10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 March 31, 2022

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 001-39386

 

ALX ONCOLOGY HOLDINGS INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

85-0642577

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

323 Allerton Avenue

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 650-466-7125

 

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, par value $0.001 per share

 

ALXO

 

The Nasdaq Global Select Market

 

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. YesNo

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, a 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 May 2, 2022, the Registrant had 40,680,947 shares of common stock outstanding, $0.001 par value per share.

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

 

our financial performance;
the sufficiency of our existing cash to fund our future operating expenses and capital expenditure requirements;
the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;
our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and our ability to grow a sales team;
the implementation of our strategic plans for our business and product candidates;
our ability to obtain and maintain regulatory approval of our product candidates and the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations, such as orphan drug designation, for our product candidates for various diseases;
our reliance on third parties to conduct preclinical research activities, and for the manufacture of our product candidates;
the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates;
the progress and focus of our current and future clinical trials, and the reporting of data from those trials;
our ability to advance product candidates into and successfully complete clinical trials;
the ability of our clinical trials to demonstrate the safety and efficacy of our product candidates, and other positive results;
the success of competing therapies that are or may become available;
developments relating to our competitors and our industry, including competing product candidates and therapies;
our plans relating to the further development and manufacturing of our product candidates, including additional indications that we may pursue;
existing regulations and regulatory developments in the United States and other jurisdictions;
our potential and ability to successfully manufacture and supply our product candidates for clinical trials and for commercial use, if approved;
our continued reliance on third parties to conduct clinical trials of our product candidates, and for the manufacture of our product candidates;
our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;

 


 

the scope of protection we are able to establish and maintain for intellectual property rights, including our technology platform and product candidates;
our ability to retain the continued service of our key personnel and to identify, hire, and then retain additional qualified personnel;
our expectations regarding the impact of the ongoing COVID-19 pandemic or geopolitical risks on our business;
our plans for and prospects of our acquisitions and other business development activities, and our ability to successfully capitalize on these opportunities; and
our anticipated use of our existing cash and cash equivalents and short-term and long-term investments.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this Quarterly Report, whether as a result of any new information, future events or otherwise.

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 you are cautioned not to unduly rely upon these statements.

 


 

Table of Contents

 

 

 

Page

PART I

FINANCIAL INFORMATION

 

Item 1

Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets

5

 

Condensed Consolidated Statements of Operations

6

 

Condensed Consolidated Statements of Comprehensive Loss

7

 

Condensed Consolidated Statements of Stockholders' Equity

8

 

Condensed Consolidated Statements of Cash Flows

9

 

Notes to Condensed Consolidated Financial Statements

10

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3

Quantitative and Qualitative Disclosures about Market Risk

30

Item 4

Controls and Procedures

30

 

 

 

PART II

OTHER INFORMATION

 

Item 1

Legal Proceedings

31

Item 1A

Risk Factors

31

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

91

Item 3

Defaults Upon Senior Securities

91

Item 4

Mine Safety Disclosures

91

Item 5

Other Information

91

Item 6

Exhibits

92

 

 

 

 

SIGNATURES

93

 

 

 


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ALX ONCOLOGY HOLDINGS INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

159,086

 

 

$

363,667

 

Short-term investments

 

 

157,510

 

 

 

 

Prepaid expenses and other current assets

 

 

4,929

 

 

 

3,352

 

Total current assets

 

 

321,525

 

 

 

367,019

 

Property and equipment, net

 

 

1,338

 

 

 

897

 

Long-term investments

 

 

25,109

 

 

 

 

Other assets

 

 

15,704

 

 

 

12,267

 

Total assets

 

$

363,676

 

 

$

380,183

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,133

 

 

$

3,764

 

Payable and accrued liabilities due to related party

 

 

1,446

 

 

 

1,630

 

Accrued expenses and other current liabilities

 

 

8,729

 

 

 

9,901

 

Total current liabilities

 

 

15,308

 

 

 

15,295

 

Other non-current liabilities

 

 

4,772

 

 

 

1,839

 

Total liabilities

 

 

20,080

 

 

 

17,134

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Common stock, $0.001 par value; 1,000,000,000 shares authorized
   as of March 31, 2022 and December 31, 2021;
40,656,632 and
   
40,587,067 shares issued and outstanding as of March 31, 2022 and
   December 31, 2021, respectively

 

 

41

 

 

 

41

 

Additional paid-in capital

 

 

570,679

 

 

 

564,993

 

Accumulated other comprehensive loss

 

 

(606

)

 

 

 

Accumulated deficit

 

 

(226,518

)

 

 

(201,985

)

Total stockholders’ equity

 

 

343,596

 

 

 

363,049

 

Total liabilities and stockholders’ equity

 

$

363,676

 

 

$

380,183

 

See accompanying notes to these condensed consolidated financial statements (unaudited).

5


 

ALX ONCOLOGY HOLDINGS INC.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

17,073

 

 

$

9,849

 

General and administrative

 

 

7,674

 

 

 

4,359

 

Total operating expenses

 

 

24,747

 

 

 

14,208

 

Loss from operations

 

 

(24,747

)

 

 

(14,208

)

Interest income

 

 

225

 

 

 

25

 

Other income (expense), net

 

 

(11

)

 

 

(2

)

Net loss

 

$

(24,533

)

 

$

(14,185

)

Net loss per share, basic and diluted

 

$

(0.60

)

 

$

(0.35

)

Weighted-average shares of common stock used to
   compute net loss per shares, basic and diluted

 

 

40,616,302

 

 

 

40,055,435

 

See accompanying notes to these condensed consolidated financial statements (unaudited).

 

6


 

ALX ONCOLOGY HOLDINGS INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(24,533

)

 

$

(14,185

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

Unrealized loss on available-for-sale investments

 

 

(606

)

 

 

 

Total comprehensive loss

 

$

(25,139

)

 

$

(14,185

)

See accompanying notes to these condensed consolidated financial statements (unaudited).

7


 

ALX ONCOLOGY HOLDINGS INC.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

 

40,587,067

 

 

$

41

 

 

$

564,993

 

 

$

 

 

$

(201,985

)

 

$

363,049

 

Issuance of common stock
   under equity incentive plans

 

 

69,565

 

 

 

 

 

 

185

 

 

 

 

 

 

 

 

 

185

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,501

 

 

 

 

 

 

 

 

 

5,501

 

Unrealized loss on available-
   for-sale investments

 

 

 

 

 

 

 

 

 

 

 

(606

)

 

 

 

 

 

(606

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,533

)

 

 

(24,533

)

Balance as of March 31, 2022

 

 

40,656,632

 

 

$

41

 

 

$

570,679

 

 

$

(606

)

 

$

(226,518

)

 

$

343,596

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2020

 

 

39,844,522

 

 

$

40

 

 

$

548,327

 

 

$

 

 

$

(118,522

)

 

$

429,845

 

Issuance of common stock
   under equity incentive plans

 

 

364,047

 

 

 

 

 

 

1,024

 

 

 

 

 

 

 

 

 

1,024

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,800

 

 

 

 

 

 

 

 

 

1,800

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,185

)

 

 

(14,185

)

Balance as of March 31, 2021

 

 

40,208,569

 

 

$

40

 

 

$

551,151

 

 

$

 

 

$

(132,707

)

 

$

418,484

 

See accompanying notes to these condensed consolidated financial statements (unaudited).

8


 

ALX ONCOLOGY HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(24,533

)

 

$

(14,185

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

58

 

 

 

5

 

Non-cash lease costs

 

 

318

 

 

 

58

 

Stock-based compensation

 

 

5,501

 

 

 

1,800

 

Net amortization of premiums and accretion of discounts on investments

 

 

107

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,577

)

 

 

(453

)

Other assets

 

 

(317

)

 

 

(583

)

Accounts payable

 

 

1,553

 

 

 

7,346

 

Payable and accrued liabilities due to related party

 

 

(184

)

 

 

 

Accrued expenses and other current liabilities

 

 

(1,304

)

 

 

585

 

Other non-current liabilities

 

 

(296

)

 

 

292

 

Net cash used in operating activities

 

 

(20,674

)

 

 

(5,135

)

Investing activities

 

 

 

 

 

 

Purchase of investments

 

 

(183,332

)

 

 

 

Purchase of property and equipment

 

 

(589

)

 

 

(7

)

Net cash used in investing activities

 

 

(183,921

)

 

 

(7

)

Financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options under equity incentive plan

 

 

185

 

 

 

778

 

Principal payments on finance leases

 

 

(105

)

 

 

Net cash provided by financing activities

 

 

80

 

 

 

778

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(204,515

)

 

 

(4,364

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

363,667

 

 

 

434,219

 

Cash, cash equivalents and restricted cash at end of year

 

$

159,152

 

 

$

429,855

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

Purchase of property and equipment in accounts payable and
   accrued expenses

 

$

147

 

 

$

 

Right-of-use asset acquired under operating leases

 

$

3,419

 

 

$

 

Receivables for cash in-transit on exercise of common stock
   under equity incentive plans

 

$

 

 

$

246

 

 

 

 

 

 

 

 

Reconciliation of cash and cash equivalents and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

 

$

159,086

 

 

$

429,855

 

Restricted cash (included in other assets)

 

 

66

 

 

 

 

Total cash and cash equivalents and restricted cash

 

$

159,152

 

 

$

429,855

 

See accompanying notes to these condensed consolidated financial statements (unaudited).

9


 

ALX ONCOLOGY HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) ORGANIZATION

Organization

ALX Oncology Holdings Inc., or the Company, was formed as a Delaware corporation on April 1, 2020, or Inception. The Company was formed for the purpose of completing the Company’s initial public offering of its common stock and related transactions in order to carry on the business of ALX Oncology Limited. The Company is a clinical-stage immuno-oncology company focused on helping patients fight cancer by developing therapies that block the CD47 checkpoint pathway and bridge the innate and adaptive immune system.

The Company owns subsidiaries, consisting of ALX Oncology Limited, incorporated in Ireland; ALX Oncology Inc., incorporated in the United States, Alexo International Holdings Ltd, incorporated in Malta; ScalmiBio, Inc., incorporated in the United States, Alexo Therapeutics International, incorporated in the Cayman Islands, which is a wholly-owned subsidiary of Alexo International Holdings Ltd., and Sirpant Therapeutics, incorporated in the Cayman Islands, which is a wholly-owned subsidiary of Alexo Therapeutics International, or collectively, the Subsidiaries.

As of March 31, 2022, the Company has devoted substantially all of its efforts to the formation and financing of the Company, as well as product development, and has not realized product revenues from its planned principal operations. The Company has no manufacturing facilities and all manufacturing related activities are contracted out to third-party service providers.

Management expects to incur additional losses in the future to conduct product candidate research and development and to conduct pre-commercialization activities and recognizes that the Company will likely raise additional capital to fully implement its business plan. The Company intends to raise such capital through the sale of additional equity, debt financings or strategic alliances with third parties. However, there can be no assurance that the Company will be successful in acquiring additional funding at levels sufficient to fund its operations or on terms acceptable to the Company. If the Company is unsuccessful in its efforts to raise additional financing, the Company could be required to significantly reduce operating expenses and delay, reduce the scope of or eliminate some of its development programs or its future commercialization efforts, out-license intellectual property rights to its product candidates and sell unsecured assets, or a combination of the above, any of which may have a material adverse effect on the Company’s business, results of operations, financial condition and/or its ability to fund its scheduled obligations on a timely basis or at all. The Company believes that the existing capital resources will be sufficient to fund the projected operating requirements for at least the next twelve months.

(2) SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.

The condensed consolidated balance sheet as of March 31, 2022 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.

The accompanying condensed consolidated financial statements reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year ending December 31, 2022.

10


 

Reclassifications

Certain amounts in the prior period have been reclassified to conform to the current period presentation.

Principles of Consolidation

All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, management evaluates its estimates, including those related to the estimated useful lives of long-lived assets, clinical trial accruals, fair value of assets and liabilities, income taxes and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.

Significant Accounting Policies

There have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 other than the below policy on Investments.

Investments

Investments consist of money market funds, U.S. Treasury securities, corporate debt securities and commercial paper. The Company’s investments are classified as available-for-sale and carried at estimated fair values and reported in cash equivalents, short-term investments and long-term investments. Management determines the appropriate classification of the investments at the time they are purchased and evaluates the appropriateness of such classifications at each balance sheet date. Investments with contractual maturities greater than 12 months at date of purchase are considered long-term investments.

The Company regularly reviews its investments for declines in estimated fair value below amortized cost. The factors considered in determining whether a credit loss exists include the creditworthiness of the security issuers, the number of investments in an unrealized loss position, the severity and duration of the unrealized losses, and whether it is more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis. The cost of investments sold is based on the specific identification method. In circumstances when an unrealized loss is determined to be credit-related, or when the Company intends to sell or is more likely than not required to sell a security before it recovers its amortized cost basis, the difference between the fair value and the amortized cost of the security is recognized within other income (expense), net in the condensed consolidated statements of operations, and an allowance for credit loss is recorded on the condensed consolidated balance sheets. In circumstances when the decline in fair value is non-credit related, the difference is reported in accumulated other comprehensive loss, net of tax as a separate component of consolidated stockholders’ equity.

Recent Accounting Pronouncements

None.

11


 

3) FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of the Company’s financial assets and liabilities are determined in accordance with the fair value hierarchy established in ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

Level 1—Observable inputs, such as quoted prices in active markets;

Level 2—Inputs, other than the quoted prices in active markets, which are observable either directly or indirectly such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life; and

Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company classifies money market funds and U.S. treasury securities as Level 1 within the fair value hierarchy as the fair value is based on quoted prices. The Company classifies its investments in corporate debt securities and commercial paper as Level 2 within the fair value hierarchy as the fair value is estimated by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to benchmark yields, reported trades and broker/dealer quotes. Where applicable the market approach utilizes prices and information from market transactions for similar or identical assets.

The following table presents the Company's investments, which consist of cash equivalents and investments classified as available-for-sale investments, that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 was as follows (in thousands):

 

 

March 31, 2022

 

 

 

Fair Value
Hierarchy
Level

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Money market funds

 

Level 1

 

$

133,284

 

 

$

 

 

$

 

 

$

133,284

 

U.S. Treasury securities

 

Level 1

 

 

96,360

 

 

 

2

 

 

 

(207

)

 

 

96,155

 

Corporate debt securities

 

Level 2

 

 

61,747

 

 

 

3

 

 

 

(218

)

 

 

61,532

 

Commercial paper

 

Level 2

 

 

16,133

 

 

 

 

 

 

 

 

 

16,133

 

Long-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

Level 1

 

 

15,768

 

 

 

 

 

 

(90

)

 

 

15,678

 

Corporate debt securities

 

Level 2

 

 

9,526

 

 

 

 

 

 

(96

)

 

 

9,430

 

Total

 

 

 

$

332,818

 

 

$

5

 

 

$

(611

)

 

$

332,212

 

 

 

 

December 31, 2021

 

 

 

Fair Value
Hierarchy
Level

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Money market funds

 

Level 1

 

$

357,181

 

 

$

 

 

$

 

 

$

357,181

 

 

12


 

The fair value of cash equivalents and available-for-sale investments by classification included in the condensed consolidated balance sheets was as follows (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

149,593

 

 

$

357,181

 

Short-term investments

 

 

157,510

 

 

 

 

Long-term investments

 

 

25,109

 

 

 

 

Total

 

$

332,212

 

 

$

357,181

 

Cash and cash equivalents in the above table excludes bank account cash of $9.5 million and $6.5 million as of March 31, 2022 and December 31, 2021, respectively.

The fair value of cash equivalents and available-for-sale investments by contractual maturity was as follows (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Maturing in one year or less

 

$

307,103

 

 

$

357,181

 

Maturing after one year through two years

 

 

25,109

 

 

 

 

Total

 

$

332,212

 

 

$

357,181

 

The primary objective of the Company's investment portfolio is to maintain safety of principal, prudent levels of liquidity and acceptable levels of risk. The Company's investment policy limits investments to certain types of instruments issued by institutions with investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

There were no transfers of financial instruments between the fair value measurement levels during the three months ended March 31, 2022 and there were no financial instruments classified as Level 3 as of March 31, 2022.

As of March 31, 2022, accrued interest receivable related to the Company's investments was $0.6 million and was included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

As of March 31, 2022, the unrealized losses for available-for-sale investments were non-credit related and the Company does not intend to sell the investments that were in an unrealized loss position, nor will it be required to sell those investments before recovery of their amortized costs basis, which may be maturity. As of March 31, 2022, no allowance for credit losses for the Company's investments was recorded. During the three months ended March 31, 2022, the Company did not recognize any impairment losses related to investments.

(4) BALANCE SHEET COMPONENTS

Property and Equipment, Net

The following table presents the components of property and equipment, net as of March 31, 2022 and December 31, 2021 (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Laboratory equipment

 

$

789

 

 

$

324

 

Computer hardware and software

 

 

275

 

 

 

241

 

Leasehold improvements

 

 

229

 

 

 

229

 

Furniture and fixtures

 

 

166

 

 

 

166

 

Property and equipment, gross

 

 

1,459

 

 

 

960

 

Less: accumulated depreciation and amortization

 

 

(121

)

 

 

(63

)

Property and equipment, net

 

$

1,338

 

 

$

897

 

Depreciation and amortization expense was nominal for the three months ended March 31, 2022 and 2021.

13


 

Other Assets

The following table presents the components of other assets as of March 31, 2022 and December 31, 2021 (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Long-term prepaid clinical expenses

 

$

7,011

 

 

$

6,694

 

Long-term prepaid contract manufacturing costs

 

 

2,854

 

 

 

2,854

 

Operating lease right-of-use assets

 

 

4,995

 

 

 

1,829

 

Finance lease right-of-use assets

 

 

634

 

 

 

746

 

Deposits

 

 

144

 

 

 

144

 

Restricted cash

 

 

66

 

 

 

 

Total other assets

 

$

15,704

 

 

$

12,267

 

Accrued Expenses and Other Current Liabilities

The following table presents the components of accrued expenses and other current liabilities as of March 31, 2022 and December 31, 2021 (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accrued clinical and nonclinical study costs

 

$

4,026

 

 

$

4,125

 

Accrued compensation and related expenses

 

 

2,372

 

 

 

3,294

 

Accrued professional fees

 

 

455

 

 

 

790

 

Accrued contract manufacturing

 

 

460

 

 

 

693

 

Finance lease liabilities, current

 

 

429

 

 

 

429

 

Operating lease liabilities, current

 

 

596

 

 

 

313

 

Other

 

 

391

 

 

 

257

 

Total accrued expenses and other current liabilities

 

$

8,729

 

 

$

9,901

 

 

(5) LEASES

In conjunction with the adoption of ASC 842, the Company evaluated its vendor contracts to identify embedded leases, if any, and noted that a pharmaceutical support services agreement entered into in May 2016 included leases under ASC 842 because the Company has the right to direct the use of certain equipment. The embedded leases commenced in September 2020 and expire in August 2023 with no stated option to extend the term. The Company classified the leases as finance leases.

In May 2021, the Company entered into a lease agreement for approximately 10,000 square feet of office space located in South San Francisco, California. The lease commenced on June 6, 2021 and expires on August 31, 2026. The lease does not provide an option to extend after it expires. The total lease payments for the life of the lease is approximately $2.0 million. The Company classified the lease as an operating lease.

In February 2022, the Company entered into a lease agreement totaling approximately 11,074 square feet of office and laboratory space located in Palo Alto, California. The lease consists of two premises and expires in February 2030. The lease provides for an option to extend for two years after expiration. The lease for one premise commenced in February 2022 and the second premise commenced in April 2022. The lease provides for an annual base rent of approximately $0.8 million, which increases on an annual basis by 3%. The total lease payments for the life of the lease is approximately $7.0 million. The Company is also responsible for leasehold improvement costs related to the second premise, which are expected to be approximately $2.0 million, of which $1.5 million is to be paid with interest at a rate of 7% per annum as additional payments over the life of the lease. The Company classified the lease as an operating lease. The Company has not recognized a right-of-use asset or aggregate lease liability related to the second premise as of March 31, 2022 for the minimum rental payments as the Company did not control the underlying assets at any time in the period ended March 31, 2022. Under the terms of the lease agreement, the Company issued a letter of credit to the landlord in the amount of $0.1 million, which is collateralized by a restricted cash deposit of $0.1 million (see Note 4 "Other assets").

14


 

As of March 31, 2022, the right-of-use asset, or ROU, recorded for operating leases and finance leases was $5.0 million and $0.6 million, respectively. These amounts were included in other assets on the condensed consolidated balance sheets.

The following table presents the maturities and balance sheet information of the Company's operating and finance lease liabilities as of March 31, 2022 (in thousands, except lease term and discount rate):

 

 

March 31, 2022

 

 

 

Operating Leases

 

 

Finance Leases

 

2022 (remaining 9 months)

 

$

752

 

 

$

324

 

2023

 

 

1,013

 

 

 

288

 

2024

 

 

1,033

 

 

 

 

2025

 

 

1,064

 

 

 

 

2026

 

 

939