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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, 2019

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: 001-38582

 

Allakos Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

45-4798831

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

975 Island Drive, Suite 201

Redwood City, California

94065

(Address of principal executive offices)

(Zip Code)

(650) 597-5002

Registrant’s telephone number, including area code

 

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

ALLK

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.     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 5, 2019, the registrant had 48,665,674 shares of common stock outstanding.

 

 

 


ALLAKOS INC.

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

2

 

Balance Sheets

2

 

Statements of Operations and Comprehensive Loss

3

 

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

4

 

Statements of Cash Flows

5

 

Notes to Unaudited Interim Financial Statements

6

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

59

Item 3.

Defaults Upon Senior Securities

59

Item 4.

Mine Safety Disclosures

59

Item 5.

Other Information

59

Item 6.

Exhibits

60

Signatures

61

 

 

 

1


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited).

allakos inc.

balance sheets

(in thousands, except per share data)

 

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

308,805

 

 

$

33,660

 

Investments in marketable securities

 

208,199

 

 

 

145,246

 

Prepaid expenses and other current assets

 

3,071

 

 

 

2,703

 

Total current assets

 

520,075

 

 

 

181,609

 

Property and equipment, net

 

8,427

 

 

 

8,848

 

Operating lease right-of-use assets

 

5,843

 

 

 

 

Other long-term assets

 

802

 

 

 

802

 

Total assets

$

535,147

 

 

$

191,259

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

3,823

 

 

$

2,092

 

Accrued expenses and other current liabilities

 

8,675

 

 

 

3,164

 

Total current liabilities

 

12,498

 

 

 

5,256

 

Other long-term liabilities

 

8,223

 

 

 

2,009

 

Total liabilities

 

20,721

 

 

 

7,265

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 20,000 shares

   authorized as of September 30, 2019 and December 31, 2018;

   no shares issued and outstanding as of September 30, 2019

   and December 31, 2018

 

 

 

 

 

Common stock, $0.001 par value per share; 200,000 shares

   authorized as of September 30, 2019 and December 31, 2018;

   48,664 and 42,117 shares issued and outstanding as of

   September 30, 2019 and December 31, 2018, respectively

 

48

 

 

 

42

 

Additional paid-in capital

 

679,145

 

 

 

288,079

 

Accumulated other comprehensive gain (loss)

 

102

 

 

 

(15

)

Accumulated deficit

 

(164,869

)

 

 

(104,112

)

Total stockholders’ equity

 

514,426

 

 

 

183,994

 

Total liabilities and stockholders’ equity

$

535,147

 

 

$

191,259

 

 

See accompanying notes to unaudited interim financial statements

 

2


 

 

Allakos Inc.

Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

16,067

 

 

$

8,706

 

 

$

45,276

 

 

$

22,256

 

General and administrative

 

 

7,517

 

 

 

3,269

 

 

 

19,292

 

 

 

7,952

 

Total operating expenses

 

 

23,584

 

 

 

11,975

 

 

 

64,568

 

 

 

30,208

 

Loss from operations

 

 

(23,584

)

 

 

(11,975

)

 

 

(64,568

)

 

 

(30,208

)

Interest income, net

 

 

1,887

 

 

 

836

 

 

 

3,888

 

 

 

1,352

 

Other expense, net

 

 

(35

)

 

 

(9

)

 

 

(77

)

 

 

(154

)

Net loss

 

 

(21,732

)

 

 

(11,148

)

 

 

(60,757

)

 

 

(29,010

)

Unrealized gain (loss) on marketable securities, net of tax

 

 

(12

)

 

 

(36

)

 

 

117

 

 

 

(33

)

Comprehensive loss

 

$

(21,744

)

 

$

(11,184

)

 

$

(60,640

)

 

$

(29,043

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.47

)

 

$

(0.34

)

 

$

(1.38

)

 

$

(2.34

)

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

46,280

 

 

 

32,609

 

 

 

44,025

 

 

 

12,406

 

 

See accompanying notes to unaudited interim financial statements

 


 

3


 

Allakos Inc.

Statements of CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(unaudited)

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated Other Comprehensive Gain (Loss)

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

 

 

$

 

 

 

 

42,117

 

 

$

42

 

 

$

288,079

 

 

$

(15

)

 

$

(104,112

)

 

$

183,994

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,834

 

 

 

 

 

 

 

 

 

2,834

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

968

 

 

 

1

 

 

 

367

 

 

 

 

 

 

 

 

 

368

 

Issuance of common stock upon 2018 ESPP purchase

 

 

 

 

 

 

 

 

 

39

 

 

 

 

 

 

595

 

 

 

 

 

 

 

 

 

595

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Unrealized gain on marketable securities, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

 

 

 

 

 

45

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,953

)

 

 

(19,953

)

Balance at March 31, 2019

 

 

 

 

$

 

 

 

 

43,124

 

 

$

43

 

 

$

291,881

 

 

$

30

 

 

$

(124,065

)

 

$

167,889

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,105

 

 

 

 

 

 

 

 

 

3,105

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

60

 

 

 

 

 

 

138

 

 

 

 

 

 

 

 

 

138

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Unrealized gain on marketable securities, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

84

 

 

 

 

 

 

84

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,072

)

 

 

(19,072

)

Balance at June 30, 2019

 

 

 

 

$

 

 

 

 

43,184

 

 

$

43

 

 

$

295,130

 

 

$

114

 

 

$

(143,137

)

 

$

152,150

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,960

 

 

 

 

 

 

 

 

 

3,960

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

218

 

 

 

 

 

 

1,934

 

 

 

 

 

 

 

 

 

1,934

 

Issuance of common stock upon 2018 ESPP purchase

 

 

 

 

 

 

 

 

 

35

 

 

 

 

 

 

595

 

 

 

 

 

 

 

 

 

595

 

Issuance of common stock upon follow-on offering,

   net of offering costs of $24,975

 

 

 

 

 

 

 

 

 

5,227

 

 

 

5

 

 

 

377,520

 

 

 

 

 

 

 

 

 

377,525

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Unrealized loss on marketable securities, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,732

)

 

 

(21,732

)

Balance at September 30, 2019

 

 

 

 

$

 

 

 

 

48,664

 

 

$

48

 

 

$

679,145

 

 

$

102

 

 

$

(164,869

)

 

$

514,426

 

 

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated Other Comprehensive Gain (Loss)

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity (Deficit)

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

 

30,971

 

 

$

142,969

 

 

 

 

2,114

 

 

$

3

 

 

$

1,803

 

 

$

 

 

$

(60,574

)

 

$

(58,768

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

614

 

 

 

 

 

 

 

 

 

614

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,485

)

 

 

(8,485

)

Balance at March 31, 2018

 

 

30,971

 

 

$

142,969

 

 

 

 

2,114

 

 

$

3

 

 

$

2,423

 

 

$

 

 

$

(69,059

)

 

$

(66,633

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

438

 

 

 

 

 

 

 

 

 

438

 

Proceeds from repayment of recourse promissory note

 

 

 

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

416

 

 

 

 

 

 

291

 

 

 

 

 

 

 

 

 

291

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Unrealized gain on marketable securities, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,377

)

 

 

(9,377

)

Balance at June 30, 2018

 

 

30,971

 

 

$

143,019

 

 

 

 

2,530

 

 

$

3

 

 

$

3,158

 

 

$

3

 

 

$

(78,436

)

 

$

(75,272

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

979

 

 

 

 

 

 

 

 

 

979

 

Proceeds from repayment of recourse promissory note

 

 

 

 

 

(50

)

 

 

 

 

 

 

 

 

 

50

 

 

 

 

 

 

 

 

 

50

 

Issuance of common stock upon initial public offering,

   net of offering costs of $3,466

 

 

 

 

 

 

 

 

 

8,453

 

 

 

8

 

 

 

138,349