10-Q
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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, 2021

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 3, 2021, the registrant had 54,313,379 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

26

Item 4.

Controls and Procedures

26

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

60

Item 3.

Defaults Upon Senior Securities

60

Item 4.

Mine Safety Disclosures

60

Item 5.

Other Information

60

Item 6.

Exhibits

61

Signatures

62

 

 

 

1


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited).

allakos inc.

balance sheets

(in thousands, except per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

274,420

 

 

$

207,177

 

Investments in marketable securities

 

 

231,187

 

 

 

451,820

 

Prepaid expenses and other current assets

 

 

25,843

 

 

 

10,270

 

Total current assets

 

 

531,450

 

 

 

669,267

 

Property and equipment, net

 

 

40,329

 

 

 

8,345

 

Operating lease right-of-use assets

 

 

37,174

 

 

 

39,731

 

Other long-term assets

 

 

12,125

 

 

 

2,275

 

Total assets

 

$

621,078

 

 

$

719,618

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

8,808

 

 

$

13,960

 

Accrued expenses and other current liabilities

 

 

31,815

 

 

 

8,490

 

Total current liabilities

 

 

40,623

 

 

 

22,450

 

Operating lease liabilities, net of current portion

 

 

55,902

 

 

 

42,773

 

Total liabilities

 

 

96,525

 

 

 

65,223

 

Contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 20,000 shares
   authorized as of September 30, 2021 and December 31, 2020;
   
no shares issued and outstanding as of September 30, 2021
   and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value per share; 200,000 shares
   authorized as of September 30, 2021 and December 31, 2020;
   
54,292 and 53,081 shares issued and outstanding as of
   September 30, 2021 and December 31, 2020, respectively

 

 

54

 

 

 

53

 

Additional paid-in capital

 

 

1,042,940

 

 

 

997,298

 

Accumulated other comprehensive gain

 

 

19

 

 

 

8

 

Accumulated deficit

 

 

(518,460

)

 

 

(342,964

)

Total stockholders’ equity

 

 

524,553

 

 

 

654,395

 

Total liabilities and stockholders’ equity

 

$

621,078

 

 

$

719,618

 

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

43,560

 

 

$

30,380

 

 

$

123,460

 

 

$

77,011

 

General and administrative

 

 

19,056

 

 

 

12,055

 

 

 

51,936

 

 

 

35,701

 

Total operating expenses

 

 

62,616

 

 

 

42,435

 

 

 

175,396

 

 

 

112,712

 

Loss from operations

 

 

(62,616

)

 

 

(42,435

)

 

 

(175,396

)

 

 

(112,712

)

Interest income

 

 

74

 

 

 

766

 

 

 

307

 

 

 

4,039

 

Other expense, net

 

 

(187

)

 

 

(417

)

 

 

(407

)

 

 

(529

)

Net loss

 

 

(62,729

)

 

 

(42,086

)

 

 

(175,496

)

 

 

(109,202

)

Unrealized gain (loss) on marketable securities

 

 

(13

)

 

 

(620

)

 

 

11

 

 

 

30

 

Comprehensive loss

 

$

(62,742

)

 

$

(42,706

)

 

$

(175,485

)

 

$

(109,172

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(1.16

)

 

$

(0.86

)

 

$

(3.27

)

 

$

(2.24

)

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

54,069

 

 

 

48,950

 

 

 

53,644

 

 

 

48,819

 

 

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, 2020

 

 

53,081

 

 

$

53

 

 

$

997,298

 

 

$

8

 

 

$

(342,964

)

 

$

654,395

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,354

 

 

 

 

 

 

 

 

 

12,354

 

Issuance of common stock upon exercise of stock options

 

 

321

 

 

 

 

 

 

3,788

 

 

 

 

 

 

 

 

 

3,788

 

Issuance of common stock upon 2018 ESPP purchase

 

 

17

 

 

 

 

 

 

995

 

 

 

 

 

 

 

 

 

995

 

Issuance of common stock upon vesting of restricted stock units

 

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

80

 

 

 

 

 

 

80

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55,558

)

 

 

(55,558

)

Balance at March 31, 2021

 

 

53,457

 

 

$

53

 

 

$

1,014,435

 

 

$

88

 

 

$

(398,522

)

 

$

616,054

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

11,397

 

 

 

 

 

 

 

 

 

11,397

 

Issuance of common stock upon exercise of stock options

 

 

443

 

 

 

 

 

 

800

 

 

 

 

 

 

 

 

 

800

 

Issuance of common stock upon vesting of restricted stock units

 

 

36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(56

)

 

 

 

 

 

(56

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(57,209

)

 

 

(57,209

)

Balance at June 30, 2021

 

 

53,936

 

 

 

53

 

 

 

1,026,632

 

 

 

32

 

 

 

(455,731

)

 

 

570,986

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,496

 

 

 

 

 

 

 

 

 

12,496

 

Issuance of common stock upon exercise of stock options

 

 

308

 

 

 

1

 

 

 

3,039

 

 

 

 

 

 

 

 

 

3,040

 

Issuance of common stock upon 2018 ESPP purchase

 

 

12

 

 

 

 

 

 

773

 

 

 

 

 

 

 

 

 

773

 

Issuance of common stock upon vesting of restricted stock units

 

 

36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

 

 

 

(13

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(62,729

)

 

 

(62,729

)

Balance at September 30, 2021

 

 

54,292

 

 

$

54

 

 

$

1,042,940

 

 

$

19

 

 

$

(518,460

)

 

$

524,553

 

 

 

 

 

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

 

 

See accompanying notes to unaudited interim financial statements

 

4


 

Allakos Inc.

Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(175,496

)

 

$

(109,202

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

1,128

 

 

 

1,162

 

Stock-based compensation

 

 

36,247

 

 

 

23,240

 

Net amortization of premiums and discounts on marketable securities

 

 

2,035

 

 

 

1,659

 

Noncash lease expense

 

 

2,103

 

 

 

217

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(13,467

)

 

 

(2,088

)

Other long-term assets

 

 

(9,850

)

 

 

 

Accounts payable

 

 

(6,038

)

 

 

1,602

 

Accrued expenses and other current liabilities

 

 

18,465

 

 

 

3,901

 

Operating lease liabilities, net of current portion

 

 

2,397

 

 

 

 

Net cash used in operating activities

 

 

(142,476

)

 

 

(79,509

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of marketable securities

 

 

(255,877

)

 

 

(270,302

)

Proceeds from maturities of marketable securities

 

 

474,000

 

 

 

411,800

 

Purchases of property and equipment

 

 

(17,800

)

 

 

(76

)

Net cash provided by investing activities

 

 

200,323

 

 

 

141,422

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

7,628

 

 

 

2,569

 

Proceeds from issuance of common stock under the 2018 ESPP

 

 

1,768

 

 

 

1,454

 

Net cash provided by financing activities

 

 

9,396

 

 

 

4,023

 

Net increase in cash, cash equivalents and restricted cash

 

 

67,243

 

 

 

65,936

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

209,452

 

 

 

40,642

 

Cash, cash equivalents and restricted cash, end of period

 

$

276,695

 

 

$

106,578

 

Supplemental disclosures

 

 

 

 

 

 

Noncash investing and financing items:

 

 

 

 

 

 

Lessor funded lease incentives included in property and equipment

 

$

9,995

 

 

$

 

Property and equipment purchased, not yet paid

 

$

5,317

 

 

$

16

 

 

See accompanying notes to unaudited interim financial statements