) | |
Accounts payable | (537) | | | (7,200) | |
Accrued and other current liabilities | (4,142) | | | (7,109) | |
Operating lease liabilities | (4,531) | | | (4,445) | |
Other long-term liabilities | 164 | | | (615) | |
Net cash used in operating activities | (163,602) | | | (184,026) | |
Cash flows from investing activities: | | | |
Purchases of property and equipment | (437) | | | (1,335) | |
Proceeds from sales of investments | 5,398 | | | 5,623 | |
Proceeds from maturities of investments | 330,294 | | | 461,467 | |
Purchase of investments | (314,501) | | | (369,927) | |
Net cash provided by investing activities | 20,754 | | | 95,828 | |
Cash flows from financing activities: | | | |
Proceeds from issuance of common stock from ATM offering, net of commissions and issuance costs | 1,021 | | | 91,112 | |
Proceeds from issuance of common stock from registered offering, net of commissions and issuance costs | 105,283 | | | — | |
Proceeds from CIRM award | 2,280 | | | — | |
Proceeds from issuance of common stock upon exercise of stock options | 813 | | | 1,932 | |
Proceeds from issuance of common stock under the employee stock purchase plan | 1,535 | | | 2,496 | |
Net cash provided by financing activities | 110,932 | | | 95,540 | |
Net change in cash and cash equivalents and restricted cash | (31,916) | | | 7,342 | |
Cash and cash equivalents and restricted cash — beginning of period | 93,447 | | | 72,196 | |
Cash and cash equivalents and restricted cash — end of period | $ | 61,531 | | | $ | 79,538 | |
Non-cash operating activities: | | | |
Right-of-use asset obtained in exchange for lease liability | $ | 2,409 | | | $ | — | |
Non-cash deferred revenue included in other long-term liabilities | $ | 3,079 | | | $ | — | |
Supplemental disclosure: | | | |
Cash paid for amounts included in the measurement of lease liabilities | $ | (9,308) | | | $ | (9,013) | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALLOGENE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
1. Description of Business
Allogene Therapeutics, Inc. (the Company or Allogene) was incorporated on November 30, 2017 in the State of Delaware and is headquartered in South San Francisco, California. Allogene is a clinical stage immuno-oncology company pioneering the development of genetically engineered allogeneic T cell product candidates for the treatment of cancer and autoimmune diseases. The Company is developing a pipeline of “off-the-shelf” T cell product candidates that are designed to target and kill cancer cells in patients or eliminate pathogenic autoreactive cells in patients with autoimmune disorders. The Company’s 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. The Company believes this key difference will enable it to deliver readily available treatments faster, more reliably, at greater scale, and to more patients.
Registered Offering
On May 13, 2024, the Company entered into (i) an underwriting agreement (Underwriting Agreement) with Goldman Sachs & Co. LLC (Underwriter) and (ii) a Securities Purchase Agreement (Securities Purchase Agreement) with certain members of the Company’s Board of Directors and executive officers or their respective affiliates (Purchasers), pursuant to which the Company sold and issued to the Underwriter and the Purchasers an aggregate of 37,931,035 shares of common stock of the Company at a purchase price of $2.90 per share, in a registered offering transaction (Registered Offering) for aggregate gross proceeds of $110.0 million, before deducting the underwriting discount and commissions and estimated offering expenses payable by the Company. The Registered Offering closed on May 16, 2024. The aggregate fee payable by the Company to the Underwriter was $4.7 million, plus the reimbursement of certain expenses. The Purchasers purchased an aggregate of 1,034,484 shares of common stock of the Company in the Registered Offering.
Need for Additional Capital
The Company has sustained operating losses and expects to continue to generate operating losses for the foreseeable future. The Company’s ultimate success depends on the outcome of its research and development activities as well as the ability to commercialize the Company's product candidates.
The Company had cash and cash equivalents and investments of $403.4 million as of September 30, 2024. Since inception through September 30, 2024, the Company has incurred cumulative net losses of $1,759.9 million. Management expects to incur additional losses in the future to fund its operations and conduct product research and development and recognizes the need to raise additional capital to fully implement its business plan.
The Company intends to raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidates. The Company expects that its cash and cash equivalents and investments will be sufficient to fund its operations for at least the next 12 months from the date the accompanying unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (SEC).
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the Company’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Allogene Therapeutics, B.V. The subsidiary was dissolved on January 3, 2024.
The condensed consolidated balance sheet as of September 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023, the condensed consolidated statements of stockholders’ equity as of September 30, 2024 and 2023, the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023, and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited. The results of operations for the three
and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for any other future annual or interim period. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2024.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include but are not limited to the fair value of common stock, the fair value of stock options, the fair value of investments, income tax uncertainties, the CIRM award liability and certain accruals. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances change. Actual results could differ from those estimates.
Significant Accounting Policies
There have been no significant changes to the accounting policies during the three and nine months ended September 30, 2024, as compared to the significant accounting policies described in Note 1 of the “Notes to Financial Statements” in the Company’s audited financial statements included in its Annual Report, with exception of the following.
California Institute for Regenerative Medicine (CIRM) Award
Accounting for the CIRM award does not fall under ASC 606, Revenue from Contracts and Customers, as CIRM does not meet the definition of a customer. No income associated with the CIRM award will be recognized until it is confirmed with CIRM that the award does not require repayment. Until then such award will be recognized, along with any interest, as a long-term liability upon cash receipt. Any estimated interest accrued for the CIRM award received is recognized as interest expense in the condensed consolidated statements of operations. See Note 5 below for more details.
Recently Adopted Accounting Pronouncements
There have been no new accounting pronouncements issued or effective that are expected to have a material impact on the Company's condensed consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures. The guidance in this update is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024. The Company is currently in the process of evaluating the effects of this pronouncement on its related disclosures.
In December 2023, the FASB issued Accounting Standard Update No. 2023-09, Income taxes (Topic 740), Improvement to income tax disclosures, which enhances the disclosures required for income taxes in the Company’s annual financial statements. This standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not plan to adopt this standard early. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.
3. Fair Value Measurements
The Company measures and reports its cash equivalents, restricted cash, and investments at fair value.
Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1. Investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs, except for investments in U.S. treasury securities which are classified as Level 1.
There were no Level 3 assets or liabilities as of September 30, 2024 and as of December 31, 2023.
Financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of September 30, 2024 and as of December 31, 2023 are presented in the following tables:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Fair Value |
| (In thousands) |
Financial Assets: | | | | | | | |
Money market funds (1) | $ | 43,977 | | | $ | — | | | $ | — | | | $ | 43,977 | |
Commercial paper | — | | | 36,840 | | | — | | | 36,840 | |
Corporate bonds | — | | | 125,587 | | | — | | | 125,587 | |
U.S. treasury securities | 107,226 | | | — | | | — | | | 107,226 | |
U.S. agency securities | — | | | 72,813 | | | — | | | 72,813 | |
Asset-backed securities | — | | | 9,680 | | | — | | | 9,680 | |
Total financial assets | $ | 151,203 | | | $ | 244,920 | | | $ | — | | | $ | 396,123 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Fair Value |
| (In thousands) |
Financial Assets: | | | | | | | |
Money market funds (1) | $ | 78,536 | | | $ | — | | | $ | — | | | $ | 78,536 | |
Corporate bonds | — | | | 97,166 | | | — | | | 97,166 | |
U.S. treasury securities | 229,516 | | | — | | | — | | | 229,516 | |
U.S. agency securities | — | | | 38,860 | | | — | | | 38,860 | |
Total financial assets | $ | 308,052 | | | $ | 136,026 | | | $ | — | | | $ | 444,078 | |
(1)Included within cash and cash equivalents on the Company’s condensed consolidated balance sheets.
4. Financial Instruments
The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of September 30, 2024 and as of December 31, 2023 are presented in the following tables:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2024 |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| (In thousands) |
Money market funds | $ | 43,977 | | | $ | — | | | $ | — | | | $ | 43,977 | |
Commercial paper | 36,818 | | | 35 | | | (13) | | | 36,840 | |
Corporate bonds | 125,371 | | | 218 | | | (2) | | | 125,587 | |
U.S. treasury securities | 107,072 | | | 157 | | | (3) | | | 107,226 | |
U.S. agency securities | 72,617 | | | 196 | | | — | | | 72,813 | |
Asset-backed securities | 9,669 | | | 11 | | | — | | | 9,680 | |
Total cash equivalents and investments | $ | 395,524 | | | $ | 617 | | | $ | (18) | | | $ | 396,123 | |
| | | | | | | |
Classified as: | | | | | | | |
Cash equivalents | | | | | | | $ | 43,977 | |
Short-term investments | | | | | | | 240,325 | |
Long-term investments | | | | | | | 111,821 | |
Total cash equivalents and investments | | | | | | | $ | 396,123 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| (In thousands) |
Money market funds | $ | 78,536 | | | $ | — | | | $ | — | | | $ | 78,536 | |
Corporate bonds | 97,265 | | | 113 | | | (212) | | | 97,166 | |
U.S. treasury securities | 229,563 | | | 132 | | | (179) | | | 229,516 | |
U.S. agency securities | 39,225 | | | — | | | (365) | | | 38,860 | |
Total cash equivalents and investments | $ | 444,589 | | | $ | 245 | | | $ | (756) | | | $ | 444,078 | |
| | | | | | | |
Classified as: | | | | | | | |
Cash equivalents | | | | | | | $ | 78,536 | |
Short-term investments | | | | | | | 365,542 | |
Long-term investments | | | | | | | — | |
Total cash equivalents and investments | | | | | | | $ | 444,078 | |
As of September 30, 2024, the remaining contractual maturities of available-for-sale securities were less than 3 years. There were no significant realized losses on available-for-sale securities for the three and nine months ended September 30, 2024. Realized losses on available-for-sale securities for the three and nine months ended September 30, 2023 were zero and $1.0 million, respectively. As of September 30, 2024, unrealized losses on available-for-sale securities are not attributed to credit risk. The Company believes that it is more likely than not that investments in an unrealized loss position will be held until maturity and all interest and principal will be received. The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s available-for-sale securities are due to market factors. As of September 30, 2024 and December 31, 2023, securities with a fair value of zero and $48.4 million, respectively, were in a continuous net unrealized loss position for more than 12 months. To date, the Company has not recorded any impairment charges on available-for-sale securities.
As of September 30, 2024 and December 31, 2023, the Company recognized $2.8 million and $1.7 million, respectively, of accrued interest receivable from available-for-sale securities within prepaid expenses and other current assets on the condensed consolidated balance sheets.
5. Balance Sheet Components
Property and Equipment, Net
Property and Equipment consist of the following: | | | | | | | | | | | |
| September 30, 2024 | | December 31, 2023 |
| (In thousands) |
Leasehold improvements | 107,545 | | | 108,621 | |
Laboratory equipment | 32,089 | | | 33,157 | |
Computer equipment and purchased software | 4,752 | | | 4,663 | |
Furniture and fixtures | 4,171 | | | 4,121 | |
Total | 148,557 | | | 150,562 | |
Less: accumulated depreciation | (59,568) | | | (51,084) | |
Total property and equipment, net | $ | 88,989 | | | $ | 99,478 | |
The Company reviews for indicators of impairment on a quarterly basis which includes the change in how its property is being used. In June 2024, the Company made a decision to sublease one of its leased buildings in South San Francisco. The Company vacated and ceased occupancy of this building in June 2024 and currently the Company is actively marketing the leased building for sublease. The Company determined that the change in how this building is being used was an indicator of impairment. The Company identified this to-be-sublet property as a separate asset group. The Company concluded that the carrying value of this to-be-sublet property asset group was not recoverable and the estimated fair value of this asset group was below its carrying value. The decrease in the fair value of this asset group was mainly due to the lower estimated sublease income based on current commercial rental market conditions compared to the lease payments in accordance with the initial operating lease agreement. The Company applied a discounted cash flow method to estimate fair value of its right-of-use asset and leasehold improvements. Based on this analysis, the Company concluded the fair value of the right-of-use asset and leasehold improvements of $2.5 million was lower than its net book value of $7.5 million. The Company recognized a long-lived asset impairment charge of $5.0 million on the right-of-use asset and leasehold improvements in June 30, 2024.
In September 2024, the Company identified an additional indicator that the carrying value of this to-be-sublet property asset group was not recoverable. The expected sublease rental income of $4.0 million as of June 30, 2024 had decreased to $1.9 million as of September 30, 2024. In addition, the risk-adjusted annual discount rate of 9.0% as of June 30, 2024 had increased to 9.5% as of September 30, 2024. The Company updated its discounted cash flow analysis to estimate fair value of its right-of-use asset and leasehold improvements. Based on this analysis, the Company concluded the fair value of the right-of-use asset and leasehold improvements of $1.2 million was lower than its net book value of $2.4 million. The Company recognized an additional long-lived asset impairment charge of $1.2 million on the right-of-use asset and leasehold improvements for the three months ended September 30, 2024 and recognized in aggregate long-lived asset impairment charges of $6.2 million on the right-of-use asset and leasehold improvements for the nine months ended September 30, 2024.
Previously, in December 2023, the Company made a decision to sublease one of its other leased buildings in South San Francisco. The Company had vacated and ceased occupancy of this building in December 2023 and the Company is currently actively marketing the leased building for sublease. During the year ended December 31, 2023, the Company recognized long-lived asset impairment charge of $13.2 million on the right-of-use asset by applying a discounted cash flow method to estimate fair value of its right-of-use asset. The key inputs to this valuation were expected sublease rental income of $22.7 million through March 31, 2032 and annual discount rate of 9.0%. In September 30, 2024, the Company revised its valuation based on a non-binding letter of intent with a subtenant for a portion of the building and new market data. The expected sublease rental income based on the revised valuation was $4.7 million through March 31, 2032 and the annual discount rate did not change. The Company concluded the fair value of the right-of-use asset of $3.1 million was lower than its book value of $12.6 million and recognized an additional long-lived asset impairment charge of $9.5 million on the right-of-use asset for the three and nine months ended September 30, 2024.
The determination of the fair values of the Company’s asset groups related to the to-be-sublet properties that are currently being marketed for sublease purposes represent Level 3 nonrecurring fair value measurements. Calculating the fair value of these assets involve significant estimates and assumptions. These estimates and assumptions include, among other things, expected sublease rental income and risk-adjusted annual discount rate. Changes in the factors and assumptions used could materially affect the amount of impairment loss recognized in the period an asset was considered impaired.
Accrued and Other Current Liabilities
On January 4, 2024, the Company’s Board of Directors approved a reduction in the Company’s workforce of approximately 22% of the Company’s employees in connection with the Company’s pipeline prioritization and clinical development strategy. The reduction in workforce was completed by June 30, 2024. During the nine months ended September 30, 2024, the Company paid approximately $2.9 million for severance and other employee benefits. As of
September 30, 2024, $0.2 million of the severance and other employee benefits accrual was included in accrued and other current liabilities on the condensed consolidated balance sheet.
CIRM Award
On April 26, 2024, the Company was awarded up to $15.0 million from CIRM to support the clinical development of ALLO-316, an AlloCAR TTM investigational product targeting CD70 in development for the treatment of advanced or metastatic renal cell carcinoma (RCC).
Pursuant to terms of the award, the disbursements are tied to the achievement of specified operational milestones. In addition, the terms of the award include a co-funding requirement pursuant to which the Company is required to spend up to approximately $25.9 million of its own capital to fund the CIRM funded research project. The award was made in accordance with the CIRM Grants Administration Policy for Clinical Stage Projects which may require the award to be repaid by the Company. Under the terms of the CIRM award, the Company is obligated to pay royalties based on a low single digit royalty percentage on net sales of CIRM-funded product candidate. The maximum royalty that the Company may be required to pay to CIRM is equal to nine times the total amount awarded and paid to the Company.
After completing the CIRM funded research project and at any time after the award period end date (but no later than the ten-year anniversary of the date of the award), the Company has the right, upon its election, to convert the award into a loan. The terms of conversion into a loan will be determined based on various factors and could result in 80% to 100% plus interest at 10% per annum plus the Secured Overnight Financing Rate of the total award dependent upon the phase of clinical development of the product candidate at the time of the Company's election to be repaid to CIRM.
No income associated with the CIRM award will be recognized until it is confirmed with CIRM that the award does not require repayment. Upon cash receipt, the CIRM award and accrued interest will be recognized as other long-term liabilities on the Company’s balance sheet.
The Company received $2.3 million from CIRM through September 30, 2024 and accounted for the proceeds as a liability within other long-term liabilities on the condensed consolidated balance sheet. During the three and nine months ended September 30, 2024, the Company recorded interest expense of $0.1 million. As of September 30, 2024, $0.1 million of accrued interest was included in other long-term liabilities.
6. License and Collaboration Agreements
Asset Contribution Agreement with Pfizer
In April 2018, the Company entered into an Asset Contribution Agreement (the Pfizer Agreement) with Pfizer pursuant to which the Company acquired certain assets, including certain contracts and intellectual property for the development and administration of chimeric antigen receptor (CAR) T cells for the treatment of cancer. The Company is required to make milestone payments upon successful completion of regulatory and sales milestones on a target-by-target basis for the targets, including CD19 and B-cell maturation antigen (BCMA), covered by the Pfizer Agreement. The aggregate potential milestone payments upon successful completion of various regulatory milestones in the United States and the European Union are $30.0 million or $60.0 million, depending on the target, with aggregate potential regulatory and development milestones of up to $840.0 million. The aggregate potential milestone payments upon reaching certain annual net sales thresholds in North America, Europe, Asia, Australia and Oceania (the Territory) for a certain number of targets covered by the Pfizer Agreement are $325.0 million per target. The sales milestones in the foregoing sentence are payable on a country-by-country basis until the last to expire of any Pfizer Royalty Term, as described below, for any product in such country in the Territory. In October 2019, the Territory was expanded to all countries in the world. No milestone or royalty payments were made in the three and nine months ended September 30, 2024 or 2023.
Pfizer is also eligible to receive, on a product-by-product and country-by-country basis, royalties in single-digit percentages on annual net sales for products covered by the Pfizer Agreement. The Company’s royalty obligation with respect to a given product in a given country begins upon the first sale of such product in such country and ends on the later of (i) expiration of the last claim of any applicable patent or (ii) 12 years from the first sale of such product in such country.
Research Collaboration and License Agreement with Cellectis
As part of the Pfizer Agreement, Pfizer assigned to the Company a Research Collaboration and License Agreement (the Original Cellectis Agreement) with Cellectis S.A. (Cellectis). On March 8, 2019, the Company entered into a License Agreement (the Cellectis Agreement) with Cellectis. In connection with the execution of the Cellectis Agreement, on March 8, 2019, the Company and Cellectis also entered into a letter agreement (the Letter Agreement), pursuant to which the Company and Cellectis agreed to terminate the Original Cellectis Agreement. The Original Cellectis Agreement included a research
collaboration to conduct discovery and pre-clinical development activities to generate CAR T cells directed at targets selected by each party, which was completed in June 2018.
Pursuant to the Cellectis Agreement, Cellectis granted to the Company an exclusive, worldwide, royalty-bearing license, on a target-by-target basis, with sublicensing rights under certain conditions, under certain of Cellectis’s intellectual property, including its TALEN and electroporation technology, to make, use, sell, import, and otherwise exploit and commercialize CAR T products directed at certain targets, including BCMA, CD70, Claudin 18.2, DLL3 and FLT3 (the Allogene Targets), for human oncologic therapeutic, diagnostic, prophylactic and prognostic purposes. In addition, certain Cellectis intellectual property rights granted by Cellectis to the Company and to Servier pursuant to the Exclusive License and Collaboration Agreement by and between Servier and Pfizer, dated October 30, 2015, which Pfizer assigned to the Company in April 2018, will survive the termination of the Original Cellectis Agreement.
Pursuant to the Cellectis Agreement, the Company granted Cellectis a non-exclusive, worldwide, royalty-free, perpetual and irrevocable license, with sublicensing rights under certain conditions, under certain of the Company's intellectual property, to make, use, sell, import and otherwise commercialize CAR T products directed at certain targets (the Cellectis Targets).
The Cellectis Agreement provides for development and sales milestone payments by the Company of up to $185.0 million per product that is directed against an Allogene Target, with aggregate potential development and sales milestone payments totaling up to $2.8 billion. Cellectis is also eligible to receive tiered royalties on annual worldwide net sales of any products that are commercialized by the Company that contain or incorporate, are made using or are claimed or covered by, Cellectis intellectual property licensed to the Company under the Cellectis Agreement (the Allogene Products), at rates in the high single-digit percentages. Such royalties may be reduced, on a licensed product-by-licensed product and country-by-country basis, for generic entry and for payments due under licenses of third-party patents. Pursuant to the Cellectis Agreement, and subject to certain exceptions, the Company is required to indemnify Cellectis against all third party claims related to the development, manufacturing, commercialization or use of any Allogene Product or arising out of the Company’s material breach of the representations, warranties or covenants set forth in the Cellectis Agreement, and Cellectis is required, subject to certain exceptions, to indemnify the Company against all third party claims related to the development, manufacturing, commercialization or use of CAR T products directed at Cellectis Targets or arising out of Cellectis’s material breach of the representations, warranties or covenants set forth in the Cellectis Agreement.
The royalties are payable, on a licensed-product-by-licensed-product and country-by-country basis, until the later of (i) the expiration of the last to expire of the licensed patents covering such product; (ii) the loss of regulatory exclusivity afforded such product in such country, and (iii) the tenth anniversary of the date of the first commercial sale of such product in such country; however, in no event shall such royalties be payable, with respect to a particular licensed product, past the twentieth anniversary of the first commercial sale for such product.
Depending on the Cellectis Target, the Company has a right of first refusal or right of first negotiation to purchase or license from Cellectis rights to develop and commercialize products against such Cellectis Targets.
Under the Cellectis Agreement, the Company has certain diligence obligations to progress the development of CAR T product candidates and to commercialize one CAR T product per Allogene Target in one major market country where the Company has received regulatory approval. If the Company materially breaches any of its diligence obligations and fails to cure within 90 days, then with respect to certain targets, such target will cease to be an Allogene Target and instead will become a Cellectis Target.
Unless earlier terminated in accordance with its terms, the Cellectis Agreement will expire on a product-by-product and country-by-country basis, upon expiration of all royalty payment obligations with respect to such licensed product in such country. The Company has the right to terminate the Cellectis Agreement at will upon 60 days’ prior written notice, either in its entirety or on a target-by-target basis. Either party may terminate the Cellectis Agreement, in its entirety or on a target-by-target basis, upon 90 days’ prior written notice in the event of the other party’s uncured material breach. The Cellectis Agreement may also be terminated by the Company upon written notice at any time in the event that Cellectis becomes bankrupt or insolvent or upon written notice within 60 days of a consummation of a change of control of Cellectis.
All costs the Company incurred in connection with this agreement were recognized as research and development expenses in the condensed consolidated statements of operations. For the three and nine months ended September 30, 2024 and 2023, no clinical development milestones were achieved.
Exclusive License Agreement with Servier
As part of the Pfizer Agreement, Pfizer assigned to the Company an Exclusive License Agreement (the Original Servier Agreement), with Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS (collectively,
Servier) to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR T cell product candidates, including UCART19, in the United States with the option to obtain the rights over additional anti-CD19 product candidates and for allogeneic CAR T cell product candidates directed against one additional target. In October 2019, the Company agreed to waive its rights to the one additional target.
Under the Original Servier Agreement, the Company has an exclusive license to develop, manufacture and commercialize licensed products directed against CD19, including UCART19, ALLO-501 and cemacabtagene ansegedleucel (cema-cel, previously ALLO-501A) (collectively, CD19 Products) in the field of anti-tumor adoptive immunotherapy in the United States, with an exclusive option to obtain the same rights for additional product candidates in the United States and, if Servier does not elect to pursue development or commercialization of those product candidates in certain markets outside of the United States pursuant to its license, outside of the United States as well. The Company is not required to make any additional payments to Servier to exercise an option. If the Company opts-in to another product candidate, Servier has the right to obtain rights to such product candidate outside the United States and to share development costs for such product candidate.
On May 10, 2024, the Company and Servier entered into an Amendment and Settlement Agreement (the Servier Amendment) which restructured the parties’ relationship under the Original Servier Agreement (as amended, the Servier Agreement). The Company’s licensed territory was expanded to include the European Union and the United Kingdom. The Company was also granted an option to further extend its licensed territory to include China and Japan upon the objective showing of sufficient resources to develop licensed products in those countries, which could be met through the Company entering into a strategic partnership covering those countries. Additionally, the Company agreed to waive certain of its rights under the Original Servier Agreement to elect a conversion of its license to the CD19 Products to a worldwide license. Under the Servier Agreement, the Company is required to use commercially reasonable efforts to develop, manufacture and commercialize a CD19 Product.
Under the Servier Agreement, Servier sublicenses to the Company certain rights which Servier licenses from Cellectis pursuant to a License, Development and Commercialization Agreement by and between Cellectis and Servier, dated February 7, 2014, as amended by Amendment No. 1 to the License, Development and Commercialization Agreement, dated March 4, 2020 (as amended, the Servier-Cellectis Agreement). As amended by the Servier Amendment, all of the Company’s future milestone payments (regulatory and sales) under the Original Servier Agreement were modified to be the same as, and to coincide with, Servier’s milestone payments to Cellectis that are required under the Servier-Cellectis Agreement. The Servier Agreement provides for aggregate potential milestone payments by the Company to Servier of up to €75.0 million upon successful completion of various regulatory milestones and first commercial sale milestones in the United States, European Union and the United Kingdom for the initial indication of each licensed product, of which €60.0 million remains for the initial indication for cema-cel, with additional payments of €55.0 million, due for each subsequent indication, of which €50.0 million remains for the first subsequent indication for cema-cel, and aggregate potential payments by the Company to Servier of up to €80.0 million upon achievement of certain net sales milestones for each licensed product. Should Servier’s rights and obligations under the Servier-Cellectis Agreement be assigned to the Company, these milestone payments would terminate, and the Company would assume Servier’s milestone payment obligations to Cellectis. In the absence of any such assignment, Servier will remain responsible for making milestone payments that may be due to Cellectis under the Servier-Cellectis Agreement.
The Company transferred €20.0 million into an escrow account in connection with a potential future milestone payment, which is included in the remaining €60.0 million in milestone payments referenced above for the initial indication for cema-cel. Such milestone payment will be triggered, if at all, upon the occurrence of one of these events: (1) the Company doses the first subject in its first phase 3 clinical study for a CD19 CAR T product that is a licensed product under the Servier Agreement, (2) the Company submits a phase 2 clinical study for a licensed product to the U.S. Food and Drug Administration or the European Medicines Agency, and such phase 2 clinical study is accepted for regulatory approval as a pivotal study, or (3) a final and definitive decision of a tribunal or court finding that under the Servier-Cellectis Agreement the milestone has occurred and the €20.0 million payment is due to Cellectis.
The Company is obligated to pay to Servier royalties on annual net sales of any licensed products that are commercialized by the Company that is directed at CD19. Such royalties include tiered royalties on annual net sales in the United States and a flat royalty on annual net sales in territories outside the United States. The United States royalty rates are in a range from the low tens to the mid teen percentages, and the ex-U.S. royalty rate is 10%. Such royalties may be reduced for interchangeable drug entry, expiration of patent rights and amounts paid pursuant to licenses of third-party patents. This royalty obligation begins upon the first commercial sale of such product in a given country and ends after the later of a defined number of years or the expiration of the last to expire licensed patent covering the product in such country. The net effect of the Servier Amendment is that the Company’s royalty rate in the United States for the first half of the first tier of net sales was increased by a low single digit percentage as compared to the Original Servier Agreement. Should Servier’s rights and obligations under the Servier-Cellectis Agreement be assigned to the Company, each tier of royalty rates in the United States to Servier would be reduced by 10%, the ex-U.S. royalties to Servier would terminate, and the Company would assume Servier’s royalty obligations
to Cellectis. In the absence of any such assignment, Servier will remain responsible for making royalty payments that may be due to Cellectis under the Servier-Cellectis Agreement.
The parties agreed that co-development performed by the Company and Servier under the Servier Agreement, including all development performed by Servier and for product candidates that the Company was co-developing with Servier (for which specified development costs were split under the Original Servier Agreement with the Company responsible for 60% and Servier responsible for 40%), including the CD19 Products, ceased as of December 15, 2022, and that all development costs incurred by either party after that date shall be borne solely by such party.
The parties agreed to waive any and all outstanding claims that were asserted relating to alleged violations of the Original Servier Agreement, including all claims that such party was entitled to various payments or refunds from the other party under the Original Servier Agreement, and any and all claims that either party now has or may have in the future related to such outstanding claims, and mutual releases with respect to such claims were granted.
The Company will recognize expense related to the revised milestones and royalties when payments become probable. There was no gain or loss related to the expanded license territories and ceased Servier co-development.
For the three and nine months ended September 30, 2024, the Company recorded zero and $5.4 million, respectively, in research and development expenses upon achievement of a regulatory milestone. For the three and nine months ended September 30, 2023, the Company recorded $0.1 million and $0.4 million, respectively, of net cost recoveries under the cost-sharing terms of the Servier Agreement as a reduction to research and development expenses. As of September 30, 2024, the Company recorded €20.0 million as deposit placed in escrow in the condensed consolidated balance sheets.
Research Collaboration and License Agreement with Notch Therapeutics
On November 1, 2019, the Company entered into a Collaboration and License Agreement (the Notch Agreement) with Notch Therapeutics Inc. (Notch), pursuant to which Notch granted to Allogene an exclusive, worldwide, royalty-bearing, sublicensable license under certain of Notch’s intellectual property to develop, make, use, sell, import, and otherwise commercialize therapeutic gene-edited T cell and/or natural killer (NK) cell products from induced pluripotent stem cells directed at certain CAR targets for initial application in non-Hodgkin lymphoma, acute lymphoblastic leukemia and multiple myeloma. In addition, Notch has granted Allogene an option to add certain specified targets to its exclusive license in exchange for an agreed per-target option fee.
The Notch Agreement includes a research collaboration to conduct research and pre-clinical development activities to generate engineered cells directed to Allogene’s exclusive targets, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint development committee. Allogene will reimburse Notch’s costs incurred in accordance with such plan and budget. The term of the research collaboration will expire upon the earlier of (i) the fifth anniversary of the date of the Notch Agreement, (ii) at Allogene’s election, following the joint development committee’s determination that for each exclusive target, Notch has met certain success criteria, or (iii) the joint development committee’s determination that the research collaboration cannot be reasonably pursued against any exclusive target due to technical infeasibility or safety issues.
In connection with the execution of the Notch Agreement, Allogene made an upfront payment to Notch of $10.0 million in return for a license to access Notch’s technology in order to conduct research pursuant to the Notch Agreement. In addition, Allogene made a $5.0 million investment in Notch’s series seed convertible preferred stock, resulting in Allogene having a 25% ownership interest in Notch’s outstanding capital stock on a fully diluted basis immediately following the investment. In connection with this investment, an Allogene representative served on the Notch Board of Directors. In February 2021, the Company made an additional $15.9 million investment in Notch’s Series A preferred stock. In October 2021, the Company made an additional $1.8 million investment in Notch’s common stock. Immediately following this transaction, the Company’s share in Notch was 23% on a voting interest basis. On May 17, 2024, Notch closed a Series B preferred stock financing with a combination of new and existing investors (Notch Series B Financing). The Company did not participate in the Notch Series B Financing but received Series B preferred stock as part of its anti-dilution rights. Immediately following this transaction, the Company’s share in Notch was 13%. In connection with the Notch Series B Financing, the Company waived its right to appoint one member of the Notch board of directors, but retained board observation rights. The Company no longer has any significant influence over Notch and as a result of the decrease in ownership and influence, accounted for its investment in Notch as an equity investment measured at cost less any impairment effective May 17, 2024.
Under the Notch Agreement, Notch will be eligible to receive up to $7.25 million upon achieving certain agreed research milestones, up to $4.0 million per exclusive target upon achieving certain pre-clinical development milestones, and up to $283.0 million per exclusive target and cell type (i.e., T cell or NK cell) upon achieving certain clinical, regulatory and commercial milestones. Notch is also entitled to receive tiered royalties in the mid to high single digit range on Allogene’s sales of licensed products, subject to certain reductions, for a term, on a country-by-country and product-by-product basis,
commencing on first commercial sale of such product in such country and continuing until the latest of (i) the date upon which there is no valid claim of the licensed patents in such country of sale that covers such product, (ii) the expiration of applicable data or other regulatory exclusivity in such country of sale or (iii) a defined period from the first commercial sale of such product in such country.
The terms of the Notch Agreement will continue on a product-by-product and country-by-country basis until Allogene’s payment obligations with respect to such product in such country have expired. Following such expiration, Allogene’s license with respect to such product and country shall be perpetual, irrevocable, fully paid up and royalty-free. Allogene may terminate the Collaboration Agreement in whole or on a product-by-product basis upon ninety days’ prior written notice to Notch. Either party may also terminate the Collaboration Agreement with written notice upon material breach by the other party, if such breach has not been cured within a defined period of receiving such notice, or in the event of the other party’s insolvency.
On January 25, 2024, the Company entered into an Amended and Restated Collaboration and License Agreement (the Amended Notch Agreement) with Notch. The Amended Notch Agreement amends and restates the Notch Agreement. Under the Amended Notch Agreement, the Company has relinquished its exclusive rights to all original CAR targets (the Released Targets) except for one CAR target, and has agreed to limit its option right to only one additional CAR target. If the option is exercised, the Company will have a minimum funding commitment for the overall development program. If Notch subsequently out-licenses any of the Released Targets, the Company will be entitled to receive a percentage of upfront and/or milestone payments associated therewith up to a set cap of $30.0 million, and will be entitled to a low, single-digit royalty on net sales of products containing a Released Target. In addition, with respect to the Company’s previous equity investment in Notch, the Amended Notch Agreement grants the Company certain anti-dilution protections up to certain limits for certain pre-IPO equity financings. As of September 30, 2024, no Released Targets were out-licensed by Notch. On May 17, 2024, in connection with the Notch Series B Financing the Company waived certain of its anti-dilution rights in exchange for a low single digit percentage reduction in the royalty rate for the royalties the Company is obliged to pay to Notch under our Notch intellectual property license should the Company commercialize a licensed product.
For the three and nine months ended September 30, 2024, the Company recorded zero collaboration costs. For the three and nine months ended September 30, 2023, the Company recorded zero and $1.8 million, respectively, in collaboration costs as research and development expenses. For the three and nine months ended September 30, 2023, the Company recorded $3.0 million in other expenses as impairment loss on its equity method investment in Notch. No milestones were achieved by Notch for the three and nine months ended September 30, 2024 and 2023.
Strategic Alliance with The University of Texas MD Anderson Cancer Center
On October 6, 2020, the Company entered into a strategic five-year collaboration agreement with The University of Texas MD Anderson Cancer Center (MD Anderson) for the preclinical and clinical investigation of allogeneic CAR T cell product candidates. The Company and MD Anderson are collaborating on the design and conduct of preclinical and clinical studies with oversight from a joint steering committee.
Under the terms of the agreement, the Company has committed up to $15.0 million of funding for the duration of the agreement. Payment of this funding is contingent on mutual agreement to study orders in order for any study to be included under the alliance. The Company made an advance payment of $3.0 million to MD Anderson in the year ended December 31, 2020 and made an additional advance payment of $3.0 million to MD Anderson in the year ended December 31, 2023. The Company is obligated to make further payments to MD Anderson each year upon the anniversary of the agreement effective date through the duration of the agreement term. These costs are expensed to research and development as MD Anderson renders the services under the strategic alliance.
The agreement may be terminated by either party for material breach by the other party. Individual studies may be terminated for, among other things, material breach, health and safety concerns or where the institutional review board, the review board at the clinical site with oversight of the clinical study, requests termination of any study. Where any legal or regulatory authorization is finally withdrawn or terminated, the relevant study will also terminate automatically.
For the three and nine months ended September 30, 2024, the Company recorded $0.8 million and $1.1 million, respectively, in collaboration costs as research and development expenses. For the three and nine months ended September 30, 2023, the Company recorded $0.2 million and $1.2 million, respectively, in collaboration costs as research and development expenses.
Investment in and License Agreement with Overland Therapeutics, Inc.
Allogene Overland Biopharm (CY) Limited (Allogene Overland), later renamed Overland Therapeutics Inc. (Overland Therapeutics), was initially established as a joint venture by the Company and Overland Pharmaceuticals (CY) Inc. (Overland)
pursuant to a Share Purchase Agreement (Share Purchase Agreement), dated December 14, 2020. Concurrently, on December 14, 2020, the Company entered into a License Agreement (License Agreement) with Allogene Overland for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies for patients in greater China, Taiwan, South Korea and Singapore (the JV Territory).
Pursuant to the Share Purchase Agreement, the Company acquired Seed Preferred Shares in Allogene Overland representing 49% of Allogene Overland’s outstanding stock as partial consideration for the License Agreement, and Overland acquired Seed Preferred Shares representing 51% of Allogene Overland’s outstanding stock for $117.0 million in upfront and certain quarterly cash payments, to support operations of Allogene Overland. The Company received $40.0 million from Allogene Overland as partial consideration for the License Agreement. Until the Organizational Restructuring (as defined below), the Company and Overland were the sole equity holders in Allogene Overland.
Pursuant to the License Agreement, the Company granted Allogene Overland an exclusive license to develop, manufacture and commercialize certain allogeneic CAR T cell candidates directed at four targets, BCMA, CD70, FLT3, and DLL3 (Overland Licensed Products), in the JV Territory. As consideration, the Company would also be entitled to additional regulatory milestone payments of up to $40.0 million and, subject to certain conditions, tiered low-to-mid single-digit sales royalties. Subsequent to entering into the License Agreement, Allogene Overland assigned the License Agreement to a wholly-owned subsidiary, Allogene Overland BioPharm (HK) Limited (Allogene Overland HK). On April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene Overland Biopharm (PRC) Co., Limited (Allogene Overland PRC).
On May 24, 2024, the Company, Overland, and Allogene Overland entered into a Share Exchange Agreement (Share Exchange Agreement) pursuant to which Overland’s cell therapy business merged into Allogene Overland (the Organizational Restructuring).
Under the Share Exchange Agreement, Allogene Overland acquired from Overland a 100% equity interest in Overland Pharmaceuticals (US) Inc. (Overland US). Overland US includes certain research and development, clinical, and general and administrative staff, as well as select cell therapy assets, including its lead program, OL-101, an autologous GPRC5D-BCMA bispecific dual targeting CAR T for refractory multiple myeloma. Upon completion of the closing of the share exchange, Overland US became a wholly owned subsidiary of Allogene Overland, Overland’s ownership increased to 82% and the Company’s ownership decreased to 18%. Under a separate agreement between Overland and HH BioPharma Holdings Ltd. (HBP) executed on May 24, 2024, Overland distributed all Series Seed Preferred Shares of Allogene Overland held by Overland to HBP and HBP has assumed all rights and obligations attached to such shares and all rights and obligations of Overland under the Share Exchange Agreement.
In connection with the Organizational Restructuring, on May 24, 2024, the Company and Allogene Overland PRC, entered into a First Amendment to the License Agreement (the License Amendment) to amend and supplement certain provisions of the License Agreement. Under the License Amendment, the Company continues to grant Allogene Overland PRC an exclusive license to develop, manufacture, and commercialize the Licensed Products in the JV Territory, with the Company retaining exclusive rights to the Licensed Products outside the JV Territory, and the royalty obligations to the Company were amended to a flat mid single-digit royalty on net sales in the JV Territory that are no longer subject to reductions. The License Amendment also provides the Company with additional rights to terminate the License Agreement in its entirety or with respect to the relevant Overland Licensed Products if Allogene Overland PRC fails to initiate manufacturing technology transfer with respect to an Overland Licensed Product as agreed in the License Amendment, or if HBP commits a funding default or a material breach of its representations, warranties, or covenants under the Share Exchange Agreement. The License Amendment also provides that the License Agreement will terminate automatically if the Company’s ownership in Allogene Overland falls below 7.5% (other than due to the Company’s sale of the shares of Allogene Overland), unless at that time Allogene Overland PRC and the Company have mutually agreed on the manufacturing technology transfer plan for the Overland Licensed Products and Allogene Overland PRC elects to continue the license for such Overland Licensed Products with increased milestones and royalties. Under the License Amendment terms such increased milestones and royalties consist of up to $115.0 million in milestone payments for each Overland Licensed Product and tiered mid single-digit to low double-digit royalties on net sales in the JV Territory.
As part of the Organizational Restructuring, Allogene Overland was renamed Overland Therapeutics Inc. (Overland Therapeutics).
Based on the License Agreement, promises that the Company concluded were distinct performance obligations included: (1) the license of intellectual property and delivery of know-how, (2) the manufacturing license, related know-how and support, (3) know-how developed in future periods, and (4) participation in the joint steering committee.
In order to determine the transaction price, the Company evaluated all the consideration to be received over the duration of the contract. Fixed consideration exists in the form of the upfront payment and Seed Preferred Shares in Allogene Overland. Regulatory milestones and royalties were considered variable consideration. The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized
may occur in future periods. Milestone fees were constrained and not included in the transaction price due to the uncertainties of research and development. The Company re-evaluates the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The Company estimated the fair value of the shares of Seed Preferred Stock at $79.0 million, using probability adjusted future cash infusions based on the upfront and certain quarterly cash payments of $117.0 million committed by Overland. The probability for the future quarterly cash payments of 65% was developed based on consideration of the Company’s expectations for future cash infusions from Overland and was applied on a cumulative basis for each quarterly payment. The present value of the future quarterly cash payments was estimated using 11.9% annual discount rate. The fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement.
The Company determined that the initial transaction price consists of the upfront payment of $40.0 million and noncash consideration of $79.0 million received in the form of the shares of Seed Preferred Stock. The allocation of the transaction price is performed based on standalone selling prices, which are based on estimated amounts that the Company would charge for a performance obligation if it were sold separately. The initial transaction price of $119.0 million was allocated as follows: (i) $114.0 million to the license of intellectual property and delivery of know-how, which was recognized upon grant of license and delivery of know-how in the consolidated financial statements for the year ended December 31, 2021 when the know-how was delivered; (ii) $2.3 million to the manufacturing license, related know-how and support, which will be recognized as services are delivered; (iii) $2.1 million to the know-how developed in future periods, which will be recognized as services are delivered, and (iv) $0.6 million to participation in the joint steering committee, which will be recognized over time as the services are delivered. Funds received in advance are recorded as deferred revenue and will be recognized as the performance obligations are satisfied.
Based on the License Amendment, the Company determined that the remaining transaction price was $4.6 million and it was allocated as follows: (i) $1.9 million to the manufacturing license, related know-how and support, which will be recognized as services are delivered and (ii) $2.7 million to the know-how developed in future periods, which will be recognized as services are delivered. As of September 30, 2024, $4.6 million of deferred revenue was recorded in other long-term liabilities.
The Company determined that Overland Therapeutics is a variable interest entity as of September 30, 2024 and December 31, 2023. The Company does not have the power to direct the activities which most significantly affect Overland Therapeutics’ economic performance. Accordingly, the Company did not consolidate Overland Therapeutics because the Company determined that it was not the primary beneficiary. After the Organizational Restructuring, the Company has 20% voting rights of Overland Therapeutics’ board of directors. The Company concluded that it has significant influence over Overland Therapeutics and continued to account for its investment in Overland Therapeutics as an equity method investment. In connection with the Organizational Restructuring, the Company recorded an increase in its equity method investment in Overland Therapeutics and corresponding gain of $1.1 million. The Company’s total equity investment in Overland Therapeutics was zero as of September 30, 2024 and December 31, 2023 (see Note 8). For the three and nine months ended September 30, 2024 and 2023, the Company recognized less than $0.1 million of collaboration revenue.
Collaboration and License Agreement with Antion
On January 5, 2022, the Company entered into an exclusive collaboration and global license agreement (Antion Collaboration and License Agreement) with Antion Biosciences SA (Antion) for Antion’s miRNA technology (miCAR), to advance multiplex gene silencing as an additional tool to develop next generation allogeneic CAR T products. Pursuant to the agreement, Antion will exclusively collaborate with the Company on oncology products for a defined period. The Company will also have exclusive worldwide rights to commercialize products incorporating Antion technology developed during the collaboration.
The Antion Collaboration and License Agreement includes an exclusive research collaboration to conduct research and development of the use of Antion’s proprietary technologies to produce certain products for a defined period, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint steering committee. The Company will reimburse Antion's costs incurred in accordance with such plan and budget.
In connection with the execution of the Antion Collaboration and License Agreement, the Company made an upfront payment to Antion of $3.5 million in return for a license to access Antion’s technology in order to conduct research pursuant to the agreement. The upfront payment was fully recognized as research and development expense as the license had no foreseeable alternative future use. In addition, the Company made a $3.0 million investment in Antion’s preferred stock. The Company accounts for its investment in Antion’s preferred stock as an equity investment measured at cost less any impairment. In connection with this investment, a Company representative was appointed to Antion’s Board of Directors.
In July 2023, the Company and Antion entered into an amendment to the Antion Collaboration and License Agreement. Under the terms of this amendment, Antion’s exclusivity obligation relating to the collaboration was terminated; however, Antion agreed to certain restrictions on its ability to pursue products directed against specific targets. Also, in lieu of the Company’s prior obligation to make a $3.0 million investment in Antion following the completion of certain milestones, the Company agreed to make a $2.0 million investment in Antion's preferred stock and acquired warrants to purchase an additional $3.0 million of Antion's preferred stock.
Under the Antion Collaboration and License Agreement, Antion will be eligible to receive up to $35.3 million for four products upon achievement of certain development and regulatory milestones. For each additional product, Antion will be eligible to receive $2.0 million upon achievement of a regulatory milestone. Antion is also entitled to receive a low single-digit royalty on the Company’s sales of licensed products, subject to certain reductions.
For the three and nine months ended September 30, 2024, the Company recorded zero research and development expenses related to collaboration costs. For the three and nine months ended September 30, 2023, the Company recorded zero and $1.8 million, respectively, in research and development expenses related to collaboration costs. As of September 30, 2024 and December 31, 2023, the Company’s total equity investment in Antion was zero.
Strategic Collaboration Agreement with Foresight Diagnostics
On January 3, 2024, the Company entered into a Strategic Collaboration Agreement with Foresight Diagnostics, Inc. (Foresight Diagnostics) (the Foresight Agreement). Pursuant to the Foresight Agreement, the parties have agreed to collaborate on a non-exclusive basis in the development of Foresight Diagnostics’ minimal residual disease (MRD) assay based on their PhasED-Seq Circulating Tumor DNA Platform as an in vitro diagnostic to identify the MRD+ patient population to be enrolled in the Company’s ALPHA3 trial of cema-cel, for treatment of large B cell lymphoma. Under the Foresight Agreement, the Company has agreed to use its commercially reasonable efforts to obtain regulatory approval of cema-cel, and Foresight Diagnostics has agreed to use its commercially reasonable efforts to obtain regulatory approval of its MRD assay for use as an in vitro diagnostic with cema-cel. The Company has agreed to fund approximately $26.2 million in MRD assay development costs, milestone payments for regulatory submissions and assay utilization to process clinical samples.
For the three and nine months ended September 30, 2024, the Company recorded $0.5 million and $2.7 million, respectively, of research and development expenses related to clinical trials start readiness milestones.
7. Commitments and Contingencies
Leases
In August 2018, the Company entered into an operating lease agreement (HQ Lease) for office and laboratory space which consists of approximately 68,000 square feet located in South San Francisco, California. The lease term was 127 months beginning August 2018 through February 2029 with an option to extend the term for seven years which was not reasonably assured of exercise. The Company has made certain tenant improvements, including the addition of laboratory space, and has received $5.0 million of tenant improvement allowances through December 31, 2020. The rent payments began on March 1, 2019 after an abatement period. In December 2021, the Company amended its lease agreement to lease an additional 47,566 square feet of office and laboratory space in South San Francisco, California, as part of the same building as the Company’s current headquarters. The lease term commenced in April 2022 and is for a period of 120 months. The rent payments for the expansion premises began in August 2022 after an abatement period. The lease term for the existing premises was also extended and the lease for both the existing and expansion premises will expire on March 31, 2032 with an option to extend the term for eight years which is not reasonably assured of exercise.
In October 2018, the Company entered into an operating lease agreement for office and laboratory space which consists of 14,943 square feet located in South San Francisco, California. The lease term was 124 months beginning November 2018 through February 2029, with an option to extend the term for another seven years which was not reasonably assured of exercise. The Company has made certain tenant improvements, including the upgrading of current office and laboratory space with a lease incentive allowance of $0.8 million. Rent payments began in November 2018. In December 2021, the Company amended its lease agreement to extend the term of the lease to be co-terminus with the HQ Lease. The lease term will expire on March 31, 2032 with an option to extend the term for eight years which is not reasonably assured of exercise.
In February 2019, the Company entered into a lease agreement for approximately 118,000 square feet of space to develop a cell therapy manufacturing facility in Newark, California. The lease term is 188 months and began in November 2020. Upon certain conditions, the Company has two ten-year options to extend the lease, both of which are not reasonably assured of exercise. The Company has received $3.0 million of tenant improvement allowances for costs related to the design and construction of certain Company improvements.
In February 2023, the Company entered into a sublease with Bellco Capital Advisors Inc. (Bellco) for 2,218 square feet of office space in Los Angeles, California. The sublease term is 115 months, subject to certain early termination rights. The sublease commenced on January 1, 2024.
The Company maintains letters of credit for the benefit of landlords which is disclosed as restricted cash in the condensed consolidated balance sheets. Restricted cash related to letters of credit due to landlords was $6.0 million as of September 30, 2024 and December 31, 2023.
The balance sheet classification of our lease liabilities were as follows (in thousands): | | | | | | | | | | | | | | |
| | September 30, 2024 | | December 31, 2023 |
Operating lease liabilities | | | | |
Current portion included in accrued and other current liabilities | | $ | 7,389 | | | $ | 6,775 | |
Long-term portion of lease liabilities | | 85,135 | | | 88,346 | |
Total operating lease liabilities | | $ | 92,525 | | | $ | 95,121 | |
The components of lease costs for operating leases, which were recognized in operating expenses, were as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | 2024 | | 2023 | | 2024 | | 2023 | |
Operating lease cost | | $ | 2,900 | | | $ | 3,180 | | | $ | 8,931 | | | $ | 9,536 | | |
Variable lease cost | | 834 | | | 587 | | | 2,209 | | | 1,950 | | |
Total lease costs | | $ | 3,734 | | | $ | 3,767 | | | $ | 11,140 | | | $ | 11,486 | | |
Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2024 was $9.3 million and was included in net cash used in operating activities in the Company's condensed consolidated statements of cash flows.
The undiscounted future non-cancellable lease payments under the Company's operating leases as of September 30, 2024 were as follows: | | | | | | | | |
Year ending December 31: | | (In thousands) |
2024 (remaining 3 months) | | $ | 3,197 | |
2025 | | 12,920 | |
2026 | | 13,163 | |
2027 | | 13,612 | |
2028 | | 14,076 | |
2029 and thereafter | | 65,386 | |
Total undiscounted lease payments | | 122,354 | |
Less: Present value adjustment | | (29,829) | |
Total | | $ | 92,525 | |
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company uses its estimated incremental borrowing rate. The weighted average discount rate used to determine the operating lease liability was 6.25%. As of September 30, 2024, the weighted average remaining lease term for our operating leases is 8.35 years.
Other Commitments
In July 2020, the Company 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 the Company's cell therapy manufacturing facility in Newark, California. The agreement has a term of 20 years and commenced in September 2022. The Company is obligated to pay for electricity generated from the system at an agreed rate for the duration of the agreement term. Termination of the agreement by the Company will result in a termination payment due of approximately $4.3 million. In
connection with the agreement, the Company maintains a letter of credit for the benefit of the service provider in the amount of $4.3 million which is recorded as restricted cash in the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023.
The Company has entered into certain license agreements for intellectual property which is used as part of its development and manufacturing processes. Each of these respective agreements are generally cancellable by the Company. These agreements require payment of annual license fees and may include conditional milestone payments for achievement of specific research, clinical and commercial events, and royalty payments. The timing and likelihood of any significant conditional milestone payments or royalty payments becoming due was not probable as of September 30, 2024.
The Company enters into contracts in the normal course of business that includes arrangements with clinical research organizations, vendors for preclinical research and vendors for manufacturing. These agreements generally allow for cancellation with notice. As of September 30, 2024, the Company had non-cancellable purchase commitments of $2.3 million.
8. Equity Investments and Equity Method Investments
Notch Therapeutics
In conjunction with the execution of the Notch Agreement (see Note 6), the Company also entered into a Share Purchase Agreement with the Company acquiring shares of Notch’s Series Seed convertible preferred stock for a total investment cost of $5.1 million which includes transaction costs of $0.1 million, resulting in a 25% ownership interest in Notch. In February 2021, the Company made a $15.9 million investment in Notch’s Series A preferred stock. Immediately following this transaction, the Company’s share in Notch was 20.7% on a voting interest basis. In October 2021, the Company made an additional $1.8 million investment in Notch’s common stock. Immediately following this transaction, the Company’s share in Notch was 23.0% on a voting interest basis. On May 17, 2024, Notch closed the Notch Series B Financing which caused the Company’s share in Notch to decrease to 13.0% immediately following this transaction.
Accordingly, effective May 17, 2024, the Company started to account for its investment in Notch as an equity investment measured at cost less impairment. The Company’s total equity investment in Notch as of September 30, 2024 was $2.0 million. The Company’s total equity investment in Notch as of December 31, 2023 was $3.6 million and the Company accounted for the investment using the equity method of accounting. For the quarter to date and year to date periods through May 17, 2024, the Company recognized its share of Notch’s net loss of zero and $1.7 million, respectively, under the other income and expense, net caption within the condensed consolidated statements of operations. For the three and nine months ended September 30, 2023, the Company recognized its share of Notch’s net loss of $1.5 million and $4.5 million, respectively, under the other income and expense, net caption within the condensed consolidated statements of operations. During the three and nine months ended September 30, 2023, the Company recognized $3.0 million of impairment loss under the other expenses caption within the condensed consolidated statements of operations. No impairment loss was recorded in 2024.
Overland Therapeutics, Inc.
In conjunction with the execution of the License Agreement with Allogene Overland (see Note 6), the Company also entered into the Share Purchase Agreement and a Shareholders’ Agreement with the joint venture company acquiring shares of Allogene Overland’s Seed Preferred Shares representing a 49% ownership interest in exchange for entering into a License Agreement. Upon completion of the Organizational Restructuring, Overland’s ownership in Allogene Overland increased to 82% and the Company’s ownership decreased to 18%. As part of the Organizational Restructuring, Overland distributed all Series Seed Preferred Shares of Allogene Overland held by Overland to HBP and Allogene Overland was renamed to Overland Therapeutics.
The Company’s total equity investment in Overland Therapeutics was zero as of September 30, 2024 and December 31, 2023, and the Company accounted for the investment using the equity method of accounting. For the three months ended September 30, 2024, the Company recognized its share of Overland Therapeutics' net loss of $1.1 million under the other income and expense, net caption within the condensed consolidated statements of operations. For the nine months ended September 30, 2024, the Company recognized its gain from the Organizational Restructuring of $1.1 million which was offset by its share of Overland Therapeutics' net loss of $1.1 million under the other income and expense, net caption within the condensed consolidated statement of operations. For the three and nine months ended September 30, 2023, the Company recognized its share of Overland Therapeutics’ net loss of $1.0 million and $3.4 million, respectively, under the other income and expense, net caption within the condensed consolidated statement of operations.
9. Stock-Based Compensation
In June 2018, the Company adopted its 2018 Equity Incentive Plan (Prior 2018 Plan). The Prior 2018 Plan provided for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the Company’s Board of Directors and consultants of the Company under terms and provisions established by the Company’s Board of Directors. In September 2018, the Board of Directors adopted a new amended and restated 2018 Equity Incentive Plan as a successor to and continuation of the Prior 2018 Plan, which became effective in October 2018 (the 2018 Plan), which authorized additional shares for issuance and provided for an automatic annual increase to the number of shares issuable under the 2018 Plan by an amount equal to 5% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The term of any stock option granted under the 2018 Plan cannot exceed 10 years. The Company generally grants stock-based awards with service conditions only. Options granted typically vest over a four-year period but may be granted with different vesting terms. Restricted Stock Units granted typically vest annually over a four-year period but may be granted with different vesting terms. Options shall not have an exercise price less than 100% of the fair market value of the Company’s common stock on the grant date. If the individual possesses more than 10% of the combined voting power of all classes of stock of the Company, the exercise price shall not be less than 110% of the fair market value of a common share of stock on the date of grant. This requirement is applicable to incentive stock options only.
As of September 30, 2024, there were 9,508,639 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.
Stock Option Exchange Program
On June 21, 2022, the Company commenced an offer to exchange certain eligible options held by eligible employees of the Company for new options (the Exchange Offer). The Exchange Offer expired on July 19, 2022. Pursuant to the Exchange Offer, 199 eligible holders elected to exchange, and the Company accepted for cancellation, eligible options to purchase an aggregate of 3,666,600 shares of the Company’s common stock, representing approximately 93.5% of the total shares of common stock underlying the eligible options. On July 19, 2022, immediately following the expiration of the Exchange Offer, the Company granted new options to purchase 3,666,600 shares of common stock, pursuant to the terms of the Exchange Offer and the 2018 Plan. The exercise price of the new options granted pursuant to the Exchange Offer was $13.31 per share, which was the closing price of the common stock on the Nasdaq Global Select Market on the grant date of the new options. The new options are subject to a new three-year vesting schedule, vesting in equal annual installments over the vesting term. Each new option has a maximum term of seven years.
The exchange of stock options was treated as a modification for accounting purposes. The incremental expense of $5.2 million for the modified options was calculated using a lattice option pricing model. The incremental expense and the unamortized expense remaining on the exchanged options as of the modification date are being recognized over the new three-year service period.
Stock Option Activity
The following summarizes option activity under the 2018 Plan: | | | | | | | | | | | | | | | | | | | | | | | |
| Outstanding Options |
| Number of Options | | Weighted- Average Exercise Price | | Weighted- Average Remaining Contract Term | | Aggregate Intrinsic Value |
| | | | | (in years) | | (in thousands) |
Balance, December 31, 2023 | 21,812,946 | | | $ | 9.93 | | | 7.53 | | $ | 662 | |
Options granted | 5,894,664 | | | 3.11 | | | 8.87 | | |
Options exercised | (357,993) | | | 2.27 | | | | | $ | 597 | |
Options forfeited | (3,394,248) | | | 10.93 | | | | | |
Balance, September 30, 2024 | 23,955,369 | | | $ | 8.22 | | | 7.75 | | $ | 576 | |
Exercisable, September 30, 2024 | 17,409,307 | | | $ | 9.75 | | | 7.32 | | $ | 258 | |
Vested and expected to vest, September 30, 2024 | 23,955,369 | | | $ | 8.22 | | | 7.75 | | $ | 576 | |
The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Global Select Market on September 30, 2024. For the nine months ended September 30, 2024, the estimated weighted-average grant-date fair value of employee options granted was $2.07 per share. As of September 30, 2024, there was $41.7 million of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.0 years.
The fair value of employee, consultant and director stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions: | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 |
Expected term in years | 5.02 - 6.12 | | 5.27 - 6.08 |
Expected volatility | 72.85% - 73.97% | | 73.18% - 73.85% |
Expected risk-free interest rate | 3.42% - 4.32% | | 3.45% - 4.30% |
Expected dividend | 0% | | 0% |
Restricted Stock Unit Activity
The following summarizes restricted stock unit activity under the 2018 Plan: | | | | | | | | | | | | | | | | | | | | | | | |
| Outstanding Restricted Stock Units |
| Restricted Stock Units | | Weighted- Average Grant Date Fair Value per Share | | Weighted Average Remaining Vesting Life | | Aggregate Intrinsic Value |
| | | | | (in years) | | (in thousands) |
Unvested December 31, 2023 | 12,180,471 | | | $ | 6.68 | | | 2.00 | | $ | 39,099 | |
Granted | 5,091,392 | | | 4.09 | | | 1.37 | | |
Vested | (1,796,660) | | | 9.76 | | | | | |
Forfeited | (2,199,686) | | | 7.92 | | | | | |
Unvested September 30, 2024 | 13,275,517 | | | $ | 5.06 | | | 1.57 | | $ | 37,171 | |
Vested and expected to vest, September 30, 2024 | 13,275,517 | | | $ | 5.06 | | | 1.57 | | $ | 37,171 | |
As of September 30, 2024, there was $38.4 million of unrecognized stock-based compensation related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2.2 years.
As of September 30, 2024, the Company had 2,433,913 outstanding performance-based restricted stock units and 1,814,134 outstanding restricted stock units with a market condition granted to certain executive officers and other employees pursuant to the 2018 Plan, including 30,653 performance-based restricted stock units granted in the quarter ended September 30, 2024. These awards are subject to the holders’ continuous service to the Company through each applicable vesting event. Through September 30, 2024, the Company believes that the achievement of the requisite performance conditions for these awards are not probable. As a result, no compensation expense has been recognized related to the performance-based restricted stock units for the three and nine months ended September 30, 2024 and 2023. The Company recognized $0.7 million and $2.2 million in stock-based compensation expense related to the restricted stock units with a market condition for the three and nine months ended September 30, 2024, respectively. The Company recognized $0.5 million and $1.5 million in stock-based compensation expense related to the restricted stock units with market condition for the three and nine months ended September 30, 2023, respectively.
Stock-based compensation expense
For the three and nine months ended September 30, 2024, the Company recorded $13.4 million and $38.9 million, respectively, of stock-based compensation expense related to stock options, restricted stock units and employee stock purchase plans as research and development and general and administrative expense in its condensed consolidated statements of operations and comprehensive loss. For the three and nine months ended September 30, 2023, the Company recorded $15.4 million and $50.7 million, respectively, of stock-based compensation expense related to stock options, restricted stock units and
employee stock purchase plans as research and development and general and administrative expense in its condensed consolidated statements of operations and comprehensive loss.
10. Related Party Transactions
Collaboration Revenue and Equity Method Investment
In December 2020, the Company entered into the License Agreement with Allogene Overland, a corporate joint venture entity and related party (see Note 6). The License Agreement was subsequently assigned to a wholly-owned subsidiary of Allogene Overland, Allogene Overland HK. On April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene Overland PRC. On May 24, 2024, the License Agreement was amended. During the three months ended September 30, 2024 and 2023, the Company recognized zero and less than $0.1 million of collaboration revenue under this arrangement, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized less than $0.1 million of collaboration revenue under this arrangement.
For the three months ended September 30, 2024, the Company recognized its share of Overland Therapeutics' net loss of $1.1 million under the other income and expense, net caption within the condensed consolidated statements of operations. For the nine months ended September 30, 2024, the Company recognized its gain from the Organizational Restructuring of $1.1 million which was offset by its share of Overland Therapeutics' net loss of $1.1 million under the other income and expense, net caption within the condensed consolidated statement of operations. For the three and nine months ended September 30, 2023, the Company recognized its share of Overland Therapeutics’ net loss of $1.0 million and $3.4 million, respectively, under the other income and expense, net caption within the condensed consolidated statement of operations.
Sublease Agreement
In December 2018, the Company entered into a sublease with Bellco Capital LLC for 1,293 square feet of office space in Los Angeles, California for a three year term. On April 1, 2020, Bellco assumed all rights, title, interests and obligations under the sublease from Bellco Capital LLC. In November 2021, the sublease was extended to June 30, 2025. The sublease was amended, effective in July 2022, to move to a nearby location, with office space of 737 square feet. The Company’s executive chairman, Arie Belldegrun, M.D., FACS, is a trustee of the Belldegrun Family Trust, which controls Bellco. In 2023, the Company exercised its early termination right under the sublease agreement and the sublease was terminated effective December 31, 2023.
In February 2023, the Company entered into a new sublease agreement with Bellco for 2,218 square feet of office space in Los Angeles, California. The sublease term is 115 months, subject to certain early termination rights. The sublease commenced on January 1, 2024. The total right of use asset and associated lease liability recorded related to this related party lease was $2.3 million as of September 30, 2024. For the three and nine months ended September 30, 2024, the Company recorded $0.1 million and $0.3 million of rent expense related to this lease, respectively.
Consulting Agreements
In June 2018, the Company entered into a services agreement with Two River Consulting, LLC (Two River), a firm affiliated with the Company’s President and Chief Executive Officer, the Company’s Executive Chair of the board of directors, and a director of the Company to provide various managerial, clinical development, administrative, accounting and financial services to the Company. In December 2023, the service agreement between the Company and Two River was terminated. The costs incurred for services provided under this agreement were $0.1 million and $0.3 million for the three and nine months ended September 30, 2023, respectively.
In August 2018, the Company entered into a consulting agreement with Bellco Capital LLC. Pursuant to the consulting agreement, Bellco Capital LLC provides certain services for the Company, which are performed by Dr. Belldegrun, the Company's executive chair, and include without limitation, providing advice and analysis with respect to the Company’s business, business strategy and potential opportunities in the field of allogeneic CAR T cell therapy and any other aspect of the CAR T cell therapy business as the Company may agree. In consideration for these services, the Company paid Bellco Capital LLC $40,217 per month in arrears commencing January 2022. The Company may also, at its discretion, pay Bellco Capital LLC an annual performance award in an amount up to 60% of the aggregate compensation payable to Bellco Capital LLC in a calendar year. The Company also reimburses Bellco Capital LLC for out of pocket expenses incurred in performing the services. The costs incurred for services provided, bonus, and out-of-pocket expenses incurred under this consulting agreement were $0.2 million and $0.6 million for the three and nine months ended September 30, 2024, respectively, and $0.3 million and $0.7 million for the three and nine months ended September 30, 2023, respectively.
11. Income Taxes
The Company has a history of losses and expects to record a loss in 2024. The Company continues to maintain a full valuation allowance against its net deferred tax assets.
12. Net Loss Per Share
The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the period presented due to their anti-dilutive effect: | | | | | | | | | | | |
| September 30, |
| 2024 | | 2023 |
Stock options to purchase common stock | 23,955,369 | | | 21,989,462 | |
Restricted stock units subject to vesting | 13,275,517 | | | 12,169,837 | |
Expected shares to be purchased under Employee Stock Purchase Plan | 1,140,573 | | | 1,289,434 | |
Early exercised stock options subject to future vesting | — | | | 58,360 | |
Total | 38,371,459 | | | 35,507,093 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (Quarterly Report) and the audited financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023 (Annual Report), which was filed with the Securities and Exchange Commission (SEC) on March 14, 2024. Unless the context requires otherwise, references in this Quarterly Report to the “Company”, “Allogene,” “we,” “us” and “our” refer to Allogene Therapeutics, Inc., and references to “Servier” collectively refer to Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS.
In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a clinical stage immuno-oncology company pioneering the development of genetically engineered allogeneic T cell product candidates for the treatment of cancer and autoimmune diseases. We are developing a pipeline of “off-the-shelf” T cell product candidates that are designed to target and kill cancer cells in patients or eliminate pathogenic autoreactive cells in patients with autoimmune disorders. 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, solid tumors, and autoimmune disease. Earlier this year, we announced our 2024 Platform Vision under which we are now focusing on four core programs.
We are currently focused on developing cemacabtagene ansegedleucel (cema-cel, previously ALLO-501A) in large B-cell lymphoma (LBCL) and chronic lymphocytic leukemia (CLL). In June 2024, we initiated a pivotal Phase 2 clinical trial (ALPHA3) for cema-cel as part of a first line (1L) treatment plan for newly diagnosed and treated LBCL patients who are likely to relapse and need further therapy, and we now have almost 30 sites activated. The design of the ALPHA3 1L consolidation trial builds upon the results demonstrated in the Phase 1 ALPHA2 trial and leverages an investigational diagnostic test developed by Foresight Diagnostics, Inc. that we believe will identify patients who have achieved remission by standard disease assessment but who have minimal residual disease (MRD) at the completion of 1L chemoimmunotherapy. The ALPHA3 trial is designed to study the impact of treating MRD positive patients with cema-cel. The study will randomize approximately 240 patients who achieve a complete response or partial response to 1L therapy, but who are MRD positive. The patients will be randomized to either consolidation with cema-cel or the current standard of care, which is observation. The design, with a primary endpoint of event free survival (EFS), will initially include two lymphodepletion arms (one with standard fludarabine and cyclophosphamide plus ALLO-647 and one with standard fludarabine and cyclophosphamide but without ALLO-647). One lymphodepletion arm will be discontinued following a planned interim analysis in mid-2025 designed to select the most appropriate regimen for this patient population. ALPHA3 is expected to complete enrollment in the first half of 2026. Efficacy analyses are expected to occur in 2026, and will include the Independent Data Safety Monitoring Board (IDSMB) interim EFS analysis in the first half of 2026 and the data readout of the primary EFS analysis is expected year-end 2026. A biologics license application (BLA) submission is targeted for 2027. In view of the potential of the earlier line ALPHA3 trial, we have deprioritized the third line (3L) LBCL ALPHA2 and EXPAND trials.
We have initiated the Phase 1b cohort of our ALPHA2 trial to evaluate cema-cel following lymphodepletion with fludarabine/cyclophosphamide and ALLO-647 in patients with relapsed/refractory chronic lymphocytic leukemia/small
lymphocytic lymphoma (CLL/SLL). We will continue to evaluate clinical development and commercial opportunities for cema-cel in CLL/SLL and will provide an update on this program in early 2025.
We are enrolling a Phase 1 clinical trial (TRAVERSE) of ALLO-316, an allogeneic CAR T cell product candidate targeting CD70, in adult patients with advanced or metastatic clear cell renal cell carcinoma (RCC). We have implemented a protocol amendment that incorporates a diagnostic and treatment algorithm into the study design. The algorithm is designed to mitigate the treatment-associated hyperinflammatory response without compromising the CAR T function needed to eradicate solid tumors.
In November 2024, we provided a data update from patients with CD70 positive RCC, and highlighted that the newly implemented diagnostic and management algorithm appears effective in abating IEC-HS while preserving CAR T efficacy. Additional data from dose escalation cohorts, as well as a newly opened Phase 1b expansion cohort, will be presented in two upcoming scientific meetings, including the 2024 International Kidney Cancer Symposium (IKCS, November 8, 2024) and the Society for Immunotherapy of Cancer’s (SITC) Annual Meeting (November 9, 2024).
As of the October 14, 2024, data cutoff, 39 patients had been enrolled in the ongoing Phase 1 trial, of which 26 were confirmed to have CD70 positive RCC and were evaluable for efficacy outcomes. The median time from enrollment to the start of therapy was five days. Data from dose escalation cohorts and ongoing Phase 1b expansion cohort are included in the presentations. The Phase 1b expansion cohort is evaluating safety and efficacy of ALLO-316 at DL2 (80M CAR T cells) following a standard FC500 (fludarabine (30 mg/m2/day) and cyclophosphamide (500 mg/m2/d) for three days) lymphodepletion regimen. The Phase 1b expansion cohort is expected to ultimately include approximately 20 patients. Additional data from the Phase 1b expansion cohort is expected to be announced in mid-2025.
Following a single infusion of ALLO-316 in heavily pretreated patients, the trial demonstrated best Overall Response Rate (ORR) of 50% and Confirmed Response Rate of 33% in those patients with CD70 Tumor Proportion Score (TPS) of ≥50% who received DL2. Patients with a TPS of ≥50% represents the majority of patients with advanced or metastatic RCC. Of those with a TPS ≥50, 76% (16/21) experienced a reduction in tumor burden. Two of six (33%) patients with high TPS who received the Phase 1b expansion regimen showed durable responses ongoing at ≥four months.
Response Rates by CD70 Status and Dose
| | | | | | | | | | | | | | | | | |
Patients Evaluable for Disease Outcomesa (N=34) |
CD70 Positive (N=26) | CD70 Negative or Unknown (N=8) |
| All (N=26) | FCAb (N=8) | FCc (N=18) | DL2 FC500 (Phase 1b) (N=8) |
Best overall response,d n/N (%) High TPS (≥50) Low TPS (<50) | 7/26 (27) 7/21 (33) 0/5 (0) | 1/8 (13) 1/6 (17) 0/2 (0) | 6/18 (33) 6/15 (40) 0/3 (0) | 3/8 (38) 3/6 (50) 0/2 (0) | 0/8 (0) NA NA |
Confirmed ORR,e n/N (%) High TPS (≥50) Low TPS (<50) | 5/26 (19) 5/21 (24) 0/5 (0) | 1/8 (13) 1/6 (17) 0/2 (0) | 4/18 (22) 4/15 (27) 0/3 (0) | 2/8 (25) 2/6 (33) 0/2 (0) | 0/8 (0) NA NA |
aPatients evaluable for disease outcome includes those who received ALLO-316 and had at least one tumor assessment. bStandard fludarabine and cyclophosphamide plus ALLO-647 cIncludes FC300 and FC500 dBest overall response across visits did not require confirmation for CR/PR. eConfirmed overall response of CR/PR required confirmation at the subsequent visit. |
The most common all-grade adverse events were cytokine release syndrome (CRS) (with only one grade ≥3), fatigue (59%), neutropenia (56%), decreased white blood cell count (54%), anemia (51%) and nausea (51%). Immune effector cell-associated neurotoxicity syndrome (ICANS) was minimal at 8% and no graft-versus-host disease (GvHD) occurred.
Safety: Most Prevalent TEAEs (>40% Any Grade Incidence) and AESI
| | | | | | | | | | | | | | |
Adverse Event, n(%) | All Patients (N=39) | DL2 FC500 (N=11) |
| All Grades | Grade ≥3 | All Grades | Grade ≥3 |
Any TEAE | 39 (100) | 29 (81) | 11 (100) | 8 (73) |
CRS | 24 (62) | 1 (3) | 8 (73) | 0 |
Fatigue | 23 (59) | 1 (3) | 2 (18) | 0 |
Neutropenia | 22 (56) | 20 (51) | 7 (64) | 7 (64) |
| | | | | | | | | | | | | | |
White blood cell count decreased | 21/(54) | 19 (49) | 8 (73) | 8 (73) |
Anemia | 20 (51) | 13 (33) | 7 (64) | 5 (46) |
Nausea | 20 (51) | 0 | 3 (27) | 0 |
Thrombocytopenia | 18 (46) | 10 (26) | 7 (64) | 3 (27) |
Pyrexia | 16 (41) | 2 (5) | 4 (36) | 0 |
AEs of Special interest | Any Grade | Grade ≥3 | Any Grade | Grade ≥3 |
Infectiona Viral infections | 24 (62) 13 (33) | 12 (31) 2 (5) | 5 (46) 2 (18) | 2 (18) 0 |
Neurotoxicityb Headache | 17 (44) 8 (21) | 12 (31) 2 (5) | 5 (46) 2 (18) | 2 (18) 0 |
IEC-HS | 5 (13) | 1 (3) | 2 (18) | 0 |
ICANS | 3 (8) | 0 | 3 (27) | 0 |
Graft-versus-host disease | 0 | 0 | 0 | 0 |
TEAE included all AEs that started from the first dose date of study drug in each treatment period up to start of another treatment period, death, or the date prior to initiation of another anti-cancer agent, whichever occurred first. IEC-HS includes the preferred terms IEC-HS, HLH, Hemophagocytic lymphohistiocytosis, and atypical HLH. Two patients developed an inflammatory syndrome prior to the existence of IEC-HS as a term in MedDRA, which has been updated as of September 2023. aInfection events (62%) were primarily low grade; the most common was viral infections (33%) with cytomegalovirus infection and COVID-19 (any grade, 18% and 15%; Grade ≥3, 0% and 5%, respectively). bNeurotoxicity includes system organ class of nerve system disorders and psychiatric disorders with onset date up to Study Day 30 post ALLO-316 infusion. |
Two DLT events of autoimmune hepatitis and cardiogenic shock were reported. Each event occurred in two separate participants who received FCA (FC300 plus ALLO-647) lymphodepletion and DL2 of ALLO-316. Three Grade 5 treatment-related adverse events were reported: 1) cardiogenic shock, which was one of the two DLT events; 2) sepsis from multi-drug resistant Klebsiella pneumoniae in a participant who received DL4 of ALLO-316. This participant had a prior episode of muscle abscess and bacteremia from the same multi-drug resistant Klebsiella and was receiving anakinra and dexamethasone for hyperinflammation; 3) failure to thrive in a participant 16 months after treatment with ALLO-316. This subject had tumor response of stable disease (SD) at month 12 and no interval scans to evaluate disease status prior to death.
On October 29, 2024, we announced that we had received Regenerative Medicine Advanced Therapy (RMAT) designation for ALLO-316 for adult patients with advanced or metastatic RCC. We will continue to evaluate the safety and efficacy at the Phase 1b dose level in 2025.
We are developing ALLO-329, a next-generation allogeneic CAR T cell product candidate targeting both CD19 and CD70 for the treatment of certain autoimmune diseases (AID). Inclusion of an anti-CD70 CAR in ALLO-329 incorporates the Dagger® technology, which is designed to reduce or eliminate the need for standard chemotherapy by preventing premature rejection while targeting CD19+ B-cells and CD70+ activated T-cells, both of which play a role in AID. We plan to file an investigational new drug (IND) application in the first quarter of 2025. We expect to initiate the Phase 1 trial with ALLO-329 in mid-2025 and have proof-of-concept by year-end 2025.
We are developing an anti-CD52 monoclonal antibody, ALLO-647, which is a proprietary component of our lymphodepletion regimen. ALLO-647 may be able to reduce the likelihood of a patient’s immune system rejecting the engineered allogeneic T cells for a sufficient period of time to enable a window of persistence during which our engineered allogeneic T cells can actively target and destroy cancer cells. During Part A of our pivotal ALPHA3 trial, we will be assessing ALLO-647’s contribution to the overall benefit to risk ratio of the lymphodepletion regimen for cema-cel. Patients will be randomized to receive cema-cel and a lymphodepletion regimen with fludarabine and cyclophosphamide either with or without ALLO-647. In mid-2025, we plan to select the lymphodepletion regimen with which we will complete enrollment in the study (Part B).
While we have additional programs in our pipeline, our development priorities are focused on cema-cel (1L Consolidation), ALLO-316 and ALLO-329. We will explore opportunities to partner with collaborators on product candidates across our pipeline.
In May 2024, we entered into an Amendment and Settlement Agreement (the Servier Amendment) under which we expanded the geographic territory for our CD19 license to include the European Union and the United Kingdom. The Servier Amendment also grants us an option to further expand the licensed territory to include China and Japan upon the objective showing of sufficient resources to develop licensed products in those countries, which could be met through the Company entering into a strategic partnership covering those countries. We estimate that the expansion of our license for the CD19 Products to the European Union and United Kingdom will substantially increase our market opportunity in 1L consolidation
LBCL and R/R/ CLL from more than $6.0 billion in the U.S. alone to more than $9.5 billion across the U.S., European Union and United Kingdom, in turn increasing the potential future revenue opportunity for cema-cel by more than 50%.
Since inception, we have had significant operating losses. Our net losses were $66.3 million and $197.7 million for the three and nine months ended September 30, 2024, respectively. As of September 30, 2024, we had an accumulated deficit of $1.8 billion. As of September 30, 2024, we had $403.4 million in cash and cash equivalents and investments and we expect our cash runway to fund operations into 2026. 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.
Our Licenses and Collaboration Agreements
Below is a summary of the key terms for certain of our licenses and collaboration agreements. For a more detailed description of these agreements, see Note 6 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Asset Contribution Agreement with Pfizer
In April 2018, we entered into an Asset Contribution Agreement (the Pfizer Agreement) with Pfizer pursuant to which we acquired certain assets and assumed certain liabilities from Pfizer, including agreements with Cellectis S.A. (Cellectis) and Servier as described below, and other intellectual property for the development and administration of CAR T cells for the treatment of cancer.
Research Collaboration and License Agreement with Cellectis
In June 2014, Pfizer entered into a Research Collaboration and License Agreement with Cellectis. In April 2018, Pfizer assigned the agreement to us pursuant to the Pfizer Agreement. In March 2019, we terminated the agreement with Cellectis and entered into a new license agreement with Cellectis.
Exclusive License Agreement with Servier
In October 2015, Pfizer entered into an Exclusive License Agreement with Servier (the Original 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 April 2018, Pfizer assigned the agreement to us pursuant to the Pfizer Agreement. In October 2019, we agreed to waive our rights to the one additional target.
In May 2024, we entered into an Amendment and Settlement Agreement (the Servier Amendment) with Servier under which we: (1) expanded our territory under the Original Servier Agreement to include the European Union and the United Kingdom, and provides for an option to further expand our territory to include China and Japan, (2) waived certain of our rights to elect to convert certain of our license rights to a worldwide license, (3) revised our future milestone payments to coincide with Servier’s milestone payments to Cellectis under the Servier-Cellectis Agreement, (4) agreed to pre-pay a future €20 million milestone payment into an escrow account, and (5) increased the United States tiered royalty rates to a range from the low tens to the mid teen percentages, and agreed to an ex-U.S. royalty rate of 10%. For more information, see “Risk Factors—Servier’s discontinuation of its involvement in the development of CD19 Products and Servier's disputes with Cellectis, or future disputes with us, may have adverse consequences."
Collaboration and License Agreement with Notch
On November 1, 2019, we entered into a Collaboration and License Agreement (the Notch Agreement) with Notch Therapeutics Inc. (Notch), pursuant to which Notch granted us an exclusive, worldwide, royalty-bearing, sublicensable license under certain of Notch’s intellectual property to develop, make, use, sell, import, and otherwise commercialize therapeutic gene-edited T cell and/or natural killer cell products from induced pluripotent stem cells directed at certain CAR targets for initial application in NHL, B-cell precursor acute lymphoblastic leukemia (ALL) and multiple myeloma. In addition, Notch has granted us an option to add certain specified targets to our exclusive license in exchange for an agreed upon per-target option fee.
On January 25, 2024, we entered into an Amended and Restated Collaboration and License Agreement (the Amended Notch Agreement) with Notch. The Amended Notch Agreement amends and restates the Notch Agreement. Under the Amended Notch Agreement, we have relinquished our exclusive rights to all original CAR targets (the Released Targets) except for one CAR target, and have agreed to limit our option right to only one additional CAR target. If the option is exercised, we will have a minimum funding commitment for the overall development program. If Notch subsequently out-
licenses any of the Released Targets, we will be entitled to receive a percentage of upfront and/or milestone payments associated therewith up to a set cap of $30.0 million, and will be entitled to a low, single-digit royalty on net sales of products containing a Released Target.
Strategic Alliance with The University of Texas MD Anderson Cancer Center
On October 6, 2020, we entered into a strategic five-year collaboration agreement with The University of Texas MD Anderson Cancer Center (MD Anderson) for the preclinical and clinical investigation of allogeneic CAR T cell product candidates.
License Agreement with Allogene Overland Biopharm (PRC) Co., Limited
On December 14, 2020, we entered into a License Agreement with Allogene Overland Biopharm (CY) Limited (Allogene Overland) (the License Agreement), a joint venture established by us and Overland Pharmaceuticals (CY) Inc. (Overland), pursuant to a Share Purchase Agreement (Share Purchase Agreement), dated December 14, 2020, for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies directed at four targets, BCMA, CD70, FLT3 and DLL3 (Overland Licensed Products) for patients in greater China, Taiwan, South Korea and Singapore (the JV Territory). Allogene Overland subsequently assigned the License Agreement to a wholly owned subsidiary, Allogene Overland BioPharm (HK) Limited (Allogene Overland HK). On April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene Overland Biopharm (PRC) Co., Limited (Allogene Overland PRC).
On May 24, 2024, we, Overland and Allogene Overland entered into a Share Exchange Agreement (Share Exchange Agreement) pursuant to which Overland’s cell therapy business merged into Allogene Overland (the Organizational Restructuring). Under a separate agreement between Overland and HH BioPharma Holdings Ltd. (HBP) executed on May 24, 2024, Overland distributed all Series Seed Preferred Shares of Allogene Overland held by Overland to HBP and HBP has assumed all rights and obligations attached to such shares and all rights and obligations of Overland under the Share Exchange Agreement.
In connection with the Organizational Restructuring, on May 24, 2024, we and Allogene Overland PRC entered into a First Amendment to Exclusive License Agreement (the License Amendment) to amend and supplement certain provisions of the License Agreement. Under the License Amendment, we continue to grant Allogene Overland PRC an exclusive license to develop, manufacture, and commercialize the Overland Licensed Products in the Territory, with us retaining exclusive rights to the Overland Licensed Products outside the JV Territory, and the royalty obligations to us were amended to a flat mid single-digit royalty on net sales in the JV Territory that are no longer subject to reductions as previously provided. The License Amendment also provides us with additional rights to terminate the License Agreement in its entirety or with respect to the relevant Overland Licensed Product(s) if Allogene Overland PRC fails to initiate manufacturing technology transfer with respect to an Overland Licensed Product as agreed in the License Amendment, or if HBP commits a funding default or a material breach of its representations, warranties, or covenants under the Share Exchange Agreement. The License Amendment also provides that the License Agreement will terminate automatically if our ownership in Allogene Overland falls below 7.5% (other than due to our sale of the shares of Allogene Overland), unless at that time we and Allogene Overland PRC have mutually agreed on the manufacturing technology transfer plan for the Overland Licensed Product(s) and Allogene Overland PRC elects to continue the license for such Overland Licensed Product(s) with increased milestones and royalties. Under the License Amendment terms such increased milestones and royalties consist of up to $115 million in milestone payments for each Overland Licensed Product and tiered mid single-digit to low double-digit royalties on net sales in the JV Territory.
As part of the Organizational Restructuring, Allogene Overland was renamed to Overland Therapeutics Inc. (Overland Therapeutics).
Collaboration and License Agreement with Antion
On January 5, 2022, we entered into an exclusive collaboration and global license agreement (Antion Collaboration and License Agreement) with Antion Biosciences SA (Antion) for Antion’s miRNA technology (miCAR), to advance multiplex gene silencing as an additional tool to develop next generation allogeneic CAR T products. On July 11, 2023, we entered into an amendment to the Antion Collaboration and License Agreement, which included a $2.0 million investment in Antion’s preferred shares and the acquisition of warrants to purchase an additional $3.0 million of Antion’s preferred shares.
Strategic Collaboration Agreement with Foresight Diagnostics
On January 3, 2024, we entered into a Strategic Collaboration Agreement (the Foresight Agreement) with Foresight Diagnostics, Inc. (Foresight Diagnostics). Pursuant to the Foresight Agreement, the parties have agreed to collaborate on a non-exclusive basis in the development of Foresight Diagnostics’ MRD assay as an in vitro diagnostic to identify the MRD+ patient population to be enrolled in our ALPHA3 trial of cemacabtagene ansegedleucel, or cema-cel (previously known as ALLO-501A) for treatment of large B cell lymphoma (LBCL). Under the Foresight Agreement, we have agreed to use commercially reasonable efforts to obtain regulatory approval of cema-cel, and Foresight Diagnostics has agreed to use commercially reasonable efforts to obtain regulatory approval of an MRD assay for use as an in vitro diagnostic with cema-cel.
Components of Results of Operations
Revenues
As of September 30, 2024, our revenue has been exclusively generated from the License Agreement with Allogene Overland PRC. See Note 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the License Agreement.
In the future, we may generate revenue from a combination of product sales, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestones and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, will be materially adversely affected.
Operating Expenses
Research and Development
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 nine months ended September 30, 2024 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;
•costs related to production of clinical materials, including fees paid for raw materials and to contract manufacturers;
•laboratory and vendor expenses related to the execution of preclinical and clinical trials;
•employee-related expenses, which include salaries, benefits and stock-based compensation;
•facilities and other expenses, which include expenses for rent and maintenance of facilities, depreciation and amortization expense and supplies; and
•other significant research and development costs including overhead costs.
We expense all research and development costs in the periods in which they are incurred. We accrue for costs incurred as the services are being provided by monitoring the status of the project and the invoices received from our external service providers. We adjust our accrual as actual costs become known. Where contingent milestone payments are due to third parties under research and development arrangements or license agreements, the milestone payment obligations are expensed when the milestone results are achieved.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase in the future as our clinical programs progress and as we seek to initiate clinical trials of additional product candidates. The cost of advancing our manufacturing process as well as the cost of manufacturing product candidates for clinical trials are included in our research and development expense. We also expect to incur increased research and development expenses as we selectively identify and develop additional product candidates. However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates.
The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:
•per patient trial costs;
•biomarker analysis costs;
•the cost and timing of manufacturing for the trials;
•the number of patients that participate in the trials;
•the number of sites inc