SAN CARLOS, CA – Allakos Inc . (NASDAQ:ALLK), a biopharmaceutical company, has entered into an agreement to terminate its headquarters lease early, resulting in a net impact of approximately $2.5 million on its cash and cash equivalents. The Lease Termination Agreement with ARE-San Francisco No. 63, LLC was finalized on November 15, 2024, and will see the company's lease end between January 1 and March 31, 2025, instead of the original expiration date of November 30, 2031.
Under the terms of the Lease Termination Agreement, Allakos will make a lease modification payment of around $2.3 million to the landlord. This sum includes approximately $1.5 million that will be covered by the landlord drawing down on the company's security deposit in the form of a letter of credit secured by restricted cash. The remaining balance will be paid upon the early termination of the lease. Additionally, the company is responsible for broker commissions totaling about $1.7 million.
Before this agreement, the lease accounted for annual expenditures of roughly $11 million for Allakos. The company is now looking into options to significantly reduce future rent expenses while still supporting its operational requirements.
Details of the Lease Termination Agreement are expected to be included in Allakos's Annual Report on Form 10-K for the year ending December 31, 2024. This move comes as part of Allakos's efforts to manage its expenditures and optimize operational efficiency. The information provided in this article is based on a press release statement.
In other recent news, Allakos Inc. has reported encouraging results from its Phase 1 study of AK006, a treatment for mast cell-driven diseases. The study revealed that the drug has approximately 77% bioavailability and an estimated half-life of 12-22 days. A 720 mg dose achieved 98% receptor occupancy at day 113, indicating potential for infrequent dosing. The drug was well-tolerated with no serious adverse events reported.
In financial developments, Allakos reported a net loss of $71 million in the first quarter of 2024, primarily due to a non-cash impairment charge. However, the company maintains $139 million in cash reserves, projected to sustain operations until mid-2026.
In terms of analyst evaluations, TD Cowen has maintained its Hold rating for Allakos, while Piper Sandler and JMP Securities have maintained their Overweight and Market Outperform ratings respectively, following the release of Phase I study results. The company also faces a potential delisting risk from the Nasdaq Global Select Market due to non-compliance with the minimum bid price requirement, but has been granted a 180-day period to regain compliance.
InvestingPro Insights
Allakos Inc.'s recent decision to terminate its headquarters lease early aligns with several key financial indicators highlighted by InvestingPro. The company's efforts to reduce expenses are particularly crucial given that it is "quickly burning through cash," as noted in one of the InvestingPro Tips. This strategic move to cut annual expenditures by approximately $11 million could help address this concern.
The company's financial health is further illuminated by InvestingPro Data, which shows a market capitalization of $94.7 million and an EBITDA of -$154.72 million for the last twelve months as of Q3 2024. These figures underscore the importance of cost-cutting measures like the lease termination.
Another relevant InvestingPro Tip indicates that Allakos "holds more cash than debt on its balance sheet," which may provide some financial flexibility as the company navigates its operational changes. This positive aspect is balanced against the fact that Allakos is "not profitable over the last twelve months," emphasizing the need for strategic financial management.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Allakos, providing deeper insights into the company's financial position and market performance.
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