Executive Summary / Key Takeaways

• ALX Oncology is undergoing a strategic pipeline prioritization, shifting focus from failed checkpoint inhibitor combinations to evorpacept combinations with anti-cancer antibodies and advancing its novel EGFR-targeted ADC, ALX2004.
• Recent Q1 2025 financials reflect reduced R&D spend following manufacturing completion and workforce reduction, contributing to an extended cash runway into Q4 2026, a critical factor for funding ongoing and planned trials.
• Despite positive data in gastric cancer (ASPEN-6), regulatory feedback necessitates a Phase 3 trial versus ENHERTU for U.S. registration, a path ALXO will not pursue independently, highlighting challenges in competitive landscapes.
• The company faces immediate pressure from a Nasdaq minimum bid price notice, requiring the stock price to regain compliance by October 2025 to maintain listing.
• The successful advancement of ALX2004 into the clinic mid-2025, with initial safety data expected in 1H 2026, represents a key near-term value driver and diversification beyond the CD47 pathway.

A Strategic Reorientation in the Immuno-Oncology Arena

ALX Oncology Holdings Inc. is a clinical-stage immuno-oncology company strategically positioned at the intersection of innate and adaptive immunity, primarily focused on developing therapies that modulate the CD47 checkpoint pathway. Tracing its operational roots back to 2015, the company was structured through the formation of ALX Oncology Holdings Inc. in 2020 specifically for its initial public offering. Early financings, including a $169.5 million IPO in July 2020 and a $194.9 million follow-on offering in December 2020, provided the capital foundation to pursue its ambitious pipeline.

The company's core technological approach centers on evorpacept, a differentiated CD47 blocking therapeutic. Evorpacept is engineered with a high-affinity CD47 binding domain derived from SIRPα and a proprietary inactivated Fc domain. This design is intended to maximize CD47 blockade while minimizing the hematologic toxicities, such as anemia, often associated with other CD47-targeting agents that possess an active Fc domain capable of inducing phagocytosis of healthy red blood cells. This inactivated Fc domain is a key differentiator, aiming to enable higher dosing and broader combination potential with other anti-cancer therapies that rely on an active Fc domain to stimulate macrophage-mediated tumor cell killing (antibody-dependent cellular phagocytosis, or ADCP).

ALXO's strategy has revolved around exploring evorpacept in combination with standard-of-care agents, leveraging two primary mechanisms: enhancing ADCP when combined with anti-cancer antibodies, and activating dendritic cells to stimulate T-cell responses when combined with PD-1/PD-L1 inhibitors. This dual approach aimed to address a wide range of solid tumors and hematological malignancies.

The competitive landscape in immuno-oncology is intensely crowded, populated by pharmaceutical giants like Merck & Co. (MRK), Bristol-Myers Squibb (BMY), and F. Hoffmann-La Roche (RHHBY), alongside numerous smaller biotechnology firms. These large-cap competitors possess significantly greater financial resources, established global commercial infrastructures, and extensive R&D capabilities. While ALXO's TTM financial ratios reflect its pre-revenue clinical stage (Gross Profit Margin: 0.00%, Operating Profit Margin: 0.00%, Net Profit Margin: 0.00%, EBITDA Margin: 0.00%), contrasting sharply with the robust profitability of peers like MRK (Gross Margin: 0.76%, Operating Margin: 0.35%, Net Margin: 0.27%) and BMY (Gross Margin: 0.71%, Operating Margin: 0.12%, Net Margin: -0.19%), ALXO seeks to carve out a niche through its differentiated technology and strategic combinations.

ALXO's evorpacept, with its inactivated Fc, aims to offer a safety and dosing advantage over competing CD47 blockers, potentially enabling superior combination efficacy. For instance, early data from the ASPEN-6 trial in gastric cancer suggested ORR improvements compared to historical controls, hinting at the potential of the antibody combination mechanism. However, the large-cap competitors benefit from established market share, faster regulatory processing speeds due to experience, and diversified pipelines that can absorb individual program setbacks more readily than ALXO, whose success is heavily weighted on its lead candidates. ALXO's competitive positioning relies on demonstrating a clear, quantifiable clinical benefit and favorable safety profile that translates into a compelling value proposition for physicians and payors, overcoming the inherent scale and financial advantages of its larger rivals.

Recent Performance and Strategic Realignment

The first quarter of 2025 reflects a period of strategic adjustment for ALX Oncology. The company reported a net loss of $30.8 million for the three months ended March 31, 2025, an improvement from the $35.6 million loss incurred in the same period of 2024. This decrease in net loss was primarily driven by a significant reduction in research and development (R&D) expenses, which fell by 25% from $31.7 million in Q1 2024 to $23.9 million in Q1 2025. This reduction was largely attributable to the completion of clinical trial material manufacturing in early 2024 and lower stock-based compensation expense, partially offset by severance costs related to a workforce reduction and increased preclinical spending on new targets. Conversely, general and administrative (G&A) expenses increased by 31% to $7.9 million in Q1 2025, up from $6.0 million in the prior year period, mainly due to severance costs, higher legal consulting fees, and increased stock-based compensation. Interest income also saw a notable decrease from $2.6 million to $1.5 million, reflecting lower cash and investment balances.

As of March 31, 2025, ALXO held $107.0 million in cash, cash equivalents, and investments. This liquidity position, combined with the impact of the workforce reduction and cash preservation strategy approved in February 2025, is projected to fund operations into the fourth quarter of 2026. This extended runway is critical, providing the company with more time to achieve meaningful clinical milestones from its refined pipeline.

The strategic realignment was heavily influenced by recent clinical trial outcomes. Topline data from the Phase 2 ASPEN-3 and ASPEN-4 trials evaluating evorpacept in combination with pembrolizumab +/- chemotherapy in first-line HNSCC did not meet their primary endpoints in April 2025. This led to the decision to discontinue development in this indication, marking a setback for the PD-1/PD-L1 combination strategy. Similarly, final data from the ASPEN-7 trial in urothelial cancer showed that adding evorpacept to enfortumab vedotin did not provide sufficient efficacy benefit, resulting in the discontinuation of this combination study in May 2025.

While the ASPEN-6 trial in HER2-positive gastric/GEJ cancer yielded positive updated data presented in January 2025, demonstrating a 41.3% ORR in the ITT population and a 48.9% ORR in patients with confirmed HER2-positive expression (vs. 26.6% and 24.5% in the control arm, respectively), regulatory feedback from the FDA in April 2025 indicated that this Phase 2 data was not sufficient for accelerated approval. The FDA's stance, influenced by the evolving standard of care with the availability of ENHERTU, requires a Phase 3 trial comparing Evo-TRP directly against ENHERTU for a U.S. registrational path. Given resource constraints, ALXO has decided not to pursue this costly Phase 3 trial independently but will explore potential development partnerships for the gastric cancer program.

These clinical outcomes have prompted a significant pipeline prioritization, focusing resources on evorpacept combinations with anti-cancer antibodies where prior data has shown promise. This includes plans to initiate a randomized Phase 2 trial in HER2-positive metastatic breast cancer after prior ENHERTU treatment and a Phase 1b study in second-line metastatic colorectal cancer (CRC) in mid-2025.

Beyond evorpacept, ALXO is advancing ALX2004, a novel EGFR-targeted ADC developed from its proprietary linker-payload platform. This represents a strategic diversification. ALX2004 is designed with an affinity-tuned anti-EGFR antibody, a proprietary topoisomerase I inhibitor payload with enhanced bystander effect, and a stable linker. Preclinical data suggests a differentiated safety profile, notably the absence of EGFR-related skin toxicity and payload-related interstitial lung disease observed in models, issues that have limited previous EGFR-targeted ADCs. The FDA cleared the IND for ALX2004 in April 2025, and the company plans to initiate a Phase 1 dose escalation trial in EGFR-expressing solid tumors (including NSCLC, CRC, HNSCC, esophageal SCC) in mid-2025, with initial safety data anticipated in the first half of 2026.

Outlook and Risks

The path forward for ALX Oncology is one of focused execution on its refined pipeline. The extended cash runway into Q4 2026 provides a crucial window to generate meaningful data from the planned evorpacept trials in breast and colorectal cancers and the initial Phase 1 study of ALX2004. Data milestones across these three clinical programs are anticipated in 2026, representing key potential inflection points for the stock. The decision to seek partnerships for the gastric cancer program allows ALXO to potentially realize value from that asset without bearing the full cost of a large Phase 3 trial.

However, significant risks remain. The recent Nasdaq minimum bid price notice, requiring the stock to close at or above $1.00 for at least ten consecutive business days by October 20, 2025, poses an immediate threat to the company's listing if not resolved. Failure to regain compliance could negatively impact liquidity and access to capital markets. While a reverse stock split is a potential action, it carries its own risks.

Clinical trial success is inherently uncertain, as demonstrated by the recent HNSCC and urothelial cancer results. The planned trials in breast and colorectal cancer, while based on the more promising antibody combination mechanism, are still subject to the risks of enrollment delays, unexpected safety issues, or failure to demonstrate sufficient efficacy. The competitive landscape in these indications is also challenging, with established therapies and other pipeline candidates vying for market share.

Funding remains a long-term consideration. While the cash runway is extended, ALXO will require substantial additional capital beyond Q4 2026 to complete clinical development, pursue regulatory approvals, and potentially commercialize any approved products. The ability to raise this capital will depend on market conditions and the success of its clinical programs. The term loan facility provides limited additional flexibility ($25 million at the lenders' discretion as of March 31, 2025), and equity financing would dilute existing shareholders.

Intellectual property protection is vital in the competitive biotech space. While ALXO has patents covering its technology, challenges to validity or enforceability, or the existence of blocking patents held by third parties (such as those related to SIRPα/CD47 interactions) could adversely impact its ability to commercialize products.

Conclusion

ALX Oncology is at a critical juncture, having recalibrated its clinical strategy following mixed trial results. The decision to discontinue certain evorpacept combinations while prioritizing others and advancing the novel ALX2004 ADC reflects a pragmatic approach to resource allocation. The extended cash runway into Q4 2026 provides necessary time to execute on this focused pipeline.

The investment thesis for ALXO now hinges significantly on the success of the planned evorpacept trials in breast and colorectal cancers and, importantly, the initial clinical data from ALX2004. The ALX2004 program, with its differentiated design and preclinical promise, offers a new avenue for value creation and pipeline diversification. While the Nasdaq listing challenge and inherent risks of clinical development loom, the company's ability to generate positive data from its prioritized programs in 2026 will be paramount in determining its future trajectory and potential to deliver value to investors. The strategic shift, while born from setbacks, positions ALXO to pursue opportunities in indications where its differentiated technology may hold greater promise, provided execution is strong and future clinical data is compelling.