Allogene Therapeutics, Inc. (NASDAQ:ALLO) Q4 2023 Earnings Call Transcript
Allogene Therapeutics, Inc. (NASDAQ:ALLO) Q4 2023 Earnings Call Transcript March 14, 2024
Allogene Therapeutics, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by and welcome to Allogene Therapeutics Fourth Quarter and Full Year 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be aware that today's conference call is being recorded. I would now like to turn the call over to Christine Cassiano, Chief Corporate Affairs and Brand Strategy Officer. Ms. Cassiano, please go ahead.
Christine Cassiano: Thank you, operator, and welcome to all who have joined this call. After the market closed today, Allogene issued a press release that provides a business update and financial results for the fourth quarter and full year 2023. This press release and today's webcast are both available on our website. Following our prepared remarks, we will host a Q&A session. We ask you to limit your questions to one per person, as we will keep this call to an hour and do our best to get to as many questions as possible. Joining me today are Dr. David Chang, President and Chief Executive Officer; Dr. Zachary Roberts, Executive Vice President of Research and Development and Chief Medical Officer; and Geoff Parker, Chief financial officer.
During today's call, we will be making certain forward-looking statements. These may include statements regarding the success and timing of our ongoing and planned clinical trials, data presentations, regulatory filings, future research and development efforts, manufacturing capabilities, the safety and efficacy of our product candidates, and 2024 financial guidance, among other things. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change. A description of potential risks can be found in our press release and latest SEC disclosure documents. You are cautioned not to place undue reliance on these forward-looking statements, and Allogene disclaims any obligation to update these statements.
I'll now turn the call over to David.
David Chang: Thank you, Christine, and thank you for all who have joined our call today. Rather than looking back, which is the norm for this type of call, I would like to take the opportunity to look ahead. We have recently returned from an investor conference in Boston and we are beyond thrilled to feel a renewed enthusiasm for biotech and even more so a resurgence in cell therapy. I would argue this is also true for Allogene, a sentiment seemingly shared by many of our investors following the pivot we announced at the beginning of 2024. From our innovative ALPHA3 trial, which is designed to embed cema-cel as part of a curative first-line regimen for patients with large B-cell lymphoma to specifically creating a CAR T that could meet the unique needs of patients with autoimmune disease and possibly reduce reliance on lymphodepletion, our development approach focuses on the distinctive attributes of an off-the-shelf alternative and creates an advantage for our CAR T programs.
We are no longer developing CAR T using an outdated playbook. Now that we have established the viability of our allogeneic platform, our product can be developed using a fresh approach created for what we do, both in design of our trial and design of our constructs to meet the current and future needs of patients and dramatically expand opportunity. ALPHA3, which based on feedback from investors and doctors is perhaps one of the greatest example of the role an allogeneic CAR T can play in this resurgence for cell therapy. This is the first pivotal trial for frontline consolidation in large B-cell lymphoma with a goal of improving cure rates. There was significant insight gathering work and discussion with the FDA in 2023 to inform and finalize ALPHA3.
When we revealed the trial in January, there was acknowledgement almost right away that this groundbreaking trial creates the potential to leapfrog all other CAR T and embed cema-cel in first-line treatment. Equally important is the innovative concept of treating minimum residual disease, or MRD, together with the benefit of drug in a vial, could open the door to make allogeneic CAR T available in community-based cancer centers where most early line patients are treated. The more we've talked about ALPHA3, the deeper the understanding this trial design is something truly unique. A rare opportunity in oncology to do a randomized trial against observation, and the prospect of becoming new standard of care in the first-line setting. Based on the addressable market just in the US, the revenue potential could be upwards of $3 billion and could easily double when expanded at ex-US.
This type of opportunity only presents itself when you center on patients and their endeavor to be curative. Our second most asked program by investor after ALPHA3 is ALLO-329 in autoimmune disease or AID. Enthusiasm for CAR T in AID is palpable. However, we have chosen not to rush into the already crowded field with an undifferentiated approach. The future result of that could mean an uphill battle in trial enrollment or worse, at commercialization. Instead, we are applying our deep and hard-earned experience to specifically design our [indiscernible] targeting CAR T 2.0 for autoimmune disease. Our design is centered on both scalability and reducing or eliminating lymphodepletion which we believe is absolutely critical for rapid clinical development and future commercial success.
We expect to be in clinic with ALLO-329 in a Phase 1 trial in early 2025. Our next two-core program also lean into attributes of allogeneic CAR T. Our new ALPHA2 cohort for cema-cel in chronic lymphocytic leukemia, or CLL, aims to address the growing unmet need among patients whose disease are not controlled by DTK and/or BCL3 inhibitors. Relapse refractory CLL in these second and third line settings represents a commercially attractive opportunity with revenue potential in the $3 billion range in the US. We believe an allogeneic CAR T product is particularly well suited to overcome in limitation of autologous CAR T, where poor T cell fitness is a known barrier to efficacy. New approvals could reopen the door of interest in CLL and we look to charge through it with our program.
Our ongoing TRAVERSE trial tackles one of the hardest industry challenges, but one we are willing to undertake, solid tumors. ALLO-316 in renal cell carcinoma leverages our Dagger technology to optimize CAR T cell expansion and persistence to maximize the potential of an AlloCAR T. In the second quarter, we plan to publish what we believe to be fundamental discovery, the algorithm that may mitigate the treatment-associated hyperinflammatory response without compromising the CAR T function needed to eradicate solid tumors. A more comprehensive update from the TRAVERSE trial is planned for year-end 2024. Now, I'd like to turn the call over to Zach to address some of the more commonly asked questions about our programs.
Zachary Roberts: Thank you, David. As I'm sure you can tell, we are all very excited about our new strategy and thrilled that investors and investigators alike share that enthusiasm. I'll start with CLL because that gets a little less attention than ALPHA3, although it has the potential to pack a powerful punch. It's ironic that complete remissions in relapse refractory CLL ignited the CAR T field many years ago, but that excitement waned for the very limitations we've stated. New approvals could offer a much needed alternative for these patients, but there remains a growing need for effective treatment post BTKis and B-cell 2 inhibitor therapies. Recent autologous CD19 CAR T data has been a positive step for patients with relapsed refractory CLL, but there is still room for improvement.
Durable responses in relapsed refractory CLL is likely hindered by an unfortunate reality that T cell dysfunction and high circulating tumor burden makes manufacturing of highly active T cells difficult. There is strong scientific rationale to believe that an AlloCART product derived from healthy donor cells could create a clinically meaningful advance for these late-stage patients with a one-time dose and simpler administration and logistics. The new Phase 1 ALPHA2 cohort will include 12 patients treated with cema-cel. This study driven by investigator enthusiasm, is now enrolling patients, and we plan to have initial data at the end of this year. I'll now talk about ALLO-329 in autoimmune disease, our next intended advance. We believe the approach we are taking to reduce or even eliminate the need for standard lymphodepletion will be critical to meet the unique requirements for these patients.
The risk tolerance of these patients is very different than those with cancer, in large part because of patient demographics, wide availability of effective therapies, and rheumatologists general lack of experience with chemotherapy, leukapheresis procedures, and cell therapies. Our wholly-owned, next-generation, site-specific integration-based dual targeting CD19, CD70 AlloCAR T is designed to reduce or eliminate the need for standard chemotherapy while targeting CD19 positive B-cells and CD70-positive activated T-cells, both of which play a role in autoimmune disorders. We have invested in this highly differentiated dual-targeting approach to set us apart from the pack and position us for long-term success. All current CAR T programs in AID are targeting CD19 and therefore solely addressing the B-cell component.
We believe that introducing CD70 will allow the elimination of both pathogenic B and T cells that underlie autoimmunity, thereby potentially increasing effectiveness in diseases with direct or indirect T cell involvement, possibly allowing us to extend beyond indications in which the strict CD19 targeting has demonstrated clinical benefit. Of course, the ability to manufacture hundreds of off-the-shelf CAR T doses from a single healthy donor leukapheresis could provide an additional competitive advantage during clinical trial execution and would much more readily meet the potentially enormous commercial demand. Initiation of this Phase 1 trial with ALLO-329 is expected in early 2025. We are very excited to have partnered with Arbor Biotechnologies for use of their proprietary CRISPR gene editing technology to support our overarching next-generation AlloCAR T platform in autoimmune disease.
Finally, I am particularly proud of and excited by ALPHA3. Make no mistake, this was a year of hard work. But bringing this novel trial to life with the broader Allogene team, our Advisory Boards and potential investigators, both comprised of academic KOLs and community oncologists alike, and securing the support of the FDA is already one of the highlights of my career. The elegant design of this innovative trial and the aha that comes with it is likely why we get asked, why hasn't anyone tried this before? It simply wasn't possible until now. To run a study like ALPHA3, we needed two things to come together, a highly accurate MRD assay and a one-time powerful treatment that could be administered immediately. We believe we now have the right combination.
The design of the ALPHA3 first line consolidation trial builds upon the results demonstrated in the Phase 1 ALPHA2 trial and leverages an investigational cutting-edge diagnostic test developed by Foresight Diagnostics to identify patients who have minimal residual disease at the completion of frontline chemo-immunotherapy for treatment with cema-cel. Approximately one-third of LBCL patients who initially respond to R-CHOP will relapse. Unfortunately, until recently, there has been no way to know which patients would go on to never experience a disease recurrence and which would have their cancer relapse. The standard of care after frontline treatment has for decades been to simply watch and wait for this disease to relapse. ALPHA3 takes advantage of cema-cel as a one-time off-the-shelf treatment that can be administered immediately upon discovery of MRD following six cycles of R-CHOP, positioning it to become the standard seventh cycle of frontline treatment available to all eligible patients with MRD.
ALPHA3 builds on the growing understanding that administration of CAR T therapies to patients with low disease burden improves both safety and efficacy outcomes. Cema-cel's Phase 1 safety profile with low rates of CRS and ICANS already permits its use in the outpatient setting in relapse refractory patients and may further improve in patients with no radiological evidence of disease. What's incredibly exciting is that the outcome of this pivotal trial could allow cema-cel to be embedded in the frontline setting, where autologous therapies are far less feasible. Why? Consolidating response with an MRD positive result post R-CHOP requires immediate and definitive action to prevent an impending relapse. A one-time treatment with cema-cel could happen roughly two to three days post MRD positive test results.
As we have seen, autologous CAR T's have had difficulty penetrating community cancer centers and accessing earlier-line patients. Use of cema-cel won't rely on the same complex logistics that have hindered CAR T adoption, nor will there be a reliance on referrals, as the intent is for CAR T to be available in these community cancer centers. An allogeneic like cema-cel is what these doctors have been waiting for as entry to the modality in their centers. We believe these differentiated attributes of cema-cel cannot be reproduced by autologous CAR T, bispecifics, or any other treatment modality. Startup activities for ALPHA3 have been initiated. The study will randomize approximately 230 patients who are MRD positive at the end of frontline therapy to either consolidation with cema-cel or the current standard of care, which is observation.
The design, with a primary endpoint of event-free survival, will initially include two lymphodepletion arms, one with standard fludarabine and cyclophosphamide plus ALLO-647 and one without ALLO-647. The trial start is planned for mid-2024 and will be conducted in a wide array of cancer treatment centers, including community cancer centers where most earlier-line patients seek care. The outcome of this pivotal trial could allow cema-cel to potentially improve cure rates and become the only treatment approved for frontline consolidation, with the potential to significantly reduce the need for CAR T in later lines. We look forward to answering any additional questions you have on our pipeline during the Q&A. I'll now hand the call over to Geoff.
Geoff Parker: Thank you, Zach. I'd like to echo David's comments made at the beginning of this call. It's been a very exciting few months, speaking with current and prospective investors. The enthusiasm expressed for our strategy has been greatly appreciated and inspirational for our team. Such broad and unanimous enthusiasm is something that is unique in my career. We look forward to having ample opportunity to continue to share our vision and program updates throughout the year, especially on ALPHA3, TRAVERSE, our CLL trial, and ALLO-329, our CAR T 2.0 for autoimmune disease. Our vision is bold and we recognize the cash runway as critical. We are pleased that the changes we've made following our announcement in early January have focused the strategy and extended our runway into 2026 but acknowledge that extending that runway must remain a focus.
Rest assured that while we actively manage costs, we will also be actively pursuing opportunities to build our cash reserves. We do however have a strong cash balance ending 2023 with $448.7 million in cash, cash equivalents, and investments, and we have no debt. As we look ahead to a full year 2024, we expect a cash burn of approximately $190 million. We expect our full-year 2024 GAAP operating expenses to be approximately $280 million which includes estimated non-cash stock-based compensation expense of approximately $60 million. From a longer-term perspective, we continue to forecast that our cash runway will support our operations into 2026. This guidance excludes any impact from potential business development activities. Full-year 2023 research and development expenses were $242.9 million, which included $31.9 million in expenses associated with non-cash, stock-based compensation.
For the full year of 2023, general and administration expenses were $71.7 million, which included $34 million of non-cash, stock-based compensation expense. For the full year of 2023, our net loss was $327.3 million or $2.09 per share, including non-cash stock-based compensation expense of $66 million and $13.2 million in non-cash impairment of long-lived asset expense. With that, we will now open the call for your questions.
Operator: [Operator Instructions] Our first question comes from the line of Tyler Van Buren of TD Cowen. Your question, please, Tyler.
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