ACLX Arcellx Inc

 

 

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, 2023

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: 001-41259

ARCELLX, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-2855917
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
25 West Watkins Mill Road, Suite A Gaithersburg, MD	20878
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (240) 327-0603

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, $0.001 par value per share		ACLX		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 August 9, 2023, the registrant had 48,358,981 shares of common stock, $0.001 par value per share, outstanding.

 

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Table of Contents

 

		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022	6
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	94
Item 3.	Defaults Upon Senior Securities	94
Item 4.	Mine Safety Disclosures	94
Item 5.	Other Information	94
Item 6.	Exhibits	95
Signatures		96

 

“Arcellx,” “we,” “us,” “our,” or “the Company” as used in this Quarterly Report on Form 10-Q refer to Arcellx, Inc. and, where appropriate, our subsidiary, Subdomain, LLC.

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Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (Quarterly Report) contains express or implied forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Quarterly Report include, but are not limited to, statements about:

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Forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions, and projections about the business and future financial results of the pharmaceutical industry, and other legal, regulatory, and economic developments. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “intend,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “continue,” “likely,” and similar expressions (including their use in the negative) intended to identify forward-looking statements although not all forward-looking statements contain these identifying words. Actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including, but not limited to, those described in Part II, Item 1A (Risk Factors) of this Quarterly Report.

 

You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with or furnished to the U.S. Securities and Exchange Commission (the SEC) completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

 

The forward-looking statements in this Quarterly Report represent our views as of the date of this Quarterly Report. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ARCELLX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)

	June 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	303,665		$	64,179
Marketable securities		202,819			190,656
Receivable from collaboration partner		29,431			—
Prepaid expenses and other current assets		22,155			12,028
Total current assets		558,070			266,863
Restricted cash		2,501			2,501
Property and equipment, net		22,285			11,231
Operating lease right-of-use assets		29,386			28,659
Prepaid research and development expenses and other long-term assets		11,286			4,563
Total assets	$	623,528		$	313,817
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,693		$	9,053
Accrued liabilities		12,390			11,679
Contract liability		93,875			—
Operating lease liabilities, current portion		6,111			2,901
Finance lease liabilities, current portion		38,045			33,060
Total current liabilities		156,114			56,693
Operating lease liabilities, net of current portion		40,638			31,299
Finance lease liabilities, net of current portion		8,841			20,871
Contract liability, net of current portion		124,268			—
Total liabilities		329,861			108,863
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, par value of $0.001 per share; 200,000,000 shares authorized and no shares issued and outstanding as of June 30, 2023 or December 31, 2022		—			—
Common stock, par value of $0.001 per share; 1,000,000,000 shares authorized and 48,315,391 shares issued and outstanding as of June 30, 2023; 1,000,000,000 shares authorized and 44,105,981 shares issued and outstanding as of December 31, 2022		48			44
Additional paid-in capital		663,614			523,921
Accumulated other comprehensive loss		(7	)		(221	)
Accumulated deficit		(369,988	)		(318,790	)
Total stockholders’ equity		293,667			204,954
Total liabilities and stockholders’ equity	$	623,528		$	313,817

 

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

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ARCELLX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share amounts)

 

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Collaboration revenue	$	14,302		$	—		$	32,213		$	—
Operating expenses:
Research and development		28,327			22,083			61,258			40,139
General and administrative		15,535			9,207			30,972			17,241
Total operating expenses		43,862			31,290			92,230			57,380
Loss from operations		(29,560	)		(31,290	)		(60,017	)		(57,380	)
Other income (expense):
Interest income, net		6,304			521			10,772			574
Interest expense		(880	)		(3	)		(1,906	)		(7	)
Total other income		5,424			518			8,866			567
Loss before income taxes		(24,136	)		(30,772	)		(51,151	)		(56,813	)
Income tax (benefit) provision		(282	)		—			47			—
Net loss		(23,854	)		(30,772	)		(51,198	)		(56,813	)
Other comprehensive loss:
Unrealized gain (loss) on marketable securities		(93	)		(218	)		214			(242	)
Comprehensive loss	$	(23,947	)	$	(30,990	)	$	(50,984	)	$	(57,055	)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.50	)	$	(0.84	)	$	(1.08	)	$	(1.98	)
Weighted-average common shares outstanding—basic and diluted		48,106,528			36,609,772			47,441,647			28,729,029

 

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

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ARCELLX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ Equity (DEFICIT)

(unaudited)

(in thousands, except share data)

 

	Stockholders’ Equity
	Common Stock
	Shares			Amount			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Gain (Loss)			Stockholders' Equity
Balance as of December 31, 2022		44,105,981		$	44		$	523,921		$	(318,790	)	$	(221	)	$	204,954
Issuance of common stock in accordance with Gilead Stock Purchase Agreement		3,478,261			4			115,266			—			—			115,270
Issuance of common stock upon exercise of stock options		34,713			—			374			—			—			374
Issuance of common stock from vesting of    restricted stock units		222,433			—			—			—			—			—
Share-based compensation		—			—			10,156			—			—			10,156
Unrealized gain on marketable securities		—			—			—			—			307			307
Net loss		—			—			—			(27,344	)		—			(27,344	)
Balance as of March 31, 2023		47,841,388		$	48		$	649,717		$	(346,134	)	$	86		$	303,717
Issuance of common stock upon exercise of stock    options		398,861			—			2,965			—			—			2,965
Issuance of common stock from vesting of    restricted stock units		46,593			—			—			—			—			—
Issuance of common stock pursuant to employee stock    purchase plan		28,549			—			528									528
Share-based compensation		—			—			10,404			—			—			10,404
Unrealized loss on marketable securities		—			—			—			—			(93	)		(93	)
Net loss		—			—			—			(23,854	)		—			(23,854	)
Balance as of June 30, 2023		48,315,391		$	48		$	663,614		$	(369,988	)	$	(7	)	$	293,667

 

	Redeemable Convertible Preferred Stock																		Stockholders’ Equity (Deficit)
	Series A						Series B						Series C						Common Stock
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive (Loss)			Stockholders' Equity (Deficit)
Balance as of December 31, 2021		5,413,272		$	28,894			8,975,585		$	85,367			10,396,707		$	119,118			544,210		$	1		$	8,615		$	(130,111	)	$	(20	)	$	(121,515	)
Issuance of common stock (initial public    offering),net of transaction costs of $15,029		—			—			—			—			—			—			9,487,500			9			127,274			—			—			127,283
Issuance of common stock (private placement),    net of transaction costs of $42		—			—			—			—			—			—			590,318			1			9,957			—			—			9,958
Conversion of preferred stock to common stock		(5,413,272	)		(28,894	)		(8,975,585	)		(85,367	)		(10,396,707	)		(119,118	)		24,785,564			25			233,354			—			—			233,379
Issuance of common stock from vesting of    restricted stock units		—			—			—			—			—			—			24,889			—			107			—			—			107
Exercise of stock options		—			—			—			—			—			—			286,283			—			307			—			—			307
Share-based compensation		—			—			—			—			—			—			—			—			4,481			—			—			4,481
Unrealized loss on marketable securities		—			—			—			—			—			—			—			—			—			—			(24	)		(24	)
Net loss		—			—			—			—			—			—			—			—			—			(26,041	)		—			(26,041	)
Balance as of March 31, 2022		—		$	—			—		$	—			—		$	—			35,718,764		$	36		$	384,095		$	(156,152	)	$	(44	)	$	227,935
Issuance of common stock (follow-on offering), net of transaction costs of $8,081		—			—			—			—			—			—			8,050,000			8			120,711			—			—			120,719
Issuance of common stock from vesting of restricted stock units		—			—			—			—			—			—			13,294			—			11			—			—			11
Exercise of stock options		—			—			—			—			—			—			—			—			—			—			—			—
Share-based compensation		—			—			—			—			—			—			—			—			5,944			—			—			5,944
Unrealized loss on investment		—			—			—			—			—			—			—			—			—			—			(218	)		(218	)
Net loss		—			—			—			—			—			—			—			—			—			(30,772	)		—			(30,772	)
Balance as of June 30, 2022		—		$	—			—		$	—			—		$	—			43,782,058		$	44		$	510,761		$	(186,924	)	$	(262	)	$	323,619

 

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

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ARCELLX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Six Months Ended June 30,
	2023				2022
Cash flows from operating activities
Net loss	$	(51,198	)		$	(56,813	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		871				565
Amortization of operating lease right-of-use assets		569