ALIGOS THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in "Risk factors" and "Special note regarding forward-looking statements."
Overview
We are a clinical-stage biopharmaceutical company focused on developing novel
therapeutics to address unmet medical needs in viral and liver diseases. We
utilize our proprietary oligonucleotide and small molecule platforms to develop
pharmacologically optimized drug candidates for use in combination regimens
designed to achieve improved treatment outcomes. Our lead effort is to develop a
functional cure for Chronic Hepatitis B (CHB), which often results in
life-threatening conditions such as cirrhosis, end-stage liver disease (ESLD)
and the most common form of liver cancer, hepatocellular carcinoma (HCC). The
most widely used treatment for CHB, nucleos(t)ide analogs, suppresses viral
replication but only achieves low rates of functional cure and often requires
long-term administration. To address this issue, we have developed a portfolio
of differentiated drug candidates for CHB, including
an
Our second area of focus is in non-alcoholic steatohepatitis (NASH), a complex, chronic liver disease where combination regimens may likewise prove beneficial. Our most advanced drug candidate for NASH is ALG-055009, a small molecule THR-ß agonist is currently in nonclinical studies to enable a first-in-human clinical trial. We plan to file a CTA for a Phase 1a/1b study in HVs and subjects with hyperlipidemia in Q3 2021. We believe ALG-055009 has the potential to become an integral component of future combination regimens for NASH.
Our third area of focus is to develop drug candidates with pan-coronavirus activity, including Severe Acute Respiratory Syndrome coronavirus 2 (SARS-CoV-2), the virus responsible for COVID-19. Our efforts to identify a coronavirus therapeutic are multipronged and utilize both our small molecule and oligonucleotide expertise. For our small molecule approach, we are exploring coronavirus protease inhibitors in collaboration with KU Leuven / CISTIM / CD3. In the oligonucleotide areas, we are investigating a siRNA modality and are exploring the potential for targeted lung delivery with this approach.
In
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of
In
We have incurred net losses and negative cash flows from operations in each year
since our formation in
Components of our results of operations
Operating expenses
Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.
Research and development expenses
We rely substantially on third parties to conduct our discovery activities, nonclinical studies, clinical trials and manufacturing. We estimate research and development expenses based on estimates of services performed, and rely on third party contractors and vendors to provide us with timely and accurate estimates of expenses of services performed to assist us in these estimates. A portion of our research and development expenses are based on contractual milestones. Research and development costs consist primarily of costs incurred for the identification and development of our drug candidates through our technology platforms, which include:
• salaries, benefits and other employee-related costs, including stock-based
compensation expense, for personnel engaged in research and development
functions;
• costs of outside consultants, including their fees, and related travel
expenses;
• costs associated with in-process research and development, including license
fees and milestones paid to third-party collaborators for technologies with
no alternative use;
• costs related to production of clinical materials, including fees paid to
contract manufacturers;
• expenses incurred under agreements with collaborators that perform
nonclinical activities;
• costs related to compliance with regulatory requirements; and
• facility costs, depreciation, and other expenses, which include direct and
allocated expenses for rent and maintenance of facilities, insurance, and
other supplies.
We expense research and development costs as the services are performed or the goods are received. Non-refundable payments for goods or services that will be used for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the goods are delivered or the related services are performed until it is no longer expected that the goods will be delivered or the services will be rendered.
We expect our research and development costs to increase in future periods as we continue to invest in research and development activities and advance our nonclinical and clinical programs through clinical development. The process of conducting nonclinical studies and, eventually, clinical trials necessary to obtain regulatory approval is costly and time consuming, and the successful development of our drug candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or clinical trials or if and to what extent we will generate revenue from the commercialization and sale of any of our drug candidates.
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General and administrative expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs not otherwise classified as research and development costs.
We expect that our general and administrative expenses will increase in the
future as we increase our general and administrative personnel headcount to
support personnel in research and development and to support our operations
generally as we increase our research and development activities and activities
related to the potential commercialization of our drug candidates. We also
expect to incur increased expenses associated with operating as a public
company, including costs of accounting, audit, legal, regulatory and tax-related
services associated with maintaining compliance with exchange listing rules and
requirements of the
Interest and other income (expense), net
Interest and other income (expense), net comprises interest income, net and other income (loss), net. Interest income, net primarily consists of interest earned on our cash, cash equivalents, and short-term investments and interest expense related to our convertible note instruments. Other (loss) income, net consists primarily of the change fair value of derivative liabilities and our short-term investments.
Results of Operations
Comparison of the three months ended
Operating expenses
The following table summarizes our operating expenses for the three months endedJune 30, 2021 and 2020: Three Months Ended June 30, Change 2021 2020 ($) % Operating expenses: Research and development$ 24,554 $ 17,176 $ 7,378 43 % General and administrative 6,556 4,095 2,461 60 % Total operating expenses$ 31,110 $ 21,271 $ 9,839 46 %
Research and development expenses
Research and development expenses were
General and administrative expenses
General and administrative expenses were
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Interest and other income (expense), net
` Three Months Ended
June 30, Change
2021 2020 ($) %
Interest income, net $ 72 $ 374 $ (302 ) -81 %
Other (loss) income, net (298 ) 41 (339 ) -818 %
Total interest and other income
(expense), net $ (225 ) $ 415 $ (641 ) -154 %
Interest income, net decreased to
Other (loss) income, net decreased to a loss of
Comparison of the six months ended
Operating expenses
The following table summarizes our operating expenses for the six months endedJune 30, 2021 and 2020: Six Months Ended June 30, Change 2021 2020 ($) % Operating expenses: Research and development$ 47,422 $ 34,478 $ 12,944 38 % General and administrative 12,337 7,514 4,823 64 % Total operating expenses$ 59,759 $ 41,992 $ 17,767 42 %
Research and development expenses
Research and development expenses were
General and administrative expenses
General and administrative expenses were
Interest and other income (expense), net
` Six Months Ended
June 30, Change
2021 2020 ($) %
Interest income, net $ 178 $ 842 $ (665 ) -79 %
Other (loss) income, net (292 ) 266 (557 ) -210 %
Total interest and other income
(expense), net $ (114 ) $ 1,108 $ (1,222 ) -110 %
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Interest income, net decreased to
Other (loss) income, net decreased to a loss of
Liquidity and capital resources
Since our inception, we have not generated any revenue from product sales or any
other sources, and have incurred significant operating losses. We have not yet
commercialized any products and we do not expect to generate revenue from sales
of any drug candidates for at least several years, if ever. To date, we have
financed our operations through private placements of preferred stock, issuances
of common stock and convertible debt. Through
Funding requirements
We have incurred net losses since inception. Our primary use of cash is to fund operating expenses, which consist primarily of research and development costs related to our drug candidates and our discovery programs, and to a lesser extent, general and administrative expenditures. We expect our expenses to increase substantially in connection with our ongoing clinical development activities related to our most advanced drug candidates, ALG-010133 and ALG-000184, which are still in the early stages of development, as well as our research and development of our other drug candidates within our CHB, NASH and coronavirus programs.
In addition, we are incurring additional costs associated with operating as a
public company following our IPO in
• conduct our current and future clinical trials, and additional nonclinical
studies;
• initiate and continue research and nonclinical and clinical development of
other drug candidates;
• seek to identify additional drug candidates;
• pursue marketing approvals for any of our drug candidates that successfully
complete clinical trials, if any;
• establish a sales, marketing and distribution infrastructure to
commercialize any products for which we may obtain marketing approval;
• require the manufacture of larger quantities of our drug candidates for
clinical development and potentially commercialization;
• obtain, maintain, expand, protect and enforce our intellectual property
portfolio;
• acquire or in-license other drug candidates and technologies;
• hire and retain additional clinical, quality control and scientific
personnel;
• achieve milestones triggering payments by us under our current and potential
future licensing and/or collaboration agreements;
• build out or expand existing facilities to support our ongoing development
activity; and
• add operational, financial and management information systems and personnel,
including personnel to support our drug development, any future
commercialization efforts and our transition to becoming a public company.
As of
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convertible preferred stock financing for aggregate proceeds to us of
Because of the numerous risks and uncertainties associated with our research and development programs and because the extent to which we may enter into collaborations with third parties for development of our drug candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our drug candidates. Our future capital requirements will depend on many factors, including:
• the scope, progress, results and costs of researching and developing our
drug candidates and programs, and of conducting nonclinical studies and
clinical trials;
• the timing of, and the costs involved in, obtaining marketing approvals for
drug candidates we develop if clinical trials are successful;
• the cost of commercialization activities for our current drug candidates,
and any future drug candidates we develop, whether alone or in
collaboration, including marketing, sales and distribution costs if our
current drug candidates or any future drug candidate we develop is approved
for sale;
• the cost of manufacturing our current and future drug candidates for
clinical trials in preparation for marketing approval and commercialization;
• our ability to establish and maintain strategic licenses or other
arrangements and the financial terms of such agreements, including milestone
payments to our licensors;
• the costs involved in preparing, filing, prosecuting, maintaining,
expanding, defending and enforcing patent claims, including litigation costs
and the outcome of such litigation;
• the timing, receipt and amount of sales of, or profit share or royalties on,
our future products, if any;
• the emergence of competing therapies hepatological indications and viral
diseases and other adverse market developments; and
• any acquisitions or in-licensing of other programs or technologies.
Developing pharmaceutical products, including conducting nonclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any drug candidates or generate revenue from the sale of any drug candidate for which we may obtain marketing approval. In addition, our drug candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends, which could adversely constrain our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute your ownership interest.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or drug candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.
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Cash flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Six Months Ended
June 30,
2021 2020
Net cash used in operating activities $ (52,814 ) $ (38,013 )
Net cash (used in) provided by investing activities 19,541 (8,838 )
Net cash (used in) provided by financing activities 173 (21 )
Net decrease in cash, cash equivalents, and restricted cash
Operating activities
During the six months ended
During the six months ended
Investing activities
During the six months ended
During the six months ended
Financing activities
During the six months ended
During the six months ended
Contractual obligations and commitments
We have no material changes to our contractual obligations and commitments as of
Off-balance sheet arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
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Indemnification agreements
We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these arrangements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these agreements is minimal.
Critical accounting policies and use of estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with
For a discussion of our critical accounting estimates, see "Management's
discussion and analysis of financial condition and results of operations" in our
annual report on Form 10-K for the year ended
Recently issued and adopted accounting pronouncements
For a description of the expected impact of recently adopted accounting pronouncements, see Note 2. Summary of Significant Accounting Policies in the "Notes to Unaudited Condensed Consolidated Financial Statements" contained in Part I, Item 1 of this report.
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