ALLO - Allogene: ALLO-715 Phase 1 Results And ALLO-213 Preclinical Data Is Promising

Summary

• Allogene Therapeutics presents an attractive investment opportunity in the biotechnology sector due to its focus on developing allogeneic CAR T products for cancer treatment.
• The recent announcement of preclinical data demonstrating the effectiveness of its Dagger platform technology in solid tumors is a game-changer.
• The recent publication of data from Allogene Therapeutics' Phase 1 UNIVERSAL trial of ALLO-715 in Nature Medicine is an encouraging development.
• Their recent preclinical data showing that Delta-like ligand 3 (DLL3) is a promising target for AlloCAR T in small cell lung cancer (SCLC) is also equally exciting.

Allogene Therapeutics (ALLO) presents a unique and compelling investment opportunity for those seeking high-growth potential in the biotechnology sector. With a focus on developing allogeneic CAR T (AlloCAR T) products for cancer treatment, Allogene is at the forefront of cutting-edge technology that could revolutionize cancer therapy.

One of the main advantages of Allogene's technology is its superior safety profile compared to competitors, which could significantly reduce the dependence on other lymphodepletion strategies. This aspect has the potential to enhance the convenience and accessibility of cancer treatment for patients, leading to broader adoption of Allogene's technology in the market.

Moreover, Allogene's recent announcement of preclinical data demonstrating the effectiveness of its Dagger platform technology in solid tumors is a game-changer. This technology has the potential to overcome one of the main limitations of current CAR-T therapies, which is their limited effectiveness in solid tumors. By resisting rejection of AlloCAR-T cells by the host immune system, the Dagger technology could enable a prolonged window of persistence during which AlloCAR T cells can actively target and destroy cancer cells. This development represents a significant competitive advantage for Allogene and could position the company as a leader in the oncology market.

Solid Assets With Strong R&D Investment

At the end of 2022, Allogene Therapeutics had $576 million in cash, cash equivalents, and investments. This substantial amount provides them with notable financial maneuverability to finance their research and development endeavors. In the fourth quarter of 2022, they allocated $75.4 million toward R&D activities. Moreover, their general and administrative expenses amounted to $21 million during this same period; this comprised a $9.8 million noncash stock-based compensation expense. Altogether, it is evident that the company is investing heavily in research and development, which investors can view as a promising sign.

Notwithstanding its investment in R&D, Allogene registered a net loss worth $94.8 million or $0.66 per share for Q4 2022. However, this is including a non-cash stock-based compensation expense of $17.2 million. Knowing that although the company operates within the highly uncertain biotechnology sector, such an expenditure indicates they are working hard on long-term profitable growth opportunities.

Looking ahead, concerns surrounding finances are progressing well as Allogene anticipates total GAAP operating expenses slightly lower than their original estimates at about $350 million, including estimated non-cash stock-based compensation of about $90 million, without taking into account probable business activities. Furthermore, the forecast suggests by next year's end the company will expend about $250 million in cash burn. These expectations show dedication to fiscal discipline, while still allotting important funds to research and development.

CAR T-Cell Products

Allogene Therapeutics is revolutionizing cancer treatment with AlloCAR T products - investigational allogeneic CAR T cell therapy that uses healthy donor cells. The cells are isolated in a manufacturing facility, modified via gene editing and engineered to express CARs to target and destroy cancer cells; they can then be stored off-the-shelf for use on demand. This approach has the potential to treat all eligible patients, allow for repeat dosing if needed, eliminate complex logistics, and have lower ancillary costs. Using healthy donor cells allows for a larger pool of cells to create more treatments. This makes them easily accessible to those who are critically ill and have T cells that are difficult to harvest or expand.

To further increase availability, Allogene Therapeutics is developing additional AlloCAR T products. Their lead product, ALLO-501A , utilizes their Alloy manufacturing process and targets CD19 for the treatment of relapsed or refractory Large B Cell Lymphoma (LBCL). They also have two most advanced products: ALLO-715, which targets BCMA for Multiple Myeloma treatment and ALLO-316 which targets CD70 for Clear Cell Renal Cell Carcinoma. In addition to increased accessibility, AlloCAR T products also reduce risks associated with graft versus host disease (GvHD) and allogeneic rejection. This is done by knocking out a T cell receptor gene and CD52 gene respectively. This way, AlloCAR T products stay engrafted and yield full therapeutic impact.

To increase efficiency, Allogene Therapeutics is developing technology to facilitate scaling up of their manufacturing process. This includes building a master cell bank from renewable iPSC sources and working on proprietary T-cell differentiation techniques. Furthermore, through development of TurboCARS, their CAR T cell efficacy is expected to improve, reducing dose requirement and allowing for use on solid tumors.

ALLO-715 Data Readout is Promising

I believe that the recent publication of data from Allogene Therapeutics' Phase 1 UNIVERSAL trial of ALLO-715 in Nature Medicine is a groundbreaking development for cancer treatment. ALLO-715 is an anti-BCMA AlloCAR T product candidate for relapsed/refractory multiple myeloma, and showed remarkable response rates with a single dose administered to these patients.

This type of progress is particularly important as it could help lower the obstacles faced by those suffering from multiple myeloma when searching for access to cell therapy. Through demonstrating efficacy comparable to certain autologous CAR T therapies while also showing durable remissions and a manageable safety profile in 92% of all enrolled individuals and with products successfully manufactured and released under its specifications, Allogene Therapeutics has made meaningful strides in the cancer treatment field.

The Phase 1 UNIVERSAL study tested doses of its treatments on respondents with heavily pretreated relapsed/refractory multiple myeloma. Data of the first 48 participants studied up to October 2021 suggest AlloCAR T's tremendous potential to revolutionize the treatment of this type of cancer. Moreover, it was the sole allogeneic CAR T study to make evidence statements about the effectiveness of achieving responses with only a single dose application among patients with relapsed/refractory multiple myeloma; This is an impressive feat overall.

Allogene Therapeutics is well equipped to improve outcomes of people enduring Multiple Myeloma and other diseases owing to its inventive technology and promising clinical records, along with sound fiscal posture and collaborations with large pharmaceutical companies.

DLL3 Has Positive Response Against SCLC

The recent publication of preclinical data showing that Delta-like ligand 3 (DLL3) is a promising target for AlloCAR T in small cell lung cancer (SCLC) is an exciting development for Allogene Therapeutics. As a leader in allogeneic CAR T research and development, their dedication to exploring the potential of this therapeutic modality across various indications, including solid tumors with limited treatment options, should be commended.

The selection of ALLO-213 as an allogeneic CAR T candidate targeting DLL3 from many single-chain variable fragment (scFv)-based anti-DLL3 CARs is a noteworthy advancement in creating a safe and effective SCLC treatment option. The choice of ALLO-213 was based on its potency and specificity against SCLC cell lines in vitro and in vivo, even those with very low antigen density to demonstrate sensitivity. Preclinical data suggests that ALLO-213 has a favorable safety profile and the ability to curb tumor growth without causing damage to normal tissue.

This development holds great significance due to SCLC's aggressiveness, lack of accessible treatments and dismal survival rate. If ALLO-213 succeeds at becoming a safe and successful treatment for SCLC patients, it could provide them with much needed hope.

Dagger Platform Resists Rejection Risk

The Dagger platform technology is designed to resist the rejection of AlloCAR T cells by the host immune cells, thus representing a significant milestone in the field of allogeneic CAR T therapy. This technology has been incorporated into Allogene's anti-CD70 product candidate ALLO-316 and is currently being evaluated in TRAVERSE, a Phase 1 study of patients with relapsed/refractory renal cell carcinoma ((RCC)). The platform works by arming AlloCAR T cells with a CD70-targeting receptor that both recognizes and depletes CD70-positive host cells, while simultaneously masking the CD70 molecule expressed on the AlloCAR T cells themselves. As such, this technology may assist in enhancing AlloCAR T cell function by preventing premature rejection of the cells, and potentially reducing dependence on other lymphodepletion strategies.

Remarkably, preclinical results have demonstrated the potential of the Dagger platform technology to bolster the effectiveness of next-generation AlloCAR T products targeting both hematologic and solid tumors. In particular, when used together with CD19 AlloCAR T cells armed with a CD70 Dagger, it was found that dual-specificity could be achieved, thereby thwarting tumor escape due to antigen loss and potentially improving outcomes for cancer patients through an enhanced patient experience stemming from increased effectiveness, reduced treatment burden, and improved overall outcome.

Oncology Market Risks

The oncology and T-cell therapy market is subject to various risks, with the regulatory environment being one of the primary concerns. As these therapies are relatively novel, regulations may change which could affect their development and commercialization. For instance, recent concerns involving the long-term safety and efficacy of CAR-T therapies have led to increased regulatory scrutiny. Despite Allogene Therapeutics showing hopeful results in its clinical trials, regulation changes can hold back approval progressions.

Moreover, another risk associated with this market is the costly price tags of such therapies. CAR-T therapies often exceed amounts of $1 million, resulting in limited accessibility and worries about terms for pricing models. Although payers might be able to negotiate lower prices for these therapies, it still presents an element of uncertainty to the market and profits from companies like Allogene may suffer accordingly.

Finally, competition is a potential threat to this market. Allogene Therapeutics is not alone when it comes to researching allogeneic CAR T treatments and other businesses could easily enter the sector to compete for market share. This could detrimentally influence the pricing, profitability, partnerships, and collaborations related to Allogene's products.

Despite these risks, the oncology and T-cell therapy market is still poised for growth, and Allogene Therapeutics is well-positioned to take advantage of this. The company's recent clinical trial results have been promising, and its innovative DaggerTM platform technology has the potential to enhance the efficacy and persistence of its AlloCAR T products.

Competitors in Oncology and Cell Therapy

Allogene Therapeutics, Fate Therapeutics, and Precision BioSciences are all biotech companies that focus on developing novel cell therapies for cancer treatment. While all three companies share similar goals and objectives, Allogene Therapeutics stands out in a few key areas which makes it an attractive choice for investors interested in the potential of cell therapy markets.

Firstly, Allogene has a powerful pipeline of products based on its own AlloCAR T platform. These products offer off-the-shelf convenience, allowing them to be manufactured in advance and stored until needed - meaning they do not require individualized manufacturing as compared to competitors like Fate, who develop induced pluripotent stem cell ((IPSC))-derived CAR T cell products. The iPSC-derived CAR T cells have the potential to address limitations of autologous CAR T cells but nevertheless remain early in their development, likely more expensive and time-consuming to produce than offerings from Allogene.

Another key advantage for Allogene Therapeutics is its experienced management team. CEO David Chang, M.D., Ph.D., is a seasoned biotech executive with more than two decades of experience in drug development and commercialization. He was previously the Chief Medical Officer and Executive Vice President of Research and Development at Kite Pharma, where he played a key role in the development of Yescarta, one of the first CAR T cell therapy to receive FDA approval. Allogene's executive team also includes several other industry veterans with extensive experience in biotech and cell therapy development. By contrast, Fate Therapeutics and Precision BioSciences both have less seasoned management teams, with fewer individuals who have experience bringing cell therapies to market.

Valuation

I believe that Allogene Therapeutics is undervalued based on its Price/Book (P/B) ratio compared to the sector median. The company's current trailing twelve-month ((TTM)) P/B ratio is 1.38 , which is significantly lower than the sector median of 2.08. Looking ahead to the future, Allogene's P/B ratio difference from the median is even lower at 1.47 relative to the now higher median of 2.53. Given the huge upside potential in this market and the strength of Allogene's pipeline, I consider the company's relatively low P/B ratio unwarranted.

Overall Outlook

Allogene Therapeutics is a compelling investment opportunity in the rapidly growing field of oncology and T-cell therapy. The company's innovative allogeneic CAR T products and technologies have shown promising results in early clinical trials and hold the potential to address significant unmet medical needs in multiple indications.

Allogene stands out amongst its competitors with its unique approach to allogeneic CAR T therapy, incorporating cutting-edge technologies such as its proprietary Dagger platform to boost the safety and efficacy of its products. Compared to other companies in the space, Allogene's current market valuation suggests it may be undervalued, creating an attractive entry point for investors.

Even with that said, there are various risks and challenges that await like clinical trial setbacks or regulatory obstacles. Nonetheless, Allogene's strong financial position, experienced management team, and diverse pipeline provide a firm base for future growth. With an emphasis on developing off-the-shelf CAR T therapies, which could revolutionize the current autologous CAR T landscape and gain major market share, the investment opportunities around Allogene continue to shine.

For those looking to gain exposure within the realm of oncology and T-cell therapy, investors should strongly consider Allogene Therapeutics as a high-growth investment opportunity with possible huge returns. With consistent clinical progress underway also accompanied by multiple product candidates at different stages of development across their diversified pipeline, Allogene is well-positioned to increase value while making a meaningful contribution to the fight against cancer.

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