UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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:
(Exact Name of Registrant as Specified in its Charter)
Delaware |
45-4798831 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
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Registrant’s telephone number, including area code
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.
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 |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 ☒
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 |
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The Nasdaq Global Select Market |
As of July 31, 2019, the registrant had
ALLAKOS INC.
Table of Contents
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PART I. |
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Item 1. |
2 |
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2 |
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3 |
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Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
Item 3. |
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Item 4. |
25 |
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PART II. |
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Item 1. |
26 |
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Item 1A. |
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Item 2. |
59 |
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Item 3. |
59 |
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Item 4. |
59 |
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Item 5. |
59 |
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Item 6. |
60 |
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61 |
1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
allakos inc.
balance sheets
(in thousands, except per share data)
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June 30, |
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December 31, |
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2019 |
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2018 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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Investments in marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Other long-term assets |
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Total assets |
$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Stockholders' equity: |
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Preferred stock, $ authorized as of June 30, 2019 and December 31, 2018; and December 31, 2018 |
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Common stock, $ authorized as of June 30, 2019 and December 31, 2018; June 30, 2019 and December 31, 2018, respectively |
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Additional paid-in capital |
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Accumulated other comprehensive gain (loss) |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ |
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$ |
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See accompanying notes to unaudited interim financial statements
2
Allakos Inc.
Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Operating expenses |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Interest income, net |
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Other income (expense), net |
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( |
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Net loss |
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Unrealized gain on marketable securities, net of tax |
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Comprehensive loss |
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$ |
( |
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$ |
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$ |
( |
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$ |
( |
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Net loss per common share: |
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Basic and diluted |
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$ |
( |
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$ |
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$ |
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$ |
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Weighted-average number of common shares outstanding: |
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Basic and diluted |
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See accompanying notes to unaudited interim financial statements
3
Allakos Inc.
Statements of CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands)
(unaudited)
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Convertible Preferred Stock |
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Common Stock |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Gain (Loss) |
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Accumulated Deficit |
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Total Stockholders’ Equity |
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Shares |
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Amount |
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Shares |
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Amount |
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Balance at December 31, 2018 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation expense |
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Issuance of common stock upon exercise of stock options |
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Issuance of common stock upon 2018 ESPP purchase |
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Vesting of restricted common stock |
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Unrealized gain on marketable securities, net of tax |
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Net loss |
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( |
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Balance at March 31, 2019 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation expense |
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Issuance of common stock upon exercise of stock options |
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Vesting of restricted common stock |
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Unrealized gain on marketable securities, net of tax |
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Net loss |
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( |
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Balance at June 30, 2019 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Convertible Preferred Stock |
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Common Stock |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Gain |
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Accumulated Deficit |
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Total Stockholders’ Deficit |
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Shares |
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Amount |
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Shares |
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Amount |
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Balance at December 31, 2017 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Stock-based compensation expense |
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Vesting of restricted common stock |
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Net loss |
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( |
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( |
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Balance at March 31, 2018 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Stock-based compensation expense |
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Proceeds from repayment of recourse promissory note |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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Vesting of restricted common stock |
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Unrealized gain on marketable securities, net of tax |
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Net loss |
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( |
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( |
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Balance at June 30, 2018 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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See accompanying notes to unaudited interim financial statements
4
Allakos Inc.
Statements of Cash Flows
(in thousands)
(unaudited)
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Six Months Ended |
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June 30, |
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2019 |
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2018 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Accretion of tenant improvement allowance |
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Stock-based compensation |
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Net amortization of premiums and discounts on marketable securities |
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( |
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Noncash lease expense |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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( |
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Other long-term assets |
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( |
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Accounts payable |
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( |
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Accrued expenses and other current liabilities |
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Other long-term liabilities |
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Net cash used in operating activities |
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( |
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Cash flows from investing activities |
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Purchases of marketable securities |
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( |
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( |
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Purchases of property and equipment |
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( |
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( |
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Proceeds from maturities of marketable securities |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities |
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Proceeds from issuance of common stock under the 2018 ESPP |
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Proceeds from exercise of stock options, net of repurchases |
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Proceeds from the repayment of recourse promissory note |
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Payments for deferred financing costs |
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( |
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Net cash provided by (used in) financing activities |
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( |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
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$ |
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$ |
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Supplemental disclosures |
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Noncash investing and financing items: |
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Right-of-use assets obtained in exchange for lease obligations (1) |
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$ |
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$ |
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Property and equipment purchased in accounts payable |
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$ |
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$ |
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Lessor funded lease incentives included in property and equipment |
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$ |
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$ |
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Deferred initial public offering costs in accounts payable and accrued expenses |
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$ |
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$ |
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Vesting of restricted common stock subject to repurchase |
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$ |
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$ |
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(1) |
Amount for the six months ended June 30, 2019 includes a transition adjustment recorded as part of the Company’s adoption of a new lease accounting policy effective January 1, 2019. |
See accompanying notes to unaudited interim financial statements
5
ALLAKOS INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
1. Organization and Business
Allakos Inc. (“Allakos” or the “Company”) was incorporated in the state of Delaware in March 2012. Allakos is a clinical stage biopharmaceutical company focused on the development of AK002 for the treatment of eosinophil and mast cell related diseases. The Company’s primary activities to date have included establishing its facilities, recruiting personnel, conducting research and development of its product candidates and raising capital. The Company’s operations are located in Redwood City, California.
Liquidity Matters
Since inception, the Company has incurred net losses and negative cash flows from operations. During the six months ended June 30, 2019, the Company incurred a net loss of $
Initial Public Offering and Related Transactions
On July 23, 2018, the Company completed an initial public offering (“IPO”), selling
In connection with the completion of the IPO on July 23, 2018, all then outstanding shares of convertible preferred stock were converted into
Upon the completion of the IPO, the Company’s certificate of incorporation was amended and restated. Under the amended and restated certificate of incorporation, the Company’s authorized capital stock consists of
2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes.
The interim balance sheet as of June 30, 2019, the statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders’ equity (deficit) and statements of cash flows for the six months ended June 30, 2019 and 2018 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position as of June 30, 2019 and its results of operations and comprehensive loss for the three and six months ended June 30, 2019 and 2018 and its cash flows for the six months ended June 30, 2019 and 2018. Certain information and note disclosures normally included in annual audited financial statements prepared in accordance with U.S. GAAP have been omitted. The financial data and the other financial information disclosed in these notes to the interim financial statements are also unaudited. The results of operations for any interim period are not necessarily indicative of the results to be expected for the entire year or for any other future annual or interim period. The balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date. These interim financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2019.
Use of Estimates
Management uses significant judgment when making estimates related to common stock valuation and related stock-based compensation expense, accrued expenses related to clinical trials, calculation of right-of-use assets and lease liabilities, and deferred tax valuation allowances. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
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and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions, and those differences could be material to the financial position and results of operations.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to credit risk principally consist of cash, cash equivalents and marketable securities. These financial instruments are held in accounts at a single financial institution that management believes possesses high credit quality. Amounts on deposit with this financial institution have and will continue to exceed federally-insured limits. The Company has not experienced any losses on its cash deposits. Additionally, the Company’s investment policy limits its investments to certain types of securities issued by the U.S. government and its agencies.
The Company is subject to a number of risks similar to that of other early-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future clinical trials, its reliance on third-parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitive developments, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, protection of proprietary technology, the ability to make milestone, royalty or other payments due under licensing agreements, and the need to secure and maintain adequate manufacturing arrangements with third-parties. If the Company does not successfully commercialize or partner its product candidates, it will be unable to generate product revenue or achieve profitability.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Restricted cash as of June 30, 2019 represents $
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June 30, |
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December 31, |
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2019 |
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2018 |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash in other long-term assets, deposit for lease facility |
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