Allogene Therapeutics, Inc. (ALLO) Earnings Call Transcript & Summary

Thanks for joining us this morning at the Bank of America Annual Healthcare Conference in Las Vegas. I am Jason Gerberry. I'm one of the biotech analysts at BofA. And I am pleased to be introducing our next -- our first company presenter, Allogene Therapeutics and Eric Schmidt, CFO. Eric, I think, has a couple of prepared remarks, and then we'll go right into Q&A from there.

Thank you, Jason. Thanks for the invitation. Thanks to Bank of America for hosting myself and our Chief Commercial Officer, Christine Cassiano, who's here in the front row. And thanks, everyone, for getting up early to kick off this conference. I appreciate those on the webcast as well. In terms of a quick background on Allogene, Matthew, we have just one slide I'd like to present for those a little less familiar to our story. We're a 4-year-old company. In fact, we celebrated our fourth anniversary just earlier this year. We acquired a variety of pre-clinical programs, all focused on allogeneic CAR-T cell therapy from Pfizer back in 2018. Since that acquisition, we've really built all sorts of infrastructure verticals, functionality around those assets and progressed 5 into the clinic, including our lead program, ALLO-501A, which will be going into a pivotal program toward the middle of this year. We've grown our team to a little over 300 professionals. Many of them are focused on [ ops ] technology and manufacturing, which we think is a key area of differentiation. We've treated now, I think, more patients than anyone else in the allogeneic CAR-T cell field with over 145 treated. I think we're quite well financed in these difficult times for biotech companies with over $700 million in cash on the balance sheet. No debt. Everyone at Allogene is focused on one thing and one thing only, and that is bringing a next wave, the next generation of cell therapies to patients in need. These off-the-shelf products, we think, can be really revolutionary in terms of expanding the reach in cell therapy. Clearly, a very potent modality, but one that hasn't fulfilled its true promise because of some of the logistical considerations associated with autologous products. So I'll pause there, Jason, and we can go into any questions you have.

Sure. Sure. So it's probably not lost on anybody that cell therapy is an extremely competitive field with the first autologous approach is being out there on the market. Can you talk to us a little bit about the 90-second elevator pitch on allogenic purchase and what you think the key value proposition is and how you'd be able to differentiate as effectively a later mover in cell therapy to the autologous approaches?

Yes. We really see allogeneic cell therapy as a completely different modality. In many ways, what we're doing is delivering a traditional pharmaceutical product, something that's quality control, something that's available on demand, something that's accessible to all through the normal distribution chains. And we compare that to the autologous products, the only approved cell therapy products, which are very much therapeutic modalities that are not product, I would call them processes or individually-tailored medicines or therapies. So that's the key differentiation, right? But today, despite the wonderful data that Yescartas and Breyanzis and Carvyktis of the world have generated. These therapies are not available to most patients in need. In fact, 5 years after the approval of Yescarta in non-Hodgkin's lymphoma, the market share of autologous products in the third-line LBCL setting is about 20% to 30%. So the great majority of patients who potentially could have a curative outcome with these therapies are not able to access those therapies. And that's a real shame. And we think that by having a product that's available, quality controlled, off the shelf, we can do much better. We can expand the market. These products as good as they are, are not doing any good in the patients who can't access them.

Can you paint a picture of what the future logistical consideration looks like with an allogeneic approach? You're investing a lot in manufacturing. And how much [ individual ] hospitals keeping on stock versus sort of the distribution model and how easy you'll make it for institutions and patients to get your products, presuming they get to clinical development?

Yes. I mean manufacturing is key. First, just in terms of supply, one of the major reasons that folks are not able to access these CAR-T therapies today is that the supply hasn't been there. So Gilead is now building out its third manufacturing facility. By most estimates, they're talking about treating the first 8 years of the commercial launch for Yescarta about 25,000 total patients cumulatively. We think that there'll probably be at capacity with 3 manufacturing facilities able to create potentially 4,000 patients to 5,000 patients per year. In terms of our ability to supply the market, it's a vastly different scale. Our single facility, we term it Cell Forge 1 out in Newark, California. With a single year of operation, should make enough product for 20,000 patients. So again, probably in order of magnitude different from a single autologous CAR-T therapy production facility. And with that type of supply, we think we can stock in a traditional pharmaceutical sense. Certainly, these cells can be cryo frozen, shipped overnight, ready on demand. In fact, in our clinical trials, we were successful in treating patients within 2 days to 5 days of entry into our trial with our products. And if you compare that, of course, the autologous therapies in the commercial setting, we hear, on average, from the time a decision is made to treat a patient with an autologous therapy to the time the infusion actually takes place anywhere between 4 weeks and 8 weeks typically on the longer end of that. So all the complexities of delivering that medicine, finding and identifying a manufacturing slot, setting up the apheresis, doing the manufacturing, shipping cells back and forth, scheduling the reinfusion, that takes weeks, not days. And that's the fundamental value proposition. Again, too many patients that can't access these very potent therapies because of the complexity.

Yes. Okay. And just thinking about your approach, you've talked about it in non-specific terms, but you have a potentially a cost of goods advantage versus the existing autologous approaches. And as I think about potential for dose consolidation, there's some, I guess, some permutations of what your final product offering could look like ultimately. But it seems like your cost of goods advantage forging the flexibility to adapt and extract maximum value whatever innovation ultimately makes it to the goal line for you guys. Is that a fair assessment and that investors shouldn't worry about that?

Yes. I think it's a little bit too early to talk about specifics in terms of our cost of goods. But generally speaking, we've talked about our ability to scale and a single manufacturing run at Allogene we can make doses up to 100 or more for patients to be treated. And that provides us with a lot of flexibility. A single manufacturing run for an allogeneic process is more expensive than a single manufacturing run for an autologous process, but certainly not hundred-fold more expensive. So I think we're in a very good position with regard to our margin structure. And when it comes to flexibility of dosing, also a very good position there. The doses that we've been studying in our trials for non-Hodgkin's lymphoma, for example, we are in a 120 million cells per dose. That's a relatively low level of cell dose regimen exposure. So we think that given we're at the lower end of where cell therapies have been dosed versus our competitors, we'll have an advantage there, too, maybe even within the allogeneic space.

Okay. A big topic coming out of the 1Q update is your CD19 program and moving into a pivotal program. So this is an area of focus for investors. And I realize, I think at some point in the next couple of months, we'll get a look at what your trial design ultimately looks like. But in the lead up to that, maybe just frame the landscape right now for CAR-T therapy. You talked a little bit about Gilead and some of the penetration metrics. As a later entrant into the field, how you see that evolving? Will autologous approaches be kind of moving upwards into second line? When you come to market and that's a big question of what the market looks like by the time you guys could be commercial ready?

Yes. So thank you, Jason. Our lead program is ALLO-501A. As you mentioned, that's a CD19-directed CAR-T product for non-Hodgkin's lymphoma. We've already shown, I think, a very strong proof of concept in a Phase I study. We've been able to deliver on efficacy that seems very much on par with the autologous products. And importantly, in terms of efficacy, the duration of our responses seems like it's best-in-class and again, very much similar to what you'd expect for an autologous cell therapy. Meanwhile, on the safety side of the equation, if anything, we have a very tolerable profile with adverse events, namely Grade 3 CRS and Grade 3 neurotoxicity rates that are at the lower end of the spectrum of cell therapy products. So we feel like we've got the profile to move forward. And as you noted, Jason, our expectation is to begin our first pivotal trial, the ALPHA2 study is the name of that trial toward the middle of this year. So fairly shortly here. In terms of the competitive landscape and outlook, yes, autologous products have been approved in the third-line setting now for several years, but we still see a lot of unmet medical need. As I mentioned, the penetration of those products into this later line setting is only on the order of 20% or 30% 5 years into their commercial launch. And we think we can do a lot better. Certainly, we think there's a lot of unmet need there and certainly a reasonable commercial opportunity. But as you also alluded to, Yescarta and Breyanzi at least are moving into earlier lines of therapy. I think one of the issues for autologous products is that the more patients you're able to treat, the larger your commercial opportunity is, the more challenges you're still going to face with regard to manufacturing, delivery, complex logistics, et cetera. So you just can't squeeze these products down a funnel and hope that more patients are going to come out the back end. It's very, very challenging logistically to do what these companies are trying to do, which is move upstream. And we think with an allogeneic product, we can really broaden that funnel and truly treat many, many more patients. If you go to the next slide, actually, Matthew, I think there's a good illustration here, the differences of having a product versus a therapy when it comes to larger market indications. So we want to really break that bottleneck. And we think that being a fast follower to the autologous products, we're going to be able to meaningfully increase the number of patients in the second-line setting, where as we talked about in the myeloma setting earlier lines, wherever we have an opportunity to treat. You can go back to that final slide, Matthew.

Okay. Great. Okay. In terms of characterizing your profile and data generation over the course of this year, there's not going to be much at ASCO for 501. But thinking ahead to ASH later in the year, can you talk about some more data around the durability profile of 501? And if you can just talk about what you think physicians care most about and what you hope to learn about the durability profile? I think 12-month PFS tends to be something we hear more from physicians that they care about. If there are any disconnects in your view between how Wall Street use data bogeys versus how you guys think what physicians care about and what you want to, hopefully, see in your product profile?

No. I think in this case, the investment community and the [ physician ] community is fairly well aligned on what matters for cell therapy. And that is that durability, that one-and-done treatment that can provide potentially functional cures. As you know, with autologous products, we've seen now data out to 5 years and 10 years that suggest that an autologous therapy can have curative intent, at least in non-Hodgkin's lymphoma. So we're fortunate that we've already shown some, I'd say, very favorable data at the ASH Conference in December of last year, specifically when we look at our complete responses in our Phase I studies on our CD19 products. We had 14 patients who achieved a complete response across our 2 Phase I studies. And at the time of the ASH meeting, 10 of those 14 patients were still in complete response. And all 7 of the patients had achieved a CR at 6 months remain in CR. So like the autologous products, we had a few patients early on between months 2, 4 that dropped out of complete response, but the majority maintained that response through 6 months. And at the time of the follow-up, again, last year, we're seeing very good durability beyond 6 months. So yes, I can understand that investors and for that matter, physicians, will always want to see more data and longer follow-up. And I think, Jason, as you alluded to, back half of the year would be a good time to provide an update on our experience there.

Okay. In terms of initiating your pivotal Phase II, can you just talk a little bit about what are the outstanding deliverables there? And it sounds like you're going to be initiating relatively soon, and I think there was some commentary on the one you called about some CMC work that's perhaps being done as sort of the last gating item.

Yes. So we're, I'd say, at the final stages of establishing everything we need to do in order to kick off that trial that speaks both to the protocol or I'd say, we're dotting the i's and crossing the t's, as well as some CMC work that we've chosen to accelerate with an eye towards front-end loading, what's going to be required of us. This is a novel innovative space. It's an area where the FDA continues to raise the bar and certainly keep companies on their toes. And we're keen not to just start that trial, but to also be sure on the back end of the trial that we have everything we need in order to receive with BLA filing, assuming we're able to have a successful clinical result. So much of what we've done, probably if we were starting the study a year or 2 ago, would be done after the trial in terms of the CMC work, but we are looking again to front-end load that and be in a position should we have successful clinical data to file as soon as possible. And I think as you well know, that stands in contrast to what's been maybe happening in the cell therapy space where many companies have gotten around to the CMC requirements toward the end of their clinical program and have taken on meaningful delays to BLA filing or have gone through several review cycles with the FDA or have even now been told by the agency that they may need to redo their clinical program. So we're really trying to avoid that. We're going to be launching our study with material manufactured at our Cell Forge 1 facility. That's our commercial intended site. And we think by taking the extra time at the front end, we'll save ourselves a lot of headache on the back end.

And can you just remind us your last substantive interaction with FDA approximately and were these topics of discussion? I know that one of the big concerns maybe a year ago was with this study and the accelerated pathway be available to you. I think you pretty definitively address that part. But just curious if there's anything else to add on that front.

Yes. We've had a lot of discussion with the FDA. I'd say it's very cooperative, very, very much interactive discussion. And I wouldn't go into the details of when and what. But I think what you're asking, Jason, is about whether the pivotal trial will be single arm or not. I think that's what you're getting at. Correct me if not. But yes, we believe that we have the ability to go forward with a single-arm study. Given the very high expected response rates in the cell therapy space, a single-arm trial should be adequate for ruling out the [ no ] hypothesis, which is that our cells are not active. And I think even at that fairly modest-sized single-arm study should be more than adequately powered to rule out the fact that our cells are not active. So I think any time you're dealing with a therapy, this potent complete response rates potentially in the 40% to 50% range. It doesn't take a lot of patients. It doesn't take a randomized trial to demonstrate efficacy.

And as it pertains to the prior clinical hold, there was no discussion of requirements as it pertains to monitoring cells after they've been infused. I believe that the issue occurred with the one patient in the cells that were serendipitously evaluated kind of post-infusion. So if you can just elaborate on that, that would be helpful.

Yes. For those who are less familiar, we had an issue with a single patient in one of our trials back in fall of last year, where a chromosomal aberration and abnormality was observed in that patient. And the FDA put our programs on clinical hold until we could adequately address their questions. We conducted a very thorough investigation. We were thrilled to get off hold in a fairly expeditious fashion. What that investigation uncovered was that this chromosomal abnormality occurred in the patient in vivo. It was not part of our manufacturing process or our technology platform. That process and platform were absolved of any issues. So there really was a pretty clean lift to the clinical hold. There are very few, if any, requirements that were imposed upon us from that experience. Like other companies in the cell therapy field, we do need to follow up our patients in long-term trials. That's been the case really since the beginning of the cell therapy field. But other than monitor patients long term, we don't have any meaningful requirement.

Okay. So a true CFO question coming. You talked about a tough biotech tape. You talk -- and this is a capital-intensive space, right? This is not a cheap space you're investing in manufacturing. So as I look at some of the investment needs on the horizon, it would probably be to move 501 eventually into a second-line study and then prioritization of the BCMA programs and then advancing that into a pivotal program sometime next year. So can you manage all that? Should investors be thinking about moving forward in kind of multiple additional pivotal trials next year in terms of what you got capital to start?

Yes. No, that's a great question. I think in today's market environment, everyone's got to be a little bit careful about overextending themselves. We're in a good position, fortunately, and we have the resources to continue to invest through this market downturn. As I mentioned earlier, we ended the March quarter with $733 million in cash. And we expect that our cash burn will be somewhere below $300 million. We haven't given specific guidance. But I think we certainly have several years of cash on hand, and that should be enough to fully execute on our game plan. I think, Jason, you're right about our priorities. Number one, to start the pivotal program for ALLO-501A. Number 2, in the BCMA space, we haven't talked yet about our program, but we think we have a very competitive profile. And if anything, that market opportunity could be a larger opportunity than the NHL opportunity. So we are keen to try and make some progress there. And then don't forget, we have some solid tumor candidates, one in the clinic and others awaiting IND that we'd like to explore as well. So we'll have to find a way to resource those priorities. Certainly, there are other opportunities other than coming to the public markets and we'll fully explore what's best for our shareholders with regard to how to move forward.

Okay. Well, maybe let's transition to BCMA. It's obviously a much larger market. Supply issues are very high profile. And I think there's sort of a mixed debate that we hear about whether or not there's a shoulder on the durable, like OS curve or long-term PFS curve with this setting versus NHL. So there's clearly unmet need across the board. And so I'm curious if you can sort of set the table for -- it sounds like you're going to have data coming in on multiple different cell therapy constructs by end of year, and then you'll go through a prioritization exercise and what that could look like?

Yes. Okay. So a lot to chew on there. Starting at the top, maybe we have a multi-pronged strategy focused on BCMA, a target in the myeloma space. And we've also shown, I think, some very promising proof-of-concept data on our first program in the BCMA arena, which is ALLO-715. Back at the ASH Meeting in December 2021, we were able to show, again, with the ability to treat all patients and do so within days of entry in our trial. It will show response rates that mirrored Abecma, which is improved CAR-T therapy with, I would say, a more favorable safety tolerability profile as well. So we think that places us in a competitive position. But certainly, we're looking for ways to potentially further enhance the profile from that parental compound. We're looking at things like combining 715 -- ALLO-715 with nirogacestat. We're also looking at advancing our TurboCAR, which is a next-generation platform approach to enhance the potency of AlloCar T therapy. So we'll investigate those other strategies and towards the end of the year, as you say, hopefully pick a winner and advance that program into a pivotal Phase II study. Cell therapy has been revolutionary for myeloma patients. Whether or not, there's a shoulder on that Kaplan-Meier curve, whether or not, there's some small percentage of patients who have long-term curative outcomes, it doesn't really matter. These are still, I'd say, by far and away, the most potent, most efficacious therapies that have come to the myeloma field at any point in time. And we think that we're already in that ballpark with regard to the profile that we have. So we're very keen to move forward. And as we discussed earlier, really open up this field because of the supply constraints and capacity constraints on cell therapies today. There are many, many more patients who could benefit from therapies that just aren't getting them.

Yes. So if I could summarize, it sounds like on near-term 6-month or 12-month follow-up type of metrics, it's near impossible to differentiate from Legend. But being in the same ballpark, offering the additional benefits that an allogenic approach offers would be, if you can identify something in the portfolio that offers that, that would be probably a very good outcome for you guys.

I mean Legend J&J's Carvykti sets a very, very high bar in terms of efficacy, right? There's no doubt. But it doesn't do anything for the patients who aren't able to access the therapy. And right now, unfortunately, the supply constraints are severe, and we have no visibility on when that situation will be remedied. I'd also note, putting supply constraints aside that if you looked at the Legend J&J studies closely, about 15% of patients who enrolled in those studies, unfortunately, were unable to receive cells due to manufacturing delays. Another 18% or so of patients enrolled in those studies got a product back that was out of spec, which in the commercial setting is not going to be allowed. And then we think that even on the way in screening, which we don't have a lot of visibility into, a lot of patients who potentially signed up for those studies failed due to the inability to collect an apheresis sample. So we believe putting even the supply constraints aside, there's going to be many subpopulations of patients that are going to want immediate access, no questions asked, within days of delivery of having an allogeneic product like ours.

When you talked Cell Forge and 20,000, was that combined between the 2 BCMA and CD19 or?

Yes. [ I mean, combined ]. Jason, I think if you put any kind of projected price on that 20,000 capacity number, it would be a big market opportunity that we could serve. But yes, that would be capacity for any number of products that we decided to supply out of Cell Forge 1.

From a safety standpoint, the CRS and patients getting autologous and readmission at the hospital, there's a financial burden that a lot of institutions may face with that dynamic. Is safety and CRS profile something you feel like you guys can differentiate on?

We do. If you look across our studies, both in non-Hodgkin's lymphoma and myeloma, our rates of CRS and neurotox, for that matter, seemingly are consistently lower. We're at the very, very low end of what the autologous products are able to deliver. And we do think that safety matters, I'd say that. First and foremost, efficacy matters, and we need to be in the ballpark on efficacy in order to compete on safety. But it's certainly nice that we may have lower rates of those adverse events that prevent some patients from accessing therapies and also prevent those therapies from being delivered in an outpatient setting. So really, the key to expanding the market into the outpatient setting is to have low rates of Grade 3 CRS and neurotoxin. We think we're in the ballpark and looking forward to doing that, too.

Okay. Maybe shifting gears to solid tumors, and you talked a little bit about the renal study. When can we expect maybe the initial clinical data from this study and what are some of the key kind of efficacy parameters? These are mainly a -- what, a second or third-line patient population that you're looking at. So can you talk a little bit about that?

Yes. Our first foray in the solid tumors is with a construct called ALLO-316. This is a AlloCAR T therapy directed against CD70, which is an antigen expressed in renal cell carcinoma, other tumors, including other heme malignancies. And we're excited about this target because I think one of the key challenges the CAR-T space has been identifying a target that's selectively and potently expressed in solid tumor histologies. And with CD70 at least, we think that is the case. If you're going to succeed in solid tumors, you have to start with a good target. So right now, we're in the early phases of dose escalation of a Phase I study with ALLO-316. We talked about on our call last week being in the second dose escalation cohort. And we're committed to, as we typically do at Allogene, providing a meaningful Phase I dataset. So it's a little bit early for us to predict when Phase I data set will be meaningful, but we don't want to dribble out a couple of patients here or there. If you're thinking maybe over the next 12 months are having data, I think that's a reasonable estimate.

Okay. And so you mentioned some of the legacy challenges with cell therapy in solid tumors. So there's -- you've sort of ruled out concern that CD70 might be expressed in healthy tissue that there could be any sort of safety liability with that approach. And in terms of being having to kind of hit CD70 intratumorally or intracellularly, are you able to get good enough antigen expression from an extracellular perspective?

Yes. I think it's a little too early to say we've ruled out anything in our trials. Again, we're still dose escalating. And until you reach a dose that's efficacious and safe, you can't predict what you might find. So we do think, based on the preclinical models and all the tumor expression data we've seen in humans that this target is a good one, and we certainly don't expect to encounter any safety issues, but too early to say we've ruled out and deemed it a safe target. With regard to tumor trafficking into solid tumors, which is, I think what you're getting at is our T cells able to penetrate that tumor microenvironment. Certainly, that's an additional challenge in cell therapy for solid tumors. But the TIL space provides proof of concept for the fact that T cells, if they do engage with an antigen, are able to infiltrate a tumor and we'd be looking in our Phase I study for evidence that that's possible too.

Okay. I got about a minute left. Let's see if there's any questions in the audience. Doesn't look like it. I guess maybe just a last one for me. Just thinking about Cell Forge and the work that's being done there, you would not have an FDA inspection, I presume, until you actually submit your data from the pivotal CD19 study. Is that correct?

Yes, that's right. Typically, how it works is the FDA inspection would occur just after the BLA filing. But it's a wonderful facility. It's located in the Bay Area. It's operational. It's fully functional. And certainly, we would invite anyone out to take an in-person visit of the facility is just unbelievable. First of its kind, really best of its kind. And I think it shows what's required to be competitive in the space.

From a -- I guess, last CFO question. From a maintenance CapEx perspective, what are sort of the ongoing costs that you'd incur to keep a facility like this GMP-compliant?

Yes. I mean I think we've commented that a minority, but a meaningful minority of our OpEx goes into maintaining this facility. So it's not 50% of our budget each year that's required to support all the manufacturing operations, not just the facility, but quality control, supply chain, quality assurance, et cetera. But all in, we spend somewhat not less than half of our OpEx budget on manufacturing.

Okay. Great. Well, Eric, thanks so much for joining us. And thanks, everybody, for listening today. Thank you.

Thank you.