Allakos Annual Report 2021
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Allakos Annual Report 2021 Form 10-K (NASDAQ:ALLK) Published: March 1st, 2021 PDF generated by stocklight.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-38582 Allakos Inc. (Exact name of Registrant as specified in its Charter) Delaware 45-4798831 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 975 Island Drive, Suite 201 Redwood City, California 94065 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (650) 597-5002 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, par value $0.001 ALLK The Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☒ NO ☐ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒ Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐ Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒ The aggregate market value of the common stock held by non-affiliates of the Registrant based on the closing price of the Registrant’s Common Stock on the Nasdaq Global Select Market as of June 30, 2020 was $2,155.5 million. The number of shares of Registrant’s Common Stock outstanding as of February 23, 2021 was 53,117,414. Portions of the Registrant’s Definitive Proxy Statement relating to the registrant’s 2020 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s 2020 fiscal year ended December 31, 2020. Table of Contents Page PART I Item 1. Business 1 Item 1A. Risk Factors 37 Item 1B. Unresolved Staff Comments 75 Item 2. Properties 75 Item 3. Legal Proceedings 76 Item 4. Mine Safety Disclosures 76 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 77 Item 6. Selected Financial Data 79 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 80 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 92 Item 8. Financial Statements and Supplementary Data 93 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 118 Item 9A. Controls and Procedures 118 Item 9B. Other Information 121 PART III Item 10. Directors, Executive Officers and Corporate Governance 122 Item 11. Executive Compensation 122 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 122 Item 13. Certain Relationships and Related Transactions, and Director Independence 122 Item 14. Principal Accounting Fees and Services 122 PART IV Item 15. Exhibits, Financial Statement Schedules 123 Item 16. Form 10-K Summary 125 Signatures 126 PART I Item 1. Business. Overview We are a clinical stage biotechnology company developing lirentelimab (AK002), our wholly owned monoclonal antibody, for the treatment of various mast cell and eosinophil related diseases. Lirentelimab selectively targets both mast cells and eosinophils, two types of white blood cells that are widely distributed in the body and play a central role in the inflammatory response. Inappropriately activated mast cells and eosinophils have been identified as key drivers in a number of severe diseases affecting the gastrointestinal tract, eyes, skin, lungs and other organs. Our initial focus is on eosinophilic gastrointestinal diseases which include eosinophilic gastritis (“EG”), eosinophilic duodenitis (“EoD”) which has also been referred to as eosinophilic gastroenteritis, and eosinophilic esophagitis (“EoE”); in addition, lirentelimab has the potential to treat a number of other severe diseases. Lirentelimab has received orphan disease status for EG, EoD, and EoE from the U.S. Food and Drug Administration (the “FDA”). Lirentelimab completed a randomized, double-blind, placebo-controlled Phase 2 study in patients with EG and/or EoD (see ENIGMA study results). The ENIGMA study met all prespecified primary and secondary endpoints when compared to placebo and results were published in the New England Journal of Medicine. ENIGMA patients that continued to receive lirentelimab treatment for at least 52 weeks have experienced continued symptom improvement with an average 70% reduction in EG and EoD symptoms. Additionally, patients in the ENIGMA study with co-morbid EoE showed histologic and symptomatic improvement when treated with lirentelimab compared to placebo. Based on the results from the ENIGMA study and End of Phase 2 meeting with the FDA, we began enrollment of a Phase 3 study in patients with EG and/or EoD and a Phase 2/3 study in patients with EoE. We expect results from these trials in the fourth quarter of 2021. Despite the knowledge that mast cells and eosinophils drive many pathological conditions, there are no approved therapies that selectively target both mast cells and eosinophils. Lirentelimab binds to Siglec-8, an inhibitory receptor found on mast cells and eosinophils, which represents a novel mechanism to selectively inhibit or deplete these important immune cells and thereby potentially resolve inflammation. We believe lirentelimab is the only Siglec-8 targeting antibody currently in clinical development and may have advantages over current treatment options available to patients for the diseases we are pursuing. Our lead indication is EG and/or EoD, which are chronic, often severe, inflammatory diseases characterized by persistent gastrointestinal symptoms and elevated and activated eosinophils in the stomach and/or, duodenum, respectively. Emerging data suggests that activated mast cells also contribute to disease pathogenesis. Common symptoms of the diseases include abdominal pain, nausea, diarrhea, bloating, cramping, early satiety, loss of appetite, vomiting and weight loss. There are no treatments approved specifically for these diseases. Treatment with systemic steroids can provide symptomatic improvement, but long-term treatment with steroids is generally not possible due to the numerous side effects. Published literature reports the prevalence of EG and EoD in the United States to be approximately 50,000 people. However, we believe that these diseases may be significantly underdiagnosed or misdiagnosed as other gastrointestinal diseases. Initial evidence of underdiagnosis came from the ENIGMA study. During the enrollment phase of the ENIGMA study, our investigational sites screened patients that had not been previously diagnosed with EG or EoD. Many of these patients had chronic unexplained gastrointestinal symptoms or had been previously diagnosed with a functional gastrointestinal disorder (“FGID”) such as irritable bowel syndrome (“IBS”) and functional dyspepsia (“FD”). Of 26 patients biopsied with no prior EG or EoD diagnosis, 15 (58%) were found to have EG or EoD and were therefore eligible for enrollment in the ENGIMA study. The high rate of discovery among previously undiagnosed patients suggested that many patients with chronic gastrointestinal symptoms (including those diagnosed with IBS, FD or nonspecific gastritis) have EG and/or EoD. More recently, we have confirmed these findings in a large prospective study examining the rates of elevated eosinophil and mast cell levels in patients with chronic unexplained gastrointestinal symptoms or FGIDs such as IBS and FD. In this prevalence study 45% (181 of 405) of patients biopsied met the histologic criteria for EG and/or EoD (See Prevalence Study results for more information). Millions of patients in the U.S. are under the care of a gastroenterologist and suffer from chronic unexplained gastrointestinal symptoms or FGIDs. Our results provide evidence that prevalence of EG and EoD is significantly higher than reported in the literature.