SEC Filing | Alector

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ 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 001-38792

Alector, Inc.

(Exact name of Registrant as specified in its Charter)


Delaware		82-2933343
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
131 Oyster Point Blvd, Suite 600 South San Francisco, California		94080
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 415-231-5660

Not applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

ALEC

The Nasdaq Stock Market LLC 
(The Nasdaq Global Select Market)

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2022, the registrant had 82,701,539 shares of common stock, $0.0001 par value per share, outstanding.

Alector, Inc.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 6.	Exhibits	74
	Signatures	75

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, regulatory approvals, timing, and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this report include, but are not limited to, statements about:

•

our plans relating to the development and manufacturing of our product candidates and research programs, including additional indications that we may pursue;

•

the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;

•

the beneficial characteristics, safety, efficacy, and therapeutic effects of our product candidates;

•

the expected potential benefits of strategic collaborations with third parties and our ability to attract collaborators with development, regulatory and commercialization expertise;

•

our estimates of the number of patients in the United States who suffer from the diseases we are targeting and the number of patients that will enroll in our clinical trials;

•

the timing and focus of our future clinical trials, and the reporting of data from those trials;

•

our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and sales strategy;

•

the size of the market opportunity for our product candidates in each of the diseases we are targeting;

•

our ability to expand our product candidates into additional indications and patient populations;

•

the success of competing therapies that are or may become available;

•

the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations, such as orphan drug designation, for our product candidates for various diseases;

•

our ability to obtain and maintain regulatory approval of our product candidates;

•

existing regulations and regulatory developments in the United States and other jurisdictions;

•

our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;

•

our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;

•

the need to hire additional personnel and our ability to attract and retain such personnel; especially in light of a competitive compensation environment;

•

the accuracy of our estimates regarding expenses, future revenue, capital requirements, and additional financing needs;

•

our financial performance, including potential volatility in our stock price;

•

the impact of the ongoing coronavirus (COVID-19) pandemic, including recent and new variants, on our business;

•

the effects of a rising rate of inflation; and

•

the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this report and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, or otherwise.

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 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 you are cautioned not to unduly rely upon these statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (https://investors.alector.com), Securities and Exchange Commission (SEC) filings, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with our stockholders and public about our company, our products, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Alector, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share data)


	September 30,			December 31,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	184,231		$	329,152
Marketable securities		574,075			406,099
Receivable from collaboration partner		6,491			7,391
Prepaid expenses and other current assets		10,166			7,071
Total current assets		774,963			749,713
Property and equipment, net		26,289			27,330
Operating lease right-of-use assets		28,530			30,569
Restricted cash		1,472			1,472
Other assets		5,784			5,574
Total assets	$	837,038		$	814,658
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	4,546		$	4,749
Accrued clinical supply costs		5,444			8,748
Accrued liabilities		23,225			27,460
Deferred revenue, current portion		119,684			90,803
Operating lease liabilities, current portion		7,990			7,795
Total current liabilities		160,889			139,555
Deferred revenue, long-term portion		386,357			334,415
Operating lease liabilities, long-term portion		36,455			39,806
Other long-term liabilities		233			158
Total liabilities		583,934			513,934
Commitments and contingencies
Stockholders' equity:
Common stock, $0.0001 par value; 200,000,000 shares authorized; 82,700,939 and 81,986,192 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		8			8
Additional paid-in capital		787,097			748,036
Accumulated other comprehensive loss		(6,742	)		(943	)
Accumulated deficit		(527,259	)		(446,377	)
Total stockholders' equity		253,104			300,724
Total liabilities and stockholders' equity	$	837,038		$	814,658

The accompanying notes are an integral part of these condensed consolidated financial statements.

Alector, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Collaboration revenue	$	14,852		$	182,413		$	119,177		$	193,091
Operating expenses:
Research and development		48,348			43,066			155,925			136,617
General and administrative		14,252			13,018			45,648			38,105
Total operating expenses		62,600			56,084			201,573			174,722
Income (loss) from operations		(47,748	)		126,329			(82,396	)		18,369
Other income, net		2,333			268			4,047			910
Income (loss) before income taxes		(45,415	)		126,597			(78,349	)		19,279
Income tax expense		733			—			2,533			—
Net income (loss)		(46,148	)		126,597			(80,882	)		19,279
Unrealized loss on marketable securities		(518	)		(244	)		(5,799	)		(655	)
Comprehensive income (loss)	$	(46,666	)	$	126,353		$	(86,681	)	$	18,624
Net income (loss) per share:
Basic net income (loss) per share	$	(0.56	)	$	1.56		$	(0.98	)	$	0.24
Diluted net income (loss) per share	$	(0.56	)	$	1.49		$	(0.98	)	$	0.23
Weighted-average shares used in calculating:
Shares used in computing net income (loss) per share, basic		82,602,842			80,964,701			82,367,936			80,048,758
Shares used in computing net income (loss) per share, diluted		82,602,842			85,232,690			82,367,936			82,871,254

The accompanying notes are an integral part of these condensed consolidated financial statements.

Alector, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)


	Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount
Balance — December 31, 2021		81,986,192	$	8	$	748,036	$	(943	)	$	(446,377	)	$	300,724
Exercise of stock options		234,117		—		2,483		—			—			2,483
Vesting of restricted stock units		104,368		—		—		—			—			—
Stock-based compensation		—		—		11,939		—			—			11,939
Unrealized loss on marketable securities		—		—		—		(2,992	)		—			(2,992	)
Net loss		—		—		—		—			(44,617	)		(44,617	)
Balance — March 31, 2022		82,324,677		8		762,458		(3,935	)		(490,994	)		267,537
Exercise of stock options		4,244		—		41		—			—			41
Vesting of restricted stock units		101,076		—		—		—			—			—
Purchase of common stock under employee stock purchase plan		114,904		—		866		—			—			866
Stock-based compensation		—		—		12,478		—			—			12,478
Unrealized loss on marketable securities		—		—		—		(2,289	)		—			(2,289	)
Net income		—		—		—		—			9,883			9,883
Balance — June 30, 2022		82,544,901	$	8	$	775,843	$	(6,224	)	$	(481,111	)	$	288,516
Exercise of stock options		54,278		—		489		—			—			489
Vesting of restricted stock units		101,760		—		—		—			—			—
Stock-based compensation		—		—		10,765		—			—			10,765
Unrealized loss on marketable securities		—		—		—		(518	)		—			(518	)
Net loss		—		—		—		—			(46,148	)		(46,148	)
Balance — September 30, 2022		82,700,939	$	8	$	787,097	$	(6,742	)	$	(527,259	)	$	253,104

The accompanying notes are an integral part of these condensed consolidated financial statements.

Alector, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)


	Common Stock					Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
	Shares			Amount
Balance — December 31, 2020		79,316,261		$	8	$	676,956	$	614		$	(410,048	)	$	267,530
Exercise of stock options		415,386			—		3,874		—			—			3,874
Stock-based compensation		—			—		8,800		—			—			8,800
Unrealized loss on marketable securities		—			—		—		(204	)		—			(204	)
Net loss		—			—		—		—			(52,171	)		(52,171	)
Balance — March 31, 2021		79,731,647			8		689,630		410			(462,219	)		227,829
Exercise of stock options		207,453			—		1,993		—			—			1,993
Purchase of common stock under employee stock purchase plan		84,105			—		969		—			—			969
Forfeiture of restricted common stock		(18,043	)		—		—		—			—			—
Stock-based compensation		—			—		9,078		—			—			9,078
Unrealized loss on marketable securities		—			—		—		(207	)		—			(207	)
Net loss		—			—		—		—			(55,147	)		(55,147	)
Balance — June 30, 2021		80,005,162		$	8	$	701,670	$	203		$	(517,366	)	$	184,515
Exercise of stock options		1,178,085			—		14,821		—			—			14,821
Vesting of restricted stock units		65,399			—		—		—			—			—
Stock-based compensation		—			—		10,201		—			—			10,201
Unrealized loss on marketable securities		—			—		—		(244	)		—			(244	)
Net income		—			—		—		—			126,597			126,597
Balance — September 30, 2021		81,248,646		$	8	$	726,692	$	(41	)	$	(390,769	)	$