ALPINE IMMUNE SCIENCES, INC. You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations for the year endedDecember 31, 2021 , included in our Annual Report on Form 10-K , or the "Annual Report", filed with theSEC onMarch 17, 2022 .
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. In some cases you can identify these statements by forward-looking words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect," or similar expressions, or the negative or plural of these words or expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other "forward-looking" information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to:
•our ability to identify, develop and commercialize additional products or product candidates;
•our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing;
•our ability to obtain funding for our operations;
•the implementation of our business model and strategic plans for our business and technology;
•the timing of the commencement, progress and receipt of data from any of our preclinical and clinical trials;
•the expected results of any preclinical or clinical trial and the impact on the likelihood or timing of any regulatory approval;
•the scope of protection we are able to establish and maintain for intellectual property rights covering our technology and product candidates;
•the anticipated impact of the COVID-19 pandemic on our business, research and clinical development plans and timelines and results of operations;
•the timing or likelihood of regulatory filings and approvals;
•the therapeutic benefits, effectiveness and safety of our product candidates;
•the rate and degree of market acceptance and clinical utility of any future products;
•our ability to maintain and establish collaborations;
•our ability to achieve milestones in our current and any future collaborations;
•our expectations regarding market risk, including interest rate changes and general macroeconomic conditions;
•our expectations regarding the sufficiency of our cash and cash equivalents to fund operations for at least the next 12 months;
•developments relating to our competitors and our industry; and
•our expectations regarding licensing, acquisitions and strategic operations.
These forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those anticipated in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in this report in Part II,
Item 1A - Risk Factors , and elsewhere in this report. Forward-looking
statements are based on our management's beliefs and assumptions and on
information currently available to our management. These statements, like all
statements in this report, speak only as of their date, and we undertake no
obligation to update or revise these statements in light of future developments,
except as required by law.
In addition, statements that "we believe" and similar statements reflect our
beliefs and opinions on the relevant subject. These statements are based upon
information available to us as of the date of this report, and while we believe
such
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information forms a reasonable basis for such statements, such information may
be limited or incomplete, and our statements should not be read to indicate that
we have conducted an exhaustive inquiry into, or review of, all potentially
available relevant information. These statements are inherently uncertain and
investors are cautioned not to unduly rely upon these statements.
Overview
We are a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat cancer and autoimmune and inflammatory diseases. Our approach includes a proprietary scientific platform that converts native immune system proteins into differentiated, multi-targeted therapeutics. We believe our strategies are capable of meaningfully modulating the human immune system and significantly improving outcomes in patients with serious diseases.
Autoimmune/Inflammatory Diseases
Acazicolcept (ALPN-101) is a dual Inducible T cell Costimulator, or ICOS, and CD28 antagonist intended for the treatment of autoimmune and inflammatory diseases. Preclinical studies with acazicolcept have demonstrated efficacy in models of systemic lupus erythematosus, or SLE, Sjögren's syndrome, or SjS, arthritis, inflammatory bowel disease, multiple sclerosis, type 1 diabetes, uveitis, and graft versus host disease. We have evaluated acazicolcept in a Phase 1 healthy volunteer study and initiated patient dosing in Synergy, a global, randomized, double-blind, placebo-controlled Phase 2 study of acazicolcept in adults with moderate-to-severe SLE. InJune 2020 , we entered into an Option and License Agreement withAbbVie Ireland Unlimited Company , or AbbVie, which grants AbbVie an exclusive option to take an exclusive license to acazicolcept. ThroughJune 30, 2022 , we have received$105.0 million in upfront and pre-option exercise development milestones as part of the AbbVie Agreement. ALPN-303 is a dual B cell cytokine antagonist, being developed for the treatment of B cell mediated inflammatory and autoimmune diseases. Engineered using our proprietary directed evolution platform, ALPN-303 potently inhibits the pleiotropic B cell cytokines B cell activating factor (BAFF, BLyS), and a proliferation inducing ligand, or APRIL, which play key roles in B cell development, differentiation, and survival, and together may contribute to the pathogenesis of multiple autoimmune diseases, including SLE. Data presented at theAmerican College of Rheumatology , or ACR, Convergence 2021 Annual Meeting and 2022 AnnualEuropean Congress of Rheumatology , orEULAR , demonstrated that ALPN-303 inhibits the activity of the B cell cytokines APRIL and BAFF more potently than wild-type TACI-Fc counterparts, as well as anti-BAFF and anti-APRIL monoclonal antibodies. In addition, ALPN-303 has been well-tolerated in preclinical models and exhibited superior pharmacokinetics and pharmacodynamics over wild-type TACI-Fc counterparts, including superior serum exposure, suppression of T-dependent antibody production, and/or serum immunoglobulins in mice and/or cynomolgus monkeys. A first-in-human, Phase 1 study of ALPN-303 in adult healthy volunteers (NCT05034484) began in the fourth quarter of 2021. This randomized, placebo-controlled study is designed to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of ALPN-303 administered intravenously and subcutaneously. The ongoing phase 1 study demonstrates that ALPN-303 has been well tolerated to date and has exhibited highly encouraging preliminary pharmacodynamic reductions in circulating immunoglobulins (IgA, IgG, IgM). We plan to provide a more detailed clinical update from the phase 1 study in the third quarter of 2022. Initiation of up to three basket trials in hematologic, renal, and dermatologic indications and a phase 2 study in SLE is anticipated beginning in the first half of 2023, updated from the end of 2022 due, in part, to delays in enrollment in our phase 1 study related to the effects of the COVID-19 pandemic inAustralia earlier this year. Based on this updated timing, we anticipate receiving initial clinical data from the basket trials in the second half of 2023. InDecember 2021 , we entered into an exclusive license and collaboration agreement with Horizon Therapeutics Ireland DAC, or Horizon, which grants Horizon an exclusive license for the development, manufacture and commercialization of one Existing Program and up to three additional Research Programs generated from our libraries of proteins and molecules for research, discovery and identification of additional compounds. Under the terms of the agreement, Horizon made an upfront payment to us of$25.0 million as well as an equity investment for which they paid$15.0 million , a 25% premium to the 30-day volume-weighted average share price as ofDecember 9, 2021 . In addition, we are eligible to receive up to$381.0 million per program, or approximately$1.5 billion in total, in future success-based payments related to development, regulatory and commercial milestones as well as tiered royalties on global net sales.
Davoceticept (ALPN-202), is a conditional CD28 costimulator and dual checkpoint inhibitor intended for the treatment of cancer. Preclinical in vivo data have demonstrated monotherapy efficacy in tumor models superior to approved therapies. Results from the dose-escalation portion of NEON-1 (NCT04186637), a first-in-human, dose-escalation and expansion study of davoceticept monotherapy in 48 evaluable participants with advanced malignancies were presented at the 2022 Annual Meeting of theAmerican Association for Cancer Research , or AACR and the 2022 Annual Meeting American Society of Clinical Oncology. The study data demonstrates tumor volume reduction in 23% of evaluable participants despite a highly 15 -------------------------------------------------------------------------------- heterogeneous, heavily pretreated, advanced solid tumor population. In addition, davoceticept was well-tolerated and exhibited largely dose-dependent pharmacokinetics and pharmacodynamics, including relevant immune activation such as increased T cell activation, expansion of central memory T cells, and reduction in regulatory T cells. Monotherapy expansion cohorts are open for enrollment with a particular interest in renal cell carcinoma, given the observed preliminary activity in this setting. Preliminary data from the monotherapy expansion cohorts is anticipated in the second half of 2023. InJune 2021 , we announced a collaboration and supply agreement with Merck to evaluate the safety and efficacy of davoceticept in combination with Merck's anti-PD-1 therapy KEYTRUDA (pembrolizumab) in a Phase 1 dose escalation and expansion study. The clinical trial, NEON-2, was initiated inJune 2021 . OnMarch 7, 2022 , we announced that theU.S. Food and Drug Administration , or FDA, placed a partial clinical hold on our NEON-2 trial evaluating davoceticept in combination with pembrolizumab in adults with advanced malignancies. The partial clinical hold was prompted by our report of a Grade 5 serious adverse event (patient death) in the NEON-2 trial. The participant had choroidal melanoma previously treated with nivolumab and ipilimumab, and had received a single dose each of davoceticept and pembrolizumab. The participant's death was attributed to cardiogenic shock, considered by the treating physicians as likely related to immune-mediated myocarditis, or possibly infection. OnMay 24, 2022 , we announced that the FDA had removed the partial clinical hold placed on our NEON-2 trial after a review of our Complete Response, which included a comprehensive review of the davoceticept safety database, as well as a revised investigator brochure and study protocol. Preliminary data from the NEON-2 trial is anticipated in the second half of 2022. Our scientific platform has also generated immune modulatory proteins with the potential of improving engineered cell therapies such as chimeric antigen receptor T cells, T cell receptor-engineered T cells, and tumor infiltrating lymphocytes. InMay 2019 , we signed a collaboration and license agreement withAdaptimmune Therapeutics plc , orAdaptimmune , to develop next-generation SPEAR™ T cell products which incorporate our secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™) technology. We intend to continue to leverage our existing pipeline and platform to actively explore and evaluate potential value-creating partnering opportunities.
Our goal is to discover and develop modern therapies to treat patients with serious conditions such as cancer and autoimmune/inflammatory diseases. To achieve our goals, we intend to:
•aggressively move our most advanced autoimmune/inflammatory program acazicolcept through clinical development as part of our Option and License Agreement with AbbVie, or the AbbVie Agreement, including conducting Synergy, our Phase 2 study for the treatment of SLE;
•aggressively move our second autoimmune/inflammatory program ALPN-303 through a Phase 1 study in healthy volunteers and into clinical studies for the treatment of B cell mediated autoimmune/inflammatory diseases;
•aggressively move our lead oncology program davoceticept through clinical development for the treatment of cancer; and
•maximize the value of our pipeline and platform via potential partnering activities.
Our operations to date have been limited to business planning, raising capital, developing our platform technology, identifying potential immunotherapy candidates, clinical studies, and other research and development activities. To date, we have financed operations primarily through private placements of common stock and convertible preferred stock, funds received from license and research agreements, debt financing and assets acquired upon the close of our merger withNivalis Therapeutics Inc. , or Nivalis. We do not have any products approved for sale and have not generated any product sales. Since inception and throughJune 30, 2022 , excluding amounts borrowed through debt financing, we have raised an aggregate of$418.1 million to fund operations, of which$185.6 million was from the sale of common stock and warrants,$49.2 million was from the sale of convertible preferred stock,$139.2 million was through our license and collaboration agreements, and$44.1 million in cash, cash equivalents, and marketable securities acquired through the merger with Nivalis. As ofJune 30, 2022 , we had cash, cash equivalents, restricted cash, and investments totaling$201.2 million . Our net loss was$18.1 million and$11.0 million for the three months endedJune 30, 2022 and 2021, respectively, and$25.6 million and$21.7 million for the six months endedJune 30, 2022 and 2021, respectively. We expect to continue incurring significant expenses and operating losses for at least the next several years as we: •initiate and complete nonclinical studies and clinical trials for our product candidates, including acazicolcept, a dual ICOS/CD28 antagonist program targeting autoimmune/inflammatory disorders, davoceticept, a conditional CD28 costimulator and dual checkpoint inhibitor intended for the treatment of cancer, and ALPN-303, a dual B cell cytokine antagonist for B cell-mediated autoimmune/inflammatory diseases;
•contract to manufacture and perform additional process development for our product candidates;
•continue research and development efforts to build our pipeline beyond the current product candidates;
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--------------------------------------------------------------------------------•maintain, expand, and protect our intellectual property portfolio;
•hire additional clinical, quality control, scientific, and management personnel; and
•add operational and financial personnel to support our product development efforts and operational capabilities applicable to operating as a public company.
We do not expect to generate product revenue unless and until we successfully complete development of, obtain marketing approval for and commercialize our product candidates, either alone or in collaboration with third parties. We expect these activities will take a number of years and our success in these efforts is subject to significant uncertainty. Accordingly, we will need to raise additional capital prior to the regulatory approval and commercialization of any of our product candidates. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our operating activities through equity or debt financings, collaborations or licenses, capital lease transactions, or other available financing transactions. However, additional capital may not be available on reasonable terms, if at all, and if we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations. Financial Overview Collaboration Revenue We derive our collaboration revenue primarily from our collaboration and licensing agreements. We may generate revenue in the future from milestone payments received pursuant to our collaboration and licensing agreements with AbbVie, Horizon,Adaptimmune , or from payments from future license or collaboration agreements, product sales, or government contracts and grants. We expect revenue we generate, if any, will fluctuate from quarter to quarter.
AbbVie
InJune 2020 , we entered into the AbbVie Agreement for the development of acazicolcept. The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to acazicolcept, or the License Option. The License Option is exercisable by AbbVie at any time and will expire 90 days from the achievement of certain development milestones. If AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Prior to the exercise of the License Option, we will perform research and development services, including conducting our Phase 2 study in SLE, based on an agreed-upon development plan, or the Development Plan. We will be fully responsible for all costs incurred to conduct the activities under the Development Plan, provided that, AbbVie may be responsible for increased costs under the Development Plan in connection with certain material amendments proposed by AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and regulatory filings for acazicolcept necessary to complete activities under the Development Plan. InJune 2020 , in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of$60.0 million . Prior to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development milestones, or the Alpine Development Milestones, up to an aggregate amount of$75.0 million . In the second quarter of 2021, we achieved$45.0 million of theAlpine Development Milestones. If AbbVie exercises the License Option, they will pay a one-time cash payment of$75.0 million . Following the exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to$205.0 million upon AbbVie's achievement of certain development and commercial milestones and additional aggregate cash payments of up to$450.0 million upon AbbVie's achievement of certain sales-based cash milestones, collectively referred to as the AbbVie Milestones. Subsequent to commercialization, we are also eligible to receive high single-digit to low double-digit percentage royalties on worldwide net sales of licensed products. For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the upfront payment and Alpine's Development Milestones were combined into a single performance obligation. We determined the Alpine Development Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these milestone payments were fully constrained and were not initially included in the transaction price. InJune 2021 , we re-evaluated and updated the transaction price to include the achieved portion of the Alpine Development Milestones. We will continue to re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur. 17 -------------------------------------------------------------------------------- The License Option and the AbbVie Milestones were determined not to be performance obligations at the inception of the contract as they did not represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur. We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation. These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. We recognized revenue from the AbbVie Agreement of$4.6 million and$7.2 million for the three months endedJune 30, 2022 and 2021, respectively, and$10.5 million and$10.4 million for the six months endedJune 30, 2022 and 2021, respectively. We expect to recognize the remaining deferred revenue over the remainder of our Development Plan, which began inJune 2020 and will end upon the later of the exercise or expiration of the option.
Horizon
InDecember 2021 , we entered into the Horizon Agreement which grants Horizon an exclusive license for the development, manufacture and commercialization of one Existing Program and up to three additional Research Programs generated from our libraries of proteins and molecules for research, discovery and identification of additional compounds. Under the terms of the agreement, Horizon made an upfront payment to us of$25.0 million as well as an equity investment for which they paid$15.0 million , a 25% premium to the 30-day volume-weighted average share price as ofDecember 9, 2021 . In addition, we are eligible to receive up to$381.0 million per program, or approximately$1.5 billion in total, in future success-based payments related to development, regulatory and commercial milestones as well as tiered royalties on global net sales. We have completed our activities under the Existing Program and will conduct additional activities for up to three Research Programs to deliver compounds meeting agreed criteria. In addition, Horizon will pay us for the costs and expenses of conducting such activities under the deliverables plans. Horizon will then assume responsibility for development and commercialization activities and costs. For revenue recognition purposes, we determined that the Existing Program and each Research Program are distinct performance obligations. We allocated revenue to each performance obligation based on its relative stand-alone selling price. The future success-based payments related to development and regulatory milestones are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these milestone payments are fully constrained and are not initially included in the transaction price. We will continue to re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur. Any consideration related to commercial milestones and royalties will be recognized when the related sales occur.
We recognized revenue from the Horizon Agreement of
InMay 2019 , we entered into a collaboration and licensing agreement withAdaptimmune (the "Adaptimmune Agreement") to develop next-generation SPEAR T cell products. Under the Adaptimmune Agreement, we are to perform certain research services and grantAdaptimmune an exclusive license to programs from our secreted immunomodulatory protein ("SIP") and transmembrane immunomodulatory protein ("TIP") technologies. 18 -------------------------------------------------------------------------------- ThroughJune 30, 2022 , we have recorded a total of$3.0 million in license payments under the terms of the Adaptimmune Agreement consisting of a$2.0 million upfront license payment received inJune 2019 and an additional$1.0 million license fee uponAdaptimmune's selection of an additional research program inJune 2022 . In addition, we have recorded$1.8 million in research support payments to fund ongoing programs throughJune 30, 2022 . As ofJune 30, 2022 ,$1.1 million for license fee and research support payments related to the additional research program is included within accounts receivable on our
Condensed Consolidated Balance Sheets . In addition, we are eligible for
research support payments, one-time payments and downstream development and
commercialization milestones of up to
For revenue recognition purposes, licensing and research support fees billed under the agreement are being recorded as deferred revenue and recognized to revenue based on employee hours contributed to each performance obligation.
Research and Development Expenses
We focus our resources on research and development activities, including the conduct of preclinical studies, product development, regulatory support, and clinical trials for our product candidates. We recognize research and development expenses as they are incurred. Our research and development expenses consist of:
•employee-related expenses, including salaries, benefits, taxes, travel, and stock-based compensation expense for personnel in research and development functions;
•expenses related to process development and production of product candidates paid to contract manufacturing organizations;
•costs associated with preclinical activities and regulatory operations, including the cost of acquiring, developing, and manufacturing research material;
•clinical trials and activities related to regulatory filings for our product candidates; and
•allocation of facilities, overhead, depreciation, and amortization of laboratory equipment and other expenses.
The table below summarizes our research and development expenses for the periods
indicated. Our direct research and development expenses consist primarily of
expenses incurred pursuant to agreements with third-party manufacturing
organizations for our product candidates, contract research organizations, or
CROs, clinical trial sites, collaborators, and consultants. Other direct costs
included direct research and development costs incurred before a selected
product candidate begins clinical trials.
We use our employee and infrastructure resources across multiple research and
development programs that we are advancing in parallel, and therefore do not
allocate salaries, stock-based compensation, employee benefit expenses or other
indirect costs related to our research and development to specific product
candidates. These expenses are included in indirect research and development
expense by type in the table below.
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Our research and development expenses are summarized as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Direct research and development expense by program:
Acazicolcept $ 2,643 $ 2,930 $ 5,406 $ 4,154
Davoceticept 2,654 1,929 6,081 3,182
ALPN-303 3,485 3,378 6,266 6,218
Other 259 98 343 268
Total direct research and development expense 9,041 8,335 18,096 13,822
Indirect research and development expense by type: Personnel-related costs
6,829 4,417 12,708 7,784
Research and development supplies and services 786 807 1,450 1,571
Allocated facility, equipment and other expenses 930 1,074 1,643 1,893
Total indirect research and development expense 8,545 6,298 15,801 11,248
Total research and development expense $ 17,586 We expect our research and development expenses to increase for the foreseeable future as we continue to develop our platform and product candidates.
The successful development of our platform and product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing, or costs of the efforts necessary to finish developing any of our product candidates or the period in which material net cash, if any, from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty of:
•the scope, rate of progress, expense, and results of clinical trials;
•the scope, rate of progress, and expense of process development and manufacturing;
•preclinical and other research activities; and
•the timing of regulatory approvals.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for employees in executive, business development, finance, and administrative functions. Other significant general and administrative expenses include professional fees for accounting and legal services, expenses associated with obtaining and maintaining patents and other intellectual property, and allocation of facility and overhead costs. We expect general and administrative expenses to increase as we expand infrastructure, headcount, and continue to prosecute our patents and other intellectual property. Other increases could potentially include increased costs for insurance, costs related to the hiring of additional personnel, and increased fees for directors, outside consultants, lawyers, and accountants. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies.
Interest Expense
Interest expense consists primarily of interest associated with our term loan
with
Interest Income
Interest income consists of interest earned on our cash, cash equivalents, and investments.
Other Expense
Other expense consists of a loss on the sale of equipment.
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--------------------------------------------------------------------------------JOBS Act
We ceased to be an "emerging growth company" under the JOBS Act effective
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with generally accepted accounting principles inthe United States , or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are more fully described in Note 2 of the accompanying unaudited condensed consolidated financial statements and in Note 2 to the audited financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant or material changes in our significant accounting policies during the six months endedJune 30, 2022 , as compared to those disclosed in our Annual Report. 21 --------------------------------------------------------------------------------
Results of Operations
Comparison of Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended June 30, Increase/
2022 2021 Decrease
(unaudited)
Collaboration revenue $ 5,292 $ 7,193 $ (1,901)
Operating expenses:
Research and development 17,587 14,634 2,953
General and administrative 4,194 3,290 904
Total operating expenses 21,781 17,924 3,857
Loss from operations (16,489) (10,731) (5,758)
Other income (expense):
Interest expense (130) (218) 88
Interest income 314 51 263
Other expense (15) - (15)
Loss before taxes (16,320) (10,898) (5,422)
Income tax expense (1,778) (131) (1,647)
Net loss $ (18,098) $ (11,029) $ (7,069)
Collaboration Revenue
Revenue for the three months ended June 30, 2022 consists of approximately $4.6
million related to the AbbVie Agreement, approximately $0.6 million related to
the Horizon Agreement, and approximately $0.1 million related to the Adaptimmune
Agreement. Revenue for the three months ended June 30, 2021 consists of $7.2
million related to the AbbVie Agreement.
Research and Development Expenses
The$3.0 million increase in research and development expenses was primarily attributable to increases of$2.9 million in clinical trial activities primarily related to ongoing enrollment in our Synergy, NEON and ALPN-303 studies and$2.4 million in personnel-related expenses due to increased headcount, which includes$0.5 million in higher stock-based compensation expense. These increases were partially offset by decreases of$1.5 million in direct research activities, and$0.7 million in contract manufacturing and process development of our product candidates.
General and Administrative Expenses
The$0.9 million increase in general and administrative expenses was primarily attributable to increases of$0.5 million in personnel-related expenses, which includes$0.3 million in higher stock-based compensation expense,$0.2 million in legal and professional services, and$0.2 million in allocated overhead and facilities to support the growth of our business.
Other Income (Expense)
The$0.3 million increase in other income (expense) is primarily attributable to interest income due to higher investment balances and rising rates, and lower interest expense due to amortization of the underlying term loan balance.
Income Tax Expense
The$1.6 million increase in income tax expense primarily relates to a$1.3 million cumulative change to our foreign income tax provision as a result of tax return filed under a revised transfer pricing model for the activities of our wholly owned subsidiary,Alpine Immune Sciences Australia PTY LTD. 22 --------------------------------------------------------------------------------
Comparison of Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended June 30, Increase/
2022 2021 Decrease
(unaudited)
Collaboration revenue $ 18,921 $ 10,397 $ 8,524
Operating expenses:
Research and development 33,898 25,071 8,827
General and administrative 8,969 6,546 2,423
Total operating expenses 42,867 31,617 11,250
Loss from operations (23,946) (21,220) (2,726)
Other income (expense):
Interest expense (284) (435) 151
Interest income 459 114 345
Other expense (72) - (72)
Loss before taxes (23,843) (21,541) (2,302)
Income tax expense (1,782) (131) (1,651)
Net loss $ (25,625) $ (21,672) $ (3,953)
Collaboration Revenue
Revenue for the six months ended June 30, 2022 consists of approximately $10.5
million related to the AbbVie Agreement, approximately $8.3 million related to
the Horizon Agreement, and approximately $0.1 million related to the Adaptimmune
Agreement. Revenue for the six months ended June 30, 2021 consists of $10.4
million related to the AbbVie Agreement.
Research and Development Expenses
The$8.8 million increase in research and development expenses was primarily attributable to increases of$6.7 million in clinical trial activity and$4.9 million in personnel-related expenses due to increased headcount, which includes$1.0 million in higher stock-based compensation expense. These increases were partially offset by decreases of$1.4 million in contract manufacturing and process development of our product candidates,$1.0 million in direct research activities, and$0.4 million in indirect supplies and allocated overhead and facilities.
General and Administrative Expenses
The$2.4 million increase in general and administrative expenses was primarily attributable to increases of$1.4 million in personnel-related expenses, which includes$0.5 million in higher stock-based compensation,$0.6 million in allocated overhead and facilities to support the growth and expansion of our business, and$0.4 million in legal and professional services.
Other Income (Expense)
The$0.4 million increase in other income (expense) is primarily attributable to interest income due to higher investment balances and rising rates, and lower interest expense due to amortization of the underlying term loan balance.
Income Tax Expense
The$1.7 million increase in income tax expense primarily relates to a$1.3 million cumulative change to our foreign income tax provision as a result of tax return filed under a revised transfer pricing model for the activities of our wholly owned subsidiary,Alpine Immune Sciences Australia PTY LTD. 23 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Sources of Liquidity
To date, we have financed our operations primarily through the sale of equity securities, debt, and payments received under our collaboration agreements. As ofJune 30, 2022 , we had cash, cash equivalents, restricted cash, and investments totaling$201.2 million . Except for any obligations of our collaborators to make milestone payments under our agreements with them, we do not have any committed external sources of capital. Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of collaboration agreements and equity or debt financings.
Equity Financing Agreements
InDecember 2021 , in connection with the execution of the Horizon Agreement, we entered into a Stock Purchase Agreement with Horizon, or the Purchase Agreement, in which Horizon made an equity investment in Alpine of 951,980 shares of our common stock for approximately$15.76 per share, for an aggregate purchase price of$15.0 million . The purchase price represents a 25% premium to the volume-weighted average share price of our common stock for the 30-day period endedDecember 9, 2021 . The shares were subject to lock-up restrictions, which, subject to certain exceptions, prohibit Horizon from selling the shares for a period of six months after the date of the Purchase Agreement. The shares were recorded at the fair value of our common stock on the effective date of the Horizon Agreement, with the excess of the proceeds recorded to deferred revenue. InSeptember 2021 , we entered into a securities purchase agreement, or the 2021 Securities Purchase Agreement, for a private placement with a select group of institutional investors, pursuant to which we sold 6,489,357 shares of our common stock, or the Shares, and prefunded warrants to purchase 3,191,487 Shares, or the Prefunded Warrants. The purchase price for each Share and for each Prefunded Warrant was$9.40 per share, for an aggregate purchase price of approximately$91.0 million . The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of$0.001 per share. In connection with the 2021 Securities Purchase Agreement, approximately 3.7 million of the Shares issued and approximately 2.3 million of the Prefunded Warrants issued, for gross proceeds of approximately$57.0 million , were issued to certain stockholders whose beneficial ownership exceeded 5% prior to completion of the 2021 Securities Purchases Agreement. InJuly 2021 , we entered into a sales agreement, or the Sales Agreement, withCowen and Company, LLC , or Cowen, pursuant to which we may sell shares of our common stock from time to time through an "at the market" equity offering for up to$75.0 million in gross cash proceeds. Cowen will act as the sales agent and will be entitled to compensation for services of up to 3.0% of the gross sales price per share of all shares sold through Cowen under the Sales Agreement. The shares would be issued pursuant to our effective shelf registration statement on Form S-3 (File No. 333-256107). We filed a prospectus supplement, datedJuly 2, 2021 , with theSEC in connection with the offer and sale of the shares pursuant to the Sales Agreement. As of the date of this report, we have made no such sales under the Sales Agreement. InJuly 2020 , we entered into a securities purchase agreement, or the 2020 Securities Purchase Agreement, for a private placement with a select group of institutional investors, pursuant to which we sold 5,139,610 units, or the Common Units, and 790,710 units, or the Prefunded Warrant Units, for an aggregate purchase price of$60.0 million . Each Common Unit consists of one share of our common stock plus a warrant to purchase 0.3 shares of common stock, or the Common Stock Warrants, and each Prefunded Warrant Unit consists of one prefunded warrant to purchase one share of common stock, or the Prefunded Warrants, plus one Common Stock Warrant to purchase 0.3 shares of common stock. The Prefunded Warrant Units and the Common Units are collectively referred to as the Units and each Unit has a purchase price of$10.1175 . The Common Stock Warrants have an exercise price of$12.74 and a term of 3.5 years. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of$0.001 per share. InJanuary 2019 , we entered into a securities purchase agreement, or the 2019 Securities Purchase Agreement, with a limited number of accredited investors, pursuant to which we sold approximately 4.7 million units, or the 2019 Units, for an aggregate purchase price of$25.3 million in a private placement, which we refer to as the Private Placement. Each 2019 Unit has a purchase price of$5.37 and consists of one share of our common stock and a warrant to purchase 0.39 shares of common stock. Pursuant to the terms of the 2019 Securities Purchase Agreement, we issued approximately 4.7 million shares of common stock and warrants to purchase an aggregate of approximately 1.8 million shares of common stock. The warrants have an exercise price of$12.74 and have a term of five years. 24 --------------------------------------------------------------------------------
Debt Financing Agreements
As of
Note 7 for further discussion of our Term Loans.
Cash Flows
The following is a summary of our cash flows (in thousands):
Six Months Ended
June 30,
2022 2021
(unaudited)
Net cash used in operating activities $ (10,620) $ (30,653)
Net cash (used in) provided by investing activities (31,239) 14,320 Net cash (used in) provided by financing activities (1,670) 211
Net cash used in operating activities was$10.6 million during the six months endedJune 30, 2022 , and consisted of our net loss of$25.6 million , partially offset by changes of$9.2 million in our net operating assets and liabilities, and$5.8 million in net non-cash adjustments, which primarily relate to stock-based compensation, depreciation and amortization. The$9.2 million decrease in our net operating assets and liabilities was largely driven by the receipt of a$25.0 million upfront payment from Horizon partially offset by other changes in net operating assets and liabilities. Net cash used in operating activities was$30.7 million during the six months endedJune 30, 2021 , and consisted of our net loss of$21.7 million and a decrease of$12.9 million in our net operating assets and liabilities. This was partially offset by an increase of$4.0 million in our net non-cash adjustments, which primarily relate to stock-based compensation, depreciation and amortization.
Cash flows from investing activities primarily reflect cash used to purchase investments and proceeds from the maturities and sales of investments, thus causing a shift between our cash and cash equivalents and investment balances. We manage our cash usage with respect to our total cash, cash equivalents and investments. Net cash used in investing activities was$31.2 million during the six months endedJune 30, 2022 , and consisted primarily of net purchases of investments inU.S. Treasury securities, commercial paper, and corporate debt securities using excess liquidity consisting primarily of funds received in connection with entering into the Horizon Agreement.
Net cash provided by investing activities was
Net cash used in financing activities was$1.7 million during the six months endedJune 30, 2022 , and consisted primarily of$2.4 million in principal payments on our debt, partially offset by$0.7 million related to the exercise of stock options. Net cash provided by financing activities was$0.2 million during the six months endedJune 30, 2021 , and consisted of proceeds received from the exercise of stock options. 25 --------------------------------------------------------------------------------
Funding Requirements
We have incurred operating losses since inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we continue our research and preclinical and clinical development of our product candidates; expand the scope of our current studies for our product candidates; initiate additional preclinical, clinical or other studies for our product candidates, including under any collaboration agreements; change or add additional manufacturers or suppliers; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical studies; seek to identify, evaluate and validate additional product candidates; acquire or in-license other product candidates and technologies; maintain, protect and expand our intellectual property portfolio; attract and retain skilled personnel; and experience any delays or encounter issues with any of the above. Additionally, we have ongoing obligations with respect to our Loan Agreement, as described above, and our Operating Lease and certain Contingencies, as described below. Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of equity or debt financings and collaboration agreements. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through collaboration agreements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product 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 when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Our future capital requirements are difficult to forecast and will depend on many factors, including:
•the number and characteristics of the future product candidates we pursue either from our internal research efforts or through acquiring or in-licensing other product candidates or technologies;
•the scope, progress, results and costs of independently researching and developing any of our future product candidates, including conducting preclinical research and clinical trials;
•whether our existing collaborations generate substantial milestone payments and, ultimately, royalties on future approved products for us;
•the timing of, and the costs involved in, obtaining regulatory approvals for any future product candidates we develop independently;
•the cost of future commercialization activities, if any;
•the cost of manufacturing our future product candidates and products, if any;
•our ability to maintain our existing collaborations and to establish new collaborations, licensing or other arrangements and the financial terms of such arrangements;
•the costs of preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such litigation; and
•the timing, receipt and amount of sales of, or royalties on, our current or future collaborators' product candidates, and our future products, if any.
We have considered that our long-term operations anticipate continuing net
losses and the need for potential equity or debt financing. We have also
considered that new collaborations or selectively partnering our technology or
programs may provide other sources of capital. However, there can be no
assurances that additional funding or other sources of capital will be available
on terms acceptable to us, or at all. Based on our current operating plan, we
believe our available cash and cash equivalents and investments, will be
sufficient to fund our planned level of operations for at least the next 12
months. We have based this estimate on assumptions that may prove to be wrong,
and we could use our capital resources sooner than we expect. Additionally, the
process of testing drug candidates in preclinical and clinical studies is
costly, and the timing of progress in these studies remains uncertain. Further,
inflation may affect our use of capital resources by increasing our cost of
labor and clinical trial expenses. Our long-term funding requirements will
consist of operational, capital, and manufacturing expenditures, including those
contractual commitments described above. Because of the inherent risks and
uncertainties associated with the development and commercialization of our
product candidates, we are unable to estimate the amounts of capital outflows
and operating expenditures associated with our long-term anticipated preclinical
studies and clinical trials.
26
--------------------------------------------------------------------------------Operating Lease
InMarch 2019 , we entered into a lease with ARE-Seattle No. 28, LLC, or the Landlord, for 27,164 square feet of office and laboratory space located at188 East Blaine Street ,Seattle, Washington . The term of the lease is 10.8 years with one option to extend the term by 5 years. The lease term commenced inJune 2019 . The "Rent Commencement Date" began inMarch 2020 , nine months after the commencement date. We were not required to pay base rent from the Rent Commencement Date throughNovember 2020 , the last day of the ninth month following the Rent Commencement Date. The annual base rent under the lease is$1.7 million for the first year and will increase by 3.0% each year thereafter. We received a tenant improvement allowance of$5.4 million , which is included in our base rent, and a maximum additional tenant improvement allowance of$1.8 million , which will result in additional rent amortized over the term of the lease at an annual rate of 8.0%. The lease also requires us to pay additional amounts for operating and maintenance expenses. InMarch 2019 , in connection with the lease, we provided a$254,000 letter of credit as a security deposit, which is recorded as restricted cash in our accompanying Condensed Consolidated Balance Sheets .
Contingencies
Certain credits received related to our research and development expenditures and previously recorded within other income in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) are subject to review by foreign taxing authorities. Upon reaching constructive agreement with theAustralian Taxation Office during the quarter endedJune 30, 2022 , we recorded an estimated current foreign income tax provision of$1.3 million for the expected repayments, which is included within accrued liabilities on our accompanying Condensed Consolidated Balance Sheets .
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