View:
United States securities and exchange commission logo
December 28, 2023
David Chang
President and Chief Executive Officer
Allogene Therapeutics, Inc.
210 East Grand Avenue
South San Francisco, California 94080
Re: Allogene
Therapeutics, Inc.
Form 10-K for
Fiscal Year Ended December 31, 2022
Filed February 28,
2023
File No. 001-38693
Dear David Chang:
We have reviewed your December 15, 2023 response to our comment
letter and have the
following comments.
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your response to this letter, we may have
additional comments. Unless
we note otherwise, any references to prior comments are to comments in
our November 21, 2023
letter.
Form 10-K for the Fiscal Year Ended December 31, 2022
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Research and Development Expenses, page 85
1. We note your response
to our prior comment one and your proposed disclosure revisions
for your research and
development expenses. Please further help us understand whether
you track your external
costs by product/program. If you do, please provide the related
disaggregated
information. Otherwise disclose the fact that you do not track external costs
by product/program.
David Chang
FirstName LastNameDavid
Allogene Therapeutics, Inc. Chang
Comapany28,
December NameAllogene
2023 Therapeutics, Inc.
December
Page 2 28, 2023 Page 2
FirstName LastName
Notes to Consolidated Financial Statements
6. Joint Venture and License Agreement with Allogene Overland Biopharm (CY)
Limited, page
111
2. We note your response to prior comment two. We do not object to your
determination
that the License Agreement falls under the guidance in ASC 606.
However, we do not see
a basis for excluding the value of the Seed Preferred Shares received
as partial
consideration from the transaction price based on the application of
the sales-based
royalties guidance in ASC 606-10-55-65. Your basis for applying this
guidance appears
to be based on the recharacterization of your equity investment in
Allogene Overland,
which is in the form of Seed Preferred Shares, as in substance a
right to receive payments
based on a percentage of net profit from commercial sales if and when
the CAR T cell
therapies are successful in clinical development, approved by
regulators and commercially
successful in the JV Territory. Please address the following:
Cite the authoritative literature you relied upon in
determining that it was appropriate
to characterize your equity investment in Allogene Overland based
on its economic
substance rather than its legal form.
Explain your basis for determining that the economic substance
was a right to
receive payments based on a percentage of net profit from
commercial sales and
point us to the specific sections of the organizational documents
that outline these
rights.
Explain your consideration of the Share Purchase Agreement
dated December 14,
2020 which describes the Seed Preferred Shares as legal form
equity capital with a
par value of $0.0001 per share and a purchase price of
approximately $2.2941 per
share.
Provide us a copy of the Memorandum and Articles which set
forth the rights,
preferences, privileges and restrictions of the Seed Preferred
Shares.
3. We do not agree with your conclusion that because the License
Agreement is within the
scope of ASC 606, the guidance in ASC 323-10-30-2 and ASC 610-20 are
not applicable.
The Seed Preferred Shares received represent an equity investment in
Allogene Overland
and your respective ownership interest would require equity method
accounting under
ASC 323. ASC 323-10-30-2(b) specifically states that an investor
should initially
measure, at fair value, an investment in the common stock of an
investee (including a
joint venture) recognized upon the derecognition of a distinct
nonfinancial asset or distinct
in substance nonfinancial asset in accordance with Subtopic 610-20,
Gains and Losses
from the Derecognition of Nonfinancial Assets. Furthermore, ASC 610-20
specifically
interacts with ASC 606.
As it relates to the fair value of your equity investment, you stated
that the estimated fair
value, using net present value of future cash flows approach, on the
date of transaction
was de minimis due to various reasons listed. Explain why you did not
consider the
purchase price of $2.2941 specifically outlined in the Share Purchase
Agreement to
David Chang
Allogene Therapeutics, Inc.
December 28, 2023
Page 3
represent the fair value of your equity investment. In this regard, we
note that Overland
received 51 million Seed Preferred Shares for total cash consideration
of $117 million
based on the $2.2941 per share purchase price. It is therefore not
clear why you would not
have valued the 49 million Seed Preferred Shares you received at
approximately $112.4
million. Please advise or revise accordingly.
4. You disclose that the negative basis difference between the recorded
amount for the shares
in Allogene Overland in the Company s financial statements and
proportionate share of
net assets of Allogene Overland would be tracked in the memo
accounts. Please explain
what you mean by memo account and how this complies with the
guidance in ASC 323-
10-35-13 which states that a difference between the cost of an
investment and the amount
of underlying equity in net assets of an investee shall be accounted
for as if the investee
were a consolidated subsidiary. Considering that the resulting
basis difference is
attributable to IPR&D, explain whether this IPR&D has an alternative
future use and if
not, your consideration of charging off such basis difference as IPR&D
expense. Refer to
the Background and Basis for Conclusions of ASU 2023-05 for further
discussion of such
basis differences.
Please contact Li Xiao at 202-551-4391 or Angela Connell at 202-551-3426
if you have
questions regarding comments on the financial statements and related matters.
FirstName LastNameDavid Chang Sincerely,
Comapany NameAllogene Therapeutics, Inc.
Division of
Corporation Finance
December 28, 2023 Page 3 Office of Life
Sciences
FirstName LastName