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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, 2020

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, 2020, the registrant had 52,503,346 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 Stockholders’ Equity

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 3.

Defaults Upon Senior Securities

58

Item 4.

Mine Safety Disclosures

58

Item 5.

Other Information

58

Item 6.

Exhibits

59

Signatures

60

 

 

 

1


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited).

allakos inc.

balance sheets

(in thousands, except per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

104,303

 

 

$

38,367

 

Investments in marketable securities

 

 

315,452

 

 

 

457,534

 

Prepaid expenses and other current assets

 

 

5,012

 

 

 

3,969

 

Total current assets

 

 

424,767

 

 

 

499,870

 

Property and equipment, net

 

 

7,340

 

 

 

8,410

 

Operating lease right-of-use assets

 

 

5,558

 

 

 

5,775

 

Other long-term assets

 

 

2,839

 

 

 

2,839

 

Total assets

 

$

440,504

 

 

$

516,894

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,581

 

 

$

5,963

 

Accrued expenses and other current liabilities

 

 

11,359

 

 

 

7,098

 

Total current liabilities

 

 

18,940

 

 

 

13,061

 

Other long-term liabilities

 

 

7,752

 

 

 

8,112

 

Total liabilities

 

 

26,692

 

 

 

21,173

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

   authorized as of September 30, 2020 and December 31, 2019;

   no shares issued and outstanding as of September 30, 2020

   and December 31, 2019

 

 

 

 

 

 

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

   authorized as of September 30, 2020 and December 31, 2019;

   48,989 and 48,668 shares issued and outstanding as of

   September 30, 2020 and December 31, 2019, respectively

 

 

49

 

 

 

48

 

Additional paid-in capital

 

 

712,282

 

 

 

685,020

 

Accumulated other comprehensive gain

 

 

167

 

 

 

137

 

Accumulated deficit

 

 

(298,686

)

 

 

(189,484

)

Total stockholders’ equity

 

 

413,812

 

 

 

495,721

 

Total liabilities and stockholders’ equity

 

$

440,504

 

 

$

516,894

 

 

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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

30,380

 

 

$

16,067

 

 

$

77,011

 

 

$

45,276

 

General and administrative

 

 

12,055

 

 

 

7,517

 

 

 

35,701

 

 

 

19,292

 

Total operating expenses

 

 

42,435

 

 

 

23,584

 

 

 

112,712

 

 

 

64,568

 

Loss from operations

 

 

(42,435

)

 

 

(23,584

)

 

 

(112,712

)

 

 

(64,568

)

Interest income, net

 

 

766

 

 

 

1,887

 

 

 

4,039

 

 

 

3,888

 

Other expense, net

 

 

(417

)

 

 

(35

)

 

 

(529

)

 

 

(77

)

Net loss

 

 

(42,086

)

 

 

(21,732

)

 

 

(109,202

)

 

 

(60,757

)

Unrealized gain (loss) on marketable securities

 

 

(620

)

 

 

(12

)

 

 

30

 

 

 

117

 

Comprehensive loss

 

$

(42,706

)

 

$

(21,744

)

 

$

(109,172

)

 

$

(60,640

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.86

)

 

$

(0.47

)

 

$

(2.24

)

 

$

(1.38

)

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

48,950

 

 

 

46,280

 

 

 

48,819

 

 

 

44,025

 

 

See accompanying notes to unaudited interim financial statements

 


 

3


 

Allakos Inc.

Statements of STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated Other Comprehensive Gain

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

48,668

 

 

$

48

 

 

$

685,020

 

 

$

137

 

 

$

(189,484

)

 

$

495,721

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,489

 

 

 

 

 

 

 

 

 

7,489

 

Issuance of common stock upon exercise of stock options

 

 

57

 

 

 

 

 

 

33

 

 

 

 

 

 

 

 

 

33

 

Issuance of common stock upon 2018 ESPP purchase

 

 

40

 

 

 

 

 

 

756

 

 

 

 

 

 

 

 

 

756

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

1,869

 

 

 

 

 

 

1,869

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,824

)

 

 

(27,824

)

Balance at March 31, 2020

 

 

48,765

 

 

$

48

 

 

$

693,298

 

 

$

2,006

 

 

$

(217,308

)

 

$

478,044

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,762

 

 

 

 

 

 

 

 

 

7,762

 

Issuance of common stock upon exercise of stock options

 

 

148

 

 

 

1

 

 

 

1,707

 

 

 

 

 

 

 

 

 

1,708

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(1,219

)

 

 

 

 

 

(1,219

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(39,292

)

 

 

(39,292

)

Balance at June 30, 2020

 

 

48,913

 

 

$

49

 

 

$

702,767

 

 

$

787

 

 

$

(256,600

)

 

$

447,003

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,989

 

 

 

 

 

 

 

 

 

7,989

 

Issuance of common stock upon exercise of stock options

 

 

39

 

 

 

 

 

 

828

 

 

 

 

 

 

 

 

 

828

 

Issuance of common stock upon 2018 ESPP purchase

 

 

30

 

 

 

 

 

 

698

 

 

 

 

 

 

 

 

 

698

 

Issuance of common stock upon vesting of restricted stock units

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(620

)

 

 

 

 

 

(620

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42,086

)

 

 

(42,086

)

Balance at September 30, 2020

 

 

48,989

 

 

$

49

 

 

$

712,282

 

 

$

167

 

 

$

(298,686

)

 

$

413,812

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated Other Comprehensive Gain (Loss)

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,732

)

 

 

(21,732

)

Balance at September 30, 2019

 

 

48,664

 

 

$

48

 

 

$

679,145

 

 

$

102

 

 

$

(164,869

)

 

$

514,426

 

 

See accompanying notes to unaudited interim financial statements

 

4


 

Allakos Inc.

Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(109,202

)

 

$

(60,757

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,162

 

 

 

1,117

 

Stock-based compensation

 

 

23,240

 

 

 

9,899

 

Net amortization of premiums and discounts on marketable securities

 

 

1,659

 

 

 

(2,083

)

Noncash lease expense

 

 

217

 

 

 

207

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(2,088

)

 

 

292

 

Accounts payable

 

 

1,602

 

 

 

1,731

 

Accrued expenses and other current liabilities

 

 

3,901

 

 

 

5,652

 

Other long-term liabilities

 

 

 

 

 

41

 

Net cash used in operating activities

 

 

(79,509

)

 

 

(43,901

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(270,302

)

 

 

(259,413

)

Proceeds from maturities of marketable securities

 

 

411,800

 

 

 

198,000

 

Purchases of property and equipment

 

 

(76

)

 

 

(696

)

Net cash provided by (used in) investing activities

 

 

141,422

 

 

 

(62,109

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

 

 

 

377,525

 

Proceeds from exercise of stock options

 

 

2,569

 

 

 

2,440

 

Proceeds from issuance of common stock under the 2018 ESPP

 

 

1,454

 

 

 

1,190

 

Net cash provided by financing activities

 

 

4,023

 

 

 

381,155

 

Net increase in cash, cash equivalents and restricted cash

 

 

65,936

 

 

 

275,145

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

40,642