alvr-10q_20200630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 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: 001-39409

 

ALLOVIR, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

83-1971007

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

139 Main Street, Suite 500

Cambridge, MA

 

02142

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (617) 433-2605

 

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 $0.0001 per share

 

ALVR

 

The Nasdaq Global 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 August 31, 2020, the registrant had 21,574,585 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

4

 

Condensed Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

30

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

76

Item 3.

Defaults Upon Senior Securities

76

Item 4.

Mine Safety Disclosures

76

Item 5.

Other Information

76

Item 6.

Exhibits

77

Signatures

78

 

 

 

i


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including but not limited to, statements about:

 

the success, cost, timing and potential indications of our product development activities and clinical trials, including the ongoing clinical trials of Viralym-M, ALVR106 and ALVR109;

 

the timing of our planned IND submissions to the FDA for our product candidates, including ALVR106, ALVR109, ALVR107 and ALVR108;

 

the timing of the initiation, enrollment and completion of planned clinical trials;

 

our plans to research, develop and commercialize our product candidates, including Viralym-M, ALVR106, ALVR109, ALVR107 and ALVR108;

 

the outcomes of our preclinical studies;

 

the costs of development of any of our product candidates or clinical development programs and our ability to obtain funding for our operations, including funding necessary to complete the clinical trials of any of our product candidates;

 

our ability to successfully manufacture and distribute Viralym-M and ALVR106 or any other future product or product candidate, including under the Development and Manufacturing Services Agreement with ElevateBio BaseCamp, Inc.;

 

the potential benefits of and our ability to maintain our collaboration with our existing collaborators, including BCM, and establish or maintain future collaborations or strategic relationships or obtain additional funding;

 

the ability to maintain our existing license agreements, including BCM, and to license additional intellectual property relating to any future product candidates and to comply with our existing license agreements;

 

our ability to attract and retain collaborators with development, regulatory and commercialization expertise;

 

risks associated with the COVID-19 pandemic, which may adversely impact our business and clinical trials;

 

the size of the markets for our VST product candidates, and our ability to serve those markets;

 

whether the results of our clinical trials will be sufficient to support domestic or foreign regulatory approvals for any of our product candidates;

 

our ability to successfully commercialize our product candidates, including Viralym-M and ALVR106;

 

the rate and degree of market acceptance of our product candidates, including Viralym-M and ALVR106;

 

our ability to obtain and maintain regulatory approval of our product candidates in any of the indications for which we plan to develop them, and any related restrictions, limitations or warnings in the label of any approved product we develop;

 

our ability to develop and maintain sales and marketing capabilities, whether alone or with potential future collaborators;

 

regulatory developments in the United States and foreign countries with respect to our product candidates or our competitors’ products and product candidates;

 

our reliance on third-party contract manufacturers and the performance of our third-party suppliers and manufacturers to manufacture and supply our product candidates for us;

 

the success of competing therapies that are or become available;

 

our ability to attract and retain key scientific or management personnel;

 

our expectation about the period of time over which our existing capital resources will be sufficient to fund our operating expenses and capital expenditures;

 

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

our financial performance;

1


 

the impact of laws and regulations;

 

developments and projections relating to our competitors or our industry;

 

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

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates and our ability to operate our business without infringing on the intellectual property rights of others.

In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

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 investors are cautioned not to unduly rely upon these statements.

You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. 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, changed circumstances or otherwise.

You should read this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

2


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ALLOVIR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

(in thousands, except share and per share amounts)

 

June 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

78,267

 

 

$

61,084

 

Short-term investments

 

 

26,184

 

 

 

64,993

 

Accrued interest

 

 

58

 

 

 

262

 

Unbilled grant receivables

 

 

354

 

 

 

298

 

Prepaid expenses and other current assets

 

 

2,425

 

 

 

676

 

Total current assets

 

 

107,288

 

 

 

127,313

 

Property and equipment

 

 

313

 

 

 

350

 

Operating lease right-of-use assets

 

 

10,245

 

 

 

11,759

 

Total assets

 

$

117,846

 

 

$

139,422

 

Liabilities, convertible preferred stock and stockholders’ deficit

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

680

 

 

$

630

 

Accrued expenses

 

 

4,546

 

 

 

5,163

 

Operating lease liability, current

 

 

3,147

 

 

 

3,067

 

Amount due to related party

 

 

542

 

 

 

246

 

Total current liabilities

 

 

8,915

 

 

 

9,106

 

Operating lease liability, long term

 

 

7,098

 

 

 

8,692

 

Total liabilities

 

 

16,013

 

 

 

17,798

 

Series B preferred stock, $0.0001 par value: 14,877,697 shares authorized,

   issued and outstanding at June 30, 2020 and December 31, 2019; net of

   issuance costs (liquidation value of $121.3 million)

 

 

120,923

 

 

 

120,923

 

Series A preferred stock, $0.0001 par value: 64,520,653 shares authorized

   at June 30, 2020 and December 31, 2019; 44,520,653 shares issued and

   outstanding at June 30, 2020 and December 31, 2019; net of issuance

   costs (liquidation value of $66.8 million)

 

 

52,204

 

 

 

52,204

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value: 90,000,000 shares authorized at

   June 30, 2020 and December 31, 2019; 6,559,348 and 6,502,929

   issued at June 30, 2020 and December 31, 2019, respectively;

   2,801,859 and 2,099,740 outstanding at June 30, 2020 and

   December 31, 2019, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

4,886

 

 

 

3,748

 

Accumulated other comprehensive income

 

 

110

 

 

 

68

 

Accumulated deficit

 

 

(76,290

)

 

 

(55,319

)

Total stockholders’ deficit

 

 

(71,294

)

 

 

(51,503

)

Total liabilities, convertible preferred stock and stockholders’ deficit

 

$

117,846

 

 

$

139,422

 

 

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

 

3


ALLOVIR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

UNAUDITED

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(in thousands, except share and per share amounts)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

 

 

$

 

 

$

 

 

$

165

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,885

 

 

 

2,755

 

 

 

15,724

 

 

 

3,906

 

General and administrative

 

 

3,268

 

 

 

3,190

 

 

 

6,269

 

 

 

4,977

 

Total operating expenses

 

 

12,153

 

 

 

5,945

 

 

 

21,993

 

 

 

8,883

 

Loss from operations

 

 

(12,153

)

 

 

(5,945

)

 

 

(21,993

)

 

 

(8,718

)

Total other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

166

 

 

 

503

 

 

 

623

 

 

 

619

 

Other income, net

 

 

355

 

 

 

140

 

 

 

399

 

 

 

273

 

Net loss

 

$

(11,632

)

 

$

(5,302

)

 

$

(20,971

)

 

$

(7,826

)

Net loss per share — basic and diluted

 

$

(4.43

)

 

$

(5.05

)

 

$

(8.66

)

 

$

(8.49

)

Weighted-average common shares outstanding — basic and diluted

 

 

2,625,648

 

 

 

1,050,190

 

 

 

2,420,797

 

 

 

921,995

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(11,632

)

 

$

(5,302

)

 

$

(20,971

)

 

$

(7,826

)

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities

 

 

(134

)

 

 

129

 

 

 

42

 

 

 

129

 

Total other comprehensive (loss) income

 

 

(134

)

 

 

129

 

 

 

42

 

 

 

129

 

Comprehensive loss

 

$

(11,766

)

 

$

(5,173

)

 

$

(20,929

)

 

$

(7,697

)

 

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

 

4


ALLOVIR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND CHANGES IN STOCKHOLDERS’ DEFICIT

UNAUDITED

 

 

 

Series B

Preferred Stock

 

 

Series A

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

(in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2018

 

 

 

 

$

 

 

 

42,066,666

 

 

$

52,204

 

 

 

 

747,231

 

 

$

 

 

$

858

 

 

 

 

 

$

(31,480

)

 

$

(30,622

)

Issuance of common stock, upon vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

231

 

 

 

 

 

 

 

 

 

231

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,524

)

 

 

(2,524

)

Balance at March 31, 2019

 

 

 

 

$

 

 

 

42,066,666

 

 

$

52,204

 

 

 

 

887,337

 

 

$

 

 

$

1,089

 

 

$

 

 

$

(34,004

)

 

$

(32,915

)

Issuance of Series B Preferred Stock, net of $330 issuance costs

 

 

14,877,697

 

 

$

120,923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock, upon vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

510,876

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

129

 

 

 

 

 

 

129

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,441

 

 

 

 

 

 

 

 

 

1,441

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,302

)

 

 

(5,302

)

Balance at June 30, 2019

 

 

14,877,697

 

 

$

120,923

 

 

 

42,066,666

 

 

$

52,204

 

 

 

 

1,398,213

 

 

$

 

 

$

2,530

 

 

$

129

 

 

$

(39,306

)

 

$

(36,647

)

 

 

 

Series B

Preferred Stock

 

 

Series A

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

(in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2019

 

 

14,877,697

 

 

$

120,923

 

 

 

44,520,653

 

 

$

52,204

 

 

 

 

2,099,740

 

 

$

 

 

$

3,748

 

 

$

68

 

 

$

(55,319

)

 

$

(51,503

)

Issuance of common stock, upon vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

292,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

176

 

 

 

 

 

 

176

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

646

 

 

 

 

 

 

 

 

 

646

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,339

)

 

 

(9,339

)

Balance at March 31, 2020

 

 

14,877,697

 

 

$

120,923

 

 

 

44,520,653

 

 

$

52,204

 

 

 

 

2,392,384

 

 

$

 

 

$

4,394

 

 

$

244

 

 

$

(64,658

)

 

$

(60,020

)

Issuance of common stock, upon vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

409,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(134

)

 

 

 

 

 

(134

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

492

 

 

 

 

 

 

 

 

 

492

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,632

)

 

 

(11,632

)

Balance at June 30, 2020

 

 

14,877,697

 

 

$

120,923

 

 

 

44,520,653

 

 

$

52,204

 

 

 

 

2,801,859

 

 

$

 

 

$

4,886

 

 

$

110

 

 

$

(76,290

)

 

$

(71,294

)

 

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

 

 

 

5


 

ALLOVIR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

 

 

Six Months Ended

June 30,

 

(in thousands)

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(20,971

)

 

$

(7,826

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

37

 

 

 

 

Accretion of discounts on short-term investments

 

 

7

 

 

 

(148

)

Stock compensation expense

 

 

1,138

 

 

 

1,672

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Subscription receivable and unbilled grants receivable

 

 

(56

)

 

 

159

 

Accrued interest

 

 

204

 

 

 

(254

)

Prepaid expenses and other current assets

 

 

(1,749

)

 

 

(378

)

Accounts payable, accrued expenses and amount due to related party

 

 

(271

)

 

 

2,049

 

Deferred grant revenue

 

 

 

 

 

(158

)

Net cash used in operating activities

 

 

(21,661

)

 

 

(4,884

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

 

 

 

(225

)

Purchase of short-term investments

 

 

(26,156

)

 

 

(99,344

)

Maturities of short-term investments

 

 

65,000

 

 

 

 

Net cash provided by (used in) investing activities

 

 

38,844

 

 

 

(99,569

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of Series B Preferred Stock

 

 

 

 

 

121,253

 

Issuance costs related to the issuance of preferred stock

 

 

 

 

 

(330

)

Net cash provided by financing activities

 

 

 

 

 

120,923

 

Net increase in cash, cash equivalents and restricted cash

 

 

17,183

 

 

 

16,470

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

61,084

 

 

 

24,960

 

Cash, cash equivalents and restricted cash at end of period

 

$

78,267

 

 

$

41,430

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Unrealized gain on short-term investments

 

 

42

 

 

 

129

 

Right-of-use assets obtained in exchange for operating lease liability

 

 

 

 

 

6,890

 

 

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

6


 

ALLOVIR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

1. Nature of the Business

AlloVir, Inc., (“AlloVir” or “the Company”, formerly known as ViraCyte, Inc.) is a leading late, clinical-stage cell therapy company developing highly innovative allogeneic T cell therapies to treat and prevent devastating viral diseases. The Company’s innovative and proprietary virus-specific T cell, or VST, therapy platform allows AlloVir to generate off-the-shelf VSTs designed to restore immunity in patients with T cell deficiencies who are at risk from the life-threatening consequences of viral diseases. There is an urgent medical need for therapies to treat a large number of patients suffering from viral diseases who currently have limited or no treatment options. To date, the Company has generated five innovative, allogeneic, off-the-shelf VST therapy candidates targeting 12 different devastating viruses, the most advanced of which has successfully completed a proof-of-concept trial across five viruses and is entering initial pivotal trials for the treatment of virus-associated hemorrhagic cystitis in the fourth quarter of 2020.

The Company’s lead product candidate, Viralym-M, is a multi-VST cell therapy that targets five viruses: BK virus, cytomegalovirus, adenovirus, Epstein-Barr virus and human herpesvirus 6. To fully explore the clinical benefit of Viralym-M, the Company plans to initiate a total of three Phase 3 pivotal and three Phase 2 proof-of-concept trials in 2020 and 2021 for the treatment and prevention of life-threatening viral diseases in pediatric and/or adult patients, each representing a potential meaningful commercial opportunity. In addition, the Company anticipates filing an Investigational New Drug, or IND, application with the FDA in the second half of 2020 for its second cell therapy, ALVR106, an allogeneic, off-the-shelf, VST therapy designed to target severe respiratory diseases caused by four respiratory viruses: respiratory syncytial virus, influenza, parainfluenza virus and human metapneumovirus. The Company plans to initiate a Phase 1/2 clinical study in autologous and allogeneic hematopoietic stem cell transplant patients with respiratory viral diseases in the fourth quarter of 2020. We own worldwide development and commercialization rights to our cell therapies. Pursuant to the Company’s sponsored research agreement with Baylor College of Medicine (“BCM”), the Company anticipates BCM will initiate a proof-of-concept trial for ALVR109, an allogeneic, off-the-shelf VST therapy designed to target SARS-CoV-2, the virus that causes the severe and life-threatening viral disease, COVID-19. ALVR109 is being developed to arrest the progression of COVID-19 by eradicating SARS-CoV-2 virus-infected cells.

The Company was formed on August 16, 2013 as a Delaware limited liability company (“LLC”) under the name AdCyte LLC and on July 29, 2014 the Company changed its name to ViraCyte LLC. On September 17, 2018, the Company converted from a Delaware LLC to a Delaware corporation (the “LLC Conversion”) and changed its name to ViraCyte, Inc. On May 22, 2019, the Company changed its name to AlloVir, Inc. The Company has principal offices in Houston, Texas and Cambridge, Massachusetts.

On August 8, 2019, AlloVir formed AlloVir International Designated Activity Company (“AlloVir International”), a wholly-owned subsidiary established in Ireland.

On October 9, 2019, AlloVir Securities Corporation was incorporated as a Massachusetts Security Corporation, a wholly-owned subsidiary of AlloVir.

On November 10, 2019, AlloVir International formed AlloVir Italia S.R.L. (“AlloVir Italia”), a wholly-owned subsidiary in Italy.

On August 3, 2020, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 18,687,500 shares of its common stock, at a public offering price of $17.00 per share, resulting in gross proceeds of $317.7 million. The Company received approximately $292.4 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

In connection with the IPO, the Company effected a 1-for-1.49020520953831 reverse stock split of the Company’s common stock and adjusted the ratio at which the Company’s preferred stock is convertible into common stock, as well as the number of shares under the 2018 Equity Incentive Plan (“2018 Plan”), as well as the share amounts of restricted stock grants under the 2018 Plan and the number of options and exercise prices of options under the 2018 Plan as a result of the 1-for-1.49020520953831 reverse stock split. Accordingly, all common shares, stock options, and per share information presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted, where applicable, to reflect the reverse stock split on a retroactive basis for all periods presented. The per share par value and authorized number of shares of the Company’s common stock were not adjusted as a result of the split.

Upon the closing of the IPO, all of the then-outstanding shares of convertible preferred stock automatically converted into 39,859,139 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding. The condensed consolidated financial statements as of June 30, 2020, including share and per share amounts, do not give effect to the IPO, as it closed subsequent to June 30, 2020.

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ElevateBio, LLC

On September 17, 2018, the Company executed a Series A2 Preferred Stock Purchase Agreement (“Series A2 Agreement”) with ElevateBio, LLC, a Delaware LLC (“ElevateBio”) concurrent with the LLC Conversion. ElevateBio was formed on November 29, 2017 and is headquartered in Cambridge, Massachusetts with a focus on the development of a portfolio of novel cell therapy programs acquired through business development activities with biotechnology companies. ElevateBio is structured as a holding company, comprised of asset-specific subsidiaries focused on the development of pipeline assets, as well as a manufacturing subsidiary with the expertise to provide drug development and manufacturing services. As a result of the purchase of the Company’s Series A2 Preferred Stock, ElevateBio acquired an ownership interest in the Company. The Chief Executive Officer, Chief Financial Officer, and other executives of ElevateBio also serve in similar management roles with AlloVir.

Going Concern

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance and reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The Company believes that its $104.5 million of cash, cash equivalents and short-term investments held at June 30, 2020 in addition to the proceeds from the IPO, are sufficient to fund planned operations for at least twelve months from the date that these condensed consolidated financial statements are available to be issued.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Through June 30, 2020, the Company has funded its operations primarily with proceeds received from capital contributions, research grants and from the sale of preferred stock. The Company has incurred recurring losses since its inception, including net losses attributable to AlloVir common stockholders of $11.6 million and $5.3 million for the three months ended June 30, 2020 and 2019, respectively and $21.0 million and $7.8 million for the six months ended June 30, 2020 and 2019, respectively. In addition, at June 30, 2020, the Company had an accumulated deficit of $76.3 million. The Company expects to continue to generate operating losses for the foreseeable future.

The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

COVID-19 Considerations

The development of product candidates could be disrupted and materially adversely affected in the future by a pandemic, epidemic or outbreak of an infectious disease, such as the recent COVID-19 pandemic. The spread of COVID-19 has impacted the global economy and has impacted the Company’s operations, including the interruption of preclinical and clinical trial activities and potential interruption to the Company’s supply chain. For example, the COVID-19 pandemic has delayed clinical trials. If the disruption due to the COVID-19 pandemic continues, planned pivotal clinical trials also could be delayed due to government orders and site policies on account of the pandemic, and some patients may be unwilling or unable to travel to study sites, enroll in trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay the Company’s ability to conduct preclinical studies and clinical trials or release clinical trial results and could delay the Company’s ability to obtain regulatory approval and commercialize product candidates. Furthermore, COVID-19 could affect the Company’s employees or the employees of research sites and service providers on whom the Company relies on as well as those of companies with which the Company does business, including suppliers and contract manufacturing organizations or CMOs, thereby disrupting business operations. Quarantines and travel restrictions imposed by governments in the jurisdictions in which the Company and the companies with which it does business operate could materially impact the ability of employees to access preclinical and clinical sites, laboratories, manufacturing sites and offices. The Company has implemented work-at-home policies and only employees essential to the development and research of product candidates remain on-site at the Company’s research and manufacturing facilities; accordingly, the Company may experience limitations in employee resources. The outbreak and any other preventative or protective actions that the Company, its suppliers or other third parties with which it has business relationships, or governments may take in respect of the COVID-19 pandemic, could disrupt, delay or otherwise adversely impact the business.

8


 

The Company is still assessing business plans and the impact the COVID-19 pandemic may have on its ability to advance the testing, development and manufacturing of drug candidates, including as a result of adverse impacts on the research sites, service providers, vendors, or suppliers on whom the Company relies on, or to raise financing to support the development of our drug candidates. No assurances can be given that this analysis will enable the Company to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or this sector in particular. The Company cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if the Company or any of the third parties on whom it relies on or with whom it conducts business, were to experience shutdowns or other business disruptions, the Company’s ability to conduct business in the manner and on the timelines presently planned could be materially and adversely impacted.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the years ended December 31, 2019 and 2018 (“annual financial statements”), included in the Company’s final prospectus that forms part of the Company’s Registration Statement on Form S-1 (Reg. No. 333-239698), dated July 29, 2020 and filed with the SEC pursuant to Rule 424(b)(4) on July 30, 2020 (the “Prospectus”). Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies, except as noted below.

Interim Financial Information

The accompanying condensed consolidated balance sheet at June 30, 2020, and the condensed consolidated statements of operations and comprehensive loss, statements of convertible preferred stock and changes in stockholders’ deficit for the three and six months ended June 30, 2020 and 2019 and condensed consolidated statements of cash flows for the six months ended June 30, 2020 and 2019 are unaudited. The condensed consolidated interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position at June 30, 2020 and the results of its operations for the three and six months ended June 30, 2020 and 2019 and its cash flows for the six months ended June 30, 2020 and 2019. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2020 and 2019 are also unaudited. The results for the three and six months ended June 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020 or for any other subsequent interim period.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are presented in the consolidated balance sheets as a direct reduction from the carrying amount of the respective equity instrument issued. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss. At June 30, 2020, the Company recorded deferred offering costs of approximately $1.3 million. Upon closing the IPO in August 2020, deferred offering costs were derecognized and recorded against the IPO proceeds as a debit to additional paid-in capital.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with certain new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. As noted below, certain new or revised accounting standards were early adopted.

The new accounting pronouncements recently adopted by the Company and issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company are described in the Company’s audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, which are included in the Company’s Prospectus filed with the SEC on July 30, 2020. There have been no new accounting pronouncements issued in the six months ended June 30, 2020 that are applicable to the Company, except as noted below.

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Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740) (“ASU 2019-12”), which removes certain exceptions from the guidance and simplifies the accounting for income taxes in certain areas. The new standard will be effective beginning January 1, 2021. The Company does not expect that the new standard will have a material impact to the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for the Company’s fiscal year beginning December 15, 2023 and subsequent interim periods. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

3. Short-Term Investments

The following table summarizes the amortized cost and estimated fair value of the Company’s marketable securities, which are considered to be available-for-sale investments and were included in short-term investments on the condensed consolidated balance sheets:

 

 

 

June 30, 2020

 

(in thousands)

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

U.S. treasury securities

 

$

4,995

 

 

-

 

 

$

(1

)

 

$

4,994

 

U.S. government treasury securities

 

 

21,072

 

 

 

118

 

 

 

-

 

 

 

21,190

 

Totals

 

$

26,067

 

 

$

118

 

 

$

(1

)

 

$

26,184

 

 

 

 

December 31, 2019

 

(in thousands)

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

U.S. government treasury securities

 

$

64,925

 

 

$

68

 

 

$

 

 

$

64,993

 

Totals

 

$

64,925

 

 

$

68

 

 

$

 

 

$

64,993

 

 

Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents on the condensed consolidated balance sheets and are not included in the tables above. At June 30, 2020 and December 31, 2019, all investments had contractual maturities within one year.

4. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:

 

 

 

June 30, 2020

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

53,139

 

 

$

 

 

$

 

 

$

53,139

 

U.S. treasury securities

 

 

19,995

 

 

 

-

 

 

 

-

 

 

 

19,995

 

Totals

 

$

73,134

 

 

$

 

 

$

 

 

$

73,134

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities and government treasury securities

 

$

26,184

 

 

$

 

 

$

 

 

$

26,184

 

Totals

 

$

26,184

 

 

$

 

 

$

 

 

$

26,184

 

10


 

 

 

 

December 31, 2019

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

46,407

 

 

$

 

 

$

 

 

$

46,407

 

Demand deposit

 

 

10,027

 

 

 

 

 

 

 

 

 

10,027

 

Totals

 

$

56,434

 

 

$