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In my previous article, we saw how Allogene Therapeutics, Inc. (NASDAQ:ALLO) came out of that clinical hold on its ALLO501A product for its phase 1 Non-Hodgkin Lymphoma (NHL) trial. I also mentioned how the CAR-T space is the worst performer in an already poor market, and these stocks are becoming too risky for normal investment.
One of the major problems of approved CAR-T therapies is their inordinate expense resulting from their autologous nature. No healthcare system is going to be able to support for long these therapies costing upwards of half a million dollars, especially for non-orphan diseases. The way out, in theory, is allogeneic therapy, like Allogene’s, which is the leader in this space. However, allogeneic therapy has a singular problem – the human immune system considers those cells foreign bodies, and rejects them. This process can lead to debilitating GvHD, or graft versus host disease. In order to stop that from happening, stringent immunosuppressive drugs need to be taken, which cause other side effects.
This, in a nutshell, is the problem Allogene is trying to overcome.
As for their planned catalysts, here’s what I noted in June:
Once the clinical hold was lifted, Allogene began enrolling in the ALLO-715 and ALLO-605 trials in relapsed refractory multiple myeloma and ALLO-316 in advanced or metastatic renal cell carcinoma. The Phase 1 study of ALLO-501A is also enrolling patients again and will begin a pivotal trial this year.
This pivotal trial has started – here and especially here. The clinical hold occurred in all 5 of its trials due to a chromosomal abnormality in the phase 1 trial of ALLO-501A in LBCL. The ALPHA2 trial is the first phase 2 trial of an allogeneic CAR-T product, and is potentially pivotal. It was started in October and will enroll approximately 100 patients. A lymphodepletion regimen that includes Allogene’s ALLO-647 will also be tested in the EXPAND trial, and the company may approach the FDA for an approval for both products based on these trials. Response duration will be a metric critically considered in the trial. While 9 out of 14 patients saw a complete response in the ALLO-501A trials, allogeneic CAR-T therapies have been notoriously unable to maintain the excellent response that otherwise compares well to autologous therapies.
Their next asset I want to discuss is ALLO-715. This is in a phase 1 trial targeting fifth line recurrent/refractory multiple myeloma. The trial combines ALLO-715 with SpringWorks Therapeutics’ nirogacestat in an open label, single arm setting. The trial will read out in December, and will inform their upcoming phase 2 trial’s dosing. Goldman Sachs said, in July, that they expect this asset to have a profile similar to Bristol Myers Squibb and 2seventy bio’s Abecma, the first autologous CAR-T therapy for MM.
Besides these heme cancers, the company has ALLO-316 in renal cell carcinoma ((RCC)) in the TRAVERSE trial. The trial was initiated in the first half of 2021. ALLO-316 targets CD70.
In September, a complicated agreement between Allogene, Servier and Cellectis was terminated by Servier. Cellectis owns TALEN, a gene editing technology, which is licensed by Servier, sublicensed to Allogene, which Allogene used to develop its anti-CD19 CAR-T therapies, specifically UCART19 and ALLO-501A. About why this happened, here’s what the company states in its 8-K:
Servier also licenses certain rights to the CD19 Products from Cellectis S.A. (“Cellectis”) and sublicenses those rights to us. Cellectis has challenged certain performance by Servier and has also challenged the ability of Servier to grant a world-wide sublicense. Servier’s Discontinuation and any subsequent actions may further strain the relationship between Servier and Cellectis, as well as between us and Cellectis. Any failure to resolve Cellectis challenges could have a significant adverse impact on our business, financial condition and prospects.
Allogene may now outlicense ex-US its rights to the CD19 products, however, that will make it ineligible to recover 40% of R&D costs from Servier. Servier has also requested that Allogene do this out-licensing within a specific timeframe, although such a timeframe is not part of their contract.
This news actually had a negative impact on Allogene Therapeutics, Inc. stock, although it doesn’t really hurt the company monetarily. They either sublicense and earn, or they recover some of the costs, and earn.
Financials
ALLO has a market cap of $1.4bn, a cash reserve of $637mn, and a short interest of 38%. Research and development expenses were $63.6 million for the third quarter of 2022, while general and administrative expenses were $18.9 million. At that rate, the company has cash for about 8 quarters.
Bottom Line
I once took a small position in ALLO at around $30, because of their leading position in a cutting edge cancer therapy space. I thought I saw the logic behind their offering. Then the clinical hold stuck, and the stock plummeted. Given the scientific logic here, I held on, and when the clinical hold was lifted, I thought the stock would recover. However, nothing happened, despite solid data and excellent science. It could be lack of catalysts, or durability issues, or something else – however, Allogene Therapeutics, Inc. has been unprofitable.
ALLO is trading at $10 now. In theory, it is enticing. Buying ALLO, you buy into a very promising field in cancer therapy. Note the absolute lack of major catalysts for the next few quarters, and don’t expect an immediate profit. Also be aware, if they don’t get durability, they will be sidelined. With those things in mind, Allogene Therapeutics, Inc. is always attractive as a small investment at these prices.
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