Compass Therapeutics, Inc. — Q2 2021 Form 10-Q Summary
Business context and reporting period
Compass Therapeutics, Inc. is a clinical-stage oncology biopharmaceutical company developing antibody-based therapeutics focused on angiogenesis and immuno-oncology. This unaudited Form 10-Q covers the three and six months ended June 30, 2021, filed August 16, 2021. The company has no approved products and has never generated revenue from product sales.
Key programs include CTX-009, acquired through the June 25, 2021 acquisition of Trigr Therapeutics, CTX-471, an anti-CD137 antibody in Phase 1 development, and CTX-8371, a preclinical PD-1/PD-L1 bispecific antibody.
Financial performance and position
| Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $2.9 million | $3.0 million | $7.6 million | $6.6 million |
| General and administrative expense | $2.2 million | $2.1 million | $4.8 million | $4.3 million |
| In-process R&D expense | $50.6 million | $0 | $50.6 million | $0 |
| Net loss | $55.8 million | $5.6 million | $63.2 million | $12.0 million |
| Net loss per share | $1.07 | $0.41 | $1.23 | $1.16 |
There is no meaningful revenue or operating margin to report because the company remains pre-commercial and reported operating losses. The Q2 and year-to-date 2021 losses include a $50.6 million noncash in-process R&D charge for the Trigr acquisition, which was completed using common stock.
- Cash and cash equivalents were $31.2 million at June 30, 2021, compared with $47.1 million at December 31, 2020. Cash, cash equivalents and restricted cash totaled $31.4 million at June 30, 2021.
- Net cash used in operating activities was $11.5 million for the six months ended June 30, 2021, compared with $13.1 million in the prior-year period.
- Net cash used in investing activities was $0.6 million, including $0.4 million for property and equipment and $0.3 million of Trigr acquisition costs.
- Net cash used in financing activities was $3.8 million, consisting of debt principal repayments. The prior-year period included $53.1 million of net financing cash inflow, primarily from an equity private placement.
- Total assets were $40.9 million and total liabilities were $12.0 million at June 30, 2021. Stockholders’ equity was $28.9 million, compared with $39.9 million at December 31, 2020.
- Accumulated deficit was $214.6 million at June 30, 2021.
- Debt, net of discount, was $5.6 million, all classified as current. The Pacific Western Bank facility bears interest at 6.25%, requires monthly principal payments of $625,000, and matures in March 2022. The company was in compliance with its covenants.
- The company adopted lease accounting guidance on January 1, 2021 and recognized $4.7 million of operating lease liabilities related primarily to its Boston office and laboratory facility.
Material changes versus the prior comparable period
- Net loss increased by $50.2 million in Q2 and by $51.3 million for the six-month period, primarily because of the $50.6 million Trigr-related in-process R&D charge.
- Six-month R&D expense increased $1.1 million to $7.6 million, primarily due to higher CTX-8371 manufacturing costs. Q2 R&D expense was essentially flat year over year.
- Six-month general and administrative expense increased $0.5 million to $4.8 million, primarily due to higher stock-based compensation.
- Shares outstanding increased to 61.7 million as of August 10, 2021, partly reflecting the issuance of 10.3 million shares to Trigr shareholders. Common shares outstanding at June 30, 2021 were 61.7 million, compared with 51.2 million at December 31, 2020.
- The Trigr acquisition added CTX-009 to the pipeline and resulted in the assignment of Trigr’s license agreement with ABL Bio. Trigr shareholders may receive up to $9 million in contingent earnout payments.
- Cash declined by $15.9 million during the first six months of 2021, compared with a $40.1 million increase in the prior-year period, when the company completed a major equity financing.
Guidance, outlook, commentary and risks
- Management states that the June 30, 2021 cash balance is not sufficient to fund the current operating plan for at least the next 12 months following the filing. The filing therefore identifies substantial doubt about the company’s ability to continue as a going concern.
- Management is evaluating additional equity or debt financing, collaborations, licensing transactions and other funding sources. Additional financing may dilute existing stockholders, impose restrictive covenants or require the company to surrender valuable rights.
- Planned activities include initiating at least one Phase 2 trial of CTX-009, completing the Phase 1b portion of the CTX-471 trial and commencing planned Phase 1 development of CTX-8371, subject to completion of IND-enabling work.
- For CTX-009, management reported approximately 20% overall response rate in prior Phase 1 dose escalation and monotherapy expansion data. As of May 31, 2021, the ongoing Phase 1b combination study reportedly had a 23.5% overall response rate and 76% clinical benefit rate; these are early-stage, interim results and may not predict later outcomes.
- For CTX-471, 18 patients had received at least one dose in the Phase 1b expansion as of June 21, 2021. Nine of 15 patients reaching the first tumor evaluation had stable disease, and one patient had a confirmed partial response. Management expected to complete Phase 1b in the first half of 2022 and begin a combination study in the same period.
- Management targeted submission of an IND for CTX-8371 in the second quarter of 2022, while noting that manufacturing delays had shifted the expected timing to mid-2022.
- COVID-19 caused delays in patient enrollment at several sites and delays in sourcing selected manufacturing supplies. The company added three trial sites to address enrollment challenges and warned that the pandemic could affect trial timelines, supplies, costs and operations.
- Principal risks include clinical and regulatory failure, limited operating history, dependence on third-party manufacturers and clinical research organizations, intellectual-property and licensing risks, integration of Trigr, overseas clinical-trial execution, competition, adverse events and the need for substantial additional capital.
- The company reported no material legal proceedings, no off-balance-sheet arrangements and effective disclosure controls as of June 30, 2021.
Most important facts for investors to verify
- Whether Compass can obtain sufficient financing before its projected cash shortfall and on terms that do not materially dilute shareholders or restrict operations.
- The actual cash-burn rate and expected runway after incorporating CTX-009 development, CTX-471 and CTX-8371 manufacturing and clinical costs.
- Whether early CTX-009 and CTX-471 clinical signals are confirmed in larger, later-stage or controlled studies.
- The status, timing and regulatory acceptability of planned IND submissions and Phase 2 or combination trials.
- The integration of Trigr, the enforceability and economics of the ABL Bio license, and the likelihood of up to $9 million in contingent earnout obligations.
- Manufacturing capacity, supply continuity and the effect of COVID-19-related delays on clinical development.
- Debt repayment obligations through the March 2022 maturity and continued compliance with the $6.0 million minimum cash covenant.